Marketing The Core 5Th Canadian Edition By Roger A. Kerin - Test Bank

Marketing The Core 5Th Canadian Edition By Roger A. Kerin – Test Bank

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Sample Questions Are Posted Below

Chapter 05

B2B Marketing

True / False Questions

Peter purchases pizza crusts from Cakes & Bakes Co., which uses the flour from Husk Mills LLC to manufacture the crusts. Here, Cakes & Bakes Co. is the organizational buyer.
TRUE

Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: Moderate
Learning Objective: 05-01 Identify the distinguishing characteristics of industrial; reseller; government; and non-profit markets and how they are measured.
Topic: 05-01 The Nature and Size of Organizational Markets

Organizational buyers include all buyers in a nation, including the ultimate consumers.
FALSE

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 05-01 Identify the distinguishing characteristics of industrial; reseller; government; and non-profit markets and how they are measured.
Topic: 05-01 The Nature and Size of Organizational Markets

The total purchases of ultimate consumers in a year are always far greater than those of organizational buyers.
FALSE

Polyron Inc. reprocesses the products it purchases before selling it to the next buyer. Polyron Inc. is an industrial firm.
TRUE

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Easy
Learning Objective: 05-01 Identify the distinguishing characteristics of industrial; reseller; government; and non-profit markets and how they are measured.
Topic: 05-02 Industrial Markets

Wholesalers and retailers that buy physical products and sell them again without any reprocessing are known as industrial firms.
FALSE

Government units are the federal, provincial, regional, and municipal agencies that buy goods and services for the constituents that they serve.
TRUE

Organizations that operate without having financial profit as a goal, and which seek to provide goods and services for the good of society, are called charitable organizations.
TRUE

Common industry definitions provided by the North American Industry Classification System (NAICS) facilitate the measurement of economic activity in Canada, Mexico, and the United States.
TRUE

Large firms that engage in many different activities are given as many North American Industry Classification System (NAICS) codes as the number of activities they engage in.
FALSE

Content marketing seeks to keep customers engaged through informative and timely communications.
TRUE

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 05-02 Describe the importance of content marketing to business-to-business (B2B) marketers.
Topic: 05-07 Content Marketing

Digital communications technologies have made content marketing easier for many companies.
TRUE

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Moderate
Learning Objective: 05-02 Describe the importance of content marketing to business-to-business (B2B) marketers.
Topic: 05-07 Content Marketing

Consumer demand for products and services is derived.
FALSE

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 05-03 Explain which key characteristics of organizational buying make the process different from consumer buying.
Topic: 05-09 Derived Demand

The demand for the cows at Rockeller’s dairy farm is based on the consumer demand for milk, cheese, ice cream, cream, and butter. This is an example of inelastic demand.
FALSE

Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: Moderate
Learning Objective: 05-03 Explain which key characteristics of organizational buying make the process different from consumer buying.
Topic: 05-09 Derived Demand

Regardless of whether there is an increase or decrease of the price of a B2B product, customers buying the same quantity signifies an inelastic demand for that product.
TRUE

For organizational buyers, price is not always the most important criteria.
TRUE

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Moderate
Learning Objective: 05-03 Explain which key characteristics of organizational buying make the process different from consumer buying.
Topic: 05-15 Organizational Buying Criteria

Organizational buying behaviour is the process by which organizations determine the need for goods and then choose among alternative suppliers.
TRUE

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 05-04 Describe how buying centres and buying situations influence organizational purchasing.
Topic: 05-18 The Organizational Buying Process and the Buying Centre

A buying centre is a heterogeneous group consisting of individuals with different goals and knowledge related to purchase decisions.
FALSE

Deciders control the flow of information in the buying centre.
FALSE

Freight Systems is a leading courier company. It provides courier services to large international businesses. It takes care of international customs, duties, and specialized packaging for these large businesses. It also provides courier services to small domestic organizations. It should use the same distribution channel for both types of clients.
FALSE

Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: Moderate
Learning Objective: 05-05 Outline the process of business segmentation.
Topic: 05-23 Size of Customer

Foreroll Inc. decides to shift its focus on firms looking for quality products and good customer service from those looking simply for lower prices. This is an example of segmenting business market on the basis of benefits sought.
TRUE

Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: Moderate
Learning Objective: 05-05 Outline the process of business segmentation.
Topic: 05-26 Benefits Sought

Independent e-marketplaces charge a fee for their services and exist in settings that have thousands of geographically dispersed buyers and sellers.
TRUE

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 05-06 Explain the growing importance of and the approaches to online buying for industrial; reseller; and government markets.
Topic: 05-29 E-Marketplaces: Virtual Organizational Markets

In a reverse auction, a seller puts an item up for sale and would-be buyers are invited to bid in competition with each other.
FALSE

Multiple Choice Questions

_____ is the marketing of products to companies, governments, or not-for-profit organizations for use in the creation of goods and services that they then produce and market to others.
A.Micromarketing
B. Retail marketing
C. Business marketing
D. Consumer marketing

Business marketing is the marketing of products to companies, governments, or non-profit organizations for use in the creation of goods and services that they then produce and market to others.

Which of the following is an organizational buyer?
A.Girl Guides buying mint cookies to sell in their local neighbourhood to raise funds for charity.
B. A girl buying Timbits from Tim Hortons.
C. A couple buying a mega pack of cleaning supplies from Costco for their cottage.
D. A group of friends pooling their funds and buying a Lotto 6/49 ticket.

Organizational buyers are those manufacturers, wholesalers, retailers, and government agencies that buy goods and services for their own use or for resale. Girl Guides who buy mint cookies for resale are organizational buyers.

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Moderate
Learning Objective: 05-01 Identify the distinguishing characteristics of industrial; reseller; government; and non-profit markets and how they are measured.
Topic: 05-01 The Nature and Size of Organizational Markets

Which of the following statements represents an organizational buying decision?
A.Mr. Crowe buys a Toyota minivan to commute to work.
B. A dentist buys a new DVD player for her den.
C. Mr. Langley hires a housecleaning service to clean his apartment.
D. A restaurant owner hires a snow removal service to keep the parking lot clear for its clients.

Organizations buy products and services for their own use or for resale. The restaurant owner hires a service for the use of the restaurant to make sure its clients (ultimate consumers) can reach the restaurant safely.

Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: Difficult
Learning Objective: 05-01 Identify the distinguishing characteristics of industrial; reseller; government; and non-profit markets and how they are measured.
Topic: 05-01 The Nature and Size of Organizational Markets

Which of the following is true about organizational buyers?
A.Their total purchases in a year are far more than that of ultimate consumers.
B. They purchase and lease smaller amounts of supplies than ultimate consumers.
C. They purchase only business services for their firm.
D. They purchase only raw materials for their firm.

Organizational buyers purchase and lease large volumes of equipment, raw materials, manufactured parts, supplies, and business services. Because they often buy raw materials and parts, process them, and sell the upgraded product several times before it is purchased by the final organizational buyer or ultimate consumer, the total purchases of organizational buyers in a year are far greater than those of ultimate consumers.

An industrial firm:
A.is distinguished by the amount of energy it uses and the potential for pollution to the environment.
B. in some way reprocesses a product or service it buys before selling it again to the next buyer.
C. employs more than 500 people, who are paid minimum wages with few or no benefits.
D. deals exclusively with federal, provincial, and local governments, and often mediates governmental agency disputes.

Industrial firms in some way reproduce a product or service they buy before selling it again to the next buyer.

Marker Jimmy’s Co., a large cocoa-bean processor, buys cocoa beans and converts the beans into cocoa powder and cocoa butter, which is sold to companies that manufacture consumer products containing chocolate. Marker Jimmy’s Co. is operating in a(n) _____ market.
A.reseller
B. vertical
C. industrial
D. business-to-consumer

Marketing organizations operating in an industrial market buy a good or service, reprocess that good or service, and then sell the product or service to another buyer. In this instance, the cocoa-bean processor buys cocoa beans, reprocesses them, and then resells them to consumer food manufacturers.

A manufacturer of consumer food products for the Chinese market in North America buys several thousand tonnes of camellia nuts annually. It converts those nuts into cooking oil that is popular among the Chinese population and then sells it to Chinese supermarkets. The pulp from which the oil is extracted is sold to beef cattle farmers who use it to fatten their cattle. These transactions occur in the _____ market.
A.vertical
B. reseller
C. business-to-consumer
D. industrial

Marketing organizations operating in an industrial market buy a good or service, reprocess that good or service, and then sell the product to another buyer. In this case, the company buys camellia nuts, reprocesses them, and then resells a finished product to Chinese supermarkets. The pulp is sold to beef cattle farmers for feed.

Pride Mobility makes wheelchairs from component parts purchased from Potto Hardware. The wheelchairs are sold to hospitals, nursing homes, and retailers of health care products. Pride Mobility operates in a(n) _____ market.
A.business-to-consumer
B. psychographic
C. industrial
D. reseller

Industrial firms in some way reprocess a good or service they buy before selling it again to the next buyer. The firm buys the mattresses, wheels, metal component parts, etc. and makes wheelchairs and specialty chairs before selling them to hospitals, nursing homes, and resellers of health care products.

Wholesalers and retailers that buy physical products and resell them again without any reprocessing are _____.
A.industrial firms
B. resellers
C. non-intermediaries
D. facilitators

Wholesalers and retailers that buy physical products and sell them again without any reprocessing are resellers.

The reseller market includes:
A.manufacturers and service providers.
B. Retailers and wholesalers.
C. government agencies and service providers.
D. agricultural markets and the mining industry.

Wholesalers and retailers that buy physical products and sell them again without any reprocessing are resellers.

The Scotts Company manufactures and sells packaged lawn fertilizers to The Home Depot. The Home Depot sells these products to the ultimate consumer—the homeowner. The Home Depot is a(n) _____.
A.service provider
B. municipal agency
C. reseller
D. industrial firm

In this scenario, The Home Depot is a reseller. Resellers are wholesalers and retailers who buy physical products and resell them again without any reprocessing.

The Baybuys a variety of kitchen products, such as mixers and blenders, and sells them to amateur cooks. Sears is an example of a _____.
A.non-profit organization
B. monopolist
C. reseller
D. industrial firm

In this scenario, The Bayis a reseller. Resellers are wholesalers and retailers who buy physical products and resell them again without any reprocessing.

_____ are the federal, provincial, regional, and municipal agencies that buy goods and services for the constituents that they serve.
A.Industrial firms
B. Resellers
C. Co-operatives
D. Government units

Government units are the federal, provincial, regional, and municipal agencies that buy goods and services for the constituents that they serve.

When a city-managed library system buys new computers, monitors, and printers for its student computer labs, it is operating as a(n) _____.
A.industrial market
B. business market
C. government market
D. facilitating agent

Government units are federal, provincial, regional, and municipal agencies (such as a city library system) that buy goods and services for the constituents they serve.

Many Canadians participate in events like “Run for the Cure” and United Way fundraising campaigns. These organizations purchase significant amounts of goods and services as
A.Industrial buyers
B. Non-profit organizations
C. Resellers
D. Government buyers

Non-profit organizations operate without having profit as a goal. They still demand significant products and services and tend to purchase like other organizational buyers.

_____ makes easier the measurement of economic activity in Canada, Mexico, and the United States by providing common industry definitions for these countries.
A.Strategic International Classification (SIC)
B. Federated Domestic and International Classification (FDIC)
C. Federated Trade Codification (FTC)
D. North American Industry Classification System (NAICS)

The North American Industry Classification System (NAICS) provides common industry definitions for Canada, Mexico, and the United States, which facilitate the measurement of economic activity in the three member countries of the North American Free Trade Agreement (NAFTA).

The North American Industry Classification System (NAICS) provides common industry definitions, which make easier the measurement of economic activity for member countries of the _____.
A.G7
B. World Trade Organization (WTO)
C. North American Free Trade Association (NAFTA)
D. North Atlantic Treaty Organization (NATO)

Which of the following statements is true about the North American Industry Classification System (NAICS)?
A.After being used more than 50 years, NAICS was replaced by the Standard Industrial Classification (SIC) system.
B. NAICS neither permits comparability across countries nor accurately measures new or emerging industries.
C. NAICS provides a five-digit national industry code to each of the three countries.
D. NAICS groups economic activity to permit studies of market share, demand for goods and services, competition from imports in domestic markets, and similar studies.

NAICS replaced the SIC system, a version of which had been in place for more than 50 years. SIC neither permitted comparability across countries nor accurately measured new or emerging industries. NAICS is consistent with the International Standard Industrial Classification of All Economic Activities, published by the United Nations. NAICS groups economic activity to permit studies of market share, demand for goods and services, and similar studies.

The North American Industry Classification System (NAICS) permits a firm to:
A.find the NAICS codes of its present customers and then obtain NAICS-coded lists for similar firms.
B. get the names of the purchasing agents of all prospective customers.
C. sell to any company within North America as long as it is not a monopoly.
D. engage in benchmarking with companies manufacturing and/or marketing similar products.

The North American Industry Classification System (NAICS) permits a firm to find the NAICS codes of its present customers and then obtain NAICS-coded lists for similar firms.

In organizational buying settings, _____ keeps potential customers engaged by providing valuable information.
A.Content marketing
B. NAICS
C. Derived demand
D. Price elasticity

Content marketing focuses on providing potential customers with timely and relevant information at key points in the decision process.

In selling business equipment, Xerox has found social media incredibly useful for keeping potential customers informed and engaged. This reflects
A.Derived demand
B. NAICS
C. Reseller markets
D. Content marketing

Xerox, among othersb2b sellers, has found that content marketing works very well through social media channels. This approach provides potential customers with timely and relevant information.

Derived demand means the demand for industrial products and services is driven by, or derived from:
A.mathematical formulas and statistical models.
B. the gross national product (GNP).
C. demand for consumer products and services.
D. demand for industrial goods.

Derived demand means that the demand for industrial products and services is driven by, or derived from, demand for consumer products and services.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Moderate
Learning Objective: 05-03 Explain which key characteristics of organizational buying make the process different from consumer buying.
Topic: 05-09 Derived Demand

MKL Inc. processes wheat into flour, which is sold to bakeries and pasta makers. What kind of demand exists for MKL Inc.’s flour?
A.unitized
B. derived
C. consumer
D. applied

Derived demand means that the demand for industrial products and services is driven by, or derived from, demand for consumer products and services. The demand for flour is driven by consumer demand for pasta and baked goods, so in this case the demand for flour is a derived demand.

P & P is a global leader in pallet and container pooling services. Pallets are used for transporting and storing new appliances such as stoves, freezers, and refrigerators. Which of the following is true about the demand for P & P’s pallets?
A.There is a high consumer demand for P & P’s pallets.
B. There is elastic demand for P & P’s pallets independent of the sales of pallets but tied to the sales of appliances.
C. There is derived demand for P & P’s pallets because demand for the pallets is tied to demand for the appliances.
D. There is inelastic demand for P & P’s pallets tied to the cost of the components of the pallets.

Derived demand means that the demand for industrial products and services is driven by, or derived from, demand for consumer products and services. The demand for the pallets is driven by the sales of (demand for) appliances.

Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: Difficult
Learning Objective: 05-03 Explain which key characteristics of organizational buying make the process different from consumer buying.
Topic: 05-09 Derived Demand

Concert Staging Company (CSC) provides the stage, roof system, lighting, and sound for outdoor concerts and theatres. The frequency of concerts and theatre events conducted depends on the customers’ decisions to purchase the tickets. The number of concerts and theatre events determine how many times CSC gets an opportunity to provide its services. Thus, the demand for the services provided by CSC is a(n) _____ demand.
A.derived
B. unitized
C. holistic
D. applied

Derived demand means that the demand for industrial products and services is driven by, or derived from, demand for consumer products and services. The demand for Concert Staging Company services is driven by the sales of tickets to concert/theatre attendees, so it is a derived demand.

Five Star Windows (FSW) manufactures high-quality, energy-efficient windows for homes and offices. The number of windows sold is directly linked to the number of new homes built. The sales of FSW’s windows go up when the economy is strong and many homes are being built. This information reveals that the demand for FSW’s windows is an example of _____.
A.derived demand
B. the price-quality relationship
C. the acceleration principle
D. price elasticity

Derived demand means that demand for industrial goods and services is driven by, or derived from, the demand for consumer products. In this case, the demand for windows is a derived demand as it is driven by the consumer demand for new houses.

When small changes in price for consumer products can result in large increases or decreases in demand for the facilities and equipment needed to make the consumer product, it is referred to as _____ demand.
A.horizontal
B. fluctuating
C. discrete
D. unit

Small changes in demand for consumer products can result in large increases or decreases in demand for the facilities and equipment needed to make the consumer product. This is referred to as fluctuating demand.

If the price of brake pads goes up, a car manufacturer will still order the same quantity because this single business product is only a minor portion of the price of the car. This is an example of _____ demand.
A.inelastic
B. vertical
C. fluctuating
D. elastic

Inelastic demand means that regardless of whether there is an increase or decrease of the price of a B2B product, customers will buy the same quantity.

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Easy
Learning Objective: 05-03 Explain which key characteristics of organizational buying make the process different from consumer buying.
Topic: 05-10 Inelastic Demand

Which of the following is a market characteristic of products and services purchased within an organizational context?
A.The focus is on delivery time and post-sale service.
B. Raw and semi-finished goods are predominantly purchased.
C. Demand for industrial products and services is derived.
D. Goods and services are purchased on the basis of specifications that are technical in nature.

Market characteristics of products and services purchased within an organizational context include derived demand for industrial product and services and the small number of business customers with large purchase orders.

Identify the buying process characteristic from the following dimensions of organizational buying behaviours.
A.The focus is on delivery time and post-sale service.
B. Raw and semi-finished goods are predominantly purchased.
C. Online buying over the Internet is widespread.
D. Goods and services are purchased on the basis of specifications that are technical in nature.

Extensive online purchase of products and services is a buying process characteristic within an organizational context.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Moderate
Learning Objective: 05-06 Explain the growing importance of and the approaches to online buying for industrial; reseller; and government markets.
Topic: 05-27 Online Buying in Organizational Markets

Which of the following is a marketing mix characteristic of the organizational buying behaviour?
A.The focus is on delivery time and post-sale service.
B. Advertising and other promotional forms are technical in nature.
C. Online buying over the Internet is widespread.
D. Goods and services are purchased on the basis of specifications that are technical in nature.

Marketing mix characteristics of organizational buying behaviour include advertising and promotional forms that are technical in nature.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Moderate
Learning Objective: 05-02 Describe the importance of content marketing to business-to-business (B2B) marketers.
Topic: 05-07 Content Marketing

Which of the following statements accurately characterizes buying behaviour in organizational markets?
A.Organizational buying behaviour is similar to consumer buying behaviour since individuals are involved in both processes.
B. Demand for industrial products is elastic instead of inelastic or derived because companies, not ultimate consumers, determine the quantity of goods produced.
C. Fewer customers typically exist in organizational markets than in consumer markets.
D. Forecasting is not as important in organizational buying as in consumer buying.

Firms selling to organizations are always restricted to far fewer buyers than firms selling consumer products to ultimate users.

Firms selling consumer goods or services often try to reach thousands or millions of individuals or households. Firms selling to organizations are often:
A.inclined to try to reach tens of millions.
B. restricted to fewer buyers.
C. under pressure to stay within a fixed target of clients.
D. restricted by government regulations to only a few industrial categories.

The number of potential buyers is much smaller in organizational buying situations. Firms selling to organizations are often restricted to far fewer buyers.

A company that runs its trucks on a mixture of petroleum and ethanol buys its ethanol from the only large supplier of ethanol that has an ethanol manufacturing facility in the province and is able to meet the trucking company’s delivery schedules. The selection of ethanol supplier is based on _____.
A.organizational buying criteria
B. derived demand factors
C. marginal demand
D. profit margins

Most commonly used organizational buying criteria include price, ability to meet the quality specifications required, ability to meet the required delivery schedules, technical capability, warranties and claim policies, past performance on previous contracts, and production facilities and capacity. The location of the ethanol supplier and its ability to meet required delivery schedules are examples of organizational buying criteria.

_____ are detailed specifications for the products and services they want to buy and the characteristics of the suppliers that will supply them.
A.Supplier evaluative dimensions
B. Organizational buying criteria
C. Evaluative criteria
D. Performance measures

Organizational buying criteria are detailed specifications for the products and services they want to buy and the characteristics of the suppliers that will supply them.

Which of the following is a commonly used organizational buying criterion?
A.taste of the buyer
B. personal relationship with sales representative
C. price
D. existing mood of the buyer

The practice of organizational buyers attempting to work with suppliers to make their products, services, and capabilities fit the buyer’s needs is called _____.
A.low pricing strategy
B. high quality protocol
C. reverse marketing
D. traditional supply chain management

Many organizational buyers today are transforming their buying criteria into specific requirements that are communicated to suppliers. This practice, called reverse marketing, means that organizational buyers are attempting to work with suppliers to make their products, services, and capabilities fit the buyer’s needs.

For many organizations, purchase decisions are made based upon minimizing risk. This reflects
A.The need for low price in organizational selling
B. Fear as a factor in organizational buying
C. Content marketing
D. Fluctuating and derived demand

In organizational buying settings, individuals face the risk of making the wrong choice. Many marketers think that fear of making a bad choice is an important factor that limits the way purchases are made.

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Difficult
Learning Objective: 05-03 Explain which key characteristics of organizational buying make the process different from consumer buying.
Topic: 05-16 Fear in Organizational Buying Behaviour

Which type of buyer-seller interaction is demonstrated when Evergreen Motors (EM) purchases Mark & Drew transmissions, and Mark & Drew buys trucks and cars from EM?
A.exclusive dealing
B. monopolistic arrangement
C. supply partnership
D. non-competitive bidding

This is an example of a supply partnership between EM and Mark & Drew. A supply partnership exists when a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost or increasing the value of products and services delivered to the ultimate consumer.

A relationship called a _____ exists when a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost or increasing the value of products and services delivered to the ultimate customer.
A.double-deal
B. conflict of interest
C. restricted access
D. supply partnership

A supply partnership exists when a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost or increasing the value of products and services delivered to the ultimate consumer.

The process by which organizations determine the need for goods and then choose among alternative suppliers is referred to as _____.
A.the consumer purchase decision process
B. organizational buying behaviour
C. the industrial purchase procedure
D. the reseller procurement process

Organizational buying behaviour is the decision-making process that organizations use to establish the need for products and services and identify, evaluate, and choose among alternative brands and suppliers.

Once an organization making a purchase decision passes through the problem recognition stage of the process, it reaches the _____ stage.
A.information search
B. post purchase behaviour
C. alternative evaluation
D. purchase decision

The information search stage follows the problem recognition stage in an organizational purchase decision process.

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Easy
Learning Objective: 05-04 Describe how buying centres and buying situations influence organizational purchasing.
Topic: 05-19 Stages in the Organizational Buying Process

In which stage would a company’s marketing research and sales department observe the improvement of its competitors?
A.problem recognition
B. information search
C. evaluation of alternatives
D. purchase decision

During the problem recognition stage, a company’s marketing research and sales department observe the improvement of its competitors.

Smith Systems is in the process of making a purchase decision for some key equipment. The company heads have asked the design and production engineers to draft specifications for the equipment needed. Smith Systems is in the _____ stage of the organizational purchase decision process.
A.problem recognition
B. information search
C. evaluation of alternatives
D. purchase decision

Smith Systems is in the information search stage of the organizational purchase decision process. In this stage, organizations ask their design and production engineers to draft specifications for the equipment needed.

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Moderate
Learning Objective: 05-04 Describe how buying centres and buying situations influence organizational purchasing.
Topic: 05-19 Stages in the Organizational Buying Process

At which stage in the buying decision process will a firm visit potential suppliers to assess their facilities?
A.problem recognition
B. information search
C. evaluation of alternatives
D. purchase decision

At the evaluation of alternatives stage, a firm must assess suppliers in terms of facilities, production capabilities, financial stability, and so on in order to select which supplier can best satisfy the firm’s current needs.

At which stage in the buying decision process would a firm clarify its organizational buying criteria and select a supplier?
A.problem recognition
B. information search
C. purchase decision
D. evaluation of alternatives post-purchase behaviour

At the purchase decision stage of the firm’s buying decision process, the firm selects its organizational buying criteria such as price, quality, delivery time, and so on, and then selects a supplier, negotiates terms, and awards a contract.

At which stage in the buying decision process would a firm use a formal vendor rating system to evaluate the quality of the vendor’s product and customer service?
A.problem recognition
B. information search
C. purchase decision
D. post-purchase behaviour

At the post-purchase behaviour stage, a firm would evaluate suppliers using a formal vendor rating system and notify suppliers if satisfactory standards are not met. Suppliers who do not maintain a satisfactory level or performance are dropped and not asked to bid on future products.

The _____ is a group of persons within an organization who participate in the buying process and share common goals, risks, and knowledge important to purchase decisions.
A.status quo committee
B. purchasing agency
C. buying centre
D. gatekeeper group

The buying centre is a group of people in an organization who participate in the buying process.

In an effort to make better and more-efficient purchase decisions, Supersaver Inc., a large multi-store chain reseller, has formed formal groups of people to work together on purchase decisions.
The groups formed at Supersaver Inc. are referred to as the _____.
A.selling committee
B. decision-making unit
C. purchasing unit
D. buying committee

The buying centre is a group of people in an organization who participate in the buying process. For most large multi-store chain resellers, such as Sears, 7-Eleven convenience stores, or Safeway, the buying centre is very formal and is called a buying committee.

In an effort to make better and more-efficient purchase decisions, Supersaver Inc., a large multi-store chain reseller, has formed formal groups of people to work together on purchase decisions.
Which of the following statements accurately describes the people in the groups formed at Supersaver Inc.?
A.The groups will not include individuals from other functional areas.
B. The groups will never contain cross-functional teams.
C. The organizational buyer will not be a member of the groups.
D. The composition of the groups depends on the specific item being purchased.

The composition of the buying centre changes as the item that is to be purchased changes. Cross-functional teams are used in buying centres, especially if the purchased item is to become part of the manufactured product. The only consistency within the buying centre is the inclusion of the organizational buyer or purchasing agent.

The people in the organization who actually use the product or service are called _____.
A.gatekeepers
B. deciders
C. users
D. influencers

Users are the people in the organization who actually use the product or service.

Within the buying centre, influencers are people who:
A.have the formal authority and responsibility to select the supplier and negotiate the terms of the contract.
B. control the flow of information in the buying centre.
C. have the formal or informal power to select or approve the supplier that receives the contract.
D. affect the buying decision usually by helping define the specifications for what is bought.

Influencers affect the buying decision, usually by helping define the specifications for what is bought. They usually have specialized knowledge.

In a buying centre, _____ have formal authority and responsibility to select the supplier and negotiate the terms of a contract.
A.gatekeepers
B. deciders
C. buyers
D. influencers

Buyers have formal authority and responsibility to select the supplier and negotiate the terms of the contract.

Within the buying centre, deciders are people who:
A.have the formal authority and responsibility to select the supplier and negotiate the terms of the contract.
B. control the flow of information in the buying centre.
C. have the formal or informal power to select or approve the supplier that receives the contract.
D. affect the buying decision usually by helping define the specifications for what is bought.

Deciders have the formal or informal power to select or approve the supplier that receives the contract.

In terms of the buying centre, people who control the flow of information in the buying centre, such as purchasing personnel, technical experts, and secretaries, and help or prevent sales people from reaching others in the buying centre are called _____.
A.influencers
B. obstructionists
C. gatekeepers
D. power brokers

Gatekeepers control the flow of information in the buying centre.

Franco, a purchasing manager, reorders an existing product from a list of acceptable suppliers without doing any quality check. This is an example of a _____.
A.new buy
B. straight rebuy
C. modified rebuy
D. standard buy

In a straight rebuy, the buyer or purchasing manager reorders an existing product or service from the list of acceptable suppliers, probably without even checking with users or influencers from the engineering, production, or quality control departments.

Mark & Co., a regular purchaser of personal computers, wants to change product specifications, price, and delivery schedule of the product. This is an example of a _____.
A.new buy
B. straight rebuy
C. modified rebuy
D. standard buy

In a modified rebuy situation, the company is purchasing a product that it has experience purchasing, such as new laptops for salespeople, but it wants to change the product specifications, price, delivery schedule, or supplier.

Hartey & Inova Inc. is a first-time buyer of the services of Gamko Inc. This is an example of a _____.
A.new buy
B. straight rebuy
C. modified rebuy
D. make-buy

In a new buy situation, the company is buying the product or service for the first time. This purchase involves greater potential risk and is more complex than other buying situations.

If a purchase is a new buy for a manufacturer, the seller should be prepared to act as a consultant to the buyer, work with technical personnel, and expect:
A.a long time for a buying decision to be reached.
B. a lot of conflict.
C. specifications to be changed many times before the buy is completed.
D. to have to do some favours for the decision makers.

If a purchase is a new buy for a manufacturer, the seller should be prepared to act as a consultant to the buyer, work with technical personnel, and expect a long time for a buying decision to be reached.

The small business services department at Global Information Services is aimed at providing small business owners with information and assistance to promote growth of their companies. The existence of such a department is an example of market segmentation based on _____.
A.type of customer
B. size of customer
C. type of buying situation
D. customer location

Many B2B marketers divide their potential market into large and small accounts, using separate distribution channels to reach each segment.

Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: Moderate
Learning Objective: 05-05 Outline the process of business segmentation.
Topic: 05-23 Size of Customer

Mayor &Lawrell Inc. decides to shift its focus to firms looking for quality products and good customer service from those looking simply for lower prices. This is an example of segmenting business market on the basis of _____.
A.type of customer
B. size of customer
C. benefits sought
D. customer location

The market may also be segmented on the basis of benefits sought. A company may decide to focus on firms looking for quality products and good customer service as opposed to those looking simply for lower prices. In this scenario, Mayor &Lawrell Inc. is focusing on the benefits sought.

Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: Moderate
Learning Objective: 05-05 Outline the process of business segmentation.
Topic: 05-26 Benefits Sought

Business-to-business electronic commerce over the Internet:
A.is not nearly as prevalent as consumer electronic commerce when measured by the total dollar value of all Internet transactions.
B. is approximately four times greater than consumer electronic commerce when measured by the total dollar value of all Internet transactions.
C. has dramatically decreased since face-to-face time is so important.
D. is impossible to estimate since companies will not share information.

Organizations vastly outnumber consumers both in terms of online transactions made and purchase volume. Organizational buyers account for 80 percent of the total dollar value of all Internet transactions. Additionally, Internet technology has been found to reduce costs.

Online buying in organizational markets is prominent because Internet/Web technology:
A.increases marketing costs.
B. reduces the need for timely information.
C. substantially reduces buyer order-processing costs.
D. narrows the potential customer base for many products.

Web-based technology has been shown to substantially reduce buyer order-processing costs.

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Moderate
Learning Objective: 05-06 Explain the growing importance of and the approaches to online buying for industrial; reseller; and government markets.
Topic: 05-28 Prominence of Online Buying in Organizational Markets

Fasteasytrade.com is an online trading community that brings together more than 50,000 suppliers and 4,000 buyers from various industries. It handles more than $30 billion in orders annually.
Fasteasytrade.com is a(n) _____.
A.e-marketplace
B. Web stock exchange
C. Web commerce room
D. consortium

E-marketplaces bring together buyers and supplier organizations. These online communities make possible the real-time exchange of information, money, products, and services.

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Easy
Learning Objective: 05-06 Explain the growing importance of and the approaches to online buying for industrial; reseller; and government markets.
Topic: 05-29 E-Marketplaces: Virtual Organizational Markets

Fasteasytrade.com is an online trading community that brings together more than 50,000 suppliers and 4,000 buyers from various industries. It handles more than $30 billion in orders annually.
Which of the following is true about Fasteasytrade.com?
A.It focuses on many industries.
B. It refers to open-to-the-public trading communities.
C. It acts as a neutral third party enabling exchanges between buyers and sellers.
D. It is free to use.

E-marketplaces focus on one industry, not many. They are not open to the public; rather they are only used in organizational buying. They charge a fee. Globally, the number of e-marketplaces for businesses is extensive. They act as a neutral third party and provide an online trading platform and a centralized market that enable exchanges between buyers and sellers.

Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: Moderate
Learning Objective: 05-06 Explain the growing importance of and the approaches to online buying for industrial; reseller; and government markets.
Topic: 05-29 E-Marketplaces: Virtual Organizational Markets

Fasteasytrade.com is an online trading community that brings together more than 50,000 suppliers and 4,000 buyers from various industries. It handles more than $30 billion in orders annually.
Which of the following is true about the services provided by Fasteasytrade.com?
A.It provides small business buyers and sellers an economical way to increase their customer base.
B. It offers small business buyers a reduced cost of purchased products and services.
C. It links large companies with all possible suppliers and customers.
D. It provides a decentralized market for buyer-seller transactions.

Small business buyers and sellers, in particular, benefit from independent e-marketplaces. These e-marketplaces offer suppliers an economical way to expand their customer base and reduce the cost of purchased products and services.

As more sellers take part in a reverse auction
A.Prices fall
B. Prices rise
C. Prices do not change
D. Increased moderation is required

With reverse auctions, sellers attempt to out-bid each other in order to win the auction. Thus prices tend to fall as more potential sellers take part in the auction.

Which of the following is true of a traditional auction?
A.Would-be sellers are invited to bid in competition with each other.
B. As the auction progresses, fewer would-be buyers become involved.
C. The auction ends when a single bidder “wins” the item with the lowest price.
D. There is an upward pressure on bid prices.

In a traditional auction, a seller puts an item up for sale and would-be buyers are invited to bid in competition with each other. As more would-be buyers become involved, there is an upward pressure on bid prices.

Reverse auctions:
A.are seller-initiated.
B. benefit the sellers significantly more than the buyers.
C. have a decreasing number of bidders as the auction progresses.
D. benefit the buyers more than the sellers.

In a reverse auction, a buyer communicates a need for a product or service and would-be suppliers are invited to bid in competition with each other. Bidding is sequential and prospective suppliers observe the bids of others and decide whether to decrease the bid price. In this way, buyers normally receive the lowest possible price.

Which of the following is true of a reverse auction?
A.Would-be buyers are invited to bid in competition with each other.
B. As the auction progresses, more would-be sellers become involved.
C. It benefits the sellers significantly more than the buyers.
D. The bidding is sequential—it occurs in order, one at a time.

Super Pallets Inc. wants to get rid of excess wooden pallets by attracting the greatest number of potential buyers online. The company could use a _____ to locate a company that is willing to pay the highest amount for the used pallets.
A.combinatorial operation
B. traditional auction
C. silent auction
D. reverse auction

In a traditional auction, a seller (the organization wanting to sell the pallets) puts an item up for sale and would-be buyers are invited to bid in competition with each other. Presumably the seller would accept the highest bid.

PowerChain Solutions is an e-commerce marketplace serving companies and organizations world-wide. It helps buyers of parts and services to purchase these items for the lowest price, using bids from prospective sellers. In this example, what type of auction would PowerChain Solutions facilitate?
A.reverse
B. traditional
C. marketing efficiency
D. forward

Short Answer Questions

Describe the three major types of organizational markets.

There are three types of organizational markets:

An industrial market is a market in which a business reprocesses a good or service it buys before selling it again to the buyer.
A reseller market is composed of wholesalers and retailers who buy physical products and resell them again without reprocessing.
A government market is comprised of federal, provincial, and local agencies that buy goods and services for the constituents they serve.
Some students may mention non-profit organizations as organizational buyers. Increasingly, they are behaving much like profit-oriented businesses in terms of their business practices (including purchase behaviour).

What is the North American Industry Classification System (NAICS)?

NAICS is a replacement for the earlier Standard Industrial Classification (SIC) system. The North American Industry Classification System (NAICS) designates industries with a numerical code in a defined structure. The first digit of the NAICS code designates a sector of the economy followed by a two-digit code signifying a subsector. Subsectors are further divided into three-digit industry groups, four-digit industries, and five-digit country-specific industries. The system became effective to provide common industry definitions for Canada, Mexico, and the United States to facilitate the measurement of economic activity in the three member countries of the North American Free Trade Agreement (NAFTA).

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Difficult
Learning Objective: 05-01 Identify the distinguishing characteristics of industrial; reseller; government; and non-profit markets and how they are measured.
Topic: 05-06 Measuring Industrial, Reseller, Government, and Non-Profit Markets

Describe the role of Content marketing in organizational selling using examples.

Answers will vary. Students should demonstrate an understanding of the need to provide potential buyers with relevant and timely information that is organized around touch points. Social media platforms have allowed b2b marketers to be more efficient in their communications.

Organizations differ from individuals in the way they make purchase decisions. Describe each of the following differences: derived demand, inelastic demand, order size.

Student answers will vary. Derived demand refers to the business purchases depending upon demand for their own products. Inelastic demand means that business purchases are not typically sensitive to prices changes (in the short term) provided the buyer’s products are still in demand. Order sizes for organizations are typically much larger than those for individual buyers.

What are the characteristics of the organizational buying process?

Technically qualified and professional buyers exist and follow established purchasing policies and procedures to purchase large orders. There are only a few buyers. Buying objectives and criteria are typically spelled out, as are procedures for evaluating sellers and goods and services. Multiple buying influences exist, and multiple parties participate in purchase decisions. Reciprocal arrangements exist, and negotiation between buyers and sellers is commonplace. Buyer-seller relationships may develop into supply partnerships. Online buying over the Internet is widespread.

What are the five stages of the organizational buying process?

The five stages of the organizational buying process are:

Problem recognition
Information search
Evaluation of alternatives
Purchase decision
Post-purchase behaviour

What is a buying centre and in what type of business would a person expect to find one operating?

A buying centre is a group of individuals within an organization who participate in the buying process. They share common goals, risks, and knowledge important to purchase decisions. For most large multi-store chain resellers, such as Sears, 7-Eleven convenience stores, or Safeway, the buying centre is very formal and is called a buying committee. In addition, most industrial firms or government units use groups to arrive at buying decisions.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Moderate
Learning Objective: 05-04 Describe how buying centres and buying situations influence organizational purchasing.
Topic: 05-20 The Buying Centre: A Cross-Functional group

Identify and describe the five roles in a buying centre.

There are five roles an individual can play in a buying centre:

1. users, who actually use the product or service
2. influencers, who help define the specifications for what is bought
3. buyers, who have the formal authority and responsibility to select the supplier and negotiate the terms of the contract
4. deciders, who have the formal or informal power to select or approve the supplier
5. gatekeepers, who control the flow of information in the buying centre

What are the three types of organizational buying situations?

The three types of organizational buying situations are:

1. straight rebuy: simply reordering an existing product of service from the list of acceptable suppliers
2. modified rebuy: when the users, influencers, or deciders in the buying centre want to change the product’s specifications, price, delivery, schedule, or supplier
3. new buy: when the organization is a first-time buyer of the product of service

What are the bases on which business markets are segmented?

The process of segmenting business markets divides markets based on type of customer, size of customer, type of buying situation, customer location, and benefits sought.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Moderate
Learning Objective: 05-05 Outline the process of business segmentation.
Topic: 05-21 B2B Market Segmentation

Differentiate between traditional and reverse auctions.

With a traditional auction, there is one seller and many prospective buyers. Prospective buyers observe the bidding process and decide whether to increase the bid price. The auction ends when a single buyer who is willing to pay the highest price remains. With a reverse auction, there is one buyer and many sellers. A buyer communicates a need for a product and invites potential suppliers to bid in competition with each other. As more prospective suppliers become involved, there is a downward pressure on price. The auction ends when a single supplier willing to offer the lowest price remains.

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