Small Business Management 6th Canadian Edition by Longenecker – Test Bank

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Chapter 5—The Family Business

 

TRUE/FALSE

 

  1. When a parent retires completely and turns the firm over to a son or daughter, the firm ceases to be a family business.

 

ANS:  F

A firm remains a family business when it passes from one generation to the next.

 

PTS:   1                    REF:   p. 138            OBJ:   5-1 TYPE: C

NAT:  Analytic | Dynamics

 

  1. A company run by the great grandchildren of the founder would be considered to be managed by a cousin consortium.

 

ANS:  T                    PTS:   1                    REF:   p. 136             OBJ:   5-1 TYPE: D

NAT:  Analytic | Dynamics

 

  1. In a family business, the family’s primary function it to ensure the profitability and survival of the business.

 

ANS:  F

The family’s primary goals are the development of members as well as equality of reward opportunities for each member.

 

PTS:   1                    REF:   p. 137            OBJ:   5-1 TYPE: C

NAT:  Analytic | Dynamics

 

  1. One advantage of a family business is that there is no need to separate the business interests from the family interests.

 

ANS:  F

Competing interests can complicate the management process; therefore the separation of business interests from family interests would be best as each organization has separate purposes..

 

PTS:   1                    REF:   p. 138            OBJ:   5-1 TYPE: C

NAT:  Analytic | Dynamics

 

  1. An advantage of a family business is that family members may have company knowledge that leads to better decisions.

 

ANS:  T                    PTS:   1                    REF:   p. 139             OBJ:   5-1 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Nepotism is not as large of a problem for small companies as for large ones.

 

ANS:  F

Nepotism can be a problem for both.

 

PTS:   1                    REF:   p. 140            OBJ:   5-1 TYPE: C

NAT:  Analytic | Dynamics

 

  1. One weakness of a family business is the tendency of family members to leave quickly when the business starts to falter.

 

ANS:  F

Members of the family are drawn to the business because of family ties, and they tend to stick with the business “through thick and thin.”

 

PTS:   1                    REF:   p. 138            OBJ:   5-1 TYPE: C

NAT:  Analytic | Dynamics

 

  1. A major weakness of a family business is that it has greater difficulty than a nonfamily business in focusing on long-run decision making.

 

ANS:  F

A family can take the long-run view more easily than corporate managers who are being evaluated on year-to-year business results.

 

PTS:   1                    REF:   p. 139            OBJ:   5-1 TYPE: C

NAT:  Analytic | Dynamics

 

  1. The distinctive values that motivate and guide an entrepreneur in the founding of a firm cannot serve as a foundation for competitive advantage in the firm.

 

ANS:  F

The values can serve as a foundation for competitive advantage in the firm. For example, emphasizing intensive customer service may attract business that would normally go to competing firms.

 

PTS:   1                    REF:   p. 138            OBJ:   5-1 TYPE: C

NAT:  Analytic | Value Creation

 

  1. A family firm’s special patterns and beliefs comprise the firm’s organizational culture.

 

ANS:  T                    PTS:   1                    REF:   p. 140             OBJ:   5-2 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Research shows that next-generation family members motivated by a need-based commitment instead of a desire-based commitment are the most likely to pursue long-term careers with the family business.

 

ANS:  F

 

The family members motivated by a desire-based commitment are the most likely to work hard, because of their passion for the business.

 

PTS:   1                    REF:   p. 144            OBJ:   5-2 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Family members with an obligation-based commitment may see their participation in the family business as a requirement for family unity.

 

ANS:  T                    PTS:   1                    REF:   p. 142             OBJ:   5-2 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Family members with a desire-based commitment in the family firm are the least likely to work hard because of their lack of confidence in their abilities.

 

ANS:  F

 

Family members with a need-based commitment are often in doubt and may lack the capabilities and confidence to excel.  This problem is compounded if they are promoted only because of their last name.

 

PTS:   1                    REF:   p. 144            OBJ:   5-2 TYPE: C

NAT:  Analytic | Dynamics

 

  1. A 2007 survey of family business owners conducted by MassMutual Financial Group, Kennesaw State University and the Family Firm Institute concluded that the overlap between individual and organizational values may result in increased levels of employee loyalty, commitment and organizational citizenship behavior.

 

ANS:  T                    PTS:   1                    REF:   p. 144             OBJ:   5-2 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Husband-wife teams that own a business are popularly referred to as co-preneurs.

 

ANS:  T                    PTS:   1                    REF:   p. 145             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Two major factors involved in grooming a son or daughter to enter the family business are the child’s aptitude and the right to choose a career.

 

ANS:  T                    PTS:   1                    REF:   p. 146             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Some family businesses benefit from effective collaboration among brothers and sisters.

 

ANS:  T                    PTS:   1                    REF:   p. 147             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. A family business involving two or more children may experience either sibling cooperation or sibling rivalry.

 

ANS:  T                    PTS:   1                    REF:   p. 147             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. One sibling dilemma in a family business has been labeled the predator/parasite conflict.

 

ANS:  T                    PTS:   1                    REF:   p. 148             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. In-laws not working in the family business may have a bad attitude about the company because of only hearing one side of an argument.

 

ANS:  T                    PTS:   1                    REF:   p. 148             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. The role of the entrepreneur’s spouse in family conflicts can sometimes be described as that of a mediator in business relationships between the entrepreneur and the children.

 

ANS:  T                    PTS:   1                    REF:   p. 149             OBJ:   5-3 TYPE: D

NAT:  Analytic | Dynamics

 

  1. In the family business, family considerations affect only members of the family.

 

ANS:  F

Those employees who are not family members are still affected by family considerations–e.g., being passed over for a deserved promotion that was set aside for a family member.

 

PTS:   1                    REF:   p. 150            OBJ:   5-4 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Nonfamily employees in a family business may be caught in the crossfire between feuding family members.

 

ANS:  T                    PTS:   1                    REF:   p. 150             OBJ:   5-4 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Family retreats are best handled by an outside facilitator, who can help develop an agenda and establish ground rules for discussion.

 

ANS:  T                    PTS:   1                    REF:   p. 152             OBJ:   5-4 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Even if family members lack the capability to run the business, an entrepreneur should always select a successor from this pool of talent.

 

ANS:  F

When capable family members are not available, the entrepreneur may have to bring in outside leadership to avoid a decline in firm performance.

 

PTS:   1                    REF:   p. 154            OBJ:   5-5 TYPE: C

NAT:  Analytic | Dynamics

 

  1. The process of preparing a family member to take over a family business typically takes about one year.

 

ANS:  F

This process usually takes a number of years, and in some cases decades.

 

PTS:   1                    REF:   p. 155            OBJ:   5-5 TYPE: C

NAT:  Analytic | Dynamics

 

  1. The owners of Lackland Self Storage are an example of how founding parents should clarify their children the transfer of management responsibilities.

 

ANS:  T                    PTS:   1                    REF:   p. 155             OBJ:   5-5 TYPE: A

NAT:  Reflective Thinking | Dynamics

 

  1. A “best practices” for the family firm is to promote family members above other, more skilled employees, so that the workers will understand who is in charge.

 

ANS:  F

Family members should be promoted based on their skill levels not on their being a family member.

 

PTS:   1                    REF:   p. 150            OBJ:   5-4 TYPE: C

NAT:  Analytic | Dynamics

 

  1. When hiring non-family employees it is only fair to identify the positions, if any, that are reserved for family members.

 

ANS:  T                    PTS:   1                    REF:   p. 151             OBJ:   5-4 TYPE: C

NAT:  Analytic | Dynamics

 

  1. A responsibility of a junior generation member who desires advancement is to understand that change is needed more so than the history of the family business.

 

ANS:  F

Junior generation member should understand how the founding values of the company could be used to implement change if needed.

 

PTS:   1                    REF:   p. 155            OBJ:   5-5 TYPE: C

NAT:  Analytic | Dynamics

 

  1. When a senior generation member is planning for succession, planning should encompass family members, employees and the owners.

 

ANS:  T                    PTS:   1                    REF:   p. 155             OBJ:   5-5 TYPE: C

NAT:  Analytic | Dynamics

 

  1. A 2008 study found that a majority of business owners had prepared both a will and a succession plan.

 

ANS:  F

 

The survey by PNC Wealth Management reported 77 percent of business owners had a will but only 33 percent have a succession plan.

 

PTS:   1                    REF:   p. 153            OBJ:   5-5 TYPE: C

NAT:  Analytic | Ethical and Legal

 

  1. Bequeathing equal shares of ownership to children in a family business will probably create havoc in the future functioning of the business.

 

ANS:  T                    PTS:   1                    REF:   p. 156             OBJ:   5-5 TYPE: C

NAT:  Analytic | Dynamics

 

  1. A critical part of a family firm transfer from one generation to the next is to discuss decisions with potential heirs as well as family members working in the company.

 

ANS:  T                    PTS:   1                    REF:   p. 157             OBJ:   5-5 TYPE: C

NAT:  Analytic | Dynamics

 

  1. When considering the long term health of a company during the transfer of ownership, tax advantages should be the primary concern.

 

ANS:  F

Tax considerations are relevant; however they should not be the primary concern as possible adverse effects on management may hurt the long term health of the company.

 

PTS:   1                    REF:   p. 156            OBJ:   5-5 TYPE: C

NAT:  Analytic | Finance

 

  1. A family retreat can bring family members closer together as well as strengthen the family business.

 

ANS:  T                    PTS:   1                    REF:   p. 151             OBJ:   5-5 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Family owned businesses represent less than five percent of the Fortune 500 firms in the United States.

 

ANS:  F

Over 35 percent of Fortune 500 firms have been identified as family businesses.

 

PTS:   1                    REF:   p. 137            OBJ:   5-1 TYPE: C

NAT:  Analytic | Economic Environments

 

MULTIPLE CHOICE

 

  1. In the U.S., family businesses generate what percent of the gross domestic product?
a. 35
b. 49
c. 75
d. 80

 

 

ANS:  B                    PTS:   1                    REF:   p. 137             OBJ:   5-1 TYPE: C

NAT:  Analytic | Economic Environments

 

  1. Which item is not an advantage of a family-owned business?
a. shared culture
b. focus on the long-run
c. reduced cost of control
d. commitment

 

 

ANS:  C                    PTS:   1                    REF:   p. 139             OBJ:   5-1 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Which family characteristic may be in conflict with a business?
a. competition is valued
b. taking advantage of opportunities
c. perpetuate traditions
d. All of the above may be in conflict.

 

 

ANS:  C                    PTS:   1                    REF:   p. 140             OBJ:   5-1 TYPE: C

NAT:  Analytic | Dynamics

 

  1. In a family business, the interests of the family and the interests of the business are best described as
a. overlapping.
b. conflicting.
c. coinciding.
d. having no relationship with each other.

 

 

ANS:  A                    PTS:   1                    REF:   p. 137             OBJ:   5-1 TYPE: C

NAT:  Analytic | Dynamics

 

  1. People with higher levels of _____ and _____ commitment are more likely to support efforts to promote change to improve the company’s performance and survival.
a. need-, cost
b. desire-, obligation-
c. cost-, desire-
d. strategy-, cost-

 

 

ANS:  B                    PTS:   1                    REF:   p. 142             OBJ:   5-2 TYPE: C

NAT:  Analytic | Dynamics

 

  1. A(n) _____   commitment may motivate a person to go “beyond the call of duty” to protect or extend personal financial interests in the company.
a. Need-based
b. Obligation-based
c. Cost-based
d. Strategy-based

 

 

ANS:  C                    PTS:   1                    REF:   p. 144             OBJ:   5-2 TYPE: D

NAT:  Analytic | Dynamics

 

  1. The close relationship of business factors and family concerns in a family business has been described as
a. separation of domains.
b. a generational gap.
c. an example of blood being thicker than water.
d. overlapping.

 

 

ANS:  D                    PTS:   1                    REF:   p. 137             OBJ:   5-1 TYPE: C

NAT:  Analytic | Dynamics

 

  1. A benefit of a strong family relationships is the greater willingness of family members to
a. adopt new operating methods when needed.
b. act generously in compensating nonfamily employees.
c. sacrifice salaries and dividends when necessary.
d. emphasize short-run profits.

 

 

ANS:  C                    PTS:   1                    REF:   p. 138             OBJ:   5-1 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Steve, Harry, and Chris, who own and operate a family auto parts store, are experiencing tough times during a downturn in the local economy. To help the store survive these conditions, the brothers agree to each take a 25 percent reduction in salary for a one-year period. This decision
a. demonstrates a weakness of financial management.
b. illustrates an important advantage of a family business.
c. reveals a lack of customer orientation in a family business.
d. reflects a lessening of entrepreneurial ambition in second-generation businesses.

 

 

ANS:  B                    PTS:   1                    REF:   p. 138             OBJ:   5-1 TYPE: A

NAT:  Reflective Thinking | Dynamics

 

  1. A founder’s core values may become part of the family business culture because
a. the founder typically knows what is best for the company’s culture.
b. others in the firm absorb traditions and values established by the founder.
c. the values coincide with modern management theory.
d. family members follow family traditions without excessive analysis.

 

 

ANS:  B                    PTS:   1                    REF:   p. 141             OBJ:   5-2 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Those with a(n) _______ commitment are the most likely to work hard because of their passion for the business.
a. need-based
b. strategy-based
c. cost-based
d. desire-based

 

 

ANS:  D                    PTS:   1                    REF:   p. 142             OBJ:   5-2 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Family members who join the business because of a concern that they may not be able to reach career success on their own display a(n)  _____ commitment.
a. desire-based
b. obligation-based
c. need-based
d. cost-based

 

 

ANS:  C                    PTS:   1                    REF:   p. 142             OBJ:   5-2 TYPE: D

NAT:  Analytic | Dynamics

 

  1. A family member who feels he/she ought to pursue a career in the family business is expressing a(n) ______  commitment.
a. desire-based
b. obligation-based
c. cost-based
d. need-based

 

 

ANS:  B                    PTS:   1                    REF:   p. 142             OBJ:   5-2 TYPE: D

NAT:  Analytic | Dynamics

 

  1. A family member who believes that joining the business may be the best way to benefit from what the family firm has to offer is revealing a (n)  _____ commitment.
a. desire-based
b. obligation-based
c. cost-based
d. need-based

 

 

ANS:  C                    PTS:   1                    REF:   p. 142             OBJ:   5-2 TYPE: D

NAT:  Analytic | Dynamics

 

  1. A common problem for a founder in passing the business on to a daughter or son is
a. introducing the child to outsiders such as bankers.
b. finding a suitable position for the son or daughter within the business.
c. arranging the transition from part-time to full-time employment.
d. deciding whether the child has the necessary temperament and ability.

 

 

ANS:  D                    PTS:   1                    REF:   p. 145             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. An inherent problem for couples involved in a family business is that
a. conflicts in the business tend to carry over into family life.
b. hours of work may become longer for one person.
c. uneven division of labor i.e. one person is only responsible for the menial tasks.
d. some husbands find their masculinity threatened when their wives are better managers.

 

 

ANS:  A                    PTS:   1                    REF:   p. 145             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Jane and Joe are experiencing a strain with their family relationship after running their family business for 5 years. Which issue might be the most likely underlying cause of the tension?
a. Jane is the CEO while her husband is the CPA.
b. Joe started the business but has stepped down from the CEO position.
c. Jane and Joe’s roles have not been carefully defined as the business has grown.
d. Their difference of opinions about a business matter is spilling over into their family time.

 

 

ANS:  D                    PTS:   1                    REF:   p. 145             OBJ:   5-3 TYPE: A

NAT:  Reflective Thinking | Dynamics

 

  1. In considering the role of younger family members, the best philosophy is to recognize that
a. a child should have a right to a job in the business if he or she desires.
b. no family member should be hired at any level.
c. children should have a right to prove themselves.
d. sibling rivalry will always be an issue with second-generation managers.

 

 

ANS:  C                    PTS:   1                    REF:   p. 146             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. From the children’s standpoint, one common reason that they may be reluctant to join the family firm is a desire to
a. make a difference in another industry.
b. prove their abilities without family assistance.
c. make a higher rate of pay.
d. help the parent avoid favoritism.

 

 

ANS:  B                    PTS:   1                    REF:   p. 146             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Sibling rivalry in a family business
a. rarely affects nonfamily members in the firm.
b. may create disagreements about business policy.
c. is unusual if roles are determined before the siblings join the business.
d. is often good because it spurs business competition within the organization.

 

 

ANS:  B                    PTS:   1                    REF:   p. 147             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. As the spouse of the President of Two Men and a Truck, Neil Bergeron serves the family business in a typical but critical role of
a. making impartial decisions on controversial business matters when his wife, Melanie, asks.
b. filling the role of a company director so as to provide balance in family matters.
c. mediating family disputes.
d. supporting Melanie through the many hours the business requires.

 

 

ANS:  D                    PTS:   1                    REF:   p. 149             OBJ:   5-3 TYPE: A

NAT:  Reflective Thinking | Dynamics

 

  1. In a 2007 study on family unity, ___ percent of respondents said family members share the same values.
a. 87%
b. 65%
c. 50%
d. 38%

 

 

ANS:  A                    PTS:   1                    REF:   p. 144             OBJ:   5-2 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Which statement is the most correct about in-laws and possible complications in a family business?
a. Rarely do in-laws impact the business since they are only indirectly involved and have limited decision making responsibilities if at all.
b. In-laws may impact the business if they are employed in the firm and are responsible for decision making.
c. There will be a complication only when in-laws are competing against another family member for a promotion.
d. In-laws will impact the business as they increase the number of persons who are either directly or indirectly involved in the family business.

 

 

ANS:  D                    PTS:   1                    REF:   p. 148             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. A document that states the principles intended to guide a family firm through times of crisis and change, including the succession process is called the
a. business plan
b. articles of incorporation
c. family business constitution
d. corporate by-laws

 

 

ANS:  C                    PTS:   1                    REF:   p. 152             OBJ:   5-4 TYPE: D

NAT:  Analytic | Ethical and Legal

 

  1. If the spouse is not actively involved in the family business, how can they best support the entrepreneur?
a. Serve as the mediator between any children wanting to enter the business and the entrepreneur.
b. Be a good listener.
c. Mandate they are given a copy of the books each month.
d. All of the above roles should be done.

 

 

ANS:  B                    PTS:   1                    REF:   p. 149             OBJ:   5-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Concerning the need for good management in the family business, which “best practice” is best?
a. Resist preparing successors for leadership to avoid demoralizing those who are not selected.
b. Maintain rigid guidelines based on family traditions to guide the company into the future.
c. Emphasize the attraction and retention of family members.
d. Stimulate new thinking and fresh strategic insights by promoting learning.

 

 

ANS:  D                    PTS:   1                    REF:   p. 150             OBJ:   5-4 TYPE: C

NAT:  Analytic | Dynamics

 

  1. To avoid a stifling atmosphere for nonfamily employees in a family business, the owner should
a. promote only nonfamily members.
b. avoid all special consideration for family members.
c. make clear the extent of opportunity for nonfamily members.
d. minimize discussion about future management changes.

 

 

ANS:  C                    PTS:   1                    REF:   p. 151             OBJ:   5-4 TYPE: C

NAT:  Analytic | Dynamics

 

  1. To protect the interests of both the family and the business in a family business, the owner should
a. recognize a basic obligation to supply the family with employment of some type.
b. refuse to hire family members but, instead, reward them with generous dividends.
c. personally make all personnel decisions affecting family members.
d. identify the positions, if any, that are reserved for members of the family.

 

 

ANS:  D                    PTS:   1                    REF:   p. 151             OBJ:   5-4 TYPE: C

NAT:  Analytic | Dynamics

 

  1. A nonfamily employee of a family business complains that the recent promotion of a family member was unfair. The owner should
a. enter into a discussion of the roles and opportunities for both family members and outsiders.
b. clarify that family members always have the inside track, even though this fact is disappointing to the bypassed employee.
c. get the employee to think more positively by describing other attractive features of the employee’s job.
d. acknowledge that a tension always exists and that it can never be dealt with satisfactorily.

 

 

ANS:  A                    PTS:   1                    REF:   p. 151             OBJ:   5-4 TYPE: A

NAT:  Reflective Thinking | Dynamics

 

  1. A family retreat is designed to
a. bring family members together to openly discuss business matters.
b. focus on business matters while avoiding extensive communication.
c. control the lines of communication.
d. announce the latest policy decisions and other changes in the business.

 

 

ANS:  A                    PTS:   1                    REF:   p. 151             OBJ:   5-4 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Patricia, a nonfamily employee of a family business, is concerned about competing with family members for future career opportunities. To protect her personal interests, she should
a. align herself with the CEO to hopefully know when new positions will become open.
b. ask that the owner/manager clarify the extent of opportunities considering her skill set.
c. seek assurances that she will receive first consideration for promotion, ahead of family members who are not as qualified.
d. be realistic enough to leave the firm and seek employment in a nonfamily business.

 

 

ANS:  B                    PTS:   1                    REF:   p. 151             OBJ:   5-4 TYPE: A

NAT:  Reflective Thinking | Dynamics

 

  1. Family retreats, which open lines of communication,
a. use the founding entrepreneur as a communication facilitator.
b. avoid discussing sensitive issues for best results.
c. involve family members but not in-laws.
d. may result in formation of a family council to continue discussion.

 

 

ANS:  D                    PTS:   1                    REF:   p. 152             OBJ:   5-4 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Which statement is true concerning the process of preparing a family successor for leadership in the family business?
a. A specific date can be decided for a smoother transition between the successor and the current manager.
b. The process should be short for best result so as to not stall out any company momentum.
c. The process is best when the parties age as the next generation will be better prepared.
d. The process should be as long and drawn out as possible for the successor to be ready.

 

 

ANS:  D                    PTS:   1                    REF:   p. 155             OBJ:   5-5 TYPE: C

NAT:  Analytic | Ethical and Legal

 

  1. A family business constitution is sometimes labeled a _____.
a. business plan
b. by-law guide
c. family creed
d. succession plan

 

 

ANS:  C                    PTS:   1                    REF:   p. 153             OBJ:   5-4 TYPE: D

NAT:  Analytic | Ethical and Legal

 

  1. In preparing for succession, the senior generation should have accountability meaning that before a transfer of management occurs,
a. the estate of the senior generation should be settled and audited.
b. the senior generation should hold the next generation accountable for their actions.
c. the business should have a formal audit of the financial statements.
d. the next generation should develop long term plans for leadership and be held to these plans.

 

 

ANS:  B                    PTS:   1                    REF:   p. 155             OBJ:   5-5 TYPE: C

NAT:  Analytic | Ethical and Legal

 

  1. Senior management will be more receptive to the junior generation advancing if the junior generation
a. decides what time is best for their personal lives.
b. prepares for ownership by concentrating on learning “big” picture skills as opposed to basic management skills.
c. designs life plans for themselves and the business that involves what happens if the business fails,
d. proactively shares their preparation for advancement and ask for advice for implementation.

 

 

ANS:  D                    PTS:   1                    REF:   p. 156             OBJ:   5-5 TYPE: C

NAT:  Analytic | Ethical and Legal

 

  1. What step is best for parents to decrease succession conflict among children active in the firm and those who are not?
a. Letting those not involved in the company have a larger portion of an inheritance outside of the company and allow those involved in daily operations have more ownership of the business.
b. Letting the next generation reach a consensus about management of the company.
c. Changeing the ownership of the company so common (voting) stock is only given to those active in the company and others receive preferred (nonvoting) stock.
d. Making decisions based on tax considerations, not what is best for the next generation or the business.

 

 

ANS:  C                    PTS:   1                    REF:   p. 156             OBJ:   5-5 TYPE: C

NAT:  Analytic | Ethical and Legal

 

  1. Which statement is true concerning using available family talent in the succession plan?
a. Younger family members working in the business should realize that mistakes early on in their careers should be considered in their future advancement.
b. If the available talent is not sufficient inside the company, the owner must bring in outside leadership even if it is not perceived as a favorable decision by the family at large.
c. If a younger family member would like to advance their career by working on a new direction for the company, a negative decision by their parent means they should not discuss their ideas with the board of directors.
d. It is rare a younger member will have the skill set to rescue a struggling company; therefore they should not be considered for a succession plan.

 

 

ANS:  B                    PTS:   1                    REF:   p. 154             OBJ:   5-5 TYPE: C

NAT:  Analytic | Ethical and Legal

 

  1. Jim, the founder of a family business specializing in real estate, is contemplating turning the business over to his five children. One possibility, the founder believes, is to divide ownership equally among the children. This action would
a. be next to impossible as gaining consensus from six persons is difficult.
b. be inherently unfair if any of the children work in the company.
c. potentially hinder the future functioning of the business.
d. require a possible change in corporate structure since the company deals in real estate.

 

 

ANS:  C                    PTS:   1                    REF:   p. 156             OBJ:   5-5 TYPE: A

NAT:  Reflective Thinking | Dynamics

 

  1. Fran and Bob (who are married) own and manage a cleaning service. A potential advantage of this arrangement is that
a. differences of opinion about the business won’t carry over into family lives since they will see each other more hours daily.
b. it affords the opportunity to share more of their lives and build something together.
c. the business isn’t likely to dissipate their energies as they can each work on separate sections.
d. they can count on working fewer hours in the business.

 

 

ANS:  B                    PTS:   1                    REF:   p. 145             OBJ:   5-3 TYPE: A

NAT:  Reflective Thinking | Dynamics

 

  1. As a college student, Billy works part time in his mother’s garden supply wholesaling business during the year and full time in the summer. He would like to enter into the business after he graduates.  Based on the text, should his mother agree to his plan?
a. No, as he needs to work externally to build his confidence in taking over from nonfamily members.
b. No, as he should see if he can succeed with the family safety net and possibly gain knowledge in another industry.
c. Yes, as he would simply continue the tasks he does in the summer when he works full time.
d. Yes, as his talents have already been fully developed and shouldn’t be wasted on another company.

 

 

ANS:  B                    PTS:   1                    REF:   p. 146             OBJ:   5-2 TYPE: A

NAT:  Reflective Thinking | Dynamics

 

  1. A parent might attempt to resolve a transfer of ownership by giving active children in the firm’s management _____ stock and giving nonactive children _____ stock.
a. preferred, common
b. growth, speculative
c. common, preferred
d. more, less

 

 

ANS:  C                    PTS:   1                    REF:   p. 156             OBJ:   5-5 TYPE: C

NAT:  Analytic | Finance

 

  1. Tom is taking over the family business because it is what his parents have wanted him to do. He is showing a(n) _____ commitment.
a. cost-based
b. obligation-based
c. desire-based
d. need-based

 

 

ANS:  B                    PTS:   1                    REF:   p. 142             OBJ:   5-2 TYPE: A

NAT:  Reflective Thinking | Dynamics

 

  1. John is more likely to pursue a long-term career in the family business if he is motivated by a(n) _____ commitment.
a. cost-based
b. obligation-based
c. desire-based
d. need-based

 

 

ANS:  C                    PTS:   1                    REF:   p. 142             OBJ:   5-2 TYPE: C

NAT:  Analytic | Dynamics

 

  1. John and his brother Jack started a produce farm 20 years ago and are thinking about retirement.  Over time, their children have worked at the farm and so the cousins have started talking about taking over management.  At present, this produce farm is an example of ____.
a. co-preneur managed business
b. cousin consortium
c. owner-managed business
d. sibling partnership

 

 

ANS:  C                    PTS:   1                    REF:   p. 136             OBJ:   5-1 TYPE: A

NAT:  Reflective Thinking | Dynamics

 

  1. Jan and Jill started a business 20 years.  Jill recently stepped down; her daughter Jenny has agreed to start managing the company with Jan’s help; and the eventual goal is for Jenny to run the entire company.  This process between Jan and Jenny is called ____.
a. sibling partnership
b. family consortium
c. mentoring
d. Two of the above are true.

 

 

ANS:  C                    PTS:   1                    REF:   p. 155             OBJ:   5-5 TYPE: A

NAT:  Reflective Thinking | Dynamics

 

ESSAY

 

  1. Explain the concept of family and business overlap in a family business.

 

ANS:

Although the family and the business are separate institutions (each with its own members, goals, and values), they overlap in the family firm.

 

Families and businesses exist for fundamentally different reasons.  The family’s primary function is the care and nurturing of family members, while the business is concerned with the production and distribution of goods and services.  Family goals include the personal development of each member and the creation of equal opportunities and rewards for each member; the main business goal is to create value for the customer and firm’s owners.

 

Since relationships among family members in a business are more sensitive than relationships among unrelated employees, competing interests can complicate the management process.  Tension that is created may sometimes lead to conflict requiring management to act as managers and not as someone’s parent or child.

 

PTS:   1                    REF:   p. 137-138     OBJ:   5-1 TYPE: C

NAT:  Communication | Dynamics

 

  1. Explain the role of the entrepreneur’s spouse as it affects a family business and show how it can be made most effective if they do not have an active part of daily operations.

 

ANS:

The spouse’s role is often described as mediator. The spouse occupies a unique position, with a strong concern for each member of the family. At the same time, the spouse sees the business with some detachment because he or she is not involved in its everyday operations. The task of creating harmony and minimizing misunderstanding is a major one.

The role can be made most effective if there is effective communication between the spouse and entrepreneur.  The spouse must be informed about what is going on in the business.

 

Students should recognize, of course, that individual differences in personality affect the manner in which spouses carry out this role.

 

PTS:   1                    REF:   p. 149            OBJ:   5-3 TYPE: C

NAT:  Communication | Dynamics

 

  1. Outline the “best practices” for the management of a family firm.

 

ANS:

The text identified the following list of “best practices”:

a. Stimulate new thinking and fresh strategic insights.
b. Solicit ample input from outsiders.
c. Establish channels for constructive communication and use them often.
d. Build a culture that accepts continuous change.
e. Promote family members only according to their skill levels.
f. Attract and retain excellent nonfamily managers.
  1. Ensure fair compensation for all employees, including those outside the family.
  2. Establish a solid leadership succession plan.
  3. Exploit unique advantages of family ownership.

 

PTS:   1                    REF:   p. 150            OBJ:   5-4 TYPE: C

NAT:  Communication | Dynamics

 

  1. Discuss guidelines for a successful family business retreat.

 

ANS:

 

Since a family retreat should have all family members including in-laws, having the meeting away from the company could encourage a more informal atmosphere.  A facilitator should be hired to guide discussion if discussion is expected to be difficult.

 

Lansky’s guidelines are to:

  1. Be clear about the purpose of the retreat. What should the meeting accomplish?
  2. Set small, attainable goals. Don’t look at the retreat as having to accomplish all possible goals.
  3. Use an agenda and stick to it. Schedule the meeting for a fixed period of time, and appoint someone to take notes.
  4. Give everyone a chance to participate. This action is critical to establish trust among the participants. People need to feel that they have been heard.
  5. Know the difference between consensus and agreement. Participants don’t have to see things the same way (agreement) in order to concur on a course of action (consensus).

 

PTS:   1                    REF:   p. 139-140     OBJ:   5-4 TYPE: C

NAT:  Communication | Dynamics

 

  1. What could a founder do to make a succession plan successful?  Using the Three-Circle Model of Family Firms, identify issues the founder should discuss with each group.

 

ANS:

 

A founder should have a well developed plan that is properly communicated to all parties.  While it may be hard for the entrepreneur to think about not being at the business, a discussion should be had with

1) a spouse especially about issues related to settling an estate;

2) family members in the business (who may or may not be an owner) so they understand who will be leading the company and why.  Family members with possible succession talent should be supported;

3) family members not in the business in relation to the impact the change would make on any inheritance; and

4) nonfamily employees and nonfamily owners in the business as to who will be leading the company and the impact of a change in leadership.

 

PTS:   1                    REF:   p. 137 | p. 153                                 OBJ:   5-1 TYPE: C | 5-5 TYPE: C

NAT:  Communication | Dynamics

 

  1. Describe seven strengths of family enterprises.  Based on the text, how does Two Men and a Truck (TNT) achieve these strengths?

 

ANS:

 

The seven principles are summarized from Leach’s Family Business: The Essentials and Exhibit 5-2.

 

  1. Family business culture and values – which provide guidance toward accomplishing shared goals

TNT has been in business for over 30 years and has involved a mother and three siblings in its daily operations for most of those years.  Even a grandmother was involved in the early years of operations. Husband of daughter is supportive even though he isn’t in daily operations.

 

  1. Commitment – the passion that grows out of a family’s sense of responsibility

Sibling partnership as the brothers and sister along with the mother still run the company now. TNT ‘s Gramma Rule of “Treat everyone with dignity, respect, and patience” illustrates this principle along with its core value of giving back to the community.

 

  1. Knowledge – applied as a competitive advantage by family members who have learned through intimate involvement

Again TNT’s 30 year history with the same family members speaks of knowledge.

 

  1. Long-range thinking – looking toward the next generation, not just the next quarter

Mother’s plan to franchise brought daughter into the company but also looked to future growth.

 

  1. A stable culture – typically found in durable, low-profile, profitable niche enterprises

3o years of operations

 

  1. Speedy decisions – a function of trust among family members

When daughter decided to step down, decision was made immediately for brother to step into position.

 

  1. Reliability and pride, recognized by customers, suppliers, creditors, and other outsiders

Again 3o years of operations has resulting in TNT being a national operation.

 

PTS:   1                    REF:   p. 139            OBJ:   5-2 TYPE: A

NAT:  Communication | Dynamics

 

 

 

Chapter 17—Promotional Planning

 

TRUE/FALSE

 

  1. Every communication has a receiver, a source, and a channel through which the message is passed.

 

ANS:  T                    PTS:   1                    REF:   p. 498             OBJ:   17-1 TYPE: D

NAT:  Analytic | Value Creation

 

  1. Promotion is the marketing communications that informs and persuades consumers.

 

ANS:  T                    PTS:   1                    REF:   p. 497             OBJ:   17-1 TYPE: D

NAT:  Analytic | Value Creation

 

  1. The way a business combines its communications is a promotional mix.

 

ANS:  F

The combination of promotional methods is a promotional mix.

 

PTS:   1                    REF:   p. 499            OBJ:   17-1 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The way small businesses communicate with their customers is completely different from the way family members communicate with one another.

 

ANS:  F

There are many similarities between the way small businesses communicate with their customers and the family members communicate with each other.

 

PTS:   1                    REF:   p. 498            OBJ:   17-1 TYPE: C

NAT:  Analytic | Value Creation

 

  1. While communication technology is changing, promotion is still based on communication.

 

ANS:  T                    PTS:   1                    REF:   p. 498             OBJ:   17-1 TYPE: C

NAT:  Technology | Value Creation

 

  1. The promotional mix is influenced by three major factors: the geographical nature of the market to be reached, customer income, and the target market.

 

ANS:  F

The promotional mix is influenced by three major factors: the geographical nature of the market to be reached, the size of the promotional budget, and a product’s characteristics.

 

PTS:   1                    REF:   p. 499            OBJ:   17-1 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Personal selling is an effective method for promoting light bulbs.

 

ANS:  F

A widely dispersed market such as light bulbs generally requires mass coverage through advertising.  More individualized, local or small markets would best be served by personal selling.

 

PTS:   1                    REF:   p. 499            OBJ:   17-1 TYPE: A

NAT:  Analytic | Value Creation

 

  1. In many cases, the best way to set a promotional budget would be to compare amounts from all four methods.

 

ANS:  T                    PTS:   1                    REF:   p. 500             OBJ:   17-2 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The best approach to promotional funding is allocating what can be spared.

 

ANS:  F

Such an approach to promotional spending should be avoided because it ignores promotional goals.

 

PTS:   1                    REF:   p. 500            OBJ:   17-2 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The percentage of sales method for estimating promotional expenditures can not be used for new businesses because the companies do not have historical sales figures.

 

ANS:  F

The method can be used by using secondary date on industry averages to determine a percentage.

 

PTS:   1                    REF:   p. 500            OBJ:   17-2 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Spending as much as the competition does for promotional efforts can lead the firm to copy the mistakes and successes of a rival.

 

ANS:  T                    PTS:   1                    REF:   p. 500             OBJ:   17-2 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The preferred approach for estimating promotional costs is to use a percentage of sales for allocating expenses.

 

ANS:  F

Estimating expenditures would be best by costing out what the promotional efforts will need.

 

PTS:   1                    REF:   p. 500            OBJ:   17-2 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Personal selling is promotion that is delivered in a one-on-one environment.

 

ANS:  T                    PTS:   1                    REF:   p. 501             OBJ:   17-3 TYPE: D

NAT:  Analytic | Value Creation

 

  1. Prospecting is the ongoing search for new customers.

 

ANS:  T                    PTS:   1                    REF:   p. 502             OBJ:   17-3 TYPE: D

NAT:  Analytic | Value Creation

 

  1. Inquiries by a potential customer that do not lead to a sale can still create what is known as a “promising prospect.”

 

ANS:  F

These inquiries can create what is called a “hot prospect.”

 

PTS:   1                    REF:   p. 502            OBJ:   17-3 TYPE: C

NAT:  Analytic | Value Creation

 

  1. A “canned” sales talk will be successful with most buyers.

 

ANS:  F

A “canned” sales talk will not succeed with most buyers.

 

PTS:   1                    REF:   p. 504            OBJ:   17-3 TYPE: C

NAT:  Analytic | Value Creation

 

  1. For most persons, training a salesperson on how to deal with customer objections will be sufficient.

 

ANS:  F

There is no substitute for actual selling experience.

 

PTS:   1                    REF:   p. 504            OBJ:   17-3 TYPE: C

NAT:  Analytic | Value Creation

 

  1. To better serve the customer, a salesperson should be most passionate about the product or service than the customer’s objections.

 

ANS:  F

An excellent salesperson will show true passion about what the product or service can do for the customer.

 

PTS:   1                    REF:   p. 504            OBJ:   17-3 TYPE: C

NAT:  Analytic | Value Creation

 

  1. An issue with motivating salespeople is that the goals of the entrepreneur may differ from the salesperson.

 

ANS:  T                    PTS:   1                    REF:   p. 505             OBJ:   17-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Straight salaries are best for motivating salespeople because of the financial security salaries provide.

 

ANS:  F

Straight salaries may actually reduce the motivation of salespeople precisely because of the financial security salaries provide.

 

PTS:   1                    REF:   p. 505            OBJ:   17-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Social websites have an increasing number of subscribers providing reviews of establishments, providing the astute entrepreneur with impersonal referrals.

 

ANS:  T                    PTS:   1                    REF:   p. 502             OBJ:   17-3 TYPE: C

NAT:  Technology | Value Creation

 

  1. The most cost-efficient mode of personal selling may be the use of a self-employed sales or marketing representative.

 

ANS:  T                    PTS:   1                    REF:   p. 504             OBJ:   17-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. A generous cap with a commission cap is typically best for most small businesses.

 

ANS:  F

Putting a cap will limit top producers causing them to possibly leave the company.

 

PTS:   1                    REF:   p. 505            OBJ:   17-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Institutional advertising is primarily concerned with a company and its reputation.

 

ANS:  T                    PTS:   1                    REF:   p. 506             OBJ:   17-4 TYPE: D

NAT:  Analytic | Value Creation

 

  1. Product advertising makes potential customers aware of a particular product or service and their need for it.

 

ANS:  T                    PTS:   1                    REF:   p. 506             OBJ:   17-4 TYPE: D

NAT:  Analytic | Value Creation

 

  1. An app can be on a mobile device such as a smartphone and used for business or entertainment.

 

ANS:  T                    PTS:   1                    REF:   p. 512             OBJ:   17-4 TYPE: D

NAT:  Technology | Value Creation

 

  1. Product advertising is intended to keep the public conscious of the company and its good reputation.

 

ANS:  F

It is institutional advertising that is intended to keep the public conscious of the company and its good reputation.

 

PTS:   1                    REF:   p. 506            OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Customers expect a small business to have a websites.

 

ANS:  T                    PTS:   1                    REF:   p. 508             OBJ:   17-4 TYPE: C

NAT:  Technology | Value Creation

 

  1. Social networking is an informal communication method that can be controlled by the company through its website.

 

ANS:  F

While social networking is a way to communicate informally with other users, social networking can not be controlled through social media such as websites and apps.

 

PTS:   1                    REF:   p. 513            OBJ:   17-4 TYPE: C

NAT:  Technology | Value Creation

 

  1. Advertising seeks to sell by informing, persuading, and reminding customers of the existence or superiority of a firm’s product or service.

 

ANS:  T                    PTS:   1                    REF:   p. 506             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Advertising can make a product successful in the long term.

 

ANS:  F

If the product is second-rate, the success will be temporary; advertising should complement a good product and never be a replacement for a bad product.

 

PTS:   1                    REF:   p. 506            OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The majority of small business advertising is institutional advertising.

 

ANS:  F

The majority of small business advertising is product advertising.

 

PTS:   1                    REF:   p. 506            OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The type of advertising used should be based on the nature of the business, industry practice, available media, and the firm’s objectives.

 

ANS:  T                    PTS:   1                    REF:   p. 506             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Most small businesses create their own promotional messages.

 

ANS:  F

Most small businesses rely on others (e.g., advertising agencies, suppliers, trade associations, advertising media) to create their promotional messages.

 

PTS:   1                    REF:   p. 506            OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Advertising online is still too new to challenge traditional media for promotional dollars.

 

ANS:  F

With color graphics, two-way information exchanges, video streaming, and 24-hour availability, web advertising is challenging traditional media for promotional dollars.

 

PTS:   1                    REF:   p. 508            OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. While e-mail promotion provides a low-cost way to pinpoint customers and achieve response rates higher than those for banner ads, the issue of churning is a concern.

 

ANS:  F

The concerns are cluttered consumer inboxes, fear of computer viruses and spam.

 

PTS:   1                    REF:   p. 511            OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Banner ads and pop up ads are clearly cost effective.

 

ANS:  F

The effectiveness is not clear; the novelty has worn off and click through rates are declining.,

 

PTS:   1                    REF:   p. 511            OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Domain name should be checked for availability and registered with ICANN.

 

ANS:  F

The Internet Corporation for Assigned Names and Numbers (ICANN), a nonprofit

corporation currently overseeing the global Internet, does not register names.  This step should be done through a domain registration firm.

 

PTS:   1                    REF:   p. 509            OBJ:   17-4 TYPE: C

NAT:  Technology | Ethical and Legal

 

  1. A small business that is search engine-friendly will have lower ranks and therefore it will attract more visitors.

 

ANS:  F

The sooner a small business is represented in search engine results (i.e., the higher it ranks), the more visitors it will attract.

 

PTS:   1                    REF:   p. 510            OBJ:   17-4 TYPE: C

NAT:  Technology | Value Creation

 

  1. Sales promotion refers to promotional techniques other than personal selling or advertising.

 

ANS:  T                    PTS:   1                    REF:   p. 514             OBJ:   17-5 TYPE: D

NAT:  Analytic | Value Creation

 

  1. Publicity is accurately described as free advertising.

 

ANS:  F

Although publicity is often considered to be free advertising, this type of promotion is not always free (e.g., consider charges for representation in school yearbooks and with community athletic programs.)

 

PTS:   1                    REF:   p. 516            OBJ:   17-5 TYPE: D

NAT:  Analytic | Value Creation

 

  1. Advertising is considered to be part of sales promotion.

 

ANS:  F

Advertising is separate from a sales promotion.

 

PTS:   1                    REF:   p. 514            OBJ:   17-5 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Trade show groups claim that the cost of an exhibit is less than one-fourth the cost of a sales call.

 

ANS:  T                    PTS:   1                    REF:   p. 515             OBJ:   17-5 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Many small manufacturers, while agreeing that trade-show exhibits can be helpful in promotion, rightly believe that they are not as cost-effective as media advertising.

 

ANS:  F

Trade show exhibits are more cost-effective than advertising, but they are not free.

 

PTS:   1                    REF:   p. 515            OBJ:   17-5 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Regular contact with news media is required if publicity programs are to be effective.

 

ANS:  T                    PTS:   1                    REF:   p. 516             OBJ:   17-5 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Both wholesalers and retailers can utilize sales promotion tools to increase sales.

 

ANS:  T                    PTS:   1                    REF:   p. 517             OBJ:   17-5 TYPE: C

NAT:  Analytic | Value Creation

 

MULTIPLE CHOICE

 

  1. Which component is not part of the communication process?
a. Source
b. Perception
c. Message
d. Channel

 

 

ANS:  B                    PTS:   1                    REF:   p. 498             OBJ:   17-1 TYPE: D

NAT:  Analytic | Value Creation

 

  1. A promotional mix is influenced by the
a. geography of the market, the promotional budget, and product characteristics.
b. geography of the market, retailer market, and product characteristics.
c. firm’s target customers, product characteristics, and budget requirements.
d. firm’s target customers, market size, and product characteristics.

 

 

ANS:  A                    PTS:   1                    REF:   p. 499             OBJ:   17-1 TYPE: C

NAT:  Analytic | Value Creation

 

  1. A widely dispersed market favors which promotional method?
a. Personal selling
b. Sales promotion
c. Personal promotion
d. Advertising

 

 

ANS:  D                    PTS:   1                    REF:   p. 499             OBJ:   17-1 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Which category would be best for permanent markers?
a. Advertising
b. Personal Selling
c. Sales Promotions
d. Two of the above would be appropriate.

 

 

ANS:  A                    PTS:   1                    REF:   p. 499             OBJ:   17-1 TYPE: A

NAT:  Analytic | Value Creation

 

  1. Which category would be best for a CPA firm?
a. Advertising
b. Personal Selling
c. Sales Promotions
d. Two of the above would be appropriate.

 

 

ANS:  B                    PTS:   1                    REF:   p. 499             OBJ:   17-1 TYPE: A

NAT:  Analytic | Value Creation

 

  1. Which channel option would be the least personal for a business to its customer?
a. Blog
b. E-mail
c. Greeting Card
d. Personal Visit

 

 

ANS:  A                    PTS:   1                    REF:   p. 498             OBJ:   17-1 TYPE: A

NAT:  Analytic | Value Creation

 

  1. Promotional funds are determined according to past experience in which of the following methods?
a. What can be spared
b. Spending as much as the competition
c. Percentage of sales
d. Forecasted industry standard

 

 

ANS:  C                    PTS:   1                    REF:   p. 499             OBJ:   17-2 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The major problem with the ____ method of determining promotional expenditures is the tendency to spend more when sales are increasing and less when they are declining.
a. percentage of sales
b. what it will take to do the job
c. sales plus
d. what can be spared

 

 

ANS:  A                    PTS:   1                    REF:   p. 500             OBJ:   17-2 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Which method does not describe the determination of promotional expenditures?
a. Matching industry forecasts
b. Spending as much as the competition
c. What can be spared
d. What it will take to do the job

 

 

ANS:  A                    PTS:   1                    REF:   p. 500             OBJ:   17-2 TYPE: C

NAT:  Analytic | Value Creation

 

  1. A widely used piecemeal approach to determining the level of promotional expenditures is
a. expert opinion.
b. what can be spared.
c. what the market will bear.
d. cost plus.

 

 

ANS:  B                    PTS:   1                    REF:   p. 500             OBJ:   17-2 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The preferred method of determining promotional expenditures is
a. percentage of sales.
b. what it will take to do the job.
c. cost plus.
d. what can be spared.

 

 

ANS:  B                    PTS:   1                    REF:   p. 500             OBJ:   17-2 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The “spending as much as the competition” method
a. can be used to duplicate the promotional efforts of close competitors.
b. depends on past experiences.
c. should be used to introduce a unique, new product.
d. should never be used.

 

 

ANS:  A                    PTS:   1                    REF:   p. 500             OBJ:   17-2 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Inspiring Toys, a small manufacturer of educational toys, is formulating a budget for next year’s promotional activities. What method should be considered to react to a short run promotional tactic done by Mattel?
a. spending as much as the competition
b. percentage of sales
c. how much for specific results
d. deciding what can be spared

 

 

ANS:  A                    PTS:   1                    REF:   p. 499-500      OBJ:   17-2 TYPE: A

NAT:  Analytic | Value Creation

 

  1. Rebecca is starting a new consulting business for a small, local target market. She has determined the amount for the four methods:  percentage of sales $2,000; how much to spare $1,000; competition spending $5,000; and specific results $3,000. How much should she spend?
a. $1,000 because it is the least amount.
b. $3,000 because it is within the range and also for specific results.
c. $5,000 because it is the largest amount.
d. $10,000 because it twice the total of the competition.

 

 

ANS:  B                    PTS:   1                    REF:   p. 500             OBJ:   17-2 TYPE: A

NAT:  Analytic | Value Creation

 

  1. Personal selling is widely used in
a. retail establishments only.
b. wholesale and retail establishments only.
c. service establishments only.
d. all types of establishments

 

 

ANS:  D                    PTS:   1                    REF:   p. 501             OBJ:   17-3 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Personal selling degenerates into order-takers when a salesperson
a. has limited knowledge of the product or service.
b. is persistent about selling the product or service.
c. is not friendly and enthusiastic when a customer enters the store.
d. can not handle objections.

 

 

ANS:  A                    PTS:   1                    REF:   p. 501             OBJ:   17-3 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The two major steps in preparing for a sales presentation are
a. advertising and practicing.
b. prospecting and practicing.
c. publicity and prospecting.
d. exhibits and prospecting.

 

 

ANS:  B                    PTS:   1                    REF:   p. 502             OBJ:   17-3 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Media publications, public records, and directories are sources of
a. impersonal referrals.
b. marketer-initiated contacts.
c. personal referrals.
d. customer-initiated contacts.

 

 

ANS:  A                    PTS:   1                    REF:   p. 502             OBJ:   17-3 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Telephone calls and mail surveys are examples of
a. impersonal referrals.
b. marketer-initiated contacts.
c. personal referrals.
d. customer-initiated contacts.

 

 

ANS:  B                    PTS:   1                    REF:   p. 502             OBJ:   17-3 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Customer objections can be categorized as relating to
a. product and price.
b. need and sequence.
c. source and pitch.
d. timing and sequence.

 

 

ANS:  A                    PTS:   1                    REF:   p. 502             OBJ:   17-3 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Which compensation plan is best suited for salespersons in a small business?
a. Straight salary plan
b. Strictly commissions-on-sales plan
c. Combination of salary and commissions, with the salary representing the larger portion
d. Combination of salary and commissions, with the commissions representing the larger portion

 

 

ANS:  C                    PTS:   1                    REF:   p. 505             OBJ:   17-3 TYPE: C

NAT:  Analytic | Dynamics

 

  1. Which technique is not for responding to customers objections?
a. Indirect Denial Method
b. Compensation Method
c. Clutter Hachette Method
d. Pass-up Method

 

 

ANS:  C                    PTS:   1                    REF:   p. 503             OBJ:   17-3 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Mary, a sales representative for a small cleaning business, asks current customers for names of friends, customers and other businesses that might be interested in the company’s cleaning services. Mary is relying on ____ to identify potential customers.
a. customer-initiated contacts
b. impersonal referrals
c. marketer-initiated contacts
d. personal referrals

 

 

ANS:  D                    PTS:   1                    REF:   p. 502             OBJ:   17-3 TYPE: A

NAT:  Analytic | Value Creation

 

  1. Will is a salesperson for a small appliance store. In an attempt to locate potential new customers, he decides to poll Facebook visitors; they are entered into a drawing for a gift certificate at the store. Those individuals complete the poll will receive a phone call from Will about the store’s products and current promotions. Will is gaining knowledge of potential customers through
a. personal referrals.
b. marketer-initiated contacts.
c. impersonal referrals.
d. customer-initiated contacts.

 

 

ANS:  B                    PTS:   1                    REF:   p. 502             OBJ:   17-3 TYPE: A

NAT:  Technology | Value Creation

 

  1. A salesperson at Carpet Warehouse searches public records of new building permits to identify potential customers for new carpets. This salesperson is relying on ____ to identify sales prospects.
a. personal referrals
b. marketer-initiated contacts
c. impersonal referrals
d. customer-initiated contacts

 

 

ANS:  C                    PTS:   1                    REF:   p. 502             OBJ:   17-3 TYPE: A

NAT:  Analytic | Value Creation

 

  1. An example of a non-financial reward that may motivate a salesperson is
a. personal recognition.
b. compensation.
c. a stock plan.
d. a bonus plan.

 

 

ANS:  A                    PTS:   1                    REF:   p. 505             OBJ:   17-3 TYPE: A

NAT:  Analytic | Dynamics

 

  1. The two basic types of advertising are ____, which makes potential customers aware of products and their need for them, and ____, which conveys an idea about the firm that produces the product.
a. institutional, product
b. product, institutional
c. product, publicity
d. specialty, publicity

 

 

ANS:  B                    PTS:   1                    REF:   p. 506             OBJ:   17-4 TYPE: D

NAT:  Analytic | Value Creation

 

  1. The nonprofit corporation currently overseeing the global Internet is called the
a. Global Internet Management Corporation.
b. Internet Corporation for Assigned Names and Numbers.
c. International Office for Internet Oversight.
d. International Public Internet Corporation.

 

 

ANS:  B                    PTS:   1                    REF:   p. 509             OBJ:   17-4 TYPE: D

NAT:  Technology | Ethical and Legal

 

  1. A word, phrase, or image that a user may click on to go to another part of a document or website or to a new document or website is called
a. an email.
b. spam.
c. a website.
d. a hyperlink.

 

 

ANS:  D                    PTS:   1                    REF:   p. 511             OBJ:   17-4 TYPE: D

NAT:  Technology | Value Creation

 

  1. A term referring to the second generation of the World Wide Web, which allows for

online collaboration, social interactions, and information sharing is called

a. social networking.
b. Web 2.0.
c. an app.
d. mobile device.

 

 

ANS:  B                    PTS:   1                    REF:   p. 513             OBJ:   17-4 TYPE: D

NAT:  Technology | Value Creation

 

  1. Tips to promote a business on a smartphone consist of all of the following except
a. use the platform for announcements of interest to customers and prospects.
b. locating the business in the search engines used by the customers.
c. having a mobile-friendly website.
d. giving the audience what they want.

 

 

ANS:  A                    PTS:   1                    REF:   p. 513             OBJ:   17-4 TYPE: C

NAT:  Technology | Value Creation

 

  1. Payment for banner advertising is usually based on the number of people who actually
a. click on the banner.
b. make a purchase.
c. spend a certain length of time on the advertiser’s website.
d. visit the website.

 

 

ANS:  A                    PTS:   1                    REF:   p. 511             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Robert Kiyosaki, author of the Rich Dad, Poor Dad series, claims that promotions should be invested for _____ before seeing results.
a. 1 month
b. 6 weeks
c. 3 months
d. 1 year

 

 

ANS:  B                    PTS:   1                    REF:   p. 507             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The successful combination of advertising media depends on
a. the type of business.
b. customer income.
c. the ad agency.
d. the class of the customer.

 

 

ANS:  A                    PTS:   1                    REF:   p. 507             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. To make an informed selection about where to advertise, a small business manager should
a. consult different banks for loans to pay for the process.
b. create the message in conjunction with past campaigns.
c. learn about the strengths and weaknesses of each advertising medium.
d. perform a statistical analysis of the target market (s).

 

 

ANS:  C                    PTS:   1                    REF:   p. 508             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Which service is not one ad agencies provide?
a. Furnishing design and artwork
b. Evaluating the effectiveness of different advertising appeals
c. Analyzing the balance of a firm’s marketing mix
d. Advising on sales promotions

 

 

ANS:  C                    PTS:   1                    REF:   p. 506             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Internet advertising is facing an obstacle because
a. consumers are reluctant to respond to banner ad images that pass by so quickly.
b. consumers can install ad-blocking software on his or her computer.
c. it lacks scale efficiencies in the totals amounts used.
d. legislation that is intended to restrict Internet use.

 

 

ANS:  B                    PTS:   1                    REF:   p. 511             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Which task is not one of the critical startup tasks involved in the preparation of the successful launch of a dot.com site?
a. Building a user-friendly site
b. Creating and registering a site name
c. Identifying a target market
d. Promoting the firm’s site

 

 

ANS:  D                    PTS:   1                    REF:   p. 509             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. A frequent reason why web sites fail to retain customers is
a. inferior quality of the site design.
b. poor performance in order fulfillment.
c. slow downloading.
d. too much information at the site.

 

 

ANS:  C                    PTS:   1                    REF:   p. 510             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The more direct method to promote a company online is by
a. placing banner ads on reciprocal sites.
b. offering rebates that can be applied toward future purchases.
c. making sure that the site is accessible by search engines.
d. All of the above are direct methods.

 

 

ANS:  C                    PTS:   1                    REF:   p. 510             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. HubSpot, Inc. used  a(n) ______ to establish the company’s platform of inbound marketing.
a. app
b. Blog
c. e-mail campaign
d. hyperlink

 

 

ANS:  B                    PTS:   1                    REF:   p. 512             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Which statement concerning advertising is false?
a. Advertising is a complement to a good product and not at replacement for a bad one.
b. Advertising must not create false expectations that reduces customer satisfaction.
c. Advertising can accentuate a good sales trend, but it rarely has the power to reverse a bad trend.
d. Advertising is only important for new product launches.

 

 

ANS:  D                    PTS:   1                    REF:   p. 506             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Which medium is considered to have a high pass-along rate?
a. Magazines
b. Outdoor Media
c. Radio
d. Television

 

 

ANS:  A                    PTS:   1                    REF:   p. 508             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Which medium is considered to have a no visual treatment?
a. Magazines
b. Outdoor Media
c. Radio
d. Television

 

 

ANS:  C                    PTS:   1                    REF:   p. 508             OBJ:   17-4 TYPE: C

NAT:  Analytic | Value Creation

 

  1. An inducement to buy a certain product while typically offering value to recipients is
a. a sales promotion.
b. a specialty trade show.
c. specialty advertising.
d. includes all of the above.

 

 

ANS:  A                    PTS:   1                    REF:   p. 514             OBJ:   17-5 TYPE: D

NAT:  Analytic | Value Creation

 

  1. Specialties are promotional tools that can
a. allow customers to sample the product.
b. cast doubt on the products offered by competitors.
c. create goodwill for the company.
d. prevent price competition.

 

 

ANS:  C                    PTS:   1                    REF:   p. 515             OBJ:   17-5 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Which tool is not considered part of a sales promotion?
a. Coupons
b. Newspaper ads
c. Point-of-purchase displays
d. Premiums

 

 

ANS:  B                    PTS:   1                    REF:   p. 515             OBJ:   17-5 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The most widely used specialty item is the
a. calendar.
b. key chain.
c. lighter.
d. pen.

 

 

ANS:  A                    PTS:   1                    REF:   p. 515             OBJ:   17-5 TYPE: C

NAT:  Analytic | Value Creation

 

  1. The “lasting medium” is a term that refers to
a. contests.
b. samples.
c. specialties.
d. trade shows.

 

 

ANS:  C                    PTS:   1                    REF:   p. 515             OBJ:   17-5 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Hands-on experience with a product is possible with
a. coupons.
b. personal selling.
c. specialty promotions.
d. trade show exhibits.

 

 

ANS:  D                    PTS:   1                    REF:   p. 515             OBJ:   17-5 TYPE: C

NAT:  Analytic | Value Creation

 

  1. All of the following are examples of social shopping websites except
a. EasyBuy
b. Kaboodle
c. Milo.com
d. ThisNext

 

 

ANS:  A                    PTS:   1                    REF:   p. 516             OBJ:   17-5 TYPE: A

NAT:  Technology | Value Creation

 

  1. At its core, successful promotion is all about effective _____.
a. salesmanship
b. communication
c. publicity
d. advertising

 

 

ANS:  B                    PTS:   1                    REF:   p. 517             OBJ:   17-5 TYPE: C

NAT:  Analytic | Value Creation

 

  1. Anne owns a small business dealing with industrial products. She currently uses personal selling extensively, but she wants to reduce her cost without losing exposure. Which promotional tool should she use?
a. Contests
b. Coupons
c. Specialties
d. Trade show exhibits

 

 

ANS:  D                    PTS:   1                    REF:   p. 515             OBJ:   17-5 TYPE: A

NAT:  Analytic | Value Creation

 

ESSAY

 

  1. Sophia has a daughter in high school who just called her cell phone and left a voice mail saying “Practice has been canceled and I need you to pick me up at 3:30 instead of 5:30.” Her daughter also sent her an email to relay the information. Identify the different elements in the communication process and apply it to a business.

 

ANS:

For this personal communication process, the source was Sophia’s daughter; the message was the change in practice and pick up time; the channel options used by the daughter were the non-personal forms of voice mail and the e-mail; and the receiver was Sophia.

 

A business could use a similar process for communicating a message from themselves to a customer and even use some channel options that are more associated with the personal communication channel to be more personal.  The source would be the business; the message could be a sales promotion, a change in merchandise or a reminder of their hours; the channel options could be both personal, non-personal and/or special forms such as advertisements, direct selling, emails, Blog posts, a greeting card, and the website; and the receiver would be the customer.

 

PTS:   1                    REF:   p. 499            OBJ:   17-1 TYPE: A

NAT:  Communication | Value Creation

 

  1. What factors determine the combination of the promotional mix for a business? Use examples of non-personal, personal and special forms of communication for each.

 

ANS:

– Geographical nature of the market: A widely dispersed market generally requires mass coverage through advertising (non-personal), in contrast to the more costly individual contacts of personal selling (personal). If the market is local and/or customer number is small, personal selling may be more feasible. Sales promotions (special) could be used for all geographical areas.

Promotional budget size: Some promotional forms are not feasible due to high costs.  For example, radio advertising is generally less expensive than television advertising. The lower costs and more targeted nature of company websites have led many small firms to choose electronic media and inbound marketing strategies.

-Product characteristics: If a product has high unit value, such as real estate, personal selling will be vital to the mix. Non-personal advertising will be more effective for an inexpensive item such as chewing gum.

 

PTS:   1                    REF:   p. 499            OBJ:   17-1 TYPE: C

NAT:  Communication | Value Creation

 

  1. William is analyzing his financials and determining a budget for promotional activities for his company. He has data from last year’s budget, past financial statements, projections for next year’s budget as well as a general idea of what the competition spent last year.  How should he determine the new budget and what concerns should he be aware of during the process?

 

ANS:

William has enough information to complete all four methods.

Percentage of sales can be determined by using last year’s sales.  He also could examine industry data for a comparison.

How much can be spared would be what was left after next year’s estimated sales and expenses. The pro-formas for next year’s financial statements could provide this information.

Spending as much as the competition is easily completed since he has an idea about competitive spending.

Determining how much is needed for specific results can be obtained base on projections from next year’s budget.

 

While determining how much is needed for results would be the preferred approach, William could also examine the minimum and maximum amounts and compare all totals.

 

PTS:   1                    REF:   p. 500            OBJ:   17-2 TYPE: A

NAT:  Communication | Value Creation

 

  1. List and briefly explain the four common methods of earmarking funds for promotion.

 

ANS:

· Percentage of sales. A company’s own past sales experiences or industry averages are evaluated to establish the firm’s promotion/sales ratio.
· What can be spared. Promotional budgeting is based on spending what is left over when all other activities have been funded.
· Spending as much as the competition. This method studies competitors and allocates funds close to their levels.
· What it will take to do the job. This method analyzes the market and promotional alternatives to determine the amount of funds required to do the job.

 

 

PTS:   1                    REF:   p. 499            OBJ:   17-2 TYPE: C

NAT:  Communication | Value Creation

 

  1. List techniques for responding to customers’ objections.

 

ANS:

· Direct denial: Follow denial by giving facts to back up the denial.
· Indirect denial: Follow an expression of concern about the prospect’s objection with a denial.
· Answer objection with “feel, felt, found”: Don’t argue-express understanding and give examples from past satisfied customers
· Take notes: Write down objections to show attention.
· Compensation method: Admit to agreeing with the objection and then proceed to show compensating advantages.
· Pass-up method: Acknowledge the concern expressed by the prospect and then move on.
· Find the true objection: The first one mentioned may not be the main concern – ask for details.
· Follow up and follow through: If promises are made, keep them.

 

 

PTS:   1                    REF:   p. 502            OBJ:   17-3 TYPE: C

NAT:  Communication | Value Creation

 

  1. What are the advantages and disadvantages of using salary and commission as methods of compensating salespeople?

 

ANS:

Security for the salesperson is the greatest advantage of a salary plan. However, a straight salary tends to restrict the salesperson’s earning ability and can even promote laziness. On the other hand, when a salesperson is compensated with salary, the firm can easily require that person to perform non-selling activities.

 

A commission plan serves as a strong incentive to the sales force “no sale, no income.” A commission plan also helps with a firm’s cash flow problems because payment is not made until sales revenue begins to come in. However, a 100 percent commission plan may not help the salesperson’s morale if sales are slow.

 

PTS:   1                    REF:   p. 505            OBJ:   17-3 TYPE: C

NAT:  Communication | Dynamics

 

  1. What are the specific services that an advertising agency can provide?

 

ANS:

· Furnishing design, artwork, and copy for specific advertisements and/or commercials
· Evaluating and recommending the advertising media with the greatest “pulling power”
· Evaluating the effectiveness of different advertising appeals
· Advising on sales promotions and merchandise displays
· Conducting market-sampling studies to evaluate product acceptance or determining the sales potential of a specific geographic region
· Furnishing mailing lists

 

 

PTS:   1                    REF:   p. 506            OBJ:   17-4 TYPE: C

NAT:  Communication | Value Creation

 

  1. Zoe has decided to start a personal shopper company in her metropolitan town of 250,000.  She wants to concentrate on college professors at the small university she graduated from which has 85 professors employed full time.  After deciding whether the mediums would be acceptable, complete the following chart.
Medium Acceptable?  Why or Why not?
Newspaper – Campus and Local  

 

 
Radio – Campus and Local

 

   
 

Internet

 

 

 

 

 

 
 

Others?

 

 

 

 

 

 

ANS:

 

Medium Acceptable?  Why or Why not?
 

Newspaper – Campus and Local

 

Yes and No

Yes to campus: its high individual coverage and short lead time may make it affordable.  Cost would have to be checked. No to local: cost would be expensive
 

Radio – Campus and Local

 

 

Yes and No

Possible if radio has enough listeners.  Typically low cost but have commercial clutter.  No to area stations as not specific to target market.
 

Internet

 

 

Yes

Yes as people expect a site for information.

Easy to update, able to direct people to site for information.  Concern is having to rely on another company for service since business size would not have a web designer.

 

 

Others?

 

 

Yes

Personal emails to professors she knows; offering discount for professors by going through university’s human resources department.

 

 

PTS:   1                    REF:   p. 508            OBJ:   17-4 TYPE: A

NAT:  Communication | Value Creation

 

  1. Patty has been in operation for 5 years with a seasonal business, Patty’s Pumpkin Patch, specializing as the state’s largest pumpkin patch and high quality pumpkin products. Other services include hay rides around the farm and a corn maze. For each basic type advertising, discuss what Patty would use and how would these types benefit the company?

 

ANS:

For product advertising, Patty could make customers aware of the products and services such as the state’s largest pumpkin patch, pumpkin products, hay rides, and corn maze. A newspaper, radio or television advertisement could stress these products and drive potential customers to the website.

 

Institutional advertising would focus on the business (especially its 5 year history) and should add to the credibility and the image of the business. This advertising would be best for the website.

 

The same advertisement could be used to promote both the product and the institutional themes.  Both should be consistent in either informing, persuading and reminding customers of what Patty’s Pumpkin Patch can offer

 

PTS:   1                    REF:   p. 506            OBJ:   17-4 TYPE: A

NAT:  Communication | Value Creation

 

  1. What are five “essential” suggestions for a website?

 

ANS:

  1. Clear description of company name and products or services on homepage
  2. A simple, sensible Web address
  3. An easily navigated site map with clear links
  4. Easy-to-find contact information
  5. Customer testimonials
  6. An obvious call to action
  7. Know the basics of Search Engine Optimization so people can find the site
  8. Fresh, quality content to make the critical first impression
  9. A secure hosting platform
  10. A design and style that’s friendly to online readers with short paragraphs, bullet points and highlighted important words or phrases.

 

PTS:   1                    REF:   p. 509            OBJ:   17-4 TYPE: C

NAT:  Communication | Value Creation

 

  1. Kevin is the lead singer for the band Killin’ Beats. The band would like to have items at their live shows to gain exposure and attract fans to their merchandise table. What promotion items should Killin’ Beats use and what advantages will this provide?

 

ANS:

Killin’ Beats should use specialty items at their live shows to attract fans to their merchandise table. The items should be imprinted with the Killin’ Beats name and/or identifying slogan and be consistent in color, fonts, and designs. The items should be enduring in nature and tangible especially since many fans may want to have the band autograph the item. The result is an item that will be worth something to the fan and will have value. Most bands would have CDs for sale but could also offer pictures, calendars, keychains, shirts or anything unique for the fans. Offering these items will allow the band to develop a one-on-one relationship with their fans, develop good will for their business and help develop their band image.

 

PTS:   1                    REF:   p. 515            OBJ:   17-5 TYPE: A

NAT:  Communication | Value Creation

 

  1. List three sales promotional tools and briefly explain the unique characteristics of each tool.  When should these tools be used?

 

ANS:

· Specialties are sales promotion items with enduring nature and tangible value.  Items should reinforce or add to a company’s image and goodwill. These items can be used to remind a customer of the company in conjunction with advertising and personal selling campaigns.
· Trade show exhibits are product demonstrations that provide hands-on experience with a product. Specialities could be given out at the show in hopes to stimulate a purchase.  These shows are involved with personal selling.
· Publicity is a less costly form of sales promotion that is almost “free” but can be unfavorable.  Again, using publicity in combination with advertising and personal selling would be best.  Technology now makes it easer to create publicity through social shopping websites.

 

 

PTS:   1                    REF:   p. 515            OBJ:   17-5 TYPE: C

NAT:  Communication | Value Creation

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