Scarb Eesbm6e TB 08

Essentials of Entrepreneurship & Small Business Management, 6e (Scarborough)
Chapter 8 Building a Powerful Marketing Plan
1) ________ is the process of creating and delivering desired goods and services to customers
and involves all of the activities associated with winning and retaining loyal customers.
A) Marketing
B) Personal selling
C) Promotion
D) Customer service
Answer: A
Diff: 1 Page Ref: 228
AACSB: Communication
2) For an entrepreneur, a business plan:

A) is of relatively little importance due to the dynamic nature of the marketplace.
B) is synonymous with the marketing plan.
C) tends to stress how the entrepreneur will operate rather than detailing what he/she wants to
accomplish.
D) contains both a marketing plan and a financial plan.
Answer: D
3) The focus of a small company's marketing plan should be on:

A) preparing accurate financial forecasts.
B) the customer.
C) describing how its products or services are superior to those of competitors.
D) the competition.
Answer: B
4) Small businesses can compete with larger rivals with bigger budgets by employing
unconventional, low-cost creative techniques known as:
A) market research.
B) astonishing customer service.
C) guerrilla marketing strategies.
D) psychographics.
Answer: C
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Copyright © 2011 Pearson Education, Inc.
5) Warren Cassell, owner of Just Books, a very small book store, makes special orders for
customers at no extra charge, provides free gift-wrapping, conducts out-of-print book searches,
offers autographed copies of books, hosts "Meet the Author" breakfasts, and publishes a
newsletter for book lovers. By offering his customers lots of "extras" they do not get at larger
bookstores, Cassell has won a growing base of loyal customers. Cassell is relying on which
marketing strategy?
A) Demographic marketing
B) Transaction selling
C) Individualized marketing
D) Guerrilla marketing
Answer: D
Diff: 2 Page Ref: 228-229
6) Which of the following is not one of the objectives a guerrilla marketing plan should
accomplish?
A) Determine customer needs and wants through market research.
B) Determine how the company will be able to serve all customers.
C) Analyze the firm's competitive advantages and build a marketing strategy around them.
D) Create a marketing mix that meets customer needs and wants.
Answer: B
7) Successful marketing requires a business owner to:

A) understand target customers' needs, demands, and wants.
B) offer customers products and services that will satisfy their needs, demands, and wants.
C) provide customers with service, convenience, and value so that they will return.
D) All of the above
Answer: D
8) The foundation of every business is:

A) its products and services.
B) satisfying the customer.
C) doing whatever it takes to earn a profit.
D) operating in a socially responsible manner.
Answer: B
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9) Which of the following statements concerning a company's target market is false?
A) Marketing experts contend that the greatest marketing mistake small companies make is
failing to clearly define the target market to be served.
B) A "shotgun approach" to marketingtrying to appeal to everyone rather than to only a small
market segmentis the most effective way to compete with large companies and their bigger
marketing budgets.
C) Small companies are usually better suited to pinpointing target markets that their larger rivals
overlook or consider too small to be attractive.
D) Most successful small businesses have well-defined portraits of the customers they are trying
to attract.
Answer: B
AACSB: Analytic Skills
10) Most marketing experts contend that the greatest marketing mistake small businesses make
is:
A) failing to identify the target market.
B) spending too little on advertising.
C) underpricing their products and services.
D) spending too little on quality improvement.
Answer: A
11) Studies of shifting patterns in age, income, education, race, and other population
characteristics are the subject of:
A) psychographics.
B) demographics.
C) sociographics.
D) paleontology.
Answer: B
12) Tracking ________ patterns can enable entrepreneurs to adjust their strategies accordingly to
better position them to take advantage of the opportunities these trends may create.
A) population
B) demographic
C) weather
D) traffic
Answer: B
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13) One of the worstand most commonmistakes entrepreneurs make is:
A) assuming that a market exists for their product or service.
B) taking too much time to conduct planning and research.
C) conducting informal research.
D) conducting online research, which is too impersonal and does not yield accurate information.
Answer: A
AACSB: Reflective Thinking
14) Which of the following statements concerning marketing research is false?

A) Market research is the vehicle for gathering the information that serves as the foundation for
the company's marketing plan, helps avoid costly marketing mistakes, and can uncover unmet
customer needs the business can serve.
B) Market research involves systematically collecting, analyzing, and interpreting data pertaining
to the small company's market, customers, and competitors.
C) Small companies are at a distinct disadvantage compared to larger ones when conducting
market research since it is so expensive.
D) Small businesses cannot afford to miss their target markets and market research can help
them focus their efforts.
Answer: C
15) Which of the following techniques does marketing consultant Faith Popcorn recommend to
small business owners interested in tracking market trends?
A) Hire a top-10 market research firm to track trends for you.
B) Watch what the large corporations in your industry are doing.
C) Read as many current publications as possible.
D) Talk with two to three people at random each week to hear what they are buying and why.
Answer: C
16) Companies whose products or services are ________ from major social, demographic, and
economic trends rather than ________ with them must change their course or run the risk of
failing.
A) converging; separating
B) diverging; fragmenting
C) converging; diverging
D) diverging; converging
Answer: D
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17) Your friend has decided to conduct market research to assist in making informed decisions
for his small business. What should you recommend as the first step in the market research
process?
A) Collect data
B) Define the objective
C) Design the research
D) Determine the relevant information
Answer: B
18) An individualized (one-to-one) marketing campaign requires business owners to:

A) collect information on their customers, linking their identities to their transactions.
B) calculate the long-term value of their customers so they know which ones are most desirable
and most profitable.
C) practice "just-in-time marketing" by knowing what their customers' buying cycle is and time
their marketing efforts to coincide with it.
D) All of the above
Answer: D
19) Which of the following is not a primary market research source?

A) Customer surveys
B) Focus groups
C) Daily transactions
D) All of the above are sources of primary market research.
Answer: D
20) A process in which computer software that uses statistical analysis, database technology, and
artificial intelligence finds hidden patterns, trends, and connections in data so that business
owners can make better marketing decisions and predictions about customers' behavior is know
as:
A) guerilla marketing.
B) data mining.
C) individualized marketing.
D) total quality management.
Answer: B
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21) Which of the following is not a secondary source of market research data?
A) Census data
B) Trade publications
C) Focus groups
D) Magazines
Answer: C
22) Which of the following features allows a small company to utilize relationship marketing
successfully?
A) Close contact with its customers
B) Personal attention to its customers
C) Emphasis on superior service for its customers
D) All of the above
Answer: D
23) One "natural" advantage small businesses have over large businesses, which can be a
significant competitive advantage, is:
A) relationship marketing.
B) their ability to conduct market research.
C) their lower costs.
D) their ability to serve many highly diverse target markets.
Answer: A
24) The marketing approach that is most effective today for a small business is:
A) mass marketing.
B) market segmentation.
C) niche marketing.
D) individualized (one-to-one) marketing.
Answer: C
25) Which of the following was not identified as one of the guerrilla marketing principles in your
text?
A) Strive to be like everyone else so that your company "fits in."
B) Create an identity for your business.
C) Connect with customers on an emotional level.
D) Do not just sellentertain.
Answer: A
Diff: 2 Page Ref: 238, Table 8.2
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26) A marketing concept designed to draw customers into a store by creating a kaleidoscope of
sights, sounds, smells, and activities, all designed to entertainand of course, sell, is:
A) entertailing.
B) entertaining.
C) retailing.
D) branding.
Answer: A
27) A key customer benefit of a product or service that sets it apart from the competition answers
the critical questions every customer asks: "What's in it for me?" and is known as:
A) its brand identity.
B) the unique selling proposition (USP).
C) total quality management (TQM).
D) branding.
Answer: B
28) A ________ is a company's "face" in the marketplace and communicates a key message to
the target market.
A) blog
B) logo
C) unique selling proposition (USP)
D) brand
Answer: D
29) ________ is the process of communicating a company's unique selling proposition to its
target customers in a consistent and integrated manner.
A) Branding
B) Selling
C) Entertailing
D) Marketing
Answer: A
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30) ________ can be an effective part of a guerrilla marketing strategy, enabling an entrepreneur
to economically communicate with large numbers of customers.
A) Frequent emails
B) Brand awareness
C) Direct mail
D) Business blogging
Answer: D
AACSB: Use of IT
31) Research shows that repeat customers spend ________ percent more than new customers.
A) 5
B) 52
C) 67
D) 97
Answer: C
32) In your training program, you stress to all new employees the importance of customer
satisfaction, citing the fact that ________ of the average company's sales come from present
customers.
A) a small amount
B) about one-half
C) a majority
D) an undetermined percentage
Answer: C
33) The typical business loses ________ percent of its customers each year.
A) 20
B) 30
C) 40
D) 50
Answer: A
34) The majority of customers who stop patronizing a particular store do so because:
A) its prices are too high.
B) its quality is too low.
C) an indifferent employee treated them poorly.
D) it failed to advertise enough.
Answer: C
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35) Attracting a new customer costs ________ as much as keeping an existing one.
A) twice
B) five times
C) half
D) three-fourths
Answer: B
36) A study by The Jay H. Baker Retailing Initiative at the University of Pennsylvania and the
consulting firm Verde Group reports that for every 100 customers who have a negative
experience with a business, the company stands to lose ________ to ________ current customers
or potential customers.
A) 10: 15
B) 25: 28
C) 32: 36
D) 55: 60
Answer: C
37) Companies with a customer focus typically ask their customers all but which of the
following questions?
A) What are we doing right?
B) What have we done wrong?
C) What can we do in the future?
D) What have our competitors done wrong?
Answer: D
38) The worst catastrophe to befall any business would be to:

A) encourage customers to complain and have employees give management feedback on the
complaints.
B) have great advertising and poor quality products.
C) spend an excessive amount of money attracting new customers.
D) have a great product and an inaccessible location.
Answer: B
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39) The process of systematically creating the optimum experience for the customer every time
they interact with a company is called:
A) total quality management, or TQM.
B) time compression management, or TCM.
C) guerilla marketing.
D) customer experience management, or CEM
Answer: D
40) Which of the following is not a suggestion of a means of focusing on the customer?
A) Discourage customer complaints.
B) Get total commitment to superior customer service from top managers.
C) Carefully select and train everyone who will deal with the customer.
D) Actually, all of the above are suggested as a means of focusing on the customer.
Answer: A
41) Which of the following is a way to improve customer service?

A) Encourage customers to complain.
B) Ask employees for feedback on improving customer service.
C) Develop a service theme that communicates the importance of customer service in the
company.
D) All of the above
Answer: D
42) The total quality management (TQM) concept:

A) strives to achieve quality not just in the product or service itself, but in every aspect of the
business and its relationship with the customer.
B) relies on quality inspections through an army of quality control inspectors.
C) focuses on reducing the time it takes to fulfill a customer's request for a product.
D) None of the above
Answer: A
43) Which of the following factors do American consumers rank as the top component of
quality?
A) Low price
B) Reliability
C) Ease of use
D) Durability
Answer: B
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44) Companies with strong reputations for quality follow certain guidelines, such as:
A) establishing long-term relationships with suppliers.
B) fostering individual effort and pride of workmanship.
C) securing employees' commitment to the quality philosophy; it is not important to secure top
management's full support, as the employees are the ones who work more closely with the
products and the customers.
D) All of the above
Answer: A
45) Your ETDBW ("Easy To Do Business With") index is based on customer convenience
factors, including which of the following?
A) Is your business located near your customers, and does it provide easy access?
B) Are your business hours suitable to your customers?
C) Are your employees trained to handle business transactions quickly, efficiently, and politely?
D) All of the above
Answer: D
46) Small businesses are able to maintain a leadership role in innovation by:
A) using their size, flexibility, and speed to their advantage.
B) spending much more money on R&D than larger companies do.
C) foreseeing trends better and far enough in advance that they can spread innovation costs over
several years.
D) making better use of technology than large companies.
Answer: A
47) Most customers never complain to the business; in fact, for every complaint that a company
receives, there are ________ other complaint that go unspoken.
A) 2
B) 7
C) 10
D) 17
Answer: D
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48) A recent Harris Poll reports that ________ percent of customers say that they will never
return to a business after a negative customer service experience.
A) 20
B) 40
C) 60
D) 80
Answer: D
49) Numerous surveys have concluded that the most important element of service is:
A) the personal touch.
B) convenient business hours.
C) speedy transactions.
D) innovative product design.
Answer: A
50) What can a company do to achieve stellar customer service and satisfaction?
A) Listen to customers with the help of suggestion boxes, focus groups, surveys, and other tools.
B) Define what "superior service" means so that customers and employees know exactly what to
expect and what to provide.
C) Hire friendly, courteous sales and service representatives.
D) All of the above
Answer: D
51) The key ingredient in the superior customer service equation is:
A) state-of-the-art equipment.
B) standards and measurements of customer service.
C) the support of managers.
D) friendly, courteous, well-trained people delivering customer service.
Answer: D
52) A study by McKinsey and Company found that high-tech products that come to market on
budget but are six months late:
A) experience no significant profit difference over the next five years.
B) earn 3 percent less profit over the next five years.
C) earn 13 percent less profit over the next five years.
D) earn 33 percent less profit over the next five years.
Answer: D
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53) Time compression management (TCM) involves:
A) speeding new products to market.
B) reducing the administrative time required to fill an order.
C) shortening customer response time in manufacturing and delivery.
D) All of the above
Answer: D
54) Which of the following is not a suggestion for using time compression management (TCM)
to turn speed into a competitive advantage?
A) Instill speed in the company's culture.
B) Use technology to find shortcuts wherever possible.
C) Pay workers more if they do their jobs the same way only faster.
D) Set aggressive goals for time reduction and stick to them.
Answer: C
55) To attract potential customers, a Web site should be:

A) easy to navigate.
B) interactive.
C) inviting, offering more than a "laundry list" of items for sale.
D) All of the above
Answer: D
AACSB: Use of IT
56) When applied as a marketing tool, the Internet allows entrepreneurs to provide existing and
potential customers with meaningful information:
A) in a passive, one-directional manner.
B) for those with advanced high-tech skills.
C) in a complex and difficult-to-manage method.
D) in an interactive rather than passive setting.
Answer: D
AACSB: Use of IT
57) Which of the following is not an element of the marketing mix?

A) Product
B) Place
C) Profit
D) Promotion
Answer: C
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58) Profits normally reach their peak in the ________ stage of the product life cycle, while sales
normally reach their peak in the ________ stage of the product life cycle.
A) growth and acceptance; maturity
B) maturity and competition; market saturation
C) growth and acceptance; market saturation
D) introduction; growth
Answer: B
Diff: 3 Page Ref: 259, Figure 8.3
59) The five characteristics of a great product are:

A) deep, indulgent, complete, elegant and emotive.
B) deep, intelligent, complete, elegant and emotive.
C) deep, indulgent, competitive, elegant and emotive.
D) deep, indulgent, complete, elegant and evolutionary.
Answer: A
Diff: 3 Page Ref: 258, Figure 8.2
60) The typical product's life cycle lasts ________ years, but the length of that cycle appears to
be ________.
A) 1 to 2; increasing
B) 4 to 6; increasing
C) 10 to 14; shrinking
D) 15 to 20; shrinking
Answer: C
61) The ________ stage of the product life cycle describes a point where sales rise and profits
peak.
A) introductory
B) growth and acceptance
C) maturity and competition
D) market saturation
Answer: C
62) The most common channel of distribution for consumer goods is:
A) manufacturer to consumer.
B) manufacturer to retailer to consumer.
C) manufacturer to wholesaler to retailer to consumer.
D) manufacturer to broker to consumer.
Answer: C
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63) The right price for a product or service depends on three main factors. Which of the
following is not one of the main three factors?
A) Cost structure
B) What the market will bear
C) Desired image the company wants to create in its customer's minds
D) Competitors' prices
Answer: D
64) The goal of ________ is to inform and persuade consumers.

A) promotion
B) place
C) price
D) product
Answer: A
65) Too many business plans describe in great detail what an entrepreneur intends to accomplish
and pay little, if any, attention to the strategies to achieve those targets.
Answer: TRUE
66) A business plan is a written statement of what an entrepreneur plans to accomplish in both
quantitative and qualitative terms and how she plans to accomplish it.
Answer: TRUE
67) Because they lack the size and financial resources of their larger competitors, small
companies are powerless when it comes to developing effective marketing strategies.
Answer: FALSE
68) By using guerrilla marketing strategiesunconventional, low-cost, creative

techniquessmall companies can get as much "bang" for their marketing bucks as their larger
rivals.
Answer: TRUE
69) A marketing plan should identify a small company's target customers and describe how the
business will attract and keep them.
Answer: TRUE
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70) A "shotgun approach" to marketing is the small business's secret to competing successfully
with larger rivals and their bigger marketing budgets.
Answer: FALSE
71) An effective marketing program depends on a clear, concise definition of the firm's target
market.
Answer: TRUE
72) Most marketing experts contend that the greatest marketing mistake small businesses make is
failing to clearly define their target market.
Answer: TRUE
73) The specific group of customers at whom a company aims its goods and services is its target
market.
Answer: TRUE
74) The company's target customer should permeate the entire business, from the merchandise
purchased, in the layout and decor of the store, and on their Web site.
Answer: TRUE
75) The increasing diversity of our population is creating a marketing "threat" to small
businesses because they cannot profitably serve small niches.
Answer: FALSE
AACSB: Multicultural & Diversity
76) Small companies that spot demographic trends and act on them early can gain a distinctive
edge in the market.
Answer: TRUE
77) Demographics is the study of important population characteristic such as age, income,
education, race, and others.
Answer: TRUE
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78) Market research is a valuable tool for defining the firm's target market, its needs, and its
potential profitability.
Answer: TRUE
79) Watching the top ten TV shows, seeing the top ten movies, or listening to her children are all
ways a small business owner could conduct market research.
Answer: TRUE
80) To be useful, market research must be structured, formal, and highly sophisticated.
Answer: FALSE
81) An individualized marketing strategy requires a business owner to collect data on individual
customers and then to develop a marketing program designed specifically to appeal to their
needs, tastes, and preferences.
Answer: TRUE
82) Small companies are at a definite disadvantage compared to larger ones when it comes to
conducting market research since it is so expensive.
Answer: FALSE
AACSB: Multicultural & Diversity
83) Primary research data is less time consuming and less costly to gather than secondary
research data.
Answer: FALSE
84) Secondary research data is less time consuming and less costly to gather than primary
research data.
Answer: TRUE
85) The best way , and possibly the only way, for small retailers to compete effectively with the
giant "category killers" and "big box" competitors is to offer lower prices than these rivals.
Answer: FALSE
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86) A company has a competitive edge when customers perceive that its products or services are
superior to those of competitors.
Answer: TRUE
87) Branding is communicating a company's unique selling proposition to its target customers in
a consistent and integrated manner.
Answer: TRUE
88) Because about 20 percent of a typical company's customers account for about 80 percent of
its sales, a business should focus its resources on keeping its best customers rather than trying to
chase "fair weather" customers who will defect to any better deal that comes along.
Answer: TRUE
89) Customer experience management (CEM) is the process of systematically creating the
optimum experience for their customers every time they interact with the company.
Answer: TRUE
90) It costs five times as much money and time to keep existing customers as it does to attract
new ones.
Answer: FALSE
91) Most dissatisfied customers complain about rude or discourteous service to the owner or the
manager.
Answer: FALSE
Diff: 2 Page Ref: 249, Table 8
92) The best way to find out what customers really want and value is to ask them.
Answer: TRUE
93) Giving customers a chance to complain about a problem usually is fruitless; once a business
makes a customer angry, he typically will not buy from that company again under any
circumstances.
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Answer: FALSE
94) If given the chance to complain, 95 percent of customers will buy again when a business
handles their complaints promptly and effectively.
Answer: TRUE
95) Since front-line service workers are not able to predict the causes of customer complaints,
managers must be the ones to identify potential customer service problems.
Answer: FALSE
96) When an employee in a business treats a customer poorly, that customer usually does not
complain; however, she does tell her "horror story" about that business to more than 10 other
people.
Answer: TRUE
Diff: 2 Page Ref: 249,253
97) One disadvantage of total quality management (TQM) is that its principles apply only to
manufacturers.
Answer: FALSE
98) If employees are committed to quality, management's commitment becomes unimportant.

Answer: FALSE
99) It takes much less money and time to keep existing customers than it does to attract new
ones.
Answer: TRUE
100) Providing low prices is the most effective way for a small business to attract and maintain a
growing customer base.
Answer: FALSE
101) Total quality management (TQM) works best when it becomes an integral part of a small
company's strategy and focuses on continuous improvement in the quality the company delivers
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to customers.
Answer: TRUE
102) The best way for a small business to ensure quality products is to use quality inspections.
Answer: FALSE
103) Several studies have found that customers rank convenience and easy access to goods and
services at the top of their purchase criteria.
Answer: TRUE
104) Hours of operation, quick answering of phone calls, and ease of use of credit cards are just
three "measures" of a company's "ETDBW" index.
Answer: TRUE
105) A survey by the National Federation of Independent Businesses reports that 78 percent of
small business owners believe that adding innovative products and services is important to their
companies' success.
Answer: TRUE
106) Because a majority of the average company's sales come from present customers, few can
afford to alienate any customers.
Answer: TRUE
107) Truly customer-oriented companies seek to go beyond customer satisfaction, striving for
customer astonishment.
Answer: TRUE
108) The easiest and least expensive way to achieve customer satisfaction is through friendly,
personal service.
Answer: TRUE
109) Companies known for their superior service devote from one to five percent of their
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employees' work hours to training.
Answer: TRUE
110) In addition to treating employees with respect, smart entrepreneurs see customer service as
an investment that builds long-term value for their companies through:
A) listening to customers and providing superior service.
B) setting standards and measuring performance.
C) examining the company's service cycle and empowering employees.
D) All the above build long-term customer service value.
Answer: D
111) Most businesses are finding technology provides efficiency in providing a wide array of
services to their customers.
Answer: TRUE
AACSB: Use of IT
112) The Internet allows creative small business owners to make their companies look as big as
their larger rivals.
Answer: TRUE
AACSB: Use of IT
113) The four Ps of marketing are product, place, profit, and promotion.
Answer: FALSE
114) Marketing experts recommend introducing a new product only when the existing one is in
the maturity stage of the product life cycle.
Answer: FALSE
115) Profits generally are low, or even negative, in the introductory stage of the product life
cycle.
Answer: TRUE
116) Sales and profits peak in the growth stage of the product life cycle.
Answer: FALSE
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117) When products reach the decline stage of the product life cycle, they fail and become
extinct.
Answer: FALSE
118) In the maturity stage of the product life cycle, sales volume continues to rise, but profit
margins begin to fall as competitors enter the market.
Answer: TRUE
119) The typical product's life cycle lasts four to six years.
Answer: FALSE
120) For many small businesses, nonprice competitionfocusing on factors other than priceis
a more effective strategy than trying to beat larger competitors in a price war.
Answer: TRUE
121) Promotion is an important part of a small firm's marketing mix because it plays a significant
role in creating the proper perception of a product or service in the customer's mind.
Answer: TRUE
122) Promotion, which involves both advertising and personal selling, should inform and
persuade consumers.
Answer: TRUE
123) A marketing strategy results when a small business owner blends together the results of
meaningful market research with a plan to develop a competitive advantage in a particular target
market to develop a successful marketing mix.
Answer: TRUE
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124) Why is it important for small business owners to define clearly their target market(s) as part
of their marketing strategies?
Answer: It is important that small businesses define the specific group of customers at whom the
company aims its goods or services. Many companies try a "shotgun approach" to marketing,
where the company fires marketing blasts at every customer they see, hoping to capture some of
them. Unfortunately, most small businesses do not have the deep pockets to continue this type of
marketing approach. Small businesses must be more focused on the types of customers they
want to target. Small firms are ideally suited to reaching market segments that their larger rivals
overlook or consider too small to be profitable. A clear, concise target market allows a small
business to be profitable.
125) Why is it important for small business owners to track demographic trends? How can small
companies become effective trend trackers?
Answer: Shifting patterns in age, income, education, race, and other population characteristics
(demographics) will have a major impact on companies, their customers, and the way they do
business with those customers. Small businesses can become effective trend trackers by staying
close to their customer base and staying abreast of changes in their environment through various
information sources. According to Faith Popcorn, possible sources of market information
include current publications, top ten shows, top ten movies, and customers.
126) Your friend Maria is experiencing declining sales in the business she has owned and
successfully operated for three years. She has asked for your guidance in determining the
course(s) of action she should take. Your recommendation to her is to undertake a marketing
research project. Briefly outline the steps involved in market research. She is concerned that
market research will be too expensive and sophisticated for a small business such as hers. Is this
true? Explain.
Answer: The steps in marketing research include:
• Define the objectivemost crucial step; should be clear and concise; do not confuse a
symptom with the true problem.
• Collect the datagather secondary research and, if necessary, conduct primary research on
your customers.
• Analyze and interpret the datause judgment and common sense to determine what the facts
you have uncovered actually mean.
• Draw conclusions and actdecide how to use the information in the business; what is the
appropriate action to take?
No, market research does not have to be expensive and sophisticated to be valuable. For
example, for most business owners, information is often floating around. It can often be just a
matter of asking customers and suppliers, and collecting and organizing the data to make it
valuable. This valuable information is often available for most small businesses. Not only is this
type of information convenient, but the cost of obtaining it can be low as well.
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127) Describe what is meant by guerrilla marketing. What objectives should a guerrilla
marketing plan accomplish? List at least five guerrilla marketing tactics your small business
might be able to use successfully.
Answer: Guerrilla marketing involves using unconventional, low-cost, creative techniques in
order to get more out of every marketing dollar.
The marketing plan has four objectives that include:

1. Pinpoint the specific target market the small company will serve.
2. Determine customer needs and wants through market research.
3. Analyze the firm's competitive advantages and build a guerrilla marketing strategy around
them.
4. Help create a marketing mix that meets customer needs and wants.
Examples of guerrilla marketing tactics include:

• Help organize and sponsor a service- or community-oriented project.
• Always be on the lookout for new niches to enter. Try to develop multiple niches.
• Offer to speak about your business, industry, product, or service to local organizations.
• Ask current customers for referrals.
• Offer customers gift certificates.
• Offer samples of your product to give to customers.
• Offer a 100 percent, money-back, no-hassles guarantee.
• Create a frequent-buyer program.
• Find unique ways to thank customers for their business–a note, a lunch, a gift basket, etc.
• Accept competitors' coupons.
128) Describe why a small business might gain a competitive edge over its rivals by using a
focus on the customer, devotion to quality, paying attention to convenience, concentration on
innovation, dedication to service, and emphasis on speed.
Answer:
• Focusing on the customer develops and allows the small business to retain a close
relationship, which fosters repeat purchases and positive referrals.
• Devotion to quality focuses on continuous improvement fostering trust and customer loyalty.
• Paying attention to convenience makes access easy to products and services, increasing sales.
• Concentration on innovation allows the company to stay abreast of new trends and
opportunities that allows them to detect and act on new opportunities faster.
• Dedication to service can make customer astonishment a reality.
• Emphasis on speed can satisfy the time pressures of customers.
24
129) Explain the concept of total quality management. How is it different from the quality
inspection of a final product just before being packaged?
Answer: TQM is a strategic objectivean integral part of a company's strategy and culture.
Quality not just in the product or service, but every aspect of the business and its relationship
with the customer and continuous improvement in the quality delivered to the customer.
Total quality management is a philosophy of continuous improvement where cross-functional

teams and employees contribute individually to product quality along the manufacturing process.
It is different from the typical quality inspection in that quality is a component all along the way,
not just at the time a product is inspected before packaging or shipment.
130) Why is it important for a small business to keep existing customers satisfied? How can a
company achieve such customer satisfaction?
Answer: It is important to retain existing customers because typically 70 percent of the average
company's sales come from its present customers. Few businesses can afford to alienate
shoppers, as 80 percent of a company's sales typically come from the best 20 percent of its
customers. It is also five times more costly to attract new customers than to retain existing ones.
Customer satisfaction can be achieved by giving your best customers incentives to return,
encouraging them to complain, including employees in the feedback loop, calling customers by
name, getting total commitment to superior customer service astonishment, carefully training
everyone who comes into contact with customers, making your products easy to buy and access.
131) What marketing potential does the Internet offer small business owners?
Answer: The Internet offers a vast network connecting the world's computers and information
sources. With its ability to display colorful graphics, sound, animation, and video as well as text,
the Web allows small businesses to equal or even surpass their larger rival's Web presence. It
offers small businesses a worldwide opportunity for marketing and distribution system access.
AACSB: Use of IT
25
132) Define the four Ps of the marketing mix and explain the importance of each for a small
business owner's marketing strategy.
Answer:
• Product (and/or service)essential for customer satisfaction. Market research will help
determine the products/services that meet the needs and wants of customers.
• Placemethod of distribution. Provides place utility. Growing in importance as customers
expect greater service and convenience from businesses.
• Pricedetermined by your costs, what the market will bear, and your desired image. Also
impacted by factors of nonprice competition, such as free delivery, lengthy warranties, money-
back guarantees, and other non-price factors.
• Promotioninvolves both advertising and personal selling. Goal is to inform and persuade
consumers.
As the main elements of a marketing strategy, the four elements are self-reinforcing, and when
coordinated, increase the sales appeal of a product or service.
133) List and explain the stages in the product life cycle.
Answer: The stages of the product life cycle include:
• Introductionproducts are presented to potential customers. Generally, new products must
break into existing markets and compete with established products. Costs are generally high and
profits are low.
• Growthconsumers begin to buy in large enough numbers for sales to rise, with a potential
for profits.
• Maturity sales volume continues to rise, but profit margins peak and then begin to fall as
competitors enter the market.
• Market saturationsales peak.
• Declinethe final stage in which sales drop and profits fall. A focus on product innovation
and change, as well as the development of more stable products versus fad merchandise will
extend product life cycle.
26
Mini-Case 8-1: Customers: Key to Success
Lloyd Dixon has owned and operated a small dress shop for the past three years. Each fashion
season, Lloyd attends the apparel shows and he is always very impressed by the glamour and the
hundreds of different manufacturers, all with the merchandise that they say will be this season's
biggest sellers. Lloyd caters to an older market and baby boomers. He hopes to tap into the
upscale market.
After his first year of operation, Lloyd recognized that some of his merchandise was not selling.
The "inventory close-out sale" did rescue his investment in this merchandise but did not make
him a profit or contribute much to his overhead. Lloyd knew that it was not reasonable to expect
to sell everything you bought, but he was not sure exactly how much of his inventory was
comprised of slow movers. Lloyd believed that when he went into business he knew what
women wanted in dresses. He had always prided himself on having good taste. When he had the
opportunity to open this store, he was confident that he could choose merchandise that would be
well received. In the first three years of operations, sales have not met Lloyd's expectations.
134) How could Lloyd realistically create a competitive advantage by giving customer service a
focus in his business?
Answer: Lloyd should consider asking his customers questions such as:
• What are we doing right?
• How can we do that even better?
• What have we done wrong?
• What can we do in the future?
Lloyd should ensure that the customers believe that he values their business. He should give his
best customers incentives to return, encourage customers to complain, include employees in the
feedback loop, call customers by name, get total commitment to superior customer service
astonishment, carefully train everyone who comes into contact with customers, and make his
products easy to buy and access.
27
135) Faith Popcorn offers several ways Lloyd Dixon could collect information about his
customers and competitors. Explain at least five of those ways.
Answer:
• Lloyd should read current magazines, especially women's fashion magazines and industry
trade publications to get a sense of what fashions, colors, styles, and designs are becoming
popularand which ones are not.
• He should also watch the top ten TV shows and the top ten movies to see which styles they
might inspire.
• Lloyd should also spend time talking to his current customers and notice how they dress
(perhaps even taking photos of their garments).
• In addition, Lloyd could use census data and other sources such as the "Survey of Buying
Power" to gather demographic statistics on his customers. To collect more specific data, he
could conduct an in-depth survey of present customers using current sales records to compile a
mailing list.
Case 8-2: TQM and TV in Omaha
Nobody who knew Marvin Tollison ever met a man who liked television better. In the Navy, he
had the opportunity to learn a great deal about his trade. When he finished his tour of duty,
Marvin opened a television repair shop back home in Omaha, Nebraska. Over the years the
quality of his workmanship, his fair prices, and his general overall good nature made his business
flourish. Marvin had a way of finding men and women like himself when expansion was needed.
Over 17 years, the business had grown from a one-man shop operating in his garage to a 38-
employee television repair staff that was dispatched to customers by two-way truck radio. Over
the years, the time between a customer's call and the television repairman getting to the home
had increased to about two days because the repairmen were taking longer with each call. Call-
backs, having to "re-repair" equipment, are up significantly. Marvin wasn't sure, but he thought
some of his customers were going elsewhere for service.
28
136) Can Marvin use TQM to develop a competitive edge? If so, what would you recommend
he do?
Answer: Yes, in fact, if Marvin does not improve the quality of his company's repair service
soon, he will soon be out of business. Marvin should start tracking key measures of quality in
his company repair time, number of "re-repairs," number of complaints, and others listen to
them, to learn what they say about quality problems.
He should also find the answers to these questions:
• Are they too rushed to provide good service?
• Do they lack proper tools and equipment?
• Do they need additional training?
Marvin should create a system of rewards (financial or otherwise) for employees who perform
quality work. He should track manner of quality and post results for all to see. Above all, he
should avoid the tendency to try to identify employees who are causing the quality problems just
so he can punish them. Marvin should empower his employees and involve them in designing a
new and improved system for improving the company's quality.
137) How can Marvin develop "stellar" customer service?

Answer: Once the company's quality improves, Marvin should be able to offer additional
services that his customers would appreciate, such as guarantees, overnight repairs, pick-up and
delivery services, and a host of other "value-added" services.
29

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Essentials of Entrepreneurship & Small Business Management, 6e (Scarborough)

Chapter 8 Building a Powerful Marketing Plan

2) For an entrepreneur, a business plan:

3) The focus of a small company's marketing plan should be on:

7) Successful marketing requires a business owner to:

8) The foundation of every business is:

14) Which of the following statements concerning marketing research is false?

18) An individualized (one-to-one) marketing campaign requires business owners to:

19) Which of the following is not a primary market research source?

38) The worst catastrophe to befall any business would be to:

41) Which of the following is a way to improve customer service?

42) The total quality management (TQM) concept:

55) To attract potential customers, a Web site should be:

57) Which of the following is not an element of the marketing mix?

59) The five characteristics of a great product are:

64) The goal of ________ is to inform and persuade consumers.

68) By using guerrilla marketing strategiesunconventional, low-cost, creative

98) If employees are committed to quality, management's commitment becomes unimportant.

The marketing plan has four objectives that include:

Examples of guerrilla marketing tactics include:

Total quality management is a philosophy of continuous improvement where cross-functional

Case 8-2: TQM and TV in Omaha

137) How can Marvin develop "stellar" customer service?

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