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Key Words: Completion DIRECTIONS: Write the letter for the key word that best completes each sentence below. a. break-even point

h. marketing

b. channel of distribution

i. marketing concept

c. demographics

j. marketing mix

d. direct distribution e. indirect distribution f. market

k. relationship marketing l. retailer m. target marketing

g. market research

n. wholesaler

1.

is the study of the population in terms of age, gender, income, and education.

2.

consists of gathering and studying data about the buying habits of consumers.

3. A businesses. 4.

buys large quantities of goods from manufacturers and resells them to other

involves one or more intermediaries when distributing goods or services.

5. Building customer loyalty through good customer relations is called 6. A

k

.

is a group of consumers who share common wants and needs, and who have

the ability to purchase a product. 7. The

is the amount of money a company must make on a product to pay for the

cost of producing it. 8. Finding and analyzing a specific group of consumers is called 9.

.

is the process of creating, promoting, and presenting a product to meet the wants and needs of consumers.

10. The means by which a product is distributed is called the 11. 12. A

.

is when goods or services are sold directly to the consumer. sells goods to the final consumer for personal use.

13. Businesses’ need to know their customers’ wants and needs is called the 14. The

.

consists of the four main elements of marketing.

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Key Concepts: Multiple Choice DIRECTIONS: Circle the letter for the word or phrase that best completes each sentence. 1. __________ is not a stage of product development. a. Testing b. Screening c. Evaluation d. Distribution 2. A channel of distribution directs __________. a. products to producers b. consumers to wholesalers c. products to consumers d. retailers to distributors 3. The biggest impact distribution has on marketing is how it affects __________. a. the design of the product b. the content of the product c. the pricing of the product d. the number of units of the product sold 4. This is not a question marketers consider to determine the price of a product: __________. a. How much are customers willing to pay? b. Is the price fair? c. Is the price competitive with other products? d. Can the company make a profit? 5. _____________ is not one of the functions of marketing. a. Financing b. Production c. Product d. Promotion 86

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Analytical Skills 1: Pricing DIRECTIONS: Deborah has just recorded a CD, which she intends to sell on her own. She needs to figure out how to price the disc. The graph below lists her expenses. Study the information and answer the questions below. (Note: Deborah’s marketing costs came to $900.)

MAKING A CD $10,000

Marketing Costs

9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Development

Manufacturing Distribution Business Plan Considerations

Marketing

1. What is Deborah’s break-even point? $15,900 2. By buying in bulk, she managed to get 6,000 CDs manufactured for $9,000. What was the cost per unit for manufacturing? $1.50 3. What is the cost per unit including all expenses? $2.65 4. Deborah wants to break even after selling 1,200 CDs. What will she have to charge to accomplish this? $13.25 5. How many CDs will she need to sell at this price to earn a 20 percent profit? 1,440 6. What will her profit be if she sells all of her CDs at this price? $63,600

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Analytical Skills 2: Household Incomes DIRECTIONS: The following table lists the income of U.S. households by selected characteristics. Marketers use demographic studies like this one to determine how to market a product. Study the information and answer the questions below. (Note: The median income is not the same thing as the average income of a specific group. The median income is the point at which exactly half of the group studied earns more and half earns less.) Income of U. S. Households by Selected Characteristics (in thousands)

Total Age of householder: 15 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over Region: Northeast Midwest South West Type of household: Family: Married couple Male, wife absent Female, husband absent Non-family: Male Female

Under $10,000 10,705

$10,000 to $14,999 8,093

$15,000 to $24,999 14,587

$25,000 to $34,999 13,698

$35,000 to $49,999 16,660

$50,000 to $74,999 19,272

$75,000 and over 20,860

Median income $38,885

5,770 18,819 23,968 20,158 13,571

1,075 1,506 1,494 1,288 1,507

668 1,193 1,132 790 863

1,325 2,521 2,426 1,831 1,590

944 2,932 2,950 2,119 1,681

932 3,502 4,387 3,123 2,086

551 4,192 5,529 4,621 2,494

274 2,973 6,051 6,387 3,350

$23,564 $40,069 $48,451 $54,148 $43,167

21,589

3,836

3,448

4,893

3,071

2,631

1,886

1,824

$21,729

19,877 24,489 36,959 22,549

2,155 2,187 4,380 1,982

1,580 1,834 2,925 1,755

2,614 3,304 5,683 2,985

2,358 3,353 5,100 2,887

3,007 3,940 5,907 3,806

3,582 5,032 6,473 4,185

4,580 4,840 6,491 4,948

$40,634 $40,609 $35,797 $40,983

71,535 54,770 3,976

4,187 1,541 235

3,653 1,841 209

8,639 5,488 641

8,996 6,329 675

12,192 9,454 759

15,676 13,301 845

18,191 16,816 612

$47,469 $54,276 $39,414

12,789 32,339 14,368 17,971

2,411 6,518 2,084 4,435

1,603 4,440 1,364 3,076

2,510 5,948 2,475 3,473

1,992 4,701 2,237 2,464

1,979 4,468 2,415 2,053

1,530 3,596 2,128 1,467

764 2,668 1,665 1,003

$24,393 $23,441 $30,414 $18,615

Number of Households 183,874

Source: Statistical Abstracts of the United States

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1. What is the median income of persons aged 15 to 24 years?

2. How many non-family households earned between $25,000 and $34,999?

3. Which income bracket had the most 15- to 24-year-olds?

4. Which other age group shares this main income bracket?

5. Which group had the most respondents to this survey?

6. How many households in the Midwest earned $35,000 or more per year?

7. What is the total number of households, by age, which earn $75,000 or more per year?

8. Of these, what is the percentage of householders between 25 and 34 years of age? (Round to the nearest percent.)

9. Which region had the highest percentage of households with an income between $15,000 and $24,999 per year?

10. What was the percentage? (Round to the nearest percent.)

11. Which type of household (family or non-family; married, etc.) has the highest percentage of income in the $50,000 to $74,999 range?

12. Suppose you’re marketing a luxury sedan. You want to attract the largest possible market (in terms of total households) with a yearly income of $50,000 and over. What are the characteristics of this market?

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Reading Skills: Floor Ads DIRECTIONS: The article below describes an innovative form of advertising—floor ads. Read the article, then answer the questions that follow. In December, 1996, Fred Potok was hanging out in the Acme Market in Malvern, Pa., watching customers react to the fruit of two years of entrepreneurial effort—a six-square-foot floor decal of bugs succumbing to Raid. Repeatedly people looked down, then grabbed the pesticide off the shelf. “[That] gave me chills up my spine,” says Potok. “Oh my God, this works!” he recalls thinking. The numbers bore out his observations. In a 5-month, 20-store test, Acme’s sales of Raid rose 91 percent. Other products with floor ads also showed impressive gains. Potok hit on the idea as a 39-year-old salesman at his father-in-law’s bus-decal business. Two things caught his eye: A 1995 Point-of-Purchase Advertising Institute study showing that most people decide to buy a brand-name product in the store; and an Atlantic City casino operator’s remark that he preferred ugly carpets because “People always look down, and we want them looking up.” The floor ad was born. He left his job in 1995 to devote himself to his company, FLOORgraphics. The idea was that the company would lease floor rights from retailers and then sell ad space to manufacturers in fourweek cycles. He would design, manufacture, install, maintain, and remove the graphics. He’d only sell space to one manufacturer per product category in each store to keep the competition out. Three years later, FLOORgraphics Inc. has ads in 15,000 grocery, mass-merchandise, drug, and convenience stores. It expects $30 million in revenues this fiscal year, and it’s profitable. “Floor ads just make sense,” Potok declares proudly. FLOORgraphics pitched the ads as a media buy because TV, radio, magazine, and billboard advertising budgets were fatter than those for circulars and store displays. Potok explained that the ads were “billboards on the floor” that “closed the loop” on national ad campaigns, not promotions for discounts. These days Potok only shops for groceries in stores where he can step on his own ads—so he can keep an eye on his installers. That’s one way to make sure nobody walks all over your interests. Adapted from Meg Lundstrom, “Raising the Roofs With Floor Ads,” BusinessWeek, 16 September 1999.

1. What difference did the floor ads make in the sales of “Raid” in the test stores?

2. What factors caused Potok to develop this idea?

3. What are some of the benefits advertisers get from buying a floor ad?

4. Why did Potok approach big businesses with this idea, rather than use it for small promotions?

5. How did Potok explain to advertisers that floor ads were worthwhile?

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Writing Skills: Placement DIRECTIONS: Go to a clothing store, record store, convenience store, or grocery store. Take note of where the items are placed. Which are closest to the entrance? Which are placed near the checkout stand? Why do you think this is? Explain your findings in general terms.

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Computer Skills: Calculating Profits DIRECTIONS: Pick a product that you might be interested in producing, such as skateboards, T-shirts, or jewelry. Estimate the costs involved in developing, manufacturing, distributing, and marketing 1,000 units of this product. Create a spreadsheet using this information. 1. Start your spreadsheet program. 2. Enter the information into your spreadsheet. Total the expenses to determine your breakeven point. 3. Determine a competitive price (a price the customer might realistically pay based on prices of similar existing products) that will cover your expenses and earn you a profit. What would you need to charge in order to earn a 20 percent profit? 4. After completing your spreadsheet, save your work to a new file. 5. Print out a copy of your work if your teacher has instructed you to do so.

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