MKTG 181 Winter 2024
Midterm Exam Review Guide
The in-class, in-person midterm exam on February 8th will consist of 23 multiple choice and 3
short answer questions (each with multiple parts). Anything discussed in class is fair game for
the midterm (unless explicitly mentioned otherwise). Anything in this review document is also
fair game for the midterm. This guide may provide new ways to think about material we have
covered so far. The midterm exam grade will constitute 25% of your total grade.
The goal of this document is to help you think about some of the important concepts covered in
class. It is not necessarily an exhaustive list of what you will find on the exam. You will notice
that some bullet points are in bold. These are some that I find more important than the others
on the list. (This might correlate positively with the likelihood of relevant questions appearing
on the exam, but this correlation will not be perfect.) Note that the exam questions will tend to
be more applied than those that appear here.
In addition to studying this review guide, you might find it helpful to try explaining different
concepts (e.g., heart loyalty vs. hand loyalty or frontal attack vs. flank attack) to friends who
have not taken the class (learning-by-teaching). Verbalizing your knowledge might reveal holes
in your understanding and/or help you understand the material at a deeper level.
*Note: Questions that are preceded by an * have answers at the end of this document. Try to
answer these questions yourself before turning to the answers.
For your exam:
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You need to bring your own Scantron sheet and a #2 pencil.
You may bring a simple (non-programmable) calculator. Programmable calculators,
smartphones, or tablets are neither allowed nor needed.
You may bring a one-page letter-sized cheat sheet with handwritten notes on both
sides. You will be asked to submit it with your exam if you do bring one.
A note on the type of question not to expect too much:
To the extent possible, I plan to minimize asking “simple memorization” questions unless they
are foundational. For example, I won’t give you a blank 5-box positioning statement and ask
you to fill in the names of the components (e.g., “current behavior”). I’ll be more focused on
testing your deeper understanding of the material and your ability to think logically and
analytically.
In addition, I do not plan on testing your memory of all the commercial / ad examples discussed
in class. For example, I wouldn’t ask you to identify the name of the drug from the commercial
in which it claims to be proven better on pain than Tylenol Extra Strength (it’s Aleve by the
way). However, if there are examples that we discussed multiple times (e.g., the New Coke
failure), I’d expect you to be familiar with those.
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1. Introduction
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What is the ‘consensus’ definition of marketing? How is it different from just
advertising and sales?
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What makes marketing different from other functions of a business such as accounting
and finance?
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What elements are inside the big picture framework? What do “STP” and “4P”
variables (a.k.a. the marketing mix variables) stand for respectively?
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What are the advantages of using the big picture framework, as opposed to studying
each component in isolation?
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2. Business Objective & Branding Strategies
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Remember that core competence should be something that cannot be easily imitated by
others, and that it needs continuous investment nevertheless.
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Keep in mind the distinction between a core competence and a strategic asset, and
which leads to which.
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How a company defines its core business influences who we need to consider as
competitors. If Coke is in the soda business, their chief competitor might be Pepsi. On
the other hand, if Coke is in the refreshment business, one of their chief competitors
might be tap water.
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What is “marketing myopia”? What does it tell us regarding how to define our core
business?
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What role does the fundamental entity serve? What should marketers consider when
choosing the fundamental entity?
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What are the three common types of branding strategies? How are they related?
What are the advantages (and disadvantages) of each of these branding strategies?
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I expect you to be able to identify the branding strategies of brands (that you might
not necessarily be familiar with) when given some brief descriptions of them.
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Why would there be no such thing as ‘Reebok Lunch Meat’ (most likely)?
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What are the two common types of brand extensions when using an umbrella
branding strategy? How are they different?
•
*Suppose that Pepsi recently started selling a “Pepsi Table Lamp” on its website. Which
of the following descriptions would be true regarding the Pepsi Table Lamp?
A. It is a brand extension.
B. It is a product line extension.
C. It is a category extension.
D. More than one of the above
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*Gary manufactures a line of snacks, including Gary’s Munch-Ems and Gary’s Big Pies.
Gary’s smiling face appears on all those packages. Gary also recently acquired a line of
snacks from Dan, which includes Dan’s Crackers and Dan’s Cookies. Gary does not plan
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to change the original names or packaging of the Dan line of snacks. Considering all this,
how would you characterize Gary’s branding strategy?
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3. Marketing Objective
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What is the main question that is being asked when determining the Marketing
Objective? In other words, what does the Marketing Objective tell us about a brand’s
marketing strategy? What are the two Marketing Objectives that a brand can choose
from?
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What is a marketing or purchase funnel? What is the relationship between the 5 stages
of the funnel? In other words, why is it shaped the way it is? Which stages of the funnel
are Acquisition and Retention most often times related to?
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How are contractual vs. non-contractual settings different? Know how to distinguish the
two settings given a description on the nature of the relationship, and under which
setting the definition of current customers is easier.
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RFM criteria are often used to define our current customers in non-contractual settings.
What does “RFM” stand for? Remember that the criteria (cutoffs) can differ by industry.
If Joe last purchased a Lexus three years ago, Lexus might still consider him to be a
current customer. If Joe last ate at McDonalds three years ago, McDonalds probably
would not consider Joe a current customer.
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Understand the pros and cons of acquisition and retention marketing. When is one
more important / suitable than the other?
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What are some typical examples or types of acquisition and retention marketing
efforts? In which stage of the purchase funnel is each more relevant?
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Note that if a company is completely new, a Retention marketing objective is most often
not an option (there is no customer to retain). Brand new companies will necessarily
pursue an Acquisition marketing objective. However, just because a company is
pursuing an Acquisition marketing objective does not mean it’s new. It could of course
be new. But it could also be a well-established company trying to grow the category or
trying to steal loyalists from an even larger competitor. Put differently:
- The probability that a company is pursuing a Retention MO if it is new = 0%
- The probability that a company is pursuing an Acquisition MO if it is new = 100%
- The probability that a company is new if it is pursuing an Acquisition MO < 100%
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What three broad types of loyalty are there? Understand the different circumstances
under which each type of loyalty usually develops and how each would look like.
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The New Coke failure is a typical example that demonstrates the importance of
recognizing and understanding the different types of loyalties. It had the (retrospective)
misperception that what sets it apart from the main competitor Pepsi was its taste and
its customers had head loyalty. It turns out that customers did not love Coke because it
tastes better; they loved Coke just because it was Coke. In other words, they
demonstrated heart loyalty.
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What is a customer lifetime value (CLV)? What can marketers use it for? What are the
factors that determine the CLV and how are they related to the CLV?
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*Sometimes, customers take advantage of big sales and never shop from us again once
prices return to normal levels. We lose money on those transactions. Why shouldn’t we
attempt to stop acquiring all customers who seek big discounts?
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*Is Customer Lifetime Value (CLV) positively or negatively related to the firm’s cost of
capital?
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4. Source of Volume
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What is the main question that is being asked when determining the Source of
Volume? In other words, what does the Source of Volume tell us about a brand’s
marketing strategy?
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Be absolutely comfortable with the 4 possible quadrants / combinations of Marketing
Objective X Source of Volume (i.e., targeting our loyalists, multi-brand customers,
competitors’ loyalists, and people outside the category). Also be familiar with how to
specify the target market of each combination using a Venn Diagram.
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Be aware that these Venn diagrams can be drawn in any number of ways (e.g., multiple
competitors; little white space in categories with few non-users; categories filled with
multi-brand users; etc).
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One of the four strategic quadrants we’ve discussed is Retention / Steal Share. How can
you focus on retention and steal share at the same time? Does this make any sense?
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How is a category defined? What 2 types of variables can be used to describe it? How
are our competitors defined?
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Is affordability a main or dynamic variable?
A. Main variable
B. Dynamic variable
C. Both
D. Neither
E. The question is impossible to answer without more information
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Category leaders are generally most motivated to stimulate demand for the entire
category (i.e., “expand the category” by bringing in more people into the category),
despite the fact that competitors enjoy free-rider benefits. Why?
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What are some major differences between frontal and flank attacks? What are some
examples of each?
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What are some pros and cons of using each of the two Sources of Volume?
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If a commercial repeats a product’s name or the brand in order to raise awareness
among potential customers, we can quite confidently infer that the company’s
Marketing Objective is Acquisition. However, based on this information alone, we can’t
confidently infer the company’s Source of Volume. We would need to know more about
the commercial, the brand, or its competitors. For example, if we know that it is a
completely new brand, it is more likely that it is trying to Steal Share from its
competitors. On the other hand, if we know that it is the category leader, it might be
running such an ad to expand the category, in which case the Source of Volume would
be Stimulate Demand.
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Duluth Trading Co. is attempting to steal share from competing t-shirt manufacturers
with ads like this:
Would you consider this more of a frontal attack or a flank attack?
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*When competition is present (i.e., outside of a monopoly context), why is reaching
100% market share not always optimal?
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*If we find that our main problem is that we have a non-zero but low share of wallet
(consumers spend only a small proportion of money they spend in the category with us),
which strategic quadrant should we be in to solve this problem?
A. Acquisition / Stimulate Demand
B. Acquisition / Steal Share
C. Retention / Stimulate Demand
D. Retention / Steal Share
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5. Marketing Research Methods
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What are the two broad types of marketing research? What are some examples of
each?
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Imagine that your laddering interview reveals that I drink light beer over regular beer
because it has less alcohol, which lets me stay awake later, which gives me extra time to
talk to my spouse, which allows me to have a happier marriage. Which of the underlined
statements are product attributes? Which are consequences of consumption? Which
are values served by the consequences?
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What could the insights from a laddering interview be used for?
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What are some key potential problems of using surveys? Make sure you are able to
recognize common survey problems when you see one, and how to solve them.
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What might be one of the most common reasons people lie when they respond to
surveys? Can you think of any examples from your own life experience?
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*True or False: When measuring behavioral frequency using a multiple-choice question
(with choices, for example, that include once a month, once a year, etc.), the choices
listed do not influence the average frequency that participants report.
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Why could observational or ethnographic studies be valuable to marketing researchers?
In other words, what kind of insight do they provide that other methods of marketing
research such as surveys cannot?
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Understand the three conditions needed to establish causality, and how causality
differs from correlation. Also make sure that you recognize some of the common
mistakes when trying to establish causality (e.g., spurious correlation).
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What are Randomized Control Trials (RCTs)? What are A/B Tests? Why are they useful in
establishing causality?
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What is the difference between independent vs. dependent variables in an
experiment? How about internal vs. external validity?
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*Consider the following statement: “We randomly assigned participants to view one of
two package colors (red or blue) and then asked them how much they are willing to pay
for it.” Could this be considered a randomized control trial? Can you identify the
independent variable based on the information provided? What about the dependent
variable?
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*True or False: Confounds are a threat to internal validity of an experiment more so
than to the external validity.
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6. Test Marketing
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What are some major steps in test marketing? How are they interrelated? Do you have
to go through all of these steps? Can you go through a step multiple times?
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What are product concepts and concept testing? What are some of the major goals of
concept testing?
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Who can participate in focus group interviews (FGIs)? What are some potential
problems or limitations of working with focus groups?
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Why does asking consumers to consider multi-attribute products (in conjoint) yield
more informative data than asking consumers to evaluate the attributes themselves,
one at a time?
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Conjoint analysis is a versatile method used to address questions such as
- How much are people willing to pay for a certain product with a combination of
attribute levels?
- How much are people willing to pay for an improvement in an attribute?
- How should we configure a product to balance all the attributes?
- How are consumers different in terms of their preferences?
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*Which of the following questions could be asked of participants in a typical conjoint
study?
A. Which color packaging do you prefer for your soda, red or blue?
B. Is nutritional content more or less important than price when choosing a soda?
C. Would you be more likely to buy a cheap, high-calorie soda or an expensive, lowcalorie soda?
D. Please rank the importance of the following attributes: nutritional content, price,
and flavor.
E. All of the above
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How is prototype testing different from concept testing? What are the two types of
commonly used prototype testing? How are these two different and what are some
examples of each?
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What is a test market? What are the potential benefits and drawbacks of utilizing one?
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Make sure you are able to assess which test marketing technique might be more
useful than others given a scenario.
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Absolutely know how to solve for BreakEven Volume (BEV), possibly even without any
guidance regarding the intermediate steps. Understand what the components mean
(e.g., what’s a unit margin?), and what the Breakeven volume means. If you expect to
sell less than the BEV, you will incur a loss and you should NOT launch the product
whereas if you expect to sell more than the BEV, you will make a profit and you
should launch the product.
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*Which of the following points represents when BEV is achieved: A, B, C, or none of
these?
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7. Segmentation & Targeting
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Why do we need segmentation? Why can’t we treat customers who have different
needs in the same way?
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What is a segment? Will different marketing strategies be used for customers in the
same segment? Will different marketing strategies be used for customers in different
segments?
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*Imagine that we wanted to segment customers from around the globe based on their
nationality / citizenship. Would that create mutually exclusive and collectively
exhaustive segments?
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How is the cost of segmentation related to the optimal segment size (or the optimal
number of segment)? Can you think of specific examples where the cost of
segmentation (or customization) might be high vs. low?
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What are some examples of segmentation based on demographic, behavioral and
attitudinal variables? What are the benefits and disadvantages of using each?
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Fox News and MSNBC example as well as the Bud Light example demonstrate that
segmenting based on attitudinal variables can produce polarization that can be either
profitable or unprofitable. (Note, of course, that many brands are quite profitable
without active polarization.)
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How do we use importance and perception data or the perceptual map to understand
the market landscape? What does such data tell us about targeting?
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What are some factors to consider when deciding which segment to target? In other
words, which segment(s) are you most likely to go after?
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Should you always target a single segment? Should your target segment stay the same
forever? Can you think of products that might be targeting multiple segments that were
not discussed during class?
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Who are considered to be vulnerable customers? When should we be more concerned
when targeting these customers with our products?
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8. Positioning & Connecting Strategy and Execution
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What is positioning and why is it necessary?
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What are the main components of a positioning statement? Thinking about what the
positioning statement of a product you know can be helpful.
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What are the elements in the 5-box positioning statement? (No need to be able to recall
the name, but you should be able to recognize what the names mean.) How are they
interrelated? Pay close attention to the direction of the arrows.
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What are the two types of common current beliefs that need to be addressed that were
discussed in class? What types of messages can be used to address each? How would
the two types of efforts be different with regards to how it would be reflected in the
perceptual map?
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Note that the links between beliefs and behavior are not always straightforward. I may
believe donating to charities is a good thing, but not always have the motivation to do it.
Likewise, consumer propositions do not always lead to desired beliefs. We don’t believe
everything we hear, we counterargue, and initial beliefs can be hard to change.
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The distance between current beliefs and desired beliefs sheds light on how costly (in
terms of time and money) it will be to convert beliefs. This is one reason why we usually
would not want to target all segments and achieve 100% market share.
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What is the biggest difference between the pull and push strategies?
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When is pull strategy more useful than push strategy and vice versa? What are some
typical examples of each?
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In the early days of the MTV show, when it wasn’t carried by many cable providers, MTV
would run commercials featuring musicians who urged viewers to ‘Call your cable
operator and say, “I want my MTV!”’ Would these commercials be considered an
example of push strategy or an example of pull strategy?
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Understand very clearly how our category definition can influence who our
competitors are (and also who the “outside of category” people are), who and how big
the primary audience of each strategic quadrant (MO X SOV) is, and our 5-box
positioning statements.
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*In the camping example we covered in class in detail, why can’t we pursue a Retention
/ Steal Share strategy when we perceive ourselves as being in the ‘Night Camping’
category? (You won’t need to remember the particulars of this example, of course. But
you should be able to think through similar problems.)
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Which is generally considered to be larger: the number of people whose beliefs the
marketer can change or the number of people whose behavior the marketer can
change? (Hint: also think of the marketing funnel and the positioning 5-box statement)
Thinking about these questions will be helpful in determining which strategy will be the
most effective to pursue.
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Some Answers
2. Business Objective & Branding Strategies
*Suppose that Pepsi recently started selling a “Pepsi Table Lamp” on its website. Which of the
following descriptions would be true regarding the Pepsi Table Lamp?
A. It is a brand extension.
B. It is a product line extension.
C. It is a category extension.
D. More than one of the above claims are true
D. Because it was both a brand extension and more specifically a category extension. Productline extensions and category extensions are two types of brand extensions. Clearly, Pepsi is
jumping into a new category by introducing a lamp (meaning C is correct, and thus A as well).
If Pepsi introduced a new flavor of soda under its brand name, that would be a typical example
of a product line extension (and thus a brand extension as well).
In both of these cases, Pepsi would be using the umbrella branding strategy, where it uses the
“Pepsi” brand name for all the products under it.
* Gary manufactures a line of snacks, including Gary’s Munch-Ems and Gary’s Big Pies. Gary’s
smiling face appears on all those packages. Gary also recently acquired a line of snacks from
Dan, which includes Dan’s Crackers and Dan’s Cookies. Gary does not plan to change the
original names or packaging of the Dan line of snacks. Considering all this, how would you
characterize Gary’s branding strategy?
Overall, this would be considered hybrid branding. Gary maintains a line of snacks (Munch-Ems
and Big Pies) under the “Gary” umbrella. Consumers associate those snacks with Gary. At the
same time, Gary also maintains the Keith brand for the crackers. However, consumers may not
even realize the connection between the Keith cracker and the “Gary” brand, which implies
some use of distinct branding. Thus, the combination of umbrella branding for Gary lines,
alongside the distinct branding for the Keith brand (i.e., Keith brand is distinct from Gary brand)
would together be considered hybrid branding. Note the difference between this case and a
case like Unilever. Unilever maintains a number of distinct brands, and none are prominently
associated with Unilever. This would be more similar to the Google example we discussed in
class, where some sub-brands of Google don’t mention Google at all (e.g., YouTube) whereas
many others directly mention Google (e.g., Google Maps).
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3. Marketing Objective
*Sometimes, customers take advantage of big sales and never shop from us again once prices
return to normal levels. We lose money on those transactions. Why shouldn’t we attempt to
stop acquiring all customers who seek big sales?
Some people who are initially attracted by the big discount may come to love the brand, and
keep buying even at higher prices. Recall that, generally, the top 20% of customers generate
80% of sales. Using a sale to attract a few true loyal customers with a high CLV is often worth
the cost of attracting many strangers who end up not being very profitable (i.e., marginal or
negative CLV).
*Is Customer Lifetime Value positively or negatively related to the firm’s cost of capital?
Negatively. As i rises, CLV falls because we now have to discount the future stream of revenue
more heavily. A higher cost of capital would imply that future profits or margins would not be
as valuable to the firm at the present moment.
4. Source of Volume
*When competition is present (i.e., outside of a monopoly context), why is reaching 100%
market share not optimal?
The cost of courting holdout customers with high loyalty to competitors, unique needs, or who
prefer dealing with smaller, local suppliers may be too high. Having achieved 100% market
shares implies that you are probably wasting your marketing resources on converting
customers who don’t really like you in the first place (those with a larger distance between their
current belief and our desired belief).
Although not discussed in class, 100% market share also isn’t helpful if exclusivity is a feature of
your brand. Burberry products wouldn’t be considered as prestigious if everyone was wearing
Burberry. A high number of customers might also hurt actual or perceived quality (e.g., AOL
took on too many customers originally, slowing all customers’ internet access).
* If we find that our main problem is that we have a non-zero but low share of wallet
(consumers spend only a small proportion of money they spend in the category with us), which
strategic quadrant should we be in to solve this problem?
A. Acquisition / Stimulate Demand
B. Acquisition / Steal Share
C. Retention / Stimulate Demand
D. Retention / Steal Share
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D. Low share of wallet as described above would be a situation in which a brand does have
quite a few customers (our share of wallet is not 0); the problem is that they are low in volume.
This suggests a retention marketing objective. Moreover, the fact that these customers spend a
low share of their wallet on the brand suggests that these are probably multi-brand users who
we would like to spend more on our brand. These are the typical main targets for the Retention
/ Steal Share strategic quadrant.
5. Marketing Research Methods
*True or False: When measuring behavioral frequency using a multiple choice question (with
choices, for example, that include once a month, once a year, etc.), the choices listed do not
influence the average frequency that participants report.
False. The choices listed do matter, because survey respondents assume that the researcher
constructs a meaningful scale based on knowledge of the distribution of real-world frequencies.
Response options in the middle of the scale are usually assumed to be typical. This is important
when respondents do not have perfect knowledge of their own behavioral frequency in a given
category. If the question was about the age, for example, which most respondents would have
a very clear answer for, this would not be a big issue.
*Consider the following statement: “We randomly assigned participants to view one of two
package colors (red or blue) and then asked them how much they are willing to pay for it.”
Could this be considered a randomized control trial? Can you identify the independent variable
based on the information provided? What about the dependent variable?
Yes. Because the participants were randomly assigned to the two conditions (red vs. blue
packaging), the two groups of participants should be (on average) not noticeably different from
one another, ruling out any third factor driving both the independent and dependent variables.
The independent variable is package color, and the dependent variable is the amount one is
willing to pay. The evaluation of internal and external validity might require more information
about the specifics of how the experiment was implemented. Note that even if the participants
were NOT randomly assigned to the two colors, it would still be considered an experiment; it’s
just that the internal validity of the experiment would be considered low, because the
participants in the two groups might be different a priori, which could lead to an unknown third
factor affecting both the independent and dependent variables.
*True or False: Confounds are a threat to internal validity of an experiment more so than to the
external validity.
True. As the Coke vs. Pepsi example with different cups being used from the lecture
demonstrates, you cannot confidently conclude that the shape of the soda container
(independent variable) caused a change in the amount consumed (dependent variable) because
it may be the soda brand in each cup (a confounding variable) rather than the shape of the
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container that might have caused any differences in the amount consumed. This does not
directly relate to whether these findings are generalizable to other non-lab settings for example
(external validity). Often times, lab experiments with a higher internal validity tend to have
lower external validity and vice versa, but there are plenty of experiments that excel in both
and others that are bad in both.
6. Test Marketing
*Which of the following questions could be asked of participants in a typical conjoint study?
A. Which color packaging do you prefer for your soda, red or blue?
B. Is nutritional content more or less important than price when choosing a soda?
C. Would you be more likely to buy a cheap, high-calorie soda or an expensive, low-calorie
soda?
D. Please rank the importance of the following attributes: nutritional content, price, and
flavor.
E. All of the above
C. Conjoint analysis is aimed at indirectly inferring the importance of different attributes
through choices between different combinations of attributes (or ratings of different products)
rather than asking directly the preference and importance of each attribute, ruling out A, B, and
D, and thus E. You want respondents to go through a series of tradeoff so that you reveal what
they actually care about as opposed to what they say they care about, which can be very
different in many cases.
* Which of the following points represents when BEV is achieved: A, B, C, or none of these?
B. It is the point where total revenue = total cost. Remember that if you sell less than this
quantity, you will incur a loss as your cost is greater than your revenue. On the other hand, if
you sell more than this quantity, you will make profits as your revenue is greater than the total
cost.
7. Segmentation & Targeting
*Imagine that we wanted to segment customers from around the globe based on their
nationality/citizenship. Would that create mutually exclusive, collectively exhaustive segments?
No. Nationalities are not always mutually exclusive (some people have dual citizenship,
meaning they’d appear in > 1 segment). (Also, in very rare instances, some people legally have
no nationality, which would violate the collectively exhaustive requirement.)
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8. Positioning & Connecting Strategy and Execution
*In the camping example we covered in class in detail, why can’t we pursue a Retention / Steal
Share strategy when we perceive ourselves as being in the ‘Night Camping’ category? (You
won’t need to remember the particulars of this example, of course. But you should be able to
think through similar problems.)
Because there are currently no multi-brand users (kids who stay at both Night Inside and Night
Outside camp).
Good luck!
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