PCM Marketing Strategy 2 — Questions and Answers
Question 1: A company discovers that its target segment is highly price-sensitive and competition is intensifying. Which pricing strategy best defends market share while maintaining profitability?
- Skimming pricing
- Value-based pricing with tiered offerings (Correct answer)
- Prestige pricing
- Cost-plus pricing
Correct answer: Value-based pricing with tiered offerings
Value-based pricing with tiered offerings addresses price sensitivity by matching price to perceived value while protecting margins through differentiated product tiers.
Question 2: In the BCG Growth-Share Matrix, a 'Question Mark' business unit is best described as one with:
- High market share, low growth
- Low market share, high market growth (Correct answer)
- High market share, high growth
- Low market share, low growth
Correct answer: Low market share, high market growth
Question Marks have low relative market share in high-growth markets, requiring strategic decisions about investing to build share or divesting.
Question 3: A brand extending into a new product category leverages its existing equity. The primary risk of brand extension is:
- Increased manufacturing costs
- Brand dilution if the extension underperforms or misaligns with core identity (Correct answer)
- Reduced distribution channel options
- Higher advertising frequency requirements
Correct answer: Brand dilution if the extension underperforms or misaligns with core identity
Brand dilution occurs when a poorly received or misaligned extension weakens consumers' perceptions of the parent brand.
Question 4: Which strategic framework explicitly evaluates the attractiveness of an industry based on five competitive forces?
- SWOT Analysis
- Ansoff Matrix
- Porter's Five Forces (Correct answer)
- McKinsey 7-S Framework
Correct answer: Porter's Five Forces
Porter's Five Forces analyzes supplier power, buyer power, competitive rivalry, threat of new entrants, and threat of substitutes to assess industry attractiveness.
Question 5: A company pursuing a 'market development' strategy according to the Ansoff Matrix would:
- Launch new products for existing customers
- Enter new markets with existing products (Correct answer)
- Diversify into unrelated business areas
- Increase penetration in existing markets with existing products
Correct answer: Enter new markets with existing products
Market development involves selling existing products to new customer segments or geographic markets.
Question 6: Customer Lifetime Value (CLV) is most useful in marketing strategy for:
- Setting short-term quarterly sales targets
- Allocating acquisition and retention budgets based on long-term profitability (Correct answer)
- Measuring brand awareness across segments
- Determining optimal product assortment width
Correct answer: Allocating acquisition and retention budgets based on long-term profitability
CLV helps marketers decide how much to invest in acquiring and retaining customers by quantifying the total expected profit from a customer relationship.
Question 7: A firm achieves competitive advantage through cost leadership when it:
- Charges a premium for unique product features
- Produces at lower costs than rivals while maintaining acceptable quality (Correct answer)
- Focuses exclusively on a narrow market niche
- Maximizes product variety to capture multiple segments
Correct answer: Produces at lower costs than rivals while maintaining acceptable quality
Cost leadership means becoming the lowest-cost producer in the industry, enabling competitive pricing or higher margins at market-average prices.
PCM Marketing Strategy 2
A company discovers that its target segment is highly price-sensitive and competition is intensifying.
Which pricing strategy best defends market share while maintaining profitability?