Question 1

Which of the following best illustrates the "80-20" principle?
A)Eighty percent of our products are sold in 80 percent of our territories.
B)Sales increased 15 percent last year.
C)Seventy-two percent of our customers account for only 12 percent of our sales.
D)Volume increased 80 percent,but profits increased only 20 percent.
E)Total sales increased 12 percent,but sales in the western region declined 3 percent.

Accepted Answer

The "80-20" principle, also known as the Pareto principle, states that roughly 80% of effects come from 20% of causes. In this case, 72% of customers only account for 12% of sales, illustrating the principle that a small percentage of customers are responsible for a large percentage of sales.

Question 2

Which of the following is the best reason for continuing to carry a product when a sales volume analysis indicates it is a low-volume item?
A)The item is needed to round out the company's product line.
B)The product accounts for 5 percent of the sales volume and 2 percent of the profit.
C)The primary demand for the product is declining.
D)The product's gross margin is also low.
E)The product was what gave the company its start in life.

Accepted Answer

If the low-volume item is needed to round out the company's product line, it may be important to continue carrying it for branding and customer satisfaction purposes. This could also help maintain customer loyalty and prevent them from looking for similar products from competitors.

Question 3

When making a sales volume analysis by product line:
A)It is useful if industry sales figures are available for each of our product lines.
B)The 80-20 and the iceberg principles usually do not apply.
C)With respect to a given product,management should be satisfied if sales of that product are increasing as a share of company total sales.
D)Management should drop a product if its sales are below expectations.
E)Low-volume products should be dropped,especially if a cost analysis shows them to be a loss.

Accepted Answer

Having industry sales figures for each product line can provide valuable context and benchmarks for analyzing our own sales volume by product line.

Answer: C
 If a product's sales are increasing as a share of company total sales, it suggests that the product is performing well relative to other products in the company's portfolio.

Answer: E
 Low-volume products that are not profitable can be a drain on resources, so dropping them can be a sound business decision. A cost analysis can help determine whether a product is profitable or not.

Question 4

Which of the following best illustrates the 80-20 principle?
A)We are a hardware wholesaler,and 20 percent of our sales volume comes from building supply dealers.
B)Fifteen percent of our customers account for 65 percent of our sales volume.
C)Industry sales declined 10 percent last year.
D)Our company's sales increased 18 percent last year.
E)Last year our volume was up 10 percent,but our market share declined 4 percent.

Accepted Answer

The 80-20 principle, also known as the Pareto principle, states that 80% of effects come from 20% of causes. In this scenario, 15% of the customers are responsible for 65% of the sales volume, which illustrates the 80-20 principle.

Question 5

The basic reason for the existence of the 80-20 situation in most marketing programs is:
A)The inevitable failure of many new products.
B)The high cost of marketing.
C)Misdirected marketing effort.
D)Too many salespeople.
E)None of these.

Accepted Answer

The 80-20 situation in marketing refers to the Pareto Principle which states that 80% of the effects come from 20% of the causes. This principle applies in marketing as well, where 80% of the sales come from 20% of the customers or products. Misdirected marketing efforts, such as focusing on the wrong target market or using ineffective marketing channels, can lead to a situation where sales are not evenly distributed among all products or customers, resulting in the 80-20 situation. The other options do not directly relate to the 80-20 situation in marketing.

Question 6

The "80-20" principle exists in many companies because:
A)Marketing efforts and costs follow the number of territories,products,and customers,rather than actual sales or profit from these units.
B)Management does not evaluate the marketing performance.
C)All sales generate about the same rate of profit.
D)Most marketing executives are sales-oriented and not profit-oriented.
E)A company does not conduct a marketing cost analysis.

Accepted Answer

The "80-20" principle states that 80% of a company's sales come from 20% of its customers or products. However, many companies still allocate their marketing efforts and costs based on the number of territories, products, and customers rather than focusing on the most profitable units. This can lead to inefficient use of resources and lower overall profits.

Question 7

In performance evaluation by sales managers,the soft-spot principle holds that:
A)A company should not get rid of a territory or product that is a soft spot.
B)It is more useful to measure soft spots on a percentage basis rather than dollar volume.
C)If a company does a good job in sales-volume analysis,it won't have any soft spots.
D)The principle is applicable only to a territorial volume analysis and not to a product or customer analysis.
E)An executive reaps the largest possible gain by working with the weakest segments of the organization.

Accepted Answer

The soft-spot principle suggests that focusing on and improving the weakest areas or "soft spots" within an organization can yield the most significant gains, as these areas often have the most room for improvement.

Question 8

A detailed study of the "net sales" section of a company's profit and loss statement is called a ____________ analysis.
A)P & L
B)Sales volume
C)Marketing cost
D)Marketing audit
E)Historical

Accepted Answer

A sales volume analysis focuses on examining the "net sales" section of a company's profit and loss statement to understand sales performance.

Question 9

When evaluating sales performance,a sales volume analysis alone is usually not sufficient because:
A)It does not take into consideration the territorial sales potentials.
B)It does not tell us whether the 80-20 principle is at work.
C)Sales forecasts are only estimates.
D)It does not indicate the profitability of sales territories or product lines.
E)None of these.

Accepted Answer

Sales volume analysis only measures the amount of sales made, but it does not take into consideration the profitability of sales territories or product lines. It is essential to evaluate the profitability of the sales not just the volume to determine the overall success of the sales team.

Question 10

Misdirected marketing effort occurs in many firms because:
A)The salespeople do not ordinarily make their quota.
B)Companies typically find that their sales forecasts are below the figure for sales potentials.
C)Companies do not earn a satisfactory return on investment.
D)Management lacks reliable standards for determining what results should be expected from marketing expenditures.
E)The opening statement is false in that mis-directed marketing effort does not occur in companies which show a good profit rate.

Accepted Answer

Misdirected marketing effort occurs when management lacks reliable standards for determining what results should be expected from marketing expenditures. This can lead to ineffective marketing campaigns and a failure to meet sales targets or earn a satisfactory return on investment.

Question 11

Regarding a sales volume analysis by territory or product line:
A)They are not worth their cost if the sales are increasing year by year.
B)Below-par territories or products should be eliminated.
C)To make a useful analysis,management first should have set some sales goals or quotas by territory or product.
D)You cannot make this type of analysis without knowing territorial or product costs.
E)Market indexes are not used.

Accepted Answer

In order to make a useful analysis of sales volume by territory or product line, management first needs to set sales goals or quotas for these areas. Without such goals or quotas, it would be difficult to determine whether sales performance is meeting expectations. A and E are incorrect because increasing sales volume alone does not render such analysis worthless, and market indexes may be used in some contexts. B and D could be potential considerations after conducting the analysis, but they do not relate directly to the necessary steps for conducting the analysis.

Question 12

In our company the figure for total sales is quite satisfactory,but it does not show that sales are declining in a certain product line or territory.This situation:
A)Is an example of the 80-20 principle.
B)Indicates a well-managed company.
C)Tells us that we did a poor job of sales forecasting.
D)Illustrates the need for detailed sales information.
E)Suggests that we drop that product or territory.

Accepted Answer

The fact that total sales are satisfactory but declining in a certain product line or territory suggests that more detailed sales information is needed to identify the issue and address it accordingly. This highlights the importance of gathering and analyzing sales data to make informed business decisions.

Question 13

Misdirected marketing effort occurs in many firms because:
A)Sales budgets are not prepared.
B)Management is profit-conscious rather than being volume-conscious.
C)Sales volume analyses cannot be done carefully.
D)Marketing and accounting executives do not sufficiently coordinate their efforts.
E)Management often lacks reliable standards for determining what should be spent on various marketing activities.

Accepted Answer

Misdirected marketing efforts occur when management lacks reliable standards for determining what should be spent on various marketing activities. Without clear guidelines, it is easy for firms to overspend in some areas and underspend in others, leading to ineffective marketing campaigns. Additionally, without coordination between marketing and accounting, it can be difficult to accurately analyze sales volumes and identify areas for improvement.

Question 14

When preparing a sales volume analysis by customer classification:
A)Management rarely finds the 80-20 principle in operation.
B)Customers can be classified by industry groups but not by channels of distribution.
C)This type of analysis is usually more fruitful when the customer groups are also analyzed by product line or territory.
D)Management should study its large accounts and not waste time and money on the small ones.
E)It is not useful to extend this analysis over several periods of time.

Accepted Answer

Analyzing customer classification by product line or territory can provide more valuable insights for sales volume analysis. This helps in identifying the areas where the company is performing well and where it needs to improve. Therefore, choice C is the best option. The other choices are incorrect because the 80-20 principle is commonly found in sales volume analysis, customers can be classified by both industry groups and channels of distribution, management should study both large and small accounts, and it is useful to extend this analysis over several periods of time to identify trends and patterns.

Question 15

Misdirected marketing effort:
A)Rarely occurs in a well-managed firm.
B)Is easy to detect.
C)Usually is corrected when a company conducts a sales volume analysis.
D)Means that a company should reduce its marketing activities.
E)Is a key reason underlying the existence of the 80-20 principle.

Accepted Answer

Misdirected marketing effort is a key reason underlying the existence of the 80-20 principle, which states that 80% of a company's revenue comes from 20% of its customers. This suggests that companies may focus too much on the wrong customers, products, or markets, leading to ineffective marketing efforts and ultimately, lower sales and revenue.

Question 16

Which of the following is an accurate generalization regarding a sales volume analysis?
A)It does not uncover which products are selling best.
B)It does not tell us whether the 80-20 principle is occurring in the firm.
C)It does not take into consideration the industry sales volume.
D)It indicates the contribution margin of territories.
E)None of these is correct.

Accepted Answer

None of these choices accurately represent a generalization regarding a sales volume analysis. In fact, a sales volume analysis can provide insights into which products are selling well, whether the 80-20 principle is occurring, and the contribution margin of territories. The analysis may also take into consideration industry sales volume.

Question 17

When a large percentage of our products or customers account for only a small share of our total sales or profit,we refer to this situation as:
A)The iceberg principle.
B)Sales-volume analysis.
C)Performance evaluation.
D)The 80-20 principle.
E)Marketing profitability analysis.

Accepted Answer

The situation described is commonly known as the 80-20 principle, which states that 80% of the effects come from 20% of the causes. In this case, it means that 80% of the sales or profits come from 20% of the products or customers, while the remaining 80% of the products or customers only account for 20% of the total sales or profits. This principle can help managers identify which products or customers are the most valuable and deserving of attention.

Question 18

If the Magenta Corporation were to assign one salesperson to each of its Pacific Coast territories,a substantial difference in the potential volume and profit from the various territories is likely to occur as a result of:
A)The SFA principle.
B)The high cost of marketing.
C)The mission statement.
D)Misdirected marketing effort.
E)The wheel of selling.

Accepted Answer

The answer of If the Magenta Corporation were to assign...

Question 19

Which of the following best illustrates the 80-20 principle?
A)Our company's sales increased 80 percent last year,but the industry's volume went up only 20 percent.
B)Sixty-eight percent of our customers account for only 12 percent of our sales.
C)Company volume increased 10 percent,but sales in territory A decreased 4 percent.
D)Eighty percent of our customers account for 80 percent of our sales;20 percent of our customers account for 20 percent of our sales.
E)Eighty percent of our territories usually are not profitable.

Accepted Answer

This option illustrates the 80-20 principle, also known as the Pareto Principle, which states that 80 percent of effects come from 20 percent of causes. In this case, it means that a small percentage of customers (20 percent) account for a large percentage of sales (80 percent).

Question 20

A territorial sales volume analysis is likely to include all of the following steps,except for:
A)Establish a sales volume goal or quota for each territory.
B)Determine actual total sales in each territory.
C)Determine what percentage of total company sales should come from each territory.
D)Determine how much is the variation between the actual sales and the quota-goal figure.
E)Deduct territorial sales expenses.

Accepted Answer

Territorial sales volume analysis typically focuses on setting sales goals, measuring actual sales, and analyzing the variance between these figures to assess performance. Deducting territorial sales expenses is more related to profitability or cost analysis rather than sales volume analysis.

Quiz 14: Analysis of Sales Volume

Which of the following best illustrates the "80-20" principle?

Which of the following is the best reason for continuing to carry a product when a sales volume analysis indicates it is a low-volume item?

When making a sales volume analysis by product line:

Which of the following best illustrates the 80-20 principle?

The basic reason for the existence of the 80-20 situation in most marketing programs is:

The "80-20" principle exists in many companies because:

In performance evaluation by sales managers,the soft-spot principle holds that:

A detailed study of the "net sales" section of a company's profit and loss statement is called a ____________ analysis.

When evaluating sales performance,a sales volume analysis alone is usually not sufficient because:

Misdirected marketing effort occurs in many firms because:

Regarding a sales volume analysis by territory or product line:

In our company the figure for total sales is quite satisfactory,but it does not show that sales are declining in a certain product line or territory.This situation:

Misdirected marketing effort occurs in many firms because:

When preparing a sales volume analysis by customer classification:

Misdirected marketing effort:

Which of the following is an accurate generalization regarding a sales volume analysis?

When a large percentage of our products or customers account for only a small share of our total sales or profit,we refer to this situation as:

If the Magenta Corporation were to assign one salesperson to each of its Pacific Coast territories,a substantial difference in the potential volume and profit from the various territories is likely to occur as a result of:

Which of the following best illustrates the 80-20 principle?

A territorial sales volume analysis is likely to include all of the following steps,except for: