Section A: Sixty (60) Independent Multiple-Choice Questions Answer All Questions in This Section

PB Module 6 – Marketing and Selling in Financial Services – Mock 2 Examination
SECTION A: SIXTY (60) INDEPENDENT MULTIPLE-CHOICE QUESTIONS

ANSWER ALL QUESTIONS IN THIS SECTION
1. After concept testing, what is the next stage that a company would engage in to
develop and market a new product or service?
A. Market testing
B. Business analysis
C. Screening
D. Commercialisation
2. Which method of research can be used to obtain information to gauge the success of
an advertising campaign if people are either unwilling or uncooperative in providing
information?
A. Focus groups
B. Sales patterns
C. In-depth interviews
D. Questionnaires
3. Maslow's hierarchy of needs includes all of the following, EXCEPT:
A. Safety needs
B. Physiological needs
C. Need recognition
D. Self actualisation
4. A product which is rapidly gaining market acceptance and is starting to generate a

profit has reached which stage of its life cycle?
A. Introduction
B. Growth
C. Shakeout
D. Maturity
5. A company has introduced a mortgage product which allows customers the option to
vary the basis of the interest from fixed rate to variable rate over the course of the
mortgage. The new product has been well received by industry analysts but the
company now has to educate customers about its benefits.
Which of the following marketing mix variables does the above involve?
A. Price
B. Product
C. Distribution (Place)
D. Promotion
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6. Which of the following on Customer Relationship Management (CRM) are

CORRECT?
I. CRM identifies the importance of the entire organisation focusing on satisfying

customer requirements.
II. The logic for CRM stems from the observation that it is cheaper to attract new
customers than to retain existing ones.
III. CRM is most effective in situations where companies have infrequent
communication with their customers.
IV. Firms can implement their relationship strategy through effective CRM.
A. I and II only.
B. I and III only.
C. I and IV only.
D. II and III only.
7. A bank charges a monthly fee of $10 for a current account product and the bank's
costs associated with providing the account are $6 per month.
On average, current account customers remain with the bank for 5 years, and buy
additional services which generate an additional $250 profit for the bank over that
period.
What is the average lifetime value of a current account customer to the bank?
A. $240
B. $270
C. $490
D. $600
8. A company has introduced a new product which has proved very popular and which
is relatively price inelastic. There is currently very little competition for the product due
to tight regulation of the market.
Which of the following combinations of the price of the product and the amount of
advertising required to promote it should the firm use to MAXIMISE its current
profitability?
A. Low price; Low promotion

B. Low price; High promotion
C. High price; Low promotion
D. High price; High promotion
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9. Currently, a company only uses direct distribution channels to make its products
available to customers.
The company’s management team believe it could increase its market share by also
using indirect distribution channels, but are concerned about the potential for conflicts
of interest or mis-selling in such channels.
Which of the following would be the MOST suitable indirect distribution channel for
the company to use to make its products more widely known?
A. Agents
B. Brokers
C. Its own website
D. Financial comparison sites
10. A customer is hoping to apply for a home equity loan.
The customer's home has recently been valued at $450,000. The customer had
originally taken out a mortgage of $300,000, but has now repaid $50,000 of the
capital value of the mortgage.
What is the MAXIMUM amount of the home equity loan the customer could obtain?
A. $100,000
B. $150,000
C. $200,000
D. $250,000
11. Which of the following are TRUE?
I. Islamic finance transactions are based on the concept of sharing risk and
reward between the provider and user of funds.
II. Charging interest on loans is forbidden in Islamic finance.
III. In Islamic finance, a lessor continues to be the owner of an asset and so
remains responsible for maintenance and insurance of the asset.
A. I and II only.
B. I, II and III.
C. I and III only.
D. II and III only.
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12. A customer is prepared to accept a moderate level of risk in the hope of boosting the
outputs from his savings or investments. He is looking to invest on a
relatively long-term basis.
Which of the following would be suitable for the customer?
I. Deposit account
II. Stocks
III. Mutual fund
A. I only.
B. I and III only.
C. II and III only.
D. III only.
13. An investor has a sum of money available and wants to invest it in a way which offers
the potential for the highest returns, regardless of the level of risk involved. He
anticipates he will need to withdraw the capital from his investment in 5 years' time to
pay for future projects.
Which of the following types of product is MOST suitable for the customer?
A. Savings account
B. Stocks
C. Certificate of deposit
D. Pension plan
14. Which of the following are KEY principles of the marketing concept?
I. Identifying customer needs.

II. Fulfilling customer requirements profitably.
III. Identifying market opportunities.
IV. Selling products.
A. I, II and IV only.
B. I, II and III only.
C. I, III and IV only.
D. II, III and IV only.
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15. A financial services company is evaluating possible ways to increase customer

lifetime value.
Assuming other factors remain unchanged, which of the following should be expected
to increase customer lifetime value?
I. Reducing the cost of acquiring new customers.

II. Enticing customers in the earlier stages of their lives.
III. Increasing customer satisfaction levels.
A. I and II only.
B. I, II and III.
C. I and III only.
D. II and III only.
16. The senior managers of a company have identified that it needs to expand into new
market segments in order to generate the levels of growth which its shareholders
want. The senior managers are currently evaluating the suitability, acceptability and
feasibility of various possible ways of pursuing this expansion.
Which stage of the strategic management process are the senior managers
undertaking?
A. Action
B. Choice
C. Implementation
D. Position
17. A consumer has realised that it would be sensible for her to start investing in a
personal pension but she doesn't know much about the sorts of plan which might be
available.
The consumer's realisation indicates she is at which stage of the buying

decision- making process?
A. Evaluation of alternatives
B. Problem-solving
C. Information search
D. Purchase evaluation
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18. A consumer is in the process of purchasing his first house and is trying to choose a
mortgage product.
The consumer has identified the following attributes which could affect his product
choice:
 Interest rates - whether the interest rates are fixed or variable;

 Loan-to-Value ratios;
 Initial lock-in period;
 Application fees;
 Flexibility in relation to over- or under-payments;
 Brand name; and
 Reputation of different providers.
Which of the following difficulties of marketing financial services does this illustrate?
A. Lack of quality assurance

B. Regulations
C. Lack of opportunities for cross-selling
D. Complexity
19. At a recent meeting, a bank's management team discussed the following issues:
I. Closing all the bank's branches so that the bank operates wholly as an online
business.
II. The need to develop new products in its personal banking division in order to
reverse recent declines in market share.
III. Consider incentive scheme for staff in its retail banking division.
Which of the avove issues relate to the corporate level of strategy?
A. I and II only.
B. I only.
C. I and III only.
D. II and III only.
20. A company currently charges a monthly fee of $500 for an exclusive service and has
seven customers.
However, the company's research has shown that if it reduced the monthly fee to
$495, then demand would increase to eight customers.
What would be the marginal revenue of the eighth customer?
A. - $5
B. $460
C. $495
D. $499
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21. A bank has reduced the monthly account fee it charges on its current accounts for a
short time as part of a promotional campaign to try to attract new current account
customers. Although the bank revised account fee is slightly less than the cost to the
bank of offering the accounts, the bank feels it can make profits by selling additional
products to its current account customers.
What approach to pricing has the bank adopted for its current accounts?
A. Comparison pricing
B. Market-based pricing
C. Cost-plus pricing
D. Price leadership pricing
22. A bank has calculated that the variable costs (e.g. transaction handling) of its current
accounts are $2.45 per account per month. The bank's fixed costs (e.g. employees'
salaries) are $95,000 per month.
The bank has 25,000 active accounts.
The bank has decided to start charging customers a monthly fee for their current
accounts using a mark-up of 20% on full cost.
What is the monthly account fee the bank charges customers?
A. $2.94
B. $4.56
C. $7.50
D. $7.81
23. A company which wants to maximise the profit it earns from the sale of a product
should always aim to sell the quantity of the product at which:
A. marginal revenue equals zero.

B. marginal revenue equals marginal cost.
C. average revenue equals average cost.
D. average cost is minimised.
24. Which of the following on price and pricing are TRUE?
I. A product's price needs to be consistent with the overall marketing strategy to

avoid creating confusion in the customer's mind and in the market place.
II. Price leaders can use their position in the market to charge a higher price than
rival products whilst still maintaining market share.
III. Price is often used as a surrogate for judging quality, such that people will
assume higher priced products are better quality than cheaper alternatives.
A. I and II only.
B. I, II and III.
C. I and III only.
D. II and III only.
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25. Which of the following are TRUE?
I. Customers with low credit ratings will be charged a higher rate of interest to
compensate for the higher chance of default.
II. Variable interest rate credit is usually priced more cheaply than fixed interest
rate credit.
III. Customers with low credit ratings are considered less risky to the lender.
A. I and II only.
B. I, II and III.
C. I and III only.
D. II and III only.
26. Which of the following initiatives relate to changes in the 'place' element of the
marketing mix?
I. A bank has installed video links in its branches so that customers can talk to
product specialists.
II. Internet banking facilities which enable customers to view and manage their
accounts online.
III. An insurance company has started offering cheaper premiums for customers
who apply online.
IV. A bank has re-designed the layout of its branches to provide more self-service
machines.
A. I, II and III only.

B. I, II and IV only.
C. I, III and IV only.
D. II, III and IV only.
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27. A financial service company is looking at ways to increase revenue and to expand its
market share but at the same time to maintain its favourable reputation for offering
high quality service and ethical behaviour. The company currently conducts all its
business through face-to-face meetings with clients but recognises that this approach
may be restricting its growth potential.
The company's management team believes that using direct distribution channels
enables it to maintain the standards it wants to offer its clients, and they believe the
company can expand successfully whilst continuing to use only direct distribution
channels.
Of the following options which have been proposed to help the company expand,
which will the management team consider to be suitable?
I. Appoint firms of agents to act on behalf of the company in foreign countries,

selling its products there.
II. Develop an e-commerce website in order that the company can start providing
advice to its clients and selling products online.
III. Allow the company's products to be listed on financial comparison websites so
that a wider audience becomes aware of them.
A. I and II only.
B. I and III only.
C. II only.
D. II and III only.
28. A financial services company is keen to differentiate itself from its competitors on the
basis of the high quality of service and financial advice it offers to its customers.
Which of the following aspects of a marketing programme would be appropriate for

the company?
I. It operates online only.

II. Salaries it offers its staff are significantly above the industry average.
III. Its prices and commissions are lower than many of its competitors.
A. I and II only.
B. I and III only.
C. II only.
D. II and III only.
29. Which of the following is an example of indirect distribution?
A. A bank offers a product more cheaply to customers who buy it online

compared to customers who buy it in person from a branch.
B. A customer withdraws money from an ATM at the local branch of his bank.
C. A customer visits her financial adviser to invest in a mutual fund.
D. A customer logs on to a bank's website in order to compare the interest rates it
is charging on fixed interest mortgage products compared to variable rate
products.
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30. A company has decided to support the launch of a new product with a major
advertising and promotion campaign. The product has been advertised in television
and newspaper adverts which highlight its key features. The company has also sent
e-mail and SMS promotions to existing customers who have bought similar products
in the past.
Which of the following ways used to promote the product are examples of direct
marketing?
A. SMS promotions and newspaper adverts.

B. E-mail promotions and television adverts.
C. Television and newspaper adverts.
D. E-mail and SMS promotions.
31. A financial services company has paid for advertising messages to be added to
panels along the sides of the escalators at several stations on the underground
(Metro) network in a large city.
What form of marketing is the company using?
A. Ambush marketing
B. Sponsorship
C. Product placement
D. Ambient advertising
32. A company is preparing to launch a major advertising campaign involving television

and radio adverts, banner adverts online, and Twitter postings by the company.
The company is working very hard to ensure that its marketing message is essentially
the same across all the different media used in the course of its campaign.
What concept does the company's approach demonstrate?
A. Market segmentation
B. Integrated marketing communications
C. Customer Relationship Management
D. Direct marketing communications
33. Which of the following are forms of direct marketing?
I. Postal mailshots
II. E-mail marketing
III. Event sponsorship
A. I and II only.
B. I, II and III.
C. I and III only.
D. II and III only.
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34. A company wants to undertake market research into how customers rank its brand
against other brands across a range of different product attributes.
Which technique would be MOST suitable for the company to use to obtain the
information it wants?
A. Focus groups
B. In-depth interviews
C. Analysing sales patterns
D. Questionnaire surveys
35. An insurance company has placed banner adverts for holiday insurance cover on two
different web pages.
The first is a popular holiday comparison website which people often visit two or three
times while they are in the process of booking a holiday.
The second is on a website which displays foreign currency prices. The website has a
lower number of unique visitors than the holiday comparison website, but people who
do use the website regularly check the movements in different currencies.
Which of the following is TRUE?
The advert on the:
A. holiday comparison website has the higher reach but the lower frequency.
B. holiday comparison website has the higher reach and the higher frequency.
C. foreign currency website has the higher reach but the lower frequency.
D. foreign currency website has the higher reach and the higher frequency.
36. A bank is introducing a new mortgage product.
The bank has decided that the mortgage will have the following attributes:
I. The interest rate on the mortgage will be fixed for five years.
II. Customers will have to pay an application fee of $400 when they apply for the
mortgage.
III. The mortgage will be portable so customers will be able to transfer it to their
new house if they move house within the term of the mortgage.
Which of the above features is/are core attributes of the mortgage?
A. I only.
B. I and II only.
C. I, II and III.
D. II and III only.
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37. Getting reactions from potential customers about the ideas behind a new product and
how well that product would fit their needs occurs at which stage of the new product
development process?
A. screening
B. idea generation
C. concept testing
D. product development
38. A company had been researching the possibility of launching a new product.
However, before the actual details of the product were formulated, the company
decided not to proceed with it. The company assessed that the new product would be
likely to have a negative impact on sales of the company's existing products and
would have a relatively poor fit with the company's other products.
At which stage of the development process has the product's development been
stopped?
A. Screening
B. Concept testing
C. Business analysis
D. Market testing
39. Although a product's sales have increased recently, the profits generated from it
remain relatively low and in turn, the cash flows it generates are lower than the
profits. This is partly due to the additional features which have had to be added to the
product as buyers have become more sophisticated. It is also partly due to the
marketing expenditure which has been required to advertise the new features in order
to differentiate the product from competitors' products.
Which stage of its life cycle has the product reached?
A. Introduction
B. Shakeout
C. Growth
D. Maturity
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40. A bank is considering introducing a new mortgage product and is evaluating which
attributes to include in the mortgage.
The bank intends the mortgage to have a fixed interest rate initially, but it has yet to
finalise the length of the fixed interest rate period, or what the interest rate should be.
It is also considering different initial product application fees, and adjusting the
interest rate charged according to the application fee paid.
The bank has identified a number of different permutations of the attributes for the
mortgage product and wants to assess the relative attractiveness of different
permutations to potential customers.
Which of the following would be the MOST appropriate method of analysis?
A. Cluster analysis
B. Sales patterns
C. Conjoint analysis
D. Attribute rating
41. An insurance company has introduced a new motor insurance policy exclusively for
drivers who have just passed their driving tests.
The insurance policy is renewed every six months (rather than every year, which is
the case with all other policies currently available). If a driver has not made a claim for
the first six months after they obtained their driving licence, then their premium for the
second six months of the year is reduced.
Which core attributes have been used to define the new policy?
I. Risk
II. Input
III. Time frame
A. I and II only.
B. I, II and III.
C. I and III only.
D. II and III only.
42. A company has identified that the users of its product can be differentiated into those
who remain loyal to a single brand and those who switch brands in response to
special offers or changes in price.
This information could help the company segment its market, using which basis for
segmentation?
A. Demographic
B. Lifestyle
C. Behavioural
D. Psychographic
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43. New product development goes through a number of sequential stages.
Which of the following four stages are in the CORRECT sequence?
A. Screening, Idea generation, Concept testing, Business analysis.

B. Screening, Idea generation, Business analysis, Concept testing.
C. Idea generation, Screening, Concept testing, Business analysis.
D. Idea generation, Screening, Business analysis, Concept testing.
44. Which of the following characteristics is associated with market segmentation?
A. Mass communication.
B. Grouping together customers with similar needs.
C. Increasing market share.
D. Using a single marketing mix for the entire market.
45. Which of the following are valid reasons for market segmentation?
I. To enable customer needs to be satisfied more effectively.

II. To increase the amount of communication to customers.
III. To improve customer retention.
A. I and II only.
B. I, II and III.
C. I and III only.
D. II and III only.
46. A financial services company has been analysing demand for its products from
different groups of consumers in order to help it target its promotions for different
products more effectively.
The company has noticed that demand is strongly influenced by customers' income
and wealth, regardless of any variations in their age.
What basis should the company use to segment its market?
A. Behavioural factors
B. Demographic factors
C. Geographic factors
D. Psychographic factors
47. Which of the following is CORRECTLY stated as a reason for a company to use
external (secondary) data in preference to using internal data as an input to the
segmentation process?
A. Fit – It can be tailored specifically to the company's requirements.

B. Speed – It is quicker to buy readily available data than to mine internal data.
C. Accuracy – The company can be assured of the accuracy of secondary data.
D. Format – It will already be in the format required by the company.
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48. A company has analysed a range of different variables and has identified four
potential groups of customers, which it hopes to use as a basis for designing targeted
marketing campaigns.
 Group 1 - Customers who do not respond at all to marketing communications;

 Group 2 - Respond to introductory offers but lapse quickly thereafter meaning
their customer lifetime value is less than the cost of the marketing to them;
 Group 3 - Loyal customers with high incomes and a high customer lifetime
value; and
 Group 4 - Loyal customers with low income but the potential to increase their
incomes significantly over time.
When designing a new promotional campaign, how many valid segments does the
company have?
A. 1
B. 2
C. 3
D. 4
49. In Parasuraman et al 's model of service quality, which 'gap' ultimately defines service
quality?
The gap between:
A. service quality specifications and service delivery.

B. external communications and service delivery.
C. customer expectations and management perceptions.
D. customer expectations and perceived service.
50. Disconfirmation of customer expectations occurs when:
A. customer expectations of a service exceed their perception of the service they

receive.
B. level of service provided is consistent with that promised in marketing
communications.
C. customer expectations of a service exceed management's perceptions of the
level of service required.
D. customer's perceptions of the service they receive meet their expectations of
the service.
51. Which of the following is NOT a factor which influences a customer's perception of
service quality?
A. Company image.
B. Alternative services available.
C. Approachability of service personnel.
D. Objective performance.
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52. High levels of staff turnover and poor training given to new joiners are likely to lead to
which service quality gap?
Gap between:
A. management perceptions and service standards.

B. service standards and service delivery.
C. management expectations and service delivery.
D. customer expectations and service standards.
53. The observation in a customer service questionnaire that 'I know I can trust the
company to deal with all my transactions accurately' illustrates that a company is
performing well in the ____________ dimension of the 'RATER' model:
A. Responsiveness
B. Assurance
C. Reliability
D. Empathy
54. Which of the following would be expected to lead to an increase in customer lifetime
value?
I. An increase in the current profitability of servicing a customer.

II. An increase in customers' propensity to stay loyal.
III. An increase in the expected revenues from servicing a customer over the
lifetime of the relationship with them.
A. I and II only.
B. I and III only.
C. II and III only
D. I, II and III.
55. The policy in a company's call centre is that customers should never have to hold the
line for more than five minutes when waiting to speak to a member of staff.
The number of customers waiting more than five minutes is recorded as a key
performance indicator for the call centre and the call centre's managers are all aware
of the target time.
Recently, however, almost 10% of customers calling the call centre have had to wait
more than five minutes to speak to a member of staff.
In relation to which aspects of service quality does the company have a service gap?
Gap between:
A. service delivery and external communications.

B. service quality specifications and service delivery.
C. customer perceptions and management perceptions.
D. management perceptions and service quality specifications.
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56. Which of the following is associated with relationship marketing rather than
transactional marketing?
A. Marketing material emphasises product features.

B. Quality is the concern of the whole company.
C. Persuasive communication with customers.
D. Each sale is treated as being unique.
57. A company has a fixed number of units of a product for sale each week and has been
changing the price of the product on a daily basis to reflect the current level of
demand for the product in relation to the number of unsold units still available.
Which of the following approaches to pricing is the company using?
A. Penetration pricing
B. Cost-plus pricing
C. Dynamic pricing
D. Transparent pricing
58. A customer is looking to renew their car insurance policy and is using the internet to
search for the cheapest policies which are available to him.
By enabling customers to compare prices quickly and easily in this way, the internet
increases:
A. price transparency.
B. price skimming.
C. complementary pricing.
D. dynamic pricing.
59. Internet data analysts have noticed that one financial comparison website is attracting
a significantly higher number of visits from consumers than other similar websites.
The perception among consumers is that the popular website provides impartial data
about different products, while the majority of the other sites receive commissions for
promoting particular companies' products.
Which aspect of navigation is leading to the popularity of the leading website?
A. Affiliation
B. Localisation
C. Reach
D. Richness
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60. The internet and e-marketing can play an important role in retaining existing
customers as well as attracting new ones.
Which of the following is MOST useful for customer retention rather than acquiring
new customers?
A. Banner advertising
B. Search engine optimisation
C. E-newsletters
D. Affiliate networks
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SECTION B : TWENTY (20) CASE-BASED MULTIPLE-CHOICE QUESTIONS

ANSWER ALL QUESTIONS IN THIS SECTION
Questions 61 to 65 relate to the following case/caselet:
A bank offers its customers a wide range of products including current accounts, savings and
investment accounts, loans, mortgages and insurance; although its share of the savings and
investment market in its country has fallen in recent years.
However, the bank has identified that the ethical investment market presents it with some
significant opportunities for growth and it hopes to take advantage of them by offering a new
mutual fund which invests solely in ethical companies.
The bank has estimated that average variable costs associated with managing the new fund
will be $145 per customer per year, and it intends to apply a mark-up of 20% to determine the
annual fee it charges customers for investing in the fund. The bank's fixed costs attributable
to the fund are expected to be $50,750.
The bank has also identified Islamic finance transactions as a potential area for growth and it
is currently reviewing the products it might be able to offer in this respect and the issues it
needs to consider before starting to offer any of them.
61. How many units of the new ethical investment fund will the bank have to sell in order
to break even?
A. 292
B. 350
C. 1,400
D. 1,750
62. The bank's management team have recently analysed the degree to which the new
ethical fund fits with their existing product portfolio and are satisfied that the fund will
complement their existing products rather than harming them. Having reviewed the
projected revenues and costs associated with providing the fund, they are also
satisfied that it has the potential to be profitable in due course.
Which stages of the new product development process still need to be undertaken
before the commercialisation and launch of the fund?
I. Market testing
II. Product development
III. Concept testing
A. I only.
B. I and II only.
C. I and III only.
D. II and III only.
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63. The bank believes that the ethical mutual funds are still in the introduction phase of
their product life cycles.
Which of the following is NOT consistent with this position?
A. Rapid sales growth due to the innovative nature of the product.

B. High marketing costs in order to get the product recognised by customers.
C. The product has few, if any, competitors.
D. The product will be initially be loss-making and will have negative cash flows.
64. As well as developing its new fund, the bank has also been reviewing its pricing policy
to check that it remains competitive whilst adequately reflecting the risks it faces from
its business.
Which of the following is/are TRUE?
The bank should:
I. charge higher interest rates on collateralised credit than on non-collateralised

credit.
II. price fixed interest rate credit higher than variable interest rate credit.
III. price fixed interest rate credit lower than the variable interest rate credit.
A. I only.
B. I and II only.
C. II only.
D. III only.
65. One of the types of Islamic transaction the bank is considering offering is Ijara.
Which of the following on Ijara are CORRECT?
I. The bank can make a profit on the Ijara equivalent to the difference between
the regular payments it receives from its customer and the initial price it paid
to acquire the asset.
II. During the course of the Ijara, the bank will remain the owner of the asset and
remains responsible for major maintenance and insurance.
III. The regular payments the customer makes to the bank covering the initial
purchase cost of an asset plus interest charged on it.
A. I and II only.
B. I and III only.
C. II and III only.
D. I, II and III.
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A marketing director has just returned from a conference at which one of the speakers
discussed research that showed television viewers are more responsive to adverts which
have no relationship to adverts either side of them in a commercial break. For example, the
speaker claimed sports insurance (ski insurance) and 4x4 off road vehicles have the same
'personality' since both appeal to people who enjoy an active, outdoor lifestyle. But the
research suggested that viewers would actually be more responsive to the sports insurance
advert if it was next to an advert for a more sedate, family car.
The marketing director was intrigued by these findings. On the one hand, he could see the
logic that a product or advert benefits from being perceived as distinct to the others all
around it. On the other hand, he felt the idea of combining adverts which potentially appealed
to different audiences could cause problems for targeting and market segmentation.
66. The marketing director is particularly interested in the idea of increasing customer's
responsiveness to adverts because he feels that in the past customers have often not
taken as much notice of his company's adverts, because of the volume and type of
other adverts around them.
The marketing director is trying to improve the company's performance at which stage
of the communications process?
A. Attention
B. Evaluation
C. Exposure
D. Information processing
67. Assuming a company is looking to advertise specialist insurance products, such as

insurance for skiing holidays or for adventure sports, which basis of segmentation
would be MOST appropriate for helping it define market segments to target?
A. Demographic
B. Geographic
C. Psychographic
D. Behavioural
68. Given his concerns about segmentation, which characteristic of e-marketing could be
MOST attractive to the marketing director compared to traditional advertising?
A. Independence of location
B. Individualisation
C. Interactivity
D. Intelligence
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69. The speaker at the conference also went on to talk more generally about the factors
which affected the impact of an advert.
Which of the following characteristics determine the impact of an advert?
A. Reach × Gross rating point

B. Frequency × Attention
C. Exposure × Attention
D. Reach × Frequency
70. The marketing director is keen to increase the number of distribution channels which
are used to sell the company's insurance policies, and has considered using agents
to sell them. However, he is concerned about the potential problems which could
arise from doing so.
Which of the following are TRUE on the potential disadvantages of using agents?
I. It is difficult for the company to maintain the consistency of service quality

which customers receive.
II. The company misses out on customer feedback and with it opportunities for
relationship marketing.
III. The agent could mis-sell a policy simply to gain a commission, but this mis-
selling could damage the brand name of the underlying insurance company.
A. I and II only.
B. I and III only.
C. II and III only.
D. I, II and III.
PQR Bank has recently run an online advertising campaign aimed at increasing its share of
the insurance market. It is now looking to evaluate how successful the campaign has been.
The campaign used promotions on PQR Bank's own website and social media feeds, as well
as banner adverts on financial websites.
The campaign generated 2,480 new customers in total. PQR Bank's marketing analyst has
identified that 1,160 were acquired through the online banner adverts, and the remainder
were acquired through PQR Bank's own website etc.
The cost of designing the adverts on PQR Bank's own website was $25,000 and there was a
one-off, promotional cost of $150 for each customer acquired through this channel. PQR
Bank paid a fee of $180 per customer acquired through the banner adverts.
On average, customers who take out insurance policies with PQR Bank retain them for three
years, and PQR Bank earns a profit on the policies of about $125 per customer per year.
PQR Bank's marketing manager is slightly disappointed that the advertising campaign didn't
acquire more customers. However, he has subsequently found out that a rival bank also ran
a promotional campaign at the same time, in which it reduced the price of its policies
meaning they became cheaper than PQR Bank.
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71. What is PQR Bank's expected return on investment for the advertising campaign?
A. -28.2%
B. 113.0%
C. 115.4%
D. 215.4%
72. Which of the following combinations would mean the rival bank's campaign has most
impact on the PQR Bank's existing insurance sales, assuming that the market is
mature so that increases in sales by one bank can only be achieved at the expense of
another bank's sales?
Price sensitivity of insurance Price elasticity of demand
A High High
B Low High
C High Low
D Low Low
73. Assuming any other factors remain unchanged, what will be the impact of the rival
bank's bank change in the price of its policies on its own demand curve and on PRQ
Bank's demand curve?
Rival's own demand curve PQR's demand curve

A Movement along Shift
B Shift Shift
C Movement along Movement along
D Shift Movement along
74. A central feature of the rival insurance provider's campaign was a graphic showing
the new reduced price alongside the previous price.
What approach to pricing does this illustrate?
A. Price leadership
B. Misleading pricing
C. Market-based pricing
D. Comparison discounting
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75. Following PQR Bank's campaign, the number of customers visiting its website looking
for information about its policies increased significantly. However, there was a
relatively low conversion rate into sales, as a result of the rival campaign.
Which stage of the customer buying decision process had the MOST significant
impact on the level of sales PQR earned from its advertising campaign?
A. Purchase decision.
B. Need recognition.
C. Evaluation of alternatives.
D. Information search.
A bank has recently introduced a new credit card, designed specifically for people with lower
credit ratings who have previously not been able to find any banks prepared to give them a
credit card.
The initial monthly interest rate of the product is relatively high, but it is subject to review
every six months. This interest rate review is highlighted to potential customers as a major
feature of the account. If customers have consistently made their agreed repayments during
the previous six months, then their interest rate is reduced. If they consistently fail to make
their agreed repayments, then their interest rate is increased.
In addition to its new credit card, the bank has also been reviewing its mortgage products,
because its share of the mortgage market has decreased recently. The bank charges slightly
higher interest rates than the majority of other mortgage providers, but unlike the other
providers, it does not charge customers an initial application fee. However, the bank is
concerned that potential customers evaluate potential mortgages based solely on the interest
rates.
76. The variable interest rates on the bank's new credit card are best described by which
two of the card's attributes?
A. Inputs; Outputs
B. Inputs; Risk
C. Outputs; Time frame
D. Time frame; Risk
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77. The bank's new credit card proved very popular and a number of customers signed
up for it. However, after the end of the first six months the bank started to receive a
number of complaints from customers who had met all their monthly payments but
whose interest rates had not been reduced.
The bank's IT director has identified that there was a bug in the software programme,
which had prevented any interest rate reductions taking place.
Which quality gaps have arisen here?
I. Gap between management perceptions and service standards.

II. Gap between service standards and service delivery.
III. Gap between external communications and service delivery.
A. I and II only.
B. I and III only.
C. II and III only.
D. I, II and III.
78. The difficulties the bank is facing as a result of the way customers are comparing
mortgage products highlights which of the difficulties marketing financial services?
A. Difficulty of assessing quality.

B. Need to comply with market regulations.
C. Impact of technology on the financial services industry.
D. Complexity involved in comparing prices.
79. As part of an initiative to improve sales of its mortgages, the bank has included an
online mortgage calculator so that customers can see how much their monthly
repayments will be, and what the total cost of their mortgage will be.
Which characteristic of e-marketing does the online calculator make use of?
A. Integration
B. Individualisation
C. Interactivity
D. Intelligence
80. The bank has used a variety of direct and indirect marketing techniques to promote its
new credit card and to try to regain some of its share of the mortgage market.
Which of the following is NOT a form of direct marketing?
A. Blog postings on the internet

B. Telemarketing
C. SMS messaging
D. Digital coupons
- END OF QUESTION PAPER -
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PB MSFS Mock 2 Examination Answers
1. B The stages of the new product development process (in sequence) are: Idea
generation; screening; concept testing; business analysis; product
development; market testing; and commercialisation.
2. C Although sales patterns are best used in conjunction with other methods when
assessing the success of a promotion, the other three methods listed (focus
groups, interviews, and questionnaires) require responses and co-operation
from people.
3. C The five levels of human needs described in Maslow's hierarchy are:

physiological needs; safety needs; social needs; esteem needs; and self-
actualisation. Need recognition is the first stage of a customer's decision-
making process in relation to buying products or services.
4. B During the Introduction stage, products experience only a slow growth in sales
as they take time to gain market acceptance. However, in the growth stage,
products gain market acceptance and sales rise more sharply enabling the
product to start generating a profit.
5. D The benefits of the product (ie the 'product' element) have already been
designed, and it is likely that the price (ie the interest rates) will also have been
identified. What the company now has to do is communicate the benefits of the
product to customers. This relates to the 'promotion' activities of the marketing
mix.
6. A CRM identifies the importance of the entire organisation (rather than, for
example, just the marketing department) in satisfying customer requirements.
The logic for CRM stems from the observation that it is cheaper to retain
existing customers than to attract new ones. CRM is most effective when there
is regular communication between organisations and their customers.
7. C The current accounts themselves generate a $4 profit per month, which

equates to $240 over a 5 year period. Adding in the $250 earned from selling
additional profits, means the average customer lifetime value is $490.
8. C The high levels of current demand, and the relative inelasticity of the product
suggest that the company will be able to increase its revenue by increasing the
price of the product. Because the product has already proved popular, the firm
will only need to spend a relatively small amount on promotion. The products
popularity is likely to mean that word of mouth advertising by satisfied
customers will also help to promote the product.
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9. D Using its own website is a method of direct distribution rather than indirect
distribution. Agent, broker and financial comparison sites are all potential
channels for indirect distribution, but using agents and brokers could give rise to
the issues which the management team are trying to avoid. Impartial financial
comparison sites will, however, allow customers to make informed decisions for
themselves based on unbiased data.
10. C The maximum amount of the home equity loan will be the value of the client's
equity in the house. The amount left to repay on the mortgage is $300,000 –
$50,000 = 250,000. Therefore the customer's equity in the house is $450,000 –
$250,000 = $200,000.
11. B In Islamic finance, transactions are strongly based on the sharing of risk and
reward between the provider of funds and the user of funds. Riba (interest) is
forbidden in Islamic finance. Under Ijara (which is a form of leasing), the lessor
continues to be the owner of the asset and incurs the risk of ownership. This
means that the lessor remains responsible for major maintenance and
insurance.
12. D Deposit accounts are most likely to be useful for short-term savings; and,
although they only present a low level of risk they are also likely to generate a
relatively low level of return. Investing in individual stocks should be viewed as
a high risk strategy, due to the volatility of stock markets. Investing in mutual
funds provides a less risky alternative to investing in individual stocks.
13. B Investing in stocks involves higher risk than investing in a savings account or a
certificate of deposit, but also offers the potential for higher returns, depending
on the performance of the companies in which the investor buys stock.
Investing in a pension plan is not suitable, since the investor wants to use the
capital to pay for future projects rather than to fund his retirement.
14. B Marketing is a customer-centric process, focusing on identifying, anticipating

and satisfying customer requirements profitably. Marketing is definitely not
about persuading people to buy products which they do not really need.
15. B Customer lifetime value reflects the profit earned by a company across the
duration of its relationship with the customer. Given that the fees earned by
servicing the customer remain unchanged, then reducing the cost of acquiring
the customer will increase the profit from the relationship with them. If the
revenue a company receives from a customer remains unchanged, then
reducing the cost of acquiring a customer will improve profitability. The earlier in
a customer's life that a company can attract them, then the longer the potential
relationship with the customer can be. Increasing customer satisfaction levels
should help to improve customer retention. The longer customers remain loyal
to a company, the more valuable they are likely to be to the company.
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16. B The stages of the strategic management process are: position – choice
action/implementation. The senior management team are currently evaluating
the possible directions the company should take in the future. Prior to this stage
they should already have assessed the company's strengths and weaknesses
and identified the opportunities and threats facing the company, and they
should use this information to help them assess the suitability of different
strategic options for the company.
17. B The stages of the buying decision-making process are: Problem-solving/Need

recognition – Information search – Evaluation of alternatives – Purchase
decision – Post-purchase evaluation. Problem-solving (or need recognition) is
the first stage of the buying decision-making process. The consumer has
recognised that she needs to purchase a product (a personal pension), and this
recognition will then drive her to start searching for information about the
different plans which she could invest in.
18. D Comparing the prices of financial services, and therefore which is the most
appropriate for the consumer, can often be difficult because many services
have multiple price considerations. For example, the 'price' of a mortgage may
depend on the minimum deposit requirements (loan to value ratios), interest
rates (which could be either fixed or variable), and the initial application fee.
19. B Corporate strategy relates to the general direction of the organisation. The
decision to close all the bank's branches and to become online business only
(OptionI) represents a major change to the business's overall strategy. Option II
is likely to be a business unit strategy; identifying ways in which the personal
banking business unit can increase market share in its own markets.
20. B Currently, the monthly revenue from the product is $500 × 7 = $3,500.
Under the new pricing policy, monthly revenue would be: $495 × 8 = $3,960.
The marginal revenue is $3,960 – $3,500 = $460.
21. D Price leaders are sold below the usual mark up, usually for a price near, or just
below, cost. The aim of price leaders is to entice customers in the hope that
they subsequently make additional purchases on which greater profits are
made. Comparison pricing is another type of promotional pricing, but it would
involve a comparison of the promotional price to the previous (higher) price. In
the example given, there is no indication that the bank is highlighting any direct
comparison between the reduced price and the previous price.
22. C Apportioning the fixed costs over the number of accounts means that the
average fixed cost per account is $3.80 per month ($95,000/25,000 accounts).
When added to variable costs of $2.45 per account, the total cost per account is
$6.25 per month. Adding a mark-up of 20% to this, means that the account fee
per month is $7.50
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23. B Profit is maximised where marginal cost equals marginal revenue. At quantities
below this point, the additional revenue generated from selling one extra unit of
a product exceeds the additional cost of producing it, therefore the company
can increase its profit by selling an extra unit. At quantities in excess of this
point, the additional cost of producing an extra unit is greater than the additional
revenue generated by selling it, so selling the extra unit will reduce the level of
profit.
24. C Price plays a key role in determining how a product is perceived by customers
and the market place. If the price set is inconsistent with other elements of the
product (in particular, quality) this could lead to confusion about the true nature
of the product. Therefore Option I is true. Similarly, customers typically assume
that a higher priced product is better quality than a cheaper one, and so they
may often be prepared to pay extra in the expectation of obtaining a better
product. (Option III) The aim of price leadership is to set low prices to attract
customers, so Option II is not correct.
25. A Customers with low credit ratings will be considered by lenders to be a higher
risk, and therefore they will be charged a higher rate to compensate for the
higher chance of default. Fixed interest rate credit is usually priced more
expensively than variable interest rate credit, to cover the lender's risk of losing
out if interest rates or financial market rates rise dramatically.
26. B The 'place' element of the marketing mix relates to how customers access
products and services, and/or how those products and services are distributed
to customers. Although the insurance company is distinguishing between those
customers who apply online compared to those who apply offline, the element
of the marketing mix being varied is price.
27. C The use of intermediaries characterises indirect distribution rather than direct
distribution. Agents are intermediaries, and so are financial comparison
websites. Therefore Options I and III cannot be correct. The use of the
company's own website to sell products, however, remains a direct method of
distribution.
28. C The company is competing on the basis of quality rather than low cost or low
price. However, the choice to offer its services online only would suggest that
the company is adopting a low cost strategy; as would the decision to set prices
and commissions lower than its competitors. By contrast, offering salaries
which are above the industry average indicates the firm's intention to attract the
best quality staff, who in turn will deliver high quality service to its customers.
29. C The financial adviser acts as an intermediary, linking the customer to the fund
management company which provides the mutual fund. The key distinction
between direct and indirect distribution is not whether a transaction is carried
out online vs offline, but whether or not there are any intermediaries in the
relationship between a company and a customer.
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30. D Direct marketing requires a direct relationship between a company and its
prospective customers, without the use of an intermediary and in a way which
allows response to be measured. In this case, the television company and the
newspaper company are intermediaries, because they distribute the advert.
Also, the adverts are presented to the viewers of a television programme or the
readers of a newspaper in general rather than to individual prospective
customers of the new product, which makes it hard for the company to measure
any individual's responses to the adverts. Moreover, although the adverts give
details about the product features, it is not clear what information they provide
to prospective customers about the steps they need to take in order to buy the
products. By contrast, e-mails and SMS (text) messages can be sent directly by
the company to potential customers of the new product, whose responses can
be measured (for example, in terms of whether they respond to the messages
or not).
31. D Ambient advertising is advertising which becomes part of the physical

environment.
32. A The concept of integrated marketing communications suggests that the

advertising messages being presented by a company should be essentially the
same regardless of which form of media is used, to ensure that there is no
conflict between different messages or media.
33. A Direct marketing develops a direct relationship with target customers through
interactive communication in a way which allows response to be measured.
Mailshots and e-mail marketing can both be sent to specific addresses,
meaning that they can be used to support a targeted marketing campaign
However, the audience for event sponsorship is a large group of people,
indicating that event sponsorship is characteristic of mass marketing rather than
targeted marketing.
34. D The company's desire to 'rank' its brand suggests that it needs some degree of
quantifiable information as an output from its research. Questionnaire surveys
can be designed so that respondents rank how important they think various
attributes are in a purchasing decision, or how well they think a brand performs
in relation to different attributes (for example, by using a grading scale from 1 -
5 where '5' is very important or very good, and '1' is not important, or poor).
While focus groups and in-depth interviews can provide detailed information
about how customers perceive a brand, this information is more likely to be
qualitative than quantitative, and therefore harder to analyse.
35. A An advert's reach relates to the number of customers who will be exposed, at
least once, to it. In this case, the holiday comparison's website has a higher
number of unique visitors than the foreign currency website. An advert's
frequency relates to the number of times that a customer will see it. In this case,
the users of the foreign currency website will visit the site more frequently than
the users of the holiday comparison website visit it.
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36. B The interest rate is effectively the fee the customer pays for the product, and is
therefore a key input into the product. The application fee also contributes to
the amount the customers pays for the mortgage product, and therefore is also
an input into the product. Although portability (the attribute being described in
Option III respectively) may be important to some customers, it should be
regarded as a non-core attribute because it does not relate directly to the four
core attributes: inputs, outputs, time frame and risk.
37. C At the concept testing stage, the basic idea behind a new product is shown to
potential customers and their comments are invited on it.
38. C The product development process has been stopped before the product has
actually been developed (which rules out market testing as a possible option).
The key issues which caused the product to be rejected were the harm it could
do to existing sales and its poor fit with the company's existing products, and
most likely also its existing corporate strategies. These issues need to be
considered at the business analysis stage of the new product development
process.
39. C Rapidly increasing sales are one of the key characteristics of the growth stage,
but equally cash flows remain lower than profit as continued investment in the
product is needed to fulfil levels of demand. As the market grows and becomes
more established, buyers become more sophisticated, products are likely to
become more complex. Companies need to add additional features to their
products to differentiate them from competitors' products. This is in contrast to
the Introduction stage of a product's life cycle, where a product has few, if any,
competitors.
40. C Attribute ratings are appropriate for identifying the importance of different
individual attributes in a consumer's choice of which product to buy. However,
in this case, the company is interested in which combination of attributes will be
most attractive to consumers. Therefore conjoint analysis is the appropriate
method to use, not attribute ratings.
41. C Insurance companies have identified that there is a correlation between factors
such as age, experience and driving risk, and therefore the premiums that a
driver has to pay. By restricting the policy to drivers who have recently passed
their tests, the insurance company is targeting a particular segment of the risk
profile. The company's ability to change the premiums based on a driver's
history during the term of the contract to date relates to the time frame element
of the policy. Inputs would relate to the premiums paid by the drivers, while
outputs would relate to the level of coverage and benefits provided by the
policy. These inputs and outputs are not unique to the new product; policy
holders under the existing policies already available on the market will pay
premiums and receive insurance cover in return.
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42. C Behavioural segmentation can be used to divide a market into groups based on
the way people use a product (their purchase behaviour). In this case, their
purchase behaviour relates to how loyal they are to brand when making
purchasing decisions. Lifestyle (or Psychographic) segmentation is concerned
with people's opinions, attitudes and lifestyles; but there is no indication in this
case that there is any correlation between people's lifestyles and their
propensity to remain loyal to individual brands. Similarly there is no information
about demographic factors in the two groups (eg age). All we know is that one
group of potential customers can be expected to remain more loyal to a brand,
while the other one can't.
43. C The full sequence of the stages of new product development is: Idea
generation, screening, concept testing, business analysis, product
development, market testing, and commercialisation.
44. B The purpose of marketing segmentation is to ensure that the elements of

marketing activities are designed to meet the particular needs of different
customer groups. Segmentation enables different groups within the market to
be targeted and reached with a distinct marketing mix style. In this way,
segmentation could help a company to increase its share of a segment within
the market – rather than its share of the entire market as a whole. The
existence of different groups means it would not be appropriate to use a single
market mix across the entire market. Mass communication is effectively the
opposite of targeted communication and so is not appropriate for market
segmentation.
45. C By targeting different products at different segments of the market a company

should be able to satisfy customer needs more effectively. Doing so, should
also help the company improve customer retention levels. However, the aim of
market segmentation is to target specific communications to customers; for
example, by only sending communications about products a customer is likely
to be interested in. As a result, segmentation should make marketing
communications more efficient, and reduce the cost of marketing
communication – rather than increasing the overall amount of communication to
customers.
46. B Although age (which is a demographic factor) doesn't appear to influence

demand, income and wealth (which are also demographic factors) do. In this
case, the factors which the company has been monitoring (income, wealth,
age) are all demographic. There is no information about why customers buy the
product (behavioural factors) or about their opinions or attitudes (psychographic
factors).
47. B Buying readily available data will be significantly quicker for the company than
having to mine existing customer databases to produce its own internal data.
However, disadvantages of using external data are: that it is unlikely to provide
the exact variables that are required in the exact format required (fit; format),
and the accuracy of the data might not be verifiable.
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48. B In effect, Group 1 cannot be reached at all, and Group 2 cannot be reached
profitability, so they are not valid segments. Given that the customers in Group
3 have a lifetime value, this suggested they can be reached profitability, making
this a valid group. Although the customers in Group 4 currently only have low
incomes, their loyalty and their potential to increase their income over time
suggests their lifetime value will also exceed the cost of marketing to them
(meaning they can also be reached profitably.)
49. D Parasuraman et al's model of service quality identified five gaps. Gap 5 – the
gap between expected service and perceived service – was as service quality,
and it is influenced by the preceding four gaps.
50. A The concept of disconfirmation relates to the difference between the level of
service customers expect and the service they actually receive. In Option A, the
level of service received has fallen short of the customer's expectations, and so
will cause them to be dissatisfied.
51. B The factors which influence a customer's perception of quality can be analysed
into: Objective performance (for example, does a mutual fund create wealth for
the people who have invested in it?) Human interactions (including the
accessibility and approachability of service staff), and Company image (eg the
company's reputation and history). The alternative services available may well
affect the customer's choice of which company to buy a service from, but the
choice available won't directly affect the customer's perception of quality.
52. B The high levels of staff turnover coupled with poor training given to new joiners
mean that employees may not be able to perform to the required (specified)
standards. This means a gap will arise between the actual levels of service
delivered to customers and the service quality specifications. There is no
indication that the service standards have changed (so Options A and C are not
correct); the gap has arisen due to a fall in the level of service delivery (Option
B).
53. C The 'reliability' element of the 'RATER' model relates to the ability to perform the
promised service dependably and accurately. In this case, the customer's
feedback relates to the company as a whole, rather than specifically to the
service received from the company's staff, so reliability is the key measure here
rather than assurance (which deals more with the knowledge of employees and
their ability to convey trust and confidence.)
54. D Customer lifetime value depends on: a customer's current profitability; the
length of time the customer will remain with the company; and the customer's
profitability in the future. Option I will increase current profitability; Option II
should increase the length of time the customer will remain with the company;
and Option III should increase the customer's profitability in the future. In
practice, future profitability will also depend on the future costs of servicing a
customer over the length of their relationship, but the scenario only mentions
future revenues.
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55. B The requirement to answer all calls within five minutes is the service quality
specification. However, the service being delivered does not meet this
standard, with almost 10% of customers having to wait more than five minutes.
Although the policy is regularly communicated to managers (ie internally) there
is no indication that it is advertised to customers. Therefore there isn't a gap
between service delivery and external communications.
56. B In a relationship marketing environment, quality is regarded as the being the

concern of the whole company rather than just the concern of selected groups
of employees. In relationship marketing, marketing material emphasises
customer benefits (rather than product features). Similarly, communication is
regular (rather than persuasive) and the focus is on building a relationship with
a customer rather than treating each sale as a one- off event.
57. C The phenomenon in which companies rapidly change their prices to reflect the
current state of demand and supply is called dynamic pricing. Transparent
pricing relates to customers' ability to compare prices between different
suppliers, rather than companies' actions in changing their own prices.
58. A By enabling the customer to compare the price of different products quickly and
easily, the internet increases price transparency. Dynamic pricing relates to
companies changing their prices rapidly, rather than customers comparing
prices.
59. A Affiliation is about whose interests the website represents – the consumers or
the suppliers. In this case, the website is proving popular because consumers
think it is acting in their interests rather than those of different suppliers Reach
relates to access and connection; how many consumers a business can
access. Richness relates to the depth and detail of the information that a
business gives a customer or collects about a customer.
60. C E-newsletters can be used by companies to send news about new products
and services to customers. However, in order to be able to receive the
newsletter, the recipient must have already given the company their details (eg
their e-mail address), which suggests there is already some kind of relationship
between the company and the customer. Search engines, banner adverts and
affiliate marketing are all techniques designed to achieve acquisition, and are
not dependent on any kind of existing relationship between the company and
the customer.
61. D Price = 145 + 20% mark-up = 174

Break-even = 50,750 / (174 – 145) = 1,750.
62. B The stage which has just been undertaken is the business analysis stages
(assessing the fit with existing products, and assessing profitability). The
sequence of the new product development process is: Business analysis,
product development, market testing; commercialisation and launch. Concept
testing should be carried out before business analysis.
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63. A In the introduction stage of a product's life cycle there is slow growth, as the
product takes time to be accepted by the market. Sales only start to rise more
sharply once a product enters the growth stage of its life cycle.
64. C The risk to the bank from providing non-collateralised credit is far greater than
the risk from providing collateralised credit, because in the event on non-
repayment the bank can sell the collateral attached to a collateralised loan.
Therefore Option I is incorrect. Fixed interest rate credit is usually price more
highly than variable interest rate credit, to cover the lender's risk of losing out if
interest rates rise significantly. Therefore Option II is correct.
65. A Interest (riba) is forbidden in Islamic finance, so the reference to interest in

Option III means it is incorrect. However, although interest is forbidden, banks
can still make profits from the projects they help to finance.
66. C Specifically the company appears to have an issue with cognitive exposure.
Cognitive exposure relates to the degree to which a potential customer notices
an advert; and cognitive exposure is harder to achieve because of the volume
of adverts that most customers are exposed to. Attention is the stage of the
communications process at which customers allocate processing capacity to an
advert, and start to take on board the information in the advert. Information
processing (or comprehension) is the stage at which customers interpret
information from the advert; and, for example, decide how convincing the
claims made about a product are.
67. C Psychographic (or lifestyle) segmentation aims to target adverts according to

customers' interests. For example, customers who have 'liked' adventure sports
or skiing related activities on Facebook could be suitable recipients for the
insurance policies under consideration.
68. B One of the key aspects of e-marketing is that it enables communications to be

tailored to the individual, unlike traditional media where the same message is
broadcast to everyone who sees or hears it. As a result, the message can be
sent directly to an individual; in effect becoming a market segment of 1, and
removing the concerns about the differing interests of the members of the
potential audience for an advert.
69. D The impact an advert is likely to have is measured by its gross rating point.
Gross rating point = reach × frequency.
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70. D All three of the options are potential disadvantages of using agency
agreements. It is more difficult for the company to control the quality of service
which an agency provides to customers than it would be for the company to
control the quality of service provided by its own staff. Because the customer
deals with an agent rather than directly with the company, the company has
less opportunity to gather feedback from the customer or to develop a
relationship with them. The agent could sell a policy to a customer just to earn a
commission even though the features of the policy (or the activities covered by
it) are not appropriate for what the customers want. This kind of mis-selling
could damage the brand name of the underlying insurance company if the
customer subsequently tries to make a claim on their insurance policy and is
told they can't because the event which caused their claim was not covered by
their policy.
71. C Gain from investment = 2,480 × $125 × 3 = $930,000

Cost of investment = (1,160 × $180) + $25,000 + (1,320 × $150) = $431,800
ROI = 930, 000 – 431, 800 = 115.4%
431, 800.
72. A The more price sensitive a product is, the more likely customers are to switch to
an alternative supplier purely on the grounds of price. In this case, the rival's
policies are cheaper than PQR's, so price sensitive customers could be
expected to switch to them. If demand is elastic, then the increase in demand
following a reduction in price will be greater than if demand is inelastic. The
more the rival bank's demand increases, the greater the impact on PQR's own
sales will be.
73. A The change in demand for the rival's own policies following the change in their
price will be reflected by a movement along its demand curve. However, a
change in the price of a competitor's product will lead to a shift in PQR's
demand curve. If PQR's prices remain unchanged, demand for its policies will
fall; meaning its demand curve shifts inwards.
74. D The rival company is comparing its new price against the previous (higher)
price of its product. There is no indication, however, that the price is misleading.
Equally, the product is not necessarily a price leader; for example, there is no
indication about the level of mark-up the company is still earning by providing it,
even though the price is lower than usual.
75. C PQR's campaign appears to have captured the attention of people at the
information search stage of the process, and therefore they have looked for
information about PQR's products on its website. However, once price-sensitive
consumers have compared the prices of PQR's policies against those of the
rival provider (i.e. when they have been evaluating the alternatives available)
they have decided not to purchase one of the rival's policies instead of PQR's.
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76. B The monthly repayments made by a credit card customer, and the interest
charged on the month-end balance are inputs. If the balance is not repaid in
full, or on time, then the customer is liable to incur significant interest charges.
This relates to the risk aspect of the card. Outputs relate to the benefit to the
customer from having the card – which in this case is likely to be the option of
paying for items over a longer time than they have previously been able to do if
they have had to pay by cash or debit card only. Although the interest rates are
reviewed every six months, this doesn't reflect the time frame of a credit card
product.
77. C The bug in the computer system has meant that the service actually delivered
hasn't matched the service level which was intended (i.e. that rates were
reduced after six months). So the service delivered didn't meet the service
standards set, and which were consistent with what had been promised to the
bank's customers. However, the service delivered also didn't match the level
which had been promised to customers (through external communications). So
there is also a gap here. In turn, these gaps will also lead to an overall service
quality gap between customer expectations and customer perceptions.
78. D The interest rates and the application fees effectively represent the price a
customer pays for their mortgage. The difficulty being described in this scenario
is the difficulty of comparing the overall 'price' of a mortgage with no application
fee and higher monthly payments, against one with an initial fee and lower
subsequent payments. Although the difficulty of assessing quality is also one of
the key difficulties in marketing financial services, the scenario here relates
specifically to issues of price rather than quality.
79. C The concept of 'interactivity' highlights that consumers can seek information
about companies and products themselves, rather than just being the recipients
of information published by a company. In this case, the customer could use the
online calculator to compare the overall cost of the bank's mortgages against
the cost of the mortgages provided by other banks.
80. A Direct marketing techniques aim to generate a direct and measurable response
from a potential customer. Telemarketing and SMS marketing are targeted to at
specific customers, and their responses to the phone call or SMS message they
receive can be measured. However, internet blogs would be designed more to
highlight the company's profile, or to highlight issues and features of different
products, rather than eliciting a specific call to action or a direct response which
can be tracked and measured.
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Section A: Sixty (60) Independent Multiple-Choice Questions Answer All Questions in This Section

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Section A: Sixty (60) Independent Multiple-Choice Questions Answer All Questions in This Section

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PB Module 6 – Marketing and Selling in Financial Services – Mock 2 Examination

SECTION A: SIXTY (60) INDEPENDENT MULTIPLE-CHOICE QUESTIONS

3. Maslow's hierarchy of needs includes all of the following, EXCEPT:

4. A product which is rapidly gaining market acceptance and is starting to generate a

6. Which of the following on Customer Relationship Management (CRM) are

I. CRM identifies the importance of the entire organisation focusing on satisfying

A. Low price; Low promotion

10. A customer is hoping to apply for a home equity loan.

11. Which of the following are TRUE?

Which of the following would be suitable for the customer?

I. Identifying customer needs.

15. A financial services company is evaluating possible ways to increase customer

I. Reducing the cost of acquiring new customers.

The consumer's realisation indicates she is at which stage of the buying

 Interest rates - whether the interest rates are fixed or variable;

A. Lack of quality assurance

Which of the avove issues relate to the corporate level of strategy?

What would be the marginal revenue of the eighth customer?

The bank has 25,000 active accounts.

What is the monthly account fee the bank charges customers?

A. marginal revenue equals zero.

24. Which of the following on price and pricing are TRUE?

I. A product's price needs to be consistent with the overall marketing strategy to

25. Which of the following are TRUE?

A. I, II and III only.

I. Appoint firms of agents to act on behalf of the company in foreign countries,

Which of the following aspects of a marketing programme would be appropriate for

I. It operates online only.

29. Which of the following is an example of indirect distribution?

A. A bank offers a product more cheaply to customers who buy it online

A. SMS promotions and newspaper adverts.

What form of marketing is the company using?

32. A company is preparing to launch a major advertising campaign involving television

What concept does the company's approach demonstrate?

33. Which of the following are forms of direct marketing?

Which of the following is TRUE?

The advert on the:

36. A bank is introducing a new mortgage product.

Which of the above features is/are core attributes of the mortgage?

Which stage of its life cycle has the product reached?

Which of the following would be the MOST appropriate method of analysis?

43. New product development goes through a number of sequential stages.

Which of the following four stages are in the CORRECT sequence?

A. Screening, Idea generation, Concept testing, Business analysis.

44. Which of the following characteristics is associated with market segmentation?

I. To enable customer needs to be satisfied more effectively.

What basis should the company use to segment its market?

A. Fit – It can be tailored specifically to the company's requirements.

 Group 1 - Customers who do not respond at all to marketing communications;

The gap between:

A. service quality specifications and service delivery.

50. Disconfirmation of customer expectations occurs when:

A. customer expectations of a service exceed their perception of the service they

A. management perceptions and service standards.

I. An increase in the current profitability of servicing a customer.

A. service delivery and external communications.

A. Marketing material emphasises product features.

Which of the following approaches to pricing is the company using?

Which aspect of navigation is leading to the popularity of the leading website?

SECTION B : TWENTY (20) CASE-BASED MULTIPLE-CHOICE QUESTIONS

Questions 61 to 65 relate to the following case/caselet:

Which of the following is NOT consistent with this position?

A. Rapid sales growth due to the innovative nature of the product.