Chapter 9Identifying Market Segments and Selecting Target Markets

True/False Questions
1. Traditionally, micromarketing of a consumer product results in the largest potential market for that product. False (moderate) p. 171 2. Consumers who belong to the same market segment have identical needs and wants. False (difficult) p. 171 3. Target marketing requires marketers to take three major steps: 1) identify and profile distinct groups, 2) select one or more segments to enter, and 3) predict the consumer behavior of the segments. False (moderate) p. 171 4. The ultimate level of marketing segmentation is mass marketing. False (moderate) p. 171 5. There are four levels at which a firm could micromarketsegments, niches, local areas, and individuals. True (easy) p. 171 6. If everyones choice for their computer printer were an HP LaserJet 1200, there would be a heterogeneous preference segment in the computer printer market. False (moderate) p. 173 7. Mass customization means a company has the ability to prepare individually designed products to meet customer requirements. True (easy) p. 173 8. The first step in segmenting a market is to create segment story boards to test the segments viability. False (moderate) p. 174 9. Lifestyle is an example of a demographic segmentation variable. False (easy) p. 176 10. One of the reasons demographic variables are the most popular variables for segmenting the consumer market is because usage rates are often associated with demographic characteristics. True (moderate) p. 175 11. By and large, income is an excellent predictor of who will buy what products. False (easy) p. 177 12. Social Class is an example of a psychographic segmentation variable. False (moderate) p. 177 13. Many marketers believe behavioral variables are the best starting point for constructing market segments. True (moderate) p. 178 14. Benefits sought is an example of a behavioral segmentation variable. True (moderate) p. 178 15. When Harley Davison used the slogan Its time, and offered test rides and bargain financing on its Sportsters products, it was using geographic segmentation. False (moderate) p. 175 16. Geoclustering is a technique for segmenting markets on the basis of multiple attributes. True (difficult) p. 179

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17. One reason geoclustering is increasingly popular is the falling cost of data manipulation. True (difficult) p. 179 18. In business market segmentation, operating variables are the most important segmentation variable. False (moderate) p. 180 19. In business markets, the segment programmed buyers is the most profitable, and relationship buyers are the least profitable. False (moderate) p. 181 20. Firms that offer tailored programs for several different market segments engage in differentiated marketing. True (moderate) p. 184 Multiple Choice Questions 21. Traditionally, mass marketing of a consumer product results in _______________. a.) the largest potential market for that product (moderate) p. 171 b.) increased product prices due to the lack of differentiation and decreased competition c.) easier channel selections d.) fewer competitors because there are fewer markets e.) lower profit margins 22. Bentley produces fine automobiles with price tags in the $300,000 and above range. Since the number of people with sufficient income to purchase a Bentley is relatively small, we might say Bentley is engaged in _______________ marketing. a.) local b.) aggregated c.) individual d.) niche (easy) p. 172 e.) derived 23. A(n) _______________ market is characterized by a fairly narrowly defined market with a complete and distinct set of needs, and a willingness to pay a premium to meet those needs. a.) local b.) niche (easy) p. 172 c.) individual d.) derived e.) homogeneous 24. A southern chain of barbecue restaurants would find it advantageous to prepare a sweet pork sandwich with coleslaw inside for Mississippians, a mustard-based sauce with pork and coleslaw on the side for Carolinians, and a smoky beef sandwich with thick white bread instead of a bun for Texans. If the chain engages in _______________ marketing, it will improve the likelihood of its success. a.) local (moderate) p. 172 b.) niche c.) individual d.) homogeneous e.) demographic

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25. An argument against local marketing is that it _______________. a.) makes it difficult to be profitable because of the small size of the market b.) makes it difficult to select a proper distribution channel c.) drives up marketing and manufacturing costs by reducing economies of scale (difficult) p. 172 d.) leads to a homogenization of the market e.) solidifies a brands overall image in the marketplace because it delivers the same advertising message throughout its market 26. The ultimate level of marketing segmentation is _______________ marketing. a.) local b.) niche c.) individual (moderate) p. 173 d.) homogeneous e.) mass 27. All of the following are part of an attractive niche except _______________. a.) the niche has variety-seeking consumers (moderate) p. 172 b.) consumers in the niche have distinct needs c.) the niche is not likely to attract heavy competition d.) the niche can specialize and therefore realize certain economies e.) the niche has growth potential 28. _______________ is the ability to prepare, on a mass basis, individually designed products to meet each customers requirements. a.) Niching b.) Specialization c.) Mass customization (moderate) p. 173 d.) Concentrated marketing e.) Clustered marketing 29. A consumer preference pattern in which all the dots are spread out and no pattern emerges is called _______________. a.) clustered preferences b.) homogeneous preferences c.) concentrated preferences d.) diffused preferences (moderate) p. 173 e.) honeycombed preferences 30. If everyones choice for a their computer printer were an HP LaserJet 1200, there would be a _______________ preference segment in the computer printer market. a.) homogeneous (moderate) p. 173 b.) heterogeneous c.) diffused d.) stratified e.) clustered

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31. Which of the following is not necessary to make a market segment useful? a.) It is measurable. b.) It is satisfied. (moderate) p. 175 c.) It is substantial. d.) It is actionable. e.) It is accessible. 32. A marketer facing a market segment with natural market segments is dealing with a market with _______________ preferences. a.) diversified b.) stratified c.) heterogeneous d.) diffused e.) clustered (moderate) p. 174 33. The last step in segmenting a market is _______________. a.) concept testing b.) the survey stage c.) segment acid test d.) marketing mix strategy (difficult) p. 174 e.) segment identification 34. If a food company segments a market on the basis of demographic and/or psychographic information, its basis for segmentation is _______________. a.) customer responses b.) preference segments c.) customer characteristics (moderate) p. 176 d.) customer behavior e.) market partitions 35. While studying consumer-buying patterns for malt liquor, Joan has learned that more of the product is consumed in ethnic neighborhoods on a per capita basis than in less homogeneous areas. She is studying _______________ data. a.) geographic b.) demographic (easy) p. 176 c.) psychological d.) personality e.) lifestyle 36. Which of the following is an example of a demographic segmentation variable? a.) generation or social class (moderate) p. 176 b.) personality c.) attitude toward the product d.) lifestyle e.) user status

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37. Perrigo Corporation makes One-Source Mature, a high potency, multivitamin for active men and women over 50. This is an example of _______________ segmentation. a.) gender b.) generation c.) age and life-cycle (moderate) p. 176 d.) user status e.) usage rate 38. Which of the following statements best describes the difference between age and life-cycle segmentation and generational segmentation? a.) Age and life-cycle segmentation is rigid and unchanging over time while generational segmentation changes with each decade. b.) Age and life-cycle segmentation assumes people are influenced by where they are in life, and generational segmentation assumes they are influenced by what they grew up with. (difficult) p. 177 c.) Age and life-cycle segmentation is a relatively straightforward segmentation strategy while generational segmentation is much harder to implement. d.) Age and life-cycle segmentation assumes the effect of time, and generational segmentation is based on the effects of economic and social status. e.) There are no differences between age and life-cycle segmentation and generational segmentation. 39. Which of the following is an example of a behavioral segmentation variable? a.) occupation b.) education level c.) readiness stage (moderate) p. 176 d.) lifestyle e.) family life cycle 40. The Lazy H Dude Ranch is open to people of all sizes, shapes, and belief systems. Its a place people can go to unwind from the stress of daily life. Which of the following is an example of a psychographic variable the owner of the retreat could use in its marketing strategy? a.) occupation b.) age c.) lifestyle (moderate) p. 176 d.) social class e.) income 41. A segmentation study of people who would be interested in subscribing to a music and entertainment magazine discovered three distinct groups of potential subscribers: (1) those who wanted reviews of the latest music releases, (2) those who wanted to know behind the scenes gossip about the stars, and (3) those who sought to improve their own musicianship. This magazine discovered its market can be segmented using _______________ variables. a.) demographic b.) social class c.) lifestyle (moderate) p. 176 d.) generation e.) geographic

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42. Which of the following is an example of a behavioral segmentation variable? a.) generation b.) user status (moderate) p. 178 c.) personality d.) religion e.) social class 43. Since two-thirds of the sales of new motorcycle policies at Dairyland Insurance Company are to current policyholders, it should use a _______________ segmentation strategy. a.) education-based b.) benefit c.) demographic d.) behavioral (moderate) p. 178 e.) psychographic 44. For years Spiral-Cut Hams have been on thousands of Easter dinner tables. Spiral-Cut is working hard to implement other segmentation strategies beyond the limited _______________ strategy it used in the past. a.) user rate b.) lifestyle c.) family life-cycle d.) benefit e.) occasion (moderate) p. 178 45. Research by Voicestream Wireless revealed that it serves two different kinds of consumers: chatterboxes who seemed to live on the phone and those that make lots of short calls. Based on this research, it should use a(n) _______________ segmentation strategy. a.) age-based b.) usage rate (moderate) p. 178 c.) user status d.) loyalty status e.) occupation-based 46. When dealing with loyalty status, buyers can be segmented in a variety of ways. When given a choice of canned fruit at the supermarket, Barton will select either Libbys or the house brand, and no other brand. He makes his selection based on which brand first catches his eye. Barton is an example of a _______________. a.) hardcore loyal b.) split loyal c.) shifting loyal (difficult) p. 179 d.) switcher e.) splinter loyalist

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47. Ninety percent of all sales made by GEICO Insurance Company are initiated by the buyer rather than commissioned agents. Before purchasing insurance, buyers had typically researched and compared GEICO to other providers; they felt that GEICO best satisfied their needs. Given this information, GEICO should develop a strategy around which of the behavioral segmentation strategies? a.) buyer-readiness (difficult) p. 179 b.) income c.) education d.) lifestyle e.) attitude 48. If you go to a Target store on the east side of Phoenix, you will find prayer candles but no bicycle child carriers. The Target store in Scottsdale sells trailers but does not stock portable heaters. Youd have to go to the Target store in Mesa to find heaters. Target realizes that the people in each of these neighborhoods do not have the same needs and should therefore not be offered the same products. This is an example of _______________. a.) geographic segmentation b.) geoclustering (moderate) p. 179 c.) demographic segmentation d.) behavioral segmentation e.) psychographic segmentation 49. When the parent company introduced Southern Belles magazine, it was described as a new publication that covers female style and southern life. From this statement, you should be able to describe the segmentation strategy used for this magazines as _______________. a.) geographic segmentation b.) geoclustering (moderate) p. 179 c.) demographic segmentation d.) behavioral segmentation e.) psychographic segmentation 50. According to Bonoma and Shapiro, the most important segmentation variable for business markets is _______________. a.) demographic characteristics (moderate) p. 180 b.) operating variables c.) situational factors d.) purchasing approaches e.) personal characteristics 51. Which of the following is not a major business segmentation variable? a.) demographic b.) geographic (difficult) p. 180 c.) purchasing approaches d.) operating variables e.) personal characteristics

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52. According to Rangan, Moriarty, and Swartz, buyers who see the product as not very important to their operation are often called _______________. a.) programmed buyers (moderate) p. 181 b.) relationship buyers c.) transformational buyers d.) transactional buyers e.) bargain hunters 53. The main two things to consider when selecting a target market are a.) if the segment has potential and if it fits with the companys objectives and resources (difficult) p. 181 b.) if the segment is easily communicated with and if it is different enough from other segments c.) if it is easy to define the needs of the segment and if economies of scale are possible with the segment d.) if the segment is actionable and if the consumers in it are action-oriented e.) if the firm can provide a flexible market offering to fulfill the segments needs and if the segment is large enough to be viable 54. According to Rangan, Moriarty, and Swartz, _______________ are buyers who regard the product as moderately important and are knowledgeable about competitive offerings. a.) programmed buyers b.) relationship buyers (moderate) p. 181 c.) transformational buyers d.) transactional buyers e.) bargain hunters 55. Sams Pizza buys raw inputs like olives, cheeses, and flour for dough and packages the to-go orders in shallow cardboard boxes. Sam continues to place routine monthly orders with Weyerhaeuser, because Weyerhaeuser provides Sam with a small discount and a modest amount of service and because Weyerhaeusers prices are in line with its competitors prices. Sams Pizza is an example of which of the following business segments? a.) programmed buyers b.) relationship buyers (moderate) p. 181 c.) transformational buyers d.) transactional buyers e.) bargain hunters 56. Northern State University buys hundreds of new desktop PCs for labs, staff, and faculty every year. The university demands a deep discount and a high level of service from its PC suppliers. It is ready to switch at the slightest dissatisfaction. NSU is an example of which of the following business segments? a.) programmed buyers b.) relationship buyers c.) transformational buyers d.) transactional buyers e.) bargain hunters (moderate) p. 181

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57. According to Rangan, Moriarty, and Swartz, buyers who see the product as very important and demand low prices and top service are called _______________. a.) programmed buyers b.) relationship buyers c.) transformational buyers d.) transactional buyers e.) bargain hunters (moderate) p. 181 58. A sports car manufacturer considered marketing to a market segment made up of individuals separated from their spouses but not yet divorced. However, investigation of the segment showed that this group of individuals could not be reached by any specific media. In effect, this group was not a(n) _______________ market. a.) accessible and substantial b.) measurable, differentiable, and accessible c.) accessible, differentiable, and actionable (difficult) p. 175 d.) actionable, differentiable, and substantial e.) substantial and actionable 59. A marketer wants to market beeping balls to sight-disabled softball players. This market segment is _______________ even if it meets none of the other characteristics needed for a market segment to be useful. a.) immeasurable b.) substantial c.) accessible d.) differentiable (moderate) p. 175 e.) not quantifiable 60. A marketer who selected a _______________ segmentation strategy would find this segmentation strategy to possess the greatest amount of risk. a.) selective specialization b.) single-segment concentration (moderate) p. 182 c.) full market coverage d.) market specialization e.) product specialization 61. A manufacturer of disposable patterned paper placemats that decided it was only going to sell to sitdown restaurants would have adopted a _______________ segmentation strategy. a.) selective specialization b.) single-segment concentration c.) full market coverage d.) market specialization (moderate) p. 183 e.) product specialization 62. For years, Sears used the slogan, Sears Has Everything. Which of the following strategies does this slogan most likely support? a.) differentiated marketing b.) single-segment concentration c.) undifferentiated marketing (moderate) p. 183 d.) market specialization e.) product specialization

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63. Ford Motor Company sells Ford, Mercury, Volvo, Lincoln, and Jaguar brands, each having appeal to a select segment of the market. This is an example of _______________. a.) countersegmentation b.) undifferentiated marketing c.) differentiated marketing (easy) p. 184 d.) market specialization e.) single segment concentration 64. The Gap caters to buyers seeking classic clothing at mid-range prices. It also owns other retailing chains including Banana Republic (catering to more affluent buyers) and Old Navy (which sells value-priced jeans, tee-shirts and khakis). The Gap is practicing _______________ marketing. a.) differentiated (moderate) p. 184 b.) single-segment concentration c.) undifferentiated d.) market specialization e.) product generalization 65. Firms that offer tailored programs for several different market segments engage in _______________ marketing. a.) differentiated (moderate) p. 184 b.) single-segment concentration c.) undifferentiated d.) market specialization e.) product specialization 66. In terms of its affect on the marketing process, differentiated marketing _______________. a.) lowers total sales, which increases profits by increasing the margin on each sale b.) significantly decreases manufacturing costs c.) keeps advertising costs low d.) reduces inventory costs e.) increases administrative and production costs (difficult) p. 184 67. In terms of its affect on the marketing process, undifferentiated marketing _______________. a.) increases administrative and production costs b.) keeps down advertising and R&D costs (moderate) p. 183 c.) increases the firms cost for product modification d.) creates more total sales than differentiated marketing e.) puts the company at risk of being supplanted by an entirely new technology 68. Research shows that sports cards appeal to 6- to 17-year-old boys, 24- to 54-year old men, and professional collectors. Because these groups only exploitable similarity is their interest in sports cards, this would be an example of a(n) _______________. a.) interrelated segment b.) market niche c.) supersegment (moderate) p. 184 d.) blocked market e.) intersegment cooperative

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69. When companies encounter blocked markets, the best approach to those markets is to _______________. a.) use a segment-by-segment invasion plan b.) use a megamarketing approach (moderate) p. 184 c.) forget the blocked market and approach easier to enter markets d.) study intersegment cooperation and use it to enter the blocked markets e.) find an exploitable similarity and create a megamarket 70. _______________ is strategic coordination of economic, psychological, political, and public-relations skills to gain the cooperation of a number of parties in order to enter and/or operate in a given market. a.) Segment-by-segment invasion planning b.) Market niching c.) Megamarketing (moderate) p. 184 d.) Intersegment cooperation e.) Turbomarketing

Essay Questions
71. Markets can be segmented at four levels. In a short essay, describe each level and explain the benefits associated with segmenting the market at each of the four levels. Answer (1) Segment marketing consists of a large identifiable group within a market with similar wants, purchasing power, geographical location, buying attitudes, or buying habits. With segment marketing, the marketer can create a more fine-tuned product or service offering than with mass marketing. The product can be priced appropriately for its target audience. The choice of distribution and communication channels becomes easier. The company also faces fewer competitors in the segment. (2) A niche is a more narrowly defined group, typically a small market whose needs are not well served. With niche marketing, a marketer finds customers with a distinct set of needs that will pay premium prices to the firm that best satisfies that need. The niche is not likely to attract other competitors. The niche gains certain economies through specialization, and the niche has size, profit, and growth potential. (3) Tailoring marketing programs to the needs and wants of local customer groups (trading areas, neighborhoods, and even individual stores) is called local marketing. National advertising could be wasteful because it often fails to address local needs. (4) The ultimate level of segmentation is individual marketing. Marketers benefit from increased sales and profits by realizing that their customers want to express their individuality. (difficult) pp. 171-173 72. Suppose potato chip buyers are asked how much they value price, taste, crunchiness, and nutritional content as product attributes. In a short essay, describe the three different preference patterns that should emerge from this research? Answer The attributes would reveal three basic-market preference graphs. (1) The term homogeneous preferences describes a market where all the consumers have roughly the same preferences for value and nutritional content. The market shows no natural segments. Potato chip brands would cluster around the center of the scale. (2) The term diffused preferences is at the other extreme. Consumer preferences vary greatly. The first brand to enter the market is likely to position itself in the center to appeal to the most people. A brand in the center minimizes the sum of total customer dissatisfaction. A second competitor could locate next to the first and fight for market share, or locate in the corner to attract those not satisfied with the center brand. (3) Clustered preferences occur when the market

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reveals distinct preference clusters called natural market segments, like if a group preferred a crispier chip with more nutritional content. The first firm would have three options. It might position itself in the center, hoping to appeal to all groups. It might position itself in the largest marketing segment. It might develop several brands, each positioned in different segments. If the first firm developed only one brand, then competitors would enter and introduce brands in the other segments. (moderate) pp. 173-174 73. In a short essay, discuss niche marketing and explain the phrase guerrillas against gorillas as it relates to marketing to niche segments. Give an actual or made-up example of a niche market and the firms that compete there. Answer The phrase refers to the fact that large firms (the gorillas) often lose small pieces of their market share to highly focused competitors (the guerrillas). A niche is a narrowly defined group that seeks a distinct set of benefits. They will often pay a premium to the firm that better satisfies their needs. Niches are small enough that they do not attract as much competition as do segments with larger potentials. The examples students give will vary according to their knowledge and experiences. (moderate) p. 172 74. As multinational companies look for ways to improve their efficiency, one solution is the purchase of executive jet planes. It is quite often necessary for management to fly to other operations around the world. Having a corporate jet removes time constraints from these trips. In a short essay, discuss which major segmentation variables for business markets a manufacturer of corporate jets can use. Answer Students will answer this question in a variety of ways. The following is a possible answer: Industry or location of industry are both potential demographic variables than can be used. Businesses can be segmented according to heavy or light usage of air travel; this would be an example of an operating variable. All five of the purchasing approaches would be applicable as segmentation variables purchasing-function organization, power structure of organization, nature of existing relationship, general purchase policies of buyer, and buyers purchasing criteria. The one that is least likely is the nature of existing relationship, but it is not out of the realm of possibility that a company would need and buy more than one corporate jet. In terms of situational factors as segmentation variables, how the buyer will use the jet falls under the category of specific application. Personal characteristics might include buyers willingness to take risks, and buyer-seller similarities could also be a viable segmentation variable in this example. (moderate) pp. 180-181 75.A Chinese manufacturer of small and inexpensive motorcycles (125cc to 250cc engines, probable retail prices $1,200 to $2,100) decides to enter the U.S. market, as they see very little competition in that power range. You are asked to help them decide how to segment the U.S. marketplace for small motorbikes. Using the Major Segmentation Variables for Consumer Markets, discuss three or four possible segments which might be targeted by the Chinese concern. Include a brief explanation for why this segment might be a good one to consider. pp. 175-179

Mini-Cases
Mini-Case 9-1 A group of investors are starting a for-profit college to be called Haven University. They have identified a small segment of society that is displeased with the high cost of college and is willing to forego all social and sporting extracurricular activities in order to get an inexpensive, quality education in four

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years. The university investors will advertise nationally. Its target audience is individuals between 22 and 40 years of age who have either not started earning a college degree or who did not finish one they began in the last ten years. The investors want to attract students who are currently working at a job with which they are dissatisfied. Haven will only offer three degree programs, which cannot be modified to individual student needs. Research has shown that these are degrees that this market segment repeatedly seeks. Students can earn their degrees over the Internet and only have to attend a one-week seminar on campus twice a year. 75. Refer to Mini-Case 9-1. These university investors are using _______________ marketing to identify their target market. a.) mass b.) niche (easy) p. 172 c.) local d.) aggregated e.) individual 76. Refer to Mini-Case 9-1. The investors have identified their market through the use of _______________ segmentation variables. a.) behavioral, geographic, and demographic b.) psychographic and behavioral c.) geographic and demographic d.) psychographic, behavioral, and geographic e.) demographic, psychographic, and behavioral (moderate) p. 176 77. Refer to Mini-Case 9-1. The investors discovered there was a segment of the population who was being passed over for promotions because they lacked a college degree. These people had always assumed getting a degree was impossible because they did not have the time to attend classes. What kind of segmentation variable would be used to identify this segment? a.) occasion b.) personality c.) values d.) benefit (moderate) p. 176 e.) lifestyle

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Mini-Case 9-2 A large international pharmaceutical firm decides to enter the Philippines with a new oral birth control product. The Filipino population varies greatly in terms of levels of age, education, rural versus urban population, income, ethnicity, sexual activity rates, awareness about the availability and uses of birth control, religious orientation, access to health care, and other variables that might influence consumption patterns for birth control. 78. Refer to Mini-Case 9-2. If the firm marketed their product in the form of white pills in a plain bottle and sold it to rural government clinics, who subsidized it to the consumers, the target segment most prominently includes which variables? a.) religion, age, sexual activity, and city size b.) income, access to health care, and city size (moderate) pp. 175-179 c.) race, income, and education d.) age, awareness (readiness), and religious orientation e.) nationality, loyalty status, and stage of the family life cycle 79. Refer to Mini-Case 9-2. The firm needs to decide which of the many possible segments to target. Which of the following is not relevant as they make this decision? a.) if consumer preferences are diffused or clustered b.) if the segments are measurable, accessible, and actionable c.) whether to go into rural or urban areas of the Philippines d.) if there are sufficient women of child-bearing age in the Filipino population e.) whether Filipino businesses are more likely to be relationship or programmed buyers (moderate) p. 181 80. Refer to Mini-Case 9-2. If the firm decides to sell pastel colored pills at higher than the competitors prices, and sell through pharmacies in the capital, Manila, the target segment most prominently includes which variables? a.) religion, age, sexual activity, and city size b.) income, access to healthcare, and city size (moderate) pp. 175-179 c.) race, income, and education d.) age, awareness (readiness), and religious orientation e.) nationality, loyalty status, and stage of the family life cycle

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