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CHAPTER 14 MKT
1
CHAPTER 14 MKT
A marketing channel is a set of interdependent organizations
that ease the transfer of ownership as products move from producer
to business user or consumer.TrueFalse
ANSWER:True
As products move through the marketing channel, channel members
provide specialization and division of labor, overcome
discrepancies, and provide contact efficiency.TrueFalse
ANSWER:True
Consider a scenario in which there are five manufacturers, no
intermediaries, and four consumers. Twenty transactions would be
required for each consumer to receive products from each
manufacturer. The introduction of one intermediary reduces the
required number of transactions to four and demonstrates the idea
of contact efficiency.TrueFalse
ANSWER:False
RATIONALE:Introducing one intermediary reduces the required
number of transactions to nine. See Exhibit 1.
Carl represents a manufacturer of floor coverings and gets paid
a commission for finding buyers and linking them up with the
manufacturer. Carl is an example of a merchant
wholesaler.TrueFalse
ANSWER:False
RATIONALE:This defines an agent or broker.
Transactional functions include contacting potential customers
and assuming the risk of owning inventory.TrueFalse
ANSWER:True
The direct channel is used more often in consumer markets than
in business and industrial markets.TrueFalse
ANSWER:False
RATIONALE:The direct channel is used more often in business and
industrial markets than in consumer markets.
Metallurgical Designs makes gold and silver charms for necklaces
and bracelets. It markets its charms to a few retailers in any one
region and promotes them intensively to those retailers. This is an
example of intensive distribution.TrueFalse
ANSWER:False
RATIONALE:Intensive distribution means the product is available
in every outlet the potential customer might want to buy it, not to
just a few retailers.
Exclusive distribution increases direct competition among a
great number of retailers.TrueFalse
ANSWER:False
RATIONALE:An exclusive distribution arrangement establishes a
dealer and enables it to be the main
beneficiary of the manufacturers promotion efforts in that
geographic area.
Highly integrated channel relationships are loosely bonded
relationships characterized by informal arrangements that
explicitly define the relationships of the channel
members.TrueFalse
ANSWER:False
RATIONALE:Highly integrated channel relationships are closely
bonded relationships characterized by formal arrangements that
explicitly define the relationships of the channel members.
Reciprocal conflict occurs among channel members on the same
level, such as two or more different wholesalers
or two or more different retailers that handle the same
manufacturers brands.
TrueFalse
ANSWER:False
RATIONALE:This is referred to as horizontal conflict.
Many regard vertical conflict as healthy
competition.TrueFalse
ANSWER:False
RATIONALE:Vertical conflict occurs between different levels in a
marketing channel and is much more serious than horizontal conflict
among channel members on the same level.
Gray marketing channels assist brand name manufacturers in
marketing their products more efficiently.TrueFalse
ANSWER:False
RATIONALE:Gray marketing channels use unauthorized channel
intermediaries.
The person who called Alisa last night and tried to sell her
double-paned windows for her home was using outbound
telemarketing.TrueFalse
ANSWER:True
A retailing establishment that sells a wide variety of shopping
and specialty goods under one roof would be classified as a
department store.TrueFalse
ANSWER:True
Emily has just opened a health food store that sells organic
foods, herbal supplements, and environmentally friendly products.
Because it will be a specialty store, she should have a broad
product assortment with moderately low prices.TrueFalse
ANSWER:False
RATIONALE:Specialty stores have narrow product assortments and
moderate to high prices.
Jennifer owns a greeting card store where she also sells womens
purses, Crocs shoes for the whole family, Jibbitz charms, cell
phone skins, Sandy Lion stickers, Yankee candles, Godiva
chocolates, Precious Memories figurines, beaded jewelry, and
stuffed animals. Jennifer uses multibrand
merchandising.TrueFalse
ANSWER:False
RATIONALE:This would be an example of scrambled merchandising
because it involves offering nontraditional goods. There is no such
thing as a multibrand.
Supercenters are more than just larger versions of traditional
markets. In addition to foodstuffs, supercenters
have pharmacies, dry cleaners, portrait studies, photo
finishing, hair salons, and restaurants.
TrueFalse
ANSWER:True
Specialty discount stores differ from other discount stores.
While most other discounters offer a predictable assortment of
merchandise, the styles and brands offered at specialty discount
stores change frequently and cost 25 percent or more below
traditional department store prices.TrueFalse
ANSWER:False
RATIONALE:Off-price retailers are being described here, not
specialty discount stores.
Marketers who use nonstore retailing no longer have to worry
about the place element of the four Ps.TrueFalse
ANSWER:False
RATIONALE:Non-store retailing refers to shopping without
visiting a store; however, products must still be distributed to
end users, whether by vending, in-home retailing, or direct
marketing.
The two types of franchising are target market franchising and
geographic franchising.TrueFalse
ANSWER:False
RATIONALE:The two types of franchising are product and trade
name franchising and business format franchising.
The six Ps of the retailing mix are product, place, price,
promotion, personnel, and planning.TrueFalse
ANSWER:False
RATIONALE:Presentation, not planning, is one of the six Ps of
the retailing mix.
Every October through December, Hickory Farms opens a temporary
store in many malls to sell products during the Christmas season
without the long-term commitment of a more expensive retail lease.
This is an example of a pop-up shop.TrueFalse
ANSWER:True
When discussing customer-oriented service industries, you will
often hear channel members discussing the need to minimize wait
times.TrueFalse
ANSWER:True
Color can be used by retailers to create a mood or focus
customer attention on a particular product.TrueFalse
ANSWER:True
Dillards, Target, and Walmart use data mining to determine which
products to stock at what price, how to manage
markdowns, and how to advertise to draw target customers.
TrueFalse
ANSWER:True
Mcommerce is a type of managed commerce in which both buyer and
seller end the transaction with a winwin
feeling.
TrueFalse
ANSWER:False
RATIONALE:M-commerce, or mobile e-commerce, enables consumers
using wireless mobile devices to connect to the Internet and
shop.
Ais a set of interdependent organizations that eases the
transfer of ownership as products move from producer to business
user or consumer.facilitating agency or place membermarketing mix
intermediaryselective distribution channelmarketing channel or
channel of distributiontransportation channel or channel of
movement
ANSWER:d
RATIONALE:This is the definition of a marketing channel, also
called the channel of distribution.
Kayak.com is a company that allows customers to efficiently
search databases to find the best airline and hotel deals all over
the Web. Kayak does not make bookings but rather provides
recommendations for the best travel plans. Travel providers pay
Kayak a commission when customers click through to their sites.
Kayak.com, travelers, the airlines, and the hotels are all part of
a:facilitating agencymarketing mix intermediaryselective promotion
channelmarketing channel or channel of distributiontransportation
channel or channel of movement
ANSWER:d
RATIONALE:A marketing channel is a business structure of
interdependent organizations that reaches from the point of product
origin to the consumer.
Jones Soda is positioned as the anti-Coke. In the early years,
few mainstream retailers sold Jones Soda. Fans had to get their
Jones fix in surf shops, tattoo parlors, and bookstores, adding to
the brands mystique. Jones Soda used itsto create a competitive
advantage.channel ascendancydistribution channelchannel
conflictchannel focusvertical integration
ANSWER:b
RATIONALE:Its unusual retail venues added to the brands
mystique.
Marketing channels make distribution simpler by reducing the
number of transactions required to get products from manufacturers
to consumers. This is called:forward integrationcontact
efficiencyelimination of temporal
discrepanciessortingreciprocity
ANSWER:b
RATIONALE:Marketing channels provide contact efficiencies by
reducing the number of stores customers must shop in to complete
their purchases.
The major characteristic that is used to differentiate among
types of intermediaries is whether they:install exchange barriers
such as location, time, and quantitycreate specialization of
laborcreate economies of scaletake title to the products they
sellraise profit margins for independent middlemen
ANSWER:d
RATIONALE:Taking title means they own the merchandise and
control the terms of the sale.
W.W. Grainger, Inc. is one of the worlds largest
businesstobusiness distributors of equipment, component parts, and
supplies in the United States and Canada. It has ownership title to
over 220,000 products, which are stocked in one national and nine
regional warehouses to guarantee product availability and quick
service to the many manufacturers who are its customers. W.W.
Grainger is an example of a(n):agent or brokermerchant
wholesalerretailerconsumer markethypermarket intermediary
ANSWER:b
RATIONALE:A merchant wholesaler is an institution that buys
goods from manufacturers and resells them to other wholesalers and
retailers. Merchant Wholesalers receive and take title to the
goods, own warehouses, and ship the products they sell.
are intermediaries who facilitate the sales of a product from
producer to end user by representing retailers, wholesalers, or
manufacturers and providing little input as to the terms of the
sale.Marketing facilitatorsChannel cooperativesAgents and
brokersMerchant wholesalersChannel functionaries
ANSWER:c
RATIONALE:Agents and brokers simply facilitate the sale of a
product from producer to end user.
considerations affecting the wholesaler choice include how often
a product is purchased and how long a customer is willing to wait
to receive the product.MarketTransactionalProductBuyerLogistic
ANSWER:d
RATIONALE:The question describes buyer considerations.
The three basic functions channel intermediaries perform
are:transactional, logistical, and facilitatingcontacting,
negotiating, and ownershippromoting, distributing, and
bulk-breakingassorting, accumulating, and allocatingfinancing,
mediating, and storing
Transactional channel functions include all of the following
activities EXCEPT:explaining product benefitsmaking buyers aware of
existing productsexplaining product features, advantages, and
benefitscontacting and communicating with prospective
buyersphysically distributing and sorting products
ANSWER:e
RATIONALE:Physically distributing and sorting products is not a
transactional channel function.
Which of the following are examples of facilitating functions
performed by wholesaling intermediaries?Sorting and storingRisk
taking and promotionAssorting, accumulating, grading, and
allocatingResearching and financingFinancial management and
storing
ANSWER:d
RATIONALE:The third basic channel function, facilitating,
includes research and financing.
Serenity is a manufacturer of outdoor fountains that are popular
in gardens. Even though fountains represent a product category that
does not sell yearround due to inclement weather, Serenitys sales
remain steady all year because it sells to wholesale distributors
that stock the product. Serenity sells to wholesale distributors
that perform
functions for the manufacturer.
financialtransactionalfacilitatinglogisticalpromotional
ANSWER:d
RATIONALE:Storing for later sale to retailers is a logistical
function.
The only way that Jim Keeler in New Mexico can get a box of
Carolyn Popwells Festive Holiday Truffles from
Washington is to order it through the mail. Popwell, who makes
the candy by hand, uses a(n)exclusively.
exclusive distribution systemconventional channelvertical
marketing systemreciprocal channeldirect channel
ANSWER:e
RATIONALE:The manufacturer sells directly to the consumer.
Vutek manufactures printing machines used to print
high-resolution graphics for billboards, bus cards, banners, and
posters. For distribution, you would expect Vutek to use a:network
of facilitating agentshorizontally integrated channelreciprocal
channeldirect channelvertical marketing system
ANSWER:d
RATIONALE:Direct channels are typical in business and industrial
markets.
Achannel is commonly used for low-cost consumer items that are
frequently purchased, such as candy, cigarettes, and
magazines.retaileragent/brokerindustrial
distributorproducerwholesaler
ANSWER:e
RATIONALE:Manufacturers sell their products to wholesalers in
large quantities; the wholesalers then break the large quantities
into smaller quantities to satisfy individual retailer orders.
Nontraditional channel arrangements:tend to make a firms product
seem the same as the competition.usually broaden a brands
coverage.can give a producer serving a niche market a way to gain
market access without having to establish channel
intermediaries.are not usually useful for larger firms.All of the
above are true.
ANSWER:c
RATIONALE:Nontraditional channel arrangements can give a
producer serving a niche market a way to gain market access without
having to establish channel intermediaries
Customers can purchase Hewlett-Packard computers from retail
stores like Best Buy and Office Depot, online directly from HP, and
through various catalogs. HP is using a(n)distribution
arrangement.intensivemultipleexclusivecumulativeaggregated
ANSWER:b
RATIONALE:Multiple distribution occurs when a producer selects
two or more different channels to distribute the same products to
target markets.
Selfridges is the second-largest department store in Great
Britain. It works with House of Frasier, one of its competitors, to
reduce operating costs by sharing channels of distribution to ship
goods from 1,500-plus suppliers. Selfridges and House of Frasier
are engaged in:vertical conflictan integrated supply chaina
strategic channel alliancean information-based distribution
channela distribution cooperative
ANSWER:c
RATIONALE:A strategic channel alliance is a cooperative
agreement between businesses to use each others alreadyestablished
distribution channels.
Which of the following statements concerning how market factors
affect channel decisions is true?Industrial customers tend to buy
in larger quantities and require more customer
service.Geographically concentrated target markets should be served
with an indirect sales force.Widely dispersed markets require fewer
intermediaries.New firms in extremely competitive markets will be
more successful if they use indirect channels.A very large market
requires fewer intermediaries.
ANSWER:a
RATIONALE:Industrial customers buying habits are very different
from those of consumers, and they tend
to buy in larger quantities and require more customer
service.
Canesta Company has developed a virtual keyboard out of light to
be used with cell phones and PDAs. The product beams an image of a
keyboard on a desk, allowing the user to type on the image. The
words are picked up by the users digital device. When introduced to
the market, the device will sell for less than $50. If, in choosing
its channel, Canesta is most concerned about its lack of financial,
managerial, and marketing resources to support the products
introduction, then its choice of channels will largely be
influenced by:factors of ownership.market factors.producer
factors.product factors.internal environmental characteristics.
ANSWER:c
RATIONALE:Financial, managerial, and marketing issues are
producer factors.
Chewing gum and soft drinks are sold in grocery stores, service
stations, convenience stores, drugstores, discount stores, and
motel vending machines. This is a an example of a(n)distribution
strategy.exclusivereciprocalselectivehorizontalintensive
ANSWER:e
RATIONALE:Intensive distribution is distribution aimed at
maximum market coverage. It is used for many convenience goods that
need to be available in every outlet where the potential customer
might want to buy them.
distribution is achieved by screening dealers to eliminate all
but a few in any single geographic area. Shopping goods and some
specialty products that consumers are willing to search for are
sold this way.IntensiveSelectiveExclusiveDualControlled
ANSWER:b
RATIONALE:This is a description of selective distribution.
Canesta Company has developed a virtual keyboard out of light to
be used with cell phones and PDAs. The product beams an image of a
keyboard on a desk, allowing the user to type on the image. The
words are picked up by the users digital device. When introduced to
the market, the device will sell for less than $50. What level of
distribution intensity should the company
use?ExclusiveControlledExtensiveReciprocalSelective
ANSWER:e
RATIONALE:Screening dealers will promote a quality image for the
product. Price is also a factor in its level of distribution
intensity. It is not a convenience good.
Which level of distribution intensity is the most restrictive
and entails establishing only one or a few dealers within a given
geographic area?SelectiveIntensiveExclusiveDualPremium
ANSWER:c
RATIONALE:This is the definition of exclusive distribution.
Caterpillar, the manufacturer of tractors and other earthmoving
equipment, has an extremely high market share, which means
customers seek the dealers out regardless of where they are. There
are approximately 50 Caterpillar dealers in the United Statesone in
each state. From this information, you can surmise that Caterpillar
uses distribution.selectivepremiumintensiveexclusiveinclusive
ANSWER:d
RATIONALE:Exclusive distribution, the most restrictive form of
distribution, entails establishing one or a few dealers within a
given geographic area. Because buyers need to be willing to search
or travel to acquire the product, this form of distribution is
limited to consumer specialty goods, a few shopping goods, and
major industrial equipment.
This summer, college student Pat is planning on selling kites at
Panama City Beach. He has found some suppliers and has preordered
all of the kites he thinks he can sell this summer. What type of a
distribution channel relationship does Pat have with his
suppliers?ArmslengthFunctionalCooperativeHierarchicalIntegrated
ANSWER:a
RATIONALE:The armslength relationship is considered to be
temporary.
With thechannel relationship, both parties retain their
independence and pursue their own interests while attempting to
benefit from the goods or services provided by the
other.armslengthfunctionalcooperativeco-opetitiveintegrated
ANSWER:a
RATIONALE:These types of relationships are often referred to as
armslength relationships due to the companys unwillingness or lack
of ability to develop a closer type of relationship.
One of the earliest, largest, and most famous examples of
vertical integration was the Carnegie Steel Company. The company
controlled not only the mills where the steel was manufactured but
also the mines where the iron ore was extracted, the coal mines
that supplied the coal, the ships that transported the iron ore,
and the railroads that transported the coal to the factory.
Carnegie Steel had a(n)channel
relationship.armslengthfunctionalcooperativeco-opetitiveintegrated
ANSWER:e
RATIONALE:Integrated relationships are tightly connected, with
linked processes across and between firm boundaries and high levels
of trust and commitment.
Which channel relationship is less ambiguous than an armslength
relationship but without the longerterm and/or
capital investment required to achieve full integration?
Co-opetitiveCooperativeFunctionalIntegratedSupplemental
ANSWER:b
RATIONALE:Cooperative relationships are between companies that
take the form of informal partnership with moderate levels of trust
and information sharing as needed to further each companys
goals.
The capacity of a particular marketing channel member to control
or influence the behavior of other channel members is known
as:channel power.channel conflict.channel control.channel
dominance.channel inversion.
ANSWER:a
RATIONALE:Channel power is a channel members ability to control
or influence the behavior of other channel members.
A situation that occurs when one marketing channel member
intentionally affects another members behavior is
called:
channel power.channel control.channel conflict.channel
dominance.channel inversion.
ANSWER:b
RATIONALE:Channel control is when one channel member actually
affects another.
DeBeers sells most of the diamonds it produces to industry. The
company controls over 90 percent of the market and has great power
over its distributors. In its marketing channel, DeBeers would be
considered a:channel authority.channel member.channel
captain.channel gatekeeper.power broker.
ANSWER:c
RATIONALE:The channel captain is a member of a marketing channel
that exercises authority and power over the activities of other
channel members. DeBeers has control over delivery, inventory, and
so on.
Channel conflict:always has an adverse effect on the members of
the channelis not caused by ideological differences, because such
differences would prevent the members from ever operating as a
channelis often caused by an inability of some channel members to
keep up with the changing timescan appear as either internal or
externaldoes not occur when multiple distribution channels are
used
ANSWER:c
RATIONALE:In a broad context, channel conflict can be good for a
channel. It is sometimes caused by ideological differences. It
appears as vertical or horizontal.
Honda uses just-in-time manufacturing to build its Odyssey
minivans. Five companies that make component parts for the Honda
Odyssey relocated to Alabama and states bordering Alabama when
Honda announced plans to build a new Odyssey manufacturing plant in
Alabama. This relocation in order to provide efficient delivery of
goods indicates that Honda is a:channel captainhorizontal
integratordistribution championdistribution ombudsmandemand
maverick
ANSWER:a
RATIONALE:A channel captain exercises authority and power over
the other channel members.
Horizontal channel conflict occurs most often when manufacturers
practice:dual or multiple distributiontrade loadingpromotional
pricingdirect distributionchannel distribution
ANSWER:a
RATIONALE:Horizontal conflict occurs when more than one channel
is used to handle the same brand.
Channel conflict that occurs between different levels in a
marketing channel is referred to as:horizontal conflictprimary
conflictvertical conflictsecondary conflictparallel conflict
ANSWER:c
RATIONALE:This describes vertical conflict, which typically
occurs between the manufacturer and wholesaler or between the
manufacturer and retailer.
is the joint effort of all channel members to create a channel
that serves customers and creates a competitive advantage.Selective
partneringDirect distributionChannel partneringIntensive
integrationClosed channel distribution
ANSWER:c
RATIONALE:This is the definition of channel partnering, which is
also called channel cooperation.
You are responsible for physical distribution of your companys
service and should focus on:ensuring the intangibility of the
service so that physical distribution becomes a less important
factor.minimizing wait times, managing service capacity, improving
service delivery, and establishing channel-wide network
coherence.making sure production and consumption are
simultaneous.setting quality standards, choosing faster
transportation modes, and using safety stock.customer-oriented
order processing and inventory control.
ANSWER:b
RATIONALE:Service industries are customer oriented and must
manage intangible services by minimizing wait times, managing
service capacity, improving service delivery, and establishing
channel-wide network coherence.
Paul operates Kayak.com, a company that allows customers to
efficiently search company databases and find the best airline and
hotel deals all over the Web. Kayak does not make bookings but
rather provides recommendations for the best travel plans. Travel
providers pay Kayak a commission for most customers who click
through to their sites. Paul wants his users to have as short and
sweet an experience on Kayak as possible. Time is of the essence in
responding to any customer question, especially in this day where
airfare can increase dramatically in just a couple of hours. Paul
is devoted to:improving service delivery.maximizing queues.reducing
discrepancies of assortment.reducing wait time.managing service
capacity.
ANSWER:a
RATIONALE:The Internet is an alternative channel for delivering
these deals. Kayak is a service organization.
is defined as all activities directly related to the sale of
goods and services to the ultimate consumer for personal,
nonbusiness use or
consumption.WholesalingRetailingBusinessFranchisingDistribution
ANSWER:b
RATIONALE:This is the definition of retailing.
A Target store is an example of a(n):merchant
wholesalerretailerbrokeragentexporter
ANSWER:b
RATIONALE:Retailers are firms that sell mainly to consumers.
Which of the following intermediaries sell mainly to
consumers?RetailersMerchant wholesalersAgentsBrokersSpecialists
ANSWER:a
RATIONALE:Retailers are firms that sell mainly to consumers.
Retail establishments are generally classified according to all
of the following EXCEPT:ownershiplevel of saleslevel of
servicepriceproduct assortment
ANSWER:b
RATIONALE:The four elements used to classify retail
establishments are its ownership, level of service, product
assortment, and price.
Around the world, most retailers are, operating one or a few
stores in their community, owned by a single person or partnership
and not operated as part of a larger retail
institution.independentchain storesfranchise outletsspecialty
clubsproduct assortment stores
ANSWER:a
RATIONALE:Independent retail outlets are owned by a single
person or partnership and not operated as part of a larger retail
institution.
Jims Bike Shop sells bicycles for the serious racer to the
casual cyclist. Jims also sells biking gear and clothing.
Jim is the sole owner of the store, so in terms of ownership,
his store would be classified as a(n):
independent retailer.freestanding store.franchise.chain
store.common retailer.
ANSWER:a
RATIONALE:Independent retailer stores are owned by a single
person or partnership and not operated as part of a larger retail
institution.
Which type of retail ownership is owned and operated by an
individual but is licensed by a larger supporting
organization?Independent retailerChain
storeFranchiseCooperativeSecondary retailer
ANSWER:c
RATIONALE:This describes a franchise.
The number of different varieties of fishing lures carried by
the Anglers Store refers to the stores:supply standard.complete
retail offering.retail mix.volume.assortment depth.
ANSWER:e
RATIONALE:Breadth and depth refers to product assortment.
shows how much the retailer makes as a percentage of sales after
the cost of goods sold is subtracted.Net incomeRetained
earningsProfitabilityNet equityGross margin
ANSWER:e
RATIONALE:This is the definition of gross margin.
Housing several departments under one roof, acarries a wide
variety of shopping and specialty goods, including apparel,
cosmetics, housewares, electronics, and sometimes
furniture.supermarketspecialty storeconvenience storesuper
clubdepartment store
ANSWER:e
RATIONALE:Department stores house several departments under one
roof.
Each department in a department store is usually treated as a
differentcenter and central management sets broad policies about
the types of merchandise carried and
prices.franchisefinancialcomptrollerhuman resourcesbuying
ANSWER:e
RATIONALE:Each department in a department store is treated as a
separate buying center
Which type of retail store specializes in a given type of
merchandise?An independent storeA department storeA discount storeA
specialty storeA first-level store
ANSWER:d
RATIONALE:This is the definition of a specialty store.
James wants to open a small store that caters to the model
railroad hobbyist. The store would sell model trains, scenery,
accessories, and books on the subject of model railroading. Which
of the following types of stores would most likely support an
effective launch of his business idea?An off-price retailerA
specialty storeA full-discount storeA general storeA warehouse
club
ANSWER:b
RATIONALE:Specialty stores specialize in a given type of
merchandise.
Which of the following statements about specialty stores is
true?Specialty stores find it easy to compete on price with big-box
stores.Customers at specialty stores are not concerned with the
distinctiveness of the merchandise or the stores
physical appearance.
Customers of specialty stores usually consider price to be
secondary.Specialty stores are ineffective test markets.A typical
specialty store carries a wider assortment of specialty merchandise
than department stores.
ANSWER:c
RATIONALE:Customers usually consider price to be of secondary
importance in their selection of a specialty store. Customers at
specialty stores are very concerned with the distinctiveness of the
merchandise or the stores physical appearance. Specialty stores
provide a lowrisk testing ground for new products. A typical
specialty store carries a narrower assortment of specialty
merchandise than department stores.
Fairway is a chain of retail outlets in Iowa, Minnesota,
Nebraska, and Illinois that are described as large,
departmentalized, self-service stores that specialize in food and
limited nonfood items. Fairway stores are:off-price
retailersdiscount storeswholesale clubsconvenience
storessupermarkets
ANSWER:e
RATIONALE:The key factors are the emphasis on food and the size
of the stores.
Kroger is the second-largest supermarket chain in the United
States. Which of the following is the most likely reason why Kroger
supermarkets sell all types of foodstuffs as well as nonfood
products including a wide range of eyewear and accessories?Consumer
demand for one-stop shopping often leads to scrambled
merchandising.The fulfillment of the wheel of retailing
hypothesisInflationary economic climateRepositioning as a
discounterGrowth of convenience merchandising
ANSWER:a
RATIONALE:In many cases, supermarkets offer a wide variety of
nontraditional goods and services under one roof (a strategy called
scrambled merchandising) to respond to consumers who want
convenience.
carry a limited line of high-turnover, high-priced goods and
resemble miniature supermarkets. These self- service stores are
typically located near residential areas and are open long hours,
seven days a week.Specialty storesWholesale storesConvenience
storesFactory outletsGeneral stores
ANSWER:c
RATIONALE:This describes convenience stores.
Prices are usually higher in convenience stores than in
supermarkets because convenience stores offer:more specialty goodsa
wider variety of productsa higher level of customer servicesbetter
location, longer hours, and faster servicehigher-quality goods
ANSWER:d
RATIONALE:Convenience stores carry a limited amount of
high-turnover, high-priced goods and resemble miniature
supermarkets. Customers patronize these stores because of
convenience.
are retailers that compete on the basis of low prices, high
turnover, and high volume.Convenience outletsDiscount storesGeneral
storesDepartment storesSpecialty stores
ANSWER:b
RATIONALE:This is the definition of discount stores. Convenience
stores are miniature supermarkets, carrying only a limited line of
high-turnover convenience goods.
is the retailing strategy of offering consumers very limited
service and carrying a broad assortment of well-
known, nationally branded hard goods.
Specialty store positioningMerchandise positioningM-store
retailingThe wheel of retailingFull-line discounting
ANSWER:e
RATIONALE:This describes full-line discounters.
A retail operation that has a 90,000-square-foot facility and
houses a florist, baker, bank, craft shop, photo finisher, dry
cleaner, and pharmacy under the same roof as grocery and household
items would be called a:membership warehouse club.wholesale
outlet.factory outlet.supercenter.mass merchandiser.
ANSWER:d
RATIONALE:Supercenters offer an array of products and services,
as well as groceries.
Toys R Us sells a huge assortment of toys and childrens books at
greatly reduced prices. It offers customers few services and
competes on the basis of moderate to low prices on the large
quantities of merchandise it stocks. Toys R Us is an example of
a:full-line discount store.specialty discount store.general
store.department store.wholesale store.
ANSWER:b
RATIONALE:A specialty discount store (also called a category
killer) offers a nearly complete selection of single-line
merchandise and uses self-service, discount prices, high volume,
and high turnover to its advantage.
sell a limited selection of brand name appliances, household
items, and groceries, usually in bulk on a cash- and-carry basis to
members only.Super outletsFactory outletsWholesale
discountersOff-price discount retailersWarehouse membership
clubs
ANSWER:e
RATIONALE:This describes warehouse membership clubs.
Off-price retailers:usually dont ask for return privilegesvery
often offer a consistent assortment of merchandise.seldom stock
brand name merchandise.are owned by the manufacturer of the
products they sell.offer very deep assortments.
ANSWER:a
RATIONALE:Offprice retailers usually dont ask for return
privileges.
Ais an off-price retailer that is owned and operated by a
manufacturer and carries one line of
merchandiseits own.
mass merchandiserfactory outletwholesale clubdiscount
storebargain basement store
ANSWER:b
RATIONALE:This describes a factory outlet.
refers to shopping without visiting a store and is currently
growing faster than in-store shopping because of the consumer
demand for convenience.Non-store
retailingCustomerizationHypershoppingNiche marketingSpecialty
merchandising
ANSWER:a
RATIONALE:Non-store retailing is selling to consumers through
other means than by visiting a store.
is the most pervasive retail business in the United States.
Consumers get products out of automated machines, and it accounts
for billions of dollars worth of goods each year in the United
States.Automatic vendingParty-plan sellingDirect marketingA pyramid
schemeProfessional selling
ANSWER:a
RATIONALE:Automatic vending is the use of machines to offer
goods for sale.
Southwestern Company recruits and trains college students to
sell educational reference books, software, and children's books
door-to-door. This form of non-store retailing is called:direct
retailingpersonal marketingdirect marketingautomatic
vendingelectronic retailing
ANSWER:a
RATIONALE:Direct retailing is the selling of products by
representatives who work door-to-door, office-to- office, or at
home sales parties.
refers to the techniques used to get consumers to buy from their
home. Those techniques include direct mail, catalogs and
mail-order, telemarketing, and electronic retailing.Nonstore
vendingIn-home retailingFranchisingDirect marketingDirect
retailing
ANSWER:d
RATIONALE:Direct marketing includes techniques, such as catalogs
and telemarketing, to get consumers to make a purchase from their
home, office, or other nonretail setting.
Marketers can precisely target their customers according to
demographics, geographics, and psychographics with:direct
mail.vending machines.franchise stores.specialty retail
outlets.electronic selling.
ANSWER:a
RATIONALE:With direct mail, marketers can precisely target their
customers according to demographics, geographics, and even
psychographics.
Telemarketing can consist of either unsolicitedsales calls,
orsales calls, which allow companies to receive orders through
toll-free telephone numbers.order placement; lead generationpush
strategy; pull strategysystematic; synergisticqualifying;
finalizingoutbound; inbound
ANSWER:e
RATIONALE:Outbound telemarketing is generally used for
unsolicited selling, while inbound calls are from customers placing
orders.
is a type of shopping available to consumers with access to the
Internet.Shop-at-home networksOnline retailingFranchisingElectronic
wholesalingMobile vending
ANSWER:b
RATIONALE:Online retailing, also called e-tailing, is a type of
shopping available to consumers with access to the Internet.
The Cedar Store carries a full line of cedar swings, gliders,
garden benches, and tables. All of its products can be purchased
through its Web site. The site has done well since the Cedar Stores
products do not need to be touched or smelled before purchase. The
Cedar Store is engaging in:online retailing.shop-at-home
networking.mobile vending.franchising.electronic wholesaling.
ANSWER:a
RATIONALE:Online retailing is a two-way interactive service
offered to users with personal computers.
A(n)is a continuing relationship in which an individual or
business grants business rights to operate or sell a product to
another individual or business.leasing contractalliance for
profitbrokered partnershipfranchisecountertrade
ANSWER:d
RATIONALE:A franchise is a continuing relationship in which a
franchiser grants to a franchisee the business rights to operate or
sell a product.
The party in a franchise relationship that is an individual or
business granted the right to sell another partys product
is called the:
franchisorfranchiseereceiverrenterowner/operator
ANSWER:b
RATIONALE:The franchisee sells the franchisors products.
Chattanooga Bottling Company is licensed to bottle Coke
products. The Chattanooga Bottling Company is an example of
a:product and trade name franchisee.redistributor
franchisor.business format franchisee.licensed
franchisor.relationship franchisee.
ANSWER:a
RATIONALE:In product and trade name franchising, a dealer agrees
to sell certain products provided by a manufacturer or
wholesaler.
Dominos pizza, Hyatt Corporation, and Wendys are all examples
ofbecause the franchisee buys the right to use the franchisors
approach to doing business.product and trade name
franchisorsredistributor franchisorsbusiness format
franchisorslicensed franchisorsrelationship franchisors
ANSWER:c
RATIONALE:Business format franchising is an ongoing relationship
between a franchisor and a franchisee in which the franchisor sells
a franchisee the rights to use a format or approach to doing
business.
The first task of developing a retail strategy is to:create a
buying organization.decide what to buy.define the target
market.create a promotional strategy.define the pricing
policies.
ANSWER:c
RATIONALE:The target markets wants and needs form the foundation
for a successful retail strategy.
Retailers such as Dillards and Sears are responding to consumer
needs by changing product mixes, hours of
operation, locations, and prices. These stores are changing
aspects of their:
merchandising groupings.retailing mixes.product offerings.retail
trade areas.store positioning strategies.
ANSWER:b
RATIONALE:Retailers are altering several aspects of the six Ps
of the retailing mix. See Exhibit 6.
Which of the following statements about a retailers promotion
strategy is true?The design of the promotion strategy would be done
separately from the creation of the retailing mix.The goal of a
retail stores promotion mix is to position the store in consumers
minds.Most advertising for retailers is carried out at the national
level.Retailers find direct mail marketing inefficient.Retail
promotion strategy does not include public relations
activities.
ANSWER:b
RATIONALE:Promotion is part of the retailing mix and includes
advertising, public relations and publicity, and sales promotions.
Most advertising for retailers is carried out at the local level.
Retailers have been very successful with direct marketing.
When opening a new retail operation, the retailer needs to
consider all of the following factors EXCEPT:traffic flow.employee
density.geographic region.growth potential.zoning regulations.
ANSWER:b
RATIONALE:Employee density is concerned with the amount of
employees per 1,000 square feet in the storenot in the
neighborhood. The other four factors are to be considered when
deciding on a location.
Large retailers such as Target and Walmart and sellers of
shopping goods such as automobiles and furniture often usefor their
locations.remote, rural locationsoffice complexesfactory
outletsfreestanding storesregional malls
ANSWER:d
RATIONALE:Freestanding stores are often used by large
retailers.
Maggie Moos has decided that consumers will drive out of their
way for the stores yummy ice cream offerings. The owner needs to
keep his overhead costs (such as rent) low and wants to avoid
locating near competitors. For a location, Maggie Moos should open
in a:factory outlet.strip center.freestanding store.shopping
center.regional mall.
ANSWER:c
RATIONALE:A freestanding store has the advantage of low site
costs and will be a benefit if consumers are willing to seek it
out.
Another name for an anchor store is a:mass
merchandiser.generator store.host store.shopping center
pillar.destination store.
ANSWER:b
RATIONALE:Anchor stores or generator stores are usually located
at opposite ends of the mall to create heavy foot traffic.
The newest generation of shopping centers is the:regional
mall.shopping business district.lifestyle center.franchised
center.strip mall.
ANSWER:c
RATIONALE:Lifestyle centers are open-air shopping centers
targeted to upper-income shoppers with an
aversion to the mall.
The Halloween Super Store is only open from September until
November, usually in an otherwise vacant store. This is an example
of a:temp store.m-commerce.convenience retailing.pop-up shop.flash
sale site.
ANSWER:d
RATIONALE:Pop-up shops are temporary shops that allow a flexible
location without a long-term commitment.
All of the following are factors in creating a stores atmosphere
EXCEPT:employee type and density.fixture type and
density.sound.price.odors.
ANSWER:d
RATIONALE:Influential factors in creating a stores atmosphere
include employee type and density,
merchandise type and density, fixture type and density, sound,
odors, and visual factors.
Theof retail stores is a key factor in their success; the goal
is to use all space in the store effectively, including aisles,
displays, and even nonselling areas.merchandise densitylayouttarget
strategymerchandise mixpromotional strategy
ANSWER:b
RATIONALE:The layout of retail stores is described here.
A common practice among most retailers that seeks to broaden
customers original purchases with related items is
called:
suggestion selling.trading up.bait and switch.comprehensive
selling.interactive selling.
ANSWER:a
RATIONALE:Suggestion selling is common in helping customers
recognize true needs.
When Irvin went into Lowes to buy his wife a small tool set she
said she wanted, the sales clerk suggested a larger set with a tool
kit on wheels that included a router and circular saw. In this
example, the sales clerk engaged in:trading up.suggestion
selling.bait and switch.customer relationship
retailing.service-disguised selling.
ANSWER:a
RATIONALE:Trading up means persuading customers to buy a
higher-priced item than the one they intended to buy.
Whenever a customer opens an account at First Southern National
Bank, a teller or account representative asks the customer whether
he or she needs a CD, online banking, or other services. In other
words, the account representative engages in:interactive
selling.bait and switch.trading up.customer relationship
retailing.suggestion selling.
ANSWER:e
RATIONALE:Suggestion selling seeks to broaden customers original
purchase with related items.
One of the new developments in retailing is mcommerce. The m in
mcommerce stands for:motivatedmultimediamarketingmanagedmobile
ANSWER:e
RATIONALE:Mcommerce, or mobile ecommerce enables consumers using
wireless mobile devices
to connect to the Internet and shop.
uses complex mathematical models to help retailers make better
product mix decisions.Inbound telemarketingData
miningBlogsSpammingOnline auctions
ANSWER:b
RATIONALE:This is the definition of data mining.
Redbox
Movie DVD sales represent a $16 billion market, and rentals make
up another $7.5 billion. Naturally, production studios would prefer
consumers purchase DVDs rather than rent them. Production studios
like Twentieth-Century Fox, Warner Bros., and General Electric
refused to sell new releases to Redbox, a DVD vending machine
company, until almost a month after new releases arrived in stores.
Redbox, the ubiquitous DVD rental red kiosks found in and outside
of convenience stores, grocery stores, drugstores, fast-food
restaurants, and Walmart, is cutting in on production companies
profits. These studios are tangled in lawsuits with Redbox. Sony,
Paramount, and Lionsgate, on the other hand, permit distribution
through Redbox, and Disney allows third-party distribution to
Redbox. With more than 20,000 kiosks now in operation, Redbox ranks
fifth in DVD rental revenues, which is impressive considering the
rental fee is only $1.00. But Blockbuster is trying to steal
vending market share by allowing NCR Corporation, known for ATM
machines, to license its name to place Blockbuster Express kiosks
in similar types of locations.
Refer to Redbox. Warner Bros., Blockbuster, Redbox, Walmart, and
third-party DVD distributors are part of a:distribution
cooperativemarketing mixtransportation channelmarketing
channellogistics system
ANSWER:d
RATIONALE:A marketing channel is a set of interdependent
organizations that facilitate the transfer of ownership as products
move from producer to business user or consumer.
Refer to Redbox. Redbox offers DVDs from several production
studios, such as Disney, Sony, and Paramount. Consumers can rent
from Redbox instead of obtaining the DVD from the various
production studios if they want a childrens movie from Disney and
an action movie from Paramount. Thus, one kiosk providesfor both
consumers and the production studios.contact
efficiencyintegrationsynergydistribution efficiencydistribution
intensity
ANSWER:a
RATIONALE:Marketing channels provide contact efficiencies by
reducing the number of stores customers must shop in to complete
their purchases.
Refer to Redbox. Video stores that distribute DVDs usually also
sell popcorn, candy, soft drinks, and entertainment publications.
Basically, they overcome discrepancies of quantity and assortment
by combining products into collections or assortment that consumers
want available in one place. Which channel function does this
describe?Logistical functionsTransactional functionsFacilitating
functionsPurchasing functionsSecondary functions
ANSWER:a
RATIONALE:Logistical functions include physically distributing,
storing, and sorting. Sorting overcomes discrepancies of quantity
and assortment.
Refer to Redbox. Production studios distribute DVDs in grocery
stores, drugstores, discount stores, entertainment stores, and
vending machines like Redbox. Which level of distribution intensity
does this represent?IntensiveExtensiveProduct focusedMarket
focusedExclusive
ANSWER:a
RATIONALE:Intensive distribution is aimed at maximum market
coverage.
Refer to Redbox. Production studios are potentially
producingamong its existing distributors by allowing Redbox to rent
their DVDs for $1.00.vertical conflictcognitive dissonancesupply
management divergencehorizontal conflictdisintermediation
ANSWER:d
RATIONALE:Horizontal conflict occurs among channel members on
the same level.
Walmart
Walmart, the worlds largest retailer by revenue, announced that
it will get back to its founders roots by initiating more price
cuts. Critics claimed that the giant was getting away from its
original focus because it posted relatively high gross profit
margins. CEO Mike Duke assuaged critics by saying Walmarts $400
billion in sales will become even larger because the price cuts
will attract more customers and it will lower its costs of goods
sold.
Refer to Walmart. In terms of ownership, Walmart would be
classified as a(n):independent retailer.chain
store.franchise.discount store.department store.
ANSWER:b
RATIONALE:Chain stores are owned and operated as a group by a
single organization. While Walmart is a discount store, in terms of
ownership, it is a chain store.
Refer to Walmart. Walmarts gross margin is the:total sales from
all of its stores worldwide.amount of money it makes as a
percentage of sales after the cost of goods sold is
subtracted.amount of money it makes as a percentage of sales before
taxes.amount of money it makes as a percentage of sales after all
costs are subtracted.net profit it earns after all expenses and
taxes are subtracted.
ANSWER:b
RATIONALE:Gross margin is the money the retailer makes as a
percentage of sales after the costs of goods sold is
subtracted.
Refer to Walmart. Which type of pricing strategy describes
Walmarts commitment to offer consistently lower
prices?
Highlow pricingEveryday low pricingextreme value pricingPrestige
pricingMarginal pricing
ANSWER:b
RATIONALE:Everyday low pricing offers consumers a low price all
the time rather than holding periodic sales on merchandise.
Refer to Walmart. Many Walmart stores have a full line of
groceries and general merchandise with a wide range of services,
such as a pharmacy, portrait studio, optical shop, and bank.
Walmart is an example of which type of discount
store?HypermarketSupermarketExtreme-value
retailerSupercenterCategory killer
ANSWER:d
RATIONALE:Supercenters combine a full line of groceries and
general merchandise with a wide range of
servicesall in one location. Walmart operates over 7,200
supercenters worldwide.
Refer to Walmart. Most Walmart stores are not located in
shopping centers but rather are buildings all by themselves. This
type of location is referred to as a:primary outlet.freestanding
store.pop-up store.single-unit retailer.strip store.
ANSWER:b
RATIONALE:An isolated, freestanding location can be used by
large retailers like Walmart.
Diaz
John Diaz immigrated to Tallahassee from Cuba in the 1980s. He
set up a coffee shop called Diaz in a small upper- middle-class
neighborhood. It rapidly became popular because of the wonderful
coffee it brewed. Soon Diaz was selling the finest coffees from
around the world, plus coffee-making necessities such as grinders
and brewers.
Within ten years, Diaz was operating a lucrative mail-order
business in addition to his coffee shop. Upon entering the shop,
the first thing the customer sees is a countertop crowded with all
of the machinery needed for making a perfect cup of coffee.
Marble-topped tables are set in cozy nooks with overstuffed chairs.
Bookshelves on one wall hold books about coffee for patrons to read
while they sip. The smell is intoxicating to a real coffee lover.
Coffee drinkers can take home a pound when they leave. The store
carries all types of coffee from $8 per pound Brazilian Cerrado to
$300 per pound Kopi Luwak from Sumatra.
Refer to Diaz. In terms of ownership, Diazs coffee shop would be
classified as a(n):franchise.wholesaler.independent
retailer.agency.chain store.
ANSWER:c
RATIONALE:It is owned by a single person.
Refer to Diaz. The type of merchandise carried by Diaz is deep
but with a narrow assortment. The store would most likely be
classified as a:convenience store.mass merchandiser.specialty
store.category killer.membership club.
ANSWER:c
RATIONALE:A specialty store specializes in a given type of
merchandise with a deep but narrow assortment.
Refer to Diaz. Customers of Diazs coffee shop can purchase
coffee, coffee makers, mugs, chocolate, music CDs,
and all sorts of unique gift items. Diaz is practicing:
m-commerce.interactive merchandising.lifestyle
merchandising.scrambled merchandising.pop-up shopping.
ANSWER:d
RATIONALE:Scrambled merchandising is the tendency to offer a
wide variety of nontraditional goods and services under one
roof.
Refer to Diaz. If Diaz wanted to grow his business and granted
another owner the rights to use his format and approach to doing
business, he would be involved in:trading up.m-commerce.direct
marketing.product and trade name franchising.business format
franchising.
ANSWER:e
RATIONALE:Business format franchising is a business relationship
in which the franchisor (Diaz) sells a franchisee the rights to use
the franchisors format or approach to doing business.
Refer to Diaz. The smell of fresh coffee, the fact it is made
where drinkers can watch the process, and the
comfortable chairs all are used to create the stores:
atmosphere.cultural impact.target strategy.merchandise
mix.promotional strategy.
ANSWER:a
RATIONALE:The main element of a stores presentation is its
atmospherehow the stores physical
layout, decor, and surroundings convey an overall
impression.
Apple Stores
Apple, Inc. opened its first Apple Store in 2001 and currently
has hundreds of stores spanning several countries. Many of the
Apple Stores are inside malls, but Apple also has several
freestanding stores, which they call their flagship stores, with
each looking a little different on the outside. These are located
in New York City, Boston, Los Angeles, Chicago, San Francisco,
Montreal, Tokyo, and Osaka.
The store in New York City is a glass cube with a glass
cylindrical elevator and spiral staircase that leads to an
underground store. Inside, they have long tables displaying
products ranging from the iMac, MacBook Air, iPods, printers,
cameras, and other accessories. All these products are accessible
to customers who can try them out and ask various questions of
informed associates. The walls are mostly metallic, and the signs
are all backlit.
All stores have a Genius Bar where customers can receive
technical advice or set up service and repair for their products.
To address the needs of the many iPod users, some stores, such as
the New York store, have set up a separate iPod Bar where customers
can get their own technical assistance. They also have an iMac
station for kids who want to try out games and learning products
and a theater for workshops, product training sessions, and special
presentations.
Apple introduced the handheld Easy Pay system where customers
dont have to wait in line to purchase products. With a simple click
of a paperless, handheld credit card scanner, the employee brings
the cash register to the customer. Items can be rung up anywhere on
the show room floor. Apple plans to open several more stores in the
years to come.
Apple also has its online store. At its Web site, a customer can
order any Mac or iPod product, plus a large variety of accessories.
In addition to its product offerings, a customer can watch a
demonstration of how products work or check out the latest Mac ads
or news.
Refer to Apple Stores. In terms of ownership, which of the
following best describes Apple stores?Independent retailerChain
storesFranchisesPop-up shopsDepartment stores
ANSWER:b
RATIONALE:Chain stores are owned and operated as a group by a
single organization.
Refer to Apple Stores. Of the major types of retail operations,
Apple stores are:department stores.specialty
stores.Superstores.convenience stores.discount stores.
ANSWER:b
RATIONALE:A specialty store specializes in a deeper but narrower
assortment of merchandise. The
Apple Stores specialty product is electronics.
Refer to Apple Stores. What method of non-store retailing does
Apple take advantage of through the use of its Web
site?TelemarketingAutomatic vendingDirect mailCatalogs and mail
ordersOnline retailing
ANSWER:e
RATIONALE:Online retailing is a type of shopping available to
consumers with personal computers and access to the Internet.
Refer to Apple Stores. Some shoppers purposely plan to visit the
Apple store on Fifth Avenue in New York City, which is
characteristic of:generator stores.lifestyle stores.interactive
stores.m-stores.destination stores.
ANSWER:e
RATIONALE:Destination stores are ones that consumers purposely
plan to visit.
Refer to Apple Stores. Apple has the Genius Bar, the backlit
signs, the Apple products themselves, the modern
metallic walls and spiral staircases in its stores. These are
all work together to convey the stores:
impression.environment.atmosphere.surroundings.elements.
ANSWER:c
RATIONALE:Atmosphere is the overall impression given by a stores
physical layout, decor, and
surroundings.
What is a marketing channel? What type of businesses make up a
marketing channel?
ANSWER:A marketing channel, or channel of distribution, is a
business structure of interdependent organizations that eases the
transfer of ownership as products move from producer to business
user or consumer. It encompasses the processes involved in getting
the right product to the right place at the right time. Marketing
channels represent place in the marketing mix. Channel members
include wholesalers, distributors, agents and brokers, and
retailers.
One important reason channel members are included between
producers and users is the concept of specialization and division
of labor. Define these concepts and explain their roles in channels
of distribution.
ANSWER:Specialization and division of labor break down a complex
task into smaller, simpler ones and allocate them to specialists,
which results in much greater efficiency.
Marketing channels achieve economies of scale through
specialization and division of labor. Some producers do not have
the interest, financing, or expertise to market directly to end
users or consumers. These producers use channel members to perform
functions and activities that the producers are not equipped to
perform or that these intermediaries are better prepared to
perform. Channel members can perform some functions and activities
more efficiently than producers, and they enhance the overall
performance of the channel because of their specialized
expertise.
One important reason channel members are included between
producers and users is to increase contact efficiency. How do
channel members increase contact efficiency? Use the following two
scenarios to illustrate your answer: (1) Assume that there are
2,000 business students who need to buy textbooks from eight
textbook publishers. How many transactions must take place? (2)
Assume the first scenario, but now one campus bookstore is acting
as an intermediary. Now how many transactions must take place?
ANSWER:Channels make distribution simpler and more efficient by
reducing the number of transactions required to get products from
manufacturers to consumers. In the provided example, the first
scenario requires 16,000 transactions (2,000 students 8
publishers). In the second scenario, only 2,008 transactions are
necessary (1 bookstore 8 publishers + 2,000 students 1 bookstore).
Clearly, a significant reduction in transactions takes place if
intermediaries are added to the system.
Intermediaries must perform three basic functions. Name these
functions and describe the activities involved in each
function.
ANSWER:TRANSACTIONAL FUNCTIONS include contacting and promoting
(contacting potential customers, promoting products, soliciting
orders), negotiating (determining how many goods or services to buy
and sell, transportation types, delivery times, and payment method
and timing), and risk taking (assuming the risk of owning
inventory). LOGISTICAL FUNCTIONS include physical distribution
(transporting and storing goods to overcome temporal and spatial
discrepancies), storing (maintaining inventories and protecting
goods), and sorting (overcoming discrepancies of quantity and
assortment by sorting out, accumulating, allocating, and
assorting).
FACILITATING FUNCTIONS include researching (gathering
information about other channel members and consumers) and
financing (extending credit and other financial services to
facilitate the flow of goods through the channel to the final
consumer).
What are the three factors affecting channel choice? Briefly
discuss how each factor might influence a company to implement a
direct channel of distribution.
ANSWER:MARKET FACTORS. Industrial customers tend to buy in
larger quantities and require more customer service. Conversely,
consumers usually buy in very small quantities and sometimes do not
mind if they get no service at all. Geographic location and size
also determine channel choice. A geographically concentrated market
is appropriate for direct selling through a direct sales force.
Markets that are more widely dispersed may need more
intermediaries. Generally, a very large market requires more
intermediaries. Also, if there is lots of existing competition,
choosing a direct channel may be less difficult and more
profitable.
PRODUCT FACTORS. Products that are more complex, customized, and
expensive tend to benefit from shorter and more direct marketing
channels. Product life cycle also plays a role. In fact, the choice
of channels may change over the life of the product. As products
become more common and less intimidating to potential users,
producers tend to look for alternative channels. Finally, fragile
and perishable products require a shorter channel that involves
less handling.
PRODUCER FACTORS. Producers with large financial, managerial,
and marketing resources are better able to use channels that
require fewer intermediaries. More direct channels may also be used
by producers who wish to control pricing, positioning, brand image,
and customer support.
A retail clothing store in a small northwest Georgia community
is the sole distributor of Spanx brand hosiery in the region. How
does this form of market coverage benefit the retailer? How does it
benefit the manufacturer?
ANSWER:Exclusive distribution entails only one or a few dealers
within a given market area. It is the most restrictive form of
distribution intensity. Retailers may be unwilling to commit the
time and money necessary to promote a product unless the
manufacturer guarantees them an exclusive territory. The
arrangement shields the retailer from direct competition and
enables it to be the main beneficiary of the manufacturers
promotion within the geographic area. For the manufacturer,
exclusive distribution can serve to project an exclusive image for
the product.
Define channel power, channel control, channel leadership, and
channel partnering and explain how these four terms are
related.
ANSWER:Power, control, leadership, conflict and partnering are
the main social dimensions of marketing channel relationships.
CHANNEL POWER refers to the capacity of one channel member to
control or influence the behavior of other channel members.
CHANNEL CONTROL occurs when one channel member intentionally
affects another members behavior. CHANNEL LEADERSHIP is the
exercise of authority and power. CHANNEL PARTNERING is the joint
effort of all channel members to create a channel that serves
customers and creates a competitive advantage.
Collaborating channel partners meet the needs of consumers more
effectively by ensuring the right products reach shelves at the
right time and at a lower cost, boosting sales and profits. They
are all components of channel relationship management.
Discuss the four main areas of importance in service
distribution.
ANSWER:MINIMIZING WAIT TIMES. Minimizing the amount of time a
customer waits for service is a key factor in maintaining the
quality of service. People tend to overestimate the amount of time
they spend waiting in line, and unexplained waiting seems longer
than explained waiting.
MANAGING SERVICE CAPACITY. If service firms dont have the
capacity to meet demand, they must either turn down dome
prospective customers, let service slip, or expand capacity. For
instance, at tax time, a tax preparation firm may have so many
customers desiring its services that it has to either turn business
away or add temporary offices or prepares.
IMPROVING SERVICE DELIVERY. Like manufacturers, service
providers are now experimenting with different distribution
channels. These new channels can increase the time that service is
available (such as the Internet) or add to consumer convenience
(plan a vacation cruise).
ESTABLISHING CHANNEL-WIDE NETWORK COHERENCE. Because
services are to some degree intangible, service firms also find
it necessary to standardize their service offering quality across
different geographic regions in order to maintain brand image.
Network coherence means that suppliers, service processes and
customer service have quality standards that are maintained
regardless of where the service is purchased or consumed.
Define retailing and list the factors that are used to classify
retail operations.
ANSWER:Retailing is defined as all the activities directly
related to the sale of goods and services to the ultimate consumer
for personal, nonbusiness use. Retail establishments can be
classified according to ownership, level of service, product
assortment, and price, and retailers use the latter three variables
to position themselves in the competitive marketplace.
There are several types of retail stores, each offering a
different product assortment, service level, and price level,
according to the shopping preferences of its customers. Name eight
types of retailers. For each type, indicate the level of service,
product assortment, and level of price.
ANSWER:See Exhibit 4.
Type of Retailer
Level of Service
Product Assortment
Level of Price
Department store
Moderately high to high
Broad
Moderate to high
Specialty store
High
Narrow
Moderate to high
Supermarket
Low
Broad
Moderate
Drugstore
Low to moderate
Medium
Moderate
Convenience store
Low
Medium to narrow
Moderately high
Discount store
Moderate to low
Medium to broad
Moderately low to low
Off-price retailer
Low
Medium to narrow
Low
Used goods retailer
Low to moderate
Broad
Low to high
Restaurant
Low to high
Narrow
Low to high
A specialty store is not only a type of store but also is a
method of retail operations. Describe the specialty store strategy.
Then name two examples of specialty stores.
ANSWER:Specialty stores specialize in a given type of
merchandise such as childrens clothing, baked goods, and pet
supplies. Specialty stores carry a narrow assortment of merchandise
but a very deep product selection. Specialty stores typically offer
more customer service and more knowledgeable salesclerks.
Prices and gross margins tend to be high, but this is of
secondary importance to the customer who strongly values
distinctive merchandise, attractive stores, and quality
personnel.
Examples of specialty stores include The Childrens Place,
Gadzooks, Williams
Sonoma, and Foot Locker.
Discount stores are retail chains that compete on the basis of
low prices, high turnover, and high volume. Name and briefly
describe four types of discounters, and give an example of each
type.
ANSWER:FULL-LINE DISCOUNTERS. These stores are similar to
traditional department stores, except that they carry a much
broader assortment of well-known, nationally branded hard goods and
offer consumers very limited service. Most fullline discounters are
national chains such as Kmart, Walmart, and Target. Supercenters
combine a full line of groceries and general merchandise with a
wide range of services. Extreme-value retailers cater to low-income
consumers; their stores are generally rather small, they offer a
narrow selection of merchandise emphasizing day- to-day
necessities, and they stress rock-bottom prices.
SUPERCENTERS. These combine a full line of groceries and general
merchandise with a wide range of services, including pharmacy, dry
cleaning, portrait studios, photo finishing, hair salons, optical
shops, and restaurantsall in one location.
SPECIALTY DISCOUNT STORES. Single-line specialty discount stores
offer consumers a nearly complete selection of one line of
merchandise and use self- service, discount prices, high volume,
and high-turnover merchandise in their retailing strategies. These
stores are also called category killers because they dominate their
narrow segment. Toys R Us (toys), Home Depot (home improvement),
Office Depot (office supplies), and Best Buy (electronics) are
examples.
WAREHOUSE MEMBERSHIP CLUBS. These are usually warehouse outlets
that allow members to buy items on a cash-and-carry basis. Examples
include Costco and Sams Club.
What is the first task of developing a retail strategy? What is
involved in this task?
ANSWER:The first and foremost task of developing a retail
strategy is defining the target market the prospective retailer
wishes to serve. This process begins with market segmentation and a
thorough knowledge of the segment targeted. Target markets in
retailing are often defined on demographic, geographic, and
psychographic dimensions. Different combinations of the elements in
the retail marketing mix enable a retailing establishment to
position itself for its particular targeting strategy.
