Chapter 14 , 15 – Marketing Channels, Retailing

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Marketing Channels
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Also the channel of distribution; A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer; a pipeline; represent the place or distribution in the marketing mix
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Supply chain
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The connected chain of all the business entities, both internal and external to the company, that perform or support the logistics function; connects business entities in the marketing channel; whole process
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Marketing channel benefits
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1) Specialization and division of labor 2) Overcoming discrepancies 3) Providing contact efficiency
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Specialization and Division of Labor
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-creates greater efficiency -provides lower costs -achieves economies of scale -aids producers who lack resources to market directly -builds good relationships with customers
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Discrepancy of Quantity
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The difference between the amount of product produced and the amount an end user wants to buy.
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Discrepancy of Assortment
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The lack of all the items a customer needs to receive full satisfaction from a product or products
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Temporal Discrepancy
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A situation that occurs when a product is produced but a customer is not ready to buy it.
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Spatial Discrepancy
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The difference between the location of a producer and the location of widely scattered markets.
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50
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Over __% reduction because efficiency of having a middle person
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Types of Channel Intermediaries
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Retailers, Merchant Wholesalers, and Agents & Brokers
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Retailer
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A channel intermediary that sells mainly to customers; take title to goods
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Merchant Wholesaler
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An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them. ex. Sames Club
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Agent and brokers
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Wholesaling intermediaries who facilitate the sale of a product by representing channel members; do not take title; contact buyers and sellers
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Factors Suggesting Type of Wholesaling Intermediary to Use
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1) Product characteristics 2) Buyer considerations 3) Market characteristics 4) Custom v. standardization
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Brokers
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________ do well in complex, one off products, longer lead times between order and shipping, and when there is a low profit margin. ex. insurance
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Wholesalers
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_____ do well with standardization, simple products a lot of customers, and frequent ordering
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Types of channel functions
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Transactional, Logistical, and Facilitating
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Transactional Functions
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1) Contacting & Promotion 2) Negotiating 3) Risk Taking
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Logistical Functions
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1) Physically distributing 2) Storing 3) Sorting
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Facilitating Functions
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1) Researching 2) Financing
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Logistics
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The process of strategically managing the efficient flow and storage of raw materials, in-process inventory, and finished goods from point of origin to point of consumption
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Direct channel
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A distribution channel in which producers sell directly to consumers.
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Retailer Channel
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Channel where Retailer is between producer and consumer
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Wholesalers Channel
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goes Producer to Wholesalers to Retailers to Consumers
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Agent/Broker Channel
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Goes from producer to agents/broker to wholesalers to retailers to consumers
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3 types of business to business exchanges on the internet
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1) Agents link buyers and sellers 2) Companies drop the intermediary from the supply chain 3) “Private exchanges” with select suppliers automate the supply chain
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Alternative Channel Arrangements
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1) Multiple channels 2) Nontraditional channels 3) Strategic channel alliances
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Strategic channel alliances
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Channel that leads to one company’s using another’s marketing channel
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Types of business channels
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1) Direct 2) Industrial 3) Agent/broker 4) Agent/broker industrial
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Factors affecting channel choice
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1) Marketing 2) Product 3) Producer
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Level of Distribution Intensity
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1) Intensive 2) Selective 3) Exclusive
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Market Factors that affect channel choices
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1) Customer profiles 2) Consumer or Industrial customer 3) Size of market 4) Geographic location
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Product Factors that affect channel choices
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1) Product Complexity 2) Product Price 3) Product Standardization 4) Product Life Cycle 5) Product Delicacy
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Producer Factors
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1) Producer Resources 2) Number of Product Lines 3) Desire for Channel Control
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Intensive
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A form of distribution aimed at having a product available in every outlet. Mass market selling. Convenience goods Ex. candy bars
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Selective
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A form of distribution achieved by screening dealers to eliminate all but a few in any single area. Shopping and some specialty goods Ex. Ralph Lauren
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Exclusive
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A form of distribution that established one or a few dealers within a given area. Specialty goods and industrial equipment Ex. Rolex
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Social Dimension of Channels
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Power, Control, Leadership, Conflict, and Partnering
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Channel Power
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A channel member’s capacity to control or influence the behavior of other channel members
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Channel Control
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A situation that occurs when one marketing channel member intentionally affects another member’s behavior
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Channel Leader
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A member of a marketing channel that exercises authority/power over the activities of other members
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Channel Conflict
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A clash of goals and methods between distribution channel members
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Channel Partnering
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The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage
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Conflicts may occur if channel members:
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1) Have conflicting goals 2) Fail to fulfill expectations of other channel members 3) Have ideological differences 4) Have different perceptions of reality
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Horizontal conflicts
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occur among firms at the same level of the channel, e.g., two car dealers.
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Vertical Conflicts
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occur between different levels of the same channel, e.g., Black & Decker and Home Depot
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Transaction-Based Partnering
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Short-term, adversarial, independent, price is important, many suppliers, little info sharing, and little investment
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Partnership-Based
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Long-term, cooperative, dependent, value-added services, few suppliers, a lot of info sharing, and high investment required
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Retailing
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All the activities directly related to the sale of goods and services to the ultimate consumer for personal, non-business use.
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Role of retailing
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1) Over 1.6 million U.S. retailers employ more than 24 million people 2) Retailers account for 11.6 percent of U.S. employment 3) Retailing accounts for 13 percent of U.S. businesses 4) Retailers ring up almost $4 trillion in sales—nearly 40 percent of the U.S. GDP 5) Industry is dominated by a few giant organizations, such as Wal-Mart
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Classification of Retail Operations
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1) Ownership 2) Level of Service 3) Product Assortment 4) Price
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Classification of Ownership
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1) Independent retailers 2) Chain stores 3) Franchises
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Independent Retailers
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Owned by a single person or partnership and not part of a larger retail institution
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Chain Stores
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Owned and operated as a group by a single organization
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Franchises
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The right to operate a business or sell a product
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Levels of service
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1) Factory outlet/Warehouse clubs 2) Discount Stores 3) Exclusive Stores
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Gross Margin
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The amount of money the retailer makes as a percentage of sales after the cost of goods sold is subtracted.
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Types of retail operations
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Department, Specialty, Supermarkets, Drugstores, Convenience, Discount, Restaurants
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Categories of Discount Stores
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Full-line discounters, specialty-discount stores, warehouse clubs, and off-price discount retailers
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Mass merchandising
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Retailing strategy using moderate to low prices on large quantities of merchandise and lower service to stimulate high turnover of products.
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Supercenter
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Retail store combining groceries and general merchandise goods with a wide range of services.
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Full-line discounter
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Retailer offering consumers very limited service and carrying a broad assortment of well-known, nationally branded “hard goods”. ex. Walmart
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Category killers
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Specialty discount stores that heavily dominate their narrow merchandise segment.
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Nonstore Retailing
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Automatic vending, direct retailing, direct marketing, and electronic retailing
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Direct retailing
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door-to-door, office-to-office, and home sale parties
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Direct Marketing
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direct mail, catalogs and mail order, telemarketing, and electronic retailing
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Product and Trade Name Franchising
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Dealer agrees to sell in products provided by a manufacturer or wholesaler.
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Business Format Franchising
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An ongoing business relationship between a franchiser and a franchisee.
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Retail marketing strategy
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1) Define & Select a Target Market 2) Develop the 6 Ps
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Segment Retail Marketing by
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Demographics, Geographics, and Psychographics
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Retailing Mix
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Product, Place, Price, Personnel, Promotion, and Presentation
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Product Offering
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The mix of products offered to the consumer by the retailer; also called the product assortment or merchandise mix.
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Promotion
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Advertising, Public Relations, Publicity, and Sales Promotion
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Location
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1) Community- economic growth potential, competition, and geography 2) Site- Freestanding store, shopping center, and mall
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Important factors for site choice
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Neighborhood socioeconomics, Traffic flow, Land costs, Zoning regulations, Public transportation, Site’s visibility, parking, entrances and exits, accessibility, and safety, Fit with other stores
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Shopping center advantages
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1) Design attracts shoppers 2) Activities and anchor stores draw customers 3) Ample parking 4) Unified image 5) Sharing of common area expenses
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Shopping center disadvantages
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1) Expensive leases 2) Failure of common promotion efforts 3) Lease restrictions 4) Hours of operation 5) Anchor store domination 6) Direct competitors 7) Consumer time limits
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Atmosphere
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The overall impression conveyed by a store’s physical layout, dĂ©cor, and surroundings
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Factors in Presentation
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1) Employee type and density 2) Merchandise type and density 3) Fixture type and density 4) Sounds 5) Odors 6 ) Visual Factors
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Two Common Selling Techniques
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1) Trading Up 2) Suggestion Selling
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Customer Service for Online Retailers
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1) Easy-to-use websites 2) Product availability 3) Simple returns
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Order of Retail Marketing Strategy
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Product, Place, Promotion, Price, Presentation, Personnel
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Interactivity
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Consumers are involved in the retail experience
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M-commerce
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Purchasing goods through mobile devices
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Personnel
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Customer service and personal selling
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Price
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supports postioning

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