Marketing Management, 14e (Kotler/Keller) Chapter 15 Designing and Managing Integrated Marketing Channels 1) are sets of interdependent organizations participating in the process of making a product or service available for use or consumption A) Marketing channels B) Interstitials C) Communication channels D) Sales territories E) Marketing terrains Answer: A Page Ref: 415 Objective: Difficulty: Easy 2) Which of the following entities in the marketing channel is a merchant? A) wholesalers B) brokers C) sales agents D) warehouses E) advertising agencies Answer: A Page Ref: 416 Objective: Difficulty: Easy 3) A(n) is a facilitator who assists in the distribution process A) advertising agency B) sales agent C) manufacturer's representative D) broker E) wholesaler Answer: A Page Ref: 416 Objective: Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 4) A manufacturer uses the company's sales force and trade promotions to carry, promote, and sell products to end users Which of the following strategies is this manufacturer using? A) personalization strategy B) tailoring strategy C) push strategy D) pull strategy E) consumer promotion strategy Answer: C Page Ref: 416 Objective: Difficulty: Easy 5) Total Beverages, a maker of fruit juices and health drinks, recently launched a new brand of packaged drinking water called AquaPure In order to induce distributors to carry the product, Total offers all its intermediaries a free refrigerator to store bottles of AquaPure This is an example of a A) consumer promotion B) push strategy C) backward flow D) reverse flow E) pull strategy Answer: B Page Ref: 416 Objective: AACSB: Analytic skills Difficulty: Moderate 6) Spike Inc is a sportswear manufacturer that recently launched its new line of customizable running shoes The shoes come with a digital component that allows them to adapt to the runner's biomechanics To promote this new product, Spike launches an advertising campaign and also ropes in a famous athlete to endorse the product This is an example of a A) trade promotion B) reverse flow C) push strategy D) pull strategy E) backward flow Answer: D Page Ref: 416 Objective: AACSB: Analytic skills Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 7) When is a pull strategy appropriate? A) when there is low brand loyalty B) when consumers are able to perceive differences between brands C) when brand choice is made in the store D) when it is a low involvement purchase E) when the product is an impulse item Answer: B Page Ref: 416 Objective: Difficulty: Easy 8) Using the push strategy is most appropriate when A) consumers are able to perceive differences between brands B) the product being sold is an impulse item C) there is high brand loyalty for the product D) the product is a high involvement purchase E) consumers choose the brand before they go to the store Answer: B Page Ref: 416 Objective: Difficulty: Moderate 9) A firm uses its sales force to sell to large accounts and outbound telemarketing to sell to medium-sized accounts The firm is using marketing A) hybrid B) pull C) personalized D) vertical E) internal Answer: A Page Ref: 416 Objective: Difficulty: Easy 10) A computer manufacturing company allows customers to place orders online, which they can later pick up from a convenient retail location Which of the following terms best represents this practice? A) channel integration B) mass customization C) online personalization D) push strategy E) internal marketing Answer: A Page Ref: 417 Objective: Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 11) Which of the following is the most accurate description of a value network? A) A system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings B) A system of organizations and resources involved in moving a product from supplier to customer C) An arrangement whereby an organization transforms inputs into finished goods D) A network that allows an organization take the finished products to the end-users E) A communication network that allows an organization to transfer information to endcustomers Answer: A Page Ref: 417 Objective: Difficulty: Moderate 12) Companies should first think of the target market and then design the supply chain backward from that point This strategy is called A) demand chain planning B) resource planning C) external channel planning D) materials planning E) strategic business planning Answer: A Page Ref: 417 Objective: Difficulty: Easy 13) Which of the following channel functions constitute only a backward flow? A) movement of physical goods B) placing orders with manufacturers C) persuasive communication D) storage of physical goods E) overseeing actual transfer of ownership Answer: B Page Ref: 418 Objective: Difficulty: Moderate 14) Identify the channel function that constitutes both backward and forward flow A) obtaining funds for financing B) storage of physical goods C) persuasive communication D) movement of physical goods E) overseeing actual transfer of ownership Answer: A Page Ref: 418 Objective: Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 15) Producers often shift some functions to intermediaries Which of the following is the most significant benefit of doing this? A) It increases customer loyalty B) It provides the producer with greater control over operations C) It reduces the amount of direct customer interaction D) It lowers the producer's costs and prices E) It ensures greater information security Answer: D Page Ref: 419 Objective: Difficulty: Easy 16) Which of the following is an example of a zero-level channel? A) A company takes online orders from customers and ships the products to them B) An organization uses a combination of direct salespeople and sales agencies to increase sales C) A company sells its products through wholesalers and retailers D) A company sells its products through chains of supermarkets and other large sellers E) A large company forms alliances with smaller companies to increase sales coverage Answer: A Page Ref: 420 Objective: AACSB: Analytic skills Difficulty: Moderate 17) Which of the following entities is present in a zero-level marketing channel? A) consumers B) retailers C) brokers D) jobbers E) wholesalers Answer: A Page Ref: 420 Objective: Difficulty: Easy 18) A direct marketing channel is a A) one-level channel B) two-level channel C) zero-level channel D) three-level channel E) reverse-flow channel Answer: C Page Ref: 420 Objective: Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 19) A jobber in a three-level marketing channel is a(n) A) small-scale wholesaler B) external broker C) advertising agent D) independent evaluator E) communication channel Answer: A Page Ref: 421 Objective: Difficulty: Easy 20) Which of the following activities is a reverse-flow channel of marketing? A) raw materials movement B) product recycling C) materials ordering D) finished goods storage E) customer order placement Answer: B Page Ref: 421 Objective: Difficulty: Moderate 21) Toyota has an advantage over Lexus due to the fact that there are more Toyota dealers, which helps customers save on transportation and search costs in buying and repairing an automobile Which of the following service outputs relates to this competitive advantage? A) spatial convenience B) service backup C) lot size D) waiting time E) delivery time Answer: A Page Ref: 422 Objective: Difficulty: Easy 22) As a service output produced by marketing channels, product variety refers to the A) units the channel permits a customer to purchase at once B) assortment provided by the marketing channel C) add-on services provided by the channel D) ability of a product to provide incremental value E) degree to which the channel makes it easy for customers to purchase a product Answer: B Page Ref: 423 Objective: Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 23) Which of the following terms refers to the add-on services, such as credit, delivery, installation, and repairs, provided by a marketing channel? A) service backup B) product accessories C) external products D) product variety E) service extensions Answer: A Page Ref: 423 Objective: Difficulty: Easy 24) Atburex is a furniture manufacturing company in the United States The company provides a sixty day credit period and EMI options to customers and also offers on-site delivery and installation These special benefits refer to which of the following service outputs? A) good service backup B) large product variety C) spatial convenience D) large lot size E) short waiting time Answer: A Page Ref: 423 Objective: AACSB: Analytic skills Difficulty: Moderate 25) Which of the following types of distribution involves severely limiting the number of channel intermediaries? A) exclusive B) selective C) intensive D) aggressive E) retail Answer: A Page Ref: 424 Objective: Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 26) Which of the following allows a firm to maintain control over the service level and obtain more dedicated and knowledgeable selling? A) selective distribution B) intensive distribution C) push strategy D) exclusive distribution E) pull strategy Answer: D Page Ref: 424 Objective: Difficulty: Moderate 27) Which of the following channel alternatives is most suited to handle complex products and transactions? A) sales forces B) the Internet C) dealers D) telemarketers E) direct mails Answer: A Page Ref: 424 Objective: Difficulty: Easy 28) Which of the following is a major disadvantage of using the Internet as a marketing channel? A) It is less effective for complex products B) It lacks convenience and practicality C) It cannot be used to reach a wide audience D) It is considered expensive E) It causes the company to lose direct contact with customers Answer: A Page Ref: 424 Objective: Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 29) Armon Apparels designs, manufactures, and distributes athletic apparel and accessories for men and women The company has only nine distributors across the United States These distributors control a nationwide network of 600 retailers The company does not sell its products through other channels This is an example of distribution A) selective B) intensive C) exclusive D) internal E) passive Answer: A Page Ref: 425 Objective: AACSB: Analytic skills Difficulty: Moderate 30) Exclusive dealing arrangements are mainly used by companies looking for an edge in markets increasingly driven by A) price B) efficiency C) product variety D) add-on services E) spatial convenience Answer: A Page Ref: 425 Objective: Difficulty: Easy 31) An intensive distribution strategy serves well for A) premium cars B) commercial trucks C) private label products D) industrial equipment E) newspapers Answer: E Page Ref: 425 Objective: Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 32) Which of the following products is most likely to be sold using an exclusive distribution strategy? A) designer luggage B) cigarettes C) alcoholic beverages D) car fuel E) medicine Answer: A Page Ref: 425 Objective: AACSB: Analytic skills Difficulty: Moderate 33) Which of the following covers payment terms and producer guarantees? A) conditions of sale B) pricing policies C) exclusive dealings D) mutual services E) territorial rights Answer: A Page Ref: 426 Objective: Difficulty: Easy 34) call(s) for the producer to establish a schedule of discounts and allowances that intermediaries see as equitable and sufficient A) Exclusive dealings B) Mutual services C) Territorial rights D) Price policy E) Tying agreements Answer: D Page Ref: 426 Objective: Difficulty: Easy 10 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 86) Marketing channel functions such as storage and movement and communications constitute a backward flow of activities Answer: FALSE Page Ref: 418 Objective: Difficulty: Easy 87) All functions in a marketing channel use scarce resources and can be shifted among channel members Answer: TRUE Page Ref: 419 Objective: Difficulty: Easy 88) A zero-level marketing channel typically uses a wholesaler and a retailer Answer: FALSE Page Ref: 420 Objective: Difficulty: Easy 89) The flow of materials to refurbish products for resale constitutes a reverse flow Answer: TRUE Page Ref: 421 Objective: Difficulty: Easy 90) Lot size refers to the total number of units a channel can transmit from the manufacturer's place to the service outlet Answer: FALSE Page Ref: 422 Objective: Difficulty: Easy 91) Add-on services such as credit, delivery, installation, and repairs provided by the marketing channel are referred to as service backup Answer: TRUE Page Ref: 423 Objective: Difficulty: Easy 92) Products such as heating and cooling systems are usually sold and maintained by the company or by franchised dealers Answer: TRUE Page Ref: 423 Objective: Difficulty: Easy 26 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 93) When economic conditions are depressed, producers want to move goods to market using longer channels Answer: FALSE Page Ref: 423 Objective: Difficulty: Easy 94) Intensive distribution relies on only some of the intermediaries willing to carry a particular product Answer: FALSE Page Ref: 425 Objective: Difficulty: Easy 95) Intensive distribution is becoming a mainstay for specialists looking for an edge in markets increasingly driven by price Answer: FALSE Page Ref: 425 Objective: Difficulty: Easy 96) An intensive distribution strategy serves well for products such as snack foods and soft drinks Answer: TRUE Page Ref: 425 Objective: Difficulty: Easy 97) Distributors' territorial rights define the terms under which the producer will enfranchise other distributors Answer: TRUE Page Ref: 426 Objective: Difficulty: Easy 98) Manufacturers can obtain greater control over the selling process by using a sales agency Answer: FALSE Page Ref: 427 Objective: Difficulty: Easy 27 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 99) After a company has chosen a channel system, it must select, train, motivate, and evaluate individual intermediaries for each channel Answer: TRUE Page Ref: 427 Objective: Difficulty: Easy 100) Channel power is the ability to alter channel members' behavior so they take actions they would not have taken otherwise Answer: TRUE Page Ref: 428 Objective: Difficulty: Easy 101) A manufacturer is using reward power when it offers intermediaries an extra benefit for performing specific acts or functions Answer: TRUE Page Ref: 428 Objective: Difficulty: Easy 102) When a manufacturer requests a behavior that is warranted under the contract, the manufacturer is using coercive power Answer: FALSE Page Ref: 428 Objective: Difficulty: Easy 103) A manufacturer obtains referent power when it has special knowledge that intermediaries value Answer: FALSE Page Ref: 428 Objective: Difficulty: Easy 104) Coercive and referent power are subjective and depend on the ability and willingness of parties to recognize them Answer: FALSE Page Ref: 428 Objective: Difficulty: Easy 28 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 105) In competitive markets with low entry barriers, the optimal channel structure will inevitably change over time Answer: TRUE Page Ref: 429 Objective: Difficulty: Easy 106) Early buyers might be willing to pay for high-value-added channels, but later buyers will switch to lower-cost channels Answer: TRUE Page Ref: 429 Objective: Difficulty: Easy 107) The first step in global channel planning is to get close to customers Answer: TRUE Page Ref: 431 Objective: Difficulty: Easy 108) A conventional marketing channel includes the producer, wholesalers, and retailers acting as a unified system Answer: FALSE Page Ref: 431 Objective: Difficulty: Easy 109) Vertical marketing systems achieve economies through size, bargaining power, and elimination of duplicated services Answer: TRUE Page Ref: 432 Objective: Difficulty: Easy 110) A corporate vertical marketing system combines successive stages of production and distribution under single ownership Answer: TRUE Page Ref: 432 Objective: Difficulty: Easy 111) Advanced supply-distributor arrangements for administered vertical marketing systems not rely on distribution programming Answer: FALSE Page Ref: 432 Objective: Difficulty: Easy 29 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 112) Retailer cooperatives allow nonmember retailers to buy through them and share the profits Answer: FALSE Page Ref: 433 Objective: Difficulty: Easy 113) Unrelated companies put together resources or programs in horizontal marketing systems Answer: TRUE Page Ref: 433 Objective: Difficulty: Easy 114) Adding more marketing channels increases the channel cost of selling Answer: FALSE Page Ref: 434 Objective: Difficulty: Easy 115) Conflicts between various franchisees of a company are an example of vertical channel conflict Answer: FALSE Page Ref: 435 Objective: Difficulty: Easy 116) Multichannel conflicts are common when the members of one channel get a lower price based on larger-volume purchases Answer: TRUE Page Ref: 436 Objective: Difficulty: Easy 117) Dual compensation pays existing channels for sales made through new channels Answer: TRUE Page Ref: 437 Objective: Difficulty: Easy 118) Exclusive dealings and tying agreements are illegal and prohibited by law Answer: FALSE Page Ref: 438 Objective: Difficulty: Easy 30 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 119) Brick-and-click companies are those that have launched a Web site without any previous existence as a firm Answer: FALSE Page Ref: 439 Objective: AACSB: Use of IT Difficulty: Easy 120) Price pressure will be more for undifferentiated products than differentiated products Answer: TRUE Page Ref: 440 Objective: Difficulty: Easy 121) What are marketing channels? Briefly explain some of the different types of intermediaries Answer: Marketing channels are sets of interdependent organizations participating in the process of making a product or service available for use or consumption They are the set of pathways a product or service follows after production, culminating in purchase and consumption by the final end user Some intermediaries—such as wholesalers and retailers—buy, take title to, and resell the merchandise; they are called merchants Others—brokers, manufacturers' representatives, sales agents—search for customers and may negotiate on the producer's behalf but not take title to the goods; they are called agents Still others—transportation companies, independent warehouses, banks, advertising agencies—assist in the distribution process but neither take title to goods nor negotiate purchases or sales; they are called facilitators Page Ref: 415-416 Objective: Difficulty: Moderate 122) Explain the concept of a value network Answer: A company can be seen as being at the center of a value network, a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings A value network includes a firm's suppliers and its suppliers' suppliers, and its immediate customers and their end customers The value network includes valued relationships with others such as university researchers and government approval agencies A company needs to orchestrate these parties in order to deliver superior value to the target market Managing a value network means making increasing investments in information technology (IT) and software Firms have introduced supply chain management (SCM) software and invited such software firms as SAP and Oracle to design comprehensive enterprise resource planning (ERP) systems to manage cash flow, manufacturing, human resources, purchasing, and other major functions within a unified framework Page Ref: 417-418 Objective: Difficulty: Moderate 31 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 123) What are the various functions performed by members of a marketing channel? Provide examples Answer: Some of the functions that the members of a marketing channel perform (storage and movement, title, and communications) constitute a forward flow of activity from the company to the customer; other functions (ordering and payment) constitute a backward flow from customers to the company Still others (information, negotiation, finance, and risk taking) occur in both directions Page Ref: 418 Objective: Difficulty: Easy 124) Briefly explain the various levels of marketing channels Answer: A zero-level channel, also called a direct marketing channel, consists of a manufacturer selling directly to the final customer The major examples are door-to-door sales, home parties, mail order, telemarketing, TV selling, Internet selling, and manufacturer-owned stores A one-level channel contains one selling intermediary, such as a retailer A two-level channel contains two intermediaries In consumer markets, these are typically a wholesaler and a retailer A three-level channel contains three intermediaries In the meatpacking industry, wholesalers sell to jobbers, essentially small-scale wholesalers, who sell to small retailers Page Ref: 420-421 Objective: Difficulty: Moderate 125) Briefly explain the various service outputs that marketing channels produce Answer: Channels produce five service outputs: (1) Lot size: The number of units the channel permits a typical customer to purchase on one occasion (2) Waiting and delivery time: The average time customers wait for receipt of goods Customers increasingly prefer faster delivery channels (3) Spatial convenience: The degree to which the marketing channel makes it easy for customers to purchase the product (4) Product variety: The assortment provided by the marketing channel Normally, customers prefer a greater assortment because more choices increase the chance of finding what they need, although too many choices can sometimes create a negative effect (5) Service backup: Add-on services (credit, delivery, installation, repairs) provided by the channel The greater the service backup, the greater the work provided by the channel Page Ref: 422-423 Objective: Difficulty: Moderate 32 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 126) Explain the three distribution strategies based on the number of intermediaries Answer: Exclusive distribution: This strategy focuses on severely limiting the number of intermediaries It's appropriate when the producer wants to maintain control over the service level and outputs offered by the resellers, and it often includes exclusive dealing arrangements By granting exclusive distribution, the producer hopes to obtain more dedicated and knowledgeable selling It requires a closer partnership between seller and reseller and is used in the distribution of new automobiles, some major appliances, and some women's apparel brands Selective distribution: This distribution strategy relies on only some of the intermediaries willing to carry a particular product Whether established or new, the company does not need to worry about having too many outlets; it can gain adequate market coverage with more control and less cost than intensive distribution Intensive distribution: This strategy places the goods or services in as many outlets as possible This strategy serves well for snack foods, soft drinks, newspapers, candies, and gum–products consumers buy frequently or in a variety of locations Page Ref: 424-425 Objective: Difficulty: Moderate 127) What is channel power? Explain the various types of channel powers Answer: Channel power is the ability to alter channel members' behavior so they take actions they would not have taken otherwise Coercive power: A manufacturer threatens to withdraw a resource or terminate a relationship if intermediaries fail to cooperate This power can be effective, but its exercise produces resentment and can lead the intermediaries to organize countervailing power Reward power: The manufacturer offers intermediaries an extra benefit for performing specific acts or functions Reward power typically produces better results than coercive power, but intermediaries may come to expect a reward every time the manufacturer wants a certain behavior to occur Legitimate power: The manufacturer requests a behavior that is warranted under the contract As long as the intermediaries view the manufacturer as a legitimate leader, legitimate power works Expert power: The manufacturer has special knowledge the intermediaries' value Once the intermediaries acquire this expertise, however, expert power weakens The manufacturer must continue to develop new expertise so intermediaries will want to continue cooperating Referent power: The manufacturer is so highly respected that intermediaries are proud to be associated with it Companies such as IBM, Caterpillar, and Hewlett-Packard have high referent power Coercive and reward power are objectively observable; legitimate, expert, and referent power are more subjective and depend on the ability and willingness of parties to recognize them Page Ref: 428 Objective: Difficulty: Moderate 33 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 128) Comment on the challenges and opportunities that international markets pose Answer: International markets pose distinct challenges, including variations in customers' shopping habits, but opportunities at the same time Behavior of markets and preferences for intermediaries differ across countries Foreign markets provide an opportunity for growth and expansion Many pitfalls also exist in global expansion, and retailers must also be able to defend their home turf from the entry of foreign retailers Page Ref: 430-431 Objective: Difficulty: Easy 129) What is a vertical marketing system (VMS)? What are the various types VMSs? Answer: A vertical marketing system includes the producer, wholesaler(s), and retailer(s) acting as a unified system One channel member, the channel captain, owns or franchises the others or has so much power that they all cooperate There are three types of VMSs: corporate, administered, and contractual A corporate VMS combines successive stages of production and distribution under single ownership An administered VMS coordinates successive stages of production and distribution through the size and power of one of the members Manufacturers of dominant brands can secure strong trade cooperation and support from resellers A contractual VMS consists of independent firms at different levels of production and distribution, integrating their programs on a contractual basis to obtain more economies or sales impact than they could achieve alone Page Ref: 431-433 Objective: Difficulty: Moderate 130) Differentiate between pure-click companies and brick-and-click companies Answer: Pure-click companies are those that have launched a Web site without any previous existence as a firm, while brick-and-click companies are existing companies that have added an online site for information or e-commerce There are several kinds of pure-click companies: search engines, Internet service providers (ISPs), commerce sites, transaction sites, content sites, and enabler sites Brick-and-click companies are formed by adding an e-commerce channel to an existing business Page Ref: 439 Objective: AACSB: Use of IT Difficulty: Easy 34 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 131) Sweet Treats is a startup confectionery manufacturer that sells chocolates, boiled sweets, toffees, marshmallows, jelly candies, and so on Should the firm adopt a push or a pull strategy? Explain your answer Answer: Considering that Sweet Treats is a startup, its products are likely to have low brand loyalty Moreover, its products are likely to be impulse items Thus, a push strategy would be more suitable Page Ref: 416 Objective: AACSB: Analytic skills Difficulty: Moderate 132) The Norticon Group provides and manages computers and network systems for businesses and communities Norticon sells its products through various means–it uses its sales force to sell to large customers and telemarketing to sell to smaller customers The company also sells its products via the Internet Briefly explain the marketing approach being used by the company Answer: The company is using hybrid channels or multichannel marketing which involves the use of two or more marketing channels to reach customer segments In multichannel marketing, each channel targets a different segment of buyers, or different need states for one buyer, and delivers the right products in the right places in the right way at the least cost Page Ref: 416-417 Objective: AACSB: Analytic skills Difficulty: Moderate 133) Garolds Stores operates as a low price retailer It offers home fashion products, such as wall decor, frames, candles, bath and bedding products, furniture, home accents, and kitchen products The firm has showrooms and retail stores across United States Customers can buy products in three different ways: (1) they can place orders online and have the products shipped to their homes; (2) they can buy directly from the showrooms and retail outlets; or (3) they can place orders online and pick them up from the nearest showroom What are the benefits that Garolds Stores could achieve by using various channels to sell to customers? Answer: The company can increase its sales by targeting different segments of customers through various channels Multichannel marketing allows the company to deliver the right products in the right places in the right way at the least cost Page Ref: 417 Objective: AACSB: Analytic skills Difficulty: Moderate 35 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 134) Cortron Consultants provides business consulting services for startups It helps customers design their supply chains by first evaluating the target market and then proceeds backward from that point What is this strategy of reverse design called? Briefly explain Answer: This strategy is called demand chain planning This helps the companies have a clear focus on the target market Page Ref: 417 Objective: AACSB: Analytic skills Difficulty: Moderate 135) Members of a marketing channel perform three types of functions Provide examples of these three functions in the context of a publishing company that publishes books and magazines Answer: The storage and movement of books from the company to the customer constitutes a forward flow Ordering books and paying for them constitute a backward flow from customers to the company Sharing information and risk taking are activities that occur in both directions Page Ref: 418 Objective: Difficulty: Moderate 136) Dell computers is a manufacturer of computers Dell accepts orders for computers online and ships the products to the customer Depict the likely physical flow of materials in this case Answer: Suppliers —>Transporters -> Warehouses-> Dell ->Transporters-> Customers Page Ref: 419 Objective: AACSB: Analytic skills Difficulty: Moderate 137) Eureka Forbes, an Asian consumer appliances company, sells its vacuum cleaners through door-to door sales This allows the company to obtain a high conversion ratio Comment on the length of the channel in the case of Eureka Forbes' vacuum cleaners Answer: The company is using a zero-level channel, i.e the manufacturer sells directly to the final customer This is the shortest channel Page Ref: 420 Objective: AACSB: Analytic skills Difficulty: Moderate 36 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 138) Orion Airlines is an American airline that provides domestic and international air transport services Explain the five service outputs provided by marketing channels with reference to Orion Answer: Lot size—Customers may be allowed to book as many tickets as they want, subject to availability Waiting and delivery time - This would refer to the average time customers take to book their tickets Spatial convenience—This refers to the ease of booking tickets The location of Orion's retail ticketing outlets and whether the company offers online ticket booking services would be classified under spatial convenience Product variety—This refers to the assortment provided by the marketing channel in terms of travel destinations, holiday packages, hotel bookings, car rental services, and the like Service backup—This refers to the add-on services provided by the channel such as credit, discounts, delivery, refunds, and so on Page Ref: 422-423 Objective: AACSB: Analytic skills Difficulty: Moderate 139) Ravake is a manufacturer of high-end designer apparel Competition in the apparel industry is very severe and the market is driven by price What distribution strategy would be best suited to help Ravake obtain an edge over its competitors? Answer: The company can use exclusive distribution It severely limits the number of intermediaries and reduces costs This would help the company maintain greater control over service levels Page Ref: 424-425 Objective: AACSB: Analytic skills Difficulty: Moderate 140) National Beverage Corp produces and distributes a wide range of beverages It offers a selection of flavored soft drinks, juices, sparkling waters, energy drinks, nutritionally-enhanced waters, and other specialty beverages What distribution strategy will be most suitable for the company's products? Answer: The company has to use intensive distribution, which places the goods or services in as many outlets as possible This strategy serves well for products consumers buy frequently or in a variety of locations Page Ref: 425 Objective: AACSB: Analytic skills Difficulty: Moderate 37 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 141) Apple Inc., together with subsidiaries, designs, manufactures, and markets personal computers, mobile phones and media devices It also sells software, services, and third-party digital content Apple is a highly respected brand across the globe What kind of channel power does this respect give Apple? Answer: Apple is so highly respected that intermediaries are proud to be associated with it This gives Apple referent power Page Ref: 428 Objective: AACSB: Analytic skills Difficulty: Moderate 142) Atronix Solutions is a major manufacturer of electronic measuring devices in the U.S The company often threatens to terminate its relationship with its intermediaries if they not agree with its terms and conditions What channel power does Atronix use? What are its effects? Answer: Here, the manufacturer is using coercive power This power can be effective, but its exercise produces resentment and can lead the intermediaries to organize countervailing power Page Ref: 428 Objective: AACSB: Analytic skills Difficulty: Moderate 143) A group of entrepreneurs is planning to start a food processing company Comment on the likely evolution of the company's marketing channels Answer: The firm is likely to start as a local operation selling in a fairly circumscribed market, using a few existing intermediaries At this stage, it is often difficult to convince the available intermediaries to handle the firm's line If the firm is successful, it might branch into new markets with different channels In smaller markets, the firm might sell directly to retailers; in larger markets, through distributors Page Ref: 429 Objective: AACSB: Analytic skills Difficulty: Moderate 144) DMM Industries, a manufacturer of composite metal products, sells its products using a conventional marketing channel The company decides to adopt a vertical marketing system to improve its performance What advantages could this provide? Answer: Each entity in a conventional channel is a separate business seeking to maximize its own profits, even if this goal reduces profit for the system as a whole A vertical marketing system, by contrast, acts as a unified system This would make the company more profitable VMSs achieve economies through size, bargaining power, and elimination of duplicated services Page Ref: 431-432 Objective: AACSB: Analytic skills Difficulty: Moderate 38 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 145) Altrudex, Inc., is involved in the manufacture, distribution, and sale of consumer electronics The company sources over half the products it sells from companies it partly or wholly owns It also owns a large retail chain and sells its products through them What marketing system is Altrudex using? Answer: The company is using a corporate VMS A corporate VMS combines successive stages of production and distribution under single ownership Page Ref: 432 Objective: AACSB: Analytic skills Difficulty: Moderate 146) True Value is a retailer-owned cooperative with over 4,000 independent retail locations worldwide Members of True Value own their individual stores and operate independently True Value helps its members procure materials at a low cost What kind of a marketing system is True Value? Explain briefly Answer: True Value is a type of contractual VMS It is a retail cooperative wherein retailers take the initiative and organize a new business entity to carry on wholesaling and possibly some production Page Ref: 433 Objective: AACSB: Analytic skills Difficulty: Moderate 147) Flash Designs is an apparel manufacturing company and has adopted a franchising model to distribute and sells its garments The company recently received complaints from a particular franchisee that another competing franchisee was infringing on its territory What type of conflict is this? Answer: This is an example of horizontal channel conflict, between channel members at the same level Page Ref: 435 Objective: AACSB: Analytic skills Difficulty: Moderate 148) Crafted Jewels is a jewelry manufacturer that sells its designs to various jewelry retailers The retailers often complain that the company's online store acts as a competitor and reduces their profitability What type of conflict is this? Briefly explain Answer: This is a case of multichannel conflict It exists when the manufacturer has established two or more channels that sell to the same market Page Ref: 436 Objective: AACSB: Analytic skills Difficulty: Moderate 39 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 149) UltraMotion Pictures produces and distributes music and television entertainment in the United States The company distributes music in partnership with a large music retailer, Fromen Tunes Fromen executives often work for a short time with UltraMotion and some of the UltraMotion executives work at the retail outlets to study Fromen's operations This strategy minimizes the conflicts between partners What strategy is being used here? Briefly explain Answer: This strategy of managing channel conflict is called an employee exchange which involves the exchange of persons between two or more channel levels Thus participants can grow to appreciate each other's point of view Page Ref: 437 Objective: AACSB: Analytic skills Difficulty: Moderate 150) eBay Inc is an online auction and shopping company Procter & Gamble is an American multinational corporation that manufactures a wide range of consumer goods Both companies sell their products online How are these companies different from a marketing channel perspective? Answer: eBay is a pure-click company whereas Procter & Gamble is a brick-and-click company Pure-click companies are companies that have launched a Web site without any previous existence as a firm Brick-and-click companies are existing companies that have added an online site for information or e-commerce Page Ref: 439-440 Objective: AACSB: Analytic skills Difficulty: Moderate 40 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall ... acting as a unified system A) parallel marketing channel B) vertical marketing system C) extensive marketing channel D) internal marketing system E) conventional marketing channel Answer: B Page Ref:... What is the major difference between a conventional marketing channel and a vertical marketing system (VMS)? A) Elements in a conventional marketing channel act as separate businesses whereas... service output produced by marketing channels, product variety refers to the A) units the channel permits a customer to purchase at once B) assortment provided by the marketing channel C) add-on