Chapter 14 Pricing and Distributing Goods and Services MULTIPLE CHOICE QUESTIONS. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following is correct with regard to the opening case entitled “Buyers and Sellers Jockey for Position”? A) Over time, large retailers like Wal-Mart have gradually gained the upper hand over consumers and are generally able to charge what they want for products B) Retail stores try to attract “cherry-picking” consumers because those consumers buy the products with the highest margins for the store C) Marketers believe that consumers don’t notice changes in quantity as much as they notice changes in price D) Because the cigarette industry is an oligopoly, cigarette companies simply raise prices when they want to increase or maintain profit margins E) All of these are correct Answer: C 2) ________ are goals that producers hope to attain in pricing products. A) Pricing objectives B) Pricing targets C) Return on investment D) Profit targets E) Profit returns Answer: A 3) Which of the following is not a consideration when pricing products? A) Protecting trademarks B) Company image C) Attaining a desired market share D) Surviving in competitive marketplaces E) Maximizing profits Answer: A 4) What are the two main pricing objectives that are observable in corporate pricing? A) Market share and company image B) Advertising and sales promotion C) Company survival in a competitive marketplace and profit maximization D) Market share and profit maximization E) Advertising and profit maximization Answer: D 5) Prices set to maximize the profits on a product usually result in A) prices set high. B) prices set to sell the most products. C) prices set on the basis of return on investment. D) prices set to achieve 15 percent return on sales. E) prices set low. Answer: C 6) In the U.K., one insurer has introduced a system where car insurance premiums vary depending on how much, where, and when a person drives. This system is designed to A) maximize profits. B) help the company survive in a competitive marketplace. C) improve the company’s image. D) attain a desired market share. E) protect trademarks. Answer: A 7) Companies often price their products to establish ________, a company's percentage of the total market sales for a specific product type. A) breakeven point B) sales percentage C) variable costs D) fixed costs E) market share Answer: E 8) By stocking a new, highly visible line of shampoos priced lower than local stores, Jack is trying to increase A) the quality of hair of the youth in the area. B) the break-even point. C) yield management. D) fixed costs so that the variable costs would decrease. E) the market share of the hair product market. Answer: E 9) A music storeowner would begin to price CDs by taking into consideration all of the following costs except A) market share objectives. B) utilities and insurance. C) store rent and staff salaries. D) product displays. E) cost of buying CDs from the manufacturer. Answer: A 10) Which of the following would not be a consideration for Trimar Video when pricing products? A) Pricing according to the company image B) Pricing to maximize profits C) Pricing to retain trademarks D) Pricing to survive in competitive marketplaces E) Pricing to attain a desired market share Answer: C 11) What is "markup"? A) Markup is the point at which the firm covers the fixed and variable costs B) Markup is the amount of money left over after all expenses have been deducted from revenues C) Markup is an amount equal to demand divided by product cost D) Markup is an amount added to the cost of the item to arrive at the selling price E) Markup is the point where demand equals supply Answer: D 12) A product's cost plus ________ results in the sales price. A) margin B) variable price C) fixed price D) markup E) breakeven price Answer: D 13) The formula for markup percentage is A) fixed costs/variable costs. B) variable costs/markup. C) sales price/variable costs. D) sales price/markup. E) markup/sales price. Answer: E 14) The amount added to a product's cost to meet profit targets is usually expressed as a percentage of A) selling price. B) selling costs. C) component costs. D) total costs. E) wholesale price. Answer: A 15) How is markup percentage calculated? A) By dividing the selling price by fixed costs B) By adding the selling price and the cost of advertising C) By dividing the selling price by the dollar amount of the markup D) By dividing the dollar amount of the markup by the selling price E) By dividing inventory by the selling price Answer: D 16) Markup is usually stated as a percentage of A) selling price. B) total costs. C) component costs. D) selling costs. E) wholesale price. Answer: A 17) Sally is selling bracelets for $16.00 and the markup is $6.40. What is the markup percentage? A) 40% B) 12.5% C) 19.6% D) 36.4% E) 54% Answer: A 18) Sara Jane is selling posters at the sale price of $12.00, and the markup percent is 35%. What is the dollar amount of the markup? A) $7.80 B) $4.20 C) $7.75 D) $3.50 E) none of these Answer: B 19) Assume that the cost of one unit of product is $8 and the store sells the product for $15. What is the markup percentage? A) 46.7 percent B) 41.3 percent C) 150.3 percent D) 214.5 percent E) 66.3 percent Answer: A 20) Assume that the cost of one unit of product is $12 and the store sells the product for $22. What is the markup percentage? A) 32 percent B) 41 percent C) 45 percent D) 21 percent E) 66 percent Answer: C 21) How would the manager of Silks Courtyard Cafe calculate markup percentage? A) The markup is divided by the sales volume B) The markup is divided by sales price C) The total costs are divided by total fixed costs D) The sales price is divided by profit E) The fixed costs are divided by variable costs Answer: B 22) A 10 kg. bag of soil costs Green corp $6. If management prices the bag at $15, the markup percentage is A) 40%. B) 10%. C) 34%. D) 60%. E) 25%. Answer: D 23) Which of the following is correct with regard to the box entitled “Men and Cars: Unrequited Love”? A) Auto Vault has experienced difficulties in expanding its customer base B) Auto Vault customers are purchasing not only storage and service, but also peace of mind C) The owner of Auto Vault does not maintain personal contact with his customers because he does not want to know if his customers are hiding luxury cars from their spouses D) Price is the major consideration for customers when they purchase Auto Vault’s services E) All of these are correct Answer: B 24) Costs that change with the quantity of a product that is produced or sold are A) on-going costs. B) variable costs. C) fixed costs. D) product costs. E) selling costs. Answer: B 25) Costs that are unaffected by the quantity of a product that is produced or sold are A) variable costs. B) on-going costs. C) selling costs. D) fixed costs. E) product costs. Answer: D 26) Which of the following is one of the basic tools used to determine the business impact before setting prices? A) Break-even analysis B) Negotiation with each customer C) Process capability analysis D) Company image pricing E) Competitive product analysis Answer: A 27) What is the purpose of using break-even analysis when attempting to set prices? A) To determine the total costs of the product B) To show the cost, volume, and profit relationships C) To compare demand and supply D) To reflect the markup needed to make a profit E) To show the costs which must be considered in setting prices Answer: B 28) What information is provided to the manager by performing a break-even analysis? A) The break-even point identifies the total costs B) The break-even point identifies the point where variable costs equal fixed costs C) Sales volume above the break-even point makes a profit for the firm D) The break-even point identifies the amount of markup E) The break-even point identifies the intersection of the demand and supply curves Answer: C 29) If total fixed costs are $100 000, the price for which the product sells is $15.00, and variable cost per unit is $8.00, what is the break-even point? A) 20 275 units B) 16 274 units C) 14 286 units D) 18 283 units E) 12 356 units Answer: C 30) Shiras Watch Depot prices all watches at $150. The variable cost per watch is $70 and the fixed costs are $55 000. What is Shiras' break-even point in units? A) 687.50 B) 806.25 C) 702.00 D) 300.00 E) 453.75 Answer: A 31) A highly successful bakery specializes in making cherry tarts. The bakery workers are paid by the number of tarts that they make and sell. Which of the following costs at the bakery are not variable? A) Cherries B) Sugar C) Flour for tarts D) Rental fee on bakery's building E) They are all variable Answer: D 32) From the choices below, pick the best definition of the term fixed costs. A) Costs that are unaffected by the number of goods sold by a firm B) Costs that seem to stay the same from year to year C) The cost of acquiring fixed assets D) Setting a price for a product and sticking to it E) None of these Answer: A 33) Which of the following best represents the formula for the breakeven point? A) Total variable costs divided by (price minus variable costs) B) Total variable costs divided by (price minus fixed costs) C) Total fixed costs divided by (price minus variable costs) D) Total fixed costs divided by (price minus fixed costs) E) Total revenue divided by (price minus fixed costs) Answer: C 34) What are the two basic tools used in price-setting? A) Profit maximization and market share B) Advertising and sales promotion C) Cost-oriented pricing and break-even analysis D) Cost-oriented pricing and profit maximization E) Cost-oriented pricing and market share Answer: C 35) Which of the following tools is used to determine how many units of a product a company must sell before all of its fixed costs are covered and it begins to make a profit? A) Price lining B) Return on investment C) Cost-oriented pricing D) Psychological pricing E) Break-even analysis Answer: E 36) Which of the following is correct with regard to breakeven analysis? A) Variable costs are really all that is important B) Fixed costs are all that really is important C) Some costs are unaffected by the number of units of product that are sold D) Generally speaking, retailers should charge higher prices so that they will reach the breakeven point earlier E) Breakeven analysis fails to take into account the slope of the demand curve Answer: C 37) As prices fall, the number of units that must be sold before the break-even point is reached A) decreases. B) doubles. C) triples. D) increases. E) it is not possible to say with the information given. Answer: D 38) Trimar Videos is re-evaluating its pricing on its existing products. Which of the following is not one of its options? A) Price set at the prevailing market rate B) Price set below the prevailing market rate C) Price set near the prevailing market rate D) Price set above the prevailing market rate E) A skimming pricing strategy Answer: E 39) Pricing above the market plays on the common assumption that A) consumers are so foolish that they won't know the difference. B) although consumers will not admit it, they like to pay higher prices. C) a desperate business in danger of failing must get the most for each item it sells. D) higher prices are much more popular now. E) higher price means higher quality. Answer: E 40) Pricing below prevailing market price can succeed for a firm if A) the firm has effective promotional tactics and gimmicks. B) the firm can effectively criticize its competitors' products. C) the firm can offer a product of acceptable quality. D) the public doesn't learn that the firm's product is indeed inferior. E) none of these. Answer: C 41) What results can be expected if Trimar Videos used a price skimming strategy to price its new video equipment? A) May allow the firm to earn a large profit on sales B) Generates a lot of consumer interest and very low profits C) Permits the firm to gain entrance to a market and then later adjust the price to a More realistic figure D) Generates a lot of consumer interest E) very low profits Answer: A 42) What results can be expected if Trimar Videos uses a price skimming strategy to price its new video equipment? A) It may allow the firm to earn a large profit on each unit of sales of the product B) It will generate a lot of trial purchases of the product C) It will generate a lot of consumer interest D) It permits the firm to gain entrance to a market and then later adjust the price to a more realistic figure E) It will result in price fixing charges by the government Answer: A 43) Which of the following would not be anticipated result when Trimar Videos uses a price-skimming strategy? A) The high price will keep away potential competitors B) High profits will attract competitors C) High profits permit the firm to cover product development costs D) It convinces consumers that a product is truly different from those already on the market E) It may allow high profits initially Answer: A 44) Which of the following is correct with regard to the pricing of existing and new products? A) Price skimming is generally most effective for consumer goods, but penetration pricing is generally most effective for industrial goods B) The penetration pricing option is generally most effective for both consumer and industrial goods C) In the car rental business, setting prices below the market generally works best D) Penetration pricing is generally superior to a skimming strategy for new products E) None of these Answer: E 45) Which of the following is an anticipated result when Manda Videos uses s price-skimming strategy? A) High profits permit the firm to cover product its development costs B) It convinces consumers that a product is truly different from those already on the market C) It may allow high profits initially D) High profits will attract competitors E) All of these Answer: E 46) Which of the following is most likely to generate the highest amount of profits to cover the expenses of developing new products? A) Market pricing B) Penetration pricing C) Price skimming D) Price lining E) Price fixing Answer: C 47) What pricing strategy has generally been used for HDTV? A) Penetration pricing B) Price lining C) Market pricing D) Price fixing E) Price skimming Answer: E 48) The pricing strategy that is used to create consumer interest and stimulate trial purchases of a new product is A) penetration pricing. B) price lining. C) market pricing. D) price fixing. E) price skimming. Answer: A 49) If Trix, a new electronics company, begins producing TVs and prices them as high as possible then Trix is using A) a penetration-pricing strategy. B) price leadership. C) a price skimming strategy. D) price fixing. E) price lining. Answer: C 50) Which of the following is correct with regard to the pricing of new products? A) There are two basic strategies available: follow-the-leader and price leadership B) Price skimming is more effective than penetration pricing C) Penetration pricing is generally more effective than price skimming D) Price skimming involves trying to sell a new product only to customers with the highest income levels E) Penetration pricing is designed to stimulate trial purchase Answer: E 51) Which of the following is most likely to generate profits to cover the expenses of developing new products? A) Price skimming B) Price lining C) Penetration pricing D) Price fixing E) Market pricing Answer: A 52) Which of the following is most likely to be used to establish a new product in a market which already has similar products? A) Penetration pricing B) Market pricing C) Price skimming D) Price fixing E) Price lining Answer: A 53) Price skimming involves A) setting prices in uneven dollar amounts. B) setting a limited number of prices for certain categories of products. C) setting an initial high price to cover new product costs and generating a profit. D) setting an initial low price to establish a new product in the market. E) taking advantage of the fact that consumers do not always respond rationally to stated prices. Answer: C 54) When a company sets an initial low price to establish a new product in the market, they are using A) anti-bargain pricing. B) penetration pricing. C) preliminary pricing. D) price skimming. E) introductory splurge. Answer: B 55) Penetration pricing involves A) setting prices in uneven dollar amounts. B) setting an initial low price to establish a new product in the market. C) taking advantage of the fact that consumers do not always respond rationally to stated prices. D) setting an initial high price to cover new product costs and generating a profit. E) setting a limited number of prices for certain categories of products. Answer: B 56) Many e-tailers, such as eBay and Priceline, use ________ pricing. A) penetration B) skimming C) dynamic D) psychological E) odd-even Answer: C 57) What term identifies a company's policy of offering all items in certain categories (e.g., men's suits) at a limited number of prices? A) Price skimming B) Boundary pricing C) Discounting D) Penetration pricing E) Price lining Answer: E 58) Which of the following is usually associated with price points? A) Psychological pricing B) Price lining C) Price discounting D) Market pricing E) Price fixing Answer: B 59) "Sears Good," "Sears Better," and "Sears Best" are examples of A) market pricing. B) price fixing. C) psychological pricing. D) price lining. E) price discounting. Answer: D 60) Setting prices by offering all items in certain categories at a limited number of prices is A) psychological pricing. B) price fixing. C) market pricing. D) price discounting. E) price lining. Answer: E 61) Psychological pricing involves A) setting an initial low price to establish a new product in the market. B) setting prices in uneven dollar amounts. C) setting a limited number of prices for certain categories of products. D) setting an initial high price to cover new product costs and generating a profit. E) taking advantage of the fact that consumers do not always respond rationally to stated prices. Answer: E 62) If Louisa's Craft Supply Store uses odd-even psychological pricing, then it would likely price its yarn at A) $4.50 per ball. B) $4 per ball. C) $5 per ball. D) $4.95 per ball. E) $6 per ball. Answer: D 63) Julia, owner of Julia's Craft Supply Store would like to take advantage of the fact that customers are not completely rational when making buying decisions and may prefer prices that are not stated in even dollar amounts. Which pricing tactic is she interested in? A) Discounting B) Price skimming C) Psychological pricing D) Skewed pricing E) Price lining Answer: C 64) The idea that consumers consider only the round dollar amount of an item when purchasing goods has led to A) price lining. B) cash discounting. C) threshold pricing. D) price skimming. E) odd-even psychological pricing. Answer: E 65) ________ involves taking advantage of the fact that consumers do not always respond rationally to stated prices. A) Odd-even pricing B) Penetration pricing C) Psychological pricing D) Skimming pricing E) Pricing lining Answer: C 66) Odd-even pricing involves A) setting a limited number of prices for certain categories of products. B) setting an initial high price to cover new product costs and generating a profit. C) taking advantage of the fact that consumers do not always respond rationally to stated prices. D) setting prices in uneven dollar amounts. E) setting an initial low price to establish a new product in the market. Answer: D 67) "We can offer you a quality men's suit for under $200," the salesman says. The actual price is $199.99. This is an example of A) salesman's jabber. B) price choking. C) odd-even pricing. D) price detailing. E) price lining. Answer: C 68) Hyatt Hotels uses ________ for frequent business users and large-scale events, such as conventions and trade shows. A) market pricing B) price fixing C) price lining D) psychological pricing E) price discounting Answer: E 69) Nell's Nurseries offers lower prices for large quantity purchases. This is an example of A) price lining. B) price fixing. C) market pricing. D) price discounting. E) psychological pricing. Answer: D 70) Which of the following is not a common form of discounting? A) Trade discounts B) Skimming discounts C) Seasonal discounts D) Quantity discounts E) Cash discounts Answer: B 71) When is discounting used to set prices? A) When attempting to stimulate sales B) When odd-even psychological pricing is not successful C) When conducting a break-even analysis D) When a price-skimming strategy is used E) When profit margins are too low Answer: A 72) The price eventually set for a product is not always the price at which all items are sold. Many companies have to offer ________ in order to sell their products. A) price lining B) discounts C) odd-even pricing D) psychological pricing E) giveaways Answer: B 73) Searchmont Ski Resort was finding that the spring season was a particularly slow time for chalet rentals. In order to increase the occupancy rate, Searchmont implemented a A) quantity discount. B) seasonal discount. C) skimming discount. D) cash discount. E) trade discount. Answer: B 74) Chartwell’s Cafeteria Services purchased such a great volume of pop from Coca-Cola they were given a A) cash discount. B) trade discount. C) seasonal discount. D) quantity discount. E) break-even discount. Answer: D 75) The combination of distribution channels that a firm selects to get a product to its end users is its A) distribution mix. B) distribution strategy. C) distribution network. D) channel selection. E) channel intermediaries. Answer: A 76) A wholesaler is A) the combination of distribution channels by which a firm gets its products to end-users. B) an intermediary who sells products to other businesses for resale to final consumers. C) an individual or firm that helps to distribute a product. D) a network of independent companies through which a product passes from producer to end-user. E) an intermediary who sells products directly to consumers. Answer: B 77) A retailer is A) an individual or firm that helps to distribute a product. B) an intermediary who sells products to other businesses for resale to final consumers. C) an intermediary who sells products directly to consumers. D) a network of independent companies through which a product passes from producer to end-user. E) the combination of distribution channels by which a firm gets its products to end-users. Answer: C 78) A distribution channel is A) an intermediary who sells products directly to consumers. B) an intermediary who sells products to other businesses for resale to final consumers. C) the combination of distribution channels by which a firm gets its products to end-users. D) an individual or firm that helps to distribute a product. E) a network of independent companies through which a product passes from producer to end-user. Answer: E 79) The distribution mix is A) an intermediary who sells products directly to consumers. B) an individual or firm that helps to distribute a product. C) an intermediary who sells products to other businesses for resale to final consumers. D) a network of independent companies through which a product passes from producer to end-user. E) the combination of distribution channels by which a firm gets its products to end-users. Answer: E 80) An intermediary is A) the combination of distribution channels by which a firm gets its products to end-users. B) a business that sells products to other businesses for resale to final consumers. C) a business that sells products directly to consumers. D) an individual or firm that helps to distribute a product. E) a network of independent companies through which a product passes from producer to end-user. Answer: D 81) A(n) ________ sells products to a(n) ________ who sells them to customers. A) retailer; wholesaler B) wholesaler; intermediary C) intermediary; wholesaler D) intermediary; retailer E) wholesaler; retailer Answer: E 82) A(n) ________ is the path that a product follows from producer to end user. A) distribution mix B) intermediary channel C) distribution channel D) flow of goods network E) intermediary flow chart Answer: C 83) Which of the following is a function of an intermediary? A) An intermediary participates in all of these activities B) Financing manufacturers' capital expansion programs C) Product development D) Manufacturing production E) Participate in the distribution of products Answer: E 84) Where must all consumer products distribution channels begin? A) The industrial user B) The retailer C) The government D) The wholesaler E) The manufacturer/producer Answer: E 85) Channel number one has which participants? A) Manufacturer, agent, consumer B) Manufacturer, wholesaler, consumer C) Manufacturer, consumer D) Manufacturer, retailer, consumer E) Manufacturer, wholesaler, retailer, consumer Answer: C 86) Channel number two has which participants? A) Manufacturer, agent, consumer B) Manufacturer, wholesaler, consumer C) Manufacturer, consumer D) Manufacturer, retailer, consumer E) Manufacturer, wholesaler, retailer, consumer Answer: D 87) Channel number three has which participants? A) Manufacturer, agent, consumer B) Manufacturer, wholesaler, consumer C) Manufacturer, consumer D) Manufacturer, retailer, consumer E) Manufacturer, wholesaler, retailer, consumer Answer: E 88) Channel number four has which participants? A) Manufacturer, agent, consumer B) Manufacturer, wholesaler, consumer C) Manufacturer, consumer D) Manufacturer, retailer, consumer E) Manufacturer, wholesaler, retailer, consumer Answer: A 89) Which distribution channel is used by companies such as Gateway 2000, an internet storefront? A) Producer to retailer to consumer B) Producer to agent to retailer to consumer C) Producer to agent to wholesaler to retailer to consumer D) Producer to wholesaler to retailer to consumer E) Producer to consumer Answer: E 90) Wagner's family-owned grocery store sells approximately 12 cases of canned potatoes per year. It orders one case a month from a local wholesaler. This is an example of a A) channel 4 distribution system. B) channel 3 distribution system. C) channel 2 distribution system. D) channel 5 distribution system. E) channel 1 distribution system. Answer: B 91) Lawless Container Corp. produces packaging containers and sells them to industrial buyers such as Fisher-Price and Mr. Coffee. Lawless is a A) channel 1 system. B) channel 4 system. C) channel 2 system. D) channel 3 system. E) none of these. Answer: A 92) The most widely used channel for industrial goods is A) producer to wholesaler to industrial user. B) producer to industrial user. C) producer to agent to retailer to industrial user. D) producer to retailer to industrial user. E) producer to agent to wholesaler to retailer to industrial user. Answer: B 93) Which channel is most likely to be used for steel, Dell Computers, or packaging containers? A) Producer to retailer to industrial user B) Producer to wholesaler to industrial user C) Producer to agent to wholesaler to retailer to industrial user D) Producer to industrial user E) Producer to agent to retailer to industrial user Answer: D 94) Which channel is most likely to be used for accessory equipment (computer terminals, office equipment) and supplies (diskettes, copier paper) ? A) Producer to agent to wholesaler to retailer to industrial user B) Producer to agent to retailer to industrial user C) Producer to wholesaler to industrial user D) Producer to industrial user E) Producer to retailer to industrial user Answer: C 95) Which of the following represents the end of every distribution channel? A) A manufacturer B) A broker C) A retailer D) Users E) A wholesaler Answer: D 96) Goodyear and Levi’s have their own retail outlets. This is an example of which distribution channel? A) Direct distribution B) Retail distribution C) Wholesale distribution D) Distribution by agents E) Distribution by brokers Answer: B 97) Avon, Dell, and Tupperware use the __________ channel of distribution. A) direct distribution B) retail distribution C) wholesale distribution D) distribution by agents E) distribution by brokers Answer: A 98) When Vancouver-based Uniglobe Travel International books flight reservations, it is an illustration of which channel of distribution? A) Direct distribution B) Retail distribution C) Wholesale distribution D) Distribution by agents/brokers E) None of these Answer: D 99) The real estate industry relies on which channel of distribution? A) Direct distribution B) Retail distribution C) Wholesale distribution D) Distribution by agents/brokers E) Distribution by vendors Answer: D 100) Which of the following is correct with regard to non-direct distribution? A) Non-direct distribution usually means lower prices B) The value added by intermediaries is generally exceeded by the costs of the services they provide C) Eliminating intermediaries eliminates the tasks they perform and the costs they incur D) Intermediaries provide an essential service, but it may not be a low-cost service E) There is no need for intermediaries in business activities like those on eBay Answer: D 101) In the direct channel of distribution, how many intermediaries are there between the producer and the consumer? A) 0 B) 1 C) 2 D) 3 E) 4 Answer: A 102) In which channel of distribution are there two intermediaries between the producer and the consumer? A) Direct B) Indirect C) Retail distribution D) Wholesale distribution E) Distribution by agents/brokers Answer: D 103) The “wholesale” channel of distribution has which of the following participants? A) Manufacturer, consumer B) Manufacturer, broker, consumer C) Manufacturer, wholesaler, retailer, consumer D) Manufacturer, retailer, consumer E) Manufacturer, agent, consumer Answer: C 104) Which of the following intermediaries usually receive commissions based on the prices of the goods they sell? A) Produce markets B) Wholesalers C) Retailers D) Agents E) All of these Answer: D 105) Which of the following intermediaries represents several producers and is paid a commission based on invoice values? A) Agent/broker B) Sales office C) Sales branch D) Merchant wholesaler E) Collective agent-distribution Answer: A 106) Which of the following is not a characteristic of an agent/broker? A) Independent business firm B) Represents many companies C) Value lies in knowledge of markets and merchandising expertise D) Owned by the manufacturing firm E) Does not own the product Answer: D 107) How do agents differ from brokers? A) Agents receive commissions B) Brokers take title to merchandise, agents do not C) Brokers provide information services to customers, agents do not D) Agents take title to merchandise, brokers do not E) Agents deal in the product lines of a few producers usually on a long term basis, whereas brokers match sellers and buyers as needed Answer: E 108) What explains the expanding use of wholesalers? A) Delivery time between the producer and the consumer is faster than it used to be B) Wholesalers have a bigger distribution network C) The cost of retail space has risen, thereby creating pressure to limit storage space in retail outlets D) The development of a good truck distribution system and highway system permitted quicker delivery of ordered goods E) The order-cycle time has declined Answer: C 109) Why is Wal-Mart an example of retail distribution? A) Because it is so important on the Canadian retail scene B) Because it buys products directly from manufacturers C) Because it employs more retail employees than any other firm D) Because it uses sales agents only for its sporting goods department E) Because many industrial buyers shop there Answer: B 110) Which of the following intermediaries represents several producers and is paid a commission based on invoice values? A) Agent/broker B) A retail outlet C) Sales office D) A wholesaler E) A sales branch Answer: A 111) Jim Bradley represents several producers and is paid a commission based on invoice values. Which of the following types of intermediaries is Jim? A) Wholesaler B) Sales office C) Sales branch D) Agent/broker E) Rack jobber Answer: D 112) Which distribution strategy attempts to get the largest market exposure possible? A) Distribution by trucks which can reach almost any point in Canada B) Intensive distribution C) Distribution by air D) Selective distribution E) Exclusive distribution Answer: B 113) Caramilk bars are an example of _____________ distribution, whereas Jaguar cars are an example of ______________ distribution. A) exclusive; selective B) selective; exclusive C) intensive; selective D) selective; selective E) intensive; exclusive Answer: E 114) Companies like Black & Decker have product lines which do not require intense market exposure to increase sales. Which distribution strategy is it likely to use? A) Intensive distribution B) Industrial distribution C) Discriminatory distribution D) Exclusive distribution E) Selective distribution Answer: E 115) Fiama Electric, a new home appliance producer wants to get the largest market exposure possible. Which distribution strategy should Fiama use? A) Wholesalers B) Distribution by trucks which can reach almost any point in Canada C) Distribution by air D) Intensive distribution E) Selective distribution Answer: D 116) The owner of Fiama Electric overheard the manager of a competing firm discussing his new exclusive distribution strategy. You explain to him what this strategy entails A) distributing the product through as many warehouses and retailers as possible, thereby excluding no one. B) distributing through the use of a limited number of outlets for a product. C) only one trucking firm is given the exclusive transportation contract to deliver the products. D) a firm selects only those wholesalers and retailers who will give exclusive attention to their product. E) the manufacturer grants the right to distribute and sell the product to only one wholesaler or retailer in an area. Answer: E 117) Which term is used to describe a situation in which one member of a distribution system has more power than others and is viewed as receiving preferential treatment? A) Channel conflict B) Selective distribution C) Vertical marketing system D) Corporate vertical marketing system E) Exclusive distribution Answer: A 118) The Limited is part of a(n) ____________, while IGA is part of a(n) ____________. A) corporate vertical marketing system; contractual vertical marketing system B) intensive distribution system; exclusive distribution system C) administrative vertical marketing system; corporate vertical marketing system D) exclusive distribution system; selective distribution system E) contractual vertical marketing system; corporate vertical marketing system Answer: A 119) In a(n) ____________, all stages in the channel are under single ownership, while in a(n) ___________, channel members sign contracts agreeing to specific duties and rewards. A) contractual vertical marketing system; corporate vertical marketing system B) intensive distribution system; exclusive distribution system C) administrative vertical marketing system; corporate vertical marketing system D) exclusive distribution system; selective distribution system E) corporate vertical marketing system; contractual vertical marketing system Answer: E 120) Which term describes a vertical marketing system (VMS) where all stages in the channel are under single ownership? A) Administered VMS B) Contractual VMS C) Consolidated VMS D) Proprietary VMS E) Corporate VMS Answer: E 121) Which of the following is not a function of a merchant wholesaler? A) Storage B) Delivery C) Buying D) Credit extension E) Manufacturing Answer: E 122) An independently owned wholesaler who purchases, stores, and repackages a product before selling the product to his or her customer is known as a(n) A) agent/broker. B) contract carrier. C) sales branch. D) distributor. E) merchant wholesaler. Answer: E 123) Which of the following is not a type of retail outlet? A) Hypermarket B) Convenience store C) Merchant wholesaler D) Specialty store E) Department store Answer: C 124) Department stores, supermarkets, and specialty stores are all A) bargain retailers. B) catalogue showrooms. C) discount houses. D) syndicated sellers. E) product line retailers. Answer: E 125) Which type of retailing activity is most likely to be found in a suburban shopping mall? A) Convenience stores B) Specialty stores C) Video marketing stores D) Wholesalers E) Factory outlets Answer: B 126) Which of the following is not a feature of a department store? A) Offers delivery services B) A large store with specialized departments C) A wide range of goods is carried D) Sells a wide variety of low-priced merchandise E) Offers a variety of services such as credit plans and a liberal merchandise return policy Answer: D 127) Edna's Specialty Bakery produces large cakes for commercial events and weddings. Edna's Bakery is a(n) A) convenience store. B) one-product store. C) specialty store. D) off-price store. E) variety store. Answer: C 128) Which of the following retail stores do manufacturers own? A) Factory outlets B) Off-price stores C) Warehouse club D) Hypermarkets E) Source outlets Answer: A 129) Wal-Mart is known as a ________ because it is set up as a bargain retail store that offers major items such as televisions and large appliances at discount prices. A) discount house B) convenience store C) factory outlet D) category killer E) department store Answer: A 130) ________ differ from most bargain retailers in that they do not feature low prices. They do, however, offer speedy service and accessible locations. A) Warehouse clubs B) Catalogue showrooms C) Factory outlets D) Convenience stores E) Wholesale clubs Answer: D 131) _________ and __________ are examples of bargain retailers. A) Zellers; The Bay B) Wal-Mart; Zellers C) Sears; Walmart D) Sears; The Bay E) 7-Eleven; The Bay Answer: B 132) What is the appeal of merchandise in a factory outlet? A) The outlet stores keep prices low by locating in a low rent area and operating on a cash only basis B) The outlet is organized into different departments such as children's clothing, bedding, drapes, and men's clothing C) The merchandise consists of many brand-name clothing, groceries, and appliances D) Prices are lower because the outlet is owned by the manufacturer and bypasses intermediaries E) Prices are lower because the outlet owners purchase the overstocked merchandise from manufacturers or large chains at a reduced price Answer: D 133) Which of the following is correct with regard to the box entitled “The Bag Controversy”? A) The retailing sector has struggled to find opportunities to “go green” B) Most of the cities in North America have now banned the use of plastic bags in grocery stores C) Because they are made from oil, plastic bags degrade quickly in landfills D) Consumers are increasingly demanding that retailers provide more eco-friendly packaging for products E) All of these are correct Answer: D 134) Direct-response retailing includes all of the following except A) direct selling. B) publicity. C) telemarketing. D) mail order. E) mail marketing. Answer: B 135) Which of the following is the oldest form of direct-response retailing? A) Mail order B) Telemarketing C) Electronic retailing D) Mail marketing E) Direct selling Answer: E 136) The use of the telephone to sell directly to consumers is called A) telemarketing. B) mail marketing. C) mail order. D) direct selling. E) electronic retailing. Answer: A 137) In 2010, Canadians bought approximately ________ worth of goods and services over the internet. A) $12.0 billion B) $800 million C) $1.2 trillion D) $444.6 billion E) $50.4 billion Answer: A 138) Which of the following is correct with regard to the boxed insert entitled "Exploiting E-Distribution Opportunities"? A) When retailers initially went online, they combined their internet site with their bricks-and-mortar retail stores B) Walmart is dominant in bricks-and-mortar stores, but has not shown much interest in online retailing C) The fastest growing cell phone activity is shopping directly from mobile devices D) The movement to online retailing has now peaked E) None of these Answer: D 139) The benefits of cybermalls include all of the following except A) speed. B) 24-hour access. C) catalogue marketing. D) convenience. E) an efficient search that avoids the "click-'til-you-drop" syndrome. Answer: C 140) Live Person is a leading provider of real-time sales and customer service for over 3,000 Web sites and is an example of A) multilevel marketing. B) electronic marketing. C) interactive marketing. D) video marketing. E) telemarketing. Answer: C 141) Dollar Rent A Car pays Expedia a commission for each booking that comes through this channel. This is known as A) influence peddling. B) direct-response retailing. C) telemarketing. D) syndicated selling. E) interactive marketing. Answer: D 142) ________ help internet consumers by gathering and sorting information on comparison products and product features. A) Electronic retailers B) Direct-response sellers C) Syndicated sellers D) E-agents E) Cybermalls Answer: D 143) A ________ agent helps Internet consumers by gathering and sorting information they need to make purchases. A) wholesale B) syndicate C) shopping D) business E) cybermall Answer: C 144) Which of the following is correct with regard to e-intermediaries? A) It is illegal for one website to offer another website a commission for referring customers B) Shopping agents take possession of the goods they sell C) Most cataloguers are now taking an interest in the internet, but there are still only a minority of them doing internet business D) Internet spending in 2010 represented less than 5 percent of all retail spending in Canada E) One problem with cybermalls is that choice is limited Answer: D 145) RMH uses the telephone to sell directly to consumers. Which direct response retailing method is RMH using? A) Mail marketing B) Direct selling C) Mail order D) Electronic retailing E) Telemarketing Answer: E 146) Which of the following is not included in physical distribution operations? A) Transporting goods B) Advertising C) Warehousing goods D) Customer-service operations E) Order processing Answer: B 147) The two major categories of physical distribution are A) transportation and materials handling. B) production and operations. C) inventory control and quality control. D) materials handling and inventory control. E) warehousing and transportation. Answer: E 148) Producers of seasonal items, such as agricultural crops, use this type of warehouse. A) Public B) Distribution centre C) Private D) Containerization E) storage Answer: E 149) ________ refers to the activities needed to move products efficiently from manufacturer to consumer. A) Order processing B) Customer-service operations C) Warehousing goods D) Physical distribution E) Direct marketing Answer: D 150) The two major categories of physical distribution are A) materials handling and inventory control. B) warehousing and transportation. C) inventory control and quality control. D) transportation and materials handling. E) production and operations. Answer: B 151) ________ are independently owned and operated. A) Private warehouse B) Private-public warehouse C) Public warehouse D) General warehouse E) All of these Answer: C 152) A wholesale grocer purchases groceries by truckload or railroad boxcar load and then fills individual grocery store orders from inventory. What transportation method will typically be used to ship these grocery orders to supermarkets within a 100-mile radius of the warehouse? A) Air B) Rail C) Water D) Pipeline E) Truck Answer: E 153) What is the advantage of using trucks as a method of transporting goods? A) Lowest rates B) Unaffected by weather conditions C) Fastest delivery times D) Less packaging of the product is required: therefore, packaging costs are lower E) flexibility, dependability, and fast service to most parts of Canada Answer: E 154) Which of the following modes of transportation is used primarily to transport heavy, bulky items such as cars, steel and coal? A) Air B) Pipeline C) Trucks D) Water E) Railroads Answer: E 155) What is a "piggy-back" service? A) Shipping by a combination of truck and rail B) Airlines that ship race horses to Europe in specially equipped airplanes C) Shipping by a combination of water and rail D) Shipping by a combination of air and rail E) Shipping by a combination of water and truck Answer: A 156) The combined use of several different transportation methods is called A) intermodal transportation. B) unitization. C) containerization. D) common carrier. E) freight forwarding. Answer: A 157) ________ are able to deliver a steady flow of product, unaffected by the weather. A) Water carriers B) Railroads C) Trucks D) Planes E) Pipelines Answer: E 158) "Birdyback" and "piggyback" are examples of A) containerization. B) intermodal transportation. C) unitization. D) common carriers. E) freight forwarding. Answer: B 159) The combined use of several different transportation methods is called A) containerization. B) piggyback. C) freight forwarding. D) unitization. E) none of these. Answer: E 160) Yellowknife Inc. is a small manufacturing company located in the far north of Canada. What transportation mode are they most likely to use? A) Trucks B) Trains C) Planes D) Water carriers E) Pipelines Answer: C 161) All of the following are advantages of plane transportation except A) reduced shipping costs. B) speed. C) reduced inventory carrying costs. D) reduced handling costs. E) reduced costs in packing. Answer: A 162) Doreen owns a seafood restaurant in Alberta. She would like to have the freshest seafood possible, so her preferred method of delivery would be A) plane. B) train. C) truck. D) any of these would deliver fresh seafood in an equal amount of time. E) none of these are good delivery methods for seafood. Answer: A 163) Of all transportation modes ________ is the least expensive. A) trains B) pipelines C) water carriers D) planes E) trucks Answer: C 164) Which of the following is correct with regard to the various modes of transportation? A) Water transportation is the least expensive, but slowest of the various modes B) One of the disadvantages of air travel is that it increases packing and handling costs C) Trucks are a particularly good choice for long-distance distribution and for less expensive products D) Overall, trucks are the best way to transport goods E) All of these Answer: A 165) National Semiconductor has streamlined its delivery system by A) opening six additional warehouses around the world. B) running their own storage, sorting and shipping activities. C) opening additional distribution centres around the world. D) shutting down six warehouses around the world. E) none of these are correct. Answer: D TRUE/FALSE QUESTIONS. Write 'T' if the statement is true and 'F' if the statement is false. 166) A corporation which has an objective of achieving a high market share will almost always have a second objective to maximize profits. Answer: False 167) Two major objectives of pricing are maximization of profit and achieving market share. Answer: True 168) When Coke tested a vending machine that automatically raised the price of a Coke when the temperature went up, that was an example of a profit-maximizing strategy. Answer: True 169) When Walmart cut prices in an attempt to attract customers who were shopping for food at supermarkets, this was an example of a market share pricing objective. Answer: True 170) Cost-oriented pricing of products takes into account the supply and demand for the product at various prices. Answer: False 171) In cost-oriented pricing, over the long run, the market price will always settle where the demand and supply curves meet. Answer: False 172) Markup is usually expressed as a percent of cost. Answer: False 173) The markup percentage is determined by dividing total sales revenue by the number of store employees. Answer: False 174) In order for a company to be successful its pricing must cover its fixed costs and its variable costs. Answer: True 175) Movies seem to be a case when cost-oriented pricing is not relevant. Answer: True 176) A break-even analysis is used to determine the impact on the business when setting a price for the product. Answer: True 177) A break-even analysis is used to determine how many units must be sold at a given price before the company begins to make a profit. Answer: True 178) A retail seller of music would like to hit the break-even point as late as possible so profits will be maximized. Answer: False 179) Pricing strategy refers to pricing as a planning activity that affects the marketing mix. Answer: True 180) Pricing new products is usually a choice between skimming and penetration. Answer: True 181) Price lining is a tactic used for new products and requires that prices be set very high to cover product development and introduction costs. Answer: False 182) Price lining is the practice of pricing goods slightly under a whole dollar amount (e.g., $9.95, $1.95). Answer: False 183) A company which sets prices above the market rate plays on the consumer's belief that higher prices mean higher quality products. Answer: True 184) Psychological pricing tactics result in prices that are not stated in even dollar amounts (e.g., $99.95). Answer: True 185) Generally speaking, penetration pricing is a better idea for new products than price skimming is. Answer: False 186) When Carbonite Inc. started its new online backup service, it charged "one flat low price no matter how much you need to back up your PC files." This is an example of price skimming. Answer: False 187) Dynamic pricing is feasible in the electronic marketplace because the flow of information on the internet notifies millions of buyers of instantaneous changes in product availability. Answer: True 188) Trade discounts are used to stimulate product sales during times of the year when most customers do not normally buy the product. Answer: False 189) Individuals and firms, other than the producers, who participate in a product's distribution, are known as intermediaries. Answer: True 190) Retailers sell products to other businesses who in turn resell them to the final consumer. Answer: False 191) Intermediaries include wholesalers, retailers, and customers. Answer: False 192) All things considered, the direct distribution channel is usually the best one. Answer: False 193) Channels of distribution always contain a manufacturer and an end user. Answer: True 194) Direct channels of distribution usually mean higher prices for the consumer because transportation costs are higher. Answer: False 195) Most industrial goods are distributed directly from the manufacturer to the user. Answer: True 196) Product costs to the consumer decline as more intermediaries are involved in the distribution network. Answer: False 197) Real estate agents are examples of the intermediary category called "broker." Answer: True 198) Wholesalers have become a popular distribution channel due to increasing costs of store space. Answer: True 199) Wholesalers have declined in popularity because of increasing land and transportation prices. Answer: False 200) Channel conflict occurs when manufacturers and customers disagree over which retail outlets should carry the manufacturer’s goods. Answer: False 201) Vertical marketing systems make the problem of channel conflict worse. Answer: False 202) Vertical marketing systems were developed to overcome the problems caused by channel conflict. Answer: True 203) An intensive distribution strategy requires the manufacturer to work harder than a selective distribution strategy. Answer: False 204) A selective distribution system is normally used when a manufacturer doesn't trust certain retailers to properly price the manufacturer’s products. Answer: False 205) Eliminating intermediaries reduces prices to consumers because the profit normally gained by intermediaries no longer needs to be paid. Answer: False 206) Intermediaries are not necessary when people sell things on web sites like eBay. Answer: False 207) A merchant wholesaler purchases merchandise and owns the goods until it sells them to the wholesaler's customers. Answer: True 208) Like merchant wholesalers, agents or brokers take title to the goods, they just don't take possession. Answer: False 209) Agent/brokers are employees of the manufacturer. Answer: False 210) Agents and brokers do not own the products they sell. Answer: True 211) The pro shop at the golf course is a specialty store because it carries a full line of merchandise within a very narrow product line. Answer: True 212) Contraband cigarettes have boosted the sales revenues of convenience stores. Answer: False 213) A factory outlet is a retail store owned by the manufacturer that bypasses the normal wholesalers and retailers. Answer: True 214) Direct selling is the main strategy of such firms as Tupperware and Avon. Answer: True 215) Syndicated selling occurs when a website offers other websites a commission for referring customers. Answer: True 216) Shopping agents don't take possession of the goods they sell. Answer: True 217) A factory outlet is a retail store owned by the manufacturer, but the outlet uses normal wholesalers and retailers. Answer: False 218) Search engines such as Yahoo serve as cyber malls. Answer: True 219) Door-to-door selling of encyclopaedias, brushes, and vacuum cleaners is known as direct selling. Answer: True 220) LivePerson.com, a provider of real-time sales and customer service for over 3,000 websites, is an example of interactive marketing. Answer: True 221) In 2010, Canadians purchased nearly $53 billion worth of goods and services over the internet. Answer: False 222) About 20 percent of retail sales in Canada are channeled through internet-based stores. Answer: False 223) The two major aspects of physical distribution are warehousing and transportation. Answer: True 224) Private warehouses are used for products for which high security is required (for example, computers). Answer: False 225) Public warehouses are popular with firms that need storage space only during peak business periods. Answer: True 226) The key determination for selecting the appropriate transportation method is cost. Answer: True 227) The principal difference in costs among trucks, railroads, planes, ships, and pipelines is directly related to the speed of delivery. Answer: True 228) Flexibility, fast service, and dependability are attributes of shipping by truck. Answer: True 229) Water carriers are the cheapest and slowest method of transportation and are used primarily for large quantities of bulky material. Answer: True 230) Due to an excellent transportation network in Canada, transportation costs are a minor factor when determining the method to be used to move goods from one location to another. Answer: False SHORT ANSWER QUESTIONS. Write the word or phrase that best completes each statement or answers the question. 231) What are pricing objectives? Answer: Pricing objectives are goals that producers hope to attain in pricing products for sale. 232) Identify the two most common pricing objectives. Answer: Profit maximization and market share. 233) What is the difference between a profit maximization objective and a market share objective? Answer: With a profit maximization objective, prices are set in such as way as to maximize the profit a company makes. In a market share objective, profit is not the major consideration. Indeed, a company may sacrifice profits (at least in the short-run) by reducing prices in an attempt to gain a larger share of the customers in a give market. 234) What is a markup? Answer: A markup is an amount added to an item's cost to sell it at a profit. 235) How is the markup percentage calculated? Answer: The markup percentage is calculated by dividing the markup amount by the selling price. For example, if a music stores buys DVD's for $8 and sells them for $15, the markup percentage is $7/$15 = 46.7 percent. 236) Why are the concepts of "fixed costs" and "variable costs" important? Answer: Fixed costs are those that are unaffected by the number of units of a product that are sold. Variable costs, however, do change based on the number of units that are sold. These two concepts are important in determining the break-even point. 237) ABC Company sells product X for $12.00 each. With a fixed cost of $72,000 and a variable cost of $4.50, what is the breakeven point in units? Answer: $72,000/($12 - $4.50) = 9,600 units. 238) What is the formula for computing the break-even point? Answer: The break-even point = total fixed costs divided by (price minus variable cost). 239) Identify three options for pricing existing products. Answer: Pricing above market prices, pricing below market prices, and pricing at or near market prices. 240) Identify two strategies for pricing new products. Answer: Price skimming and penetration pricing. 241) What pricing objectives are implied by penetration and skimming? Answer: The profit objective of market share is implied by penetration pricing, while the profit maximization objective is implied by price skimming. 242) What is price lining? Answer: Price lining is setting a limited number of prices for certain categories of products. 243) What is dynamic pricing? Give an example. Answer: Dynamic pricing means that the price charged is not the same to all buyers. An example is Progressive Casualty Insurance Company's pricing system which charges different drivers different rates based on their real-time driving behaviour. 244) Identify the three pricing tactics. Answer: Price lining, psychological pricing, and discounting 245) How is psychological pricing different from discounting? Answer: In psychological pricing, prices are set based on the notion that consumers may not be completely rational when making purchase decisions. For example, in odd-even pricing, a price of $99.95 may be seen as much lower than a price of $100.00. In discounting, prices are set based on the notion that consumers may buy more of a given product if they can get a lower price per unit. For example, customers may be attracted by quantity discounts because each of the multiple units of the product they buy is cheaper than if they just buy one unit. 246) Why might a retailer price a television at $299.99 rather than $300.00? Answer: Over the years, marketers have formed the opinion that consumers find $299.99 far more attractive than $300.00. Being of that opinion, marketers still use this form of psychological pricing, often called odd-even pricing. 247) What is the distribution mix? Answer: The distribution mix is the combination of distribution channels by which a firm gets its products to end-users. 248) Why has channel 3 (wholesale distribution) gained in popularity? Answer: The increased cost of retail store space motivated retailers to use wholesalers to storage quantities of products. 249) Why have e-brokers emerged in various industries? Answer: Because traditional intermediaries may not provide low-cost service. The current dispute in the real estate industry is an example. E-brokers charge a flat rate for selling a home and that rate is far below that charged by traditional real estate agents. 250) What is a direct channel? Answer: A direct channel is a distribution channel in which a product travels from producer to consumer without intermediaries. 251) Identify three degrees of market coverage. Answer: Intensive, exclusive, and selective distribution. 252) What is a channel captain? Answer: A channel captain is the channel member who is the most powerful in determining the roles and rewards of other members. 253) Vertical marketing systems are designed to overcome what channel problem? Answer: Conflict in the channel among channel members. 254) Identify at least three services provides by full-service merchant wholesalers. Answer: Credit, storage, marketing, delivery, product information, and merchandising services such as marking prices and setting up displays. 255) What is the difference between retailers and wholesalers? Answer: Wholesalers provide a variety of services to buyers of products for resale or business use. Retailers concentrate on selling products to ultimate consumers. 256) List three types of intermediaries. Answer: Wholesalers, retailers, agents/brokers. 257) Identify three types of product line retailers. Answer: Department stores, supermarkets, and specialty stores. 258) Identify three types of e-intermediaries. Answer: Syndicated sellers, shopping agents, and e-retailers. 259) Identify three types of bargain retailers. Answer: Discount houses, catalog showrooms, and factory outlets. 260) List three forms of direct response retailing. Answer: Mail order (catalog) marketing, telemarketing, direct selling, and e-intermediaries (e.g., syndicated sellers, shopping agents, and e-retailers). 261) What are the three main types of retailers? Answer: Product line retailers (department stores, supermarkets, specialty stores) , bargain retailers (discount houses, catalogue showrooms, wholesale clubs) , and convenience stores. 262) How does syndicated selling work? Answer: One Web site offers another a commission for referring customers. 263) What do shopping agents do? Answer: They help internet customers by gathering and sorting information. 264) What is a catalog showroom? Answer: Catalog showrooms mail catalogs to attract customers into showrooms to view display samples, place orders, and wait briefly while clerks retrieve orders from attached warehouses. 265) What is the difference between a private warehouse and a public warehouse? Answer: A private warehouse is owned by and operated for a single company. Public warehouses are independently owned and operated, and store goods for many firms. 266) Describe the advantages of trucks as a mode of transportation. Answer: Flexibility, fast service, and dependability. 267) Describe the advantages of planes as a mode of transportation. Answer: Speed and lower handling and packaging costs. 268) What is the primary advantage of water carriers as a mode of transportation? Answer: The primary advantage of water carriers is low cost. 269) Describe the advantages of pipelines as a mode of transportation. Answer: Their ability to transport liquids and gases, and their independence from weather conditions. 270) How is distribution useful as a marketing strategy? Answer: Instead of just offering advantages in product features and quality, price, and promotion, many firms have turned to distribution as a cornerstone of business strategy. This means improving all the activities that are necessary in order to get products to customers. ESSAY QUESTIONS. Write your answer in the space provided or on a separate sheet of paper. 271) What are the various business objectives that influence pricing decisions? Answer: • maximize profits • secure high market share • survival in competitive marketplace • adherence to social and ethical concerns • corporate image 272) What tools are used by the marketing managers to determine prices of products? Which tool or combination of tools provides the best price? Answer: • cost-oriented pricing • break-even analysis 273) Why might a company adopt a pricing objective other than profit maximization? Answer: Sometimes a firm may value establishing market share over making immediate profits. Companies may set an initially lower price to get buyers to try products. In such a case, the firm would defer profits to a later time. In addition, companies are also influenced by the need to compete in the marketplace, by social and ethical concerns, and by corporate image. 274) Explain the various pricing philosophies and strategies for new and existing products. Answer: • existing products: set prices lower, same, higher, price leadership • new products: price-skimming strategy, penetration-pricing strategy 275) How are price lining and psychological pricing used to determine prices of products? Which tool or combination of tools provides the best price? Answer: • Price lining: the practice of offering all items in certain categories at a limited number of predetermined price points • Psychological pricing: the practice of setting prices to take advantage of the nonlogical reactions of consumers to certain types of prices 276) Identify and describe each of the five possible types of channel members. Answer: • manufacturer • agent/broker • wholesaler • retailer • end user 277) Identify the two principal types of intermediaries and explain their importance in the distribution of goods. Answer: • wholesalers and retailers • wholesalers sell products to other businesses, who resell them to consumers • retailers sell products directly to consumers 278) Briefly discuss each of the four channels of distribution. Answer: • channel 1: producer to end user • channel 2: manufacturer to retailer to end user • channel 3: manufacturer to wholesaler to retailer to end user • channel 4: manufacturer to agents/brokers to end users 279) Explain the distribution mix and the role of intermediaries in the distribution mix. Answer: The distribution mix is the combination of distribution channels by which a firm gets products to end users. This includes both consumers and industrial buyers of products. The success of any product depends on its distribution mix. The role of intermediaries is important in the distribution mix; intermediaries help to distribute a producer's goods, either by moving them or by providing information that stimulates their movement from sellers to customers. Two primary intermediaries are wholesalers and retailers. Wholesalers are intermediaries who sell products to other businesses for resale to final consumers; retailers sell products directly to consumers. Whereas some firms rely on independent intermediaries, others employ their own distribution networks and sales forces. Further, a distribution channel is the path that a product follows from producer to end user. 280) What is the difference between exclusive, selective and intensive distribution? Answer: • exclusive: a product's distribution is limited to only one wholesaler/retailer in a given geographic area • selective: falls between intensive and exclusive distribution, calling for the use of a limited number of outlets for a product • intensive: a product's distribution is to as many channel members as possible 281) What is channel conflict? What are possible outcomes from channel conflict? Answer: • manufacturer can choose to distribute through more than one channel or wholesaler • retailers can make agreements with as many producers as they like • in these cases channel conflict may arise • if members are given preferential treatment or more power, then other members will get upset • members may get frustrated and switch dealers 282) What is a vertical marketing system? Answer: • a system in which there is a high degree of coordination among all the units in the distribution channel so that a product moves efficiently from manufacturer to consumer 283) How do wholesalers differ from agents/brokers? Explain the operation of each. Answer: • wholesalers sell products to other businesses and take title to the product which they sell • agent/broker is an independent businessperson who represents a business and receives a commission in return, but never takes legal possession of the product 284) List the specific types of retail outlets. Answer: • department store • supermarkets .department stores .supermarkets • specialty stores • discount houses • catalogue showrooms • factory outlets • wholesale clubs • convenience stores 285) How have discount houses changed? Answer: Discount houses began by selling large numbers of items at substantial price reductions to cash-only customers. As name-brand items became more common, they offered better product assortments while still transacting cash-only sales in low-rent facilities. As they became firmly entrenched, they began moving to better locations, improving decor, selling better-quality merchandise at higher prices, and offering services such as credit plans and non-cash sales. 286) Explain the three classifications of retailers. Answer: Retail stores can be classified as product line retailers, bargain retailers, and convenience stores. Product line retailers include department stores, which are organized into specialized departments, handling a wide range of goods and offering a wide variety of services. Supermarkets are also product line retailers; supermarkets are divided into departments of related products. They stress low prices, self-service, and wide selection. Another type of product line retailer is the specialty store; these stores are small stores that carry one line of related products. The second classification of U.S. retail stores is the bargain retailer. These retailers carry wide ranges of products and come in many forms, including the discount house, catalog showroom, and the factory outlet. Finally, convenience stores, the third classification, offer ease of purchase. These stores stress easily accessible locations, extended store hours, and speedy service. 287) What is nonstore retailing? Identify the major types. Answer: • nonstore retailing means direct interaction with customers to inform them of products and receive sales orders • mail marketing, mail order (catalogue marketing) , telemarketing, direct selling and electronic retailing (including video shopping) are the major types 288) Explain electronic retailing. Answer: Electronic retailing is made possible by communications networks that let sellers post product information on consumers' PCs. Use of the Internet to interact with customers—to inform, sell to, and distribute to them—is booming. Electronic catalogs, or e-catalogs, use the Internet to display products for both retail and business customers. Using electronic displays, firms give millions of users instant access to pages of product information. Electronic storefronts represent sellers' virtual storefronts. These virtual storefronts allow consumers to collect information about products and buying opportunities, place orders, and pay for purchases. Collections of virtual storefronts, accessible by everyday consumers, are known as cybermalls. Interactive marketing provides real-time sales and service for thousands of Web sites. In addition, video marketing lets viewers shop at home from TV screens by phoning in or e-mailing orders. QVC is an example. 289) Explain the difference between an electronic storefront and a cybermall. Answer: An electronic storefront is a seller's web site from which consumers collect information about products and buying opportunities, place orders, and pay for purchases. Search engines serve as cybermalls and are a collection of virtual storefronts representing diverse products and offering speed, convenience, 24-hour access, and efficient searching. 290) Compare the five basic forms of transportation and identify the types of products that each carries. Answer: • truck: short-distance distribution and more expensive products (large furniture) • plane: fast, cheaper packaging, handling, unpacking (fresh fish to restaurants) • rail: heavy, bulky items (cars) • water carriers: cheapest, slowest (sand, gravel) • pipelines: slow, inflexible (liquids, gases) Test Bank for Business Essentials Ronald J. Ebert, Ricky W. Griffin, Frederick A. Starke, George Dracopoulos 9780132479769, 9780134384733
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