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Chapter 12 Points of Customer Interface: Bricks and Clicks True/False Questions 1. Customers are satisfied interacting with a company or product based primarily on visiting a retail store. Answer: False Rationale: Customers are no longer satisfied interacting with a company or product based primarily on visiting a retail store. They want access to the company (information, customer service) immediately, whatever their location. 2. Companies create call centers around the world to handle regional customer traffic over the course of a 24-hour business cycle. Answer: True Rationale: The global nature of company operations coupled with worldwide access to the Internet means at least minimal customer support must go on 24/7/365 days a year. So companies create call centers around the world to handle regional customer traffic over the course of a 24-hour business cycle. 3. Consumers around the world want to purchase when they are ready and expect the product to be available on demand. Answer: True Rationale: Consumers around the world want to purchase when they are ready and expect the product to be available on demand. Hence one of the most important retailer functions is holding inventory in advance of a consumer purchase. 4. Assortment is the number of product categories offered by a retailer. Answer: False Rationale: Variety (and not assortment) is the number of product categories offered by a retailer. Assortment is the number of different product items within a product category. 5. Assortment is referred to as the depth of merchandise. Answer: True Rationale: Assortment is the number of different product items within a product category and is referred to as the depth of merchandise. 6. Within a particular product category, the variety and assortment of products carried by retailers remain the same. Answer: False Rationale: Even within a particular product category, the variety and assortment of products carried by retailers can be very different. 7. A general rule in retailing is that broader, deeper product assortments and expanded service options require a higher price to cover increased costs. Answer: True Rationale: Carrying more inventories or providing additional services has a cost that ultimately must be covered by the consumer. 8. E-retailing is the fastest-growing retail format. Answer: True Rationale: Electronic retailing has been growing at double-digit rates and now accounts for a relatively small but rapidly increasing percentage of all retail sales in the United States. 9. Supply chains work most efficiently and effectively when producing small volumes of products and moving them through the distribution system in small amounts. Answer: False Rationale: Supply chains work most efficiently and effectively when producing large (and not small) volumes of products and moving them through the distribution system in bulk. 10. The number of product categories offered by a retailer is referred to as the depth of merchandise. Answer: False Rationale: The number of product categories offered by a retailer is referred to as the breadth (and not depth) of merchandise. 11. In-store retailing offers consumers the most payment options and is the only retailing format that easily accommodates cash payment. Answer: True Rationale: Financing and purchase options (cash, credit card, checks) are important financial services consumers expect and in-store retailing offers theses payment options (including cash payment). 12. One of the oldest forms of retailing, catalog retailing has started to lose its popularity as two-income households often do not like shopping from home. Answer: False Rationale: Catalog retailing has become extremely popular as two-income households often lack the time for an in-store retail experience and appreciate the convenience of shopping when they choose from home. 13. Variety is the number of different product items within a product category. Answer: False Rationale: Assortment (and not variety) is the number of different product items within a product category. Variety is the number of product categories offered by a retailer. 14. The primary advantage of the television home shopping retail format is the ability to show and demonstrate the product. Answer: True Rationale: The television home shopping retail format allows a product to be shown and demonstrated but unlike catalogs, however, shoppers must wait for the product to show up on the screen, which limits sales. 15. While popular with consumers, vending machines are not particularly profitable. Answer: True Rationale: In case of vending machines, rising costs in labor, gasoline, and maintenance, coupled with a very competitive environment that limits price increases, keeps margins low. 16. From information search to purchase, the Internet gives consumers greater access to more choices and different product options. Answer: True Rationale: The breadth and depth of selection offered by the Internet is better than any other retailing channel. 17. In evaluating a Web site, one of the key measures is its "stickiness," which refers to the length of time visitors remain at the site. Answer: True Rationale: Stickiness of a Web site refers to the amount of time visitors remain at the site. The customer is in total control of the Web experience and can walk away at any time, so the Web site should be able attract and hold on to visitors. 18. The Internet has decreased the efficiency of B2B relationships. Answer: False Rationale: The Internet has increased the efficiency of B2B relationships through dedicated B2B sites that facilitate the exchange of products and services. 19. It is not common for multiple retailers to target the same group. Answer: False Rationale: Often multiple retailers will target the same group. For instance, Sak's Fifth Avenue and Nieman Marcus both target upscale, fashion-conscious consumers. 20. National brands tend to be supported with excellent product design, support, and marketing communications by their manufacturers. Answer: True Rationale: National brands tend to be supported with excellent product design, support, and marketing communications by their manufacturers. As a result, retailers spend relatively less on marketing with national brands than their own private-label brands. Multiple Choice Questions 21. Companies seek better and more frequent interaction with their customers. At the same time, customers are more attached to their products. The result has been a concerted effort by both companies and their customers to redefine the _______________. A. Product quality B. Customer interface C. Product variety D. Breadth of merchandise E. Depth of merchandise Answer: B. Customer interface Rationale: Better technology, increased knowledge and growing sophistication of customers, and fierce competition have raised the stakes in relating to customers. The customer interface has become a critical part of creating value for customers. 22. Stickiness of a Web site refers to _______________. A. The ease with which visitors can navigate through the site B. The readability of the site C. The attractiveness of the site D. The amount of time visitors remain at the site E. The number of visitors who visit the site Answer: D. The amount of time visitors remain at the site Rationale: Stickiness of a Web site refers to the amount of time visitors remain at the site. 23. As a result of customers wanting access to the company (information, customer service) immediately, whatever their location, customer service has revolutionized service delivery by _______________. A. Improving telephone support B. Pushing more information through mobile communications C. Creating effective, customer-oriented Web sites D. A & B E. A, B & C Answer: E. A, B & C Rationale: Better technology, growing sophistication of customers, and fierce competition have raised the stakes in relating to customers. Customer service has revolutionized service delivery by various means like effective Web sites, telephone support and through mobile communications. 24. An example of a customer touchpoint that allows only one way interaction is _______________. A. A retail store visit B. Advertising C. A Web site bulletin board D. Personal selling E. An online focus group Answer: B. Advertising Rationale: Customer touchpoints occur in many ways. In some cases, there is two-way interaction (retail store visit, Web site bulletin board) while in other cases the interaction is one way as in advertising or direct mail. 25. Security of personal data is a major concern in _______________. A. In-store retailing B. Television home shopping retailing C. Catalog retailing D. Electronic retailing E. Vending machine retailing Answer: D. Electronic retailing Rationale: While companies work hard to make their Web sites secure and keep personal data such as credit-card numbers private, many consumers still have concerns about the security of their data. 26. _______________, in whatever form, is the point of contact in the supply chain with the consumer of the product. A. Retailing B. Branding C. Warehousing D. Transportation E. Inventory management Answer: A. Retailing Rationale: Retailing is an essential component of the supply chain because it represents the point of contact in the supply chain with the consumer of the product. 27. _______________ focuses on lower prices, which means fewer services and limited assortments and variety. A. Supermarkets B. Specialty retailers C. Discount stores D. Catalog retailing E. Direct selling Answer: C. Discount stores Rationale: Carrying more inventories or providing additional services has a cost that ultimately must be covered by the consumer. So discount stores focus on lower prices, which means fewer services and limited assortments and variety. 28. An efficient, effective supply chain moves materials from _______________ to _______________. A. Wholesaler, manufacturer B. Consumer, distributor C. Distributor, manufacturer D. Retailer, distributor E. Manufacturer, consumer Answer: E. Manufacturer, consumer Rationale: An efficient, effective supply chain moves materials from manufacturer to consumer and retailing is the point of contact in the supply chain with the consumer of the product. 29. Which of the following functions is carried out by a retailer? A. Evaluate quality of the products. B. Carry out market research to identify customer perceptions regarding quality of the product. C. Assimilate the large quantities produced by manufacturers and offer smaller, more consumer-friendly quantities for the consumer. D. Product development and manufacturing. E. Maintenance and repair of products. Answer: C. Assimilate the large quantities produced by manufacturers and offer smaller, more consumer-friendly quantities for the consumer. Rationale: Manufacturers carry out production in bulk. However, consumers don't need or want the quantities produced by manufacturers. Retailers play a vital role assimilating the large quantities produced by manufacturers and offering smaller, more consumer-friendly quantities for the consumer. 30. A typical supermarket carries between _______________ product items. A. 10,000 and 20,000 B. 20,000 and 30,000 C. 30,000 and 40,000 D. 40,000 and 50,000 E. 50,000 and 60,000 Answer: B. 20,000 and 30,000 Rationale: A typical supermarket carries between 20,000 and 30,000 products. While that may seem like a large number, it is only a small fraction of all the products available. 31. The role of retailing is to _______________. A. Offer variety to customers B. Separate large product volume into consumer purchase quantities C. Maintain inventory levels D. Make additional services available E. All of the above Answer: E. All of the above Rationale: Retailers offer variety to customers, separate large product volumes into consumer purchase quantities, maintain inventory levels, and make additional services available. 32. _______________ are important service(s) consumers expect but they require a significant investment by the retailer. A. In-store events B. Shipping C. Order tracking D. Financing and purchasing options E. None of the above Answer: D. Financing and purchasing options Rationale: Retailers offer additional services that facilitate the purchase for the consumer like financing and purchase options (cash, credit card, checks). These are important financial services consumers expect, but these services require a significant investment by the retailer. 33. The retailers'_______________ helps manufacturers because it stores the product close to consumers and makes it easier for them to purchase. A. Store layout B. Assortment of products C. Variety of products D. Inventory E. Pricing strategy Answer: D. Inventory Rationale: Retailers carry inventory that helps both the customer and the manufacturer as they keep a supply on hand when it is needed. 34. Assortment is the number of different product items within a product category and is referred to as the _______________. A. Width of merchandise B. Length of merchandise C. Variety D. Breadth of merchandise E. Depth of merchandise Answer: E. Depth of merchandise Rationale: Assortment is the number of different product items within a product category and is referred to as the depth of merchandise. 35. Variety is the number of product categories offered by a retailer and is referred to as _______________. A. Market penetration B. Product reach C. Assortment D. Breadth of merchandise E. Depth of merchandise Answer: D. Breadth of merchandise Rationale: Variety is the number of product categories offered by a retailer and is referred to as breadth of merchandise. 36. Marketing managers know that creating an effective retail strategy begins with knowledge of _______________. A. Merchandise assortment B. Level of service C. The retail value proposition D. A & C E. A, B & C Answer: E. A, B & C Rationale: Knowledge of merchandise assortment, level of service, and the retail value proposition is required to create an effective retail strategy. 37. Characteristics of retailers include _______________. A. Type of merchandise B. Assortment C. Services imparted to customers D. Differences in the value equation E. All of the above Answer: E. All of the above Rationale: The four specific characteristics which define retailers are type of merchandise, assortment, services imparted to customers, and differences in the value equation. 38. _______________ is the number of different product items within a product category. A. Assortment B. Variety C. Breadth of merchandise D. Product mix E. Product penetration Answer: A. Assortment Rationale: Assortment is the number of different product items within a product category and is referred to as the depth of merchandise. 39. _______________ is the number of product categories offered by a retailer. A. Assortment B. Variety C. Breadth of merchandise D. Product mix E. Product penetration Answer: B. Variety Rationale: Variety is the number of product categories offered by a retailer and is referred to as breadth of merchandise. 40. Margot works for a retailer that carries a number of different product items within a product category and this is known as _______________. A. Assortment B. Market penetration C. Product reach D. Variety E. Breadth of merchandise Answer: A. Assortment Rationale: Assortment is the number of different product items within a product category and is referred to as the depth of merchandise. 41. The _______________ defines value in terms of price and delivered benefits to the customer. A. Value equation B. Value proposition C. Breadth of merchandise D. Depth of merchandise E. Assortment Answer: A. Value equation Rationale: The value equation, as we have discussed, defines value in terms of price and delivered benefits to the customer. Retailers make critical decisions about each of these elements in the value equation. 42. _______________ focus on value-added benefits such as greater product selection, more experienced service personnel, and other services. A. Food retailers B. Specialty retailers C. Warehouse clubs D. Discount stores E. A & C Answer: B. Specialty retailers Rationale: Specialty retailers focus on value- added benefits such as greater product selection, more experienced service personnel, and other services. For those retailers, the focus is on the delivered benefits and, as a result, prices are higher. 43. _______________ have had to develop sophisticated supply chains that keep products moving into the store while carefully balancing inventory levels to reduce spoilage. A. Non-store retailers B. Manufacturers C. Consumers D. Food retailers E. Catalogue retailers Answer: D. Food retailers Rationale: Much of the food retailer's product mix is perishable (dairy, meat, fruits, vegetables) so companies develop sophisticated supply chains that keep products moving into the store while carefully balancing inventory levels to reduce spoilage. 44. A unique challenge for a _______________ is that profit margins are low relative to other retailing concepts with net margins averaging 1 percent of sales. A. Market maker B. National brand C. Food retailer D. Non-store retailer E. Catalogue retailer Answer: C. Food retailer Rationale: Food retailers occupy a unique retail space and face a number of specific challenges, one of them being low profit margins relative to other retailing concepts with net margins averaging 1 percent of sales. 45. _______________ is an advantage of store retailing. A. Personal contact with product B. Personal service C. Immediate need fulfillment D. None of the above E. All of the above Answer: E. All of the above Rationale: Personal contact with product, personal service, and immediate need fulfillment are the advantages offered by store retailing. 46. _______________ is an advantage that is most likely to be associated with store retailing. A. Social experience B. Reduced risk to the consumer C. Payment options D. None of the above E. All of the above Answer: E. All of the above Rationale: Social experience, reduced risk to the consumer, and payment options are the advantages of store retailing. 47. Conventional supermarkets are responding to new competitors with _______________. A. Greater emphasis on freshness B. Targeting new markets such as health-conscious consumers C. Creating a neighborhood atmosphere and upgrading facilities D. A & B E. A, B & C Answer: E. A, B & C Rationale: Low-cost alternatives to conventional supermarkets are the new competitors for super markets. Conventional supermarkets are responding to this by laying greater emphasis on freshness, targeting new markets such as health-conscious consumers, creating a neighborhood atmosphere, and upgrading facilities. 48. _______________ have become extremely popular as two-income households often lack the time for an in-store retail experience. A. Malls B. Flea markets C. Grocery stores D. Sidewalk retailers E. Catalog retailers Answer: E. Catalog retailers Rationale: Two-income households often lack the time for an in-store retail experience and appreciate the convenience of shopping when they choose from home. Catalog retailing is extremely popular among such consumers. 49. A _______________ allows consumers to purchase from their homes or some other convenient location and includes catalogs, direct selling, television home shopping, vending machines, and electronic retailing. A. Vending machine B. Supermarket C. Food retailer D. Non-store retailer E. Wholesaler Answer: D. Non-store retailer Rationale: Non-store retailing uses alternative methods to reach the customers that do not require a physical location. This allows consumers to purchase from their homes or some other convenient location. 50. A _______________ offers its merchandise in the comfort of a consumer's home. A. General merchandise retailer B. Supermarket C. Food retailer D. Speciality store E. Catalog retailer Answer: E. Catalog retailer Rationale: Catalog retailers offer their merchandise in the comfort of a consumer's home using a printed or online catalog. Consumers who do not have time for an in-store retail experience appreciate the convenience of catalog retailing. 51. Once a(n) _______________ strategy is in place, inventory tends to fluctuate less and it is easier to manage inventory levels. A. Every day low pricing (EDLP) B. High/low pricing C. Market penetration D. Intensive distribution E. Market development Answer: A. Every day low pricing (EDLP) Rationale: EDLP can help build customer loyalty because customers know they can rely on consistently low prices. The loyal customers ultimately reduce inventory fluctuations and managing inventory levels becomes easy. 52. _______________ involves independent businesspeople contacting consumers directly to demonstrate and sell products or services in a convenient location, often the consumer's home or workplace. A. Direct selling B. Television home shopping C. Vending machine retailing D. Catalog retailing E. Electronic retailing Answer: A. Direct selling Rationale: Direct selling is a significant non-store retail channel. It involves independent businesspeople contacting consumers directly to demonstrate and sell products or services in a convenient location. 53. Beautiful Babies is a company that utilizes _______________ to sell their products. Salespeople go to their friend's and coworker's homes to demonstrate and sell the Beautiful Babies products. A. Vending machine retailing B. Television home shopping C. Electronic commerce D. Direct selling E. Electronic retailing Answer: D. Direct selling Rationale: Direct selling involves independent businesspeople contacting consumers directly to demonstrate and sell products or services in a convenient location. In this case, Beautiful Babies is utilizing a direct selling approach. 54. With _______________ an order is placed and fulfilled by the salesperson, who usually delivers the product directly to the consumer. A. Television home shopping B. Direct selling C. Electronic commerce D. Electronic retailing E. Vending machine retailing Answer: B. Direct selling Rationale: Direct selling is a significant non-store retail channel. In case of direct selling, the order is placed and fulfilled by the salesperson, who usually delivers the product directly to the consumer. 55. With _______________ the potential market includes almost everyone with cable television in the United States, however the actual number of viewers is small. A. Direct selling B. Television home shopping C. Vending machine retailing D. Catalog retailing E. Electronic retailing Answer: B. Television home shopping Rationale: The potential market for television home shopping includes almost everyone with cable television in the United States, however the actual number of viewers is small. Shoppers must wait for the product to show up on the screen, which limits sales. 56. The primary advantage of _______________ is the ability to show and demonstrate the product. A. Catalog retailing B. Television home shopping C. Vending machine retailing D. Electronic commerce E. Retail positioning Answer: B. Television home shopping Rationale: The primary advantage of television home shopping is the ability to show and demonstrate the product. 57. _______________ sells merchandise or services that are stored in a machine then dispensed to the consumer when the payment has been made. A. Vending machine retailing B. Supermarket C. Electronic retailing D. Direct selling E. Television home shopping Answer: A. Vending machine retailing Rationale: Vending machine retailing sells merchandise or services that are stored in a machine then dispensed to the consumer when the payment has been made. 58. Advantages of non-store retailing include _______________. A. Ease of use B. Safe shopping environment C. Quality of visual presentation D. All of the above E. None of the above Answer: D. All of the above Rationale: Non-store retailing allows consumers to shop from a location convenient to them. Also, non-store retailing does a good job of presenting products in a positive visual format through well-designed catalogs, direct-mail materials, and online content. 59. _______________ refers to any action using electronic media to communicate with customers; facilitate the inventory, exchange, and distribution of goods and services; or make payment. A. Catalog retailing B. Direct selling C. Television home shopping D. Vending machine retailing E. Electronic commerce Answer: E. Electronic commerce Rationale: Electronic commerce is the fastest-growing customer interface. It uses electronic media to communicate with customers; facilitate the inventory, exchange, and distribution of goods and services; or make payment. 60. _______________ is the fastest-growing customer interface methodology and has fundamentally changed the way companies and customers interact. A. Direct selling B. Vending machine retailing C. Electronic commerce D. Television home shopping E. In-store retailing Answer: C. Electronic commerce Rationale: Electronic commerce refers to any action using electronic media to communicate with customers; facilitate the inventory, exchange, and distribution of goods and services; or make payment. It is the fastest-growing customer interface. 61. _______________ is the communication and sale of products or services to consumers over the Internet. A. Vending machine retailing B. Personal selling C. Electronic retailing D. Direct selling E. Television home shopping Answer: C. Electronic retailing Rationale: Electronic retailing is the communication and sale of products or services to consumers over the Internet. 62. _______________ offers even the smallest entrepreneur the opportunity to open a shop on the Internet. A. Direct selling B. Television home shopping C. Vending machine retailing D. Catalog retailing E. Electronic retailing Answer: E. Electronic retailing Rationale: Electronic retailing is the communication and sale of products or services to consumers over the Internet. E-retailing offers even the smallest entrepreneur the opportunity to open a shop on the Internet. 63. Advantages of electronic retailing include _______________. A. Extensive selection B. Considerable information available for product research and evaluation C. Building product communities D. Individualized customer experience E. All of the above Answer: E. All of the above Rationale: Electronic retailing is the communication and sale of products or services to consumers over the Internet. Electronic retailing offers an extensive product selection, considerable information for product research and evaluation, product communities, and individualized customer experiences. 64. Some disadvantages associated with electronic retailing include _______________. A. Easier for customers to walk away B. Reduced ability to sell features and benefits C. Security of personal data D. All of the above E. None of the above Answer: D. All of the above Rationale: In the case of electronic retailing, the customer is in total control of the Web experience and has the opportunity to walk away at any time. It is difficult to engage customers to answer questions and the security of data like credit card numbers is an important concern for consumers. These are the disadvantages associated with electronic retailing. 65. Sites such as Lendingtree.com are considered _______________ which bring buyers and sellers together and facilitate the exchange of products and services. A. Market makers B. Discussion forum C. Social networking sites D. Online groups E. Blogging sites Answer: A. Market makers Rationale: Sites like Lendingtree.com bring many buyers and sellers together to facilitate the exchange of products and services. Hence they are known as market makers. 66. Once a(n) _______________ strategy is in place, the retailer spends less on marketing communications and advertising. A. Every day low pricing (EDLP) B. High/low pricing C. Market penetration D. Intensive distribution E. Market development Answer: A. Every day low pricing (EDLP) Rationale: Once an EDLP strategy is in place, the retailer spends less on marketing communications and advertising because sales promotions are not a big part of the strategy and, as a result, do not need to be advertised. 67. _______________ enable customers to evaluate vendors and then make better product decisions. A. Loyalty programs B. Market makers C. Customer communities D. All of the above E. None of the above Answer: C. Customer communities Rationale: Customer communities allow customers to come and share stories about their vendor experiences. These sites enable customers to evaluate vendors and then make better product decisions. 68. Retailers identify _______________ using a variety of characteristics such as geographic location, demographics, lifestyle, product benefits, or buying situation. A. Customer communities B. Retail target markets C. Market makers D. A & C E. A, B & C Answer: B. Retail target markets Rationale: A retail target market is a group of consumers targeted by a retailer. Retailers identify retail target markets using a variety of characteristics such as geographic location, demographics, lifestyle, product benefits, or buying situation. 69. In the consumer's mind, _______________ is/are created through the use of a variety of tools that build a retail brand image. A. Retail positioning B. Assortment C. Merchandise categories D. Customer communities E. Value proposition Answer: A. Retail positioning Rationale: For a retailer, the best defense against a strong competitor is a loyal group of customers who want to shop at a particular retailer. Customer loyalty can be achieved with the help of retail positioning and it is created through the use of a variety of tools that build a retail brand image. 70. _______________ reinforce the benefits of purchasing at the retailer and reward consumers for being loyal. A. Market makers B. Customer communities C. Loyalty programs D. A & B E. A & C Answer: C. Loyalty programs Rationale: Retailers use loyalty programs that reinforce benefits of purchasing at the retailer and reward consumers for being loyal. Loyalty programs offer discounts and other benefits to customers that strengthen the relationship. 71. Montgomery shops at Mango Nation, a high-end clothing store. This week she received two discount cards in the mail, one for shoes and the other for clothing. The cards indicate that Montgomery participates in _______________. A. Customer communities B. Loyalty programs C. Online sales groups D. Focus groups E. None of the above Answer: B. Loyalty programs Rationale: Retailers use loyalty programs that reinforce benefits of purchasing at the retailer and reward consumers for being loyal. Loyalty programs offer discounts and other benefits to customers that strengthen the relationship. 72. The single most critical decision in store retailing is the _______________ of the store. A. Physical Size B. Decoration C. Physical location D. Layout E. None of the above Answer: C. Physical location Rationale: The single most critical decision in store retailing is the physical location because location is a vital consumer choice factor in selecting a store. Store retailing also requires a complex logistics network to make it work effectively and a good location strategy is essential in that process. 73. Choosing the right _______________ to align the retailer's corporate objectives with the target market's needs is a critical element in the retail strategy. A. Value equation B. Product mix C. Layout of the store D. Retail positioning E. Loyalty programs Answer: B. Product mix Rationale: A retailer's product assortment is an essential characteristic that defines the retailer in the marketplace. So choosing the right product mix that aligns the retailer's corporate objectives with the target market's needs is a critical element in the retail strategy. 74. _______________ is/are an assortment of items considered substitutes for each other. A. Merchandising categories B. National brands C. Private-label brands D. Product mix E. Inventory Answer: A. Merchandising categories Rationale: Merchandising categories are an assortment of items considered substitutes for each other. A mother, for example, looking to purchase pants for her son might consider a number of options (jeans or corduroys, dress or play). Those options represent a merchandise category. 75. Harry is going to purchase flowers for his mother for Mother's Day. When he arrives at the florist he has to choose between roses, tulips, and sunflowers. The flowers represent _______________. A. Convenience goods B. Giffen goods C. Merchandising categories D. Co-products E. Joint products Answer: C. Merchandising categories Rationale: Merchandising categories are an assortment of items considered substitutes for each other. Since roses, tulips, and sunflowers can be considered substitutes for one another, they represent merchandising categories. 76. _______________ are products created, manufactured, and marketed by a company and sold to retailers around the country and the world. A. Merchandising categories B. Co-products C. Giffen goods D. National brands E. Private-label brands Answer: D. National brands Rationale: National brands are products created, manufactured, and marketed by a company and sold to retailers around the country and the world. The manufacturing company is responsible for all aspects of product creation, production, distribution, and marketing. 77. Creamy Cones manufactures prepackaged ice cream cones. It creates the cones, makes the cones, distributes the cones, and markets the cones around the country. Creamy Cones is a _______________. A. National brand B. Private-label brand C. Specialty brand D. Low-cost brand E. House brand Answer: A. National brand Rationale: National brands are products created, manufactured, and marketed by a company and sold to retailers around the country. In this case, Creamy Cones is a national brand. 78. Which of the following is NOT necessarily true about a national brand? A. The manufacturer of a national brand develops the product B. The manufacturer of a national brand produces the product C. The manufacturer of a national brand carries out the marketing and advertising of the product D. The manufacturer of a national brand sells the product to the end users E. The manufacturer of a national brand sells the product to retailers around the country Answer: D. The manufacturer of a national brand sells the product to the end users Rationale: The manufacturing company is responsible for all aspects of product creation, production, distribution, and marketing. The retailer, in turn, sells the product and the manufacturer need not directly sell the product to the end users. 79. All of the following are true about a private-label brand EXCEPT: A. Private label brands are also known as house brands B. The manufacturer of a private-label brand is not identified C. The design and characteristics of the product are decided by the manufacturer D. Retailers set design and product characteristics E. The retailer accepts full responsibility for distribution and marketing of the product. Answer: C. The design and characteristics of the product are decided by the manufacturer Rationale: In the case of private-label brands, retailers set design and product characteristics and then contract with outside manufacturers. 80. Generally, _______________ offer a lower price point product relative to the national brand. A. Specialty brands B. National brands C. Private-label brands D. B & C E. None of the above Answer: C. Private-label brands Rationale: Generally, private-label brands offer a lower price point product relative to the national brand. 81. _______________ allow(s) retailers to differentiate their pricing to different target markets by charging a higher price to less price-sensitive consumers and lower prices to more price-sensitive shoppers. A. High/low pricing B. Everyday low pricing C. Variety D. Assortment E. Market penetration Answer: A. High/low pricing Rationale: High/low pricing offers frequent discounts primarily through sales promotions to stated regular prices. It allows retailers to differentiate their pricing to different target markets by charging a higher price to less price-sensitive consumers and lower prices to more price-sensitive shoppers. 82. _______________ is/are the approach used by stores that maintain a price point somewhere between high and deeply discounted sales prices. A. Exclusive distribution B. Everyday low pricing C. High/low pricing D. Retail positioning E. Loyalty programs Answer: B. Everyday low pricing Rationale: Everyday low pricing (EDLP) is the approach used by stores that maintain a price point somewhere between high and deeply discounted sales prices. EDLP can help build customer loyalty because customers know they can rely on consistently low prices. 83. Services such as such as loyalty programs, easy store access, additional facilities like restaurants, support services for young children and infants enhance the _______________ of the customers. A. Retailer experience B. Shopping experience C. Sales experience D. All of the above E. None of the above Answer: A. Retailer experience Rationale: Services such as loyalty programs, easy store access, additional facilities like restaurants, support services for young children and infants enhance the retailer experience of the customers. 84. Betty loves shopping at Rita's Round-Up because she knows she will always find the lowest price. Rita's Round-Up uses a(n) _______________ strategy. A. Product development B. Exclusive distribution C. Everyday low pricing (EDLP) D. High/low pricing E. Market development Answer: C. Everyday low pricing (EDLP) Rationale: Rita's Round-Up uses an EDLP strategy and Betty responds to it knowing that she will get a low price no matter when she goes to Rita's. 85. A customer's in-store experience is based on _______________. A. Helpful sales staff. B. Policies that make it easy to return merchandise for credit or refund C. Convenient store hours D. All of the above E. None of the above Answer: D. All of the above Rationale: The in-store experience is based on everything the customer experiences while shopping including the service, the physical surroundings, and the products. 86. Services such as fitting rooms, knowledgeable and helpful sales staff, convenient store hours, store displays, enhance the _______________. A. Shopping experience B. Sales experience C. Retailer experience D. A & B E. B & C Answer: A. Shopping experience Rationale: Services such as fitting rooms, knowledgeable and helpful sales staff, convenient store hours, and store displays enhance the shopping experience. 87. Kayla enjoys shopping at Break for her school clothes because if one of her friends bought the same outfit as she did, Break has a really easy return policy so Kayla can get something else. Kayla is responding to the _______________. A. Market makers B. Sales experience C. Shopping experience D. Depth of merchandise E. Retail experience Answer: B. Sales experience Rationale: Policies that make it easy to return merchandise for credit or refund, enhance the sales experience. Since Kayla enjoys shopping at Break because Break has a really easy return policy, she is responding to the sales experience. 88. Multiple payment methods is a service which enhances the _______________. A. Retail experience B. Shopping experience C. Sales experience D. All of the above E. None of the above Answer: C. Sales experience Rationale: Multiple payment methods make the sales experience easier. Thus it enhances the sales experience. 89. Stores use _______________ to create a comfortable environment for the customer. A. Layouts and displays B. Interior colors C. Music D. A & B E. A, B & C Answer: E. A, B & C Rationale: The environment is fundamental in setting the tone for the shopping experience. Store layout and displays, interior colors, even the music in the store all work together to create an atmosphere that it is hoped will make the customer feel comfortable. 90. Retailers must make sure their marketing communications are consistent with their store image as well as appropriate for the target market. Hence _______________ would likely not advertise in Vanity Fair or Esquire. A. Macy's B. Walmart C. Gap D. A & C E. A, B & C Answer: B. Walmart Rationale: The magazines Vanity Fair or Esquire do not match Walmart's image. Hence Walmart is not likely to advertise in these magazines. Short Answer Questions 91. Samantha is in charge of customer service for a store that sells surround sound systems. She has been getting feedback from her customers that they are calling and customer service is not available because they are calling at night. Samantha's customer service runs from 9-5. What should Samantha do? Answer: Customers want access to the company when it is convenient for them, and this means extending customer service and support beyond normal business hours. Increasingly, customers connect in the early morning, evening, or weekends and consider convenience and access to customer service in the decision-making process. 92. What are companies doing to enable them to have customer service available by phone 24 hours a day? Answer: Companies create call centers around the world to handle regional customer traffic over the course of a 24-hour business cycle. Additionally, companies create global call center strategies that enable 24-hour response despite the problems of multiple time zones. 93. Customers demand that some form of customer service be available 24 hours a day, 7 days a week, and 365 days a year. It would be difficult for all companies to staff a call center constantly. What is a great way for companies to provide round the clock customer service? Answer: The global nature of company operations, coupled with worldwide access to the Internet means at least minimal customer support must go on 24/7/365 days a year. Specifically, web sites generate customer contact all the time and responding to the customer quickly, accurately, and persuasively increases the pressure to improve customer service and response infrastructure. 94. Debbie understands that customers often want to buy a product immediately, especially in her case where customers are usually vacationers. Due to this, Debbie keeps a huge inventory of her beach themed items at her beachfront shop. Why is this not the best idea for Debbie? Answer: There is a cost of keeping products close to the customer. Holding on to a large inventory means that Debbie has a lot of money in that inventory. 95. Tyler's marketing class just visited a warehouse for one of the nation's top electronic companies. While in the warehouse Tyler was amazed at the number of televisions he could count. The warehouse manager explained that the television company produces hundreds of TV's a day, and then ships them to the various retailers, so that the retailers can make them available to the customers. Why is it important for the retailer to be a part of this system? Answer: It is important because an individual consumer needs only one TV at any given time. Retailers such as Best Buy and Circuit City, as well as online retailers like Amazon, enable the television manufacturers to manufacture in efficient product volume then transport the televisions from plants in Asia to any retailer in the United States where it is possible to purchase a single TV at a competitive price. 96. What is the difference between variety and assortment? Answer: Variety is the number of product categories offered by a retailer and is referred to as breadth of merchandise. Assortment is the number of different product items within a product category and is referred to as the depth of merchandise. 97. Chrissy is a marketing manager for a large clothing retail store. Recently she was switched from one of its discount stores to one of its high-end stores. Since Chrissy is going to be working in a new retail market, she wants to understand the characteristics of retailers in this market. Why would she want to know that? What criteria would she use to determine the characteristics of retailers? Answer: Understanding these characteristics is essential because they define the retail environment and marketing managers know that creating an effective retail strategy begins with knowledge of merchandise assortment, level of service, and the retail value proposition. 98. Gale is going to be opening a retail store in Portland. She is trying to determine what kind of product assortments to carry. What would you tell Gale? Answer: A general rule in retailing is that broader, deeper product assortments and expanded service options require a higher price to cover increased costs. In other words, carrying more inventories or providing additional services has a cost that ultimately must be covered by the consumer. 99. Lydia is a marketing manager for a grocery store in Boston. She has started to realize that the availability of low-cost alternatives to supermarkets is affecting her sales. What should Lydia focus on? Answer: Lydia should focus on providing a greater emphasis on freshness—using just-in-time delivery and maximizing the advantage of her established supply chain. She should be targeting new markets such as health-conscious consumers—incorporating more organic, low-fat, high-quality food into her product mix. Finally, she should create a neighborhood atmosphere and upgrade facilities—maximizing the location advantage (being close to the consumer) they have in many communities. 100. What are the differences between non-store retailers and other retailers? Answer: Non-store retailing uses alternative methods to reach the customer that do not require a physical location. This allows consumers to purchase from their homes or some other convenient location and includes catalogs, direct selling, television home shopping, vending machines, and electronic retailing. 101. Kristal just got back from a friend's house where she thought she was showing up for a meeting to set up a book club with all of her friends. When Kristal arrived at her friend's house she was very disappointed to find that there was a table with lots of jewelry items displayed. Kristal's friend had become a salesperson for Jubilant Jewelry and was making a sales pitch to all of her friends. What form of retail does Kristal's friend work in? Answer: Direct selling. Direct selling involves independent businesspeople contacting consumers directly to demonstrate and sell products or services in a convenient location, often the consumer's home or workplace. The order is placed and fulfilled by the salesperson, who usually delivers the product directly to the consumer. 102. Tallulah has started making sandwiches and selling them on-campus to other students. Her sandwich business has gotten so popular she is finding it hard to sell the sandwiches and get to her classes. Tallulah would like some way to sell her sandwiches without having to hire a salesperson. What popular form of retailing would help Tallulah? Answer: Vending machine retailing sells merchandise or services that are stored in a machine then dispensed to the consumer when the payment has been made. An extremely popular form of retailing, vending machines can be found throughout the world. Japan boasts one vending machine for every 23 people. 103. These days more and more companies are using the internet to conduct business. In regards to retail, there are two key ideas, e-commerce and electronic retailing. How do these two differ? Answer: Electronic commerce refers to any action using electronic media to communicate with customers; facilitate the inventory, exchange, and distribution of goods and services; or make payment. Electronic retailing is the communication and sale of products or services to consumers over the Internet. 104. Timothy thinks that electronic retailing is overrated and a fad. He keeps telling you that people will lose interest and go back to the stores. Tell Timothy what the advantages of electronic retailing are. Answer: Extensive selection, considerable information available for product research and evaluation, build product communities and individualized customer experience. 105. What are market makers, and how do they contribute to the growing success of B2B selling online? Answer: Sites that serve as market makers, (such as Lendingtree.com for mortgage and other loans) bring buyers and sellers together. 106. Melanie received her AirMiles card from Fly By Night Airlines about two months ago when she flew to Los Angeles. Since then she has been receiving e-mails offering her special prices on package deals to Los Angeles. What does this exemplify? Answer: This is an example of a loyalty program. Loyalty programs reinforce benefits of purchasing at the retailer and reward consumers for being loyal. As part of a broader customer relationship management strategy, loyalty programs offer discounts and other benefits to customers that strengthen the relationship. Sophisticated data mining programs allow retailers to develop individual loyalty incentives that address specific customer purchase patterns. 107. Kids' Corner sells clothing designed for children. All of the tops can be matched with any of the bottoms, so parents no longer have to worry about what their child is wearing. Kids Corner has just defined the product assortment for next year, and now it needs to move to the next step in developing a product mix assortment. What does Kids' Corner need to do? Answer: Defining the product assortment, however, is only the first component in developing a product mix assortment. Management must make decisions about specific product items. The analysis begins with an assessment of merchandise categories, an assortment of items considered substitutes for each other. A mother, for example, looking to purchase pants for her son might consider a number of options (jeans or corduroys, dress or play). 108. The Country Store, a small general retailer, is trying to determine the best mix of national and private-label brands it should carry. What are the differences between the two brands? Answer: National brands are products created, manufactured, and marketed by a company and sold to retailers around the country and the world. The manufacturing company is responsible for all aspects of product creation, production, distribution, and marketing. Private-label brands, also known as store or house brands, are products managed and marketed by retailers. Generally, private-label brands offer a lower price point product relative to the national brand. 109. Enrique works for an electronics store that frequently uses sales and promotions to set prices. Which pricing strategy does Enrique's company use? If they were to change their strategy which other main strategy would they use? Answer: High/low pricing offers frequent discounts primarily through sales promotions to stated regular prices. Every day low pricing (EDLP) is the approach used by stores that maintain a price point somewhere between high and deeply discounted sales prices. 110. Connie is a new salesgirl at an upscale shoe store in the mall. Her manager, Jacqueline has been telling her that the company focuses on the in-store experience, and has been explaining to Connie her role in the in-store experience. Jacqueline says there are three experiences of which Connie needs to be aware. What are those three experiences? Answer: Shopping experience are services that make shopping more enjoyable. Sales experience are services that make the sales experience easier. Retailer experience, are services that strengthen the customer's perception of the retailer. Essay Questions 111. Julie has been a stay-at-home mom for the past 15 years. Prior to becoming a mom, Julie was a District Manager at a successful retail company in Atlanta. Julie has just joined your company and is excited to be working again, but you realize her ideas are a bit dated. When she starts talking about the customer interface, you know you need to fill her in on some changes. How has the customer interface changed? Answer: The way companies approach the customer interface has shifted dramatically as better technology, increased knowledge and growing sophistication of customers, and fierce competition have raised the stakes in relating to customers. The customer-company interface is a critical element in creating customer value. Companies seek better and more frequent interaction with their customers. At the same time, customers are more attached to their products. The result has been a concerted effort by both companies and their customers to redefine the customer interface. 112. Martin was recently promoted to manager a retail store. He is trying to find the best ways to add value for customers. What are some things that Martin can do to add value? Answer: To add value, retailers offer variety to customers, in order to create an assortment of products that fit the consumer's needs. They separate large product volume into consumer purchase quantities so that customers can buy reasonable quantities of items. They maintain inventory levels so that the item a customer wants to purchase is always immediately available for purchase. Finally, they make additional services available to customers along the lines of store credit, gift-wrapping, wedding registries, etc. 113. Clark sells sports memorabilia at his store. He is having a problem developing relationships with customers and started to talk to his friends about it. Clark's friend Dennis told him that he should offer additional services to increase the value for the customer. What kinds of services could Clark offer? Answer: Clark can offer shipping, order status and tracking, order history and billing profile access online, credit, account status and payment options online and in-store rewards, returns and exchanges in-store or by mail, gift cards, gift boxes and wrapping, and wedding and gift registry. 114. Bethany works for a luggage retailer. She is establishing how the assortment of products affects her target markets. She knows that she has some competitors that may offer more brands, but not have the specialization that Bethany has. Within a particular product category, how can the variety and assortment of products carried by retailers be different? Answer: Even within a particular product category, the variety and assortment of products carried by retailers can be very different. Variety is the number of product categories offered by a retailer and is referred to as breadth of merchandise. Assortment is the number of different product items within a product category and is referred to as the depth of merchandise. It is possible, for example, to purchase a briefcase from a department store, warehouse club or superstore, or luggage store. Wilson's Leather Stores is a specialty clothing and accessories retailer specializing in leather products. Its primary product lines include women and men's clothing as well as travel and business-related leather merchandise. The company carries an extensive line of leather briefcases. Costco, the successful warehouse club, also carries briefcases. However, Wilson's Leather has less variety across product lines but more assortment within a few product lines focused on leather products than Costco, which has a large variety of product categories but very little assortment within each product category. Despite the fact they both carry briefcases, target market differences as well distinct variations in the products offered suggest the two companies do not compete directly. 115. Barry's company has just acquired a food retailer through a merger. Barry has been put in charge of managing the food retailer. While Barry has always worked in retail, he has never worked for a food retailer; what are some of the things that make food retailers unique? Answer: As recently as 20 years ago virtually all food sales in the United States were at conventional supermarkets; today that figure is only 61 percent. General merchandise retailers have become food retailers and conventional supermarkets carry more general merchandise. Indeed, the largest food retailer in the world is Wal-Mart with over $100 billion in food and related sales. Exhibit 16.6 lists the world's largest food retailers. Food retailers occupy a unique retail space and face a number of specific challenges. Much of the food retailer's product mix is perishable (dairy, meat, fruits, vegetables) so companies develop sophisticated supply chains that keep products moving into the store while carefully balancing inventory levels to reduce spoilage. Another unique challenge for food retails is that profit margins are low relative to other retailing concepts with net margins averaging 1 percent of sales. 116. Cleo runs a tennis shop at a high-end resort. She sells an assortment of tennis rackets and accessories. She has been considering expanding into catalogue sales. What are some things that Cleo should be aware of? Answer: Catalog retailers face three challenges. First, getting the catalog in the hands of the right target audience is costly. Creating, printing, and mailing catalogs is an expensive and time-consuming process taking months and costing $5 to $10 per catalog. Second, breaking through the clutter to reach the consumer is difficult. Catalog retailers mail 17 billion catalogs a year. When combined with other direct-mail solicitations and junk mail, the consumer often doesn't take the time to read the catalog. Finally, building and maintaining the order fulfillment and CRM systems used by catalog retailers is expensive. Large, sophisticated retailers generate most of the $125 billion in catalog sales; many small catalog companies do not have the resources to be competitive. 117. Holly has just graduated and would like to open a retail store. She is currently trying to determine whether or not she should open an actual retail store or do something with non-store retailing. Explain to Holly the advantages of non-store retailing. Answer: • Ease of Use: Non-store retail channels offer the shopper an easy shopping experience. Consumers may review the product when it is convenient for them at a location of their choosing and make the purchase when it fits their schedule. This experience contrasts sharply with the in-store experience and is a major reason non-store retailing is growing in popularity. • Safe Shopping Environment: Higher crime rates for theft and assault in many areas have increased concerns about the safety of in-store shopping. It isn't that people are afraid of crime in the store; rather, the concerns generally involve other activities connected to the in-store shopping experience such as traveling to the store or walking alone in a parking lot. This makes non-store shopping a safer choice for consumers concerned about security and safety issues such as senior citizens, who report safety concerns are a major factor in choosing non-store retailing options. • Quality of Visual Presentation: While not as good as seeing the product live, non-store retailing does a good job of presenting products in a positive visual format through well-designed catalogs, direct-mail materials, and online content. 118. Mackenzie has been researching business to consumer electronic retailing. She has been trying to determine if electronic retailing really reduces barriers to entry, or if the bigger retailers still dominate the industry. She has finished her research, what did she find out? Answer: E-retailing offers even the smallest entrepreneur the opportunity to open a shop on the Internet. However, although many small companies utilize e-retailing, the vast majority of e-retail sales and Internet traffic is dominated by large traditional retailers. Companies such as Wal-Mart, Merrill Lynch, American Express, and many others offer products and services as well as extensive customer support online. Today, most of these companies coordinate a sophisticated brick (store, physical location) and click (online) strategy that links the retail formats. Williams-Sonoma, for example, allows shoppers to purchase online but return products to the store, offering a seamless shopping experience for its consumers. The greatest success in electronic retailing has been in products where convenience and price are key drivers in the purchase decision. People do enjoy shopping at Barnes & Noble or Borders, but they also appreciate the convenience of shopping online for books. As consumers become more comfortable evaluating products and making purchase decisions online, they expand their electronic shopping experience. 119. The Nature of the Bark is a retailer that creates organic pet foods. They are located in San Francisco, but have recently figured out how to make their recipes ready for shipping. The Nature of the Bark would like to sell and ship their pet foods all over the country, and is considering electronic retailing, what are the disadvantages you could tell them about? Answer: • Easier for Customers to Walk Away: The customer is in total control of the Web experience and has the opportunity to walk away at any time. In sharp contrast to a personal-selling situation or even a retail store, the customer can simply click to another site. This puts additional pressure on the Web site to attract and then hold on to visitors. In evaluating a Web site, one of the key measures is its "stickiness," which refers to the amount of time visitors remain at the site. A good Web site not only attracts a lot of visitors, but it also gets them to remain and explore the site. • Reduced Ability to Sell Features and Benefits: Web sites now incorporate sophisticated tools to display and highlight critical features and benefits. However, unless the customer initiates additional contact via Web live chat, phone, or e-mail, it is not possible to engage the customer to answer questions or deal with objections. • Security of Personal Data: While companies work hard to make their Web sites secure and keep personal data such as credit card numbers private, many consumers still have concerns about the security of their data. These concerns lead some consumers to limit their electronic purchases. 120. Jessica has just been hired as a manager for a new retail store. She is working on creating an effective retail strategy, but has forgotten some of the steps. Walk Jessica through the steps of creating an effective retail strategy. Answer: Jessica will need to define her retail target market, and then she will need to determine the best location to open her store in order to serve that target market. Next she will need to determine the best product mix assortment and the pricing associated with the products. A key aspect that she will need to create next is the in-store experience. Finally she will start the important task of creating marketing communications. Test Bank for Essentials of Marketing Management Greg W. Marshall, Mark W. Johnston 9780078028786, 9780071082020, 9780077400187

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