Chapter 15 1. ________ are sets of interdependent organizations participating in the process of making a product or service available for use or consumption. A) Marketing channels B) Interstitials C) Communication channels D) Sales territories E) Marketing terrains Answer: A Rationale: Marketing channels refer to the networks of interconnected organizations involved in the production and distribution of a product or service. These channels facilitate the flow of goods or services from the producer to the consumer, encompassing various intermediaries such as wholesalers, retailers, and distributors. 2. Which of the following entities in the marketing channel is a merchant? A) wholesalers B) brokers C) sales agents D) warehouses E) advertising agencies Answer: A Rationale: Wholesalers are considered merchants in the marketing channel because they take ownership of the products they sell. They purchase goods from manufacturers and sell them to retailers or other businesses for resale to end consumers. 3. A(n) ________ is a facilitator who assists in the distribution process. A) advertising agency B) sales agent C) manufacturer's representative D) broker E) wholesaler Answer: D Rationale: A broker is a facilitator in the distribution process who connects buyers and sellers but does not take ownership of the products. Brokers earn a commission for facilitating transactions between parties. 4. A manufacturer uses the company's sales force and trade promotions to carry, promote, and sell products to end users. Which of the following strategies is this manufacturer using? A) personalization strategy B) tailoring strategy C) push strategy D) pull strategy E) consumer promotion strategy Answer: C Rationale: In a push strategy, the manufacturer focuses on pushing the product through the distribution channel by using sales teams and promotional incentives to encourage retailers or intermediaries to carry and promote the product to end consumers. 5. Total Beverages, a maker of fruit juices and health drinks, recently launched a new brand of packaged drinking water called AquaPure. In order to induce distributors to carry the product, Total offers all its intermediaries a free refrigerator to store bottles of AquaPure. This is an example of a ________. A) consumer promotion B) push strategy C) backward flow D) reverse flow E) pull strategy Answer: B Rationale: Providing free refrigerators to distributors to encourage them to carry the product is a tactic associated with a push strategy. Push strategies focus on pushing the product through the distribution channel by incentivizing intermediaries. 6. Spike Inc. is a sportswear manufacturer that recently launched its new line of customizable running shoes. The shoes come with a digital component that allows them to adapt to the runner's biomechanics. To promote this new product, Spike launches an advertising campaign and also ropes in a famous athlete to endorse the product. This is an example of a ________. A) trade promotion B) reverse flow C) push strategy D) pull strategy E) backward flow Answer: D Rationale: Engaging in an advertising campaign and leveraging a famous athlete to endorse the product are classic tactics of a pull strategy. Pull strategies aim to create consumer demand and pull the product through the distribution channel. 7. When is a pull strategy appropriate? A) when there is low brand loyalty B) when consumers are able to perceive differences between brands C) when brand choice is made in the store D) when it is a low involvement purchase E) when the product is an impulse item Answer: B Rationale: A pull strategy is appropriate when consumers are capable of perceiving differences between brands. This strategy aims to create consumer demand by emphasizing product differentiation and benefits. 8. Using the push strategy is most appropriate when ________. A) consumers are able to perceive differences between brands B) the product being sold is an impulse item C) there is high brand loyalty for the product D) the product is a high involvement purchase E) consumers choose the brand before they go to the store Answer: B Rationale: Push strategies are most suitable when the product being sold is an impulse item, as they focus on incentivizing intermediaries to promote and distribute the product effectively, rather than relying on consumer deliberation. 9. A firm uses its sales force to sell to large accounts and outbound telemarketing to sell to medium-sized accounts. The firm is using ________ marketing. A) hybrid B) pull C) personalized D) vertical E) internal Answer: A Rationale: Hybrid marketing involves utilizing a combination of different marketing approaches or channels to reach different segments of the market effectively. In this scenario, the firm is combining direct sales and telemarketing to target different types of accounts. 10. A computer manufacturing company allows customers to place orders online, which they can later pick up from a convenient retail location. Which of the following terms best represents this practice? A) channel integration B) mass customization C) online personalization D) push strategy E) internal marketing Answer: A Rationale: Channel integration refers to the seamless integration of different marketing channels to provide customers with a unified and convenient experience. Allowing customers to place orders online and pick them up from a retail location exemplifies this approach. 11. Which of the following is the most accurate description of a value network? A) A system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings. B) A system of organizations and resources involved in moving a product from supplier to customer. C) An arrangement whereby an organization transforms inputs into finished goods. D) A network that allows an organization to take the finished products to the end-users. E) A communication network that allows an organization to transfer information to end-customers. Answer: A Rationale: A value network refers to the interconnected system of partnerships and alliances established by a firm to efficiently source, enhance, and deliver its products or services to customers. It involves various stakeholders working together to create value for the end-users. 12. Companies should first think of the target market and then design the supply chain backward from that point. This strategy is called ________. A) demand chain planning B) resource planning C) external channel planning D) materials planning E) strategic business planning Answer: A Rationale: Demand chain planning involves starting with the target market and then designing the supply chain backward from that point to ensure efficient fulfillment of customer demands and preferences. 13. Which of the following channel functions constitute only a backward flow? A) movement of physical goods B) placing orders with manufacturers C) persuasive communication D) storage of physical goods E) overseeing actual transfer of ownership Answer: B Rationale: Placing orders with manufacturers involves the backward flow of information and transactions from the intermediary or retailer to the manufacturer, indicating demand for products. 14. Identify the channel function that constitutes both backward and forward flow. A) obtaining funds for financing B) storage of physical goods C) persuasive communication D) movement of physical goods E) overseeing actual transfer of ownership Answer: A Rationale: Obtaining funds for financing involves both backward flow (in the form of financial transactions from customers to the producer or intermediary) and forward flow (in the form of funds for operations or investments). 15. Producers often shift some functions to intermediaries. Which of the following is the most significant benefit of doing this? A) It increases customer loyalty. B) It provides the producer with greater control over operations. C) It reduces the amount of direct customer interaction. D) It lowers the producer's costs and prices. E) It ensures greater information security. Answer: D Rationale: Shifting functions to intermediaries can lower the producer's costs and prices by reducing the overhead associated with direct distribution, warehousing, and customer service activities. 16. Which of the following is an example of a zero-level channel? A) A company takes online orders from customers and ships the products to them. B) An organization uses a combination of direct salespeople and sales agencies to increase sales. C) A company sells its products through wholesalers and retailers. D) A company sells its products through chains of supermarkets and other large sellers. E) A large company forms alliances with smaller companies to increase sales coverage. Answer: A Rationale: A zero-level channel involves direct distribution from the producer to the consumer without the involvement of intermediaries. Online orders directly fulfilled by the company represent a zero-level channel. 17. Which of the following entities is present in a zero-level marketing channel? A) consumers B) retailers C) brokers D) jobbers E) wholesalers Answer: A Rationale: In a zero-level marketing channel, consumers are directly involved in purchasing products from the producer without the intervention of intermediaries such as retailers, wholesalers, brokers, or jobbers. 18. A direct marketing channel is a ________. A) one-level channel B) two-level channel C) zero-level channel D) three-level channel E) reverse-flow channel Answer: C Rationale: A direct marketing channel, also known as a zero-level channel, involves the direct sale of products from the producer to the consumer without the involvement of intermediaries. 19. A jobber in a three-level marketing channel is a(n) ________. A) small-scale wholesaler B) external broker C) advertising agent D) independent evaluator E) communication channel Answer: A Rationale: A jobber typically acts as a small-scale wholesaler in a three-level marketing channel, purchasing goods from manufacturers in bulk and selling them to retailers or other intermediaries. 20. Which of the following activities is a reverse-flow channel of marketing? A) raw materials movement B) product recycling C) materials ordering D) finished goods storage E) customer order placement Answer: B Rationale: Product recycling involves the reverse-flow of goods back into the production or distribution process after they have been used by consumers, making it an example of a reverse-flow channel in marketing. 21. Toyota has an advantage over Lexus due to the fact that there are more Toyota dealers, which helps customers save on transportation and search costs in buying and repairing an automobile. Which of the following service outputs relates to this competitive advantage? A) spatial convenience B) service backup C) lot size D) waiting time E) delivery time Answer: A Rationale: Spatial convenience refers to the ease with which customers can access products or services. In this scenario, having more Toyota dealers provides spatial convenience as customers have easier access to sales and service locations, reducing transportation and search costs. 22. As a service output produced by marketing channels, product variety refers to the ________. A) units the channel permits a customer to purchase at once B) assortment provided by the marketing channel C) add-on services provided by the channel D) ability of a product to provide incremental value E) degree to which the channel makes it easy for customers to purchase a product Answer: B Rationale: Product variety refers to the assortment of products available through the marketing channel. It represents the different options and choices available to customers within a product category. 23. Which of the following terms refers to the add-on services, such as credit, delivery, installation, and repairs, provided by a marketing channel? A) service backup B) product accessories C) external products D) product variety E) service extensions Answer: A Rationale: Service backup refers to the additional services provided by a marketing channel, such as credit, delivery, installation, and repairs, which enhance the overall customer experience and satisfaction. 24. Atburex is a furniture manufacturing company in the United States. The company provides a sixty day credit period and EMI options to customers and also offers on-site delivery and installation. These special benefits refer to which of the following service outputs? A) good service backup B) large product variety C) spatial convenience D) large lot size E) short waiting time Answer: A Rationale: The special benefits provided by Atburex, such as credit options, delivery, and installation services, represent good service backup, enhancing the overall value proposition for customers. 25. Which of the following types of distribution involves severely limiting the number of channel intermediaries? A) exclusive B) selective C) intensive D) aggressive E) retail Answer: A Rationale: Exclusive distribution involves limiting the number of intermediaries to a select few or even a single intermediary, granting them exclusive rights to distribute the product in a particular territory or market segment. 26. Which of the following allows a firm to maintain control over the service level and obtain more dedicated and knowledgeable selling? A) selective distribution B) intensive distribution C) push strategy D) exclusive distribution E) pull strategy Answer: D Rationale: Exclusive distribution allows a firm to maintain control over the service level and obtain more dedicated and knowledgeable selling because it involves working closely with a limited number of intermediaries who are committed to promoting and selling the product. 27. Which of the following channel alternatives is most suited to handle complex products and transactions? A) sales forces B) the Internet C) dealers D) telemarketers E) direct mails Answer: A Rationale: Sales forces are most suited to handle complex products and transactions because they provide personalized and knowledgeable assistance to customers, guiding them through the decision-making process and addressing any concerns or questions they may have. 28. Which of the following is a major disadvantage of using the Internet as a marketing channel? A) It is less effective for complex products. B) It lacks convenience and practicality. C) It cannot be used to reach a wide audience. D) It is considered expensive. E) It causes the company to lose direct contact with customers. Answer: A Rationale: One major disadvantage of using the Internet as a marketing channel is that it may be less effective for complex products where customers require more detailed information or personalized assistance, which can be challenging to provide solely through online channels. 29. Armon Apparels designs, manufactures, and distributes athletic apparel and accessories for men and women. The company has only nine distributors across the United States. These distributors control a nationwide network of 600 retailers. The company does not sell its products through other channels. This is an example of ________ distribution. A) selective B) intensive C) exclusive D) internal E) passive Answer: A Rationale: This scenario describes selective distribution, where the manufacturer chooses a limited number of intermediaries to distribute its products, allowing for greater control over distribution and ensuring that the brand is represented consistently across the selected outlets. 30. Exclusive dealing arrangements are mainly used by companies looking for an edge in markets increasingly driven by ________. A) price B) efficiency C) product variety D) add-on services E) spatial convenience Answer: A Rationale: Exclusive dealing arrangements are often used by companies looking for an edge in markets increasingly driven by price, as they can help maintain price stability and reduce competition by limiting the availability of the product through exclusive channels. 31. An intensive distribution strategy serves well for ________. A) premium cars B) commercial trucks C) private label products D) industrial equipment E) newspapers Answer: E Rationale: Intensive distribution strategies are best suited for products with high market demand and low customer involvement, such as newspapers. This strategy aims to make the product available in as many outlets as possible to maximize accessibility and reach a wide audience. 32. Which of the following products is most likely to be sold using an exclusive distribution strategy? A) designer luggage B) cigarettes C) alcoholic beverages D) car fuel E) medicine Answer: A Rationale: Designer luggage, being a premium and exclusive product, is most likely to be sold using an exclusive distribution strategy. Exclusive distribution limits the number of intermediaries and channels through which the product is sold, enhancing its exclusivity and perceived value. 33. Which of the following covers payment terms and producer guarantees? A) conditions of sale B) pricing policies C) exclusive dealings D) mutual services E) territorial rights Answer: A Rationale: Conditions of sale typically cover payment terms, warranties, and guarantees provided by the producer to the intermediaries or customers. It outlines the terms and conditions under which the product is sold. 34. ________ call(s) for the producer to establish a schedule of discounts and allowances that intermediaries see as equitable and sufficient. A) Exclusive dealings B) Mutual services C) Territorial rights D) Price policy E) Tying agreements Answer: D Rationale: Price policy involves establishing a schedule of discounts, allowances, and pricing strategies that intermediaries find acceptable and fair. This ensures a mutually beneficial relationship between the producer and intermediaries. 35. Electrobar, a European manufacturer of industrial kitchenware, sells to industrial canteens, restaurants, hotels, and so forth. The company provides a one-year warranty on all products and also allows customers to pay in installments–they pay fifty percent on delivery and the rest as equal installments. This refers to which element in the "trade-relations mix"? A) price policy B) conditions of sale C) distributors' territorial rights D) exclusive dealings E) mutual services and responsibilities Answer: B Rationale: Conditions of sale encompass elements such as warranties, payment terms, and guarantees provided by the producer to the intermediaries or customers. In this scenario, the warranty and installment payment options offered by Electrobar represent conditions of sale. 36. Which of the following channels is associated with the lowest cost per transaction? A) Internet B) telemarketing C) retail stores D) distributor E) sales force Answer: A Rationale: The Internet is associated with the lowest cost per transaction due to its ability to automate processes, reach a wide audience, and reduce overhead costs associated with physical locations and personnel. 37. Which marketing channel is associated with the highest value added per sale? A) retail stores B) sales force C) distributors D) Internet E) telemarketing Answer: B Rationale: A sales force is associated with the highest value added per sale because salespeople can provide personalized assistance, address customer needs, and provide additional information or services, resulting in a higher perceived value for the customer. 38. Which of the following problems is most likely when a sales agency is used instead of company salespeople? A) The company will find it difficult to control the sales process. B) They do not take title to goods or negotiate purchases or sales. C) The value-added per sale is the lowest for sales agencies. D) Agencies will pay less attention to customers who buy the most or in large volumes. E) Sales agencies are often difficult to access due to strict contractual obligations. Answer: A Rationale: When a sales agency is used instead of company salespeople, the company may find it difficult to control the sales process and ensure that its brand image and messaging are effectively communicated to customers. This lack of control can lead to inconsistencies and inefficiencies in the sales process. Use of Power (Scenario) Broomer manufactures fashion apparel for women, men, and children. Its products are in high demand and apparel stores are more than willing to carry and sell Broomer's garments. The company recently introduced a new clothing line named "Inducer", targeted at the youth. However, the new line is not well-received by the market, and sales fail to take off even three months after its launch. 39. In an effort to boost sales, Broomer offers its retailers a higher margin for promoting and selling products from the "Inducer" line to customers. This is an example of ________ power. A) coercive B) reward C) passive D) expert E) referent Answer: B Rationale: This scenario illustrates the use of reward power, where Broomer incentivizes its retailers with a higher margin to promote and sell products from the "Inducer" line. By offering a financial incentive, Broomer aims to motivate the retailers to prioritize the promotion and sales of the new clothing line. 40. Because of the acceptance that the other Broomer products have in the market, retailers are willing to stock items from the new "Inducer" line of clothing. This is an example of ________ power. A) referent B) passive C) legitimate D) coercive E) reward Answer: A Rationale: This scenario demonstrates the use of referent power, where the acceptance and popularity of other Broomer products in the market influence retailers to stock items from the new "Inducer" line. Retailers perceive the association with the successful Broomer brand as desirable, motivating them to carry the new clothing line despite its initial lack of success. 41. Broomer threatens to withdraw all its other products from the retailers' stores if they are unwilling to push products from the "Inducer" line. This is an example of ________ power. A) reward B) coercive C) legitimate D) expert E) referent Answer: B Rationale: This scenario illustrates the use of coercive power, where Broomer attempts to influence the retailers by threatening negative consequences (withdrawal of other products) if they do not comply with pushing products from the "Inducer" line. 42. ________ power can be effective, but its exercise produces resentment and can lead the intermediaries to organize countervailing power. A) Coercive B) Reward C) Legitimate D) Expert E) Referent Answer: A Rationale: Coercive power can be effective in influencing behavior, but its use often leads to resentment among intermediaries. This resentment may result in intermediaries organizing countervailing power to resist or challenge the coercive influence. 43. A manufacturer offers its intermediaries an extra benefit for performing a promotional activity. This is an example of the use of ________ power. A) reward B) coercive C) functional D) expert E) referent Answer: A Rationale: This scenario exemplifies the use of reward power, where the manufacturer incentivizes intermediaries with an extra benefit for performing a promotional activity. By offering rewards, the manufacturer aims to motivate intermediaries to engage in behaviors that benefit the manufacturer. 44. A manufacturer is using legitimate power when it ________. A) requests a behavior that is warranted under the selling contract B) threatens to withdraw a resource or terminate a relationship C) offers intermediaries an extra benefit for performing specific acts or functions D) makes the intermediaries sell more of a particular product by offering rewards E) sells more products by making use of its reputation in the market Answer: A Rationale: Legitimate power is demonstrated when a manufacturer requests a behavior that is warranted under the selling contract or within the framework of established rules and agreements between the manufacturer and intermediaries. 45. Hewlett-Packard is a highly respected brand. Many retailers want to be associated with the brand because of this reputation. What kind of power does Hewlett-Packard obtain due to this reputation? A) referent B) functional C) legitimate D) coercive E) reward Answer: A Rationale: Hewlett-Packard obtains referent power due to its reputation as a highly respected brand. Referent power stems from the desire of others to be associated with or emulate the characteristics, qualities, or success of a particular entity. 46. Which of the following types of power is objectively observable? A) coercive power B) legitimate power C) group power D) expert power E) referent power Answer: A Rationale: Coercive power is objectively observable because it involves the use of threats or punishment to influence behavior, which can be clearly observed by others. 47. A new firm typically starts as a local operation selling in a fairly circumscribed market by ________. A) finding and developing new intermediaries B) using a few existing intermediaries C) forming partnerships with the market leader D) creating a special channel E) forming partnerships with other firms Answer: B Rationale: A new firm typically starts by using a few existing intermediaries in its local market as it establishes its presence and builds relationships with retailers or distributors. 48. Who will most likely be willing to pay for high-value-added channels? A) early buyers of a product B) internal customers of a company C) small and matured buyers of an industry D) consumers of low involvement products E) repeat customers of a product Answer: A Rationale: Early buyers of a product, especially those seeking premium service or added value, are most likely to be willing to pay for high-value-added channels that offer personalized service, convenience, or other benefits. 49. A producer must modify its channel design and arrangements if ________. A) consumer buying patterns change B) the competition in the market stabilizes C) the product is in the growth stage of its life cycle D) the market size remains unchanged for a particular period E) the firm's profits stabilize Answer: A Rationale: A producer must modify its channel design and arrangements if consumer buying patterns change, as these changes may require adjustments to distribution strategies, channel partners, or service offerings to effectively meet evolving consumer needs. 50. What is the major difference between a conventional marketing channel and a vertical marketing system (VMS)? A) Elements in a conventional marketing channel act as separate businesses whereas the elements in a VMS act as a unified system. B) A VMS has many intermediaries whereas a conventional marketing channel has a limited number of intermediaries. C) A VMS is characterized by an independent producer whereas a conventional marketing channel is characterized by multiple producers. D) A conventional marketing channel has elements such as retailers and wholesalers whereas these elements are not present in a VMS. E) Producers have complete control over the other members in a conventional marketing channel whereas this control is minimal in a VMS. Answer: A Rationale: The major difference between a conventional marketing channel and a vertical marketing system (VMS) is that elements in a conventional marketing channel act as separate businesses, while elements in a VMS act as a unified system, often under common ownership or contractual arrangements. 51. A(n) ________ includes the producer, wholesaler(s), and retailer(s) acting as a unified system. A) parallel marketing channel B) vertical marketing system C) extensive marketing channel D) internal marketing system E) conventional marketing channel Answer: B Rationale: In a vertical marketing system (VMS), the producer, wholesaler(s), and retailer(s) work together as a unified system to enhance efficiency and distribution effectiveness. 52. A(n) ________ vertical marketing system combines successive stages of production and distribution under single ownership. A) corporate B) administered C) contractual D) regulatory E) controlled Answer: A Rationale: A corporate vertical marketing system (VMS) combines successive stages of production and distribution under single ownership, where a single entity owns and controls all stages of the supply chain. 53. The most advanced supply-distributor arrangements for ________ vertical marketing systems rely on distribution programming. A) corporate B) administered C) contractual D) regulatory E) controlled Answer: B Rationale: Administered vertical marketing systems rely on distribution programming, where the coordination of successive stages of production and distribution is achieved through the combined efforts and influence of all members, often led by a dominant member. 54. Rotter Garder Inc. is a large-scale paint manufacturer and is known for its wide range of decorative paint products and industrial coatings. In addition to making paints, the company also owns and operates the retail stores which sell its products. This is an example of a(n) ________ vertical marketing system. A) administered B) contractual C) referent D) corporate E) regulated Answer: D Rationale: This scenario describes a corporate vertical marketing system (VMS) where Rotter Garder Inc. owns and controls both the production and distribution channels, including retail stores. 55. An administered VMS coordinates successive stages of production and distribution through ________. A) an automated central control unit B) single ownership C) the combined efforts of all its members D) the establishment of contractual obligations E) the size and power of one of the members Answer: E Rationale: In an administered VMS, coordination is achieved through the size and power of one of the members, which influences and directs the activities of other members within the system. 56. A(n) ________ VMS consists of independent firms at different levels of production and distribution, integrating their programs on a contractual basis to obtain more economies or sales impact than they could achieve alone. A) administered B) contractual C) corporate D) regulated E) referent Answer: B Rationale: A contractual VMS consists of independent firms at different levels of production and distribution, which integrate their programs on a contractual basis to achieve mutual benefits such as economies of scale and increased sales impact. 57. A group of small sellers take the initiative and organize a new business entity to carry on wholesaling and possibly some production. This initiative is called a(n) ________. A) retailer cooperative B) franchise organization C) area-based cartel D) sponsored voluntary chain E) alternate selling channel Answer: A Rationale: A retailer cooperative is formed when a group of small sellers organizes a new business entity to carry on wholesaling and possibly some production, pooling their resources and efforts for mutual benefit. 58. In a retailer cooperative, ________. A) profits are equally divided among members B) members plan their advertising jointly C) nonmembers cannot buy through the co-op D) members rely on distribution programming E) members standardize their selling practices Answer: B Rationale: In a retailer cooperative, members often plan their advertising jointly to maximize the cooperative's marketing efforts and promote the collective brand or products. 59. A group of small grocery shops forms a new business entity to buy products directly from manufacturers. The group buys products in bulk which are then distributed among members. This helps the shops obtain better profit margins. Which of the following types of vertical marketing system can be observed here? A) contractual B) corporate C) administered D) controlled E) regulatory Answer: A Rationale: This scenario describes a contractual vertical marketing system (VMS), where independent firms (small grocery shops) integrate their programs on a contractual basis to purchase products directly from manufacturers, obtaining better profit margins through bulk buying. 60. A franchise organization is an example of a(n) ________ vertical marketing system. A) corporate B) administered C) contractual D) regulatory E) controlled Answer: C Rationale: A franchise organization operates as a contractual vertical marketing system (VMS), where the franchisor (producer) grants the franchisees (retailers) the right to sell its products or services in accordance with agreed-upon terms and conditions. 61. In a ________ marketing system, two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity. A) reverse flow B) vertical C) horizontal D) lateral E) forward flow Answer: C Rationale: In a horizontal marketing system, unrelated companies collaborate to exploit a shared marketing opportunity, often by pooling resources or coordinating marketing efforts. 62. Which of the following is a major advantage of adding more channels for selling? A) It helps the company increase its market coverage. B) It helps the company reduce its fixed costs. C) It reduces the likelihood of channel conflict. D) It is the best strategy for selling low-involvement consumer products. E) It results in economies of scale. Answer: A Rationale: Adding more channels for selling increases market coverage, allowing the company to reach a broader audience and potentially increase sales. 63. ________ channel conflict occurs between channel members at the same level. A) Horizontal B) Vertical C) Multichannel D) Administrative E) Contractual Answer: A Rationale: Horizontal channel conflict occurs between channel members at the same level, such as between competing retailers or wholesalers. 64. Alcart Solutions is a large distributor of Aldor phones in Canada. The company distributes products to various retailers in the New Brunswick province. Recently Aldor received several complaints from its retailers that their orders are not delivered on time. They also complain that Alcart offers preferential treatment to some of the other retailers in the region. This is an example of ________ conflict. A) multichannel B) horizontal C) vertical D) intermediate E) parallel Answer: C Rationale: This scenario describes vertical conflict, where conflict arises between different levels of the distribution channel, such as between a distributor (Alcart Solutions) and retailers. 65. A franchisee owner is unsatisfied because the manufacturer provides more benefits to a wholesaler. This conflict is an example of a(n) ________ conflict. A) horizontal B) vertical C) intermediate D) multichannel E) parallel Answer: D Rationale: This scenario describes a multichannel conflict, where conflict arises between different channels or intermediaries within the same level of the distribution channel. 66. A manufacturer wants to achieve rapid market penetration through a low-price policy. However, its dealers prefer to work with high margins and pursue short-run profitability. The major reason for this conflict is ________. A) goal incompatibility B) unclear roles C) ambiguous rights D) differences in perception E) dependence on the manufacturer Answer: A Rationale: The conflict arises due to goal incompatibility, where the manufacturer's goal of rapid market penetration conflicts with the dealers' goal of maximizing short-term profitability through higher margins. 67. General Motors' executives work for a short time in some dealerships, and some dealership owners work in GM's dealer policy department. This strategy helps the company avoid conflicts with its dealers. This is an example of the ________ strategy. A) employee exchange B) dual compensation C) joint membership D) co-optation E) diplomacy Answer: A Rationale: This strategy is an example of employee exchange, where employees from one organization work temporarily in another organization to foster understanding and cooperation, thereby reducing conflicts. 68. RX Corp. is a large manufacturer of electronic goods and sells its products through distributors and retailers. In order to keep pace with the growing use of the Internet, the company decides to start selling online. The company faces stiff opposition from its retailers as they believe that this will significantly reduce their profits. The company attempts to eliminate this resistance by offering its retailers commissions for processing and delivering orders received via the Web. This is an example of which of the following conflict resolution strategies? A) dual compensation B) joint membership C) arbitration D) co-option E) strategic pricing Answer: A Rationale: Offering retailers commissions for processing online orders is an example of dual compensation, where additional incentives are provided to alleviate concerns and reduce resistance to change. 69. Co-optation is an effort by one organization to win the support of the leaders of another by ________. A) including them in advisory councils B) engaging in mediation and arbitration C) encouraging joint memberships in trade associations D) encouraging employee exchanges E) offering strategic justifications Answer: A Rationale: Co-optation involves including leaders of another organization in advisory councils or decision-making processes to win their support and reduce conflicts through collaboration and cooperation. 70. Winstar is a large scale manufacturer which has more than a hundred partners across the globe. When making decisions concerning distribution and channel optimization, the company invites members from its channel partners to be part of its advisory committee. This helps the company maintain harmony with its partners. Which of the following conflict resolution techniques is Winstar using? A) diplomatic counselling B) mediation C) arbitration D) co-option E) joint membership Answer: D Rationale: Winstar is using the conflict resolution technique of co-option by including members from its channel partners in its advisory committee, thereby gaining their support and fostering cooperation to maintain harmony within the distribution channel. 71. Which of the following channel conflict resolution techniques is used only if everything else proves ineffective? A) legal recourse B) mediation C) arbitration D) co-option E) superordinate goals Answer: A Rationale: Legal recourse is typically used as a last resort when other conflict resolution techniques, such as mediation, arbitration, or co-option, have proven ineffective in resolving channel conflicts. 72. Which of the following is the most complete and accurate description of a pure-click company? A) These are companies that launch a Web site without any previous existence as a firm. B) These firms' business models are based on advertising revenue. C) These are established companies that have an online site for selling products. D) These companies get paid every time a user visits their Web site. E) These companies sell online space to other Web sites and are paid for the service. Answer: A Rationale: A pure-click company is one that launches a website without any previous existence as a firm, often conducting all its business operations online. 73. A large retail chain in the United States decides to expand its operations by adding an online site for e-commerce. This is called a(n) ________ company. A) B2B B) brick-and-mortar C) m-commerce D) pure-click E) brick-and-click Answer: E Rationale: A brick-and-click company refers to a business that has both physical (brick-and-mortar) stores and an online (click) presence for e-commerce. 74. An Internet service provider (ISP) is a(n) ________ company. A) pure-click B) brick and click C) brick-and-mortar D) m-commerce E) one-level Answer: A Rationale: An Internet service provider (ISP) is typically a pure-click company, as it primarily operates and delivers its services online without physical retail locations. 75. JSE Securities Exchange is the largest stock exchange in Africa. The JSE provides a market where securities can be traded freely under a regulated procedure. The company acts as an intermediary between the traders. JSE is an example of a(n) ________. A) internal broker B) infomediary C) customer community D) market maker E) third party arbitrator Answer: D Rationale: JSE Securities Exchange acts as a market maker, facilitating the trading of securities among buyers and sellers, and providing liquidity to the market. 76. Exxon Consulting, works as an agent on behalf of business consumers to collect information on various industrial products. When faced with buying decisions, businesses can approach Exxon to obtain detailed information on the various options available to them. The company earns revenue by selling such information to various customers. Marten Consulting can be called a(n) ________. A) infomediary B) market maker C) customer community D) third party arbitrator E) informant Answer: A Rationale: Exxon Consulting acts as an infomediary by collecting and providing information on industrial products to businesses, thereby facilitating informed buying decisions. 77. Consumer surveys suggest that one of the most significant inhibitors of online shopping is the absence of ________. A) pleasurable experiences B) competitive prices C) adequate technical information D) after-sales service E) facilities to compare offerings Answer: A Rationale: One of the significant inhibitors of online shopping is the absence of pleasurable experiences, which can include factors such as the inability to physically interact with products or enjoy the ambiance of a traditional retail store. 78. Which of the following is a major threat facing the brick-and-mortar manufacturers when they add an e-commerce channel? A) It creates the possibility of a backlash from the existing intermediaries. B) It increases the likelihood of product cannibalization. C) Successful implementation leads to a significant increase in operational costs. D) It significantly increases the resource requirements of the organization. E) E-commerce channels often have low potential for attracting customers. Answer: A Rationale: One major threat facing brick-and-mortar manufacturers when adding an e-commerce channel is the potential backlash from existing intermediaries, such as distributors or retailers, who may feel threatened by the direct-to-consumer approach. 79. Which of the following is an example of a brick-and-click company? A) IFB Industries, a company that sells products using various channels such as Internet, retailers, direct outlets, and franchisees. B) Opera, a Web browser and Internet suite developed by Opera Software, performs common tasks such as displaying Web sites and sending and receiving e-mail messages. C) Atrutron, a company that offers its customers access to the Internet using data transmission technology. D) eBay Inc., an American company, facilitates online auctions and shopping to people and businesses across the globe to buy and sell a broad variety of goods and services. E) Yahoo! Inc., an American corporation, provides services via the Internet such as directories, e-mail, news, advertising, online mapping, and so on. Answer: A Rationale: IFB Industries, which sells products using both online (Internet) and offline (retailers, direct outlets, and franchisees) channels, is an example of a brick-and-click company. 80. M-commerce refers to ________. A) conducting business using mobile channels B) the use of mass media communications to attract customers C) providing mobile and on-site services to customers D) the use of a specific medium to communicate with prospects E) using the Internet as a medium for doing business Answer: A Rationale: M-commerce, short for mobile commerce, specifically refers to conducting business transactions, including buying and selling goods and services, using mobile devices such as smartphones or tablets. It involves utilizing mobile channels such as mobile apps, mobile websites, or mobile payment systems to facilitate commercial activities. Therefore, option A is the correct choice as it accurately describes the concept of m-commerce. 81. Marketing channels are the set of pathways a product or service follows after production, culminating in purchase and consumption by the final end user. Answer: True Rationale: Marketing channels, also known as distribution channels, are indeed the pathways through which products or services move from the manufacturer to the end consumer. These channels encompass various intermediaries such as wholesalers, retailers, and distributors who facilitate the movement and exchange of goods or services until they reach the ultimate consumer. 82. Sales agents and brokers are called facilitators in a marketing channel. Answer: False Rationale: Sales agents and brokers typically play the role of intermediaries or intermediaries in a marketing channel, facilitating transactions between buyers and sellers. However, they are not specifically referred to as "facilitators." Facilitators in a marketing channel often include entities like transportation companies, warehouses, and financial institutions that aid in the distribution process. 83. A pull strategy is particularly appropriate when there is low brand loyalty in a category, brand choice is made in the store, the product is an impulse item, and product benefits are well understood. Answer: False Rationale: A pull strategy involves creating consumer demand to pull the product through the distribution channel. It's more suitable when there's already a strong brand loyalty, when consumers actively seek out the product, and when the product has unique benefits that consumers are aware of. Therefore, the statement is false because it mischaracterizes the conditions under which a pull strategy is effective. 84. Companies should first think of the target market and then design the supply chain backward from that point. This strategy is called demand chain planning. Answer: True Rationale: Demand chain planning involves aligning supply chain activities with customer demand. It starts with identifying the target market's needs and preferences and then designing the supply chain to meet those requirements efficiently. This approach ensures that the company's supply chain is customer-centric and responsive to market demands. 85. A marketing channel overcomes the time, place, and possession gaps that separate goods and services from those who need or want them. Answer: True Rationale: Marketing channels play a crucial role in bridging the gaps between producers and consumers. They overcome the time gap by making products available when consumers need them, the place gap by ensuring products are accessible where consumers want them, and the possession gap by facilitating the transfer of ownership from sellers to buyers. 86. Marketing channel functions such as storage and movement and communications constitute a backward flow of activities. Answer: False Rationale: Marketing channel functions such as storage, movement (logistics), and communication typically constitute forward flows of activities as they involve the physical movement and transfer of products from manufacturers to consumers or from one channel member to another. 87. All functions in a marketing channel use scarce resources and can be shifted among channel members. Answer: True Rationale: All functions within a marketing channel, whether it's distribution, promotion, or logistics, require resources such as time, money, and manpower. These resources are limited and valuable, and channel members often collaborate to optimize their allocation. Functions can indeed be shifted among channel members based on their capabilities and resources. 88. A zero-level marketing channel typically uses a wholesaler and a retailer. Answer: False Rationale: A zero-level marketing channel, also known as a direct marketing channel, involves the manufacturer selling directly to the consumer without intermediaries such as wholesalers or retailers. Examples include online sales where manufacturers sell products directly to customers through their websites or other digital platforms. 89. The flow of materials to refurbish products for resale constitutes a reverse flow. Answer: True Rationale: The flow of materials or products from the consumer back to the manufacturer or reseller for refurbishing, recycling, or disposal is considered a reverse flow in a marketing channel. Reverse logistics involves handling such flows efficiently, which may include processes like product returns, repairs, or recycling. 90. Lot size refers to the total number of units a channel can transmit from the manufacturer's place to the service outlet. Answer: False Rationale: Lot size refers to the quantity of goods produced or purchased in a single batch or production run. It represents the number of units manufactured or ordered at one time and is typically determined based on factors such as demand forecasts, production capacity, and economic order quantities. It does not specifically relate to the transmission capacity of a channel. 91. Add-on services such as credit, delivery, installation, and repairs provided by the marketing channel are referred to as service backup. Answer: True Rationale: Add-on services like credit facilities, delivery assistance, installation support, and repair services that accompany the sale of products or services through the marketing channel are indeed referred to as service backup. These services enhance the overall value proposition offered to customers and contribute to customer satisfaction and loyalty. 92. Products such as heating and cooling systems are usually sold and maintained by the company or by franchised dealers. Answer: True Rationale: Products like heating and cooling systems often require specialized installation, maintenance, and repair services. These are typically provided either directly by the manufacturing company or through franchised dealers who are trained and authorized to sell, install, and service these products according to the manufacturer's standards. 93. When economic conditions are depressed, producers want to move goods to market using longer channels. Answer: False Rationale: During economic downturns or when demand is low, producers often seek to streamline distribution channels to reduce costs and improve efficiency. This may involve using shorter channels or direct distribution methods to reach customers more effectively and minimize the impact of economic challenges. 94. Intensive distribution relies on only some of the intermediaries willing to carry a particular product. Answer: False Rationale: Intensive distribution involves making a product available in as many retail outlets as possible, aiming for maximum market coverage. It requires the product to be distributed through all available channels and intermediaries willing to carry it, rather than relying on only select intermediaries. 95. Intensive distribution is becoming a mainstay for specialists looking for an edge in markets increasingly driven by price. Answer: False Rationale: Intensive distribution is more commonly associated with products that are widely available and less differentiated, such as everyday consumer goods. It aims to maximize product availability and convenience rather than seeking a competitive edge based solely on price. Specialists typically focus on selective distribution strategies that emphasize product differentiation and targeted market segments. 96. An intensive distribution strategy serves well for products such as snack foods and soft drinks. Answer: True Rationale: Intensive distribution is well-suited for products with high demand and frequent purchase patterns, such as snack foods and soft drinks. These products benefit from being widely available in various retail outlets, including grocery stores, convenience stores, vending machines, and supermarkets, to meet consumer needs for convenience and impulse purchases. 97. Distributors' territorial rights define the terms under which the producer will enfranchise other distributors. Answer: True Rationale: Distributors' territorial rights specify the geographic areas or regions assigned to individual distributors by the producer. These rights outline the boundaries within which a distributor has exclusive rights to sell the producer's products or services. They define the terms under which the producer may grant or enfranchise other distributors within specific territories. 98. Manufacturers can obtain greater control over the selling process by using a sales agency. Answer: False Rationale: Manufacturers typically relinquish some control over the selling process when they employ sales agencies or intermediaries to market and sell their products. Sales agencies operate independently and may represent multiple manufacturers, which can limit the manufacturer's direct control over the selling process, including pricing, promotion, and customer interactions. 99. After a company has chosen a channel system, it must select, train, motivate, and evaluate individual intermediaries for each channel. Answer: True Rationale: Once a company has selected its distribution channels, it must effectively manage its relationships with individual intermediaries within each channel. This involves selecting suitable intermediaries, providing them with necessary training and support, motivating them to perform effectively, and continuously evaluating their performance to ensure alignment with the company's goals and objectives. 100. Channel power is the ability to alter channel members' behavior so they take actions they would not have taken otherwise. Answer: True Rationale: Channel power refers to the influence or control exerted by one channel member over other members within the distribution channel. This power can be used to persuade or compel other channel members to act in ways they might not have otherwise, such as accepting pricing or promotional terms, expanding distribution coverage, or prioritizing certain products over others. Channel power dynamics play a significant role in shaping the behavior and relationships among channel members. 101. A manufacturer is using reward power when it offers intermediaries an extra benefit for performing specific acts or functions. Answer: True Rationale: Reward power involves offering incentives or benefits to influence the behavior of others positively. When a manufacturer provides intermediaries with extra benefits, such as bonuses, discounts, or promotional support, for performing specific acts or functions, it is utilizing reward power to motivate and encourage desired behavior among its channel partners. 102. When a manufacturer requests a behavior that is warranted under the contract, the manufacturer is using coercive power. Answer: False Rationale: Coercive power involves the ability to influence others' behavior through punishment or the threat of punishment. When a manufacturer requests behavior that is warranted under the contract, it is not using coercive power; rather, it is exercising its rights or enforcing contractual obligations. Coercive power comes into play when one party can impose penalties or negative consequences on another party for non-compliance with contractual terms. 103. A manufacturer obtains referent power when it has special knowledge that intermediaries value. Answer: False Rationale: Referent power is based on the influence exerted by one party over another due to the admiration, respect, or identification that the latter has for the former. It is not solely dependent on possessing special knowledge. Rather, referent power is established through personal connections, charisma, or perceived expertise. Special knowledge may contribute to expert power, but referent power is more about the interpersonal relationship and influence. 104. Coercive and referent power are subjective and depend on the ability and willingness of parties to recognize them. Answer: False Rationale: Coercive and referent power are types of social power that exist regardless of individuals' recognition or acknowledgment. Coercive power stems from the ability to administer punishment or negative consequences, while referent power arises from interpersonal relationships or admiration. These power dynamics may be influenced by perceptions and interpretations, but their existence does not depend on individuals' subjective recognition. 105. In competitive markets with low entry barriers, the optimal channel structure will inevitably change over time. Answer: True Rationale: In competitive markets with low entry barriers, businesses face constant pressure to adapt and innovate to maintain a competitive edge. This includes adjusting their channel structures to optimize efficiency, reach, and customer satisfaction. Changes in consumer preferences, technological advancements, and competitive forces can all contribute to the evolution of channel structures over time. 106. Early buyers might be willing to pay for high-value-added channels, but later buyers will switch to lower-cost channels. Answer: True Rationale: Early adopters or buyers may be willing to pay a premium for high-value-added channels that offer superior service, convenience, or quality. However, as a product or service becomes more mainstream and competition increases, later buyers may prioritize cost savings over additional value-added services. This can lead to a shift towards lower-cost channels as the market matures. 107. The first step in global channel planning is to get close to customers. Answer: True Rationale: In global channel planning, understanding and getting close to customers in different markets is essential for designing effective distribution channels. This involves conducting market research, identifying customer needs and preferences, and adapting channel strategies to meet local market requirements. Getting close to customers enables companies to tailor their channel structures and offerings to specific market conditions and consumer behaviors. 108. A conventional marketing channel includes the producer, wholesalers, and retailers acting as a unified system. Answer: False Rationale: A conventional marketing channel typically involves multiple independent entities, including producers, wholesalers, and retailers, each performing distinct functions in the distribution process. While they collaborate to move products from manufacturers to end consumers, they do not necessarily act as a unified system. Each channel member operates independently and may have its own objectives and strategies. 109. Vertical marketing systems achieve economies through size, bargaining power, and elimination of duplicated services. Answer: True Rationale: Vertical marketing systems (VMS) integrate successive stages of production and distribution under single ownership or control. By consolidating operations, VMS entities can achieve economies of scale, enhance bargaining power with suppliers and customers, and eliminate duplicated services or inefficiencies that may arise in traditional channel structures. These efficiencies contribute to cost savings and improved overall performance. 110. A corporate vertical marketing system combines successive stages of production and distribution under single ownership. Answer: True Rationale: A corporate vertical marketing system (CVMS) involves the ownership or control of successive stages of production and distribution by a single entity. In a CVMS, the same company owns or manages multiple entities involved in the production, distribution, and sale of goods or services. This integration allows for centralized decision-making, coordination, and strategic alignment across the entire supply chain. 111. Advanced supply-distributor arrangements for administered vertical marketing systems do not rely on distribution programming. Answer: False Rationale: Advanced supply-distributor arrangements in administered vertical marketing systems often involve sophisticated distribution programming to coordinate activities between suppliers and distributors effectively. These arrangements may include strategies such as demand forecasting, inventory management, pricing coordination, and promotional planning to optimize the distribution process and maximize efficiency. 112. Retailer cooperatives allow nonmember retailers to buy through them and share the profits. Answer: False Rationale: Retailer cooperatives typically consist of independent retailers who join together to achieve economies of scale in purchasing, marketing, and other activities. Nonmember retailers usually cannot buy through these cooperatives and share profits. Instead, retailer cooperatives enable members to collectively negotiate better terms with suppliers, access shared resources, and benefit from joint marketing efforts. 113. Unrelated companies put together resources or programs in horizontal marketing systems. Answer: True Rationale: Horizontal marketing systems involve collaboration between unrelated companies to exploit common marketing opportunities. These companies may pool resources, share distribution channels, or jointly promote products or services to target similar customer segments or achieve mutual business objectives. Horizontal marketing alliances allow companies to leverage each other's strengths and expand market reach without direct competition. 114. Adding more marketing channels increases the channel cost of selling. Answer: False Rationale: Adding more marketing channels does not necessarily increase the channel cost of selling. In fact, expanding the number of marketing channels can sometimes lead to economies of scale or scope, especially if the new channels enhance market coverage, improve customer access, or increase sales volume. However, it's essential to manage channel complexity effectively to avoid excessive costs associated with channel duplication or inefficiencies. 115. Conflicts between various franchisees of a company are an example of vertical channel conflict. Answer: False Rationale: Conflicts between various franchisees of a company typically represent horizontal channel conflict rather than vertical. Horizontal channel conflict arises among entities at the same level of the distribution channel, such as between franchisees or retailers competing for the same customers or territories. Vertical channel conflict, on the other hand, occurs between different levels of the distribution channel, such as between manufacturers and retailers. 116. Multichannel conflicts are common when the members of one channel get a lower price based on larger-volume purchases. Answer: True Rationale: Multichannel conflicts can occur when different distribution channels compete or overlap in the marketplace. For example, conflicts may arise when one channel member receives preferential pricing or incentives based on larger-volume purchases, leading to resentment or disputes with other channel members. These conflicts highlight the challenges of managing relationships and aligning incentives across multiple channels. 117. Dual compensation pays existing channels for sales made through new channels. Answer: True Rationale: Dual compensation refers to a practice where existing channel members receive compensation or commissions for sales made through new channels introduced by the company. This approach aims to incentivize existing channel partners to support the integration of new channels into the distribution network by ensuring they benefit financially from the expanded sales reach. 118. Exclusive dealings and tying agreements are illegal and prohibited by law. Answer: False Rationale: Exclusive dealings and tying agreements are not inherently illegal but can raise antitrust concerns if they are used to stifle competition or harm consumers. Exclusive dealings involve agreements where a buyer agrees to purchase exclusively from a seller, while tying agreements link the sale of one product to the purchase of another product. While these practices can enhance efficiency and promote fair competition in some cases, they may be subject to legal scrutiny if they result in anticompetitive behavior. 119. Brick-and-click companies are those that have launched a Web site without any previous existence as a firm. Answer: False Rationale: Brick-and-click companies refer to businesses that operate both physical (brick-and-mortar) stores and online (click) channels to reach customers. These companies may have started as traditional brick-and-mortar retailers and expanded their operations to include e-commerce platforms, or they may have launched online stores in addition to their existing physical presence. The term "brick-and-click" emphasizes the integration of offline and online channels in the company's business model. 120. Price pressure will be more for undifferentiated products than differentiated products. Answer: True Rationale: Undifferentiated products, which lack unique features or attributes that distinguish them from competitors, often face intense price competition in the marketplace. Consumers perceive these products as interchangeable, leading to price sensitivity and downward pressure on prices. In contrast, differentiated products, which offer unique benefits or features valued by consumers, may command higher prices and face less price pressure due to reduced direct competition based solely on price. 121. What are marketing channels? Briefly explain some of the different types of intermediaries. Answer: Marketing channels are sets of interdependent organizations participating in the process of making a product or service available for use or consumption. They are the set of pathways a product or service follows after production, culminating in purchase and consumption by the final end user. Some intermediaries—such as wholesalers and retailers—buy, take title to, and resell the merchandise; they are called merchants. Others—brokers, manufacturers' representatives, sales agents—search for customers and may negotiate on the producer's behalf but do not take title to the goods; they are called agents. Still others—transportation companies, independent warehouses, banks, advertising agencies—assist in the distribution process but neither take title to goods nor negotiate purchases or sales; they are called facilitators. 122. Explain the concept of a value network. Answer: A company can be seen as being at the center of a value network, a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings. A value network includes a firm's suppliers and its suppliers' suppliers, and its immediate customers and their end customers. The value network includes valued relationships with others such as university researchers and government approval agencies. A company needs to orchestrate these parties in order to deliver superior value to the target market. Managing a value network means making increasing investments in information technology (IT) and software. Firms have introduced supply chain management (SCM) software and invited such software firms as SAP and Oracle to design comprehensive enterprise resource planning (ERP) systems to manage cash flow, manufacturing, human resources, purchasing, and other major functions within a unified framework. 123. What are the various functions performed by members of a marketing channel? Provide examples. Answer: Some of the functions that the members of a marketing channel perform (storage and movement, title, and communications) constitute a forward flow of activity from the company to the customer; other functions (ordering and payment) constitute a backward flow from customers to the company. Still others (information, negotiation, finance, and risk taking) occur in both directions. 124. Briefly explain the various levels of marketing channels. Answer: A zero-level channel, also called a direct marketing channel, consists of a manufacturer selling directly to the final customer. The major examples are door-to-door sales, home parties, mail order, telemarketing, TV selling, Internet selling, and manufacturer-owned stores. A one-level channel contains one selling intermediary, such as a retailer. A two-level channel contains two intermediaries. In consumer markets, these are typically a wholesaler and a retailer. A three-level channel contains three intermediaries. In the meatpacking industry, wholesalers sell to jobbers, essentially small-scale wholesalers, who sell to small retailers. 125. Briefly explain the various service outputs that marketing channels produce. Answer: Channels produce five service outputs: (1) Lot size: The number of units the channel permits a typical customer to purchase on one occasion. (2) Waiting and delivery time: The average time customers wait for receipt of goods. Customers increasingly prefer faster delivery channels. (3) Spatial convenience: The degree to which the marketing channel makes it easy for customers to purchase the product. (4) Product variety: The assortment provided by the marketing channel. Normally, customers prefer a greater assortment because more choices increase the chance of finding what they need, although too many choices can sometimes create a negative effect. (5) Service backup: Add-on services (credit, delivery, installation, repairs) provided by the channel. The greater the service backup, the greater the work provided by the channel. 126. Explain the three distribution strategies based on the number of intermediaries. Answer: Exclusive distribution: This strategy focuses on severely limiting the number of intermediaries. It's appropriate when the producer wants to maintain control over the service level and outputs offered by the resellers, and it often includes exclusive dealing arrangements. By granting exclusive distribution, the producer hopes to obtain more dedicated and knowledgeable selling. It requires a closer partnership between seller and reseller and is used in the distribution of new automobiles, some major appliances, and some women's apparel brands. Selective distribution: This distribution strategy relies on only some of the intermediaries willing to carry a particular product. Whether established or new, the company does not need to worry about having too many outlets; it can gain adequate market coverage with more control and less cost than intensive distribution. Intensive distribution: This strategy places the goods or services in as many outlets as possible. This strategy serves well for snack foods, soft drinks, newspapers, candies, and gum–products consumers buy frequently or in a variety of locations. 127. What is channel power? Explain the various types of channel powers. Answer: Channel power is the ability to alter channel members' behavior so they take actions they would not have taken otherwise. Coercive power: A manufacturer threatens to withdraw a resource or terminate a relationship if intermediaries fail to cooperate. This power can be effective, but its exercise produces resentment and can lead the intermediaries to organize countervailing power. Reward power: The manufacturer offers intermediaries an extra benefit for performing specific acts or functions. Reward power typically produces better results than coercive power, but intermediaries may come to expect a reward every time the manufacturer wants a certain behavior to occur. Legitimate power: The manufacturer requests a behavior that is warranted under the contract. As long as the intermediaries view the manufacturer as a legitimate leader, legitimate power works. Expert power: The manufacturer has special knowledge the intermediaries' value. Once the intermediaries acquire this expertise, however, expert power weakens. The manufacturer must continue to develop new expertise so intermediaries will want to continue cooperating. Referent power: The manufacturer is so highly respected that intermediaries are proud to be associated with it. Companies such as IBM, Caterpillar, and Hewlett-Packard have high referent power. Coercive and reward power are objectively observable; legitimate, expert, and referent power are more subjective and depend on the ability and willingness of parties to recognize them. 128. Comment on the challenges and opportunities that international markets pose. Answer: International markets pose distinct challenges, including variations in customers' shopping habits, but opportunities at the same time. Behavior of markets and preferences for intermediaries differ across countries. Foreign markets provide an opportunity for growth and expansion. Many pitfalls also exist in global expansion, and retailers must also be able to defend their home turf from the entry of foreign retailers. 129. What is a vertical marketing system (VMS)? What are the various types VMSs? Answer: A vertical marketing system includes the producer, wholesaler(s), and retailer(s) acting as a unified system. One channel member, the channel captain, owns or franchises the others or has so much power that they all cooperate. There are three types of VMSs: corporate, administered, and contractual. A corporate VMS combines successive stages of production and distribution under single ownership. An administered VMS coordinates successive stages of production and distribution through the size and power of one of the members. Manufacturers of dominant brands can secure strong trade cooperation and support from resellers. A contractual VMS consists of independent firms at different levels of production and distribution, integrating their programs on a contractual basis to obtain more economies or sales impact than they could achieve alone. 130. Differentiate between pure-click companies and brick-and-click companies. Answer: Pure-click companies are those that have launched a Web site without any previous existence as a firm, while brick-and-click companies are existing companies that have added an online site for information or e-commerce. There are several kinds of pure-click companies: search engines, Internet service providers (ISPs), commerce sites, transaction sites, content sites, and enabler sites. Brick-and-click companies are formed by adding an e-commerce channel to an existing business. 131. Sweet Treats is a startup confectionery manufacturer that sells chocolates, boiled sweets, toffees, marshmallows, jelly candies, and so on. Should the firm adopt a push or a pull strategy? Explain your answer. Answer: Considering that Sweet Treats is a startup, its products are likely to have low brand loyalty. Moreover, its products are likely to be impulse items. Thus, a push strategy would be more suitable. 132. The Norticon Group provides and manages computers and network systems for businesses and communities. Norticon sells its products through various means–it uses its sales force to sell to large customers and telemarketing to sell to smaller customers. The company also sells its products via the Internet. Briefly explain the marketing approach being used by the company. Answer: The company is using hybrid channels or multichannel marketing which involves the use of two or more marketing channels to reach customer segments. In multichannel marketing, each channel targets a different segment of buyers, or different need states for one buyer, and delivers the right products in the right places in the right way at the least cost. 133. Garolds Stores operates as a low price retailer. It offers home fashion products, such as wall decor, frames, candles, bath and bedding products, furniture, home accents, and kitchen products. The firm has showrooms and retail stores across United States. Customers can buy products in three different ways: (1) they can place orders online and have the products shipped to their homes; (2) they can buy directly from the showrooms and retail outlets; or (3) they can place orders online and pick them up from the nearest showroom. What are the benefits that Garolds Stores could achieve by using various channels to sell to customers? Answer: The company can increase its sales by targeting different segments of customers through various channels. Multichannel marketing allows the company to deliver the right products in the right places in the right way at the least cost. 134. Cortron Consultants provides business consulting services for startups. It helps customers design their supply chains by first evaluating the target market and then proceeds backward from that point. What is this strategy of reverse design called? Briefly explain. Answer: This strategy is called demand chain planning. This helps the companies have a clear focus on the target market. 135. Members of a marketing channel perform three types of functions. Provide examples of these three functions in the context of a publishing company that publishes books and magazines. Answer: The storage and movement of books from the company to the customer constitutes a forward flow. Ordering books and paying for them constitute a backward flow from customers to the company. Sharing information and risk taking are activities that occur in both directions. 136. Dell computers is a manufacturer of computers. Dell accepts orders for computers online and ships the products to the customer. Depict the likely physical flow of materials in this case. Answer: Suppliers —>Transporters -> Warehouses-> Dell ->Transporters-> Customers 137. Eureka Forbes, an Asian consumer appliances company, sells its vacuum cleaners through door-to door sales. This allows the company to obtain a high conversion ratio. Comment on the length of the channel in the case of Eureka Forbes' vacuum cleaners. Answer: The company is using a zero-level channel, i.e. the manufacturer sells directly to the final customer. This is the shortest channel. 138. Orion Airlines is an American airline that provides domestic and international air transport services. Explain the five service outputs provided by marketing channels with reference to Orion. Answer: Lot size—Customers may be allowed to book as many tickets as they want, subject to availability. Waiting and delivery time - This would refer to the average time customers take to book their tickets. Spatial convenience—This refers to the ease of booking tickets. The location of Orion's retail ticketing outlets and whether the company offers online ticket booking services would be classified under spatial convenience. Product variety—This refers to the assortment provided by the marketing channel in terms of travel destinations, holiday packages, hotel bookings, car rental services, and the like. Service backup—This refers to the add-on services provided by the channel such as credit, discounts, delivery, refunds, and so on. 139. Ravake is a manufacturer of high-end designer apparel. Competition in the apparel industry is very severe and the market is driven by price. What distribution strategy would be best suited to help Ravake obtain an edge over its competitors? Answer: The company can use exclusive distribution. It severely limits the number of intermediaries and reduces costs. This would help the company maintain greater control over service levels. 140. National Beverage Corp. produces and distributes a wide range of beverages. It offers a selection of flavored soft drinks, juices, sparkling waters, energy drinks, nutritionally-enhanced waters, and other specialty beverages. What distribution strategy will be most suitable for the company's products? Answer: The company has to use intensive distribution, which places the goods or services in as many outlets as possible. This strategy serves well for products consumers buy frequently or in a variety of locations. 141. Apple Inc., together with subsidiaries, designs, manufactures, and markets personal computers, mobile phones and media devices. It also sells software, services, and third-party digital content. Apple is a highly respected brand across the globe. What kind of channel power does this respect give Apple? Answer: Apple is so highly respected that intermediaries are proud to be associated with it. This gives Apple referent power. 142. Atronix Solutions is a major manufacturer of electronic measuring devices in the U.S. The company often threatens to terminate its relationship with its intermediaries if they do not agree with its terms and conditions. What channel power does Atronix use? What are its effects? Answer: Here, the manufacturer is using coercive power. This power can be effective, but its exercise produces resentment and can lead the intermediaries to organize countervailing power. 143. A group of entrepreneurs is planning to start a food processing company. Comment on the likely evolution of the company's marketing channels. Answer: The firm is likely to start as a local operation selling in a fairly circumscribed market, using a few existing intermediaries. At this stage, it is often difficult to convince the available intermediaries to handle the firm's line. If the firm is successful, it might branch into new markets with different channels. In smaller markets, the firm might sell directly to retailers; in larger markets, through distributors. 144. DMM Industries, a manufacturer of composite metal products, sells its products using a conventional marketing channel. The company decides to adopt a vertical marketing system to improve its performance. What advantages could this provide? Answer: Each entity in a conventional channel is a separate business seeking to maximize its own profits, even if this goal reduces profit for the system as a whole. A vertical marketing system, by contrast, acts as a unified system. This would make the company more profitable. VMSs achieve economies through size, bargaining power, and elimination of duplicated services. 145. Altrudex, Inc., is involved in the manufacture, distribution, and sale of consumer electronics. The company sources over half the products it sells from companies it partly or wholly owns. It also owns a large retail chain and sells its products through them. What marketing system is Altrudex using? Answer: The company is using a corporate VMS. A corporate VMS combines successive stages of production and distribution under single ownership. 146. True Value is a retailer-owned cooperative with over 4,000 independent retail locations worldwide. Members of True Value own their individual stores and operate independently. True Value helps its members procure materials at a low cost. What kind of a marketing system is True Value? Explain briefly. Answer: True Value is a type of contractual VMS. It is a retail cooperative wherein retailers take the initiative and organize a new business entity to carry on wholesaling and possibly some production. 147. Flash Designs is an apparel manufacturing company and has adopted a franchising model to distribute and sells its garments. The company recently received complaints from a particular franchisee that another competing franchisee was infringing on its territory. What type of conflict is this? Answer: This is an example of horizontal channel conflict, between channel members at the same level. 148. Crafted Jewels is a jewelry manufacturer that sells its designs to various jewelry retailers. The retailers often complain that the company's online store acts as a competitor and reduces their profitability. What type of conflict is this? Briefly explain. Answer: This is a case of multichannel conflict. It exists when the manufacturer has established two or more channels that sell to the same market. 149. UltraMotion Pictures produces and distributes music and television entertainment in the United States. The company distributes music in partnership with a large music retailer, Fromen Tunes. Fromen executives often work for a short time with UltraMotion and some of the UltraMotion executives work at the retail outlets to study Fromen's operations. This strategy minimizes the conflicts between partners. What strategy is being used here? Briefly explain. Answer: This strategy of managing channel conflict is called an employee exchange which involves the exchange of persons between two or more channel levels. Thus participants can grow to appreciate each other's point of view. 150. eBay Inc. is an online auction and shopping company. Procter & Gamble is an American multinational corporation that manufactures a wide range of consumer goods. Both companies sell their products online. How are these companies different from a marketing channel perspective? Answer: eBay is a pure-click company whereas Procter & Gamble is a brick-and-click company. Pure-click companies are companies that have launched a Web site without any previous existence as a firm. Brick-and-click companies are existing companies that have added an online site for information or e-commerce. Test Bank for Marketing Management Philip T Kotler, Kevin Lane Keller 9780132102926, 9780273753360, 9781292092621, 9780133856460, 9789332587403, 9780136009986
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