Marketing I BA 301-01: N/A
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Chapter 13 - Managing Marketing Channels/Supply Chains - Review

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1) Individuals and firms involved in the process of making a good or service available for use or consumption by consumers or industrial users are considered members of a marketing channel.

2) Consumers also benefit from intermediaries. Having the goods and services you want, when you want them, where you want them, and in the form you want them is the ideal result of marketing channels. In more specific terms, marketing channels help create value for consumers through the four utilities described in Chapter 1: time, place, form, and possession.

3) A middleman is any intermediary between a manufacturer and end-user markets.

4) An agent is any intermediary with legal authority to act on behalf of the manufacturer.

5) A wholesaler is any intermediary who sells to other intermediaries, usually to retailers, and usually in consumer markets.

6) A dealer is an imprecise term that can mean the same as distributor, retailer, wholesaler, and so on.

7) A retailor sells to ultimate consumers.

8) The three basic functions performed by intermediaries are transactional functions, logistical functions, and facilitating functions.

9) Intermediaries performing a transactional function in distribution are engaged in buying, selling, and risk taking.

10) Logistical function activities include assorting, storing, sorting, and transporting.

11) Example: When Hunter went to the hardware stare looking for gloves to wear while refinishing a table, he bought one pair because that was all he needed, but when the hardware store purchased the gloves, it purchased a case containing 100 pairs of identical gloves. The logistical function the hardware store performed for Hunter was sorting.

12) Facilitating function activities include financing, grading, and marketing information and research.

13) Example: Before consumers see a movie, it is assigned a rating such as G or PG based on its language and content. This rating system is most closely related to the facilitating function activity performed by marketing intermediaries of grading.

14) Marketing channels help create value for consumers through the four utilities: time, place, form, and possession. Quality is not a utility although it does have an effect on customer value.

15) Example: When you arrive at a motel at 2 A. M. and are hungry, a snack vending machine located in the motel creates place and time utility.

16) Example: An artist can buy white blank dishes and figurines, glaze (paint) them, fire the glazed pieces in a kiln, and sell the finished work to customers. By decorating the pieces and increasing their aesthetic value, the artist creates form utility.

17) Form utility involves enhancing a product or service to make it more appealing to buyers.

18) A direct channel exists when producers and ultimate consumers deal directly with each other.

19) In direct channels, all channel functions are performed by producers.

20) Example: Schwan's Sales Enterprises of Marshall, Minnesota, markets a full line of frozen foods in 48 states and parts of Canada using door-to-door salespeople who sell from refrigerated trucks. This particular marketing channel is called a direct channel.

21) Indirect channels for consumer goods include intermediaries that are between the producer and consumer and perform numerous channel functions.

22) The most common indirect channel moves product from producer to retailer to consumer. This type of channel is most likely to exist when the retailer is large and can buy in large quantities, the cost of inventory makes it too expensive to use a wholesaler, there are so many product variations that a wholesaler could not carry them all in sufficient quantity, and the cost of maintaining inventory is high.

23) A retailer is most commonly added when the retailer is large and can buy in large quantities from a producer or when the cost of inventory makes it too expensive to use a wholesaler.

24) Adding a wholesaler to the marketing channel for consumer goods is most common for low-cost, low unit value items.

25) The most indirect channel for consumer goods incorporates agents, wholesalers, and retailers and is most commonly used when there are many small manufacturers and many small retailers.

26) In contrast with channels for consumer products, business channels typically are shorter and rely on one intermediary or none at all because business users are fewer in number, tend to be more concentrated geographically, and buy in larger quantities. An industrial distributor performs a variety of marketing channel functions, including selling, stocking, and delivering a full product assortment and financing. In many ways industrial distributors are similar to wholesalers in consumer channels. Both business and consumer channels may use agents that represent the supplier or producer to the customer.

27) An industrial distributor is an intermediary that performs a variety of marketing channel functions involving selling, stocking, and delivering a full product assortment as well as providing financing for industrial goods and services.

28) An agent is the independent selling arm of producers, and represents a producer to industrial users.

29) Dual distribution is an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product.

30) A recent innovation in marketing channels whereby one firm's marketing channel is used to sell another firm's products is called a strategic channel alliance.

31) An example of a strategic channel alliance occurs when Kraft Foods uses the distribution system of Ajinomoto, a major Japanese food company, to market its Maxwell House coffee in Japan.

32) Vertical marketing systems are professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximum marketing impact.

33) The purpose of a vertical marketing system is to achieve channel economies and maximum marketing impact.

34) The combination of successive stages of production and distribution under a single ownership is a corporate vertical marketing system. This results in more control since ties among the intermediaries are the strongest when they are all under the same ownership.

35) When a producer owns an intermediary at the next level down in the marketing channel, it is called forward integration.

36) Backward integration is the practice of a retailer owning a manufacturing operation.

37) The most popular type of vertical marketing system, accounting for about 40 percent of all retail sales is the contractual vertical marketing systems.

38) The type of contractual vertical marketing system that involves a contractual relationship between a wholesaler and small independent retailers to standardize and coordinate buying practices, merchandising programs, and inventory management efforts is a wholesaler-sponsored voluntary chain.

39) The type of contractual vertical marketing system that involves small independent retailers forming an organization that operates a wholesale facility cooperatively is a retailer-sponsored cooperative.

40) Franchising is a form of contractual vertical marketing systems.

41) A contractual arrangement between a parent company and an individual or firm that allows the individual or firm to operate a certain type of business under an established name and according to specific rules is called franchising.

42) Manufacturer-sponsored retail franchise systems are commonly used in the automobile industry. With this system, a manufacturer licenses dealers to sell its cars subject to various sales and service conditions.

43) The manufacturer-sponsored wholesale franchise system is common in the soft drink industry where the manufacturer sells its concentrate to wholesalers, who carbonate it, and market the finished product to retailers.

44) Service-sponsored franchise systems are a type of vertical marketing system that exists when franchisors license individuals or firms to dispense a service under a trade name and specific guidelines.

45) Administered vertical marketing systems are a type of vertical marketing system that achieves coordination at successive stages of production and distribution by the size and influence of one channel member rather than through ownership.

46) Marketing executives consider three items when choosing a marketing channel and intermediaries: (1) target market coverage, including density and type of intermediaries used at retail, (2) satisfying buyer requirements, and (3) profitability of the channel and intermediaries.

47) The three degrees of distribution density are intensive, exclusive, and selective.

48) Intensive distribution means that a firm tries to place its products and services in as many outlets as possible. Intensive distribution is usually chosen for convenience products or services, such as candy and newspapers.

49) The density of distribution whereby a firm tries to place its products or services with only one retail outlet in a specified geographical area is called exclusive distribution.

50) The density of distribution whereby a firm tries to place its products in a few retail outlets in a specific geographical area is called selective distribution.

51) Satisfying four buyer requirements is another objective in channel design: (1) information, (2) convenience, (3) variety, and (4) pre- or post-sale services. Information is an important requirement when buyers have limited knowledge or desire specific data about a product or service. Properly chosen intermediaries communicate with buyers through in-store displays, demonstrations, and personal selling. Convenience has multiple meanings for buyers, such as proximity or driving time to a retail outlet or hours of operation. Variety reflects buyers’ interest in having numerous competing and complementary products carried by intermediaries, which enhances their attractiveness to buyers. Services provided by intermediaries are an important buying requirement for products such as large household appliances that require delivery, installation, and credit.

52) Forward integration occurs when a producer owns an intermediary at the next level down in the marketing channel. 54) Channel relationships can be described as: channels consist of independent individuals and firms, there is always potential for disagreement in a channel, channel disagreements include who performs which channel functions, and channel disagreements include how profits are distributed.

55) Cnannel conflict arises when one channel member believes another channel member is engaged in behavior that prevents it from achieving its goals.

56) The two types of channel conflict are horizontal and vertical.

57) Vertical conflict occurs between different levels in a marketing channel.

58) When a channel member bypasses another member and sells or buys products direct, this is called disintermediation.

59) Conflict occurring between intermediaries at the same level in a marketing channel, such as between two or more retailers that handle the same manufacturer’s brands is called horizontal conflict.

60) A channel member who coordinates, directs, and supports other channel members is called a channel captain.

61) The performance of activities that focus on getting the right amount of the right product to the right place at the right time at the lowest possible cost is called logistics.

62) Example: UPS Logistics earned more than $1 billion in revenue in a recent year and is one of the fastest growing divisions of UPS. UPS Logistics designs and manages entire transportation and customer service networks for global clients that include Ford Motor Co. and National Semiconductor. UPS Logistics creates utility for these companies' customers.

63) Logistics deals with decisions needed to move a product from the source of raw materials to consumption—that is the flow of the product.

64) Organizing the cost-effective flow of raw materials, in-process inventory, finished goods, and related information from point-of-origin to point-of consumption to satisfy customer requirements is called logistics management.

65) If you were to draw a graphic representation of logistics management, it would most likely resemble a pipeline.

66) A supply chain is a series of firms that perform activities required to create and deliver a good or service to consumers or industrial users.

67) Supply chain management is the integration and organization of information and logistics across firms in a supply chain for the purpose of creating and delivering goods and services that provide value to consumers.

68) An important feature of supply chain management is its application of information technology.

69) Example: Logistical aspects of the automobile marketing channel are also an important part of the supply chain. Major responsibilities include transportation, the operation of distribution centers, the management of finished goods inventories, and order processing for sales.

70) Cross-docking is a practice that involves unloading products from suppliers, sorting products for individual stores, and quickly reloading products on trucks, which will deliver the products to specific stores.

71) Cross-docking is most closely related to efficient supply chain activities.

72) The objective of logistics management in a supply chain is to minimize total logistics costs while delivering the appropriate level of customer service.

73) Total logistics cost includes expenses associated with transportation, materials handling and warehousing, inventory, stockouts, and order processing.

74) The five key logistics costs in a supply chain include transportation, warehousing and materials handling, order processing, stockout costs and inventory management.

75) The customer service concept implies firms should balance the customer service factors against total logistics cost factors.

76) Within the context of a supply chain, customer service is the ability of a logistics system to satisfy users in terms of time, dependability, communication, and convenience.

77) The time from ordering an item until it is received and ready for use is called order cycle time.

78) A vendor-managed inventory is an inventory-management system whereby the supplier determines the product amount and assortment a customer, such as a retailer needs and automatically delivers the appropriate items.

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