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Marketing III

strategy “place” decisions would include:
-type of physical distribution facilities.
-type of channel of distribution.
-degree of market exposure desired.
-distribution customer service level.
Which of the following best illustrates adjusting “discrepancies of assortment?”
A hardware store sells all the hardware items wanted by most people
When an online intermediary like Hulu scans thousands of hours of programming each week and groups these programs into categories of digital programs (e.g. sports, crime, etc.), this is an example of:
Every morning, Sycamore Dairy picks up milk which farmers have “milked” that morning. The dairy processes the milk and separates the cream from the milk. Some of the cream is made into butter and packaged in various sizes. The milk and remaining cream are blended into various products, sealed in pint, quart and half-gallon containers, and delivered to supermarkets in the quantities and assortments they want. The dairy is providing what regrouping activity?
-bulk breaking
From a producer’s viewpoint, which of the following is an advantage of INTENSIVE DISTRIBUTION over selective distribution?
Intermediaries’ facilities will be more convenient for customers.
Distribution agreements which limit sales by customer or territory:
-may be legal if they are vertical agreements between producers and intermediaries
-are definitely illegal if they are horizontal agreements among competing producers or intermediaries.
In Europe, auto manufacturers are required by law to allow owners of their brands to give the cars back to the manufacturers at the end of their useful life. The manufacturers must then recycle and reuse at least 85 percent of any vehicle made after 2004. This is an example of a(n):
take back law
Which of the following is typically the lowest risk approach for moving into international markets:
To minimize its own risks, the Boomtown Petroleum Corp. of Houston, Texas, operates a South American oil refinery that is owned by residents of that country. Boomtown is engaged in an activity known as:
management contracting
the transporting, storing, and handling of goods in ways that match target customers needs with a firms marketing mix
-also known as physical distribution
About what percentage of the cost of health care supplies in the U.S. are a result of logistics?
When planning physical distribution, the marketing manager should:
minimize the cost of distribution for a given customer service level.
The “total cost approach” to physical distribution management:
might suggest a high-cost transporting mode if storing costs could be reduced enough to lower total distribution costs.
A supply chain
requires skill in coordinating activities among different firms, and this has prompted many firms to seek help from outside experts.
the transportation function adds value by
-helping achieve economies of scale in production
-making products available when they’re needed.
regarding railroads:
full carload rates are lower than less-than-carload rates.
Which of the following transportation modes is “best” at handling a variety of goods?
When Sony manufactures and packages DVD players in Japan, stores them in large 8’x8’x20′ “boxes,” and then ships these boxes to Los Angeles by boat, this is an example of:
A cheese processor having regular need for regional storage of a large quantity of cheese probably should use ______________ warehouses.
Compared to a warehouse, a DISTRIBUTION CENTER is:
set up to speed the flow of products toward the consumer.
making goods and services available in the right quantities and locations when customers want them
-often have long run effects
channel of distribution
any series of firms or individuals who participate in the flow of products from producer to final user or consumer
direct marketing
direct communication between a seller and an individual customer using a promotion method other than face to face personal selling
ex. park seed company sells the seeds it grows directly to consumers with a mail catalog and website
-primarily concerned with promotion
the most important reason for using an indirect channel of distribution is that
an intermediary can often help producers serve customers needs better and at a lower cost
discrepancy of quantity
the difference between the quantity of products it is economical for a producer to make and the quantity final users or consumers normally want
discrepancy of assortment
the difference between the lines a typical producer makes and the assortment final consumers want
regrouping activities
adjust the quantities or assortments of products handled at each level in a channel of distribution
collecting products from many small producers
bulk breaking
dividing larger quantities into smaller quantities as products get closer to the final market
separating products into grades and qualities desired by different target markets
putting together a variety of products to give a target market what it wants
-usually done by those closest to the final consumer or user
ex. Hulu
ideally, all of the members of a channel system should have a shared ________________________ with all members
product market commitment
-focusing on the same target market at the end of the channel and sharing the various marketing function in appropriate ways
traditional channel systems
the various channel members make little or no effort to cooperate with each other
-they buy and sell from each other and thats the extent of their relationship
two basic types of conflict in channels of distribution
vertical and horizontal
vertical conflicts
occur between firms at different levels in the channel of distribution
-may occur if a producer and a retailer disagree about how much promotion effort the retailer should give the producers product
horizontal conflict
occur between firms at the same level in the channel of distribution
channel captain
a manager who helps direct the activities of a whole channel and tries to avoid or solve channel conflicts
-in the US, producers frequently take the lead in channel relations: usually select the target market, develop the product, set the price, done some consumer and channel promotion, and developed the place setup
vertical marketing systems
channels in which the whole channel focuses on the same target market at the end of the channel
three types: corporate, administered, and contractual
corporate channel systems
corporate ownership all along the channel
-may develop my vertical integration-acquiring firms at different levels of channel activity
-complete cooperation, controlled by one company
ex. Florsheim shoes, sherwin williams
administered channel systems
channel members informally agree to cooperate with each other
-some to good cooperation
-controlled by economic power and leadership
ex. GE,miller beer, scotts miracle grow
contractual channel systems
the channel members agree by contract to cooperate with each other
-fairly good to good cooperation
-controlled by contracts
ex. Mcdonalds, holiday inn, ace hardware, supervalu, coca cola, chevrolet
ideal market exposure
makes a product available widely enough to satisfy target customers needs but not exceed them
intensive distribution
selling a product through all responsible and suitable wholesalers or retailers who will stock or sell the product
-commonly needed for convenience products and business supplies used by all offices
selective distribution
selling through only those intermediaries who will give the product special attention
might be used to avoid selling to wholesalers or retailers that:
1)place orders that are too small to justify making calls
2) make too many returns or request too much service
3) have a poor credit rating
4) are not in a position to do a satisfactory job
exclusive distribution
selling through only one intermediary in a particular geographic area
80/20 rule
80% of a companys sales often come from only 20% of its customers until it becomes more selective in choosing customers
horizontal arrangements
among competing retailers, wholesalers, or producers has been consistently ruled illegal by the US supreme court
-a firm has to be able to legally justify any exclusive arrangements
multichannel distribution
occurs when a producer uses several competing channels to reach the same target market-perhaps using intermediaries in addition to selling directly
reverse channels
channels used to retrieve products that customers no longer want
basic approaches for entering international markets from least risky investment to most
exporting–>liscensing–>managment contracting–>joint venture–>direct investment
selling some of what the firm produces to foreign markets
management contracting
means the seller provides only management and marketing skills-other own the production and distribution facilities
joint venture
a domestic firm enters into a partnership with a foreign firm
direct investment
a parent firm has a division (or owns a separate subsidiary firm) in a foreign market
the transporting, storing, and handling of goods in ways that match the target customers needs with a firms marketing mix
(physical distribution)
developed economies in the US and europe spend about _______% of GDP on logistics related costs while in the developing economies of latin america and africa costs are _____% or more
9-15, 30
customer service level
how rapidly and dependably a firm can deliver what they the customers want
physical distribution (PD) concept
all transporting, storing, and product handling activites of a business and a whole channel system should be coordinated as one system that seeks to minimize the cost of distribution for a given customer service level
-fast PD service can be critical for retailers that appeal to consumers who are eager to get a new product that is in hot demand
in selecting a PD system, the _____________________ involves evaluating each possible PD system and identifying all of the costs of each alternative
total cost approach
Just in time (JIT) delivery system
-reduces PD costs but no security blanket if a supplier is late
-requires that a supplier have extremely high control in every PD activity
supply chain
the complete set of firms and facilities and logistics activities that are involved in procuring materials, transforming them into intermediate or finished products, and distributing them to customers
electronic data interchange
an approach that puts info in a standardized format easily shared between different computer systems
transporting costs as a % of selling price for different products
Most to least expensive:
sand and gravel–>coal–>cabbage–>iron ore–>pharmaceuticals
carry more than any other mode in US transportation system
-account for less than 10% of transport revenues
-carry heavy and bulky goods: coal, steel and chemicals
-not well suited for perishable items or those in urgent demand
-medium cost, average delivery speed, extensive locations served, high ability to handle a variety of goods, medium dependability in meeting schedules
-75% of US consumer products travel at least part of the way from producer to consumer by truck
-high cost, fast delivery speed, very extensive # of locations served, high ablility to handle a variety of goods, high dependability in meeting schedules
-the slowest shipping mode but it is usually the lowest cost way of shipping heavy freight
-very low cost and delivery speed
-limited # of locations served
-very high ability to handle a variety of goods
-very low frequency of scheduled shipments
-medium dependability in meeting schedules
-used primarily to move oil and natural gas
-low cost and slow delivery speed
-very limited # of locations served and very limited ability to handle a variety of goods
-most expensive transporting mode but the fastest
-high value, low weight goods like high fashion clothing and parts of electronics industry are often shipped by air
-extensive # of locations served
-limited ability to handle a variety of goods
-high frequency and dependability
private warehouses
storing facilities owned or leased by companies for their own use
-firms use private warehouses when a large volume of goods must be stored regularly
-very high fixed investment
-high control
-low flexibility: fixed costs have already been committed
public warehouses
independent storing facilities
-a company might choose a public warehouse if it doesnt have a regular need for space
-useful for manufacturers that must maintain stocks in many locations, including foreign countries
-no fixed payment
-low unit costs
-low control
-high flexibility: easy to end arangement
distribution center
a special kind of warehouse designed to speed the flow of goods and avoid unnecessary storing costs
covers all of the activities involved in the sale of products to final consumers
-most retailers sell physical goods produced by someone else
in the US about _____ of new retailing ventures fail during the 1st year
general stores
which carries anything they could sell in reasonable volume
-were the main retailers in the US about 150 yrs ago
Now most conventional retailers are __________________
single line or limited line stores
-stores that specialize in certain lines of related products rather than a wide assortment
specialty shop
a type of conventional line store-usually small and has a distinct personality
-expanded assortment and service
ex. coach, gap, macys, kohls
department stores
larger stores that are organized into many separate departments and offer many product lines
-in the US the # of deparment stores, the avg sales per store, and their share of retail business has declined continuously since the 1970s
mass merchandising concept
retailers should offer low prices to get faster turnover and greater sales volumes by appealing to larger markets
large store specializing in groceries with self service and wide assortments
-ex. safeway, IKEA, Costco, Home depot
-to be called a supermarket a store must have annual sales of at least $2 million
-net profits usually run 1% of sales or less
discount houses
offer hard goods (cameras, TV, and appliances) at substantial price cuts to customers who would go to discounters low rent store, pay cash, and take care of any service or repair problems themselves
mass merchandisers
large self service store with many departments that emphasize soft goods (housewares, clothing, and fabrics) and staples but still follow the discount house emphasis on lower margins to get faster turnover
ex. Walmart and target
walmart handles ____% or more of the total national sales for whole categories of products
-largest food retailer in the US
supercenters (hypermarkets)
very large stores that try to carry not only food and drug items but all goods and services that the consumer purchases routinely
-tries to meet all the customers routine needs at a low price
-avg more than 150,000 sq ft and 50,000 items
ex. meijer, fred meyer, super target, and walmart
warehouse club
sams and costco
convenience (food) stores
convenience oriented variation of conventional limited line food stores
-they limit their stock to pickup or fill in items like bread, milk, beer, and eat on the go snacks
ex. 7 eleven and stop n go
automatic vending
selling and delivering products through vending machines
-vending machine sales account for only about 1.5% of total US retail sales
it is estimated that more than ________% of all retail sales are in some way influened by the Internet
wheel of retailing theory
new types of retailers enter the market as low status, low margin, low price operators, and then if successful evolve into more conventional retailers offering more services with higher operating costs and higher prices
-then theyre threatened by new low status, low margin, low price retailers and the wheel turns again
many modern retailers are moving toward _________________ carrying any product lines they think they can sell profitably
scrambled merchandising
large retail stores
only about 11% of the retail stores but they account for almost 70% of all retail sales
corporate chain
a firm that owns and manages more than one store-usually many
-the main way for a retailer to achieve economies of scale
cooperative chain
retailer-sponsored groups-formed by independent retailers that run their own buying organizations and conduct joint promotion efforts
voluntary chains
wholesaler-sponsored groups that work with independent retailers
concerned with the activities of those persons or establishments that sell to retailers and other merchants or to industrial, institutional, and commercial users, but that do not sell in large amounts to final consumers
firms whose main function is providing wholesaling activities
manufacturers sales branches
warehouses that producers set up at separate locations away from their factories
-when manufacturers who just take over some wholesaling activities have sales branches they are considered wholesalers
merchant wholesalers
own (take title to) the products they sell
-they often specialize by certain types of products or customers
service wholesalers
merchant wholesalers that provide ALL of the wholesaling functions
three types: general merchandise, single line, and specialty
general merchandise wholesalers
service wholesalers that carry a wide variety of nonperishable items such as hardware, electrical supplies, furniture, drugs, cosmetics, and automobile equipment
single line (or general line) wholesalers
service wholesalers that carry a narrower line of merchandise then general merchandise wholesalers
ex. may carry only food or apparel
specialty wholesalers
service wholesalers that carry a very narrow range of products and offer more information and service than other service wholesalers
limited function wholesalers
provide only some wholesaling functions
cash and carry wholesalers
operate like service wholesalers except that the customer must pay cash
drop shippers
own (take title to) the products they sell-but they do not actually handle, stock, or deliver them
-mainly involved in selling- they get orders and then pass them on to producers
-sell bulky products (like lumber) for which additional handling would be expensive and possibly damaging
truck wholesalers
specialize in delivering products that they stock in their own trucks
-their big advantage is that they promptly deliver perishable products that regular wholesalers prefer not to carry
rack jobbers
specialize in hard to handle assortments of products that a retailer doesnt want to manage
catalog wholesalers
sell out of catalogs that may be distributed widely to smaller industrial customers or retailers that might not be called on by other wholesalers
-sell hardware, jewelry, sporting goods, and computers
agent wholesalers
wholesalers who do not own the products they sell
-their main purpose is to help in buying and selling
manufacturers agent
sells similar products for several noncompeting producers for a commission on what is actually sold
export of import agents
manufacturers agents who specialize in international trade-these agent wholesalers operate in every country and help international firms adjust to unfamiliar market conditions in foreign countries
brings buyer and sellers together
export and import brokers
operate like other brokers but they specialize in bringing together buyers and sellers from different countries
selling agents
take over the whole marketing job of producers not just the selling function
combination export manager
a blend of manufacturers agent and selling agent handling the entire export function for several producers of similar but non competing lines
auction companies
provide a place where buyers and sellers can come together and bid to complete a transaction
-usually for livestock, fur, tobacco, and used cars
ex. Manheim for used cars
A “good” retail strategy planner knows that:
the failure rate among beginning retailers is quite high.
When the manager of a Radio Shack electronics store decides to offer a store credit card (Radio Shack VISA), this is a decision about:
***pg 335
retailer price decisions
-credit cards
-discount policies
-frequency and level of sales prices
-charge (or not) for delivery and other services
A typical problem for limited-line retailers is that:
many of the items they carry are slow moving
Regarding supermarkets, which of the following is NOT true?
After-tax profits are very good–averaging 10 to 15 percent of sales.
Most catalog retailers, like Macy’s and L.L. Bean, now use a multichannel approach but when they mail catalogs to potential customers’ homes, they are using ___________ retailing.
direct mail
Regarding retail sales in the U.S., it is true that:
-less than 8 percent of all retail sales are made by smaller stores–those with sales less than $1 million a year.
-almost 70 percent of all retail sales are made by the largest stores–those with sales over $5 million a year.
-corporate chains account for about 50 percent of retail sales.
retailer product decisions
-product selection
-after sale service
-special services (special orders, entertainment, gift wrap)
Regarding wholesaling, what is true?
Merchant wholesalers have higher sales than agent wholesalers, but their costs (as a percent of sales) are over three times as high.
the following DO NOT own (take title to) the products they sell:
-Selling agents
-Combination export managers
-Manufacturers’ agents
Debbie Wood sells food products to grocery wholesalers and large supermarket chains in Tallahassee. She sells for several manufacturers with noncompeting lines of food products–earning a 5 percent sales commission. She neither handles nor owns the products she sells. Debbie is a:
manufacturers’ agent.
A producer is most likely to use a “selling agent” if:
he lacks marketing know-how and working capital.
“Promotion” is MAINLY concerned with:
telling the target market that the right Product is available in the right Place at the right Price.
To encourage potential buyers to purchase a ticket to its upcoming concert, a rock band posts a YouTube video of an earlier performance on the Web site of its next performance. This is an example of:
Point-of-purchase materials, coupons, trade shows, calendars, merchandising aids, and sales training materials are all examples of:
sales promotion
Southwest Airlines’ “Ding” widget pops up on your computer desktop to let you know of lower fares to cities you want to visit. This is an example of a(n) _________ promotion objective.
The AIDA model consists of four promotion jobs:
getting Attention, holding Interest, arousing Desire, and obtaining Action
BMW places a TV ad for its new 7-series sedan in the highly-rated Academy Awards program. In the traditional communication model, BMW is the:
Which of the following best illustrates communication “noise”?
A motorist doesn’t hear a radio ad because she is being stopped by a police officer for speeding.
Good marketing managers know that:
different audiences may interpret a message differently.
What medium is appropriate for integrated direct-response promotion?
telephone, interactive email, print and email
Gillette spent $100 million in its first year of advertising for a new type of razor and blades. All of its advertising was directed at final consumers in the hope that these consumers would go to retailers and ask for the product by name. This is an example of:
retailer place decisions
-physical stores and/or sales over the internet
-number and location of stores
-shopping atmosphere
-store size
-store hours
retailer promotion decisions
-helpful info
personal selling
direct spoken communication between sellers and potnetial customers
mass selling
communicating with large numbers of potential customers at the same time
any PAID form of non-personal presentation of ideas, goods, and services by an identified sponsor
any UNPAID form of nonpersonal presentation of ideas goods or services
sales promotions aimed at final consumers
contests, coupons, samples
sales promotions aimed at wholesalers or retailers
price deals, promotion allowances, sales contests, calendars, gifts, catalogs
sales promotions aimed at companys own sales force
contests, bonuses, meetings, portfolios, displays, sales aids
sales managers are concerned with managing…
personal selling
the informing promotional objective
educating the customer
the persuading promotional objective
the firm will try and develop a favorable set of attitudes to customers will buy and keep buying its product
-shows how their brand is better than others
the reminding promotional objective
-if target customers already have positive attitudes about a firms marketing mix
traditional communication process
source–>encoding–>message channel–>decoding–>receiver–>feedback
the sender of the message
a potential customer
is the source deciding what it wants to say and translating it into words or symbols that will have the same meaning to the receiver
any distraction that reduces the effectiveness of the communication process
pushing (a product through a channel)
means using normal promotion effort-personal selling, advertising, and sales promotion to help sell the whole marketing mix to possible channel members
pulling ( a product through a channel)
means getting customers to ask intermediaries for the product
-first to adopt an idea
-young and well educated
-tend to rely on impersonal and scientific info sources rather than salespeople
early adopters
-well respected by their peers and often are opinion leaders
-tend to be younger, more mobile, and more creative than later developers
-have fewer contacts than innovators outside their own social group
-this group has the greatest contact with salespeople
primary demand
demand for the general product idea and not just for the companys own brand
-for if the product is a really new idea
selective demand
demand for a company’s own brand
-during the market growth stage when more competitors enter the market
task method
the most sensible approach to budgeting promotion expenditures
-basing the budget on the job to be done
-helps set priorities so that the money you spend produces specific results

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