Eastern Michigan University MKT 510A Chapter 13 -Designing and Managing Integrated Marketing Channels TRUE/FALSE Questions 1)Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption

Eastern Michigan University

MKT 510A

Chapter 13 -Designing and Managing Integrated Marketing Channels

TRUE/FALSE Questions

1)Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption.

2. The term supply chain suggests a “sense-and respond” view of the market.

3. Consumer payments flow backward in a channel.

4. Forward channels refer to situations where one channel level acquires a level forward in the channel, such as Texaco owning its service stations.

5. A two-level channel consists of a manufacturer selling directly to the final customer through Internet selling, door-to-door sales, home parties, mail order, telemarketing, TV selling, and manufacturer-owned stores.

6. Backward or reverse-flow channels recycle trash and old or obsolete products no longer used by customers.

7. A zero-level channel involves the producer selling to the retailer. This is the baseline of channels.

8. The first step in designing a marketing channel is analyzing consumer needs for service outputs.

9. The service output that refers to the degree to which the marketing channel makes it easy for customers to purchase the product is called spatial convenience.

10. Agent intermediaries, such as brokers, manufacturer’s reps, and sales agents, seek out customers and negotiate on the producer’s behalf, but do not take title to the goods they are selling.

11. Exclusive distribution means severely limiting the number of intermediaries.

12. Intermediaries may perform the functions of promotion, ordering, and possession, but never take title to the goods they are facilitating.

13. Coca-Cola is most likely to use exclusive distribution for its multi-packs.

14. Producers of specialty products, such as Ferrari automobiles, will typically seek selective distribution.

15. Moving from exclusive to selective to intensive distribution could hurt long-term performance of a product that differentiated itself on the basis of its high quality construction.

16. A strategy in which the seller allows only certain outlets to carry its products is called full-line forcing.
17. Once the difficult process of setting up a successful channel is complete, marketing management does not need to revisit the channel issue again.

18. Franchise operations, such as McDonald’s, KFC and Pizza Hut are examples of contractual VMSs.

19. Single-channel occurs when a single firm uses two or more marketing channels to reach one or more customer segments.

20. When 50 independent hardware stores cooperated to form HWI as their own wholesale network, this was an example of a wholesaler-sponsored voluntary chain.

Multiple Choice Questions

21. Which of the following may flow backward in a channel?

1. Payment for the product.
2. Physical possession of a product.
3. Title to a product.
4. Advertising communications.
5. Consumer promotions.

22. Which of the following is NOT a key function of marketing channel members?

1. They gather information about potential customers.
2. They disseminate persuasive communications to stimulate purchases.

3. They “dig out” the channel to make it more efficient.
4. They assume risks.
5. They oversee transfer of ownership.

23. Penguin sells books through Taobao.com’s online store, this is an example of using a

                           .

1. zero-level channel
2. one-level channel
3. two-level channel
4. three-level channel
5. reverse-flow channel

24. Which of the following types of channels recycle trash and old or obsolete products no longer used by customers?

1. Zero-level channel.
2. One-level channel.
3. Two-level channel.
4. Three-level channel.
5. Reverse-flow channel.

25. A two-level marketing channel is comprised of                                      .

1. a channel captain and several channel lieutenants
2. several producers and several final consumers
3. a franchise organization
4. an independent producer, wholesaler, and retailer
5. all the players in the value chain

26. Which of the following is an example of a reverse-flow channel?

1. Rhett buys a used suit at a thrift shop.
2. Cody trades 150 bags of frozen dumplings for three 30-second commercials on FM98.2 Radio Station.
3. Zidane uses hair he swept up from a beauty salon as a mulch.
4. Bethanie cleans out moldy food containers from her fridge.
5. Garn buys scrap copper he can melt down and resell.

27. The goal of channels in the service sector is to make the service                                       .

1. available and accessible

2. affordable, differentiated, and easy to find
3. risk free, readily available, and differentiated
4. differentiated, targeted, and affordable
5. affordable and accessible

28. The service output that refers to the degree to which the marketing channel makes it easy for customers to purchase the product is called                                                                                                                               .

1. spatial convenience
2. service backup
3. lot size
4. waiting time
5. product variety

29. Home Depot carries an extensive line of tools, including many brands, quality levels, and price ranges. This is an example of a marketing channel providing                                                                                             .

1. spatial convenience
2. waiting time
3. lot size
4. service backup
5. product variety

30. If a manufacturer is concerned with the breadth of the assortment its distributor can provide customers, the manufacturer is expressing a concern about the                                                                           the distributor provides.

1. spatial convenience
2. waiting time
3. lot size
4. service backup
5. product variety

31. Which of the following strategies of distribution means severely limiting the number of intermediaries?

1. Exclusive distribution.
2. Selective distribution.
3. Intensive distribution.
4. Fragmented distribution.
5. Mass distribution.

32. A firm might choose           when it wants to maintain control over the service level and service outputs offered by the resellers.

1. exclusive distribution
2. mass distribution
3. intense distribution
4. mini-distribution
5. full-line forcing

33. For which of the following products is its manufacturer most likely to use exclusive distribution?

1. Blue jeans.
2. Hand tools.
3. Bed sheets.
4. Branded furniture.
5. Spider-Man merchandise.

34. The distribution strategy that involves the use of more than a few but less than all of the intermediaries who are willing to carry a particular product is called                                                                             .

1. exclusive distribution
2. selective distribution
3. intensive distribution
4. fragmented distribution
5. mass distribution

35. Schmaedick Corporation has developed an MP3 player—the UltraGigaMega 5000— that will allow the user to listen to up to six days’ worth of different music without needing additional batteries or drive space. The user can categorize the music in up to 50 categories if he or she chooses. Obviously, this product would sell best with better than average selling effort. However, since the players have been around a little while and the product has clear relative advantages, aggressive selling is not needed. The best form of distribution would be        distribution.

1. selective
2. intensive
3. inclusive
4. exclusive
5. restrictive

36. For which of the following would a manufacturer be most likely to use selective distribution?

1. M&Ms.
2. China Daily.
3. Souvenir T-shirts.
4. Disney products.
5. Budweiser beer.

37. McDonald’s franchisees get a small discount when they pay their bills for supplies within the first seven days (when the due date is 30 days after delivery). This is an example of within channel relations.

1. price policies
2. conditions of sale
3. sharing the risks
4. territorial rights
5. services agreed upon

38. A distributor’s concern over where and how a producer will enfranchise another distributor is addressed under    as set out in the terms and responsibilities of channel members.

1. price policies
2. conditions of sale

3. territorial rights
4. channel member parity
5. specific services to be performed by each party

39. LeadOrLeave.com is trying to decide on whether to use a company employee or a sales agent to help it expand to the UK market. Establishing a sales office would cost

$100,000. The sales employee would be paid $30,000 plus a 7.5 percent commission. An agent would charge a flat 11 percent commission on all sales. LeadOrLeave.com is using

                              criteria to evaluate their major channel alternatives.

1. economic
2. quantitative
3. territorial
4. adaptive
5. control

40. Bodyshop produces a line of all-natural lotions and soaps, and is trying to choose between using its own sales force and hiring manufacturers’ representatives to sell its products to non-Bodyshop distributors. Bodyshop has come to the realization that it can more easily direct its sales force’s efforts, the products emphasized, and how accounts are managed if it sets up its own sales force. This company is evaluating its choice on the basis of    criteria.

1. economic
2. quantitative
3. territorial
4. adaptive
5. control

41. Which of the following is NOT included in the text’s list of recommended characteristics to evaluate when choosing a channel member?

1. Number of years in the business.
2. Number of employees.
3. Growth and profit record.
4. Solvency.
5. Cooperativeness.

42. When an intermediary is underperforming, the first intervention step should probably be     the intermediary.

1. counseling
2. retraining
3. remotivating
4. charging higher rates to
5. terminating

43. Some Chinese apparel brands were once sold exclusively at upscale department stores like Grandbuy and Tianhe Shopping Mall in Guangzhou. Now the brands play a

prominent role in Carrefour Stores’ fashion line-up. This is an illustration of the fact that

                             .

1. retailers have a definite product life cycle
2. no marketing channel remains effective over the entire product life cycle
3. intermediaries usually the channel leader
4. customer preferences matter less than retailer support
5. dropping a channel member is easier than adding one

44. The             combines successive stages of production and distribution under single ownership.

1. horizontal marketing system
2. conventional marketing system
3. corporate vertical marketing system
4. multichannel marketing system
5. contractual vertical marketing system

45. Franchise operations, such as McDonald’s, KFC and Pizza Hut, are examples of

                             .

1. administered VMSs
2. horizontal marketing systems
3. contractual VMSs
4. corporate VMSs
5. conventional marketing systems

46.                organize groups of independent retailers to better compete with large chain organizations.

1. Wholesaler-sponsored voluntary chains
2. Retailer cooperatives

3. Franchise organizations
4. Catalog showrooms
5. Linked divisions

47. When 50 independent hardware stores formed a new business entity to provide them with the services of the wholesaler, this was an example of                                                                                                                   .

1. wholesaler-sponsored voluntary chains
2. retailer cooperatives
3. franchise organizations
4. catalog showrooms
5. linked divisions

48. In a(n) _               , two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.

1. administered VMS
2. horizontal marketing system
3. contractual VMS
4. multichannel marketing system
5. corporate VMS

49. GEICO Insurance agreed to include H&R Block advertising materials as a part of all their communications with their customer base, and H&R Block, in turn, will arrange for their customers to get information on auto insurance as a part of the tax preparation process. This is an example of a(n)        .

1. administered VMS
2. horizontal marketing system
3. contractual VMS
4. multichannel marketing system
5. corporate VMS

50. A single manufacturer produces high-end tools for three different customer segments and sells the identical tools under different brand names through three different retailers – Sears Craftsman tools for the home fix-it crowd, NAPA quality tools for the “shade-tree” mechanic market segment, and Snap-On tools to professional mechanics. This is an example of what type of system?

1. Single channel marketing.
2. Multichannel marketing.
3. Maxi-channel marketing.

4. Mini-channel marketing.
5. Direct channel marketing.

51. When a producer has a conflict with its wholesalers, the producer is experiencing

                               conflict.

1. horizontal channel
2. multichannel
3. direct channel
4. vertical channel
5. single channel

52.                conflict involves conflict between members at the same level within the channel.

1. Horizontal channel
2. Direct channel
3. Multichannel
4. Vertical channel
5. Single channel

53. Joe Montes hand-makes guitars and sells them to retailers and also recently began to sell them to the final customer at www.montesguitars.com. The retailers aren’t happy about the Internet sales because they claim the direct marketing sales are adversely affecting their in-store sales. This is an example of    conflict.

1. horizontal channel
2. direct channel
3. multichannel
4. vertical channel
5. single channel

54. When Subway franchisers complained that their interests were not being served by the parent company, Subway Corporation allowed three of the company’s board seats to be occupied by store owners who were elected by all franchises based on a one-vote-per- store system. This is an example of using   to manage channel conflict.

1. adoption of superordinate goals
2. exchange persons between channel levels
3. cooptation
4. diplomacy, mediation, arbitration for chronic or acute conflict
5. competition

55. Which of the following describes an effort by one organization to win the support of the leaders of another organization by including them in advisory councils, boards of directors, and trade associations?

1. Cooptation.
2. Competition.
3. Goal subordination.
4. Arbitration.
5. Mediation.

56.                takes place when each side sends a person or group to meet with its counterpart to resolve the conflict.

1. Diplomacy
2. Cooptation
3. Goal subordination
4. Arbitration
5. Mediation

57. Which of the following is NOT a method of managing channel conflict listed in the text?

1. Diplomacy.
2. Cooptation.
3. Goal subordination.
4. Confrontation.
5. Mediation.

58.                means having a skilled, neutral third party reconcile the two parties’ interests.

1. Diplomacy
2. Cooptation
3. Goal subordination
4. Arbitration
5. Mediation

59. The Internet is most useful as a channel of distribution, for all of the following situations EXCEPT:

1. when shoppers seek more ordering convenience.
2. when products must be touched or examined in advance of purchase.
3. when consumers are looking for lower cost.
4. when the customer wants more information about the product’s features.
5. when shoppers seek information about pricing.

Essay Questions

60. If a marketer chooses to use a vertical marketing system, she has three versions from which to choose. In a short essay, describe the three types of VMSs.

61. A Chinese manufacturer who rebuilds starters, generators, and alternators for popular Chinese automobile sells its goods through a two-level channel. Discuss how it would benefit from the addition of another level to its channel of distribution.

62. Through a problem with goal inconsistency, a manufacturer of cooking utensils is having a disagreement with a retail chain that carries its product line. The disagreement is new and has not reached the stage where it requires third-party intervention. What method(s) can be used to settle this conflict? What method(s) are likely to work?

63. Moonstruck Chocolates of Portland, Oregon, started out in the inventor’s home as a unique chocolate product containing delicious alcohol-enhanced fillings. Once the product was perfected, the owners decided that they had no expertise in marketing the chocolates and looked to consultants to tell them what marketing intermediaries could do for them. What did the consultants probably explain were the key functions of marketing channel members?

64. Describe the five service outputs of a Toyota dealership.

Mini-Cases

Mini-Case 13-1

In 1999, BellSouth Wireless Data introduced Palm VII, a palm-sized personal computer that has the ability to connect to the Internet. The Palm VII signals can be uploaded and downloaded by the same network used for BellSouth’s interactive paging service.

Unfortunately, proper product usage requires BellSouth to maintain a 24-hour customer support line to answer the numerous questions that arise as new users familiarize themselves with the new system as well as make sure its distributors have a thorough

understanding of the Palm VII. The Palm VII has a $600 price tag. As BellSouth chooses distributors, it is likely to be most concerned about its ability to control its distributors and the distributors’ ability to respond quickly to strategic changes.

65. Refer to Mini-Case 13-1. In analyzing its customer service requirement, BellSouth has determined that _                                                           requires the most input from its channel members.

1. lot size
2. waiting time
3. spatial convenience
4. service backup
5. product variety

66. Refer to Mini-Case 13-1. Which of the following methods for distribution is most appropriate for BellSouth to use when marketing the new Palm VII?

1. Restrictive distribution.
2. Direct marketing.
3. Intensive distribution.
4. Selective distribution.
5. Exclusive distribution.

67. Refer to Mini-Case 13-1. If BellSouth chooses to sell the product through several competing wireless plans, as well as through its own Web site, this would be an example of            .

1. restrictive distribution
2. horizontal marketing systems
3. the push strategy
4. multichannel marketing
5. an administered VMS approach

Mini-Case 13-2

The Hanlon brothers of Minnesota decided to revive an extinct motorcycle brand, the once-proud Excelsior-Henderson. They raised millions of dollars from stock sales and got the state to subsidize them for millions more. They spent lots of the raised money announcing the future coming of the bike, creating high awareness at rallies and race events. In 2000, after nearly 4 years of work, they introduced their first model , the Big X, through test rides at the Black Hills Rally in Sturgis, South Dakota, and at the Laughlin River Run in Laughlin, Nevada. Interested buyers were shown maps with a small network of about 80 U.S. dealers who had agreed to stock the bikes, and the Hanlons promised more to come. However, purchasers who had interest and the money to purchase hesitated about the quality and stability of the proposed dealership network and the bike never sold enough units to keep the company alive. Within months the company went bankrupt, probably not due to a lack of good product, but rather due to a lack of good distribution.

68. Refer to Mini-Case 13-2. Which of the following is a reason the Hanlons tried to build a network of dealers rather than create their own dealerships?