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Marketing NEW > Channel Management > Flashcards

Channel Management Flashcards

1
Q

What is a specialis market?

A

The specialist market is a large-area retail enterprise normally on one level (> 800sqm)

Assortment:

  • wide and deep, clearly presented
  • mainly** from one product area** (e.g.clothes)
  • from an area of requirements (e.g.bike, frniture)
  • or from target group area (DIY, concept stores)

Price range: low to medium

Customer Service: self-service and pre-selection

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2
Q

What is a supermarket?

A

The supermarket is a retail business with a selling area of at least 400 sqm. (up to 5’000 sqm.)

Assortment:

  • wide and deep assortment on food, alcohol and tobacco including fresh foods and goods of daily and short-term requirements (“no-problem goods”) of other branches

​Service: primarily in self-service

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3
Q

What is a Hypermarket?

A

The hypermarket is a large-area, normally single-level retail business with at least 3,000 sqm / at least 5,000 sqm.

Location is aimed for customers with cars either in isolated location or as part of established and planned centres.

**Assortment: **comprehensive assortment of goods (emphasis on food)

Service: wholly or mainly in self-service, no cost intensive customer services

Price Level: every day low price strategy or special offer price policy, high advertising activity.

Examples: Wal-Mart Supercenters, Carefour, Real, Migros MMM

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4
Q

What is a discounter?

A

Discount stores:

  • offer a limited assortment at low prices for fast turnover
  • No services like expert advice, customer support, etc.
  • operated by large retail companies in form of branches
  • requires large single-article purchasing volumes and high customer frequencies, discount business
  • basic shop furnishings
  • target group behavior: rationally oriented purchasing
  • ALDI (Europe), KiK (D), Fielmann (DACH), Wal-Mart, Kmart (both US), Costco (Jap)
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5
Q

How can you overcome the dominance in retail?

A

By using:

  • new sales channels (insurances in banks, wine at post office, etc)
  • direct sales (online shop, Internet channels ebay, etc, telemarketing, own salesforce)
  • verticalisation
    • forward integration - own shops,own retail net
    • Shop in Shop, Rack Robbing, Factory OUtlets, etc
    • Benetton, Mc Donalds, Starbucks
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6
Q

What are a company’s strategic decisions criteria when deciding on a sales partnership?

A
  • Producers Management Commitment
  • Sales Strategy of the partner
  • Ease of Collaboration
  • Product Offer
  • Sales partner Program (Marketing efforts supported, cost/performance attractivity)
  • Sustainability (business model, long-term financial stability, producer perfomance)
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7
Q

Which tools can you apply in order to motivate your sales partners?

A
  • Upfront Bonus
    • Contractual bonus based on status, e.g. „Gold Partner“
  • Backend Bonus
    • When reaching an agreed sales volume
  • Functional Bonus
    • By performance of agreed achievements, eg. 2 trainings, kept stock volume, etc
  • Project Prices
    • special cost prices for big projects
  • Headcounts
    • financing of dedicated employees
  • Marketing funds
    • Grant for marketing activities (advertising, merchandizing)
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8
Q

Which tools can you apply in order to control your sales partners?

A
  • Trade Margin
  • Sales-quota
  • Average inventory levels
  • Customer delivery time
  • Treatment of damaged and lost goods
  • Cooperation in promotional and training programs
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9
Q

What is Channel Design? Which steps are included, and which decisions need to be made?

A

Channel Design is the development of a channel structure that links the SBU’s strategy with the needs of the target market(s).

Steps included:

  1. Analysisng customer needs and wants
  2. Establishing channel objectives and constraints (Beschränkungen)
  3. Identifying major channel alternatives
  4. Evaluating major channel alternatives

Decisions to be made:

  • Length of the channel (0-Level, 1-Level, 2-Level or 3-Level)
  • Types of intermediaries
  • Number of each intermediary
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10
Q

What is Channel Operations, which steps are included?

A

Channel Operations is the development of policies & procedures to gain and maintain the cooperation of the various partners within the company’s distribution channel.

Steps included:

  1. Selecting channel members
  2. Training and motivating channel members
  3. Periodical evaluation of channel members
  4. Modifying channel design and arrangements
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11
Q

What is the definition of a (distribution) channel and what are their main functions?

A

A (distribution) channel is a set of interdependent organisations participating in the process of shifting possession of goods from the producer to the end user.

A distribution channel has two functions:

Sales function: how do I made customers aware of my product, how do I inform my customers?

Supply chain - logistical function: how do I bring the product to the cutomer?

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12
Q

What are the main types of direct and indirect channels?

A

The main channel types are:

**Direct Channel: **

  • Internet
  • Telemarketing
  • own salesforce

Indirect Channel:

  • Wholesaler
  • Retailer
  • Distibutors
  • Brokers
  • Specialised
  • Value added Partners
  • Sales Agencies
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13
Q

Why is the decision about which marketing channels a company employ one of the most critical ones management faces?

A

Because the channels chosen affects all other marketing decisions. And when this decision is made once there is no / only little chance to switch.

Explanation: The company’s pricing depends on wether it uses online discounters or high-quality boutiques. Its sales force and advertising decisions depend on how much training and motivation dealers need. And channel decisions include relatively long-term commitments with other firms as well as a set of policies and procedures.

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14
Q

On what depends a company’s channel choice?

A

Channel choices depend on the company’s marketing strategy with respect to segmentation, targeting and positioning.

Holistic marketers ensure that marketing decisions in all these different areas are made to collectively maximise value.

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15
Q

What is the core question a firm needs to decide on when deciding on a channel. And what are more detailed questions that would need to be answered when deciding on the channel to use.

A

Core question

Do I want to sell the products:

  • on my own ➔ using direct marketing channels, or own sales force
  • through intermediaries ➔ indirect channels

Detailed questions

Who is doing:

  • product presentation / advertising
  • consulting and sales
  • guarantee local supply / delivery
  • stock keeping
  • invoicing (incl. debt handling and dept risk)
  • pre- and post-sales services
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16
Q

When deciding on direct or indirect sales, what are typical decision criteria?

A

Typical decision criteria:

  • complexity of product
  • individuality of the product
  • price level of the product
  • buying frequency of the product
  • single product in customers shopping basket
  • local, national, global demand
  • niche or volume product
  • number of customers
  • domestic or international market
  • marketing and sales competence of my firm
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17
Q

What are the pro’s and con’s of partner sales?

A

Pro’s

  • Volume increase ➔ Multiplying sales work
  • Efficiency increase ➔ Integrating sales/logistic specialists

Con’s

  • Less control ➔ Confidence and verification
  • High distance to customer ➔ difficult product enhancements

Note: Partner sales is supposed to increase my power, but I also loose power.

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18
Q

What means push strategy when managing intermediaries? And when is a push strategy particularly applied?

A

A push strategy uses:

  • the manufacturers sales force
  • trade promotion
  • money or other means to include intermediaries to carry, promote and sell the product or service to end users.

Push is applied when:

  • low brand loyalty in a category
  • brand choice is made in the shop
  • the product is an impulse item
  • product benefits are well understood
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19
Q

What means pull strategy when managing intermediaries? And when is a push strategy particularly applied?

A

In a pull strategy the manufacturers uses:

  • advertising
  • promotion and other forms of communication to persuade consumers to demand the product from intermediaries, thus inducing the intermediaries to order it.

Pull is applied when:

  • high brand loyalty and high involvement in a category
  • consumers are able to perceive differences between brands
  • when consumers chose brand before they shop
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20
Q

What do top marketing companies, such as RedBull, Samsung and Gucci skillfully employ - push or pull?

A

Top marketing companies employ both push and pull strategies. A push strategy is more effective when accompanied by a well-designed and well-executed pull strategy that activates customer demand.

On the other hand, without at least some customer interest, it can be very difficult to gain much channel acceptance and support, and vice versa for that matter.

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21
Q

What are demand-side for employing channels?

A

Demand-Side factors (customers needs and wants) are:

  • Facilitation of search
    • channel brings seller and consumer together
  • **Adjustment of assortment discrepancies **
    • Sorting (only organic products, such as oranges)
    • Accumulation (wholesaler accumulates varied goods for retailers, retailers accumulate them for their customers)
    • Allocation (palletten to smaller lots and single units)
    • Assorting (chocolate to sweets, toothpaste to cosmetics)
  • Overcoming space and time
    • spatial convenience (physical availability of goods)
    • waiting and delivery time (reducing waiting for customers due to stocks)
    • near customer service (providing customer support)
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22
Q

What are supply-side factors for employing channels?

A

Supply-Side Factors

  • Routinisation of Transactions (Economics of Scale)
    • Automation of purchase transactions (orders, valuation, payment)
    • Standardization of products, services and equipment
    • Increase of efficiency in executing channel activities (e.g. CRP program)
  • Reduction in Number of Contacts
    • administrative facilitation
    • cost reduction

Note: whithout intermediaries, producers would have to interact with each potential customer

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23
Q

What selection criteria you can apply when selecting channel members?

A

Selection criteria for channel partners:

  • Number of years in business
  • Other lines carried
  • Growth and profit record
  • Financial strength
  • Cooperativeness and service reputation
  • Employees
  • If sales agency: clientele, exclusive, selective or intense distr., growth potential, locations
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24
Q

What advantages have the usage of channels?

A

Advantages:

  • serve as strategic advantage (people are willed to pay more at different places, i.e. Coke at Coop = 1.10, Coke at Kiosk=4.5)
  • use economies of scale and economies of scope
  • boost market presence
  • reduce number of contacts
  • offer a one-stop shopping for the customer
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25
Q

What kind of channel members / players do you know?

A

Category 1

Manufacturer, Importer, Supplier (the product owners)

Category 2

Intermediaries

  • Wholesale (merchant wholesalers, distributors, agents, brokers)
  • Retail
  • Specialized

Category 3

End user

  • Consumers
  • Business users
26
Q

How do producers motivate a distributor?

A
  • Opportunity for profit
  • Price, terms, conditions
  • Support & training
  • Product line: present and future direction
  • Brand
  • Personal attention
  • Co-marketing
27
Q

What are competences and interest of the various channel members?

A
28
Q

What does “physical possesion” mean in terms of the marketing flow within a channel?

A

The physical possession is a forward flow and represents:

  • storage and delivery costs
29
Q

What does “ownership / title” mean in terms of the marketing flow within a channel?

A

Ownership / title flow is a forward flow, and represents:

  • inventory carrying cost
  • depreciation
30
Q

What does “Communication / information process” mean in terms of the marketing flow within a channel?

A

Communication processes flow in both directions between sales partners, and represents costs for:

  • personal selling
  • advertising
  • sales promotion
  • PR
  • trade shows
31
Q

What does “Negotiation process” mean in terms of the marketing flow within a channel?

A

Negotiation processes can flow in both directions between sales partners and represents costs for:

  • time and legal
32
Q

What does Finance flow mean in terms of the marketing flow within a channel?

A

Finance processes can flow in both directions between sales partners.

Cost represented:

  • credit terms
  • terms and conditions of sale
33
Q

What does Risk flow mean in terms of the marketing flow within a channel?

A

Risk processes can flow in both directions between sales partners, and therefore facilitate the division of risk amongst the various parties involved.

Cost represented:

  • Price guarantees
  • return allowances
  • warranties
  • insurance
  • after-sales service cost
34
Q

What does ordering process flow mean in terms of the marketing flow within a channel?

A

Ordering processes begin with the end customer and pass through all relevant sales partners before arriving at the provider. Cost represented:

  • order-processing cost
  • In some situations, these processes have already been automated and involve the analysis of warehouse inventories and, where required, the direct triggering of ordering processes using computer systems. order-processing cost*
35
Q

What is a specialist store?

A

A specialist store is:

  • independent retail business
  • the range of merchandise is limited to a narrow, but deep section of assortment (branch-specific or needs based)
    • assortments satisfy particularly high selection demands
  • offer service and supplementary services
36
Q

What does payment process flow mean in terms of the marketing flow within a channel?

A

Payment flows are started by the end customer and pass through all relevant sales partners before arriving at the provider.

  • collections
  • bad-dept cost

The triggering of the payment process effectively represents the completion of the ordering process.

37
Q

What is a wholesaler?

A

Briefly:

A wholesaler is a market operator that** buys large quantity of goods from various producers or vendors, warehouses them andresells to retailers**. Wholesalers who carry only non-competing goods or product lines are called distributors.

Definition from Katalog E:

Wholesaling as a function exists if market operators procure goods that they do not normally process themselves from manufacturers or other suppliers and sell them to resellers, further processors or business users (e.g. authorities, educational establishments) or to other institutions (e.g. canteens, clubs) provided that private households are not involved.

38
Q

Which differen business models of wholesale do you know?

A
  • Value Added Partner (exclusive, expensive, specialized products)
  • Broadline Distributor (high volume and ready-to use products)
  • Fulfiller (high volume products)
39
Q

What is the difference between a wholesaler and a distributor?

A

A distributor handles only non competig products- / product lines (sometimes exclusively for a producer) and a wholesaler represents many producers.

Note: Difference is often blurred in daily usage.

40
Q

What is the definition of retail?

A

In brief: A retailer is a person or firm that sells goods to end-consumers.

In practise:

  • many business users buy from retailers, e.g. - SMBs buying their IT equipment from Media Markt - all kinds of accessories and supplies
  • Many retailers have privates and businesses as target group (typically specialized stores), e.g. - delicatessen store selling food and organizing events - IT dealers (shop for privates and offers für businesses) - IKEA
  • Very often the more general reseller is used instead of retailer as he sells to both consumers and business users.

Definition from Katalog E:

Retail trade as a function is present when market operators procure goods that they do not normally process themselves from other market operators and sell them to private households.

41
Q

What is franchising?

A

Franchising is an arrangement where a franchiser grants a franchisee the right to use the franchisers trademark or trade-name, as well as certain business systems and processes, to produce and market a good or service according to certain specifications.

The franchisee usually pays a one-time franchise fee plus a percentage of sales revenue as royalty. The franchiser gains rapid expansion of business and earnings at minimum capital outlay.

Or:

A form of business organization in which a firm, that already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisees) operating under the franchisor’s trade name and usually with the franchisor’s guidance, in exchange for a fee.

42
Q

What includes Cash Dating?

A

Cash datings includes:

  • C.O.D. **(cash **on delivery)
  • C.W.O. (cash with order)
  • R.O.G. (receipt of goods)
  • S.D.-B.L. **(sight draft-bill of **lading).
43
Q

What does S.D.-B.L. (sight draft-bill of
lading) mean?

A

S.D.-B.L. (sight draft-bill of lading) and means that a sight draft is attached to the bill of lading and must be honored before the buyer takes possession of the shipment.

44
Q

What is a cash discount?

A

Vendors selling on credit offer a cash discount for payment within a specified period.

The cash discount is usually expressed in the following format: “2/10, net 30.” This means that the seller extends credit for 30 days. If payment
is made within 10 days, a 2% discount is offered to the buyer. The 2% interest rate for 10 days is equivalent to a 36% effective interest rate per year. Therefore, passing up cash discounts can be very
costly.

Note: Some intermediaries who operate on slim margins simply cannot realize a profit on a merchandise shipment unless they take advantage
of die cash discount. Channel intermediaries usually maintain a line of credit at low interest rates to pay their bills within the cash discount period.

45
Q

What is delivered Sale?

A

The seller pays all freight charges
to the buyer’s destination and retains title to the
goods until they are received by the buyer.

46
Q

What does F.O.B. mean?

A

The seller places the merchandise “free on
board” die carrier at the point of shipment or other
predesignated place. The buyer assumes title to the
merchandise and pays all freight charges from this
point.

47
Q

What is a Freight Allowance?

A

Price that is high enough to compensate the seller for the cost of transportation from the seller’s place of business to the buyer’s shipping point. F.O.B. terms can be used with freight allowances to transfer the title. The seller ships F.O.B. and the buyer deducts freight costs from the
invoice payment.

48
Q

What does Future Datings include?

A
  1. Cash dating, such as “2/10, net 30.”
  2. End-of-month dating, such as “2/10, net 30, E.O.M.,” where the cash discount and the net credit periods begin on the first day of the following month rather than on the invoice date.
  3. Proximo dating, such as “2%, 10th proximo, net 60,” which specifies a date in the following month on which payment must be made in order to take the cash discount.
  4. Extra dating, such as “2/10—30 days extra,”
    which means that the buyer has 70 days from
    the invoice date to pay his bill and benefit from
    the discount.
  5. Advance or season dating, such as “2/10, net
    30 as of May 1,” which means that the discount
    and net periods are calculated from May 1.
    Sometimes extra dating is accompanied by an
    anticipation allowance. For example, if the
    buyer is quoted “2/10, 60 days extra,” and he
    pays in 10 days, or 60 days ahead, an
    additional discount is made available to him.
49
Q

What is a Gross Margin of Profit

A

The dollar difference
between the total cost of goods and net sales.

50
Q

What is Gross Margin Return on Inventory (GMROI)?

A

Total gross margin dollars divided by average inventory (at cost).

GMROI is used most appropriately in measuring the performance of
products within a single merchandise category. The measure permits the buyer to look at products with different gross margin percentages and different rates of inventory turnover and make a relatively quick evaluation as to which are the best performers.

51
Q

What are the components of Gross Margin Return on Inventory (GMROI)?

A

The components of GMROI are:

  • Gross Margin Percentage: (gross margin)/(net sales)
  • Sales-to-Inventory Ratio: X (net sales)/(average inventory) (at cost)
  • GMROI = (gross margin)/(average inventory) (at cost)
52
Q

What is Initial Markup or Mark-On?

A

The difference
between merchandise cost and the original retail
value.

53
Q

What does Maintained Markup or Margin mean?

A

The difference
between the gross cost of goods sold and net sales.

54
Q

What is Markdown?

A

A reduction in the original or previous
retail price of merchandise. The markdown
percentage is the ratio of the dollar markdown
during a period to the net sales for the same period.

55
Q

What is a Markup?

A

The difference between merchandise cost
and the retail price.

56
Q

What are Merchandise Cost?

A

The billed cost of merchandise, excluding any applicable trade or quantity discounts, but including
inbound transportation costs, if paid by the buyer.

57
Q

What does Off-Retail mean?

A

Specific reductions off the original retail price.

  • Retailers can express markup in terms of retail price or cost. Large retailers and progressive small retailers express markups in terms of retail for several reasons.*
  • formula: *
  • markup % on cost = (markup % on retail)/(100% - **markup % on retail).
  • Conversely,*
  • markup % on retail = (markup % on cost)/(100% + markup % on cost).
58
Q

What does Original Retail mean?

A

The first price at which the
merchandise is offered for sale.

59
Q

What are Quantity Discounts?

A

Quantity discounts are offered to encourage volume
buying. Legally, they should not exceed production
and distribution cost savings to ‘ the seller because
of volume buying. Vendors offer two tvpes of
quantity discounts: noncumulative and cumulative.

60
Q

What is Sale Retail?

A

The final selling price.

61
Q

What are Seasonal Discounts?

A

Discounts offered to buyers of
seasonal products who place their 1st order before
the season’s buying period. This enables the
manufacturer to use his equipment more efficiently
by spreading production throughout the year.

62
Q

What is a trade discount?

A

Discount that vendors use to provide the purchaser a
reasonable margin to cover his operating expenses
and provide for net profit margin.

Marketing NEW (5 decks)

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