Chapter 10 - Place Mix

Question 1

What is a value delivery network?

Answer 1

A network composed of the company, suppliers, distributors, and, ultimately, customers who partner with each other to improve the performance of the entire system in delivering customer value.

Question 2

What is a marketing channel?

Answer 2

Set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.

Question 3

What are 3 reasons that marketing channels are important?

Answer 3

1. Channel choices affect other decisions in the marketing mix:
   - Pricing, marketing communications
2. A strong distribution system can be a competitive advantage
3. Channel decisions involve long-term commitments to other firms

Question 4

How do channel members add value?

Answer 4

Greater efficiency

Match product assortment demand with supply.

Bridge, time, place, and possession gaps that separate products from users.

Help to complete transactions:
- Information
- Promotion
- Contact
- Matching
- Negotiation

Help to fulfill the completed transactions:
- Physical distribution
- Financing
- Risk taking

Question 5

What is a channel level?

Answer 5

A layer of intermediaries that performs work in bringing the product and its ownership closer to the final buyer

The number of intermediary levels indicates the length of a marketing channel:
- Direct Channels
- Indirect Channels

Producers lose more control and face greater channel complexity as additional channel levels are added.

Question 6

What are the 5 types of variety flows that connect channel members?

Answer 6

Physical Flow
Payment Flow
Information Flow
Promotion Flow
Flow of Ownership

Question 7

What is channel conflict and its two types?

Answer 7

Occurs when channel members disagree on roles, activities, or rewards.

Types of Conflict:
- Horizontal conflict: occurs among firms at the same channel level
- Vertical conflict: occurs among firms at different channel levels

Question 8

What is the conventional distribution channel?

Answer 8

Consist of one or more independent channel members
Each seeking to maximize its own profits
Often result in poor performance

Producer -> Wholesaler –> Retailer –> Consumer

Question 9

What is the vertical marketing system (VMS)?

Answer 9

Producers, wholesalers, and retailers act as a unified system
One channel member owns, has contracts with, or has so much power that they all cooperate
Benefits should include greater control, less conflict, and economies of scale due to the size of the system

Producer, Wholesaler, Retailer –> Consumer

Question 10

What are the three types of vertical market system (VMS)?

Answer 10

Corporate VMS
Contractual VMS
Administered VMS

Question 11

Explain what is corporate VMS

Answer 11

Integrates successive stages of production and distribution under single ownership – channel ownership is established through common ownership

Coordination and conflict through regular organizational channels

Question 12

What is contractual VMS?

Answer 12

Individual firms who join through contracts

Franchise organizations:
- Manufacturer-sponsored retailer franchise system
- Manufacturer-sponsored wholesaler franchise system
- Service-firm-sponsored retailer franchise system

Question 13

What is administered VSM?

Answer 13

Leadership through the size and power of dominant channel members

Leadership could be manufacturer or retailer

Question 14

What is horizontal marketing systems?

Answer 14

Companies at the same level work together with channel members

Question 15

What is a multichannel distribution systems?

Answer 15

Occurs when a firm uses two or more marketing channels

Question 16

What is disintermediation?

Answer 16

occurs when product or service producers cut out marketing channel intermediaries or when radically new types of channel intermediaries displace traditional ones

Question 17

What are the advantages and disadvantages of multichannel distribution systems?

Answer 17

Advantages:
- Expanding sales and market coverage
- Tailoring channels to satisfy specific needs of diverse consumer segments

Disadvantages:
- Harder to control
- Generating more conflict

Question 18

What are the 4 steps of channel design decisions?

Answer 18

Step 1: Analyzing Consumer Needs:
- Cost and feasibility of meeting needs must be considered

Step 2: Setting Channel Objectives:
- Set channel objectives in terms of targeted level of customer service
- Many factors influence channel objectives
– Nature of the company (size/financial position) and
its products
– Marketing intermediaries
– Competition
– Marketing environment

Step 3: Identifying Major Alternatives:
- Types of intermediaries refers to channel members available to carry out channel work.
- Number of intermediaries to use:
– Intensive distribution (convenience)
– Exclusive distribution (shopping)
– Selective distribution (Specialty/industrial)
- Responsibilities of each channel member

Step 4: Evaluating Major Alternatives
- Economic criteria
- Control issues
- Adaptive criteria

Question 19

How should you design international channels?

Answer 19

Channel strategies should be adapted to the existing structures within each country.

Distribution systems can have many layers and a large number of intermediaries.

Government regulations can restrict distribution in global markets.

Question 20

What are 3 channel management decisions?

Answer 20

Selecting channel members

Managing and motivating channel members

Evaluating channel members

Question 21

Public policy and distribution decisions?

Answer 21

Exclusive distribution

Exclusive dealing

Exclusive arrangements (Canadian Competition Act) are legal as long as the parties:
- Do not substantially lessen competition or tend to create a monopoly
- Enter into the agreement voluntarily