Distro and Pricing

Question 1

what are distribution channels

Answer 1

individuals and organisations
linking raw materials
through production
to end consumer

Question 2

what are intermediaries?

Answer 2

anyone linking the producer to the end consumer

through contract or purchase/resale

Question 3

why use intermediaries?

Answer 3

if they...
create utility
facilitate exchanges
reducen inefficiencies
reduce costs
eliminate redundancies
satisfy customer needs

only if they have positive gain in cost/benefit

Question 4

what are marketing channel functions?

Answer 4

customer interaction
meeting customer needs
inventory functions
financial functions

Question 5

what happens in customer interaction (marketing channel intermediary)

Answer 5

most direct contract to customer
promotion and marketing
information collection
negotiation of price, quality, delivery, etc

Question 6

what happens in meeting customer needs (marketing channel intermediary)

Answer 6

quantity desired - resellers for instance
location
variety
services - delivery, training, repair
consumer credit

Question 7

what happens in inventory function (marketing channel intermediary)

Answer 7

steady ordering - large quantities at regular intervals
physical disto - warehousing, inventory control, transpo
risk sharing - variety of locations and conditions

Question 8

what happens in financial functions (marketing channel intermediary)

Answer 8

financing of inventory - purchase and store offsite

cash flow - consistency of ordering

Question 9

what is a channel level?

Answer 9

a single layer of intermediary/middleperson
performing a channel function
between producers and consumers

Question 10

what are the types of channel levels?

Answer 10

one level (retailer)
two level (wholesale, retail)
three level (wholesale, jobber, retail)
zero level (direct)

always a producer and consumer

Question 11

what is direct marketing

Answer 11

direct from producer to consumer

Question 12

is direct marketing communication or channel

Answer 12

it’s not a communication approach
it’s a channel decision

but it does impact communication, and is augmented by communication

Question 13

what’s the difference between wholesalers and retailers?

Answer 13

wholesalers = resell to businesses (manufacturing, retailers, or business use)
retailers = resell to end users

Question 14

how long should channel level be?

Answer 14

only as long as adding players improves cost/benefit

Question 15

do long channels drive up purchase price?

Answer 15

no
customers have a range of prices they’re willing to pay

channel length impacts profit split between players

Question 16

what are the three approaches to intensity of marketing coverage?

Answer 16

intensive distribution - maximise availability
selective distribution - promote in select venues, but actively avoid in others (generally for more expensive goods)
exclusive distribution - select 1 single channel for distribution (often very top tier products)

Question 17

why is channel management tricky?

Answer 17

independent entities
integrally dependent on each other for success

different missions, strategies, and objectives

mutual benefit can be tricky to find

Question 18

what is power in a channel?

Answer 18

one member’s ability to dominate

a decision making process

Question 19

what is conflict in a channel?

Answer 19

difference in levels of power

different ideas in the best way to be successful

Question 20

what does cooperation in a channel do?

Answer 20

increases efficiency

and typically everyone’s financial gains

Question 21

what are channel alliances?

Answer 21

forming official strategic partnerships

most often in cooperative product offerings (not competitive)

Question 22

what is horizontal integration?

Answer 22

when orgs at the same level
combine or cooperate
to consolidate power

eg, farmers coop

Question 23

what is vertical integration?

Answer 23

two or more levels
are owned/managed by the same company

eg, retailer that starts manufacturing

Question 24

what are the five legal concerns for channels?

Answer 24

dual distribution - manufacturer owns some legal outlets, but also allows other companies to sell their product (possible conflict of interest / anti-competitive)
restricted sales territory - manufacturer restricts where a retailer can sell
tying agreements - requiring sale of product B in allowing retailer to sell product A (desired product) (can be OK, printer + ink, but also can be bad, unrelated products)
exclusive dealings - forbidding sale of competitor’s products
refusal to deal - refusing to sell to someone (acceptable, but concern if retaliation)

Question 25

what is physical distribution?

Answer 25

act of moving/storing products

Question 26

what parts of physical distribution are often outsourced?

Answer 26

inventory management
warehousing
transportation

Question 27

what is pricing of a product?

Answer 27

more than dollar amount to be charged

people have ideas of reasonable price - reference price

Question 28

what is total value?

Answer 28

perceived value
minus
perceived costs

includes
utility
psychological benefits
any other value perceived to be associated with ownership

Question 29

what goes into perceived total cost?

Answer 29

dollar amount paid
energy costs
time costs
psychic costs
opportunity costs

Question 30

what is energy cost of a product?

Answer 30

human physical/emotional energy
actual energy (fuel)

Question 31

what are time costs for a product?

Answer 31

time required to obtain product

eg, wait time at hospital

Question 32

what are the psychic costs?

Answer 32

psychological costs of obtaining product

fear, discomfort, perception of “fit”, impact on image

Question 33

what are the opportunity costs?

Answer 33

costs of giving up other options

eg, taking vacation here means not taking vacation elsewhere

Question 34

what is the supply/demand theory

Answer 34

economic theory

as price goes up
demand goes down

(negative slope)

doesn’t always hold true (eg, limited edition)

Question 35

what is price sensitivity?

Answer 35

relationship between price and demand

Question 36

what are price sensitive customers?

Answer 36

have elastic demand

slightly lower price = much more demand

demand changes significantly

Question 37

what are price insensitive consumers?

Answer 37

have inelastic demand

slightly lower price = very little demand change

demand is roughly static

Question 38

why is pricing complex?

Answer 38

many variables

must align with company objectives and strategy

Question 39

what are the main pricing considerations

Answer 39

costs - must cover fixed and variable costs
marketing might let us raise price
channel partners might have an opinion based on their profits and prestige
consumers might have strong existing expectations
competition influences consumer expectations

Question 40

when is pricing set for others?

Answer 40

vested interest - insurance influencing prices of healthcare
decision maker - textbooks are chosen by prof, but bought by student
legal/regulatory - can set floors / ceilings for pricing

Question 41

what are the basis’ for pricing

Answer 41

cost based pricing: start with costs
demand based pricing: maximise for profit/revenue
competition-based pricing: respond to competitive strategic approaches

Question 42

what are two important pricing strategies

Answer 42

penetration pricing - low price to gain market share

skimming pricing - high price to maximise margin