Final - 06 Distribution Policy

Question 1

define supply chain

Answer 1

The supply chain is the network created amongst different companies producing, handling and/or distributing a specific product.
- Supply chain management is a crucial process for many companies, and many companies strive to have the most optimized supply chain because it usually translates to lower costs for the company.

-> building relationships not only with customers but also with key suppliers and resellers in the company’s supply chain supply chain consists of upstream and downstream partners.

Question 2

define an upstream supply chain partners

Answer 2

Upstream from the company is the set of firms that supply the raw materials, components, parts, information, finances, and expertise needed to create a product or service.

Question 3

define downstram supply chain partners

Answer 3

Marketers traditionally focused on the downstream side of the supply chain—on the
marketing channels(or distribution channels) that look toward the customer. Downstream marketing
channel partners, such as wholesalers and retailers, form a vital connection between
the firm and its customers

Question 4

define value delivery network

Answer 4

Value delivery network
= 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 5

define marketing channels

Answer 5

Marketing channel (or
distribution channel) = A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business use

A company’s channel decisions directly affect every other marketing decision. Pricing
depends on whether the company works with national discount chains, uses high-quality specialty stores, or sells directly to consumers via the Web

Question 6

define channel level

Answer 6

Channel level = A layer of intermediaries that performs some work in bringing the product and its
ownership closer to the final buyer.

Question 7

what does the number of intermediary levels indicate?

Answer 7

The number of intermediary levels indicates the length of a channel.

• intermediaries reduce the amount of work that must be done by both producers and consumers.

Question 8

define direct marketing channel

Answer 8

Direct marketing channel =
A marketing channel that has no intermediary levels

—- the company sells directly to consumers. For example, Mary Kay Cosmetics and Amway sell their products door-to-door,
through home and office sales parties, and on the Internet; GEICO sells insurance direct via the telephone and the Internet.

Question 9

define indirect marketing channel

Answer 9

Indirect marketing channel =

Channel containing one or more intermediary levels.

Question 10

define channel conflict

Answer 10

Channel conflict =
Disagreement among marketing channel members on goals, roles, and rewards—
who should do what and for what rewards.

Question 11

define horizontal conflict

Answer 11

Horizontal conflict occurs among firms at the same level of the channel. For instance,
some Ford dealers in Chicago might complain that other dealers in the city steal sales from them by pricing too low or advertising outside their assigned territories. Or Holiday Inn franchisees might complain about other Holiday Inn operators overcharging guests or giving poor service, hurting the overall Holiday Inn image

Question 12

define vertical conflict

Answer 12

Vertical conflict, conflicts between different levels of the same channel, is even more common.

In recent years, for example, Burger King has had a steady stream of conflicts with its franchised dealers over everything from increased ad spending and offensive ads to the prices it charges for cheeseburgers. At issue is the chain’s right to dictate policies to franchisees.3

Question 13

define distribution :

Answer 13

As a Process of making Products and Services available, Distribution Channels refer to the diverse Organizations that generate Value during that process.

Question 14

describe VMS

Answer 14

Vertical marketing system (VMS) = A distribution channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate.

three major types of VMS´´s:
1 corporate,
2 contractual, and
3 administered

One of the biggest channel developments over the years has been the emergence of vertical marketing systems that provide channel leadership.

Question 15

what is corporate VMS?

Answer 15

Corporate VMS =
A vertical marketing system that combines successive stages of production and distribution under single ownership— channel leadership is established through common ownership

Question 16

define a conventional distribution channel

Answer 16

A conventional distribution channel consists of one or more independent producers,
wholesalers, and retailers. Each is a separate business seeking to maximize its own profits,
perhaps even at the expense of the system as a whole. No channel member has much
control over the other members, and no formal means exists for assigning roles and resolving channel conflict

Question 17

define contractual VMS

Answer 17

A contractual VMS consists of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone. Channel members coordinate their activities and manage conflict through contractual agreements.

Question 18

define franchise organization

Answer 18

Franchise organization =
A contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process.

The franchise organization is the most common type of
contractual relationship.

Question 19

define Administered VMS

Answer 19

Administered VMS =
A vertical marketing system that coordinates successive stages of production and distribution through the size and power of one of the parties.

Question 20

define horizontal marketing system

Answer 20

Another channel development is the horizontal marketing system, in which two or more
companies at one level join together to follow a new marketing opportunity. By working together, companies can combine their financial, production, or marketing resources to accomplish more than any one company could alone-

— Companies might join forces with competitors or noncompetitors. They might work with each other on
a temporary or permanent basis, or they may create a
separate company.
–> For example, McDonald’s places “express” versions of its restaurants in Walmart stores.
McDonald’s benefits from Walmart’s heavy store traffic,
and Walmart keeps hungry shoppers from needing
to go elsewhere to eat.

Question 21

define multichannel distribution system

Answer 21

Multichannel distribution system = A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments.
—-> These days, almost every large company and many small ones distribute through multiple channels

• ** With each new channel, the company expands its sales and market coverage and gains opportunities to tailor its products and services to the specific needs of diverse customer segments.
  
  • ** But such multichannel systems are harder to control, and they generate conflict as more channels compete for customers and sales.

Question 22

define disintermediation (changing channel organization)

Answer 22

Disintermediation occurs when product or service producers cut out intermediaries and go
directly to final buyers or when radically new types of channel intermediaries displace traditional ones.
*** Thus, in many industries, traditional intermediaries are dropping by the wayside.

*** Changes in technology and the explosive growth of direct and online marketing are having a profound impact on the nature and design of marketing channels.

—-> For example, Southwest, JetBlue, and other airlines sell tickets directly to final buyers, cutting travel agents from their marketing channels altogether

Question 23

how does Disintermediation presents both opportunities and problems for producers and resellers?

Answer 23

Channel innovators who find new ways to add value in the channel can sweep aside traditional resellers and reap the rewards. In turn, traditional intermediaries must continue to innovate to avoid being swept aside.

Question 24

what are the several channel decisions manufacturers face with regards to channel design?

Answer 24

1) analyzing consumer needs,
- what target consumers want from the channel.
- Do consumers want to buy from nearby locations or are they willing to travel to more distant and centralized locations?

2) setting channel objectives,
- targeted levels of customer service

3) identifying major channel alternatives
4) and evaluating those alternatives.

Question 25

define marketing channel design

Answer 25

Marketing channel design=
Designing effective marketing channels by analyzing customer needs, setting
channel objectives, identifying major channel alternatives, and evaluating those alternative

Question 26

describe step 1 for making a decision in marketing channel design.

Answer 26

1) analyzing consumer needs,

As noted previously, marketing channels are part of the overall customer-value delivery

network. Each channel member and level adds value for the customer. Thus, designing the marketing channel starts with finding out what target consumers want from the channel
- Do consumers want to buy from nearby locations or are they willing to travel to more distant and centralized locations?

Question 27

describe step 3 for making a decision in marketing channel design. ***

Answer 27

3) Identifying Major Alternatives

When the company has defined its channel objectives, it should next identify its major channel alternatives in terms of the types of intermediaries, the number of intermediaries, and the responsibilities of each channel member.

step 1 - types of intermeiaries

step 2: Number of Marketing Intermediaries

• • Intensive distribution = Stocking the product in as many outlets as possible.
• For example, toothpaste, candy, and other similar items are sold in millions of outlets to provide maximum brand exposure and consumer convenience
• ** Exclusive distribution = Giving a limited number of dealers the exclusive right to distribute the company’s products in their territories.
  
  • For example, exclusive Bentley automobiles are typically sold by only a handful of authorized dealers in any given market area.
• *** Selective distribution = The use of more than one but fewer than all the intermediaries who are willing to carry the company’s products.
  
  • Most television, furniture, and home appliance brands are distributed in this manner.
  • For example, Whirlpool and GE sell their major appliances through dealer networks and selected large retailers.

step 3 - Responsibilities of Channel Members
- They should agree on price policies, conditions of sale, territory rights, and the specific services to be performed by each party. The producer should establish a list price and a fair set of discounts for the intermediaries.

Question 28

define exclusive distribution (selecting # of marketing intermediaries in channel design strategy) **

Answer 28

Exclusive distribution = Giving a limited number of dealers the exclusive right to distribute the company’s products in their territories.
*** For example, exclusive Bentley automobiles are typically sold by only a handful of authorized dealers in any given market area.

Question 29

define selective distribution (selecting # of marketing intermediaries in channel design strategy) **

Answer 29

Selective distribution = The use of more than one but fewer than all the intermediaries who are willing to carry the company’s products.
** Most television, furniture, and home appliance brands are distributed in this manner.

Question 30

when evaluating major alternatives in step 4 of the channel design decisions, what criteria should be considered?

Answer 30

• economic criteria, - a company compares the likely sales, costs, and profitability of different channel alternatives
• control issues. - Using intermediaries usually means giving them some control over the marketing of the product, and some intermediaries take more control than others.
• adaptability criteria. - Channels often involve long-term commitments, yet the company wants to keep the channel flexible so that it can adapt to environmental changes.

Question 31

define marketing channel management

Answer 31

Marketing channel management = Selecting, managing, and motivating
individual channel members and evaluating their performance over time.

Question 32

define supply chain management

Answer 32

Supply chain management =
Managing upstream and downstream value-added flows of materials, final goods, and related information among
suppliers, the company, resellers, and final consumer

Question 33

what are marketing logistics?

Answer 33

Marketing logistics (or physical distribution) Planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit

— Logistics effectiveness has a major impact on both customer satisfaction and company costs.
In short, it involves getting the right product to the right customer in the right place at the right time.

Question 34

define retailing

Answer 34

Retailing includes all the activities involved in selling products or services directly to final consumers for their personal, nonbusiness use. Many institutions manufacturers, wholesalers, and retailers—do retailing.

Question 35

define retailer

Answer 35

A business whose sales come primarily from retailing.

Question 36

define self service retailer

Answer 36

Self-service retailers serve customers who are willing to perform their own “locatecompare-select”
process to save time or money. Self-service is the basis of all discount operations and is typically used by retailers selling convenience goods (such as supermarkets)
and nationally branded, fast-moving shopping goods (such as Target or Kohl’s)

Question 37

how can retailer stores be classified?

Answer 37

they can be classified in terms of several characteristics, including the amount of service they offer, the breadth and
depth of their product lines, the relative prices they charge, and how they are organized.

Question 38

define specialty store (retailer types)

Answer 38

Specialty store -
A retail store that carries a narrow product line with a deep assortment within that line.

— Today, specialty stores are flourishing. The increasing use of market segmentation,
market targeting, and product specialization has resulted in a greater need for stores that focus on specific products and segments.

Question 39

define department store (retailer type based on product line )

Answer 39

Department store -
A retail organization that carries a wide variety of product lines—each line is operated as a separate department
managed by specialist buyers or merchandisers

** In recent years,
department stores have been squeezed between more focused and flexible specialty stores on the one hand and more efficient, lower-priced discounters on the other

Question 40

define supermarkets (retailer type based on product line)

Answer 40

A large, low-cost, low-margin, highvolume, self-service store that carries a wide variety of grocery and household products.
– Supermarkets are the most frequently shopped type of retail store.

Question 41

define convenience store (retailer type)

Answer 41

A small store, located near a residential area, that is open long hours seven days a
week and carries a limited line of highturnover convenience goods.

Question 42

what are the different classifications for retailers based on relative price?

Answer 42

1) discount store
2) off-price retailer
3) independent off price retailer
4) factory outlet
5) wherehouse club

Question 43

define wholesaling

Answer 43

Wholesaling -

All the activities involved in selling goods and services to those buying for resale or business use.

Question 44

define wholesaler

Answer 44

Wholesaler –
A firm engaged primarily in wholesaling activities.

• Wholesalers buy mostly from producers and sell mostly to retailers, industrial consumers,
  and other wholesalers
  —> As a result, many of the nation’s largest and most important wholesalers are largely unknown to final consumers.

Question 45

what are the different types of wholesalers?

Answer 45

Types of Wholesalers
1 - Merchant wholesaler: An independently owned wholesale business that takes title to the merchandise it handles.
2 - Broker = A wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation.
3. Agent = A wholesaler who represents buyers or sellers on a relatively permanent basis, performs only a few functions, and does not take title to goods.
4. Manufacturers’ sales branches and offices = Wholesaling by sellers or buyers themselves rather than through independent wholesalers.

Question 46

explain what marketing logistics involves with regards to physical flow of material

Answer 46

Marketing logistics involves not
only outbound distribution (moving products from the factory to resellers and ultimately to customers) but also inbound distribution (moving products and materials from suppliers to the factory) and reverse distribution (moving broken, unwanted, or excess products returned by consumers or resellers).

That is, it involves entire supply chain management— managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers