Marketing 2

Question 1

Name a key element of the marketing mix

Answer 1

Distribution

Question 2

Place

Answer 2

Place is concerned with distribution channels, intermediaries, the distribution mix, and the distribution strategy.

Question 3

Distribution channels

Answer 3

Distribution channels may be consumer or industrial, and they may involve such intermediaries as agents and brokers, wholesalers, and retailers, who add value to the products they handle.

Question 4

Distribution mix

Answer 4

The distribution mix is the combination of distribution channels
a company uses to get its products to customers.

Question 5

Name the three kinds of distribution strategy

Answer 5

Intensive
Selective
Exclusive

Question 6

Place or distribution strategy: getting the product to the customer

Answer 6

Distribution Strategy is about getting the right product to the right person, at the right place, at the right time.

• Where do buyers look for your product or service? - If they look in a store, what kind? A specialist boutique or in a supermarket, or both? Or online? Or direct, via a catalogue?
• How can you access the right distribution channels?
• Do you need to use a sales force? Or attend trade fairs? Or make online submissions? Or send samples to catalogue companies?
• What do your competitors do, and how can you learn from that and/or differentiate?

Question 7

Channel of distribution
+ name the “intermediaries”

Answer 7

Channel of Distribution – the path that a product takes from the producer to the consumer

Producer > intermediary (channel of distribution) > consumer

Intermediary:
- direct, merchant wholesaler to retailer, agent, retailer, non-store retailer

> multiple channels may be used

Question 8

Consumer: distribution channels for consumer goods and services
(No, 1, 2 and 3 intermediaries)

Answer 8

No: producer > consumer
1: producer > retailer > consumer
2: producer > wholesaler > retailer > consumer
3: producer > agent/broker > wholesaler > retailer > consumer

Question 9

Business: production channels for business goods and services
(No and 1 or more intermediaries)

Answer 9

No: business producer > business user
1 or more: business producer > agent or wholesaler > business user

Question 10

Name the 5 channels of distribution (using intermediaries) and explain them

Answer 10

direct to consumer (from manufacturer, no intermediary): Corporately operated stores, telemarketing, online orders, door-to-door, vending machines (by manufacturer directly)

store retailers (buy form manufacturers or wholesalers): Department stores, convenience stores, supermarkets, discount stores, specialty boutiques, big-box stores

non-store retailers (buy from manufacturers or wholesalers): Online orders, vending machines, telemarketing (done by retailers)

wholesalers (buy from manufacturers): Resell to retailers or businesses (take ownership of the product and often store it before selling it)

agents: Facilitate the transaction between manufacturers and consumers or businesses (receive a commission)

Question 11

How intermediates add value

Answer 11

Cost items:
- Salary & benefits for employees such as sales & service.
- Marketing costs such as publicity & promotions.
- Interest charges on the cost of holding inventory.
- Charges related to space & building (insurance, heating, electricity)
- Transportation, for deliveries.

• Location: Selling Products Where People Want Them
• Time: Selling Products When People Want Them
• Information: Providing Knowledge about Products • Ownership: Helping Customers Acquire the Products
• Service: Helping customers use the products
• Form: Changing Materials into Useful Products

Question 12

Intermediaries: streamlining consumer transactions

Answer 12

also provide expertise in customer service, value- added services and improved access for the consumer

Question 13

Price

Answer 13

Pricing:
– Is figuring out how much to charge for a product.
– Pricing is supposed to:
• make a profit
• match or beat the competition
• attract customers
• make products affordable to certain people
• create prestige

• Determines to a large extent product demand as
  it is an important consideration for consumers
• Creates revenue in the marketing mix and
  generates profit for sellers
• Requires constant revision vs. the competition
  as it is often a key factor for customers
• Subject to some legal restrictions in certain
  industries so it is important to be aware of these

Question 14

Price setting considerations

Answer 14

Product costs
- price floor: no profits below this price

Competitors’ prices and other internal and external factors
- economic environment, technological or sociocultural trends, government regulations

Consumer perceptions of value
- price ceiling: no demand above this price

Question 15

Cost pricing

Answer 15

the cost of producing or buying the product—plus making a profit—is the primary basis for setting price.

Question 16

Target costing

Answer 16

Unlike cost pricing, target costing considers market forces. In, a company starts with the price it wants to charge, figures out the profit margin it wants,
then determines what the costs must be to produce the product to meet the desired price and profit goals

Question 17

Competitive pricing

Answer 17

price is determined in relation to rivals, factoring in other considerations such as market dominance, number of competitors, and customer loyalty.

Question 18

Factors influencing pricing

Answer 18

• What is the value of the product or service to the target market?
• Are there any external factors that could affect the perceived value? (Note: technological or socio-cultural trends, economic environment, government regulations)
• What is the cost of the product to you?
• How will your price compare with your competitors? What level of competition are you dealing with? (Note: oligopolies and monopolies have more control over pricing)
• Is the target market price sensitive? (Note: Will a small decrease in price increase market share significantly or will a small increase be indiscernible, and so gain you extra profit margin?)
• What is your overall strategy? (Note: profit per unit, increased market share, or a combination of both)

Question 19

Price common practices: Price skimming

Answer 19

To recover high research and development costs on a product, a company may set a high price to make a large profit; this can work when there is little competition.

Question 20

Price common practices: Penetration price

Answer 20

low price to attract customers and deter competition

Question 21

Price common practices: Discounting

Answer 21

assigning regular prices to products but then resorting to frequent price-cutting strategies, such as special sales, to undercut the prices of competitors

Question 22

Price common practices: Bundling

Answer 22

the practice of pricing two or more products together as a unit

Question 23

Gross margin

Answer 23

Gross profit margin = Selling price - COGS
Gross profit margin % = Gross profit margin / Selling price

When retailers are used, the manufacturers’ selling price is determined by:
Suggested retail price – retailer discount (net price to retailers)

Question 24

Basic pricing strategies

Answer 24

• Building Profitability
– Establishing a fixed profit margin
• Matching the Competition
• Creating Prestige
– Setting a higher price (price skimming)
• Boosting Volume
– Setting a low price (penetration price)

Question 25

Other important factors in marketing

Answer 25

• Buying process
• Factors influencing buying
• Market research
• Influence of social responsibility and technology