Place

Question 1

Channel

Answer 1

A set of interdependent organizations involved in the process of making a product or service available to the final consumer
Ex: manufacturer –> wholesaler –> retailer –> consumer

Question 2

Wholesalers (AKA distributors)

Answer 2

Help manufacturers reach many small business customers at low cost
Hold inventories reducing inventory costs and risks to retailers
Achieve savings for retail clients by buying in discounted bulks, and breaking down into smaller units

Question 3

Direct channels

Answer 3

Dell sells through Best Buy and other retailers
Trader Joe’s says “no middle man”

Question 4

Indirect channels

Answer 4

If you want to buy a Rolex, they are exclusively sold by official Rolex retailers
They only want experts selling them

Can’t buy Stihl chainsaws at Home Depot or Lowe’s– only at boutiques where there are experts

Coke you almost always get through a third party– they want to be everywhere

Question 5

More availability is not always better

Answer 5

You don’t want to sell Burberry products at JcPenny
Nike stopped selling at Sears because Sears started selling Kmart brand stuff

Question 6

Place can be used to bring your positioning to life

Answer 6

Trader Joe’s makes their parking lots feel crowded to feel like a small, European market

Question 7

Channel coordination

Answer 7

Each channel member makes decisions that affect other channel members’ decisions/actions
Ex: if a retailer changes what products surround your product on the shelf, causing a decrease in your volume, you’ll observe this & react

All channel members can exercise some control over other members’ decisions/actions

Question 8

Retailer competition

Answer 8

Competition among retailers can lead to prices being too low (from manufacturer’s perspective)

Question 9

Double marginalization

Answer 9

Successive markups by manufacturer, wholesaler, and retailer can lead to prices being too high

Question 10

Example of double marginalization: simple two-member channel– manufacturer and retailer

Answer 10

UVC = $1
Imagine the manufacturer sells to retailer for $1.50 each and retailer sells to consumers for $2 each
Retailer can sell 100 units at $2 retail price
Total profit for manufacturer: 100 x $0.50 = $50
Total profit for retailer: 100 x $0.50 = $50
Total channel profit: $100

Now imagine that the manufacturer sells to retailer for $1.50 each, and the retailer sells to consumers at $5 each
Retailer can sell 20 units at $5 retail price
Total profit for manufacturer: 20 x $0.50 = $10
Total profit for retailer: 20 x $3.50 = $70
Total channel profit: $80

Question 11

Consignment contract

Answer 11

Manufacturer is only paid for inventory that is sold
Manufacturer assumes the risk for unsold inventory

Question 12

No-return contract

Answer 12

Manufacturer receives same $ amount from retailer no matter how much is sold
Retailer assumes the risk for unsold inventory

Question 13

MSRP

Answer 13

manufacturer’s suggested retail price

Question 14

Forward vertical integration

Answer 14

Incorporating distribution activities– going direct

Question 15

Backward vertical integration

Answer 15

Taking greater internal control over production process
Ex: Netflix original movies
Ex: Costco opened own poultry business
Ex: Arby’s said meat should be sliced in-store

Question 16

Horizontal integration

Answer 16

Merging with or acquiring peers who perform similar functions
Ex: Microsoft buying out smaller software companies

Question 17

Trade promotions

Answer 17

Brands pay for good spaces on shelf
Common belief: Unseen is unsold

Brands use field reps or market research firms to monitor how their products are being displayed by retailers

Question 18

Effect of number of facings

Answer 18

Number of facings had strong effect on visual attention
Almost no effect on choice
What did predict choice? Your past choices; market share
“Eye level is buy level”

Question 19

Retail spaces also serve as showrooms

Answer 19

Ex: Nordstrom has home decor merchandise on display but not for sale
Ex: Best Buy sets up dedicated store kiosks

Question 20

Brand blocking

Answer 20

dedicated section on the shelf for a specific brand
Ex: Maybelline next to L’Oreal next to Covergirl

Question 21

People behave differently when they’re being observed

Answer 21

Ex: car vending machine helps alleviate customer’s car salesman pressure
Ex: Sephora red vs. black basket = help or no help

Question 22

Embarrassment aversion

Answer 22

Starbucks mobile app to avoid asking for weird things in person
People buy embarrassing things with other things to camouflage it
Ex: buying gum with adult magazine
Self-checkout
Increases shoplifting though