Chapter 10 Marketing Channels: Delivering Customer Value
Chapter 10 Marketing Channels: Delivering Customer Value
Chapter 10 Marketing Channels: Delivering Customer Value
6) From the economic system's point of view, the role of marketing intermediaries is to
________.
A) facilitate the production of products without direct customer feedback
B) help a company develop a direct channel selling system
C) buy small quantities of products from producers and break them down into narrow
assortments for customers
D) increase the amount of work that must be done by producers and consumers
E) transform the assortments of products made by producers into the assortments wanted by
consumers
Answer: E
Difficulty: Moderate
Chapter LO: 1
Course LO: Compare and contrast different approaches to value chain organization
9) In which of the following situations is a producer guaranteed full control over product sales?
A) a corporate marketing channel
B) a direct marketing channel
C) a contractual distribution channel
D) a horizontal marketing system
E) an administered marketing system
Answer: B
Difficulty: Easy
Chapter LO: 1
Course LO: Compare and contrast different approaches to value chain organization
10) A firm that uses direct marketing would most likely sell its products through ________.
A) one marketing intermediary
B) big box retailers
C) large wholesalers
D) multiple intermediaries
E) the company Web site
Answer: E
Difficulty: Moderate
Chapter LO: 1
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
13) Kevin Pinker is a freelance computer programmer who writes computer algorithms for
companies such as SoftStar and BlueHill. SoftStar and BlueHill use these algorithms to make
specific programs based on online market research. These programs are then sold to the online
retailer, Abundon, which then sells them to individual consumers and businesses. Which of the
following is a marketing intermediary in this chain?
A) SoftStar
B) BlueHill
C) the consumer
D) Abundon
E) Kevin Pinker
Answer: D
Difficulty: Difficult
Chapter LO: 1
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
16) Vertical conflicts in distribution channels are conflicts that occur between ________.
A) same levels in the same channel
B) different levels of the same channel
C) same levels of different channels
D) different levels of different channels
E) retailers and customers
Answer: B
Difficulty: Moderate
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
18) Jupiter Steel is the chief provider of metals to Greystone Motors. Greystone Motors has two
models of cars–one for commercial and ordinary consumers and another for professional car
racing teams. Greystone Motors has designated dealers to sell its commercial cars to consumers,
while racing cars are sold directly to the racing teams. In such a distribution channel, which of
the following would be considered a horizontal conflict?
A) a conflict between Jupiter Steel and Greystone Motors
B) a conflict between Jupiter Steel and Greystone dealers
C) a conflict between two Greystone Motors car dealerships
D) a conflict between a Greystone Motors car dealership and a racing team
E) a conflict between Greystone Motors and its car dealerships
Answer: C
Difficulty: Difficult
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
22) A(n) ________ marketing system combines successive stages of production and distribution
under single ownership, where channel leadership is established through common ownership.
A) contractual vertical
B) corporate vertical
C) administered vertical
D) horizontal
E) direct
Answer: B
Difficulty: Easy
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
24) Which type of channel arrangement does a franchise organization most likely follow?
A) administered vertical marketing system
B) horizontal marketing system
C) contractual vertical marketing system
D) corporate vertical marketing system
E) direct marketing system
Answer: C
Difficulty: Easy
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
25) Rage, a leading motor vehicle manufacturer, introduces a new superbike model. It invites
proposals from independent dealers who are willing to set up exclusive showrooms that only sell
Rage's superbikes. Chosen dealers will sell and service the superbikes, and Rage will oversee
national advertising. This is most likely an example of a(n) ________.
A) administered vertical marketing system
B) horizontal manufacturing marketing system
C) manufacturer-sponsored retailer franchise system
D) manufacturer-sponsored wholesaler franchise system
E) direct marketing system
Answer: C
Difficulty: Difficult
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
27) In a(n) ________ marketing system, leadership over production and distribution is assumed
through the size and power of one or a few dominant channel members.
A) direct
B) contractual vertical
C) horizontal
D) corporate vertical
E) administered vertical
Answer: E
Difficulty: Easy
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
28) Sonic Shack, an audio equipment retailer, signs an agreement with PineWire, a renowned
electronics company, to sell PineWire products. The deal requires Sonic Shack to provide
PineWire products with superior displays, shelf space, and promotion compared to competing
products. Sonic agrees to these terms as PineWire products command a huge share in the market.
Which of the following types of channel arrangements do PineWire and Sonic Shack most likely
have?
A) administered vertical marketing system
B) corporate vertical marketing system
C) indirect marketing system
D) wholesaler franchise system
E) horizontal marketing system
Answer: A
Difficulty: Difficult
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
30) TruMart, a leading retail chain, decides to open a restaurant inside its stores, so the firm
partners with MeatMe, a popular burger chain. MeatMe opens a restaurant inside TruMart. The
MeatMe chain of restaurants also has a deal with Westman Cola to serve only Westman soft
drinks at its outlets. This arrangement will benefit all three companies. What kind of channel
arrangement is being followed in this case?
A) administered vertical marketing system
B) horizontal marketing system
C) direct marketing system
D) contractual vertical marketing system
E) corporate vertical marketing system
Answer: B
Difficulty: Moderate
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
31) GreatWords is a book retailer. Due to the increasing demand for audiobooks, the firm
decides to sell audiobooks in its stores. GreatWords signs a deal with Carpem, a leading
producer of educational audiobooks. According to the deal, GreatWords will sell only Carpem's
audio titles in its stores, while Carpem will not sell its books through other retailer stores.
GreatWords profits from Carpem's popularity while Carpem, in return, enjoys better sales. This
is most likely an example of a(n) ________ marketing system.
A) direct
B) administered vertical
C) corporate vertical
D) contractual vertical
E) horizontal
Answer: E
Difficulty: Difficult
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
33) Clara's, a cosmetics manufacturer, sells many of its products through retail outlets. However,
the firm sells a few expensive, popular products only through direct selling methods. What kind
of channel arrangement does Clara's follow for all of its products together?
A) horizontal marketing system
B) multichannel distribution system
C) administered vertical marketing system
D) contractual vertical marketing system
E) corporate vertical marketing system
Answer: B
Difficulty: Moderate
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
34) For over ten years, Erudite, a publishing and educational company that produces college
textbooks, has been selling its books online through studysmart.com, a popular online retailer
that sells textbooks published by different companies. Recently, Erudite stopped selling its books
through studysmart.com and set up its own website for selling its books. This change in channel
organization is called ________.
A) disintermediation
B) intensive distribution
C) brokering
D) franchising
E) selective distribution
Answer: A
Difficulty: Moderate
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
37) ________ distribution gives a limited number of dealers the sole rights to distribute a
company's products in their territories.
A) Inclusive
B) Horizontal
C) Intensive
D) Exclusive
E) Vertical
Answer: D
Difficulty: Easy
Chapter LO: 3
Course LO: Compare and contrast different approaches to value chain organization
40) When a seller requires that only certain dealers carry its products, its strategy is known as
________.
A) horizontal restraint of trade
B) intensive distribution
C) vertical distribution
D) disintermediation
E) exclusive distribution
Answer: E
Difficulty: Easy
Chapter LO: 4
Course LO: Compare and contrast different approaches to value chain organization
41) Which of the following is an advantage of exclusive dealing between a seller and a dealer?
A) The seller gains more shelf power compared to competitors' products.
B) The seller can avoid using any intermediary and sell the product directly to customers.
C) Customers get more loyal and dependable outlets.
D) The dealer obtains a steady source of supply and more support from the seller.
E) The dealer can freely choose what products to sell without any interference from the seller.
Answer: D
Difficulty: Moderate
Chapter LO: 4
Course LO: Compare and contrast different approaches to value chain organization
42) ________ is a practice whereby a producer agrees to sell a brand to a dealer only if the dealer
agrees to sell some or all of the rest of its products.
A) Horizontal price fixing
B) Horizontal integration
C) Full-line forcing
D) Direct marketing
E) Disintermediation
Answer: C
Difficulty: Moderate
Chapter LO: 4
Course LO: Compare and contrast different approaches to value chain organization
44) The Memphis Rock chain of restaurants has a deal with WestEnd Cola, according to which it
will serve only WestEnd sodas at its restaurants. What strategy has most likely been adopted by
WestEnd Cola?
A) horizontal price fixing
B) disintermediation
C) exclusive dealing
D) selective distribution
E) horizontal integration
Answer: C
Difficulty: Moderate
Chapter LO: 4
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
45) Bateman Gray Motors sells the cars it produces using dedicated dealers who only sell
Bateman Gray's products at their outlets. What kind of marketing strategy has Bateman Gray
adopted with its car dealers?
A) direct marketing
B) exclusive dealing
C) disintermediation
D) horizontal integration
E) vertical integration
Answer: B
Difficulty: Moderate
Chapter LO: 4
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
47) In supply chain management, moving products and materials from suppliers to the factory is
known as ________ logistics.
A) outbound
B) reverse l
C) inbound
D) downstream
E) inventory
Answer: C
Difficulty: Easy
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization
50) In a logistics system, minimizing distribution costs most likely involves ________.
A) flexible assortments
B) large shipping lots
C) rapid delivery
D) large inventories
E) liberal return policies
Answer: B
Difficulty: Moderate
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization
51) A ________ is highly automated and designed to receive goods from various plants and
suppliers, take orders, fill them efficiently, and deliver goods to customers as quickly as possible.
A) distribution center
B) storage warehouse
C) cold storage unit
D) controlled-atmosphere unit
E) storage silo
Answer: A
Difficulty: Easy
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization
56) Which of the following is most efficient for short hauls of high-value merchandise and is
highly flexible in its routing and time schedules?
A) water carriers
B) pipeline
C) trucks
D) air carriers
E) railroads
Answer: C
Difficulty: Easy
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization
57) Which mode of transportation is best for carrying perishable goods to distant markets?
A) railroads
B) water carriers
C) trucks
D) air carriers
E) pipelines
Answer: D
Difficulty: Moderate
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
58) ________ involves combining two or more systems of transportation to move products.
A) Vertical transportation
B) Disintermediation
C) Just-in-time management
D) Vertical integration
E) Multimodal transportation
Answer: E
Difficulty: Easy
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization
60) Under ________, a customer shares real-time data on sales and current inventory levels with
a supplier, and the supplier then takes full responsibility for managing inventories and deliveries.
A) periodic inventory systems
B) vendor-managed inventory systems
C) selective-trading inventory systems
D) manual inventory replenishment systems
E) customer-managed inventory systems
Answer: B
Difficulty: Moderate
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization
61) Introducing intermediaries into a distribution chain increases the number of direct channel
transactions between a manufacturer and its customers.
Answer: FALSE
Difficulty: Easy
Chapter LO: 1
Course LO: Compare and contrast different approaches to value chain organization
62) From a producer's point of view, a greater number of levels in a supply chain means less
control and greater channel complexity.
Answer: TRUE
Difficulty: Moderate
Chapter LO: 1
Course LO: Compare and contrast different approaches to value chain organization
63) A channel level is a layer of intermediaries that performs some work in bringing the product
and its ownership closer to the final buyer.
Answer: TRUE
Difficulty: Easy
Chapter LO: 1
Course LO: Compare and contrast different approaches to value chain organization
65) Historically, conventional distribution channels have provided channel leadership and have
had the power to assign roles and manage conflict.
Answer: FALSE
Difficulty: Moderate
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
66) A vertical marketing system is one in which the producer is always the dominant member of
the channel.
Answer: FALSE
Difficulty: Moderate
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
67) In a vertical marketing system, producers do not use intermediaries to sell their products.
Answer: FALSE
Difficulty: Easy
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
69) In an administered VMS, the producer assumes the leadership position in a distribution
channel by default.
Answer: FALSE
Difficulty: Moderate
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
70) A horizontal marketing system can develop between a company and its competitor.
Answer: TRUE
Difficulty: Easy
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
72) Disintermediation occurs when product or service producers cut out intermediaries and sell
directly to final buyers.
Answer: TRUE
Difficulty: Easy
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
73) Marketing channel design calls for analyzing consumer needs, setting channel objectives,
identifying major channel alternatives, and evaluating those alternatives.
Answer: TRUE
Difficulty: Easy
Chapter LO: 3
Course LO: Compare and contrast different approaches to value chain organization
74) Companies selling perishable products generally prefer direct marketing, which minimizes
delays.
Answer: TRUE
Difficulty: Easy
Chapter LO: 3
Course LO: Compare and contrast different approaches to value chain organization
75) Intensive distribution occurs when only one intermediary is used by a producer to sell all its
products.
Answer: FALSE
Difficulty: Moderate
Chapter LO: 3
Course LO: Compare and contrast different approaches to value chain organization
76) Exclusive dealing that creates a monopoly comes under the scope of the Clayton Act of
1914.
Answer: TRUE
Difficulty: Moderate
Chapter LO: 4
Course LO: Compare and contrast different approaches to value chain organization
79) In exclusive dealing, a producer may agree not to sell to other dealers in a given area.
Answer: TRUE
Difficulty: Easy
Chapter LO: 4
Course LO: Compare and contrast different approaches to value chain organization
80) Customer-centered logistics starts with the marketplace and works backward to the factory.
Answer: TRUE
Difficulty: Easy
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization
81) Supply chain management involves managing both upstream and downstream value-added
flows of materials.
Answer: TRUE
Difficulty: Easy
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization
82) According to the text, the goal of any logistics system should be to maximize sales, not
profits.
Answer: FALSE
Difficulty: Easy
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization
83) Inbound logistics involves managing the flow of products from an intermediary to a
customer.
Answer: FALSE
Difficulty: Easy
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization
84) With a vendor-managed inventory system, the supplier takes full responsibility for managing
inventories and deliveries.
Answer: TRUE
Difficulty: Easy
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization
86) What are the different functions of the members of a marketing channel?
Answer: Members of a marketing channel perform many key functions. Some help to complete
transactions, which include:
Information: Gathering and distributing information about consumers, producers, and other
actors and forces in the marketing environment needed for planning and aiding exchange.
Promotion: Developing and spreading persuasive communications about an offer.
Contact: Finding and communicating with prospective buyers.
Matching: Shaping offers to meet the buyer's needs, including activities such as manufacturing,
grading, assembling, and packaging.
Negotiation: Reaching an agreement on price and other terms so that ownership or possession
can be transferred.
Others help to fulfill the completed transactions, such as:
Physical distribution: Transporting and storing goods.
Financing: Acquiring and using funds to cover the costs of the channel work.
Risk taking: Assuming the risks of carrying out the channel work.
Difficulty: Moderate
Chapter LO: 1
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
89) Differentiate between the three types of franchises and provide examples of each type.
Answer: There are three types of franchises. The first type is the manufacturer-sponsored
retailer franchise system–for example, Ford and its network of independent franchised dealers.
The second type is the manufacturer-sponsored wholesaler franchise system–Coca-Cola licenses
bottlers (wholesalers) in various world markets that buy Coca-Cola syrup concentrate and then
bottle and sell the finished product to retailers locally. The third type is the service-firm-
sponsored retailer franchise system–for example, Burger King and its nearly 12, 300 franchisee-
operated restaurants around the world.
Difficulty: Moderate
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
92) What is disintermediation? With a suitable example, explain the opportunities and problems
that disintermediation presents for producers and resellers.
Answer: 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. Disintermediation presents both opportunities and problems for producers and
resellers. 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. For example, superstore booksellers Borders and Barnes &
Noble pioneered huge book selections and low prices, sending most small independent
bookstores into ruin. Then, along came Amazon.com, which threatened even the largest brick-
and-mortar bookstores through online book sales. Now, both offline and online sellers of
physical books are being threatened by digital book downloads and e-readers. Rather than being
threatened by these digital developments, however, Amazon.com is leading them with its highly
successful Kindle ereaders. By contrast, Barnes & Noble–the giant that helped put so many
independent bookstores out of business–is a latecomer with its Nook e-reader and now finds
itself locked in a battle for survival. Like resellers, to remain competitive, product and service
producers must develop new channel opportunities, such as the Internet and other direct
channels. However, developing these new channels often brings them into direct competition
with their established channels, resulting in conflict. To ease this problem, companies often look
for ways to make going direct a plus for the entire channel.
Difficulty: Difficult
Chapter LO: 2
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
94) Differentiate between intensive distribution, exclusive distribution, and selective distribution
strategies, Provide examples of products that would be appropriate for each.
Answer: Companies must determine the number of channel members to use at each level of a
value network chain. Three strategies are available: intensive distribution, exclusive distribution,
and selective distribution. Producers of convenience products and common raw materials
typically seek intensive distribution–a strategy in which they stock their products in as many
outlets as possible. These products must be available where and when consumers want them. For
example, toothpaste, candy, and other similar items are sold in millions of outlets to provide
maximum brand exposure and consumer convenience. Kraft, Coca-Cola, Kimberly-Clark, and
other consumer goods companies distribute their products in this way. By contrast, some
producers purposely limit the number of intermediaries handling their products. The extreme
form of this practice is exclusive distribution, in which the producer gives only a limited number
of dealers the exclusive right to distribute its products in their territories. Exclusive distribution is
often found in the distribution of luxury brands. Between intensive and exclusive distribution lies
selective distribution–the use of more than one but fewer than all of the intermediaries who are
willing to carry a company's products. Most television, furniture, and home appliance brands are
distributed in this manner.
Difficulty: Difficult
Chapter LO: 3
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Analytic thinking
96) What criteria should a firm consider before choosing a channel alternative?
Answer: If a company has identified several channel alternatives and wants to select the one that
will best satisfy its long-run objectives, then each alternative should be evaluated against certain
economic, control, and adaptability criteria. Using economic criteria, a company compares the
likely sales, costs, and profitability of different channel alternatives. The company must also
consider control issues. Using intermediaries usually means giving them some control over the
marketing of the product, and some intermediaries take more control than others. Other things
being equal, the company prefers to keep as much control as possible. Finally, the company must
apply 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. Thus, to be
considered, a channel involving long-term commitments should be greatly superior on economic
and control grounds.
Difficulty: Moderate
Chapter LO: 3
Course LO: Compare and contrast different approaches to value chain organization
97) How do companies generally manage and motivate their channel members? What
technological tools are available to help with this task?
Answer: Channel members must be continuously managed and motivated to do their best. The
company must sell not only through the intermediaries but also to and with them. Most
companies see their intermediaries as first-line customers and partners. They practice strong
partner relationship management to forge long-term partnerships with channel members. This
creates a value delivery system that meets the needs of both the company and its marketing
partners. In managing its channels, a company must convince suppliers and distributors that they
can succeed better by working together as a part of a cohesive value delivery system. Many
companies are now installing integrated high-tech partnership relationship management (PRM)
systems to coordinate their whole-channel marketing efforts. Companies can now use PRM and
supply chain management (SCM) software to help recruit, train, organize, manage, motivate, and
evaluate relationships with channel partners.
Difficulty: Moderate
Chapter LO: 4
Course LO: Compare and contrast different approaches to value chain organization
AACSB: Information technology
99) What is marketing logistics? What are the components of marketing logistics?
Answer: Marketing logistics–also called physical distribution–involves planning, implementing,
and controlling the physical flow of goods, services, and related information from points of
origin to points of consumption, to meet customer requirements at a profit. Marketing logistics
involves (a) outbound logistics, which is moving products from the factory to resellers and
ultimately to customers, (b) inbound logistics, which is moving products and materials from
suppliers to the factory, and (c) reverse logistics, which is reusing, recycling, refurbishing, or
disposing of broken, unwanted, or excess products returned by consumers or resellers.
Difficulty: Moderate
Chapter LO: 5
Course LO: Compare and contrast different approaches to value chain organization