Distribution Channels and Intermediaries

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Questions and Answers

What is a primary objective in distributing bulky products?

Reduce transaction times

Increase handling methods

Maximize product variety

Minimize shipping costs (correct)

How do channel intermediaries improve buyer convenience?

By creating assortments of various products (correct)

By increasing bulk purchases for consumers

By exclusively providing single item sales

By eliminating the need for comparisons

When introducing a new product to the market, what is an important channel objective?

To restrict product availability

To minimize handling risks

To maximize product exposure (correct)

To eliminate direct sales

In the context of distribution, what is the main role of wholesalers and retailers?

To purchase large quantities and sell smaller amounts Signup and view all the answers

What benefit is provided to consumers when products are made available where similar items are sold?

Convenience in price comparison Signup and view all the answers

What is the term used for distribution that is more exclusive than intensive but less exclusive than extensive?

Selective distribution Signup and view all the answers

Why do firms create inventory?

To respond to seasonal demand Signup and view all the answers

Which of the following best describes the backlash against RFID technology?

It is equated with privacy violations from Orwell's 1984 Signup and view all the answers

What do marketers consider first when developing distribution strategies?

Channel levels Signup and view all the answers

What primarily characterizes the market coverage of selective distribution?

Limited outlets catering to specific segments Signup and view all the answers

What is an example of a product requiring intensive distribution?

Chewing gum Signup and view all the answers

What distinguishes selling agents from manufacturers' agents?

Selling agents control pricing and promotion Signup and view all the answers

What type of distribution limits a product's availability to a single outlet in a particular region?

Exclusive distribution Signup and view all the answers

Why is availability more important for certain products in purchase decisions?

They are frequently consumed and need replacement. Signup and view all the answers

Which of the following industries are selling agents commonly found in?

Furniture, clothing, and textiles Signup and view all the answers

What role do selling agents play in distribution?

They market the products without taking title. Signup and view all the answers

Which marketing channel has emerged due to the opportunities provided by the Internet?

Service marketing Signup and view all the answers

What is the primary advantage of using trucks for transporting consumer goods?

Trucks provide door-to-door service with minimal product handling. Signup and view all the answers

What is a key characteristic of intensive distribution?

Products need to be widely available to consumers. Signup and view all the answers

Which type of wholesaler sells products through catalogs to small retailers in remote areas?

Mail-order wholesalers Signup and view all the answers

What type of products do rack jobbers typically supply to retailers?

Specialty items like health and beauty products Signup and view all the answers

Why are trucks considered more flexible than other transportation modes like boats and trains?

Trucks can adapt routes to reach specific locations missed by other transport. Signup and view all the answers

What payment methods do mail-order wholesalers typically require before shipment?

Credit card or cash Signup and view all the answers

What is a potential drawback of truck transportation for longer deliveries?

Higher costs compared to rail or sea transport. Signup and view all the answers

Which of the following ensures minimal product damage during transportation?

Employing trucks for door-to-door service. Signup and view all the answers

What is a significant feature of rack jobbers in the supply chain?

They take care of inventory and product placement in stores. Signup and view all the answers

What is one major challenge associated with internet distribution?

Online distribution piracy Signup and view all the answers

Which benefit does coordination among warehousing members provide?

It makes handling of goods more efficient. Signup and view all the answers

What are the four main steps goods undergo in a warehouse?

Identification, checking for damage, labeling, and storage Signup and view all the answers

What is one type of vertical marketing system mentioned?

Administered VMS Signup and view all the answers

Outsourcing can potentially affect which aspect of society?

The US job market Signup and view all the answers

How is copyright infringement characterized in the context of internet distribution?

As unauthorized repurposing of protected works Signup and view all the answers

What action is taken to reduce damage and costs in warehouse operations?

Decreasing the number of times a product is handled Signup and view all the answers

What is a drawback of using the Internet as a distribution channel?

Potential for online distribution piracy Signup and view all the answers

What is the main objective of having customers become familiar with Glades fragrance candles?

To ensure that brand recognition is achieved Signup and view all the answers

What role do wholesalers play in the distribution channel?

They make products available for retailers. Signup and view all the answers

Which of the following best describes the type of communication provided by channel members?

Two-way communication to inform and persuade consumers Signup and view all the answers

What decision is NOT associated with distribution intensity?

The selection of retail outlets for product display Signup and view all the answers

Why is selling Glades products in grocery stores considered tactically advantageous?

It leverages the existing customer knowledge of aerosol products. Signup and view all the answers

Which additional decisions are part of the distribution strategies?

Integrating sales channels and distribution intensity Signup and view all the answers

What is one key benefit of warehousing in the context of distribution?

Matching supply with demand effectively Signup and view all the answers

What type of system could channel members choose to ensure better management of distribution?

Highly integrated systems with fewer intermediaries Signup and view all the answers

What mechanism is primarily used to enforce cooperation between members in a contractual VMS?

Legal contracts Signup and view all the answers

What advantage does a wholesaler gain by purchasing coffee in large bulk bags?

Meeting demand for large quantities Signup and view all the answers

In a wholesaler-sponsored VMS, what is the main role of the wholesalers?

To lead retailers in cooperation Signup and view all the answers

What is a characteristic of sales offices in distribution?

They are owned by manufacturers and provide selling functions. Signup and view all the answers

What is a key characteristic of a contractual VMS?

Legally binding agreements Signup and view all the answers

Which of the following statements accurately describes the gray market?

It consists of sales that may be legal but are deemed inappropriate by manufacturers. Signup and view all the answers

Which factor is NOT a consideration when evaluating the dependability of a carrier?

Variety of packaging options Signup and view all the answers

What is a common benchmark for inventory turnover in high-volume/low-margin settings?

12 or more turns per year Signup and view all the answers

How does a contractual VMS benefit channel members as a group?

By enhancing their negotiating power Signup and view all the answers

What is an essential aspect of the cooperation between channel members in a VMS?

Clearly defined roles and responsibilities Signup and view all the answers

What is a potential benefit of locating sales offices closer to customers?

Improved customer service Signup and view all the answers

What key element contributes to the effectiveness of wholesalers in distributing coffee?

Efficiency in handling large quantities Signup and view all the answers

In which situation would a firm benefit from targeting increases in inventory turnover?

When aiming for higher profitability Signup and view all the answers

What is a potential disadvantage of distributing a product through too many channels?

Risk of inefficiency and duplication of efforts Signup and view all the answers

What advantage do merchant wholesalers have in the distribution process?

They are responsible for marketing strategies and pricing. Signup and view all the answers

What is a primary function of logistics in distribution?

To deliver what the customer wants at the right time Signup and view all the answers

What does taking title of products entail for merchant wholesalers?

They bear risks associated with unsold or damaged products. Signup and view all the answers

Why do manufacturers use channel intermediaries?

To reduce the number of transactions by creating assortments Signup and view all the answers

Which type of product is likely to require intensive distribution?

Convenience products Signup and view all the answers

What could be a consequence of having insufficient wholesalers or retailers for a product?

Failed maximization of product sales and profits Signup and view all the answers

Which of the following is NOT considered an activity involved in logistics?

Market research Signup and view all the answers

What factor influences the decision on how many intermediaries should carry a product?

The nature of the product and purchasing behavior Signup and view all the answers

What role do distribution strategies play in marketing?

They develop distribution objectives and choose strategies. Signup and view all the answers

What might be a consequence of choosing an inappropriate distribution channel?

Decreased product availability Signup and view all the answers

What happens if a product is made widely available in too many outlets?

It can lead to brand dilution. Signup and view all the answers

Why is it essential to choose the right distribution strategy for a product?

To avoid inefficiency and optimize sales. Signup and view all the answers

Which factor is essential when firms evaluate their distribution strategy?

External environmental influences Signup and view all the answers

What is the primary objective of distribution planning?

To achieve distribution objectives Signup and view all the answers

Which of the following best describes a major benefit of effective logistics?

Enhanced customer satisfaction Signup and view all the answers

What is the primary purpose of inventory control in marketing?

To ensure adequate quantities of goods to meet customer demands Signup and view all the answers

Which best describes commission merchants?

They sell goods for the highest price without taking title. Signup and view all the answers

What does inventory turnover measure?

The frequency at which inventory is sold during a defined time frame Signup and view all the answers

What role do merchandise brokers fulfill?

They facilitate transactions among buyers and sellers. Signup and view all the answers

What is a characteristic of exclusive distribution?

It restricts a product's availability to a single outlet in a region. Signup and view all the answers

What is one of the primary strategies used by marketers when selling specialty products?

Implementing exclusive distribution arrangements Signup and view all the answers

Which of these best describes the nature of inventory management during low-inventory situations?

It requires immediate replacement strategies. Signup and view all the answers

For what type of products are commission merchants generally employed?

Primarily agricultural products Signup and view all the answers

What is a primary consideration for a marketing manager when selecting a channel structure?

Creating a competitive advantage based on market size and needs Signup and view all the answers

In exclusive distribution, why might a professional sports team choose this method?

To support a high-cost operational model Signup and view all the answers

What technology allows firms to track products utilizing tiny chips with information?

Radio Frequency Identification (RFID) Signup and view all the answers

What is typically true about the distribution strategy of merchandise marts?

They include permanent showrooms for year-round visits. Signup and view all the answers

Which consumer purchase behavior can lead to exclusive distribution in sports events?

Strong emotional attachment to the team Signup and view all the answers

What is a potential drawback of gray markets for original manufacturers?

Loss of control over how their products are sold Signup and view all the answers

How does RFID technology improve inventory control for companies?

By ensuring products are available on the shelves when needed Signup and view all the answers

Why might a marketing manager avoid using intensive distribution in certain markets?

To maintain exclusivity and brand prestige Signup and view all the answers

Study Notes

Types of Distribution Channels and Wholesale Intermediaries

Distribution channels facilitate product movement from producer to customer, encompassing order processing, warehousing, transportation, and inventory control.
Direct channels involve producers selling directly to customers (e.g., through websites, catalogs).
Indirect channels use intermediaries (wholesalers, agents, brokers, retailers).
Intermediaries perform functions such as breaking bulk, creating assortments, transportation, storage, providing customer services, risk-taking, communication, and transaction functions.
Delivery of goods involves physical distribution (order processing, warehousing, materials handling, transportation, and inventory control). This is part of designing, managing, improving the movement of goods through supply chains.
Channels of distribution consist of producers and customers at minimum. They often include wholesalers and retailers. Direct channels are producer -> customer.
Firms can use multiple channels for distribution
The Internet is a distribution channel, but can also face problems like online distribution piracy.

Functions of Distribution Channels

Distribution channels provide time, place, and possession utility.
They increase efficiency by reducing transactions needed to connect manufacturers to consumers.
Breaking bulk: Dividing large quantities into smaller quantities.
Creating assortments: Offering a variety of products in one location.
Wholesalers buy in bulk from manufacturers, sell to retailers or other business customers in smaller quantities.
Retailers handle transactions with final consumers.
Retailers and channel members move goods from production to storage until consumers need them.
Intermediaries can provide customer services like credit.
Intermediaries take risks when buying products from manufacturers because there is a chance the goods won't sell. This is more pronounced in B2B markets.
Intermediaries act as a communicative link between manufacturers and consumers (feedback).

Wholesaling Intermediaries

Independent Wholesalers:
- Merchant wholesalers: Buy goods from manufacturers, take title, and sell to retailers or industrial buyers.
  - Full-service: Offer extensive services including delivery, credit, and marketing.
  - Limited-service: Provide fewer services (e.g., cash-and-carry, truck jobbers, drop shippers, mail-order wholesalers, rack jobbers).
- Agents and brokers: Provide services, but don't take title to goods.
  - Manufacturers' agents: Independent salespeople who carry non-competing product lines.
  - Selling agents: Represent a manufacturer's entire output.
  - Commission merchants: Handle goods on consignment.
  - Merchandise brokers: Facilitate transactions in markets with many small buyers and sellers (real estate, food, used equipment).
Manufacturer-owned Wholesalers:
- Sales branches: Own facilities that carry inventory and offer sales/service to customers in a specific geographic area.
- Sales offices: Do not carry inventory but provide selling functions in a specific geographic area.
- Manufacturers' showrooms: Display products permanently.
- Merchandise Marts: are locations that hold industry-wide trade shows, in which manufactures have permanent showrooms that retailers can visit.

Distribution Channel Strategy

Steps in distribution planning:
- Develop distribution objectives (supporting company marketing goals).
- Evaluate internal and external environmental influences (internal capabilities, available channel intermediaries, customer access).
- Choose a distribution strategy.
- Develop distribution tactics: channel members selection and channel management.
  - Select channel partners (consider competitors' choices and diverse leadership).
  - Manage the channel to maximize effectiveness and efficiency (manage conflict, cooperation).
Distribution Strategies:
- Conventional, vertical (administered, corporate, contractual), or horizontal marketing systems.
- Intensive, exclusive, or selective distribution.

Logistics and the Supply Chain

Logistics is designing, managing, and improving the movement of goods through the supply chain (from raw materials to finished products and customer).
Logistics includes: order processing, warehousing, materials handling, transportation, inventory control.
Focus on customer needs rather than just lowest cost. This involves finding the best tradeoff between cost and customer service.
Various transportation modes exist (rail, water, truck, air, pipeline, internet).
Logistics decisions consider factors such as dependability, cost, speed, accessibility, capability, and traceability.

Inventory Control

Maintaining the right inventory levels to meet demand.
Factors include inventory turnover (annual cost of sales / average inventory), inventory turns (unit quantities).
Technology improvements like RFID (radio frequency identification) can help track inventory.
JIT (just-in-time) inventory techniques can minimize costs and optimize deliveries.
Level loading is a manufacturing approach to balance inventory holding capabilities and production capacity for a product with a consistent production schedule.
Stock-outs can negatively affect customer satisfaction, potentially leading to a lost sale; therefore, inventory management is critical to preventing stock-outs and meeting customer demand.
Just-in-time inventory management techniques can minimize inventory costs.
Companies often use cross-docking: in which products move from suppliers' trucks to buyer's vehicles without any storage, for greater supply chain efficiency.
Supply Chain Management is coordinating channels for maximizing total profitability. This includes sharing information about goods, logistics, and marketing campaigns.

Distribution Channels & the Marketing Mix

Decisions regarding channel affect pricing, product positioning, brand image, and customer expectations.
Ethical issues arise in distribution when companies use slotting allowances or product diversion practices.
Direct selling channels may be used to maintain price consistency and control, but they may not be accessible to everyone.
Product diversion is unauthorized distribution of products through non-authorized channels.
Large retailers can have significant bargaining power, possibly leading to ethical dilemmas for manufacturers due to slotting allowances.

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Description

Explore the various types of distribution channels and the roles of wholesale intermediaries in moving products from producers to consumers. This quiz covers direct and indirect channels, as well as the essential functions performed by intermediaries, including breaking bulk and creating assortments. Test your understanding of these important marketing concepts.