101. In what ways does franchising benefit the franchisor?

101. In what ways does franchising benefit the franchisor? In what ways does it benefit the franchisee?

102. The trends in retailing include new retail forms and combinations. List the six other trends in retailing discussed in the chapter.

103. Retailers are facing increasing competition from other manufacturer-to-consumer distribution channels. A retailer must develop a product-differentiation strategy. The author suggests seven product-differentiation strategies. List and explain these seven.

104. Paco Underhill, managing director of the retail consultancy Envirosell Inc., offers several tips for fine-tuning retail space in order to keep shoppers spending. List three of them.

105. The growth of “house brands” has skyrocketed in recent years. Why do intermediaries bother to sponsor their own brands?
In the confrontation between manufacturers’ and private brands, retailers have many advantages and increasing market power. What are some of the other factors affecting or weakening the national brands?


106. In general, wholesalers are efficient in performing specific functions. List these nine functions.


107. Today, stronger demands for logistical support from large customers will increase suppliers’ costs. What are the demands that retailers are requiring of manufacturers?



Multiple Choice

108. Customers who like to be waited on prefer to shop in stores that offer ________.

a. limited service

b. self-service

c. full service

d. part-time service

e. events and experiences

109. You and your best friend are considering opening a retail store. You have identified your target market and location. Now you must decide on the format. You are pressing for a store that offers leftover goods, overruns, and irregular merchandise sold at less than full retail. This is a description of a(n) _________ retailer.

a. off-price

b. self-service

c. discount

d. limited-service

e. none of the above


110. You have ideas of owning a Subway after graduation. In owning a Subway location, you are entering a ________ agreement.

a. voluntary

b. self-service

c. franchise

d. merchandising

e. none of the above


111. In your restaurant you offer a wide variety of dishes and are open for breakfast, lunch, and dinner. In terms of product assortment, you can claim that your restaurant has a product assortment that has ________.

a. a narrow focus and narrow target market

b. appeal to all consumers

c. location and variety

d. variety and long hours

e. breadth and depth



112. Using direct product profitability analysis, many users are learning, to their surprise, that the gross margin on a product ________ the direct product profit.

a. is highly correlated with

b. is negligible compared to

c. often bears little relation to

d. is often significantly less than

e. is exactly the same as


113. Mass merchandisers and discount stores typically fall into the ________ group with respect to margins and volume.

a. mixed markup, high-volume

b. low-volume, mixed markup

c. low-volume, low-markup

d. high-volume, low-markup

e. high-markup, lower-volume


114. In your neighborhood there is a small men’s store that has a limited selection of clothing, but the selection that is carried is of very high quality and price. Services include free alterations and tailoring, personalized record keeping, and free dry cleaning. The inside of the store has deep leather chairs and couches and thick pile carpet. Upon entering the store, one feels “special and rich.” In terms of differentiation, what is this retailer trying to communicate by its decorations and service level?

a. Differentiation based upon services mix and atmosphere

b. Differentiation based upon prepurchase services

c. Differentiation based upon postpurchase services and atmosphere

d. Differentiation based upon ancillary services and atmosphere

e. None of the above


115. Natural advantages of brick-and-mortar over e-commerce retailers include ________.

a. products that shoppers can actually see

b. real-life customer service

c. no delivery lag time for small or medium-sized purchases

d. a shopping experience

e. all of the above



116. As a marketing intern, your job is to “hang out at the mall” and note the percentage of people who enter a particular store versus those who pass by it. This is an example of _________ for retailers.

a. measuring advertisement effectiveness

b. measuring foot traffic at the mall

c. measuring consumer shopping patterns

d. measuring retail sales effectiveness

e. measuring retail locations


117. Wal-Mart’s Ol’Roy dog food has surpassed Nestlé’s Purina brand as the top-selling dog chow. Ol’Roy is an example of a ________.

a. generic

b. national brand

c. franchise

d. copy-cat brand

e. private-label brand


118. As a sales representative for a major food manufacturer, your largest customer has asked you to provide him with a product that meets the following definition: It must not contain any brand name, be plainly packaged, use less expensive ingredients, use lower-quality raw products in its makeup, and not allocate any funds for advertising and promotion. What type of product is your buyer describing that he wants from you?

a. Reseller brand

b. Store brand

c. Private label

d. House brand

e. Generic


119. Agricultural assemblers, petroleum bulk plants and terminals, and auction companies are examples of ________.

a. full-service wholesalers

b. specialized wholesalers

c. limited-service wholesalers

d. merchant wholesalers

e. brokers


120. Which of the following is true of brokers?

a. Brokers represent buyers or sellers on a semipermanent basis.

b. Most brokers are small businesses with a few skilled salespeople.

c. Brokers bring buyers and sellers together and assist in negotiation .

d. Selling brokers have contractual authority to sell a manufacturer’s entire output.

e. Purchasing brokers make purchases for buyers and often receive, inspect, warehouse, and ship merchandise.


121. You are interviewing for a job after graduation with a wholesaler. In your preparation for the interview, you discover that the wholesaler carries over 10,000 stockkeeping units, maintains a sales force, makes store door deliveries, and provides management and research assistance to retailers. You are interviewing with a ________ wholesaler.

a. specialized

b. rack jobber

c. full-service

d. cash and carry

e. merchant


122. The company that you work for has outlined the following to its customers: Our on-time deliveries will be set at 95%; ordering and billing accuracy will be at a minimum of 98%; and we will establish four warehouses to serve the United States. These policies relate to ________.

a. customer responsiveness

b. targeted marketing

c. integrated logistics systems

d. market logistics

e. supply chain management


123. ________ encompass sales forecasting, production planning, and inbound materials transportation.

a. Market logistics

b. Containerization

c. Supply chain management

d. Nonstore retailing

e. Wholesaling



124. A stock reorder point of 10 means reordering the product ________.

a. every 10 days

b. when stock falls to 10 units

c. every 10 units

d. when stock falls to 9 units

e. none of the above


125. Companies are reducing inventory costs by treating inventory items differently. Critical items defined as high risk, high opportunity and commodities defined as low risk, high opportunity. Recently, your company has introduced a product that is considered by the distributor a “bottleneck” item. What is the risk/reward relationship for bottleneck items?

a. Low risk, mediocre opportunity

b. Low risk, high opportunity

c. Low risk, low opportunity

d. High risk, high opportunity

e. High risk, low opportunity


126. Optimal order quantities exist when the order-processing cost per unit and inventory-carrying cost per unit curves ________.

a. increase to 1

b. decrease to less than 1

c. intersect

d. equal each other

e. equal zero


127. The trucking firm hired by your transportation manager provides service between the Northeast and the Southeast on a regular schedule. Hiring this shipper is available to all at standard rates. Your transportation manager has hired a _____________.

a. common carrier

b. contract carrier

c. private carrier

d. piggybacked carrier

e. gypsy carrier



Short Answer

128. Direct marketing has its roots in direct-mail and catalog marketing. What other kinds of direct marketing exist?

129. Identify and describe three of the six major types of corporate retail organizations.

130. Identify the three characteristics that distinguish franchises from other forms of corporate retailing.


131. In the past, retailers secured customer loyalty by offering convenient locations, special or unique assortments of goods, greater or better services than competitors, and store credit cards. How has this changed?

132. How has the growth of giant retailers threatened traditional retailers?


133. Why must retailers begin by defining their target market before making any other marketing decisions?


134. Identify the seven steps involved in retail category management.


135. The real challenge of retail category management begins after defining the store’s product assortment, and that is to develop a product-differentiation strategy. Give three possible retailing product-differentiation strategies.



136. Retailers examining their product mix find that a third of their products are not profitable or do not make economic sense. Yet these products still take up retail shelf space. Why does this continue and what techniques are retailers using to “tighten” this process?


137. The services mix afforded to retailers is a key tool for differentiating one store from another. Briefly explain the three services mixes available to retailers.


138. Explain what is meant by the term “store atmosphere” and why it is important for retailers to have a distinctive atmosphere.

139. Retailers can place their stores in a variety of locations. Give three examples of shopping venues in which retailers can place their stores.

140. As part of your internship with a marketing research firm, you have been asked to evaluate the relationship between high traffic and high rents for a retailer client who is thinking about moving his location. What methods for evaluating this relationship are available to you?


141. How do generics differ from private-label brands?


Manufacturers typically do not sell directly to retailers or final consumers. They choose to use wholesalers because wholesalers are more efficient at certain functions. What functions are these?

142. Supply chain management is the broader concept of physical distribution. Explain the concept of “supply chain management.”


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143. Your division has a new general manager. As part of his stated tasks, he believes in “getting the right goods to the right places at the right time for the least cost.” As your company’s logistics manager, you know that this objective provides little practical guidance and could in fact be detrimental to the company objectives. How would you formulate a response to the new general manager to convince him to change his “position” regarding customer service?


144. Your company’s order-to-payment cycle is 50 days. The average for your industry is 45 days. Your boss has asked you to reduce this cycle to the industry’s average. To accomplish this goal, you begin to outline the “processes” in the order-to-payment cycle to find out where improvements can be made. List the processes that make up the order-to-payment cycle.

Suggested Answer: The order-to-payment cycle is the elapsed time between an order’s receipt, delivery, and its payment. This cycle involves many steps, including order transmission by the salesperson, order entry, and customer credit check, inventory and production scheduling, order and invoice shipment, and receipt of payment.



145. As a brand manager why should you be concerned with the transportation decisions regarding your product?



146. Explain why the market-logistics strategies must be derived from business strategies, rather than solely from cost considerations.

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