Chapter 12 Marketing Channels: Delivering Customer Value

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Principles of Marketing, 17e, Global Edition (Kotler/Armstrong)

Chapter 12 Marketing Channels: Delivering Customer Value
1) Producing a product or service and making it available to buyers requires building

relationships not only with customers but also with key suppliers and resellers in the company's
________.
A) upstream partnerships
B) marketing channels
C) inventory providers
D) supply chain
E) downstream partnerships
Answer: D
AACSB: Analytical thinking
Skill: Concept
Objective: LO 12.1: Explain why companies use marketing channels and discuss the functions
these channels perform.
Difficulty: Easy
2) The sets of firms that supply companies with the raw materials, components, parts,
information, finances, and expertise needed to create products or services are known as
________.
A) retailers
B) upstream partners
C) distributors
D) downstream partners
E) distribution channels
Answer: B
Skill: Concept
Difficulty: Easy
3) Which of the following terms refers to the wholesalers and retailers that form a vital link
between the firm and its customers?
A) factory-supply networks
B) downstream partners
C) resource banks
D) upstream partners
E) supply channels
Answer: B
Skill: Concept
Difficulty: Easy
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4) The term supply chain is considered limited because it ________.

A) ignores the make-and-sell aspect of the market
B) suggests that planning begins with raw materials and factory capacity
C) takes a step-by-step, linear view of purchase-production-consumption activities
D) takes a sense-and-respond view of the market
E) suggests that planning starts with identifying the needs of target customers
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
5) The term demand chain is considered limited because it ________.

A) advocates a make-and-sell view of the market that relies on a responsive supply network
B) suggests that planning starts with raw materials, productive inputs, and factory capacity
C) takes a step-by-step, linear view of purchase-production-consumption activities
D) ignores the evolution of the global marketplace
E) overlooks the needs of target customers
Answer: C
Skill: Concept
6) A view of the market that specifies that planning starts by identifying the needs of target
customers, to which the company responds by organizing a chain of resources and activities
with the goal of creating customer value is a(n) ________ view.
A) make-and-sell
B) identify-and-target
C) purchase-produce-and-consume
D) market-and-profit
E) sense-and-respond
Answer: E
Skill: Concept
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7) A ________ is made up of the company, suppliers, distributors, and customers who partner
to improve the performance of the entire system.
A) value delivery network
B) horizontal channel
C) consumer base
D) product delivery network
E) product line
Answer: A
Skill: Concept
Difficulty: Easy
8) ________ play an important role in matching supply and demand by providing consumers
with a broad assortment of products in small quantities.
A) Virtual banks
B) Intermediaries
C) Price consultants
D) Uniform-delivery networks
E) Upstream partners
Answer: B
Skill: Concept
Difficulty: Challenging
9) Which of the following questions is NOT of major concern regarding marketing channels?
A) What role do physical distribution and supply chain management plan in attracting and
satisfying customers?
B) What impact do marketing channels have on the profitability of the firm and its partners?
C) How do channel firms interact and organize to do the work of the channel?
D) What problems do companies face in designing and managing their channels?
E) What is the nature of marketing channels, and why are they important?
Answer: B
Skill: Concept
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10) A ________ is a set of interdependent organizations that help make a product or service
available for use or consumption by the consumer or business user.
A) product line
B) product delivery network
C) marketing channel
D) consumer base
E) resource bank
Answer: C
Skill: Concept
Difficulty: Easy
11) Which of the following is most likely true of marketing channel decisions?
A) They often involve long-term commitments to other firms.
B) They have minimal influence on the prices of products offered to customers.
C) They increase the amount of time a company spends connecting with customers.
D) They increase the amount of effort a company puts in to distribute goods.
E) They are easily altered, replaced, or discarded.
Answer: A
Skill: Concept
Difficulty: Easy
12) Distribution channel decisions frequently require long-term commitments between firms. A
primary reason is that ________.
A) advertising is not easy to change
B) old products are difficult to discard and new products are difficult to introduce
C) when they set up distribution through franchisees, independent dealers, or large retailers,
they cannot readily replace these channels with company-owned stores or Internet sites if
conditions change
D) changing the manufacturing requirements is expensive and takes significant time
E) management does not want to be constantly changing the method of selling and distributing
its products
Answer: C
Skill: Concept
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13) ________ play an important role in efficiently making products available to target markets
in the needed varieties and quantities.
A) Virtual banks
B) Intermediaries
C) Price consultants
D) Uniform-delivery networks
E) Upstream partners
Answer: B
Skill: Concept
14) From the economic system's point of view, the role of ________ is to transform the
assortments of products made by producers into the assortments wanted by consumers.
A) upstream partners
B) marketing intermediaries
C) third-party logistics
D) price consultants
E) factory supervisors
Answer: B
Skill: Concept
Difficulty: Easy
15) A ________ is a layer of intermediaries that performs some work in bringing the product
and its ownership closer to the final buyer.
A) product platform
B) channel level
C) resource bank
D) contact center
E) customer franchise
Answer: B
Skill: Concept
Difficulty: Easy
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16) In a(n) ________ channel, the same member both produces and distributes a product or
service to consumers.
A) tiered
B) direct
C) platform
D) vertical
E) exclusive
Answer: B
Skill: Concept
Difficulty: Easy
17) Which of the following companies uses a direct marketing channel?

A) Fishhooks, a factory that manufactures fishing equipment that it ships to hobby stores
worldwide
B) Germfight, a factory that manufactures dental products that it distributes only to select
department stores
C) Apple Blossoms, a company that sells its cosmetics exclusively through Ray's Retail Store
D) Holly Wreaths, a store that sells Christmas ornaments to customers via its online click-to-
order catalogs
E) Showdown, a clothing store that stocks merchandise from different international brands
Answer: D
Skill: Application
18) At its most basic form, a marketing channel consists of the producer and the ________.
A) retailer
B) sales agent
C) competitor
D) processor
E) consumer
Answer: E
AACSB: Reflective thinking
Skill: Concept
Difficulty: Easy
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19) A marketing channel that consists of one or more intermediaries is known as a(n) ________
marketing channel.
A) cyclic
B) upstream
C) looped
D) direct
E) indirect
Answer: E
Skill: Concept
Difficulty: Easy
20) Plasticine Palace supplies its products exclusively to Arts & Crafts, a chain of stationery
stores across the country. The chain then makes the plasticine available to end consumers. This
is an example of ________.
A) a direct marketing channel
B) intensive distribution
C) an indirect marketing channel
D) disintermediation
E) extensive distribution
Answer: C
Skill: Application
21) Which of the following is an example of an indirect marketing channel?

A) June Bride, which sells bridal gowns via its click-to-order online catalogs
B) Farmer Brown, who delivers fresh milk from his dairy to customers every morning
C) Wine & Dine, which sells its picnic baskets to select novelty stores across the country
D) Lifebelt Insurance, which sells life insurance through its door-to-door salespeople
E) Rhonda's Rental, which rents cars to people for the day
Answer: C
Skill: Application
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22) Which of the following is a type of flow that connects all institutions in a marketing channel?
A) payment flow
B) ownership flow
C) physical flow
D) promotion flow
E) information flow
Answer: A
Skill: Concept
Difficulty: Easy
23) The greater the number of channel levels in a marketing channel, the ________.
A) less distance between producer and end-consumer
B) greater the channel complexity
C) less time it takes for products to reach end-consumers
D) greater the control producers have over the distribution of their products
E) greater the control producers have over the demand of their products
Answer: B
Skill: Concept
Difficulty: Easy
24) Which of the following is a conventional consumer marketing channel?

A) producer to business distributor to end consumer
B) producer to wholesaler to retailer to end consumer
C) producer to end consumer to business customer
D) producer to retailer
E) producer to business distributor to business customer
Answer: B
Skill: Concept
Difficulty: Easy
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25) Which of the following is an indirect business marketing channel?

A) producer to retailer to business distributor
B) producer to wholesaler to retailer to end consumer
C) producer to end-consumer to business distributor
D) producer to retailer
E) producer to business distributor to business customer
Answer: E
Skill: Concept
Refer to the scenario below to answer the following question(s).
Giant Beanstalks is a company based in Maryland that processes and cans vegetables. It has
contracts with several large farms in Riverdale, 80 miles away from the factory, that agree to
sell their produce to Giant Beanstalks. The company's products are available to the public only
through Greenleaf, a grocery chain with 38 stores in the country.
26) Which of the following is Giant Beanstalks' upstream partner?

A) the management of Greenleaf
B) the farmers of Riverdale
C) the trucks that carry Giant Beanstalks' products to Greenleaf
D) the end-consumers who buy the canned vegetables from Greenleaf
E) the logistics division of Giant Beanstalk
Answer: B
Skill: Application
27) Downstream marketing channel partners, such as wholesalers and retailers, form a vital link
between the firm and its customers.
Answer: TRUE
Skill: Concept
Difficulty: Easy
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28) A company's channel decisions directly affect the prices of its products.
Answer: TRUE
Skill: Concept
Difficulty: Easy
29) Producers use intermediaries because they create greater efficiency in making goods
available to target markets.
Answer: TRUE
Skill: Concept
Difficulty: Easy
30) The role of marketing intermediaries is to transform the assortments of products made by
retailers into the assortments wanted by producers.
Answer: FALSE
Skill: Concept
Difficulty: Easy
31) Each layer of marketing intermediaries that performs some work in bringing the product
and its ownership closer to the final buyer is a channel level.
Answer: TRUE
Skill: Concept
Difficulty: Easy
32) It is more efficient for a company to keep the marketing channel functions—such as
information gathering, promotion, contacting customers and matching their needs, negotiation,
and physical distribution—in-house as they are most skilled at those functions.
Answer: FALSE
Skill: Concept
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33) The number of products supplied indicates the length of a channel.

Answer: FALSE
Skill: Concept
Difficulty: Easy
34) In a direct marketing channel, the producer sells directly to the intermediaries, who in turn
sell directly to the customers.
Answer: FALSE
Skill: Concept
Difficulty: Easy
35) Provide an example of a company that has used an imaginative distribution system to gain a
competitive advantage.
Answer: Enterprise Rent-A-Car revolutionized the car-rental business by setting up off-airport
rental offices. Apple turned the retail music business on its head by selling music for the iPod
via the Internet on iTunes. And Amazon.com forever changed the face of retailing and became
the Walmart of the Internet by selling anything and everything without using physical stores.
Student answers will vary.
Skill: Application
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36) Why is the term value delivery network a more relevant expression to use than the terms
supply chain or demand chain?
Answer: The term supply chain may be too limited, because it takes a make-and-sell view of
the business. It suggests that raw materials, productive inputs, and factory capacity should serve
as the starting point for market planning. The term demand chain is better because it suggests a
sense-and-respond view of the market. Under this view, planning starts by identifying the needs
of target customers, to which the company responds by organizing a chain of resources and
activities with the goal of creating customer value. However, even a demand chain view of a
business may be too limited because it takes a step-by-step, linear view of purchase-production-
consumption activities. Most large companies today are engaged in building and managing a
complex, continuously evolving value delivery network. A value delivery network is made up
of the company, suppliers, distributors, and, ultimately, customers who partner with each other
to improve the performance of the entire system.
AACSB: Application of knowledge; Written and oral communication
Skill: Concept
37) How do intermediaries add value to a marketing system?

Answer: Intermediaries reduce the amount of work that must be done by both producers and
consumers. They transform the assortment of products made by producers into the assortment
wanted by consumers. They buy large quantities from many producers and break them down
into the smaller quantities and broader assortments wanted by consumers. Intermediaries help
to match supply and demand. Intermediaries add value by bridging the major time, place, and
possession gaps that separate goods and services from those who would use them.
Skill: Concept
38) What are the key functions that members of the marketing channel perform?
Answer: Members of the marketing channel help to complete transactions by gathering and
distributing information, developing and spreading promotions, contacting prospective buyers,
matching and shaping the offer to the buyer's needs, and negotiating price and other terms.
Others help to fulfill the completed transactions through physical distribution, financing, and
risk taking.
Skill: Concept
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39) ________ are complex behavioral systems in which people and companies interact to
accomplish individual, company, and channel goals.
A) Customer relationship management systems
B) Distribution channels
C) Partner relationship systems
D) Consumer bases
E) Buying centers
Answer: B
Skill: Concept
Objective: LO 12.2: Discuss how channel members interact and how they organize to perform
the work of the channel.
Difficulty: Easy
40) Which of the following does NOT apply to channel systems?

A) Some channel systems consist of only informal interactions among loosely organized firms.
B) Channel systems do not stand still; they evolve.
C) Some channel systems are formal interactions guided by strong organizational structures.
D) Intermediaries play interchangeable roles in the system.
E) Different types of intermediaries develop and emerge.
Answer: D
Skill: Concept
41) Which of the following is true of channel members?

A) They act independent of each other.
B) They play specialized roles in the channel.
C) They are not accountable to other channel members.
D) They play generalized and interchangeable roles in the distribution process.
E) Their competence and cooperation don't affect the company's image or profits.
Answer: B
Skill: Concept
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42) Conflict that occurs among firms at the same level of the marketing channel is known as
________ conflict.
A) multitiered
B) horizontal
C) vertical
D) prolonged
E) financial
Answer: B
Skill: Concept
Difficulty: Easy
43) Conflict that occurs between different levels of the same marketing channel is known as
________ conflict.
A) horizontal
B) vertical
C) multitiered
D) equilateral
E) communal
Answer: B
Skill: Concept
Difficulty: Easy
44) Managers at the Imperial Hotel-Chicago complained that the chain's overall image was hurt
because Imperial Hotel-Dallas was overcharging guests and providing poor service. The
Imperial Hotel was experiencing ________ conflict.
A) equilateral
B) vertical
C) multitiered
D) communal
E) horizontal
Answer: E
Skill: Application
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45) The management of two Panizza restaurants has an ongoing disagreement over the discount
rate given to students from the local high school. This is an example of ________ conflict.
A) intensive
B) selective
C) exclusive
D) horizontal
E) vertical
Answer: D
Skill: Application
46) When KFC came into conflict with its franchisees over the brand's Unthink KFC
repositioning, which emphasized grilled chicken over its traditional Kentucky fried chicken,
KFC experienced ________ conflict.
A) equilateral
B) horizontal
C) multitiered
D) communal
E) vertical
Answer: E
Skill: Application
47) Conflict in the channel can be healthy because ________.

A) it can disrupt channel effectiveness
B) normal give-and-take simply is normal
C) the channel could become passive and non-innovative
D) it can cause harm to channel relationships
E) the respective rights of the channel partners take priority
Answer: C
Skill: Application
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48) A(n) ________ consists of one or more independent producers, wholesalers, and retailers,
each seeking to maximize its own profits, sometimes even at the expense of the system as a
whole.
A) multitiered supply chain
B) conventional distribution channel
C) intrinsic market matrix
D) resource bank
E) product platform
Answer: B
Skill: Concept
49) Which of the following is true of conventional distribution channels?

A) Channel members have complete control over each other.
B) Channel members seek to maximize their own profits.
C) Channel conflict is governed by formal mechanisms.
D) Channel members are assigned roles according to a clearly defined framework.
E) Channel members work exclusively for the good of the organization.
Answer: B
Skill: Concept
50) A(n) ________ marketing system consists of producers, wholesalers, and retailers acting as
a unified system.
A) horizontal
B) communal
C) multitiered
D) vertical
E) equilateral
Answer: D
Skill: Concept
Difficulty: Easy
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51) Which of the following is true of vertical marketing systems?

A) Producers, wholesalers, and retailers act as a unified system.
B) Channel members have no control over each other.
C) Channel conflict is governed by informal mechanisms.
D) The system is dominated by the consumer.
E) Channel members work independently with no cooperation from other members.
Answer: A
Skill: Concept
52) Which of the following is a major type of vertical marketing system?

A) corporate
B) conventional
C) multilevel
D) intrinsic
E) extrinsic
Answer: A
Skill: Concept
Difficulty: Easy
53) A ________ VMS integrates successive stages of production and distribution under single
ownership.
A) contractual
B) contingency
C) corporate
D) conventional
E) communal
Answer: C
Skill: Concept
Difficulty: Easy
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54) A ________ VMS consists of independent firms at different levels of production and
distribution who join together through formal agreements to obtain more economies or sales
impact than each could achieve alone.
A) corporate
B) contingency
C) contractual
D) communal
E) conventional
Answer: C
Skill: Concept
Difficulty: Easy
55) The ________ organization is the most common type of contractual relationship.
A) franchise
B) horizontal
C) conventional
D) multi-national
E) entrepreneurial
Answer: A
Skill: Concept
Difficulty: Easy
56) Ford and its network of independent franchised dealers is an example of a ________.
A) manufacturer-sponsored retailer franchise system
B) manufacturer-sponsored wholesaler franchise system
C) service-firm-sponsored retailer franchise system
D) service-firm-sponsored equity strategic alliance
E) manufacturer-and-service-sponsored joint venture
Answer: A
Skill: Application
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57) Fire Up makes fireproof clothing material and it licenses select stores around the world to
use its material to make finished products with the Fire Up logo. Which of the following types
of franchising is evident here?
A) manufacturer-sponsored retailer franchise system
B) manufacturer-sponsored wholesaler franchise system
C) service-firm-sponsored retailer franchise system
D) service-firm-sponsored equity strategic alliance
E) manufacturer-and-service-sponsored joint venture
Answer: B
Skill: Application
58) In a(n) ________, leadership is assumed not through common ownership or contractual ties
but through the size and power of one or a few dominant channel members.
A) horizontal marketing system
B) administered VMS
C) corporate VMS
D) contractual VMS
E) conventional VMS
Answer: B
Skill: Concept
Difficulty: Easy
59) ________ VMS is a vertical marketing system that coordinates successive stages of
production and distribution through the size and power of one of the parties.
A) Contingent
B) Aligned
C) Corporate
D) Contractual
E) Administered
Answer: E
Skill: Concept
Difficulty: Easy
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60) In a(n) ________, two or more companies at one level join together to follow a new
marketing opportunity.
A) administered vertical marketing system
B) horizontal marketing system
C) corporate vertical marketing system
D) hybrid distribution system
E) conventional marketing system
Answer: B
Skill: Concept
Difficulty: Easy
61) Which of the following is most likely a manufacturer-sponsored retailer franchise system?
A) international fast food chains like McDonald's and Pizza Hut
B) Starbucks outlets operating within Target stores
C) Toyota and its network of independent franchised dealers
D) licensed bottlers that bottle and sell soft drinks to retailers
E) hotel chains like the Ritz Carlton and Shangri-La
Answer: C
Skill: Application
62) When McDonald's offers its products inside of a Walmart store, it is using a(n) ________.
A) conventional marketing system
B) corporate VMS
C) contractual VMS
D) administered VMS
E) horizontal marketing system
Answer: E
Skill: Concept
Difficulty: Easy
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63) A(n) ________ system involves a single firm setting up two or more marketing channels to
reach one or more customer segments.
A) conventional distribution
B) corporate vertical marketing
C) horizontal marketing
D) administered vertical marketing
E) multichannel distribution
Answer: E
Skill: Concept
Difficulty: Easy
64) Atlas Imports and Exports sells products directly to consumers via the Atlas Web site, and
through local retailers as well. Which of the following is evident here?
A) corporate vertical marketing system
B) horizontal marketing system
C) multichannel distribution system
D) administered vertical marketing system
E) conventional distribution channel
Answer: C
Skill: Application
65) Movie Giants offers DVD rentals through its Web site. It also offers DVD rentals via Star
City stores. This is an example of a(n)________ distribution system.
A) conventional
B) inclusive
C) intensive
D) extensive
E) multichannel
Answer: E
Skill: Application
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66) Which of the following is an advantage of adding new channels in a multichannel

distribution system?
A) limiting market complexity
B) reducing control over the system
C) expanding sales and market coverage
D) decreasing marketing needs and costs
E) minimizing mass customization of products
Answer: C
Skill: Concept
67) Which of the following is a disadvantage of adding new channels in a multichannel

distribution system?
A) decreasing complexity of markets
B) decreasing control over the system
C) reducing opportunities for franchising
D) lowering sales and market coverage
E) minimizing publicity needs
Answer: B
Skill: Concept
Difficulty: Easy
68) ________ 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.
A) Extensive distribution
B) Multichannelization
C) Disintermediation
D) Inclusive distribution
E) Cross merchandising
Answer: C
Skill: Concept
Difficulty: Easy
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69) The Bookworm began delivering books directly to customers through mail instead of
selling through brick-and-mortar companies. This is an example of ________.
A) indirect marketing
B) disintermediation
C) franchising
D) exclusive distribution
E) intensive distribution
Answer: B
Skill: Application
70) Which of the following is true of changes in the organization of distribution channels?
A) Developing new channels seldom causes conflict with a company's established channels.
B) To remain competitive, product and service producers must use fewer marketing channels.
C) The growth of the Internet threatens many brick-and-mortar companies with
disintermediation.
D) Companies have fewer channel options today than they did in the past due to economic
problems.
E) Advances in technology have decreased the number of channels available to entrepreneurial
firms.
Answer: C
AACSB: Information technology
Skill: Concept
71) A marketing channel works most effectively when each channel member performs the tasks
it does best.
Answer: TRUE
Skill: Concept
Difficulty: Easy
72) Horizontal conflicts are conflicts between different levels of the same channel.
Answer: FALSE
Skill: Concept
Difficulty: Easy
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73) Vertical conflict occurs among firms at the same level of the channel.
Answer: FALSE
Skill: Concept
Difficulty: Easy
74) A conventional distribution channel consists of one or more independent producers,

wholesalers, and retailers; each seeking to maximize its own profits, perhaps even at the
expense of the system as a whole.
Answer: TRUE
Skill: Concept
Difficulty: Easy
75) A non-corporate VMS integrates successive stages of production and distribution under
single ownership.
Answer: FALSE
Skill: Concept
Difficulty: Easy
76) In a vertical marketing system, two or more companies at one level join together to take
advantage of a new marketing opportunity.
Answer: FALSE
Skill: Concept
Difficulty: Easy
77) Disintermediation occurs when radically new types of channel intermediaries displace
traditional ones.
Answer: TRUE
Skill: Concept
Difficulty: Easy
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78) What is horizontal conflict? Illustrate your answer with an example.

Answer: Horizontal conflict is conflict that occurs among firms at the same level of the
channel. For example, Chevrolet would experience horizontal conflict if two of its dealers in
the same area complain that each is being undercut by the other. Student answers will vary.
Skill: Application
79) What is vertical conflict? Illustrate your answer with an example.

Answer: Vertical conflict occurs between different levels of the same channel; an example
would be conflict created between a manufacturer and its dealers when it decides to open an
online e-commerce Web site for the same product. Student answers will vary.
Skill: Application
80) What is a conventional distribution channel?

Answer: A conventional distribution channel consists of one or more independent producers,
wholesalers, and retailers. Each is a separate business seeking to maximize its own profits,
perhaps even at the expense of the system as a whole.
Skill: Concept
Difficulty: Easy
81) Explain power in a vertical marketing system.

Answer: A vertical marketing system (VMS) consists of producers, wholesalers, and retailers
acting as a unified system. One channel member owns the others, has contracts with them, or
wields so much power that they must all cooperate.
Skill: Concept
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82) How can a firm benefit from involvement in a contractual VMS?

Answer: A contractual VMS consists of independent firms at different levels of production and
distribution that join together through contracts to obtain more economies or sales impact than
each could achieve alone.
Skill: Concept
Difficulty: Easy
83) How can a firm benefit from participating in a horizontal marketing system?
Answer: Two or more companies at one level join together to follow a new marketing
opportunity; by working together, companies can combine their financial, production, or
marketing resources to accomplish more than any one company could alone.
Skill: Concept
Difficulty: Easy
84) Give an example of a multichannel distribution system.

Answer: John Deere sells its familiar green and yellow lawn and garden tractors, mowers, and
outdoor power products to consumers and commercial users through several channels,
including John Deere retailers, Lowe's home improvement stores, and online. Student answers
will vary.
Skill: Application
85) Compare a conventional distribution channel with a vertical marketing system (VMS).
Answer: A conventional distribution channel consists of one or more independent producers,
wholesalers, and retailers. Each is a separate business seeking to maximize its own profits, even
at the expense of the system as a whole. No channel member has much control over the other
members, and no formal means exists for assigning roles and resolving channel conflict. On the
other hand, a vertical marketing system is a unified system made up of producers, wholesalers,
and retailers. While members of a conventional distribution channel seek to maximize their
own profits, members of a vertical marketing system all cooperate because either one member
owns the others, one has contracts with the others, or one wields more power than the others.
Skill: Concept
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86) What are the advantages of multichannel distribution systems?

Answer: Multichannel distribution systems exist when a single firm sets up two or more
marketing channels to reach one or more customer segments. Such a system offers advantages
to firms facing large and complex markets. It allows the firms to expand sales and market
coverage. It allows firms to tailor their products and services to the specific needs of diverse
customer segments. Larger bottom-line profits may result.
Skill: Concept
87) How have changes in technology and the growth of online marketing affected the design of
marketing channels?
Answer: Changes in technology and the growth of online marketing have increased
disintermediation, which is the cutting out of marketing channel intermediaries by product or
service producers, or the displacement of traditional intermediaries with radically new types. In
many industries, traditional intermediaries are dropping by the wayside. For example, many
airlines now sell directly to final buyers, cutting retailers and sales agents from their marketing
channels. Online marketers take business from traditional brick-and-mortar retailers.
Skill: Concept
88) Which of the following should be a manufacturer's first step when designing an effective
marketing channel?
A) set channel objectives
B) analyze consumer needs
C) identify channel alternatives
D) evaluate channel alternatives
E) establish strategic alliances
Answer: B
Skill: Concept
Objective: LO 12.3: Identify the major channel alternatives open to a company.
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89) Which of the following is NOT a step in designing an effective marketing channel?
A) evaluating the channel alternatives
B) identifying major channel alternatives
C) analyzing consumer needs
D) determining pricing policy for channel members
E) setting channel objectives
Answer: D
Skill: Concept
90) In designing the marketing channel, a company must balance customer needs and wants
with ________.
A) the need to make a profit
B) the requirement to find channel members to fill all the steps
C) the firm's position in the customers' minds
D) the desire to be "the best" in all service areas
E) the firm's resources and skills to provide all the desired services
Answer: E
Skill: Concept
91) The company's channel objectives are influenced by all of the following EXCEPT
________.
A) the company's marketing intermediaries
B) the company's competitors
C) the age of the company
D) the nature of the company
E) the company's products
Answer: C
Skill: Concept
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92) Which of the following is an environmental factor that affects channel objectives and
design?
A) economic conditions
B) factory staffing
C) organizational objectives
D) interpersonal influences
E) individual motives
Answer: A
Skill: Concept
93) ________ distribution is a strategy in which producers of convenience products and

common raw materials stock their products in as many outlets as possible.
A) Direct
B) Intensive
C) Inclusive
D) Exclusive
E) Selective
Answer: B
Skill: Concept
Difficulty: Easy
94) For which of the following products would the intensive distribution strategy most likely be
used?
A) high-end cameras
B) luxury cars
C) lawn mowers
D) soft drinks
E) furniture
Answer: D
Skill: Application
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95) Whitelight sells its toothpastes in many convenience stores across the country. This is an
example of ________ distribution.
A) exclusive
B) selective
C) hybrid
D) intensive
E) normal
Answer: D
Skill: Application
96) With which of the following strategies would a company give only a limited number of
dealers the right to distribute its products in their territories?
A) exclusive distribution
B) extensive distribution
C) moderate distribution
D) primary distribution
E) intensive distribution
Answer: A
Skill: Concept
Difficulty: Easy
97) For which product would a company use an exclusive distribution strategy?
A) luxury cars
B) newspapers
C) chewing gum
D) dairy products
E) soft drinks
Answer: A
Skill: Application
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98) Ocean Spray sells its air fresheners only through Ray's Drugs. This is an example of
________ distribution.
A) exclusive
B) selective
C) intensive
D) indirect
E) corporate
Answer: A
Skill: Application
Difficulty: Easy
99) ________ distribution involves the use of more than one but fewer than all of the
intermediaries who are willing to carry a company's products.
A) Exclusive
B) Selective
C) Intensive
D) Indirect
E) Corporate
Answer: B
Skill: Concept
Difficulty: Easy
100) Craftsman Furniture Company offers its bedroom and living room furniture through
independent and smaller chain furniture stores, not through every store that sells furniture. It
uses ________ distribution.
A) intensive
B) direct
C) corporate
D) selective
E) exclusive
Answer: D
Skill: Concept
Difficulty: Easy
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101) Which of the following is true of the exclusive distribution strategy?

A) It makes products available to everybody, everywhere.
B) It is used primarily for convenience items.
C) It helps promote a brand's luxury image.
D) It gives producers no control over their products.
E) It enlists all of the intermediaries willing to carry a company's products.
Answer: C
Skill: Concept
102) When the seller allows only certain outlets to carry its products, this strategy is called
________.
A) exclusive distribution
B) subjective dealing
C) selective distribution
D) exclusive pricing
E) disintermediation
Answer: A
Skill: Concept
Difficulty: Easy
103) What distribution strategy does Giant Beanstalks use?

A) inclusive distribution
B) exclusive distribution
D) intensive distribution
E) extensive distribution
Answer: B
Skill: Application
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104) Which of the following is NOT a criterion a company will use to evaluate the major
channel alternatives?
A) adaptability
B) control
C) commitment
D) sales and costs
E) likability
Answer: E
Skill: Application
105) Why do firms have difficulty accessing potential market areas in developing countries,
such as China and India?
A) inadequate distribution systems
B) anti-globalization efforts
C) highly centralized rural markets
D) limited manpower
E) high operating costs
Answer: A
Skill: Concept
Difficulty: Easy
106) Multichannel marketing occurs when a single firm sets up two or more marketing
channels to reach one or more customer segments.
Answer: TRUE
Skill: Concept
Difficulty: Easy
107) Marketing channel design calls for analyzing consumer needs, setting channel objectives,
identifying major channel alternatives, and evaluating those alternatives.
Answer: TRUE
Skill: Concept
Difficulty: Easy
108) Producers of convenience products and common raw materials typically seek exclusive
distribution, a strategy in which they stock their products in as many outlets as possible.
Answer: FALSE
Skill: Concept
Difficulty: Easy
33

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109) Under the strategy of intensive distribution, the producer gives only a limited number of
dealers the exclusive right to distribute its products in their territories.
Answer: FALSE
Skill: Concept
Difficulty: Easy
110) The producer informs each channel member what its responsibilities are, and what the
terms of business are.
Answer: FALSE
Skill: Concept
Difficulty: Easy
111) Describe the types of products that are intensively distributed and provide examples.
Answer: Convenience products and common raw materials must be available where and when
consumers want them; examples include chewing gum, soft drinks, and toothpaste. Student
examples will vary.
Skill: Concept
Difficulty: Easy
112) Describe the types of products that are exclusively distributed and provide examples.
Answer: Exclusive distribution is often used for luxury brands, such as expensive automobiles
and prestige clothing. Student answers will vary.
Skill: Concept
Difficulty: Easy
113) Describe the types of products that are selectively distributed and provide examples.
Answer: In selective distribution, more than one, but fewer than all, of the intermediaries who
are willing to carry a company's products are used. Products include appliances and some
branded clothing. Student answers will vary.
Skill: Concept
Difficulty: Easy
34

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114) Compare the three distribution strategies that producers use, providing examples of
products for each type of distribution.
Answer: Student answers will vary. Producers of convenience products and common raw
materials typically seek intensive distribution as a strategy to stock their products in as many
outlets as possible. The goods are available where and when consumers want them. Toothpaste,
detergents, and soft drinks are examples of this kind of distribution.
Selective distribution is used when selling to more than one but fewer than all of the
intermediaries who are willing to carry a company's products in a given market. Examples are
name-brand blue jeans and computers.
Exclusive distribution is used when the producer wants to stock its products with only one or a
few dealers in an area. Examples are expensive cars.
Skill: Concept
115) ________ management calls for selecting, managing, and motivating individual channel
members and evaluating their performance over time.
A) Inventory
B) Marketing channel
C) Brand image
D) Customer experience
E) Brand content
Answer: B
Skill: Concept
Objective: LO 12.4: Explain how companies select, motivate, and evaluate channel members.
Difficulty: Easy
116) To help recruit, train, organize, manage, motivate, and evaluate relationships with channel
partners, companies are now installing integrated high-tech ________ systems.
A) advertiser funded programming
B) customer segmentation network
C) brand content management
D) partnership relationship management
E) closed loop marketing
Answer: D
Skill: Concept
Difficulty: Easy
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117) Producers motivate channel members using all of the following EXCEPT ________.
A) using strict rules to force compliance with contract terms
B) partner relationship management
C) working to sell through the intermediaries
D) persuading the intermediaries that they are first-line customers
E) convincing channel members that each will enjoy greater success working together with a
common goal
Answer: A
Skill: Concept
118) When a seller requires its dealers to abstain from handling competitors' products, it is
called ________.
A) subjective distribution
B) exclusive dealing
D) exclusive pricing
Answer: B
Skill: Concept
Difficulty: Easy
119) A strategy of exclusive dealing is most likely considered legal if ________.

A) the industry is newly developed
B) both parties have large territories
C) competition is not substantially lessened
D) the dealer agrees to promote the competitor's products
E) the dealer receives a steady source of supply and support
Answer: C
AACSB: Ethical understanding and reasoning
Skill: Concept
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120) Which of the following involves the producer agreeing not to sell to other dealers in a
given area, or the buyer agreeing to sell only in its own region?
A) closed loop marketing
B) uniform-delivery pricing
C) exclusive territorial agreement
D) cross merchandising
E) nationalized marketing
Answer: C
Skill: Concept
Difficulty: Easy
121) Producers of strong brands sometimes sell to dealers only on the condition that dealers
take some or all of the rest of a product line. This practice is known as ________.
A) product line franchising
B) selective dealing
C) cross merchandising
D) full-line forcing
Answer: D
Skill: Concept
Difficulty: Easy
122) Marketing channel management calls for selecting, managing, and motivating individual
channel members and evaluating their performance over time.
Answer: TRUE
Skill: Concept
Difficulty: Easy
123) As a part of intensive distribution, dealers are expected to refrain from selling the products
of the producers' competitors.
Answer: FALSE
Skill: Concept
Difficulty: Easy
124) When a producer uses exclusive dealing and the use of exclusive territorial agreements to
keep a dealer from selling outside its territory, it is completely legal.
Answer: FALSE
Skill: Concept
Difficulty: Easy
37

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125) What factors should a firm consider when selecting intermediaries?

Answer: A company may want to evaluate each intermediary's years in business, other lines
carried, growth and profit records, cooperativeness, and reputation.
Skill: Concept
Difficulty: Easy
126) When would an exclusive dealing contract be legally problematic?

Answer: An exclusive dealing contract may become a legal issue if one party has not
voluntarily agreed to the contract or if the arrangement substantially lessens competition or
tends to create a monopoly.
Skill: Concept
Difficulty: Easy
127) Explain how companies select, motivate, and evaluate intermediaries or channel members.
Answer: When selecting intermediaries, the company should evaluate each channel member's
qualifications and select those who best fit its channel objectives. The company should use
economic criteria, control issues, and adaptive criteria to analyze each possible channel
member. Once selected, channel members must be continuously motivated to do their best. The
company must sell not only through the intermediaries but also to and with them. It should
work to forge long-term partnerships with channel partners to create a marketing system that
meets the needs of both the manufacturer and the partners. The company must also regularly
check channel member performance against established performance standards, rewarding
intermediaries who are performing well and assisting or replacing weaker ones.
Skill: Concept
128) Evaluate how public policy affects distribution decisions.

Answer: For the most part, companies are legally free to develop whatever channel
arrangement suits them, as long as they do not substantially lessen competition or tend to create
a monopoly, and as long as both parties enter into the agreement voluntarily. Exclusive
territorial agreements in which a producer attempts to keep a dealer from selling outside of a
designated territory have become a major legal issue. Producers are free to select their dealers,
but they must have legitimate cause to terminate a relationship with a dealer.
Skill: Concept
38

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129) Smart Shoppers, an online store that delivers its products to homes in and around
California, recently switched its entire fleet to biodiesel trucks that run on used cooking oil
rather than gas. Smart Shoppers has most likely developed a(n) ________.
A) vertical marketing channel
B) green supply chain
C) multitiered marketing channel
D) intermodal transportation system
E) hybrid distribution system
Answer: B
Skill: Application
Objective: LO 12.5: Discuss the nature and importance of marketing logistics and integrated
supply chain management.
130) ________ 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.
A) Advertising
B) Product positioning
C) Mass customization
D) Marketing logistics
E) Branding
Answer: D
Skill: Concept
Difficulty: Easy
131) Marketing logistics includes all of the following EXCEPT ________.

A) reverse logistics
B) inbound logistics
C) outbound logistics
D) customer-centered logistics
E) producer-centered logistics
Answer: E
Skill: Concept
Difficulty: Easy
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132) ________ logistics starts with the marketplace and works backward to the factory or even
to sources of supply.
A) Outbound
B) Customer-centered
C) Upstream
D) Reverse
E) Inbound
Answer: B
Skill: Concept
Difficulty: Easy
133) ________ logistics involves moving products from the factory to resellers and ultimately
to customers.
A) Customer-centered
B) Reverse
C) Upstream
D) Outbound
E) Inbound
Answer: D
Skill: Concept
Difficulty: Easy
134) ________ logistics refers to moving products and materials from the suppliers to the
factory.
A) Outbound
B) Diverse
C) Inbound
D) Reverse
E) Customer-centered
Answer: C
Skill: Concept
Difficulty: Easy
40

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135) Reusing, recycling, refurbishing, or disposing of broken, unwanted, or excess products

returned by consumers or resellers is known as ________.
A) cross merchandising
B) reverse logistics
C) disintermediation
D) diverse logistics
E) inbound logistics
Answer: B
Skill: Concept
Difficulty: Easy
136) ________ management refers to the management of upstream and downstream value-
added flows of materials, final goods, and related information among suppliers, the company,
resellers, and final consumers.
A) Cross
B) Price
C) Supply chain
D) Product cycle
E) Customer
Answer: C
Skill: Concept
Difficulty: Easy
137) Which of the following is NOT a major logistics function?

A) inventory management
B) product designing
C) warehousing
D) transportation
E) packaging
Answer: B
Skill: Concept
Difficulty: Easy
41

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138) Logistics has grown in importance for all of the following reasons EXCEPT that
________.
A) companies that become channel members want to continue to grow and expand.
B) companies can gain a powerful competitive advantage by using improved logistics to give
customers better service or lower prices.
C) improved logistics can yield tremendous cost savings to both a company and its customers.
D) more than almost any other marketing function, logistics affects the environment and a
firm's environmental sustainability efforts.
E) the explosion in product variety has created a need for improved logistics management.
Answer: A
Skill: Concept
139) Major logistics functions are logistics information management, inventory management,
transportation, and ________.
A) advertising
B) product design
C) financial projections
D) warehousing
E) customer sales
Answer: D
Skill: Concept
Difficulty: Easy
140) ________ are large and highly automated warehouses designed to receive goods from
various plants and suppliers, take orders, fill them efficiently, and deliver goods to customers as
quickly as possible.
A) Loading docks
B) Open warehouses
C) Distribution centers
D) Shipping platforms
E) Product platforms
Answer: C
Skill: Concept
Difficulty: Easy
42

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141) ________ or smart tag technology helps companies locate a product's exact position
within its supply chain.
A) RFID
B) PRM
C) VMS
D) BCODE
E) 3PL
Answer: A
Skill: Concept
Difficulty: Easy
142) Which of the following is true of using trucks as a transportation mode?

A) Transportation via trucks is costlier than by rail or air.
B) Trucks are a specialized means of shipping petroleum, natural gas, and chemicals from
sources to markets.
C) Trucks provide in-transit services such as the diversion of shipped goods to other
destinations en route.
D) Trucks are highly flexible in their routing and time schedules.
E) Trucks are the slowest mode of transportation and most affected by the weather.
Answer: D
Skill: Concept
143) Which of the following is true of transporting goods via railroads?

A) Railroads are ideal for the transportation of digital technology.
B) Railroads are a specialized means of shipping petroleum, natural gas, and chemicals from
sources to markets.
C) Railroads are a cost-effective way to ship large amounts of bulk products over long
distances.
D) Railroads are the most flexible mode of transportation in their routing and time schedules.
E) Railroads are the slowest mode of transportation and are the most affected by the weather.
Answer: C
Skill: Concept
43

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144) Which of the following is true of shipping goods via water transportation?
A) Water transportation is an efficient way to ship perishable merchandise over long distances.
B) Water carriers are highly flexible in their routing and time schedules.
C) Water transportation provides in-transit services, such as the processing of goods en route.
D) Water transportation is ideal when time is short and speed is needed.
E) Water transportation is the slowest mode of transportation and the most affected by the
weather.
Answer: E
Skill: Concept
145) ________ are a specialized means of shipping petroleum, natural gas, and chemicals from
sources to markets.
A) Air tunnels
B) Rail flatcars
C) Steam ships
D) Pipelines
E) Airlines
Answer: D
Skill: Concept
Difficulty: Easy
146) Which of the following is true about using air carriers as a transportation mode when
shipping products?
A) Air carriers are the most cost-effective way to ship non-perishable goods over short
distances.
B) Air carriers are the slowest and least reliable modes of transport.
C) Air carriers provide in-transit services such as the processing of goods en route.
D) Air carriers are ideal when time is short and speed is needed.
E) Air carriers are a specialized means of shipping chemicals from sources to markets.
Answer: D
Skill: Concept
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147) In intermodal transportation, which of the following describes the use of both rail and
trucks for transportation?
A) fishyback
B) drawbar
C) trainship
D) piggyback
E) airtruck
Answer: D
Skill: Concept
Difficulty: Easy
148) In intermodal transportation, which of the following describes the use of both water and
trucks for transportation?
A) fishyback
B) drawbar
C) trainship
D) piggyback
E) airtruck
Answer: A
Skill: Concept
Difficulty: Easy
149) Which of the following is the most effective way for a company to ship bulky, non-
perishable products if its key requirement is low price?
A) pipelines
B) air transport
C) trucks
D) water carriers
E) piggyback
Answer: D
Skill: Concept
Difficulty: Easy
45

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150) Heart of Midnight sells blue orchids to major florists around the world. Their key
requirement is speed. Which of the following modes of transport will help them?
A) rail transport
B) air carriers
C) trucks
D) piggybacks
E) water transport
Answer: B
Skill: Application
151) Using ________, retailers can share real-time data on sales and current inventory levels
with suppliers.
A) automated storage and retrieval systems (ASRS)
B) vendor-managed inventory (VMI) systems
C) transportation management systems (TMS)
D) warehouse management systems (WMS)
E) distribution center management systems (DCMS)
Answer: B
Skill: Concept
Difficulty: Easy
152) ________ management is the logistics concept that emphasizes teamwork—both inside
the company and among all the marketing channel organizations—to maximize the
performance of the entire distribution system.
A) Logistics inventory
B) Integrated logistics
C) Logistics information
D) Independent logistics
E) Group logistics
Answer: B
AACSB: Interpersonal relations and teamwork
Skill: Concept
46

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153) Roland is the logistics manager of Giant Beanstalks. Which of the following is NOT an
area of responsibility for him?
A) the transportation of the canned vegetables to Greenleaf
B) the storage of the unprocessed vegetables
C) the advertising of the final product
D) product inventory management
E) the packaging of the final product
Answer: C
Skill: Concept
Difficulty: Easy
154) Which of the following modes of transport should Roland choose to transport the
unprocessed vegetables from Riverdale's farms to the Giant Beanstalks' factory quickly and
with minimum cost?
A) air carrier
B) pipeline
C) truck
D) oil tanks
E) air tunnels
Answer: C
Skill: Concept
Difficulty: Easy
47

lOMoARcPSD|7909860
Kimberly's Crown sells and designs jewelry. Despite the jewelry's popularity, products are
available only through a few shopping stores across the country.
155) What distribution strategy does Kimberly's Crown use?

A) exclusive
B) intensive
C) selective
D) inclusive
E) extensive
Answer: C
Skill: Concept
Difficulty: Easy
156) When one of the stores complains that the jewelry they're being given is inferior to the
jewelry Kimberly sells to other stores, Kimberly experiences ________ conflict.
A) horizontal
B) multitiered
C) vertical
D) intensive
E) subjective
Answer: C
Skill: Concept
157) Kimberly decides to alter its distribution strategy so that its jewelry is accessible to the
public only through one distributor. The strategy they're considering is known as ________
distribution.
A) elusive
B) extensive
C) exclusive
D) selective
E) elective
Answer: C
Skill: Concept
Difficulty: Easy
48

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158) What mode of transport should Kimberly use to ship its goods over long distances as
quickly as possible?
A) flatcars
B) water transport
C) air transport
D) trucks
E) railroads
Answer: C
Skill: Concept
Difficulty: Easy
159) Marketing logistics 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.
Answer: TRUE
Skill: Concept
Difficulty: Easy
160) Reverse logistics refers to the moving of products and materials from suppliers to the
factory.
Answer: FALSE
Skill: Concept
Difficulty: Easy
161) Environmental sustainability is an important factor in supplier selection and performance

evaluation, as designing sustainable supply chains has become the right thing to do.
Answer: TRUE
Skill: Concept
Difficulty: Easy
162) In contrast to distribution centers, storage warehouses are designed to move goods rather
than just house them.
Answer: FALSE
Skill: Concept
Difficulty: Easy
49

lOMoARcPSD|7909860
163) Air carriers transport digital products from producer to customer via satellite, cable, phone
wire, or wireless signal.
Answer: FALSE
Skill: Concept
Difficulty: Easy
164) Intermodal transportation refers to the combination of two or more modes of

transportation.
Answer: TRUE
Skill: Concept
Difficulty: Easy
165) Electronic data interchange is the digital exchange of data between organizations, which
primarily is transmitted via the Internet.
Answer: TRUE
Skill: Concept
Difficulty: Easy
166) How can a company benefit through a just-in-time logistics system?

Answer: With just-in-time logistics systems, producers and retailers carry only small
inventories of parts or merchandise, often only enough for a few days of operations. This
creates substantial savings in inventory carrying and handling costs.
Skill: Concept
Difficulty: Easy
167) What does the concept of integrated logistics management advocate?

Answer: This concept recognizes that providing better customer service and trimming
distribution costs require teamwork, both inside the company and among all the marketing
channel organizations. Inside, the company's various departments must work closely together to
maximize its own logistics performance. Outside, the company must integrate its logistics
system with those of its suppliers and customers to maximize the performance of the entire
distribution network.
AACSB: Interpersonal relations and teamwork
Skill: Concept
Difficulty: Easy
50

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168) Why are companies increasingly turning to third-party logistics providers (3PLs)?
Answer: A third-party logistics provider is an independent company that performs any or all of
the functions required to get a producer's product to market, helping clients to tighten up
sluggish, overstuffed supply chains, slash inventories, and get products to customers more
quickly and reliably. Companies use third-party logistics providers because getting the product
to market is the main focus of 3PLs, so they can often do it more efficiently and at a lower cost.
Second, outsourcing logistics frees a company to focus more intensely on its core business.
Finally, integrated logistics companies understand increasingly complex logistics
environments. For example, third-party logistics partners can be especially helpful to
companies attempting to expand their global market coverage.
Skill: Concept
51

Chapter 12 Marketing Channels: Delivering Customer Value

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Principles of Marketing, 17e, Global Edition (Kotler/Armstrong)

1) Producing a product or service and making it available to buyers requires building

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4) The term supply chain is considered limited because it ________.

5) The term demand chain is considered limited because it ________.

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17) Which of the following companies uses a direct marketing channel?

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21) Which of the following is an example of an indirect marketing channel?

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24) Which of the following is a conventional consumer marketing channel?

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25) Which of the following is an indirect business marketing channel?

Refer to the scenario below to answer the following question(s).

26) Which of the following is Giant Beanstalks' upstream partner?

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33) The number of products supplied indicates the length of a channel.

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37) How do intermediaries add value to a marketing system?

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40) Which of the following does NOT apply to channel systems?

41) Which of the following is true of channel members?

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47) Conflict in the channel can be healthy because ________.

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49) Which of the following is true of conventional distribution channels?

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51) Which of the following is true of vertical marketing systems?

52) Which of the following is a major type of vertical marketing system?

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66) Which of the following is an advantage of adding new channels in a multichannel

67) Which of the following is a disadvantage of adding new channels in a multichannel

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74) A conventional distribution channel consists of one or more independent producers,

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78) What is horizontal conflict? Illustrate your answer with an example.

79) What is vertical conflict? Illustrate your answer with an example.

80) What is a conventional distribution channel?

81) Explain power in a vertical marketing system.

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82) How can a firm benefit from involvement in a contractual VMS?

84) Give an example of a multichannel distribution system.

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86) What are the advantages of multichannel distribution systems?

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93) ________ distribution is a strategy in which producers of convenience products and

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101) Which of the following is true of the exclusive distribution strategy?

Refer to the scenario below to answer the following question(s).