Marketing A Roadmap To Success 1st Edition Sirsi Test Bank

Marketing A Roadmap to Success 1st
Edition Sirsi Test Bank

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CHAPTER 7
Channel Strategies
MULTIPLE CHOICE
1. In the 1970s, alternate channels like bank machines (ATMs) allowed banks to reduce
their
a. advertising costs.
b. personal selling costs.
c. cost to serve the customer.
d. media costs.
e. product development costs.
Answer: c Difficulty: easy Page: 145 Skill: recall

Learning objective: 7-1
2. Inserting your company into your customers’ network of suppliers and customers is a
concept called
a. supply chain.
b. market share.
c. shareholder return.
d. advertising.
e. channel selection.
Answer: a Difficulty: easy Page: 146 Skill: recall

3. Zara, a popular fashion retailer, has developed a channel strategy that is successful
because it
a. relies on traditional advertising.
b. is very responsive to market information flowing through its channels.
c. has a single focus in its product offering.
d. enjoys lower production and distribution costs.
e. maintains a long production cycle and is unresponsive to trends.
Answer: b Difficulty: challenging Page: 147 Skill: applied

4. The prime purpose of a channel is to effectively

a. provide a source for customer research.
b. keep production costs low.
c. fend off competitive activity.
d. maintain tight delivery and production schedules.
e. deliver the customer value proposition.
Answer: e Difficulty: moderate Page: 148 Skill: recall
Copyright © 2010 Pearson Education Canada 1

5. By properly understanding customer needs and channel dynamics, a business can

a. build a competitive advantage.
b. introduce new products.
c. increase the acquisition costs of its products.
d. reduce advertising spending.
e. compensate for product weaknesses.

6. One of the benefits of Dell’s direct channel model is that it allows

a. Dell to receive payment after the product is shipped.
b. for just-in-time inventory management.
c. for face-to-face selling.
d. for a positive cash conversion cycle.
e. Dell to stockpile parts for its computers.

7. In order to compete with companies that have larger advertising budgets or greater
resources, smart companies look to their
a. marketing mix.
b. advertising.
c. public relations.
d. product development.
e. channels.
Answer: e Difficulty: challenging Page: 148 Skill: applied

8. To overcome weaknesses in its marketing mix, Papa John’s was one of the first pizza
companies to introduce
a. instantly redeemable coupons.
b. a two-for-one pizza offering.
c. excessive price drops.
d. front-door delivery.
e. online ordering.


9. Nokia is taking on Apple’s iPhone not by making changes to its core product, but by
focusing on the
a. functional product.
b. augmented product.
c. potential product.
d. advertising strategy.
e. media strategy.
Answer: c Difficulty: moderate Page: 150 Skill: applied

10. Well-designed channels primarily move

a. goods.
b. services.
c. raw materials.
d. product orders.
e. information.
Answer: e Difficulty: easy Page: 150 Skill: recall

11. A strong supply chain strategy can be used to

a. reduce costs.
b. eliminate delivery delays.
c. share marketing communications costs.
d. build customer loyalty.
e. shut out the competition.
Answer: d Difficulty: moderate Page: 151 Skill: applied

12. Saturn made channel members its partners to offer excellent after-sales service,
resulting in increased
a. sales.
b. media coverage.
c. public relations.
d. brand awareness.
e. customer loyalty.
Answer: e Difficulty: easy Page: 151 Skill: applied

13. The cost of going to market is often

a. a fraction of product development costs.
b. less than 3% of the advertising budget.

c. equal to retail markup costs.
d. a company’s single largest expense.
e. a company’s smallest expense.
Answer: d Difficulty: moderate Page: 152 Skill: recall

14. A company will likely lose market share if it does not closely align its channel mix to
a. customer needs.
b. supply chain needs.
c. retailer needs.
d. competitive activity.
e. its marketing communications strategy.

15. Poorly conceived channel decisions result in

a. increased sales.
b. increased market share.
c. increased profits.
d. decreased red tape.
e. wasted effort.
Answer: e Difficulty: easy Page: 154 Skill: recall

16. Multi-channel marketing may decrease a company’s profits because it

a. increases customer dissatisfaction.
b. decreases channel conflict.
c. decreases customer value.
d. increases the cost to serve the customer.
e. decreases the number of transactions.
Answer: d Difficulty: challenging Page: 155 Skill: applied

17. In some industries such as retail banking, offering more channels has
a. decreased customer value.
b. increased the cost to serve the customer.
c. decreased channel conflict.
d. increased customer dissatisfaction.
e. decreased the number of transactions.


18. Once a company has added channels, it becomes very hard to reduce the number of
channels because
a. of competitive activity.
b. of bad publicity.
c. customers have become used to them.
d. customers make more transactions.
e. of operational silos.
Answer: c Difficulty: moderate Page: 155 Skill: recall

19. The first step in determining the right channels for your business is to
a. focus on low-cost channels.
b. define a realistic channel range.
c. guide customers to channels.
d. touch customers at each point.
e. mitigate channel conflict.
Answer: b Difficulty: moderate Page: 155 Skill: recall

20. Rather than taking a strategic approach to channel design, managers often spend the
majority of their time
a. guiding customers to channels.
b. touching customers at each point.
c. mitigating channel conflict.
d. defining a realistic channel range.
e. focusing on low-cost channels.

21. In the channel design process, channel economics examines

a. customer needs.
b. product characteristics.
c. profitability.
d. the brand strategy.
e. the firm’s overall strategy.

22. In addition to looking at the cost side of channel economics, businesses must also
look at channel
a. conflicts.

b. range.
c. fit with the brand.
d. revenues.
e. competition.
Answer: d Difficulty: moderate Page: 156 Skill: recall

23. A failure to understand customer preferences for different channels as they move
through the purchase process may result in
a. a lower E/C ratio.
b. a lower E/R ratio.
c. over-serving customers.
d. conserved resources.
e. decreased channel costs.
Answer: c Difficulty: challenging Page: 157 Skill: applied

24. The purchase is the ______ step in the customer purchase process.
a. first
b. second
c. third
d. fourth
e. final

25. Among the four steps of the customer purchase process is

a. post-sale service.
b. online research.
c. personal selling.
d. word of mouth.
e. sampling.
Answer: a Difficulty: moderate Page: 158 Skill: recall

26. The major problem associated with offering customers a choice of channels is that
customers will often
a. use multiple channels.
b. be exposed to competitive messages.
c. choose the lower-cost channel.
d. choose the higher-cost channel.
e. be confused.

Answer: d Difficulty: moderate Page: 159 Skill: applied
27. To migrate customers to the preferred channel, ING, the Dutch online bank
a. offers multiple channels.
b. offers customers an incentive.
c. advertises only the lower-cost channel.
d. penalizes customers who use the lower-cost channel.
e. matches all competitive offerings.

28. Charles Schwab’s multi-channel strategy keeps costs down by using its branches to
acquire customers and its other channels to
a. charge them higher fees.
b. offer advice to them.
c. cross-sell products to them.
d. advertise to them.
e. keep them.

29. Companies that make it easy for customers to switch channels reap the benefits of
a. decreased channel conflict.
b. expanded channel range.
c. customer satisfaction.
d. a lower E/C ratio.
e. a lower E/R ratio.

30. Many airlines have been successful at migrating customers to self-serve check-in
counters by
a. making the process easy.
b. conducting customer research.
c. offering discounts.
d. using humour in their advertising.
e. ensuring airline personnel are scarce.
Answer: a Difficulty: easy Page: 161 Skill: applied


31. When an organization begins to move customers from one channel to another, the
organization’s sales force and its channel partners
a. embrace the transition.
b. are not affected in any way.
c. focus on stepping up customer service.
d. are usually downsized.
e. face the same fears as customers.
Answer: e Difficulty: moderate Page: 161 Skill: applied

32. W. W. Grainger, a leading supplier of facilities maintenance products, successfully

switched its customers to a web-based ordering system and ensured a high degree of
customer satisfaction by
a. offering incentives.
b. using disincentives.
c. managing the fears of its sales force.
d. increasing channel costs.
e. eliminating commissions.

33. Formulating channel strategy often results in

a. new product development.
b. increased customer research.
c. hiring additional sales representatives.
d. increased channel costs.
e. conflict among channel members.

34. An important part of any channel strategy is

a. mitigating conflict.
b. segmenting customers.
c. identifying new opportunities.
d. focusing on low-cost channels.
e. conducting customer research.
Answer: a Difficulty: moderate Page: 163 Skill: applied

35. Sony reduces channel conflict among the various retail outlets for its products by
a. ensuring that club stores such as Costco have a higher markup.

b. encouraging customers to browse for items in high-cost channels and buy in
low-cost channels.
c. offering incentives to the customer.
d. offering sales representatives a commission regardless of the channel.
e. tweaking product features to ensure the different channels are not competing
for the “same” product.

36. With changing customer needs and market conditions, channel strategies have to
a. be driven by costs.
b. add additional channels.
c. have buy-in from the sales force.
d. remain unchanged over time.
e. evolve.

37. Despite focusing on the brand, innovation, and product quality, the Lego Group of
Denmark was in trouble because its channel strategy
a. offered too many channels.
b. focused only on low-cost channels.
c. had not kept pace with the changing environment.
d. did not have buy-in from the sales force.
e. didn’t touch customers at each point.
Answer: c Difficulty: challenging Page: 164 Skill: applied

38. A lesson learned from the Lego Group of Denmark is that it is better to think of
supply chain, innovation, and product quality as
a. separate topics.
b. connected.
c. low priorities.
d. top priorities.
e. competitive advantages.

39. Channel strategies can help a business to focus on

a. innovation.
b. costs.
c. return on investment.

d. the core product.
e. the potential product.

40. The sequence from raw material to sale is known as

a. a product strategy.
b. a sales strategy.
c. a supply chain.
d. channel economics.
e. the core product.

41. A value chain is a supply chain, but its emphasis in on examining how value
a. is perceived by the customer.
b. is created or destroyed by a channel member.
c. is compared to the competition.
d. can be added at the point of purchase.
e. can be added during the product development phase.
Answer: b Difficulty: moderate Page: 167 Skill: recall

42. Looking at value chains enables a business to

a. build relationships with its channel partners.
b. improve product research and development.
c. keep costs low.
d. expand its distribution.
e. expand its product portfolio.

TRUE - FALSE
1. Channel strategies impact every aspect of a business.
Answer: True Difficulty: easy Page: 146 Skill: recall

2. The most important thing channels move is information.

Answer: True Difficulty: easy Page: 146 Skill: applied
3. The prime purpose of a channel is to effectively deliver the customer value

proposition.
Answer: True Difficulty: moderate Page: 148 Skill: recall

4. The direct channel model allows Dell to practice just-in-time (JIT) inventory
management, thus keeping its inventory costs at a minimum.
Answer: True Difficulty: moderate Page: 148 Skill: applied

5. Devices alone are not enough anymore; consumers want a complete experience.
Answer: True Difficulty: moderate Page: 150 Skill: applied

6. While channels may be used to improve customer satisfaction levels, they cannot be
used to build brand loyalty.
Answer: False Difficulty: challenging Page: 150 Skill: applied

7. The cost of going to market (the combined cost of sales and marketing expenses
across all channels) is often a company’s single largest expense.

8. Mismatching a customer’s channel preferences with the company’s channel strategy

has little or no impact on market share.
Answer: False Difficulty: easy Page: 153 Skill: recall

9. By adding more channels, a business better serves its customers.
Answer: False Difficulty: moderate Page: 155 Skill: applied

10. Having more channels means getting more sales.

11. The first step in channel design is to realistically define a set of channels.

12. Even if a channel is a good fit with the product and certain customer segments may
use it, it should be rejected if it is not a good fit with the firm’s overall strategy.
Answer: True Difficulty: challenging Page: 156 Skill: applied

13. Mitigating channel conflicts consists of examining channel profitability and the
channel’s capacity for generating sales.
Answer: False Difficulty: challenging Page: 156 Skill: recall

14. A typical customer goes through four steps in the purchase process: brand awareness,
product knowledge, purchase, and post-sale service.

15. Left to their own devices, customers will usually choose a lower-cost channel, mainly
due to habit.
Answer: False Difficulty: challenging Page: 159 Skill: recall

16. ING, the Dutch online bank, uses the proverbial “carrot-and-stick” approach, offering
customers a higher savings rate if they use the preferred internet channel and
"punishing" them with long lineups if they choose to conduct a transaction face to
face with a teller.

17. Companies that make it easy for customers to switch channels reap the dual benefits
of channel migration and customer satisfaction.


18. When an organization begins to move customers from one channel to another, the
sales force and channel partners experience the same fears as the customers.

19. Formulating channel strategy often results in conflict among channel members.

20. To reduce channel conflict, Sony makes it hard for the consumer to comparison shop
by tweaking features on each item so different channels are not really competing to
sell the “same” product.

21. It is not necessary for a channel strategy to keep pace with changing customer needs
and market conditions.
Answer: False Difficulty: moderate Page: 163 Skill: recall

22. Channel strategies can help a business focus on the potential product.

23. The sequence from raw material to sale is known as the supply chain.

24. A value chain is a supply chain, but its emphasis is on examining how value is created
or destroyed by a channel member.

25. Given its low cost, the internet is always a great channel to reach customers.


SHORT ANSWER
1. The most important thing channels move is information. Using the popular fashion
retailer Zara as an example, explain this statement.
Answer: Although moving goods from manufacturer to consumer is still an important

role played by channels, the most important thing channels move is information.
Successful businesses use information to attract and keep customers. In Zara’s case,
information from retail stores is sent to designers, its own manufacturing facilities, and a
small set of suppliers and used strategically.
Difficulty: challenging Page: 147 Skill: applied

2. Explain how a channel strategy can be used to build a competitive advantage.

Provide an example.
Answer: By properly understanding customer needs and channel dynamics, a business

can build a significant competitive advantage. Consider the revolution in channels that
Dell unleashed in 1984. Dell has sold all of its products to customers using a direct-sales
model via the telephone or the internet. It only builds the product after receiving the
order from the customer, allowing it to customize orders, record customer needs, and stay
ahead of competitors by knowing about customer trends in advance.
Difficulty: challenging Page: 148 Skill: applied

3. If channel decisions are so important, why not simply add more channels to serve the
customer?
Answer: Multi-channel marketing is much harder than it appears. Also, adding more
channels may actually decrease a company’s profits by increasing the cost to serve the
customer.
Difficulty: easy Page: 155 Skill: recall

4. Why is it important to base channel decisions on customers' needs?
Answer: Customer channel preferences and needs must be considered when choosing the
right channel. ING, a Dutch financial services company that pioneered online banking,
succeeded because it focused on one channel. When the company tried to duplicate its
success with its insurance company, it found that while customers will bank online, they
prefer to buy insurance through a broker. Accordingly, it provides two channel options
for insurance customers, online and brokers.

Difficulty: moderate Page: 155 Skill: recall
5. List the six steps in the channel design process.
Answer: 1. Define realistic channel range.

2. Calculate channel economics.
3. Guide customers to channels.
4. Touch customers at each point.
5. Mitigate channel conflict.
6. Evolve channel strategy.

6. What is examined when calculating channel economics?
Answer: Channel economics consists of examining channel profitability and the

channel’s capacity for generating sales. It is important not only to focus on costs, but
also to look at revenues.
Difficulty: easy Page: 156 Skill: recall

7. What is the customer purchase process?
Answer: A typical customer goes through four steps in the purchase process: brand
awareness, product knowledge, purchase, and post-sale service.

8. Explain how a company can successfully migrate customers to the right (preferred)
channel?
Answer: Successful migration can be achieved by providing customer incentives, such as

a higher savings rate for choosing the right channel, or by “punishing” customers with
long waits when they choose a higher-cost channel. By making it easy for customers to
switch channels, the company also benefits from customer satisfaction. A company needs
to provide a safety net when customers begin to switch from one channel to another,
since sales personnel and channel partners face the same fears and uncertainty as
customers.
Difficulty: challenging Page: 159-161 Skill: applied


9. Provide an example of circumstances that might cause channel conflict. How might a
company mitigate or eliminate this conflict?
Answer: Sony sells the same item (for example, a DVD player) through multiple
channels such as club stores, department stores, specialty electronics retailers, the
internet, and Sony stores. Sony must ensure that consumers don’t browse a high-cost
channel like the Sony store and then buy the same item through a low-cost channel like
the internet. To reduce channel conflict, Sony tweaks product features so that each of the
different channels is selling a different product.
Difficulty: moderate Page: 163 Skill: applied

10. Why is it important for channel strategies to evolve?
Answer: A firm’s marketing strategy has to be dynamic. It has to change with changing
customer needs and market conditions. Channel strategies are no exception. When a
company's channel strategy hasn’t kept pace with the changing environment, it could
experience a drop in sales, market share, and profit.
Difficulty: moderate Page: 163-164 Skill: applied


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Answer: c Difficulty: easy Page: 145 Skill: recall

Answer: a Difficulty: easy Page: 146 Skill: recall

Answer: b Difficulty: challenging Page: 147 Skill: applied

4. The prime purpose of a channel is to effectively

Copyright © 2010 Pearson Education Canada 1

5. By properly understanding customer needs and channel dynamics, a business can

Answer: a Difficulty: easy Page: 148 Skill: recall

6. One of the benefits of Dell’s direct channel model is that it allows

Answer: b Difficulty: challenging Page: 148 Skill: applied

Answer: e Difficulty: challenging Page: 148 Skill: applied

Answer: e Difficulty: challenging Page: 149 Skill: applied

Copyright © 2010 Pearson Education Canada 2

Answer: c Difficulty: moderate Page: 150 Skill: applied

10. Well-designed channels primarily move

Answer: e Difficulty: easy Page: 150 Skill: recall

11. A strong supply chain strategy can be used to

Answer: d Difficulty: moderate Page: 151 Skill: applied

Answer: e Difficulty: easy Page: 151 Skill: applied

13. The cost of going to market is often

Copyright © 2010 Pearson Education Canada 3

Answer: d Difficulty: moderate Page: 152 Skill: recall

Answer: a Difficulty: easy Page: 153 Skill: recall

15. Poorly conceived channel decisions result in

Answer: e Difficulty: easy Page: 154 Skill: recall

16. Multi-channel marketing may decrease a company’s profits because it

Answer: d Difficulty: challenging Page: 155 Skill: applied

Answer: b Difficulty: challenging Page: 155 Skill: applied

Copyright © 2010 Pearson Education Canada 4

Answer: c Difficulty: moderate Page: 155 Skill: recall

Answer: b Difficulty: moderate Page: 155 Skill: recall

Answer: e Difficulty: moderate Page: 155 Skill: recall

21. In the channel design process, channel economics examines

Answer: c Difficulty: easy Page: 156 Skill: recall

Copyright © 2010 Pearson Education Canada 5

Answer: d Difficulty: moderate Page: 156 Skill: recall

Answer: c Difficulty: challenging Page: 157 Skill: applied

Answer: c Difficulty: easy Page: 158 Skill: recall

25. Among the four steps of the customer purchase process is

Answer: a Difficulty: moderate Page: 158 Skill: recall

Copyright © 2010 Pearson Education Canada 6

Answer: b Difficulty: challenging Page: 159 Skill: applied

Answer: b Difficulty: challenging Page: 159 Skill: applied

Answer: c Difficulty: moderate Page: 161 Skill: applied

Answer: a Difficulty: easy Page: 161 Skill: applied

Copyright © 2010 Pearson Education Canada 7

Answer: e Difficulty: moderate Page: 161 Skill: applied

32. W. W. Grainger, a leading supplier of facilities maintenance products, successfully

Answer: c Difficulty: moderate Page: 162 Skill: applied

33. Formulating channel strategy often results in

Answer: e Difficulty: moderate Page: 161 Skill: recall

34. An important part of any channel strategy is

Answer: a Difficulty: moderate Page: 163 Skill: applied

Copyright © 2010 Pearson Education Canada 8

Answer: e Difficulty: challenging Page: 163 Skill: applied

Answer: e Difficulty: moderate Page: 163 Skill: recall

Answer: c Difficulty: challenging Page: 164 Skill: applied

Answer: b Difficulty: challenging Page: 164 Skill: applied

39. Channel strategies can help a business to focus on

Copyright © 2010 Pearson Education Canada 9

Answer: e Difficulty: moderate Page: 165 Skill: recall

40. The sequence from raw material to sale is known as