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Final Exam Study GuideChannel Strategy:o Creating Time & Place Utility:Time Utility – Convenient & quick for customer to get productHow many retailers the company deals with; more = better/fasterConvenience how many stores there are, their location, & placement in particular storesPlace Utility – where item is locatedConvenience – lots of retailers/locationsPrestige – “something special” at a particular locationo Channels of Distribution v. Physical Distribution:Logistical Functions: moving products (methods of delivery)Asserting – variety of products, what products they carryTransportingTransactional Functions: no physical movement of productSelling – manufacturer’s agent will go to retailer to try & sell a bulk of product (wholesale)Risk Taking – who takes the risk when consumer returns/does not like product – negotiationFacilitating Functions: no physical movement, but facilitates movementFinancing – terms/agreements with retailers to kepp them and handle prductsMarket Research – retailers convince manufacturers to use them*Breaking Bulk – Manufacturer wants to sell product wholesale/by the pallet, by the truckload, but consumer wants to buy individual units of product. Manufacturer will sell in bulk to retailer, who will break it down into individual unitso 3 Options for Channel Coverage:Intensive Distribution – maximize the number of retailers to sell your product; meant for products that don’t need a lot of supportSelective Distribution – a lot of retailers, but not intensive; needs some supportExclusive Distribution – specialized product; requires a lot of support; well-trained retailer in a particular locationo Channel Paths:Direct: Manufacturer End UserIndirect: Manufacturer Retailer End User (causes channel conflict)
“Typical:” Manufacturer Wholesaler Retailer End User
o Types of Channel Members (Intermediaries):Wholesalers:Merchant Wholesaler – completely independent of the manufacturero Distributor – does everything job related o Jobber – carries inventoryAgent – independent distributer who represents multiple manufacturerso Don’t handle inventoryManufacturer’s Sales:o Branch – similar to the distributor role, but the manufacturer owns ito Sales Office – plays similar role to agent, place to take orderRetailers:Specialty Store – narrow selection, but deepDepartment Store – more selection, less depth, good servicePower Retailer – Will come with notes from the video lectureDiscounter – lots of categories, little depthNon-Store – catalogs/on-line stores/vending machineso Types of Channels:Contractual – Franchising (Franchisee, franchisor, licensing agreement)Administered – “handshake deal”Vertically Integrated – all channel owners owned by same entityo Channel Captain – when one entity needs another more than that other entity needs it (tradeoff)o Why use the “middle man” (intermediaries)? – transaction efficiency; ensures the deal runs smoothlyPricing Strategy:o “Administered Pricing” – the price is set in advance, there is no negotiation (not a street market – in-store price is what it is) in the consumer marketParticipative Pricing – when there is negotiation, like in a street market (not a consumer market)o Purpose of Price: To capture the value of a product in the consumer’s mind.
o Types of Competition:Price-Based – “lazy way to compete;” there is minimal creativity, not sustainable unless you are the lowest cost or can outlast competitors, and does not build brand equityNon-Price-Based – selling quality (E.g. – Apple)o Price/Quality Relationship:Price communicates value; the higher the price, the greater the worth, the higher the quality (what population believes, but is not always the case)o Pricing Objectives:Sales (dollar value and unit volume) lower price = higher sales; give up profitProfits (maximize (through fees, like Verizon) and/or satisfice (looking for a reasonable/satisfying profit))Market Share (lower prices to gain market share)Stability (price change over time)Social Responsibility:Quantity Surcharge – product @ fair priceHidden Fees – credit cards as an examplePredatory Pricing – illegal, price product very low to drive competition out of marketplace to make yourself the only one in the market (need deep pockets)o Pricing Approaches:Cost-Based:Types:o Breakeven Analysis: Quantity = Fixed Cost ÷ (Price – Unit Variable Cost); can be adjusted to solve for priceo Cost-Plus; Two Variants:Price = TC + (% of TC)Price = TC + Fixed Feeo Markup (most common): % of selling pricePrice = Cost of Goods ÷ ((100 – Markup %)/100)Profit-Based:Target Profit Pricing:o (Total FC + Total VC + Total Profit) ÷ Total Number of UnitsTarget ROI Pricing:o Profit = (Total FC + Total VC + (Investment X ROI)) ÷ Standard Number of UnitsProblems with Cost & Profit-Based Approaches include: internal focus, ignores demand and competition, assumes all produced is sold at the
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School: University at Buffalo
Department: Management Marketing
Term: Spring 2016
Name: Final Exam Study Guide (Exam 3)
Description: Should use notes from lectures, ublearns, videos, and textbook.