Chapter 15 – Distributing Products
1. Organizations that assist in moving goods and services from producers to business and
consumer users are called supply-side transition specialists.
2. Agents and brokers and wholesalers are types of marketing intermediaries.
3. Wholesalers are marketing intermediaries who sell goods or services to ultimate
consumers.
4. A channel of distribution consists of the marketing intermediaries who join together to
transport and store goods in their path from producers to consumers.
5. Brokers are marketing intermediaries that do not take title to the goods they help
distribute.
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6. Retailers are marketing intermediaries who sell to ultimate consumers.
7. Some manufacturers sell directly to consumers or businesses rather than relying on
marketing intermediaries.
8. Agents are marketing intermediaries who take title to the goods they distribute and
provide credit to customers who need it.
9.
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Manufacturers are usually able to perform marketing functions such as transporting,
advertising, and storing, faster and more cheaply than marketing intermediaries.
10. One way marketing intermediaries improve marketing efficiency is by reducing the
number of exchange relationships necessary to move goods through the channel of
distribution.
11. Some economists would say that intermediaries add costs to the channel of distribution
and need to be eliminated.
12. Marketers claim that intermediaries add value to the channel of distribution that
outweighs the cost.
13.
Chapter 15 – Distributing Products
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Marketing costs make up less than 25 percent of the total cost of the goods consumers
buy.
14. The activities performed by most marketing intermediaries are not essential to the
marketing process.
15. The best way to reduce the cost of goods is to eliminate marketing intermediaries from
the distribution channel.
16. Marketing intermediaries have survived because they have been able to perform
marketing functions more efficiently and effectively than a manufacturer or consumer
could perform these functions.
17.
Chapter 15 – Distributing Products
The costs added by marketing intermediaries usually outweigh the value they create.
18. Jessica Talmadge is a real estate agent who brings together the buyers and sellers of
houses and commercial property. Jessica helps the parties negotiate the terms and
conditions of real estate sales, but she does not take title to the property, provide credit, or
assume any risks associated with the exchanges she helps negotiate. Because Jessica
provides only limited services, she is not a true marketing intermediary.
Feedback: It is not necessary for all marketing intermediaries to take title to goods or to
perform all of the functions associated with distribution. Agents and brokers are examples of
marketing intermediaries who help distribute goods without actually taking title to the goods.
19. Sav-U-More Grocery Store sells a wide range of foods and household supplies to
households in Miller’s Creek, a suburb of a large city. The store advertises that its prices
are much lower than the prices charged by larger supermarket chains in the area. This low
price approach means that Sav-U-More is a classic example of a merchant wholesaler.
Feedback: The distinction between wholesalers and retailers is not based on whether prices
are high or low, but rather on the types of customers these marketing intermediaries serve. A
retailer sells to final consumers. A wholesaler sells to organizations and individuals who are
not final users of the product. Since Sav-U-More is selling to households (who are final
users), it would be classified as a retailer.
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23. Marketing intermediaries must charge a price for the functions they perform. Thus, a
surefire way to reduce distribution costs is to eliminate marketing intermediaries from the
channel of distribution.
Feedback: Marketing intermediaries not only add costs to products, they also create value by
storing, transporting, selling and performing other marketing functions. Moreover, the reason
intermediaries have survived is that they often perform these functions more efficiently than
producers or consumers could perform them for themselves. Thus, eliminating marketing
intermediaries could raise overall distribution costs rather than reduce them.
24. Currently, Halperin Electrical sells directly to thousands of industrial customers. Halperin
could reduce the number of exchange relationships by including wholesalers in its channel
of distribution.
Feedback: As Figure 15.2 illustrates, wholesalers typically reduce the number of exchanges
that must be established in a channel.
25.
Chapter 15 – Distributing Products
Hartselle Home Products, Inc., manufactures a variety of inexpensive household gadgets.
The company has decided to cut costs by eliminating all of the marketing intermediaries
who help distribute its products. Hartselle will be able to reduce its total marketing costs
by eliminating the marketing functions these intermediaries perform.
Feedback: Although marketing intermediaries can be eliminated, their functions must still be
performed. If Hartselle eliminates marketing intermediaries, it will have to perform their
functions itself, or shift some of them to consumers. Unless Hartselle and its customers are
better at performing these tasks than its marketing intermediaries, total marketing costs could
actually rise rather than fall.
26. To marketers, the term utility refers to the value added to goods or services by
organizations when they make the product more useful or accessible to consumers.
27. Marketers provide a total of four types of utility: primary, secondary, marginal, and total.
28. Producers normally provide form utility, but retailers sometimes also provide this type of
utility.
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51. Rack jobbers sell goods on consignment, splitting the profits from their sales with a
retailer.
52. Although drop shippers own merchandise they have shipped to buyers, they do not
actually handle, stock, or deliver this merchandise themselves.
53. Drop shippers are wholesalers that stock heavy or bulky items and transport them to retail
stores.
54. Drop shippers are limited function wholesalers that typically put together many small
shipments to form a single larger shipment.
55.
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Cash-and-carry wholesalers are limited-function wholesalers that serve mostly smaller
retailers with a limited assortment of products.
56. The main difference between agents and brokers is that agents perform a wide array of
marketing functions while brokers only negotiate exchanges between buyers and sellers.
57. As long as they do not represent competing products, manufacturer’s agents can represent
more than one manufacturer in a given sales territory.
58. A key distinction between agents and brokers is that agents tend to maintain long-term
relationships with the people they represent whereas brokers are hired on a temporary
basis.
59.
Chapter 15 – Distributing Products
A sales agent is an agent who represents the interests of the consumer in a particular
territory when negotiating terms of purchases made directly from a producer.
60. A full-service wholesaler will provide suppliers with market information they can’t afford
or can’t obtain themselves.
61. Wholesalers may provide market information and business consulting services.
62. Larry and Dale Ingram solicit orders for lumber from area wholesalers and retailers
specializing in building supplies and arrange to have the orders shipped directly from
nearby logging companies. Larry and Dale operate as drop shippers.
Feedback: Drop shippers solicit orders from retailers and other wholesalers and arrange for
the merchandise to be shipped directly from the producers to the buyers.
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63. Henry Hart supplies shelves of inexpensive plastic toys to grocery stores, supermarkets,
and drug stores. He keeps title to the goods until they are sold and then splits the profits
with the retailer. Henry works as a drop shipper.
Feedback: Wholesalers who furnish racks or shelves of merchandise to retailers and sell the
goods on consignment are known as rack jobbers.
64. Barbara Dixon operates a small business out of her home. She makes a trip to a local
Riteprice Office Supply about once a month to buy computer and office supplies for her
business. The prices at the Riteprice are very low, but it does not offer credit or delivery
services. Riteprice is a cash-and-carry wholesaler.
Feedback: A cash-and-carry wholesaler mainly serves businesses that are too small to have
wholesalers service them. This type of wholesaler usually does not extend credit or offer
delivery (hence the name “cash-and-carry”). Today, some stores that serve the same functions
as cash-and-carry wholesalers do accept credit. The text cites Office Depot and Staples as
examples of such firms that accept credit cards. The term cash-and-carry may become
obsolete.
65.
Chapter 15 – Distributing Products
Merrill helps growers of fresh fruits and vegetables negotiate sales to food processing
companies. However, once he has helped negotiate the transaction, he does not maintain a
long-term relationship with the growers. Merrill is an example of a sales agent in this
market.
Feedback: Agents typically develop long-term relationships with their clients. Because
Merrill does not maintain a long-term relationship, he is more likely to be a broker than an
agent.
66. Melanie is a broker who has just helped negotiate a major deal. As a broker Melanie can
expect to earn a fixed amount of profit for her efforts regardless of the dollar value of the
contract she negotiated.
Feedback: Brokers and agents do not earn a profit and the amount they receive is not a fixed
dollar amount. Instead, they typically receive a commission based on a percentage of sales
revenue.
67. Retail organizations employ more than 11 million people in the U.S.
68. Discount stores, department stores, supermarkets, and specialty stores are all among the
major types of retail stores.
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69. Department stores offer a wide variety of products that are sold in separate departments.
70. Warehouse clubs compete with enhanced service to customers and seldom try to compete
on price.
71. Discount stores compete in the retail market mainly on the basis of price.
72. A category killer is an extremely successful product that kills the sales of other products
in its category in a retail store.
73. Specialty stores use a wide variety of products in one product category as their key
competitive tool.
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74. Category killer stores tend to compete mainly on the basis of carrying a wide array of
products, superior service, and low prices.
75. Warehouse clubs are usually smaller than supermarkets.
76. Discount stores and department stores sell different brands of products that are usually
priced about the same.
77. Exclusive distribution is the use of only one retail outlet in a given geographic area.