RCSC 400 Exam 2: Final

What differentiates a well-designed performance objective from one that isill-conceived?

A well-designed performance objective includes (1) the performance desired, including a numerical index against which progress can be measured, (2) a time frame within which the goal is to be achieved, and (3) the resources needed to achieve the objective.

Goals have to be specific and measurable. Which of the following examples of goals fulfills these criteria best?

A. Increase revenue by 10% in product category C each month by distributing couponsto 1,000 households

Which of the following items has the most price elasticity?

- McDonald's sandwich meals

Frankie is a buyer for a department store and is buying some handbags at a cost of $30 from a vendor. He desires to have a 60% markup to meet the financial goals of this category. What will the retail price be of these handbags?

. A - $75

What is wrong with a CRM program that encourages repeat buying by offering price discounts

. A - These CRM programs can be easily copied by competitors and they encourage customers to always be looking for the best deal rather than encouraging a relationship with one retailer

Based upon the following customer purchase data, which customer would have a higher lifetime value to the retailer?

. B - Jan

When consumers agree to share personal information, it is referred to as

. B - opting in

When there is high inventory turnover, you can expect less of a risk for markdowns because

. B - the merchandise does not stay in stores for long enough to be marked down

The television network ABC's show "Extreme Makeover: Home Edition" is a reality

. C - product placement

When given a choice between a national brand of costume jewelry, and a private-label brand, the buyer for a chain of mall specialty stores might choose the private-label brand .

. C - to prevent its customers from comparison shopping

A retailer selling products at a price lower than their competitor for the purpose of causing their competitor to go out of business is using .

. D - predatory pricing

The Bird of Paradise flower is one of the world's most stunning tropical flowers standing tall and radiant with color. When Josiah knows he's receiving flowers from Hawaii, he emails all of his customers who he knows enjoys the flower and informs them of the upcoming shipment. Josiah's program is an example of?

. E - 1-to-1 retailing

Which of the following does NOT describe how retailers use a customer lifetime value (CLV)?

. E - A customer who spends $800 twice a year has a higher CLV than a customer that spends $100 each month.

Which of the following is NOT an advantage of EDLP?

A - Higher profits through price discrimination

Which of the following is NOT a typical mechanism to provide high service quality to customers?

A - Retailers need to provide better service than their competitors

The radio advertisement announced the video store would be open until 10:00 P.M. on Friday evenings. When Norm drove to the store to get a copy of the latest Disney video for his daughter's birthday party the next morning, it was only 9:45 P.M., but the store was locked up and a sign on the door said the store closes at 9:00pm. This is an example of a gap.

A - communications

What is the first step in merchandise management planning?

A - developing a forecast for sales

Which is NOT a consideration typically taken into account when setting retail prices?

A - developing a forecast for sales

Loretta went to Kohl's to buy thermal underwear for her son stationed in Germany. The underwear had been featured in an ad for $29.99 a pair. When she arrived at the store to learn it had sold out of the underwear, she was disappointed because the underwear had to be wrapped and mailed that day to reach her son for Christmas. The rain check did not satisfy her. In trying to resolve the problem and make Loretta happy, the sales clerk was dealing with

A - distributive fairness

When Zed purchased his new computer through an Internet retailer, he was promised 24 hours, 7 days a week access to a toll-free number where he could talk to a real-life computer technician. When he had trouble with his computer and needed help, he called the number provided and was put on hold for 45 minutes. When the technician got on the phone, Zed was told that there were only two technicians on staff who were dealing with about 150 calls daily. The electronic retailer did not provide for its employees.

A - instrumental support

Which of the following programs help retailers deliver comprehensive and consistent messages to their customers?

A - integrated marketing communication programs

When a retailer makes a generous contribution to a charity and the event is covered on the evening news, it would be a method of communicating through .

A - public relations

How can having strong brands benefit a retailer?

A brand with good equity, also known as a strong brand name, influences customers' decision processes, often by encouraging their repeat visits, which in turn leads to greater loyalty. In addition, strong brand names enable retailers to increase their margins because customers will tolerate higher prices. When retailers have high customer loyalty, they can engage in premium pricing and reduce their reliance on price promotions to attract customers. Brands with weaker images instead must offer lower prices and have frequent sales to maintain their market share.

Which of the following statements about income statement and balance sheet is (are) true?

A.The income statement summarizes a firm's financial performance over a period of time. & D.The balance sheet summarizes a firm's financial position at a given point in time.

Which of the following can be considered a current asset?

Accounts Reciveavble

Which of the following does NOT describe the customer relationship management which retailers implement?

All of the above describe customer relationship management.

What are advantages and disadvantages of using a category captain?

As vendors, category captains frequently have more information and analytical skills about the category than retailers. They can help retailers understand consumer behavior, create assortments that satisfy the consumer, and improve profitability of the category. However, category captains are mostly interested in selling their own brands and in increasing their own products' profitability within the category, which for instance can affect other vendor relations and the sale of private label brands negatively.

A drugstore purchases hand cream at $2 per jar and sells them for $15. What is their markup percentage?

B - 87%

Which of the following is NOT a typical cue to assess the characteristics of a service?

B - Efficiency

Which of the following is a drawback for a retailer when offering national brands?

B - Retailers have to discount some national brands in order to attract customers to their stores because customers compare prices for these brands across stores

Why is constructing a customer database more difficult for in-store transactions than it is for on-line shopping?

B - Store purchases can be made with cash

Which of the following is NOT a disadvantage of private label brands?

B - The retailer is more vulnerable to competitive pressures

When customers indicate they know the brand when the name is presented to them it is referred to as

B - aided recall

The sandwich restaurant, Subway, saw their sales double during the first two years of their ad campaign with Jared who ate only Subway sandwiches to lose weight. "Jared" has become synonymous with Subway through:

B - brand association

Which of the following is a vendor who forms an alliance with a retailer to help gain consumer insight, satisfy customer needs and improve performance and profit across a category?

B - category captain

In order to build the brand equity of their private label merchandise, a retailer needs to .

B - create a high level of brand awareness

Moselle was upset as to the service she received when she was trying to purchase a new handbag. First, the salesperson seemed preoccupied with a conversation with another associate and when she finally recognized Moselle, she was nowhere to be found when Moselle wanted to make a purchase. Moselle plans to make a formal complaint to management. What can a manager do to recover from this service failure?

B - encourage the customer to complain by listening without interruption

Which of the following best describes the type of data analysis that focuses on the composition of products purchased by a household during a single shopping

B - market basket analysis

In staple merchandise management systems, the _ is the amount of inventory below which the quantity available shouldn't go or the item will be out of stock before the next order arrives

B - order point

The ........ is the difference between customers' expectations and their perceptions of customer service.

B - service gap

Return on Assets, Asset turnover, Sales per employee, Sales per square foot are

B. Productivity measures on the organization level

When Aeropostale introduced their kids store P.S. from Aeropostale, they were ________ to support their growth strategy.

B. extending their brand name

Which of the following statements about assortment is NOT true?

C - Consumers want to have unlimited choices in merchandise.

Which of the following statements does NOT describe price discrimination correctly?

C - Consumers want to have unlimited choices in merchandise.

A performance measure, which assesses a buyer's performance based on the factors the buyer can control, is

C - GMROI

Which of the following best describes customer loyalty?

C - It is an emotional connection between a retailer and a customer.

Which of the following is NOT a cost typically associated with global sourcing decisions?

C - Labor cost

Which of the following is NOT TRUE regarding frequent shopper programs?

C - When retailers in the United States issue customers a frequent shopper card, the companies are legally required to obtain the customers' permission to share personal information.

Roland manages a large antique mall housing 200 vendors and welcoming 150,000 shoppers annually. He has strived to increase his overall sales each year. Up until a year ago, his advertising was limited to signage along the local highway. For one year now, he has been advertising in antique magazines and regional newspapers in order to increase sales in the mall. How should Roland begin with evaluating the results of his advertising campaign?

C - compare the sales of this year to prior

Walgreens and CVS brands are placed next to the manufacturer's brands in the store, and they often look like them. This kind of brand is called .

C - copycat brand

The only retailer that Tommy Hilfiger apparel is available at other than manufacturer's own outlet stores is Macy's. This is an example of a/an:

C - exclusive brand

Which the following type of brands would a retailer normally expect to get the lowest gross margin percentage?

C - national brands

Merchandise like men's crew socks, canned peas, college ruled loose leaf paper and 60-watt light bulbs would be considered .

C - staple merchandise

Dust free, clean, and organized stores with updated dressing rooms, are examples of a retailer's commitment to service through _

C - tangibility

What measures the profitability of products that are sold?

C. gross margin

What is empowerment and why s empowerment an important factor in setting up the procedures for handling customer complaints?

Empowerment is when employees are self-sufficient in handling problems to provide better customer service. Customers are more satisfied when the first person they contact is able to resolve the problem. When customers are referred to several different employees, they waste a lot of time repeating their story. In addition, the possibility of conflicting responses by store employees increases.

A buyer for men's underwear category tries to project units of sales for next year based upon historical data. The buyer believes that the planner will keep the inventory in stock better this year by size and color, reducing the amount of stock outages from last year. Because of this predicted better in stock position, the buyer forecasts that there will be 4% growth in sales this year over last year. Last year 120,000 units were sold. Assuming that the other factors affecting men's underwear sales last year will be the same, what will be the unit sales projection for this year?

D - 124,800 (Last year's unit sales * + 4% increase or growth = 120,000 * 1.04 = 124,800)

. is the actual sales realized for the merchandise minus its costs of the merchandise sold

D - Maintained markup

Why do department stores organize some of their private label products near national brands?

D - The known national brands attract customers into the department

A catalog retailer of kitchen items that sells aluminum muffin pans has found that some weeks it sells 40 pans, and other weeks it sells none. A reorder can take up to three weeks. The probability of running out of pans and alienating its customers can be alleviated by maintaining .

D - backup stock

Which of the following is an excellent source of information to help a retailer improve its customer service?

D - customers' complaints

To reduce the delivery gap, retailers need to:

D - provide employees with necessary skills and knowledge to be able to perform their jobs

Which of the following is NOT a vehicle through which retailers communicate with their customers?

D - store management

Ferdinand ran a pie shop in a busy metropolis. He sold his fresh pies for $7, but it cost him $2.50 to make them. The cooking equipment in his shop cost him $46,000. How many pies does Ferdinand need to sell to make $50,000 annually?

D. 21,333 pies ($46,000 + $50,000) / ($7-$2.5) = 21,333 pies)

Second Chance is a paperback book exchange. For each book trade, the buyer pays a $1 trade fee. Books that are sold and not traded cost half of their original purchase price. The store has total assets of $126,000 and current assets of $40,200. Its net sales equaled $35,000 and its net profit after taxes was $9,000. Calculate the store's net profit percentage.

D. 25.7%

The owner of a jewelry retail chain estimated advertising at $4,000 for the year and estimated the downtown store location's market share at 35 percent. By using the competitive parity method, what is the jewelry downtown store location's communication budget?

E (The competitive parity method utilizes the market share the store has to the total company to determine the amount of communication budget for that location. $4000 * .35 = $1400)

Best Buy originally priced a private-label portable DVD player at $99, then sold 1,200 units per week. After raising the price to $120, sales dropped to 1,000 units per week. What would the item's price elasticity be?

E - -.7855

Which of the following statements is NOT correct?

E - Inventory Turnover is Cost of Goods Sold divided by Average Inventory at Retail.

Country Homes is a store for people who collect country arts and crafts and use them to decorate their homes. Last year its net sales totaled $120,500. The cost value of the items it sold was $72,300. Taxes for the year were $7,680. The only expenses that the operation had were (1) rent for $3000, (2) salaries to the owner and one part-time assistant for $27,000, (3) utilities at $1,200 and (4) advertising of $500. Calculate the after tax net profit percentage for Country Homes

E. 7.3 percent

What can a retailer do to build the brand equity of its firm or private-label merchandise?

In order for a retailer to build the brand equity of its firm or private-label merchandise, they need to (1) create a high level of brand awareness, (2) develop favorable associations with the brand name, and (3) consistently reinforce the image of the brand.

Describe the difference between initial markup and maintained markup

Initial markup is the first price or mark-up on the product. The initial mark-up must be high enough to cover reductions such as markdowns, employee discounts and shrinkage. Maintained markup is the realized price or mark-up on the product that takes place after markdowns, employee discounts and shrinkage.

Explain why or in what case focusing on increasing inventory turnover can decrease GMROI

Inventory Turnover helps assess the buyer's performance in managing asset (merchandise inventory) while GMROI is a measurement of how many gross margin dollars are earned on every dollar of inventory investment made by the buyer. Buyers need to consider the trade-offs associated with managing Inventory Turnover. For instance, a price promotion can speed up inventory turnover but price discounts also reduce gross margin and, therefore, GMROI. Inventory turnover = Cost of goods sold / Average inventory at cost GMROI = Gross Margin / Avg. Inventory at Cost

What is inventory turnover used to evaluate?

It is used to see how quickly retailers sell their investment in inventory

What is market basket analysis, and when do retailers utilize it?

Market basket analysis is a specific type of data analysis. It is focused on the composition of the basket, or bundle, of products purchased by a household during a single occasion. This analysis is often used for suggesting where to place merchandise in a store, or recommending complementary items in online shopping environments.

What is a customer lifetime value (CLV), and how is it estimated?

Retailers often use information in their customer databases to determine how valuable each customer is to their firm. The value of a customer, called customer lifetime value (CLV), is the expected contribution from the customer to the retailer's profits over their entire relationship with the retailer. Retailers typically use past behaviors to forecast their CLV.

What are some of the drawbacks of using a private label brands?

Some of the drawbacks of offering private label brands include (1) The high initial investment to design merchandise, create customer awareness and develop a fashionable image for the brand. (2) It is complicated if the private label vendor is located outside the U.S. (3) Sales associates require additional training that is completely funded by the retailer. (4) If the private label merchandise doesn't sell, it cannot be returned to the vendor.

Define debt-to-equity ratio.

The debt-to-equity ratio is the retailer's short- and long-term debt divided by the value of the owners' or stockholders' equity in the firm. The debt-to-equity ratio measures how much money a company can safely borrow over long periods of time. A high ratio means the retailer faces greater risk and more potential for bankruptcy.

What is the difference between first degree price discrimination and second degree price discrimination?

The difference between the two is that with first degree price discrimination, the retailers charge customers as much as they would be willing to pay. Second degree price discrimination is charging different prices to different people based on the nature of the offering.

Why do manufacturer brands often generate lower gross margins for retailers than do private label brands?

The manufacturers must charge the same price to all retailers who purchase a given quantity. Since multiple retailers may carry the same product in a market, retailers are forced to price competitively on those manufacturer brand items. Thus, there is less opportunity to earn higher gross margins. On the other hand, private labels, by definition, are only available at one retailer. Thus, by having an exclusive brand, it is possible to garner higher margins.

what are net sales?

The revenues received from selling merchandise

What are the steps involved in effective service recovery?

The steps in effective service recovery are (1) listen to the customer, (2) provide a fair solution, and (3) resolve the problem quickly.

How is gross margin percent calculated?

gross margin dollars divided by net sales