marketing channels quiz 1 in class review questions
Start at retailer: Retailer sells to consumer for $20 and has 50% trade margin. Selling price (SP) of retailer ($20) = cost price (CP) of retailer + retailer profits, which are 50% of SP (= 50%*$20=$10). So, CP of retailer =$10. This must be same as SP for wholesaler . For Wholesaler: SP = CP + Profit (40% of SP ) $10 (from above) = CP+ 40%*$10 So, CP for wholesaler =$6. This must be same as SP of manufacturer. For Manufacturer: SP = CP + Profit $6 (from above) = CP (which is same as COGS for manufacturer= $4) +Profit So, $6= $4+ Profit; thus profit =$2. Hence, trade margin for manufacturer (as % of its selling price always)= $2*100/$6= 33.33%.
A manufacturer sells a good to a wholesaler (trade margin 40%) who sells to a retailer (trade margin 50%). The retailer in turn sells to end consumers at $20/ unit. What is manufacturer's trade margin if its cost of production (COGS) is $4/ unit
Selling price (SP) = cost price(CP) + profit, Trade margin = 50% = 0.5* SP [Trade margin is always computed as % of selling price] So, SP = $10 + 0.5*SP So, 0.5 SP= $10 So, SP= $20
A retailer's trade margin is 50%. What is her selling price to consumers, if her cost price is $10?
True
True or False Manufacturers have only a limited control over their reps.
False- Agents work for commission.
True or False Merchant wholesalers always work on a commission basis.
False- It increased retailer power
True or false: Private label brands tend to increase manufacturer power over retailer
Three-tailing
Convergence of in-store, catalog and online retailing is known as
Selling same product through more than one channel such as retail stores and online can lead to conflict between the two outlets.
Define Multi-channel conflict. Illustrate with an example
Territorial restriction is an arrangement where one dealer gets the exclusive right to represent a manufacturer in a given location. It can be good because it can create commitment in the dealer's mind towards' manufacturer brands, and the dealer will strive hard against other competing brands (INTER-BRAND competition); this can promote competition. -- But as explained in class, by itself, territorial exclusivity can reduce competition between dealers of same brand (INTRA-BRAND competition).
Define territorial restrictions . Can they be beneficial to firms ? Why/ how?
Dual distribution refers to a scenario where the same product is sold through company's own outlet as well as through an independent dealer. Exclusive dealing does not involve necessarily the idea of selling through company's own stores. It implies a situation where a firm (manufacturer) forces a retailer to carry only the manufacturer's products.
List one difference between dual distribution and exclusive dealings.
Drop shipper, rack jobbers, cash and carry
List one type of limited function wholesaler
With RPM clauses, dealers are not allowed to go below a certain price floor; so, the likelihood of dealers undercutting each other in terms of pricing is almost eliminated. This increases the likelihood of dealers being profitable. Profitable dealers are more likely to offer superior service, warranty, repairs, returns etc to consumers and keep them satisfied. They will also be more likely to engage in inter-brand competition to bring competitor customers into their fold.
Manufacturers often impose retail price maintenance (RPM) clauses on their dealers. List one reason against viewing such restrictions as anti-competitive.
C
The "Colgate Doctrine" is: a. The legal basis for the American Dental Association's endorsement of toothpaste channels. b. The common term for state level "fair trade laws". c. The legal basis for sellers to use their own judgment in deciding to deal with new channel members.
B
Which is not a part of the definition of marketing channel? A. External, i.e., the channel involves interorganizational relationships B. Non-Contactual, i.e., channel does not involve negotiatory functions. C. Distribution objectives, meaning management has certain distribution goals in mind.