MKT 320 Exam 3

The purpose of an open-to-buy system is to __________.

record how much of the merchandise budget has been spent at any given time, and keep track of how much remains available to spend

According to the authors of your textbook, one of the advantages of the EDLP pricing strategy is that it __________.

reduces stockout

Shirley Turley owns Ballistic Bazaar, a gun shop and shooting range. Ballistic Bazaar pays $822 for a Sig Sauer 1911 Carry Scorpion. To set her retail price for the SKU, Shirley applies an initial markup that is 33.33% of her selling price. Then, to implement odd pricing, she rounds the price upward to the nearest 99 cents. The retail price of this particular SKU will be _____.

$1,232.99

If a retailer can sell an item for $6 and needs a 40% markup on selling price to meet profit objectives, that retailer should pay no more than _______ for the item.

$3.60

Sondra Alondra owns Gothic Ghoullery, a specialty apparel and accessories store. For most of the merchandise she sells, Sondra sets the price by "keystoning." This means that if Sondra sells a pair of chrome-studded black multi-buckle knee-high platform boots for $150, the markup must be _____.

$75

Polly-Esther Cotton is a buyer for a national women's wear chain. Yesterday, Polly-Esther told her significant other that she is "going to market" and she will be away for a week and a half. In this context, what does "market" mean?

A concentrated area where vendors are permanently located; here, they show new merchandise during certain times of the year.

Regarding frequent-shopper programs, with which of the following statements would the authors of your textbook likely agree?

A. Members of such programs generally prefer to receive something extra as a reward for their purchases, rather than lower prices. B. One of the objectives of a frequent-shopper program is to identify customers by their transactions, in order to build a customer database. C. Frequent-shopper programs often are not very effective at building repeat

As a retailer develops its CRM program, which of the following is likely to be one of its objectives?

A. Retain high-LTV customers - and gain a greater share of wallet from them by providing more value. B. Convert "good" customers into high-LTV customers, perhaps through add-on sales. C. Get rid of unprofitable customers, i.e., "get the lead out."

10. Minnie Small-Frye is a buyer for a chain of toddlers' and children's' apparel stores. This week, Minnie is working through adjustments to the chain's assortment plan for its winter clothing offerings. In order to decide which SKUs should continue to be in the plan - as well as to determine backup stock requirements and merchandise availability - Minnie is analyzing each SKU based on its sales, contribution to gross margin, and GMROI. Next, she'll classify the SKUs into four groups. The first group will consist of a small group of SKUs that account for a disproportionately-large share of the retailer's sales. Minnie will make a point of maintaining ample backup stock of these items, in order to ensure that the stores do not run out of them at any time during the winter season. The next group will consist of SKUs that sell pretty well, but account for a lesser share of the retailer's sales than the first group. Minnie will not give these SKUs as high a priority as the first group; in fact, she doesn't view the prospect of running out of them for a day or two as particularly tragic. Minnie's third group will consist of SKUs that account for a small percentage of sales, maybe ten or fifteen percent. Minnie will order only the most popular sizes of these items, and will expect store managers to place special orders for other sizes when customers occasionally request them. The fourth and final group will consist of SKUs that never sell until they're marked down. Yes, that's right - as good as Minnie is at her job, she still picks some losers from time to time. That's the nature of retailing. Minnie will eliminate most SKUs in the fourth group from the assortment plan. The procedure that Minnie is following is called __________.

ABC analysis

A(n) __________ identifies the set of SKUs (within a category) that a retailer will offer in each of its stores.

Assortment plan

Market basket analysis has found __________ to be the most common item in Americans' grocery carts.

bananas

To calculate __________, retailers use a mathematical model that takes into consideration the gross margin from a customer's past purchases, the estimated cost (including advertising and other promotion) of acquiring the customer, and the cost of processing merchandise that has been returned by the customer.

Customer lifetime value (CLV)

The fourth step in merchandise management planning is to __________.

Establish a control system for managing inventory

Gross Margin return on investment (GMROI) is a metric used by retailers to determine a ______'s contribution to ________

buyer; ROA

As they are developing their CRM programs, many retailers use the "customer pyramid" classification to identify their highest-value customers. On the pyramid, customers are classified hierarchically based upon their customer lifetime value (CLV) scores. These four tiers of customers, in order of bottom of the pyramid to top, are labeled __________, __________, __________, and __________.

Lead; iron; gold; platinum

The authors of your textbook describe [a] __________ as "a specific type of retail analytics that focuses on the composition of the . . . bundle of products purchased by a household during a single shopping occasion."

Market basket analysis

In the typical system for grouping merchandise within a retailer's buying organization, which of the following correctly describes the levels of merchandise, from highest to lowest? Or, said differently, from the broadest to the most specific?

Merchandise Group > Department > Classification > Category > SKU

As a vendor, Allie McNally works very well with Nordstrom's women's advanced modern sportswear buyer, Mollie Holley. The working relationship has been mutually satisfactory for several years. This past year, Allie's line of sportswear has included a few SKUs that sold poorly. It's now time to show Nordstrom (i.e., Mollie) the next season's product line. Allie expects that this time, Mollie will be a tougher negotiator than before. What should Allie be prepared to do?

Provide markdown money.

Under federal law, a vendor cannot charge different prices on "goods of like grade and quality." Exceptions are allowed in the case of a retailer that is performing functions that lower the vendor's cost of doing businesses with that retailer. For example, a retailer that can receive one large shipment at its central distribution center - where other retailers require multiple small shipments to their individual stores - provides the vendor with money-saving efficiency in the loading and shipping process. Therefore, the vendor can legally offer that retailer a price that accurately reflects the lower cost of doing business with the retailer. The specific law that sets forth these provisions is the __________.

Robinson-Patman Act (1936)

Last month, Harry Krishna spent $42.24 at Rite Aid, $55.37 at Walgreens, $19.87 at CVS, and $88.60 in the pharmacy section of Walmart.If we divide the amount that Harry spent at Walmart ($88.60) by his total drug-related expenditures for the month ($42.24 + $55.37 + $19.87 + $88.60), we are left with a quotient of .4299 (42.99%).Retailers refer to this figure as Walmart's __________.

Share of wallet

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

Staple merchandise

If you're walking into Martin's Cigar Shop in Lexington for the first time, the first thing you notice is likely to be the sign on the door:This is a work-free smoke place. The second thing you're likely to notice is that the customers are in no hurry to leave after they make a purchase. A "regular" customer is likely to take a seat, light a recently-purchased cigar, and engage in conversation about such time-honored topics as cigar preferences, single-barrel bourbon, horse race handicapping, politics, and the Kentucky Wildcats. Most of the customers will not shop at any of the other cigar retailers in town. Most regular customers have also bought a humidor from Martin's at one time or another, and most keep at least a couple dozen fine cigars on hand at home. Furthermore, most regulars also visit Martin's several times per week, most know several other regulars by their first name, and most will treat a newcomer to the same good-natured ribbing that they dish out to the other regulars.The authors of your textbook would say that Martin's customers are, collectively, a classic example of __________.

a retail brand community

A(n) __________ is a group of consumers with similar needs and a group of retailers that satisfy those needs using a similar retail format.

a retail market segment

3. According to the authors of your textbook, one of the ways a retailer can develop a sustainable competitive advantage is by building strong relationships with customers, i.e., by cultivating customer loyalty. All other things being equal, retailers can build strong customer loyalty by __________.

a. Offering unique merchandise b. Training employees to deliver superior customer service c. Offering attractive rewards through a frequent shopper program

For retailers who wish to involve themselves in the CRM process, the first necessary activity is collecting customer shopping data. The second activity is __________.

analyzing customer data and identifying

Kent Dent and his partner "Scratch" Hatch own Scratch & Dent Appliance. Last summer, they bought a truckload of LG clothes dryers that had minor cosmetic defects. Kent and Scratch paid $375 each for the machines, which they displayed in the store with a retail price of $579.99. Three months later, none of the machines had sold, so Kent and Scratch reduced the price to $529.99. Within a month, all of the machines had sold. The maintained markup on this truckload of merchandise was ___ percent.

approximately 30

Carrefour asked a vendor, Colgate, to help it better understand how consumers shop for oral care products, and to help maximize sales of all oral care products that Carrefour carries, regardless of brand. Colgate dug into its own past research into consumer behavior and made several well-informed recommendations, including the suggestion that Carrefour display toothbrush products directly above toothpaste products, instead of side by side as it had been doing for years. Carrefour followed Colgate's advice. Thereafter, sales of oral care products in Carrefour stores increased by 6 to 16 percent, depending on location. Colgate's sales increased as well. By asking Colgate to serve in this advisory capacity, Carrefour gave the company preference over other oral care product vendors such as Unilever, Procter & Gamble, GlaxoSmithKline, and Church & Dwight. The authors of your textbook would say that in this example, Colgate is Carrefour's __________ for oral care products.

category captain

Porter McWhorter's seasonal allergies were acting up when he got out of bed yesterday morning. Throughout the day, his symptoms got worse. On the way home from campus, Porter stopped at CVS to buy Claritin. On the shelf, next to the blue Claritin packages, he noticed similarly-colored packages of "non-drowsy allergy relief tablets" with the red CVS logo in small print. When Porter picked up both the Claritin package and the CVS non-drowsy allergy relief tablets package, he saw that both medications have the same active ingredient: 10 mg Loratadine. Porter sees that he can buy almost twice as many CVS "non-drowsy allergy relief tablets" as he can Claritin tablets for the same price. The authors of your textbook would classify CVS' private-label allergy relief tablets as a(n) __________ brand.

copycat

Last week, Jolene Moline went shopping for bargain-priced clothing and shoes at Overstock.com. Jolene was thrilled to find a pair of Alfani boots (in her size!) for $51.99. As Jolene was finalizing her order, she said to herself, "I don't think I've seen this brand anywhere but Macy's before." Indeed, Jolene is correct. Alfani is one of Macy's private-label brands. The authors of your textbook would describe Jolene's new boots as __________ merchandise.

diverted

When designer Vince Camuto created women's shoe brands Antonia Melani, Gianni Bini, Nurture, and Michelle D to be sold only at Dillard's, the retailer and the designer were teaming up to launch __________ private-label brands.

exclusive

Even though they do not have authorization from manufacturers, distributors will sometimes divert products from low-price markets to sell them in high-price markets. For example, a consumer in the U.S. who is shopping for a new Japanese-built Yamaha grand piano may find one for $27,500 and another very similar one for $14,000. The difference is that the $27,500 Yamaha piano was built for the U.S. market; the $14,000 Yamaha piano was built for the southeast Asia market and was intended to be sold at a list price of $8,500 in that market. Through unauthorized redirection into the U.S., some distributor (which has not been authorized by the Yamaha Corporation) makes additional money, even though the consumer pays less. (The consumer may actually be ripped off, though, because the wooden parts of the piano have been carefully selected and treated for optimal performance in the humidity of southeast Asia; those parts may crack or wear out prematurely from becoming excessively dry in some areas of the U.S.) This scenario is an example of __________.

gray-market merchandise

Matt Flatt buys most of his business attire and some of his casual attire at Joseph A. Bank. Matt thinks Jos. A. Bank's regular pricing is "a bit on the high side," but the clothes are well made and he likes the way they look and feel. Matt has learned to watch for sales at Jos. A. Bank's stores, as well as at the company's online store. A couple of months ago, during a two-day sale, he was able to buy an "Executive" suit for $199, instead of paying the regular price of $598. A month later, during a dress shirt sale, he ordered two "Reserve Collection" wrinkle-free dress shirts at the Jos. A. Bank website. The shirts were priced at two for $89 instead of the regular price of $109.50 each. Not too long thereafter, Matt took advantage of another sale and bought three "Traveler" sportshirts for $39 each (they're normally $89.50 each). The following month, during a four-day sale, he bought a "Traveler" suit for $279 instead of paying the regular price of $798. As an experienced Jos. A. Bank shopper, Matt knows he can expect several more sales this year, and he plans to add something relevant to his work wardrobe each time a sale happens. In this scenario, Matt is benefiting from Jos. A. Bank's __________ pricing strategy.

high/ low

Kroger's Big K cola, Target's Archer Farms snacks, and Walmart's Ol' Roy dog food are examples of __________ brands.

house

5. While Vince Pence is buying a pair of Air Jordan XXXIII basketball shoes at Dick's Sporting Goods, the sales associate asks him if he has a ScoreCard®. After Vince replies that he does not, the sales associate explains that if Vince were to become a member, he would earn a $10 reward every time his points reached 300 - and points add up at the rate of 1 point per dollar spent in the store or at DicksSportingGoods.com. The sales associate asks if Vince would like to become a member. Vince does some mental arithmetic and concludes that if he had become a member a year ago, he would have earned $40 worth of free merchandise by now. When Vince says yes, he would indeed like to have a ScoreCard®, the sales associate puts a brochure (which includes a wallet-sized card and two key fobs) in his bag and informs Vince that he can go online at his convenience and activate his membership. If the ScoreCard® program is the principal component of Dick's growth strategy, then the retailer's strategy can best be described as a(n) __________ growth strategy.

market penetration

A(n) __________ is an assortment of items that customers see as substitutes for one another. A few examples might be men's outerwear, soft drinks, fashion footwear, salty snacks, kitchen gadgets, floor coverings, and swim apparel.

merchandise category

To develop and refine its target marketing and positioning, a retailer may rely on a two-dimensional plot of consumers' perceptions of the retailer and its competitors. This visual aid is called a __________.

perceptual map

If you divide "percentage change in quantity sold" by "percentage change in price," you are calculating __________.

price elasticity

"Multi-unit pricing" means the same thing as __________.

quantity discount

Vincent Laurent, an English-speaking Frenchman, meets with buyers from the United States when they visit Paris. Once in Paris, the buyers rely on Vincent to make appointments with French vendors, which saves the buyers time and helps them penetrate the market. During the buyers' meetings with vendors, Vincent serves as an interpreter and assists in negotiations. From this information, we can conclude that Vincent works for a(n) __________.

resident buying office

The authors of your textbook define a retail strategy as a statement that identifies (1) the retailer's target market, (2) the format the retailer plans to use to satisfy the target market's needs, and (3) __________.

the bases on which the retailer plans to build a sustainable competitive advantage

Levi Strauss, a national manufacturer of apparel, will supply JCPenney with its most-popular styles of jeans only if JCPenney also carries other, lesser-known Levi's products, as well as the Dockers line of apparel and accessories. Levi Strauss is enforcing a(n) __________ in its relationship with JCPenney.

tying agreement