Muhammad Umar Farooq

Short Questions:
Chapter:6

Q: When would price cuts and price increases be necessary?

Answer: Price cuts may be necessary when there is excess capacity. Another time to
cut prices is when market share is falling in the face of strong price competition. A
company may also cut prices in a drive to dominate the market through lower costs. A
major factor in price increases is cost inflation. Rising costs squeeze profit margins
and lead companies to pass cost increases along to customers. Another factor leading
to price increases is over-demand. When a company cannot supply all its customers'
needs, it can raise its prices, ration products to customers, or both.
Q: For what types of products might marketers use market-
skimming pricing?
Answer: Such pricing works when the product's quality and image support the higher
price; for example, companies selling high-tech electronics may use market-skimming
pricing.
Q: For what types of products might marketers use market-
penetration pricing?
Answer: Marketers use such pricing when attempting to attract a large number of
buyers quickly and win a large market share; such pricing may be common when
competition for products is high.
Q: How do consumers benefit from product bundle pricing?
Answer: Several products are sold together at a reduced rate; vacation packages that
include air and hotel or value meals in the fast-food industry are examples.
Q: Give an example of a cash discount.
Answer: With a 2/10, net 30 arrangement, for example, the customer can deduct 2
percent if the bill is paid within 10 days.
Q: Explain the psychology behind a price of $9.99 instead of
$10.00.
Answer: Consumers typically see the $9.99 product in the $9 range instead of the $10
range; the price appears to psychologically be cheaper.
Q: How does deceptive pricing harm consumers?
Answer: Deceptive pricing occurs when a seller states prices or price savings that
mislead consumers or are actually not available to consumers.

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Chapter:7
Q. Compare and contrast a conventional distribution channel with a vertical
marketing system (VMS).
Answer: A conventional distribution channel consists of one or more independent
producers, wholesalers, and retailers. Each is a separate business seeking to maximize
its own profits, even at the expense of the system as a whole. No channel member has
much control over the other members, and no formal means exists for assigning roles
and resolving channel conflict. On the other hand, a vertical marketing system is a
unified system made up of producers, wholesalers, and retailers. While members of a
conventional distribution channel seek to maximize their own profits, members of a
vertical marketing system all cooperate because either one member owns the others,
one has contracts with the others, or one wields a more power than the others.

Q. Why are multichannel distribution systems gaining popularity today?

Answer: Multichannel distribution systems exist when a single firm sets up two or
more marketing channels to reach one or more customer segments. Such a system
offers advantages to firms facing large and complex markets. It allows the firms to
expand sales and market coverage. It allows firms to tailor their products and services
to the specific needs of diverse customer segments. Larger bottom-line profits may
occur.

Q. Distinguish between the three distribution strategies.

Answer: Producers of convenience products and common raw materials typically seek
intensive distribution as a strategy to stock their products in as many outlets as
possible. The goods are available where and when consumers want them, such as
chewing gum. Selective distribution is used when selling to more than one but fewer
than all of the intermediaries who are willing to carry a company's products in a given
market. Examples are name-brand blue jeans and computers. Exclusive distribution is
used when the producer wants to stock its products with only one or a few dealers in
an area. Examples are expensive cars and prestige clothing.

Q. What is the role of marketing intermediaries?

Answer: The role of marketing intermediaries is to transform the assortments of
products made by producers into the assortments wanted by consumers.

Q. How can a firm benefit from participating in a horizontal marketing system?

Answer: Two or more companies at one level join together to follow a new marketing
opportunity; by working together, companies can combine their financial, production,
or marketing resources to accomplish more than any one company could alone.

Q. What types of products are intensively distributed?

Answer: These products must be available where and when consumers want them;
examples include chewing gum, soft drinks, toothpaste, and candy.

Q. What types of products are exclusively distributed?

Answer: Exclusive distribution is often used for expensive automobiles and prestige
clothing. These products are geographically dispersed.

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Q. What types of products are selectively distributed?

Answer: With this type of distribution, more than one, but fewer than all, of the
intermediaries who are willing to carry a company's products are used. Products
include appliances and some name-brand clothing.

Chapter:8

Q. Explain how advertising may change as a product moves from the introductory
stage to the growth stage of the product life cycle?
Answer: Because there may be little awareness or little information generated about
products in the introductory stage of the life cycle, marketers may spend large
amounts of promotional dollars toward creating awareness. As the product moves into
the growth stage, many competitors may enter the market in an attempt to move the
product out of the way; in such cases, marketers may continue spending large
amounts of promotional dollars for advertising. However, at this point, the marketer
may decide to attempt to persuade consumers to buy based on specific product or
company attributes, or to compare their product with competing products in an
attempt to convince consumers that their product is superior. At the decline stage,
advertising is kept at a reminder level.

Q. How are advertising and direct marketing different?

Answer: Advertising is the non personal promotion of ideas, goods, or services, while
direct marketing is the promotion of ideas, goods, or services to carefully targeted
individuals.

Q. When does a marketer use informative ads?

Answer: Informative ads are used heavily when introducing new products or new
product categories.

Q. When does a marketer use a comparative ad?

Answer: Comparative ads are a type of persuasive ads in which a company directly or
indirectly compares its brand with one or more other brands.

Q. When does a marketer use reminder ads?

Answer: Reminder ads are important for mature products; they keep consumers
thinking about the product.

Q. Explain how different types of messages may require different media.

Answer: For example, a message announcing a major sale tomorrow will require
radio or newspapers; a message with a lot of technical data might require magazines,
direct mailings, or an online ad.

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Q. Explain why an ad would need to be modified from one country to the next.
Answer: Differences in perceptions of time, color, and imagery will impact how
effective or acceptable an advertisement will be in other countries. In addition,
changes in the use of language may be required to avoid being offensive to the foreign
culture. Also, countries have varying laws regulating advertising.

Q. Describe how nonstore retailing has grown in the past decade.

Answer: Though most purchases are still made in stores, more and more consumers
are now shopping using a broad range of nonstore alternatives, including mail-order,
television, phone, and online shopping. Easy-to-use Web sites, improved online
service, and sophisticated search engines have all helped online business grow at a
faster rate than retail buying. All types of retailers now use direct and online channels,
with traditional brick-and-mortar retailers selling online, along with online-only
retailers such as Amazon.com and eBay. Much of the growth in online sales will go to
multichannel retailers who provide service both in stores and online.

Q. Why would a producer use wholesalers rather than selling directly to retailers or
consumers?
Answer: Wholesalers add value by performing one or more of the following channel
functions: selling and promotion, buying and assortment building, bulk breaking,
warehousing, transportation, financing, risk bearing, providing market information,
and giving management services and advice. Wholesalers can perform many channel
functions more efficiently and effectively than a producer can, allowing the producer
to focus its energies on creating its product.

Q. How can discount stores sell merchandise at lower prices?

Answer: Discount stores sell merchandise at lower prices by accepting lower margins
and selling higher volumes.

Q. What are three advantages a chain has over an independent retailer?

Answer: A chain may benefit from a regionally or nationally known name, as well as
an established promotional campaign. In addition, because a chain is held together by
a centralized purchasing or administrative center, there is much bargaining power
with suppliers.

Q. How do merchant wholesalers and agents/brokers differ?

Answer: Merchant wholesalers "take title to" (or own) what it is they sell;
agents/brokers merely serve as liaisons, bringing buyers and sellers together.

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