Chapter 10: Place (Distribution) and Market Research

Question 1

What is a marketing channel

Answer 1

A marketing channel consists of the people, organizations, and activities necessary to transfer the ownership of goods from the point of production to the point of consumption.

Question 2

Why is a marketing channel needed?

Answer 2

• Customers’ desire for product assortment
• Better rate of return on core business
• Improve efficiencies of distribution

Question 3

3 Types of Marketing Channels

Answer 3

1. Manufacturer -> Customer
2. Manufacturer -> Retailer -> Customer
3. Manufacturer -> Wholesaler -> Retailer -> Customer

Question 4

What determines a marketing channel?

Answer 4

Characteristics of the Product
- Product or service
- Price
- Complexity
- Demonstration

Characteristics of the Customer
- Decision maker/decision making process
- Familiarity with product
- Shopping habit/places

Question 5

Unique role of channel members

Answer 5

Collaborators
- Common interest to make the sale and grow
- Share information
(Increase size of the pie)

Competitors
- Want more share of the margin
- Retailers interested in selling competitor’s products
- Retailer selling own (store) brand
- The brand sells to other retailers
(Compete over the share of the pie)

Question 6

Channel Functions: Physical Distribution

Answer 6

Physical Distribution
- Ordering (assortment, lot size,
availability..)
- Transportation and logistics
- Holding inventory
- Risk-taking

Question 7

Channel Functions: Selling activities

Answer 7

Selling activities
- Promotion & Demand Generation
- Contact with prospective customers
- Negotiation

Question 8

Channel Functions: Information/Market Feedback

Answer 8

Information/market feedback
- On Product, Customer, Competition…

Question 9

Channel Functions: Service

Answer 9

Service
- Customization of augmented product
- Financing

Question 10

Channel Member’s Economic Role

Answer 10

Manufacturer’s Transferred Business Cost to Channel Member:
- Inventory
- Order Handling
- Selling
- Credit

Channel Members: Wholesalers, Retailers, and Distributors.

Question 11

Characteristics of Distribution Schemes

Answer 11

For Exclusive Distribution:
- # of Distributors/Retailers: One
- Market Coverage: Less Important
- Product Category: Specialty
- Profit margin: High

For Selective Distribution:
- # of Distributors/Retailers: Limited but more than one
- Market Coverage: Moderate
- Product Category: Specialty and some Shopping
- Profit Margin: Moderate

For Intensive Distribution:
- # of Distributors/Retailers: All Suitable
- Market Coverage: Critical
- Product Category: Convenience
- Profit Margin: Low

Question 12

Channel Management Decisions

Answer 12

a. Selecting channel members
- Financial capability
- Stake in your firm and switching costs
- Category experience
- Organizational skills
b. Motivating Channel Members
- Promotions
- Training services
- Financing options
c. Evaluating Channel Members
- Sales quota attainment
- Customer service levels
- Treatment of lost and damaged goods

Question 13

Distribution Systems

Answer 13

1. Conventional marketing channel
   - M-W-R-C
2. Vertical marketing system
   - MWR-C
3. Horizontal marketing system
   - (M1+M2)-C
4. Hybrid marketing system
   - M-W-R-C1
   - M-C2

Question 14

Channel Conflict

Answer 14

1. Vertical
   - Coca-Cola and bottlers wanting to bottle Dr. Pepper
2. Horizontal
   - Some Ford dealers complain about other dealers being too aggressive in their pricing

Question 15

Managing Channel Conflict

Answer 15

• Diplomacy
• Focus on common goals
• Exchange of personnel
• Joint membership in trade associations
• Arbitration/mediation

Question 16

4 Steps of Channel Design

Answer 16

1. Find out what your customers want
2. Identify alternatives, determine costs
3. Bound the “ideal”. Impose constraints
4. Evaluate and Compare Alternatives

Question 17

Why is Marketing Research Necessary?

Answer 17

Value of Information:
- Decisions involve risk and uncertainty
when information is imperfect
- Information eliminates (or at least reduces) risk and uncertainty

Question 18

Purpose of Marketing Research

Answer 18

To collect useful information

Question 19

How can marketing research help?

Answer 19

• It can reduce risk and uncertainty
• It takes out some of the guess
  work involved in making marketing
  decision
• It can supplement (not replace)
  good sense

Question 20

Why is Marketing Research Necessary?

Answer 20

• Competitive Pressure
• Expanding Markets
• Increasing Customer
  expectations

Mistakes can be costly

Question 21

Why study research methods? what is the purpose?

Answer 21

• Information of higher accuracy is more valuable
• Study of research method gives insight into accuracy and reliability
  of information being generated

Question 22

(4 Steps) Marketing Research Process

Answer 22

1. Formulate Research Problem
2. Develop Research Plan: Research Objectives
   Exploratory, Descriptive, Causal
3. Implement Plan:
   a. Identify Data Source: Primary, Secondary
   b. Develop Questionnaire Design, Sample Size
4. Analysis and interpretation
   a. Analysis
   b. Reporting

Question 23

Stage 1: Problem Formulation

Answer 23

• Decision Problem: What should the manager do?
  –> You (manager) must develop a new product package.
• Research Problem: What
  information is needed, and how do you obtain the information?
  –> Evaluate effectiveness of alternative package design:
• Product freshness
• Visual Appeal
• Comparison to other options
• Comparison to competition

Question 24

Stage 2, Develop Plan: Sources of Data

Answer 24

Primary: Data gathered for the specific problem
at hand
- Demographics, psychographics, attitudes, intentions,
behavior

Secondary: Data that have been previously
gathered for some purpose. Relatively
inexpensive and fast, but inaccurate and ill-
fitting the problem
- Internal: Sales data, warranty cards
- Published: Directories, periodicals, statistical sources
- Commercial: Ad exposures, scanner data, store audits

Question 25

Stage 2: Develop Plan and Research Design

Answer 25

Research Objectives: a. To Define the Problem and Suggest Hypotheses: Exploratory Research: - To gain ideas and insights - Newspaper facing decreasing sales generates possible explanations b. To Describe Market Situation: Descriptive Research: - To obtain summary measures - Trends in lifestyle of current users c. To Predict Hypothesis about Cause and Effect: Causal Research: - For cause-effect connection - How people react to a newspaper’s topic selection and space allocation

Question 26

Different ways to Operationalize

Answer 26

1. Exploratory 2. Observation and Focus groups 3. Qualitative research 4. Descriptive 5. Survey 6. Quantitative 7. Causal Research 8. Experiments 9. Hypothesis

Question 27

Exploratory

Answer 27

- No sense of what is going on, why - Need to find out more even to form a hypothesis - Provides a starting point

Question 28

Observation and Focus groups

Answer 28

- Best suited for exploratory research - Observing consumer behave (in stores) gives pointers to ‘why’ they behave - In-depth interviews - Focus groups

Question 29

Qualitative Research

Answer 29

Very special skills to get it right!

Question 30

Descriptive

Answer 30

- Need to get quantitative estimate of sizes - Sample size critical

Question 31

Survey

Answer 31

- Best suited for descriptive research - You have a sense of what you want to find out – need to get a sense of population proportions - Design of survey is critical - wording, ordering, response format - Do not want to bias the responses [Note: all surveys should be pre-tested]

Question 32

Quantitative

Answer 32

Requires good quantitative skills to analyze data

Question 33

Causal Research

Answer 33

Need to establish causality: ‘x’ causes ‘y’; e.g., change in price affects sales

Question 34

Experiments

Answer 34

- Take comparable situations – just change one element to test its effect. (e.g., two similar cities with high vs. low price  effect on sales) - Test market is another example

Question 35

Hypothesis

Answer 35

Specific hypothesis being tested

Question 36

Stage 3, Implement Plan: Developing the Questionnaire (survey)

Answer 36

Specify what information is sought - Determine method of administration - Determine content, wording, response format for each question - Determine question sequence - Pretest questionnaire and revise if necessary

Question 37

Stage 3, Implement Plan: Sampling

Answer 37

- Simple random sampling: Each element of population has an equal probability of being selected - Stratified sampling: Entire population is divided into strata, and do simple random sampling from each stratum - Cluster sampling: Entire population is divided into clusters –each representing the population, and do random sampling of clusters - Key considerations: a. Cost: Sample size, method of data collection b. Information accuracy: Sample representativeness, respondent error, administrative error

Question 38

Contact Methods (For primary data collection)

Answer 38

- Mail - Telephone - Internet - Personal a. individual (one-on-one) b. group (focus groups) - Sampling Plans (for primary data collection) a. Who to survey? (individuals? families?) b. How many people? c. Sampling procedure? Q: How reliable and/or valid are the results?

Question 39

Typical Problems in Wording Questions

Answer 39

1. Leading question 2. Ambigous question 3. Unanswerable question 4. Two questions in one 5. Non-exhaustive question 6. Mutually non-exclusive question

Question 40

Stage 4, Analysis and Reporting

Answer 40

- Did the research meet its objectives? - Was the information helpful in making the decision? Did the managers use the information? - Was there an ‘aha’ factor? - Did the analysis throw open some additional issues?