UF MAR3023 - Unit 3 Vocabulary (Spring 2024)

UF MAR3023 (Principles of Marketing) Unit 3 (Chapters 2, 7, 13, 14, 15, 16, 17, and 22) with Professor Guinot.

Marketing Channel

A group of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users. This pipeline makes the flow of products and services from a producer, through intermediaries, to a buyer possible. Moreover, intermediaries are used by manufacturers to create value for buyers.

Middleman

Any intermediary between the manufacturer and end-user markets.

Agent (Broker)

Any intermediary with legal authority to act on behalf of the manufacturer. This intermediary can be from a third-party group that does not own the manufacturer's products. They are typically responsible for managing all aspects of the sales process, including negotiating prices and handling product orders.

Wholesaler

An intermediary who sells to other intermediaries or retailers. This term also usually applies to consumer markets.

Retailer

An intermediary who sells to consumers.

Distributor

An imprecise term that is usually used to describe intermediaries who perform a variety of distribution functions, including selling, maintaining inventories, and extending credit. Even though this term is more common in business markets, it can also be used to refer to wholesalers.

Dealer

A more imprecise term than distributor that can mean the same as distributor, retailer, or wholesaler.

Transactional Function

One of the three basic functions performed by intermediaries that involves purchasing products for resale or as an agent for the supply of a product (buying), contacting potential customers, promoting products, seeking orders (selling), and assuming business risks in the ownership of inventory that can become obsolete or deteriorate (risk-taking). This function is performed when an intermediary wants to buy and sell products or services.

Logistical Function

One of the three basic functions performed by intermediaries that involves creating product assignments from several sources to serve customers (assorting), assembling and protecting products at a convenient location to offer better customer service (storing), purchasing in large quantities and breaking into smaller amounts desired by customers (sorting), and physically moving a product to customers (transporting). This function involves the details of preparing and getting a product to buyers.

Facilitating Function

One of the three basic functions performed by intermediaries that involve extending credit to customers (financing), inspecting, testing, or judging products and assigning them quality grades (grading), and providing information to customers and suppliers, including competitive conditions and trends (marketing information and research). These functions make a transaction easier for buyers.

Time Utility

One of the four utilities that refers to having a product or service when the consumer wants it. This helps create value related to convenience and speed for consumers.

Place Utility

One of the four utilities that refers to having a product or service available where consumers want it. This helps create value related to convenience and prestige for consumers.

Form Utility

One of the four utilities that refers to enhancing a product or service to make it more appealing to buyers. This helps create value for consumers.

Possession Utility

One of the four utilities that entails efforts by intermediaries to help buyers own a product or service. Through the use of things like easy payment methods or leasing contracts, this utility helps create value for consumers.

Direct Channel (Channel A)

A marketing channel where the producer and the ultimate consumer deal directly with each other. Since there are no intermediaries with this marketing channel, the producer performs all channel functions. Firms also use this marketing channel when they maintain their salesforce and perform all channel functions.

Indirect Channel

A marketing channel where intermediaries are inserted between the producer and consumers and perform numerous channel functions. The intermediaries that are inserted between the producers and the consumers are either in Channel B (common for large retailers), Channel C (common for low-cost, low-unit value items), or Channel D (common for small manufacturers).

Channel B

An indirect channel where an industrial distributor performs a variety of marketing channel functions, including selling, stocking, delivering a full product assortment, and financing. These industrial distributors are like wholesalers in consumer channels.

Channel C

An indirect channel that introduces a second intermediary, an agent, who serves primarily as the independent selling arm of producers and represents a producer to industrial users.

Channel D

The longest indirect channel that includes both agents and industrial distributors. Typically, this indirect channel uses agents to call on industrial distributors who then sell to potential users.

Digital Marketing Channels

Common marketing channels that make products and services available for consumption or use by consumers or organizational buyers. A unique feature of these channels is that they combine electronic and traditional intermediaries to create time, place, form, and possession utility for buyers.

Direct-to-Consumer Marketing Channels

Marketing channels that allow consumers to buy products by interacting with various print or electronic media without a face-to-face meeting with a salesperson. These marketing channels include mail-order selling, direct-mail sales, catalog sales, telemarketing, interactive media (websites), and televised home shopping.

Dual Distribution

An application in marketing channels that involves an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product. While this is not illegal, it can be viewed as anticompetitive in some situations and could violate both the Sherman and Clayton Acts.

Strategic Channel Allowances (Strategic Channel Alliances)

An application in marketing channels whereby one firm's marketing channel is used to sell another firm's products. This is popular in global marketing, where the creation of marketing channel relationships is expensive and time-consuming.

Vertical Marketing Systems

Professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximum marketing impact. The three major types of these marketing channels are the corporate marketing system, the contractual marketing system, and the administered marketing system.

Corporate Vertical Marketing System

A vertical marketing system that is the combination of successive stages of production and distribution under a single ownership.

Forward Integration

A practice where a producer might own the intermediary at the next level down in the channel. It is a business strategy that involves expanding a company's activities to include control of the direct distribution of its products.

Backward Integration

A practice where a retailer might own a manufacturing operation. It is a business strategy that allows a company to expand its role to fulfill tasks formerly completed by businesses up the supply chain.

Contractual Vertical Marketing System

A vertical marketing system that lets independent production and distribution firms integrate their efforts on a contractual basis to obtain greater functional economies and marketing impact than they could achieve alone. This is the most popular type of the three vertical marketing systems.

Wholesaler-Sponsored Voluntary Chains

A variation of the contractual system that involves a wholesaler that develops a contractual relationship with small, independent retailers to standardize and coordinate buying practices, merchandising programs, and inventory management efforts.

Retailer-Sponsored Cooperatives

A variation of the contractual system that exists when small, independent retailers form an organization that operates a wholesale facility cooperatively. Member retailers then concentrate their buying power through the wholesaler and plan collaborative promotional and pricing activities.

Manufacturer-Sponsored Retail Franchise Systems

A type of franchise agreement in the automobile industry where a manufacturer licenses dealers to sell its cars subject to various sales and service conditions.

Manufacturer-Sponsored Wholesale Franchise Systems

A type of franchise agreement in the soft-drink industry where a company licenses wholesalers (bottlers) who purchase concentrate from the company and then carbonate, bottle, promote, and distribute its products to retailers and restaurants.

Service-Sponsored Retail Franchise Systems

A type of franchise agreement that is used by firms that have designed a unique approach for performing a service and wish to profit by selling the franchise to others.

Service-Sponsored Franchise Systems

A type of franchise agreement that exists when franchisors license individuals of firms to disperse a service under a trade name and according to specific guidelines. They also do not have a unique approach.

Administered Vertical Marketing Systems

A vertical marketing system that achieves coordination at successive stages of production and distribution by the size and influence of one channel member rather than through ownership.

Density

The number of stores in a geographical area and the type of intermediaries to be used at the retail level of distribution. The three degrees of channel coverage are intensive, exclusive, and selective distribution. This is one of the factors that affect channel choice and management since it is connected to target market coverage.

Intensive Distribution

One of the three degrees of distribution density which means that a firm tries to place its products and services in as many outlets as possible. This distribution density is usually chosen for convenience products or services such as candy, fast food, and soft drinks.

Exclusive Distribution

One of the three degrees of distribution density that is the extreme opposite of intensive distribution because only one retailer in a specific geographic area carries the firm's products. This distribution density is usually chosen for specialty products or services, such as some women's fragrances and men's and women's apparel and accessories.

Selective Distribution

One of the three degrees of distribution density that lies between the two extremes and means that a firm selects a few retailers in a specific geographic area to carry its products. This distribution density weds some of the market coverage benefits of intensive distribution to the control over resale evident with exclusive distribution.

Buyer Requirements

The second consideration in channel choice that refers to gaining access to channels and intermediaries that satisfy at least some of the interests that buyers might want to be fulfilled when they purchase a firm's products or services.

Information

One of the four buyer requirements that is important when buyers have limited knowledge or desire specific data about a product or service. Properly chosen intermediaries communicate with buyers through in-store displays, demonstrations, and personal selling.

Convenience

One of the four buyer requirements that has multiple meanings for buyers, such as proximity or driving time to a retail outlet. For some consumers, this buyer requirement means a minimum of time and hassle.

Variety

One of the four buyer requirements that reflects buyers' interest in having numerous competing and complementary items from which to choose. This buyer requirement is evident in the breadth and depth of products and brands carried by intermediaries, which enhances their attraction to buyers.

Pre- or Post-Sale Services

One of the four buyer requirements provided by intermediaries that is important for products such as large household appliances that require delivery, installation, service, and credit.

Profitability

The third consideration in choosing a channel that is determined by the margins earned (revenue minus cost) for each channel member and the channel as a whole. Channel costs are important in this consideration, and they include distribution, advertising, and selling expenses associated with different types of marketing channels. The extent to which channel members share these costs determines the margins received by each member and by the channel as a whole.

Channel Conflict

A conflict that arises when one channel member believes that another channel member is engaged in behavior that prevents it from achieving its goals. The two types of conflicts that can occur in marketing channels are vertical conflicts and horizontal conflicts.

Vertical Conflict

A channel conflict that occurs between different levels in a marketing channel. This conflict can happen between a manufacturer and a wholesaler or retailer or between a wholesaler and a retailer. The three sources of this conflict can come from disintermediation, disagreements over how profit margins are distributed among channel members, and situations where manufacturers believe wholesalers or retailers are not giving their products adequate attention.

Disintermediation

A type of vertical conflict that involves a channel member bypassing another member and directly selling or buying products. This concern (which did not materialize) is also known as the “Death of Retailers.”

Horizontal Conflict

A channel conflict that occurs between intermediaries at the same level in a marketing channel. This conflict can happen between two or more retailers or two or more wholesalers that handle the same manufacturer's brands. The two sources of this conflict can come from situations where a manufacturer increases its distribution coverage in a geographic area or situations where different types of retailers carry the same brands.

Channel Captain

A channel member who coordinates, directs, and supports other channel members. This channel member can be a producer, wholesaler, or retailer. A firm can also become this channel member if it can influence the behavior of other members. They can also manage potential conflicts by using rewards, expertise, legitimate rights, or economic influence.

Reward

One of the sources of influence that arises from a firm's ability to award other channel members given its strong financial position or customer franchise. Microsoft Corporation, Amazon, and Walmart have this influence.

Expertise

One of the sources of influence that arises from a firm's ability to help its customers manage inventory and streamline order processing for supplies. American Hospital Supply has this influence with its customers (hospitals).

Identification

One of the sources of influence that arises when recognition of a particular channel member creates influence for that channel member.

Legitimate Right

One of the sources of influence that arises from one channel member when they try to direct the behavior of other members. This situation mainly occurs in contractual vertical marketing systems where a franchisor can legitimately direct how a franchisee behaves.

Vertical Integration

A business strategy where a company takes ownership of two or more key stages of its supply chain. This practice is also sometimes subject to legal action under the Clayton Act if it has the potential to lessen competition or foster monopolies.

Exclusive Dealing

A practice that exists when a supplier requires channel members to sell only its products or restricts distributors from selling directly competitive products. This practice is prohibited by the Clayton Act.

Tying Arrangement

A practice that exists when a supplier requires a distributor who is purchasing some products to buy others from the supplier. These arrangements often arise in franchising and are illegal if the tied products could be purchased at fair market values from other suppliers at the desired quality standards of the franchisor. This practice is prohibited by the Clayton Act.

Full-Line Forcing

A special tying arrangement that involves a supplier requiring that a channel member carry its full line of products to sell a specific item in the supplier's line. This practice is prohibited by the Clayton Act.

Refusal to Deal

A practice of denying the supply of a product to a retailer or wholesaler. This practice with existing channel members may be illegal under the Clayton Act.

Resale Restrictions

A practice that refers to a supplier's attempt to stipulate (specify) to whom distributors may resell the supplier's products and in what specific geographical areas or territories they may be sold. These practices are prosecuted under the Sherman Act.

Logistics

Activities that focus on getting the right amount of the right products to the right place at the right time at the lowest possible cost. These activities deal with the decisions needed to move a product from the source of raw materials to consumption (the flow of the product). These decisions need to also be cost-effective as long as they can deliver expected customer service, which means satisfying customer requirements.

Logistics Management

The performance of logistics activities that involve the practice of organizing the cost-effective flow of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption to satisfy customer requirements.

Supply Chain

The various firms involved in performing the activities required to create and deliver a product or service to consumers or industrial users. It differs from a marketing channel in terms of the firms involved. This includes suppliers that provide raw material inputs to a manufacturer as well as the wholesalers and retailers that deliver finished products to consumers. It also has a different management process. The two things this should be consistent with are the firm's marketing strategy and the targeted customer's needs.

Supply Chain Management

The integration and organization of information and logistics activities across firms in a supply chain to create and deliver products and services that provide value to consumers. An important feature of this management is its application of sophisticated information technology that allows companies to share and operate systems for order processing, transportation scheduling, and inventory and facility management.

Understand the Customer

A supply chain configuration where a company must identify the needs of the customer segment being served. These needs, such as a desire for a low price or convenience of purchase, help a company define the relative importance of efficiency and responsiveness in meeting customer requirements.

Understand the Supply Chain

A supply chain configuration where a company must understand what a supply chain is designed to do well. Supply chains range from those that emphasize being responsive to customer requirements and demand to those that emphasize efficiency to supply products at the lowest possible delivered cost.

Harmonize the Supply Chain with the Marketing Strategy

A supply chain configuration where a company needs to ensure that what the supply chain is capable of doing well is consistent with the targeted customer's needs and its marketing strategy. If a mismatch exists between what the supply chain does well and a company's marketing strategy, the company will need to either redesign the supply chain to support the marketing strategy or change the marketing strategy.

Cross-Docking

A practice in an efficient supply chain that involves unloading products from suppliers, sorting products from individual stores, and quickly reloading products onto trucks for a particular store. If the merchandise was warehoused before this process, it is only there for a short period. Walmart uses this practice with its network of Walmart stores, Supercenters, Neighborhood Markets, and Sam's Clubs to keep low inventory levels and increase efficiency.

Bullwhip Effect

The tendency for supply chain managers at different levels of the supply chain to exaggerate the need to increase or decrease inventory in response to variation or lack of predictability in customer demand. Logistics management in a supply chain tries to minimize this and total logistics costs while delivering the appropriate level of customer service at the same time.

Total Logistics Cost

A cost related to the time customer service factor that includes expenses associated with transportation, material handling and warehousing, inventory, stockouts (being out of inventory), order processing, and return products handling. This cost routinely exceeds $1 trillion annually for all companies in the U.S. Two-thirds of this cost is related to transportation expenses while another 30% is related to inventory expenses.

Customer Service

The ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience. These four factors are balanced with the six factors affecting the total logistics cost.

Order Cycle of Replenishment

The time between the ordering of an item and when it is received or ready for use or sale. The elements that are related to this and the typical order cycle include recognition of the need to order, order transmittal, order processing, documentation, and transportation.

Quick Response

A delivery system that enables retailers or manufacturers to share their inventory needs in real time. This helps make the process of reordering and receiving products as simple as possible.

Efficient Consumer Response

A delivery system that is focused on standards, skills, and systematic interaction among internal business departments and value chain organizations. The main goal of this delivery system is to meet customers' needs as effectively and efficiently as possible.

Dependability

A customer service factor that refers to the consistency of replenishment. This is important to all firms in a supply chain and to consumers. This factor can be broken into three elements, which are consistent lead time, safe delivery, and complete delivery.

Clear Communication

A customer service factor among buyers and sellers in a supply chain that is critical for supply chain managers. Tracking the transformation, movement, and storage of raw materials, parts, and finished products is time-consuming, time-sensitive, and susceptible to error.

Blockchain Technology

A decentralized digital system for recording, documenting, and facilitating transactions across all participants in a supply chain. This system helps update the "chain of custody" (who has what, where, and when) of raw materials, parts, and finished products. It also streamlines communication for supply chain managers so that they can focus on other logistics costs and customer service factors.

Vendor-Managed Inventory (VMI)

An inventory management system where a supplier determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items. This is connected to the convenience customer service factor since it helps minimize the effort a buyer needs to do business with a seller.

Just-in-Time (JIT)

An inventory management system where goods are received from suppliers only as they are needed. The main goal of this method is to reduce inventory holding costs and increase inventory turnover.

Reverse Logistics

A process of reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or use for repair, manufacturing, redistribution, or disposal. The effects of this process can be seen in the reduced waste in landfills and lowered operating costs for companies.

Electronic Data Interchange (EDI)

An order processing system that utilizes an automated exchange of business documents between organizations. Daily business workflows require the exchange of documents like invoices, purchase orders, and shipping forms.

Multichannel Marketing

A type of marketing that uses several media channels for spreading marketing messages. This can include email, social media, print, mobile, display ads, and television. Leveraging multiple channels allows brands to interact with their customers across multiple touchpoints for a more comprehensive campaign. The blending of different communication and delivery channels is also mutually reinforcing in attracting, retaining, and building relationships with consumers who shop and buy in traditional intermediaries and online. Retail stores can also use these channels to leverage their physical presence through BOPUS (customers buy online and pick up at a store) and BORIS (customers buy online and return purchases in a store) capabilities, which have significantly increased during the coronavirus pandemic. This type of marketing has a product-centric approach.

Omnichannel Marketing

A type of marketing that involves the integration and cooperation of the various channels an organization uses to interact with consumers. Their goal is to create a consistent brand experience by utilizing both physical and digital channels. This type of marketing has a customer-centric approach.

Retailing

All activities involved in selling, renting, and providing products and services to ultimate consumers for personal, family, or household use.

Form of Ownership

The first factor in classifying retail outlets that distinguishes retail outlets based on whether independent retailers, corporate chains, or contractual systems own the outlet.

Level of Service

The second factor in classifying retail outlets that is used to describe the degree of service provided to the customer. Three levels of service are provided by self-, limited-, and full-service retailers.

Merchandise Line

The third factor in classifying retail outlets that describes how many different types of products a store carries and in what assortment.

Independent Retailer

One of the three general forms of ownership that refers to businesses owned by individuals. These individuals account for most of the 3.8 million retail establishments in the U.S. and include hardware stores, convenience stores, clothing stores, and electronic stores. Since the owner is the boss, the store can offer convenience, personal service, and lifestyle compatibility.

Corporate Chain

One of the three general forms of ownership that involves multiple outlets under common ownership. Since centralization in decision-making and purchasing is common in these outlets, they have an advantage in dealing with manufacturers to obtain good service or volume discounts on orders. Since this allows the buying power of consumers to create lower prices, they benefit from dealing with these outlets since they have similar merchandise and consistent management policies.

Contractual Systems

One of the three general forms of ownership that involves independently owned stores that band together to act like a chain. These stores also utilize one of the three contractual vertical marketing systems (retail-sponsored cooperatives, wholesaler-sponsored voluntary chains, or franchises).

Franchise System

A type of contractual system where an individual or firm (the franchisee) contracts with a parent company (the franchisor) to set up a business or retail outlet. The franchisor usually assists in selecting the location, setting up the store or facility, advertising, and training personnel. The franchisee then pays a one-time franchise fee and an annual royalty that is tied to the franchise's sales. This system is attractive because it has lower costs and offers an opportunity for people to enter a well-known, established business for which managerial advice is provided. This model also causes an organization to reduce the cost of expansion and the control they have over their retail outlets.

Self-Service

A level of service that requires that the customer perform many functions during the purchase process. New forms of this service are being developed at convenience stores, fast-food restaurants, and even car rental companies. Some stores that provide this service are T.J. Maxx, Whole Foods, and Trader Joe's.

Limited Service

A level of service that includes outlets that provide some services, such as credit and merchandise return, but not others, such as clothing alterations. Customers are responsible for most shopping activities, although salespeople are available in departments such as consumer electronics, jewelry, and lawn and garden. Some stores that provide this service are Walmart, Kmart, and Target.

Full Service

A level of service that includes specialty stores and department stores that provide many services to their customers. Some stores that provide this service are Neiman Marcus, Nordstrom, and Saks Fifth Avenue.

Depth of Product Line

A type of merchandise line that means that the store carries a large assortment of each item, such as a shoe store that offers running shoes, dress shoes, and children's shoes.

Specialty Outlets

Small retailers which offer a specific range of merchandise and related items. The two types of these small retailers are limited and single-line stores. This is related to the depth of a product line.

Limited-Line Stores

A specialty outlet (store) that carries a considerable assortment (depth) or a related line of items. It also offers a narrow range of products that generally have high prices and high-quality standards. This is related to the depth of a product line.

Single-Line Stores

A specialty outlet (store) that carries tremendous depth in one primary line of merchandise. It focuses on certain lines of related products rather than a wide assortment. This is related to the depth of a product line.

Category Killers

Specialty discount outlets that focus on one type of product and dominate the market. Some examples of these specialty discount outlets that offer very competitive prices are Best Buy (electronics), Staples (office supplies), and Barnes and Noble (books). This is related to the depth of a product line.

Breadth of Product Line

A type of merchandise line that refers to the variety of different items a store carries, such as appliances and books.