Chapter 11 practice, Chapter 12 practice, Chapter 13 practice, Chapter 14 MAR 3213

Your page rank:

Total word count: 8028
Pages: 29

Calculate the Price

- -
275 words
Looking for Expert Opinion?
Let us have a look at your work and suggest how to improve it!
Get a Consultant

Customer loyalty can be enhanced by creating an appealing brand image


Customer loyalty is limited to ensuring satisfaction by offering a wide assortment of products.


A customer database normally contains information on customer preferences.


Cookies are not equipped to track customer interactions on social networking sites.


The customer lifetime value (CLV) is the expected contribution from the customer to the retailer’s profits over his or her entire relationship with the retailer.


A specific type of data analysis that focuses on the composition of the bundle of merchandise purchased by a consumer during a single shopping occasion is called a market basket analysis.


Frequent-shopper programs are expensive to implement and manage.


Effective frequent-shopper programs are transparent.


Customers in the platinum segment place more value on the price of a product.


Developing retail programs for small groups or individual customers is referred to as 1-to-1 retailing.


_____ indicates that customers are committed to purchasing merchandise and services from the retailer regardless of competing retailers’ enticements.

Customer loyalty

What is the primary objective of CRM process?

To develop a base of loyal customers who patronize the retailer frequently

Customer loyalty means:

customers are committed to purchasing from the retailer and will seldom shop at competing stores.

A business philosophy and set of strategies, programs, and systems that focuses upon identifying and building loyalty with a retailer’s most valued customers is called _____.

customer relationship management

The objective of the CRM process is to:

develop loyalty and repeat-purchase behavior.

_____ refers to the percentage of the customers’ purchases made from the retailer.

Share of wallet

Which of the following statements is true of customer loyalty?

It is an emotional connection between a retailer and a customer.

Retailers will use all BUT which of the following to retain and increase share of wallet from their best customer?

Lower prices

Which of the following statements does NOT describes the customer relationship management process that retailers implement?

All of these statements describe customer relationship management.

Which is the final step in the CRM process?

Implementing programs

The first step in the CRM process is _____.

collecting customer data

A(n) _____ forms the foundation for all CRM activities.

customer database

Which of the following information does NOT form a part of the customer database of a retailer?

Details of competitor patronization

Why is constructing a customer database more difficult for in-store transactions than it is for online shopping?

Store purchases can be made with cash or third-party credit cards.

Which of the following is an inherent limitation associated with asking the customer for identifying information for building a customer database?

Some customers may feel that the sales associate is violating their privacy.

When Mary purchased some caulk for her windows at Home Depot, the cashier asked for her telephone number at the point-of-sale. What was the retailer doing by asking this question?

The retailer was collecting data for the store’s database.

Before Emily started her transaction at a retailer, the cashier requests her to register her fingerprints and credit card details. Emily can now pay for products without having to use her credit card or cash each time she shops. Her fingerprint would suffice. Which method of collecting customer data is the retailer using?

Using biometrics

Wilbur uses Books-A-Million customer card, Kash-N-Karry customer card, Blockbuster customer card, and Sandwich Shop customer card when he shops at any of these retailers. Each time he uses them, he gets rewarded with reduced cost, free merchandise, or a credit. These cards form a part of:

frequent-shopper programs.

Which of the following statements is NOT TRUE of frequent-shopper programs?

Frequent-shopper cards are issued on the basis of market basket analysis.

When customers join the Daily Needs Reward Zone, they receive one point on every purchase they make at Daily Needs stores and Reward Zone points are converted to reward certificates which can be redeemed for merchandise at Daily Needs stores or on Reward Zone Members also receive exclusive offers throughout the year and a "special reward" for their birthday. This strategy by Daily Needs is an example of _____.

a customer loyalty program

_____ identify and provide rewards to customers who patronize a retailer.

Loyalty programs

Airlines and credit cards that offer points for each dollar spent are utilizing ____ for effective customer relationship management.

a loyalty program

Biometrics helps customers by:

facilitating a faster checkout.

Although, having information about individual customers helps retailers provide better services to consumers, consumers are concerned about _____.


Which of the following principles forming the basis of a new legislation on consumer privacy encourages retailers to treat consumer privacy as their default setting?

Privacy by design

Which of the following is a reason for consumers to have privacy concerns regarding cookies?

Customers cannot realize the amount of information being collected without their knowledge.

Electronic retailers can collect transaction data for their data warehouse, but they can also collect information by placing cookies on a visitor’s hard drive. Cookies are:

files that identify visitors when they return to a website.

When Lana went to to look for books on health and wellness, she saw a personalized greeting and books recommendations. The greeting and books recommendations were based on her previous visits to the site. Which of the following best describes how knew that Lana has accessed their site? placed cookies on her computer to identify her.

When consumers explicitly agree to share personal information, the agreement is referred to as _____.

opt in

When consumers explicitly tell the retailer not to use their personal information, they must _____.

opt out

If a U.S. retailer wants to conform to the European policies concerning how customer information is collected, which type of policy should it adopt?

Opt in

Which of the following statements correctly describes the practices regarding customer privacy in the U.S.?

In the U.S., personal information is generally viewed as being in the public domain, and retailers can use it in any way they desire.

Which of the following statements best describes a customer lifetime value (CLV)?

CLV is what a customer contributes to a retailer’s profits over his or her entire relationship with the retailer.

Based on the following customer purchase data, which customer would have a higher lifetime value to the retailer? (chart on TB)


Which of the following statements does NOT describe how retailers use a customer lifetime value (CLV)?

A customer who spends $800 twice a year has a higher CLV than a customer that spends $100 each month.

Which of the following retail analytic applications involves the use of search techniques to gain insights into customers’ buying patterns?

Data mining

_____ uses the data on recent purchases made by customers to evaluate the potential contribution of each customer segment.

RFM analysis

_____ are applications of statistical techniques and models that seek to improve retail decisions through analyses of customer data.

Retail analytics

_____ help in measuring a customer’s CLV by using the data collected about customers.

Retail analytics

_____ is a method often used in catalog and Internet channels to determine customer segments that a retailer should target for a promotion or send a catalog.

RFM analysis

A(n) _____ is used by catalog retailers and direct markets to identify the best prospects on the basis of how recently the customers made a purchase, how often they make purchases, and how much they spent.

RFM analysis

Many products in a supermarket can be found in more than one place throughout the stores. What type of retail analytics technique is used to decide where to place products in a store?

Market basket analysis

Which of the following terms best describes the type of data analysis that focuses on the composition of products purchased by a customer during a single shopping trip?

Market basket analysis

Since Yolanda used _____ to analyze what her customers often buy together during a single store visit, she knows to place facial tissues by the cold medicine and Wonder bread by the Skippy Peanut Butter in her store.

market basket analysis

Which of the following statements is true of frequent-shopper programs?

The discounts offered appeal mostly to price-conscious customers.

Millhouse loves books and often shops at a nearby Book Universe store. At the beginning of the year, he enrolled in a $5 program, and he would get a percentage off on the purchases he made throughout the year. Which of the following best demonstrates this type of approach toward customer retention?

Frequent-shopper program

Which of the following statements is true of frequent-shopper programs?

It is hard to gain competitive advantage with CRM as programs can be duplicated.

Which of the following statements is true of a tiered reward structure?

It provides an incentive for customers to consolidate their purchases with one retailer to reach the higher tiers.

What does the 80-20 rule mean?

80% of the sales or profits come from 20% of the customers.

Why would the customer pyramid be more appropriate in identifying customer’s lifetime value than utilizing the traditional 80-20 rule?

The 80-20 rule does not consider important differences among the 80 percent of customers in the "rest" segment.

In the customer pyramid, which of the following segments consists of customers with the top 25 percent CLVs?

Platinum segment

Which of the following statements is true of the gold segment members in the customer pyramid?

Price plays a greater role in their decision making process.

Which of the following statements is TRUE of the customer pyramid?

Customers in the lead segment buy merchandise on sale or abuse return privileges.

CRM programs directed toward customers in the high-value segment:

are focused on maintaining loyalty.

Which of the following approaches toward retaining customers has retailers offering unique benefits and targeted messages to individuals?


Which of the following statements does NOT describe personalization implemented as a CRM program?

It helps retailers to convert their unprofitable customers in the lead segment in the customer pyramid to best customers.

Developing retail programs for small groups or individual customers is referred to as _____.

1-to-1 retailing

The Bird of Paradise is one of the world’s most attractive tropical flowers. When Josiah, who owns Joe’s Flower Shop, knows he’s receiving flowers from Hawaii, he emails all his customers whom he knows will like the flower and informs them of the expected shipment. Josiah’s program is an example of:

1-to-1 retailing.

A _____ is a group of customers who are bound together by their loyalty to a store and the activities the retailer sponsors and undertakes.

retail brand community

The release of the new Harry Potter book brought excitement in Enid’s neighborhood. The local Book Universe store sold thousands of vouchers for the night of the release. The store invited Harry Potter enthusiasts to come for a party at the store that lasted until midnight when the book would be available for purchase. Book Universe is seen developing a customer retention program based on:

creating a sense of community among its customers.

What is customer alchemy?

Converting iron and gold customers into platinum customers

A way to achieve customer alchemy is through _____, which involves offering and selling more products and services to existing customers and increasing the retailer’s share of wallet with these customers.

add-on selling

Depending on the amount of money you have in Wachovia bank, you will receive a variety of different services. The lower-tiered customers are charged $7 to use a teller but can receive the same services for free if they use an ATM. Charging low-tiered customers for using live tellers is Wachovia’s approach to:

getting the lead out.

Which of the following describes an approach that is used to deal with unprofitable customers?

Retailers charging a restocking fee for returned merchandise

At La Rue Fashions, there is a certain customer who makes large purchases every Friday and returns everything two weeks later. In response, the manager recently created a policy and published it. It included specifics of the store’s terms regarding returned merchandise stating that all tags must be intact; the clothing must not have been worn; and it must be returned within seven days to receive credit. Which of the following best describes the retailer’s actions?

Getting the lead out

Buyers, divisional merchandise managers, and general merchandise managers are some of those who undertake the responsibilities of merchandise management.


The highest classification level in the buying organization is the merchandise category.


Fashion merchandise consists of items that are in continuous demand over an extended time period.


Seasonal merchandise consists of items whose sales fluctuate dramatically depending on the time of the year.


An in-depth interview is an unstructured personal interview in which the interviewer uses extensive probing to get individual respondents to talk in detail about a subject.


Assortment, or depth, of a merchandise category is the number of different merchandising subcategories offered.


Buyers need not compromise on breadth or depth of merchandise to increase product availability.


Shorter lead times result in a higher level of backup stock required to maintain the same level of product availability.


The quantity of merchandise has a bigger impact on profitability than allocation decisions.


An ABC analysis identifies the performance of individual SKUs in the assortment plan.


Which of the following is the process by which a retailer attempts to offer the appropriate quantity of the right merchandise, in the right place and at the right time while meeting the company’s financial goals?

Merchandise management

The highest classification level in a buying organization is the _____.

merchandise group

A merchandise group of a retailer is managed by a _____.

general merchandise manager (GMM)

Which of the following schemes is the correct order describing the levels of the merchandise classification scheme from the highest level to the lowest level?

Merchandise Group-Department-Classification-Category-SKU

The second highest level in the merchandise classification structure is the _____.


Which of the following statements is NOT true of a department in the merchandise classification scheme?

It is managed by a general merchandise manager (GMM).

Which of the following statements is NOT true of the merchandise classification scheme?

SKUs are the basic units of analysis for making merchandising management decisions.

A _____ is a group of items targeting the same customer type, such as girls’ sizes 4 to 6.


Which of the following products is an example of a classification?

Infant apparel

Which of the following statements is true of a merchandise category?

It is the basic unit of analysis for merchandising decisions.

Which of the following products is NOT an example of a stock-keeping unit (SKU)?

Teen necklaces with matching bracelets and rings

A _____ is the basic unit of analysis for making merchandise management decisions.

merchandise category

A(n) _____ is the smallest unit available for inventory control.

stock-keeping unit

Which of the following is NOT true of category management?

A category manager is also called a category captain and works with vendors to get the most profit from collaborative relationships.

Which of the following persons is a vendor who forms an alliance with a retailer to help gain consumer insight, satisfy customer needs, and improve performance and profit across a category?

Category captain

What is the drawback of utilizing category captains?

The vendor category captain could take advantage of their position and maximize their own sales.

Why are vendors in a better position to manage a category than a smaller retailer?

Vendors have superior information through their focus on a specific category.

Which of the following statements is NOT true of a potential problem with appointing vendors as category captains?

Appointing vendors as category captains makes merchandise management tasks difficult for retailers.

A performance measure which assesses a buyer’s contribution to ROA is called the _____.

gross margin return on investment

When there is a high inventory turnover, there is an increase in sales because:

new merchandise is continually available to customers.

Which of the following is NOT a benefit of a high inventory turnover?

Reduced gross margin

Which of the following is a consequence of a high inventory turnover?

Improved employee morale

Merchandise like men’s crew socks, canned peas, college ruled loose leaf paper, and 60-watt light bulbs would be considered _____ that are in continuous demand over an extended time period.

staple merchandise

Which of the following is an example of staple merchandise?

Men’s black socks

Smart Wash is a popular brand of detergent powder. The stock needs to be continuously replenished in stores and supermarkets due to its high demand. The detergent powder belongs to the category of _____.

staple merchandise

_____ consist of items that are only in demand for a relatively short period of time.

Fashion merchandise categories

Which of the following is NOT true of a fashion merchandise category?

Forecasting sales for this category is simplistic and predictable.

Which of the following is NOT true of staple merchandise categories?

Because their sales are relatively steady from day-to-day, periodic inventory system is used.

Which of the following statements holds true for the purchase of staple merchandise?

Staple merchandise is purchased using a continuous replenishment system by monitoring sales and generating replacement orders.

_____ categories consist of items whose sales fluctuate dramatically depending on the time of year.

Seasonal merchandise

Garden rakes, lawn mowers, and sunscreen would be considered part of a(n) _____ category.

seasonal merchandise

Which of the following is NOT true of fashion merchandise categories?

Buyers for fashion merchandise categories have a high degree of flexibility in correcting forecasting errors.

Which of the following merchandise systems focuses on staying as close to out of stock as possible?

Fashion merchandise management system

Which of the following merchandise categories is purchased in a manner similar to fashion merchandise?

Seasonal merchandise

What is the first step in merchandise management planning?

Developing a forecast for sales

Which of the following is true of the forecasting approach for staple merchandise categories?

Forecasts are typically based on extrapolating historical sales.

Which of the following processes is an unstructured form of personal questioning used in market research and involves extensive probing to get individual respondents to talk in detail about a subject?

In-depth interview

A(n) _____ is a small group of respondents interviewed by a moderator using a loosely structured format in which participants are encouraged to express their views and comment on the views of others in the group.

focus group

Which of the following best describes variety?

The number of different merchandising subcategories within a store

Father Christmas is a retail store in Georgia that sells a unique Santa made from fur, wool, and tapestry. The store does not sell any other product. Therefore, the store has no _____.


_____ of a retailer’s merchandise is the number of SKUs within a subcategory.


_____ of a merchandise category is the number of different merchandising subcategories offered.


Which of the following statements about assortment is NOT true?

Offering a large assortment normally simplifies a customer’s buying decision.

Which of the following statements does NOT describe the trade-offs that buyers should consider for merchandise assortment planning?

SKU rationalization programs can help in increasing inventory turnover without reducing sales.

The _____ is the number of each SKU in the assortment plan that the buyer wants to have available for purchase in each store.

model stock plan

Which of the following terms is defined as the percentage of demand for a particular SKU that is satisfied?

Product availability

_____ is also referred to as the level of support or service level.

Product availability

Father Christmas is a retail store in Georgia that sells a unique Santa made from fur, wool, and tapestry. If 150 customers wish to buy a Santa from this store, and it sells 120 before running out of stock, what is its service level?

80 percent

Which of the following statements does NOT describe the relationship between product availability and stock level?

The quantity of backup stock is fixed by a retailer and is not influenced by product availability.

Which of the following factors does NOT contribute to the increase of buffer stock levels?

Frequent store deliveries

_____ refers to inventory for which the level goes up and down in response to the replenishment process.

Cycle stock

Which of the following statements does NOT describe the approach which deals with cycle (base) stock?

Frequent orderings with smaller quantities will reduce transportation costs.

Since sales and the arrival of merchandise from vendors can’t be predicted with perfect accuracy, retailers have to carry _____.

backup stock

A catalog retailer of kitchen items observes that during some weeks it sells 40 muffin pans, and during other weeks it sells none. A reorder takes up to three weeks. The probability of running out of pans and alienating its customers can be alleviated by maintaining _____.

backup stock

Which of the following is NOT a factor that determines the level of required backup stock?

Price of the product

_____ is the amount of time between the recognition that an order needs to be placed and the point at which the merchandise arrives in the store and is ready for sale.

lead time

The percentage of SKUs received complete on a particular order from a vendor is called the _____.

fill rate

The retailer’s information system determines the _____ by comparing the sales made through the POS terminals with the shipments received by the store.

perpetual inventory

A(n) _____ indicates the decision variables set by the buyer, such as product availability, the backup stock needed to provide the product availability, and the order points and quantities.

inventory management report

In staple merchandise management systems, the _____ is the amount of inventory below which the quantity available shouldn’t go or the item will be out of stock before the next order arrives.

order point

The merchandise budget plan:

specifies the level of inventory needed to support the sales.

A(n) _____ is used to keep track of the actual merchandise flows—what the present inventory level is, when purchased merchandise is scheduled for delivery, and how much has been sold to customers.

open-to-buy system

An open-to-buy system compares:

the planned and actual end-of-month inventory.

After developing a plan for managing merchandise within a category, the next step in the merchandise management process is to:

allocate the merchandise to the stores.

Retail chains typically classify each of their stores on the basis of annual sales. According to this classification, _____.

A stores would have the largest sales volume

Which of the following factors is considered by retailers in making merchandise allocation and promotion decisions specific to difficult economic times?

Paycheck cycle

After developing a plan and allocating the merchandise, the next step in the merchandise planning process involves:

analyzing the performance and making adjustments.

Which of the following analysis techniques compares actual and planned sales to determine whether more merchandise is needed to satisfy demand or whether price reductions are required?

Sell-through analysis

A(n) _____ identifies the performance of individual SKUs in the assortment plan.

ABC analysis

Retailers often find the 80-20 principle evident within the ABC analysis. What does the 80-20 principle imply?

Approximately 80 percent of a retailer’s sales come from 20 percent of its products.

Which of the following statements is true of the ABC analysis?

The SKUs in a merchandise category are rank-ordered by several performance measures.

The _____ method for evaluating vendors uses a weighted-average score for each vendor.

multiattribute analysis

Copycat brands imitate the manufacturer’s brand in appearance and packing, generally are perceived as lower quality, and are offered at lower prices.


The availability of national brands can affect a customer’s image of the retailer.


Wholesale markets for retail buyers include only annual trade shows.


Due to an increase in the production of private-label brands, resident buying offices have become increasingly more significant and important.


In a Dutch auction, the retail buyer provides a specification for what they would like to be produced for their private-label products, and then manufacturers bid on the opportunity to be the supplier


Bonuses are funds vendors give retailers to cover lost gross margin dollars due to markdowns needed to sell unpopular merchandise.


Slotting allowances are charges imposed by a retailer to stock a new item.


Credible commitments are tangible investments in the strategic relationship and involve spending money to improve the supplier’s products or services provided to the customer.


Diverted and gray-market goods go through distribution channels that are not authorized or intended by the manufacturer.


A buyer asking or receiving something of value that influences purchasing decisions occurs in the black market.


National brands are also called _____.

manufacture’s brands

Techno Comp is a well-known national brand of computer and electronic products and accessories. Their tablet would be considered a(n) _____.


Spring Clean, Sparkle Glass, and Dazzle Floor are various cleaning liquids marketed under the brand name Clean Homes. Therefore, Clean Homes is a(n) _____.

umbrella brand

Tide detergent, Ralph Lauren polo shirts, and Hewlett-Packard printers are all examples of _____.

national brands

All of the following are terms for products developed by retailers EXCEPT _____.

manufacturer’s brands

_____ are products developed by retailers.

Store brands

Which of the following is true of store brands?

Retailers develop the design for these products in most cases.

When identifying national brands, vendors use a(n) _____ associated with their company.

umbrella brand

A(n) _____ developed by a retailer is comparable with national brands on quality rather than price.

premium brand

Home Day is a large supermarket. It recently launched its own brand of cereals called Fast Bites equivalent to most national brands and also priced slightly lower. Therefore, Fast Bites is an example of a(n) _____.

premium store brand

A(n) _____ is a brand that is developed by a national brand vendor, often in conjunction with a retailer, and is sold solely by the retailer.

exclusive brand

_____ are private-label products produced by the retailer that imitate the national brand in both appearance and packaging, but are often offered at a lower price.

Copycat brands

When a grocery retailer develops its own high quality private-label organic food product, this would be a(n) _____.

premium brand

The only retailer that offers Fresh Sun organic food products is Daily Needs. Therefore, Fresh Sun is an example of a(n):

exclusive brand

Popular national brands are placed next to a manufacturer’s brands in a store and look like them. This kind of brand is called a(n) _____.

copycat brand

_____ target a price-sensitive segment by offering a no-frills product at a discount price.

Generic brands

Which of the following is neither a store brand nor a national brand?

Generic brands

How does a national retailer benefit from selling private-labels?

By selling private-labels, a national retailer can differentiate its assortments.

The premium option in the multiple price tiers created for store brands offers:

consumers quality that is comparable to that of national brands.

National brands:

can limit a retailer’s flexibility.

If there many advantages to selling national brands, why do retailers still carry private-label brands?

Private-label brands yield higher profits to retailers.

What is an advantage of selling private-label brands for a national retailer?

Customers can’t compare prices for private-label products because of their exclusivity.

Which of the following is a drawback for a retailer offering national brands?

Retailers have to discount some national brands in order to attract customers to their stores because customers compare prices for these brands across stores.

Which of the following is a drawback of selling private-label merchandise?

Significant investment is needed to develop, manage, and market private-label brands.

A _____ for retail buyers is a concentration of vendors within a specific geographic location, perhaps even under one roof or over the Internet.

wholesale market

One way for a buyer to become familiar with products and styles is to:

attend trade shows.

Which of the following is NOT descriptive of a trade show?

Trade shows are often associated with wholesale market centers.

At FN Platform, vendors display their fashion footwear in designated areas at the Las Vegas convention center and have sales representatives available to talk with buyers as they walk through the exhibit area. This exhibition is an example of a _____.

trade show

_____ are taxes collected by a government on imported merchandise.


When contemplating sourcing products internationally, which of the following would NOT be an additional cost associated with global sourcing?

Reduced lead times

_____ are imposed by governments to shield domestic manufacturers from foreign competition.

Import tariffs

Which of the following is a subjective issue associated with global sourcing?

Quality control

Why are inventory carrying costs higher for retailers who source internationally?

Lead times are longer, and there is a need to maintain higher levels of safety stocks.

Linda is a fashion designer who sourced out to a manufacturer in India in order to assemble her fall line. She assumed the patterns for the clothes were simple, and she deemed it unnecessary to personally visit the factory and supervise the workers sewing her clothes. Months later, the shipment arrived in New York and, the seams on all of the blouses were sewn incorrectly. This mishap is an issue of _____.

quality control

Which of the following is true of collaborative supply chain management?

It is difficult to implement these strategies when sourcing globally.

Violations of human rights are avoided by _____.

enforcing core labor practices

Retailers proactively engage in enforcing the labor practices of their suppliers because:

they want to ensure a safe and healthy work environment for laborers.

Yves, an English speaking Frenchman, meets with buyers from the United States when they visit Paris. Once in Paris, the buyers rely on Yves to make appointments with French vendors to save time and penetrate the market. Yves works to help interpret and negotiate during the buyer-vendor meetings. Therefore, Yves works for a(n) _____.

resident buying office

Louise runs a successful shop in Chicago featuring unique dolls from Western Europe. Louise speaks German and a little Dutch, but no Italian, French or Spanish. Which of the following is the best way for Louise to procure dolls from all western European countries?

She can utilize a resident buying office when she visits Europe to buy.

Which of the following does NOT describe an approach for buying national brand merchandise?

Buyers using reverse auctions to procure seasonal merchandise

Which of the following is not true of reverse auctions?

The retailer chooses the lowest bidder regardless of other factors.

Retailers use _____ to get quality private-label merchandise at low prices.

reverse auctions

As a vendor, Melissa works well with a buyer she’s known for years at Dream Toys. This year, Melissa’s line of toys had a few products that sold poorly, and it is now time to show the Dream Toys’ buyer the next holiday season’s product line. Melissa knows the Dream Toys’ buyer will be a hard negotiator. What should Melissa be prepared to do?

Provide markdown money.

_____ refers to funds vendors give retailers to cover lost gross margin dollars.

Markdown money

_____ are charges imposed by a retailer to stock a new item.

Slotting allowances

Fantasy and Stanley’s are popular apparel stores. A Fantasy vendor has offered a Stanley’s buyer an attractive discount on merchandise that had been returned to Fantasy by a different retailer. The Stanley’s buyer realizes the high gross margin opportunity but refuses the offer nevertheless. Why?

The buyer wants to preserve Stanley’s image as a fashion leader by not selling returned merchandise that could be out of season.

When a swimwear buyer negotiates for delivery and exclusivity with a vendor, what would a buyer typically want?

A buyer would want unique swimwear to arrive early in the season to get the most sales at the original price.

Which of the following is a negotiation issue that is often used in fashion merchandise categories?

Exclusivity arrangement

When negotiating with a vendor, the best outcome for a retailer would be to:

have mutual gain.

Isabel works as a senior jewelry buyer for a department store chain. On a recent visit to a trade show, she noticed a new vendor selling unique earrings, necklaces, and bracelets made of glass. She had seen such pieces in trade magazines, but initially ignored them because of the exorbitant price. She thought her affluent customers would appreciate the look, so she decided to talk with the sales representative to learn more about the possibility of a trial in only a few of her top stores. Isabel is in the _____ phase of building strategic relationships.


Randolph is the divisional merchandise manager for home products for Daisy’s, a supermarket. At a recent trade show, he noticed small kitchen appliances being shown in retro colors like pistachio, eggplant, and cotton candy. Knowing the kitchen designs were moving in this direction, he decided to discuss it with his senior buyers to see if these retro colors would suit the Walmart market. Randolph is in the _____ phase of building strategic relationships.


What is the best reason for retailers to develop and maintain relationships with multiple and sometimes competing suppliers?

A function of retailers is to provide assortments, so they must deal with a variety of suppliers.

When Whitney took over her father’s sporting goods store, she evaluated some of her father’s vendor relationships. She found that Rodney’s Exercise Wear wasn’t particularly profitable for the store. Although committed, his products were expensive, and he seemed inflexible. Whitney tried to work out a more amicable relationship with him by discussing her sales goals and new ideas for the coming year, but Rodney seemed uninterested. Which of the following elements crucial for maintaining strategic relationships is absent in the given example?

Open communication

By sharing common goals, buyers and vendors:

can pool their strengths and abilities to exploit potential opportunities.

What is the outcome when a retailer sells counterfeit merchandise?

It can destroy the relationship with the vendor of the legitimate brand.

_____ involve the flow of merchandise through distribution channels, usually across international borders, other than those authorized or intended by the manufacturer or producer.

Gray-market goods

Which of the following prohibits vendors offering different retailers different prices and purchase order terms for the same merchandise and quantity?

Robinson-Patman Act

Janine buys swimwear for a chain of apparel stores. At a recent trade show, she took the opportunity to meet with a few vendors. During a meeting with the vendor that she normally purchased from each season, he proposed a weekend in the Cayman Islands to view the swimwear that European tourists were wearing. Janine knows that it would be beneficial to see what European tourists are wearing and then translate what she is seeing into her assortment for her target customers. Before continuing her discussions with the vendor, what should she do?

She must inform her divisional merchandise manager of the proposal.

Steve buys men’s dress shirts for Martin’s, a clothing retailer. At a recent trade show, he took the opportunity to see a few new vendors. During one meeting, a vendor proposed a ticket to a coveted college football game. Steve graciously declined because he was concerned he would be engaging in _____.

commercial bribery

_____, also known as stocklifts or lift-outs, are activities engaged in by vendors with retailers to get their products into retail stores.


A(n) _____ exists when a vendor and a retailer enter into an agreement that requires the retailer to take a product it doesn’t necessarily desire to ensure that it can buy a product that it does desire.

tying contract

A vendor’s recent shipment at the retailer’s distribution center was on time, but the boxes were mislabeled along with other infractions against the retailer’s mandated shipment policies. What should the retailer do?

Issue a chargeback.

_____ is a socially responsible movement that ensures that producers receive adequate prices for their products.

Fair trade

Companies are practicing _____, which is the practice of marketing products or services as being environmentally friendly with the purpose of gaining public approval and sales rather than actually improving the environment.

green sheen

What is value?

It is the relationship between what consumers receive and what they paid for it.

Retailers using a(n) _____ strategy frequently—often weekly—discount the initial prices for merchandise through sales promotions.

high/low pricing

A(n) _____ strategy emphasizes the continuity of retail prices at a level somewhere between the regular nonsale price and the deep-discount sale price of high/low retailers.

everyday low-pricing

Which of the following is NOT a benefit typically ascribed to an everyday low pricing (EDLP) strategy?

Increased sale advertising

How does an improved inventory management through the use of an everyday low pricing (EDLP) strategy benefits retailers?

It increases the total sales.

Which of the following statements holds true for an everyday low-pricing (EDLP) strategy?

EDLP retailers do not have to incur the labor costs of changing price tags.

How can a retailer that wants to use an EDLP strategy persuade customers away from high/low strategy competitors?

By assuring customers of low prices

Which of the following is NOT a factor that retailers consider in setting prices?

Language barriers

A price experiment:

can be used to measure the price sensitivity of customers.

A price experiment:

is method of determining the most profitable price for a product.

Cliff struggled with the price of produce at his well-established produce markets. The reputation of the markets attracts repeat customers from a 50-mile radius. Recently, local farmers started increasing produce prices for him due to the upsurge in gas prices. Now, Cliff feels it is time to pass the costs onto his customers. Which of the following should Cliff estimate to determine the effect of price changes?

Price elasticity

A commonly used measure of price sensitivity is _____.

price elasticity

A retailer originally priced a private-label portable DVD player at $99 and sold 1,200 units per week. After raising the price to $120, sales dropped to 1,000 units per week. What would the item’s price elasticity be?


Which of the following items has the most price elasticity?


Smith’s Electronics originally priced a private-label portable DVD player at $90, and then sold 1,500 units per week. After raising the price to $100, sales dropped to 1,000 units per week. First, determine the price elasticity, and then determine the profit-maximizing price if the private-label portable DVD player costs $50.


When pricing products, retailers must:

choose a pricing policy considering the company’s overall strategy.

Retailers collect price data about their competitors to:

see if they need to adjust their prices.

Catherine had checked the price of an airline ticket in November to fly to Daytona Beach for her spring break. She was surprised when she checked again in February that the price had increased significantly. The airline had adjusted its prices based on the demand. This practice is known as _____.

yield management

Yield management means:

adjusting prices in response to demand in order to control sales generated.

A drugstore purchases hand cream at $2 per jar and sells them for $15. What is its markup percentage?


The _____ is the difference between the retail price and the cost of an item.


Frankie is a buyer for a department store and is buying some handbags at a cost of $30 from a vendor. He desires to have a 60% markup to meet the financial goals of this category. What will be the retail price of these handbags?


Which of the following factors influences reductions?

Theft and accounting errors

The approach of using 50 percent markup is known as _____ because of which the retail price would be double the cost.


Joe keystones every product’s price in his skateboard store. Therefore, the initial mark-up percent that Joe uses is:

50 percent.

_____ is the actual sales realized for the merchandise minus its costs of the merchandise sold.

Maintained markup

The Bow Shop caters to archery enthusiasts. It sells bows starting at $300. The maintained markup used by the store is 60 percent. Reductions are estimated to be 12 percent. Calculate the store’s planned initial markup percentage.

64.29 percent

Mattie owns a clock shop featuring vintage clocks from the 1950s. Mattie plans to achieve a 40% maintained mark-up, and her reductions are planned at 4%. What is her planned initial markup percentage?


Left Lanta is a small retailer in Underground Atlanta, a historical retail district in that city. Here, the Lanta family sells items for left-handed people. Since the store is located in a kiosk near one of the entrances to the underground, it is often the target of shoplifters. Therefore, the store is forced to reduce the actual selling price of its products. The factors such as theft that cause the reduction in the selling price are called _____.


A bookstore is considering stocking a limited edition of Alice in Wonderland dolls at a cost of $125 each. The manager calculated the retail price with an initial markup percentage of 48 percent and plans to ticket the product with a ".00" ending. What would the initial retail price be on the doll?


The retail price of a sweater is $75, and the initial markup is 51 percent. Calculate the cost of the product.


The merchandise cost from the vendor for an MP3 player is $82.50, and the retailer who is selling the device wants to use an initial markup percentage of 67 percent. Calculate the initial retail price.


Because of markdowns, discounts to employees and customers, and merchandise reductions, _____.

the actual selling price is lower than the initial sales price

_____ is an analytical tool which enables retailers to know of units they need sell to begin making a profit.

Break-even analysis

Which of the following is an example of a fixed cost for a bridal gown shop?

The cost of the mannequin used to display current gowns

Eunice buys a worm farm. She plans to sell a small carton of worms to people who want to fish for $3. Her fixed costs are $1,201, and her variable cost for each carton sold is $.75. How many cartons of worms does Eunice need to sell to reach her break-even quantity?


Ferdinand runs a pie shop in a busy metropolis. He sells his fresh pies for $7, but it costs him $2.50 to make them. The cooking equipment in his shop cost him $46,000. How many pies does Ferdinand need to sell to make $50,000 annually?

21,333 pies

Which of the following is an example of a variable cost for a retailer of electronic equipment?

The cost associated with the free pack of paper for every computer printer sold

Reductions in the initial retail prices are known as _____.


Which of the following statements describes a situation in which markdowns would NOT be appropriate?

Markdowns would be appropriate for a group of t-shirts that have a higher turnover than other t-shirts in the department.

Which of the following statements is NOT true of markdowns?

A buyer’s objective is to minimize markdowns.

Which of the following statements on markdowns is FALSE?

Markdowns are an unnecessary part of business if planned correctly.

Which of the following statements is a limitation of the rule-based approach to taking markdowns?

It does not consider the demand for merchandise at different price points.

How does optimization software help retailers in taking markdowns?

It updates pricing based upon actual sales and factors in differences in price sensitivities.

Some retailers liquidate end-of-season merchandise to retailers like T.J. Maxx, who in return sell it at a deep discount. What is the benefit to the retailer who liquidates merchandise using this strategy?

It helps retailers recoup a percentage of the merchandise cost.

Which of the following statements does NOT describe a benefit of markdowns for a retailer?

It is a way to gain a higher gross margin.

Jenny runs a produce stand in an inner-city neighborhood. With the recent layoffs, she has become popular because she gives her day-old produce to the local charity. Which of the following benefits does Jenny gain by donating produce to the local charity?

It offers her strong public relations benefits.

Which of the following strategies is NOT viable for liquidating markdown merchandise?

Adopt a keystoning strategy.

When making a good markdown decision, a retailer should:

work closely with its vendors and share the financial burden of the markdowns.

Which of the following is the LEAST profitable method of liquidating markdown merchandise?

Carry the merchandise over to the next season.

Charging each individual customer a different price based on their willingness to pay is called _____.

first-degree price discrimination

Which type of retailer is MOST likely to use first-degree price discrimination?

An antique shop is a website which features a wide range of products from different retailers put up for auction. The retailers charge customers based on their willingness to pay to maximize profits. Which pricing technique is being used by the retailers who put their products for auction on

First-degree price discrimination

When making a good markdown decision, a retailer should:

work closely with its vendors and share the financial burden of the markdowns.

Which of the following statements holds true for individualized variable pricing?

Customers may feel that they are being treated in an unfair manner.

_____ is the practice of offering the same multiple-price schedule to all customers and encourages price-sensitive customers to take advantage of the lower price.

Second-degree price discrimination

Which of the following is NOT an example of a second-degree price discrimination strategy?

Online auction bidding

Manuel’s vacation to Chicago for $395 for three nights in a four star hotel on Michigan Avenue included airfare and accommodation. If these services were availed individually, it would have been expensive. This form of second-degree price discrimination is referred to as _____.

price bundling

_____ is the practice of offering two or more different products or services for sale at one price.

Price bundling

A travel brochure shows that a couple can buy a round trip ticket to Orlando, a three-day pass to Disney World, car rental for four days, and hotel accommodations for 5 nights for $1200 per person. These services are expensive when availed individually. This offer is an example of _____.

price bundling

What is the potential byproduct of promotional markdowns?

The increased in-store traffic can lead to the purchase of other products at regular prices.

Giant, a retail store, is offering two 6-packs of beer for $5. The price for a single tin is $2.69. What pricing strategy is Giant using?

Multiple-unit pricing

The practice of charging different prices to different demographic market segments is referred to as _____.

third-degree price discrimination

_____ refers to charging of different prices for different stores, markets, or regions.

Zone pricing

_____ is the practice of pricing certain items lower than normal to increase customers’ traffic flow or boost sales of complementary products.

Leader pricing

Dream Homes is an appliance store. It recently launched its own brand of freezers in order to build customer loyalty. The store launched three different models to cater to low, middle, and high income groups. The freezers are also priced accordingly. These freezers are exclusive to Dream Homes and cater to all customer segments. This pricing strategy involving price points within a merchandise category is known as _____.

price lining

At the new toy store that opened near his home, Ryan noticed all the products were priced at $.49, $.79, or $.99 endings. What type of pricing is the store following?

Odd pricing

_____ are customers who go from one store to another, buying only items that are on special.

Cherry pickers

_____ enables customers with mobile devices to check prices in stores and purchase online, ostensibly at a lower price.


_____ is the concept of offering customers localized promotions of retailers in close proximity of their mobile phones.


Which of the following is set by vendors by withholding benefits such as cooperative advertising or even refusing to deliver merchandise to noncomplying retailers?

MSRP pricing

_____ is an unlawful, deceptive practice which lures customers into a store by advertising a product at a lower-than-normal price and then, once they are in the store, induces them to purchase of higher-priced model.

Bait and switch

Why do vendors encourage retailers to sell at MSRP?

To reduce retail price competition among retailers

A _____ is a promise to customers to sell currently out-of-stock merchandise at the advertised price when it arrives.

rain check

Which of the following pricing practices employs tactics such as inadequate inventory for advertised products?

Bait and switch

An agreement between retailers that are in direct competition with each other to set the same prices is called _____.

horizontal price fixing

A _____ is the price against which buyers compare the actual selling price of the product, and thus it facilitates their evaluation process.

reference price

Periodic price audits are completed at retail stores to ensure that the:

extent and cause of scanning errors are identified.

Share This

More flashcards like this

NCLEX 10000 Integumentary Disorders

When assessing a client with partial-thickness burns over 60% of the body, which finding should the nurse report immediately? a) ...

Read more


A client with amyotrophic lateral sclerosis (ALS) tells the nurse, "Sometimes I feel so frustrated. I can’t do anything without ...

Read more

NASM Flashcards

Which of the following is the process of getting oxygen from the environment to the tissues of the body? Diffusion ...

Read more

Unfinished tasks keep piling up?

Let us complete them for you. Quickly and professionally.

Check Price

Successful message