Retail Marketing
Magic Solutions
RetailLecture13Micromarketing332019.pptxRetail Micromarketing
NBS7030B
Retail Marketing & Management
Ratula Chakraborty
Professor of Business Management
Director MSc Programmes
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Video on Micro Marketing
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Lecture Outline
Understanding Consumers
Applying Retail Psychology
Segmenting Consumers
Discriminatory Pricing Practices
Other Discriminatory Micromarketing Practices
Self-Targeting Techniques
Purpose: to show how retailers can use micromarketing to boost sales and profits by tailoring and adapting in-store offers to appeal to different consumers in different ways
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Questions for Discussion #1
Why do you go shopping?
How do you decide which shops to visit? What are the key criteria on which you make your decision?
Do you tend to plan your purchases in advance of your shopping trip or buy on impulse? How do you control your urge to make impulse purchases?
Do you ever haggle on prices to get the best possible deal? What is the biggest discount you have ever negotiated?
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1. Understanding Consumers
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What Makes Retail Shoppers Tick?
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Understanding Consumers
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Motives for shopping
Why do people shop?
Serving consumer needs
Physiological, social, symbolic, hedonic, cognitive, experiential needs from products
Personal motives for shopping
role-playing, diversions, self-gratification, learning about new trends, physical activity, sensory stimulation
Social motives for shopping
social interaction, communication, peer group attraction, status/authority, pleasure of haggling and bargain hunting
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Understanding Consumers
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Store Choice
Store attributes as an attraction
prices, convenience, facilities, product range, product quality, service, ambience, opening hours
Shopping costs as a deterrent
money (travel and purchases costs), time, effort, stress, risk (physical, financial, performance, psychosocial)
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Key factors in main supermarket choice
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Source: Nielsen Homescan Survey, January 2014
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Key factors in top-up supermarket choice
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Source: Nielsen Homescan Survey, January 2014
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2. Applying Retail Psychology
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How can retailers use their understanding of consumer behaviour to boost sales and profits?
How can retailers encourage store loyalty and repeat custom (and so preventing consumers shopping elsewhere)?
How can retailers encourage existing customers to buy more goods?
How can retailers reduce consumers’ sensitivity over prices to encourage consumers to spend more?
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Applying Retail Psychology
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Encouraging Store Loyalty
Measures: budget ratio, switching ratio, patronage ratio
respectively measuring “share of wallet”, degree of switching across retailers, and proportion of retailers patronised out of total available
Consumer types: switcher, habitual, variety seeker or loyal shopper
Loyalty programmes: loyalty cards and reward vouchers
Relationship marketing: database/direct marketing, building retailer-customer relationships, focus on most valuable customers
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Applying Retail Psychology
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Encouraging More Spending
Value assurance
Price cuts, loss-leaders and consistent low prices
Product mix
wide range of complementary goods for one-stop shopping
Encouraging time spent in store
attractive ambience, in-store amenities (café, toilets), “retailtainment” (in-store demonstrations), navigable store layout
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Applying Retail Psychology
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Reducing Consumers’ Price Sensitivity
Product positioning and displays (e.g. separating high/low priced substitutes)
Product presentation (e.g. use packaging/labelling to signal quality)
Value-for-money image (e.g. cheap own label products, promotional offers/discounts, price comparisons with rival stores)
Psychological pricing
standard or odd price ends (e.g. £x.99 v. £x.77),
price clustering of products with similar quality,
discrete price steps in line with quality
Why do retailers set 99 price endings? (4min) https :// www.youtube.com/watch?v=9xs6c6jnmNU
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Applying Retail Psychology
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| Effects on Price Sensitivity | Examples of Retailer Practices |
| 1. Reference price effect | Place similar items side by side and keep prices broadly consistent over time |
| 2. Difficult comparison effect | Offer unique sizes and quantities to make comparisons difficult |
| 3. Switching cost effect | Build loyalty through reward card schemes, distinct but familiar store layouts and retail brand image |
| 4. Price-quality effect | Use clear price steps to communicate quality benefits |
| 5. Expenditure effect | Price regular purchased item high; one-off purchases low |
| 6. End-benefit effect | Lower margins on basic goods; higher margins on additional “treats” and impulse purchased items |
| 7. Fairness effect | Set higher margins on goods which consumer believe justify higher prices |
| 8. Framing effect | Express prices as discounts off the usual higher price |
Reducing Consumer Price Sensitivity
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Applying Retail Psychology
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Tricks retailers can play on consumers
Consumers do not always make fully-informed and rational purchase decisions
Retailers might be tempted to exploit ill-informed or non-rational consumers with misleading offers
Example: Poor value “economy packs” and “multi-buy” offers Charging more for less when consumers do not carefully compare offers
Warning: This can backfire on the retailer when the trick is exposed to the public!
Errors in supermarket special price offers (BBC News)
http://www.bbc.co.uk/news/business-11853318
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3. Segmenting Consumers
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Which consumer segments are most attracted to the retailer? Which segments are put off?
How straightforward is it to distinguish different consumer segments and types?
On what basis can the retailer segment and target specific customer groups?
Which basis of segmentation is the most important for the retailer to understand?
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Segmenting Consumers
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Bases for Segmentation
Demographic (age, gender, occupation, income, etc)
Geographic (area type, density, region)
Behavioural (frequency, loyalty, usage rate)
Psychographic (lifestyles, fashion orientation, values)
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Segmenting Consumers
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Shopper Orientation
Shopper types (convenience, recreational, price-bargain, or store-loyal shopper)
Search intensity (high search, selective search, or low search)
Value orientation (price conscious, value conscious, or quality conscious)
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Shopper Profiles for UK Supermarkets #1
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Source: Nielsen Homescan, Year to Jan 2014
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Shopper Profiles for UK Supermarkets #2
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Source: Nielsen Homescan, Year to Jan 2014
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Shopper Profiles for UK Supermarkets #3
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Source: Nielsen Homescan, Year to Jan 2014
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4. Discriminatory Pricing Practices
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Retailers normally offer a standard price that applies for every customer
However, different consumers might have a different willingness to pay, so there might be a profit gain from charging different prices to different customers
Question: How can retailers charge different prices to different consumers?
Answer: Price discrimination
Retailers can overtly or subtly charge different consumers different prices through four types of price discrimination
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Discriminatory Pricing Practices
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1. Individual Pricing
(1st Degree Price Discrimination)
Haggling: individual one-on-one negotiation to determine prices (e.g. in bazaars)
Personalised pricing: targeted prices to individuals based on perceived willingness/ability to pay (e.g. personalised vouchers/coupons)
British ‘learning to haggle’
(BBC News) http://news.bbc.co.uk/1/hi/business/7781078.stm
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Discriminatory Pricing Practices
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2. Quantity/size discounts
(2nd Degree Price Discrimination)
Separate consumers by their willingness to buy more (e.g. families vs. single households)
Multi-buy offers (e.g. “buy-one-get-one-free”, “3-for-the-price-of-2”, “Buy 2 Save £x”)
Discounts for larger package sizes (e.g. £2 for 100g, £3 for 200g)
Frequent purchaser discounts (e.g. loyalty discounts)
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Discriminatory Pricing Practices
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3. Consumer group/type discrimination (3rd Degree Price Discrimination)
Charge different prices to different groups of consumers
Store-based pricing (e.g. “zone pricing” - adjusting price based on store location)
Consumer type discrimination (e.g. by age, status, or gender)
Consumer purchasing behaviour (e.g. discounts for using loyalty cards)
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Discriminatory Pricing Practices
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4. Time-based discrimination
(peak-load pricing)
Charge different prices for different time periods (of the day, month or year)
Peak-load pricing: High prices for high demand periods, low prices for low demand (“off-peak”) periods (e.g. electricity, train tickets, “happy hours”)
Early bird pricing: Discount prices for early buyers, premium prices for late buyers (e.g. airlines)
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Discriminatory Pricing Practices
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5. Complex pricing – “Confusopoly”
(offering multiple prices and product variants to confuse consumers as to what is the best value for their needs)
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Discriminatory Pricing Practices
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6. Targeted pricing examples
Loyalty cards to help retailers target consumers with personalised offers (US, 4min):
https :// www.youtube.com/watch?v=HRKChVmTlsU
Facial scanning technology to target advertising (Tesco, 2 min):
https://www.youtube.com/watch?v=bMCw7-lYUKw
Tailoring prices according to consumer’s online search history with “dynamic pricing” (US, 2 min):
https :// www.youtube.com/watch?v=bMCw7-lYUKw
Exploiting the tourists in Rome: £54 for 4 ice creams (1 min) http:// www.bbc.co.uk/news/uk-22440593
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Questions for Discussion #2
Practising price discrimination could cause resentment amongst consumers when they feel they are being discriminated against and paying higher prices than other consumers. How can retailers avoid such consumer resentment?
Is it fair that different consumers can be charged different prices for the same good?
As a student, when does price discrimination work in your favour? Does this affect your purchasing behaviour?
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5. Other Micromarketing Practices
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Multiple/chain-store retailers can adjust their offer across their store network to appeal specifically to the characteristics of the local served population
Store-level quality variation
Different service levels, amenities, ambience, accessibility, store size
Store-level product variation
Different product ranges, category depth, product sizes, varieties
Store-level promotion variation
Varying local promotion and advertising across stores
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6. Self-Targeting Techniques
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Multiple quality variants and product varieties
Let consumers select preferred price-quality level
Promotional offers aimed at different consumer types
Discounts for “deal seekers”, multi-buys for “stockpilers”, and introductory special offers for “experimenters”
Store layout and product mix
Tempt shoppers with “impulse purchase items” along with their “intended purchase items”
Shelf layout and product displays to show choice
High-price items at eye-level, budget items below
In-store displays combining complementary products (“adjacencies”)
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Questions for Discussion #3
Not everyone enjoys shopping and many consumers wish to spend the shortest time possible shopping. Similarly, many people are often in a hurry and too busy for leisurely shopping. How can a retailer tailor its retail offer to suit these types of consumer?
In the context of your group coursework, which micromarketing techniques might work best for you to increase sales and revenues by tailoring your retail offer to more effectively target particular consumer segments?
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References
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Varley, R. and Rafiq, M. (2014), Principles of Retail Management, Palgrave MacMillan.
Berman, B. and Evans, J.R. (2010), Retail Management: A Strategic Approach, 11th edition, Prentice-Hall.
BBC News (12/5/2013) – Ice Cream: How much would you pay? http:// www.bbc.co.uk/news/magazine-22447799
BBC News (9/12/2011) - Supermarket price war: Can they all be cheapest?
http:// www.bbc.co.uk/news/business-16002303
Thank You!
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