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Retail Management

TEST 2

1. Need Recognition

2. Info Search

3. Alternative Evaluation

4. Choice

5. Outcomes

Need Recognition

A. Functional Needs: needs directly related to performance of product/ retailers.

B. Psychological Needs: needs associated with personal gratification and enhancement of self-esteem.

Ex. Stimulation, social experience, learning new trends, status and power, self-reward

needs can conflict
strategies to encourage need recognition

Information Search

economics of information approach dominates
Diminishing marginal returns. Later bits of info contribute less and less to our knowledge.
Most knowledge is learned at first.
internal VS external search
retailers wish to limit search to their stores

Factors Affected Amount of Information Search

Characteristics of the Product

Complexity-more complex the product the more you search because there’s a lot to learn.
Cost-more money more search

Characteristics of Customer

Past Experience-internally VS externally
Perceived risk-info search is a risk-reduction strategy.
Time pressure

Market Characteristics

Number of alternative brands

Reducing Information Search

Extensive merchandise Assortment
Assistance in location alternatives
Everyday low pricing
Credit-diff methods of payment
Information from sales associates

Alternative Evaluation

Different methods can be used to evaluate alternatives.
A multi-attribute attitude model may be particularly helpful in planning retail strategy because it helps to predict consumers' evaluation of store alternatives and choice.

Ao= the sum of ∑^n Bi Ii i=1

Where

Ao= attitude towards anything ( for this case it will be store)

N=the number of salient attributes

Bn=beliefs that the store possesses a given attribute I

Ii=importance of a given attribute I to the consumer

Consumer Female 40's income >$60000 working professional status orient

4=most important

1=least important

B i

N Macy’s Express TJmaxx

2 Knowledgeable helpful salespeople4(8) 3(16) 1(2)

4 Good quality merchandise 5(20) 3(12) 3(12)

3 Good atmosphere 4(12) 3(9) 1(3)

1 Low prices 1(1) 3(3) 5(5)

Ao= 41 30 22

Retailing Strategy and Multi-attribute attitude models

To enhance like hood that consumers will visit store, retailers can

A. ΔBi

For the retailer( increase performance rating on important attributes)
For the retailers competition (decrease performance ratings of competitors)

B. ΔIi

Convince consumers that an attribute is more/less important than previously thought. (ie. High price is a good thing)
Difficult to do.

C. Add a new attribute N

Post-Purchase Evaluation

Satisfaction: post-purchase evaluation of how well a store meets or exceeds consumers’ expectations.

To enhance satisfaction (and reduce negative word-of-mouth) retailers can -

- provide accurate information (don’t over-promise)
- offer quality merchandise
- have liberal guarantee and return polices
- follow-up after a sales

Customer Relationship Management (crm)

Set of strategies, programs and systems focused on identifying and building loyalty with the firms most valuable customers
recognizes that nota ll customers are equally profitable of serve

Customer Relationship Management (CRM)

A set of strategies, programs, and systems focused on identifying and building loyalty with the firms most valuable customers.
Recognized that not all customers are equally profitable to serve
Firms can increase profitability develop a sustainable competitive advantage by building and maintaining relationship with their better customers.

Identifying Best Customers

Lifetime customers value (LTV) the expected contribution of the customer’s patronage to the retailer’s profitability over his/ her entire relationship with the retailer.

- LTV estimated using post purchase behavior.
- Use post purchases to estimate future lifetime purchases and then deduct costs of serving he customer.
- 80/20 rule 20% of customers account for 80% of sales.
- 4 LTV segments

4 LTV SEGMENTS

Platinum-most loyal customers; not very price sensitive; place more value on good customers service.
Gold- more price sensitive than A; may shop at competitors stores from time to time. Iron
Price Sensitive; no very loyal; frequently shop competition.
Lead-cost retailers’ money to serve these customers; “get the lead out”

Customer Alchemy-turning gold ad iron customers into platinum customers by increasing retailers share of wallet for these customers.

Retaining Best Customer

A. Frequent Shopper programs offer customers incentives and/ or discounts for patronage- 4 limitations.

- - - - Programs are expensive to develop and administer.
      - Difficult to decrease benefits once they are given to consumers.
      - Do these programs really create loyalty
      - Competitors may offer similar programs than competitive advantage is lost.

B. Special Customers Services offered only to host customers.

Other customers may not be aware of the programs.

Personalization use past purchase data to make recommendations to customers.

Community: create sense of community or family among consumers

community involvement sponsorships etc

E. Company Owned Production

retailer ecoes manufacturer of private label goods
Merchandise costs are decreasing since there are no middlemen
But retailer must bear cost and risks of production
speeds production process
tailoring of goods to clients (customers)
quality is assured (retailer controls level)

Levels of Private Label Involvement

(Low)No Private brands; all manufacturer brands, off-price retailers

(Middle)Proportional private label inventories; mix of manufacturer and private brands dept. stores

(High) 100% private labels the store is the brand

Specialty stores

A. “The store is the Brand”

entire inventory consists of private label merchandise
Otherwise store and brand name are synonymous
requires more investment in product development than any other branding strategy mix
Often these retailers design and produce their own private label goods.
- requires multiple skills and competencies
- risky strategy

B. “Proportional private Label inventories”

some % of merchandise offerings consists of private label goods
tries to capitalize on the benefits of both manufacturer and private brands
may attract multiple target groups of customers

Labeling Techniques

A. Company Name

ex. Gap, Talbots, Ann Taylor, etc.

B. Image Building Brand

Mock designer names
- ex. Jennifer Moore, Valerie Stevens
Foreign/ Regional sounding names
- ex. Alfani- implies Italian origin
prestige-sounding names
- ex. Charter Club, inc
Theme building names
- sports oriented
- ex. Marshal fields “field sport” and “club follow”

C. Famous-Signature Labels

celebrity name associated with private label goods
attempts to capitalize on celebrity appeal
could become problematic when celebrity becomes involved a scandal
works best when celebrity and product category are somehow linked
- ex. Martha Stewart home furnishings paint outdoor furniture
- Michael Graves – uniquely designed housewares
- Kathy Ireland-athletic wear, swimwear.

Manufacture-turned- Private Brand-name

Bisou Bisou-JCP
Joe Boxer-Kmart
Mossimo-Target

E. Publications-Affiliated Label

-attempts to capitalize on “brand” equity of publications.
- ex. Walmart and better homes: Gardens
Kmart: Country Living

Tactics for Successful Private Brands

A. Extensive advertising to develop/ promote image of private brand

B. Allocation of separate floor space devoted to private brands

C. displays

D. Employee training (increase knowledge)

E. giveaways emblazoned with private brand

help to keep brands name in consumer minds

F. Special Events/ Promotions

fashion shows, sales, etc

G. Money-back guarantees (grocery, drugstores etc)

Growth Opportunities

has the target market changed?

1. Market Penetration-not existing

2. Market Expansion-ll bean in japan-ex

3. Retail Format Development-Macy’s by mail. Walmart.com

4. Diversification-banana republic

Ansoff's Matrix

A. Market Penetration

Focus on existing market using present retailing format.
encourage existing customers to visit store more often
attract customers in segment who aren’t patrons currently
open more stores convenient to target customers
cross-sell( sell complementary merchandise)
least risky strategy to pursue for growth

B. Market Expansion

use existing retail formats to appeal to new segments and consumers
new geographic territories(i.e. Open stores like Publix in north east
new target markets

C. Retail format development

use new retail formats to appeal to customers in existing segments

Store retailer selling through catalogs or internet, or vice versa (costly)
adding new merchandise categories
adjust service levels

D. Diversification

new retail formats to appeal to new market segments
Most risky strategy for growth.
related diversification; present retail strategy shares something in common with new opportunity (buying from some vender, etc)
unrelated diversification; no commonality between present business and new business
vertical integration; retailer buys up supplier, manufacturer (backward integration)

3 Objectives for store design

Stores atmosphere should be consistent with the stores image.
Stores design should influence customers buying decisions.
Stores design should make productive use of space.\

Store Layout

Layout should encourage customers to move through the store and purchase more merchandise.
Layouts should make productive use of space and also give consumers room to shop
Layouts should offer flexibility

Types of store Layouts

A. Grid Layouts: displays and aisles are placed in a rectangular or grid iron pattern

Advantages

Dogs: low product profitability low unit sales; strategies-Raise price

lower shelf position
cut promotions
consider dropping

Winners: high product profitability, high unit sales; strategies-

promote more
better position
display more (more facings)

Traffic builders: low product profitability, high unit sales; strategies

review prices
lower shelf position
expand space
mix with sleepers

Types of Retail Location

A. Central Business Districts (CBD'S)

Main Street Locations

B. Shopping Centers

1. Strip Centers

a. Neighborhood Centers

b. Community Centers

c. Power Centers

2. Malls

a. Regional Centers

b. Super-Regional Centers

c. Fashion/ Specialty Centers

d. Outlet Centers

e. Theme/ Festival Centers

f. Lifestyle Centers

Freestanding Sites

Carts, Kiosks RMUS, Wall Units

E. Mixed-use development (mxd'S)

CBD'S

downtown business area of a city
high traffic area
gentrification may make CBDs more attractive
problems

Parking

Security

Off-peak times (evening/ weekends)

Poor planning

Main street location (shopping area of smaller towns or secondary business district in suburb or with in city may be more successful

Shopping Centers

a group of retail and other commercial businesses that is planned, developed, owned and managed as a single property
provides synergy among members stores
two primary types

1. Strip centers

2. Malls

Strip Centers

parking in front of stores
no enclosed walkways
convenient locations (access points on highways or neighborhoods)
low rent

3 TYPES

A. neighborhood Centers

Convenient shopping for daily needs.
Usual anchors; super market or drugstores.
trade area: 3 miles

B. Community Centers

widest variety of retail formats
2 or more anchors.
usual anchors; supermarkets, drugstores, discount dept. stores, off price retailers, etc
trade area: 3-7 miles

Power Centers

fast growing types of development
3 or more anchors
Usual anchors; discount dept. stores, off-price retailers category killers, etc.
trade area: 5-10miles
can be configured as strips
“village”

Few free-standing anchors and a small # of specialty stores.

Malls

typically enclosed
park in outlying area and walk into stores
Tenant mix is planned (good balance in types of stores, shopping opportunities.)
Stores appealing to similar segments often located together.
mall management controls and maintains environment
high rent
malls becoming entertain centers

6 types.

A. Regional Centers

Provide general merchandise (partis. Soft goods)
at least 2 anchors
Usual anchors: traditional, mass merchant, and/ or discount dept. store.
Trade area 5-15 miles

B. Super regional Centers

similar to, but larger.
more anchors and a wider variety of merchandise.
often multi-level
trade area: 5-25miles

C.Fashion/specialty Centers

composed of upscale apparel shops, boutiques and gift shops
may or may not have an anchor
usually located in tourist areas, high-income areas or CBD's
trade area: 5-15 miles

Outlet Centers

include manufacturers(and retailers') outlet stores and sometimes, and off-price retailers
often located in tourist areas (and away from dept and specialty stores)
trade areas: 25-75 miles

E. Theme / festival Centers

member stores carry out unifying “theme”
usually no anchor stores
unstable environment
Popular in tourist areas

F. Lifestyle Centers

street scape layout with restaurants and stores (may include movie theaters)
no discount stores or self-service stores
High income areas.

Free-standing Sites: retail location that isn’t connected to other retailers, but site may be adjacent to mall; used by retailers with large space requirements (eg. Category killers)

low rent
convenient parking
no direct competition
but store must be a destination point for consumers (no synergy with other stores

Cart: mobile site: typically located in mall common areas.

Kiosk: stationary site larger than cart: mall common areas.

RMU (retail merchandising unit); combination of cart; kiosk

Wall Units: 6-7ft selling spaces located on a wall rather than in middle of an aisle. Carts, Kiosks, RMU's and wall units are less expensive than traditional stores but have short-term leases; stores may not appreciate those businesses, particularly if they sell similar merchandise.

Mixed-use developments (MXD'S)

Combine different uses (e.g. shopping centers, offices, hotels, residences, etc.) in one complex
bring additional shoppers in
make productive use of space
- ex airports resorts, hospitals store with in a store.

Trade Areas

a contiguous geographic area that contains the customers of a particular firm for specific goods and services
primary zone: geographic area from which the business services 60-65 percent of its customers
Secondary zone: geographic area that contains an additional 15-25 percent Of firms customers and is located outside of the primary zone: customers more widely dispersed.
Tertiary (fringe) zone; geographic area located outside of the secondary zone containing all remaining customers; customers most widely dispersed here