Retail Marketing (Chapters 1-5)

Human Resources

"Employees are key to building a sustainable competitive advantage" Strategies for Recruiting and Retaining Talented Employees Employee Branding (Target: Red and Khaki, Hollister: Hollister Attire, SWA: Polos and Shorts) Develop Positive Organizational Culture

Mobile Banking and Mobile Payments

2 billion mobile deposits Mobile payments: Slow growth but large potential (forecast is +30% in 2017) Starbucks is largest mobile payment processor Your phone = browse, make lists, store directory, alerts in stores, coupons, process payment, and loyalty program. All in one.

Viable Target Market

Actionable - Similar needs/seek similar benefits? Identifiable - Determine segment size/find them? Substantial - Large enough? Reachable - Ways to market to them? Also: Attractiveness - Large or Large Enough. Growing, Little Competition = More Profits Consistent with Your Competitive Advantages

Brand Loyalty

Committed to a specific brand May switch retailers to buy brand

Multi-Attribute Attitude Model

Customers see a retailer, product, or service as a collection of attributes or characteristics Predict a customer's evaluation of a retailer, product, or service based on • Its performance on relevant attributes • the importance of those attributes to the customer

Using Multiple Channels to Interact with Customers

Customers want to interact in different ways Each channel offers a unique set of benefits for customers Increase "Share of Wallet" Increase Sales and Profitability (no kidding!)

Types of General Merchandise Retailers

Department Stores Specialty Stores Category Specialists (Big Box/Category Killer) Home Improvement Centers Discount Stores Drugstores Off-Price Retailers Extreme Value Retailers

Capabilities for Multi-Channel Retailing

Developing assortments and managing inventory Distribute merchandise efficiently from DCs to stores Present merchandise in catalogs Present merchandise on websites Process orders electronically Efficient distribution of individual orders to/from homes Operate information systems for all channels

Converting Evaluations into Purchases

Don't stock out of popular merchandise Reduce waiting times at checkout Salesperson Information Extensive assortments Range of services EDLP and Credit Easy navigation and check-out at websites (amazon.com one click purchases) Offer liberal return policies, money back guarantees, refunds, and price matching

Fashion Life Cycle

Early Adoption, Spreads to Larger Groups, Saturates, Declines, Obsolescence Time Can Vary Trickle-down Theory Mass Market Theory (Fashion leader in a peer group - horizontal...Camelbak Water Bottle, SmartPhone) Subculture/Trickle-up Theory (Urban Youth, Jeans, Rap)

Three Tiers of Department Stores

First Tier: Upscale, high fashion chains with exclusive designer merchandise and excellent customer service - Nordstrom, Neiman Marcus, Saks Second Tier: Retailers sell more modestly priced merchandise with less customer service - Macy's, Dillards Third Tier: Value oriented caters to more price conscious customer - JCPenney, Sears, Kohl's

Issues in Extreme Value Retailing

Focuses on Lower Income Consumers Names mostly imply good value not $1 price points Low Cost Location Limited Services One of the Fastest Growing Retail Segments Adding Food

Engage Consumers in Habitual Decision Making

If the customer habitually comes to you, reinforce behavior -Make sure merchandise is in stock - Provide good service - Offer rewards to loyal customer If the customer goes to your competitor's store, break the habit - Offer special promotions

4 Methods to Increase the Chance of a Store Visit

Increase Performance Beliefs of Your Store - Lowes: "Not for Women" = Brighter Stores Decrease Performance Beliefs About Competitor (See "Political Ads") - Ace: Home Improvement Center = Too Big Increase Importance Weight of Attributes on which You Have an Advantage - Whole Foods: Healthy Food = Healthy Family Add a New Benefit on Which You Excel - Blood Diamond Case: Conflict Free Gems

Encourage Impulse Buying

Influence by using prominent point-of-sale (POS) display with a sign (24/7/365) Have Salespeople Suggest Add-ons Have Complementary Merchandise Displayed Near Product of Interest Put Merchandise Where Customers Are Waiting

Resources Needed to Compete on the Internet

Interesting, easy to use website Management Information Systems -Order processing and status - Customer database - Personalization software Retailing Skills (Was Initially Overlooked) -Managing inventory -Editing assortment Efficient Fulfillment Systems - Picking, packing, shipping individual orders - Handling returns - reverse distribution

Sources of Information

Internal - Past experiences - Memory External - Consumer Reports - Advertising - Word of mouth - Internet - Social media

Location

Location is a competitive advantage A high density of Starbucks stores • Creates a top-of-mind awareness • Makes it very difficult for a competitor to enter a market and find good locations

Vendor Relationships

Low Cost - Efficiency Through Coordination -Electronic Data Interchange (EDI) - Collaborative Planning and Forecasting to Reduce Inventory and Distribution Costs Exclusive Sale of Desirable Brands Special Treatment - Early Delivery of New Styles - Shipment of Scarce Merchandise

Issues in Specialty Store Retailing

Mall-Based Apparel Retailers Decline in Mall Shopping and Apparel Sales -Lack of New Fashions -Less Interest in Fashion ("Business Casual") -Increased Price Consciousness Lifestyle Formats - Urban Outfitters Growth in Resale Shops ("Rent the Runway")

Customer Loyalty

More than simply liking one retailer over another Loyal customers will be reluctant to patronize competitive retailers Retailers build loyalty by: - Developing a strong brand for the store or store brands (Nordstrom, Sears Craftsmen) - Developing clear/precise positioning strategies (Target) - Creating an economic/emotional attachment with customers through loyalty programs (AA, Charity-ties)

Opportunities to Enhance Multi-Channel Experience

Order on Internet, Pick-Up in Store Promote Web Site In-store, on Receipts, Shopping Bags Product Availability in Stores Available on Website Kiosk in Stores to Order Merchandise Not Available in Stores Plan Purchases (Shopping Lists) on Website/Mobile In-Store Events Promoted on Website Ad Circular on Website, In store and Online Coupons QR Codes

Family Influences Buying Decisions

Purchases are for the entire family to use Whole family participates in the decision making process Retailers work to satisfy the needs of all family members Kids in the U.S. spend over $200 billion on personal items. They directly influence the purchase of another $300 billion worth of items such as food and clothing.

Post-Purchase Evaluation

Satisfaction - A post-consumption evaluation of how well a store or product meets or exceeds customer expectations Becomes part of the customer's internal information that affects future store and product decisions Builds store and brand loyalty

Hedonic Needs That Retailers Can Satisfy

Stimulation - Background music, visual displays, scents Social experience Learn new trends and fashions Satisfy need for power and status - Upscale health resorts, Massage Envy Self-rewards - Personalized makeovers Adventure - Treasure hunting for bargains

Elements in Retail Strategy

Target Market - The market segment(s) toward which the retailer plans to focus its resources and retail mix Retail Format - The nature of the retailer's operations—its Retail Mix Sustainable Competitive Advantage (LTSCA) - A long term advantage over the competition

Chico's Strategy

Target Market - Women 35 to 55 Who Want Comfortable, Casual, But Stylish Apparel Retail Format - Specialty Apparel Stores in Malls and Strip Centers Selling Private Label, Coordinated Outfits Bases for Building Sustainable Competitive Advantage - Unique Merchandise Sized 0,1,2,3 (Extended Sizes)

Ethical Concerns

When does targeting become stereotyping? Targeting the vulnerable (children, low income, low education, various ethnic groups) Fast Food retailers are criticized for only targeting urban areas Grocery Store retailers are criticized for not targeting urban areas (food deserts).

Mobile Coupons

"The future of coupons is mobile" Primary methods: Mobile apps SMS (usable with non-smart phones) Targeting: "Smart" coupons "Geofencing" Loyalty programs

Amazon

"Walmart Who?" Of every additional $1 spent by Americans online in 2015, Amazon captured 51 cents Amazon's market capitalization is $366 Billion now which dwarfs Walmart's $213 Billion Years of heavy investment in infrastructure and logistics has blanketed the country with 100 Amazon warehouses. Walmart added 4. Half of all households will be Amazon Prime members by 2020 Walmart.com is one sixth of Amazon sales and growing 10%. Amazon is +20%.

6 Steps in the Buying Process

1. Need Recognition 2. Information Search (For Both Retailer and the Product) 3. Evaluation 4. Choice (For Both Retailer and the Product) 5. Visit Store/Internet/Catalog to Purchase Merchandise/Service 6. Loyalty (Post-Purchase Evaluation and Patronage Determination) - MOST IMPORTANT

A Retail Strategy Should Identify:

1. the target market 2. the product and service mix (Retail Mix) 3. a long-term, sustainable competitive advantage ex. Walmart, Whole Foods, FC Barcelona train station

Retailer

A business that sells products and/or services to consumers for personal or family use. Kohl's, Macy's, Wendy's, Amazon.com, Jiffy Lube, AMC Theaters, Lands End, Avon, J.Crew

Multi-Channel Retailer

A retailer that sells merchandise or service through more than one channel. By using a combination of channels, retailers can exploit the unique benefits provided by each channel. (Brick and Mortar, Catalog, Online, and Mobile)

Supply Chain

A set of firms that make and deliver a given set of goods and services to the ultimate consumer.

Discount Store Competition

Amazon Low prices Little service Lower costs

Market Segmentation

Avoid wasting time and money Create a retail strategy that delights a viable segment LTCSA

Variety

Breadth of merchandise Wide vs. Narrow The number of merchandise categories

Internet Channel

Broader Selection More and Better Information to Evaluate Merchandise Personalization - Information is tailored to individual consumers to help them make quicker and better purchase decisions Information for Solving Problems, Not Just Merchandise Characteristics - Virtual Communities

3 Approaches to Sustainable CA

Building strong relationships with customers Building strong relationships with suppliers Achieving efficient internal operations

Wholesalers

Buy from manufacturers, sell to retailers

Cross Shopping

Buy premium and low value products

Distribution and Info Systems

By decreasing costs here, we can invest in: -Better services -Increase in breadth and depth -Decrease in prices -More marketing

Catalog Retailers

Can add an electronic channel easily Ready to take orders Able to pack merchandise Able to deliver Able to handle returned merchandise Already have a database Visual merchandise for catalog is the same for electronic

Store Loyalty

Committed to a specific retailer Reluctant to switch retailers

Issues in Department Store Retailing

Competition -Below....Discount Stores on Price -Above....Specialty Stores Service, Assortment Lowering Costs by Reducing Services - Centralized Checkouts Building better relationships with their key customers (technology based) (Macy's Search and Send) Focus on Apparel and Soft Home Develop Private Labels and Exclusive Brands Undertaking multichannel and social media marketing campaigns to develop strong images for their stores and brands

Trends in Supermarkt Retailing

Competition from Discount Stores - Efficient Distribution - Lower Costs - Lower Prices Changing Consumption Patterns - Time Pressure - Eating Out More - Meal Solutions

Extended Problem Solving

Consumers devote time and effort to analyzing alternatives High risk Financial risks - purchasing expensive products or services Physical risks - purchases that will affect consumer's health and safety Social risks - consumers will believe product will affect how others view them

Supermarkets

Conventional: 30,000 SKU Limited Assortment (extreme value food retailers) - Only 2,000 SKUs -Offer one or two brands or sizes - Designed to maximize efficiency and reduce costs - Offer merchandise at 40-60% lower prices than conventional - ALDI, Save-A-Lot - Fair trade

Characteristics of Retail Strategy

Customer Service Location Merchandise Assortment Pricing Communication Mix Store Design/Display

Category Specialists

Deep and Narrow Assortments Destination Stores "Category Killers" or "Big Box" Stores Low Price and Service...usually Wholesaling to Business Customers and Retailing to Consumers Incredible Growth....Best ROA - Most store closes, growth in resale shops

Assortment

Depth of merchandise Deep vs. Shallow The number of items in a category (SKUs)

More Attention to Long-Term Strategic Planning

Due to the emergence of New competitors New formats New technologies Shifts in customer needs

Supermarket Survival

Emphasize Fresh Perishables ("Power Perimeter") - Provide a Better In-store Experience Offer More Private Label Brands Target Health Conscious and Ethnic Consumers

Vertical Integration

Firm performs more than one set of activities in the channel Most supply chains feature this

E-Commerce Superior Benefits

GIFTS Saves time Saves effort in packing Saves effort in delivery SERVICES No Shipping Problems Examples Travel websites Banking Newspapers

Methods for Segmenting

Geographic Geo-demographic Demographic Buying situation Benefit Lifestyle

Nature of Retailing and Distribution in the U.S.

Has the greatest retail density (wealth driven) Has the greatest concentration of large retail firms Large enough to operate their own warehouses, eliminating the need for wholesaling. The combination of large stores and large firms result in a very efficient distribution system. U.S is in the top 1% in the world

Retail Strategy

Identify the Competition - intratype competition (e.g., Dillards vs. Macys) -intertype competition (e.g., Dillards vs. Wal-Mart) Identify Potential Customers

Types of Retail Ownership

Independent, Single Store Establishments Wholesale Supply-sponsored voluntary group (IGA, True Value Hardware) Corporate Retail Chains (Target) Franchises (can often be a combo of company owned and franchised stores)

Convenience Stores

Limited variety and assortment at a convenient location - Higher prices, shorter lines - Need to decrease depending on gas customers - Adding new services

Habitual Problem Solving

Little or no conscious thought For purchases that aren't important to the consumer For merchandise consumers have purchased in the past For consumers loyal to brands or a store

Showrooming

Look at product in store but buy it cheaper online

Strategic Decisions

Made Infrequently Long-term Require significant investment Not easily reversed ex. Store location

Forward Integration

Manufacturers undertake retailing activities Ex: Ralph Lauren (New York Jones, Liz Claiborne) operates its own stores

Growth Strategies

Market Penetration - Existing customers/ new consumers from the target/ buy more Market Expansion - New market segments Retail Format Development - Different retail mix for the same target Diversification - New mix, new market

Top-of-Mind Awareness

More stores in the same area (e.g., Starbucks) Signs, PR, ads, events, promotions Get exposure on search engines like Google Try to be at the top of the page

Limited Problem Solving

Most Common Moderate Time and Effort Customers engage in this when they have had some prior experience with products or services Customers rely more upon personal knowledge Majority of customer decisions involve limited problem solving

Warehouse Club

Offer a limited and irregular assortment of food an general merchandise with little service at low prices Use low cost locations, inexpensive store design, little customer service Low inventory holding costs by carrying a limited assortment of fast selling items. 15% max markup.

Off-Price Retailiers

Offer an inconsistent assortment of brand name merchandise at low prices - TJX companies (T.J. Maxx, Marshalls, HomeGoods), Ross Stores, Burlington Coat Factory, Big Lots, Tuesday Morning

Reference Groups

One or more people whom a person uses as a basis of comparison for beliefs, feelings and behaviors. Affect buying decisions by: Offering information Providing rewards for specific purchasing behaviors Enhancing a consumer's self-image

Issues in Discount Store Retailing

Only Big Ones Left - Wal-Mart, Target Remain - Kmart was #1 - Kresge Invented the Category Differentiation Strategy - Walmart Dominates = Low Price and Good Value - Target = More Fashion Forward and Nice Experience Competition from Category Specialists - Toys-R-Us, Best Buy, Sports Authority Dollar Stores (Walmart vacated this space)

Why Multi-Channel Retailing?

Overcome Limitations of Existing Format (Store Size, Inconsistent Sales Execution, Catalog Updates are Impossible) Expand Market (Geography, Demographics) Provide Services More Cost-Efficiently (Banking) Leverage Existing Assets (Economy of Scale) Develop Customer Shopping Behavior Insights

Hedonic Needs

Satisfied when purchases accomplish a need for entertainment, emotional, and recreational experience as in department stores or specialty stores. (WANT)

Utilitarian Needs

Satisfied when purchases accomplish a specific task. Shopping needs to be easy, and effortless like a grocery or convenience store. (NEED)

Retail Mix

Satisfy consumers and influence needs Types of merchandise and services offered Goods/services offered, pricing, advertising, store design, merchandise, location Walmart, Macy's, Target, Whole Foods example

Firms that are Retailers and Wholesalers

Sell to other business as well as consumers: Office Depot, Lowes, United Airlines, Bank of America, Costco Large retailers engage in both wholesaling and retailing Ex: Wal-Mart, Safeway, Brown Shoe Company

Mobile Commerce

Selling & buying of products by means of wireless mobile devices: Conducted via smart-phones & tablets "Mobile commerce is an essential component of a retailer's digital platform." Fastest-growing advertising strategy/tactic Location Based Marketing via GPS (issues?) 87% of U.S. retailers have mobile capability

Retailing

Set of business activities that adds value to the products and services sold to consumers for their personal or family use. Part of the distribution channel Also involves sale of services

Fast Fashion: Strategic Advantage

Shorter cycle time from design to production to delivery to stores (3 days versus 3 times per year) Shorter lead time - own production, small quantity production in close proximity, efficient logistics, premium transportation, frequent delivery, "What's hot" No discounts necessary Zara, H and M, TopShop, Forever 21

Logistics

Storage/transportation Be efficient and save money

Retail Branding

Stores use brand (store's name and store brands - private label brands) to build customer loyalty Can create an emotional tie with customers that build their trust and loyalty Facilitates store loyalty because it stands for a predictable level of quality Kenmore and Craftsmen at Sears

Supercenters

The fastest growing retail category Large stores that combine a supermarket with a full -line discount store One-stop shopping experience WalMart is now the largest food retailer Hypermarkets, Big-box stores

Consideration Set

The set of alternatives the customer evaluates when making a selection

Factors Affecting the Amount of Info Search

The value of searching versus the cost of searching Product Characteristics • Complexity and cost Customer Characteristics • Past experience • Perceived risk • Time pressure - Characteristics of the consumer and aspects of the market/buying situation Number of Alternative Brands

Corporate Social Responsibility

The voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations, in addition to the concerns of its stakeholders Examples: Starbucks: pays its farmers 42% more than the commodity price of Arabica coffee beans Target: community giving programs (5% of income, $3 million a week)

Benefits of Stores

Touching and feeling merchandise Personal service Risk reduction Immediate gratificaiton Entertainment and social interaction Browsing Cash payment

Overcoming E-Channel Limitations

Use technology to convert "touch and feel" information into "look and see" information 3-D Imaging Zoom Technology Live Chat 360 Degree Viewing Virtual Models

Merchandise Offering

Variety Assortment Scrambled Merchandising (you wouldn't expect) Kayak example

Retail Channel

Way a retailer sells and delivers to its customers Most common: store Channel: transaction Medium: communication

Conversion Rate

the % of customers who enter a store or access a website and then buy a product from that same store or website. Increased by technology

Ways to Stimulate Need Recognition

• Suggestions by Sales Associates • Advertising and Direct Mail • Visual Merchandise in Store • Special Events in the Store • Signs/Displays • Free Food Sample • Sight/Sound/Smell/Touch/Taste - 5 Senses

Services vs. Merchandise Retailers

■ Intangibility (Can't Touch or See) Problems in Evaluating Service Quality by the Consumer (pre) and the Provider (post) ■ Simultaneous Production and Delivery Create and Deliver at the Same Time...Quality Control ■ Perishability Cannot Save, Store, or Resell (Airplane Seat) Matching Supply and Demand is Hard (Movie Matinee) ■ Inconsistency of the Offering Performed by People...No Two Services Identical Importance of HR Management

Benefits of Internet

Safety Convenience Broad and deep assortments Extensive and timely information Personalization

Benefits of Catalogs

Safety Convenience Ease of use

How Retailers Add Value

Provide Assortment - Buy other products at the same time Break Bulk - Buy it in quantities customers want Hold Inventory - Buy it at a convenient place when you want it Offer Services -See it before you buy; get credit; layaway

Backward Integration

Retailer performs some distribution and manufacturing activities Ex: JCPenney sells Arizona jeans (Private Label)

Retailer's Role in the Supply Chain

Retailers are the final business within a supply chain which links manufacturers to consumers. Part of the distribution channel ("Place")

Five Rights

Right product at the Right price at the Right time at the Right place in the Right quantity Sell the most with the least amount of inventory

Attribution

Who gets credit for the sale? Browse on your phone (M-Commerce), you buy on your laptop (E-Commerce), and then pick up at the store because of free shipping (Brick and Mortar)? Digital influences $.64 of every dollar spent in-store Thanksgiving/Black Friday/Cyber Monday