MAR3231 Exam 4

Transparency Pricing

A pricing strategy that involves making consumers aware of the cost breakdown of products. EX: Oliver Cabell's $285 bag

Gathering Information

A retailer gathers information about merchandise decisions from a variety of sources: -Consumer (always first) -Suppliers -Manufacturers -Wholesalers Data -> Knowledge -> Action

At-the-market orientation

Average prices -When you have 2 big competitors like Petco & PetSmart -Charge the same price as their competitors -These companies compete on other factors, not just price.

Scope of Merchandising: Assortment

Blue Buffalo sets up stands at farmers markets

Music

Familiar music leads to impulsive decisions, while lesser-known background music encourages focus. -Sidenote: we remember the first, last, and peak moments of certain experiences. This applies to vacations and past romantic relationships

Current and Potential Customers

FitBit was better than the Apple Watch at first, now their sales are drastically dropping.

Exterior Planning

It takes an online visitor less than two-tenths of a second to form an opinion of a brand once they access the company's website. 1. Storefront 2. Store entrances 3. Display windows 4. Exterior building height 5. Surrounding stores and area 5. Parking facilities

Type of Evaluation: description

Items are not sampled or inspected

Inelastic Pricing Attitude

Large % changes in price lead to small % changes in the number of units bought. EX: Medicine you need to survive, movie tickets

Elastic Pricing Attitude

Small % changes in price lead to substantial % changes in the number of units bought. EX: If gas prices go up, some people might refuse to drive and some might continue driving because they need to.

All buying and selling functions of scope of merchandising

Smaller organizations make decisions not just on buying but also pricing, displays, and employees managed 1. Assortments 2. Advertising pricing 3. Point-of-sale displays 4. Employee utilization 5. Personal selling approaches

Forecasts

These are projections of expected retail sales for given periods Components: •Overall company projections •Product category projections •Item-by-item projections •Store-by-store projections (if a chain)

Timing

Timing can relate to seasonality -Special events: movie releases (superhero movies do well in the box office but do better with the merchandise) -New product releases (Apple owns Beats but they are coming out with an Apple branded Beats headphone)

Manufacturers

Toblestone Chocolate had to reduce the amount of chocolate in their candy bars because the price went up. Company had to decide whether they should reduce the shape of the candy bar instead of raising their prices.

Pioneer Advertising

Used for a product category instead of a specific brand -Rare in retail Does not try to get your to buy a certain product, they want you to just increase consumption of an overall category EX: got milk? beef is what's for dinner

Type of Evaluation: sampling

Used with regular purchases of large quantities of breakables, perishables, or expensive items

Advertising Advantages

1. Attracts a large audience 2. Low cost per contact (can also be a disadvantage with the billboards on Tennessee) 3. Many alternatives available 4. Control over message content; message can be standardized

Selecting Merchandise Sources

1. Company-owned (Whole Foods & their 365 private label) 2. Outside, regularly used supplier (vendor) 3. Outside, new supplier -No perfect source

Factors Affecting Pricing Strategy

1. Consumers 2. Government (federal, state, local) 3. Manufacturers, wholesales & other suppliers 4. Current & potential competitors (Apple Watch & FitBit)

Elements of the Promotional Mix

1. Advertising 2. Public Relations 3. Personal Selling 4. Promotion

Straight Traffic Pattern Advantages

1. An efficient atmosphere is created 2. More floor space is devoted to product displays 3. People can shop quickly 4. Inventory control and security are simplified 5. Self-service is easy, thereby reducing labor costs

Pricing Options for Retailers

-Discount Orientation -At-the-market orientation -Upscale orientation

Market Segments by Price Sensitivity

-Economic consumers (college students, only care about cost & money) -Status-oriented consumers (everything has to be brand name) -Assortment-oriented consumers (consumers who want a wide variety) -Personalizing consumers (people love to customize food orders) -Convenience-oriented consumers (becoming a huge factor in how we shop and buy)

Merchandising Philosophy: PetCo, Chewy, PetSmart

-Hard to distinguish between PetCo & PetSmart -PetSmart bought Chewy to try to stand out -PetCo is positioning themselves with pet's health

Retail Advertising

-Have more concentrated target markets -Cannot utilize national media as readily as manufacturers -EX: Sephora

Cross-merchandising continued

-Know "what" your customer is purchasing -Too many firms focus on the product and not the benefit -"Southwest Airlines is successful because the company understands it's a customer service company. It also happens to be an airline."

Manufacturer Advertising

-More concerned with developing favorable attitudes -EX: Urban Decay

Retail Advertising vs. Manufacturer Advertising

-Retail: Advertising many different lipsticks for Sephora because they just want you to come to their store -Manufacturer: Advertising aimed at increasing awareness of a brand (Gwen Stefani in Urban Decay ad because they want you to buy the brand, they don't care where you buy it)

Free Flow Pattern Advantages

1. A friendly atmosphere 2. Shoppers do not feel rushed 3. People are encouraged to walk through in any direction 4. Impulse or unplanned purchases are increased

What contributes to a retailer's image?

1. Customer Service 2. Firm's Positioning 3. Target Market 4. Store Location 5. Merchandise Attributes 6. Pricing 7. Attributes of physical facilities 8. Shopping experiences 9. Community service 10. Promotion tools (advertising, PR, personal selling, sales promotion)

Atmosphere created by the retailer

1. Exterior 2. General interior 3. Interior displays 4. Store layout

Penetration Pricing Advantages

1. Faster growth 2. Broad market potential 3. Combat competitors

Merchandise Plan

1. Forecasts 2. Innovativeness 3. Assortment 4. Brands 5. Timing 6. Allocation

Implementing Merchandise Plans

1. Gathering Info* 2. Selecting and Interacting with merchandise sources* 3. Evaluation 4. Negotiation 5. Concluding purchases 6. Receiving and stocking merchandise 7. Reordering 8. Re-evaluation

Straight Traffic Pattern Disadvantages

1. Impersonal atmosphere 2. More limited browsing by customers 3. Rushed shopping behavior

Goals of Advertising

1. Inform customers about goods and services and/or company attributes (pop-up ads or flash sales, Handpicked Outfits, weed shop) 2.Develop demand for private brands (future of private labels: spiking with more offerings, Cookie Butter) 3.Develop and/or reinforce a retail image (Spotify reinforces a fun, young, energetic image, beer company with tap on the side of the street)

Price Skimming Advantages

1. Insight into what consumers are willing to pay 2. Can create an aura of prestige around your product 3. Late adopters might be pleased to get your prestigious product at a bargain price

Advertising Disadvantages

1. Messages lack flexibility 2. Geographic flexibility limited 3. Some media require large investments 4. Some media have high throwaway rates 5. Some media limit the ability to provide detailed information

Factors Affecting Elasticity

1. Number of substitutes 2. Cost of switching 3. Degree of necessity (more elastic) 4. Proportion of income 5. Peak and off-peak demand

Free Flow Pattern Disadvantages

1. Possible customer confusion 2. Wasted floor space 3. Difficulties in inventory control 4. Higher labor intensity 5. Potential loitering 6. Displays may cost more

Merchandising Philosophy should reflect:

1. Target market desires 2. Retailer's institutional type 3. Market-place positioning 4. Defined value chain 5. Supplier capabilities 6. Costs 7. Competitors 8. Product trends

Merchandising

Activities involved in acquiring goods/services and making them available at the places, times, prices, and quantities that enable a retailer to reach its goals. -Very attractive side of corporate retail careers -Critical activity in retail

Retail Employees

Compared to friendly salespeople, rude salespeople cause customers with low self-confidence to spend more.

Other Customers

Customers with negative self image are less likely to purchase if they see someone more attractive trying on the same item.

General Interior

Flooring Colors Lighting Scents Sounds Store fixtures Wall textures Temperature Aisle space Dressing facilities In-store transportation (elevator, escalator, stairs) Dead areas Personnel Merchandise Price levels Displays Technology Store cleanliness

Price Skimming

Focuses on maximizing profits by charging a high price for early adopters- come in with a higher price (many tech companies) EX: any new iPhone release is based on this- they place phones at high prices because they can- you will still buy it

Consumers

Have an impact on the strategy chosen by a retailer EX: the misfits in a grocery store. consumers willing to pay a reduced price for unattractive produce

Scope of Merchandising

Having what your customers want to buy -The buying function for large organizations EX: Going to fashion week and saying those are the clothes we want EX: Fresh market has an employee that decides what products they are going to carry in store

Upscale Orientation

Higher / Highest prices EX: Versace, Hermes, Tesla, Tumi What are you actually buying?

Retail Positioning

How you are viewed relative to your competitors

Discount Orientation

Low prices as a competitive advantage EX: Walmart, Dollar General, TJ Maxx -All competing on price, trying to be the cheapest option around "Discount and variety stores have a relatively low level of Ecommerce penetration" "Amazon.com is a threat to many retailers, particularly to discounters..." -Walmart has lower prices than Amazon, we are just paying for the convenience with Amazon. -Walmart is going head to head with Amazon. Walmart is bigger in size & that is how they are still making it. How much are we really influenced by low prices? -More people are looking for convenience instead of price

Micromerchandising

Retailers adjust shelf-space allocations to respond to customer differences and other differences among local markets. -Can get very specific -Know what the customers in your area are going to buy -Business in Tally (FSU gear) vs. Gainesville (UF gear)

Publicity

Nonpersonal form communication whereby messages are transmitted by mass media. -The time/space provided by the media is not paid for, and there is no identified commercial sponsor -Can't control it, more difficult to manage -Very strong- we believe it more than we believe a billboard EX: IHob (Burgers)

Type of Evaluation: inspection

Occurs on every single unit delivered

Penetration Pricing

Occurs when a company launches a low-priced product with the goal of securing market share. -come in with a low price- opposite of skimming -about winning market share, not money -for a different type of product or retail EX: generic offerings such as a pizza place

Personal Selling

Oral communication with one or more prospective customers for the purpose of making a sale EX: Nordstrom

Advertising

Paid, nonpersonal communication transmitted through out-of-store mass media by an identified sponsor. Key aspects: -Paid form -Non-personal presentation -Out-of-store mass media -Identified sponsor More heavily influenced

Brands

Private (dealer or store)- Cookie Butter Manufacturer (national)- Apple, Coke Generic- Publix Brand

Marketing Mix

Product- most closely related to merchandising Price Place Promotion

Gathering Info Cont.

Retailers can most effectively track consumer preferences through consumer loyalty programs: 1. Use a simple point system 2. Use a tier system to reward loyalty 3. Charge an upfront fee for VIP benefits 4. Use nonmonetary programs around customer values 5. Partner to provide all-inclusive offers

Cross-merchandising

Retailers carry complementary goods and services to encourage shoppers to buy more. -Deeper than micromerchandising -EX: Placing the ketchup near the hotdogs -Diaper purchases are highly correlated with beer purchases -TTI talked about putting caution tape near Halloween decorations

What elements contribute to a store's atmosphere?

Sampling has been shown to... -Boost sales of certain products (in some cases by as much as 2,000%) -Boost sales of product categories over time -Create a positive atmosphere EX: Costco

Merchandising Philosophy

Sets the guiding principles for all the merchandise decisions made by the retailer...because this is the "product" element of the 4Ps. -What guides the decisions -Tough because the merchandiser has to buy things that makes sense for the company as a whole -Takes a lot of factors into consideration

Government

Setting minimum wage effects the pricing strategy of companies.

Dynamic Pricing

The practice of pricing items at a level determined by a particular customer's perceived ability/willingness to pay. -Also known as surge & variable pricing -EX: Uber & Disney -Know the relationship with elasticity and dynamic pricing

Atmosphere

The psychological feeling a customer gets when visiting a retailer. This is shown to influence customer mood. -Store retailer: Atmosphere refers to store's physical characteristics that project an image and draw customers

Price Elasticity of Demand

The sensitivity of customers to price changes in terms of the quantities they will buy. -Every person has different sensitivity to price changes Highest: Airline travel & movies Lowest: Telephone & food

Retail Image

The way a firm is perceived by its customers. The perception people have when they hear the name of your company. Why is it sometimes difficult for a retailer to convey/manage image? Nike, Harley Davidson, Whole Foods -Crucial to success -Very difficult to manage -Firm hopes they can create a uniform image but it is not always like that in the mind of the consumer

Micromerchandising: women and beer consumption

When you get more specific, you run into problems: old stereotype was that women drink wine and men drink beer. Study found that: -Women prefer "build your own" 6-packs -Beer is becoming "wine-fied" (I.E. beer pairings, location specific preferences) -Women prefer meaningful organization of items when shopping