Mar 3231 exam 4

discount orientation

low prices as a competitive orientation

ex: Walmart, TJ Maxx, Dollar general

Examples of discount orientation

TJ Maxx, Dollar General, Walmart

Amazon is a threat to discounters

e-commerce penetration

discount and variety stores have a relatively low level of _____________ ___________________

at-the-market orientation

average prices

usually only have one other competitor

ex: Lowe's & Home Depot, Dicks & Academy, Petco & Petsmart

upscale orientation

-Higher(est) prices

EX: Gucci; Rolex; Louis Vuitton; Givenchy; Burberry; Fendi; ..........

What are you "actually" buying?

transparency pricing

a pricing strategy that involves making consumers aware of the cost breakdown of products

ex: Oliver Lane (shows breakdown of everything), Everlane

-consumers -Government -Manufacturers -Wholesalers -Suppliers -current and potential competitors

Factors affecting retail price strategy

consumers

(Factors affecting retail price strategy)

Misfits section showed that consumers were interested in buying imperfect veggies at lower prices

Governments

(Factors affecting retail price strategy)

Min wage would impact retailer pricing strategy

Manufacturers, wholesales, retailers

Ingredient prices increased and Toblerone decided to change their design to smaller to keep their same price

Current and potential consumers

Fitbit took a stock hit when Apple watches included fitbit options and more

price elasticity of demand

the sensitivity of customers to price changes in terms of the quantities they will buy

higher the number the more elastic it is

marketers job is to move from elastic to inelastic

elastic

small percentage changes in price lead to substantial percentage changes in the number of units bought

inelastic

large percentage changes in price lead to small percentage changes in the number of units bought

no matter what is charged you buy the same amount

-number of substitutes -cost of switching -degree of necessity -proportion of income -peak and off-peak demand

Factors affecting elasticity

1. Economic consumers

2. Status oriented consumers

3. Assortment-oriented consumers

4. Personalizing consumers

5. Convenience-oriented consumers

Market segments by price sensitivity

economic consumers

wants affordable option

status-oriented consumers

status oriented

assortment-oriented consumers

want a wide variety when choosing, will pay more when they can see more options

personalizing consumers

like personalized experiences and products

convenience-oriented consumers

look for the easiest option

price skimming

strategy focuses on maximizing profits by charging a high price for early adopters

aspects of price skimming

-insight into what consumers are willing to pay

-it can create an aura of prestige around a product

-late adopters might be pleased to get the older version of your prestigious product at bargain price

penetration pricing

occurs when a company launches a low-priced product with the goal of securing market share

aspects of penetration pricing

faster growth broad market potential combat competitors

dynamic pricing

the practice of pricing items at a level determined by a particular customer's perceived ability/willingness to pay

aka "surge" pricing

merchandising

the act of acquiring goods and making them available at the places, times, prices, and quantities that enable retailer to reach its goals

focuses on the "product" aspect of the marketing mix

goal of merchandising

maximize sales & minimizing markdowns

merchandising philosophy

sets the guiding principles for all merchandise decisions made by the retailer

merchandising examples for target markets

1. Urban Outfitters- 18-28 lifestyle brand

2. Free people- 25-30 contemporary women, boho

3. Anthropologie- 28-45 for women with a little more money in her pocket

Petco & Petsmart example merchandising

1. Petco- leaning towards healthy products so they are known as the health brand

2. Petsmart- bought Chewy online, has strong grooming

scope of merchandising- buying

involves selecting and purchasing goods sold by the retailer

-assortment -advertising -point-of-sale displays -employee utilization -personal selling approaches

All merchandising functions

micromerchandising

retailers adjust shelf-space allocations to respond to customer differences and other differences among local markets

what decisions go into the process of effective micromerchandising?

-demographic of the area -location specific preferences -whats around it (FSU, UF)

• preferences (women prefer meaningful organization of items) -new popular segment (women have 25% beer consumption, build your own 6 packs, wine-fied beers.)

cross -merchandising

Retailers carry complementary goods and services to encourage shoppers to buy more

What decisions go into the process of effective cross-merchandising?

-know what your customers is purchasing -too many firms focus on the product and not the benefit

ex: Bandaids next to bike stand & Grahman crackers next to marshmallows

merchandising planning

the process retailers use to offer the right kind of product at the right place, and at the right price

-innovativeness -assortment -forecasts -brands -allocation timing

Devising merchandise plans

forecasts

projection of expected retail sales for given periods

Forecasts components

-Overall company projections

-Product category projections

-Item-by-item projection

-Store-by-store projections (if a chain)

Examples of forecasting companies

-WGSN -Arth-bomber

-Pantone- color of the year, every year

timing can relate to:

-seasonality -special events -new product releases

Advantages of private labels vs. national brands

-store loyalty

-differentiation strategy

-increased channel power over suppliers

-higher profit margins on private labels

store loyalty

(Advantages of private labels vs. national brands )

10% increase in private label purchases, increases that retailers market share of that household by 3% points

differentiation strategy

(Advantages of private labels vs. national brands)

opportunity to differentiate store on the basis of recipe, styling, value, features

Increased channel power over suppliers

(Advantages of private labels vs. national brands)

depends on strength of private label vs. national brand

Higher profit margins on private labels

(Advantages of private labels vs. national brands)

25-30% higher

(but no return privileges, co-op promotions, slotting fees, warehousing)

1. Gathering information

2. Selecting interacting with merchandise sources

3. Evaluation

4. Negotiation

5. Concluding purchases

6. Receiving and stocking merchandise

7. Reordering

8. Re-evaluation

Implementing merchandise plans

Gathering Information

(Step 1- Implementing merchandise plans)

A retailer gathers information about merchandise decisions from a variety of sources

Consumer Suppliers Manufacturers Wholesalers

1. Use a simple point system

2. Use a tier system to reward loyalty

3. Charge an upfront fee for VIP benefits

4. Use a non-monetary programs around customer values

5. Partner to provide all-inclusive offers

Retailers can most effectively track consumer preferences through consumer loyalty programs

-company owned -outside, regularly used supplier -outside, new supplier

Selecting merchandise sources

(Step 2- Implementing merchandise plans)

inspection

occurs on every single unit delivered

sampling

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

description

items are not sampled or inspected

retail image

the way a firm is perceived by its customers

Aspects affecting retail image

-attributes of physical facilities -shopping experiences -community service -promotion tools

-name -line of trade -claim to fame -price position -personality

In seconds a shopper should be able to determine a stores.....

atmosphere

includes the physical characteristics of a retail store used to help create the retail image

Store Retailer Atmosphere

the physical characteristics that project an image and draw customers

non-store retailer atmosphere

it takes an online visitor less 2/10th of second to form an opinion of brand once they access the company's website

retail employees

(store atmospherics)

compared to friendly salespeople, rude salespeople cause customer with low self-esteem to spend more

other customers

(store atmospherics)

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

side note

(store atmospherics)

when thinking about past experiences, we focus most heavily on the peaks (intensive positive or negative_ and the end. This applies to retail experiences, vacations and past romantic relationships

Storefront Store entrances Display windows Exterior building height Surrounding stores and area Parking facilities

Exterior planning

Flooring Colors Lighting Scents Crowds

General interior

task shoppers

high need for control. These shoppers view customer density as crowding

social shoppers

higher need for intimacy. These shoppers perceive customer density as positive

straight traffic pattern disadvantages

-Impersonal atmosphere -More limited browsing by customers -Rushed shopping behavior

straight traffic pattern advantages

-Efficient atmosphere is created -More floor space is devoted to product displays -People can shop quickly -Inventory control and security are simplified -Self-service is easy, thereby

Curving (Free-Flowing) Traffic Pattern advantages

-A friendly atmosphere -Shoppers do not feel rushed -People are encouraged to walk through in any direction -Impulse or unplanned purchases increases

Curving (free flowing) traffic pattern disavantages

-Possible customer confusion -Wasted floor space -Difficulties in inventory control -Higher labor intensity -Potential loitering -Displays may cost more

Advertising Public relations Publicity Personal selling

Elements of the promotional mix

advertising

paid, nonpersonal communication transmitted through out-of-store mass media by an identified sponsor

key aspects of advertising

Paid form Non-personal presentation Out-of-store mass media Identified sponsor

Goals of Advertising

1. Inform customers about goods and services and/or company attributes

2. Develop demand for private brands

3. Develop and/or reinforce a retail image

retail advertising

advertising for a retail business

Ex. Sephora making ads with urban decay brand -Have more concentrated target markets -Cannot utilize national media as readily as manufacturers

manufacturing advertising

advertising aimed at increasing awareness of a brand More concerned with developing favorable attitudes

Advertising advantages

1. Attracts a large audience

2. Low cost per contact

3. Many alternatives available

4. Control over message content

5. Message can be standard

Advertising Disadvantages

1. Standardized messages lack flexibility

2. Some media require large investments

3. Geographic flexibility limited

4. Some media have high throwaway rate

5. Some media limit the ability to provide detailed information

1. Pioneering advertising

2. Competitive advertising

Types of Advertising Content

pioneer advertising

advertising that tries to stimulate demand for a product category rather than a specific brand by informing potential buyers about the product

has awareness as a goal

pioneer advertising examples

Used for new products or customer education

Used for a product category instead of a specific brand

Rare in retail, if retailers advertise they want to drive sales to the store

Ex: new dental procedure available

competitive advertising

Focuses on stimulating demand for a specific brand/retailers

Most of advertising

public relations

Communication that fosters a favorable image for the retailers

Key aspects of PR

Non Personal or personal

Paid or unpaid

Sponsor-controlled or not

Essentially reputation management

Lots of ambiguity

PR objectives for retailers

Increase awareness of the retailer and its strategy mix

Maintain or improve the company image

Present a favorable message in a highly believable manner

Minimize total promotion costs

PR advantages

Image can be presented or enhanced

More credible source

No costs for message's time or space

Mass audience addressed

Carryover effects possible

People pay more attention than clearly identified ads

PR disadvantages

Some retailers do not believe in spending on image-related communication

More suitable for short run

publicity

non personal form of communication whereby messages are transmitted by mass media

Key Aspects of Publicity

The time or space provided by the media is not paid for

there is no identified commercial sponsor

Why don't firms dedicate their entire promotional efforts to publicity?

no control over the message, timing, placement, etc.

personal selling

oral communication with one or more prospective customers for the purpose of making a sale

Advantages of Personal Selling

-Provides detailed explanation/demonstration of product

-Message can be varied according to motivations of each customer

-Can be directed only to qualified prospects

-Can purchase personal selling in small increments

-Most effective promotion form in obtaining sale and satisfying customer

Disadvantages of Personal Selling

-Message inconsistency

-Conflict between sales force and management

-High cost

-Poor reach

-Ethical concerns