Marketing 4250 Chapters 1–4 Study Guide

Vocabulary practice cards generated from the Marketing 4250 Chapters 1–4 study guide.

Retailing

The final activities and steps needed to place merchandise made elsewhere into the hands of consumers or provide services.

Scrambled Merchandising

A practice where a retailer handles many unrelated product categories

• EX: Menards, Scheels, Walgreens, and QuikTrip.

Economies of Scale

The concept that as the amount sold increases, fixed costs can be spread over more units, lowering the cost per unit.

Same-store Sales

A performance metric that compares sales at individual stores for the same month or period with the previous year.

Market Share

A retailer's sales compared with total sales in the relevant market.

E-tailing

Retailing conducted through electronic or online channels.

M-tailing

Retailing conducted through mobile devices.

Bricks-and-Mortar

Physical retail store locations.

Showrooming

The consumer practice of examining products in a physical store and purchasing them elsewhere, often online.

Channel Surfing (Customer Power)

The ability of consumers to move among various retail channels to compare information, prices, and options.

Category Killer

A large retailer that dominates a particular product category.

Private Label

A product or brand developed for and sold by a specific retailer.

Standard Stock List

A list of retail items that are expected to be carried across stores.

Optional Stock List

A list of merchandise items selected based on the specific store or market context.

Gross margin and inventory turnover

Can be viewed together. A retailer may use a low-margin/high-turnover strategy or a high-margin/low-turnover strategy.

Gross margin and inventory turnover Examples

Walmart = low margin/high turnover

Ashley Furniture = high margin/low turnover

Breaktime = high margin/high turnover.

Retail career paths

Store management and buying

Managers may be…

analytical, creative, or hybrid.

Duplicators

Retail managers who rely on and use proven ideas.

Originators

Retail managers who create new approaches rather than following established ideas.

Retail orientations include…

environmental, planning, profit, and decision-making orientations.

Strategic Planning

The process of determining where a retailer wants to go and how it will get there.

Strategic Planning Sequence

Mission → Goals/Objectives → SWOT → Strategies.

Mission Statement

A statement explaining the retailer's overall purpose and what it is trying to accomplish.

Net Profit Margin

A financial metric calculated as Net Profit After Taxes ÷ Net Sales.

• If net profit after taxes = $10,000 on net sales of $100,000 then Net Profit Margin = 10%. The retailer is making 10c on every $1 of sales.

Asset Turnover

A financial metric that measures how effectively assets generate annual sales dollars.

Return on Assets (ROA)

A measure of the level of profit returned from asset investment.

Financial Leverage

Total Assets expressed as a percentage of Owner's Equity.

Balance Sheet:

Assets = Liabilities + Owners equity

If Total Assets = Owner's Equity…

There are no liabilities/debt.

Return on Net Worth

Net Profit as a percentage of Owner's Equity.

Productivity

Focus on how effectively the retailer uses resources.

Space Productivity

A productivity metric calculated as Sales ÷ square feet.

• Trader Joe's ≈ $1,700/sq. ft.

• Apple ≈ $5,500/sq. ft.

• Tiffany ≈ $3,000/sq. ft.

• average ≈ $250–$500/sq. ft.

Labor Productivity

Sales divided by the number of full-time employees.

• Generally, $150,000-$250,000 per FT employee.

Merchandise Productivity

Sales generated per dollar invested in inventory.

Societal Objectives

Reflect the retailer’s desire to help society fulfill some of its needs

Employment Objectives

Provide employment opportunities for the members of the retailer’s community

Payment of taxes

Helping finance societal needs that the government deems appropriate

Consumer Choice

Provide the consumer with choices that previously were not available in the trade area.

Equity

Retailer’s desire to treat the consumer and suppliers fairly.

Being a benefactor

Retailer may desire to underwrite certain community activities.

Personal Objectives

Reflect the retailers’ desire to help individuals employed in retailing fulfill some of their needs.

SWOT Analysis

A strategic framework evaluating internal factors (Strengths and Weaknesses) and external factors (Opportunities and Threats).

Traffic Strategy

A strategic approach designed to get more customers into the store.

Closure Strategy

A strategic approach designed to convert shoppers/visitors into actual buyers.

Cost management strategy

Implement the two marketing strategies at the lowest operating cost possible that is consistent with the level of service that customers expect.

• AKA: manage/reduce operating costs.

Retail Mix

The combination of controllable retail decisions used to meet customer needs and compete in the market.

Market Segmentation

Dividing a broad market into distinct groups of consumers with similar characteristics or needs.

Segmentation Example

• Walmart serves 3 segments: Brand Aspirationals, Price-Sensitive Affluents, Value-Price Shoppers

• Sam’s Club targets small businesses

As population growth slows, successful retailers must:

- Focus on taking market share away from competitors

• Managing gross margin by controlling selling price and cost price

• Increasing the productivity of existing stores

• International expansion

Age Distribution

Boomerang Effect

The recent trend of children returning to live with their parents after having already moved out.

Sandwich (Trigenerational) Family

A family structure where multiple generations are connected within the same household and decision-making environment.

Micromarketing

Tailoring marketing strategies to very specific individual customers or small market segments.

Disposable Income

The amount of income available after paying taxes, used for spending or saving.

Discretionary Income

The money available for nonessential purchases after necessary living expenses have been paid.

Consumer Behavior Model

1. Stimulus

2. Problem recognition

3. Information gathering

4. Evaluation of alternatives

5. Purchase

6. Post-purchase Evaluation

Metropolitan statistical areas (MSA)

Freestanding urban areas with populations in excess of 50,000

• Most of the U.S. population resides in this

Social Trends

• The education level of the average American is increasing

• Married couples is one of the slowest-growing household types in the world

• Divorce rate is increasing, and average is 7.2 years of marriage. In a bad economy, couples stay together.

Stimulus

Cue that is external to the individual or a drive that is internal to the individual

Cue

An external signal or stimulus that can trigger a consumer response.

Drive

An internal motivation that pushes a person toward action.

Problem Recognition

The second step of the consumer decision process, occurring when a consumer recognizes a need, want, or discrepancy between their current and desired state.

Purchase

May include final negotiation, application for credit if necessary, and the determination of the terms of purchase.

• Seen by retailers as an opportunity to use suggestion selling to sell add-on or related purchases.

Post-purchase Resentment

Negative feelings or regret experienced by a consumer after making a purchase.

Evaluation of alternatives

Consumers develop a set of attributes on which the purchase decision will be based and then narrow their consideration set to a more manageable number of attributes.

Suggestion Selling

The practice of offering additional products or services that complement the customer's purchase.

Retailers compete on five major fronts:

1. price/value

2. service

3. product selection

4. location/access

5. Customer experience

Monopolistic Competition

A market structure where multiple firms offer differentiated but substitutable products.

Outshopping

Occurs when customers leave their local market geographic area to shop elsewhere.

Elastic Demand

A condition in which the quantity demanded of a product changes significantly in response to a change in price.

• This will always occur in a monopolistic competition

True customer price

retailer's charge + tax + delivery/shipping.

Nonprice Decisions

Price is the easiest variable to copy so look for other advantages

• EX: Store positioning

Store Positioning

The retailer positions the store as different from all the others. Some ways they can do this include:

• Altering their mix of goods and being the go-to place for certain products, offering greater personal service, desirable private-label merchandise, shopping experiences, or customizing orders.

Overstored Market

A market condition where there is more retail capacity and stores than the local population can comfortably support.

Understored Market

A market condition where there is insufficient retail capacity to adequately serve consumer demand.

Etailers can compete with…

Traditional retailers.

Suppliers can…

be both partners and competitors.

Intratype Competition

Two or more retailers of same type compete directly with each other for the same household dollars.

• EX: Lowe’s and Home Depot

Intertype Competition

Two or more retailers of different type compete directly by attempting to sell the same merchandise lines to the same households.

• EX: Gerbes floral department and Tiger Garden

Divertive Competition

Retailers intercept or divert customers from competing retailers.

• EX: Gas station at Hy-Vee where customers can earn discounts on gas by purchasing designated products in the store.

Pop-Up Stores

A type of divertive competition which are temporary small-scale stores that are set up for a relatively short period of time, explicitly to intercept shoppers.

Breakeven point

Total revenues equal total expenses and the retailer is neither making a profit nor a loss.

Wheel of Retailing

A theory describing how new retail formats enter the market with a low-cost, low-price approach and evolve into higher-cost operations as they develop.

Retail Accordion Theory

A theory suggesting that retailers alternate over time between broad and narrow merchandise assortments.

Retail Life Cycle

The four developmental stages that retail formats progress through: Introduction, Growth, Maturity, and Decline.

Future Changes in Retail Competition

1. Nonstore retailing

2. New retailing formats

3. Heightened global competition

4. Integration of technology

5. Increasing use of Private Labels

Nonstore retailing

E-commerce (or e-tailing), door-to-door sales, vending

machines, direct marketing

New retailing formats

Off-price retailers, recycled merchandise sold at resell and thrift stores, and rentals (sharing economy)

Heightened global competition

As economies in international markets advance, there are opportunities and threats that emerge.

• Retailers must know the culture and nature of competition in the host market

• And also, that success may manifest different in this host country

Integration of technology

Operationally link retailers and their suppliers and customers

Increasing use of Private Labels

Proprietary brands protect the retailer by offering a competitive advantage when the brand is demanded by the market