MAR 3231 Exam 4 Hopkins

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

Merchandising Philosophy

- Sets the guiding principles for all the merchandise decisions made by the retailer

- "product" element of the 4 Ps

Scope of Merchandising

Having what your customers want to buy

Buying and Selling Functions:

- Assortments

- Advertising Pricing

- Point of Sale Displays

- Employee Utilization

- Personal Selling Approaches

Micromerchandising

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

ex: women and beer consumption

Cross-merchandising

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

ex: ketchup next to buns at publix

Merchandise Plans

guide that helps merchandising decisions

Forecasts

Projections of expected retail sales for given periods

Components of Forecasts

- Overall company projections

- Product category projections

- Item-by-item projections

- Store-by-store projections

3 Steps to Implement Merchandise Plans

1. Gather information

2. Select Merchandise Sources

3. Evaluate

Who do you gather information from?

- consumers (they are key)

- suppliers

- manufacturers

- wholesalers

Where are the merchandise sources from?

- company-owned

- outside, often used supplier

- outside, new suppliers

Types of Evaluation:

- inspection

- sampling

- description

Inspection

occurs on every single unit delivered

-ex: auto dealers

Sampling

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

Description

items are not sampled or inspected

Factors in Planning Merchandise Innovativeness:

- target market

- goods/service growth potential

- fashion trends

- retailer image

- competition

- customer segments

- responsiveness to consumers

- amount of investment

Target Market

Evaluate whether its conservative or innovative

Goods/Service Growth Potential

Consider each new offering on the basis of rapidity of initial sales, max sales potential per time period, and length of sales life

Fashion Trends

Understand vertical and horizontal trends

Retailer Image

Carry goods/services that reinforce the firm's image

Competition

Lead or follow it in the selection of new goods/services

Customer Segments

Segment customers by dividing merchandise into established and new product displays and

Responsiveness to Consumers

Carry new offerings when requested by the target market

Amount of Investment

Consider all possible investment for each new good/service: product costs, new fixtures, and additional personal

Advantages of Private Label vs. National Brands

- Store Loyalty

- Differentiation Strategy

- Increased Channel Power Over Suppliers

- Higher Profit Margins on Private Labels

Pricing Options for Retailers

- Discount Orientation

- At-the-market orientation

- Upscale orientation

Discount Orientation

Lowest prices as a competitive advantage

ex. Wal Mart, Tj Maxx, Dollar General

At-the-market Orientation

Average prices; retailers look to their competitors and price match

ex. Lowes and Home Depot

Upscale Orientation

Higher(est) prices

ex. Polo, Gucci, Louis Vutton

Transparency Pricing

Company lists out costs to make and deliver the item on the price tag

ex. Oliver Cabell

Factors Affecting Pricing Strategy

- Consumers: "misfit" section of fruits

- Government (federal, state, local): min. wage increase = price increase

- Manufacturers and Wholesalers: Candy bar change in price due to manufacturing costs

- Current and Potential Competitors: Apple Watch vs Fitbit

Price Elasticity of Demand

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

Elastic Demand

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

ex. airline tickets

Inelastic Demand

Large percentage changes in price leads to small percentage changes in the number of units bought

ex. medication to live

Factors Affecting Elasticity

- Number of substitutes

- Cost of switching

- Degree of necessity

- Proportion of income

- Peak and off-peak demand

Market Segments by Price Sensitivity

- economic consumer

- status-oriented consumer

- assortment-oriented consumer

- personalizing consumers

- convenience-oriented consumer

Price Skimming

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

Penetration Pricing

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

Skimming Objectives

- insight into what consumers are willing to pay

- it can create an aura of prestige around your product

- late adopters might be pleased to get your prestigious product at bargain price

Penetration Objectives

- faster growth

- broad market potential

- combat competitors

Dynamic Pricing

Pricing in real time based off consumer demand

ex. uber surges and disney

Retail Image

the way a firm is perceived by its customers

Atmosphere

the psychological feeling a customer gets when visiting a retailer; influences customer mood

Atmosphere in Store Retailer

refers to a store's physical characteristics that project an image and draw customers

Atmosphere in Nonstore Retailer

website focused;It takes an online visitor less than 2/10ths of a second to form an opinion of a brand once they access the company's website

Trademark a Store Layout

ex. All off Apple's retail stores look exactly the same

Sampling has been shown to:

- Boost sales of certain products

- Boost sales of product categories over time

- create a positive atmosphere

Atmospherics: Retail Employees

Rude salespeople cause customers with low self-confidence to spend more

Atmospherics: Other customers

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

Atmospherics: Music

Familiar music leads to impulsive decisions, lesser known background music encourages focua

Elements of Atmophere

- exterior

- store layout

- interior displays

- general interior

Exterior Planning

- store front

- store entrances

- display windows

- exterior building height

- surrounding stores and areas

- parking facilities

General Interior

flooring, colors, lighting, scents, sounds, store fixtures, wall textures, temperature, aisle space, personnel, merchandise, displays, store cleanliness

Advantages of Straight Traffic Pattern

- efficient atmosphere is created

- more floor space is devoted to product display

- people can shop quickly

- inventory control and security are simplified

- self-service is easy, reducing labor costs

Disadvantages of Straight Traffic Pattern

- impersonal atmosphere

- more limited browsing by customers

- rushed shopping behavior

Advantages of Curving (Free-Flowing) Traffic Pattern

- friendly atmosphere

- shoppers don't feel rushed

- people are encouraged to walk in any direction

- impulse or unplanned purchases are increased

Disadvantages of Curving (Free-Flowing) Traffic Pattern

- possible customer confusion

- wasted floor space

- difficulties in inventory control

- higher labor intensity

- potential loitering

- displays cost more

Haagan-Dazs Effect

People assumed it was a premium product by the name itself

Elements of the Promotional Mix

- Advertising

- Public Relations

- Personal Selling

Advertising

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

Advantages of Advertising

- attracts a larger audience

- low cost per contact

- many alternatives available

- control over message; message can be standardized

Disadvantages of Advertising

- Standardized messages lack flexibility

- some media require large investments

- geographic flexibility limited

- some media have high throwaway rate

- some media limit the ability to provide detailed information

Advertising Goals

- Develop and/or reinforce a retail image: Spotify

- Inform customers about goods and services and/or company attributes: Chevy trucks

- Develop demand for private brands: #ILikeAldi

Retail Advertising

Have more concentrated target markets; Cannot utilize national media as readily as manufacturers

Manufacturer Advertising

More concerned with developing favorable attitudes

Pioneer Advertising

- Has awareness as a goal

- Used for new products or customer education

- Used for a product category instead of a specific brand

- Rare in retail

Competitive Advertising

Focuses on stimulating demand for a specific brand

Public Relations

Communication that fosters a favorable image for the retailer; Can be:

- nonpersonal or personal

- paid or unpaid

- sponsored or unsponsored

Publicity

- Nonpersonal form of communication whereby messages are transmitted by mass media

- Not paid and no sponsor

Public Relations 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 promotional costs

Public Relations Advantages

- image can be presented or enhances

- more credible source

- no costs for message's time or space

- mass audience addressed

- carryover effects possible

- people pay more attention than do clearly identified ads

Public Relations Disadvantages

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

- more suitable for the short run

Personal Selling

Oral Communication with one or more prospective customers for the purpose of making a sale

Advantages of Personal Selling

- Messages can be adapted

- Many ways to meet customer needs

- High attention span

- Less waste

- Better response

- Immediate feedback

Disadvantages of Personal Selling

- Limited number of customers at one time

- High costs

- Does not get customer in store

- Self-service discouraged

- Negative attitude toward salespeople