MAR 3231 FSU Exam 4 Hopkins

Discount Orientation

Low price as a competitive advantage

Examples of Discount Orientation

Walmart, Dollar General, TJ Maxx

Amazon is a threat to many retailers, particularly to

Discounters

Discount and variety stores have a relatively low level of

E-commerce penetration

At-the-market Orientation

Average prices

Examples of At-the-market Orientation

Lowes, Home Depot, Petco, Pet Smart, Dicks, Academy

Upscale Orientation

Higher(est) prices

Examples of Upscale Orientation

Chanel, Hermes

Transparency Pricing

A pricing strategy that involves making consumer aware of the cost breakdown of products

Factors Affecting Retail Price Strategy

- Consumers

- Government

- Manufacturers, wholesalers and other suppliers

- Current and potential competitors

Price Elasticity of Demand

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

Elastic

Small % changes in price lead to substantial % changes in the # of units bought

Inelastic

Large % changes in price lead to small % changes in the # of units bought

Example of something that is Elastic

Airline travel

Example of something that is Inelastic

Food

A marketer's job is to move products from relatively _____ to relatively _____

Elastic; Inelastic

Factors Affecting Elasticity

- Number of substitutes

- Cost of switching

- Degree of necessity

- Peak and off-peak demand

- Proportion of income

Market Segments by Price Sensitivity

- Economic consumers

- Status-oriented consumers

- Assortment-oriented consumers

- Personalizing consumers

- Convenience-oriented consumers

Economic Consumers

Shop around for the lowest prices

Status-oriented Consumers

Purchase based on how it makes them look or appear to look

Assortment-oriented Consumers

They seek retailers with a strong selection in the product categories being considered; They want fair prices

Personalizing Consumers

Prefer personalized products

Convenience-oriented Consumers

Consumers look for nearby stores with long hours and may use catalogs or the web; They are willing to pay higher prices

Pricing Objectives

- Price skimming

- Price penetration

Price Skimming

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

Price Penetration

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

Why do firms use price skimming?

- 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 the older versions of your prestigious product at a bargain price

Why do firms use price penetration?

- Faster growth

- Broad market potential

- Combar competitors

Dynamic Pricing (aka surge pricing)

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

Merchandising

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

Merchandising focuses on the "____" aspect of the marketing mix

Product

Merchandising Philosophy

Sets the guiding principles for all the merchandise decisions that a retailer makes

The merchandising philosophy should reflect

- Target market desires

- Retailer's institutional type

- Market-place positioning

- Defined value chain

- Supplier capabilities

- Costs

- Competitors

- Product trends

Scope of Merchandising

Merchandising roles and responsibilities vary from company to company; Buying <---> All merchandising functions

Scope of Merchandising: Buying

Involves selecting and purchasing goods sold by the retailer

Scope of Merchandising: All 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

Women prefer

Meaningful organization of items when shopping

Cross-Merchandising

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

What is important to think about with Cross-Merchandising?

- Know "what" your customer is purchasing

- Too many firms focus on the product but not on the benefit

Merchandise Planning

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

The goal of merchandise planning is to

Maximize sales while also ensuring you minimize markdowns

Devising Merchandise Plans

- Innovativeness

- Assortment

- Brands

- Timing

- Allocation

- Forecasts

Forecasts

These are 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 (if a chain)

Examples of a Forecasting Company

WGSN and Pantone

What company offers the "color of the year"?

Pantone

Timing

- Timing can relate to: Seasonality

- Special events: Movie release

- New product releases

Brands

- Private (dealer or store)

- Manufacturer (national)

- Generic

Advantages of Private Labels vs. National brands

- Store loyalty

- Differentiation strategy

- Increased channel power over suppliers

- Higher profit margins on private labels

Implementing Merchandise Plans

1) Gathering Information

2) Selecting and Interacting with Merchandise Sources

3) Evaluation

4) Negotiation

5) Concluding Purchases

6) Receiving and Stocking Merchandise

7) Reordering

8) Re- evaluation

Gathering Information

A retailer gathers info about merchandise decisions from a variety of sources:

- Consumer

- Suppliers

- Manufacturers

- Wholesalers

What is the most important source for retailers to gather info from?

Consumers

Retailers can most effectively track consumer preferences through

Customer loyalty programs

Customer Loyalty Programs

- Use a simple point system

- Use a tier system to reward loyalty

- Charge an upfront fee for VIP benefits

- Use nonmonetary programs around customer values

- Partner to provide all-inclusive offers

Selecting Merchandise Sources

- Company owned

- Outside, regularly used supplier

- Outside, new supplier

Type of Evaluation

- Inspection

- Sampling

- Description

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; The perception people have when they hear the name of a company

A shopper should be able to determine a store's

- Name

- Line of trade

- Claim to fame

- Price position

- Personality

Atmosphere

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

Atmosphere: Store Retailer

The physical characteristics that project an image and draw customers

Atmosphere: Non-Store Retailer

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

Store Atmospherics

- Retail employees

- Other customers

Store Atmospherics: Retail Employees

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

Store Atmospherics: Other Customers

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

When thinking about past experiences, we focus more on

The peaks and the end

Exterior Planning

- Storefront

- Store entrances

- Display windows

- Exterior building height

- Surrounding stores and area

- Parking facilities

General Interior

Includes color,

aroma, music,

and crowding

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

Advantages of Straight Traffic Pattern

- An 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 reducing labor costs

Disadvantages of Straight Traffic Pattern

- Impersonal atmosphere

- More limited browsing by customers

- Rushed shopping behavior

Where are you likely to see a Straight Traffic Pattern?

Grocery stores

Advantages of Curving (Free-Flowing) Traffic Pattern

- A friendly atmosphere

- Shoppers do not feel rushed

- People are encouraged to walk through in any direction

- Impulse and unplanned purchases are increased

Disadvantages of Curving (Free-Flowing) Traffic Pattern

- Possible customer confusion

- Waster floor space

- Difficulties in inventory control

- Higher labor intensity

- Potential loitering

- Displays may cost more

Where are you likely to see Curving (Free-Flowing) Traffic Pattern?

Department stores

Elements of Promotional Mix

- Advertising

- Public Relations

- Publicity

- Personal Selling

Advertising

Paid, non-personal communication transmitted through out-of-state mass media by an identified sponsor

Key Aspects of Advertising

- Paid form

- Non-personal presentation

- Out-of-store media

- Identified sponsor

Goals of Advertising

- Inform customers about goods and services and/or company attributes

- Develop demand for private brands

- Develop and/or reinforce a retail image

Retail Advertising

Advertising for a retail business

Manufacturer Advertising

Advertising aimed at increasing awareness of a brand

Key Aspects of Retail Advertising

- Have more concentrated target markets

- Cannot utilize national media as readily as manufacturers

Key Aspect of Manufacturer Advertising

More concerned with developing favorable attitudes

Advantages of Advertising

- Attracts a large audience

- Low cost per contact

- Many alternatives available

- Control over message content; 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

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/retailer; ***common

Public Relations

Communication that fosters a favorable image for the retailer

Key Aspects of Public Relations

- Nonpersonal or personal

- Pair or unpaid

- Sponsor-controlled or not

PR is essentially

Reputation Management

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

Advantages of PR

- 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 to clearly identified ads

Disadvantages of PR

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

- Little control over publicity message

- More suitable for short-run

Publicity

Nonpersonal form of communication whereby messages are transmitted by mass media; The time or space provided by the media is not paid for, and where is no identified commercial sponsor

Personal Selling

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