MAR3231 FSU HOPKINS EXAM 4

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76 Terms

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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

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Merchandising Philosophy

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

  • "product" element of the 4 Ps

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Scope of Merchandising

Having what your customers want to buy

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Buying and Selling Functions:

  • Assortments

  • Advertising Pricing

  • Point of Sale Displays

  • Employee Utilization

  • Personal Selling Approaches

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Micromerchandising

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

ex: women and beer consumption

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Cross-merchandising

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

ex: ketchup next to buns at publix

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Merchandise Plans

guide that helps merchandising decisions

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Forecasts

Projections of expected retail sales for given periods

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Components of Forecasts

  • Overall company projections

  • Product category projections

  • Item-by-item projections

  • Store-by-store projections

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3 Steps to Implement Merchandise Plans

  1. Gather information

  2. Select Merchandise Sources

  3. Evaluate

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Who do you gather information from?

  • consumers (they are key)

  • suppliers

  • manufacturers

  • wholesalers

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Where are the merchandise sources from?

  • company-owned

  • outside, often used supplier

  • outside, new suppliers

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Types of Evaluation:

  • inspection

  • sampling

  • description

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Inspection

occurs on every single unit delivered

-ex: auto dealers

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Sampling

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

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Description

items are not sampled or inspected

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Factors in Planning Merchandise Innovativeness:

  • target market

  • goods/service growth potential

  • fashion trends

  • retailer image

  • competition

  • customer segments

  • responsiveness to consumers

  • amount of investment

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Target Market

Evaluate whether its conservative or innovative

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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

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Fashion Trends

Understand vertical and horizontal trends

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Retailer Image

Carry goods/services that reinforce the firm's image

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Competition

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

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Customer Segments

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

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Responsiveness to Consumers

Carry new offerings when requested by the target market

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Amount of Investment

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

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Advantages of Private Label vs. National Brands

  • Store Loyalty

  • Differentiation Strategy

  • Increased Channel Power Over Suppliers

  • Higher Profit Margins on Private Labels

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Pricing Options for Retailers

  • Discount Orientation

  • At-the-market orientation

  • Upscale orientation

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Discount Orientation

Lowest prices as a competitive advantage

ex. Wal Mart, Tj Maxx, Dollar General

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At-the-market Orientation

Average prices; retailers look to their competitors and price match

ex. Lowes and Home Depot

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Upscale Orientation

Higher(est) prices

ex. Polo, Gucci, Louis Vutton

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Transparency Pricing

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

ex. Oliver Cabell

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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

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Price Elasticity of Demand

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

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Elastic Demand

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

ex. airline tickets

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Inelastic Demand

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

ex. medication to live

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Factors Affecting Elasticity

  • Number of substitutes

  • Cost of switching

  • Degree of necessity

  • Proportion of income

  • Peak and off-peak demand

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Market Segments by Price Sensitivity

  • economic consumer

  • status-oriented consumer

  • assortment-oriented consumer

  • personalizing consumers

  • convenience-oriented consumer

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Price Skimming

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

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Penetration Pricing

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

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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

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Penetration Objectives

  • faster growth

  • broad market potential

  • combat competitors

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Dynamic Pricing

Pricing in real time based off consumer demand

ex. uber surges and disney

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Retail Image

the way a firm is perceived by its customers

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Atmosphere

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

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Atmosphere in Store Retailer

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

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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

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Trademark a Store Layout

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

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Sampling has been shown to:

  • Boost sales of certain products

  • Boost sales of product categories over time

  • create a positive atmosphere

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Atmospherics: Retail Employees

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

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Atmospherics: Other customers

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

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Atmospherics: Music

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

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Elements of Atmophere

  • exterior

  • store layout

  • interior displays

  • general interior

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Exterior Planning

  • store front

  • store entrances

  • display windows

  • exterior building height

  • surrounding stores and areas

  • parking facilities

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General Interior

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

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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

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Disadvantages of Straight Traffic Pattern

  • impersonal atmosphere

  • more limited browsing by customers

  • rushed shopping behavior

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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

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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

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Haagan-Dazs Effect

People assumed it was a premium product by the name itself

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Elements of the Promotional Mix

  • Advertising

  • Public Relations

  • Personal Selling

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Advertising

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

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Advantages of Advertising

  • attracts a larger audience

  • low cost per contact

  • many alternatives available

  • control over message; message can be standardized

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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

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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

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Retail Advertising

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

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Manufacturer Advertising

More concerned with developing favorable attitudes

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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

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Competitive Advertising

Focuses on stimulating demand for a specific brand

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Public Relations

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

  • nonpersonal or personal

  • paid or unpaid

  • sponsored or unsponsored

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Publicity

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

  • Not paid and no sponsor

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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

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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

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Public Relations Disadvantages

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

  • more suitable for the short run

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Personal Selling

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

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Advantages of Personal Selling

  • Messages can be adapted

  • Many ways to meet customer needs

  • High attention span

  • Less waste

  • Better response

  • Immediate feedback

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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