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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
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
Gather information
Select Merchandise Sources
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