Retail Strategy Exam 2

When does the buying process begin?

When does the buying process begin?

When customers recognize an unsatisfied need

What are the steps of the buyiing process?

1. Need recognition

2. Information search about channels, stores, merchandise, and services

3. Evaluation of alternatives for channels, stores, merchandise, and services

4. Purchase the merchandise or service

5. Postpurchase

Unsatisfied need

Arises when customers' desired level of satisfaction differs from their present level of satisfaction

Types of needs

Hedonic and utilitarian

Hedonic needs

Needs for entertaining, emotional, and recreational experiences

PLEASURE

Utilitarian needs

Shopping to accomplish a specific task

WORK

How retailers satisfy hedonic needs

1. Stimulation (music, visuals, scents, demonstration)

2. Status and power (attention and respect)

3. Adventure (bargains, sales, discounts, low prices)

Cross shopping

Pattern of buying both premium and low priced merchandise or patronizing both expensive, status oriented retainers and price oriented retailers

Can retailers stimulate need recognition?

Yes

Internal sources of information

Information in MEMORY

names, images, past experiences with different stores

What is a major source of internal information?

Customer's past shopping experience

External sources of information

Information provided by a host of sources

When customer's are not already well informed, they turn to ___ sources of information

External

What determines the amount of information search undertaken?

The value customers believe they can gain from searching versus the cost of searching

What kind of shopper spends more time collecting information?

Hedonic

Conversion rate

The percentage of customers who enter a store or access a website and then buy a product form that same store or website

___ provided by retailers can also limit the search once at the retailer's location

Services (informed salespeople, credit)

Walmart reduces information search with what strategy?

Everyday Low Pricing (EDLP) Strategy

Showrooming

Consumers visit stores to gather information, then buy online... enable consumers to find the best prices for any product quickly

How do Best Buy and Walmart attempt to thwart showrooming?

Price matching

Multiattribute attitude model

Predicts a customer's evaluation of a product, retailer, or channel on the basis of:

1. Its performance on relevant attributes

2. the importance of those attributes to the customer

Information retailers need to collect

1. Alternative retailers customers consider

2. Characteristics or benefits that customers consider when evaluating and choosing a retailer

3. Customers' ratings of each retailer's performance on the characteristics

4. The importance weights that customers attach to the characteristics

Consideration set

The set of alternatives the customer evaluates when making a choice of a retailer to patronize

Methods to increase the chances that customers will select a retailer for a visti

1. Increase beliefs about the store's performance

2. Change customer's importance weights

3. Add a new benefit

Tactics to increase chances customers will purchase

1. Easy to purchase

2. Providing sufficient information

3. Reducing risk of making a mistake

4. Create a sense of urgency or scarcity

Postpurchase Evaluation

Satisfaction

Types of buying decisions

1. Extended problem solving (lots of risk)

2. Limited problem solving (low effort/time)

3. Habitual decision making (loyalty)

Types of retail locations

1. Unplanned locations

2. Planned locations

Trade area

Geographic area that encompasses most of the customers who would patronize a specific retail site

Unplanned location types

1. Freestanding (Walgreens)

2. Urban locations (think NYC, smaller, faster)

3. Main street locations

Outparcels

Freestanding stores that are not connected to other stores in a shopping center, but are located on the premises of a shopping center, typically in a parking area

Fast food and banks

Gentrification

the renewal and rebuilding of offices, housing, and retailers in deteriorating areas and an influx of more affluent people that displaces the former, lower income residents

Shopping center

a group of retail businesses built on a site that is planned, developed, owned, and managed as a single property

What are major retailers called when they are in a shopping center?

Anchors

Convenience, neighborhood, and community shopping centers (strip shopping centers)

Attached rows of open air stores, usually with parking in the front

Power centers

Shopping centers that consists primarily of collections of big-box retail stores, such as full-line discount stores, off-price stores, warehouse clubs, and category specialists.

Enclosed shopping malls

1. Attract many customers and have a large trade area (shopping and experience)

2. Don't have to worry about weather

3. Consistency

Disadvantages of malls

1. Occupancy costs are high

2. Some retailers don't like mall management's control

3. Competition is intense

Lifestyle centers

shopping centers that have an open-air configuration of specialty stores, entertainment, and restaurants, with design ambience and amenities such as fountains and street furniture

Mixed-use development

development that combines housing and businesses in one area

Outlet centers

shopping centers that contain mostly manufacturers' and retailers' outlet stores

Theme/Festival Centers

a unifying theme generally is reflected in each individual store, both in their architecture and the merchandise they sell

Omnicenters

new shopping center developments are combining enclosed malls, lifestyle centers, and power centers

Pop up stores

Stores in temporary locations that focus on new products or a limited group of products

Store within a store

Locations involve an agreement in which a retailer rents a part of the retail space in a store operated by another independent retailer

Starbucks in Target

Merchandise kiosks

small selling spaces, typically located in the walkways of enclosed malls, airports, college campuses, or office building lobbies

Types of shopping situations

1. Convenience (minimize effort)

2. Comparison (open to different brands, but generally know product)

3. Specialty (will not accept a substitute, know exactly what they want)

Destination stores

Places where consumers will go even if it is inconvenient

Urban sprawl

Increased expansion of residential and shopping center development in suburban and rural areas outside of their respective urban centers

Zoning

Regulate land uses in specific areas to prevent any interference with existing uses by residents or businesses, as well as encourage the preservation of a community's sense of identities

Building codes

Specify the type of building, signs, size, and type of parking lot

1. Signs

2. Licensing requirements

Metropolitan Statistical Area (MSA)

In the United States, a central city of at least 50,000 population, the county within which the city is located, and adjacent counties meeting one of several tests indicating a functional connection to the central city.

Micropolitan Statistical Area (uSA)

An urbanized area of between 10,000 and 50,000 inhabitants, the county in which it is located, and adjacent counties tied to the city.

Evaluating Store Locations

1. Economic conditions

2. Competition

3. Strategic fit of the area's population with the retailer's target market

4. Cost of operating stores

Number of stores in an area

1. Economies of scale from multiple stores

2. Cannibalization (stores too close to one another)

Evaluate and select a specific site

1. Characteristics of site

2. Characteristics of trading area

3. Estimated potential sales that can be generated by a store at the site

Site characteristics

1. the traffic flow past the site and accessibility to the site

2. parking

3. visibility

4. adjacent tenants

5. restrictions and costs

Natural barriers

rivers, mountains

Artificial barriers

Railroad tracks, divided or limited access highways, parks

cumulative attraction

A cluster of similar and complementary retailing activities will generally have greater drawing power than isolated stores that engage in the same retailing activities

Trade area

A contiguous geographic area that accounts for the majority of a store's sales and customers

Primary trading area

Geographic area from which the shopping center or store site derives 50 to 70 percent of its customers

Secondary trading area

20 to 30 percent of the site's customers

Tertiary/fringe trading area

Remaining customers who travel from widely dispersed areas

Typically more than 15 minute drive time

Customer Spotting

The process of locating the residences of customers for a store on a map and displaying their positions relative to the store location

Sources of information about trade areas

1. US Census Bureau

2. Geographic information system suppliers (ESRI, Nielsen)

Regression analysis

Based on the assumption that factors that affect the sales of existing stores in a chain will have the same impact on stores located at new sites being considered

Analog approach

Retailer simply describes the site and trade area characteristics for its most successful stores and attempts to find a site with similar characteristics

Steps of the analog approach

1. Conduct a competitive analysis

2. Define the present trade area

3. Analyze the trade area characteristics

4. Match characteristics of the present trade area with potential sites

Types of leases

1. Percentage (rent based on percent of sales)

2. Fixed rate (fixed amount per month)

Percentage lease with a specified minimum/maximum

MINIMUM: retailer must pay a minimum rent, no matter how low sales are

MAXIMUM: percentage of sales up to a certain amount

Sliding scale lease

The percentage of sales paid as rent decreases as the sales go up

Graduated lease

Rent increases by a fixed amount over a specified period of time

Cotenancy clause

A clause in a leasing contract that requires a certain percentage of a shopping center be leased, while others name specific retailers or types of retailers that are to remain open.

Prohibited use clause

Limits the shopping center management from leasing to certain kinds of tenants

Exclusive use clause

Prohibits the shopping center management from leasing to retailers that sell competing products

Can't place competing stores, or outparcels

Common area maintenance clause

Require the most extensive negotiations

Sidewalks, parking lots, roofs

How do retailers achieve their financial objectives?

Managing...

1. Location

2. Merchandise inventory

3. Inventory

4. Channels

5. Employees and customers

What is HRM responsible for?

Aligning the capabilities and behaviors of employees with the short and long term goals of the retail firm

Can HRM build competitive advantage?

Yes

By lowering costs and/or increasing differentiation

Activities to acquire and retain productive employees

1. Recruit

2. Train and articulate

3. Motivate

4. Evaluate

5. Reward and compensate

How many times does the recruiting step occur?

1

Recruit retail employees

1. Develop a job description

2. Locate prospective employees

3. Screen applicants to interview

4. Test applicants

5. Preview the job

6. Conduct a personal interview

Behavioral interview

Asks candidates how they have handled actual situations they have encountered in the past, especially situations requiring the skills outlined in the job description

Train and Acculturate Employees

1. Provide a structured program

2. Offer on the job training

3. Use a blended approach

4. Analyze successes and failures

Motivate Employees

Set goals

Employee performance improves when employees feel that...

1. Their efforts will enable them to achieve the goals set for them by managers

2. they'll receive rewards they value if they achieve their goals (3. Becoming part owners)

Evaluate Employees

1. Who should do the evaluation

2. How often should evaluations be made

3. What format should be used for evaluations

4. How can managers avoid evaluation errors

5. HRM performance measures (productivity, turnover, engagement)

Poductivity

Sales generated per employee

Turnover

Number of employees who leave their job during a year/number of positions

Engagement

Emotional commitment by an employee to the organization and its goals

Reward and Compensate Employees

1. Extrinsic rewards (compensation rewards from manager or firm)

2. Intrinsic rewards (rewards gotten personally from doing the job)

There is never too many extrinsic rewards.

False

Straight salary compensation

Fixed amount of compensation for each hour or week

Incentive compensation plans

Reward employees on the basis of their productivity

Straight commission

Income entirely on comission

Drawing account

A method of sales compensation in which salespeople receive a weekly check based on their estimated annual income

More stable

Quota

Target level used to motivate and evaluate performance

Quota bonus plan

Bonus when sales exceed quota

Team incentives

Encourages salespeople to work together