Marketing Lemonade (Part 1)

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Scenario: Your team is looking for a way to make some revenue as either a for-profit or not-for-profit organization. This organization can market locally, nationally, or internationally. The product that you have decided to sell is lemonade. To make the endeavor work, you will have to define a marketable form of the drink and decide on a target market. Your marketing team’s mission is to prove the company’s goals will be met by providing research, strategy development, and the reason why this form of the product is viable. For this part of the project report on the following:    Product’s definition to the target market

Wk#

MKT/421 Version 17 Marketing Lemonade (Part 1)
Dimensions or Assignment Criteria Does Not Meet Expectations Approaches Expectations Meets Expectations Exceeds Expectations Assignment Points (x10)
100% 0% 60% 80% 100% 10
Select a company name and determine the real business world industry of operation. Did not select a company name and determine the real business world industry of operation. Attempted to select a company name and determine the real business world industry of operation. Adequately select a company name and determine the real business world industry of operation. Thoroughly select a company name and determine the real business world industry of operation. 1
5% 0.000 0.300 0.400 0.500
Describe in no more than 90 words the new and unique form of lemonade that will be launced by your company. Did not describe in no more than 90 words the new and unique form of lemonade that will be launched by your company. Did not provide a logical rationale for your descriptions. Specific details to support the rationale are missing or incomplete and quality is poor. Attempted to describe in no more than 90 words the new and unique form of lemonade that will be launched by your company. Attempted to provide a logical rationale to support for your descriptions but the rationale is not clear. Specific details to support the rationale are incomplete and quality is below average. Adequately described in no more than 90 words the new and unique form of lemonade that will be launched by your company. Provided a clear, logical rationale to support your descriptions. Specific details to support the rationale are complete and quality is acceptable. Thoroughly described in no more than 90 words the new and unique form of lemonade that will be launched by your company. Provided a clear, logical rationale to support your descriptions. Specific details to support the rationale are complete and concise, and quality is exceptional. 1
10% 0.000 0.600 0.800 1.000
Describe in no more than 90 words your organization, their mission and values, industry of operation, and how they differ from other organizations. Did not describe any aspects of their organization. Did not provide a logical rationale for your descriptions. Specific details to support the rationale are missing or incomplete and quality is poor. Attempted to describe the organization, industry of operation, its mission and values, and how it differs from other organizations. Attempted to provide a logical rationale to support for your descriptions but the rationale is not clear. Specific details to support the rationale are incomplete and quality is below average. Adequately described the organization, industry of operation, its mission and values, and how it differs from other organizations. Provided a clear, logical rationale to support your descriptions. Specific details to support the rationale are complete and quality is acceptable. Thoroughly described the organization, industry of operation, its mission and values, and how it differs from other organizations. Provided a clear, logical rationale to support your descriptions. Specific details to support the rationale are complete and concise, and quality is exceptional. 1
10% 0 0.600 0.800 1.000
Identify the composition of target market and the segmentation criteria used in identification. Did not identify the composition of target market and the segmentation criteria used in identification. Did not provide a logical rationale for your identifications. Specific details to support the rationale are missing or incomplete and quality is poor. Attempted to identify the composition of target market and the Segmentation criteria used in identification. Attempted to provide a logical rationale to support your identifications but the rationale is not clear. Specific details to support the rationale are incomplete and quality is below average. Adequately identified the composition of target market and the segmentation criteria used in identification. Provided a clear, logical rationale to support your identifications. Specific details to support the rationale are complete and quality is acceptable. Thoroughly identified the composition of target market and the segmentation criteria used in identification. Provided a clear, logical rationale to support your identifications. Specific details to support the rationale are complete and concise, and quality is exceptional. 2
15% 0.000 0.900 1.200 1.500
Determine in no more than 90 words how you will define the lemonade to your target market (Include information on packaging, labeling, etc). How will this add value and differentiate the brand and product from the competition, while encouraging the target market to buy? Did not determine in no more than 90 words how you will define the lemonade to your target market (including information on packaging, labeling, etc). Did not explain how will this add value and differentiate the brand and product from the competition, while encouraging the target market to buy. Specific details to support the rationale are missing or incomplete and quality is poor. Attempted to determine in no more than 90- words how you will define the lemonade to your target market (including information on packaging, labeling, etc). Attempted to explain how will this add value and differentiate the brand and product from the competition, while encouraging the target market to buy. Attempted to provide a logical rationale to support argument. but the rationale is not clear. Specific details to support the rationale are incomplete and quality is below average. Adequately determined in no more than 90 words how you will define the lemonade to your target market (including information on packaging, labeling, etc). Adequately explained how will this add value and differentiate the brand and product from the competition, while encouraging the target market to buy. Provided a clear, logical rationale to support your argument. Specific details to support the rationale are complete and quality is acceptable. Thoroughly determined in no more than 90 words how you will define the lemonade to your target market (including information on packaging, labeling, etc). Thoroughly explained how will this add value and differentiate the brand and product from the competition, while encouraging the target market to buy. Provided a clear, logical rationale to support your argument. Specific details to support the rationale are complete and concise, and quality is exceptional. 2
15% 0 0.900 1.200 1.500
Compare your company with industry competitors Did not compare your company with industry competitors. Did not provide a logical rationale for your comparisons. Specific details to support the rationale are missing or incomplete and quality is poor. Attempted to compare your company with industry competitors. Attempted to provide a logical rationale to support your comparisons but the rationale is not clear. Specific details to support the rationale are incomplete and quality is below average. Adequately compared your company with industry competitors.. Provided a clear, logical rationale to support your comparisons. Specific details to support the rationale are complete and quality is acceptable. Thoroughly compared your company with industry competitors. Provided a clear, logical rationale to support your comparisons. Specific details to support the rationale are complete and concise, and quality is exceptional. 1
10% 0.000 0.600 0.800 1.000
Define the pricing strategy in no more than 90 words that you will use for the introduction of the product. Did not define the pricing strategy in no more than 90 words that you will use for the introduction of the product. Did not provide a logical rationale for your definitions. Specific details to support the rationale are missing or incomplete and quality is poor. Attempted to define the pricing strategy in no more than 90 words that you will use for the introduction of the product. Attempted to provide a logical rationale to support your definitions but the rationale is not clear. Specific details to support the rationale are incomplete and quality is below average. Adequately defined the pricing strategy in no more than 90 words that you will use for the introduction of the product. Provided a clear, logical rationale to support your definitions. Specific details to support the rationale are complete and quality is acceptable. Thoroughly defined the pricing strategy in no more than 90- words that you will use for the introduction of the product. Provided a clear, logical rationale to support criteria/dimension. Specific details to support the rationale are complete and concise, and quality is exceptional. 1
10% 0 0.600 0.800 1.000
Discuss in no more than 90 words the maturity life cycle stages of your product. Did not discuss in no more than 90- words the maturity life cycle stages of your product.. Did not provide a logical rationale for your discussion. Specific details to support the rationale are missing or incomplete and quality is poor. Attempted to discuss in no more than 90 words the maturity life cycle stages of your product. Attempted to provide a logical rationale to support for your discussion but the rationale is not clear. Specific details to support the rationale are incomplete and quality is below average. Adequately discuss in no more than 90 words the maturity life cycle stages of your product. Provided a clear, logical rationale to support discussions. Specific details to support the rationale are complete and quality is acceptable. Thoroughly discuss in no more than 90 words the maturity life cycle stages of your product. Provided a clear, logical rationale to support your discussion. Specific details to support the rationale are complete and concise, and quality is exceptional. 1
5% 0.000 0.300 0.400 0.500
Describe in 90 words how you will use suppliers, agents, or distributors to create your distribution channel. Did not describe in 90- words how you will use suppliers, agents, or distributors to create your distribution channel. Did not provide a logical rationale for your descriptions. Specific details to support the rationale are missing or incomplete and quality is poor. Attempted to describe in 90 words how you will use suppliers, agents, or distributors to create your distribution channel. Attempted to provide a logical rationale to support for your descriptions but the rationale is not clear. Specific details to support the rationale are incomplete and quality is below average. Adequately described in 90 words how you will use suppliers, agents, or distributors to create your distribution channel. Provided a clear, logical rationale to support your descriptions. Specific details to support the rationale are complete and quality is acceptable. Thoroughly describe in 90 words how you will use suppliers, agents, or distributors to create your distribution channel. Provided a clear, logical rationale to support your descriptions. Specific details to support the rationale are complete and concise, and quality is exceptional. 1
10% 0.000 0.600 0.800 1.000
Mechanics Assignment is organized in a logical or coherent manner but not both. Multiple errors in grammar and spelling. Assignment is generally organized in a logical and coherent manner. Several errors in grammar and spelling. Assignment is generally organized in a logical and coherent manner.  Few errors in grammar and spelling. Assignment is fully organized in a logical and coherent manner. Little to no errors in grammar and spelling. 1
10% 0 1 1 1

Case Study- Gale Force Surfing Grading Guide FIN/486 Version 5

Page &P of &N

 
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Case Pinterest: Revolutionizing The Web-Again

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Write a 2 page (500) paper summarizing the case and answering any three of the questions at the end.  You are allowed to discuss the case with your classmates if you wish, but you must write your own paper.  Please turn it in by email as usual.

 

Pinterest: Revolutionizing the Web-Again; starting on page 561 (Case and Questions Attached); summarize the case and answer 3 of the 4 questions

 

Need it done by Friday

Company Case Pinterest: Revolutionizing the Web—Again

Ben Silbermann runs ragged. And it isn’t because the 31-yearold

husband is up before dawn every morning with his infant son.

It has a lot more to do with the fact that he is the founder and

CEO of Pinterest, the latest “hottest Web site on the planet.” In

less than two years, Pinterest reached the milestone of 10 million

unique monthly visitors—faster than any other online site in history.

At that time, it was driving more traffic than Google+, You-

Tube, and LinkedIn combined. A year later, it reached 50 million

unique monthly visitors. So far, 70 million members have created

750 million Pinterest boards and have pinned 30 billion items.

Pinterest is growing so fast that trying to quantify its success with

such numbers seems pointless.

Rather, the impact of this brash young start-up can be observed

in more substantial ways. In fact, Pinterest seems to have

accomplished the unlikely achievement of revolutionizing the

Web—something that seems to happen only every few years.

Like Amazon, Google, Facebook, and others before it, Pinterest

has put businesses and other online sites everywhere on notice

that they’d better orient themselves around its platform or be left

behind. And like other Internet revolutionists before it, Pinterest’s

impact has caused even the online giants to stop and take notice.

Indeed, Pinterest is changing Web design. It is also changing

e-commerce. And it looks as though Pinterest has solved one of

the Internet’s biggest problems—discovery.

The Discovery Problem

At first blush, Pinterest may seem like any other social media site,

full of people sharing images and commenting on them. Silbermann’s

big idea for Pinterest came as he and college buddy Paul

Sciarra struggled to make a business out of their first product,

a shopping app called Tote. Although Tote failed to take off, it

revealed a pent-up need among Internet users. Tote users didn’t

buy things (kind of a necessity for a shopping app). But they did

e-mail themselves pictures of products to view later.

Silbermann—a lifetime collector of “stuff”—could identify with

that. As a boy, he had a particular fascination with collecting bugs. “I

really liked insects,” he says. “All kinds: flies, grasshoppers, weevils.”

He spent his youth collecting, pinning, drying, tagging—creating his

own private museum of natural history. So when Silbermann and

Sciarra met Pinterest’s third co-founder, Evan Sharp, the idea of digital

collections—of books, clothes, or even insects—as a powerful

medium for self-expression began to take shape.

As the three began working on developing Pinterest, something

about all-things-Internet bothered Silbermann. Despite the

seemingly infinite possibilities for exploration, expression, and

creation, he felt that the Internet was organized in a way that

boxed people in. For starters, the nature of “search” in any online

context may seem to promote discovery, but it actually stunts it.

For example, Google depends on finely tuned queries in order to

yield useful results. Try to find something when you’re not quite

sure what you want—say, “nice Father’s Day gift” or even “very

special Father’s Day gift”—and Google isn’t really much help. The

bottom line is, if you try talking to Google as you would talk to a

friend or a department store clerk, it won’t know where to begin.

The belief that discovery is a problem on the Internet isn’t

original to Silbermann. In fact, it’s an issue that many digital designers

have struggled with since the launch of the Web but no

one has been able to solve fully. Take Amazon, for example. As

successful as Amazon is, its entire structure mirrors every other

e-commerce site—a detailed system of menus and categories.

To browse for something, users must work within this structure

while at the same time being pulled in dozens of different directions

by suggested items and competing products.

“You spend three hours buying a $20 toaster,” says Barry

Schwartz, psychology professor and author of The Paradox of

Choice. “Amazon and Google pretty much stink at browsing,”

echoes Leland Rechis, director of product experience at Etsy. But

Amazon and Google are not alone. The entire Internet is structured

as a series of ever-more-specific menus, inconsistent with how

the human mind works. Such structure inhibits the types of freeassociative

leaps that happen naturally as people walk through

shopping malls, meander through a museum, or even drive down

the street.

As Silbermann and his co-founders worked to sketch out Pinterest,

the three were also intent on eliminating another limiting

characteristic of online design. Other social networks are organized

around “feeds”—lines of text or images organized by time.

This setup lets users browse multiple images at once. The Pinterest

team wanted to change this. “We were really excited about

bringing something that wasn’t immediate and real time, something

that wasn’t a chronological feed,” says Sharp. They pictured

a grid of images, rather than the directories, time stamps,

and pagination commonly imposed by the Web. The goal for Pinterest

was to create an interface that would feel more like visiting

a store or a museum.

As Pinterest took shape, its creators never questioned that it

was to be a social network at its core. What set Pinterest apart

in yet another way was Silbermann’s ability to look outside the

tunnel-vision of other social media entrepreneurship. Although

the current social Web is frequented by millions, most users are

observers, not creators. Thus, they take part on only one level.

Not everyone is a photographer, a filmmaker, or a broadcaster.

“Most people don’t have anything witty to say on Twitter or anything

gripping to put on Facebook, but a lot of them are really interesting

people,” Silbermann says. “They have awesome taste in

books or furniture or design, but there was no way to share that.”

Something Completely Different

The Pinterest team’s focus on solving some of the most limiting

characteristics of the Internet bore fruit. When Pinterest launched

in March 2010, it was widely hailed as one of the most visually

stunning online sites ever. Silbermann, Sciarra, and Sharp worked

through 50 versions of the site, painstakingly tweaking and perfecting

column widths, layouts, and ways of presenting pictures.

“From the beginning, we were aware that if we were going to get

somebody to spend all this time putting together a collection,

at the very least, the collection had to be beautiful,” Silbermann

says. Pinterest’s grid is a key element of its design—interlocking

images of fixed width and varying heights that rearrange every

time a new image is pinned, meaning users rarely see the same

home page twice.

Pinterest also bucked conventional online design in other

ways. At a time when “gamification” was hot, Pinterest displayed

no elements of competition. There is no leader board or any other

means of identifying the most popular pinners. Pinterest also did

away with page views—the predominate metric for illustrating

growth and momentum. Rather, Pinterest’s “infinite scroll” automatically

loads more images as the user expands the browser or

scrolls downward. With almost no time spent clicking or waiting

for pages to load, this feature has proven addictive for many.

“When you open up Pinterest,” Silbermann says, “you should

feel like you’ve walked into a building full of stuff that only you

are interested in. Everything should feel handpicked for you.” Silbermann

and his cohorts have obviously succeeded. Page after

page, Pinterest gives the feel of a collection designed by an individual

to reflect her or his needs, ambitions, and desires. It’s as

if each person is saying, “Here are the beautiful things that make

me who I am—or who I want to be.” There is no single theme to

a pinboard. Pinterest is a place where young women plan their

weddings, individuals create the ultimate wish list of food dishes,

and couples assemble furniture sets for their new homes. Unlike

other social networks, every Pinterest home page is an everchanging

collage that reflects the sum of each user’s choices.

Because Pinterest’s design has departed from Internet convention

in so many ways, it’s only natural that its growth dynamics

would also break from previous trends. Most successful social

services spread through early adopters on the nation’s coasts,

then break through to the masses. But Pinterest’s growth has

been scattered throughout the heartland, driven by such unlikely

cohorts as the “bloggernacle” of tech-savvy young Mormons.

Additionally, nearly 83 percent of Pinterest’s users are women,

most between the ages of 25 and 54—another demographic not

normally associated with fast-growing social media sites.

Hope for Monetization

But perhaps the biggest splash that Pinterest has made in the online

pool is its huge influence on consumer purchasing. Although

many dot-coms have made profits by online sales, the digital

world in general still struggles with turning eyeballs into dollars.

Even Facebook, although it turns a profit, prompts relatively few

of its one-billion-plus members to open their wallets.

But something about the combination of Pinterest’s elegant design

and smart social dynamics has users shopping like mad. A

Pinterest user following an image back to its source and then buying

an item spends an average of $180. For Facebook users, it’s only

$80. And for Twitter, it’s only $70. But Pinterest is having a much

greater impact than those numbers indicate. Although Pinterest is

still far from the top in terms of members and unique visits, when

it comes to e-commerce referrals, Pinterest is the market leader,

driving 40 percent of traffic and edging out social media dominator

Facebook by 1 percent. Even more impressive, Pinterest traffic

converts to a sale 22 percent more often than Facebook traffic.

Companies are jumping on this opportunity. Initially, brands

could drive traffic to their own Pinterest or external sites by paying

opinion leaders to pin images of their products. For example,

companies pay 31-year-old Satsuki Shibuya, a designer with more

than a million followers, between $150 and $1,200 per image.

This method works well because, with Pinterest’s authentic feel,

it’s almost impossible to tell the difference between paid pins and

unpaid pins—something that can’t be said of other online sites.

But recently, Pinterest has entered the world of advertising with

promoted pins and is poised to make a big online advertising push.

More than a dozen marketers have signed up with a $1 million to

$2 million commitment, including Kraft, General Mills, Nestle, Gap,

and Expedia. “Our target is 25- to 54-year-old women, and Pinterest

is a perfect fit,” says Deanie Elsner, chief marketing officer for

Kraft Foods. For Kraft, Pinterest has already been an effective way

to connect with the younger half of that demographic that is typically

harder to reach. “It lets them be the hero,” she said, referring

to Kraft’s practice of publishing recipes on its Pinterest site.

It’s little wonder then that so many other social media sites

have taken note of Pinterest. Numerous copycat sites (such as

Fancy and Polyvore) have mimicked Pinterest’s look and feel,

right down to the font selections. The influence of Pinterest’s design

is also notable on sites such as Lady Gaga’s social network

LittleMonsters.com and the question-and-answer site Quora.

Even Facebook’s move to its current Timeline format is notably

Pinterest-like.

Despite all the ways that Pinterest has departed from the typical

path of social media development, it has largely stayed the

course in terms of making money. That is, it spent the first few

years building its network and honing its site. This year, the company

will begin generating revenue. Silbermann and friends are

still tossing other ideas around. In addition to advertising, Pinterest

could also adopt a referral fee model, retaining a percentage

of the sale of every item sold as the result of a pin. Pinterest

has been valued at $5 billion and has had no trouble raising all

the venture capital that it needs, despite having yet to earn any

money. “There was never a doubt in our minds that we could

make a s**tload of money,” says a former Pinterest employee.

Apparently, investors feel the same way.

 

Questions for Discussion

17-18 Analyze the forces in the marketing environment that have contributed to Pinterest’s explosion in popularity.

17-19 Why has Pinterest demonstrated such a high influence on consumers’ decisions to purchase products?

17-20 Discuss ways that companies can use Pinterest to build their own brands and generate sales.

17-21 What threats does Pinterest face in the future? Give recommendations for dealing with those threats.

 
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Do Power Players Rule? (CASE 1)

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page 180

13th edition 

Responses to the mini-case questions that appear at the end of each case should be typed, single-spaced using 1” margins with a 12-point font.  Each mini-case should have a cover page that includes the case name, textbook edition you are using, as well as your name, date, course name and number.  Responses should include many details whether from the case or from your own research.  Each assignment should be 2 pages (not including the cover sheet).  Remember, the more detailed, the better the assignment.  Please do not retype the questions.  Simply list the question # and your response.  These are individual assignments.

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RETAIL MANAGEMENT A Strategic Approach THIRTEENTH EDITION GLOBAL EDITION

Barry Berman Hofstra University

Joel R. Evans Hoftsra University

Patrali Chatterjee Montclair State University

Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney • Dubai • Singapore • Hong Kong Tokyo • Seoul • Taipei • New Delhi • Cape Town • São Paulo • Mexico City • Madrid • Amsterdam • Munich • Paris • Milan

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To Linda; Glenna, Paul, Danielle, Sophie, and Joshua; and Lisa, Ben, Philip, Emily, and Levi

To Linda, Jennifer and Phil, and Stacey and Adam

To Amit; Amal, Bharati, and Parnali; and Trisha and Raaka

Thank you for support and encouragement.

Vice President, Business Publishing: Donna Battista Director of Portfolio Management: Stephanie Wall Portfolio Manager: Daniel Tylman Editorial Assistant: Linda Albelli Project Manager, Global Edition: Nitin Shankar Acquisitions Editor, Global Edition: Tahnee Wager Senior Project Editor, Global Edition: Daniel Luiz Managing Editor, Global Edition: Steven Jackson Manager, Media Production, Global Edition: M. Vikram Kumar Senior Manufacturing Controller, Production, Global Edition: Trudy Kimber Vice President, Product Marketing: Roxanne McCarley Director of Strategic Marketing: Brad Parkins Strategic Marketing Manager: Deborah Strickland Product Marketer: Becky Brown Executive Field Marketing Manager: Adam Goldstein Field Marketing Manager: Lenny Ann Kucenski Field Marketing Assistant: Kristen Compton Product Marketing Assistant: Jessica Quazza

Vice President, Production and Digital Studio, Arts and Business: Etain O’Dea

Director of Production, Business: Jeff Holcomb Managing Producer, Business: Ashley Santora Content Producer: Linda Albelli Operations Specialist: Carol Melville Creative Director: Blair Brown Manager, Learning Tools: Brian Surette Content Developer, Learning Tools: Sarah Peterson Managing Producer, Digital Studio, Arts and Business:

Diane Lombardo Digital Studio Producer: Darren Cormier Digital Studio Producer: Alana Coles Full-Service Project Management and Composition: Nathaniel Jones,

SPi Global Interior Design: SPi Global Cover Design: Lumina Datamatics, Inc. Cover Art: Shutterstock/Creative Lab

Acknowledgments of third-party content appear on page[s] 560–576, which constitute an extension of this copyright page.

Pearson Education Limited KAO Two KAO Park Harlow CM17 9NA United Kingdom

and Associated Companies throughout the world

Visit us on the World Wide Web at: www.pearsonglobaleditions.com

© Pearson Education Limited 2018

The rights of Barry Berman, Joel R. Evans and Patrali Chatterjee to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.

Authorized adaptation from the United States edition, entitled Retail Management: A Strategic Approach, 13th edition, ISBN 978-0-13-379684-1, by Barry Berman, Joel R. Evans, and Patrali Chatterjee, published by Pearson Education © 2018.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a license permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS.

All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners.

ISBN 10: 1-292-21467-8 ISBN 13: 978-1-292-21467-2

British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library.

10 9 8 7 6 5 4 3 2 1 14 13 12 11 10

Typeset in Palatino LT Pro Roman by SPi Global.

Printed and bound by Vivar, Malaysia.

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Brief Contents

Preface 11

PART 1 An Overview of Strategic Retail Management 21 Chapter 1 An Introduction to Retailing 22 Chapter 2 Building and Sustaining Relationships in Retailing 44 Chapter 3 Strategic Planning in Retailing 71

PART 2 Situation Analysis 109 Chapter 4 Retail Institutions by Ownership 110 Chapter 5 Retail Institutions by Store-Based Strategy Mix 130 Chapter 6 Web, Nonstore-Based, and Other Forms of Nontraditional

Retailing 151

PART 3 Targeting Customers and Gathering Information 187

Chapter 7 Identifying and Understanding Consumers 188 Chapter 8 Information Gathering and Processing in Retailing 211

PART 4 Choosing a Store Location 239 Chapter 9 Trading-Area Analysis 240 Chapter 10 Site Selection 264

PART 5 Managing a Retail Business 291 Chapter 11 Retail Organization and Human Resource Management 292 Chapter 12 Operations Management: Financial Dimensions 315 Chapter 13 Operations Management: Operational Dimensions 332

PART 6 Merchandise Management and Pricing 357 Chapter 14 Developing Merchandise Plans 358 Chapter 15 Implementing Merchandise Plans 382 Chapter 16 Financial Merchandise Management 404 Chapter 17 Pricing in Retailing 427

PART 7 Communicating with the Customer 459 Chapter 18 Establishing and Maintaining a Retail Image 460 Chapter 19 Promotional Strategy 482

PART 8 Putting It All Together 515 Chapter 20 Integrating and Controlling the Retail Strategy 516

Appendix: Careers in Retailing 539 Glossary 546 Endnotes 560 Name Index 577 Subject Index 581

3

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Preface 11

PART 1 An Overview of Strategic Retail Management 21

Chapter 1 An Introduction to Retailing 22

Chapter Objectives 22 Overview 23

The Framework of Retailing 23 Reasons for Studying Retailing 25 The Special Characteristics of Retailing 29

The Importance of Developing and Applying a Retail Strategy 30

The Home Depot Corporation: Successfully Navigating the Omnichannel Landscape 31 The Retailing Concept 34

The Focus and Format of the Text 38 Chapter Summary 38 •†Key Terms†39†•†Questionsâ€for Discussion 39 • Web-Based Exercise: blog (www.bermanevansretail.com) 39

Appendix Understanding the Recent Economic Environment in the United States and Around the Globe 40

The Current Economic Situation in the United States 40 The Impact of the Downturn on Economies Around the World 41 The Effect of the Current Economic Climate on Retailing 41 Strategic Options for Retailers 42

Chapter 2 Building and Sustaining Relationships in Retailing 44

Chapter Objectives 44 Overview 45

Value and the Value Chain 46 Retailer Relationships 48

Customer Relationships 49 Channel Relationships 56

The Differences in Relationship Building Between Goods and Service Retailers 57 Technology and Relationships in Retailing 59

Electronic Banking 60 Customer and Supplier Interactions 60

Ethical Performance and Relationships in Retailing 62

Ethics 62 Social Responsibility 63 Consumerism 64

Chapter Summary 66 • Key Terms†67†•†Questionsâ€for â€Discussion†67†•†Web-Basedâ€Exercise:†Sephora (www.sephora.com)†67

Appendix Planning for the Unique Aspects of Service Retailing 68

Abilities Required to be a Successful Service Retailer 68 Improving the Performance of Service Retailers 68 The Strategy of Pal’s Sudden Service: Baldrige Awardâ€Winner†70

Chapter 3 Strategic Planning in Retailing 71

Chapter Objectives 71 Overview 72

Situation Analysis 73 Organizationalâ€Mission†73 Ownershipâ€andâ€Managementâ€Alternatives†75 Goods/Serviceâ€Category†77 Personalâ€Abilities†78 Financialâ€Resources†79 Timeâ€Demands†79

Objectives 80 Sales 80 Profit 81 Satisfaction of Publics 81 Image (Positioning) 82 Selection of Objectives 84

Identification of Consumer Characteristics and Needs 84 Overall Strategy 85

Controllable Variables 85 Uncontrollableâ€Variables†87 Integrating Overall Strategy 88

Specific Activities 88 Control 90 Feedback 90 A Strategic Planning Template For Retail Management 90

4

Contents

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CONTENTS 5

Chapter Summary 94 •†Key Terms†94†•†Questionsâ€for†Discussion 95 • Web-Based Exercise: Angie’s List (www.angieslist.com) 95

Appendix The Special Dimensions of Strategic Planning in a Global Retailing Environment 96

Opportunities and Threats in Global Retailing 96 U.S. Retailers in Foreign Markets 98 Foreign Retailers in the U.S. Market 98

Part 1 Short Cases 100 Case 1: Retailers MUST Be Future- Oriented 100 Case 2: Stores That Accommodate Those with Physical Limitations 100 Case 3: Is the Proliferation of Job Titles Helping or Hurting? 101 Case 4: Competition and Quick Foodservice 102

Part 1 Comprehensive Case 104 Ideas Worth Stealing 104

PART 2 Situation Analysis 109

Chapter 4 Retail Institutions by Ownership 110

Chapter Objectives 110 Overview 111

Retail Institutions Characterized by Ownership 111

Independent 112 Chain 114 Franchising 116 Leased Department 120 Vertical Marketing System 121 Consumer Cooperative 123

Chapter Summary 123 •†Keyâ€Terms†124†•†Questionsâ€for†Discussion 124 • Web-Based Exercise: 7-Elevenâ€(www.franchise.7-eleven.com) 125

Appendix The Dynamics of Franchising 126

Managerial Issues in Franchising 126 Franchisor–Franchiseeâ€Relationships†127

Chapter 5 Retail Institutions by Store- Based Strategy Mix 130

Chapter Objectives 130 Overview 131

Considerations in Planning a Retail Strategy Mix 131

The Wheel of Retailing 131 Scrambled Merchandising 133

The Retail Life Cycle 134

How Retail Institutions are Evolving 136 Mergers, Diversification, and Downsizing 136 Cost Containment and Value-Driven Retailing†137

Retail Institutions Categorized By Store- Based Strategy Mix 138

Food-Oriented Retailers 139 General Merchandise Retailers 142

Chapter Summary 149 •†Keyâ€Terms†150†•†Questionsâ€for†Discussion 150 • Web-Based Exercise: Dillard’s (www.dillards.com) 150

Chapter 6 Web, Nonstore-Based, and Other Forms of Nontraditional Retailing 151

Chapter Objectives 151 Overview 152

Direct Marketing 154 The Domain of Direct Marketing 156 The Customer Database: Key to Successful Direct Marketing 156 Emerging Trends 156 The Steps in a Direct-Marketing Strategy 159 Key Issues Facing Direct Marketers 161

Direct Selling 161 Vending Machines 163 Electronic Retailing: The Emergence of the World Wide Web 164

The Role of the Web 164 The Scope of Web Retailing 165 Characteristicsâ€ofâ€Webâ€Users†167 Factors to Consider in Planning Whether to Have aâ€Webâ€Site†167 Mobileâ€Appsâ€Enablingâ€Onlineâ€Retailing†170 Examplesâ€ofâ€Webâ€Retailingâ€inâ€Action†170

Other Nontraditional Forms of Retailing 172

Videoâ€Kiosks†172 Airportâ€Retailing†172

Chapterâ€Summary†173†•†Keyâ€Terms†175†•†Questionsâ€for†Discussion†175†•†Web-Basedâ€Exercise:†“Charts & Data” section of Internet Retailer’s Web site (www.internetretailer.com)†175

Appendix Omnichannel Retailing 176 Advantages of Omnichannel Retail Strategies†177 Developing a Well-Integrated Omnichannel Strategy†177 Specialâ€Challenges†179

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6 CONTENTS

Part 2 Short Cases 180 Case 1: Do Power Players Rule? 180 Case 2: Will the Favorites of Today Remain Popular? 180 Case 3: Omnichannel Strategies of Top Retailers 181 Case 4: Omnichannel Food Retailing Still Needs Work 182

Part 2 Comprehensive Case 183 What Consumers Find Expendable versus Untouchable 183 What Are Consumers Finding Expendable? 183 Ongoing Recovery 183 Mash-Up 184 Older and Wiser? 185 Tracking Trends 185 Gender Trends 186

PART 3 Targeting Customers and Gathering Information 187

Chapter 7 Identifying and Understanding Consumers 188

Chapter Objectives 188 Overview 189

Consumer Demographics and Lifestyles 190

Consumer Demographics 190 Consumer Lifestyles 192 Retailing Implications of Consumer Demographics and Lifestyles 194 Consumer Profiles 196

Consumer Needs and Desires 196 Shopping Attitudes and Behavior 197

Attitudesâ€towardâ€Shopping†197 Where People Shop 199 The Consumer Decision Process 200 Types of Consumer Decision Making 203 Impulse Purchases and Customer Loyalty 204

Retailer Actions 206 Retailersâ€withâ€Massâ€Marketingâ€Strategies†207 Retailers with Concentrated Marketing Strategies†207 Retailers with Differentiated Marketing Strategies 208

Environmental Factors Affecting Consumers 208 Chapter Summary 208 •†Keyâ€Terms†209†•†Questionsâ€for†Discussion 210 • Web-Based Exercise: Claire’s (www.claires.com) and Icing (www.icing .com) 210

Chapter 8 Information Gathering and Processing in Retailing 211

Chapter Objectives 211 Overview 212

Information Flows in a Retail Distribution Channel 213 Avoiding Retail Strategies Based on Inadequate Information 214 The Retail Information System 215

Building and Using a Retail Information System 215 Databaseâ€Management†217 Gathering Information through the UPC and EDI 220

The Marketing Research Process 221 Secondary Data 224 Primaryâ€Data†227

Chapter Summary 230 •†Keyâ€Terms†231†•†Questionsâ€for†Discussion 231 • Web-Based Exercise: Coca-Cola Retailing Research Council (www. ccrrc.org) 231

Part 3 Short Cases 232 Case 1: Eating Patterns in America 232 Case 2: The Convenience Economy Comes of Age 232 Case 3: Are Hot Retailers of 2015 Still Hot? 233 Case 4: Navigating the Shopper Universe through Big Data 234

Part 3 Comprehensive Case 235 How Do You Attract and Satisfy Millennials? 235

PART 4 Choosing a Store Location 239

Chapter 9 Trading-Area Analysis 240 Chapter Objectives 240 Overview 241

The Importance of Location to a Retailer 241 Trading-Area Analysis 242

The Use of Geographic Information Systems in Trading-Area Delineation and Analysis 244 Theâ€Sizeâ€andâ€Shapeâ€ofâ€Tradingâ€Areas†247 Delineating the Trading Area of an Existing Store 249 Delineating the Trading Area of a New Store 250

Characteristics of Trading Areas 253 Characteristics of the Population 256 The Nature of Competition and the Level of Saturation 259

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CONTENTS 7

Chapter Summary 261 •†Keyâ€Terms†262†•†Questionsâ€for†Discussion 262 • Web-Based Exercise: Web site of Site Selection Online (www.siteselection. com) 263

Chapter 10 Site Selection 264 Chapter Objectives 264 Overview 265

Types of Locations 265 The Isolated Store 265 The Unplanned Business District 266 The Planned Shopping Center 269

The Choice of a General Location 274 Location and Site Evaluation 275

Pedestrianâ€Traffic†275 Vehicularâ€Traffic†276 Parkingâ€Facilities†276 Transportation†277 Storeâ€Composition†278 Specificâ€Site†278 Termsâ€ofâ€Occupancy†279 Overall Rating 281

Chapter Summary 281 •†Keyâ€Terms†282†•†Questionsâ€for†Discussion 282 • Web-Based Exercise: Main Street America (www.preservationnation. org/main-street) 282

Part 4 Short Cases 283 Case 1: Are Smaller and Faster Better? 283 Case 2: Organize, Optimize, Synchronize 283 Case 3: Removing Barriers to Cross- Border Commerce 284 Case 4: Warehouse Management: Right Time, Right Place 285

Part 4 Comprehensive Case 286

PART 5 Managing a Retail Business 291

Chapter 11 Retail Organization and Human Resource Management 292

Chapter Objectives 292 Overview 293

Setting Up a Retail Organization 293 Specifying Tasks to Be Performed 294 Dividing Tasks among Channel Members and Customers 294 Grouping Tasks into Jobs 295 Classifying Jobs 296 Developing an Organization Chart 296

Organizational Patterns in Retailing 297 Organizational Arrangements Used by Small Independentâ€Retailers†297 Organizational Arrangements Used by Department Stores 298 Organizational Arrangements Used by Chain Retailers 300 Organizational Arrangements Used by Diversified Retailers 300

Human Resource Management in Retailing 301

The Special Human Resource Environment of Retailing 303 The Human Resource Management Process in Retailing 305

Chapter Summary 313 •†Keyâ€Terms†314†•†Questionsâ€for†Discussion 314 • Web-Based Exercise: Macy’s, Inc. has dedicated to “Careers After College” (www.macyscollege.com) 314

Chapter 12 Operations Management: Financial Dimensions 315

Chapter Objectives 315 Overview 316

Profit Planning 316 Asset Management 317

The Strategic Profit Model 319 Other Key Business Ratios 320 Financial Trends in Retailing 321

Budgeting 324 Preliminary Budgeting Decisions 325 Ongoing Budgeting Process 326

Resource Allocation 328 The Magnitude of Various Costs 329 Productivity 329

Chapter Summary 330 •†Keyâ€Terms†331†•†Questionsâ€for†Discussion 331 •†Web-Basedâ€Exercise:â€QuickBooksâ€(http:// quickbooks.intuit.com/tutorials) 331

Chapter 13 Operations Management: Operational Dimensions 332

Chapter Objectives 332 Overview 333

Operating a Retail Business 333 Operations Blueprint 333 Store Format, Size, and Space Allocation 335 Personnelâ€Utilization†337 Store Maintenance, Energy Management, and Renovations 338 Inventory Management 340 Store Security 341 Insurance 342 Credit Management 343

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8 CONTENTS

Technology and Computerization 344 Outsourcing 346 Crisis Management 346

Chapterâ€Summary†347†•†Keyâ€Terms†348†•†Questionsâ€for†Discussion 348 • Web-Based Exercise: Pricer (www.pricer.com/en/Solutions) 348

Part 5 Short Cases 349 Case 1: Assistant Store Manager 349 Case 2: Manager, Training and Development 349 Case 3: Senior Manager of Digital Operations 350 Case 4: Retail Shrinkage: A Significant Problem 351

Part 5 Comprehensive Case 352 Predicting Retail Trends 352 Predictions of 2016 Retailing Trends 352

PART 6 Merchandise Management and Pricing 357

Chapter 14 Developing Merchandise Plans 358

Chapter Objectives 358 Overview 359

Merchandising Philosophy 359 Buying Organization Formats and Processes 361

Level of Formality 361 Degree of Centralization 361 Organizational Breadth 362 Personnel Resources 362 Functions Performed 364 Staffing 364

Devising Merchandise Plans 364 Forecasts 364 Innovativeness 366 Assortment 369 Brands†372 Timing†375 Allocation†375

Category Management 376 What Manufacturers Think about Retailers†377 Whatâ€Retailersâ€Thinkâ€aboutâ€Manufacturers†377

Merchandising Software 378 Generalâ€Merchandiseâ€Planningâ€Software†378 Forecastingâ€Software†378 Innovativenessâ€Software†378 Assortmentâ€andâ€Allocationâ€Software†379 Category Management Software 380

Chapter Summary 380 •†Keyâ€Terms†381†•†Questionsâ€for†Discussion 381 • Web-Based Exercise: TXT Retail Web site (http://-txtretail.txtgroup.com/ solutions/ assortment-planning-buying/) 381

Chapter 15 Implementing Merchandise Plans 382

Chapter Objectives 382 Overview 383

Implementing Merchandise Plans 383 Gathering Information 383 Selecting and Interacting with Merchandise Sources 385 Evaluating Merchandise 386 Negotiatingâ€theâ€Purchase†387 Concluding Purchases 388 Receiving and Stocking Merchandise 389 Reordering Merchandise 391 Re-evaluating on a Regular Basis 392

Logistics 392 Performance Goals 393 Supply Chain Management 394 Order Processing and Fulfillment 394 Transportation and Warehousing 396 Customer Transactions and Customer Service†397

Inventory Management 398 Retailer Tasks 398 Inventory Levels 398 Merchandise Security 399 Reverse Logistics 400 Inventory Analysis 401

Chapter Summary 402 •†Keyâ€Terms†402†•†Questionsâ€for†Discussion 403 • Web-Based Exercise: “Business” section of the U.S. Postal Service’s Web site (www.usps.com/business) 403

Chapter 16 Financial Merchandise Management 404

Chapter Objectives 404 Overview 405

Inventory Valuation: The Cost and Retail Methods of Accounting 405

The Cost Method 406 The Retail Method 408

Merchandise Forecasting and Budgeting: Dollar Control 411

Designating Control Units 411 Sales Forecasting 412 Inventory-Level Planning 413 Reduction Planning 416 Planning Purchases 416 Planning Profit Margins 418

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CONTENTS 9

Unit Control Systems 418 Physical Inventory Systems 419 Perpetual Inventory Systems 419 Unit Control Systems in Practice 420

Financial Inventory Control: Integrating Dollar and Unit Concepts 421

Stock Turnover and Gross Margin Return on Investment 421 When to Reorder 423 How Much to Reorder 424

Chapter Summary 425 •†Keyâ€Terms†425†•†Questionsâ€for†Discussion 426 • Web-Based Exercise: benchmarking section of the Retail Owners Institute Web site (http://retailowner.com/ Benchmarks) 426

Chapter 17 Pricing in Retailing 427 Chapter Objectives 427 Overview 428

External Factors Affecting a Retail Price Strategy 429

The Consumer and Retail Pricing 429 The Government and Retail Pricing 431 Manufacturers, Wholesalers, and Other Suppliers—and Retail Pricing 433 Competition and Retail Pricing 434

Developing a Retail Price Strategy 435 Retail Objectives and Pricing 435 Broad Price Policy 436 Price Strategy 438 Implementation of Price Strategy 443 Priceâ€Adjustments†447

Chapter Summary 450 •†Keyâ€Terms†450†•†Questionsâ€for†Discussion 451 • Web-Based Exercise: Neiman Marcus (www.neimanmarcus.com) 451

Part 6 Short Cases 452 Case 1: Buyer of Sports Equipment 452 Case 2: Adapting to the Internet of Things (IoT) 452 Case 3: High Marks by Suppliers and Wholesalers for Convenience Stores 453 Case 4: Data-Driven Pricing 454

Part 6 Comprehensive Case 456 Knocking Off the Knockoffs? 456

PART 7 Communicating with the Customer 459

Chapter 18 Establishing and Maintaining a Retail Image 460

Chapter Objectives 460 Overview 461

The Significance of Retail Image 461 Components of a Retail Image 462 The Dynamics of Creating and Maintaining a Retail Image 462

Atmosphere 464 A Store-Based Retailing Perspective 464 Aâ€Nonstore-Basedâ€Retailingâ€Perspective†474 Encouraging Customers to Spend More Time Shoppingâ€â€ 476 Communityâ€Relations†479

Chapterâ€Summary†479†•†Keyâ€Terms†480†•†Questionsâ€for†Discussion 480 • Web-Based Exercise: Johnny Rockets (www.johnnyrockets.com) 481

Chapter 19 Promotional Strategy 482 Chapter Objectives 482 Overview 483

Elements of the Retail Promotional Mix 483

Advertising 483 Public Relations 490 Personal Selling 491 Sales Promotion 494

Planning a Retail Promotional Strategy 499

Determining Promotional Objectives 499 Establishing an Overall Promotional Budget 500 Selecting the Promotional Mix 501 Implementing the Promotional Mix 501 Reviewing and Revising the Promotional Plan 505

Chapter Summary 506 •†Keyâ€Terms†506†•†Questions†forâ€Discussion†507†•†Web-Based†Exercise: Web site (www.entrepreneur.com/ article/241607)†507

Part 7 Short Cases 508 Case 1: Keep It Simple 508 Case 2: More than Price 508

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10 CONTENTS

Case 3: Enhancing the In-Store Experience through Facial Recognition Software 509 Case 4: Revitalizing Customer Loyalty 510

Part 7 Comprehensive Case 511 Inside the Mind of Shake Shack’s Founder 511

PART 8 Putting It all Together 515

Chapter 20 Integrating and Controlling the Retail Strategy 516

Chapter Objectives 516 Overview 517

Integrating the Retail Strategy 518 Planning Procedures and Opportunity Analysis 518 Defining Productivity in a Manner Consistent with the Strategy 519 Performance Measures 521 Scenario Analysis 525

Control: Using the Retail Audit 526 Undertakingâ€anâ€Audit†527 Responding to an Audit 529

Possible Difficulties in Conducting a Retail Audit 529 Illustrations of Retail Audit Forms 529

Chapter Summary 531 •†Keyâ€Terms†532†•†Questionsâ€for†Discussion 532 • Web-Based Exercise: American Customer Satisfaction Index (www. theacsi.org) 532

Part 8 Short Cases 533 Case 1: Envision the Future: Part 1 533 Case 2: Envision the Future: Part 2 533

Part 8 Comprehensive Case 535 Achieving Excellence in Retailing 535 Research Methodology 538

Appendix: Careers in Retailing 539 Glossary 546 Endnotes 560 Name Index 577 Subject Index 581

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Preface

We are quite proud and very thankful to have produced a book that has been so enduringly popu- lar. The book has been adopted by universities and colleges around the world, and it has been translated into Chinese and Russian.

Both Joel and I (Barry) are pleased to welcome a new co-author for this edition. Dr. Patrali Chatterjee (Ph.D. in Management with a major in Marketing) is a Full Professor of Marketing in the Feliciano School of Business at Montclair State University. She is currently an officer for the American Collegiate Retailing Association (ACRA). She has published her research in several academic journals and been featured in business media, as well. Professor Chatterjee has also consulted for several Fortune 500 companies.

As we move further into the twenty-first century, our goal is to seamlessly meld the tradi- tional framework of retailing with the realities of the competitive environment and the emergence of high-tech as a backbone for retailing. Retail Management: A Strategic Approach is a cutting-edge text, while retaining the coverage and features most desired by professors and students. To remain timely, we regularly post material about current events at our blog (www. bermanevansretail.com), which already has more than 1,500 posts and viewers from 180 countries.

Our enthusiasm for teaching and writing remains quite high. We all teach a full schedule of undergraduate and graduate courses in the Zarb School of Business at Hofstra University (Barry and Joel) and the Feliciano School of Business at Montclair State University (Patrali); both schools are fully accredited by AACSB International. We have been all been active in and supportive of ACRA. Barry has served as president and is in the ACRA Hall of Fame, while Joel has edited several conference proceedings and Patrali is an officer on the board.

The concepts of a strategic approach and a retail strategy remain our cornerstones. We were the first authors to take this primary orientation to the teaching of retail management. With a strategic approach, the fundamental principle is that the retailer has to plan for and adapt to a complex, changing environment. Both opportunities and constraints must be considered. A retail strategy is the overall plan or framework of action that guides a retailer. Ideally, it will be at least one year in duration and outline the mission, goals, consumer market, overall and specific activi- ties, and control mechanisms of the retailer. Without a pre-defined and well-integrated strategy, the firm may flounder and be unable to cope with the environment that surrounds it. Through our text, we want the reader to become a good retail planner and decision maker and be able to adapt to change.

Retail Management is designed as a one-semester text for students of retailing or retail man- agement. Due to the flexible pedagogical elements that accompany the book and the ability of the instructor to cover all or selected chapters in the book, Retail Management has been used by four-year and two-year schools, in undergraduate and graduate courses, and by business schools and nonbusiness schools. In many cases, students will have already been exposed to marketing principles. We feel retailing should be viewed as one form of marketing and not distinct from it.

NEW TO THE THIRTEENTH EDITION Since the first edition of Retail Management: A Strategic Approach, we have sought to be as con- temporary and forward-looking as possible. We are proactive rather than reactive in our prepa- ration of each edition. That is why we still take this adage of Walmart’s founder, the late Sam Walton so seriously: “Commit to your business. Believe in it more than anybody else.”

For the Thirteenth Edition, there are many changes in Retail Management:

1. All data and examples are as current as possible and reflect the current economic and world situations as much as possible. We believe it is essential that our book take into account the economic environment that has dramatically affected so many businesses and consumers.

2. There is now extensive coverage of omnichannel retailing—an evolving practice whereby the best retailers understand and seamlessly integrate all of their interactions across channels (including stores, online, mobile, social media, and more).

11

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12 PREFACE

3. ALL NEW CHAPTER-OPENING VIGNETTES—each relating to the evolving nature of retailing. We had a lot of fun writing these vignettes: Chapter 1: Multichannel versus Omnichannel Experiences Chapter 2: The Role of Digital and Traditional Channels in Delivering in-Store Service Chapter 3: Brand Intimacy: How Consumers Form Bonds with Brands Chapter 4: Tesla Motors Seeks to Bypass the Franchise Dealer Network Chapter 5: The Evolution of Factory Outlets Chapter 6: Buy Online, Pick Up In Store Programs Chapter 7: Online Groceries: Traditional Grocer’s New Threat Chapter 8: Lip Service Versus Real Customer Service Chapter 9: Trading-Area Analysis for Traditional and Destination Retailers Chapter 10: The Impact of Store Closings on Shopping Centers Chapter 11: Strategies to Reduce Retail Employee Turnover Chapter 12: Incremental Versus Zero-Based Budgeting Chapter 13: Facial Recognition: The Faceoff Against Retail Credit Card Fraud Chapter 14: Amazon’s Dash Button Chapter 15: American Eagle Outfitters New Distribution Center Chapter 16: Strategies to Reduce Markdowns Chapter 17: Retailer Price Matching Programs Chapter 18: The In-Store Service Imperative Chapter 19: Apps with Generation Z Appeal Chapter 20: Customer Satisfaction Suffers: American Customer Satisfaction Data

4. ALL NEW BOXES! They now include thought-provoking questions. Topics include: a. Technology in Retailing

Chapter 1: Generating Location-Sensitive Offers Chapter 2: Automated Customized Service Chapter 3: Retail Planning Software Chapter 4: Loyalty Programs Chapter 5: Sephora’s Phygital Makeover Chapter 6: Bringing Concierge Service to Online Shopping Chapter 7: Recommendation Engines Chapter 8: Mobile Beacons and Data Collection Chapter 9: GIS Systems Chapter 10: Lease Management Software Chapter 11 Job Listing Web Sites Chapter 12: The Impact of Self-Scanning on Impulse Sales Chapter 13: Energy Management Chapter 14: Store Planning Software Chapter 15: Retailers Taking the Right Steps to Fight Shrinkage Chapter 16: Point-of-Sale (POS) Systems Chapter 17: Oracle Markdown Software Chapter 18: 3D Afoot Chapter 19: Smartphone Couponing Chapter 20: Retail Planning Using EXCEL

b. Retailing Around the World Chapter 1: Debenhams Goes East: The Continuing Expansion of the UK Department

Store Retailer Chapter 2: Lane Crawford; Selling Luxury Goods in Hong Kong Chapter 3: Handling Payments from Global Customers Chapter 4: KFC in China Chapter 5: McDonald’s Investments in Russia Chapter 6: The Global Retail E-Commerce Index Chapter 7: Global Adaptation Chapter 8: Studying a Consumer’s Purchase Journey Chapter 9: Doomed Locations? Chapter 10: Pop-Up Stores Chapter 11: Recruiting of Retail Executives

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PREFACE 13

Chapter 12: Ikea’s Global Results Chapter 13: Countries’ Payment-Related Issues Chapter 14: Young Chinese Favor Global Brands Chapter 15: Processing Foreign Credit Cards Chapter 16: Gray Market Sourcing Chapter 17: Game Stores: Africa’s Largest Discounter Chapter 18: Hyatt Hotels Promotes Global Social Responsibility Chapter 19: Burberry’s Chinese Promotional Strategy Chapter 20: Best Buy’s Failure in China

c. Ethics in Retailing Chapter 1: Environmental Sustainability Chapter 2: Community Champions in the UK Chapter 3: Deceptive Price Advertising Chapter 4: Unethical Behavior by Franchisors Chapter 5: Bargaining Power by Category Killers Chapter 6: Sales Tax Collection By Online Retailers Chapter 7: Selling Add-Ons Chapter 8: Retail Security Breaches Chapter 9: Gentrification Issues Chapter 10: Shopping Center Leases Chapter 11: Zero-Hour Contracts Chapter 12: Restrictive Loan Covenants Chapter 13: Corporate Responsibility at Target Chapter 14: What’s a Fair Return Policy Chapter 15: Upcycling: A Form of Green Marketing Chapter 16: Markdown Allowances Chapter 17: Trust and Fairness in Revenue Management Chapter 18: Product Reviews on the Web Chapter 19: Using of Promotional Goods Chapter 20: Why Do Poor Ethics Occur?

d. Careers in Retailing Chapter 1: Hiring From Within Versus Best Person for the Job Chapter 2: Category Managers Chapter 3: “Builders,” “Maintainers,” and “Undertakers” Chapter 4: Succession Planning Chapter 5: Considering Being a Retail Buyer as a Career Chapter 6: Web Developers Chapter 7: Marketing Research as a Career Chapter 8: Careers in Customer Relationship Management Chapter 9: Trading-Area Analysis Careers Chapter 10: Site-Selection Based Careers Chapter 11: Buyer Training Chapter 12: Retail Financial Analyst Chapter 13: Security Personnel Chapter 14: Buying for a Retailer’s Private-Label Program Chapter 15: Opportunistic Buying by Discounters Chapter 16: Retailing Accounting Careers Chapter 17: Carol Meyrowitz of TJX Chapter 18: Joseph Bona’s Design Career Path Chapter 19: Omnichannel Promotions Manager Chapter 20: Retail Audit Personnel

5. ALL NEW! 30 shorter cases, as well as 8 comprehensive cases. Every case is based on real companies and real situations. Cases include: a. Short cases:

Part One 1. Retailers MUST Be Future-Oriented 2. Stores that Accommodate Those with Physical Limitations

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14 PREFACE

3. Is the Proliferation of Job Titles Helping or Hurting? 4. Competition and Quick Foodservice

Part Two 1. Do Power Players Rule? 2. Will the Favorites of Today Remain Popular? 3. Omnichannel Strategies of Top Retailers 4. Omnichannel Food Retailing Still Needs Work

Part Three 1. Eating Patterns in America 2. The Convenience Economy Comes of Age 3. Are Hot Retailers of 2015 Still Hot? 4. Navigating the Shopper Universe Through Big Data

Part Four 1. Are Smaller and Faster Better? 2. Organize, Optimize, Synchronize 3. Removing Barriers to Cross-Border Commerce 4. Warehouse Management: Right Time, Right Place

Part Five 1. Assistant Store Manager 2. Manager, Training and Development 3. Senior Manager of Digital Operations 4. Retail Shrinkage: A Significant Problem

Part Six 1. Buyer of Sports Equipment 2. Adapting to the Internet of Things (IoT) 3. High Marks by Suppliers and Wholesalers for Convenience Stores 4. Data-Driven Pricing

Part Seven 1. Keep It Simple 2. More than Price 3. Enhancing the In-Store Experience Through Facial Recognition Software 4. Revitalizing Customer Loyalty

Part Eight 1. Envision the Future: Part 1 2. Envision the Future: Part 2

a. Part Cases: Part One: Ideas Worth Stealing Part Two: What Consumers Find Expendable Vs. Untouchable Part Three: How Do You Attract and Satisfy Millennials? Part Four: Autenticidad en Acción: Mexican Delights the Real Deal at Food City Remodel Part Five: Predicting Retail Trends Part Six: Knocking Off the Knockoffs Part Seven: Inside the Mind of Shake Shack’s Founder Part Eight: Achieving Excellence in Retailing

6. MANY photos and images have been replaced or updated throughout. 7. The hundreds of PowerPoint slides that accompany the book have been fully revised; AND

there are descriptions related to each slide. 8. Our blog (www.bermanevansretail.com) has been updated. We have a current (multiple posts

each week), dynamic, multimedia, interactive blog just for students and professors interested in retailing. There is a lot of cool stuff there. Please join us at (www.bermanevansretail.com). Our blog has a lot of career material. There are more than 325 career-related posts at the blog.

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PREFACE 15

Substantive Changes for the Thirteenth Edition by Chapter

▶▶ Chapter 1 (An Introduction to Retailing). The importance of omnichannel retailing is high- lighted. We describe Home Depot’s overall strategy and its approach to the complex market- place. And to properly capture the importance of the economic situation facing retailers today, we update the chapter appendix to reflect the state of economy after the worldwide recession period: “Understanding the Recent Economic Environment in the United States Around the Globe.” The appendix covers the U.S. economy, the global effects of the downturn, the effect of the current economic climate on retailing, and strategic options for retailers.

▶▶ Chapter 2 (Building and Sustaining Relationships in Retailing). There is more coverage of “value” and “relationships” in retailing—with both customers and other channel members. Retailer interactions with customers depend on the customer base and customer service, and they have an impact on customer satisfaction; and there are different types of loyalty programs. Emerging technologies often enable retailers to form stronger relationships; and retailer ethics can stimulate or deter shoppers. The end-of-chapter appendix (“Planning for the Unique Aspects of Service Retailing”) reflects current thinking on service retailing.

▶▶ Chapter 3 (Strategic Planning in Retailing). There is greater attention to strategic plan- ning in today’s marketplace, with numerous examples. The software that supplements the section of this chapter devoted to a strategic planning template—Computer-Assisted Strategic Retail Management Planning—has been updated and is available for download at our blog (www.bermanevansretail.com). The chapter appendix (“The Special Dimensions of Strate- gic Planning in a Global Retailing Environment”) notes the challenges for retailers operating outside their home markets and various trends in global retailing.

▶▶ Chapter 4 (Retail Institutions by Ownership). All of the data on retail ownership formats (independents, chain-owned, franchisee-operated, leased departments, owned by manufac- turers or wholesalers, or consumer-owned) have been updated. The appendix on franchis- ing opportunities (“The Dynamics of Franchising”) presents current information on various aspects of franchising.

▶▶ Chapter 5 (Retail Institutions by Store-Based Strategy Mix). All of the data on store- based retail strategies have been updated – 14 strategic formats in all that are divided into food-based and general-merchandise-based categories. There are numerous new examples.

▶▶ Chapter 6 (Web, Nonstore-Based, and Other Forms of Nontraditional Retailing). The emerging and critical omnichannel perspective of retailing is discussed in more detail in this chapter than in Chapter 1; and single-channel, multichannel, and omnichannel retailing are contrasted. The coverage of online retailing reflects the present state of the Web and mobile channels, and includes many examples. There is a fully updated and refocused appendix on retail supply chains (“Omnichannel Retailing”) and its impact.

▶▶ Chapter 7 (Identifying and Understanding Consumers). There is a strong emphasis on the retailing ramifications of the empowered consumer, as well as consumer characteristics, attitudes, and behavior. We include current demographic data on U.S. and foreign consumers, consumer profiles, and shopping attitudes and behavior.

▶▶ Chapter 8 (Information Gathering and Processing in Retailing). This chapter looks at information flows in a retail distribution channel and notes the ramifications of inadequate research. We then describe the retail information system, database management, and data warehousing. The barcode discussion is enhanced.

▶▶ Chapter 9 (Trading-Area Analysis). There is new material on geographic information sys- tems, as well as many new retail applications. We have increased the coverage of the TIGER digital mapping system, which is the basis for most geographic information systems’ software.

▶▶ Chapter 10 (Site Selection). We include many new retail applications and examples. ▶▶ Chapter 11 (Retail Organization and Human Resource Management). There is more

emphasis on employee turnover and the human resource environment in retailing, as well as updated coverage of women and minorities in retailing. We also have substantially revised some of the organization charts.

▶▶ Chapter 12 (Operations Management: Financial Dimensions). We have new material on incremental and zero-based budgeting, as well as updated information on key business ratios, financial trends, and resource allocation.

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16 PREFACE

▶▶ Chapter 13 (Operations Management: Operational Dimensions). There is a new discus- sion of digital payment systems, as well as updated material on operations issues in retailing.

▶▶ Chapter 14 (Developing Merchandise Plans). Innovative practices are highlighted. We place greater emphasis on a merchandising-based philosophy and the activities necessary to carry it out. There is updated coverage of merchandising practices, the popularity of private brands (including a new quiz), and category management.

▶▶ Chapter 15 (Implementing Merchandise Plans). There is enhanced coverage of the power of large retailers, RFID (radio frequency identification), logistics, and inventory management.

▶▶ Chapter 16 (Financial Merchandise Management). There is updated coverage of financial merchandise management, including unanticipated markdowns.

▶▶ Chapter 17 (Pricing in Retailing). We focus on the retailer’s need to provide value to customers, regardless of its price orientation—and the growing power of the consumer due to online comparison shopping.

▶▶ Chapter 18 (Establishing and Maintaining a Retail Image). We place more focus on the total retail experience (both in the store and online), retail positioning, and atmospherics and Web-based retailers, as well as how to increase shopping time.

▶▶ Chapter 19 (Promotional Strategy). There are many new applications and examples— especially with regard to mobile apps and social media—and a strong strategic emphasis on the retail promotional strategy.

▶▶ Chapter 20 (Integrating and Controlling the Retail Strategy). There is an in-depth dis- cussion on integrating the retail strategy in today’s high-tech marketplace, as well as how to assess a strategy, with a detailed example based on TJX.

▶▶ Appendix (Careers in Retailing). We emphasize the strong long-term possibilities (through 2024) for careers in retailing. There is a new table citing 10 retail positions with unique responsibilities.

BUILDING ON THE E-VOLUTION OF RETAIL MANAGEMENT: A STRATEGIC APPROACH From a retailer perspective, we see four formats—all covered in Retail Management— competing in the new millennium (cited in descending order of importance):

▶▶ Combined “bricks-and-mortar” and “clicks-and-mortar” retailers. These are store-based retailers that also offer online shopping, thus providing customers the ultimate in choice and convenience. Virtually all of the world’s largest retailers, as well as many medium and small firms, fall into this category; and they are omnichannel retailers. This is clearly the fast-growing format in retailing. Even Amazon.com, a long-time online only retailer, is now opening some physical stores.

▶▶ Clicks-and-mortar retailers. These are the online-only retailers that have emerged. Rather than use their own physical store facilities, these companies promote a “virtual” shopping experience: wide selections, convenience, and—sometimes—low prices. Among the firms in this category are Priceline—the discount airfare and hotel retailer—and Zappos –the retailer of shoes, apparel, and a whole lot more.

▶▶ Direct marketers with clicks-and-mortar retailing operations. These are firms that have relied on traditional nonstore media such as print catalogs, direct selling in homes, and TV infomercials to generate business. Almost of them have added Web sites to enhance their businesses. Leaders include Lands’ End and QVC. These direct marketers will continue to see a dramatic increase in the proportion of sales coming from the Web.

▶▶ Bricks-and-mortar retailers. These are companies that rely on their physical facilities to make sales. They do not sell online but use the Web for providing information and customer service and for image building. Auto dealers typically offer product information and cus- tomer service online but conduct their sales transactions at retail stores. Firms in this category represent the smallest grouping of retailers. Many will need to rethink their approach as online competition intensifies.

We now have access to more information sources, from global trade associations to gov- ernment agencies. The information in Retail Management, Thirteenth Edition, is more current

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PREFACE 17

than ever because we are using the original sources themselves and not waiting for data to be published months or a year after being compiled. We are also able to include a greater range of real-world examples because of the information at company Web sites.

Will this help you? Yes. You will benefit because our philosophy has always been to make Retail Management as reader-friendly, up-to-date, and useful as possible. In addition, we want students to benefit from our experiences—in this case, our E-xperiences.

Retail Management: A Strategic Approach, Thirteenth Edition, incorporates many E-features in the book; and at our lively and constantly updated blog (www.bermanevansretail.com).

Our blog includes many features that are intended to enrich both the student’s and profes- sor’s understanding and appreciation of retailing. These include:

▶▶ More than 1,600 blog posts and counting. To stay current, we post multiple times EVERY week!

▶▶ A multimedia approach—with embedded videos, colorful infographics (charts with data), photos, and links to a huge number of real world sources.

▶▶ Post categories keyed to each of 8 parts of the book. ▶▶ Additional post categories on such important issues as: Careers in Retailing, Global Retail-

ing, Nontraditional Retailing, Online Retailing, Privacy and Identity Theft, Social Media and Retailing, and Strategy Mix.

But, that’s not all! Our Web site has career material; and each chapter of the book ends with a Web-based exercise.

BUILDING ON A STRONG TRADITION Besides introducing the E-features just mentioned, Retail Management, Thirteenth Edition, care- fully builds on its heritage as the market leader in strategic retail management. These features have been retained from earlier editions of Retail Management:

▶▶ A strategic decision-making orientation, with many illustrative flow charts, figures, tables, and photos. The chapter coverage is geared to the six steps used in developing and applying a retail strategy, which are first described in Chapter 1.

▶▶ Full coverage of all major retailing topics—including merchandising, consumer behavior, information systems, omnichannel retailing, store location, operations, logistics, service retailing, the retail audit, retail institutions, franchising, human resource management, com- puterization, and retailing in a changing environment.

▶▶ A real-world approach focusing on both small and large retailers. ▶▶ Real-world boxes on current retailing issues in each chapter. These boxes further illustrate

the concepts presented in the text by focusing on real firms and situations. ▶▶ A numbered summary keyed to chapter objectives, a key terms listing, and discussion ques-

tions at the end of each chapter. ▶▶ Both short cases involving a wide range of retailers and retail practices and comprehensive

cases. ▶▶ Up-to-date information from such sources as Advertising Age, Businessweek, Chain Store

Age, Direct Marketing, Entrepreneur, Fortune, Inc., International Journal of Retail & Dis- tribution Management, Journal of Retailing, Multichannel Merchant, Progressive Grocer, Retailing Today, Shopping Centers Today, Standard & Poor’s, Stores, and Wall Street Journal.

▶▶ End-of-chapter appendixes on service retailing (following Chapter 2), global retailing (fol- lowing Chapter 3), and franchising (following Chapter 4).

▶▶ End-of-text appendix “Careers in Retailing” and a glossary.

HOW THE TEXT IS ORGANIZED Retail Management: A Strategic Approach has eight parts. Part One introduces the field of retail- ing, the basics of strategic planning, the importance of building and maintaining relations, and the decisions to be made in owning or managing a retail business. In Part Two, retail institutions are examined in terms of ownership types, as well as store-based, nonstore-based, electronic, and nontraditional strategy mixes. The wheel of retailing, scrambled merchandising, the retail life

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18 PREFACE

cycle, and the Web are covered. Part Three focuses on target-marketing and information-gather- ing methods, including discussions of why and how consumers shop and the retailing informa- tion system and data warehouse. Part Four presents a four-step approach to location planning: trading-area analysis, choosing the most desirable type of location, selecting a general locale, and deciding on a specific site.

Part Five discusses the elements involved in managing a retail business: the retail orga- nization structure, human resource management, and operations management (both financial and operational). Part Six deals with merchandise management—developing and implementing merchandise plans, the financial aspects of merchandising, and pricing. In Part Seven, the ways to communicate with customers are analyzed, with special attention paid to retail image, atmo- sphere, and promotion. Part Eight deals with integrating and controlling a retail strategy.

At the end of the text, Appendix: Careers in Retailing highlights career opportunities in re- tailing. There is also a comprehensive Glossary.

INSTRUCTOR RESOURCES At Pearson’s Higher Ed catalog, www.pearsonglobaleditions.com/berman, instructors can easily register to gain access to a variety of instructor resources available with this text in downloadable format. If assistance is needed, our dedicated technical support team is ready to help with the media supplements that accompany this text. Visit https://support.pearson.com/getsupport for answers to frequently asked questions and toll-free user support phone numbers. The following supplements are available with this text: • Instructor’s Resource Manual • Test Bank • TestGen® Computerized Test Bank • PowerPoint Presentations. This title is available as an E-book and can be purchased at most E-book retailers.

Recommended Syllabi A course in retail management is taught in a number of ways and according to different term calen- dars. Accordingly, here are two different recommended syllabi to assist instructors in their course preparation. These syllabi suggest coverage for schools on both the semester and quarter system.

These syllabi are merely recommended. We recognize that greater or lesser emphasis may be placed on particular retailing topics.

Recommended Syllabus for a 14-Week Semester Course

Week Amount of Coverage Topics Text Chapters

1 ½ week An introduction to retailing 1

1–2 1 week Relationship retailing/strategic planning in retailing

2, 3

2–3 1½ weeks Retail institutions categorized by ownership, strategy mix, Web, nonstore, and other forms of nontraditional retailing

4, 5, 6

4 ½ week Understanding consumer behavior 7

4–5 1 week Information systems and marketing research in retailing

8

5–6 1½ weeks Trading-area analysis and site selection 9, 10

7–8 1½ weeks Retail organization and human resource management; and operations management

11, 12, 13

8–9 1 week Buying and handling merchandise 14, 15

9–10 1 week Financial merchandise planning and management

16

10–11 1 week Pricing in retailing 17

11–12 1 week Establishing and maintaining a retail image 18

12–13 1 week Promotional strategy 19

14 1 week Integrating and controlling the retail strategy 20

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PREFACE 19

Recommended Syllabus for a 10-Week Semester Course

Week Amount of Coverage Topics Text Chapters

1 ½ week An introduction to retailing 1

1–2 1 week Strategic planning in retailing 2, 3

2–3 1½ week Retail institutions characterized by ownership, strategy mix, Web, nonstore, and other forms of nontraditional retailing

4, 5, 6

4 ½ week Understanding consumer behavior 7

4 ½ week Information systems and marketing research in retailing

8

5 1 week Trading-area analysis and site selection 9, 10

6 1 week Retail organization and human resource man- agement; and operations management

11, 12, 13

7 1 week Merchandise management 14, 15, 16

8 1 week Pricing in retailing 17

9 1 week Establishing and maintaining a retail image, and promotional strategy

18, 19

10 1 week Integrating and controlling the retail strategy 20

CONCLUDING REMARKS As always, we are extremely “hands on” in developing and maintaining all instructor materials and teaching resources. Please feel free to send us feedback regarding any aspect of Retail Management or its package. We promise to reply to any correspondence.

Sincerely,

Barry Berman (E-mail at [email protected]), Zarb School of Business, Hofstra University, Hempstead, NY 11549

Joel R. Evans (E-mail at [email protected]), Zarb School of Business, Hofstra University, Hempstead, NY, 11549

Patrali Chatterjee (E-mail at [email protected], Feliciano School of Business, Montclair State University, Montclair, NJ 07043

Global Edition Acknowledgments For their contributions to the content of the Global Edition, Pearson would like to thank Diane and Jon Sutherland, and for their feedback, Ronan Jouan de Kervenoael, Sabancı Üniversitesi; Hasan Gilani, University of Brighton; Khaled Haque; and Stephanie Phang, Tunku Abdul Rahman University College.

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Barry Berman Hofstra University

Joel R. Evans Hoftsra University

Patrali Chatterjee Montclair State University

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Welcome to Retail Management: A Strategic Approach, 13th edition. We hope you find the book is informative, timely, action-oriented, and reader-friendly. Visit our popular blog (www.bermanevansretail.com) for interactive, useful, up-to-date features that complement the text—including chapter hotlinks, a study guide, and much more!

In Part One, we explore the field of retailing, establishing and maintaining relationships, and the basic principles of strategic planning and the decisions made in owning or managing a retail business.

Chapter 1 describes retailing, shows why it should be studied, and examines its special characteristics. We note the value of strategic planning, including a detailed review of Home Depot (a titan of retailing). The retailing concept is presented, along with the total retail experience, customer service, and relationship retailing. The focus and format of the text are comprehensive. An appendix, “Understanding the Recent Economic Environment in the United States and Around the Globe,” appears at the end of this chapter.

Chapter 2 looks at the complexities of retailers’ relationships—with both customers and other channel members. We examine value and the value chain, customer relationships and channel relationships, the differences in relationship building between goods and service retailers, the impact of technology on retailing relationships, and the interplay between ethical performance and relationships in retailing. The chapter ends with an appendix on planning for the unique aspects of service retailing.

Chapter 3 shows the usefulness of strategic planning for all kinds of retailers. We focus on the planning process: situation analysis, objectives, identifying consumers, overall strategy, specific activities, control, and feedback. We also look at the controllable and uncontrollable parts of a retail strategy. Strategic planning is shown as a series of interrelated steps that are continuously reviewed. A detailed computerized strategic planning template, available at our Web site, is described. At the end of the chapter, there is an appendix on the strategic implications of global retailing.

Part 1

An Overview of Strategic Retail Management

Source: nasirkhan/Shutterstock. Reprinted by permission.

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22

1 An Introduction to Retailing

Chapter Objectives

1. To define retailing, consider it from various perspectives, demonstrate its impact, and note its special characteristics

2. To introduce the concept of strategic planning and apply it

3. To show why the retailing concept is the foundation of a successful business, with an emphasis on the total retail experience, customer service, and relationship retailing

4. To indicate the focus and format of the text

Source: iQoncept/Shutterstock. Reprinted by permission.

Digital technologies such as Web 2.0, social media, and mobile media have dramatically altered how businesses and consumers get information, make decisions, communicate, transact, and own versus share possessions around the world. In this always-connected, 24/7/365 competitive retailing landscape, consumers choose how, when, and where they want to interact with retailers. Retailers are expected to be proactive and adaptive in anticipating their consumers’ needs at the time and utilize an omnichannel approach to provide the customer with a seamless shopping experience, whether the customer is shopping online from a desktop or a mobile device, by telephone, or in a bricks-and-mortar store. Accordingly, in Retail Management: A Strategic Approach, we begin each chapter with a discussion of omnichannel perspectives relevant to the retailing topics in that chapter.

How do we distinguish between multichannel and omnichannel experiences? Multichannel retailing is associated with a retailer having separate channels—store and Web—as alternatives. A traditional multichannel retail environment has few linkages among these channel alternatives. Simply put, although shoppers can purchase an item through either channel, important linkages among channels may not exist. For example, consumers may not be able to view store inventories online, can be charged different prices in each channel, cannot arrange for store pickup on a Web order, may not return Web purchases to a local store, and a store and Web site can have separate customer databases.

In contrast, omnichannel retailing delivers a consistent, uninterrupted, and seamless brand experience regardless of channel or device (store, laptop computer, iPad, smartphone, etc.). Omnichannel retailing assumes that there are various shopping journey maps that use mobile, Web, and stores quite differently. As an example, product discovery can be Web or social- media–based, information search can use the Web or in-store observation, and consumers can purchase an item via a mobile device but seek to return it to a store. Omnichannel retailing is by nature seamless and integrated.

At www.bermanevansretail.com, we’ve set up a dynamic retailing blog with all sorts of interesting and current information—retailer links, career opportunities, news about the retail industry and individual retailers, and more. Check it out!

Many different kinds of retailers, both large and small, utilize multiple technologies, employ social and mobile media to communicate with customers, reinforce their images, introduce new locations and merchandise, sell products, run special promotions, and so much more.

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CHAPTER 1 • An InTRoduCTIon To RETAIlIng 23

overview Retailing encompasses the business activities involved in selling goods and services to consumers for their personal, family, or household use. It includes every sale to the final consumer— ranging from cars to apparel to meals at restaurants to movie tickets. Retailing is the last stage in the distribution process from supplier to consumer.

Today, retailing is at a complex crossroad. On the one hand, retail sales are at their highest point in history (despite a dip during the 2008–2010 “Great Recession”). Walmart is the lead- ing company in the world in terms of sales, but Amazon.com, predominately an online retailer with few physical stores as of this writing has an annual growth rate of 25 percent compared to 1 percent for Walmart.1 New technologies are improving retail productivity. There are many oppor- tunities to start a new retail business—or work for an existing one—and to become a franchisee. Global retailing possibilities abound, especially for pure-online retailers that can replicate their business models globally without the capital costs of store-based retailing.

On the other hand, retailers face numerous challenges. The rise of the U.S. dollar against major currencies in recent years has had a major impact on retailers, their suppliers, and con- sumers around the world. Many consumers are bored with shopping for products or do not have much time for it and are spending more for experiences. Some locales have too many stores, and retailers often spur one another into frequent price cutting (and low profit margins). Customer service expectations are high at a time when more retailers offer self-service, automated systems, and omnichannel ordering and pick-up services. Although online E-commerce accounts for only 7.1 percent of U.S. retail sales, today it is growing at a faster rate and displacing sales revenues at stores. Some retailers are still grappling with their omnichannel strategy in terms of capital and human resource investments for in-store versus digital formats; coordinating merchandising, pric- ing, and logistics across channels; and the relative emphasis to place on image enhancement, cus- tomer information and feedback, and sales transactions. The widespread proliferation of mobile and social media technologies has been difficult for many retailers to adapt to in their strategies all over the world. These are among the key issues that retailers must resolve:

How can we better serve our customers while earning a fair profit?

How can we stand out in a highly competitive environment where consumers have so many choices?

How can we better coordinate our merchandising, pricing, and service strategy across all our channels when costs, profit margins, and target segments differ across the channels?

How can we grow our business while retaining a core of loyal customers?

Retail decision makers can best address these questions by fully understanding and applying the basic principles of retailing in a well-structured, systematic, and focused retail strategy. That is the philosophy behind Retail Management: A Strategic Approach.

Can retailers flourish in today’s tough marketplace? You bet! Just look at your favorite restau- rant, gift shop, and food store. Look at the success of retailers such as Costco, Starbucks, L Brands (whose major brands include Victoria’s Secret and Bath & Body Works), and Amazon.com. What do they have in common? A desire to please the customer and a strong market niche. To prosper in the long term, they all need a strategic plan and a willingness to adapt—both central thrusts of this book. See Figure 1-1.

In this chapter, we look at the framework of retailing, the value of developing and applying a sound retail strategy, and the focus and format of the text. A special appendix at the end of this chapter examines the impact of the global economic environment on retailers in the United States and around the world.

THE FRAMEWORK OF RETAILING To appreciate the role of retailing and the range of retailing activities, let’s view it from three perspectives:

1. Suppose we manage a manufacturing firm that makes cosmetics. How should we sell these items? We could distribute via big chains such as Sephora or small neighborhood stores, have our own sales force visit people in their homes as Mary Kay does, or set up our own

Visit Amazon.com’s Web site (www.amazon.com) and see what drives one of the world’s “hot” retailers.

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24 PART 1 • An ovERvIEw of sTRATEgIC RETAIl mAnAgEmEnT

stores (if we have the ability and resources to do so). We could sponsor TV infomercials or magazine ads, complete with a toll-free phone number.

2. Suppose we have an idea for a new way to teach first-graders how to use computer software for spelling and vocabulary. How should we implement this idea? We could lease a store in a strip shopping center and run ads in a local paper, rent space in a local YMCA and rely on teacher referrals, or do mailings to parents and visit children in their homes. In each case, the service is offered “live.” But there is another option: We could use an animated Web site to teach children online.

3. Suppose that we, as consumers, want to buy apparel. What choices do we have? We could go to a department store or an apparel store. We could shop with a full-service retailer or a discount store. We could go to a shopping center or order from a catalog. We could patronize retailers that carry a wide range of clothing (from outerwear to jeans to suits) or firms that specialize in one clothing category (such as leather coats). We could surf the Web and visit retailers around the globe. We could also look at Facebook and see what other consumers are saying about various retailers.

There is a tendency to think of retailing as primarily involving the sale of tangible (physical) goods. However, retailing also includes the sale of services and digital goods. And this is a big part of retailing! A service may be the shopper’s primary purchase (such as a haircut) or it may be part of the shopper’s purchase of a good (such as furniture delivery). Sales in many physical goods—product categories such as books, movies, and music—are now dominated by their digi- tal applications in the format of downloads. Obviously, retailing does not have to involve a store. Mail and phone orders, direct selling to consumers in their homes and offices, Web transactions, kiosks, and vending machine sales all fall within the scope of retailing. In fact, retailing does not even have to include a “retailer.” Manufacturers, importers, nonprofit firms, wholesalers, and individual artisans on online platforms, such as Etsy.com, act as retailers when they sell to final consumers.

Let’s now examine various reasons for studying retailing and its special characteristics.

FIGURE 1-1 A Willingness to Adapt Is Essential for Retailers The most successful retailers over the long run are those which recognize that consumers and the marketplace are constantly evolving. They do research to get feedback and then act accordingly.

Source: iQoncept/ Shutterstock. Reprinted by permission.

Service businesses such as Jiffy Lube (www .jiffylube.com) are engaged in retailing.

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CHAPTER 1 • An InTRoduCTIon To RETAIlIng 25

Reasons for Studying Retailing Retailing is an important field to study because of its impact on the economy, its functions in dis- tribution, and its relationship with firms selling goods and services to retailers for their resale or use. These factors are discussed next. A fourth factor for students of retailing is the broad range of career opportunities, as highlighted with a “Careers in Retailing” box in each chapter, Appendix A at the end of this book, and our blog (www.bermanevansretail.com). See Figure 1-2.

THE IMPACT OF RETAILING ON THE ECONOMY Retailing is a major part of U.S. and world com- merce. Retail sales and employment are vital economic contributors, and retail trends often mirror trends in a nation’s overall economy.

According to the Department of Commerce, annual U.S. retail store sales in 2015 were $4.785 trillion—representing one-third of the total economy. During that year, more than one-fifth of the world’s retail sales occurred in the United States.2 The weighted-average share of retail E-commerce in overall U.S. retail sales has been steadily growing from 3.4 percent in 2007 to 7.1 percent in 2015.3 Share of online retail sales is slightly higher in Europe at 7.5 percent and highest in the Asia-Pacific region at 10.2 percent. Telephone and mail-order sales by nonstore retailers, vending machines, and direct selling generate hundreds of billions of dollars in additional yearly revenues. Personal expenditures on financial, medical, legal, educational, and other services account for another several hundred billion dollars in annual retail revenues.

Durable goods stores—including motor vehicles and parts dealers; furniture, home furnish- ings, electronics and appliance stores; and building materials and hardware stores—make up 30 percent of U.S. retail store sales. Nondurable goods and services stores—including general merchandise stores; food and beverage stores; health- and personal-care stores; gasoline sta- tions; clothing and accessories stores; sporting goods, hobby, book, and music stores; eating and drinking places; and miscellaneous retailers—together account for 70 percent of U.S. retail store sales.

The world’s 250 largest retailers generate more than $4.6 trillion in annual revenues. They represent 29 nations. Seventy-six of the largest 250 retailers are based in the United States, 28 in Japan, 17 in Germany, 16 in Great Britain, and 15 in France. Five of the 250 top retailers are nonstore retailers.4 The 10 largest retailers in the United States generate nearly one trillion dol- lars in annual domestic revenues and more than 1.2 trillion dollars in total worldwide sales. They operate over 32,000 U.S. stores. See Table 1-1. Visit our blog (www.bermanevansretail.com) for additional information on retailing.

Retailing is a major source of jobs. In the United States alone, 15 million people—about one- tenth of the total labor force—work for traditional retailers (including food and beverage service firms, such as restaurants). Yet this figure understates the true number of people who work in retailing because it does not include the several million persons employed by other service firms, seasonal employees, proprietors, and unreported workers in family businesses or partnerships.

FIGURE 1-2 Encouraging People to Consider a Career in Retailing To attract and retain high-quality, motivated workers, retailers should properly train them, empower them to be responsive to reasonable requests that may “break the rules” (without always having to ask the boss), and reward—and visibly recognize—superior performance. A key aspect of a meaningful reward system is an employee’s opportunities for upward mobility in terms of a better job and a bigger paycheck (promoting from within).

Source: Dusit/Shutterstock. Reprinted by permission.

Learn more about the exciting array of retailing career opportunities (www.allretailjobs.com).

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26 PART 1 • An ovERvIEw of sTRATEgIC RETAIl mAnAgEmEnT

Retailing is the largest private-sector employer in the United States. According to the National Retail Federation, anyone whose employment results in a consumer product—from those who supply raw materials to manufacturers to truck drivers who deliver goods—counts on retail for their livelihood. With 35 million stores and the vast number of suppliers, the retail industry is responsible for 42 million jobs, and $1.6 trillion in labor income, and it accounts for $2.6 trillion of the U.S. gross domestic product (GDP).5

From a cost perspective, retailing is a significant field of study. In the United States in 2015, on average, 36 cents of every dollar spent in department stores, 47 cents spent in women’s apparel stores, and 28 cents spent in pharmacies and drugstores go to the retailers to cover operating costs, activities performed, and profits. Costs include rent, displays, wages, ads, and maintenance. Only a small part of each dollar is profit. Profit margins in the retail sector vary. Whereas audio/video and consumer electronics stores have pre-tax profit margins of 4.2 percent, the pre-tax profit margins averaged 2.1 percent for department stores in 2015.6 In its fiscal year ending January 31, 2016, Walmart, the world’s largest retailer, had after-tax profits of 3.1 percent of sales.7 Figure 1-3 shows costs and profits for Walgreens Boots Alliance, an international drugstore chain.

The Occupational Outlook Handbook (www.bls.gov/ oco) is a great source of information on employment trends.

TABLE 1-1 The 10 Largest Retailers Based in the United States

Rank Company web Address major Retail Emphasis

2015 u.s. sales

(millions)

2015 number of u.s. stores

2015 worldwide

sales (millions)

1 Walmart www.walmart.com Full-line discount stores, supercenters, membership clubs

$353,108 5,182 $500,108

2 Kroger www.kroger.com Supermarkets, convenience stores, jewelry stores

103,878 3,747 103,878

3 Costco www.costco.com Membership clubs 83,545 476 116,671

4 Home Depot www.homedepot.com Home centers 79,297 1,965 88,621

5 Walgreen Boots Alliance

www.walgreens.com Drugstores 76,604 8,052 92,670

6 Target www.target.com Full-line discount stores, supercenters

73,226 1,774 73,226

7 CVS Health www.cvshealth.com Drugstores 72,151 9,659 73,546

8 Amazon.com www.amazon.com Web merchant 61,619 N/A 104,060

9 Albertsons www.albertsons.com Supermarkets, drugstores

58,443 2,311 58,443

10 Lowe’s www.lowes.com Home centers 57,486 1,805 59,051

Source: Based on material in David P. Schulz, “Stores Top 100 Retailers,” STORES Magazine (July 2016). Reprinted by permission Copyright 2016. STORES Magazine.

Two opposing human resources strategies in retailing are (1) limiting promotions to only those working within the firm ver- sus (2)  recruiting personnel from competing companies. The promote-from-within strategy reduces employee turnover, encourages employee loyalty, and develops specific career paths for current employees. It also minimizes the difficulty in training new employees on company policies.

The hire-from-outside strategy seeks the best person for the position regardless of employment history with the given retailer. This strategy encourages firms to adopt new ways of thinking and enables a retailer to attract personnel with skills and contacts developed at their prior firms.

Under what conditions should a retailer use the hire-from- outside strategy? How can a retailer using this strategy reduce the poor morale from existing staff?

CAREERs In RETAIlIng Hiring from within Versus Best Person for the Job

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CHAPTER 1 • An InTRoduCTIon To RETAIlIng 27

RETAIL FUNCTIONS IN DISTRIBUTION Retailing is the last stage in a channel of distribution—all the businesses and people involved in the physical movement and transfer of ownership of goods and services from producer to consumer. A typical distribution channel is shown in Figure 1-4. Retailers often act as the contact between manufacturers, wholesalers, and the consumer. Many manufacturers would like to make one basic type of item and sell their entire inventory to as few buyers as possible, but consumers usually want to choose from a variety of goods and services and purchase a limited quantity. Retailers collect an assortment from various sources, buy in large quantity, and sell in small amounts. This is the sorting process. See Figure 1-5.

Another job for retailers is communicating both with customers and with manufacturers and wholesalers. Shoppers learn about the availability and characteristics of goods and services, store hours, sales, and so on from retailer ads, salespeople, and displays. Manufacturers and wholesalers are informed by their retailers with regard to sales forecasts, delivery delays, customer complaints, defective items, inventory turnover, and more. Many goods and services have been modified due to retailer feedback.

For small suppliers, retailers can provide assistance by transporting, storing, marking, adver- tising, and pre-paying for products. Small retailers may need the same type of help from their suppliers. The tasks performed by retailers affect the percentage of each sales dollar they need to cover costs and profits.

Retailers also complete transactions with customers. This means having convenient loca- tions, filling orders promptly and accurately, and processing credit purchases. Some retailers also provide customer services such as gift wrapping, delivery, and installation. To make themselves even more appealing, many firms now engage in omnichannel retailing, whereby a retailer sells to consumers through multiple retail formats (points of contact). Most large retailers operate both physical stores and Web sites to make shopping easier and to accommodate consumer desires. Some firms provide information and sell to customers through multiple touch points: retail stores, mail order, Web sites, tablets, smartphones, and a toll-free phone number. See Figure 1-6.

For these reasons, products are usually sold through retailers not owned by manufacturers (wholesalers). This lets the manufacturers reach more customers, reduce costs, improve cash flow, increase sales more rapidly, and focus on their area of expertise. Select manufacturers, such

Sherwin-Williams (www .sherwin-williams.com) is not only a manufacturer but also a retailer.

FIGURE 1-3 The High Costs and Low Profits of Retailing— Where the Typical $100 Spent with Walgreens Boots Alliance Goes

Source: Computed and estimated by the authors from Walgreens Boots Alliance 2016 Reports.

$21.87$73.92 $0.79 $3.42

Manufacturer’s costs and profits

Retailer’s operating, personnel, advertising, and other costs

Retailer’s income taxes

Retailer’s after-tax profits

FIGURE 1-4 A Typical Channel of Distribution Manufacturer Wholesaler Retailer Finalconsumer

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28 PART 1 • An ovERvIEw of sTRATEgIC RETAIl mAnAgEmEnT

as Sherwin-Williams, Coach, and Nike, operate retail facilities (besides selling at independent retailers). In running their stores, these firms complete the full range of retailing functions and compete with conventional retailers.

THE RELATIONSHIPS AMONG RETAILERS AND THEIR SUPPLIERS Relationships among retailers and suppliers can be complex. Because retailers are part of a distribution channel, manufacturers and wholesalers must be concerned about the caliber of displays, customer service, store hours, and retailers’ reliability as business partners. Retailers are also major customers of goods and services for resale, store fixtures, computers, management consulting, and insurance.

These are some issues over which retailers and their suppliers have different priorities: control over the distribution channel, profit allocation, the number of competing retailers handling suppli- ers’ products, product displays, promotion support, payment terms, and operating flexibility. Due to the growth of large chains, retailers have more power than ever. Unless suppliers know retailer needs, they cannot have good rapport with them; so long as retailers have a choice of suppliers, they will choose those offering more.

FIGURE 1-5 The Retailer’s Role in the Sorting Process Wholesaler

Wholesaler Retailer

Wholesaler

Manufacturer Brand A

Brand C customers

Brand D customers

Brand E customers

Brand F customers

Brand B customers

Brand A customers

Manufacturer Brand B

Manufacturer Brand C

Manufacturer Brand D

Manufacturer Brand E

Manufacturer Brand F

FIGURE 1-6 The Multiple Retail Channels of WOM (World of Music) WOM (World of Music) is a German-based retailer with physical facilities and a strong online presence https://wom.de/?lang=en). It offers many genres of music CDs and DVDs, movies, books, games, sheet music, and more—and even ships to the United States.

Source: Jules Selmes/Pearson Education Ltd. Reprinted by permission.

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CHAPTER 1 • An InTRoduCTIon To RETAIlIng 29

Channel relations tend to be smoothest with exclusive distribution, whereby suppliers make agreements with one or a few retailers that designate the latter as the only ones in specified geo- graphic areas to carry certain brands or products. This stimulates both parties to work together to maintain an image, assign shelf space, allot profits and costs, and advertise. It also usually requires that retailers limit their brand selection in the specified product lines; they might have to decline to handle other suppliers’ brands. From the manufacturers’ perspective, exclusive distribution may limit their long-run total sales.

Channel relations tend to be most volatile with intensive distribution, whereby suppliers sell through as many retailers as possible. This often maximizes suppliers’ sales and lets retailers offer many brands and product versions. Competition among retailers selling the same items is high; retailers may use tactics not beneficial to individual suppliers, because they are more concerned about their own results. Retailers may assign little space to specific brands, set very high prices on them, and not advertise them.

With selective distribution, suppliers sell through a moderate number of retailers. This com- bines aspects of exclusive and intensive distribution. Suppliers have higher sales than in exclusive distribution, and retailers carry some competing brands. It encourages suppliers to provide some marketing support and retailers to give adequate shelf space. See Figure 1-7.

The Special Characteristics of Retailing Three factors that most differentiate retailing from other types of business are noted in Figure 1-8 and discussed here. Each factor imposes unique requirements on retail firms.

The average amount of a sales transaction for retailers is much less than for manufacturers. The average sales per customer transaction in retailing is low. The average supermarket transaction is about $30.00.8 In comparison, Home Depot’s average sales transaction in 2015 was $58.55.9 The average sales transaction per shopping trip is well under $100 for department stores and specialty stores. This low amount creates a need to tightly control the costs associated with each transaction (such as credit verification, sales personnel, and bagging); to maximize the number of customers drawn to the retailer, which may place more emphasis on ads and special promotions; and to increase impulse sales by more aggressive selling. However, cost control can be tough. For instance, inventory management is often expensive due to the many small transactions to a large number of customers. A typical supermarket has several thousand customer transactions per week, which makes it harder to find the proper in-stock level and product selection. Thus, retailers are expanding their use of computerized inventory systems.

FIGURE 1-7 Comparing Exclusive, Intensive, and Selective Distribution

Number of retailers

Lowest

Medium

Highest

Exclusive Distribution

Intensive Distribution

Selective Distribution

Potential for conflict

Support from supplier (retailer)

Supplier’s sales

Retailer’s brand selection

Product (retailer) image

Competition among retailers

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Final consumers make many unplanned or impulse purchases. Surveys show that a large percentage of consumers do not look at ads before shopping, do not prepare shopping lists (or do deviate from the lists once in stores), and make fully unplanned purchases. This behavior indicates the value of in-store displays, attractive store layouts, and well-organized stores, catalogs, and Web sites. Candy, cosmetics, snack foods, magazines, and other items are sold as impulse goods when placed in visible, high-traffic areas in a store, catalog, or Web site. Because so many purchases are unplanned, the retailer’s ability to forecast, budget, order merchandise, and have sufficient personnel on the selling floor is more difficult.

Despite the inroads made by nonstore retailers, most retail transactions (more than 90 percent) are still conducted in stores—and will continue to be in the future. Many people like to shop in person; want to touch, smell, and/or try on products; enjoy browsing for unplanned purchases; feel more comfortable taking a purchase home with them than waiting for a delivery; and desire privacy while at home. This store-based shopping orientation has implications for retailers; they must work to attract shoppers to stores and consider such factors as store location, transportation, store hours, proximity of competitors, product selection, parking, and ads.

THE IMPORTANCE OF DEVELOPING AND APPLYING A RETAIL STRATEGY A retail strategy is the overall plan guiding a retail firm. It influences the firm’s business activities and its response to market forces, such as competition and the economy. Any retailer, regardless of size or type, should utilize these six steps in strategic planning:

1. Define the type of business in terms of the goods or service category and the company’s specific orientation (such as full service or “no frills”).

2. Set long-run and short-run objectives for sales and profit, market share, image, and so on.

FIGURE 1-8 Special Characteristics Affecting Retailers

Small average sale Impulse purchases

Popularity of stores

Retailer’s strategy

Macy’s (www.macys .com) has a Web site to accompany its traditional stores and catalogs.

UK-based Debenhams has 248 department stores in 28 coun- tries. It is actively looking to expand its overseas business to around 30 percent of its total business. It is achieving this through a combination of franchise expansion, enhanced distribution, and online sales. Debenhams opened its largest global franchise store in Abu Dhabi and its largest-ever store in Moscow. In 2016, Debenhams focused on the Australian and

Vietnamese markets. In Australia, they partnered with Pepkor and in Vietnam with VinDS. Debenhams is targeting key markets in Northern Europe, Central Europe, the Middle East, and the Far East.

Identify examples of large or emerging markets in your region that are either weak or under-represented in terms of department stores. Identify likely franchise partners.

RETAIlIng ARound THE woRld

Debenhams Goes East: The Continuing Expansion of the UK Department Store Retailer

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CHAPTER 1 • An InTRoduCTIon To RETAIlIng 31

3. Determine the customer market to target on the basis of its characteristics (such as gender and income level) and needs (such as product and brand preferences).

4. Devise an overall, long-run plan that gives general direction to the firm and its employees. 5. Implement an integrated strategy that combines such factors as store location, product assort-

ment, pricing, and advertising and displays to achieve objectives. 6. Regularly evaluate performance and correct weaknesses or problems when observed.

To illustrate these points, the background and strategy of the Home Depot Corporation—one of the world’s foremost retailers—are presented. Then the retailing concept is explained and applied.

The Home Depot Corporation: Successfully Navigating the Omnichannel Landscape10

COMPANY BACKGROUND Home Depot is the world’s largest home improvement retail chain and the ninth largest retailer globally in terms of revenues. It was established in 1978 by Bernie Marcus (a pharmacist by training), Arthur Blank (educated as an accountant), Ken Langone (an investment banker), and Pat Farrah (who had a merchandising background). The first two Home Depot stores opened on June 22, 1979, in Atlanta, Georgia, with the vision of “one-stop shopping for the do-it-yourselfer.” Today, Home Depot operates nearly 2,275 stores with over 370,000 employees in the United States, Canada, Mexico, Puerto Rico, Virgin Islands, and Guam—as well as an online business.

Home Depot targets the do-it-yourself (DIY) and professional contractor markets with its selection of 40,000 to 600,000 SKUs (stock-keeping units, or machine-readable barcodes), includ- ing lumber, flooring, plumbing supplies, garden products, tools, paint, and appliances. Home Depot also offers installation services for carpeting, cabinetry, and other products. The Home Depot went public in 1981, experienced tremendous growth in the 1980s and 1990s, and celebrated the opening of its 100th store in 1989. One-third of Home Depot’s total sales in FY 2016 came from California, Florida, New York, and Texas.

Home Depot seeks to provide excellent customer service through consistent high-quality products, customer service, and competitive pricing. Accordingly, every customer has a bill of rights at Home Depot, and this entitles the customer to the right assortment, quantities, and prices, along with trained associates on the sales floor who want to take care of customers. Home Depot’s vision is driven by a set of eight core values: excellent customer service, building strong relation- ships, taking care of its employees, giving back, doing the “right” thing, creating shareholder value, respecting all people, and exhibiting entrepreneurial spirit.

THE HOME DEPOT CORPORATION’S STRATEGY: KEYS TO SUCCESS Throughout its existence, Home Depot has adhered to a consistent, far-sighted, customer-oriented strategy—one that has paved the way for its long-term achievements.

GROWTH STRATEGY Home Depot’s current strategy of product authority (continually analyzing customer data to better understand consumer preferences), providing a seamless and friction-free experience no matter where customers shop, and investing to build a best-in-class supply chain network support its dominant position in its industry. Disciplined capital allocation, continuous optimization of productivity, and efficient operations allow Home Depot to lower its operating costs and increase shareholder wealth.

Although the company operates in markets that are highly competitive in terms of customer service, store location, price, and quality, Home Depot has the resources to compete on the basis of price, service, and product variety. Competitors include major chains such as Lowe’s, Menard, True Value, Ace Hardware, and numerous local retailers. It also faces competition from pure- online retailers—for example, Amazon—as it moves into adjacent product categories in its quest for growth.

TARGETED APPEAL TO MULTIPLE SEGMENTS Home Depot serves three major market segments:

1. Do-it-yourself customers are mostly homeowners and end-users who purchase products to complete their projects and repairs by themselves.

2. Do-it-for-me customers are homeowners who purchase their products and hire a third party to complete their repairs and projects. To these customers, Home Depot is able to offer installa- tion programs and design services on carpets, countertops, home appliances, and many others.

See the target marketing approach of Home Depot (www.homedepot.com).

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32 PART 1 • An ovERvIEw of sTRATEgIC RETAIl mAnAgEmEnT

3. Professional customers are general contractors, repair people, and small business owners. To these customers, Home Depot offers value-added services such as dedicated staff, des- ignated parking, and bulk pricing. This segment accounts for one-third of sales revenues and represents a more recurring and larger sales opportunity compared to the first two retail customer segments.

DISTINCTIVE COMPANY IMAGE Home Depot communicates its vision and image as a one-stop shopping experience for the do-it-yourselfer through the extensive width and depth of its product portfolio and its store size. Its first stores in Atlanta, Georgia, at around 60,000 square feet each, were cavernous warehouses that dwarfed the competition and stocked 25,000 SKUs (much more than the average hardware store at that time). Empty boxes piled high on the shelves gave the illusion of even more depth in inventory. Although Home Depot still leverages its store size as a competitive advantage, it is losing its importance in the omnichannel marketplace. Stores of various sizes are continuously redesigned to allow customers to interact more with products and to allow the chain to more efficiently stock products.

“Big Orange” is the nickname by which Home Depot is known all over the world. The bright orange logo was inspired by crates used to transport freight, keeping in line with the “depot” theme. Stamped at an upright angle to symbolize success and in bright orange to help simulate activity, the logo appears on signs, equipment, and employee aprons. The Home Depot introduced the slogan “More saving. More doing” in the March 18, 2009, circular, replacing “You can do it. We can help” which had been used since 2003. Another slogan used in the past 25 years is “The Home Depot, Low prices are just the beginning” in the early 1990s. The company advertises through TV, flyers, radio, online, and social and mobile media.

STRONG CUSTOMER SERVICE FOR ITS RETAIL CATEGORY Home Depot’s philosophy of customer service—“whatever it takes”—means cultivating a relationship with customers rather than merely completing a transaction. The founders define themselves to be “in the people business.” From the start, associates offered excellent customer service, guiding customers through projects. After undergoing rigorous product knowledge training, store associates began offering clinics so cus- tomers could learn how to do it themselves. The Home Depot revolutionized the home improve- ment industry by bringing the know-how and the tools to the consumer, thus empowering them and saving them money.

MULTIPLE POINTS OF CONTACT Home Depot reaches its customers through extensive advertis- ing, stores in 49 states, a toll-free telephone service center (open 7 days a week, 17 hours a day), a Web site, and the use of Facebook, Twitter, LinkedIn, Pinterest, and other social-media sites. The retailer has applied the same customer service philosophy to its multichannel initiatives. The E-commerce channel is an increasingly vital sales driver for Home Depot, accounting for nearly 7.2 percent of overall sales revenues. Despite the many advantages of Web-only sales, Home Depot was early in recognizing that brick-and-mortar stores play a vital role in driving conver- sion rates. Stores often double as fulfillment centers. About 40 percent of Web site (homedepot .com) orders are fulfilled through its stores. Millions of deliveries are made from stores each year.

Three multichannel programs enable Home Depot to effectively leverage its store network: buy online, ship to store (BOSS); buy online, pick up in store (BOPIS); and buy online, return in store (BORIS). These omnichannel initiatives enable quicker order pickups and returns, reduce customer time, and save on storage and costs. Its fastest growing E-commerce channel is BOPIS. E-commerce sales also have a higher average ticket size than the average $55 to $65 in-store pur- chases, and a higher percentage of BOPIS sales also tends to improve store productivity metrics. Orders placed online and delivered to a purchaser’s home have the largest average ticket size because these orders typically consist of bulkier items that cannot be picked up in the store and are far more costly than smaller items typically purchased in a store.

EMPLOYEE RELATIONS Home Depot employed 385,000 associates as of the beginning of 2016. Employees are expected to share the same vision as Home Depot. Employees are provided with many in-house workshops, such as “customers-first” training program and company-sponsored programs, to give associates a better understanding of their products and services. Home Depot believes its employees are satisfied with the compensation and offers employees the opportunity to purchase stock options at a discounted price. Employees are also eligible for medical, dental, vision, and life insurance—depending on their status and tenure at the company.

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CHAPTER 1 • An InTRoduCTIon To RETAIlIng 33

INNOVATION The home improvement industry experiences continuous innovation. Home Depot introduces new products and services, such as 3D printing, thus allowing it to adapt to the change in equipment and consumer preferences. Home Depot’s focus on solving customer problems has been a source of innovation and strategic movement into adjacent markets for services by provid- ing design and installation services for its products as well as third-party resellers, equipment rental (e.g., carpet cleaning, small trucks to transport equipment), and home inspection products (water, air quality and radiation).

Home Depot collaborates with new and existing manufacturers to enable it to be a one- stop-shopping destination for home improvement products. It recently broadened the number of brands it offers in its appliances department by including Whirlpool, Frigidaire, and Electrolux. Additionally, it also introduced innovative new products to its DIY and professional customers in most of its departments.

COMMITMENT TO TECHNOLOGY Home Depot has consistently invested in backend, as well as customer-interactive, technologies. It currently operates 18 remote distribution centers in the United States, and 33 bulk distribution centers within the United States, Canada, and Mexico. The company continuously updates its distribution centers through building logistic competencies and improving its inventory management system. Over the past few years, Home Depot has centralized its inventory planning and implemented new forecasting technology. Currently, 91 percent of its U.S. store products are ordered through a central replenishment system and it hopes to increase the number in the coming years.

Home Depot is successfully implementing three multiyear internal initiatives: (1)  ProjectSync—a major supply chain synchronization to reduce average lead time from supplier to shelf; (2) COM— Home Depot’s order management platform, which provides greater visibility into and improved execution of special orders for a more seamless and friction-free experience for customers; and (3) FIRST phones—in-store mobile enablement for inventory management, product look-up, and business analytics. It even offers line-busting features to speed up checkout for associates and customers.

COMMUNITY INVOLVEMENT Home Depot believes in creating shareholder value while being responsible and balancing the needs of its communities. Through The Home Depot Foundation, community impact grants, and associates’ volunteer time, the retailer strives to have a positive impact on communities in the United States, Canada, and Mexico. It invites community partici- pation in practical and educational programs in stores that benefit children and adults. The com- mitment to environmental sustainability is demonstrated through its sale of energy-efficient and sustainable products, recycling practices, and business principles. Home Depot promotes an envi- ronmentally friendly atmosphere by protecting its employees’ health and safety requirements. It has also created a supplier social responsibility program intended to ensure that suppliers observe a high standard of social responsibility.

ADAPTATION TO A GLOBAL, OMNICHANNEL WORLD Due to the difficult economic, political, and social conditions in recent years, even outstanding retailers, such as Home Depot, have been affected. In 2012, Home Depot closed all seven of its stores in China.

The company outsources some of its products from third-party manufacturers in third-world countries with unstable political environments. It may be exposed to trade embargos, increases in tariff rates, different tax regulations, and double taxation by the countries that do not have respec- tive treaties in place to avoid double taxes. Yet, many governments in these countries may have incentive programs applicable for Home Depot as an employer of local labor.

Home Depot has capitalized on the digitization in retailing by enabling a secure multichannel shopping experience—mobile, in-store, at home, or even on the job site. Its global sales revenues have grown substantially to almost $89 billion in fiscal 2016, and its operating income increased by 12 percent from the prior year to reach $11.8 billion. Home Depot’s performance was boosted by the demand for home improvement products, a better housing market, and rising consumer employment.

Growth in the number of big-ticket transactions boosted sales. The company’s multiyear productivity enhancement plan also provided some profitability upside. The Home Depot has been one of the best-performing stocks in the consumer discretionary sector and the Dow Jones Indus- trial Average over the past five years. The stock returned an annualized average of 28.5 percent— almost three times that provided by the S&P 500 Index’s 9.6 percent over the same period.

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Although the strong U.S. dollar affected Home Depot’s sales growth in the Canadian and Mexican markets, they account for 10 percent of overall sales and are less significant. CEO Craig Menear has ambitious goals for FY 2018; his target is $101 billion in sales, with a 14.5 percent operating margin and a 35 percent return on invested capital. In 2015, Home Depot acquired Inter- line Brands, whose product portfolio of home repair and maintenance products is complementary to Home Depot’s offerings in home remodeling products and is largely viewed as a good strate- gic fit. Home Depot expects additional revenue from existing customers’ purchase of repair and maintenance products, which are recurring purchases, and a sales upside from Interline Brands’ customer base, which will get a tremendous boost from Home Depot’s E-commerce capabilities.

The Retailing Concept As just described, Home Depot has a sincere long-term desire to please customers. It uses a customer-centered, chainwide approach to strategy development and implementation, is value- driven, and has clear goals. Together, these four principles form the retailing concept (depicted in Figure 1-9), which should be understood and applied by all retailers:

1. Customer orientation. The retailer determines the attributes and needs of its customers and endeavors to satisfy these needs to the fullest.

2. Coordinated effort. The retailer integrates all plans and activities to maximize efficiency. 3. Value driven. The retailer offers good value to customers, whether it be upscale or discount.

This means having prices appropriate for the level of products and customer service. 4. Goal orientation. The retailer sets goals and then uses its strategy to attain them.

Unfortunately, this concept is not grasped by every retailer. Some are indifferent to customer needs, plan haphazardly, have prices that do not reflect the value offered, and have unclear goals. Some are not receptive to change, or they blindly follow strategies enacted by competitors. Some do not get feedback from customers; they rely on supplier reports or their own past sales trends.

FIGURE 1-9 Applying the Retailing Concept

Customer orientation

Coordinated e�ort

Goal orientation

Retailing concept

Retail strategy

Value-driven

Suppose a large supermarket chain is revising its approach regarding environmental sustainability. Hallmarks of the new strategy are to encourage customers to purchase reusable plastic shopping bags (available at cost at all registers); to use high-efficiency lighting, heating, and air-conditioning systems; and to reformulate its private-label products to have minimal negative environmental impact (such as selling grains and nuts via bins instead of prepackaged bottles). The chain plans to heavily promote this strategy via in-store displays, through its

Web site, and in its freestanding inserts that are distributed by local newspapers.

Aside from the positive societal impact, the store sees sev- eral advantages to this strategy. One, it will appeal to shoppers concerned with environmental responsibility. Two, this environ- mental strategy can position the store favorably with respect to competition. And three, the societal strategy is an excellent way to reposition its private-label products versus national brands.

Discuss additional pros and cons of this strategy.

ETHICs In RETAIlIng Environmental Sustainability

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CHAPTER 1 • An InTRoduCTIon To RETAIlIng 35

The retailing concept is straightforward. It means communicating with shoppers and view- ing their desires as critical to the firm’s success; having a consistent strategy (such as offering designer brands, plentiful sales personnel, attractive displays, and above-average prices in an upscale store); offering prices perceived as “fair” (a good value for the money) by customers; and working to achieve meaningful, specific, and reachable goals. However, the retailing concept is only a strategic guide. It does not deal with a firm’s internal capabilities or competitive advantages but offers a broad planning framework.

Let’s look at three issues that relate to a retailer’s performance in terms of the retailing con- cept: the total retail experience, customer service, and relationship retailing.

THE TOTAL RETAIL EXPERIENCE The rapid adoption of E-commerce and the proliferation of smart mobile devices makes it seem possible to purchase anything, anytime, and have it delivered anywhere. Such thinking has fundamentally changed consumers’ shopping habits and expecta- tions. Almost every customer encounters a total retail experience in his or her retail journey. Imagine using a mobile app to purchase a refrigerator while attending a ball game. By the time you get home, the refrigerator has been scheduled for delivery. Everything, from the activation of the mobile app to receiving the purchase at home, plays a role in the customer’s total retail experience.

Most retailers are aware that price has been, and always will be, a key motivator in shopping behavior. It is important for retailers to remember, however, that they must provide an appropriate customer experience at every touchpoint with the customer to sustain her or his continued loyalty. More than ever, shopping is about how to “engage” the customer and how the shopping experience makes the customer feel. It is also about driving customer engagement in new and different ways to deliver relevant experiences that customers can share with others on social media. The shift in consumer expectations is compelling retailers to look at aspects of “who” as opposed to “what” they want to be—the competition is now for share of lifetime spending, as opposed to share of wallet.11 Retailers with genuine character and interest in listening to and solving their customers’ needs, core values, and concern for community are likely to profit the most.

The total retail experience includes all the elements in a retail offering that encourage or inhibit consumers during their contact or journey with a retailer. See Figure 1-10. Many ele- ments, such as the number of salespeople, displays, prices, brand names, mobile app or Web page design, accurate product and pricing information, and inventory on hand, are controllable by a retailer. Others, such as the adequacy of parking, the speed of a consumer’s Internet con- nection, and sales taxes, are not. If some part of the total retail experience is unsatisfactory,

FIGURE 1-10 Creating a Unique Shopping Experience At this Hong Kong shopping center, an exciting and distinctive customer experience was formed by featuring an enormous dinosaur skeleton in the middle of the shopping center.

Source: Cheuk-king Lo/ Pearson Education Ltd. Reprinted by permission.

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36 PART 1 • An ovERvIEw of sTRATEgIC RETAIl mAnAgEmEnT

consumers may be “turned off” and not make a purchase—they may even decide not to patron- ize a retailer again if they attribute the failure to be controllable by the retailer. Given the widespread use of mobile devices in-store and the propensity to share information, one bad retail experience can be quickly shared with many other current and potential consumers via social media.

In planning its strategy, a retailer must be sure that all strategic elements are in place. For the shopper segment to which it appeals, the total retail experience must be aimed at fulfilling that segment’s expectations. A discounter should have ample stock on hand when it runs sales but not plush carpeting; a full-service store should have superior personnel but not personnel who are perceived as haughty by customers. Various retailers have not learned this lesson, which is why some theme restaurants are in trouble. The novelty has worn off, and many people believe the food is only fair while prices are high.

A big challenge for retailers is generating customer “excitement” because many people are bored with shopping or have little time for it. For example, Build-A-Bear Workshop is the leading and only global company that offers an interactive make-your-own stuffed animal retail- entertainment experience. The company currently operates more than 400 Build-A-Bear Workshop stores worldwide, including company-owned stores in the United States, Puerto Rico, Canada, Great Britain, and Ireland, and franchise stores in Europe, Asia, Australia, Africa, Mexico, and the Middle East.

Since 2007, the interactive experience has been enhanced—all the way to CyBEAR® space— with the launch of Bearville.com, its entertainment destination and virtual world. In September 2015, Build-A-Bear Workshop launched a new store format and brand refresh as a “multigenera- tional” brand for millennial parents who first engaged with Build-A-Bear Workshop when they were children.

Guests who visit a Build-A-Bear Workshop store still enter a recognizable and distinctive teddy-bear–themed environment consisting of eight stuffed animal-making stations: Choose Me, Hear Me, Stuff Me, Stitch Me, Fluff Me, Dress Me, Name Me, and Take Me Home. Store associ- ates, known as Master Bear Builder associates, can share the experience with guests at each phase of the bear-making process or they can do it for the guests.12 In addition, guests can enjoy the brand’s “play beyond the plush” with entertainment offerings such as the Bearville Alive YouTube channel, which features original video content and the launch of mobile apps tied to complemen- tary products (an enterprise-selling solution), and creates the memories with their friends and family that they can share through social media.13

CUSTOMER SERVICE Customer service refers to the identifiable, but sometimes intangible, activi- ties undertaken by a retailer in conjunction with the basic goods and services it sells. It has a strong impact on the total retail experience. Among the factors comprising a customer service strategy are store hours, parking, shopper-friendly store layout, credit acceptance, helpful salespeople, ameni- ties such as gift wrapping, clean restrooms, reasonable delivery policies, the time shoppers spend in checkout lines, and customer follow-up. This list is not all-inclusive, and it differs in terms of the retail strategy undertaken. Customer service is discussed further in Chapter 2.

Satisfaction with customer service is affected by expectations (based on the type of retailer) and past experience. People’s assessment of customer service depends on their perceptions—not necessarily reality; different people may evaluate the same service quite differently. The same person may even rate a firm’s customer service differently over time due to its intangibility, although the service stays constant. Interestingly, despite a desire to provide excellent customer service, a number of outstanding retailers now wonder if “the customer is always right.” Are there limits?

RELATIONSHIP RETAILING The best retailers know it is in their interest to engage in relationship retailing, whereby they seek to establish and maintain long-term bonds with customers, rather than act as if each sales transaction is a completely new encounter. This means concentrating on the total retail experience, monitoring satisfaction with customer service, and staying in touch with customers. Figure 1-11 shows a customer respect checklist that retailers could use to assess their relationship efforts.

To be effective in relationship retailing, a firm should keep two points in mind. First, it is harder to lure new customers than to make existing ones happy; a “win–win” approach is critical. For a retailer to “win” in the long run (attract shoppers, make sales, earn profits), the customer

Build-A-Bear Workshop (www.buildabear.com) even offers a great online shopping experience.

At Lands’ End (www .landsend.com), customer service means “Guaranteed. Period.”

As do the retailers profiled in this book, we want to engage in relationship retailing. So please visit our blog (www.bermanevansretail .com).

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FIGURE 1-11 A Customer Respect Checklist

When interacting with customers, do employees always say “How may I help you,” “Please,” and “Thank you”?

Are employees properly trained to service the retailer’s customers?

Do employees listen carefully when customers state their preferences and not push goods and services that are beyond the shoppers’ interest or budget?

Are employees patient and not condescending when talking to customers?

Is the customer’s time valued?

Do the hours that the retailer is open correspond with the hours sought by customers?

Do the retailer and its employees honor all promises that are made to customers—and strive not to mislead shoppers?

Do employees avoid being confrontational with customers if the latter make a complaint about merchandise or service?

Are customer phone calls, E-mails, and other contacts with the retailer directed to the right employees and handled promptly?

For a retailer that operates both store and online businesses, are policies clearly stated and distinctions between the two formats with regard to purchase, shipping, and return policies noted in the store and online?

Does the retailer monitor online customer reviews and social media discussions and work to resolve any problems that are noted there?

Does the retailer treat every customer respectfully, regardless of age, gender, race, ethnicity, and other factors?

Does the retailer recognize and reward its most loyal customers?

Does the retailer’s employee review process include how well the employees are rated by customers?

must also “win” in the short run (receive good value, be treated with respect, feel welcome by the firm). Otherwise, that retailer loses (shoppers patronize competitors) and those customers lose (by spending time and money to learn about other retailers). Second, due to advances in computer technology, it is now much easier to develop a customer database with information on people’s attributes and past shopping behavior. Ongoing customer contact can be better, more frequent, and more focused. This topic is covered further in Chapter 2.

Newer technologies such as GPS navigation, Global System for Mobiles (GSM), Bluetooth, and RFID tracking now enable retailers to track the exact location of a customer. “Geofencing” technol- ogy works outside the store, whereas “iBeacons” allow retailers to target a customer within a store.

The various advantages to a retailer that uses these technolo- gies are plentiful. From a promotional perspective, a retailer can send a mobile coupon valid for three hours to a lapsed customer

who had not purchased an item within 30 days. With iBeacons, customers receive targeted information based on their aisle posi- tion in a store. Thus, a shopper could receive a mobile coupon for a cereal brand when in the cereal aisle. Unlike traditional coupons that must be clipped and returned; mobile coupons can be scanned from smartphones.

Discuss three other retailer uses of location-sensitive technology-based promotions.

Generating Location-Sensitive OffersTECHnologY In RETAIlIng

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38 PART 1 • An ovERvIEw of sTRATEgIC RETAIl mAnAgEmEnT

THE FOCUS AND FORMAT OF THE TEXT There are various approaches to the study of retailing: an institutional approach, which describes the types of retailers and their development; a functional approach, which concentrates on the activities that retailers perform (such as buying, pricing, and personnel practices); and a strate- gic approach, which centers on defining the retail business, setting objectives, appealing to an appropriate customer market, developing an overall plan, implementing an integrated strategy, and regularly reviewing operations.

We will study retailing from each perspective but will focus on a strategic approach. Our basic premise is that the retailer has to plan for and adapt to a complex, changing environment. Opportunities as well as threats must be considered. By engaging in strategic retail management, the retailer is encouraged to study competitors, suppliers, economic factors, consumer changes, marketplace trends, legal restrictions, and other issues. A firm prospers if its competitive strengths match the opportunities in the environment, weaknesses are eliminated or minimized, and plans look to the future (as well as the past). Refer to the appendix at the end of this chapter; it examines the impact of the current economic situation on retailers and consumers alike.

Retail Management: A Strategic Approach is divided into eight parts. The rest of Part One looks at building relationships and strategic planning in retailing. Part Two examines retailing institutions on the basis of their ownership; store-based strategy mix; and Web, nonstore- based, and other nontraditional retailing formats. Part Three deals with consumer behavior and information gathering in retailing. Parts Four through Seven discuss the specific elements of a retailing strategy: planning the store location; managing a retail business; planning, handling, and pricing merchandise; and communicating with the customer. Part Eight shows how a retailing strategy may be integrated, analyzed, and improved. These topics have special end-of-chapter appendices: the impact of the economy (Chapter 1), service retailing (Chapter 2), global retailing (Chapter 3), franchising (Chapter 4), and multichannel retailing (Chapter 6). There is also an end- of-text appendix on retailing careers and a glossary.

To underscore retailing’s exciting nature, four real-world boxes appear in each chapter: “Careers in Retailing,” “Ethics in Retailing,” “Retailing Around the World,” and “Technology in Retailing.”

In this and every chapter, the summary is related to the objectives stated at the beginning of the chapter.

1. To define retailing, consider it from various perspec- tives, demonstrate its impact, and note its special char- acteristics. Retailing comprises the business activities involved in selling goods and services to consumers for personal, family, or household use. It is the last stage in the distribution process. Today, retailing is at a complex crossroad, with many challenges ahead.

Retailing may be viewed from multiple perspectives. It includes tangible and intangible items, does not have to involve a store, and can be done by manufacturers and others—as well as retailers.

Annual U.S. store sales are approaching $5 trillion, with other forms of retailing accounting for hundreds of billions of dollars more. The world’s 250 largest retailers account for more than $4.6 trillion in yearly revenues. About 15 million people in the United States work for retailers (including food and beverage service

firms), which understates the number of those actually employed in a retailing capacity. Retail firms receive up to 40 cents or more of every sales dollar as compensa- tion for operating costs, the functions performed, and the profits earned.

Retailing encompasses all of the businesses and people involved in physically moving and transfer- ring ownership of goods and services from producer to consumer. In a distribution channel, retailers perform valuable functions as the contact for manufacturers, wholesalers, and final consumers. They collect assort- ments from various suppliers and offer them to custom- ers. Retailers also communicate with both customers and other channel members. They may ship, store, mark, advertise, and pre-pay for items. In addition, they complete transactions with customers and often provide customer services. They may also offer multiple formats (multichannel retailing) to facilitate shopping.

Retailers and their suppliers have complex relationships because retailers serve in two capacities. They are part of

Chapter Summary

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CHAPTER 1 • An InTRoduCTIon To RETAIlIng 39

a distribution channel aimed at the final consumer, and they are major customers for suppliers. Channel relations are smoothest with exclusive distribution; they are most volatile with intensive distribution. Selective distribution is a way to balance sales goals and channel cooperation.

Retailing has several special characteristics. The aver- age sales transaction is small, consumers make many unplanned purchases, and most customers visit a store location.

2. To introduce the concept of strategic planning and apply it. A retail strategy is the overall plan guiding the firm. It has six basic steps: defining the business, set- ting objectives, defining the customer market, develop- ing an overall plan, enacting an integrated strategy, and evaluating performance and making modifications. For example, Home Depot’s strategy has been particularly well designed and enacted, even though it has been affected by the tough economy in recent years.

3. To show why the retailing concept is the foundation of a successful business, with an emphasis on the total retail experience, customer service, and relationship retailing.

The retailing concept should be understood and used by all retailers. It requires a firm to have a customer orienta- tion, use a coordinated effort, and be value driven and goal oriented. Despite its straightforward nature, many firms do not adhere to one or more elements of the retailing concept.

The total retail experience consists of all elements in a retail offering that encourage or inhibit consumers during their contact with a retailer. Some elements are control- lable by the retailer; others are not. Customer service includes identifiable, but sometimes intangible, activi- ties undertaken by a retailer in association with the basic goods and services sold. It has an effect on the total retail experience. In relationship retailing, a firm seeks long- term bonds with customers rather than acting as if each sales transaction is a totally new encounter with them.

4. To indicate the focus and format of the text. Retail- ing may be studied by using an institutional approach, a functional approach, and/or a strategic approach. Although all three approaches are covered in this text- book, our focus is on the strategic approach. The under- lying principle is that a retail firm needs to plan for and adapt to a complex, changing environment.

Key Terms retailing (p. 23) channel of distribution (p. 27) sorting process (p. 27) omnichannel retailing (p. 27)

exclusive distribution (p. 29) intensive distribution (p. 29) selective distribution (p. 29) retail strategy (p. 30)

retailing concept (p. 34) total retail experience (p. 35) customer service (p. 36) relationship retailing (p. 36)

Questions for Discussion 1. What is the average amount that you spend in a retail

store per transaction? What factors are likely to influ- ence your supermarket transaction spend compared to other retailing spending?

2. Why might a supplier opt for exclusive channel distribu- tion with retailers?

3. Why might a new manufacturer want their products to be sold in the maximum number of retail outlets? Is this a good idea?

4. One retailer wants to be part of a selective distribution channel. Another wants to be part of an exclusive distribu- tion channel. What might be the reasons for these choices?

5. Describe how the special characteristics of retailing offer unique opportunities and problems for local gift shops.

6. What is the purpose of developing a formal retail strategy? How could a strategic plan be used by a restaurant chain?

7. What are the six key steps of strategic planning that should be used by a retailer?

8. Explain the retailing concept. Apply it to your school’s bookstore.

9. Define the term total retail experience. Then describe a recent retail situation in which your expectations were surpassed, and state why.

10. Do you believe that customer service in retailing is improving or declining? Why?

11. How could a small Web-only retailer engage in relation- ship retailing?

12. What checklist item(s) in Figure 1-11 do you think would be most difficult for Home Depot, the global home improvement retailer, to address? Why?

Web-Based Exercise Visit the website of Global Retailing (http://globalretailmag .com/). Describe the elements of the site and give several examples of what you could learn there.

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40 PART 1 • An ovERvIEw of sTRATEgIC RETAIl mAnAgEmEnT

Understanding the Recent Economic Environment in the United States and Around the Globe

In this appendix, we present a brief overview of the U.S. and global economic climate. We then discuss some of the strategic options that retailers are pursuing and should pursue to sustain their business amid the current economic conditions.

The Current Economic Situation in the United States In 2016, the Census Bureau reported that the average U.S. family’s income was $57,243.When adjusted for inflation, the median income level was 1.3 percent lower than its high in January 2008, but well above its low in August 2011.1 Median income has climbed since the August 2011 low point. A significant factor in the increase in real income is low prices for energy, gasoline, and heat.

The percentage of Americans living in poverty is about 15 percent of the population as of 2014, nearly 1 million Americans.2 Especially noteworthy has been the growing gap between the “best-off” and “worst-off” Americans. The Pew Research Center found that the percentage of adults in the highest-income groups grew from 14 percent in 1971 to 21 percent in 2015. During the same time, the percentage of households in the lowest two categories increased from 25 to 29 percent. And middle-income households as a percentage of all households declined from 61  percent to 50 percent over the same time interval.3

One widely accepted measure of income inequality is the Gini index, which ranges from zero (if all households have the same earnings) to 100 (when all income goes to one person). The U.S. Gini index is 45.0, which is in the same range as Jamaica (45.5), Peru (45.3), and Cameroon (44.6).4 Countries with a more equal distribution of income as shown by their Gini indices include Sweden (24.9), Denmark (24.8), Ukraine (24.6), and Slovenia (23.7). The distribution of wealth in the United States is even more unequal. An Organization for Economic Co-operation and Devel- opment (OECD) report study found that the wealthiest 10 percent of all U.S. households account for 76 percent of all the wealth in the country.5

As of 2016, the U.S. unemployment rate was 4.9 percent. This rate is low, but it must be tempered with some additional insights. First, only 63 percent of adult Americans are in the labor force. This low labor force participation rate is due to large numbers of Baby Boomers who have retired, younger residents attending college or graduate school, and people giving up on finding work. Second, long-term unemployment is high, as 2.1 million U.S. residents have been unem- ployed for over 6 months.6 And third, the 4.9 percent unemployment rate does not reflect those who are no longer seeking employment or those underemployed (such as being in a part-time job).

The personal savings rate, the percent of each paycheck that is not spent, was at 5.4 percent as of the end of April 2016. Because consumer spending constituted 68.5 percent of the U.S. economy in the fourth quarter of 2015 (up from 65.3 percent at the end of 2000), this is an important number to monitor.7 Historically, the savings rate has varied from 4.6 percent as of the end of January 2013 to 5.9 percent as of the end of March 2016. At the end of December 2012, the savings rate was 6.5 percent.8 The low savings rate highlights the role of the consumer as an important factor in economic growth.

As of May 2016, consumer confidence, measured by the University of Michigan’s Index of Consumer Sentiment was 94.7. There were only four months since its January 2007 peak in which this number was higher. One reason for the higher consumer optimism is the continuing anticipation of low inflation due to low interest rates.9 Better consumer confidence is generally associated with greater amounts of consumer spending as consumers feel good about their job prospects and job security.

With some exceptions, the housing market is showing signs of improvement. A 2016 study showed that 1 in every 122 housing units had at least one foreclosure filing (such as a default

APPEndIX

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CHAPTER 1 • An InTRoduCTIon To RETAIlIng 41

notice, scheduled auction, or bank repossession) in 2015. This was the second year in a row where the foreclosure rate was less than 1 percent of all U.S. housing units. The improvement in foreclosure rates was not uniform across the country, however. States with high foreclosure rates in 2015 were New Jersey, Florida, Maryland, Nevada, and Illinois.10

The Impact of the Downturn on Economies Around the World The worldwide economic climate is not as strong as in the United States. Growth in emerging and developing economies has declined for the fifth year in a row. These economies still make up 70 percent of total global economic growth.11 According to the International Monetary Fund, three factors continue to affect the global economy: a slowdown in China’s economy, lower prices for oil and other commodities, and a possible tightening of the monetary policy in the United States.12

In mid-2016, another factor could be added to the preceding list: the decision of Great Britain to exit the European Union (also referred to as Brexit, meaning “British exit”). This decision will have a significant impact on European economies for several years, and have a smaller effect on the United States and Asia. In addition, the Euro-zone financial crises in Greece, Belgium, Italy, Ireland, and Spain—due to large national debt—affect businesses and consumers there and elsewhere.

The Effect of the Current Economic Climate on Retailing The data on income and wealth disparity present two distinct market segments: the affluent and the “getting by” groups. Affluent groups are attracted to high-quality specialty retailers, fashion designers, and designer brands. In contrast, the getting-by segment may purchase less expensive products, try and use private-label brands, and postpone purchases. Both groups have become more value-conscious as a result of the “Great Recession.” Among the retailers that are doing well in this economic climate are deep-discount retailers with their low prices, specialty retailers of food products, retailers that attract customers with fresh merchandise in a treasure-hunt experi- ence, and retailers that use opportunistic purchasing of closeouts.

Off-price apparel chains, such as Marshalls, Burlington Coat Factory (now called simply “Burlington”), and T. J. Maxx, have drawn new shoppers because more people have become value-driven. In addition, these off-price chains have had significant buying opportunities due to overstocked channel members and cancellations of purchases from bankrupt retailers. In an effort to increase sales, traditional department stores have developed their off-price outlets, such as Saks Fifth Avenue’s Off Saks, Nordstrom’s The Rack, and Macy’s Backstage. These outlets receive goods from two sources: closeout and less-than-full merchandise cartons from their own stores, and merchandise specially purchased for sales at these outlets.

Since 2008, a number of large retailers have declared bankruptcy. These include American Apparel (2015), Circuit City (2008), Linens-N-Things (2008), A&P (2015), Radio Shack (2015), Blockbuster (2010), Borders (2011), Sbarro (2011 and again in 2014), Friedman’s (2008), Brookstone (2014), and Quiksilver (2015). Numerous other retailers have suffered losses and had to run frequent sales to generate business or to close unprofitable stores.

Prior to 2005, U.S. firms had an unlimited amount of time to file a restructuring plan after filing for bankruptcy. Since then, these filings have had to be submitted within 18 months. Under earlier laws, retailers had 2 years or more (via extensions) to determine which store locations to keep. Today, retailers in bankruptcy protection must make store-closing decisions within 210 days. Retailers in bankruptcy now are required to pay suppliers and utilities during their bankruptcies. Under the older laws, suppliers and utilities had to wait until a company emerged from bankruptcy before being paid. Also, due to concerns from lenders who were burnt with mortgage-backed securities, troubled retailers have found it much more difficult to get financing. As a result of these factors, many retailers that entered bankruptcy over the past decade were unable to restructure and were therefore forced to close. A study by AlixPartners found that only 49 of 93 retailers were able to emerge from a Chapter 11 bankruptcy as a going concern.13

Great Atlantic & Pacific Tea (A&P) filed for Chapter 11 bankruptcy two times in a 5-year time period: December 2010 and July 2015. As a result of its first bankruptcy, A&P became a privately held company after obtaining financing from Goldman Sachs and others. In addition to the stores operating under its A&P name, the firm operated supermarkets under the Best Cellars,

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42 PART 1 • An ovERvIEw of sTRATEgIC RETAIl mAnAgEmEnT

Waldbaum’s, Food Emporium, Super Fresh, Food Basics, and Pathmark brands in six Northeast states. Some analysts attributed the chain’s problems to the loss of sales to supercenters such as Walmart, membership clubs like Costco, and higher-end retailers such as Whole Foods. Others cited problems such as A&P’s high debt, low-profit margins, and inability to finance store renova- tions for its dated store fixtures and interiors.14 A&P sold off all its stores, remaining merchandise, and fixtures as of late 2015, and went out of business.

Some analysts believe that retailers that are not leaders in their respective industry segments remain at least somewhat vulnerable to bankruptcy or liquidation. This is especially the case for retailers that used heavy debt to fund their expansion during the period when interest rates were low and credit availability was high—a temporary occurrence.

Strategic Options for Retailers Let’s look at several strategic options that are available to retailers to increase their performance during these economic times:

▶▶ Rethink existing store formats. A 2015 Nielsen study found that over 18,000 new retail stores opened in the United States. Of this number, 88 percent were small-format stores: dollar, convenience, and drug.15 These smaller stores have lower inventory requirements due to a more limited selection and lower rents, and they are more adaptable to urban locations.

▶▶ Close unprofitable stores. Online sales (especially by Amazon), as well as their own poor sales performance, have forced many retailers to close unprofitable stores. As of January 2016, Sears had just over 700 stores, down from 866 in 2006. Kmart was at 952 stores versus over 1,400 stores in 2006. Other major retailers that have been closing stores include Macy’s, J. C. Penney, Walmart, and Target.16 The store closings of anchor tenants (such as department stores) can have a major impact on adjacent retailers, especially when the closed store was a major source of customer traffic.

▶▶ Reexamine the role of price. Value-oriented shoppers (particularly the “worst-off” Ameri- cans) have become more price-conscious. The greater concern for price is due to a number of factors: increased price transparency (due to the ease of checking prices via the Web); the absence of sales tax when consumers purchase goods from some out-of-state retailers; and the popularity of off-price chains, factory outlets, and sites such as eBay. Traditional retailers can respond by price-matching selected competitors (currently done by Best Buy, Target, Home Depot, Walmart, and other retailers) and by unbundling prices (offering separate prices for the product, delivery, and installation). Some retailers also offer price guarantees in which they will reimburse consumers if the price of an item is reduced within a certain number of days after purchase.

▶▶ Increase promotional coupons. The number of print and/or digital coupon users have remained steady over the past 4 years, but the digital paperless coupon user base has grown 27 percent since 2012 to 68.4 million users in 2015. The print coupon user base at 116.3  million still dominates.17 NCH Marketing Services reports that free-standing inserts (FSI) account for 92 percent of coupons distributed and represent nearly 50 percent of coupons redeemed, whereas digital coupons account for less than 1 percent of distribu- tion but represent nearly 12 percent of redemptions.18 Annually, marketers distribute about 320  billion coupons. More than 62 percent of coupons are for nonfood items. Less than 1 percent (2.84 billion) of the coupons are redeemed, mostly for food.19 According to NCH Marketing Services, more than three-quarters of U.S. consumers regularly use coupons. The use of mobile phones for in-store coupons is spurring a push toward retailer app- based digital couponing platforms, such as Target’s Cartwheel, CVS’s Pharmacy App, and Walmart’s Savings Catcher.20

▶▶ Begin the holiday season earlier. One estimate is that stores typically place orders up to 4 to 7 months in advance. Thus, due to the combined effects of a recession, poor credit availabil- ity, and/or an atmosphere of consumer caution, stores may acquire 15 to 20 percent or more excess holiday inventory. As a result, many retailers promote major holidays well ahead of time and conduct special sales events even before a holiday season begins. Many retailers now reduce prices on Christmas items before Thanksgiving.

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CHAPTER 1 • An InTRoduCTIon To RETAIlIng 43

▶▶ Re-introduce layaway plans. The concept of layaways started during the Great Depression as a way of enabling customers to purchase items without using a credit card. Through a layaway plan, a customer pays the product’s total cost (plus a small fee) in installments before being allowed to take the item home. In a traditional layaway program, a customer has 30 days to pay for an item after making an initial payment. Although layaway programs deny instant gratification to the purchaser, the customer receives the attraction of credit cards (being able to purchase an item without paying the full price up front), but with- out the risk of overextending his or her credit. Until the 2008–2009 economic downturn, Kmart was the only major U.S. retailer with a layaway program. Now, Sears, T. J. Maxx, Marshalls, Burlington, Toys “R” Us, and Walmart—along with many regional chains and local stores—offer layaway programs.

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44

2 Building and Sustaining Relationships in Retailing

Chapter Objectives

1. To explain what value really means and highlight its pivotal role in retailers’ building and sustaining relationships

2. To describe how both customer relationships and channel relationships may be nurtured in today’s highly competitive marketplace

3. To examine the differences in relationship building between goods and service retailers

4. To discuss the impact of technology on relationships in retailing

5. To consider the interplay between retailers’ ethical performance and relationships in retailing

In this chapter, we emphasize the importance of value and relationships for retailers. Retailers focus on providing a great customer experience through all touchpoints–in-store, online, mobile, and customer call centers to create a superior experiential value—the intangible psychological and emotional value that attracts new customers and retains existing ones to stay competitive in the industry. Research shows that creating experiential value leads to long- term relationships and higher spending with a retailer in the future.1

Retailers face considerable challenges in maintaining long-term customer relationships when consumers expect retailers to “know” what customers have done online and respond to their individual demands with personalized assistance and tailored in-store experiences! According to TimeTrade’s “Annual State of Retail” survey (http://timetrade.com)2 based on input from 5,000 consumers and 100 senior retail executives, 59 percent of respondents want store associates to know the items in their online shopping carts!3 However, just 24 percent of retailers currently have that ability—and only 12 percent are looking to implement it within the next 18 months.

Source: Allies Interactive/ Shutterstock. Reprinted by permission.

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CHAPTER 2 • Building And SuSTAining RElATionSHiPS in RETAiling 45

Some retailers are trying to distinguish themselves from competitors by deploying technology that positions them as collaborators in the consumer’s retail choice. These retailers focus on ensuring seamless connections between digital and traditional channels to delivering prompt, personalized in-store service. For example:

EyeQ uses a combination of in-store digital signage, advanced facial recognition software, and the capabilities of Watson, IBM’s cognitive computing system. When a shopper stops to look at an EyeQ digital sign, the sign uses sophisticated facial recognition software, and based on facial features and appearance, tailors its product recommendations to the viewer’s age and gender. If the shopper gives the system her or his Twitter username, Watson can capture the shopper’s most recent 200 tweets, run them through its natural language processing capabilities, and slot the customer into a basic personality type. Based on that data, not only can the system change the products being recommended, but it can also alter the whole experience—background colors, video, music, and so on. Personalization does not require the customer to identify himself or herself. The system, even without a consumer opting in or providing personal information, can identify a repeat visitor by the unique media access control address his or her mobile device sends out to find available Wi-Fi. Every time the shopper visits the store, the system learns more about her or him, updates parameters, and provides relevant recommendations.4

When shopping in-store, consumers most highly value “prompt service” (54 percent), “a personalized experience” (30 percent), and “smart recommendations” (30 percent). The lack of prompt assistance will drive most consumers (85 percent) to leave a dressing room—and the store—and abandon intended purchases. In sum, customers want to have access to retailers on a 24-hour-a-day basis through multiple media platforms—and to be able to offer comments, feedback, questions, complaints, and praise that will get prompt and helpful responses from retailers.5

overview To prosper, a retailer must properly apply the concepts of value and relationship so (1) customers strongly believe the firm offers a good value for the money and (2) both customers and channel members want to do business with that retailer. Some firms grasp this well. Others still have some work to do. Consider GameStop Corp., a global family of specialty retail brands that make the most popular technologies affordable through retail stores and repair centers.

As the world’s largest videogame retailer, GameStop Corp. sells new and pre-owned video- game hardware, physical and digital videogame software, and videogame accessories, as well as new and pre-owned mobile and consumer electronics products and other merchandise at its Game- Stop, EB Games, and Micromania stores. Buying customers’ unwanted games and consoles, irrespective of where they were initially purchased, and selling them as “pre-owned” after repair- ing and certifying them, creates value for the selling customer and the purchasing customer (by reducing the cost associated with used goods), as well as being environmentally friendly due to its recycling efforts. As of June 2016, GameStop operated about 7,100 stores in the United States, Australia, Canada, and Europe, primarily located in shopping malls and strip centers. In July 2015, the company acquired Geeknet, Inc. (www.thinkgeek.com),which specializes in selling collect- ibles, apparel, gadgets, electronics, toys, and other products for technology enthusiasts, general consumers, and wholesale customers. Geeknet’s network includes www.kongregate.com, a browser-based game site; Game Informer magazine, the world’s leading print and digital video- game publication; and iOS and Android mobile applications.6

As discussed at the beginning of the chapter, consumers expect more for less, especially from their stores than from their online or mobile shopping experience.7 Time- and budget-constrained consumers will spend less time shopping, make fewer trips, visit fewer stores, and shop more purposefully. Different strokes will satisfy different folks. Consumers will shop for different for- mats for a variety of needs. Specifically, they will split the commodity shopping trip from the value-added shopping trip. Consumers are becoming more skeptical of pricing and advertising

GameStop (www .gamestop.com) is— first and foremost—a customer-driven retailer.

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46 PART 1 • An oVERViEW oF STRATEgiC RETAil MAnAgEMEnT

tactics and more concerned about the environmental impact of their consumption. Under the bar- rage of sales, price has lost its meaning and gimmicks have lost their appeal. To regain consumer confidence, pricing by retailers and manufacturers alike will become transparent, more sensible, and more sophisticated. See Figure 2-1.

This chapter looks at value and the value chain, relationship retailing with regard to customers and channel partners, the differences in relationship building between goods and service retailers, technology and relationships, and ethics and relationships. An appendix on service retailing is found at the end of this chapter.

VALUE AND THE VALUE CHAIN A channel of distribution involves multiple parties: manufacturer, wholesaler, retailer, and cus- tomer. These parties are most apt to be satisfied with their interactions when they have similar beliefs about the value provided and received, and they agree on the appropriate payment for that level of value.

From the perspective of the manufacturer, wholesaler, and retailer, value is embodied by a series of activities and processes—a value chain—that provides a certain value for the consumer. It is the totality of the tangible and intangible product and customer service attributes offered to shoppers. The level of value relates to each firm’s desire for a fair profit and its niche (such as discount versus upscale). Firms may differ in rewarding the value each provides and in allocating the activities undertaken.

From the customer’s perspective, value is the perception a shopper has of a value chain. It is the customer’s view of all benefits from a purchase (formed by the total retail experience). Value is based on perceived benefits received versus the price paid. It varies by type of shopper. For example, price-oriented shoppers want low prices, service-oriented shoppers will pay more for superior customer service, and status-oriented shoppers will pay a lot to patronize prestigious stores.

Why is value such a meaningful concept for every retailer in any kind of setting?

▶▶ Customers must always believe they get their money’s worth, whether the retailer sells $45,000 Patek Phillipe watches or $40 Casio watches.

▶▶ A strong retail effort is required so that customers perceive the level of value provided in the manner the firm intends.

▶▶ Value is desired by all customers; however, it means different things to different customers. ▶▶ Consumer comparison shopping for prices is easy through ads and the Web. Thus, prices have

moved closer together for different types of retailers. ▶▶ Retail differentiation is essential so a firm is not perceived as a “me too” retailer.

FIGURE 2-1 The Key to Long- Term Customer Satisfaction: Meeting Expectations In today’s highly competitive retailing enviornment, companies must do everything they can to generate and maintain a distinctive edge. To attract customers and gain their loyalty, it is no longer enough to “satisfy” them; they need to be “wowed.” This requires (a) an in-depth understanding of target shoppers’ desires; (b) the proper mix of merchandise, customer service, and prices for those shoppers; and (c) supportive, ongoing customer interaction. These are not easy tasks.

Source: iQoncept/ Shutterstock.com. Reprinted by permission.

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CHAPTER 2 • Building And SuSTAining RElATionSHiPS in RETAiling 47

▶▶ A specific value/price level must be set. A retailer can offer $100 worth of benefits for a $100 item or $125 worth of benefits (through better ambience and customer service) for the same item with a $125 price. Either approach can work if properly enacted and marketed.

A retail value chain represents the total bundle of benefits offered to consumers through a channel of distribution. It comprises shopping location and parking, retailer ambience, the level of customer service, the products/brands carried, product quality, the retailer’s in-stock position, shipping, prices, the retailer’s image, and other elements. As a rule, consumers are concerned with the results of a value chain, not the process. Food shoppers who buy online via Peapod care only that they receive the goods ordered at the promised time, not about the steps needed for the home delivery of food at the neighborhood level.

Some elements of a retail value chain are visible to shoppers, such as display windows, store hours, sales personnel, and point-of-sale equipment. Other elements are not visible, such as store location planning, credit processing, company warehouses, and many merchandising decisions. In the latter case, various cues are surrogates for value: upscale store ambience and plentiful sales personnel for high-end retailers; shopping carts and self-service for discounters.

There are three aspects of a value-oriented retail strategy: expected, augmented, and poten- tial. An expected retail strategy represents the minimum value chain elements a given customer segment (e.g., young women) expects from a type of retailer (e.g., a mid-priced apparel retailer). In most cases, the following are expected value chain elements: store cleanliness, convenient hours, well-informed employees, timely service, popular products in stock, parking, and return privileges. If applied poorly, expected elements cause customer dissatisfaction and relate to why shoppers avoid certain retailers.

An augmented retail strategy includes the extra elements in a value chain that differentiate one retailer from another. As an example, how is Saks different from Sears? The following are often augmented elements: exclusive brands, superior salespeople, loyalty programs, delivery, personal shoppers and other special services, and valet parking. Augmented features complement expected value chain elements, and they are the key to continued customer patronage with a par- ticular retailer.

A potential retail strategy comprises value chain elements not yet perfected by a competing firm in the retailer’s category. For example, what customer services could a new upscale apparel chain offer that no other chain offers? In many situations, the following are potential value chain elements: 24/7 store hours (an augmented strategy for supermarkets), unlimited customer return privileges, full-scale product customization, instant fulfillment of rain checks through in-store orders accompanied by free delivery, in-mall trams to make it easier for shoppers to move through enormous regional shopping centers, and a doorman. The first firms to capitalize on potential features typically gain a head start over their adversaries. Barnes & Noble and Borders accom- plished this by opening the first book superstores, and Amazon.com became a major player by opening the first online bookstore. Yet, even as pioneers, firms must excel at meeting customers’ basic expectations and offering differentiated features from competitors if they are to grow, which is why Borders eventually had to close all its stores—it did not adapt fast enough.

Peapod (www.peapod .com) offers a unique value chain with its home delivery service.

Compare T. J. Maxx (www.tjmaxx.com) and Lord & Taylor (www .lordandtaylor.com).

Today, Barnes & Noble (www.bn.com) relies on its stores and its Web site for revenues.

Buyers are often contrasted with category managers. Buyers usu- ally evaluate suppliers, negotiate purchases, and match inventory levels with sales prospects. They need to understand and properly respond to sales trends, seasonality, fashion influences, and price concerns among shoppers.

Whereas a buyer may be responsible for a range of prod- ucts for a supermarket such as prepackaged lettuce, spinach, and carrots; a category manager’s responsibility can extend

to all produce. Category managers also have greater sales and marketing responsibilities. This includes space allocation, assortment planning, display planning, and discussing joint promotions with key suppliers. A good category manager for a supermarket should think in terms of meal solutions versus frozen foods.

Discuss the differences between the meal solutions versus frozen foods orientation.

CAREERS in RETAiling Category Managers

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48 PART 1 • An oVERViEW oF STRATEgiC RETAil MAnAgEMEnT

There are five potential pitfalls to avoid in planning a value-oriented retail strategy:

▶▶ Planning value with just a price perspective. Value is tied to two factors: benefits and prices. All major discounters now accept credit cards because shoppers want to purchase with them.

▶▶ Providing value-enhancing services that customers do not want or will not pay extra for. Ikea knows most of its customers want to save money by assembling furniture themselves.

▶▶ Competing in the wrong value/price segment. Neighborhood retailers generally have a tough time competing in the low-price part of the market. They are better off providing augmented benefits and charging somewhat more than large chains.

▶▶ Believing augmented elements alone create value. Many retailers think that if they offer a benefit not available from competitors that they will automatically prosper. Yet, they must never lose sight of the importance of expected benefits. A movie theater with limited parking will have problems even if it features first-run movies.

▶▶ Paying lip service to customer service. Most firms say, and even believe, customers are always right. Yet, they may act contrary to this philosophy—by having a high turnover of salespeople, charging restocking fees for returned goods that have been opened, and not giving rain checks for out-of-stock items.

To sidestep these pitfalls, a retailer could use the checklist in Figure 2-2, which poses a num- ber of questions that must be addressed. The checklist can be answered by an owner/corporate president, a team of executives, or an independent consultant. It should be reviewed yearly or more often if a major development, such as the emergence of a strong competitor, occurs.

RETAILER RELATIONSHIPS In Chapter 1, we introduced the concept of relationship retailing, whereby retailers seek to form and maintain long-term bonds with customers, rather than act as if each sales transaction is a new encounter with them. For relationship retailing to work, enduring value-driven relationships are needed with other channel members, as well as with customers. Both jobs are challenging. See Figure 2-3. Visit our blog for posts related to relationship retailing issues (www.bermanevansretail .com).

FIGURE 2-2 A Value-Oriented Retailing Checklist Answer yes or no to each question.

Is value defined from a consumer perspective?

Does the retailer have a clear value/price point?

Is the retailer’s value position competitively defensible?

Are channel partners capable of delivering value-enhancing services?

Does the retailer distinguish between expected and augmented value chain elements?

Has the retailer identified meaningful potential value chain elements?

Is the retailer’s value-oriented approach aimed at a distinct market segment?

Is the retailer’s value-oriented approach consistent?

Is the retailer’s value-oriented approach e�ectively communicated to the target market?

Can the target market clearly identify the retailer’s positioning strategy?

Does the retailer’s positioning strategy consider trade-o�s in sales versus profits?

Does the retailer set customer satisfaction goals?

Does the retailer periodically measure customer satisfaction levels?

Is the retailer careful to avoid the pitfalls in value-oriented retailing?

Is the retailer always looking out for new opportunities that will create customer value?

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CHAPTER 2 • Building And SuSTAining RElATionSHiPS in RETAiling 49

Customer Relationships Loyal customers are the backbone of a business. Thus, it is important that retailers retain their loyal customers through repeated sales in a trusting relationship. Loyalty has two unique dimensions— attitudinal and behavioral—and each contributes differently to retailers’ revenues, profits, and market share.8 Customers who are attitudinally loyal will have a higher tendency to spread positive word-of-mouth recommendations to friends and family on social media, have a higher commit- ment to the retailer, and not be reluctant to pay more for products at a particular retailer.

Customers who are behaviorally loyal will have a higher tendency to continue purchasing from a particular retailer. Behavioral loyalty may also be a manifestation of inertia (or inertial loyalty) due to high switching costs associated with changing retailers. Although both attitudinal and behavioral loyalty are important to achieve business goals and to sustain the position in the marketplace, a retailer’s positioning strategy (discussed in Chapter 3) will influence which dimen- sion needs to be strategically managed. Attitudinal loyalty should be emphasized if the objective is to charge higher prices, whereas behavioral loyalty should be more important if the objective is to increase market share or profits.9

In a competitive industry such as retailing, many consumers show divided behavioral loyalty to more than one retailer for a single category need. Here’s why: You have satisfied customers. “That’s good, right? Well, yes for the short term the customer[s] will continue purchasing. While a loyal customer is a satisfied customer, the converse is not necessarily true. Real loyalty [or attitudinal loyalty]—much harder to earn than mere satisfaction—tells you that your customer wants to stick with you over the long haul and will share that feeling with others.”10 Retailers need to develop and strategically manage loyalty programs to cultivate behavioral loyalty (discussed later in this chapter). But in the long term, it’s not necessarily enough. Customers who spend a lot can defect to the retailer providing lower prices or better service and enroll in multiple loyalty programs. Attitudinal loyalty derives not from hum-drum “good” transactions but from exceed- ing customer expectations on a repeated basis and delightful experiences that make shoppers so emotionally devoted that they want to share their experience by telling others.

In relationship retailing, there are four factors to keep in mind: the customer base, customer service, customer satisfaction, and loyalty programs and defection rates. Let’s explore these next.

THE CUSTOMER BASE Retailers must regularly analyze their customer base in terms of popula- tion and lifestyle trends, attitudes toward and reasons for shopping, the level of loyalty, and the mix of new versus loyal customers.

FIGURE 2-3 The Many Relationships in Retailing In most instances, the retail supply chain is quite complex. It requires that the many relationships be satisfying to all parties, including both various channel members and customers.

Source: johnkworks/ Shutterstock. Reprinted by permission.

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50 PART 1 • An oVERViEW oF STRATEgiC RETAil MAnAgEMEnT

As reported by the Census Bureau, the U.S. population is aging. One-fourth of households consist of only one person, one-seventh of people move annually, most people live in urban and suburban areas, middle-class income has been rising very slowly, and African American, Hispanic American, and Asian American segments are expanding. Thus, gender roles are changing, shop- pers demand more, consumers are more diverse, there is less interest in shopping, and time-saving goods and services are desired.

Future retail trends will be driven by the Millennials (Generation Y), who have surpassed Baby Boomers as the largest generation. According to the Pew Research Center, there are about 75 million Americans born between the early 1980s and the late 1990s; and they defy easy cat- egorization, for they are the most racially diverse generation the United States has experienced.11 Millennials have an elevated sense of idealism and are concerned how brands and retailers perform on social responsibility, sustainability, gender equality, and fair trade.

In their quest for growth in market share and sales revenue, many retailers typically focus on one side of customer value—delivering value. The customer is king (or queen) and every- thing must be done to deliver superior value and to delight him (or her). Astute retailers balance this view with the other side of customer value—receiving value. This is achieved by attracting and retaining those customers who provide value in the form of profits to the firm through their transactions.

It is worth more to nurture relationships with some shoppers than with others. These are the retailer’s core customers—its best customers—loyal, satisfied customers who get high value from the retailer and generate high profits for the retailer. These core customers are the most desirable, are resistant to competitors’ enticements of better deals, and deliver long-term profits. At the other extreme are the “lost causes” who don’t value the retailer’s goods or services and are not profitable.12 They cost the retailer more than they are worth because they frequently complain and return products, spread bad word of mouth, misuse promotions, and lower staff morale through their interactions. It does not make economic sense for the retailer to acquire them in the first place. Losing these customers may reduce market share but lead to improved profitability and higher levels of retailer performance. “Free-riders” (customers who are highly satisfied with the company but not highly profitable) and vulnerable customers (profitable but not satisfied with the retailer) can be managed through customer relationship management strate- gies. Charging higher prices and reducing services for free-riders can increase profitability. It is important for retailers to identify unmet needs of vulnerable customers and consider whether it will be profitable to satisfy them; otherwise, competitors will poach them away.

Retailers need to identify their best customers and see what characteristics differentiate these profitable customers from all the rest. Next, the retailer should determine whether it makes economic sense to pursue a differentiated offering to free-riders and vulnerable cus- tomers and to fine-tune strategies for the consumers who are most likely to yield profitable customers.

A retailer’s desired mix of new versus loyal customers depends on that firm’s stage in its life cycle, goals, and resources, as well as competitors’ actions. A mature firm is more apt to rely on core customers and supplement its revenues with new shoppers. A new firm faces the dual tasks of attracting shoppers and building a loyal following; it cannot do the latter without the former. If goals are growth-oriented, the customer base must be expanded by adding stores, increasing advertising, and so on; the challenge is to do this in a way that does not deflect attention from core customers. Although it is more costly to attract new customers than to serve existing ones, core customers are not cost-free; they must be service properly. If competitors try to take away a retailer’s existing customers with price cuts and special promotions, that retailer might pursue the competitors’ customers in the same way. Again, regardless of what action is taken, all retailers must be careful not to alienate core customers.

CUSTOMER SERVICE As described in Chapter 1, customer service refers to the identifiable, but sometimes intangible, activities undertaken by a retailer in conjunction with the goods and ser- vices it sells. It has an impact on the total retail experience. Consistent with a value chain philoso- phy, retailers must apply two elements of customer service. Expected customer service is the service level that customers want to receive from any retailer, such as basic employee courtesy. Augmented customer service includes the activities that enhance the shopping experience and give retailers a competitive advantage.

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CHAPTER 2 • Building And SuSTAining RElATionSHiPS in RETAiling 51

The attributes of personnel who interact with customers (such as politeness and knowledge), as well as the number and variety of customer services offered, have a strong effect on the rela- tionship created. Although planning a superior customer service strategy can be complex, a well- executed strategy can pay off in a big way.

Some retailers realize customer service is better if they utilize employee empowerment, whereby workers have the discretion to do what they believe is necessary—within reason—to satisfy the customer, even if this means bending the rules. The founders of Home Depot made a strategic decision to train employees to form enduring customer relationships rather than push for incremental sales gains. As a result, the retailer grew very quickly because of its outstanding customer service. Home Depot’s core value, “Taking care of our people,” states that the company encourages associ- ates to speak up and take risks, recognizes and rewards good work performance, and leads and develops employees so that they may grow. Home Depot believes that the key to its success and its competitive advantage in the marketplace is treating people well—starting with employees, who in turn ensure that customers are treated well. However, Home Depot’s American Customer Satisfac- tion Index rating tumbled to the bottom in the home-improvement category when it faced a high- profile credit-card security breach in the fall of 2014.13 That rating has risen since then.

To apply customer service effectively, a firm must first develop an overall service strategy and then plan individual services. Figure 2-4 shows one way a retailer may view the customer services it offers.

DEVELOPING A CUSTOMER SERVICE STRATEGY. A retailer must make the following vital decisions. What customer services are expected and what customer services are augmented for a particular

retailer? Examples of expected customer services are credit for a furniture retailer, new-car preparation for an auto dealer, and a liberal return policy for a gift shop. Those retailers could not stay in business without these services. Because augmented customer services are extra elements, a firm could serve its target market without such services, but using them will enhance its competitive standing. Examples are home delivery for a supermarket within a 1-hour window, an extended warranty for a used auto dealer, and free gift wrapping for a toy store. Each firm needs to learn which customer services are expected and which are augmented for its situation. Services that are viewed as expected customer services for one retailer, such as delivery, may be viewed as augmented for another. See Figure 2-5.

What level of customer service is proper to complement a firm’s image? An upscale retailer would offer more customer services than a discounter because people expect the upscale firm to have a wider range of customer services as part of its basic strategy. Performance would also be different. Customers of an upscale retailer may expect elaborate gift wrapping, valet parking, an in-store restaurant, and a ladies’ room attendant, whereas discount shoppers may expect cardboard gift boxes, self-service parking, a lunch counter, and an unattended ladies’ room. Customer service categories are the same; performance is not.

Should there be a choice of customer services? Some firms let customers select from various levels of customer service; others provide only one level. A retailer may honor several credit cards or only its own. Trade-ins may be allowed on some items or all. Warranties may have optional extensions or fixed lengths. A firm may offer 1-, 3-, and 6-month payment plans or insist on immediate payment.

AutoZone (www .autozone.com) has a unique style of customer service.

Nordstrom (www .nordstrom.com) strongly believes in empowering its employees to better serve customers.

FIGURE 2-4 Classifying Customer Services

Examples: Employees to answer questions; nearby parking; ease of shopping

Examples: Returns accepted after expiration date; free delivery; empowered employees

Examples: Multiple payment options; self- service checkout option; electronic coupons

Basic

Type of Services O�ered Extended

Above and

Beyond

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52 PART 1 • An oVERViEW oF STRATEgiC RETAil MAnAgEMEnT

Should customer services be free? Two factors cause retailers to charge for some customer services: First, delivery, gift wrapping, and some other customer services are labor intensive, and second, people are more apt to be home for a delivery or service call if a fee is imposed. Without a fee, a retailer may have to attempt a delivery twice. In settling on a free or fee-based strategy, a firm should (1) determine which customer services are expected (these are often free) and which are augmented (these may be offered for a fee); (2) monitor competitors and profit margins; and (3) study the target market. In setting fees, a retailer must also decide if its goal is to break even or to make a profit on certain customer services.

How can a retailer measure the benefits of providing customer services against the cost of the services? The aim of customer services is to enhance the shopping experience in a way that attracts and retains shoppers—while maximizing sales and profits. Thus, augmented services should not be offered unless they increase total sales and profits. A retailer should plan augmented customer services based on its experience, competitors’ actions, and customer comments; when the costs of providing these customer services increase, higher prices should be passed on to the consumers.

How can customer services be terminated? When a customer service strategy is set, shoppers are apt to react negatively to any customer service reduction. Yet, some costly augmented customer services may have to be dropped. In that case, the best approach is to be forthright by explaining why the customer services are being terminated and how customers will benefit via lower prices. Sometimes a firm may use a middle ground, charging for previously free customer services (such as clothing alterations) to allow those who want the services to still receive them.

PLANNING INDIVIDUAL CUSTOMER SERVICES. After a broad customer service plan is outlined, indi- vidual customer services need to be planned. A department store may offer credit, layaway, gift wrapping, a bridal registry, free parking, a restaurant, a beauty salon, carpet installation, dressing rooms, clothing alterations, restrooms and sitting areas, the use of baby strollers, home delivery, and fur storage. See Table 2-1 for a range of typical customer services.

Most retailers let customers make credit purchases; and many firms accept personal checks with proper identification. Consumers’ use of credit rises as the purchase amount goes up. Retailer- sponsored credit cards have three key advantages: (1) The retailer saves the fee it would pay for outside card sales, (2) people are encouraged to shop with a given retailer because its card is usu- ally not accepted elsewhere, and (3) contact can be maintained with customers and information learned about them. There are also disadvantages to retailer cards: Startup costs are high, the firm must worry about unpaid bills and slow cash flow, credit checks and follow-up tasks must be

Amazon.com (www .amazon.com) offers free 2-day delivery to its Prime customers.

FIGURE 2-5 Providing Extra Value for Customers Retailers that offer extra services to customers often stand out in the marketplace. For example, a given retailer could offer free repairs on the products it sells (a) and also allow consumers to tag QR codes via their smartphones so they can learn more about products within the store (b).

Sources: (a) Lena Pan/Shutterstock. Reprinted by permission. (b) rangizzz/Shutterstock. Reprinted by permission.

(a) (b)

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CHAPTER 2 • Building And SuSTAining RElATionSHiPS in RETAiling 53

performed, and customers without the firm’s card may be discouraged from shopping at that par- ticular retail store. Bank and other commercial credit cards enable small and medium retailers to offer credit, generate added business for all types of retailers, appeal to mobile shoppers, provide advertising support from the sponsor, reduce bad debts, eliminate startup costs for the retailer, and provide data. Yet, the cards charge a transaction fee and do not yield loyalty to a retailer.

Most bank cards and retailer cards involve a revolving credit account, whereby a customer charges items and is billed monthly on the basis of the outstanding cumulative balance. An option credit account is a form of revolving account; no interest is assessed if a person pays a bill in full when it is due. When a person makes a partial payment, he or she is assessed interest monthly on the unpaid balance. Some credit card firms (such as American Express) and some retailers offer an open credit account, whereby a consumer must pay the bill in full when it is due. Partial, revolving payments are not permitted. A person with an open account also has a credit limit (although it may be more flexible).

For a retailer that offers delivery, there are three decisions: the transportation method, equip- ment ownership versus rental, and timing. The transportation method can be car, van, truck, rail, mail, and so forth. The costs and appropriateness of the methods depend on the products. Regarding transportation equipment ownership, large retailers often find it economical to own their delivery vehicles. This also lets them advertise the company name, have control over schedules, and use their employees for deliveries. Small retailers serving limited trading areas may use personal vehicles. Many small, medium, and even large retailers use shippers such as UPS if consumers live away from a delivery area and shipments are not otherwise efficient. And finally, for the timing of delivery, the retailer must decide how quickly to process orders and how often to deliver to different locales.

For some firms, alterations and installations are expected services—although more retailers now charge fees. However, many discounters have stopped offering alterations of clothing and installations of appliances on both a free and a fee basis. They feel the services are too ancillary to their business and not worth the effort. Other retailers offer only basic alterations: shortening pants, taking in the waist, and lengthening jacket sleeves. They do not adjust jacket shoulders or width. Some appliance retailers may hook up washing machines but not do plumbing work.

Within a store, packaging (gift wrapping)—as well as complaints and returns handling—can be centrally located or decentralized. Centralized packaging counters and complaints and returns areas have advantages: They may be located in otherwise dead spaces, the main selling areas are not cluttered, specialized personnel can be used, and there is a common policy. The advantages of decentralization are that shoppers are not inconvenienced, they are kept in the selling area (where a salesperson may resolve a problem or offer different merchandise), and extra personnel are not required. In either case, clear guidelines as to the handling of complaints and returns are needed.

TABLE 2-1 Typical Customer Services

Typical Miscellaneous

• Credit • Bridal registry • Rest rooms

• Delivery • Interior designers • Restaurant

• Alterations and installations • Personal shoppers • Babysitting

• Packaging (gift wrapping) • Ticket outlets • Fitting rooms

• Complaints and returns handling • Parking • Beauty salon

 
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Consumer Behaviour Assignment 1

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Assignments

Assignments

Each of the four assignments in this course includes specific guidelines for completing the assignment and Final Project. Some general guidelines for satisfactory completion of the assignments and Final Project are described below.

Assignment Content

· Link theory and practice by explaining what you have learned as a result of the readings, dialogue with your fellow students, feedback, reflections, and practical application of skills.

· Make specific references to readings, feedback, ideas, and theories that prodded you to re-think your experiences and helped to increase your awareness of your marketing skills.

· Provide examples to support your comments and observations. Be specific and concrete. Tell a complete story. Avoid generalizations. Support a statement with a specific example that would demonstrate your understanding and skill.

· Share your thoughts and ideas about your own experiences and about the readings. Do not be afraid to challenge or disagree with the readings. Share what makes sense for you and what you have questions about. Be a critical reader.

· Go beyond general descriptions. Be thoughtful and critical in your analyses.

Assignment Structure

Remember, you will be judged by the quality of your work, which in this case are your assignments. To ensure the quality of your written work, keep the following in mind when preparing your assignments:

· Set up a cover page with your name, assignment number, and due date for each assignment in MS Word.

· Organize your assignments with clear headings to identify subsections. For example, depending on the assignment, headings might include: introduction, description of the topic under discussion, analysis and evaluation of the topic under discussion, learning for next time, and summary.

· Use 1.5 line spacing in your document to improve readability for your Open Learning Faculty Member.

· Use an 11-point or 12-point font.

· Number the pages.

· Use spell checker to eliminate spelling errors.

· Use grammar checking to avoid grammatical errors such as run-on sentences.

· Write in a formal manner suitable for business, rather than as a letter to a friend.

· Do not use red as your Open Learning Faculty Member’s comments will be in that colour.

· Please do not exceed the required length for each assignment. Communications should be clear and concise.

· Proofread your work. Not just on the screen while you write it, but the hard copy after it is printed. Fix the errors before submitting the report to your Open Learning Faculty Member.

· Restating of course material is not included in the format of the assignment reports, nor is it considered part of analysis. Anyone reading your report will be familiar with the case, and you need only to mention those facts relevant to your analysis and recommendations.

· Reference all quotations appropriately (author, date, title, publisher, page number) and, where possible, a web URL to the content or original web reference. This course uses APA citation style. Refer to the APA Citation Style guide located on the TRU Library website at  http://libguides.tru.ca/apa .

· Common sense and logical thinking can do wonders for your valuation.

· Proofread your work one last time. Have someone else read it, particularly if English is not your first language. This second pair of eyes will give you an objective opinion of how well your report holds together.

Remember, being clear and concise is important to good communication.

Assignment Submission

Please take a few minutes to review the assignment submission guidelines below:

· Before submitting your assignment, ensure that you have answered all parts of each of the assigned questions.

· Name your Word file as follows: Course_lastname_assignment number. Thus, if your name is Jan Smith and you are submitting the assignment for Module 2, you would name it MKTG3471_Smith_Assign2.

· Follow the instructions given in the Assignments folder in Blackboard to submit your assignment.

Deliverables and Grading Criteria

Grading will be based on:

· Understanding of the concepts contained in the course materials

· Ability to connect your own experiences and opinions with the course material and any other outside sources

· Referencing of the course materials and any outside sources

· Ability to clearly express your opinions

Many of the assignment questions will ask for your opinion on certain topics. Use these questions to talk about your own experiences and then connect these experiences to the course materials.

Note

Your deliverables are the formal assessments—the quizzes, assignments, and final project, which you submit to your Open Learning Faculty Member for grading and for which you receive marks.

Informal activities are not submitted for grading; however, they are still very important parts of your learning in this course and may contribute indirectly to your graded work.

 

 

 

 

ASSIGNMENT 1

 

Assignments

Assignment 1: Analysis and Research

In this module, you have been introduced to the field of consumer behaviour and the impact of the digital revolution on consumer behaviour. You have also explored the basic research tools used for studying consumer behaviour and discussed the basic elements of marketing strategy. You will now apply your knowledge to practical marketing situations.

Assignment 1 is organized in four sections; this contributes 10% towards your final grade. Each of the four sections carries the marks as stated, for a total 100 marks. While this assignment is only worth 10% of your final grade, the effort you put into it will pay off to a much greater extent in the final project.

Note

Assignments 2 and 3 have more comprehensive activities, which are worth more marks than assignments 1 and 4.

Instructions

Section 1: Choosing a Product or Product Category (10 marks)

Pick a product to research throughout the course. You should look ahead through all the modules to see whether your choice is suitable to complete later assignments. You will need to check with your Open Learning Faculty Member to determine if the product is suitable. You should select an existing product that is widely available and well-known consumer good.

Create a 1-page summary (approximately 250 words) about your proposed product. Include in the summary the product name, product category, sources for finding relevant information, and why you want to study this particular product or brand. Provide brief background information about your chosen product.

Note

Stuck for ideas? One suggestion is to scan the popular business press. One excellent article that you may find helpful is “Luxury for the Masses,” appearing in Harvard Business Review, 81(4) (April 2003) (accessible through the article databases at TRU library).

Section 2: Consumer Research and Trends (50 marks)

Segmentation and targeting is an important aspect of consumer behaviour. In this section, you will analyze the trends in demand for your product and define market segments, targeting, and positioning, which will provide some insights into what would motivate potential customers to choose your product offering).

· Conduct a secondary research by summarizingtwo or three relevant articles discussing trends in demand for your product. You may research TRU electronic library resources, consumer reports, trade journals, and/or demographic information about your chosen product. You may also refer to Figures 2-2 and Figure 2-3 of your textbook. Remember to provide the references for the articles/resources to which you refer.

· Perform a small focus group, or a few in-depth interviews, of potential users of your product. You may consider using two different ethnic groups.

· Using your own experiences, secondary researches, and exploratory research methods (interviews or direct observations), profile the primary market segment(s) for your product. Referring to the segmentation bases on page 55 of the textbook, develop a segmentation approach for the market of your product and provide rationale for why this approach is a good one. You may refer to the Rich Market Profile Questions. Concentrate on the first 2 questions: (a) What do they want to buy, and (b) Who are they?

· Provide insights into targeting and positioning of the product.

· Make an estimate of the size of the target market for your product. Identify the market size, growth, and trends within the given market. Use business data published by Statistics Canada (www.statcan.gc.ca), Chamber of Commerce, and other relevant statistical data. Explain how you arrived at your answer and state any assumptions you have made and why.

Section 3: Use of Internet (20 marks)

· The Internet can “inform” a consumer when making purchase decisions. What might a typical consumer do online when considering making a purchase of your chosen product?

· Identify the marketing opportunities that the digital revolution offers marketers of your product.

Section 4: Comparative Analysis (20 marks)

In this section, you will carry out a comparative analysis. Choose a competitive brand of your chosen product. For example, if your chosen product is a digital camera made by Sony you may choose one competitor such as Kodak, Canon, or Nikon.

Assess the two companies’ marketing approaches by comparing and contrasting the two brands’ target markets and corresponding strategies (not the products).

Completion Guidelines

Submit your assignment by uploading it in the Assignments area in Blackboard. Be sure to save your assignment as a Word document and name it: MKTG3471_Lastname_Assign1.

Reminders before submitting assignment:

· Did you put your name and student number on the front page of the document?

· Did you complete all of the required elements?

· Did you use information and terminology learned in this course?

· Did you support your statements with specific examples?

· Did you cite references, using correct APA referencing format?

· Did you ensure that there are no spelling mistakes?

· Is your report grammatically correct, clear, and well organized?

 

 

 

 

 

Assignment 2:

Assignments

Assignment 2: Analysis of Internal Influences (Factors) on Consumer Behaviour

In this module, you have explored a variety of internal influences on consumer behaviour. You will now apply what you have learned by analyzing and investigating internal factors or influences on consumer behaviour to practical marketing situations.

Assignment 2, worth 10% of your final grade, is organized in six sections. Each of the six parts carries the marks as stated for a total of 100 marks.

Instruction

You will continue to focus on your chosen product and market for the course. In this assignment, you will examine various aspects of internal factors/influences and their implication to a marketer. Follow the specific instructions to each part of the assignment and complete all sections as required.

Section 1: Motivation and Involvement (20 marks)

Using the product that you have chosen to research, produce a 3–4-page report examining the level of motivation and involvement that a typical customer would display in the purchase of your product.

Consider the following:

1. Select one level of from Maslow’s Hierarchy of Human Needs that can be used to segment the market and position your chosen product. Explain your choices. Justify the application of Maslow’s need hierarchy for segmentation and positioning of your product.

2. Identify possible motivational conflicts that a prospective consumer of your chosen product may have. Discuss how the marketer can reduce or resolve these motivational conflicts.

3. Develop an involvement profile for a typical consumer of your chosen product and discuss any key issues that would be relevant to a marketer. Use Figures 3-5 and 3-6 from your textbook in assessing the level of involvement that a prospective customer of your chosen product may have.

Section 2: Personality (15 marks)

Produce a 1–2-page report answering the following questions:

1. Given your thinking on your product thus far, select two theories or traits from Figure 4-9 in the textbook that should prove helpful in targetting, branding, and related strategies. Provide examples of print ads (with URL, in-text citation, scan or attachment) that would appeal to those with similar personalities/traits. (Note: The ads do not have to be for your chosen product.) Explain your choices.

2. Using the concept of brand personality, describe a personality for your chosen product.

Section 3: Perception and Positioning (20 marks)

Produce a 2–3-page report answering the following questions:

1. Draw an attribute-based perceptual map for your chosen product. Include the main competitive brands and discuss any opportunity for repositioning. (You may refer to page 165 of your textbook.)

2. What extrinsic and intrinsic cues would be used in assessing the perceived quality of your chosen product, and how would you as a marketer use extrinsic cues to improve the perceived quality of your product? Also, comment on the price-quality relationship in general and of your chosen product.

3. Comment on the type and degree of perceived risks likely to be associated with your chosen product.

Section 4: Reinforcing Consumer Learning (10 Marks)

How would you apply the concept of “shaping” (step-wise operant conditioning) to reinforce desired pre-purchase behaviour and attract customers?

Section 5: Consumer Attitude Formation/Change (15 marks)

Explain the strategies you would use to change consumer attitudes towards a particular brand of your chosen product by:

1. Changing beliefs about the brand

2. Changing beliefs about competing brands

3. Changing the relative evaluation of attributes

4. Adding an attribute

Do you think the “foot-in-the-door” technique (page 230 of your textbook) is applicable to your chosen product?

Section 6: Communication and Consumer Behaviour (20 marks)

Using Figure 8-3 from your textbook, recommend two advertising media for your product and explain your choices.

For the objective of promoting sales, what type of message structure, presentation style, and appeal would you use? Would you use a comparative message?

Completion Guidelines

Submit your assignment using the Assignments function in Blackboard. Be sure to save your assignment as a Word document and name it: MKTG3471_Lastname_Assign2

Reminders before submitting assignment:

· Did you put your name and student number on the front page of the document?

· Did you complete all of the required elements?

· Did you use information and terminology learned in this course?

· Did you support your statements with specific examples?

· Did you cite references, using correct APA referencing format?

· Did you ensure that there are no spelling mistakes?

· Is your report grammatically correct, clear, and well organized?

 

Assignment 3”

 

Assignments

Assignment 3: Analysis of External Influences on Consumer Behaviour

In this module, you have explored a variety of external influences (factors) on consumer behaviour. In this assignment, you will apply what you have learned by investigating and analyzing the external factors/influences discussed on consumer behaviour to practical marketing situations.

Assignment 3, worth 10% of your final grade, is organized in five sections. Each of the five parts carries the marks as stated, for a total of 100 marks. Remember that this assignment will subsequently be combined and summarized as part of your Integrative Report.

Instructions

You will continue to focus on your chosen product and market for the course. In this assignment, you will examine various aspects of external influences/factors and their implication to a marketer. Follow the specific instructions to each part of the assignment and complete all sections as required.

Prepare a 10–12-page doubled-spaced report containing the following.

Section 1: Cultural and Value Analysis (35 Marks)

In this section, you will conduct a cultural and value analysis of your product by answering the following questions.

1. Focusing on your chosen product, answer the following.

a. Find two different print advertisements for your chosen product in two magazines that are targetted to different audiences. Provide the URL, a scan, screen capture, or other visual for each.

a. For each advertisement, analyze the contents in terms of the written and pictorial aspects, utilizing the core values discussed in this module (and in Chapter 9 of your textbook).

a. How are these values portrayed to the target audience?

1. Focusing on your chosen product, produce an analysis of cultural influences by answering the following questions.

b. Identify the core values most relevant to the purchase and use of your product.

b. Determine whether these values encourage or discourage use or ownership.

b. Discuss whether these core values are shifting upward, or downward.

b. Create a print advertisement for your product. (The result is not expected to be of publishable quality; just do your best.) Show how you would use your knowledge of cultural values to develop an advertising message. How would you portray these values to your target audience?

b. What symbols would you use in your advertisements? Discuss their effectiveness in conveying the desired product image or characteristics.

Section 2: Subculture and Social Class Analysis (35 marks)

1. Discuss multi-cultural marketing strategies that you would use to market your product that would successfully target consumers in several different racio-ethnic subcultures?

2. Identify two other subcultures and discuss various strategies you would apply to reach specific groups in your target market.

3. What is the significance of social class to you as a marketer? How would the difference in social class influence the marketing of your chosen product in terms of the following?

c. Product lines and styles

c. Advertising media selection

c. The copy and communication style used in advertisement

c. Payment policy

Section 3: Analysis of Reference Groups and Family (10 marks)

1. With your chosen product in mind, who would your target market consider their reference groups?

2. Consider choosing a superstar or celebrity to promote your chosen product. Who would that be? Discuss the reference group factors that you would raise when negotiating the hiring contract with the superstar or celebrity.

Section 4: Analysis of Consumer Influences and the Diffusion of Innovation (10 marks)

Why is an opinion leader a more credible source of product information than an advertisement for the same product? Are there any circumstances where information from advertisements is likely to be more influential than word of mouth?

Section 5: Virtual Communities (10 marks)

1. Visit and provide the URL of a virtual site where loyal customers of your chosen product help one another to evaluate the quality of choices in the marketplace.

2. How are these virtual communities shaking up the ways businesses are operating?

3. For your chosen product, provide recommendations for a promotional campaign.

Completion Guidelines

Submit your assignment by uploading it in the Assignments area of your course Home Page. Be sure to save your assignment as a Word document and name it: MKTG3471_Lastname_Assign3.

Reminders before submitting assignment:

· Did you put your name and student number on the front page of the document?

· Did you complete all of the required elements?

· Did you use information and terminology learned in this course?

· Did you support your statements with specific examples?

· Did you cite references, using correct APA referencing format?

· Did you ensure that there are no spelling mistakes?

· Is your report grammatically correct, clear, and well organized?

 

 

 

 

 

 

 

Assignment 4:

 

Assignments

Assignment 4: Influencing Purchase Decisions

In this module, you have explored a variety of factors that influence the consumer decision-making process and outcome. The consumer’s decision whether to purchase a product is an important moment for most marketers since it denotes whether a marketing strategy has been effective or missed the mark and whether a marketing plan has been successful.

In this assignment, you will refer back to some of the activities you completed throughout the module. You will apply what you have learned so far by analyzing how consumers make decisions about a product and the implications for you as a marketer when developing marketing strategies for your chosen product.

Assignment 4 is organized in two sections here (five small sections in the rubric) and is worth 10% of the final grade. Each of the parts carries the marks as stated for a total of 100 marks.

Instructions

You will continue to focus on your chosen product and market for this course. In this part of the assignment, as a marketer of your chosen product, you will demonstrate how your understanding of the behaviour of a typical consumer during the five stages of the decision-making process will influence your marketing strategy and the development of a successful marketing plan.

Follow the specific instructions to each part of the assignment and complete all sections as required.

Section 1: Consumer Decision Making —Process

Prepare a 5–6-page, doubled-spaced report addressing the following questions:

1. As a marketer, do you have the ability to control desires or create a need for your product? (Include an example.)

2. Identify the specific characteristics of your product that would make intensive pre-purchase search likely. Using your chosen product, investigate the various types and sources of information available to a consumer. How would you as a marketer improve the types of information and sources of information available to potential customers for pre-purchase searches? Discuss perceived risks associated with the purchase decision, and strategies for mitigating those risks.

3. During your research you would have come across a number of brands. Demonstrate your understanding by identifying brands within your product category and classifying them into your own evoked set, inept set, and inert set. As a marketer what strategies would you use in an attempt to place a product in a consumers evoked set after it has already been rejected?

4. Comment on why evaluation criteria used by customers is important to a marketer of your chosen product? How can marketers influence the rating of their products?

Section 2: Consumer Decision Making —Outcome

Prepare a 3–4-page, doubled-spaced report containing the following answers.

1. How significant is the choice of brand or outlet to the marketer of your chosen product?

2. What might lead to customer satisfaction or dissatisfaction with your chosen product? Outline how you would manage consumer dissatisfaction and provide positive reinforcement to consumers after the purchase of your product to reduce their dissonance? How would you determine whether a consumer is satisfied with your product and whether there will be a repeat purchase?

3. As a marketer of your chosen product, describe how you would develop trust and a long-term relationship with your customers?

Completion Guidelines

Submit your assignment by uploading them in the Assignment folder. Be sure to save your assignment as a Word document and name it: MKTG3471_lastname_Assign4.

Reminders before submitting assignment:

· Did you put your name and student number on the front page of the document?

· Did you complete all the required elements?

· Did you use information and terminology learned in this course?

· Did you support your statements with specific examples?

· Did you cite references, using correct APA referencing format?

· Did you ensure that there are no spelling mistakes?

· Is your report grammatically correct, clear, and well organized?

 

 

 

 

Assignment 5:

 

There are two parts to the final project:

· Integrative Report (worth 30% of the final mark)

· Reflective Summary (worth 10% of the final mark)

Integrative Report—Consumer Behaviour

As a marketer, it is important to consider a wide range of consumer behaviour implications prior to developing a marketing plan. You have covered materials that will help you as a marketer to define the market and identify threats and opportunities to a product brand and to recommend strategies to improve marketing programs. You will complete your analysis and research into the market and consumer behaviour of your chosen product by producing a report (roughly 10 pages or 3000 words) reflecting key concepts that you have covered. Provide suggestions or recommendations on strategies that should be focused on in the development of any future marketing programs. You should write the report as if you are a marketing consultant advising the marketing and product managers of a client firm. Include the following in your report. (You should find most sections in the module assignments relevant to this task; however, do not copy and paste what you have written previously, rather edit and synthesize.)

1. What trends in consumer behaviour can you identify within your chosen market? Discuss how consumers learn about the products from their environment and how they use this information to direct their behaviour. (Module 1)

2. How would you segment the product market? Develop a Rich Market Profile chart for your product. (You may refer to the Rich Market Profile Questions Exhibit 2 and Rich Market Profile Exhibit 1

3. Identify and discuss the primary key internal factors that would influence consumers of your product. Justify your choices and suggest appropriate strategies for your choices. (Module 2)

4. What tools will help you better understand consumers’ attitudes and behaviour? (Module 2)

5. Identify and discuss the primary key external factors that would influence consumers of your product. Justify your choices and suggest appropriate strategies for your choices. (Module 3)

6. What strategies would you develop and implement to enable customers to choose your product brand over others. What strategies would you develop to satisfy and retain customers? (All modules)

7. What advertising strategy would you adopt for your product? Include strategies that you would develop to tap into the growth in environmental awareness and opportunities in creative disposal of your chosen product. (All modules)

8. What kind of marketing activities would you adopt to coincide with each of the five stages of the consumer decision making process? (Module 4)

9. Conclusions and recommendations.

Reflective Summary

The Reflective Summary requires you to look back at your online discussions and journalling and to reflect on your course experience. As a distance learner, much of your interaction in this course may have come from participation in the online discussions. Write 3 to 4 pages (roughly 1000 words) reviewing your contribution to the discussions in the course and your journalling activity.

1. Did the contribution of other learners influence you and help enrich your knowledge of consumer behaviour?

2. Did you agree with everything others posted to the online discussions?

3. Did the ideas and information presented in the articles have a significant influence on your understanding or perspective on consumer behaviour?

4. Did your ideas and views shift as you progressed through the course?

5. Include two or three of the reflective questions and what you have learned from them.

6. Document your best contribution to the discussions and describe briefly what you have learned from the postings of other learners.

7. Include highlights from the other activities and the course in general.

 
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