Building and Sustaining Relationships in Retailing Chapter 2 Building and Sustaining Relationships in Retailing RETAIL MANAGEMENT: A STRATEGIC APPROACH, 10th Edition BERMAN EVANS

Chapter Objectives To explain what “value” role in retailers’ building and sustaining relationships To describe how both customer relationships and channel relationships in today’s highly competitive marketplace To examine the differences in relationship building between goods and services retailers To discuss the impact of technology on relationships in retailing and retailers’ ethical

What is Value? The bottom line: Channel Perspective Consumers will demand more for less from the shopping experience, spend less time shopping, and split the value-added from commodity vs shopping trip Channel Perspective Value is a series of activities and processes - the value chain - that provides a certain value for the consumer Customer Perspective Value is a perception that the shopper has of the value chain It is the view of all the benefits from a purchase versus the price paid

3 Aspects of Value-Oriented Retail Strategy Retail Value Chain Represents the total bundle of benefits offered to consumers through a channel of distribution Store location and parking, retailer ambience, customer service, brands/products carried, product quality, retailer’s in-stock position, shipping, prices, image, and other elements 3 Aspects of Value-Oriented Retail Strategy Expected Augmented Potential

Potential Pitfalls to Avoid in Planning a Value-Oriented Retail Strategy Planning value with just a price perspective Providing value-enhanced services that customers do not want or will not pay extra for Competing in the wrong value/price segment Believing augmented elements alone create value Paying lip service to customer service

Figure 2-2: A Value-Oriented Retailing Checklist 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 value-enhancing services? Does the retailer distinguish between expected and augmented value chain elements? Has the retailer identified potential value chain elements? Is the retailer’s value-oriented approach aimed at a distinct market? Is the retailer’s value-oriented approach consistent? Is the retailer’s value-oriented approach effectively communicated? Can the target market clearly identify the retailer’s positioning? Does the retailer’s positioning consider sales versus profits? Does the retailer set customer satisfaction goals? Does the retailer 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?

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

Figure 2-4: Classifying Customer Services

Fundamental Decisions What customer services are expected and what customer services are augmented for a particular retailer? What level of customer service is proper to complement a firm’s image? Should there be a choice of customer services? Should customer services be free? How can a retailer measure the benefits of providing customer services against their costs? How can customer services be terminated?

Table 2-1: Typical Customer Services Credit Delivery Alterations/ Installations Packaging/Gift wrapping Complaints/Return handling Gift certificates Trade-ins Trial purchases Special sales Extended store hours Mail and phone orders

Table 2-1: Miscellaneous Customer Services Bridal registry Interior designers Personal shoppers Ticket outlets Parking Water fountains Pay phones Restrooms Restaurants Baby-sitting Fitting rooms Beauty salons Shopping bags Information

Figure 2-6: Turning Around Weak Customer Service Focus on Customer Concerns Empower Frontline Employees Show That You Are Listening Express Sincere Understanding Apologize and Rectify the Situation

Principles of Category Management Retailers listen more to customers Profitability is improved because inventory matches demand more closely  in = out By being better focused, each department is more desirable for shoppers Retail buyers are given more responsibilities and accountability for category results Retailers and suppliers must share data and be more computerized Retailers and suppliers must plan together

Figure 2-7: Elements Contributing to Effective Channel Relationships

Three Kinds of Service Retailing Rented goods services Owned goods services Nongoods services 4 Characteristics of Services Retailing Intangibility Inseparability Perishability Variability

Figure 2.8a: Characteristics of Service Retailing Intangibility No patent protection possible Difficult to display/communicate service benefits Service prices difficult to set Quality judgment is subjective Some services involve performances/experiences

Figure 2.8b: Characteristics of Service Retailing Inseparability Consumer may be involved in service production Centralized mass production difficult Consumer loyalty may rest with employees

Figure 2.8c: Characteristics of Service Retailing Perishability Services cannot be inventoried Effects of seasonality can be severe Planning employee schedules can be complex

Figure 2.8d: Characteristics of Service Retailing Variability Standardization and quality control hard to achieve Services may be delivered in locations beyond control of management Customers may perceive variability even when it does not actually occur

Figure 2-9: Consumer Perceptions of Service Retailing

Figure A2-1: Lessons in Service Retailing

Strategic Planning in Retailing Chapter 3 RETAIL MANAGEMENT: A STRATEGIC APPROACH, 10th Edition Strategic Planning in Retailing BERMAN EVANS

Chapter Objectives To show the value of strategic planning for all types of retailers To explain the steps in strategic planning for retailers: situation analysis, objectives, identification of consumers, overall strategy, specific activities, control, and feedback To examine the individual controllable and uncontrollable elements of a retail strategy To demonstrate how a strategic plan can be prepared

Retail Strategy The overall plan or framework of action that guides a retailer One year in duration Outlines mission, goals, consumer market, overall and specific activities, and control mechanisms

Figure 3-1: Elements of a Retail Strategy

Benefits of Strategic Retail Planning Provides analysis of the requirements for doing business for different types of retailers Outlines retailer goals Allows retailer to determine how to differentiate itself from competitors Allows retailer to develop an offering that appeals to a group of customers Offers an analysis of the legal, economic, and competitive environment Provides for the coordination of the firm’s total efforts Encourages anticipation and avoidance of crises

Organizational Mission Retailer’s commitment to a type of business and to a distinctive role in the marketplace

Figure 3-2: The Focused Organizational Mission of Frisch’s Restaurants

Ownership and Management Alternatives A sole proprietorship is an unincorporated retail firm owned by one person A partnership is an unincorporated retail firm owned by two or more persons, each with a financial interest A corporation is a retail firm that is formally incorporated under state law; it is a legal entity apart from its officers

Figure 3-3: Checklist to Consider When Starting a New Business

Figure 3-4: Checklist for Purchasing an Existing Retail Business

Figure 3-5a: Selected Kinds of Retail Goods and Service Establishments Durable Goods Stores: Automotive group Furniture and appliances group Lumber, building, and hardware group Jewelry stores Nondurable Goods Stores: Apparel group Food group General merchandise group Gasoline service stations

Figure 3-5b: Selected Kinds of Retail Goods and Service Establishments Service Establishments (Personal): Laundry and dry cleaning Beauty/barber shops Funeral services Health-care services Service Establishments (Amusement): Movie theaters Bowling alleys Dance halls Golf courses

Figure 3-5c: Selected Kinds of Retail Goods and Service Establishments Service Establishments (Repair): Automobile repair Car washes Consumer electronics repair Appliance repairs Service Establishments (Hotel): Hotels Motels Trailer parks Camps

by consumers and others Image and Positioning An image represents how a given retailer is perceived by consumers and others

Positioning Approaches Mass merchandising is a positioning approach whereby retailers offer a discount or value-oriented image, a wide or deep merchandise selection, and large store facilities Niche retailing occurs when retailers identify specific customer segments and deploy unique strategies to address the desires of those segments rather than the mass market

Figure 3-7: Selected Retail Positioning Strategies

Target Market Selection 3 techniques Mass marketing Concentrated marketing Differentiated marketing Target Market Selection Retailer’s location Goods and service mix Promotion efforts Price orientation Strategy Strategic Implications of Target Market Techniques

Figure 3-9: Developing an Overall Retail Strategy Controllable Variables: Store location Managing business Merchandise management and pricing Communicating with customer Uncontrollable Variables: Consumers Competition Technology Economic conditions Seasonality Legal restrictions Retail Strategy

Table 3-4a: Legal Environment and Retailing Store Location zoning laws environmental laws direct selling laws local ordinances leases and mortgages Managing the Business licensing provisions personnel laws antitrust laws franchise agreements business taxes recycling laws

Table 3-4b: Legal Environment and Retailing Merchandise Management and Pricing trademarks merchandise restrictions product liability laws and lemon laws sales taxes unit-pricing laws collusion laws sale prices price discrimination laws

Table 3-4 c: Legal Environment and Retailing Communicating with the Customer truth-in-advertising and selling laws truth-in-credit laws telemarketing laws bait-and-switch laws inventory laws labeling laws cooling-off laws

Table 3-6: Sample Strategic Plan Sally’s is a small, independently-owned, high fashion ladies clothing shop located in a suburban strip mall. It is a full-price, full-service store for fashion-forward shoppers. Sally’s carries sportswear from popular designers, has a personal shopper for busy executives, and has an on-premises tailor. The store is updating its strategic plan as a means of getting additional financing for an anticipated expansion.

Additional Concerns for Global Retailing In addition to the strategic planning process: assess your international potential get expert advice and counseling select your countries develop, implement, and review an international retailing strategy

Factors Affecting the Success of a Global Retailing Strategy Timing A balanced international program A growing middle class Matching concept to market Solo or partnering Store location and facilities Product selection

Figure A3-1: Factors to Consider When Engaging in Global Retailing