1. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Marketing II The Chang School-Ryerson University Continuing Education Email: agervais@ryerson.ca preferred agervais@ryerson.ca Web: www.ryerson.ca/~agervais Office: Bus 308 Phone: 416-979-5000 Ext 4215 CMKT 200 Fall 2005 Instructor: Armand Gervais

2. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Lecture 8 Agenda Simulation report Due December 6 at the beginning of class Simulation report Due December 6 at the beginning of class See website for details See website for details Final exam in class on Dec. 10 9-11 a.m. Final exam in class on Dec. 10 9-11 a.m. Cover all chapters and readings cover after first exam and simulation. Cover all chapters and readings cover after first exam and simulation. Chapter 17 Chapter 17 Break Break Simulation Simulation To Do’s for next weeks class To Do’s for next weeks class

3. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Identify retailers in terms of the utilities they provide. Identify retailers in terms of the utilities they provide. Explain the alternative ways to classify retail outlets. Explain the alternative ways to classify retail outlets. Understand the many methods of non-store retailing. Understand the many methods of non-store retailing. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

4. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Classify retailers in terms of the retail positioning matrix. Classify retailers in terms of the retail positioning matrix. Develop retailing mix strategies over the life cycle of a retail store. Develop retailing mix strategies over the life cycle of a retail store. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

5. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin SMART, CHIC, AND CHEAP: TARGET HITS THE BULL’S-EYE! SMART, CHIC, AND CHEAP: TARGET HITS THE BULL’S-EYE! RETAILING

6. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Target Ad Smart, chic, and cheap

7. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Consumer Utilities Offered by Retailing Consumer Utilities Offered by RetailingRetailing The Global Economic Impact of Retailing The Global Economic Impact of Retailing THE VALUE OF RETAILING

8. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Levis Original Spin: Created to customer specifications What happen to Levis Brand?

9. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin FIGURE 17-2 Retail sales ($billion), by type of business

10. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. When Levi Straus makes jeans cut to a customer’s exact preferences and measurements, what utility is provided? A: form utility

11. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 2. Two measures of the importance or retailing in the global economy are _________ and ___________________. total sales Concept Check number of employees

12. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Form of Ownership Form of Ownership Form of Ownership Form of Ownership Independent Retailer Independent Retailer Corporate Chain Corporate Chain Contractual System Contractual System CLASSIFYING RETAIL OUTLETS

13. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Radio Shack Franchising opportunities

14. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin FIGURE 17-3 The top five franchises Tim Horton’s has 60% share in Canada

15. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Level of Service Level of Service Level of Service Level of Service Self-Service Self-Service Limited Service Limited Service Full-Service Full-Service CLASSIFYING RETAIL OUTLETS

16. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Merchandise Line Merchandise Line Merchandise Line Merchandise Line Depth of Line Depth of Line Depth of Line Depth of Line Breadth of Line Breadth of Line Breadth of Line Breadth of Line CLASSIFYING RETAIL OUTLETS

17. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin FIGURE 17-4 Breadth versus depth of merchandise lines

18. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin IKEA

19. Breadth of Line (cont) Breadth of Line (cont) Scrambled merchandising Scrambled merchandising Scrambled merchandising Scrambled merchandising Hypermarket Hypermarket Hypermarket Intertype competition Intertype competition Intertype competition Intertype competition CLASSIFYING RETAIL OUTLETS

20. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin FIGURE 17-5 Supercenters are a popular store format.

21. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1. Centralized decision making and purchasing are an advantage of ______ ownership. chain Concept Check

22. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. What are some examples of new forms of self-service retailers? A: Federal Express’s self-service package shipping stations, and the self-service scanning system being installed at K-Mart.

23. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 3. Would a shop for big men’s clothes carrying pants in sizes 40 to 60 have a broad or deep product line? A: Deep product line

24. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Vending Photo One form of non store retailing

25. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin FIGURE 17-6 Forms of nonstore retailing NONSTORE RETAILING

26. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Cost of Returns for Retailers Between 5-30% of merchants sales ends up being returned Between 5-30% of merchants sales ends up being returned In the U.S. $200 Billion worth or merchandise is returned annually In the U.S. $200 Billion worth or merchandise is returned annually The cost of handling and disposing of this merchandise is $35 billion The cost of handling and disposing of this merchandise is $35 billion Visa returns peak in December and January at 3% Visa returns peak in December and January at 3% Source: Globe & Mail January 19, 2005

27. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Automatic Vending Automatic Vending Direct Mail and Catalogs Direct Mail and Catalogs NONSTORE RETAILING

28. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin L.L. Bean Specialty catalogs appealing to market niches

29. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Television Home Shopping Television Home Shopping Online Retailing Online Retailing Telemarketing Telemarketing Telemarketing Direct Selling Direct Selling NONSTORE RETAILING

30. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Television Home Shopping Placing orders over the phone or Internet

31. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Internet Café Access to the Web

32. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1. Successful catalog retailers often send ________ catalogs to _____ markets identified in their databases. specialty Concept Check niche

33. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. How are retailers increasing consumer interest and involvement in online retailing? A: Tactics such as virtual models encourage consumer interaction and increase involvement.

34. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 3. Where are direct selling retail sales growing? Why? A: Direct selling is likely to grow in market where the lack of effective distribution channels and lack of consumer knowledge about products increase the need for a person-to-person approach.

35. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Positioning a Retail Store Positioning a Retail Store Retail Positioning Matrix Retail Positioning Matrix Retail Positioning Matrix Retail Positioning Matrix RETAILING STRATEGY

36. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin FIGURE 17-7 Retail positioning matrix

37. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Positioning a Retail Store (cont) Positioning a Retail Store (cont) Keys to Positioning Keys to Positioning Retailing Mix Retailing Mix Retailing Mix Retailing Mix RETAILING STRATEGY

38. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin FIGURE 17-8 The retailing mix

39. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Retailing Mix (cont) Retailing Mix (cont) Retail Pricing Retail Pricing Shrinkage Shrinkage Shrinkage Off-price retailing Off-price retailing Off-price retailing Off-price retailing Winners Winners Target Target RETAILING STRATEGY

40. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Retailing Mix (cont) Retailing Mix (cont) Store Location Store Location Central business district Central business district Central business district Central business district Regional shopping centers Regional shopping centers Regional shopping centers Regional shopping centers Community shopping center Community shopping center Community shopping center Community shopping center Strip location Strip location Strip location Strip location Power center Power center Power center Power center Retail Image and Atmosphere Retail Image and Atmosphere RETAILING STRATEGY

41. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. What are the two dimensions of the retail positioning matrix? A: Breadth of product line and value added.

42. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. How does original markup differ from maintained markup? A: Original markup is the initial selling price less retailer cost. Maintained markup is the final selling price less retailer cost.

43. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 3. A huge shopping strip with multiple anchor stores is a ______ center. power Concept Check

44. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Wheel of Retailing The Wheel of Retailing THE CHANGING NATURE OF RETAILING

45. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin FIGURE 17-9 The wheel of retailing

46. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Taco Bell Express Coming full cycle in the wheel of retailing

47. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Retail Life Cycle The Retail Life Cycle The Retail Life Cycle The Retail Life Cycle THE CHANGING NATURE OF RETAILING

48. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin FIGURE 17-10 The retail life cycle

49. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin BP Connect: Store Front Integrating the convenience store and gas station

50. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin BP Connect: Solar Power Canopy Panels generate 20% of electrical power needs

51. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin BP Connect: E-Commerce Pump Wide variety of online options

52. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin BP Connect: Inside Store View Wide, open aisles to create clean-looking environment

53. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin BP Connect: Wild Bean Café Sandwiches, hot and cold drinks, and a small dining area

54. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin BP Connect: Internet Kiosks & ATM

55. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin BP Connect Print Ad Announcing the conversion of Amoco to BP Connect

56. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin BP Connect Print Ad

57. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Multichannel Retailing Multichannel Retailing Multichannel retailers Multichannel retailers Multichannel retailers Multichannel retailers The Impact of Technology The Impact of Technology Changing Shopping Behavior Changing Shopping Behavior FUTURE CHANGES IN RETAILING

58. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. According to the wheel of retailing, when a new retail form appears, how would you characterize its image? A: A low-status, low-margin, low-price outlet.

59. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 2. Market share is usually fought out before the ________ stage of the retail life cycle. maturity Concept Check

60. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A: A smart card looks like a credit card but store information about bank accounts and customer purchases on computer chips. Concept Check 3. What is a smart card?

61. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1 Try each of these shopping bots. Find the best price for a Wilson tennis racket, a Sony TV, and Guess jeans. How did the two agents differ? What shipping and handling charges would apply? Why do they make different recommendations? Internet Exercise mySimon DealTime

62. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin VIDEO CASE 17-1 Mall of America 1 Why has Mall of America been such a marketing success so far?

63. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin VIDEO CASE 17-1 Mall of America 2 What (a) retail and (b) consumer trends have occurred since Mall of America was opened in 1992 that it should consider when making future plans?

64. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin VIDEO CASE 17-1 Mall of America 3 (a) What criteria should Mall of America use in adding new facilities to its complex? (b) Evaluate (1) retail stores, (2) entertainment offerings, and (3) hotels on these criteria.

65. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin VIDEO CASE 17-1 Mall of America 4 What specific marketing actions would you propose that Mall of America managers take to ensure its continuing success in attracting visitors (a) from the local metropolitan area and (b) from outside of it?

66. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin All activities involved in selling, renting, and providing goods and services to ultimate consumers for personal, family, or household use. Retailing

67. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Distinguishes retail outlets based on whether individuals, corporate chains, or contractual systems own the outlet. Form of Ownership

68. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The degree of service provided to the customer by self-, limited-, and full- service retailers. Level of Service

69. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin How many different lines a merchant carries and in what assortment. Merchandise Line

70. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The store carries a large assortment of each item. Depth of Product Line

71. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The variety of different items a store carries. Breadth of Product Line

72. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Offering several unrelated product lines in a single retail store. Scrambled Merchandising

73. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A large store (over 200,000 sq. ft.) offering a mix of 40% food products and 60% general merchandise. Hypermarket

74. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Competition between very dissimilar types of retail competitors. Intertype Competition

75. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Using the telephone to interact with and sell directly to customers. Telemarketing

76. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Positions retail outlets on two dimensions: breadth of product line and value added. Retail Positioning Matrix

77. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin In retailing strategy, the (1) goods and services, (2) physical distribution, and (3) communications tactics chose by a store. Retailing Mix

78. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Breakage and theft of merchandise by customers and employees. Shrinkage

79. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Selling brand-name merchandise at lower than regular prices. Off-Price Retailing

80. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The oldest retail setting, the community’s downtown area. Central Business District

81. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Consists of 50 to 150 stores that typically attract customers who live within a 5- to 10- mile range, often containing two or three anchor stores. Regional Shopping Centers

82. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A retail location that typically has one primary store (usually a department store branch) and 20 to 40 smaller outlets, serving a population of consumers who are within a 10- to 20- minute drive. Community Shopping Center

83. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A cluster of stores serving people who live within a 5- to 10- minute drive. Strip Location

84. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A huge shopping strip with multiple anchor (or national stores), a convenient location, and a supermarket. Power Center

85. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The process of growth and decline that retail outlets, like products, experience. Retail Life Cycle

86. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Utilize and integrate a combination of traditional store formats and nonstore formats such as catalogs, television, and online retailing. Multichannel Retailers

87. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Drug Sales

88. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin DTC Advertising Spending

89. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Does Advertising work? Four Categories of drugs account for 31% of advertising spending: Four Categories of drugs account for 31% of advertising spending: Oral Antihistamines, antidepressants, drugs to lower cholesterol, and anti-ulcerants Oral Antihistamines, antidepressants, drugs to lower cholesterol, and anti-ulcerants 1990-1998 visits to doctors remain stable at 14 million per year in 1999 jumped to 18 million 1990-1998 visits to doctors remain stable at 14 million per year in 1999 jumped to 18 million Advertising appears to have changed behaviour Advertising appears to have changed behaviour In 1989 45% of patients ask for a drug by brand name by 1995 it was 93% In 1989 45% of patients ask for a drug by brand name by 1995 it was 93% 10 Million people requested an advertised drug 10 Million people requested an advertised drug 35% ask their doctor for information on a particular drug and 20% asked to have the drug prescribed! The doctor prescribed the drug 75-84% of the time 35% ask their doctor for information on a particular drug and 20% asked to have the drug prescribed! The doctor prescribed the drug 75-84% of the time Celebrex and Vioxx are heavily promoted and cost over $2 a pill. Ibuprofen cost pennies and is just as effective Celebrex and Vioxx are heavily promoted and cost over $2 a pill. Ibuprofen cost pennies and is just as effective 145 million was spent advertising Vioxx causing sales to jump 300% to 1.5 Billion 145 million was spent advertising Vioxx causing sales to jump 300% to 1.5 Billion Summary DTC advertising has increased dramatically and has coincided with significant increases in sales of the advertised drugs Summary DTC advertising has increased dramatically and has coincided with significant increases in sales of the advertised drugs

90. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin To Do’s for Next Class Begin to study for Exam Begin to study for Exam Complete the assigned readings download through library Complete the assigned readings download through library