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Retail management book @ bec doms bagalkot mba


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Retail management book @ bec doms bagalkot mba

Retail management book @ bec doms bagalkot mba

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  • 1. RETAIL MANAGEMENT CHAPTER-1 RETAIL PRICINGA. IntroductionB. Retail Management SystemC. Retail Management Improves productivity and business performanceD. Designed for growing retailersE. Improves productivity and business performanceF. Affordable out of the box, with functionality to help provide a quick return on your investmentG. Grows with your businessH. Capable and Confident Consumers CHAPTER-2 RISK-BASED REGULATIONA. IntroductionB. Identifying thematic risksC. How we select firms for thematic risksD. Financial inclusionE. MIFIDF. Retail Loyalty Programs: seven points to ponderG. Client Relationship Management CHAPTER-3 RETAIL MARKETING STRATEGY CHAPTER-4 INTERNATIONAL RETAILINGA. IntroductionB. General Merchandise Retailing BSPATIL
  • 2. C. Food Retailers D. Non-Store Retailing E. Issues in International RetailingCHAPTER-5 IMPACT OF RETAIL MANAGEMENT IN THE GROWTH OF INDIA ECONOMY A. Definition and Scope of Retailing B. Types of Retail Operations C. The Emerging Sectors in Retailing D. Retailing Scenario- Global View E. Retail Shopkeepers F. Retail Sales CHAPTER-6 INTERNATIONAL MARKETING A. International Marketing Environment B. Retail Management Tips C. Winning at Store Management D. Retail Analytics E. Viewpoint on Retail - Retail Articles F. Retail Sales Management CHAPTER-7 RETAIL BUSINESS PLAN A. Introduction B. Retail Market Segmentation C. Relationship Marketing D. Integrated Relationship Management BSPATIL
  • 3. Chapter-8 PRICINGA. Questions involved in pricingB. DefinitionsC. Retail Location StrategiesD. New Development DriversE. Current TrendsF. Under All Is the Land BSPATIL
  • 4. CHAPTER-1 RETAIL PRICINGIntroductionRetail Management consists of Managing the sale of goods or merchandise from a fixed location,such as a department store or kiosk, or by post, in small or individual lots for direct consumption bythe purchaser. Retailing may include subordinated services, such as delivery. Purchasers may beindividuals or businesses. In commerce, a retailer buys goods or products in large quantities frommanufacturers or importers, either directly or through a wholesaler, and then sells smaller quantitiesto the end-user. Retail establishments are often called shops or stores. Retailers are at the end ofthe supply chain. Manufacturing marketers see the process of retailing as a necessary part of theiroverall distribution strategy.Shops may be on residential streets, shopping streets with few or no houses, or in a shopping centeror mall. Shopping streets may be for pedestrians only. Sometimes a shopping street has a partial orfull roof to protect customers from precipitation. Online retailing also referred to as B2C type ofe-commerce, and mail order are forms of non-shop retailing.Shopping generally refers to the act of buying products. Sometimes this is done to obtain necessitiessuch as food and clothing; sometimes it is done as a recreational activity. Recreational shoppingoften involves window shopping (just looking, not buying) and browsing and does not always resultin a purchase.The pricing technique used by most retailers is cost-plus pricing. This involves adding a markupamount (or percentage) to the retailers cost. Another common technique is suggested retail pricing.This simply involves charging the amount suggested by the manufacturer and usually printed on theproduct by the manufacturer.In Western countries, retail prices are often called psychological prices or odd prices.Often prices are fixed and displayed on signs or labels. Alternatively, there can be pricediscrimination for a variety of reasons, where the retailer charges higher prices to some customersand lower prices to others. For example, a customer may have to pay more if the seller determinesthat he or she is willing to. The retailer may conclude this due to the customers wealth, carelessness,lack of knowledge, or eagerness to buy. Another example is the practice of discounting for youthsor students.Retail Management System Store Operations allows you to better track andexpedite point-of-sale and business processes: i. Streamline business operations, including inventory, supplier management, and point-of-sale processes. BSPATIL
  • 5. ii. Make informed decisions with accurate data and powerful reporting tools. iii. Market, promote, and sell across multiple channels. iv. Expand easily to multi-store operations and e-commerce. v. Reduce POS system and operating costs.Retail Management Improves productivity and business performance i. Increase knowledge of operations. ii. Make fast, informed decisions. iii. Offer superior customer service. iv. Improve inventory and supplier management. v. Maximize cash-in per customer. vi. Minimize labor costs. vii. Reduce inventory costs and out-of-stocks. viii. Integrate credit card processing.Designed for growing retailers i. Set up and use easily. Retail Management System can be set up quickly, tailored to meet specific retail needs, and provides access to expert support and assistance from certified Microsoft Business Solutions partners. Built-in wizards and an intuitive user interface help managers and associates to learn point-of-sale procedures in minutes. ii. Track and manage inventory efficiently. Retail Management System eliminates the need to conduct inefficient, manual stock counts, saving time and reducing employee overhead. You can track and manage items across your business using any inventory method, including services, layaways, work orders, and back orders. Compatible inventory types include standard, serialized, kit, assembly, matrix, lot matrix, voucher, non-inventory, and weighed. iii. Streamline point-of-sale processes. With Retail Management System, associates can work with a customizable point-of-sale screen that lets them check prices, availability, and stock location instantly. Theyll be able to access complete customer information; handle multiple tenders and partial payments at checkout; BSPATIL
  • 6. and quickly create and process returns, backorders, sales quotes, work orders and layaways. Automated processes make it easy to balance multiple tenders efficiently and accurately, helping employees save valuable time. iv. Integrate and operate with your existing systems. Retail Management System is compatible with Microsoft Windows® 98 and later operating systems, and supports popular point of sale peripherals including printers, magnetic strip readers, bar code readers, and more.Improves productivity and business performance i. Increase knowledge of operations. Gain full visibility into store operations with daily sales graphs and journals that can be viewed and printed from any register. With Retail Management System, you can preview, search, and print journals by register, batch, and receipt number, as well as close out data accurately. Data can also be shared across multiple store locations to give you different views of your business. ii. Make fast, informed decisions. Access and analyze data across your entire business using powerful reporting and communications functionality. Drawing from detailed, current information, you can identify sales trends in every department, category, and season; evaluate operations and financials; track the return on investment of advertising and sales campaigns; set and monitor business policies across stores; and much more. iii. Offer superior customer service. Retail Management System equips your staff to respond quickly to customer needs, making it easier for you to turn a single purchase into a lasting and profitable customer relationship. Associates can expedite checkouts quickly, target customer preferences to offer up-sells and cross-sells, and implement automatic discounts for frequent shoppers. Customers receive the efficient, personalized service that builds their loyalty and boosts your revenues. iv. Improve inventory and supplier management. Replenish top-selling items efficiently and negotiate consistently lower purchasing costs by tracking item BSPATIL
  • 7. movement and vendor histories. You can also extend purchasing and fulfillment processes to the Web through e-fulfillment services.Affordable out of the box, with functionality to help provide a quick returnon your investment i. Maximize cash-in per customer. Use Retail Management System to make the most of every transaction: target customer preferences to suggest up-sells and cross-sells, and advertise other products at point of sale with onscreen graphical displays. Expand your customer reach and increase revenues with multi-channel marketing, catalog sales, and phone orders. ii. Minimize labor costs. Easy to learn and use, Retail Management System helps ensure managers and associates get up to speed quickly. Comprehensive functionality and shared data systems reduce the need to re-enter information, freeing your staff to focus on managing and selling more effectively. And with full visibility into business information, youll know when to staff up or cut back, and which associates bring in the highest revenues. iii. Reduce inventory costs and out-of-stocks. Maintain tight control over inventory with automatically generated purchase orders and stock levels. Centralized purchasing and in-store transfers enable you to replenish items efficiently and cost-effectively. Visibility into supplier histories makes it easy to select vendors who offer the best service and the lowest prices. iv. Simplify card processing and reduce transaction costs. Retail Management System helps provide quick access to authorizations and makes it easier to capture electronic signatures. Electronic Data Capture can accelerate card transactions by up to 600 percent. And, utilizing POSitive Technologies sister company POSitive Payment Solutions, Retail Management System also offers integrated card processing that includes substantial discounts on services and eliminates the need for additional card terminals. There are no charges for application or setup. Read more about Positive Payment Solutions.Grows with your business BSPATIL
  • 8. i. Expand easily. Ready to open a new store? With Retail Management System, you can protect your investment and keep the same software and systems as your business grows into multiple stores and retail channels. As you add customers and products to your system, flexible Microsoft SQL Server™ technologies let you store and manage virtually unlimited amounts of information. ii. Integrate with other solutions. Retail Management System integrates easily with a number of popular business applications, including Microsoft Business Solutions Financials, Microsoft Small Business Manager, third-party applications, and others. You also can integrate Retail Management System with PDA, mobile, and wireless solutions. iii. Invest in your business, not in IT support. Retail Management System does not require an extensive IT staff to set up and maintain, and adapts easily to meet specific retail needs. As your business changes and grows, your Microsoft Business Solutions partners can provide support and assistance with customizing, integrating, and scaling your solution. iv. Count on Microsoft. With Retail Management System, you can begin a long-lasting relationship backed by one of the worlds leading technology providers. Microsoft Business Solutions is a family of connected applications and services for small and mid-sized businesses, with years of experience delivering business applications and services known worldwide for top quality. To promote efficient, orderly and fair markets, both retail and wholesale; to help retailconsumers achieve a fair deal; and to improve our own business capability and effectiveness.Under this umbrella, we believe there to be four pillars essential to delivering a moreeffective and efficient retail market through which a fair deal for consumers can bedelivered:Capable and confident consumers. i. Clear, simple and understandable information available for, and used by, consumers. ii. Soundly managed and well capitalized firms who treat their customers fairly. iii. Risk-based regulation. BSPATIL
  • 9. Im conscious that there are significant prudential issues around too, the main issueswhich bear on the retail markets. Initiatives such as treating customers fairly and financial capability are part of thebroader picture designed to deliver these outcomes. And in all of this our emphasis is onoutcomes and thus on changing the behaviors of firms and consumers in the real world. So,ultimately, we want to measure the success of this strategy by looking at the difference itmakes to your customers, the consumers of financial services and products. In terms ofoverall regulatory approach, I should emphasize that our clear preference is to encourageefficient markets as the best means of providing quality goods and services to consumers.Only after market solutions have been exhausted should regulatory initiatives becontemplated.So how will we know that these outcomes have been achieved? Here are four generalpropositions. First, more engaged consumers will be actively thinking about their financial needsand doing something to address them - managing their money well and planning ahead forthe longer-term. Consumers will be active in educating themselves about financial productsand in seeking out information from a range of sources. Second, consumers collectively will exert greater competitive pressure in the marketby shopping around for the best deal, regularly reviewing their financial position andmoving from one firm to another when it makes sense to do so. Consumers will judge firmson the quality of the products and services provided, including how firms behave whenthings go wrong – the way in which firms deal with complaints, for example. Third, and following closely from my last point, consumers will feel much morepositive about their engagement with the industry; they will take well informed decisionsbased on clear and understandable information and will be clear about their ownresponsibilities in taking those decisions. Fourth, more consumers will be included in the financial services world. This is partlyabout capability but it is also about access. We recognize absolutely the central importanceof financial inclusion as part of this equation. BSPATIL
  • 10. Capable and Confident ConsumersFirst, the issue of consumer capability. There is no controversy about the nature of the problem. Increasing the level ofconsumer capability is more critical now than it has ever been. We live in an age whereresponsibility is passing from state to individual. Individuals are being asked to make moreand more financial decisions, many of which were previously taken for us in relation tohealth, or education, or pensions. But against this increasing requirement, the actualcapability of those who need to make financial decisions is too often inadequate, in terms ofbasic literacy and numeracy, as well as in respect of specific financial knowledge. We can all cite examples of this, so I will limit myself to just one. A study by theInstitute of Financial Services showed that eight from ten people did not correctly identifythe term APR as describing the interest rate and other costs of a loan. I suspect that ourbaseline survey of financial capability – more on which in a moment – will provide a decentfurther supply of such examples. So the problem of financial capability is immense, in terms of both the basicrequirements of literacy and numeracy which underpin financial capability; and in terms ofspecific financial knowledge.So how can we respond to this magnitude of challenge? As you know, FSA has been leading and co-ordinating the National Strategy forFinancial Capability. When the work began in 2003, we listened to those who cautionedagainst trying to address all parts of the problem at once. We and our partners -Government, industry, the media, the voluntary sector, and others - therefore examinedseven areas: schools, young adults, the workplace, families, retirement, borrowing andgeneric advice. Having undertaken a huge amount of pilot work to determine what practicalinitiatives will put us in a position to achieve the step change in capability that is required,we have started to move on to the next stage towards national delivery. The Financial Capability Steering Group met last month to take stock of the NationalStrategy and to consider options for the future. The Steering Group agreed to a set ofspecific priority projects on which to focus covering: BSPATIL
  • 11. i. schools ii. higher education iii. the workplace iv. maternity/paternity leaver resources v. FSA information campaigns vi. development and roll-out of the Debt Test - which is designed to provide guidance to individuals on whether they are at risk of becoming over-indebted vii. And further work on whether there is a commercial case for the delivery of generic advice. In addition, the Steering Group left open the possibility of wider rollout of initiativesto Young Adults not in education, employment or training, subject to the findings ofongoing pilots and an examination of the associated business case. Supported by a team ofspecialist advisers, we are now preparing business cases which will examine the publicpolicy and potential commercial benefits of taking these specific projects to nationalroll-out. The business cases will provide the basis for meaningful discussions with publicand private sector partners on sustainable funding and the other commitments fundamentalto making them happen – this includes, for example, access to both public and privatesector workplaces for the provision of financial capability seminars to the workforce. On timings, we want to be in a position by the end of the first quarter next year tohave clear delivery and funding plans in place to move to national roll-out. At the same time,we will also publish another central part of our work on financial capability, the results ofour baseline survey. This will describe and measure the state of financial capability in theUK, looking at peoples ability to manage money, make financial choices, plan ahead andget help. We will repeat the survey periodically to measure success in raising levels offinancial capability and we will, of course, be developing further success measures for theother specific priorities I mentioned. This aims to support new and innovative projects dedicated to financial capability ledby voluntary and community organisations. We have made available a minimum of £200Kfor projects running up until March 2007 with the majority of awards likely to be between£5,000-20,000. We were delighted to receive over 300 applications to the Fund from which BSPATIL
  • 12. a shortlist of applicants has been drawn up. We hope to announce the award winners beforethe end of year. We are extremely grateful for the support of BBA members in taking forward work onfinancial capability, including many contributions to the working groups. We have hadparticular support from Lloyds-TSB, with Eric Stobart chairing the Workplace Group and JimDredge energetically directing the programme of pilots, with full-time support from AlastairHogg of the Prudential.So we are now in a critical new phase as we work up the business cases. We are reaching thepoint when the rubber really hits the road on the funding and other support required tomake it all happen. As was ever the case with this initiative, that requires the proactiveinvolvement of government and the industry.Clear, Simple, Understandable Information Alongside the common desire for more capable and confident consumers, we mustensure that those consumers are given the information and advice that is both necessaryand relevant when making a financial decision. Just as you will be familiar with Principle 6of our Principles for Business essentially that firms should treat their customers fairly -Principle 7 explicitly states what we expect from firms when it comes to providinginformation: "Firms must pay due regard to the information needs of their clients andcommunicate information to them in a way which is clear, fair and not misleading." Thisranges from financial promotions in all guises, to product literature and covers allinstitutions, from small one man advisors to major retail banks. Good quality financial advice also plays an important role in ensuring that consumershave expert help in making a complex range of important financial decisions. The provisionof financial advice is a large industry, and with rising incomes and wealth, and evidence thatmany individuals are not investing enough for their retirement, there is significant scope forthe advice market to expand significantly. The challenge here for providers of advice is todemonstrate to more consumers that there is value to them in paying for these services. BSPATIL
  • 13. At the simplest level, this means a retail financial advice market that is providinggood quality, suitable advice to consumers. And that those consumers should be able torecognize when this is happening, and when it is not, and to respond accordingly. We are clear that the retail financial services market is not yet operating in aconsistently effective and efficient way. On the mortgages side, for example, our earlyfindings report a mixed picture in terms of standards. On the investments side, the marketis still changing. Both product providers and distributors face a range of challenges. Theyneed to adapt their business strategies to reflect a depolarized world. Some need to rebuildcapital and balance sheets. All this is challenging enough but comes at a time when theindustry overall is still coping with sluggish demand for investment products in weakmarkets and is trying to engage with consumers who still have low levels of confidence inthe sector. As regulator, we do not want to prescribe how the advice market should be structured.Rather, we want to allow firms to choose what advice they provide, and to allow consumersto choose what advice they want to take and how they pay for it. And we want consumers tobe able to understand the different types of advice that are available to them. That is why depolarization is largely a permissive regime and firms are free to developtheir business models in a more tailored way for their customer base, or they can continuetrading pretty much as they were before – albeit with improved disclosure and otheradjustments such as the requirement for independent firms to offer a fee option. As you would expect, we are going to conduct a review of how depolarization isworking in practice. The first stage is to check compliance with the new rules. Thereafter,and over longer time periods, we will review the extent to which firm and consumerbehavior has altered. We know that those who use our fact sheets, calculators and other web-basedmaterial find them to be helpful. But we also know that we need to do more to make thatmaterial more accessible and to promote its availability, including in partnership with otherssuch as the BBC. The current ‘mortgageslaidbare’ campaign is a hint of our new approach inthis area. We are part-way through the campaign, but we have already seen a verysignificant increase in traffic to our mortgage resources and we will feedback on the overall BSPATIL
  • 14. success of the campaign in due course. We are planning two further campaigns early in theNew Year to cover issues around pensions and A-day and to promote the various resourcesavailable to help consumers plan their finances effectively. Again, we will ensure that wemeasure the effectives of these campaigns in influencing consumer behaviorTreating Customers Fairly As I have set out, the fair treatment of customers by firms is a key part of the broaderpicture.As you know, our approach has been not to define precisely what constitutes "treatingcustomers fairly", but rather to challenge the senior management of firms to work this outfor themselves, taking into account the particular types of business that they undertake. Werecognized that many of you have already done or are in the process of carrying out a "gapanalysis", to identify areas of business where more needs to be done. Treating Customers Fairly needs to be embedded into the culture of a firm at all levels,so that over time it becomes business as usual. This is all very much a responsibility ofsenior management, not just a compliance issue. To help, we have produced a number of statements of good practice and case studiesto illustrate some of the considerations that senior management should take into account.We have published many of these on our website and further case studies on managementinformation, remuneration, complaint-handling and others were published last month. These examples reflect real life scenarios and provide material which firms may finduseful as background when considering how best to ensure that they treat their customersfairly. In particular, they are intended to illustrate the kinds of questions that firms shouldconsider in particular sets of circumstances. Inevitably, the issues raised are not exhaustiveand the practices observed are not prescriptive – treating customers fairly is not somethingthat lends itself to box-ticking.We have also suggested that a useful starting point is to think of treating customers fairly interms of the product life cycle. So depending on the precise nature of a firms business thiscould mean addressing the fair treatment of customers at any of the following stages:product design and governance; identifying target markets; marketing and promoting the BSPATIL
  • 15. product; sales and advice processes; the remuneration of sales forces and advisers; aftersales information; and complaints handling. As part of the next stage, we will also be looking at quality of advice. The aim will beto consider how we can measure and improve the overall quality of advice, rather thanlooking at specific products or examples where the advice process goes wrong. We will testcurrent practices, looking at a range of areas including training and competence; thesystems and controls that support good advice; and entry standards for advisers and firms.CHAPTER- 2RISK-BASED REGULATIONIntroduction Which brings us to the final Pillar of our retail strategy? Let’s hark back to the earlierremarks about our preference for market-based solutions over regulatory intervention.Proportionate, risk-based regulation is what brings this to life – helping us determine whereour resources are best deployed to address the biggest risks that carry the highest impactwere they to crystallize.For example, we acknowledge that the mortgage and general insurance intermediariesmarket has undergone significant changes and we have been keen to stress that we havetaken a graduated approach to supervision in the first year of the regimes. That is, in themain we are telling firms what they need to do to improve compliance levels which wellcome back and check and it is only in the more serious cases that well do further BSPATIL
  • 16. investigation. As these changes become more familiar to the market our approach willbecome firmer. We deal with emerging retail risks in two ways. First, where supervisors identify riskswithin the individual firms they supervise, they may take steps to mitigate them with thefirm concerned. Second, we seek to identify risks arising across different types of firms andmarket sectors and carry out work to mitigate them where our risk-based approach justifiesdoing so – so called thematic work. I’d like to spend a few minutes describing our approachto this.Identifying thematic risks Risks in the retail market take many forms; risks to consumers, firms, sectors, or themarket as a whole. We identify emerging retail risks in a number of ways, including: i. market data; ii. current trends and developments in the markets; iii. financial promotions; iv. issues identified through our discussions with firms; and v. Risks identified by our sector teams, supervisors, contact centers, and other stakeholders. We look for flags like new or unexpected developments. For example, an unusualsurge in retail sales of a product given market conditions might prompt us to make furtherenquiries about how this produce is being sold. Our monitoring of financial promotions isalso an important source of intelligence. We priorities our workload to focus on the most significant risks. Where adevelopment could indicate a new risk, we will often do a small amount of work to find outmore and help us identify whether action is warranted. In around 60% of the issues weinvestigate no further action is taken. If we do decide regulatory action is justified, we consider what tools to use in light ofthe circumstances of each risk. Some of the key risks we have identified and on which wedecided to do further work include: BSPATIL
  • 17. i. Payment Protection Insurance ii. Mortgage Disclosure Documents iii. Lifetime mortgages iv. Contracting out of the state second pension v. Premium reviews and variable interest rates; and vi. Income WithdrawalHow we select firms for thematic risks Thematic work involves looking at a particular issue or set of issues across sample offirms.When we contact firms they sometimes assume that, because they have been selected, thisimplies that we have already decided that there is a problem in that firm. This is not thecase. The decision takes into account a number of factors, including: i. How many – and what type of – firms are active in the market or product that we are interested in. ii. The desire to find a sample of firms that is representative of the various sizes or structures in the market. iii. The desire to create a representative sample. This will include some firms which we think are likely to set the highest standards in terms of systems and controls and practices more generally in that area. iv. Whether any of the firms are – or have recently been – involved in any other areas of our work, so that where possible thematic work is spread across firms. Achieving this spread can be a particular challenge when it comes to the largest groups. Where firms have dedicated supervisors, the supervisor will be involved in decisions about which thematic projects the firm takes part in. We realize that this "air traffic control" of thematic work and the burden it can imposeis of concern to firms and we are committed to holding regular dialogue with the industry toset out an indicative timetable for our future thematic work. Our Business Plan, which willbe published in January, provides an ideal peg for such a discussion. We are also examiningwhether the process for communicating the outcome of thematic work to individual firmsand industry trade associations can be improved. As you will have gathered from my BSPATIL
  • 18. description, thematic work will remain a key supervisory tool, allowing us to respondquickly to emerging risks.Financial inclusionI said at the start that financial inclusion is an important consideration in our work. The FSAs position on this is very clear. Under the public awareness objective, theFSA has a statutory responsibility for promoting public understanding of the financialsystem. This objective is intended to be interpreted quite generally.So while the FSA has nostatutory responsibility for financial inclusion, we are absolutely mindful of the impact ofour work on all groups.We see our role in this as twofold. First, in our regulation of the industry we want to avoid creating barriers to inclusion,including providing assistance to those taking innovative approaches to understand therelevant regulatory issues and possible solutions. When authorizing the first purely Islamicbank in Europe we worked constructively with the senior management of the Islamic Bank ofBritain on such issues. We have been very active in working with third sector lenders, for example indelivering a proportionate, lighter touch regulatory regime for credit unions and in workingwith the Community Development Finance Association to see if a code of practice forCommunity Development Finance Institutions is the best way forward for theseorganisations. And we have, over the last eighteen months, been leading a multi-agencyinitiative to defuse the identification issue’. We welcome the BBAs contribution to the workof the Joint Money Laundering Steering Group, whose new Guidance is published next year.This is expected to include a wider range of options for people to prove their ID so that, bythe end of next year, ID should be a significantly reduced barrier to financial inclusion. Second, in our consumer awareness remit we aim to help consumers become moreconfident and capable through the National Strategy for Financial Capability and our widereducation and information work about which I spoke earlier. BSPATIL
  • 19. So the FSA is just one partner in the work being done here. The Banking industry, ledby its trade association, is of course very active, in particular in addressing the challengelaid down by Government to make significant progress towards halving the number ofunbanked households in the UK within 2 years. In partnership with the BBA, we haverecently revised our guide to Basic Bank accounts. There are many further examples ofindustry activity in this area. We look forward to continuing to work with banks, the BBAand other parties to ensure the difficulties and barriers faced by those who are excludedfrom financial services can be overcome. Finally, a very brief word about two other significant challenges in the retail marketsarea, not least in respect of the impact of European legislation.MIFID It is hard to exaggerate the pervasive effect which MiFID will exert over financialmarkets and financial institutions and it is important to recognize that this is not awholesale business issue. We will do all we can to make the timetable pressures more manageable. To help givefocus to firms preparatory efforts, pending publication of the Commissionsrecommendations and then of our CPs on implementation, we plan to publish in the nextweek or so a "Planning for MiFID” document designed to help firms get to grips with theirplanning for implementation despite the continuing debate over Level 2 measures. I urgeyou to study it.Strategy challenges of A-Day Another major challenge facing the industry is A-Day, in other words 6 April 2006,when the new pension tax simplification rules take effect. Last September my colleagueSarah Wilson warned firms to make sure they review the business and strategic impact ofA-day. A-Day is very significant for those of you who deal with the complexities andintricacies of pensions on a regular basis, and who advise consumers on a product whichthey find particularly complex. It is clear that much work is going on in many firms but, with BSPATIL
  • 20. just over four months to go, both firms and advisers now urgently need to start planning forthe changes if they have not already done so. And a further dimension, of course, is that the government is expected to consult onproposals to introduce a new regulated activity for personal pensions, meaning that the FSAcould be regulating the sale of Self Invested Personal Pensions from April 2007.Retail Loyalty Programs: seven points to ponder The shape shifter: Customer knowledge is the single most powerful pay-off of aLoyalty program. Theres a load of analytical approaches beyond RFM for retailers wishing toleverage customer knowledge. Not all of these appear to be easy to adopt and marketersshun analytics more out of a lack of understanding of what it can do for them. Get theexperts in, listen to them – youll find that theres ROI in it for you. The Painter: Building a loyalty program concept requires not just sound strategicthinking, but loads of rigor. The success lies in being able to detail out solutions to over100 decision points that a loyalty program concept needs to cover. You cannot be reactingto situations as they happen! The Magician: The loyalty card is the most familiar face of a loyalty program. Thereare many options here from Mag Stripe to RFID, stand alone to coalition, but the key point isthat launching a card does not a loyalty program make. This space is littered with failedprograms that were launched as a card and little else. The Neuromancer: The software on which your program depends needs to bedesigned carefully, and should handle all aspects of your program. Retail POS solutionsoften offer a basic loyalty module – these are usually inadequate! The point: Dont designyour program to fit the software. The Band: The team that drives the program internally needs to be composed ofskills that are difficult to find in any market. Direct marketing, CRM and Loyalty skills needto be nurtured and the team needs top management support. Importantly, you will need torely on the right partners to come in with specific skills. BSPATIL
  • 21. The Campaigner: Campaign management practices are better established amongstthe banks than retailers, but here is where the real pay-off is. Leverage campaignmanagement tools as they will allow you to run hundreds of targeted campaigns whichreally do pay off, as compared to a few festival offers and generic promotions. The Timekeeper: Set expectations right. To launch a program AND expect a jump insales within 6 months is pushing it. Building up a quality member base (no massenrolments), setting up the back end, campaign management – these all take time andeffort, and the metrics to measure success take time to show the returns.Business Skills Good business management is the key to success of any business house. It is acreative force which helps in the optimum utilization of resources of an organisation. Theprocess of managing a business comprises several intertwined elements by which the goalsand objectives of the organisation are achieved. These elements or functions include,promoting and marketing the product produced by the firm; making the product availableto prospective consumers through proper distribution channels; managing the accounts andfinances of the firm; protecting its intellectual property, etc. It also involves creatingharmony among the working of various departments and divisions of the firm. Managinghuman resources and managing relationship with the customers are the most importantelements in the whole process of business management. An entrepreneur with good managerial skills can convert the disorganized resources ofmen, money, material and machinery into a productive business enterprise. In a modernbusiness, different types of skills are required in order to effectively manage anorganisation in a dynamic environment. These skills includeTechnical skills Refer to the ability and knowledge in using equipment, techniques and proceduresinvolved in performing specific tasks. An entrepreneur must know the skills which should beemployed in his enterprise and must understand both the role of each skill employed andthe inter-relationship between skills. BSPATIL
  • 22. Human skills Consist of the ability to work effectively with other people both as individuals and asmembers of a group. Such skills are required by an entrepreneur in order to winco-operation of others and to build a base for a successful work team.Conceptual skills Comprise the ability to see the whole organisation and the inter-relations between itsparts. Such skills help the entrepreneur to conceptualize the environment and to take abroad and farsighted view of the organisation. These skills include the competence tounderstand a problem facing the organisation in all its aspects and solving the problem. It isnecessary for rational decision making Managing is a dynamic and an on-going process which continues to operate so longas there is an organized action for the achievement of group goals.Client Relationship Management Client Relationship Management (CRM) means managing your client. It is a businessstrategy which is used to create and sustain long-term, profitable client relationships. Itmeans understanding customers using quantitative and qualitative research, segmentingthem and articulating positioning statements for each of the segments based on theirexpectations and contribution to profits. It is necessary in order to retain old customers,acquire new customers and improve profitability from the existing client base. The Conceptof CRM makes its origin from the changed approach to business management andprofitability. In other words, the traditional approach of making one-time sales is beingreplaced with making long-term commitments to customers. The new approach putsforward the need to have a proper customer/client relationship management (CRM) strategyin the organisation. It revolves around the customers. It is a set of processes of creating,communicating and delivering value to customers and for managing customer relationships BSPATIL
  • 23. in ways that benefit the organization and its stakeholders. It is a comprehensive strategy ofacquiring, retaining and partnering with carefully targeted customers to enhance long-termrelationships with them. This management approach seeks to create superior value for thecompany and the customers. Client relationship and satisfaction is a critical dimension of every business initiative.Foundation of a successful business lay in its successful client relationship management.Clients satisfaction with the performance of the company depends on how well theirprofessional and personal needs are addressed to by the company. Clients pay attentionnot only on what the company does but also on how well it does it. Hence, clientsperception of service quality needs to be properly managed. An efficient and effective CRM strategy is beneficial to an organisation in severalways:- i. Most importantly, it helps the company to build and maintain a loyal customer base. ii. It can have more volume of sales by selling more to the group of those customers with whom it has maintained a good relationship and are satisfied with the firm and its quality of services. iii. It overtime incurs lower costs in serving those customers because of their Increasing confidence and lesser doubts or questions about the product. iv. It can resort to lesser promotional campaigns in order to attract those customers. It also enjoys the benefit of retaining its employees if it has a stable base of satisfied customers. Besides, customers also want to remain loyal to a firm because they also enjoy benefits from such long-term association. It gives them a feeling of trust and confidence in the firms services along with a sense of a reduced anxiety about the product. Overtime, in a long-term customer-firm relationship, a service provider may actually become a part of the customers social support system. Such customers may BSPATIL
  • 24. even receive special treatment from the organisation in the form of: - getting the benefit of doubt; being given a special deal or price; getting preferential treatment etc. A successful CRM initiatives start with a business philosophy that aligns companyactivities around customer needs. The level of professionalism, listening skills, availability,responsiveness, reliability, etc form an important part of the client relationship management.CRM covers all the methods and technologies used by the companies to manage theirrelationship with their clients. The process of CRM includes:- i. Identifying the factors important to clients ii. Promoting a client-oriented philosophy iii. Adopting client based measures iv. Developing end-to-end processes to serve the clients v. Providing successful client support vi. Handling client complaints CRM virtually had its beginnings in Sales Force Automation (SFA) which is a process ofproviding the sales force of a company with technology support in order to improve theefficiency of the selling process. The main benefits of SFA are:-the improvement incustomer service by helping the sales force responds quickly & accurately; improvement insales force productivity; and better management control and visibility of the sales process.Generally, CRM works at two levels Operational CRM, also known as “front office” CRM, provides support to basic businessprocesses such as sales, marketing, services, etc. It involves areas where the customer is i. Directly in contact with the company, these contacts are classified into two: - (i) Inbound contact are the ones in which a customer accesses the company support center or website or meets the company employees. (ii) Outbound contact are the ones in which a sales representative of the firm makes direct sales to the customers or makes a sales call or e-mails a marketing message. These direct interactions are referred to as customers touch points. Each BSPATIL
  • 25. interaction with a customer is generally added to a customers history and company can retrieve such information from the database as and when needed. ii. Analytical CRM, also known as “back-office” or “strategic” CRM, involves understanding the customer activities that occurred in the front office. It involves retaining existing customers and providing timely and regular information to them. It uses the technology to compile customer data to facilitate analysis and develop new business processes to refine business decisions. Product-Centricity is the key challenge that an organisation needs to overcome, in orderto have a successful client relationship management. In other words, an organisation needsto become client-centric, because it will allow for a consistent interaction with its mostimportant constituency,’ The Clients. BSPATIL
  • 26. CHAPTER-3RETAIL MARKETING STRATEGY To develop a finely honed retail strategy, you often need to undertake primary orsecondary market research. You need to analyze your competition, their products orservices and their approach to the market. You need to use this information to shape yourretail market strategy and then develop go to market messaging and retail marketingcampaigns. Sometimes you need to recruit the right partners. Your sales force needs todevelop key account plans and execute them efficiently. Often they need retail specific toolsto help them do this. Finally, they need the industry training so that they can “talk the talk”and “walk the walk”. Faced with these needs, many of the world’s leading technology vendors turn toMartec International for assistance. Companies like Microsoft, SAP, NCR, Hewlett Packardand many others use Martec’s expertise and tools to enhance their go to market activities.They come to Martec because we blend many years of retail expertise with a deepknowledge of what a sales person needs to do to be successful. We show them how to usetheir retail knowledge and tools to close business. Martec provides primary and secondary market research services, as well aspublishing studies of the retailers such as our UK Top 100 Retailers IT in Retail Report. Wesupply a comprehensive database of UK and North American retailers to support marketingactivities and provide a wide range of tools to help sales people develop account plans andexecute sales campaigns more effectively. Most marketing strategies are geared to ensuring you beat your competitors. But youdont usually expect to eliminate competition entirely. Thats what broadband DSL provider New Edge Networks has apparently done with itsunique small-market approach - although the company has had to revise its strategies inrecent months, like everyone else, and diversify to adapt to tough market conditions. Based in Vancouver WA, New Edge started by offering DSL access services in smallcities and towns and semi-rural areas across the U.S., mainly to business customers. Its BSPATIL
  • 27. co-located in just under 600 Telco central offices (COs) in 350 cities and towns in 29 states.The footprint takes in a population of about 30.6 million. Most of the focus is on small cities. Nearly half of New Edges markets have apopulation of less than 50,000, many of them one-CO towns. In many of those COs, not even the local ILEC has competitive DSL offerings, andwhere the ILEC does offer service, it is typically more focused on the residential market. Clearly there are reasons why the New Edge approach has not attracted a host ofcopycats, the most obvious being that prospective customers are simply thinner on theground in small communities than they are in big cities. To pursue such a strategynationally as New Edge has done also means the company had to install more central officeinfrastructure and spend more on connectivity than most CLECs to reach the same sizecustomer base.But there is another side to the equation, says New Edge president, CEO and co-founderDan Moffat. "We wanted to go into markets where others werent," Moffat explains. "In metromarkets, youd typically find Covad, North Point and Rhythms, probably others too, plus theILEC all in the same CO. In most of our markets, its just us and the ILEC."Its clear now, withthe demise of North Point and with Rhythms recent troubles, just how cut-throatcompetition has been in those larger markets. Not that it hasnt been tough in smallermarkets too. While New Edge did not have to contend with deep-pocketed nationalcompetitors like North point and Covad - well, formerly deep-pocketed - it did meetsmaller rivals.Moffat characterizes them as regional players. They included Jato Communications, VectrisCommunications and Connect South Communications. But all three have now retired fromthe field of battle. The mistake too many DSL providers made, Moffat says, was blowing alltheir capital on roll-outs, leaving nothing for marketing through the tough times. The other reason New Edge adopted its small-market strategy is that Moffat, who hadworked extensively with independent telcos as a consultant, knew that contrary to BSPATIL
  • 28. expectations, demand for broadband services was high in small communities.” People inthese markets want the services just as badly as people in metro markets," Moffat says."Maybe more so." For many people in small markets, he notes, living there is a work- andlife-style choice. But to get those benefits, they sacrifice easy access to goods and services,entertainment - and customers. So many see availability of broadband services as evenmore vital as people do in larger markets. "For those," Moffat says, "[broadband] opens up awhole new window on the world." Finally, despite the obvious concentration of big company headquarters in a relativelyfew major markets that New Edge avoids, Moffat notes that 15 per cent of major nationalcompanies have bases of operation within his footprint. New Edge had a pretty good ideahow to market services in small communities because of Moffats experience with smalltelcos. He isnt prepared to spill the beans on all his secrets, but he does mention a few. First, New Edge adopted a pragmatic wholesale-retail business model. The preferenceis always to go into a new market with a good, strong local ISP partner. "You want thepeople who go for coffee [with prospective customers] or sit with them on local Chambersof Commerce," Moffat explains. "People well entrenched in the community." But where itcant find a strong and willing partner - some communities didnt even have local dial-upservice when New Edge came to town - it has for the last three months been able to offerISP services itself. Moffat also talks about the need for "guerilla tactics" as opposed to "carpet bombing"when marketing in smaller communities. "In a metro market," he says, "you do theroll-through at about 50,000 feet - usually with a big media blitz. But with our markets,were more specific and targeted." "There is much less reliance on mass media. Themarketing is usually done more through lists and direct mail and inside (telephone) sales.And it relies heavily on local knowledge which we mainly get from our partners." Local partners always help design the campaigns, though New Edge does have its owntemplates for small-town marketing drives. Local partners also share marketing costs,usually splitting it 50-50 with New Edge. "Theyve got to have some skin in the game,"Moffat says. But as relatively successful as New Edge has been with this fairly unique BSPATIL
  • 29. strategy on the broadband DSL side, it likely would not have survived if it had relied entirelyon that business. Luckily, one of the requirements of a national small-market strategy is that you needa fiber ring network to backhaul traffic from all those little markets to the Internet - orwherever. New Edges backbone includes 18 regional access points. The company had been using it all along to offer virtual private network (VPN), LANinterconnection and related services to regional and national enterprise customers. Recentlyit realized these services were actually growing faster than broadband DSL. In fact, they nowaccount for more than 50 per cent of New Edges revenues. So a month and a half ago, thecompany announced it was scaling back its aggressive plan for rolling out new markets - atone time it had intended to be in 1,200 COs by the end of 2000. It also laid off 55employees and refocused operations to help it take advantage of the wide area servicesmarket. Does this mean New Edges small-market DSL strategy really failed. Moffat doesntsee it that way. Theres no question, he says, that demand is still there and will continue togrow. The drying up of capital markets has had two important impacts, though. It means awider roll-out by New Edge is out of the question right now. But it also makes it difficult orimpossible for any new competitor to enter its markets. And that means New Edge in effecthas a competition-free zone. When capital markets do loosen up again, its position may bevirtually unassailable. BSPATIL
  • 30. CHAPTER-4INTERNATIONAL RETAILINGIntroductionInternational Expansion of Retailers In order to gain competitive advantage and to increase sales and profits, retailers arerapidly expanding internationally. Among leading retailers conquering international marketsare Wal-Mart (U.S.), Metro AG (Germany), Sears Roebuck (U.S.), followed by a number ofGerman groups—Rewe, Edeka, and Aldi.International Retailing Defined All activities involved in selling products and services to final international consumersfor their personal consumption. It involves operations of international retailers beyondhome-country borders, along with operations of local retailers in different countriesworldwide. BSPATIL
  • 31. Retail Formats Variations in Different Markets: There are three main retail formats: generalmerchandise retailing, food retailing, and non-store retailing.General Merchandise Retailing i. Specialty Stores, stores that offer a narrow product line and wide assortment, category include clothing stores, bookstores, toy stores, etc. Represent the main retail format in developing countries, but are popular in developed countries as well ii. Specialized Markets, large markets that contain specialty stores specializing in a particular product category; exist in both developed and developing countries. iii. Department Stores , large stores that offer a broad variety of products, as well as a wide assortment. Although department stores have suffered losses lately in North America and many appear to be retrenching, they abound both in Western and Eastern Europe, and are very popular in Asia. iv. General Merchandise Discount Stores, stores that sell high volumes of merchandise, offer limited service, and charge lower prices. All-purpose discount stores like Wal-Mart offer a wide variety of merchandise and limited depth. Category specialists (category killers) like Staples and Toys ‘R Us carry a narrow variety of merchandise and offer a wide assortment. v. Off-Price Retailers, retailers that sell brand name and designer merchandise below regular retail price; they usually sell overruns, irregular products and products from earlier seasons. Off-price retailers are very popular in the United States and Canada and are rapidly catching on in the rest of the world. vi. Catalog Showrooms, retailers that offer high-turnover, brand name products at discount prices. Customers usually order from a catalog in the showroom where the product is only displayed, then pick up the goods at a designated location. Ikea has pioneered the catalog showroom concept around the world.Food Retailers BSPATIL
  • 32. i. Conventional Supermarkets, self-service retailers with high annual sales; abound worldwide. ii. Superstores , large food retailers that sell food, drugs, and other products. In this category are: combination stores that sell foods and drugs, which are popular in the U.S., and hypermarkets, which combine supermarket, discount, and warehouse retailing principles, which are popular in the rest of the world, especially in Europe and Latin America. iii. Warehouse Clubs or Wholesale Clubs, stores that require members to pay an annual fee and operate in low-overhead, warehouse-type facilities, offering limited lines of brand name and dealer-brand groceries, apparel and other goods at a discount. iv. Convenience Stores, small retailers located in residential areas; carry limited lines of higher-turnover necessities. While the formats differ, convenience stores abound in both developing and developed countries.Non-Store Retailing i. Internet Retailing,(also known as interactive home shopping or electronic retailing): a venue for selling merchandise through the Internet; includes both the new dot-com companies along with traditional retailers attempting additional market penetration using the Internet. ii. Vending Machines, retailing format that has become very popular, with extent of use varying from country to country—they are particularly popular and omnipresent in Japan. iii. Television Home Shopping, a venue for selling merchandise to consumers in their homes using cable channels. Examples of television home shopping are infomercials and direct response advertising, popular in North America and Europe, and becoming increasingly popular in Asian markets. iv. Catalog Retailing and Direct Mail Retailing, a venue for selling merchandise to consumers using catalogs and other types of direct mail. It allows for the international expansion of retailers, but must be adapted to local market needs BSPATIL
  • 33. and practices. There are many obstacles to catalog retailing in developing countries: deficient telephone service, unreliable mail service, and low income, among others. v. Direct Selling, a retailing venue whereby a salesperson, typically an independent distributor, contacts a consumer, demonstrates product use and benefits, takes orders and delivers the merchandise. Direct selling firms are most active in the growth markets of Southeast Asia, Central and Eastern Europe, and Latin America. Recently, due to the negative publicity surrounding direct selling practices, China has banned all direct selling operations. vi. Network Marketing , variation on direct selling, involves signing up sales representatives to go into business for themselves with minimal start-up capital. Their primary task is to sell more "distributorships" and merchandise. Network marketing is growing rapidly, especially in emerging markets.Issues in International Retailing i. Legislation and Regulation local governmental regulations differ from one market to another. Legislation has a profound impact on a firms operations through regulations that restrict the firms marketing strategies in the target market. ii. Taxation and Cross-Border Shopping in countries where consumers are not charged duties for products they purchase from a neighboring country, consumers purchase decisions become driven by tax differences, rather than by differences in producer prices. This may cause reduced profits for domestic retailers. iii. Variation in Retail Practices Consumer Perspective, retail practices vary from one market to another depending on consumer practices and preferences in the market. In the United States, for example, consumers purchase products in bulk and less frequently. In Japan and in most European countries, consumers purchase products in smaller quantities and on a daily basis. BSPATIL
  • 34. iv. Variation in Retail Practices Sales peopl e and Management sales service differs from market to market, ranging from extremely friendly to curt and even rude salespeople. Some stores can charge an entrance fee for people shopping there, while other stores require a particular dress code of their customers.CHAPTER-5IMPACT OF RETAIL MANAGEMENT IN THE GROWTH OF INDIA ECONOMY BSPATIL
  • 35. Definition and Scope of Retailing The word retail is derived from the French word retailer, meaning to cut a piece off or to break bulk. In simple terms, it implies a first-hand transaction with the customer. Retailing can be defined as the buying and selling of goods and services. It can also be defined as the timely delivery of goods and services demanded by consumers at prices that are competitive and affordable. Retailing involves a direct interface with the customer and the coordination of business activities from end to end- right from the concept or design stage of a product or offering, to its delivery and post-delivery service to the customer. The industry has contributed to the economic growth of many countries and is undoubtedly one of the fastest changing and dynamic industries in the world today.Types of Retail Operations Retail operations enable a store to function smoothly without any hindrances. The significant types of retail operations consist of: i. Department store ii. Specialty store iii. Discount/Mass Merchandisers iv. Warehouse/Wholesale clubs v. Factory outlet Retail Management System targets small and midsize retailers seeking to automate their stores. The package runs on personal computers to manage a range of store operations and customer marketing tasks, including point of sale; operations; inventory control and tracking; pricing; sales and promotions; customer management and marketing; employee management; customized reports; and information security. BSPATIL
  • 36. The Emerging Sectors in Retailing Retailing, one of the largest sectors in the global economy, is going through a transition phase not only in India but the world over. For a long time, the corner grocery store was the only choice available to the consumer, especially in the urban areas. This is slowly giving way to international formats of retailing. The traditional food and grocery segment has seen the emergence of supermarkets/grocery chains (Food World, Nilgiris, and Apna Bazaar), convenience stores (Convenio, HP Speed mart) and fast-food chains. It is the non-food segment; however that foray has been made into a variety of newsectors. These include lifestyle/fashion segments (Shoppers Stop, Globus, Lifestyle,Westside), apparel/accessories (Pantaloon, Levis, Reebok), books/music/gifts (Archies,Music World, rosswords, Landmark), appliances and consumer durables (Viveks, Jainsons,Vasant & Co.), drugs and harmacy (Health and Glow, Apollo). The emergence of new sectors has been accompanied by changes in existing formatsas well as the beginning of new formats: i. Hyper marts ii. Large supermarkets, typically 3,500-5,000 sq. ft iii. Mini supermarkets, typically 1,000-2,000 sq. ft iv. Convenience stores, typically 750-1,000sq. ft v. Discount/shopping list grocer The traditional grocers, by introducing self-service formats as well as value-addedservices such as credit and home delivery, have tried to redefine themselves. However, theboom in retailing has been confined primarily to the urban markets in the country. Eventhere, large chunks are yet to feel the impact of organized retailing. There are two primaryreasons for this. First, the modern retailer is yet to feel the saturation effect in the urbanmarket and has, therefore, probably not looked at the other markets as seriously. Second,the modern retailing trend, despite its cost-effectiveness, has come to be identified withlifestyles. BSPATIL
  • 37. In order to appeal to all classes of the society, retail stores would have to identify withdifferent lifestyles. In a sense, this trend is already visible with the emergence of stores withan essentially `value for money image. The attractiveness of the other stores actuallyappeals to the existing affluent class as well as those who aspire for to be part of this class.Hence, one can assume that the retailing revolution is emerging along the lines of theeconomic evolution of society.Retailing Scenario- Global View Retailing in more developed countries is a big business and better organized thanwhat in India. According to a report published by McKinsey & Co. along with theConfederation of the Indian Industry the global retail business is a worth a staggering US$6.6 trillion. In the developed world, most of it is accounted for by the organized retail sector. The service sector accounts for a large share of GDP in most developed economies.And the retail sector forms a very strong component of the service sector. In short, as longas people need to buy, retail will generate employment. Globally, retailing is acustomer-centric with a emphasis on innovation in products, processes and services. With total sales of US$ 6.6 trillion, retailing is the world’s largest private industry,ahead of finance and engineering. Some of the world’s largest companies are in this sector:over 50 Fortune, 500 companies and around 25 of the Asian Top 200 firms and retailers.Wal-Mart, the world second largest retailer, has a turnover of US$ 260 billion, almostone-third of India GDP. Retailing in India is gradually inching its way to becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping. Modern retail has entered India as seen in sprawling shopping centres, multi-storeyed malls and huge complexes offer shopping, entertainment and food all under one roof. The Indian retailing sector is at an inflexion point where the growth of organized retail and growth in the consumption by Indians is going to adopt a higher growth trajectory. The Indian population is witnessing a significant change in its demographics. A large young working population with median age of 24 years, nuclear families in urban BSPATIL
  • 38. areas, along with increasing working-women population and emerging opportunities in the services sector are going to be the key growth drivers of the organized retail sector.Big in size and turnover, Indian retailing industry is characterized by certain attributes. The network of retailers reaches every nook and corner of the country. So any product produced anywhere in the country can be easily accessed by the buyers from any location. Thus the spatial convenience of Indian retailers is vary high. Secondly, in India the retailing industry is an unorganized lot consisting of, in most of the cases, small entrepreneurs. And the virtual omnipresence of the Indian retailer can be attributed to these small entrepreneurs only. The second attribute gives rise to the following characteristics: Power of the retailers, as such is very less, and in many cases it is negligible. This weakness has been exploited by the manufacturers and the stronger partners of the marketing channel. The retailers, in general, abide by the terms and conditions set by the manufacturers and other "big brothers" of the channel. The manufacturers cannot directly reach all retailers in a particular geographical area. Therefore, the manufacturers cannot maintain the desired relationship with the retailers, which in turn, make management of the channel complicated. This also makes the possibility of a direct feedback loop from the retailers almost remote. Therefore, the member operating between the manufacturers and retailers become more powerful as they can block the channel of communication between the two. So the dependence of retailers on other channel members increases to a high extent. Thus the participation of retailers in the flows of marketing mix becomes lower than desired. The financial strength of the Indian retailers, in general, is very low and hence the investment capabilities. This makes the retailers more dependent on the other channel members. However, these characteristics are peculiar to the small retail outlets and may not be present at every kind of retail level.Retail Shopkeepers BSPATIL
  • 39. India has sometimes been called a nation of shopkeepers. This epithet has its roots in the huge number of retail enterprises in India, which totaled over 12 million in 2003. About 78% of these are small family businesses utilizing only household labour. Even among retail enterprises that employ hired workers, the bulk of them use less than three workers. Indias retail sector appears underdeveloped not only by the standards of industrialized countries but also in comparison with several other emerging markets in Asia and elsewhere. There are only 14 companies that run department stores and two with hypermarkets. While the number of businesses operating supermarkets is higher (385 in 2003), most of these had only one outlet. The number of companies with supermarket chains was less than 10.Retail Sales Retail sales, which amounted to about Rs7, 400 billion in 2002, expanded at an average annual rate of 7% during 1999-2002. With the upturn in economic growth during 2003, retail sales are also expected to expand at a higher pace of nearly 10%. In a developing country like India, a large chunk of consumer expenditure is on basic necessities, especially food related items. Hence, it is not surprising that food, beverages and tobacco accounted for as much as 71% of retail sales in 2002. The remaining 29% of retail sales are non-food items. The share of food related items fell over the review period, down from 73% in 1999. This is to be expected as, with income growth, Indians, like consumers elsewhere, spent more on non-food items compared with food products. Sales through supermarkets and department stores are small compared with overall retail sales. However, their sales grew much more rapidly (about 30% per year). As a result, their sales almost tripled during this time. This high acceleration in sales through modern retail formats is expected to continue during the next few years with the rapid growth in numbers of such outlets in response to consumer demand and business potential. BSPATIL
  • 40. Government Policy There has been vigorous opposition to foreign direct investment (FDI) in retailing from small traders who fear that foreign retailing companies would take away their business, lead to the closure of many small trading businesses and result in considerable unemployment. Given the political clout of the small trading community, because of their enormous numbers, the government has barred FDI in retailing since 1997. Hence, at present, foreign retailers can only enter the retailing sector through franchising agreements.Growth of Retailing in India Indian retailing industry has seen phenomenal growth in the last five years(2001-2006). Organized retailing has finally emerged from the shadows of unorganizedretailing and is contributing significantly to the growth of Indian retail sector. RNCOS India Retail Sector Analysis (2006-2007) report helps clients to analyze the opportunities and factors critical to the success of retail industry in India. Organized retail will form 10% of total retailing by the end of this decade (2010). From 2006 to 2010, the organized sector will grow at the CAGR of around 49.53% per annum. Cultural and regional differences in India are the biggest challenges in front of retailers. This factor deters the retailers in India from adopting a single retail format. Hypermarket is emerging as the most favorable format for the time being in India. The arrival of multinationals will further push the growth of hypermarket format, as it is the best way to compete with unorganized retailing in India. Technology Impact: The other important aspect of retailing relates to technology. It is widely felt that the key differentiator between the successful and not so successful retailers is primarily in the area of technology. Simultaneously, it will be technology that will help the organized retailer score over the unorganized players, giving both cost and service advantages. BSPATIL
  • 41. Retailing is a `technology-intensive industry. It is quoted that everyday at least 500gigabytes of data are transmitted via satellite from the 1,200 point-of-sales counters ofJC Penney to its corporate headquarters. Successful retailers today work closely with theirvendors to predict consumer demand, shorten lead times, reduce inventory holding andthereby, save cost. Wal-Mart pioneered the concept of building a competitive advantagethrough distribution and information systems in the retailing industry. They introducedtwo innovative logistics techniques - cross-docking and electronic data interchange. Today, online systems link point-of-sales terminals to the main office wheredetailed analyses on sales by item, classification, stores or vendor are carried out online.Besides vendors, the focus of the retailing sector is to develop the link with the consumer.`Data Warehousing is an established concept in the advanced nations. With the help of`database retailing, information on existing and potential customers is tracked. Besidesknowing what was purchased and by whom, information on softer issues such asdemographics and psychographics is captured. Retailing, as discussed before, is at a nascent stage in our country. Most organizedplayers have managed to put the front ends in place, but these are relatively easy to copy.The relatively complicated information systems and underlying technologies are in theprocess of being established. Most grocery retailers such as Food World have startedtracking consumer purchases through CRM. The lifestyle retailers through their `affinityclubs and `reward clubs are establishing their processes. The traditional retailers willalways continue to exist but organized retailers are working towards revamping theirbusiness to obtain strategic advantages at various levels - market, cost, knowledge andcustomer. With differentiating strategies - value for money, shopping experience, variety,quality, discounts and advanced systems and technology in the back-end, change in theequilibrium with manufacturers and a thorough understanding of the consumer behavior,the ground is all set for the organized retailers. It would be important to note, however, that the retailing industry in India is still a`protected industry. It is one of the few sectors which still has restrictions on FDI. Giventhe current trend in liberalization, it will not be long before the retailing sector is also BSPATIL
  • 42. thrown open to international competition. This will see a further segregation of the international retailing brands and the domestic retailers, thereby injecting much greater dynamism into the market. That will be when the real action will begin.Major retailers in India India’s top retailers are largely life style; clothing and apparel stores.This is followed by grocery stores. Following the past trends and business models in the west retail giants such as Pantaloon, Shopper’s Stop and Lifestyle are likely to target metros and small cities almost doubling their current number of stores. These Wal-Mart wannabes have the economy of scale to be low �medium cost retailers pocketing narrow margin.Retailing Scenario-India The retail scenario in India is unique. Much of it is in the unorganized sector, with over 12 million retail outlets of various sizes and formats. Almost 96% of these retail outlets are less than 500 sq.ft. In size, the per capita retail space in India being 2 sq.ft. Compared to the US figure of 16 sq.ft. India�s per capita retailing space is thus the lowest in the world. With more than 9 outlets per1, 000 people, India has the largest number in the world. Most of them are independent and contribute as much as 96% to total retail sales. BSPATIL
  • 43. CHAPTER-6INTERNATIONAL MARKETINGInternational marketing refers to marketing carried out by companies overseas or acrossnational borderlines. This strategy uses an extension of the techniques used in the homecountry of a firm. Introduction to International Marketing. International marketing is simplythe application of marketing principles to more than one country. However, there is acrossover between what is commonly expressed as international marketing and globalmarketing, which is a similar term.International Marketing Environment One of the fundamental steps that need to be taken prior to beginning internationalmarketing is the environmental analysis. Of course there are many tools on MarketingTeacher that would prove useful at this stage such as lessons on the marketing environment,PEST Analysis, SWOT Analysis, POWER SWOT and Five Forces Analysis. However, the veryspecific and unique nature of each individual nation needs to be looked into. Below weconsider the nature of an international PEST Analysis, and the influence of tariff andnon-tariff barriers.An International PEST Analysis PEST is a well-known and widely applied tool when considering the external nature ofthe domestic market. However, it is equally as useful when applied to the nature of theinternational marketing environment.International PEST Analysis would consider i. How easy will it be to move from purely domestic to international marketing? ii. Would your business benefit from inward foreign investment? iii. What is the nature of competition within each individual market, and how will companies from other nations compete when you meet with them head-to-head in unfamiliar countries? iv. Many other factors those are specific to your organization or industry. v. Political BSPATIL
  • 44. vi. Is there any historical relationship between countries that would benefit or hinder international marketing? vii. What is the influence of communities or unions for trading? E.g. The European Union and its authority over European laws and regulation. viii. What kind of international and domestic laws will your business encounter? ix. What is the nature of politics in the country that you are targeting, and what is their view on encouraging foreign competition from overseas?Economic What is the level of new industrial growth? E.g. China is experiencing terrific industrialgrowth. What is the impact of currency fluctuations on exchange rates, and do your homemarket and your new international market - share a common currency? E.g. Polishcompanies trading in Eire will use Euros. There are of course the usual economic indicators that one needs to be aware of suchas inflation, Gross Domestic Product (GDP), levels of employment, national income, thepredisposition of consumers to spend savings or to use credit, as well as many others.Socio-cultural Culture, religion and society are of huge importance. What are the cultural norms fordoing business? E.g. is there a form of barter? Will cultural norms impact upon your abilityto trade overseas? E.g. Putonghua is very difficult for many Western people to learn.Technology Do copyright, intellectual property laws or patents protect technology in othercountries? E.g. China and Jordan do not always respect international patents. Does yourtechnology conform to local laws? E.g. electrical items that run on non-domestic currentscould be dangerous. Are technologies at different stages in the Product Life Cycle (PLC) invarious countries? E.g. versions/releases of software.Tariff and Non-Tariff Barriers BSPATIL
  • 45. There are a number of fences that companies need to plan for when initialisinginternational marketing. Tariff and non-tariff barriers are still very common, even today. Tariff barriers are charges imposed upon imports - so they are a form of importtaxation. This could mean that your margins are reduced so much that trading overseasbecomes too unprofitable. However they are normally transparent and you can plan to takethem into account. Non-tariff barriers are trickier to spot. Governments sometimes act in favour of theirown domestic industries rather than allow competition from overseas. Bureaucracy is ahurdle often encountered by exporting companies - it takes many forms and includesunnecessary hold-ups and red tape. Quotas are another form of non-tariff barrier i.e.restricting the quantity of a product that can be imported into a particular country.Retail Management Tips Its The Customer Stupid - To paraphrase that popular, and successful, quote fromBill Clintons 1992 campaign: The single most important aspect of your business is yourcustomers. Make sure your entire team understands that - and acts like they understand it. "Doctor" Your Customers - Everyone wants to think they are special. You can makeyour customers feel special if you treat them like your family doctor treats you. For the timeyou are with them, concentrate on them and what they are telling you. Exclude everythingelse for that period of time. Delight the Customer - It is heard a lot, but seldom practiced. Today I saw aproduction supervisor straighten out a mess and, in the process, calm an irate customer.When I heard her tell them to put two mugs with the companys logo into the package beingsent to the customer, I knew she understood what "Delight the Customer" means. You never have to make up for a good start - If a project or a job gets off to a badstart it can be difficult to catch up. Do your planning up front so you get a good start andyou wont regret it. Train Your Supervisors - The key to your business success is the productivity of youremployees. The key to employee productivity is their perception of their immediatesupervisor. Invest in training your supervisors and managers. It will pay off. BSPATIL
  • 46. Under-promise and over-deliver - This goes beyond the old adage dont promisewhat you cant deliver. Instead, deliver more than what you promised. Its a good way tobuild customer rapport - both outside and inside the company. Your first obligation is to the customer - Without customers you dont have abusiness. Treat them with the same respect you expect when you are a customer. Make sureeveryone in your organization understands the importance of customer service. You have to make a difference - The group you manage has to be more effective,more productive with you there than they would be if you were not. If they are as productivewithout you, there is no business sense in keeping you on the payroll. Your biggest business challenge is your competition - They have to take away yourcustomers to survive or grow. How are they going to do that? How can you stop them? Howcan you steal their customers? Dont wait for it to happen. Start preparing NOW. Follow Through On Sales Promises - Dont let your sales people make promises thecompany cant meet. If they tell a customer they can have 100 gross of widgets "tomorrowbefore 10", they better be sure that many are already in the warehouse. Nothing losescustomers faster than broken promises. Doing it right costs less than doing it over - Have you ever been asked "Why isthere never enough time to do it right, but always enough time to do it over"? Save the costs,including customer dissatisfaction and lower worker morale, by concentrating on doing thejob right the first time. Doesn’t Be A Demotivator - Your job as a leader is to get and keep your peoplemotivated and working toward the common goal. Demeaning them, to their face or toothers, erodes their motivation. So does dismissively telling them that their ideas "arestupid". Watch your own actions to be sure you arent defeating your own efforts bydemotivating your people. Keep the flame alive - When people join your organization they are all fired up andready to do great things. Over time we all too often wear down that enthusiasm. Instead, dowhat you can to fan the flames of their enthusiasm and you will be amazed at their output. BSPATIL
  • 47. You Cant Listen With Your Mouth Open - You’re associates, your employees, yoursuppliers, your customers all have something of value in what they have to say. Listen to thepeople around you. You will never learn what it is if you drown them out by talking all thetime. Remember, the only thing that can come out of your mouth is something you alreadyknow. Shut up and learn. Anyone can steer the ship in calm waters - What will set you apart in your career ishow you perform during the tough times. Dont become complacent and relax just becausethings are going well. Plan ahead for the downturn. It is easier to save a dollar than to earn a dollar - Every dollar you dont spend is adollar you dont have to earn to achieve the same profit level. Invest as needed to grow thebusiness, buy what you need, but dont spend without forethought and a good reason. Appearance Does Matter - It may be a sad commentary on our superficial society,but appearance does matter. Whether its the packaging on your product, the firstimpression you make when calling on a new client, or your companys web site peoplenotice how things look. They care about how things look and make judgments about youand/or your product based on appearance. Get your people involved - Its a lot easier to get employees to stand behind acompany decision if they have the opportunity to participate in the discussion. Managementstill has to make the decision. but if they have had the opportunity to make their point ofview known employees are more apt to stand behind the ultimate decision, even if theydont agree with it. Fix The Problem, Not The Blame - It is far more productive, and less expensive, tofigure out what to do to fix a problem that has come up than it is to waste time trying todecide whos fault it was. Actively Listen - Listen to your customers, your employees, your suppliers, andanyone else who comes in contact with your business. Honestly evaluate what they have tosay, without letting your ego get in the way, and you will probably learn something thatbenefits your businessWinning at Store Management BSPATIL
  • 48. “Winning at Store Management” includes a step-by-step approach to hiring topperformers. But hiring and motivating great people is only part of your success. You want totrain them and make sure they know what is expected of them so that you have the comfortof knowing that all of your people are moving in the same direction; the comfort of knowingthat your store is always in safe hands. This guide will teach you how to ensure that happens. With DMSRetail’s training plan,you won’t have to worry about fitting in the training time. The program is made to workwith your time constraints and your hour control or wage cost plan. The time and moneyyou save on training is a bonus. This is a training program that fits your ‘budget’. Let’s faceit, you have a limited number of staff hours available to use. It’s up to you to use thosehours in the most productive way possible. With this guide you’ll receive tools to maketraining fit into your schedule effortlessly. You won’t believe how easy it is! Your new peoplewill learn how to do their job, how to conduct themselves in an exemplary fashion and howto succeed. Thats an achievement to be proud of.Imagine that you have the best people and they are fully trained and ready to succeed In addition to hiring top performers, training them well and preparing them forsuccess, the task of managing your hours and the many changing priorities you have everyday is incredibly important. You’ll easily rise to the challenge with the skills you’ll developby reading and applying “Winning at Store Management”. You’ll effectively manage everyhour, every day, every week and so on. Planning and managing your time will make a hugedifference to the level of success you will achieve. With this guide, you’ll become highlyeffective at managing every day and will even start to do some long range planning. That’s askill that will earn you a lot of respect from your executive. Top management wants peoplewho can look ahead with concrete plans for increasing their business. People who do thismove up in the organization! DMSRetail’s “Winning at Store Management” was designed by retail experts. Theirexperience on the sales floor, at store and district management levels and as members ofthe executive teams for a number of successful, prominent retail companies…from apparelto electronics to confections and computer hardware/software…has provided them with animmense amount of knowledge in the retail management field. BSPATIL
  • 49. Retail Planograms Planograms are diagrams that show where products or merchandise should be placedon a shelf or other sort of display. The idea is to maximize the amount of merchandise onthe shelf and the amount of sales by arranging in such a way that makes it appealing to theconsumer while minimizing wasted space. Planograms differ significantly by retail sector. Fast-moving consumer goodsorganizations and supermarkets largely use text and box based planograms that optimizeshelf space, inventory turns, and profit margins. Apparel brands and retailers are morefocused on presentation and use pictorial planograms that illustrate "the look" and alsoidentify each product Often retailers use planograms to decide how best to get as much on their shelves aspossible or increase sales. Even more often, however, the suppliers will send a planogrambefore sending their product as a suggestion to help in displaying their good s so they canbe easily seen and will be placed alongside like objects.Retail AnalyticsBetter Retail Decisions through Consumer and Store Data In an industry notorious for expensive real estate, slim margins and tenuouscustomer loyalty, retailers in every category need as much support as they can get whendeciding where to operate, what they should stock, which customers they should fight toretain, and how to communicate with them."Retail Analytics leverage data in retailprocesses to enable context-specific insight that is actionable."Customer Profiles BSPATIL
  • 50. Who are my best customers and where do they live? Adding demographic and behavioral data to the transaction record completes thepicture; not only will the retailer know what customers are buying from them, but they willunderstand their lifestyles, particular life stage, their needs and wants, and what they arebuying from competitors.TargetingHow can I connect with prospects if I dont know where they live? Micromarketing data bases are produced each year, and are available at several layersof geography-including Zip+4, postal code and postal walk. Gathered into refined segments,these micro targets provide a wealth of actionable information about the households in eachlocation-and can be quickly mailed to.CreativeHow do I communicate with customers and prospects I dont know? Quantitative information will help retailers understand their customer potential andqualitative intelligence will improve marketing, messaging and targeting strategies.Combined, this intelligence offers retailers a data-driven strategy to increase profitability.Sales ForecastingHow do I predict what my customers will be looking for in the future? Demographic and expenditure variables are ideal anchors for trend analysis. Trendanalysis uses historical data to make accurate predictions about future spending-in termsof amounts, categories, even brands.Loyalty My rewards program shows me what my customers are buying from me, but what elseare they buying, and from where? BSPATIL
  • 51. Customer profile database will show retailers what their customers are spendingacross a variety of product, service and brand categories.ROIIs my marketing budget channeled for maximum return? Beyond demographics and expenditures retailers can add lifestyle, life stage andmedia preference information at the Zip+4 and the postal code level to build a completeview of their best customer.Increased Opportunity The average number of items my customers purchase seems to be declining. Whatcan I do about it? Market Basket Analysis tells retailers what products and services are most likely to bebought together. A retailer can then apply this information against customer profiles andgenerate Zip+4 and the postal code level pictures of consumer types who buy bundledproducts.ProfitabilityWhat is the value of Trade Area Analysis? Formal trade area analysis calculates sales potential, market propensity and theprobability of success of a variety of marketing and promotional activities. Combined thesethree layers of information are a powerful set of analytical tools that winning retailers use tomake more profitable business, real estate and marketing decisions.Response RatesHow can I put a lift in my Direct Marketing response rates? BSPATIL
  • 52. Target different types of customers with different offers at Zip+4 and the postal codelevel. A geographically refined profile provides a wealth of expenditure, demographic,product and lifestyle information about a retailers best customers and which Zip+4 or thepostal codes they are concentrated in.Retail Marketing In todays CRM landscape the old analogy comparing the rifle and shotgunapproaches to message and / or offer delivery is perhaps more appropriate than ever, asmore retail organizations struggle to achieve one-to-one marketing-communications withcustomers and prospects. Targeting allows a retail enterprise to channel its marketing budget where there is thegreatest (and fastest) possibility of Return on Investment (ROI). In terms of overall businessstrategy, your ability to identify and understand consumers helps you make accurateestimates about the potential for your products and services in a given market, as well assupport and direct merchandise development strategies to both new and existing customers.Whether your target is current customers or new prospects, in markets known or unknown,an effective targeting model reduces the risk of any new venture. Blending Demographic,Behavioral, Expenditure and Media Preference data with retailer-specific data and applyingdata mining technologies produces Zip+4 and postal code level data assets thatconsistently outperform all other direct marketing techniques. In addition, methodology that should be used must be dynamic to allow the sights tobe reset frequently to keep targets in focus consistently.Todays retail marketing managers mustUnderstand the connections between the lifestyle and expenditure characteristics ofcustomers, their propensity to purchase one product or brand over another, and leveragethis understanding for competitive advantage. Improve direct marketing response byensuring they are targeting the right households at the right time, using the right mediawith the right message. BSPATIL
  • 53. Leverage current consumer data to make better strategic decisions about products,marketing and locations.Increase customer loyalty and retention with a scientific, data driven approach to analyticalCRM.Applying advanced analytics to current demographic, expenditure and lifestyle dataproduces the most accurate customer segments and profiles. With a clear picture of yourdifferent customer segments, you are in a position to develop merchandise and offers thatmeet the needs of existing customers and answer (or anticipate) the needs of targetedprospects.Retail marketing managers can implement the following projects to understand theircustomer, market and store locations better; achieving a very strong ROI for their retailmarketing efforts in the process.Customer and Market potential Estimates i. Estimate the revenue potential of your customers to determine their current , potential and life-time value ii. Estimate your market potential for more effective acquisition initiatives iii. Quantify and qualify your market opportunitiesCustomer and Market Profiles i. Develop more effective communication strategies through a better understanding of who your customers are ii. Learn more about your customers (their age, income, family structure, media usage, life-styles, and more) and use this information in your branding, advertising and direct marketing strategies iii. Identify your market potential through a better understanding of your targetsCustomer and Market Segmentation i. Develop more effective communication strategies through a better understanding of different customer groups and your market segments BSPATIL
  • 54. ii. Customize your product offers by different customer and market segments iii. Identify your target segments and optimize your marketing spendProduct and Service Potential i. Identify products/services that best suit your customers’ needs and market your offerings more effectively ii. Be relevant and improve your up-sell and cross-sell initiatives iii. Manage your products and services through a better understanding of market needsTrade Area Analysis i. Use the information on the store performance and the socio-demographic characteristics of the trading area to estimate market potential by individual stores ii. Use trade area characteristics to customize your product offerings, store displays, store size, etc. to be more relevant to your customers and to better penetrate your market iii. Evaluate performance of your stores based on their trade area characteristicsStore Network Optimization i. Determine the optimum number of stores to support market needs ii. Customize and optimize your stores to attract more customersViewpoint on Retail - Retail ArticlesThe Retail Training Equation Economic times are cyclical. At present, the cycle is in a down phase and needs torecover as quickly as possible. During such times, it is people who will make the differencein your business. It is most often the people who have been trained appropriately that riseto meet and overcome these challenges.Insane Retailing BSPATIL
  • 55. It has been said by many that an appropriate definition of insanity be ‘repeating thesame actions time and time again, expecting different results’.Cutting Edge in Retail Sales and Training “Cutting Edge Sales” is in and of itself a buzz phrase describing a competitive salesadvantage that every retail sales associate is looking for, a bit like the fountain of youth.Like the fountain, though, “Cutting Edge Sales” is something that is more inside of oneselfthan something concrete to be found.Know how to interpret your Retail KPI’s? Gaining an understanding of retail math lets the Store Manager put everything inperspective. Once competent in making all of the calculations for KPI’s pertinent to his/herstore, the Store Manager gains new insight into exactly what is going on in their store. It’slike having the blindfold removed. Suddenly, everything makes sense.How to Lift Your Retail Spirits during Slow Times All we hear these days is how bad the last few months of 2008 are going to be. TheNational Retail Federation, in the United States, is predicting an increase of approximately4% over last year, and they generally predict a bit on the bright side so the reality, in NorthAmerica at least, is probably somewhat less than that.The Value of Professional Training Industry specific training provides a myriad of advantages to an individual within thatfield. They will gain confidence in dealing with day to day challenges. Having theknowledge that professional development training provides can enable the individual toapproach, assess, evaluate and resolve problems with less stress and expedite anappropriate solution much more quickly. BSPATIL
  • 56. External Conditions Most retailers generally plan their targets, or budgets, based on the actual sales ofthe previous year. As the saying goes ‘past performance is a great indicator of futureperformance’. But every wise retailer will also carefully look at external conditions beforecommitting a target or budget to paper; before using the numbers as a basis for buyingmerchandise and setting expense budgets.Introducing the 6th Pillar of Retail It started out with 4 pillars (or 4P’s): Product, Promotion, Price and Place. People didnot count for much back then. In early 1980’s with the revolution in management fueled bysuch publications as “In Search of Excellence”, “Re-inventing the Corporation” and manyothers, suddenly people woke up to the importance of people and added that to the retailarsenal. We’re now able to talk about the 5th pillar of Retail; PeopleThe Effect of Incompetent Middle Managers Retail employees can rise up through the ranks fairly quickly compared to a lot ofother industries. It makes a great career in that respect. Entry into retail is easy andpromotions come quickly provided the individual can operate a retail store, make the saleshappen, follow the Policy and Procedures manual to the letter and always say the rightthings to visiting Head Office executive.How Important Retail Associates are to Your Retail Business A study recently published by Wharton, University of Pennsylvania and Verde Groupdiscusses the findings of a survey of 1000 randomly selected consumers. The objective ofthe survey was to discover what problems shoppers were encountering during theirshopping experiences at retail stores and which of those problems were most likely to bediscussed with others and which actually put customer loyalty at risk.First Response - Cut Hours/Wages at Store Level BSPATIL
  • 57. Retailers often respond to a financial problem by cutting hours and wages being usedat store level.Sustained Motivation through Performance Discussions We know that many Retail Business Owners and Store Managers look for ways tomotivate their employees. Rightfully, they believe that motivating their sales associates willincrease business. Creating a motivational environment and culture, and maintaining thepositive effects are not easy; but not impossible either.How to Hire Right and Keep Them Recruitment isn’t just about hiring, it’s about retention, and that means hiring theright person in the first place rather than someone who merely appears to be the rightperson. It costs far more to hire and train a new employee – on any level, in any industry -than it does to retain them.Pay More, Expect more, and Get more It’s time for more retailers to test the pay more expect more, get more theory. Itseems that retailers have always argued against higher wages, benefits and full-timepositions citing exorbitant wage costs as the reason. While it is true that the expense, indollars would increase it certainly does not follow that the actual wage percentwould increase. And it is the percentage that is keyGet Out of Town - Really It is impossible to direct an operation without knowing how it works. How it reallyworks, not how it is supposed to work. If you are in charge of a retail operation and don’thave your next out of town store visit trip booked …do it now. It’s more important to visitout of town stores more often than you visit stores in close proximity to Head Office.Culture: What a difference it makes! Have you ever wondered about the impact a true leader can have on the culture of acompany? Having worked for several prominent retail organizations I have seen the impact BSPATIL
  • 58. of both positive and negative cultures on the workforce, the customers and, of course, thesuccess of the business. Have no doubt whatsoever, the head of the organization dictates,through words and actions, what the culture will be...Retail Employees vs. Customers Customers are NOT the retail employees’ enemy. After viewing a ‘down with retail’website today, I find myself very disturbed at the distance that has developed in theunderstanding between some retail employees and customers. Wild generalizations arebeing made such as ‘customers have no respect for retail employees’ and ‘retail employeesdon’t care about their customers’...Communicating for Profits and Customer Satisfaction The real reason retail personnel appear to be indifferent to their customers.ThePresident of a 200+ store division of a major retailer learned of a serious communicationproblem and commented that ‘this was to be expected in large organizations’. Well, thatclears everything up. Many retail executives don’t believe that communication is importantenough to get it right by coming up with a methodology that will ensure accurate and timelycommunication to field personnel.The House Account – A case for using it Retailers use different methods to record and monitor sales and to compensate theirassociates. Some allow, and in fact insist on, the use of a House Account and others forbidit.Manager Unfairly Perceived as Negative To really learn about field operations, retail executives need to nurture theirrelationships with Store Managers. Many Store Managers have a lot of valuable informationto offer the organization. They are rarely asked to contribute but often offer it anyway. Andthat is where the problem starts.Sales vs. Task Orientation BSPATIL
  • 59. It is reasonable to expect people to do well in activities they enjoy, or at least, do notfind difficult and unappealing, then it would be reasonable for sales associates who enjoyselling to be more successful, and to make a bigger contribution than those who do not. Forthe individual who does not enjoy selling-either because s/he does not have the skills orsimply does not want to do it – a position in a retail store may still attract them due to easeof entry. Store Managers should be very wary of this individual.The Store Manager is a Lighthouse Throughout history the lighthouse has played an important role in navigation andpilotage at sea; its purpose is to guide, to show the way, to warn of danger and generallyprovide safe entry into harbors. The Store Manager is the lighthouse for the employees of aretail store and the Head Office is the lighthouse for all of their retail employees nationwide.Unreachable? What? The executive team is unreachable? Impossible, you say? Retail executive, likeany others, need to be accessible. Imagine a situation where employees and managementcannot have any access to the President. Far, far from the open door policy, there are someretailers who allow absolutely no access to the top executive in the company.Customer Service Fanatics Be a Customer Service Fanatic and be proud of it! If more retail managers wereCustomer Service Fanatics we would see a much different picture in the service industry. Allcustomers, not just a fortunate few, would be properly treated as they part with theirhard-earned and over-taxed dollars. Isn’t that the way it should be?Multi-Channel Retail - One Critical Key to Success More and more retailers are realizing the benefits of multi-channel retailing.Leveraging brand equity in multiple touchpoints has been proven to drive loyalty andinteraction among consumers. With trends clearly showing the Internet as the core BSPATIL
  • 60. component to pre-purchase research, brick and mortar brands can ill-afford to take a waitand see approach as it relates to core multi-channel offerings...Improving the Morale of Your Employees: One Step at a Time If your customers are to enjoy a positive shopping experience and be inspired topurchase whatever it is you have to offer it really makes sense that your store employeesfeel like valued members of your team.Pushing for Performance The fiscal month is coming to a close. The store’s sales performance has beenlackluster for several months but, this month, they are doing much better. This comingSaturday is the last day of the month. The Store Manager wants to take the day off to dosomething with family members. The District Manager says no...Change your conversation, change your life The danger we face while taking in all of this bad news is that we may actually beginto focus on nothing but the bad news. We may start to believe it completely. When webelieve completely, there is a much higher chance of it being so.Retail Sales Management i. People are your most important strategic advantage. If you look at other stores, for example, in a chain store environment all stores have similar if not the same layout, merchandise, tools, procedures, etc. The difference is the people. ii. Capitalize on the activities you can measure; remember the adage “if it can not be measured, it can not be managed.” iii. Every day put some time aside (commuting time would be ideal) to think about ways and means regarding how to make your people more productive. iv. Take the best practices of the top sales associates and put them in place for everybody; the best demo, the best objection-handler, the best closer, and transfer those best practices to the whole sales team. Have the owners of these best practices train the others to do the same. You’ll find your 10% + sales increase just from this. BSPATIL
  • 61. v. Sales performance is a function of sales skills + people skills + product knowledge + knowledge of the store environment (like knowing the inventory, being able to process customer inquiries and questions with speed and efficiency, etc.). vi. Your market and customers are constantly changing. Change is the only constant. What made you successful last year, may not work this year – you must constantly reevaluate your effectiveness. Stay ahead of the curve in terms of what’s happening in the retail world, particularly in your niche. vii. Retail Sales is a marathon, not a sprint… but you still have to keep your eyes on the first position and want to get up every morning on the run.viii. Don’t procrastinate if there is a decision to be made – make it. Get the facts and then make the decision. Ultimately a quick decision-maker will be ten decisions ahead of a slow decision-maker and that’s a competitive advantage. ix. Remember people pay attention to what the boss/head office pays attention to. Make sure you are in tune with business objectives/tactics and that you clearly understand them. If in doubt, this is a great conversation to have with your supervisor. x. Listen to customers; learn to read between the lines. Do not assume you know what they are talking about, or complaining about. Look for quick solutions to customer issues. Make this a culture in the store(s). xi. Look at and examine your whole sales process. What is not working or can be improved drastically? Where can you increase the productivity/efficiency/effectiveness?xii. Whenever you are inundated with too many things to do (which is almost always) prioritize. What are the three things that provide the most leverage (most important for your sales performance), then forget to-do’s 4-10 because you’ll never get to them and they are not worth it.xiii. Don’t be afraid to ask the tough questions to customers or associates because you may not like the answer. Develop an inquisitive mind. You want to know why customers are or are not buying, why a certain process or promotion in the store is not working. Remember that retail business is not a popularity contest. Get to the bottom of all issues affecting your sales performance. BSPATIL
  • 62. CHAPTER-7RETAIL BUSINESS PLANIntroduction The best way to show bankers, venture capitalists, and angel investors that you areworthy of financial support is to show them a great business plan. Make sure that your planis clear, focused and realistic. Then show them that you have the tools, talent and team tomake it happen. Your business plan is like your calling card, it will get you in the doorwhere youll have to convince investors and loan officers that you can put your retailbusiness plan into action. Once you have raised the money to start or expand your retail business, your plan willserve as a road map for your success. It is not a static document that you write once and putaway. You will reference it often, making sure you stay focused and on track, and meetmilestones. It will change and develop as your retail business evolves.Do I need a retail business plan? Not everyone who starts and runs a business begins with a business plan, but itcertainly helps to have one. If you are seeking funding from a venture capitalist, you willcertainly need a comprehensive business plan that is well thought out and contains soundbusiness reasoning. If you are approaching a banker for a loan for a start-up business, your loan officermay suggest a Small Business Administration (SBA) loan, which will require a business plan.If you have an existing business and are approaching a bank for capital to expand thebusiness, they often will not require a business plan, but they may look more favorably onyour application if you have one.Reasons for writing a retail business plan include: BSPATIL
  • 63. i. Support a loan application ii. Rise equity funding iii. Define and fix objectives and programs to achieve those objectives iv. Create regular business review and course correction v. Define a new business vi. Define agreements between partners vii. Set a value on a business for sale or legal purposes viii. Evaluate a new product line, promotion, or expansionWhats in a business plan? i. A business plan should prove that your business will generate enough revenue to cover your expenses and make a satisfactory return for bankers or investors ii. Executive Summary--features the highlights of your plan and sells your idea in two pages or less iii. Company Summary--a factual description of your company, ownership, and history iv. Products (or Services or both)--describes your products and/or services and how they stand out from competitive products and services v. Market Analysis-provides a summary of your typical customers, competitive landscape, market size, and expected market growth vi. Strategy and Implementation-describes how you will sell your product, how you will put your plan into action, and establishes milestones vii. Management Summary-provides background on the management team, their experiences, and key accomplishments viii. Financial Plan-contains key financials including sales, cash flow, and profitsWhat makes a successful business plan? i. A well thought out idea ii. Clear and concise writing iii. A clear and logical structure iv. Illustrates managements ability to make the business a success v. Shows profitability BSPATIL
  • 64. Retail Market Segmentation The market segmentation concept is crucial to market assessment and marketstrategy. Divide the market into workable market segments -- age, income, product type,geography, buying patterns, customer needs, or other classifications. Define your terms,and define your market. Segmentation can make a huge difference in understanding your market. For example,when a local computer store business defines its customer segments as "high-end homeoffice" and "high-technology small business," its segmentation says a lot about itscustomers. The segmentation helps the company plan focus on the different types ofpotential customers. When I was consulting for Apple Computer in the mid-1980s, wedivided the markets into workable categories, including home, education, small business,large business, and all others. Some other groups in Apple also focused on government as aspecific market segment. As you define the segment, you point toward an understanding ofthe market. In the 1970s, I knew a company that was selling candy bars through retailchannels. They segmented the market in a way that defined a range of products as "oralsatisfactory" (their term, not mine). That included candy, cookies, soft drinks, and baggedchips. The segmentation helped the marketers understand their real competition, whichwasnt just other candy bars, but also other products targeting the same customer money.That understanding of competition improved the marketing and sales programs. In todays business its easy to see segmentation in action. Consider the different tone,content, and media for ads that sell products to kids, compared with those that sell thesame product to parents. Car companies change their advertising substantially from onetype of program to another. Stand-up comedian Richard Klein used to joke about the beercompany ads that changed the style of the music to match the audience. He complainedthat he kept getting the country music version, but he liked the blues version better. Thecompany that did those ads used the styles of music to address different target customergroups. In developing segmentation, consider what factors make a difference in thepurchasing, media, and value patterns of your target groups. Does age matter in choice ofrestaurants, or are style and food preference more important? Is income level a key factor? BSPATIL
  • 65. Education? I suspect that some restaurants will sell more meals to college graduates thanothers. Is this because of education, age, or income levels? That depends on your business. In your initial assessment you may have already developed your first basic marketanalysis worksheet for analyzing potential customers. It will help you define your marketand understand your key market segments. As you complete your market analysis, look atyour segmentation critically and strategically. Is this the best segmentation? Be sure torevise and polish your numbersSocial Marketing in Retail Management Social marketing is the systematic application of marketing along with other conceptsand techniques to achieve specific behavioral goals for a social good. Social marketing canbe applied to promote, for example, merit goods, make the society avoid demerit goodsand thus to promote that considers societys well being as a whole. This may include askingpeople not to smoke in public areas, for example, ask them to use seat belts, prompting tomake them follow speed limits. Although social marketing is sometimes seen only as using standard commercialmarketing practices to achieve non-commercial goals, this is an over-simplification. The primary aims of social marketing is social good, while in commercialmarketing the aim is primarily financial. This does not mean that commercial marketerscan not contribute to achievement of social good. Increasingly, social marketing is being described as having two parents - a socialparent = social sciences and social policy, and a marketing parent = commercial andpublic sector marketing approaches. Beginning in the 1970s, it has in the last decade matured into a much moreintegrative and inclusive discipline that draws on the full range of social sciences and socialpolicy approaches as well as marketing. BSPATIL
  • 66. Applications of social marketing Health promotion campaigns in the late 1980s began applying social marketing inpractice. Notable early developments took place in Australia. These included the VictoriaCancer Council developing its anti-tobacco campaign "Quit" (1988), and "Sun Smart" (1988),its campaign against skin cancer which had the slogan Slip! Slop! Slap!. Work Safe Victoria, a state-run Occupational Health and Safety organization inAustralia has used social marketing as a driver in its attempts to reduce the social andhuman impact of workplace safety failings. In 2006, it ran Homecomings, a popularcampaign that was later adopted in New South Wales, Queensland and Western Australia,and named the 2007 Australian Marketing Institute Marketing Program of the YearDance Safe followed the ideas of social marketing in its communication practices. On a wider front, by 2007, Government in the United Kingdom announced thedevelopment of its first social marketing strategy for all aspects of health. Two other public health applications include the CDCs CDCynergy training andsoftware application, and SMART (Social Marketing and Assessment Response Tool). Social marketing theory and practice has been progressed in several countries such asthe U.S, Canada, Australia, New Zealand and the UK, and in the latter a number of keyGovernment policy papers have adopted a strategic social marketing approach. Publicationssuch as Choosing Health in 2004, Its our health! in 2006; and Health Challenge Englandin 2006, all represent steps to achieve both a strategic and operational use of socialmarketing. In India, especially in Kerala, AIDS controlling programmes are largely usingsocial marketing and social workers are largely working for it. Most of the social workers areprofessionally trained for this particular task.[citation needed]Types of social marketing Using the benefits and of doing social good to secure and maintain customerengagement. In social marketing the distinguishing feature is therefore its primary focus BSPATIL
  • 67. on social good, and it is not a secondary outcome. Not all public sector and not-for-profitmarketing is social marketing. Public sector bodies can use standard marketing approaches to improve thepromotion of their relevant services and organizational aims, this can be very important, butshould not be confused with social marketing where the focus in on achieving specificbehavioural goals with specific audiences in relation to different topics relevant to socialgood (eg: health, sustainability, recycling, etc). As the dividing lines are rarely clear it is important not to confuse social marketingwith commercial marketing. A commercial marketer selling a product may only seek toinfluence a buyer to make a product purchase. Social marketers, dealing with goals such asreducing cigarette smoking or encouraging condom use, have more difficult goals: to makepotentially difficult and long-term behavioral change in target populations. It is sometimesfelt that social marketing is restricted to a particular spectrum of client -- the non-profitorganization, the health services group, the government agency. These often are the clients of social marketing agencies, but the goal of inducingsocial change is not restricted to governmental or non-profit charitable organizations; itmay be argued that corporate public relations efforts such as funding for the arts are anexample of social marketing. Social marketing should not be confused with the SocietalMarketing Concept which was a forerunner of sustainable marketing in integrating issues ofsocial responsibility into commercial marketing strategies. In contrast to that, socialmarketing uses commercial marketing theories, tools and techniques to social issues. Socialmarketing applies a “customer oriented” approach and uses the concepts and tools used bycommercial marketers in pursuit of social goals like Anti-Smoking-Campaigns or fundraising for NGOs.Social marketing confusion In 2006, Jupiter media announced its "Social Marketing" service, with which it aims toenable website owners to profit from social media. Despite protests from the socialmarketing communities over the hijacking of the term, Jupiter decided to stick with the BSPATIL
  • 68. name. However, Jupiters approach is more correctly (and commonly) referred to as socialmedia optimization.History of social marketing Social marketing began as a formal discipline in 1971, with the publication of "SocialMarketing: An Approach to Planned Social Change" in the Journal of Marketing by marketingexperts Philip Kotler and Gerald Zaltman. Craig Lefebvre and June Flora introduced social marketing to the public healthcommunity in 1988 where it has been most widely used and explored. They noted that therewas a need for large scale, broad-based, behavior change focused programs to improvepublic health (the community wide prevention of cardiovascular diseases in their respectiveprojects), and outlined eight essential components of social marketing that still hold today.They are: i. A consumer orientation to realize organizational (social) goals ii. An emphasis on the voluntary exchanges of goods and services between providers and consumers iii. Research in audience analysis and segmentation strategies iv. The use of formative research in product and message design and the pretesting of these materials v. An analysis of distribution (or communication) channels vi. Use of the marketing mix - utilizing and blending product, price, place and promotion characteristics in intervention planning and implementation vii. A process tracking system with both integrative and control functions viii. A management process that involves problem analysis, planning, implementation and feedback functions Speaking of what they termed "social change campaigns," Kotler and Roberto introducedthe subject by writing, “A social change campaign is an organized effort conducted by onegroup (the change agent) which attempts to persuade others (the target adopters) to accept,modify, or abandon certain ideas, attitudes, practices or behavior." Their 1989 text wasupdated in 2002 by Philip Kotler, Ned Roberto and Nancy Lee. BSPATIL
  • 69. In recent years there as has been an important development to distinguish betweenstrategic social marketing and operational social marketing. Much of the literature andcase examples focus on operational social marketing, using it to achieve specificbehavioral goals in relation to different audiences and topics. However there has beenincreasing efforts to ensure social marketing goes upstream and is used much morestrategically to inform both policy formulation and strategy development. Here the focusis less on specific audience and topic work but uses strong customer understanding andinsight to inform and guide effective policy and strategy development.Relationship Marketing Relationship marketing is not about having a "buddy-buddy" relationship with yourcustomers. Customers do not want that. Relationship Marketing uses the event-driventactics of customer retention marketing, but treats marketing as a process over time ratherthan single unconnected events. By molding the marketing message and tactics to theLifecycle of the customer, the Relationship Marketing approach achieves very high customersatisfaction and is highly profitable. The relationship marketing process is usually defined as a series of stages, and thereare many different names given to these stages, depending on the marketing perspectiveand the type of business. For example, working from the relationship beginning to the end:Interaction > Communication > Valuation > TerminationAwareness > Comparison > Transaction > Reinforcement > AdvocacySuspect > Prospect > Customer > Partner > Advocate > Former Customer Using the relationship marketing approach, you customize programs for individualconsumer groups and the stage of the process they are going through as opposed to someforms of database marketing where everybody would get virtually the same promotions,with perhaps a change in offer. The stage in the customer Lifecycle determines themarketing approach used with the customer. BSPATIL
  • 70. A simple example of this would be sending new customers a "Welcome Kit," whichmight have an incentive to make a second purchase. If 60 days pass and the customer hasnot made a second purchase, you would follow up with an e-mailed discount. You areusing customer behavior over time (the customer Lifecycle) to trigger the marketingapproach. Lets say a customer visits your site every day and then just stops. Something hashappened. They are unhappy with the content, or they have found an alternative source. Orperhaps they’re just plain not interested in the subject anymore. This inaction on their partis a trigger telling you something has happened to change the way this customer thinksabout your site and perhaps your service. You should react to this and then look for feedback from the customer. If youimprove the content, e-mail them a notice, and if the customer starts visiting again, thefeedback has been given. The cycle is complete until the next time the data indicates achange in behavior, and you need to react to the change with communication. Let’s say this same customer then makes a first purchase. This is an enormouslyimportant piece of data, because it indicates a very significant change in behavior. You havea new relationship now, a deeper one. You should react and look for feedback. You send a welcome message, thank the customer for the trust they have displayed inyour site, and provide a second purchase discount. Then you await feedback from thecustomer, in the form of a second purchase, or increased visits. Perhaps you get negativefeedback, a return of the first purchase. React to this new feedback and repeat the process. All of the marketing decisions in the examples above were triggered by customerbehavior, the actions of the customer as tracked by their activity (or lack of activity). Thisactivity tracked over time is the customer Lifecycle. If you can track customer Lifecycles, you can begin to predict them, and if you canpredict them, you can target your marketing efforts at the most critical trigger points in thecustomer Lifecycle. This approach eliminates a lot of wasted marketing spending, andcreates very high ROI marketing campaigns. You spend less money overall, and the moneyyou spend is much more effective. BSPATIL
  • 71. All of the above is accomplished by using the data customers create through theirinteractions with you to build simple Lifecycle models or rules to follow. The relationshipmarketing approach then uses this Lifecycle model as a "timing blueprint" to follow,targeting the right customers at the right time, with the most profitable offer.Integrate Marketing to Strengthen Consumer Relationships and Drive In-Store Sales According to Forrester Research, 65% of customers have researched a product onlinebefore purchasing it offline. This buying behavior has created exciting new opportunities forbrick and mortar retailers. When properly managed, a multi-channel customer relationshipcan significantly increase in-store sales and strengthen customer loyalty. Interactive marketing provides retailers with unprecedented insight into thepurchasing behaviors and preferences of individual customers, resulting in better-targetedand more cost-effective promotional offers, more relevant customer communications, andmore in-store sales. You should coordinate integrated marketing efforts, collect and unify data acrossmultiple customer touch points, target offers that can be tracked to individual in-storepurchases, and increase customer knowledge. Our solutions combine a full range ofon-demand marketing technologies, data-driven insights and expert services to effectivelybuild more profitable consumer relationships.Consider the potential: i. Identify customers; understand and influence their buying preferences and behaviors in order to execute better-targeted and more cost-effective marketing promotional offers, more relevant customer communications. ii. Measure how many of your customer’s research products online but ultimately purchase in-store. iii. Automatically trigger promotions offers tailored to individual interests, buying patterns, customer value and loyalty levels. BSPATIL
  • 72. iv. Decrease costs of traditional direct mail and conventional marketing by leveraging interactive efficiencies.Integrated Relationship ManagementObjective A global consumer packaged goods manufacturer wanted to increase market share inseveral product categories by generating trial, increasing usage frequency, and improvingconsumer retention across multiple brands. The company also wanted to qualify new,cost-efficient direct-to-consumer marketing methods in a period of media fragmentation.More specifically, they sought to determine which interactive marketing tactics—web sites,online advertising, e-mails, Internet coupons, etc—delivered the highest returns on theirinvestment.Challenges In order to rival well-established competitors whose direct-to-consumer marketingprograms surpassed their own, this client needed to transition from limiteddirect-to-consumer relationship marketing ("CRM") to advanced CRM quickly. The companyalso hoped to avoid the common mistake of over-spending on technology andinfrastructure. They soon realized that their traditional agency partners could not capablytake them there.Solutions Collabrys a company which developed a comprehensive integrated marketingprogram built around several of their clients brands and designed to build valuableconsumer relationships. The program included brand web sites as the primary relationshipgateway a dynamically-generated, segmented and customized e-mail newsletter, Internetcoupons targeted according to consumer attributes (e.g. product usage and categoryinterest), ongoing online surveys, interactive games, and online sweepstakes. Collabryscrafted the program strategy and tactical execution, which involved competitive analysis,content and creative services, co-marketing and strategic partnership development, datacollection and management, and ongoing program analysis. BSPATIL
  • 73. Results In-store purchases, survey results and reporting revealed that consumers exposed tothe integrated marketing program were more aware of the companys various brands andpreferred them to competitor brands, particularly among the e-mail newsletter subscribers.In addition, based on coupon redemption tracking, the program significantly impactedpurchase intent and actual purchases and there was measurable cross-sell activity. The multi-brand program also allowed the companys different brands to shareprogram costs, thus reducing each individual brands total cost. Most importantly, theprogram enabled the creation of a large consumer database for our client, an asset that cannow be used for market research, new product introductions, message testing and othermarketing initiatives.CHAPTER-8PRICING Pricing is one of the four Ps of the marketing mix. The other three aspects areproduct, promotion, and place. It is also a key variable in microeconomic price allocationtheory. Price is the only revenue generating element amongst the 4ps, the rest being costcenters. Pricing is the manual or automatic process of applying prices to purchase and salesorders, based on factors such as: a fixed amount, quantity break, promotion or salescampaign, specific vendor quote, price prevailing on entry, shipment or invoice date,combination of multiple orders or lines, and many others. Automated systems require moresetup and maintenance but may prevent pricing errors.Questions involved in pricingPricing involves asking questions like: i. How much to charge for a product or service? This question is that a typical starting point for discussions about pricing, however, a better question for a BSPATIL
  • 74. vendor to ask is - How much do customers value the products, services, and other intangibles that the vendor provides. ii. What are the pricing objectives? iii. Do we use profit maximization pricing? iv. How to set the price?: (cost-plus pricing, demand based or value-based pricing, rate of return pricing, or competitor indexing) v. Should there be a single price or multiple pricing? vi. Should prices change in various geographical areas, referred to as zone pricing? vii. Should there be quantity discounts? viii. What prices are competitors charging? ix. Do you use a price skimming strategy or a penetration pricing strategy? x. What image do you want the price to convey? xi. Do you use psychological pricing? xii. How important are customer price sensitivity (e.g. "sticker shock") and elasticity issues? xiii. Can real-time pricing be used? xiv. Is price discrimination or yield management appropriate? xv. Are there legal restrictions on retail price maintenance, price collusion, or price discrimination? xvi. Do price points already exist for the product category?xvii. How flexible can we be in pricing? : The more competitive the industry, the less flexibility we have.xviii. Are there transfer pricing considerations? xix. What is the chance of getting involved in a price war? xx. How visible should the price be? - Should the price be neutral? (ie.: not an important differentiating factor), should it be highly visible? (to help promote a low priced economy product, or to reinforce the prestige image of a quality product), or should it be hidden? (so as to allow marketers to generate interest in the product unhindered by price considerations). xxi. Are there joint product pricing considerations?xxii. What are the non-price costs of purchasing the product? (eg.: travel time to the store, wait time in the store, disagreeable elements associated with the product purchase - dentist -> pain, fish market -> smells) BSPATIL
  • 75. xxiii. What sort of payments should be accepted? (cash, check, credit card, barter) PricingPricing factors are manufacturing cost, market place, competition,marketcondition,Quality of product.What a price should doA well chosen price should do three things: i. achieve the financial goals of the company (e.g., profitability) ii. Fit the realities of the marketplace (Will customers buy at that price?) iii. Support a products positioning and be consistent with the other variables in the marketing mix . iv. Price is influenced by the type of distribution channel used, the type of promotions used, and the quality of the product. v. Price will usually need to be relatively high if manufacturing is expensive, distribution is exclusive, and the product is supported by extensive advertising and promotional campaigns. vi. A low price can be a viable substitute for product quality, effective promotions, or an energetic selling effort by distributors. From the marketer’s point of view, an efficient price is a price that is very close to themaximum that customers are prepared to pay. In economic terms, it is a price that shiftsmost of the consumer surplus to the producer. A good pricing strategy would be the onewhich could balance between the price floor (the price below which the organization endsup in losses) and the price ceiling(the price beyond which the organization experiences a nodemand situation).Definitions The effective price is the price the company receives after accounting for discounts,promotions, and other incentives. Price lining is the use of a limited number of prices for allyour product offerings. This is a tradition started in the old five and dime stores in whicheverything cost either 5 or 10 cents. Its underlying rationale is that these amounts are seen BSPATIL
  • 76. as suitable price points for a whole range of products by prospective customers. It has theadvantage of ease of administering, but the disadvantage of inflexibility, particularly intimes of inflation or unstable prices. A loss leader is a product that has a price set below the operating margin. This resultsin a loss to the enterprise on that particular item, but this is done in the hope that it willdraw customers into the store and that some of those customers will buy other, highermargin items.Promotional pricing refers to an instance where pricing is the key element of the marketingmix.T he price/quality relationship refers to the perception by most consumers that arelatively high price is a sign of good quality. The belief in this relationship is mostimportant with complex products that are hard to test, and experiential products thatcannot be tested until used (such as most services). The greater the uncertainty surroundinga product, the more consumers depend on the price/quality hypothesis and the more of apremium they are prepared to pay. The classic example of this is the pricing of the snackcake Twinkies, which were perceived as low quality when the price was lowered. Note,however, that excessive reliance on the price/quantity relationship by consumers may leadto the raising of prices on all products and services, even those of low quality, which in turncauses the price/quality relationship to no longer apply. Premium pricing (also called prestige pricing) is the strategy of consistently pricing at,or near, the high end of the possible price range to help attract status-conscious consumers.A few examples of companies which partake in premium pricing in the marketplace includeRolex and Bentley. People will buy a premium priced product because: They believe the high price is an indication of good quality; They believe it to be asign of self worth - "They are worth it" - It authenticates their success and status - It is asignal to others that they are a member of an exclusive group; They require flawlessperformance in this application - The cost of product malfunction is too high to buyanything but the best - example: heart pacemaker. BSPATIL
  • 77. The term Goldilocks pricing is commonly used to describe the practice of providing a"gold-plated" version of a product at a premium price in order to make the next-lowerpriced option look more reasonably priced; for example, encouraging customers to seebusiness-class airline seats as good value for money by offering an even higher pricedfirst-class option. Similarly, third-class railway carriages in Victorian England are said tohave been built without windows, not so much to punish third-class customers (for whichthere was no economic incentive), as to motivate those who could afford second-class seatsto pay for them instead of taking the cheaper option. This is also known as a potentialresult of price discrimination. The name derives from the Goldilocks story, in which Goldilocks chose neither thehottest nor the coldest porridge, but instead the one that was "just right". More technically,this form of pricing exploits the general cognitive bias of aversion to extremes. Thispractice is known academically as "framing". By providing three options (i.e. small, medium,and large; first, business, and coach classes) you can manipulate the consumer intochoosing the middle choice and thus, the middle choice should yield the most profit to theseller, since it is the most chosen option.Demand-based pricing Is any pricing method that uses consumer demand - based on perceived value - asthe central element. These include : price skimming, price discrimination and yieldmanagement, price points, psychological pricing, bundle pricing, penetration pricing, pricelining, value-based pricing, geo and premium pricing. Pricing factors are manufacturingcost, market place, competition, market condition, quality of product.Multidimensional pricing Is the pricing of a product or service using multiple numbers. In this practice, price nolonger consists of a single monetary amount (e.g., sticker price of a car), but rather consistsof various dimensions (e.g., monthly payments, number of payments, and a down payment).Research has shown that this practice can significantly influence consumers ability tounderstand and process price information BSPATIL
  • 78. Approaches Pricing as the most effective profit lever. Pricing can be approached at three levels.The industry, market, and transaction level. Pricing at the industry level focuses on theoverall economics of the industry, including supplier price changes and customer demandchanges. Pricing at the market level focuses on the competitive position of the price incomparison to the value differential of the product to that of comparative competingproducts. Pricing at the transaction level focuses on managing the implementation of discountsaway from the reference, or list price, which occur both on and off the invoice or receipt.Suggested retail price The (manufacturers) suggested retail price (MSRP or SRP), list price or recommendedretail price (RRP) (originally, Monroney suggested retail price) of a product is the price themanufacturer recommends that the retailer sell it for. The intention was to help tostandardize prices among locations. While some stores always sell at, or below, thesuggested retail price, others do so only when items are on sale or closeout. Suggested pricing methods may conflict with competition theory, as it allows prices tobe set higher than would otherwise be the case, potentially negatively impacting consumers.However, resale price maintenance goes further than this and is illegal in many regions. Much of the time, stores charge less than the suggested retail price, depending uponthe actual wholesale cost of each item, usually purchased in bulk from the manufacturer, orin smaller quantities through a distributor. Suggested prices can also be manipulated to be unreasonably high, allowing retailersto use deceptive advertising by showing the excessive price and then their actual sellingprice, implying to customers that they are getting a bargain. Game shows have long made use of suggested retail prices both as a game element,in which the contestant must determine the retail price of an item, or in valuing their prizes.Retail Location Strategies BSPATIL
  • 79. Nationwide, the retail sector enjoyed robust growth during the first half of the decade,due in great part to the continued expansion of big boxes. The excitement, however, isdying down, as several category-killer retailers experience slowing sales. The once-zealousplayers are becoming more cautious, and once again the rules of the game are changing fordevelopers and commercial brokers.New Development Drivers Traditionally, retail centers have been defined as either regional, community, orneighborhood, with standard tenants for each of these categories. Recently, though, thelines have blurred, as discount department stores anchor regional malls and traditional malltenants move in-line at strip centers or into freestanding locations. The three familiar categories have now polarized into either regional or neighborhoodlocations. Lackluster performance has caused the retreat or merger of a number of retailchains, both large and small. The theater and entertainment group, once shunned by manydevelopers and anchor retailers, is fast becoming the darling of the industry. And in thewake of continuing retail bankruptcies and mergers, capital markets are taking a closer lookat new development. In fact, many financial institutions have reallocated funds for propertytypes, dropping retail from the most-favored status. With fewer dollars focused on this overbuilt market-and cautious tenants becomingmore selective in choosing new locations-developers and retailers must be more creative.As a result, new deals will rely less on the credit of the tenant and more on the developersuse and positioning of a site as it relates to the market.Locati on, Location, Locati on? What does all of this mean if you have a site looking for a use or a use looking for asite? Throw out those preconceived ideas about location, as the old adage is in a state ofevolution. Market, market, market is a more-appropriate concept for the future as retailersand developers alike ask not "Is this a good location," but rather "Is this the best location inthe market, given the competition?" BSPATIL
  • 80. Historically, the criteria for many retailers has included a location on Main and Main,with a minimum population within a specific radius, generally concentric rings of 1, 3, 5, or10 miles. But providing demographics based on concentric rings and identifying thecompetition are no longer enough to sell a buyer on a location. Road systems, buyerpreferences, and new venues of competition must now be considered, making use of thenew technologically advanced systems that overlay mapping, demographics, and other data. Consistency in consumer behavior also plays a part in the decision-making process,as cluster analysis, which identifies similar behavior patterns within similar demographictracts, becomes prevalent. Psychographics-adding psychology, behavior, and lifestyles todemographic data-is also being utilized. For example, the shopping patterns in the Midwestare not the same as those in the New York City metropolitan area when parking, road access,and visibility are considered. Providing information on the existing, proposed, and potential competitionsurrounding each site is critical when reviewing any location. Geodemographic systems havequickly become the choice among savvy market researchers, as the use of one or more ofthese systems has proved successful in selecting new store locations. Doing research andproviding this information are now key to satisfying retailers and capital markets. Retailers, developers, and brokers must push the envelope and look beyond theobvious to find creative options. For example, Tandys Incredible Universe, the cutting edgeof electronics retailing, includes in-store McDonalds in its 185,000-square-foot stores.Brand recognition has made Starbucks a household word, with locations in malls, airports,stadiums, and most recently, flying the friendly skies with United Airlines.Current Trends With many retailers opting for locations in more densely populated areas, sitescurrently occupied for other uses are finding new life as adaptive reuse becomes thestandard in urban economic development. Many of the nations retailers are discovering thesubstantial dollar volumes that are largely untapped in the major urban markets.Obsolescent industrial buildings in A locations are making way for new supermarkets,Wal-Marts, and Home Depots across the country. In fact, Wal-Mart is considering BSPATIL
  • 81. obsolescence in its new prototype by designing stores that can be converted intomultifamily housing in the future. Communities with enterprise zones and other economicincentives are getting a second chance as retailers rediscover downtown in more-affluentmarkets. A shining example is the Circle Centre redevelopment in Indianapolis. B locations, or those neighborhood centers once anchored by supermarkets, aregetting a breath of new life from Rite Aid, Walgreen’s, and CVS as consumers yearn forservice and convenience. In addition, the surviving supermarkets and large discount department stores areanchoring regional malls. K mart now focuses on its superstore concept in metropolitanlocations, with Wal-Mart continuing to identify gaps in suburban markets. There are feweractive big-box players; therefore, opportunities for regional mall locations, as they becomerepositioned, will become more prevalent.The Chal lenge of Cyber Retail ing Technology is making a dramatic impact on the retail industry as a whole. A recentGallup Poll study concluded that 40 percent of all shoppers are now using nonstore venuesto make some of their purchases. Another recent study concluded that electronic shoppingcould shift 10 percent to 20 percent of sales away from retail stores. In addition to catalog and TV shopping, cyber retailing has entered the scene, andcontinuing advances in infotechnology will make home shopping more desirable. Manyretailers now have World Wide Web pages on the Internet to market their goods, makingcyberspace the great equalizer as retailers of all sizes compete on an even electronicplaying field. At a recent panel discussion regarding retail strategies, a panelist and counsel for amajor supermarket company in the Northeast stated that his company is "rethinking" theconcept of the 25-year lease, as the speed of technology is changing the way retailing willbe done in the future. The Catalina Marketing Corporation is currently beta testing a newWeb site that will allow consumers to comparison shop at local supermarkets. The site alsoprovides on-line advertising from manufacturers and coupons that consumers can printfrom their home computers. BSPATIL
  • 82. Ultimately these technological changes will result in a reduced need for physical spaceas retailers expand electronically. Tenants that may disappear from shopping centersinclude camera and photo-processing stores (as digital cameras, without film, become morepopular), travel offices, music stores, and bank branches (that are meeting and servingcustomers on-line, greatly reducing costs). All of these factors will diminish the value of location. Eventually consumers will cometo value the convenience of shopping on-line over the need to personally pick out products,just as they have with catalog shopping. For example, if a retailer were to offer its productson-line, the customer who wants to touch and try on the products at a regional locationcould do so; others could stay at home, make a selection, place an order, and await delivery.The retailer would eliminate the need for a location in every market. As an example, consider L.L. Bean, the leader in catalog retailing; most consumersknow where they can visit its stores. Becoming a destination retailer, less emphasis isplaced on location. With fewer retailers needing fewer locations, there will be an abundanceof good locations. We see this trend already as the vacancies for traditional strip centersincrease and their lease rates decrease.The Next Trend Will all of this technology eliminate the need for us to leave our homes? Humanbeings are by nature social creatures. Therefore, shopping will evolve into places forentertainment and socialization. In many areas of the country, particularly the waterfronts,we have already seen this new breed of retailers clustering around entertainment venuesand tourist destinations. Now that value pricing has left its mark, customer service andentertainment will again become the hallmarks of retailing. For example, theater chains and other entertainment venues are taking center stageas the anchors of new retail centers. The newest entertainment concept is Sega Game Works,a 5,000-to-30,000-square-foot venture between Steven Spielbergs DreamWorks,MCA/Universal, and Sega. Approximately 20 freestanding and/or mall locations across thecountry are planned, with the first to open in late 1996 in downtown Seattle. National andregional restaurant groups are complementing the mix of this new environment. BSPATIL
  • 83. Under All Is the Land In many areas, few choice undeveloped sites-level and visible from the highway or easily accessible-are still available. Those remaining may have any number of challenges associated with them. Determining and providing the following information to the developer or user will undoubtedly expedite the process, and surprisingly, is often overlooked.Physical constraints Does the site have difficult topography? Are the soil conditions such that blasting willbe required? A review by a geologist will quickly assist in determining whether the soilconditions will result in any unusual site costs. Are there any easements or rights of way thatwill affect access or use of the site? Do a title search earlier rather than later to identify anypotential negotiations with additional third parties. Conservation issues Are wetlands on the site? Are they regulated by the state or federal government? Is the site in an established flood plain area? Reviewing local or county soils and flood plain maps will reveal these facts. Additionally, if you suspect that the site may be home to some rare species of plant or animal life, consult with a qualified botanist or biologist to avoid any surprises.Environmental dilemmas Phase I and II audits may be warranted on the site-certainly any financial institutionwill require a preliminary study. Understanding state and federal environmental protectionlaws is important; however, be sure to include the reporting criteria from your lender in anyrequests for proposals to environmental review companies, because many of their guidelinesnow go beyond state or federal regulations. Assembling a qualified and experienced team of professional consultants is critical to the success of any project. Site selection and development focus on managing the process versus monitoring the transaction. BSPATIL
  • 84. The Players In addition to the developers, professional consultants, brokers, and tenants, todaycommunities themselves are very much a part of the success or failure of proposed retailprojects. Citizens are more educated, sophisticated, and involved in the development oftheir communities. Organized grass-roots efforts opposing retail projects are no longer theexception but the norm. Community public relations are an important early step to identifyopposition groups and potential objections so that issues can be negotiated and projectsare presented in a manner that will win all necessary approvals. Satisfying the concerns ofthe municipal planning and zoning boards is critical; however, the potential always existsfor a "change of heart" by one board member as a result of pressures from organized, vocalopposition-which could prove fatal to a project. In a few areas, the competition amongtenants has created direct or indirect opposition for projects-an expensive lesson to learnand too often overlooked by developers. Increased site costs, costs to development of community opposition, high land prices,and changing tax laws. As a result, many retailers have found themselves in thedevelopment business to maintain already thin profit margins and meet their objectives fornew locations. Other new players in the site development arena include real estateinvestment trusts, which will continue to see mergers as shareholders demand favorablereturns. The changing rules of retail raise as many questions about site selection as theyanswer. For instance, what will happen when category-killer retailers finally "kill" off eachother? Will we see a vast landscape of big boxes waiting for redevelopment? Will cyberretailing live up to its hype and actually decrease the need for retail space? Consider thecoming decrease in disposable income-expected to drop off after 1996-as well as thecompression of the retail cycle (concepts that once took 10 years to mature now fade afterfive or six years). These are the factors that will continue to influence retailers in their search for perfectlocations. Flexibility and preparedness will aid savvy developers and brokers in staying onestep ahead of the game. BSPATIL
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