Merchandise management

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Merchandise management

  1. 1. Chapter 16 Retail Communication Mix Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
  2. 2. 16-2 Merchandise Management Retail Pricing Chapter 15 Retail Communication Mix Chapter 16 Merchandise Planning Systems Chapter 13 Managing Merchandise Assortments Chapter 12 Buying Merchandise Chapter 14
  3. 3. 16-3 Questions ■ What can retailers build brand equity for their stores and their private-label merchandise? ■ How are retailers using new approaches to communicate with their customers? ■ What are the strengths and weaknesses of the different methods for communicating with customers? ■ Why do retailers need to have an integrated marketing communication program? ■ What steps are involved in developing a communication program? ■ How do retailers establish a communication budget? ■ How can retailers use the different elements in a communication mix to alter customers’ decision-making processes?
  4. 4. 16-4 Objectives of Communication Program Short-term Increase Traffic Increase Sales Long-term Build Brand (retailer’s name) Image Create Customer Loyalty
  5. 5. 16-5 Brands Distinguishing name or symbol, such as a logo, that identifies the products or services offered by a seller and differentiates those products and services from those offered by competitors The McGraw-Hill Companies, Inc./Bob Coyle, photographerThe McGraw-Hill Companies, Inc./John Flournoy, photographer
  6. 6. 16-6 Value of Brand Image Value to Retailers (Brand Equity) ■ Attract Customers ■ Build Loyalty ■ Higher Prices Leading to Higher Gross Margin ■ Reduced Promotional Expenses ■ Facilitates Entry into New Markets Gap  GapKids Value to Customers ■ Promises Consistent Quality ■ Simplifies Buying Process ■ Reduces Time and Effort Searching for Information About Merchandise/Retailer
  7. 7. 16-7 Building Brand Equity Brand Equity Create a High Level of Brand Awareness Create Emotional Connections Consistent Reinforcement Develop Favorable Associations
  8. 8. 16-8 The McGraw-Hill Companies, Inc./Lars Niki, photographer Tar-Zhay
  9. 9. 16-9
  10. 10. 16- Apple
  11. 11. 16- Benefits of High Brand Awareness Aided Recall Top Mind Awareness Stimulates Visits to Retailer
  12. 12. 16- Creating Brand Awareness Top-of-mind Brand Awareness Memorable Name Repeated Exposure Symbols Event Sponsorship Best Buy Home Depot Starbuck’s Macy’s
  13. 13. 16- Retailers Develop Associations with their Brand Name Merchandise Category – Office Depot – office supplies Price/quality – Neiman Marcus –, high fashion merchandise Specific attribute or benefit – 7-Eleven – convenience Lifestyle or activity – Electronic Boutique – computer games Brand associations: anything linked to or connected with the brand name in a consumer’s memory Brand name is a set of associations that are usually organized around some meaningful themes
  14. 14. 16- McDonald’s Brand Associations McDonald’s Big Mac Golden Arches Fast Food French Fries Clean Ronald McDonald
  15. 15. 16- L.L. Bean
  16. 16. 16- L.L. Bean’s Brand Associations L.L. Bean Friendly New England Practical Expertise Outdoors Honest
  17. 17. 16- Wal-Mart Associations
  18. 18. 16- Target Associations
  19. 19. 16- Consistent Reinforcement The retailer’s brand image is developed and maintained through the retailer’s communication mix Retail Communication Mix
  20. 20. 16- Consistent Reinforcement through Integrated Marketing Communication Program Integrated Marketing Communication Program ■ A program that integrates all of the communication elements to deliver a comprehensive, consistent message ■ Providing a consistent image can be challenging for multichannel retailers – Need to consider the needs of all channels early in the planning of its communication program
  21. 21. 16- Integrated Marketing Communications Present a Consistent Brand Image through all Communications with Customers •Store Design •Advertising •Web Site •Magalog The McGraw-Hill Companies, Inc./Andrew Resek, photographer
  22. 22. 16- Brand Extensions ■ Gap  GapKids and Old Navy ■ Talbots  Talbuts Mens ■ Sears  Sears Auto Centers and the Great Indoors ■ Pottery Barn  Pottery Barn Kids The McGraw-Hill Companies, Inc./Andrew Resek, photographer
  23. 23. 16- Extending Brand Name to a New Concept Pluses ■ Develop Awareness and Image Quickly ■ Less Costs Needed to Promote Extension Minuses ■ Associations Might Not Be Compatible with Extension Limited  Victoria’s Secret Abercrombie & Fitch  Hollister
  24. 24. 16- Communication Methods
  25. 25. 16- Paid Impersonal Communications ■ Advertising ■ Sales promotions – Special events, In-store demonstrations ■ Games, sweepstakes and contests ■ Coupons ■ Store atmosphere ■ Website ■ Community building Jack Star/PhotoLink/Getty Images Boxes of KrustyO’s cereal at a New York 7- Eleven stores, temporarily converted into a Kwik-E Mart, to promote the Simpson Movie.
  26. 26. 16- Store Atmosphere The combination of the store’s physical characteristics (architecture, layout, signs and displays, colors, lighting, temperature, sounds, smells) together create an image in the customers’ mind
  27. 27. 16- Mediacart A shopping cart that delivers point-of-decision advertising ■ Informs the customer about special deals as the customer passes them in the aisle ■ Each video screen is embedded with an RFID chip that interacts with chips installed on store shelves ■ Records shopping habits, dwell times, how shoppers travel through the store
  28. 28. 16- Community Building Retailers’ Community Building Websites offer opportunities for customers with similar interests to learn about products and services that support their hobbies and share information with others
  29. 29. 16- Paid Personal Communication ■ Retail salespeople are primary vehicle for providing paid personal communication to customers.  Personal selling – salespeople satisfy needs through face to face exchange of information ■ Email – retailers inform customers of new merchandise, receipt of order or when order has been shipped ■ Direct Mail ■ M-Commerce (mobile commerce)
  30. 30. 16- Unpaid Impersonal Communication Publicity is communication through significant unpaid presentations about the retailer, usually a news story, in impersonal media. • Newspaper • TV coverage • Macy’s Thanksgiving Day Parade
  31. 31. 16- PR The Gap, Emporio Armani, and Apple are among several retailers selling red products, a portion of the proceeds go to Product RED, a charity to wipe out AIDS in Africa
  32. 32. 16- Unpaid Personal Communication ■ Word-of-mouth Can be favorable Can be detrimental ■ Social Shopping  A communication strategy in which consumers use Internet to engage in the shopping process by exchanging preferences, thoughts, and opinions  Product/service reviews
  33. 33. 16- Social Shopping
  34. 34. 16- Comparison of Communication Methods
  35. 35. 16- Steps in Developing a Retail Communication Program Planning the Retail Communication Program
  36. 36. 16- Setting Objectives ■ Communication objectives:  Specific goals related to the retail communication mix’s effect on the customer’s decision-making process  Long-term: ex) creating or altering a retailer’s brand image  Short-term: ex) increasing store traffic
  37. 37. 16- Communication Objectives & Stages in the Consumers Decision-Making Process
  38. 38. 16- Retail and Vendor Communication Programs Vendor • Long-term objectives • Product focused • National • Specific product Retailer • Short-term objectives • Category focused • Local • Assortment of merchandise
  39. 39. 16- Setting the Communication Budget • Marginal analysis • Objective and task • Rules of thumb - Affordable - Percent of sales - Competitive parity Advertising Sales Sales Advertising
  40. 40. 16- Setting the Communication Budget ■ Marginal Analysis Method  Based on the economic principle that firms should increase communication expenditures as long as each additional dollar spent generates more than a dollar of additional contribution  Very hard to use because managers don’t know the relationship between communication expenses and sales
  41. 41. 16- Marginal Analysis for Setting Communication Budget
  42. 42. 16- Objective-and-Task Method ■ Determines the budget required to undertake specific tasks to accomplish communication objectives
  43. 43. 16- Illustration of Objective and Task Method for Setting a Communication Budget
  44. 44. 16- Financial Implications of Increasing the Communication Budget
  45. 45. 16- Rule of Thumb Methods Affordable Budgeting Method – sets communication budget by determining what money is available after operating costs and profits are budgeted. Drawback: The affordable method assumes that the communication expenses don’t stimulate sales and profits. Percentage of Sales Method – communication budget is set as a fixed percentage of forecasted sales. Drawback: This method assumes the same percentage used in the past, or by competitors, is still appropriate for the retailer.
  46. 46. 16- Rule of Thumb Methods Competitive Parity Method – this communication budget is set so that the retailer’s share of communication expenses equals its share of the market. Drawback: This method (like the others) does not allow the retailer to exploit the unique opportunities or problems they confront in a market.
  47. 47. 16- Allocation of the Promotional Budget ■ The retailer decides how much of its budget to allocate to specific communication elements, merchandise categories, geographic regions, or long- and short-term objectives ■ Budget allocation decision is more important budget amount decision High-assay principle: The retailer allocate the budget to areas that will yield the greatest return

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