Chapter 17


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Chapter 17

  1. 1. 17 Retailing and Direct Marketing
  2. 2. Agenda <ul><li>The Nature of Retailing </li></ul><ul><li>Major Types of Retail Stores </li></ul><ul><li>Direct Marketing </li></ul><ul><li>Other Types of Nonstore Retailing </li></ul><ul><li>Franchising </li></ul><ul><li>Strategic Issues in Retailing </li></ul>
  3. 3. The Nature of Retailing <ul><li>Retailing </li></ul><ul><ul><li>Transactions in which ultimate consumers are the buyers </li></ul></ul><ul><li>Retailers </li></ul><ul><ul><li>Organizations that purchase products for the purpose of reselling them to ultimate consumers </li></ul></ul><ul><ul><ul><li>Retailers add value — shopping convenience, services, and purchasing assistance to customers </li></ul></ul></ul><ul><ul><ul><li>Retailers create utility — time, place, possession, and form </li></ul></ul></ul><ul><ul><li>Success in retailing comes from having a strong customer focus coupled with desired levels of service, product quality, and innovation. </li></ul></ul>
  4. 4. Major Types of Retail Stores <ul><li>General-Merchandise Retailers </li></ul><ul><ul><li>A retail establishment that offers a variety of product lines </li></ul></ul><ul><ul><li>Department stores </li></ul></ul><ul><ul><ul><li>Large retail organizations characterized by wide product mixes and organized into separate departments to facilitate marketing efforts and internal management </li></ul></ul></ul><ul><ul><li>Discount stores </li></ul></ul><ul><ul><ul><li>Self-service, general merchandise stores offering brand name and private brand products at low prices </li></ul></ul></ul>
  5. 5. Major Types of Retail Stores (cont’d) <ul><li>General-Merchandise Retailers (cont’d) </li></ul><ul><ul><li>Supermarkets </li></ul></ul><ul><ul><ul><li>Large, self-service stores that carry a complete line of food products, along with some nonfood products </li></ul></ul></ul><ul><ul><li>Superstores </li></ul></ul><ul><ul><ul><li>Giant retail outlets that carry food and nonfood products found in supermarkets, as well as most routinely purchased consumer products </li></ul></ul></ul>
  6. 6. Major Types of Retail Stores (cont’d) <ul><li>General-Merchandise Retailers (cont’d) </li></ul><ul><ul><li>Warehouse clubs </li></ul></ul><ul><ul><ul><li>Large-scale, members-only establishments that combine features of cash-and-carry wholesaling with discount retailing </li></ul></ul></ul>
  7. 7. Major Types of Retail Stores (cont’d) <ul><li>Specialty Retailers </li></ul><ul><ul><li>Traditional specialty retailers </li></ul></ul><ul><ul><ul><li>Also called “limited-line” and “single-line” retailers </li></ul></ul></ul><ul><ul><ul><li>Carry a narrow product mix with deep product lines (e.g., pet supplies) </li></ul></ul></ul><ul><ul><ul><li>Have higher costs and higher margins </li></ul></ul></ul><ul><ul><ul><li>Provide more product selection (first-line brands), product expertise, and high levels of personal service </li></ul></ul></ul>
  8. 8. Traditional Specialty Retailer © Carol Lundeen
  9. 9. Major Types of Retail Stores (cont’d) <ul><li>Specialty Retailers (cont’d) </li></ul><ul><ul><li>Off-price retailers </li></ul></ul><ul><ul><ul><li>Buy manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts </li></ul></ul></ul><ul><ul><ul><li>Charge less than department stores for comparable merchandise and offer few customer services </li></ul></ul></ul><ul><ul><ul><li>Have established long-term relationships with suppliers for continuing supplies of reduced-price goods </li></ul></ul></ul><ul><ul><li>Category killers (“big box”) </li></ul></ul><ul><ul><ul><li>Concentrate on a major product category and compete on the basis of low prices and product availability </li></ul></ul></ul>
  10. 10. Examples of Category Killers <ul><li>Toys ‘R’ Us </li></ul><ul><li>Home Depot </li></ul><ul><li>Best Buy </li></ul><ul><li>Office Depot </li></ul><ul><li>PETsMart </li></ul><ul><li>Barnes & Noble </li></ul>
  11. 11. Direct Marketing <ul><li>Nonstore Retailing </li></ul><ul><ul><li>The selling of products outside the confines of a retail facility </li></ul></ul><ul><li>Direct Marketing </li></ul><ul><ul><li>The use of telephone and nonpersonal media to introduce products to consumers, who then can purchase them via mail, telephone, or the Internet </li></ul></ul>
  12. 12. Direct Marketing (cont’d) <ul><li>Catalog Marketing </li></ul><ul><ul><li>A type of marketing in which an organization provides a catalog from which customers can make selections and place orders by mail, telephone, or the Internet </li></ul></ul><ul><ul><ul><li>Consumer advantages are efficiency and convenience </li></ul></ul></ul><ul><ul><ul><li>Marketer advantages are lower location, facility, selling, and operating costs. </li></ul></ul></ul><ul><ul><ul><li>Disadvantages are inflexibility and limited selection and local service availability. </li></ul></ul></ul>
  13. 13. Direct Marketing (cont’d) <ul><li>Direct-Response Marketing </li></ul><ul><ul><li>A type of marketing that occurs when a retailer advertises a product and makes it available through mail or telephone orders </li></ul></ul><ul><li>Telemarketing </li></ul><ul><ul><li>The performance of marketing-related activities by telephone </li></ul></ul>
  14. 14. Customers’ Reactions to Telemarketing Calls Source: “Do Not Disturb,” American Demographics, May 2001, p. 28. Adapted with permission. How can telemarketers be more effective in reaching customers?
  15. 15. Direct Marketing (cont’d) <ul><li>Television Home Shopping </li></ul><ul><ul><li>A form of selling in which products are presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card </li></ul></ul><ul><li>Online Retailing </li></ul><ul><ul><li>Retailing that makes products available to buyers through computer connections </li></ul></ul>
  16. 16. Satisfaction Scores for Online Retailers American Customer Satisfaction Index Year-to-Year Comparison Source: ACSI as reported in American Demographics , April 2004, p.16. 1.2% 84 83 Average e-tailer 1.2% 83 82 All others -2.6% 76 78 0% 80 80 -1.1% 86 87 0% 88 88 % Change 2003 2002 E-Retail Online Brand
  17. 17. Satisfaction Scores for Online Retailers (cont’d) American Customer Satisfaction Index Year-to-Year Comparison Source: ACSI as reported in American Demographics , April 2004, p.16. 0% 77 77 Average e-travel score 0% 77 77 All others 0% 76 76 1.3% 77 76 Orbitz -2.5% 78 80 Expedia % Change 2003 2002 E-Travel Online Brand
  18. 18. Other Types of Nonstore Retailing <ul><li>Direct Selling </li></ul><ul><ul><li>The marketing of products to ultimate consumers through face-to-face sales presentations at home or in the workplace </li></ul></ul><ul><ul><ul><li>“ Door-to-door” </li></ul></ul></ul><ul><ul><ul><li>Party plans: hosting groups to view a product demonstration and encouraging participants to purchase the products </li></ul></ul></ul><ul><ul><li>Benefits </li></ul></ul><ul><ul><ul><li>Personal attention to customer </li></ul></ul></ul><ul><ul><ul><li>Convenience of time and place of presentation </li></ul></ul></ul><ul><ul><li>Limitations </li></ul></ul><ul><ul><ul><li>High costs make it the most expensive form of selling </li></ul></ul></ul><ul><ul><ul><li>Negative consumer view of direct selling </li></ul></ul></ul>
  19. 19. Other Types of Nonstore Retailing (cont’d) <ul><li>Automatic Vending </li></ul><ul><ul><li>The use of machines to dispense products </li></ul></ul><ul><ul><li>Can include items such as candy, chewing gum, soft drinks, cigarettes, newspapers, and coffee </li></ul></ul><ul><ul><ul><li>Advantages: small amount of space needed and no sales personnel </li></ul></ul></ul><ul><ul><ul><li>Disadvantages: high costs of equipment and frequent servicing </li></ul></ul></ul>
  20. 20. Franchising <ul><li>Franchising </li></ul><ul><ul><li>An arrangement in which a supplier (franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration </li></ul></ul><ul><ul><ul><li>Franchiser furnishes equipment, buildings, management know-how, and marketing assistance. </li></ul></ul></ul><ul><ul><ul><li>Franchisee supplies labor and capital and operates the business by the provisions of the franchise agreement. </li></ul></ul></ul>
  21. 22. Franchising (cont’d) <ul><li>Advantages </li></ul><ul><ul><li>Enables startup with limited capital </li></ul></ul><ul><ul><li>Provides developed and proven business to franchisee </li></ul></ul><ul><ul><li>Attracts customers with established brand name </li></ul></ul><ul><ul><li>Allows immediate market entry </li></ul></ul><ul><ul><li>Motivates franchisee to succeed </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Control over aspects of the business and its operations by franchiser </li></ul></ul><ul><ul><li>Expense of continuing franchise royalties and advertising fees </li></ul></ul><ul><ul><li>Lack of control of franchisees by franchisor </li></ul></ul>
  22. 23. If You Had the Financial Resources to Purchase a Franchise, Which Company Would You Select? Why? Reprinted with permission of Papa John’s International, Inc.
  23. 24. Strategic Issues in Retailing <ul><li>Retail Store Location </li></ul><ul><ul><li>Factors affecting location </li></ul></ul><ul><ul><ul><li>Intended target market </li></ul></ul></ul><ul><ul><ul><li>Kinds of products </li></ul></ul></ul><ul><ul><ul><li>Suitability site for customer access </li></ul></ul></ul><ul><ul><ul><li>Characteristics of existing retail operations </li></ul></ul></ul><ul><li>Types of Locations </li></ul><ul><ul><li>Free-standing structures </li></ul></ul><ul><ul><li>Traditional business districts </li></ul></ul>
  24. 25. Strategic Issues in Retailing (cont’d) <ul><li>Traditional Shopping Centers </li></ul><ul><ul><li>Neighborhood shopping centers </li></ul></ul><ul><ul><ul><li>Usually consist of several small convenience and specialty stores. </li></ul></ul></ul><ul><ul><li>Community shopping centers </li></ul></ul><ul><ul><ul><li>Include one or more department stores (anchors), some specialty stores, and convenience stores. </li></ul></ul></ul><ul><ul><li>Regional shopping centers </li></ul></ul><ul><ul><ul><li>Have the largest department stores, the widest product mix, and the deepest product lines of all shopping centers. </li></ul></ul></ul>
  25. 26. Strategic Issues in Retailing (cont’d) <ul><li>Nontraditional Shopping Centers </li></ul><ul><ul><li>Factory outlet malls </li></ul></ul><ul><ul><ul><li>Feature discount and factory outlet stores carrying traditional brand name products </li></ul></ul></ul><ul><ul><li>Miniwarehouse mall </li></ul></ul><ul><ul><ul><li>Loosely planned; lease space to retailers running retail stores out of warehouse bays </li></ul></ul></ul><ul><ul><li>Nonanchored malls </li></ul></ul><ul><ul><ul><li>Do not have traditional department store anchors; combine off-price and category killer stores in a “power center” format </li></ul></ul></ul>
  26. 27. Strategic Issues in Retailing (cont’d) <ul><li>Retail Positioning </li></ul><ul><ul><li>Identifying an unserved or underserved market segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment </li></ul></ul><ul><li>Store Image </li></ul><ul><ul><li>Atmospherics </li></ul></ul><ul><ul><ul><li>The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying </li></ul></ul></ul><ul><ul><ul><li>Interior layout, colors, furnishings, and lighting </li></ul></ul></ul><ul><ul><ul><li>Exterior storefront and entrance design, display windows, and traffic congestion </li></ul></ul></ul>
  27. 28. How to Succeed in Retailing as a Small Business 1. Differentiate your product from that of the other stores (avoid direct competition). 2. Determine your specific niche…you can’t please everyone. 3. Select a location with easy access and high visibility. 4. Offer products with selling features. 5. Train your employees to develop strong employee/customer relationships. 6. Plan store-related events to create excitement. 7. Focus your ad dollars on one medium versus inadequately buying many media. Source: Reprinted with permission from Arthur Andersen Retailing Issues Letter, July 1995, Vol. 7, No. 4, p. 5. Used with permission.