The Neiman Marcus GroupTable of ContentsIntroductionSt.docx

The Neiman Marcus Group
Table of Contents
Introduction
Strategic Service Vision
Background Information
Target Market: Who Shops at Neiman Marcus
Service Concept: What Do Customers Want?
Operating Strategy: What Activities are Involved?
Service Delivery System: What is the Neiman Marcus Way?
Introduction
The Neiman Marcus Group, the umbrella company for Neiman
Marcus, Bergdorf Goodman, and Horchow, was established in
1987. Over the past two decades, the company has grown to
become one of the top high-end retailers in the United States
and is part of a multi-billion dollar industry. It has 37 retail
locations and 16 Last Call (clearance merchandise) facilities
across the United States. The company has established itself so
well within the luxury market that sales have continued to grow
every year since incorporation. As stated in the company’s 2004
Annual Report, total revenues increased by 14% in a year’s
time, totaling to $3.55 billion.

The company is comprised of two divisions: the Specialty Retail
Stores Division and the Direct Marketing Division. The
organization of the company allows it to place attention and
focus on the right activities and continue to develop strategies
and processes for maintaining brand recognition and brand
loyalty. The Specialty Retail Stores Division includes The
Neiman Marcus Group’s retail facilities across the country. The
Direct Marketing Division handles all activities related to the
company’s print catalog and online offerings (Neiman Marcus
Company Website). Together, both divisions build on the
strength of the company.
The Neiman Marcus Group serves as a trendsetting retailer that
delivers high-end goods to its customers. The company’s
merchandise mix includes apparel, jewelry, accessories, shoes,
beauty, home furnishings, and other miscellaneous goods
(Hoover’s Electronic Journal). All products are high quality,
designed and manufactured by top designers from around the
world. The company values luxury and fashion and maintains a
commitment to high customer service in all of its endeavors and
sales opportunities.
Strategic Service Vision
The Service Vision can be described as a step-by-step process
for delivering the best results in any service organization. It
allows managers to organize customer wants into an
understandable form and be able to draw solutions to meet those
wants. There are four aspects of the Service Vision including:
(1) Target Market, (2) Service Concept, (3) Operating Strategy,
and (4) Service Delivery System. All four elements are geared
toward closing a gap between management’s perceptions of
customer wants and service procedures. This is an important
concept because though customers may have a criterion of
desires, often interpreting those desires and formulating

processes to better serve them becomes a difficult task [1]
Target Market: Who Shops at Neiman Marcus?
Target Market, the first part of developing the Service Vision,
involves understanding who the customer is. Neiman Marcus’
target market can be identified through determining what major
markets or publics the organization serves, what market
segments fall into each market, and recognizing demographic
and psychographic characteristics of each market segment. The
consumers of Neiman Marcus goods can be identified by their
purchasing patterns. The merchandise categories of the retailer
are segmented by sales on the company’s website and are as
follows:
This chart shows that most of the company’s sales are generated
by women’s apparel and women’s shoes/accessories. Therefore,
women are a major target for the company. They are normally
fashion savvy and find it important to look professional, trendy,
and powerful.
The retailer serves three main target markets among the female
segment: celebrities, Upper Class (white collar professionals),
and Middle Class consumers. The first target market,
celebrities, is frequently in the public eye and therefore needs
products that represent prestige and a particular image. These
elite individuals often serve as role models or opinion leaders
and therefore must be seen looking their best and appearing to
be confident. They demand a level of high respect and
appreciation in every situation. Upper class customers, who
make up majority of the retailer’s market share, are not
necessarily in the spotlight as celebrities are. However these
professionals live luxurious lifestyles and are accustomed to
elegance and sophistication in all elements of their lives. This
group requires that everyday goods (apparel and home décor)
reflect exquisite taste, an understanding of fashion and trends,

and social status. Both types of customers, celebrities and
Upper Class, live in well-developed areas within the United
States, hold top-level professions, make a considerable income
(with a great amount of disposable income), and travel in elite
social circles.
The third target market of Neiman Marcus includes individuals
belonging to the Middle Class sector. This market segment has
sufficient financial capabilities to live a comfortable lifestyle
but is careful so as not to “over spend” or exceed financial
means. These consumers are more price sensitive. Therefore
shopping at high-end retailers, such as Neiman Marcus, is
limited. All customer groups, whether celebrities, Upper Class
professionals, or Middle Class, can be categorized as being
either: (1) customers with a sense of fashion who are looking
for one centralized location where they can find the most
current trends and information related to the fashion world or
(2) customers who may not fully understand what is in style and
therefore need guidance in finding a wardrobe and other
accessories to fit their polished lifestyle.
Service Concept: What Do Customers Want?
The Service Concept deals with noting the current and evolving
needs and wants of the customer base. The Neiman Marcus
customer is looking for personal attention, prestige, and a sense
of fashion forwardness while shopping. Customers like to feel
as though they belong in Neiman Marcus. The store has a rich,
tasteful, elegance about it that gives it a radiant culture,
welcoming its customers. Customers must be viewed as
individuals, and not just as spenders; they must feel appreciated
in the Neiman Marcus setting. People enjoy building
relationships, connecting with other individuals, and being able
to voice their opinions and ask questions. Therefore personal
attention and relationship marketing are key factors for Neiman
Marcus to continue to focus on.

Also, because the Neiman Marcus customer lives a posh
lifestyle, he/she demands that all purchases and/or encounters
made mirror this lifestyle. Such customers wear designer
apparel and use designer products in their homes. These
designer goods come with an expensive price point; however the
Neiman Marcus customer recognizes this and is not sensitive to
it (for the most part). He/she wants to look and feel glamorous
at all times, which is particularly the case for the celebrity and
Upper Class customers. For all customers, uniqueness, style,
and refinement are reflected in personal buying patterns. These
elements of prestige are critical in any customer’s shopping
experiences. .
Finally, Neiman Marcus customers either are or want to be
trendsetters. They want others to notice their sense of style,
elegance, and professionalism. They buy merchandize that is
made of the best material and by the most renowned individuals
and manufacturers. Many of Neiman Marcus’ customers travel
quite frequently, as they have the financial means to do so, and
therefore are knowledgeable about what style is in different
parts of the world. Europe, for example, is home to many top
designers and therefore the newest and most unique designs are
launched there first. Customers are aware of the stylish
European reputation and want that same style available to them
here, in the United States. Neiman Marcus is able to provide its
consumers with an unmatchable degree of fashionable selections
and knowledge.
Operating Strategy: What Activities are Involved?
The operating strategy consists of a list all of the processes and
activities that are part of the Neiman Marcus experience. This
includes both front room (where the customer is physically
present) and back room (where the customer is not physically
present) activities [1]. At Neiman Marcus, where much of the

business involves face-to-face contact and therefore direct
marketing, there are many activities that are critical to meeting
customer needs. Both types of operations (front room and back
room) can be explained, visually, using flowcharts (See
Appendices A and B).
The flowcharts included identify which activities are related to
the customer service concept: personal attention, prestige, and
fashion-forwardness. As is seen in the flowcharts, many of the
activities relate to one, two, or all three of the outlined service
concepts. Activities dealing with two or three of the service
concepts must be given more attention. Such activities, from a
front room perspective, involve (1) the customer’s time spent
browsing about the store, (2) asking for help/conversing with
sales personnel, and (3) trying on/testing the merchandise. From
a back room perspective, activities that relate to at least two of
the service concepts include: (1) the hiring of sales personnel,
maintenance workers, and management, (2) product positioning
(in the store and as inventory), and (3) event planning
(including sales promotions, fashion shows, gatherings, and
other events for current and potential customers). All other
activities, though important, may not need immediate or
consistent improvement and attention in efforts to satisfy
customer wants or may not be directly related to satisfying
customer wants.
Service Delivery System: What is the Neiman Marcus Way?
Service delivery systems are procedures that an organization
creates and implements in order to better serve its customers. At
Neiman Marcus, such procedures are carefully designed,
communicated, and utilized to provide optimum customer
service, enhance employee relations, and build a strong position
within the retail industry. Specific processes have been
developed to tailor to each of the three service concepts.

However, these specific processes can be combined to fall under
three important service delivery systems: HR (involving hiring,
training, and motivational processes), layout, and quality
control (involving decisions related to purchases made from
vendors and repair/maintenance).
Dealing with HR and in efforts to increase personal attention,
the company has hired approximately three to five personal
shoppers for each location across the United States. These
personal shoppers are trained and motivated to help customers
on a one-to-one basis. They personally schedule appointments
with certain customers and build relationships with each of
those customers. If a customer visits a particular personal
shopper for the first time, the personal shopper will take note of
the customer’s tastes. As they converse and the customer begins
to try on or test the merchandise, the personal shopper is urged
to get to know the customer on a deeper level than just by name.
If, for example, a personal shopper notices that a customer has a
vivacious personality that transcends to his/her wardrobe, the
personal shopper will begin to set aside apparel and other items
that are colorful, expressive, and unique – perhaps designs by
Roberto Cavalli, a designer who does not shy away from bright,
vibrant patterns that scream of energy and passion. Encouraging
personal shoppers and other personnel to recognize details
about each customer’s wants can be a difficult task.
Employees, before beginning their job responsibility at Neiman
Marcus, are required to attend an orientation seminar. At
orientation, they are asked to discuss and think about the
Neiman Marcus vision, who the retailer serves, and how. Often,
this is hard for new employees, as truly understanding a
company mission and customer wants stems from interacting
with customers and gaining experience in the field – both of
which they have not done. Although the orientation process
does encourage employees to begin to take note of consumer
buying patterns and behaviors, the company has no real method

of ensuring that each employee is doing so after being hired.
Yes, personal shoppers and other frontline employees are
pushed to pinpoint customer wants, however no process has
been set up to help guide them or motivate them to be an active
part of the Neiman Marcus experience. Sales personnel are paid
commission only so they understand that they must sell, sell,
sell. However, they need to feel more involved in the overall
process. They must learn to focus on building a long-term, loyal
customer base. At Neiman Marcus, where the merchandise is
very expensive, a short-term customer can cost the company
thousands of dollars. Therefore, the company needs to develop
some sort of checking and evaluation system to help front line
employees better understand specific customer wants and be
able to mold their actions toward delivering to those wants. This
will increase personal attention and sales per employee
dramatically.
As a part of layout and in order to add to the luxurious culture
and atmosphere of the store and thus provide the customer with
a level of prestige he/she is used to, the company has many
different systems in place. For example, a store may re-arrange
or close a section off in one of its store’s for an elite customer.
If the customer had called the store and told a sales
representative he/she were interested in buying five fur coats
(which have a very high price point), the store may choose to
close off the furs section in order to focus all attention on this
customer and be able to cater to his/her needs. Therefore, the
retailer is flexible – willing to do anything to satisfy the
customer and make him/her feel as though he/she is most
important to the company. The large, multi-functional layout at
Neiman Marcus allows personnel and management to add to
each customer’s shopping experience.
For instance, the store is carefully arranged so that customers
can browse with ease, discuss buying options with a sales

person, or converse and relax with other customers. The store is
decorated with unique sculptures and paintings, casual and
formal sitting arrangements, large mirrors, and showcases – all
adding to the elegant and prestigious ambiance. During a
particular event, the store can be re-arranged or re-designed to
fit the theme of the event. For example, last Fall, when the
retailer held an exclusive party for elite customers at its King of
Prussia location, the store was transformed into a disco. Animal
print furniture made the space look classy, yet fun and wild.
Colorful lighting and candles had been placed throughout the
layout to add to the dramatic atmosphere. Several bars and
dance floors had been set up to force guests to mingle and enjoy
themselves. Upstairs, the store had been transformed into a
Milan runway. The event was designed to raise money for an
anti-AIDS organization. It made both customers and employees
feel more involved in the cause and have fun at the same time.
In regards to quality control, the third identified service
delivery system, it is especially important for the company to
make wise purchasing decisions and maintain optimum repair
efforts that reflect the high-quality image of the store. In terms
of purchasing decisions, Neiman Marcus must continue to buy
and sell goods that depict fashion forwardness (knowledge of
current and up and coming fashions) as well as a vast selection
of top designer merchandise. No secondary or generic brands
can be used. The store only affiliates itself with images of high
fashion and this must be apparent in all purchasing decisions.
The company values quality control in terms of purchasing
decisions so much that it frequently evaluates its vendors for
efficiency in relation to certain product specifications and how
they meet customer demands.
Quality control is also important from a maintenance
perspective because if the company cannot repair a good to fit a
customer’s want, the customer will begin to go elsewhere for

his/her shopping. Maintenance involves tailoring and repair
work of the merchandise. Sales personnel are asked to carefully
check all inventories for product malfunction or discrepancies.
Goods that need repair work must be sent to the appropriate
employees and must be taken care of immediately. A record of
repair times is kept and evaluated to improve quality control
measures.
Concluding Thoughts
The Neiman Marcus Group is dedicated to delivering more than
satisfactory results in terms of customer care, trendsetting, and
creating sustainable advantages. The company has succeeded in
implementing Strategic Service Vision (SSV) and becoming a
strong player in the retail industry and has grown to symbolize
status, fashion, and specialty service. This company recognizes
important activities with respect to the need of the customers
and delivers them in a way to differentiate itself from the
competition. This company also values its employees and
encourages them to become an integral part of its position in the
market and in the mind’s of consumers.
References
1. Fitzsimmons, James A. and Mona J. Fitzsimmons. Service
Management: Operations,
Strategy, Information Technology. 5th ed. Boston: Mc-Graw
Hill, 2006. pp. 38-40,
140-142.
Appendix A: Front Room Operations
SHAPE * MERGEFORMAT

SHAPE * MERGEFORMAT
Appendix B: Back Room Operations
SHAPE * MERGEFORMAT
Start
End
Leaving the store
Asking for help and conversing with Sales Associate
Key
Personal Attention

Prestige
Fashion Forward
End
Leaving the store
Purchasing Merchandise
Choosing between options
NO
End

Leaving the store
Need to try on/test merchandise?
Going to a Neiman Marcus Facility
Entering the store
Browsing through store
Need Assistance?
YES
NO
Finding Merchandise

Trying on/Testing Merchandise
YES
YES
Trying on/Testing Merchandise
YES
YES

NO
Purchase?
NO
Purchase?
NO
Purchase?
End

Leaving the store
Start
Key
Personal Attention
Prestige
Fashion Forward
Hiring Personnel
Cleaning and Maintaining Ambiance
Event Planning

Managing Finances
Product Positioning/Inventory
End
1
Exercise 5.
On May 19, 2004, the IASB published a single volume of its
official pronouncements that will be applicable from January
1, 2005.
Required:
Access the IASB Web site (www.iasb.org), search for these
pronouncements, and prepare a list of them.
Exercise 1
Unless otherwise indicated, exercises and problems should be
solved based on IFRS.
1. A company incurred the following costs related to the
production of inventory in the current year:
Cost of materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 100,000
Cost of direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 60,000
Allocation of variable overhead costs . . . . . . . . . . . . . . . . . . . .

30,000
Allocation of fixed overhead costs (based on normal
production levels). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 25,000
Storage costs (after production, prior to sale). . . . . . . . . . . . . .
. 2000
Selling costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . …………..8000
The cost of materials included abnormal waste of $10,000. What
is the cost of inventory in the current year?
a. $190,000
b. $205,000
c. $215,000
d. $217,000
Exercise 4
On January 1, Year 1, an entity acquires a new machine with an
estimated use- ful life of 20 years for $100,000. The machine
has an electrical motor that must be replaced every five years at
an estimated cost of $20,000. Continued opera- tion of the
machine requires an inspection every four years after purchase;
the inspection cost is $10,000. The company uses the straight-
line method of depreciation. What is the depreciation expense
for Year 1?
a. $5,000
b. $5,500
c. $8,000.
d. $10,000
Case5
S. A. Harrington Company
S. A. Harrington Company is a U.S.-based company that
prepares its consolidated financial statements in accordance
with U.S. GAAP. The company reported income in 2011 of

$5,000,000 and stockholders’ equity at December 31, 2011, of
$40,000,000.
The CFO of S. A. Harrington has learned that the U.S.
Securities and Exchange Commission is considering requiring
U.S. companies to use IFRS in preparing consolidated financial
statements. The company wishes to determine the impact that a
switch to IFRS would have on its financial statements and has
engaged you to prepare a reconciliation of income and
stockholders’ equity from U.S. GAAP to IFRS. You have
identified the following five areas in which S. A. Harrington’s
accounting principles based on U.S. GAAP differ from IFRS.
1. Restructuring
2. Pension plan
3. Stock options
4. Revenue recognition
5. Bonds payable
The CFO provides the following information with respect to
each of these accounting differences.
Restructuring Provision
The company publicly announced a restructuring plan in 2011
that created a valid expectation on the part of the employees to
be terminated that the company will carry out the restructuring.
The company estimated that the restructuring would cost
$300,000. No legal obligation to restructure exists as of
December 31, 2011.
Pension Plan
In 2009, the company amended its pension plan, creating a past
service cost of $60,000. Half of the past service cost was
attributable to already vested employees who had an average
remaining service life of 15 years, and half of the past service
cost was attributable to nonvested employees who, on average,
had two more years until vesting. The company has no retired
employees.
Stock Options
Stock options were granted to key officers on January 1, 2011.

The grant date fair value per option was $10, and a total of
9,000 options were granted. The options vest in equal
installments over three years: one-third vest in 2010, one-third
in 2011, and one-third in 2012. The company uses a straight-
line method to recognize compensation expense related to stock
options.
Revenue Recognition
The company entered into a contract in 2011 to provide
engineering services to a long-term customer over a 12-month
period. The fixed price is $250,000, and the company estimates
with a high degree of reliability that the project is 30 percent
complete at the end of 2011
Bonds Payable
On January 1, 2010, the company issued $10,000,000 of 5
percent bonds at par value that mature in five years on
December 31, 2014. Costs incurred in issuing the bonds were
$500,000. Interest is paid on the bonds annually.
Required
Prepare a reconciliation schedule to reconcile 2011 net income
and December 31, 2011 stockholders’ equity from a U.S. GAAP
basis to IFRS. Ignore income taxes. Prepare a note to explain
each adjustment made in the reconciliation schedule.

The Neiman Marcus GroupTable of ContentsIntroductionSt.docx

Recommended

Recommended

More Related Content

Similar to The Neiman Marcus GroupTable of ContentsIntroductionSt.docx

Similar to The Neiman Marcus GroupTable of ContentsIntroductionSt.docx (20)

More from cherry686017

More from cherry686017 (20)

Recently uploaded

Recently uploaded (20)

The Neiman Marcus GroupTable of ContentsIntroductionSt.docx