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rishush 06

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strategic business advantages of direct marketing

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rishush 06

  1. 1. Chapter 6 Web, Nonstore-Based, and Other Forms of Nontraditional Retailing RETAIL MANAGEMENT: A STRATEGIC APPROACH , 10th Edition BERMAN EVANS
  2. 2. Chapter Plan <ul><li>To contrast single-channel and multi-channel retailing </li></ul><ul><li>To look at the characteristics of the 3 major retail institutions involved with nonstore-based strategy mixes: direct marketing, direct selling, and vending machines. </li></ul><ul><li>To explore the emergence of e-retailing </li></ul><ul><li>To discuss 2 other nontraditional forms of retailing: video kiosks and airport retailing </li></ul>
  3. 3. Nonstore Retailing <ul><li>Retailing strategy that is not store-based </li></ul><ul><li>It exceeds $375 billion annually </li></ul><ul><li>80% comes from direct marketing </li></ul><ul><li>Web-based retailing is fastest growing area </li></ul>
  4. 4. Single-channel & multi-channel <ul><li>Single-channel: when retailer uses one retail format, could be store or nonstore-based. </li></ul><ul><li>Single-channel: usually in the beginning. </li></ul><ul><li>Multi-channel: when firm grows </li></ul>
  5. 5. Direct Marketing <ul><li>Customer is first exposed to a good or service through a nonpersonal medium and then orders by mail, phone, fax, or computer </li></ul><ul><li>2 broad categories: general & speciality </li></ul><ul><li>Annual U.S. sales exceed $300 billion </li></ul><ul><li>Other leading countries include </li></ul><ul><ul><li>Japan, Germany, France, Great Britain, Italy </li></ul></ul>
  6. 6. Characteristics of Direct Marketing Customers <ul><li>Married, upper middle class, 36-50 years old </li></ul><ul><li>Live: far from malls or in upscale metro </li></ul><ul><li>Desire: convenience, unique merchandise, good prices </li></ul>
  7. 7. Strategic Business Advantages of Direct Marketing <ul><li>Reduced costs </li></ul><ul><li>Lower prices </li></ul><ul><li>Large geographic coverage </li></ul><ul><li>Convenient to customers </li></ul><ul><li>Ability to pinpoint customer segments </li></ul><ul><li>Ability to eliminate sales tax for some </li></ul><ul><li>Ability to supplement regular business without additional outlets </li></ul>
  8. 8. Strategic Business Limitations of Direct Marketing <ul><li>Products cannot be examined prior to purchase </li></ul><ul><li>Costs may be underestimated </li></ul><ul><li>Response rates to catalogs under 10% </li></ul><ul><li>Clutter exists </li></ul><ul><li>Long lead time required </li></ul><ul><li>Industry reputation sometimes negative </li></ul>
  9. 9. Data-Base Retailing <ul><li>Collection, storage, and usage of relevant customer information </li></ul><ul><ul><li>name </li></ul></ul><ul><ul><li>address </li></ul></ul><ul><ul><li>background </li></ul></ul><ul><ul><li>shopping interests </li></ul></ul><ul><ul><li>purchase behavior </li></ul></ul><ul><li>Observation of 80-20 rule </li></ul>
  10. 10. 8 Steps in direct marketing strategy (Diagram) <ul><li>Business definition, generating customers, media selection, generating customers, media selection, presenting the message, customer contact, customer response, order fulfillment and measuring results & maintaining the database. </li></ul>
  11. 11. Business definition <ul><li>A company makes two decision regarding its business definition </li></ul><ul><li>Is the firm going to be a pure direct marketer or is going to engage in multi channel retailing. </li></ul><ul><li>Is the firm going to be a general direct marketer & carry a broad product assortment., or will it specialize in one good/service category. </li></ul>
  12. 12. Generating customer <ul><li>A firm can </li></ul><ul><li>Buy a printed mailing list from a broker. </li></ul><ul><li>Download a mailing list from the web. </li></ul><ul><li>Send out a blind mailing to all the residents in a particular area. </li></ul><ul><li>Advertise in a news paper, magazine, websites etc. </li></ul><ul><li>Contact consumers who have bought from the firm or requested information. </li></ul>
  13. 13. Media Selection & Customer Generation <ul><li>Printed catalogs </li></ul><ul><li>Direct-mail ads and brochures </li></ul><ul><li>Inserts with monthly credit card and other bills (statement stuffers) </li></ul><ul><li>Ads in mass media </li></ul><ul><li>Vending m/c </li></ul><ul><li>Others </li></ul><ul><li>Purchase a list </li></ul><ul><li>Develop a data base </li></ul><ul><li>Blind mailing </li></ul><ul><li>Advertise </li></ul>
  14. 14. Measuring results <ul><li>Overall response rate </li></ul><ul><li>Average purchase amount </li></ul><ul><li>Sales volume by product category </li></ul><ul><li>Value of list brokers- the revenues generated from various mailing lists. </li></ul>
  15. 15. Outcome Measures <ul><li>Overall Response Rate </li></ul><ul><li>Average Purchase Amount </li></ul><ul><li>Sales Volume by Product Category </li></ul><ul><li>Value of List Brokers </li></ul>
  16. 16. Direct Selling <ul><li>Includes personal contact with consumers in their homes (and other non-store locations) and phone solicitations </li></ul><ul><li>Strategy mix emphasizes convenient shopping & personal touch. </li></ul><ul><li>Lower overhead costs (for retailer). </li></ul><ul><li>Problems? </li></ul>
  17. 17. Problems in direct selling <ul><li>More women work </li></ul><ul><li>Improved job opportunities in other fields </li></ul><ul><li>Market coverage is limited by size of sales force. </li></ul><ul><li>Sales force turnover is high </li></ul><ul><li>Above average prices due to compensation to sales personnel </li></ul><ul><li>Legal restrictions </li></ul><ul><li>Name of door to door selling has poor image. </li></ul>
  18. 18. The Role of the Web <ul><li>Project a retail presence </li></ul><ul><li>Enhance image </li></ul><ul><li>Generate sales </li></ul><ul><li>Reach geographically-dispersed customers </li></ul><ul><li>Provide information to customers </li></ul><ul><li>Promote new products </li></ul><ul><li>Demonstrate new product benefits </li></ul>
  19. 19. The Role of the Web (cont.) <ul><li>Provide customer service (e.g., e-mail) </li></ul><ul><li>Be more “personal” with consumers </li></ul><ul><li>Conduct a retail business efficiently </li></ul><ul><li>Obtain customer feedback </li></ul><ul><li>Promote special offers </li></ul><ul><li>Describe employment opportunities </li></ul><ul><li>Present information to potential investors, franchisees, and the media </li></ul>
  20. 20. Figure 6-8: Five Stages of Developing a Retail Web Presence 1. Brochure Web Site 2. Commerce Web Site 3. Integrated Web Site 4. The ‘Webified’ Store 5. Site Integrated with Manufacturer Systems
  21. 21. Web Strengths <ul><li>Using the Web </li></ul><ul><ul><li>information </li></ul></ul><ul><ul><li>entertainment </li></ul></ul><ul><ul><li>interactive communications </li></ul></ul><ul><li>Shopping Online </li></ul><ul><ul><li>selection </li></ul></ul><ul><ul><li>prices </li></ul></ul><ul><ul><li>convenience </li></ul></ul><ul><ul><li>fun </li></ul></ul>
  22. 22. Reasons NOT to Shop Online <ul><li>Trust </li></ul><ul><li>Fear </li></ul><ul><li>Lack of security </li></ul><ul><li>Lack of personal communication </li></ul>
  23. 23. Recommendations for Web Retailers <ul><li>Develop or exploit a well-known, trustworthy retailer name </li></ul><ul><li>Tailor the product assortment for Web shoppers </li></ul><ul><li>Enable the shopper to click as little as possible </li></ul><ul><li>Provide a solid search engine </li></ul><ul><li>Use customer information </li></ul>
  24. 24. Nontraditional Retailing <ul><li>Nontraditional retailing also includes formats that do not fit into the store and nonstore-based categories: </li></ul><ul><ul><li>Video kiosks </li></ul></ul><ul><ul><li>Airport retailing </li></ul></ul>
  25. 25. Features of Airport Retailing <ul><li>Large group of prospective shoppers </li></ul><ul><li>Captive audience </li></ul><ul><li>Strong sales per square foot of retail space </li></ul><ul><li>Strong sales of gift and travel items </li></ul><ul><li>Difficulty in replenishment </li></ul><ul><li>Longer operating hours </li></ul><ul><li>Duty-free shopping possible </li></ul>
  26. 26. Video Kiosks <ul><li>Free standing interactive computer terminal for purchasing (purchase may occur onsite or offsite) </li></ul><ul><li>Though actual sales may be less from kiosks per se, they influence sales by providing product information </li></ul><ul><li>Used for greeting cards, movie tickets, book sales </li></ul>

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