Introduction

Concept of Retailing
• Retailing is a convenient, convincing and comfortable method of
selling goods and services. Retailing, though as old as business, trade
and commerce has now taken new forms and shapes. This is because
of new management techniques, marketing techniques and also due
to ever changing and dynamic consumer psychology.
• Retail marketing is not just buying and selling but also rendering all
other personalized consumer services. With the RM picking up it has
given a new look for various fast moving capital goods (FMCG) goods.
This not only increased the demand for various goods in the market
but also made retail marketing the second largest employment area,
the first being agriculture.
Scope and Definition of Retailing
• Retail Industry, one of the fastest changing and vibrant
industries in the world, has contributed to the economic
growth of many countries. The term 'retail' is derived from
the French word retailer which means '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.
Types of Retail Management
• Department Stores
• Discount Stores
• Supermarket
• Warehouse Stores
• Mom and Pop Store (Kirana Pasal)
• Specialty Stores
• Malls
• Dollar Stores
Theories in Retail Management
• Environmental Theory
It is based on Darwin’s theory of survival: “The fittest would
survive the longest”. The retail sector comprises consumers,
manufacturers, marketers, suppliers, and changing
technology. Those retailers that adapt to changes in
demography, technology, consumer preferences, and legal
changes are more likely to survive for long and prosper.
• Ability to adapt to change successfully is the core of the
Theory.
• Retailers are Economic Entities.
• Confront Environment made up of customers. Competitors
and changing technology.
• Alters Profitability
• Identification of Point of Precipice.
Cyclical Theory
• Also known as Wheel of Retailing
• From innovators to Traditional Retailers to Mature Retailers.
• Creates Cyclical Trends in due course of time.
• Constant evolution of the retailers as they start adding
products unto confused state thus entailing a negative cycle
Cyclical Theory
Conflict Theory
• Competition between retailers causes changes in the nature
of the retail environment.
• The causes are driven by innovations.
• Brown (1987) states that a response to innovation follows a
process of four stages:
Ø Retailers are in shock at the innovation.
Ø Retailers deny the threat by means of defensive retreat.
Ø Retailers then move into a stage of acknowledgement and
assessment.
ØFinally they (Retailers) develop a strategy of adaptation.
Retailing and Marketing

• Marketing is a core area for any retail operation as the

success or failure of retailers is based upon how well they
understand and serve the needs of their customers.
• Change in consumer behavior is constantly occurring.
• Changes produce intense competition among retialers.
Strategic approach to Retail Marketing
• Positioning
• Leadership
• Customer Loyalty
• Competitive Advantage
• Relationship with suppliers (Low cost, exclusive sale of
desirable brands, special treatment)
• Market Penetration
• Global Growth Opportunities
Consumer Behavior and
Retail Operation
Introduction
• The term Consumer Behavior is defined as the behavior that
consumers display in searching of, purchasing, using,
evaluating and disposing of products and services that they
expect will satisfy their needs.
• Consumer behavior focuses on individuals make decisions
to spend their available resources (time, money, offers) on
consumption – related items.
• Management cannot be effective unless it has some
understanding of the way in which retail consumers make
decisions and act in relation to the consumption of retail
products.
Why study Consumer Behavior
• The needs as well as the purchase motives of individuals
• How demographic change may affect retail purchasing
• The different effects of various promotional tactics
• The complexity and process of purchase decisions
• The perception of risk for retail purchases
• The different market segments based upon purchase
behavior
 Purchase Process
• The purchase process has been influenced by marketers to ensure
that products and brands are chosen to create a social comparison
between the purchaser and others.

Retail Service
Product purchased or not
purchased
Person or group making
(buying roles as to:
purchase decision (buyer
Merchandise offer product choice, brand
characteristics and evaluation
choice, timing of purchase
criteria)
, cost, alternative sought)

Other stimuli
(marketing, friends, etc)
 Time taken to shop
• There are difference in the type of shopping behavior embarked
upon i.e sometimes a shopping trip is merely a functional or
complex activity where as at other times it will be a leisure
activity.

Simple Model of Time related shopping expeditions:

Time taken to Shop
• A shopping trip is merely a functional or complex activity whereas at
other times it will be leisure activity. Shopping expeditions can
combine different behavioral influences whereby some individuals
want a predictable set of events as part of complex or functional
shopping whereas in contrast others want some novelty and interest.
• In complex shopping the customer will probably contemplate the
purchase of a technical product. This will lead to prior research of
information or the need to take advice from retail staff as there is
normally a higher risk associated with the intended purchase. This
takes more time than in functional shopping but is required to reduce
the level of perceived risk associated with a purchase.
• The leisure shopper is different, as he or she will not be concerned
with the time taken to shop but is more interested in browsing and
discovering wants rather than simply satisfying needs
Retail fashion buying process; Snyder and
Fromkin (1980)
• According to this theory, humans strive towards individuality
(uniqueness) and conformity in appearance
• There are 3 theoretical approaches that may explain the way by
which adoption processes for fashion occur in retailing
1. Trickle-down theory: New and innovative fashions and styles
originate for the Higher classes and passed down through middle
classes,
2. Trickle-up theory: A process of fashion and style creation by lower
socio-economic groups which is followed by the upper classes prior
to being adopted by the middle classes.
3. Trickle-across theory: Fashion and style can originate in any one of
the social classes. Opinion leaders of any group can take uo the
fashion development then that fashion and style is more likely to
be adopted
Behaviorist and Cognitive Perspective
Behavioristic Approach
• Observed behavior is all important
• Behavior is predictable
• People are information transmitter
• People are all alike
• Behavior is rational
• Human characteristics can be studied independently
• Emphasis is on what a person is and does
• Behavior can be studied
Cognitivist Approach
• What goes in a person's mind is the key to comprehension
• Behavior is not predictable
• People are information generators
• Each person is unique
• Behavior is irrational
• People must be studied as a whole
• Emphasis is on what a person can be
• Behavior can never be completely understood
Consumer Decision Making Process
The Engel – Kollat-Blackwel (EKB)
model
• The EKB model takes a broad view, incorporating inputs such as
perception and learning.
• A key feature of the EKB model is its incorporation of the differences
between high and low involvement as part of the buying process.
• High involvement is normally present in the decision making process
when the perceived risk in the purchase is high. This element of risk Is
higher when the consumer is unsure about the outcome of his or her
purchase decision.
• This arises when:
ü information is limited
ü The buyer has low confidence
ü The price relative to income is high
Contd…
• EKB model has the decision process as pathways of
convergence passing through various stages of processing
prior to any choice being made.
• The central process can be seen to incorporate five stages:
ü problem recognition/arousal;
ü internal search – alternative evaluation;
ü external search – alternative evaluation;
ü choice/purchase;
üOutcomes as dissonance or satisfaction
The Seth model of family buyer
behavior
Retail Buying Process
Different aspect of Perceived Risk
• Economic Risk: The risk can be economic, involving the
purchase in the problem of deciding whether or not the
product offer is of good value or not. Consumer face
economic or financial risk when they purchase retail
products that they cannot be sure will deliver the desired
benefits. (Value of Product, Financial Risk)
• Physical Risk: Fear Through products (electrical, Medicines)
• Psychological Risk: Product image which reflects personality
• Performance Risk: Desired Expectations from Retail
products.
Influences on Consumption Process
• Energizers of Demand: Forces of motivation that lead a
potential consumer to decide upon a shopping visit or to
seek out a product.
• Filterers of Demand: Factors which affects for buying I.e.
Economic factors (social class and disposable income),
sociological factors 9reference group0 and psychological
factors (perception of risk, personality, attitudes).
• Effecters: An effecter could be the position, display and
type of merchandise which creates an impulse purchase.
• Roles: (family influence, cultural influence)
Energizers or motivational forces (Tauber,
1972: utilize six categories of personal
behavior)
• Role Playing: Shopping may be learned and expected
behavior pattern
• Diversion: Shopping may provide an escape from the daily
routine
• Self-gratification: Helps to afford pleasure, satisfaction,
enjoyment, delight, etc
• Learning about new trends: i.e. fashion
• Physical activity: i.e. Physical exercise
• Sensory stimulation: i.e. light, colour, sounds, scents, etc
Social Motives behind shopping
• Social Experience outside the Home
• Communications with others having a similar interest
• Peer group attraction
• Status and authority
• Pleasure of Bargaining
Contd
Patronage of Retail Outlet:

1. Convenience
2. Reputation
3. Retail environment characteristics
4. Service encounter exectations
5. Expectations of the merchandise
6. Expectation of Value
Motivational Forces
• Motivation refers to the process that leads people to behave
as they do
• It occurs when a need is aroused
• The ad shows desired state and suggests a solution
(purchase of equipment)
Maslow’s Herarchy of Needs
Demographic Factors
• Age, Family size, Gender, Income, Occupation, Education,
Average Life expectancy, Social Structure,
 Socio-
Economic
Categories
Role and Family Influence
• As the fundamental social unit of group formation in
society, the influence on retail demand is extremely
important.
• The concept of family life cycle (FLC) helps to understand
how situation specific life stage condition exert a great
influence on buying behavior. The FLC is not just a
progression by phase or age but represents likely
fluctuations in disposable income and changes in social
responsibilities.
The role of children in the consumer
behavior process
• The child eventually becomes a dominant force in certain
purchasing decision. Companies target children at an early
age so as to build brand loyalty. i.e. Teeth related product,
their TV ad, Noodles, Biscuits Ad, etc.
Social Influence/Reference Group
• The family may introduce political ideas and consumer
attitude to purchasing to the children. However, the
reference group of the individual is just as important.
Purchases take place on the basis of thinking about the way
purchase may help provide status within the group, how
the purchaser may need to consider other members and
what message the purchase communicates to those from
whom and individual wants recognition and acceptance.
Type of Reference Group
• Primary Reference Group: i.e. family , close friends, co-
workers
• Secondary Reference Group: Formal Contact but less
continuos
• Aspirational Group: influence with personality and consider
a member
• Disassociate Group:
The Management of Service
and Quality in Retailing
Service
A service is any act or performance one party offer to
another that is essentially intangible and others does not
result in the ownership of anything. It’s production may or
may not be tied to a physical product. Increasingly however,
manufacturers, distributors, and retailers are providing
value- added service, or simply excellent customer service,
to differentiate themselves.
What Constitutes Retailing?
• Tangible Features: Retailing is malgamation of goods and
services. It is a channel service but may also involve a mix
of the physical surroundings, signage, uniforms, changing
rooms, display and other tangible features such as
merchandise. Retailing provides, most of all, the beneficial
utility of a place for purchase.
• Intangible Service: Retailing si also largely intangible and
at the extreme matches the main characteristics of pure
service with operations such as banking, insurance and
investment services. Furthermore, dry cleaners,
photographers , travel agents, car hire etc. are service
provider.
Service-Product Concept
• Transaction with Merchandise:
1. Owned goods service: Ownership of a good after purchase
from retailer,
2. Rental goods service: No ownership exists and the good has to
be returned; car rental
3. Service with bought goods: Retailers performs/ extra services
these could include delivery, wrapping, providing credit, etc.
• Transaction without Merchandise: Service without goods,
organizing travel, financial transactions and services, or
providing personal services such as dry cleaning, a haircut, or
shoe repairs.
The Intangible – Tangible product
continuum
• A pure service would be consultancy or financial advice,
whereas a pure good would be more tangible.

Service Mixture/amalgam Good

ØIntangibility (eg fastfood/traditional retail) More tangible

Ø Perishability Often
storable
ØInseparability
Standardizable
Characteristics of Services
• Intangibility: Unlike physical products, services cannot be seen,
tasted, felt, heard or smelled before they are bought.
• Inseparability: Physical goods are manufactured, put into
inventory, distributed through multiple resellers and consumed
later, services are typically produced and consumed
simultaneously.
• Variability: Because the quality of servies depends on who
provides them, when and where and to whom, services are
highly variable, i.e. 5 star overnight Hotal Stay.
• Perishability: Services cannot be stores, so their perishability can
be problem when demand fluctuates. The right services must be
available to the right customers at the right places at the right
times and right prices to maximize profitability.
A Classification of Service and Quality
• The Product Attribute Approach: It is based upon trying to
match the product’s conformance (another word for
Conformity) to standardized requirements which have been
set by reference to what company managers think the failure
point to be.
• It recognizes that the holistic process of service delivery has
to be controlled by taking in to consideration the
expectations and attitudes of retail customers.
Gronroos Model of Perceived Quality
Management
Gronroos model distinguishes between technical quality and
functional quality as the component of service image delivery
1. Technical quality: refers to what the customer is actually
receiving from the service. This is capable of objective
measurement, as with tangible goods.

2. Functional quality: refers to how the technical elements of the

service are transferred or perceived. We know that a customer
in a restaurant will not only evaluate the quality of the food
consumed but also the way in which it was delivered (the
style, manner and appearance of the staff or the ambience of
the place itself)
 The Parasuraman, Zeithami and Berry
Model (1985)
This model claims that the consumer evaluates the quality of service
experiences as the outcome of the difference (GAP) between expected
and perceived service. From the model 5 gaps may be identified that
could lead to unsuccessful service delivery. By understanding this
model, it is possible to provide greater management control over retail
customer service relationship.
Gap 1: Ignorance of the customer’s expectations, (CE & MP)
Gap 2: Requirement for service design standards, (MP &SQ)
Gap 3: Not delivering to service standards, (SQS & SD)
Gap4 : Inconsistency between performance and promises, (SD & EC)
Gap 5: The service shortfalls.
Contd…
Zone of Tolerance: customers are willing to accept different
evels of service which fall with in a zone between the desired
and adequate levels of performance.
Parasuram
an
Zeithaml
and Berry
Model
Implementation of Service
Management
Ø Leadership and Commitment by Senior Management
Realize that customer is key,
Design for comfort and convenience
Customize,
Provide one shop shopping,
Customize,
Prioritize customer expectation than employees.
Ø Training Policy and Induction Programmer should be focused on customer needs
Ø Implement Quality Audit System to meet Customer Expectations
Ø HR role for employee motivation
Ø Focus on Added value and benefits of Customer
Ø Control to ensure better service
Potential for Compliments and
Complaints
Ø Dissatisfiers
Ø Satisfiers
Ø Critical
Ø Neutrals
Growing Emphasis on Quality Control
• Companies need to find new ways of creating differential
advantage by providing better service levels than their
companies.
• The increased levels of consumerism and the greater media
attention on quality have menat that companies have to be
more responsive to quality issues.
• There has been a growing sophistication of consumer
markets, with the non-price factors of image, retail offer
positioning and service delivery processes becoming more
important.
• Adopt new technology
Key Terms for Quality
• Quality is the totality of features and characteristics of a
product or service that bear on its ability to satisfy stated or
implied needs.
• Total Quality Management (TQM) is a holistic organizationa
approach which systematically attempts to improve customer
satisfaction by focusing on continuous quality improvements
without incurring unacceptable cost increases.
• TQM has to influence the values and form the mindset od all
emplyees, leading to creation of an integrated corporate culture
because quality is required to be the concern of all employee.
Characteristics of Quality
There are 2 sets of quality characteristics which are important to a
retailer.
• Product (Merchandise)
Ø Performance based,
Ø Features that add to the basic function of the products,
Ø Reliability of the product,
Ø Durability of the product,
Ø Serviceability – related to after sales service
Ø Aesthetics of the look, feel, design, sound and smell of the products,
Ø Image of the brand association, reputation and personality of the
product
 Contd..
• Services
Ø Tangibles
Physical facilities,
Appearance of personnel,
Tools or equipment used to provide the service,
Physical representation of the service i.e. Credit card, vouchers.
Other customers in the service facility.
Ø Reliability
Accuracy in charging
Keeping the correct records,
Performing the service at the committed time
Contd….
Ø Responsiveness
Mailing a transaction slip immediately
Calling a customer back quikly after a query
Giving prompt service
Ø Competence
Knowledge and skill of the contact personal
Listening to customer needs and explaining the desired product or
services
Reinforcing the company’s reputation
Personal characteristics of the contact personnel
Ability to respect confidentiality and display financial and personal
security
Contd…
Ø Empathy
Recognizing regular customers,
Learning the customer – specific requirements and anticipating
their needs
Being attentive and providing individualized (customized)
service,
Ensuring that if there is a problem it is acknowledged,
responsibility is taken and some action is carried out to ensure
the service fault is compensated for.
Quality Auditing System

Internal Inspection Auditing

• Statistical process – control • Internal auditors of quality
based upon quality failure • External bodies
information and objective
measures • Consultants, regular users, non
• Visual inspection to check users surveys and feedback
against standards and • Croos department audits
consistency • Mystery shoppers
• Management by walking about • Content analysis of complaint
• Quality control group feedback and praise letter and
• Inspection of competitors offer documented problem
and assessment of own • Free phone line feedback
company offer
 Benchmarking
• A method widely used for assessment of the service
standards of a company is to compare them with those
which are deemed to be the best available – the benchmark.
Benchmark is a continuous process of selecting the best
practices and services against which to judge.

• Four types of benchmarking exist:

1. Internal
2. Competitive
3. Functional
4. Generic
• Service Recovery: It refers to acting fast to resolve the problem on the
spot or within short periods, being open and admitting mistakes if the
retailers is in the wrong rather than being defensive.
• Watching sign Language Consideration needs to be given to enabling
those customers who are reticent or mute when it comes to
complaints to break their silence. The silent customer who is not
satisfied will escape company notice but may tell any of their
acquaintances of the problems.
• Preplanning: There is a need to analyse the service delivery process
so a sto anticipate those aspects of service which may exceed the
tolerance level of customers.
• Training: As service is an interpersonal performance activity, the
provision of communication and customer relation skills training will
enhance the ability of staff to deal with the most difficult of
situations.
Retail Marketing Mix, the
Retail Product and Retail
Brand
The nature of Retail Markeing
• The key aspects of retail marketing is an attitude of mind
• In making retail marketing decisions, retailers must
consider the needs of the customers. Retail marketing
decisions are driven by what the shoppers need and want
• Retail marketing id therefore a philosophy and is all about
satisfying the customers
• What the customers regard as value and what they buy is
decisive
• What the customers buy determines the nature of he
retailers' business
The concept of retail marketing
• The retail marketing concept Is the acceptance by the retailer
that it is the “customer” and not “demand” that lie at the core
of the retail organization.
• It is founded on the belief that profitable retailing and
satisfactory returns on investment can only be achieved by
identifying, anticipating and satisfying customer needs and
desires.
• Is is an attitude of mind that places the customer at the very
centre of retailing activities.
Retail Marketing objectives
• Three types of retail objectives include:

• Basic Objective – those which defines retailer’s long-term

purposes

• Goals – those which the retailer must achieve to be

successful

• Targets – short – term goals that require immediate

achievement.
Marketing Mix for Retail Services
• Product
• Price
• Place
• Promotion
• Physical evidence
• People
• Process
Retail Product
• The effectiveness of planning the marketing mix depends as
muc on the ability to select the right target market as on
the skill in devising a retail offer which will generate high
levels of satisfaction.
• A product is anything that can be offered to a market that
may satisfy a need or want.
• In retailing the complete retail offer of location, price
levels, merchandise, store layout, or method of selling,
brand name and service provided play apivotal role in a
firm’s existence and long-term success or survival.
A breakdown of retailing as a product
The formulation of a successful retailing operation involves a
combination of
• Service
• Quality
• Merchandise
• Brand name
• Features and benefits
• Atmospherics (the environmental and physical aspect of place,
the social surrounding, the temporal aspects of the occasion,
the objective of the shopping trip, the predisposition of the
individual)
Service
Services are judged through the five dimensions that can be
used to measure service quality
• Tangibles
• Reliability
• Responsiveness
• Empathy
• Assurance
Quality
Implementing a method of assurance on the performance
level of staff and facilities. It is important to create good
quality reputation for the product and service offered as this
provides a positive image for the company or organization.
Quality is also used strategically; as a way of differentiating
merchandise and of positioning offer or retail outlet in an
exclusive way.
Merchandise
Retailers need to decide on the merchandise to offer by
engaging in the sorting process of assembling a range of
goods and services from a variety of suppliers.
• National Brands
• Own Brands
• Licensed Merchandise
• Franchised products via concessions in a store
Brand Name
The store exterior and brand name is the initial impression
will have of a store. Branding is also and important portable
communication tool which can be utilized on the retailers
bags and packaging of its own label products.
 Products Levels
• The products can be thought of as being an amalgam of four
different levels
Ø The Core Product: a product includes everything that the customer
receives and this includes the basic level of the core product which is
made up of the delivery of benefits and features.
Ø The Facilitating Product: the facilitating aspects of the product in a
store must be present for the customer to utilize the services of the
core product, i.e., if clothing then mirrors and fitting room, signage
and easy access around the store.
Ø The Supporting Product: extras as play area for children, baby
change facilities, free gift wrap service, free delivery.
Ø The Augmented Product: the augmented product includes aspects of
atmosphere and the interaction of the customer with the company.
Store Layout
Stores should be designed to facilitate the movement of
customers, to create a planned store experience and to
allow the optimum presentation of merchadise. The retailers
goal has to be a store layout which reflects the brand
position of the store and ensure he most effective use of the
space.
Proactive planning should therefore be based upon the
manipulation of the in-store experience rather than
accepting passive, total random experience for customers..
The correct display of merchandise in a highly frequented
area can dramatically increase sales; conversely a poor
display will have a negative effect.
Store Layout
• Grid Pattern Layout: characterized by the regimentation of
the layout into long rows of parallel fixture, with straight
aisles.
• Free Flow Layout: based upon an irregular pattern with
some logic of attempting to create a flow but which allows
the customer the choice of whether to move between the
fixtures or not.
• Boutique Layout: variation of the free flow layout pattern
whereby the departments or sectionare arranged in the
form of individual specialty areas that can cater for specific
customer requirments.
 Atmospheric
• The environmental and physical aspects of place
• The social surroundings
• The temporal aspects of the occasion
• The objective of the shopping trip
• The predisposition of the individual
Atmospheric elements creates sensory marketing. Sensory type
create a number of changes in the customer’s emotion which can
influence the type and amount of demand for different type of
merchandise in the store. The main sensory medium are;
Ø Visual: color. Brightness, variation of lighting, size, texture, etc.
Contd..
Ø Aural: volume, pitch, beat, harmony, music
Ø Olfactory: scent, freshness. This comprises ambient scent.
Ø Tactile: Softness, smoothness, shape-surface and display
area by feel touch.
Merchandise
Management
Introduction
• Merchandise management focuses on the planning and
controlling of the retailer’s inventories. The role has to
balance the financial requirements of the company with a
strategy for merchandise purchasing.
• Thus it can be defined as “the planning and
implementation of the acquisition, handling, and
monitoring of merchandise categories for an identified
retail organization.”
• As merchandise has to be acquired for future purchase
opportunities, forward planning is needed in relation to
changing consumption tastes and demand.
 Merchandise Plan Consideration
• Marketing Consideration (Store and image, trading format,
environment, retail proposition, fashion trends, customer base
potential buyer)
• Merchandise strategy options (availability based upon
assortment profile and issues of choice (width and depth),
quality, exclusivity, seasonality of range, estimated cost,
promotional agreement)
• Type of customer base (items purchased, range purchased,
length of season, average transaction value for different lines,
frequency of visits and purchases)
• Financial Consideration (Profitability and sales performance
projections, stock investment and stock return, type of contract
and payment terms, corporate objectives and pricing)
Contd….
• Merchandise assortment search (Ensuring merchandise
meets criteria of :required range, comparison, cost, price
range offer, brand policy, availability, delivery, stockholding
needs, financial returns)
 Merchandiser skill and profile
• The merchandiser is responsible for planning and controlling
and operational activity. The merchandiser is responsible for
planning and controlling stock ranges and replenishment,
• Successful execution of the role will require close liaison with,
and support for smooth supply for the retail buyer.
• Planning includes
Ø Understanding the target market groups
Ø Agreeing regional and branch sales forecast
ØCollecting information on competitors and any new branch
plans
ØTaking into consideration branding and corporate policy
Contd….
Ø Agreeing merchandise budget
Ø Liaison and initial discussion with buyer(s)

• The key common element is the support role to the buyer. It

follows that an effective working relationship with the
buyer will be vital if the trading objectives are to be
delivered on the floor.
Merchandiser skill and profile
• Managing variations in demand
The merchandiser, as part of the above planning approach,
needs to contend with the extent to which demand for
product lines fluctuates. The merchandiser has to have
intimate knowledge of customers and the type of demand
dor the product being sold.
Category Management
Category management is related to decision over groups of
products that are selected and placed to satisfy use
occasions or consumptions patterns. This is based upon
strategic retailing principles that attempt to maximize sales
and profits and may also include trade patterns.
Unsold merchandise at the end of a trading day represent an
opportunity that has been lost forever. The category offering
has to be managed to maximize sales and profits. This relies
on creating ranging and merchandising, pricing, new product
introductions and promotions which are based upon the
approach to marketing focused upon the consumer.
 Category Management
Category management would be relatively straightforward is sales
volumes remained constant over time, which of course they do not, i.e.
retailers need to plan fulfillment for promotions to meet customer
expectations efficiently.
Karona (1998) indicated that category management is now about
creating closer relationships between suppliers and retailers.
Challenges faced by Retailers
Ø Product development and sourcing
Ø Supplier management
Ø Buying
Ø Merchandising
ØDistribution
ØRetail Operations
Range Planning
• A retailers stock range can be described in terms of width and depth, with
the extent of each determined by company policy. This is sometime
assortment.
• Width will relate to the number of categories however, depth relates to the
sizes styles, and prices within a product class.
• Developing the range planning and merchandise allocation plan it requires:
Ø Understand the selection process of consumers
Ø Deciding upon core and seasonal merchandise
Ø Agreeing the range – e.g style, size , and color mix – depth and width
Ø Taking into consideration the sales-to-stock level targets
Ø Relating the range plans to individual stores and possible promotional
plans.
Space Allocation
• It allows for efficient shopping and attracts customers has a
twin effect. Firstly it allows for efficient shopping and so
attracts customers to store and secondly it will affect the
level of sales to these customers once in the store.
• The improved effect on category performance revenue can
result from ensuring increased visibility as well as methods
aimed at capturing customer attention.
Space Allocation
• Are products easy to locate individually and as part of a
basket of goods?
• How long does it take to obtain and purchase a category?
• Is the range broad enough to provide a satisfactory
selection?
• Are other retailers offering a superior layout of categories?
• Space allocation and financial performance (margin, profit,
activity based casting, loss through waste, damage shrinkage,
etc)
• https://www.smartsheet.com/store-layout
Retail Pricing
Pricing
• Price is the monetary value assigned by the seller to
something purchased, sold or offered for sale, and on
transaction by a buyer, as their, willingness to pay for the
benefits the product and channel service delivers.
Retail Pricing
• The pricing policy selected by a retailer will usually be
directly related to the resultant level of demand over a
period of time and with the right margins, to the
profitability of the enterprise.
Price Sensitivity
• The understanding of the way different price points affect deand
or how demand operates between price points is an important
consideration for the setting of retail price policy.
• Within retailing there are also major differneces between market
segments, such as youth markets and upper income groups,
which tastes may dramatically changes form one period to
another.
• Elasticity of Demand: Elasticity is a key element in the
understanding of the demand process.
• Demand Elasticity: If price rises, demand falls significantly or if
price rises, demand falls but only slightly.
Elasticity of Demand
Price Elasticity = %change in sales/%change in price

• Price Elasticity: For price elasticity the denominator is

simply changed to a percentage in price, when the price
falls, the quantity demand tends to rise and when price
rises demand tends to fall.

• Demand Elasticity: If price rises, demand falls significantly

or if price rises, demand falls but only slightly.
 Factors affecting Price Sensitivity
• Perceived Substitutes effect: Buyers are more sensitive the higher
the product’s price is in relation to another product or
substitutes they could purchase.
• Unique value effect: Buyers are less sensitive to a product’s price
the more they value any of its attributes that differentiate it
from competing products.
• Importance of purchase effect: If the risk of the purchase
increases then the price will not be the most important aspect of
the purchase, i.e. medicine
• Difficult comparison effect: Buyers are less sensitive to price
when they find it more difficult to compare alternatives
Factors affecting Price Sensitivity
• Price Quality Effect: A higher price may signal that the
product is of super quality
• Expenditure Effect: Buyers become more price sensitive
when the expenditure is larger, either in absolute money
amounts or as a percentage of their income.
• Fairness and transparency effect: If the buyer believes the
price falls outside a band of what would be judged
reasonable and fair then they become more price sensitive.
Further factors influencing pricing
Price sensitivity is only one of the factors which a retailer has
to consider in their approach to pricing. A retail company in
formulating price policy decisions has to consider a range of
influences including the following aspects:
ØPerishable nature of products,
Ø The competitive products,
ØThe market volatile nature of products
Ø Price control to establish business,
Ø Bank charges and interest rates control.
Approaches to Pricing the Retail
Product
• Cost Oriented Pricing: Cost oriented pricing refers to settling
prices on the basis of an understanding of costs to the
retailer.
• Cost Plus Pricing (This will be in relation to either marginal
costs or total costs including overheads)
• Rate of return Pricing (Return on Investment)
Approaches to Pricing the Retail
Product
Demand Oriented Pricing
Ø Discrimination Pricing (Varibale or Flexible Pricing)
Ø Backward Pricing
ØSkimming Pricing (Premium Price on occasion)
Ø Leader Pricing
ØCompetitive Pricing
ØMarket Penetration Pricing
ØPsychological Pricing/Odd Pricing
ØEveryday Low Pricing (EDLP)
Everyday Low Pricing (EDLP) can offer a
number of benefits
• Perception of Fairness
• Reduced Advertising
• Improved Customer service Management
• Reduced stock outs and improved inventory management
• Increased profit margins
Pricing and the relationship to value
In deciding to buy a product a consumer has to be willing to
give up something in order to enjoy the satisfactions of the
benefits the product will deliver. This concept is more
complex than it seems. The majority of consumers are
looking for value when they buy a product and value is
derived from the functions of quality and price, as well as
the added value of the image or brand.
Value= (Quality/Price) + Image
If a consumer believes the image and quality of a product is
good then they will be willing to make greater sacrifices in
order to purchase that product.
• The interrelationship between price, quality and value plays a
significant role in store patronage and the buying behavior of
customers.
• Value was grouped into four categories by Zeithaml (1988)
Ø Value as low price,
ØValue as whatever is wanted from a product,
Ø Value as the quality one gets for price paid,
ØValue as what one gets for what one gives.

Zeithmal describes value as a trade – off between salient benefits

components and sacrifice componenets.
Ziethmal’s Benefit Components include intrinsic attributes, extrinsic
attributes, perceived value quality and other relevant high abstractions.
This means value is a judgment about superiority and benefits
delivered.
Value= Quality/Price
Other costs therefore pricing implications
There are other costs which a retailer needs to bear in mind when
attempting to judge how competitive the store product price may be:
1. Consumer Travel cost for the purchase of products,
2. Parking charges bear by the consumer,
3. Traffic congestion in getting to the store,
4. Any changes in orice and cost, i.e., Seasonal offer/demand
5. The need for multi purpose visits to store.
 Markdown Policy consideration for
Retailers
• Virtually all retailers will have occasion to utilize price markdowns. It
is typical for markdown to be used as part of a clearance sales in
order to provide space for new merchandise.
• Reason for Markdown
Ø Competitor activity affecting demand,
Ø Inadequate original pricing policy,
ØMerchandise did not meet consumer needs or preferences,
ØEconomic or seasonal problems,
Ø Over/poor stocking of merchandise
Ø Quality of merchandise inferior due to manufacture or damage,
Ø Problems of seasonality or poor timing of offer, etc.
• A retailer has to be clear about how any downward adjustment
to original prices (markdown) should be handled. Some
retailers prefer to express the markdown as a percentage of the
new selling price.
• Markdown = Markdown amount/Net sales
• Markdown (Reduction in Price in order to encourage/stimulate
sales)
• An early markdown policy may move the bulk of the stock more
speedily, limit shop –soiling free up space for the new
merchandise and enable the remaining stock to be better
presented.
• A late policy may allow more stock to be sold at a higher profit
and could help to maintain a more positive image for the
retailer.
Retail Promotion
Retail Promotions

• Retailers communicate to their customers on a continuous basis

through the store atmosphere, the products and services,
promotional literature, advertising and other promotional means.
• Retail Promotion is the descriptive term for the mix of
communication.
• Retailing promotion will have main objective of influencing consumer
perceptions, attitudes and behaviour in order to increase store
loyalty, store visits and product purchase.
• OBJECTIVE:- The marketing objectives need to be clearly defined so
that the most effective types of promotion can be utilized. The mix
strategies could specify a need to achieve awareness; to inform; to
educate; create purchase action; improve loyalty; change the
perception of the customer, etc.
SMARRT OBJECTIVE:

• Specific
• Measurable
• Achievable
• Realistic
• Relevant
• Targeted
• Timed results
Development of Promotional Objective
Promotional Budget Approach
The common approaches are:

• Objective and Task:

• Affordable Method:
• Percentage of Sales Method:
• Competitive Parity Method:
Communication Effects
• An important part of the promotional effect is the building
of brand and product awareness. Sometimes it will take a
long time for the consumer to learn about the brand and
the type of products which will be on offer. A promotional
campaign should aim to provide knowledge of the product,
to ensure that the consumer will feel favorable towards the
product and build up a preference for it. Any campaign has
to sell the benefits that a customer would be seeking in a
credible way so that the potential customer feels conviction
and is more likely than not to make a purchase.
Elements of Communication Mix
• Main Four ways for communication are :-
1.Advertising
2.Public Relations
3.Sales Promotion
4.Personal selling
5. Direct marketing
6. Interactive marketing
7. Word-of-mouth marketing
Advertising
• The term advertising includes any paid form of non-
personal communication through the media about a
product that has an identified sponsor. The use of payment
differentiates from public relations for which no payment is
made for the time or space or convey message.
• Advertising is used to achieve a whole range of objectives
that may include changing attitudes or building image as
well as achieving sales.
DAGMAR (Defining Advertising Goals for Measured Advertising Results)
describes the sequence of stages through which the prospective
customer has to move;
Unawareness,
Awareness,
Comprehension of the offer,
Conviction,
Action or inaction
Through advertising the retailer will make the potential customer
aware of the store and its range of offers. As part of the advertising
communication process, information has to be clearly transmitted so
that it can be decided and comprehended properly.
Advertising has the potential to affect a large number of
people simultaneously with a single message. Advertising
communication flows in two way.
1.Communication flow from media to opinion leaders- the
individual whose attitudes, opinions, preferences and actions
affect others,
2.Word of mouth communications from opinion leaders to
others (followers)
Types of Advertising
• Product Advertising,
• Markdown Event Advertising,
• Institutional Advertising,
• Co-operative (Retailers + Manuf.) Advertising,
• Retail promotion in relation to the Manufacturers,
• Window Displays,
Push versus Pull Promotion Strategy
• A push strategy involves ‘pushing’ the consumer through
the channel by directing the marketing activities to promote
the store or benefits of the channel,
• The Pull Strategy is where marketing promotion activities
are targeted to the consumer to induce them to buy
retailer’s merchandise or services.
Sales Promotion
• Sales Promotion involves any paid non-personal marketing
communication activity, other than advertising, which offers incentive
to induce a desired result from potential customers, trade
intermediaries, or the sales force.
• For example, free samples or money off vouchers and offers are
frequently used in sales promotion campaigns, for brands or
companies which need to improve demand at certain periods.
• “An activity designed to boost the sales of a product or service. It
may include an advertising campaign, increased PR activity, a free-
sample campaign, offering free gifts or trading stamps, arranging
demonstrations or exhibitions, setting up competitions with attractive
prizes, temporary price reductions, door-to-door calling,
telemarketing, personal letters on other methods”.
Personal Selling
• Involves Two-Way, Personal Communication Between
Salespeople and Individual Customers Whether:
• face to face,
• by telephone,
• through video conferencing,
• or by other means.
In other words, Personal selling is an attempt to gain
benefits through face-to- face or telephone contact between
the seller’s representative and those people with whom the
sellers wants to communicate.
• The intention of personal selling is to :
• 1.Obtain sale,
• 2.Stimulate sales of ‘impulse buy’ purchases by bringing
attention to extra requirement,
• 3.Complete of successful transaction with the customer;
• 4.Customer Satisfaction, proper and detailed information,
• 5.Create good consumer relations.
The High service retailer should prioritize the message that
the customer is always the priority for attention. The
overriding values of the retailer – the commitment to
excellence in selling – have to be reinforced through
compliments, incentives and rewards, and training. This
training should include aspects of merchandise manufacture,
buying and control as well as selling techniques.
A salesperson can only sell convincingly if he or she
understands fully the product and its benefits.
Retail Selling Process
Types of Sales Promotion
• Point of Purchase
• Point of Sale
• Contest
• Sweepstakes
• Coupon
• Frequent Shopper
• Prizes
• Demonstrations
• Referral Gifts
• Two for the Price of One
• Branded Giveaways
• Samples
• Premiums
• Special Events
Relationship Marketing & Loyalty
schemes
Relationship Marketing:
Identify and establish, maintain and enhance and, when
necessary, terminate relationships with customers and other
stakeholders, at a profit so that the objectives of all parties
involved are met; and this is done by a mutual exchange and
fulfillment of promises.
Aim of Relationship Marketing:-
1.Build greater customer loyalty and retention,
2.Develop methods of creating longer-term relationships,
3.Lead ultimately to increased sales and profits.
The Growth of retail relationship
marketing schemes
• The Relationship Marketing Ladder
1. Partner
2. Advocate
3. Supporter
4. Client
5. Customer
6. Prospect
Loyalty Card Schemes
• Retailers offers Club Card, Reward Card, Consumer Card to
their Customer which allowed them to get special discount
on every purchase, gifts, rewards etc.
• Relationship Marketing is that it makes business sense to
focus on long –term financial benefits which may accrue
once a customer has been won for the first time. It has
been estimated that it is five to ten times more expensive to
recruit a new customer that it is to retain an existing one.
This is based upon the estimated cost of prospecting,
advertising and selling, commission, product samples,
credit checking, administration, and database
management.
Lifetime Value Analysis:
• Life time value allows for the measurement of the total
worth to the organization of its relationship with a
particular identified customer over a period of time with
the amounts discounted to provide a net present value.
• The analysis will reveal the profile of customers who
provide high returns as well as those who are costly for the
company to service. The LTV information will allow for
improved decision making regarding:
• 1.Identifying certain individual for long term benefits
through segmentation;
• 2.Improving media strategy through budgets;
3.Providing Selection policies for customer over a period of
time;
4.Reactivate potential customer for winback policies;
5.Identifying Potential customer and consider as assets value
for the organization.
The design and Implementation of a
relationship marketing scheme
• RM (Relationship Marketing) requires the effective
acquisition and retention of customers for the building of a
more efficient operation and ultimately, a stronger
competitive position. Acquisition is based upon the
traditional approach to marketing with the identification of
customer needs, development of a retail offer to satisfy
those needs, and the targeting of prospects.
The movement from acquisition through to retention (based upon
Gilbert, 1996) is described in the following seven steps of events:
1.Acquisition: Maintaining Customer Profile
2.Identify: Data base helps
3.Improve: Active Feedback process helps to Improve
4.Inform : Through Communication
5.Tempt: Through special targeted offers,
6.Retain: Through loyalty schemes and rewards,
7.Measure Lifetime value: Identify range of customer types which
can increase higher profits.
Defining Loyalty
• Loyalty is a state of mind which predisposes an individual towards a
particular retailer and leads to a higher than normal proportion of
expenditure to be devoted to the retailer’s offers.
• There are two approaches that can be identified (Javalgi and Moberg,
1997):
1.Behavioral terms, usually related to the number of purchases and
measured by monitoring the frequency of such purchases,
2.Attitudinal terms, incorporating consumer preferences and disposition
toward to determine levels of loyalty.
In order to provide higher levels of profit, through loyalty, retailers need to
ensure that they concentrate on developing a number of key areas that
impact upon loyalty.
These are improve perception of perceived value, maximize customer
satisfaction in order to create greater commitment and bonding, and ensure
that any critical episodes in the interaction with customers have a positive
outcome.
Assessment of customer database
• Loyalty should not be confused with satisfaction. However, a high level of
satisfaction is a necessary yet not sufficient reason for loyalty as higher
levels of satisfaction may reduce the reason for disloyalty. Satisfaction does
not always result in retention or loyalty yet on the other hand
dissatisfaction does not always result in defection (O’ Malley, 1998).
• Hart et al. (1999) offer a number of reasons related to the decisions for
setting up loyalty schemes:
• Building lasting relationships with customers by rewarding them for their
patronage;
• Gaining higher profits through extended product usage and cross selling;
• Gathering customer information;
• De-commodifying brands (i.e. differentiating from the crowd);
• Defending market position (against a competitor’s loyalty scheme); and
• Pre-empting competitive activity.
Types of Loyalty
• True Loyalty:- First purchase behavior
• Latent Loyalty:- Not on every occasion
• Spurious Loyalty:- Due to little difference which keeps a
customer loyal
• No Loyalty:- customer move around from retailer to retailer
as there is little benefit and difference perceived
Public Relations

• Public Relations is non-personal communication which

changes opinion or achieves coverage in a mass medium,
which is not paid for by the source. The coverage could
include space given to a press release or favorable editorial
comment.
• A company which has good links with the media is more
likely to have the opportunity to stop or moderate news
that could be damaging to the company.
• The major benefit of PR is that it can promote and enhance
company image.
Benefits of Good PR Effort and
Coverage
• Perceived as neutral retailer,
• Credible and believable,
• Helps to build image of a brand and develop favorable
opinion,
• Can generate increased sales,
• Cost Effective to promote seasonal merchandise and new
company or sales initiatives,
• Can Possibly limit or neutralize negative or hostile opinion,
Public Relation Activities
• Media information releases/contact/speeches,
• Production of PR materials (Video, CDs, Web information, Press
Kits, Corporate identity materials etc.)
• PR events, Media conferences and newsworthy ‘stunts’
• Advertorials (which require PR copy along with an
advertisement),
• In-house and customer magazines,
• Facility visit to store etc.
• Sponsorship and Donations,
• Lobbying.