CHAPTER 12

1. What is the primary difference between national brands, store brands, and generic brands?
National brands are created and marketed by manufacturers, widely available across multiple retailers (e.g., Tide,
Ralph Lauren). Store brands, also known as private-label brands, are developed by retailers and are exclusively sold at
their stores (e.g., Kroger’s Private Selection). Generic brands are unbranded, low-cost alternatives labeled by the
product category, often targeting price-sensitive customers (e.g., plain "sugar" or "flour").

2. What are the different types of store brands, and why might retailers prefer to develop them rather than rely
solely on national brands?
The types of store brands are:

o Premium store brands: High quality, comparable to national brands (e.g., Safeway Select).

o Exclusive brands: Collaborations with manufacturers for unique items sold only at the retailer (e.g.,
American Rag at Macy’s).

o Copycat brands: Similar in appearance to national brands but offered at lower prices.

Retailers develop store brands to increase profitability, differentiate themselves, reduce price competition, and create a
unique shopping experience.

3. What is a wholesale market, and how do market weeks and trade shows serve retail buyers?
A wholesale market is a location where vendors display products for buyers to examine and order. Market weeks allow
buyers to visit vendor showrooms, while trade shows provide a platform for viewing a wide variety of products,
engaging with vendors, and observing industry trends.

4. What are counterfeit goods, and why are they problematic for retailers?
Counterfeit goods are unauthorized imitations of branded merchandise. They damage retailer credibility, harm brand
relationships, and may lead to legal consequences for violating intellectual property laws.

5. What is the difference between gray-market, diverted, and black-market merchandise?

o Gray-market merchandise: Legitimately manufactured goods sold through unauthorized channels (e.g.,
perfumes intended for high-end stores sold at discount chains).

o Diverted merchandise: Products sold outside their intended distribution channels domestically, without
crossing international borders.

o Black-market merchandise: Illegally sold goods, often scarce, heavily taxed, or prohibited (e.g., illegal
drugs).

6. What are the legal implications of exclusive dealing agreements and tying contracts?

o Exclusive dealing agreements: May be deemed illegal if they significantly reduce competition (e.g., requiring
a retailer to only sell one vendor's product).

o Tying contracts: Requiring purchase of an undesired product alongside a desired one is illegal if it reduces
market competition.

7. How does the Robinson-Patman Act regulate pricing and terms between vendors and retailers?
The act prohibits vendors from offering different prices or terms to different retailers for the same products and
quantities unless cost differences are justified (e.g., shipping costs). It aims to ensure fair competition, especially for
smaller retailers.

8. What is commercial bribery, and how do retailers address it?

Commercial bribery occurs when a vendor offers or a buyer accepts incentives to influence purchasing decisions.
Retailers prevent it by prohibiting gifts or by implementing strict policies limiting permissible items, ensuring
decisions are based on business merit.
CHAPTER 13

1. What are the key differences between high/low pricing and everyday low pricing (EDLP), and what advantages
do each of these strategies offer?

• High/low pricing means prices are lowered often through sales. Customers wait for discounts and buy during
sales. This creates excitement, moves slow products, and attracts both price-sensitive and non-price-
sensitive buyers.

• EDLP offers steady, low prices all the time, not the lowest but consistent. It reduces advertising costs, helps
manage inventory better, and customers trust they’re getting fair prices without waiting for sales.

2. What factors should retailers consider when setting retail prices, and how does customer price sensitivity
impact this decision?

• Retailers look at customer price sensitivity, competition, service costs, break-even points, and legal issues. If
customers are very sensitive to price, even small price increases can lower sales. Retailers need to set prices
that customers feel are worth paying while staying competitive.

3. What role do pricing strategies and price experiments play in helping retailers determine the best pricing
approach to maximize profits?

• Pricing strategies like high/low and EDLP help attract different types of customers. Price experiments test
how customers react to different prices, showing the best price to increase profits without losing customers.

4. What analytical tools do retailers use to set prices, and how is markup calculated in the pricing process?

• Retailers use tools like cost-based pricing, break-even analysis, and software that tracks sales patterns.

• Markup formula:
Markup = Retail Price - Cost
Markup % = (Markup / Retail Price) × 100
This helps retailers set prices that cover costs and make a profit.

5. What is the difference between initial markup and maintained markup in retail pricing, and how do reductions
affect these figures?

• Initial markup is the price set when an item first goes on sale minus the cost of the item. Maintained markup
is the final profit after discounts, theft, or other reductions. Reductions lower the actual selling price, so
maintained markup is often lower than initial markup.

6. What is break-even analysis, and how can it help retailers determine the sales volume needed to make a profit
or cover a price change?

• Break-even analysis shows how many items need to be sold to cover costs.
Break-even formula:
Break-even Quantity = Fixed Costs / (Price per Unit - Variable Cost per Unit)

• Retailers use it to decide if they will make a profit after a price change or new product launch.

7. What is dynamic pricing and price bundling, and how is it used by retailers?

• Dynamic pricing changes prices based on demand or customer type, often used by airlines and online stores.

• Price bundling combines products at one price, like a meal deal. This encourages customers to buy more at
once and increases sales.

8. What are the key differences between promotional markdowns and clearance markdowns? Explain.

• Promotional markdowns are temporary price cuts to attract more buyers during special events or holidays.

• Clearance markdowns are used to get rid of old or slow-selling products to make room for new inventory.

9. What is the concept of "predatory pricing," and why is it considered unethical?

• Predatory pricing is when a company sells below cost to push competitors out of business. After competitors
leave, they raise prices. This is considered unethical because it reduces competition and can harm
consumers in the long run.
CHAPTER 14

1. What are the key elements of store design that help implement a retailer's strategy, and how do they contribute
to building customer loyalty?

• The key elements of store design include layout, signage, feature areas, and store exteriors. These elements
ensure that the store aligns with the retailer’s strategy and meets customer needs. A well-designed store
provides a memorable shopping experience, making it easy for customers to find products and feel
comfortable. This builds loyalty because customers enjoy shopping in a well-organized, attractive
environment that reflects the store’s brand and values.

2. What are the different types of store layouts, and how do their advantages and disadvantages affect customer
behavior and store operations?

• There are three main types of store layouts:

• Grid layout: Efficient for customers who want to shop quickly. It is cost-effective but limits exposure
to products in the middle aisles.

• Racetrack layout (loop layout): Guides customers through various departments and encourages
unplanned purchases but can be overwhelming for some shoppers.

• Free-form layout: Creates a relaxed and intimate shopping experience, often used in specialty
stores. However, it requires more personal selling and displays fewer products.

3. How does the grid layout influence customer behavior and shopping efficiency, and why might it present
challenges for retailers aiming to increase sales?

• The grid layout allows customers to find items quickly and easily, making it ideal for supermarkets and
discount stores. It’s cost-efficient with standardized fixtures. However, it limits impulse buying as customers
stick to the periphery, missing out on products in the middle aisles, which can reduce unplanned purchases.

4. How do signage and graphics inside a store contribute to customer experience and sales, and what are the
different types of signage that retailers use?

• Signage and graphics help customers navigate the store, locate products, and learn about promotions,
enhancing their shopping experience. Retailers use various types:

Call-to-action signage encourages interaction with digital channels.

Category signage identifies product areas.
Promotional signage highlights sales.
Point-of-sale (POS) signage displays prices and product details.
Digital signage is dynamic and more engaging but costly.
5. What role do store exteriors, including windows, entrances, and landscaping, play in attracting customers, and
how do they reflect the store's image?

• Store exteriors set the first impression. Windows display merchandise and the store’s style, while entrances
welcome customers and signal whether the store is accessible. Landscaping, signage, and parking enhance
the overall appearance and can reflect luxury, practicality, or fun, helping to attract and retain customers.

6. What are planograms, and how do they help retailers optimize the placement of products to drive sales?

• Planograms are diagrams that show where products should be placed on shelves to maximize sales. They
consider customer shopping patterns, visual appeal, and sales data, helping retailers strategically position
items to boost visibility and encourage purchases.

7. How do virtual-store simulations work, and what insights do they provide to retailers regarding customer
behavior and product placement?

• Virtual-store simulations let customers navigate a digital store while their eye movements are tracked. This
helps retailers understand how customers interact with products and adjust layouts or planograms for better
engagement and higher sales.

8. What is the role of spatial recognition systems in analyzing customer behavior, and how do they help improve
store layouts and product placements?

• Spatial recognition systems track customer movements in the store. They analyze where shoppers pause,
what products they pick up, and how they navigate aisles. This data helps retailers redesign layouts and
product placement to improve customer flow and increase sales.

9. What factors do retailers consider when determining the appropriate store size, and how do these
considerations affect their operations and customer experience?

• Retailers consider costs, inventory management, and customer comfort. Smaller stores reduce rent and
staffing expenses but may limit product variety and customer experience. Larger stores offer more selection
but require more resources. Balancing size with customer needs is key to success.

10. How do retailers use atmospherics to influence customer behavior and enhance the shopping experience?

• Atmospherics involve using lighting, colors, music, scent, and even taste to create a pleasant shopping environment.
For example, bright colors and upbeat music encourage quick purchases, while soft lighting and calming scents
create a relaxed atmosphere that makes customers stay longer.