FINAL BUSML 3250 Chapter 16 Retailing and channel marketing Intro Barbie Mattel created a megastore in Shanghi to change their brand strategy and keep up with the times Keeps up with the expanding demographics Floor for different ages Won retail store of the year Retailing the set of business activities that add value to products and services sold to consumers for their personal or family use o Multichannel strategy selling in more than one channel store Four factors manufactures consider to establish their strategy for cataloged internet working with retailers 1 Choosing retail partners a Channel structure b Customer expectations c Channel member characteristics i The larger the channel member the less they will use supply chain intermediaries ii Larger firms find that by performing the channel functions themselves they can gain more control be more efficient and save money d Distribution intensity the number of channel members to use at each level of the marketing channel Commonly divided into three levels i Intensive distribution place products in as many outlets as possible Pepsi P G Kraft ii Exclusive distribution estee lauder limits dist to high end retailers Assures that the most appropriate retailers are representing the products iii Selective distribution between intensive and exclusive 2 Identify types of retailers a Food retailers i Supermarket conventional supermarket carries about 30 000 SKUs Two largest limited assortment supermarket chains in US are Save a lot and Aldi 1 Emphasize fresh perishables 2 Target health conscious and ethnic consumers 3 Provide better in store experience 4 More private label brands a Adding Value 16 1 Trader Joes has a unique selection for low prices Most important key to their success is private label accounts for 70 of inventory Has a weekly newsletter and gives out samples and full refunds ii Supercenters one stop shop iii Warehouse clubs Costco Sams iv Convenience stores staying in competition by offering full service kiosks fresh food theatre tickets gift cards b General Merchandise retailers i Department stores ii Full line discount stores Walmart accounts for 67 of these in US iii Specialty Stores Sephora iv Drugstore v Category Specialists Big box retailers of category killers that offer narrow but deep assortment of merch Staples home improvement centers vi Extreme Value retailer Dollar General vii Off price retailers close out retailers offer and inconsistent assortment of brand name merch TJ Maxx marshalls HomeGoods Outlets viii Service retailers banks hospitals health spas i Providing the right mix of merchandise and services to the customer is one of the most fundamental activities ii To distinguish themselves from other retailers they create private label or store brands I N C is Macy s i Must keep the retailers price quantity relationship in b Price mind JCPenny vs Saks c Promotion i Catelogues generate online sales because they can see pictures and then purchase on web ii CVS com online coupons iii M Commerce mobile commerce iv In store displays look and feel is influenced by the music color scent aisle size lighting Better mood better experience v Share of wallet the percentage of the customers purchases made from that particular retailer 3 Developing a retail strategy using the 4 P s a Product d Place 4 Examining the circumstances in which sellers may prefer to adopt a particular strategy a Benefits of stores for consumers i Browsing ii Touching and feeling products iii Personal service iv Cash and credit payment v Entertainment and social experience Immediate gratification vi vii Risk reduction b Benefits of the Internet and Multichannel retailing i Deeper and breader selection ii Personalization 1 Personalized customer service online chat personalized offering a SUPERIOR SERVICE Amazon sells Merchandise but excels because of service iii Gain insights into consumer shopping behavior 1 Cookies collects data on how customers navigate though a website Increase customer satisfaction and loyalty 2 a Cannibalization former purchases in store are now made online They appreciate the options and spend more 3 Expand Market Presence c Effective Multichannel retailing Integrated CRM i 1 Effective multichannel operations require an integrated CRM system with a centralized customer data warehouse with complete history 1 Consistent brand image across all channels 1 Retailers with stores in multiple markets will set ii Brand Image iii Pricing different prices iv Supply chain 1 Multi channel retailers can struggle to provide an integrated shopping experience across their channels because unique skills and resources are needed to manage the channel CHP 14 STRATEGIC PRICING METHODS INTRO groupon com Discounts minimum number of people must sign up before the discount take effect Motivates people to spread word thru social media o CONSIDERATIONS FOR SETTING PRICE STRATEGIES o Cost Based Methods Assumes that costs will not vary much between different levels Cost plus price fixed variable and overhead costs profit of the market demand o Competitor based methods Price similar to competitor shows that they are similar Price wars happen can be very damaging to companies o Value Based Value perceived by the consumer demand Improvement value represents and estimate of how much more or less a consumer will pay for a product relative to others products Calculated by multiplying improved value by benefit weight 1 100 Cost of Ownership method will pay more for a product if they know it will last them a long time compared to less for a product that won t last long o PRICING STRATEGIES o Every day low prices Consumers spend less of their valued time searching for low prices average price of everything is lower Odd prices end in odd numbers usually 9 21 99 focus more on 21 Ethical Dilemma example bruce springstein concert sold out in 1 hour This was because online brokers bought the tickets and want to sell them for higher price o High Low pricing Relies on the promotion of sales Attracts two distinct market segments o EDLP and High Low are influenced by Price Quantity relationships Some may think that EDLP is less quality Price lining establishing a price floor and ceiling and then a few other price points inbetween o NEW PRODUCT PRICING STRATEGIES o Market Penetration Strategy Set the initial price low for the introduction of the new product Objective build sales market share and profit quickly Discourages competition because the profit margin is
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