Chapter 11Customer loyaltyMeans that customers are committed to purchasing merchandise and services from the retailer and will resist the activities of competitors attempting to attract their patronageCustomer loyalty is more than customers simply being satisfied with a retailer and making repeat visits; loyal customers have a bond with the retailerShare of WalletThe percentage of the customers purchases made from the retailerRetailers have focused their attention on encouraging more customers to visit their stores, look through their catalogs, and visit their web sites….while there, hopefully they will share the contents of their walletCustomer data baseIt is the first step in the CRM processThe database is part of the data warehouse described in Ch. 10It contains all the data the firm has collected about its customers and is the foundation for subsequent CRM activitiesPrivacyMany customers are concerned that retailers are violating their privacy when they collect this detailed personal informationCustomers are concerned that the data may not be secure and they may be susceptible to identity theftThe concerns are particularly acute for customers using an electronic channel because many of them do not realize the extensive amount of info that can be collected without their knowledgeConcernsTheir control over their personal information when engaging in marketplace transactionsTheir knowledge about the collection and use of personal informationOpting in/opting outOpting in:Basically, the EU perspective is that consumers own their personal information, so retailers must get consumers to agree explicitly to share this personal informationThis agreement is referred to as an opt in because European’s have a chance to opt in to giving out their informationOpting out:Personal information is the US is generally viewed as being in the public domain and retailers can use it in any way they desireAmerican consumers must explicitly tell retailers not to use their personal information; they must opt outRetail analyticsThe application of statistical techniques and models to find patterns in customer purchase data and make recommendations for improving the effectiveness of retailersEx. Flashlights are placed in the hardware aisle and with a seasonal disply of Halloween costumesMarket basket analysisMarket basket analysis is a specific type of retail analytics that focuses on examining the composition of the basket, or bundle, of products purchased by a household during a single shopping occasionIt is often useful for suggesting where to place merchandise in a storeEx. Tissues are in the paper goods aisle and also mixed in with cold meds.Customer lifetime value (CLV)The expected contribution form customers to the retailers profits over their entire relationship with the retailerUsing information in the customer database, retailers can develop a score or number indicating how valuable customers are to the firm (CLV score)Retailers use past behaviors to forecast future purchases80/20 ruleFor most retailers, a relatively small number of customers account for the majority of their profits80 percent of the sales or profits come from 20 percent of the customersthus, retailers could group their customers into two categories on the basis of their CLV scoresone group would be the 20 percent of the customers with the highest CLV and the other group would be the rest1 to 1 retailingdeveloping retail programs for small groups or individual customerswith the availability of customer level data and analysis tools, retailers can now economically offer unique benefits and target messages to individual customersthey have the ability to develop programs for small groups of customersmany specialty stores do thisFederal Trade CommissionAn independent agency of the US government established in 1914 by the Federal Trade Commission ActIts principal mission is the promotion of consumer protection and the elimination and prevention of anti-competitive business practices such as coercive monopolyCoercive monopolyA business concern that prohibits competitors from entering the field, with the natural result being the firm is able to make pricing and production decisions independent of competitive forcesChapter 12The buying organizationEvery retailer has its own system for grouping categories of merchandise but the basic structure of the buying organization is similar for most retailersThe organization chart shown has four merchandise groupsWomen’s apparelMen’s, children’s, and intimate apparelCosmetics, shoes, jewelry, and accessoriesHome and kitchenEach of the four groups is managed by a general merchandise manager is is often a senior vice president in the firmEach of the general merchandise manager (GMM) is responsible for several departmentsEx. The GMM for men’s, children’s, and intimate apparel makes decisions about how the merchandise inventory is managed in five departments: men’s dress apparel, men’s sportswear, young men’s apparel, children’s apparel, and intimate apparelFigure 12-1 on pg 303 for chartMerchandise categoryThe basic unit of analysis for making merchandising management decisionsAn assortment of items that customers see as substitutes for one anotherEx. A department store might offer a wide variety of girls dresses sizes 4 to 6 in different colors, styles, and brand names; a girl might consider all the dresses given that they are all the same price….if one is cheaper, it is more likely to increase sales of that one dress and negatively affect the other SKUs in the same categoryStock keeping unitThe smallest unit available for inventory controlIn soft goods merchandise, a SKU usually means a particular size, color, and styleEx. A pair of size 5, stonewashed, blue, straight-legged Levi jeans is an SKUTurnoverThe rate at which an employer gains and loses employeesIt is a simplified way to describe how long employees tend to stay or the rate of traffic through the revolving doorIf an employer is said to have a high turnover relative to its competitors, it means that employees of that company have a shorter average tenure than those of other companies in the same industryHigh turnover many be harmful to a company’s productivity if skilled workers are often leaving and the worker population contains a high percentage of novice workersStaple merchandise categoryAlso called basic merchandise categoriesThe categories that are in continuous demand over an extended time periodWhile