Chapter 11 Terms for Exam 3 Customer loyalty customers are committed to purchasing merchandise and services from the retailer and will resist the activities of competitors attempting to attract their patronage Share of Wallet the percentage of customer s purchases made from the retailer The goal of CRM is to develop loyalty and increase share of wallet Customer data base first step in the CRM Customer Relationship Management Process The database is part of the data warehouse and contains all the data the firm has collected about its customers and is the foundation for subsequent CRM activities The data base should contain transactions customer contacts customer preferences descriptive information demographics and psychographics and responses to marketing activities Privacy Information not publicly available The degree to which consumers feel their privacy concerning personal information has been violated depends on Their control over their personal information when engaging in marketplace transactions Their knowledge about the collecti9on and use of personal information cookies collect historical data on the computer and essentially tracks information without a persons knowledge Opting in opting out Regarding privacy of consumers The European Union perspective is that consumers own their personal information so retailers need to get consent If customers agree to share personal information they choose to opt in American consumers however must explicitly tell retailers that they should not use their personal information must opt out Retail analytics They are the application of statistics and models to find patterns in customer purchase data and make recommendations for improving the effectiveness of retailers Market basket analysis is a type of retail analytics the term below Market basket analysis 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 occasion It is often useful for suggesting where to place merchandise in a store Examples bananas are placed in the cereal isle as well as the product section Tissues are in the paper goods aisle and are also mixed in with cold medicine Snack cakes are found in the bread aisle and also next to the coffee Customer lifetime value Also known as CLV The expected contribution from customers to the retailers profits over the entire relationship with their retailer Retailers use past behaviors to forecast future purchases Measures of CLV are based on the assumption that the customer s future purchase behaviors will be the same as they have been in the past The expected CLV of a customer who purchased 600 on one visit months ago is probably less than the CLV of a customer who has been purchasing 100 every month consistently 80 20 rule 80 percent of the sales come from 20 percent of the customers Four segments of the consumer pyramid Platinum Segment customers w top 25 of CLVs Most profitable and loyal Gold Segment Not as loyal may go to competitors but still purchase Price is important to this group Iron Segment Modest amount spending levels don t require special treatment Lead Segment Lowest CLVs Demand a lot of attention but do not buy much or buy a lot and return 1 to 1 retailing developing small retail programs for small groups or individual customers greet them by name when they walk into the store and then recommend merchandise they know consumers will like Federal Trade Commission FTC Mission is consumer protection and eliminates bad business practices Chapter 12 The buying organization Has a basic structure similar for most retailers The highest level is the merchandise group there are 4 merchandise groups Managed by a general merchandise manager GMM Second level Department Managed by divisional merchandise managers DMM Third level Classification Categorizes merchandise and organizes merchandise management Activities Fourth Level SKU Smallest unit for inventory control Merchandise category an assortment of items that customers see as substitutes for one another Example wide variety of girls dresses Also retailers may define categories in terms of brands For example Tommy Hilfiger may be one category whereas Polo Ralph Lauren is another Stock keeping unit SKU the smallest unit available for inventory control Usually means particular color style and size Example a pair of size 5 stonewashed blue straight legged Levi jeans is an SKU Performance measures A good performance measure is Return on Assets Composed of two components asset turnover and net profit margin percentage Gross Margin Return on Inventory Investment aka GMROI financial ratio that assesses a buyer s contribution to ROA It measures how many gross dollars are earned n every dollar of investment made by the buyer Turnover How quickly the merchandise is bought compared to sales Higher inventory turnover increases sales because new merchandise is continually available to consumers A way to increase turnover is to reduce the number of SKUs in a category Staple merchandise category Also known as basic merchandise categories Are categories that are in continuous demand over an extended time period It is easy to predict Examples copy paper t shirts mens underwear white paint Merchandise management planning Has two different types of systems for managing 1 staple merchandise categories and fashion merchandise categories in demand for a relatively short period of time New products are continuously introduced Fast fashion Variety Also known as breadth The number of different merchandising categories offered Example types of jeans bootcut regular stonewashed by the sizes and three price points for each Assortment is the depth and the number of SKUs within a category Assortment planning The set of SKUs that a retailer will offer in a merchandise category in each of its stores This plan reflects the breadth and depth of merchandise the retailer plans to offer in a merchandise category Backup stock Also known as buffer or safety stock Level of inventory needed to ensure merchandise is available in light of these uncertainties Determines product availability Product availability is the percentage of the demand for a particular SKU that is satisfied Lead time The amount of time between the recognition that an order needs to be placed and the point at which the merchandise arrives in the store and is ready for sale Perpetual inventory The inventory level at each point in time