MKT 320_Exam 2_Unit 2_All chapters
MKT 320_Exam 2_Unit 2_All chapters MKT 320
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This 30 page Bundle was uploaded by Shristi Tuladhar on Monday March 14, 2016. The Bundle belongs to MKT 320 at University of Miami taught by Ian Scharf in Summer 2015. Since its upload, it has received 24 views. For similar materials see Retailing in Marketing at University of Miami.
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Unit 2, Class 5 I. Physical Distribution Video Key benefits to bar codes in the retail supply chain: warehouse cost saving of 2530%, accuracy, less paper work, lower cost to the consumers. Advantages and disadvantages of RFID technology: it can be read out of a line sight, accuracy is constant regardless of where the chiap is, the disadvantage is it is more expensive than the barcode. II. Concept Supply chain management: Set of techniques that a company uses to connect everybody. Set of activities and techniques the firms employ to efficiently and effectively manage the flow of merchandise from the vendors to the retailers customers. These activities ensure that the customers are able to purchase the merchandise in the desired quantities at a preferred location and at a appropriate time. Benefits to customers 2 BIG ones Reduce stockoutsdo no run out of merchandise much hence buy merchandise in the desired quantities, Tailor assortments Benefits to retailers4 BIG ones: greater sales, lower costs, higher inventory turnover, lower markdowns (reducing prices after the seasons already begun) Data Warehousing: purchase data collected at the point of sale goes into a database known as data warehouse. It can be accessed according to the level of merchandise aggregation, level of company, or day, season, year. EDI: electronic data interchange. Computer to computer exchange of business documents using standardized format. Retailervendor information flows. Specific symbols to delineate the purchase order number, vendor’s name, address the merchandise being shipped to. Computers of the vendor speaking to computers of the retailers. This EDI transmission occurs over the Internet. This raises security issues. To help secure information, the retailers have incorporated security policiesthe set of rules that apply to activities involving computer and communication resources that belong to an organization. Retailer also train employees and add the necessary software and hardware to enforce the rules. The objectives of security policy are: Authentication: the system ensures or verifies that the person or computer at the other end of the communication is who or what it claims to be. Authorization: the system ensures that the person or computer at the other end of the communication has permission to carry out the request. Integrity: the system ensures that the arriving information is the same as that sent. Logistics: tracking of merchandise from point of origin to point of consumption. It is the aspect of the supply chain management that refers to the planning, implementation and control of the efficient flow and storage of goods, services, and related information from the point of origin to the point of consumption to meet customer’s needs. In addition to the managers inbound and outbound transportation, logistics involves the activities undertaken in the retailers distribution center. Distribution Center: Crossdocking: truck from the manufacturer meets another truck going to the store and the goal is not to be in the distribution center very long. Pull supply chain: when they scan the chewing gum, store knows automatically that one packet is down. Inventory based on the point of purchase. Larger ones. A pull strategy is related to the justintime school of inventory management that minimizes stock on hand, focusing on last second deliveries. Under these strategies, products enter the supply chain when customer demand justifies it. One example of an industry that operates under this strategy is a direct computer seller that waits until it receives an order to actually build a custom computer for the consumer. With a pull strategy, companies avoid the cost of carrying inventory that may not sell. The risk is that they might not have enough inventory to meet demand if they cannot ramp up production quickly enough. Push supply chain: Stores bases its inventory on historical demand. Small stores. Merchandise is allocated to the stores on the basis of forecasted demand. A pushmodel supply chain is one where projected demand determines what enters the process. For example, warm jackets get pushed to clothing retailers as summer ends and the fall and winter seasons start. Under a push system, companies have predictability in their supply chains since they know what will come when long before it actually arrives. This also allows them to plan production to meet their needs and gives them time to prepare a place to store the stock they receive. Reverse logistics: tracking of returned merchandise. It is the process of capturing value from or properly disposing merchandise returned by customers and stores. It processes merchandise that is returned because it is damaged, has been recalled, is no longer sold to the customers, incorrectly sent to a store or a customer, discontinued product, or excessive inventory in the stores or distribution centers. In Reverse process, the goods come from all over and must be consolidated in one or few receiving centers. the percentage of returned merchandise is much greater for purchases made through the Internet channel compared to the store channel. Dropshipping: system in which retailers receive orders from customers and relay these orders to vendors, the vendors then ship the merchandise ordered directly to the customers. Famous for bulky or heavy materials. Vendor does everything hence reduce the retailers supply chain costs and investment. VMI” vendor managed inventory: vendor completely responsible for the inventory. Vendor is responsible for maintaining the retailers inventory levels. The vendor determines a reorder pointa level of inventory at which more merchandise is ordered. The retailer shares the sales and inventory data with the vendor via EDI. When the inventory drops to the order point, the vendor generates the order and delivers the merchandise. However, technological advances have increased the sophistication of VMI. The sharing of POS transaction data allows vendors to sell merchandise on consignment. Here the vendor owns the merchandise until it is sold by the retailer at which time the retailer pays for the merchandise. However, the vendor does not know what other actions is the retailer taking that might affect the sales of its products in the future. Benefits: You should have lower cost to the retailer, Fewer stock outs, Lower cost to the vendor. CPFR: Collaboration, Planning, Forecasting, and Replenishmentcost split between vendor and retailer. Sharing of forecasts, and related business information and collaborative planning between retailers and vendors to improve supply chain efficiency and product replenishment. Sharing proprietary information such as business strategies, promotion plans, new product developments and introductions, production schedules, and lead time information. RFID: Radio Frequency Identification: technology that allows an object or person to be identified at a distance by means of radio waves. They have advantages over bar codes. It can hold more data and update the data stored. The device can keep track of where an item has been in the supply chain and even where it is stored in a distribution center. The data on the devices can be acquired without a visual line of sight. Hence accurate, real time tracking of every single product, from manufacturer to checkout in the store. Accurate real time measure of item inventory levels hence reduce inventory levels and stockouts. Each unit sends out a radio signal hence keeping track of inventories. This tracking also reduces theft. III. Diva and Generation Y Case How Diva can make Gen Y employees aware of opportunities: show career progression, show success stories for Generation Y. Pros and cons of learning organizational culture: improve goal setting, lead to selfimprovement, it leads to higher salaries. However, the salaries may not be attractive enough to attract Generation Y. How others attract Gen Y: flexible work environment, lack of corporate culturepeople do not wear suits there, very engaging workplacecomparing with Google. Brief history of the company Mission statement SWOT analysis Two original ideas for this company and develop retail mixes for each of them General recommendations and conclusion. 1215 page paper, double spaced, oral ppt: 1520 min. st March 21 : names of people, the retailer chosen, how you are splitting up the work. Criteria: cannot pick anything done as case. Unit 2, Class 7 I. Rubio’s Video: Why do restaurants have such a high failure rate? There is considerable competition because the cost of entry is low compared to other types of businesses, you are primarily selling a service therefore it is hard to manage employees and equipment’s. Franchising advantages and disadvantages: advantages: you can use the money from the franchisee, managers tend to be motivated because its their restaurant. Disadvantages: free ridingwhen the franchisee basically takes the advantage of the franchisors brand name, from the retailer’s point of view there is less cash flow since you are sharing with hence stores less profitable. Why no franchising for higher quality restaurants? Most high quality restaurants do not franchise. Replication quality may not be great. II. Content: Merchandise Management: the process by which the retailers offers the right quantity of the right merchandise in a right place at the right time so that it can meet the company’s financial goals. Grouping merchandise category: Merchandise group: largest one, managed by senior vice president or general merchandise manager Department: managed by the visional or divisional managers Classification: group of items that target the same customer type SKU: stock keeping unit, particular brand, size color and style. (Specific one), small unit available for inventory control. Merchandise Category: assortment of items that customers see as substitutes for each other. Like dresses from size 4 to 6 of different colors, styles, brand names place in one place. Advantages of High Inventory Turnover 1. Increased sales volume 2. Reduction of markdowns 3. More money for buying opportunities Disadvantages of Too High an Inventory Turnover 1. Decrease in sales because people walk into stores and the item is not there 2. Not take advantage of quantity discounts and transportation economies of sales. Types of merchandise: Staple Merchandise: basic merchandise, merchandise that has continuous demand for a long time period. The demand for staple merchandise is very predictable. Continuous replenishment. Continuously monitoring merchandise sales and generating replacement orders, often automatically when inventory levels drop below predetermined levels. Fashion Merchandise: merchandise that has inconsistent demand over a long time period. Are in demand only for relatively short period of time. New products are continually introduced into these categories making the existing products obsolete. In some cases the basic product does not change but the colors and styles change. Forecasting demand for fashion merchandise is challenging than for staple merchandise. Hence, be close to out of stock as possible at the same time that the SKUs move out of fashion. Cannot order too much because wont be able to sell later and cannot order to less and reorder because short selling season hence out of stock already before reordering. Seasonal Merchandise: merchandise whose demand fluctuates on what time of the year, hence depending on the time of the year. Halloween, Christmas, swimwear, jackets, snow boots. Both staple and fashion merchandise can be seasonal merchandise. Retailers but the seasonal merchandise in the same way they buy fashion merchandise. Like store unsold winter snow boots and sell them in next winter though it will less profitable to sell it next year. Sources for Forecasting Fashion Merchandise 1. Previous sales: similar to items sold in previous years. Hence project past sales data. 2. Market Research: through internet chat rooms and blogs, attending soccer games, rock concerts, restaurants, clubs to see what people are wearing and talking about. Social media sites are important source of information for buyers. Buyers learn about likes, dislikes, preference by monitoring their past purchase and interactions with social networks sites. There is also use of traditional forms of marketing research such as indepth interviews and focus groups. In depth interview with the customers. The more informal form of interview is visiting the stores. Focus group is a small group of respondents interviewed by a moderator using a loosely structured format. Participants are encouraged to express their views and comments on the views of others in the group. 3. Fashion and trends service: third party organizations that provide data. 4. Vendors: vendors have proprietary information about their marketing plans such as new product launches, and special promotions that can have a significant impact on retail sales for their products and the entire merchandise category. Vendors have knowledge about market trends for particular categories because they tend to typically specialize in fewer merchandise categories than do retailers. Determining Product Availability: the percentage of demand for an SKU that is satisfied. If 100 people go into a store to purchase a small kennel but only 90 people can make the purchase before the kennel stock is depleted, then the product availability for that kennel is 90%. Hence how much available to satisfy the demand or the percentage of demand which is satisfied not all the demand. Also referred to as level of support or service level. Two types of merchandise inside the stores: Cycle Stock (Base): inventory you have if you could predict demand perfectly. Inventory for which the level goes up and down due to replenishment process. Backup Stock (Safety or Buffer): cushion you keep in your store in case cycle stock runs out. It shouldn’t be too low that the shop will run out when customers come and it shouldn’t be too high that the money gets tied up and also leading to waste of financial resources. Lead Time: the amount of time between recognizing when you are out of something and when the restock arrives. 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. Lead time less=less possibility of running out of stock. Fill rate: the percentage of completed orders received from the vendors. Order point: the amount of merchandise you cannot go below or the item will be out of stock before the next order arrives. The number tells that when inventory level drops to this point, the additional merchandise should be ordered. OpentoBuy: keeps track of merchandise in real time. After the merchandise is purchased on the basis of merchandise budget plan, the open to buy system is used to keep track of the actual merchandise flowwhat the present inventory level is, when purchased merchandise is scheduled for delivery, how much has been sold to consumers. Sellthrough Analysis: compares actual and planned sales to determine whether more merchandise is needed to satisfy demand or whether price reductions are required. ABC Analysis: rank SKU’s by category. A items5% of items that give you 70% of sales. B itemsthe next 10% of items that give you another 20% of your sales. C items65% of items that give you rest of the sales. D itemsNo sales. III. Lindy’s Bridal Shop Should she change the emphasis of her merchandise mix to increase sales? Which products should have more emphasis? Less? She should deemphasize flowers because they are not a good fit and are really time consuming. She should expand menswear, the prom dresses. Lindy’s personnel decisions? Herselfremain committed, and she really needs to hire a business manager to fix a lot of these problems. How to balance family and business? Unit 2, Class 4 I. Patagonia Video Why is Patagonia a great place to work? Employee Loyalty: 1. Support from the founder 2. Loyal customers 3. Little turnover Benefits Offered: 1. Let my people surf philosophy 2. Flex hours 3. Internships with grassroots programs Corporate Environmental Values: 1. Do You need this product? 2. 1% for the planet II. Why is retailing unique in regards to HR management? III. The measures that retailers frequently use to assess HRM performance: 1. Employee productivity: productivity is the sales generated per employee. It can be improved either by increasing the sales generated by employees or reducing the number of employees, or both. It is the net sales/number of fulltime equivalent employees. A full time equivalent employee is the number of hours worked by an employee / the number of hours considered to be a full time workweek for an employee. 2. Employee turnover: it is the number of employees voluntarily leaving their job during the year / number of positions. 3. Employee engagement: it is the emotional commitment by an employee to the organization and its goals. It goes beyond employee happiness and satisfaction. Employees might be happy at work but that doesn’t necessarily mean that they are working hard to make sure the retailer achieve its goals. Likewise, satisfied employees might not expend extra effort on their own. However, this engaged employees care about their work and the company hence, not just focus on the paycheck, or promotion but they work to enable the retailer to achieve its goals. They are more motivated to support the retailer in its efforts to improve the satisfaction of consumer and build consumer loyalty. They are less likely to leave the company. Other issues Designing the Structure: organization structure identifies the activities to be performed by specific employees and determines the lines of authority and responsibility in the firms. The first step in developing an organization structure is to determine the tasks that must be performed: strategic management, administrative management (operations), merchandise management, store management. Strategic marketing decisions are undertaken primarily by senior management: CEO, chief operating officer, vice presidents, and the board of directors that represents shareholders in publicly owned firms. Administrative tasks are performed by corporate managers who have specialized skills in human resource management, finance, accounting, real estate, marketing, etc. In retail firms the category managers, buyers, and merchandise planners, are involved in merchandise management and store managers and the regional managers above them are involved in management of stores. Organization of a single store retailer: the owner manager of a single store may be the entire organization. When he is out the store closes. As sales grow the owner manager may hire employees. Coordinating and controlling employee activities is easier in small store than in large stores. The owner manager simply assigns tasks to each employee and watches to see that these tasks are performed properly. Because the number of employees is limited the single store retailers have little specialization. Each employee perform a wide range of activities and the owner manager is responsible for strategic decisions. Additional employeesspecialization occurs. CEO –chief executive officer is responsible for overseeing the entire organization. Reporting to the CEO are the presidents of global operations, the internet channels, and the private label management and the senior vice presidents of merchandising, stores and administration. The senior vice president of merchandising works with the buyers and planners to develop and coordinate the management of the retailers merchandise offering and ensure that it is consistent with the firms strategy. The buyers in the merchandise division are responsible for determining the merchandise assortment, pricing, and managing relationships and negotiating with vendors. The merchandising planners are responsible for allocating merchandise and tailoring the assortments of several categories for specific stores in a geographic area. Centralization vs. Decentralization: centralization occurs when the authority for retailing decisions is delegated to corporate managers rather than to geographically dispersed managers. Decentralization occurs when the authority for decisions is assigned to lower levels in the organization. Centralization reduce cost because fewer managers are required to make the merchandise, human resource, financial decisions if centralized in corporate management. Likewise by coordinating buying across geographically dispersed stores the company can bargain for lower prices from suppliers because one large order is places than smaller orders. Likewise, the centralizations provide an opportunity to have the best people make decisions for the entire corporation. Likewise it also increases efficiency. The standard operating policies developed at the corporate headquarters are applied to the store hence store managers focus on their core responsibilities. However, centralization makes it difficult to meet the local needs, and also adjust to the local competition and labor markets. As the prices and wages are set by the centralized office. They provide detail guidelines for displaying merchandise to each store manager so that all stores have a consistent brand image throughout the country. Because they offer the same core merchandise in all stores, the centralized retailers can achieve economies of scale by advertising through national media rather than costly local media. Approaches to Coordinate Buying and Selling 1. Improving buyers appreciation for the store environment 2. Making store visits: executives visits the stores. 3. Assigning employees to coordinating roles Winning the Talent War Retailers generally use three methods to motivate and coordinate their employee’s activities: Policies: prepare written policies that indicate what the employees should do and then to have supervisors enforce the policies. Compensation based Incentives: use various forms of compensation to perform the activities consistent with the retailer’s objectives. The common type of compensation for retail sales associate is commission, which is an incentive based on the percentage of sales made or margin generated by the employee. Another individual incentive is a bonus which is additional compensation awarded periodically on the basis of an evaluation of the employees performance. In addition to individual performance there is firm’s performance i.e. profit sharing. This is the cash bonus based on the firms profits. There are stock incentives to motivate and reward al employees including sales associates. So that even employees have interest in the betterment of the company because it is related to the stocks. The other compensationbased incentive is the provision of health care benefits. Organization Culture: developing strong organizational culture motivates and coordinates employees. Organizational culture is the set of values, traditions, and customs of a firm that guides employee behavior. These guidelines aren’t written down but they are the traditions passed along by experienced to new employees. Skill Development—2 things Empowerment: managers share power and decisions making authority with employees. When employees have the authority to make decisions that are more confident about their abilities and have a greater opportunity to provide service to consumers and are more committed to firms success. Engaging Employees—There are five HR management activities that build employee engagement: reduce status difference, promote from within, enable employees to balance their careers and families, provide benefits, and use social media. Reduce status difference: many retailers attempt to reduce the status difference among employees and thus the employees feel that they play important role in the firms ability to achieve the goals and hence their contributions are valued. This can also be done by reducing the wage differences and increasing communications among managers at different levels in the company. Promote from within: its like promoting the old employees because when the new employees are placed in a higher job, though there old employees working then it is a demotivation for the old employees. Balance Careers and families: Retailers offering services like child care centers, scholarships for the employees kid, on site health clubs and massages. Flextimeit is the job scheduling system that enables the employees to choose the times they work. With Job Sharing, two employees voluntarily are responsible for a job that was previously held by one person. Hence accommodate with their work schedules. Provide benefits: benefits provide another opportunity for the retailers to signal their concerns for their employees and build engagement. Health care benefits, and other educational benefits as well. Use Social Media: social media used to connect with employees, but consumers/competitors might get access to sensitive company information, airing of employee complaints and therefore reduce employee engagement. Issues in Retail HR Mgmt Managing Diversity Training: developing cultural awareness and building competencies, the cultural awareness teaches people how their own culture differs from the culture of other employees and the role playing is used to help employees develop their competencies such as better interpersonal skills that enable them to show respect and treat people as equals. Support groups and Mentoring: there are support groups of minority employees that exchange information and provide emotional and career support for members who traditionally haven’t been included in the majority’s network and there are mentor programs where the higher level managers help lower level managers to learn the forms values and meet other senior executives. Career Development: glass ceiling which makes it difficult for minorities and women to be promoted beyond a certain level. Legal Issues— Equal Employment: the basic goal of equal employment opportunity regulations is to protect employees from unfair discrimination in the workplace. Illegal discrimination is the actions of a company or its managers that result in members of a protected class being treated unfairly and differently from others. Protected class is a group of individuals who share a common characteristic as defined by law. Compensation: laws relating to compensation define the workweek, the pay rate for working overtime, minimum wage, and protect employee investments in their pensions. Require that they provide same pay for men and women. Labor Relations laws: the process by which unions can be formed and the ways in which companies must deal with the unions. How negotiations within unions might take place and what the parties can do and cannot do. Safety, Sexual Harassment: unwelcome sexual advances, requests for sexual favors, and other inappropriate verbal or physical conduct. Harassment between the employees and the customers. Employee Privacy: employers can monitor email and telephone communications, search an employees workspace and handbag, and require drug testing. But employers cannot discriminate among employees when undertaking these activities unless suspicion of specific employees. Policies ( Dist.v Proced): developing programs and policies to ensure that the managers and employees are aware of legal restrictions and know how to deal with potential violations. To ensure employee fairness. There is distributive justice where the outcomes received are viewed as fair with respected to the outcomes received by others. But it differs amongst cultures. Procedural justice is based on the fairness of processes used to determine the outcome. It depends on the culture as well. IV. Avon Case Why so committed to diversity? Because women know what women want Why other retailers don’t follow Avon’s lead? Because they have different target markets and don't need a parttime sales force Avon’s values and new opportunities: Global expansion Men Appealing to younger consumers Unit 2, Class 6 I. Creston Vineyards Video: Business functions and value provided by distribution channel: transactional, logistical, facilitating. Add value: provide assortment, break down bulk, hold inventory, they provide services. Channels they use: traditional channel of brokers and distributors, wine clubs, trader Joe’s. Firms involved in their primary channel and their role: brokers do not take title but rather receive commission and distributors do take title. Why do they use multiple channels: to reach multiple segments,. Opportunities and problems of selling wine online: you can lower your price because you avoid the middle man, and the problem is it is still illegal in fifteen states. Customer Relationship Management: a philosophy that identifies and builds loyalty with retailers best customers. Business philosophy and set of strategies, programs, systems that focuses on identifying and building relationships with a retailer’s valued customers. Enables to develop a base of loyal customers and increases its share of walletthe percentage of customers purchase made from the retailer. Customer Loyalty: The consumers will patron the retailer, and they will resist competition. Consumers are committed to purchasing merchandise and services from the retailer and will resist the activities of competitors attempting to attract their patronage. It is more than having customer satisfied with a retailer and making repeat visits. Hence not switch to another supermarket even though it offers better products or services. There is an emotional connection with the retailer and this emotional bond is the personal connection. Personal attention and customer service are two of the most important methods for developing loyalty. CRM Process (4 Major Steps) 1. Collecting Customer Data: Customer Database—For the database to be effective: Transactions at the SKU levela complete history of the purchases made by the customer including the purchase data, the SKU’s purchased, the price paid, the amount of profit, and whether the merchandise was purchased in response to a special promotion or marketing activity, Customer contactstotal number of customer contactsa record of the interactions that the customer has had with the retailer including the visits to the retailers website, inquiries made through instore kiosks, commends made on blogs and Facebook pages, merchandise returns, telephone calls made to the retailers call center, plus information about contacts initiated by the retailer, such as catalogs and emails sent to the customer, Preferenceslike style and size and colorwhat the customer likes such as favorite colors brands fabrics and flavors and sizes, Descriptive Infodescriptive information like demographics and psychographic information of the customer that can be use to develop market segments. Identifying Info—Identifying customers who are making customer transactions is difficult therefore these measures will help to identify the customers: Asking people while they are shoppingask for identifying information: in some retailers the sales associates ask customers for identifying information such as their phone number, email address, or name and home address when they process a sale and this information is issued to link all the transactions to the customer, but some customers maybe reluctant because they feel that the sales associates are violating their privacy. Connecting Internet Data w/ stores when the customer uses third party like the credit cards then the customer cannot be identified by the retailer but if the customer uses the same credit card while shopping at the retailers website then provide shipping information hence, connect the credit card purchases through in store and electronic channels, Frequent Shopper Programsget information from the application that must be filled out and when the card is scanned at the point of sale terminal, Biometrics: rather than asking for identifying information or having to present a frequent shopper card, some retailer use biometrics to identify customers and provide a card less, cashless method of payment. When retailers use biometrics, they are measuring human characteristics such as person’s hand geometry, fingerprints, iris or voice. When a retailer installs a biometric system customers can preregister their fingerprints and credit card information and pay for products by simply placing their finger for on a fingerprint scanner. The customer data is captured consistently. Faster checkout, receive discounts and coupons without having to carry a lot of cards in their wallets. This also benefits retailers in terms of reduced labor costs and accumulate the customer information quickly and accurately. This also reduce employee fraud and shop lifting, RFID chips (on the merchandise): through RFID reader it can acquire customers personal information from small devices that are carried by the customers and also through the RFID tags on the merchandise they want to purchase, likewise through satellite tracking systemthe store reader could also collect information about where the customer has been in the store. PrivacyCookies are small files stored on a customers computer that identify computers when they return to a website. Because of the data in cookies, the customers do not have to identify themselves or sue passwords every time they visit the website. The cookies enable the collection of data about what pages people have viewed, other sites people have visited, ho they spend money online, and their interactions on the social networking sites. Hence information is easily collected using cookies. Opt in (In Europe, the customers owns the information, the customer has to authorize if the retailer wants to use it which is opt in) vs. Opt out (In US the retailers owns the customers information, and if the customer doesn’t want it then the customers opt out). 2. Analyzing Customer Data and Identifying Target Customers Identifying Best Customers: Customer Lifetime Value (CLV): expected contribution time from the customer to the retailers profits over the entire relationship with the retailer, customer lifetime value: how much you spend during your life on the retailer. Use past behaviors to forecast their CLV. Like if there are two customers and one has $400 purchase and the other one has $350 purchase, however the $400 purchase is a one time purchase like, 000and $400 purchase one time, but the $350 purchase customer is like 5025050hence consistent purchase therefore though the value of purchase is less this is more consistent hence this customer valuable not the $400 purchase one no matter what is the total amount of purchase. RFM Analysis: Recency Frequency Monetary a method often used in catalog and Internet channels to determine customer segments that a retailer should target for a promotion or catalog mailing. It uses three factors for evaluation: how recently the customer in the segment made a purchase, how frequently they make purchases, and how much money they have spent. Retail Analytics: applications of statistical techniques and models that seek to improve retail decisions through analyses of customer data. Data Mining: analyze data and find patterns that you are unaware of.. information processing method that relies on search techniques to discover new insights into the buying patterns of the customer using large databases. Market Basket Analysis: analyzes items that are purchased together. The data mining tools determine which products appear in the market basket that a customer purchases during a single shopping trip. This analysis can suggest where stores should place merchandise and which merchandise to promote together based on the merchandise that tends to show up in the same market basket. 3. Developing CRM Programs Through Frequent Shopper 4. Implementing CRM Programs Customer Pyramid8020 rule: 80% of the sales or profits come from 20% of the consumers. Platinum top 25% CLVs, Goldnext 25%, Ironremaining 50%, Leadcustomers that cost you money because they are no longer purchasing and they make a negative contributions to the firms income. They buy the merchandise on sale from the retailers or abuse return privileges. They may even cause additional problems by complaining about the retailers to others. No attention to these customers by the retailer. Customer Retention: Personalization: by providing personalized services as the CRM strategies developed from market segments such as platinum segments has a large number of customers with different needs hence there are approaches the retailers used to provide personalized service such as 1 to 1 retailing program, where they know each of their customers and hence know what the customer needs are and they greet the customers as well. Community: creating social community through social media, blogs. The retail brand community is a group of customers who are bound together by their loyalty to a retailer and the activities that the retailer sponsors and undertakes. They also feel an obligation to attract new customers and help other members of the community by sharing their experiences and product knowledge hence through this the customers become more reluctant to leave the family of other people patronizing the retailer. Customer Conversion From Good to Best customers: Customer alchemy: when you offer more products through existing customers through increase share wallet. Binging new lines of products. Addon Selling: selling brand new products through existing customers. Example: scrambled merchandising. Customer Alchemy is increasing the sales made to good customers, and a way to achieve customer alchemy is through add on sellingOffering and selling more products and services to existing customers to increase the retailer’s share of wallet with these customers. Use customer shopping histories to suggest products, personalized recommendations. They also provide coupons on these add on items. Dealing with Unprofitable Customers: the bottom tier of customers has a negative CLV. Retailers loose money on every sale they make to these customers. For example, catalog retailers have customers who repeatedly buy three or four items and return all but one of the. The cost of processing these two r three returned items is much greater than profit from one of these items. reduce your marketing expenses, charge them a fee if they want to stick around. Likewise, some consumers transfer to other retailer and then they come back again, and the cost of their reacquisition make them unprofitable. The process of no longer selling to these unprofitable customers can be referred to as getting the lead out, in terms of customer pyramid. The approaches of getting the lead out are offering less costly services to satisfy the needs of lead customers, charging customers for the services they are abusing. Rejecting customers. II. Sephora Loyalty Programs Company Case Benefits to a company of a loyalty program: develop repeat purchase behavior, can encourage retailer loyalty, and create a sense of community. Design characteristics of a loyalty program: use a tier program: the more you spend the greater the percentage of savings, reward all transactions, have the program be transparent and simple, offer unique benefits. Benefits of a tiered program: 20% of the consumer buy 80% of the item, these 20% are the most profitable and loyal customers and they are not price conscious or price sensitive. People in lower tiers can get into higher tiers and break into the 20% category. French vs. US loyalty programs: In France, they have discounts and rewards, In US the programs only have rewards. The French has three tiers, and the Americans have two tiers. The French tend to have large number of personalized services. Are they worth it? Why limited time and spending requirements? Benefit is you should get increased share of wallet, greater sales, the cost would be rewards themselves, additional training for the employees, probably need to have large database. They have limited time and spending requirements is you deserve your status, and it can be taken away. Could the French premium program work in the US? No, because people in the US spends more on these types of productsskin care, and US consumers do not spend much on premium beauty products. Unit 2, Class 2 I. Suburban Regional Malls Video o SWOT analysis: o Strengths: secure and safe, protected from the weather. o Weakness: high rent, age (a lot of them are old). o Opportunities: renovation, add leisure time entertainment o Threats: interest rates, oversupply of retail space. o Brief description of each type: o Neighborhood center: food and a drugstore anchor o Regional malls: department stores anchor o Power center: free standing stores o Outlets: owned by manufacturers o Function of anchor stores: they attract shoppers, they tend to have larger advertising budgets o Zonal merchandising: group similar retailers by merchandise category. It allows for comparison shopping. o Types of entertainment choices: movies, restaurants, mixeduse developments. II. Lifestyle Centers Video What is a Lifestyle Center? Hybrid mall with high end retailers and easy parking. Opportunity for social experience. Designed for people that spend less time browsing but more money. Why are they appealing to customers? Convenience, smaller than most shopping malls, the cost are lower, they cater to adult man (most underserved for demographic retailers). III. Course Content: MSA vs. Micropolitan: MSAMetropolitan Statistical arearetailers in United States, focus their analysis on a MSA because consumers tend to shop within an MSA, and media coverage and demographic data for analyzing location opportunities are organized by MSA. MSA is a core urban area containing population more than 50,000 inhabitants, together with adjacent communities that have a high degree of economic and social integration with the core community. Like many people in an MSA commute to work in the central business district but live in the surrounding areas. Micro Politian Statistical Area10,000 or more people but less than 50,000. They are removed from larger US cities, often by up to 100 miles. Although they lack big cities pull and economic significance, these notable population centers often are responsible for substantial production capabilities and provide reasonable housing accommodations for many residents. The designation refers to the core population of a central town so regardless of their name a micro Politian could be larger than a Metro Politian area. Factors Affecting Area: the best areas for locating stores are those that generate the highest long term profits for a retailer. These factors affect the longterm profit generated by stores and these should be considered when evaluating an area: 1. Economic conditions: areas level and growth of population and employment. Because a large fully employed population means high purchasing power hence high retail sales. It is also necessary to determine how long it will grow and how long it will affect the demand of merchandise sold in stores. 2. Competition: the competition level affects the demand of the retailers merchandise. 3. The strategic fit: the area needs to have consumers who are in the retailers target market and who are attracted to the retailers offerings. Hence the area must have the right demographic and lifestyle profile. So choose the are that fits the target market you are targeting. 4. Operating cost: the cost of operating stores can vary across areas. Cost like store rental, advertising cost. Likewise if the store is located near the distribution centers then lower shipping cost. Likewise, local and state legal requirements also effects operating costs. Factors Affecting # of Stores in an Area: how many stores to operate in the area. Larger MSAs can support more stores than smaller MSAs. 1. Economies of scale from multiple stores: most retail chains open multiple stores in an area to lower promotion and distribution through economies of scale. 2. Cannibalization: Though the retailers gain economies of scale from operating multiple locations in an MSA, they also suffer diminishing returns associated with locating too many additional stores in an area. Thus retailers should continue to open stores only as long as profits continue to increase or as longs as the marginal revenues achieved by operating new store are greater than the marginal costs. Factors Affecting a Specific Site: evaluating a specific site. Traffic flow: the number of vehicles and pedestrian that pass by the site. When the traffic is greater more consumers are likely to stop in and shop at the store. This retailers often use traffic count measures to assess a site’s attractiveness. Traffic counts are particularly important for retailers offering merchandise and service bought on impulse or on frequent trips. However sometimes it can be misleading. These measures do not provide any indication of how much of that volume of traffic actually stops and shops at a particular reaction. And some roads are heavily traveled increasing the traffic flow. Likewise, traffic volume counts are collected over 24 hour period whereas retail properties are typically open 812 hours each day. Accessibility: the ability of the customers to get in or out of the site. Accessibility is greater for sites located near major highways, streets with traffic lights, and lanes than enable turns into the site. Ingressentrance, Egressexit. Barriers in accessibilitythere are natural barriers in accessibility such as mountains and artificial barriers like railroad tracks, divided, or limited access highways, or parks. The barrier impact will depend on the customer loyalty, because the customers might be so loyal to a certain retailer or product that they cross the barrier. Parking: the amount and quality of parking facilities are critical for evaluating a shopping center. If there aren’t enough space or the spaces are too far from the store, the customers will be discouraged from patronizing the site and the store. But if there are too many open stores then the shopping center may be perceived as having unpopular stores. The parking issues arise due to congestion. Congestion is an excess level of traffic that results in customer delays. 5.5:1000shopping center and, 10 to 15 spaces per 1000 square feet for a supermarket. Visibilityability to be seen from the outside by the customers. From the street. Good visibility is less important for stores with a wellestablished and loyal customer base but most retailers still want a direct, unhindered view of the store in the area with a highly transient populationtourist center. Adjacent Retailers: the locations with complementary as well as competing, adjacent retailers have the potential to build traffic. Complementary retailers target the same market, but have a different and noncompeting merchandise offering. The ability to get along with others. The cluster of similar and complementary retailing activities will generally have greater drawing power than isolated storescumulative attraction. Primary vs. Secondary vs. Tertiary Trading Areas Primary zone: 5070% of your customers. Secondary zone: another 2030% additional customers. Tertiary zone: everybody else. IV. Hutch company case: How do the people in the trade area compare with their target market? The target market is women 1840 years old and their trade area is a population of between 10,000 and 50,000 and a trade area of between 50,000 and 150,000. Dalton is larger but Hinesville has more people in the target market. Dalton is more affluent but Hinesville is more educated. How do the locations fit with their location requirements? Both locations fit but both have a potential issue. Dalton would be in trouble if there were a drought and Hinesville would be in trouble if there were a sudden military deployment. Which location and why? You may pick either location. If you pick Dalton it is because it is bigger...if you choose Hinesville it's because there is less competition. Unit 2, Class 1 I. Mall of the America video What environmental factors suggest that the concept would be successful? Need to have a large local market In the 13 counties that surround the mall there is 3 million people Average household income is close to 70000 Need a natural tourist area: Over 10,000 lakes that attract over 15 million tourist a year. Desire to combine shopping and entertainment. What environmental factors suggest that the concept would NOT work? The decline of shopping malls. Get stores into the mallHow would attract the stores to come into the mall this big. What were the primary challenges facing managers as they designed and built it? Money Authorization The design of the mall Logistics: parking, bathrooms, needs of disabled Advertising: they had to attract the people far away too because if its just customers living in Minnesota then the mall would go bankrupt. Almost 40% of people shop in Mall of America live more than 150 miles away from the mall. From a retailer’s perspective, why locate there? Higher foot traffic From a retailer’s perspective, why NOT locate there? Higher rents Some people may just come there for entertainment It might be intimating to a lot of people, a mall this big. II. Domino’s Pizza in Mexico How do they address cultural and societal differences? They adjust their products for local taste and preferences They use consistent signage High traffic locations What is their entry strategy and why has it worked? Rather than trying to start fresh, they look for a successful entrepreneur in the country, and the franchisee is in charge of everything (master franchise). They delegate everything to this successful entrepreneur. III. Course Content: Store Locations: The types of locations available are: planned and unplanned. A. Unplanned Locations: they do not have a centralized management that determines what stores will be in a development, where the specific stores will be located, and how they will be operated. Freestanding Sites: retail locations for an individual, isolated store unconnected to other stores, however they might be near other freestanding stores or near a shopping center. The advantages are: their convenience for customers (easy access and parking), high vehicular traffic, and visibility to attract customers driving by, modest occupancy cost, fewer restrictions on signs, hours, or merchandise that might be imposed by management of planned locations. The disadvantages are: there is limited trade area, no nearby retailers to attract customers interested in conveniently shopping for multiple categories of merchandise on one trip. They also typically have higher outstanding cost because they typically do not have other retailers to share the common area maintenance costs. They also have little pedestrian traffic (number of customers in and out), limiting the number of customers who might drop in because they are walking by. Retailer that is not connected to any other retailers. Outparcels: It is a freestanding site that is in the parking lot of another retailer. Freestanding store that are not connected to other stores in a shopping center, but are located on the premises of a shopping center, typically in a parking area. They can offer customers the convenience of a drive through window, extensive parking, and clear visibility from the street. Urban Locations CBD: Central Business District. It is the traditional downtown financial and business area in a city or town. It is the commercial and business center of a city. It draws many people and employees into the area during business hours. There is high level of pedestrian traffic, but the shopping flow in the evening and on the weekends is slow in many CBDs. There is parking problems reducing consumer convenience, and the vehicular traffic is limited due to congestion in urban areas. There are people living in the nearby areas. Inner City: Low income residential area within a large city. Empty lots, buildings, and condemned houses,
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