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UM / Marketing / MKT 320 / What environmental factors suggest that the concept would be successfu

What environmental factors suggest that the concept would be successfu

What environmental factors suggest that the concept would be successfu


Unit 2, Class 1

What environmental factors suggestthatthe concept would be successful?

I. Mall ofthe America video

What environmental factors suggestthatthe concept would be successful? - Large local market (e.g. 3 million people surrounding this mall, $70,000 annual)

- Natural tourist attraction (e.g. 15 million tourists for lakes)

- Consumer desire to combine shopping & entertainment

What environmental factors suggestthatthe concept would NOT work? - General decline of shopping malls (starting from the 1990s) - How to get stores into the mall

What were the primary challenges facing managers as they designed and builtit? - Investors (getting money for this)

- Authorization

- Design of the mall

- Logistics

What environmental factors suggestthatthe concept would not work?

- Advertising

From a retailer’s perspective, why locate there?

- High foot trafc

From a retailer’s perspective, why NOT locate there?

- High rent

- The mall might be intimidating to shop

- Some people may come just for entertainment

II. Domino’s Pizza in Mexico

How do they address cultural and societal differences? Don't forget about the age old question of What is the difference between empiricism and rationalism?
If you want to learn more check out Refers to how much time does it take for the wave to start and repeat itself?
We also discuss several other topics like Expectancy violation theory means what?
We also discuss several other topics like What is a no-kill shelter?

- Adjust their products & systems for local taste & preferencesWe also discuss several other topics like What are the three basic concepts of american privacy?
If you want to learn more check out What are the methods to test infant perception?

- Consistent signage & logos

- High trafc locations

Whatis their entry strategy and why has it worked?

- Master franchising strategy (one huge delegation, typically an established company)

What were the primary challenges facing managers as they designed and builtit?

III. Levy and Weitz ( and more)

Store Locations---2 Choices

A Unplanned Locations

● Freestanding Sites - Retailer that is not connected to any other retailers - Outparcels - Not connected to any retailers but is next to a retailer

● Urban Locations

- CBD---(Central Business District) Inner City: Plans to redevelop downtown

● Main Street- Small towns or suburbs

B. Shopping Centers - Typically owned by one entity

● Convenience, Neighborhood and Community (Strip)

○ Drug store or grocery store anchor + surrounding shops

○ A plaza

● Power Center

○ Collection of discount stores or category killer under one roof ○ E.g. Dadeland north Station

● Shopping Malls

○ 2 department stores anchor w/ specialty stores in between

● Lifestyle Centers

○ Open-air congurations (Sunset)

○ Lots of it don’t have department stores

● Mixed-Use

○ Any combination of commercial, retail, residential, hospitality ○ E.g. hotel and stores combined

● Outlet

○ Owned by manufacturer

○ Inside shopping malls

○ Outlet city

● Pop-up Stores

○ Temporary stores

○ Seasonal

○ To try something out

● Store Within a Store

○ Both retailers can benet from each other’s brand name ● Merchandise Kiosks

○ Temporary selling spaces

Location and Retail Strategy


a. Neighborhood centers

b. Strip malls


a. Shopping mall

b. Power centers


a. Free standing

b. In a shopping mall

Societal and Legal Issues:

- Urban Sprawl: People go to shop in the suburbs instead of city - Zoning: Zones for residents vs. business

- Building Codes Issues: Signage & Licensing (e.g. liquor)

IV. Stephanie Wilson’s Boutique case

Pluses and minuses of each location

- Downtown Arcade

- + Just revamped

- - Unknown customer mix

- Village

- + Cheapest

- - Smallest market

- Mall

- + Known customer mix

- - Cost

- - Competition

Appropriateness for each location

- Downtown Arcade

- Conservative women businessware

- Village

- Can sell more expensive & collective

- Mall

- Lower price & make it up on volume

Unit 2, Class 2

I. Suburban Regional Malls Video

SWOT analysis

- Strength

- Secure & Safe

- Protected from the weather

- Weakness

- High rent

- Age

- Opportunity

- Renervation

- Bring in leisure time entertainment

- Threat

- Interest rate

- Over supplied retail space

Brief description of each type

- Neighborhood center: grocery/drug store anchor - Regional mall: department store anchor

- Power center: discount/category anchor

- Outlet: owned by manufacturer

Function of anchor stores

- Bring in trafc

- Tend to have bigger advertising budgets

Zonal merchandising

- Group retailers by category, allows for comparison shopping

Types of entertainment choices

- Movies

- Night clubs

- Restaurants

II. Lifestyle Centers Video

Whatis a Lifestyle Center?

- Hybrid mall with easy parking & high-end retailers

- Provides an opportunity for social experience

- Designed for people who have more money but less time shopping

Why are they appealing to customers?

- Convenience

- The occupancy cost & operating restrictions are lower than traditional malls - They cater to adult men

III. Levy and Weitz issues

MSA vs. Micropolitan

- Metropolitan Statistical Area: >50,000 people

- Micropolitan: groups of ~10,000 people

Factors Affecting Area

1. Economic Conditions

2. Competition

3. The strategic t

4. Cost

Factors Affecting # of Stores in an Area

1. Economy of Scale

2. Cannibalisation

Factors Affecting a Specic Site

● Accessibility: Ingress (Entrance) vs. Egress (Exit)

- Barriers---Natural (River, Mountain) vs. Articial (Highways, UNiversal Park)

● Locational Advantages

- Parking (both customer & employees)

- Congestion (trafc surrounding the area)

- Visibility

- Adjacent Retailers (does the retailer get along with others?)

Primary (50-70%) vs. Secondary (20-30%) vs. Tertiary (Everyone else) Trading Areas

IV. Hutch company case

How do the people in the trade area compare with their target market? (women 18-40 yrs-old)

- Daltan

- More money

- More competition

- Heinseld

- Greater number of people in target market

- More educated

How do the locations t with their location requirements?

- Population 10k-50k

- Trading area 50k-150k

Which location and why?

- Daltan ← demand perspective

- Heinseld ← competition perspective (less competition)

Unit 2, Class 4

I. Patagonia Video

Why is Patagonia a great place to work?

Employee Loyalty

- Support from the founder

- They have very loyal customers

- Very little turnover

Benets Offered

- Let my people serve philosophy

- Flex hours

- Internship with grassroots programs

Corporate Environmental Values

- Do you really need this product?

- 1% for the planet (1% of their sales or 10% pre-tax prot, whichever is higher) II. Why is retailing unique in regards to HR mgmt?

1. Labor cost is a signicant percentage of total expense

2. Most customers have an experience with an employee

3. HR advantages are almost impossible to duplicate

Objectives….3 BIG ones

· To increase productivity

· To reduce turnover

· To increase employee engagement

Other issues

· Large number of part-timers

· Thin prot margins

· Changing employee demographics

Designing the Structure

· The structure identies the activities and the responsibilities of every employees

Centralization vs. Decentralization

- Centralization = HR done at the corporate level

- Decentralization = HR done at the store level

(Buyers of the merchandise and the employees who’s there to sell it have disagreement)

- Approaches to Coordinate Buying and Selling

1. Have an improved appreciation for the store environment 2. Force the buyers to visit the stores

3. Create a position in the company for coordination

Winning the Talent War

· Have Policiesthat written and enforced

· Offer Incentiveslike bonus and commissions

· Create a sense of an Organization Culture 

Building Employee Commitment

Skill Development — in hiring and training

Empowerment(transfer your own decision making ability to them) Engaging Employees

o Reduce status differences

o Promote from within

o Balance career and family

§ Job sharing (two or more employees do one job)

§ Flex time (choose own schedule if it meets the hour requirement) o Strong benets

o Social Media

Issues in Retail HR Mgmt

Managing Diversity

· Diversity Training

· Mentoring

· Career Development

Legal Issues:

· Equal Employment (discrimination)

· Compensation (minimum wage, overtime, child labor)

· Labor Relations (deals w/ unions)

· Safety (deals w/ physical environment)

· Sexual Harassment (workspace behavior)

· Employee Privacy (Social Media & Emails)

· Policies (Distributive justice: perception of the result vs. Procedural justice: perception of the process)

III. Avon Case

Part-time sale force

Why so committed to diversity?

- They realize that “women know what women want”

Why other retailers don’tfollow Avon’s lead

- They have a different target market

- There is no need for a part-time sales force

Avon’s values and new opportunities

- International expansion

- Men

- Young women

Unit 2, Class 5

I. Physical Distribution Video

Key benets to bar codes in the retail supply chain

1. Warehouse and distribution cost savings between 25-30%

2. Accuracy and the ability to handle more data

3. Less paperwork

4. Lower cost for the consumer

Advantages and disadvantages of RFID technology

+ Can be read out of the line of sight of the reader

+ The accuracy is constant regardless where the chip is

- Cost (Very expensive compared to the bar code)

II. Levy and Weitz Issues

Supply chain management---whatis it?

- A set of techniques that a company uses to integrate everybody

Benets to customers ---2 BIG ones

1. Fewer stock outs

2. Tailored assortments

Benets to retailers---4 BIG ones

1. Greater sales

2. Lower cost

3. Higher inventory turnover

4. Reduction in markdowns (lower the price after season started; clearance) Flow of Information

Data Warehousing: Data collected at the point of sale for further processing

EDI (Electronic Data Interchange): Computers speaking to other computers

Security Concerns---3 areas:

1. Authentication

2. Authorization

3. Integrity (compromising the data from computer to computer?)

Logistics: The tracking of merchandise from point of origin to point of consumption

Distribution Center

Cross-docking: When a truck from the manufacturer meet a truck from the store in the middle (at the distribution center, then it doesn’t have to be big)

Pull supply chain: The point of service dictates the restocking Push supply chain: Based on historical demand

Reverse logistics: Tracking of returned merchandise

Drop-shipping: When the vendor ships direct to the customer VMI (Vendor Managed Inventory) (Coke in Publix example)


1. Reduction in stock outs

2. Lower the retailer’s cost

3. Lower the vendor’s cost if done right

CPFR (Collaboration, Planning, Forecasting, Replenishment)

- A partnership between the retailer and the vendor

RFID (Radio Frequency Identication)

III. Diva and Generation Y Case

How Diva can make Gen Y employees aware of opportunities - Clearly dened career progression

- Share success stories

Pros and cons of learning organizational culture + Improves goal setting and can lead to self improvement + Could lead to high salaries

- May not be enough to attract Gen Y anyhow

How others attract Gen Y

- Very exible work environment

- Lack of a corporate culture

- Very engaging workplace

Unit 2, Class 6

I. Creston Vineyards Video

Business functions and value provided by distribution channel - Transactional

- Logistical

- Facilitating

- Add value by:

o Provide assortment

o Break bulk

o Hold inventory

o Provide services

Channels they use

1. Traditional channel of brokers, distributors, and retailers (primary) 2. Mail order wine clubs

3. Trader Joes

Firms involved in their primary channel and their role - Broker does not take title but rather gets commission - The distributor does take title

Why do they use multiple channels

- To reach different market segments

Opportunities and problems of selling wine online

+ Cheaper for the consumer

- Still illegal in some states

II. Customer Relationship Management

A Basic Denition of CRM

- A set of strategies that a retailer uses to identify and build royalty with their key customers

Customer Loyalty

- The consumer will patron the retailer

- Will resist competition

CRM Process (4 Major Steps)

A. Collecting Customer Data

Customer Database —

o Transactions (at SKU level)

o Total number of Contacts

o Preferences (Style & Color)

o Descriptive Information (e.g. demographics)

Identifying Info

o Asking

o Frequent Shopper Programs

§ Has info on applications

o Connecting Internet Data w/ stores

o Biometrics (nger prints, retinal scans)

o RFID chips

Privacy--- Optin vs. Opt out

- In Europe, it is assumed that the consumer owns their information. If the retailer wants to use it, consumer has to give permission (opt in) - In USA, it’s the opposite, consumer has to opt out

B. Analyzing Customer Data and Identifying Target Customers Identifying Best Customers

CLV – Customer Lifetime Value

o How much a consumer spends over their lifetime

RFM Analysis

o Recentcy, frequentcy, monitory

Retail Analytics

Data Mining – when the retailer nds patterns of data they are not aware of

Market Basket Analysis – when you analyze groups of products that were purchased together

C. Developing CRM Programs Through Frequent Shopper

See Case Below

D. Implementing CRM Programs

Customer Pyramid----Platinum, Gold, Iron, Lead

- When you break your customers up into categories

o Platinum (top 25%)

o Gold (next 25%)

o Iron (remaining 50%)

o Lead - cost the retailer money (negative customers)

Customer Retention

- Highly personalized services

- Having a sense of community

Customer Conversion From Good to Best

- Customer alchemy: where you sell more of the same products for the same customers

- Add-on Selling: completely new & unrelated products for these customers

Dealing with Unprotable Customers

- Reduce your marketing expenses to them

- Charge them a fee if they want to stick around III. Sephora Loyalty Programs Company Case

Benets to a company of a loyalty program

- Develop repeat purchase behavior

- Create a sense of community

- Encourage retailer royalty

Design characteristics of a loyalty program (4)

- Tiered (the more you spend, the more you save) - Reward all transactions

- Offer unique benets

- Should be transparent & simple

Benets of a tiered program

- 20% of the customer end up buying 80% of the products - those 20% doesn’t care about cost savings

- Get people into the lower tiers and offer the ability to move up

French vs. US loyalty programs

- F:

o Combination of discounts and rewards

o 3 tiers

o more personalized services

- US:

o initially just rewards

o 2 tiers

Are they worth it? Why limited time and spending requirements? Costs:

- Marketing expenses

- Rewards & discounts

- Database


- More cross selling opportunities

- Hopefully more spending

· Wants you to feel special in the program but at the same time it can be taken away from you

Could the French premium program work in the US?

No, because even though US consumers spend more on fragrances, most of it are mass marketed

Unit 2, Class 7

I. Rubio’s Video

Why do restaurants have such a high failure rate?

- Considerable competition because the cost of entry is low - Restaurant primarily sell a service rather than a product (usually more difcult to manage)

Franchising advantages and disadvantages

+ Can utilize the capital from the franchisee

+ The managers tend to be more motivated coz they’re also the owners - Free writing: when the franchisee takes advantage of the franchisor’s brand names

- The prots are lower because they’re being split

Why no franchising for higher quality restaurants?

- Most high-quality restaurants have an unique asset (e.g. chef) that cannot be duplicated

II. West Point Market Video

How can they compete in a market served by a number of larger supermarkets? - Most supermarkets appeal to what is called a “broad, middle market” - WestPoint has a unique high quality merchandises and services

III. Levy and Weitz Merchandise Planning Issues

Merchandise Management

Denition: Merchandise management is the process by which a retailer attempts to offer the appropriate quantity of the right merchandise, in the right place and at the right time, so that it can meet the company’s nancial goals.

Merchandise group: managed by senior vice presidents

Department: managed by divisional vice presidents

Classication: when you target the same customer type


Merchandise Category—a basic denition

- An assortment of items that customers see as substitutes for each other Advantages of High Inventory Turnover

1. Increased sales

2. Reduction in markdowns

3. More money for buying opportunities

Disadvantages of Too High an Inventory Turnover

1. Decrease in sales

2. Not take advantages in quantity discounts

Staple Merchandise

- Has continuous demand over a long period of time

Fashion Merchandise

- Has inconsistent demand over a short period of time

Seasonal Merchandise

- Demand uctuates based on the time of the years

Sources for Forecasting Fashion Merchandise

1. Previous sales

2. Market research

3. Fashion & trend services (a 3rd party that studies these things)

4. The vendors

Determining Product Availability

- The percentage of demand for an SKU that is satised

Cycle Stock (Base) **

- The inventory you keep if you can predict the demand perfectly

Backup Stock (Safety or Buffer) **

- A cushion against cycle stock running out

Lead Time

- The time between you realize you’re out of something and the restock arrives

Fill rate

- The percentage of completed orders received from the vendor

Order point

- The level of inventory you cannot go below without a forcing a stock out


- Keeps track of merchandise in real time

Sell-through Analysis

- Compares actual and planned sales

ABC Analysis

- When you look at you’re SKUs and you break them up into categories - A items: are the 5% of your items that gives you 70% of your sales - B items: the next 10% of your items that gives you 20% of your sales - C items: the next 65% of your items that gives you rest of the sales - D items: have no sales

IV. Lindy’s Bridal Shop

Should she change the emphasis of her merchandise mix to increase sales? Which products should have more emphasis? Less?

- Get rid of the silk owers

- Should stock menswear

Lindy’s personnel decisions?

- Herself

- Needs to hire a business manager

How to balance family and business?

- Can’t be fulltime in both

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