FINAL Review MARK 4303-001
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This 11 page Study Guide was uploaded by Alise Rekieta on Monday December 14, 2015. The Study Guide belongs to MARK 4303-001 at University of Texas at Arlington taught by Jeff Wallman in Spring 2015. Since its upload, it has received 83 views. For similar materials see Retail & Service Marketing in Marketing at University of Texas at Arlington.
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Date Created: 12/14/15
Retail & Service Management Dr. Jeffrey Wallman FINAL EXAM Wednesday DEC 16 2-4:30pm The exam will be composed largely of multiple choice, short answer, definition and short essay questions. First principles 1. “Listen to the customer” Customer behavior is key to building relationships *Listening*- Ask “Why is that important?” repeatedly until you find what is important to them. 2. “Write it down” Management of customer relationships through formalization. Written objectives provide: Common objectives, Built-in evaluation, and Revenue. If it’s important (Biggest UPS) put it at the TOP of the list, if it’s not important DROP it off the list. 3. “Change the rules” Entrepreneurship: Develop innovated exchanges *Value of leadership* 4. “Weigh the pros and cons” Decision Analysis Modeling- Make smart decisions 5. “Win with strength” Strategy: Develop winning strategies Segmentation: “Who is the customer?” Positioning: “Why should they transact with me?” Remember: the bases of retail and the bases of GNP are the consumers. Chapter 6- FINANCIAL STRATEGY Net profit margin- is part of the profit management path. The net profit (revenues minus expenses and period losses) a firm makes divided by its net sales will give you the net profit margin percent. net profit / net sales= net profit margin Asset turnover- is part of the asset management path. The net sales divided by the firm's total assets (including inventory, store fixtures, any resources owned or controlled by the firm) will give you the asset turnover. net sales / total assets = asset turnover ROI- Return on Investment (or return on assets). When you multiply net profit margin by asset turnover you can find the Return on Investment/Assets. net profit margin X asset turnover = ROI (or ROA) *return on investment and return on assets are the same, do not let the interchangeable terminology confuse you.* Remember: Financing is a huge source of cash (ie: credit cards) but you have to pay it back and that is a huge USE of cash-- a company can’t grow unless FINANCING is in place first! Chapter 7 - RETAIL LOCATIONS The 3 most important things in retail are LOCATION. LOCATION. LOCATION ** it is very important that the selection of location matches the retailer’s strategy** Remember: Location is of strategic importance to develop sustainable competitive advantage location must be consistent with: Shopping behavior, the target markets & the size of those target markets Types of locations- Free standing sites- unconnected to other retailers. City or Town locations: Inner city, Main street, Central Business District (CBD) Shopping centers: Strip centers (neighborhood/community), shopping malls (regional is less than 1 mil sq ft & Superregional is more than 1 mil sq ft), power centers, lifestyle centers, fashion specialty centers, outlet centers, mixed use developments, omnicenters, and theme/festival centers. Other. Airports, resorts, store within a store, temp/pop-up stores << POP-UP, TEMPORARY and ONLINE are growing rapidly!!>> Primary advantages of each type of location- *** Remember there is always a tradeoff between locations*** (The cost of rent &&& the amount of traffic; if rent is low good traffic is low and vice-versa) Freestanding locations- PROS: convenient, high traffic, modest cost, less competition, less regulations CONS: low foot traffic, low drawing power City/Town locations- *Gentrification: is bringing people back into the cities PROS: affluence, young professionals & empty nesters, increasing population, low cost, hi,h foot traffic busy business hours (CBD), public transportation, entertainment and residents CONS: high crime, poor parking, slow evenings & weekends, higher occupancy cost, regulation Shopping centers- PROS & CONS: shopping center controls-, lighting, signage, advertising and special events PROS: convenient, generally good traffic (depending on venue), easy parking, security, attraction CONS: competition, hours set by shopping center, occupancy costs can be high Other/Alternative locations- Temporary/pop-up- PROS: focus on product (less assortment) usually a hot item, high traffic areas, busy seasonal times, visibility, creates buzz about an idea or product Store within a store- PROS: more traffic, convenience Kiosks- PROS: located in walkways= lots of traffic Airports- PROS: connecting flights or lots of wait time when people are bored CONS: high rent Nontraditional locations- Airports, resorts, store within a store, temporary or pop-up stores, kiosks, Chapter 10- INFORMATION SYSTEMS AND SUPPLY CHAIN MNGMT. Strategic importance of supply chain management- Supply Chain Management is the set of approaches and techniques used to integrate the many levels of the supply chain and transportation with the end result providing the most effective quantities at the most effective locations at the most efficient times. The right amount. At the right place. At the right time. To minimize the costs of the supply system and provide for the customers demand. Helps improve product availability (fewer stockouts)(more assortment with less inventory on hand) and Increase return on investment (reducing transportation and inventory holding costs) leading to: a better strategic advantage. Example: WAL-MART’s Supply chain management is superb they are leading the pack in information and SCM systems. Remember: INVENTORY is LOWER when using supply chain management and there are more INFORMATION flows than merchandise flows. Four approaches for collaboration- between retailers and vendors Collaboration is to help deter the bullwhip effect: or in other words inventory building up because retailers and vendors do not coordinate their activities along the supply chain. 1. EDI (electronic data interchange) exchange of business documents (advanced shipping notices.. etc) 2. Share information (reduces the need for backup inventory, improves forecasting and efficiency) 3. VMI (Vendor managed inventory)- Manuf. accesses POS to automatically replenish stock 4. CPFR (Collaborative planning, forecasting and replacement) REMEMBER this is the most advanced! RFID definition- radio frequency identification- technology allowing an object to be ID'd by its radio frequency when scanned *Distribution centers- manage inbound and outbound transportation, receive and check merchandise, store or cross-dock merchandise, get merchandise floor ready (includes ticketing, marking, hangering), and prepare merchandise to ship. Push supply chain: merch is allocated to stores based on forecast demands Costs less. Less complicated info. system. Efficient for steadily demanded merch. Pull supply chain: merch orders are generated at the store based on POS sales data More accurate stocking. Better inventory turnover. More responsive to changes in demand. Easier for uncertain merch. Chapter 11- CUSTOMER RELATIONSHIP MNGMT CRM- Customer Relationship Management- Is the business philosophy and strategic planning to identify and build loyalty in the company's most valued customers. it's the idea that all customers are not of the same value to a retailer- more profitable customers need to be treated different than the less profitable customers. They do this often by promoting customer loyalty- loyalty encourages an emotional attachment to the brand that will resist competitors purely lowering prices, offering discounts, or promotions does not build loyalty. CRM process- is an 4 step interactive process to achieve customer loyalty 1. Collecting customer data (LEARNING) a. collected through transactions b. touchpoints-- any contact with the retailer-- (web, call center, direct mail etc) c. customer preferences d. demographic, psychographic customer information e. customer responses to marketing 2. Analyzing the data and identifying target customers . requesting information (phone numbers, names, addresses) a. frequent shopper programs-- loyalty cards or private label credit cards b. connecting internet purchases with locations *data mining- is used to identify patterns in data- market basket, market segments, or best customers *market basket analysis looks at what items are frequently bought together for joint promotion or product placement *destination items are placed at the back of store- intercept items on the way back to checkout *best customers identification is used to estimate lifetime value (LTV) see (CLV) and helps classify customers by RFM analysis (Recency, frequency, monetary value) 3. Developing CRM programs (TAKING ACTION) The main goals are to a. Retain the best customers i. using frequent shopper programs - to encourage continued purchases 1. offer graduating rewards based on customer value level 2. offer choices of rewards 3. keep it simple 4. reward all transactions to encourage purchases ii. special customer services iii. personalization (1-to-1 retailing) retail programs for small groups or individuals iv. community b. Convert good customers into best customers . customer alchemy* IRON -> GOLD-> PLATINUM level customers i. add-on selling (to increase share of wallet or get more sales from best customers) c. To shift focus off of unprofitable customers . offer less costly services to unprofitable customers i. charge for extra services 4. Implementing those programs a. close coordination between departments is vita b. and shifting from a product focus to a customer focus will help CRM thrive. Share of wallet- The percent of a customer's total purchases made by that customer in a specific store retailers concentrate on providing more value to their best customers to up their “share of wallet” CLV- Customer Lifetime Value- How much that customer is estimated to contribute to that retailer’s profits over their entire lifetime of interactions with that retailer. Customer retention programs- frequent shopper programs special customer services personalization (1to1 retailing) community Chapter 12- MANAGING THE MERCHANDISE PLANNING PROCESS The merchandise management process includes: 1. Forecasting sales a. understanding the product lifecycle b. collecting data c. projecting sales d. working with vendors to CPFR (the most advanced form of collaboration*see above) 2. Developing an assortment plan . assortment plans list the SKUs offered in each category a. includes variety (breadth) the number of different merch categories b. and assortment (depth) the number of SKUs in each category c. as well as product availability- the %demand of each SKU d. balancing the backup (buffer) stock-- most efficient amount of backup inventory 3. Determining the more efficient inventory level . cycle (base) stock- inventory levels that are available (go up and down between orders) a. backup (buffer) stock- needed to avoid stockout GMROI- Gross margin return on investment- Gross margin percent (gross margin/net sales) multiplied by the sales-to stock ratio (net sales/average inventory at cost) Gross margin / Avg inventory at cost = GMROI *Inventory turnover= (1- Gross margin percent) X sales-to-stock ratio Inventory turnover helps assess the buyer’s performance in managing the merchandise inventory Staples- Staple merchandise is merchandise that are in continuous demand over time- these are basic items that the inventory must be constantly replenished. They are easy to forecast demand for and are limited in new product developments. The buyer determines what are the basics and how much backup inventory is needed and the system automatically reorders when inventory levels get low. Fashion- a changing product, style or behavior that is largely popular among consumers because it is considered to be socially important in that time or area. There are constantly new product developments in fashion, and the old ones are continuously becoming out-dated ABC analysis- an analysis that ranks products by their importance by profitability- their profitability determines how often they should be replenished or if they should be discontinued. A -- high product availability B -- medium product availability C -- lower product availability is acceptable Chapter 13- BUYING MERCHANDISE Brand alternatives- national (manufacturer) brands- designed, produced and marketed by a vendor and then sold to retailers private-label (store) brands- produced marketed and sold by the retailer Advantages of private label- only available for sale by that store because it is their personal store brand unique merchandise so it's not available at competitors exclusivity will boost store loyalty there is no true price comparison because nobody else sells that product higher margins- because you don’t have to pay the vendor for the production What do sourcing departments do?- Sourcing departments find a manufacturer, negotiate a contract and monitor the production process OR. use reverse auctions to get quality private label merchandise at low prices. *reverse auctions- are when there is one buyer (the retailer) and multiple sellers. The sellers bid for the buyer's business. So the price gets lower. There are no strategic relationships with vendors here- it is merely competing for a retailer’s business. Grey market definition- merchandise that is made by foreign manufactures has a valid US registered trademark- it is imported to the US without the trademark owners permission Chapter 14- RETAIL PRICING Pricing is becoming more and more important because of how easy it is for customers to compare the value to alternatives. All they have to do is Google it from their phones now. Retail price = cost of merchandise + markup Retail price % = cost of merchandise / (1-markup%) So retailers increase value by creating perceived value in sales- increasing benefits or reducing price. Value= perceived benefits / price Pricing strategies- High/Low Pricing (HI-LO)- when retailers offer prices above their competition but they use advertising to promote more frequent sales. The sales get people excited and make them feel like they got a better deal. Everyday Low Pricing (EDLP)- Consistently low prices *Price optimization software- utilize past and current merchandise sale prices, then estimates the relationship between price and sales generated, then determines the most profitable price as well as timing for markdowns to ensure that inventory holding doesn’t lead to loss *Breakeven analysis: determines how much merchandise is needed to be sold to break-even (zero profit) Fixed costs don’t change, variable costs are determined by labor and materials Break-even quantity= fixed costs/ (actual sales price- unit variable cost) *horizontal price fixing- agreement between retailers in competition to charge the same price Pricing techniques for increasing sales- leader pricing- lowering costs on certain items (like eggs, milk and bread) to boost traffic flow or encourage sales of complementary items price lining- a set number of predetermined price points (good, better and best prices) allowing customers to “trade up” odd pricing- price that ends in an odd number 2.99$ looks way more appealing than 3$ then introduce the customers to a higher-price model (the switch)e customers into a store with advertised low prices (the bait) and Reasons for taking markdowns- Clearance- to get rid of slow-moving obsolete merchandise Promotion- to increase awareness of merch, to generate excitement and increase sales OR-- to generate cash to buy more profitable merchandise Chapter 15- COMMUNICATION MIX Communicating with customers Interactive vs passive Online vs offline ***Study the chart on pg 406 of your textbook (slide 11 of CH15 in Wallman’s lecture slides).*** Building brand equity- (the valued offered by the brand image to retailers) -A valuable brand will bring in customers, build loyalty, allow the retailer to charge more and raise gross margin, reduce promotional expenses (because the brand name sells itself), and facilitate entry into new markets. To build brand equity you must 1. Create a high level of brand awareness ** Brand awareness is most important ** 2. Develop favorable associations 3. Create emotional connections 4. Provide consistent reinforcement << done through integrated marketing communication (Integrated marketing communication is a program that integrates the communication mix elements to deliver a uniform message. A consistent message/image can be difficult when spread across many channels but an organized communication program will cater to each channel while still keeping the message the same.) Creating brand awareness- (the ability to recognize a certain brand name belongs to a retailer/product/service) Brand awareness or Top of mind awareness is important because it stimulates visits to the retailer. (You want your brand to be in the top 5-7 names) To create brand awareness you need: 1. A memorable name 2. Repeated exposure 3. Event sponsorship 4. Symbols Objective and task method- determines the budget required accomplish communication objectives *rule of thumb methods- affordable budgeting method- determines what money is available after operating costs and profits are budgeted drawback- assumes that communication expense doesn’t stimulate profit- aren’t independent of each other percentage of sales method- set as a fixed percent of forecasted sales drawback- assumes that what was used in the past is still appropriate- does not allow for change competitive parity method- retailer’s share of communication expenses = share of the market drawback- does not allow the retailer to exploit unique opportunities High assay principle- the retailer can allocate resources to the areas the provide the highest margin of return. Budget allocation is the most important budget decision Chapter 16- MANAGING THE STORE Store manager responsibilities (know key categories)- 1. Managing the store *Managing employees- the people- sales/employees* Delegating responsibilities Motivating, Evaluating and rewarding workers Recruiting, selecting, and training *Controlling costs* Managing the real estate- sales/sq ft Maintenance and energy costs Inventory control 2. Store layout, design and visual merchandising *Managing merchandise* Customizing it to the local consumers 3. *Providing Customer service* Customer loyalty Providing attractive merchandise Leader behaviors- Task performance- planning, organizing, motivating, evaluating, coordinating Group maintenance- assuring group satisfaction and group cohesion Decision making- Autocratic- makes decisions on their own Democratic- encourages employee participation in decision making Leading styles- transformational leaders- get people to make sacrifices and get excited about benefiting the group Types of rewards for evaluating employees- It’s important to have goals or quotas to measure against. Objective measures- (sales, margin, shrinkage) Subjective measures- (supervisors’ opinions) And to reward off of those evaluations... Extrinsic Rewards-Provided by managers/firm (compensation plan, promotion and recognition, quota bonus plan) (“A La Carte reward plan”: Gives employees a choice of rewards) - Straight salary compensation - Incentive compensation plan: rewards based on their productivity - Group incentives Intrinsic Rewards- Personal rewards from doing their job well (job enrichment- redesign to provide more responsibility) Ways to control costs- Labor scheduling Energy, heating , lighting Maintenance Reducing Inventory shrinkage (Employee theft, Shoplifting, Mistakes, Vendor error, Unaccounted) BIG IDEAS: Changes that trigger value are sales, costs, and investment Ask your customer “Is there anything I can do?” Location is your most important factor, Position is your second most important Location decisions are risky LEASE it! It’s either push or pull: APPLE and WALMART are Pull. OPIUM is a push market. Let the customer control the direction of your brand. Supply chain benefits consumers: by reducing stock-outs, increasing asset velocity, and tailoring assortments CRM = turning customers into LOYAL customers. Share of wallet- the key is add-on sales. It comes down to a few KEY DEALS. Merchandise management: It’s as easy as ABC Sourcing involves finding, negotiating, and monitoring contractors. There are 2 ways to grow 1. IF the pie is growing: Grow with the pie! 2. IF the pie is fixed: Steal from someone else! MARKETING HISTORY LESSONS: Sam’s started going after CostCo Don Keogh of coca-cola let the customer take control of the brand, and as president gave not only sound direction but took the company from $4bil to $56bil MIS in today’s retail is a BIG DEAL; it is way faster than previous systems. Torchy’s tacos was awarded for their winning salsa. They got their start in a food truck by giving away free food to develop traffic. “An island of loss in a sea of profit.” Dr. Anthony Youn MD a high-end plastic surgeon in Beverly Hills, California. He offered the utility of up-to-date anti aging techniques. “volumetric facelift and reshaping) when the competition just offered ordinary techniques. Telemedicine doctors as compared to the typical doctor offer the utility of treatment from a physician without leaving your home. Remember: The world’s largest wholesaler market is 5 mil sq ft and is DALLAS MARKET CENTER. Amazon proves that the internet wins! Troy Aikman and Buddy King- Buddy’s Alzheimer's story. What’s the point of terrorism from a marketing perspective: The pie of religion isn’t growing quickly so they need to steal part of the pie from someone else. (11) Other terms to know (6) cookies customer database accounts receivable assets 80-20 rule bottom-up planning opt in opt out comparable store sales growth COGS retail branding community current assets (12) current ratio debt-to-equity ratio earnings before interest and taxes (EBIT) extraordinary nonrecurring expenses breaking sizes fixed assets category captain gross margin depth interview gross margin percentage fill rate gross profit lead time input measures markdown money liabilities merchandise budget plan operating expenses model stock plan operating profit margin multiattribute analysis quick ratio open-to-buy same-store sales growth order point SG&A expenses perpetual inventory strategic profit model product availability top down planning safety stock (7) sell-through analysis shrinkage anchor stock-keeping unit (SKU) building codes common area maintenance (13) destination store buybacks outparcel chargeback specialty shopping commercial bribery trade area co-op advertising zoning corporate social responsibility diverted merchandise (10) duties consignment exclusive dealing agreements consumer direct fulfillment fair trade cross-docked green sheen direct store delivery (DSD) greenwashing lift outs dispatcher distribution center markdown money drop shipping market weeks floor ready merchandise parallel imports freight forwarders resident buying offices logistics slotting allowances pick ticket slotting fees public warehouse stocklifts subbrand reverse logistics security policy trying contract stockout umbrella brand UPC universal product code (14) cherry picker first-degree price discrimination keystoning loss leader low-price guarantee policy maintained markup multiple-unit pricing predatory pricing price bundling price elasticity quantity discount reference price second-degree price discrimination third-degree price discrimination yield management zone pricing (15) aided recall brand image cooperative (co-op) advertising freestanding insert marginal analysis mcommerce mobile commerce personal selling premium preprint rebates spot (16) Equal Employment Opportunity Commission (EEOC) Age Discrimination and Employment Act disparate impact disparate treatment Americans with Disabilities Act (ADA) cash wraps drawing account electronic article surveillance system EAS equal pay act fair labor standards act job analysis straight commission
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