Randalls Department Stores

Group : 7 Date: 23/6/2012

Members: Ashim Sarkar Vaidya Nachiket Vasant Rizurekh Saha

Aravind G Boddepalli Satish Chandra Deepika Nenavath (Ms)

What is the nature of customer behaviour that is pertinent to Randalls pricing decision?

The profile of the majority of the customers at Randalls: Age 25+; Household income:

$25,000+; region Billingsville & its suburbs

Customers are attracted by discounts & sales promotions and are moving towards a stage

where only higher discounts are considered as best bet.

Since the brand loyalty of customers is less, the buying behaviour is driven mostly by price.

So customers prefer cheapest price among alternatives. However customers do not always

look at prices in absolute terms, framing of prices plays an important role in buying

behaviour.

The sales discount and the EDLP (Everyday low price) are not communicated clearly to the

customers thereby leading to confusion & ambiguity while purchasing.

Customers look for variety in Jewellery, Childrens apparel & Shirts category.

In Childrens apparel, the value proposition to customers is shifting towards fashionable items.

Customers expect a large variety to choose from

Discounts are very much expected during special occasions & weekends

Evaluate the advantages and disadvantages of EDLP versus price discounting on the current

pattern for Randall for mens suits, childrens clothing and fine jewellery.

Childrens Apparel: EDLP successful

1. Consumers are aware of the EDLP and it is well communicated to them. The competitors

also follow the same pricing policy.

Case: Randalls department store Group No: 7

2. EDLP has also helped in clearing the stock. The inventory turns in this segment is driven

mostly by EDLP policy.

Fine jewellery: EDLP unsuccessful

1. In this segment, the quality cannot be checked by the customer. So price is considered

as an indicator of quality. Whereas EDLP reduces the perceived utility by the buyer.

Hence, if it is priced high and given a better discount, the customer perceives it to be a

better bargain.

2. There is steady decline in fine jewellery from 28% to 22% (1988 to 1990).

Mens suiting : EDLP unsuccessful

a. Even though EDLP improved the day-to-day sales, the business dropped relative to the

sales period. The customers were doubtful about the EDLP at Randalls. Also, they had

trouble in understanding the pricing system.

b. EDLP did not help in clearing existing inventory which was considerable as Suits are

Fashionable goods and need end of season clearance.

c. The Buyer was a bargain hunter and was confused by different prising between Suits and

Shirts.

What is return for the marketing effort for Randall?

Randall advertised in the print media and Television and radio, primarily for Sale
announcements
The Return on Marketing Investment (ROMI) could be defined as:

( )

We have considered three categories of Childrens apparel, Fine Jewelry and Mens Suits to
find out the ROMI.

Pricing
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 Case: Randalls department store Group No: 7

The assumptions are:

o All the incremental sales can be attributable to marketing efforts. This is because the
consumer is driven by promotions and would go to the store offering the best
discounts
o The marketing is mainly in the form of promotions and hence the effects would be
short term. Thus we can assume that Marketing expenditure in 1989 would lead to
increase in sales in 1989 itself
Based on the data given in Exhibit 5 and Exhibits 11,13, we found out that the ROMI for the
categories are as follows:

Sales Volume Increase from Sales Change in Net Adv. Contribution ROMI
in 1989 ($) 1988 (%) Volume in Sales volume Dollars as % sales
1988 ($) ($)

Children's 33944325 1 33608243 336082 434435 34 -0.74

Fine Jewelry 44067315 -12 50076494 -6009179 678810 22 -2.95
Men's Suits 30622440 -1 30931758 -309318 525045 10 -1.06

Thus from the data, it is evident that Marketing expenditure by Randall is having a very low
return in the categories: Childrens, Fine Jewelry and Mens Suits.

What should Emily and Caroline Randall do? Why?

Greater the promotion frequency, greater the decrease in reference price (Alba et. Al. 1999)
Based on this research, the Randalls should reduce the number of promotion activities.

For jewellery segment, the concept of pricing it high initially and providing discounts can be
applied. This will be perceived by customers as a better bargain.

Pricing
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