Randall's Department Stores

1) What is the nature of customer behaviour that is pertinent to Randall’s Pricing Decision?

 Customers are attracted by discounts & sales promotions and they select store and time
for shopping according to the best discount deal offered to them. So their buying
behaviour is price driven.
 From the exhibit 7 & 8 we can say that most of the customers are between age of 18-54
with an average income of around $41000. So the majority of the customers are from
middle class family this justifies the price driven behaviour of customers.
 This also implies that customers expect special discounts and seasonal offers.
 Customers are not being clearly told about the sales discount and EDLP which leads to
confusion in purchasing. So it should be made clear and continue with one pricing
strategy is more important.

2) Evaluate the advantages and disadvantages of EDLP versus price discounting on the
current pattern for Randall for men’s suits, children’s clothing and fine jewelry.

 Children’s clothing: -
 EDLP was implemented in this category by Randall’s when many competitors like
Prescott’s, R Us etc had implemented it and was promoting intensively.
 For this category EDLP was successful because Randall’s was implementing it when
every competitors was doing the same thing so the customers were well informed
about this. And with big network of 12 stores Randall’s could become market leader.
 But according to Cole, DMM of Children’s apparel EDLP was becoming less
appropriate for children’s clothing because it is now a fashion category and it
required taking markdowns to clear obsolescent merchandise which would not be
possible with EDLP.
 Fine Jewelry: -
 EDLP was unsuccessful in this category because they could not convince the
customers about their quality with low price. Customers considered price with
quality for jewelry so they preferred discount given on higher price rather than
selling directly at lower price.
 Because of this they could not clear their inventory as they forecasted earlier which
resulted in stock up hence they could not bring new and fresh designs. Also they
could not clear these stocks with more as discount as it was already in EDLP
category.

 Men’s Suits: -

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  EDLP was implemented in recognition of the fact that 70 to 80% of men’s suits
already sold at 25% off during the Early Season Sale, Extra Value, and other
storewide sales so implementing EDLP would make merchandise easy to compare
across retailers and customer can judge fairness of the price and also they did not
have to wait for sale season to buy suits.
 However, EDLP improved the day-to-day sales but the business dropped relative to
the sales period. EDLP was unsuccessful in this category because the customers
could not understand different pricing strategy for shirts and suits (more or less same
category for customer).
 Also many premium brands of suits did not want their name to be associated with
EDLP as it could harm their brand name or brand value.

3) What is the return for the marketing effort for Randall’s?

 Randall’s marketing effort is mainly the advertisement cost of print media, television and
radio which they used for Sale announcement.
 Return on marketing effort can be defined as

Change∈ sales due

¿ marketing spending−Marketing spending ¿
Marketing spending

 Here we are assuming that change in sales figure is only due to marketing efforts and
advertisement spending for different category was same as 1989 in 1988.

 From the exhibit 5,10 and 11,

Category Sales Volume Increase Sales Volume Change in Net Adv. ROMI
in 1989 ($) from 1988 in 1988 ($) Sales Spending
(%) volume ($)
($)
Children's 33944325 1 33608243 336082 434436 -0.23
Fine Jewellery 44067315 -12 50076494 -6009179 126696 -48.42
Men's Suits 30622440 -1 30931758 -309318 91925 -4.36

 Thus from the data, it is evident that Marketing expenditure by Randall is having
negative return in the categories: Children’s, Fine Jewelry and Men’s Suits.

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 4) What should Emily and Caroline Randall do? Why?

 Based on the above calculation they should reduce the number of promotion activities.
 For jewelry segment customers implies price as quality so discount on higher price can be
done rather than EDLP.
 For a category like men’s suit where customers are more attracted by the service they get,
they can implement commissioned sales force in every stores for superior customer service
and it can help them to achieve more loyal customers.


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