CHAPTER 8:

INFORMATION
GATHERING AND
PROCESSING IN
RETAILING

1
 Chapter Objectives
• To discuss how information flows in a
retail distribution channel
• To show why retailers should avoid
strategies based on inadequate
information
• To look at the retail information system,
its components, and recent advances
• To describe the marketing research
process

©2013 Pearson Education 8-2

 Figure 8-2: How Information Flows in a
Retail Distribution Channel

Information Information Information

and the and the and the
Supplier Retailer Consumer

8-3
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 Suppliers Need To Know
From the Retailer From the Customer
• Estimates of • Attitudes toward
category sales styles and models
• Inventory turnover • Extent of brand
rates loyalty
• Feedback on • Willingness to pay a
competitors premium for
• Level of customer superior quality
returns
©2013 Pearson Education 8-4
 Retailers Need To Know
From the Supplier From the Customer
• Advance notice of • Why people shop
new models and there
model changes • Customers’ likes
• Training materials and dislikes
• Sales forecasts • Where else people

• Justifications for shop

price changes

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 Consumers Need To Know

From the Supplier From the Retailer

• Assembly and • Where specific
operating merchandise is
instructions stocked in the store
• Extent of warranty • Methods of payment
coverage acceptable
• Where to send a • Rain check and other
complaint policies

©2013 Pearson Education 8-6

 Retail Information System (RIS)

• Anticipates the information

needs of retail managers
• Collects, organizes, and stores
relevant data on a continuous
basis
• Directs the flow of information to
the proper decision makers

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 Figure 8-3: A Retail Information System

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 Data-Base Management
• A major element in an RIS
• System gathers, integrates, applies, and
stores information in related subject
areas
• Used for
• Loyalty program management
• Customer analysis
• Promotion evaluation
• Inventory planning
• Trading area analysis
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 Five Steps to Approaching
Data-Base Management
• Plan the particular data base and its
components and determine information needs
• Acquire the necessary information
• Retain the information in a usable and
accessible format
• Update the data base regularly to reflect
changing demographics, recent purchases,
etc.
• Analyze the data base to determine strengths
and weaknesses

©2013 Pearson Education 8-10

 Figure 8-5: Data-Base Management
in Action

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 Components of a Data Warehouse
• Physical storage location for data –
the warehouse
• Software to copy original
databases and transfer them to
warehouse
• Interactive software to allow
processing of inquiries
• A directory for the categories of
information kept in the warehouse
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 Data Mining and Micromarketing

• Data mining is the in-depth analysis of

information to gain specific insights
about customers, product categories,
vendors, etc.
• Micromarketing is an application of
data mining whereby retailers use
differentiated marketing and develop
focused retail strategy mixes for
specific customer segments

©2013 Pearson Education 8-13

 Data Mining Example:
• Using traditional statistical methods, an retail
analyst would ask “Are higher-income people
prone to be more loyal to a warehouse club
than those with lower income levels?”
• Data mining, on the other hand, could
potentially provide more insight by pointing out
other factors contributing to store loyalty.
• Data mining might group customers who have a
warehouse club’s credit cards, who live within
10 miles of the club, who own more than one
car, and who have a separate freezer.
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 Figure 8-6: Applying UPC Technology
to Gain Better Information

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Figure 8-7: The Marketing Research Process

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 Marketing Research in Retailing

The collection and analysis of

information relating to specific
issues or problems facing a
retailer

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 Secondary Data
Advantages Disadvantages
• Inexpensive • May not suit current
• Fast study
• Several sources and • May be incomplete
perspectives • May be dated
• Generally credible • May not be accurate
• Provides or credible
background • May suffer from poor
information collection techniques
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 Secondary Data Sources
Internal External
• Sales reports • Data bases
• Billing reports • Academic Search
Premier
• Inventory
• Government
records
• U.S. Census of
• Performance Retail Trade
reports
• Statistical Abstract
of the U.S.
• Public records

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 Primary Data

Advantages Disadvantages
• Collected for • May be more
specific purpose expensive
• Current • Tends to be more
• Relevant time consuming
• Known and • Information may
controlled not be acquired
source • Limited
perspectives
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 Primary Data Decisions
o In-house or outsource?
o Sampling method?
• Probability
• Non-probability
o Data collection method?
• Survey
• Observation
• Experiment
• Simulation

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 Survey Methods

• In person • Disguised
• Over the • Non-
telephone disguised
• By mail
• Online

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 Figure 8-9: A Semantic Differential
for Two Furniture Stores

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 Mystery Shoppers

• Retailers hire people to pose as

customers in order to evaluate
aspects of the store environment
(e.g. sales presentations, display
maintenance, and service calls)
• Often sales encounter based.

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 Experiments
• An experiment is a research method
in which one or more elements of a
retail strategy mix are manipulated
under controlled conditions.
• An element may be a price, a shelf
display, store hours, etc.
• If a retailer wants to find out the effects
of a price change on a brand’s sales,
only the price of that brand is varied.

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 Simulation
• A simulation is a type of experiment
whereby a computer program is
used to manipulate the elements of
a retail strategy mix rather than test
them in a real-life setting.
• Two simulation types are now being
applied in retail settings: those
based on mathematical models and
those involving “virtual reality.”

©2013 Pearson Education 8-26