Retail Management
2. CENTRALIZED CHECKOUTS
CHAPTER 1: EVOLUTION OF THE RETAIL INDUSTRY
RETAILING
- Direct selling to customers
- Adds value to products and services sold to consumers
for their personal or family use
- Involves the sale of services
o Overnight lodging in a motel
o Doctor’s exam
o Haircut
o Pizza delivery
- Not all retailing is done in stores
o Ordering shirt online
o Buying cosmetics from a salesperson
o Ordering from a catalog
o Streaming a movie
FETCH SYSTEM
- An over the counter system of procuring goods in the
20th century
- Also known as the pharmacy system where the clerk is
given a list then compile everything in a basket and
payment is done over the counter which can be seen in
pharmacies today
- PROBLEMS: flow issue (customer flow), selection
(product selection), staffing
o FLOW:
- process of analyzing the arrival, length of
stay, the activities, and exit of consumers
- people who enter in the first something feel
empowered
- more items in the cart, pabawas ng pabawas
yung confidence (since you will feel like you
are overspending)
- willingness to add more items becomes
lower
o SELECTION:
- Presence of alternatives, additional, excess
product offerings to maximize profit
- Selection draws power from interaction ;
allowing customers to experience interaction
increases their attachment to products
- ENDOWNMENT EFFECT: strategies are
formed where you are encouraged to try-on
the products for you to interact (ex. Letting
you try/wear an outfit to have an experience
with it)
o STAFFING ISSUE
- Less man power compared to fetch system
- Supermarket = self-service
- Man power reduction = increases traffic
coverage of the flow
AFTER 1946 (CHARACTERISTICS OF MODERN RETAILING)
1. PRINCIPLE OF SELF-SERVICE
- First self-service store: Piggly Wiggly (Memphis)
- Symbol of Retailing: Shopping Cart
- Counters are strategically placed in located payment
centers
- Manpower reduction
- Increase traffic coverage of the flow
3. BRAND CONSOLIDATION
- More brands can be housed due to comparative
shopping experience (product selection)
▪ COMPETE – alternative ; COMPLIMENT – additional ;
intensity of selection will vary
4. PRODUCT ASSORTMENT
- Cornerstone of retail marketing
- For revenue flow for any retail enterprise
- Can be internal or external selection of products
- INTERNAL: SM Bonus, Pure Basics
- EXTERNAL: big enterprises (brands)
THE RETAILER’S ROLE IN A SUPPLY CHAIN
RETAILER
- A business that sells products and/or services to
consumers for their personal or family use
- Key component in a supply chain that links
manufacturers to consumers
- Typically buy products from wholesalers and/or
manufacturers and resell them to consumers
SUPPLY CHAIN
- A set of firms that make and deliver goods and services
to consumers
MANUFACTURER →WHOLESALER→RETAILER→CONSUMER
RETAILERS CREATES VALUE
PROVIDING AN ASSORTMENT OF PRODUCTS AND SERVICES
- Enables customers to choose from a wide selection of
products at one location
- Prevents customers from going to different stores to
buy groceries to prepare a single meal
BREAKING BULK
- Reduce transportation costs
- Retailers then offer products in smaller quantities
tailored to consumption patterns
- Allows manufacturers to produce and ship in large
quantities but enables consumers to purchase in small
quantities
HOLDING INVENTORY
- Products will be available when consumers want them
- Important to consumers with limited storage space
PROVIDING SERVICES
- Retailers offer credit for consumers to have a product
now and pay it later
- They display products so consumers can see and test
them before buying
- Some retailers hire salespeople in stores or maintain
websites to answer questions and provide information
about their products.
 - SKU is composed of an alphanumeric combination of
CHAPTER 2: TYPES OF RETAILERS
eight-or-so characters ; characters make up a code that
RETAILER CHARACTERISTICS
tracks the price, product details, manufacturer, and
- Type of retailer a consumer chooses to patronize
point-of-sale
depends on the benefits the customer is seeking
- Value convenience - Each different item of merchandise
- All these retailers survive and prosper because they
satisfy a group of consumers’ needs more effectively
that their competitors
- What qualifies as a good retailer? Unique
characteristics depending on consumer needs
- As consumers needs and competition change, new
retail formats are created and existing formats evolve
- Many retailers are broadening their assortments –
offerings overlap and competition increases

ELEMENTS RETAILERS USE TO SATISFY CONSUMERS’ NEEDS

4 ELEMENTS OF THE RETAIL MIX
1. TYPES OF MERCHANDISE AND/OR SERVICES
OFFERED
2. VARIETY AND ASSORTMENT OF MERCHANDISE
OFFERED
3. LEVEL OF SERVICE SERVICES OFFERED
4. PRICE OF THE MERCHANDISE - Displaying merchandise
- Accepting credit cards
TYPE OF MERCHANDISE - Providing parking
- The United States, Canada, Mexico have developed a - Being open at convenient hours
classification scheme (North American Industry - Home delivery
Classification System NAICS) – collect data and - Gift wrapping
business activity in each country
- Every business is assigned a hierarchal, six digit code FOOD RETAILERS
based on the type of products and services it sells POWER PERIMETER
- Includes the dairy, bakery, meat, florist, produce, deli,
VARIETY and coffee bar in a grocery store that are found around
- Breadth the outer walls of the store
- Number of merchandise categories a retailer offers - Fresh merchandise
- Wide vs. narrow
- Brands (noodles), ready to eat SUPERMARKET
- Origin (local/imported) - Conventional Supermarket – large, self-service retail
- Format (dry/wet) food store offering groceries, meat, and produce, as
- Size well as non-food items (health and beauty aids and
general merchandise)
ASSORTMENT - Robinsons Supermarket, SM Supermarket
- Depth
- Number of different items offered in a merchandise
GREEN MERCHANDISE
category
- Natural, organic, and locally sourced food for those
- Each different item of merchandise is called stock-
who are health and environmentally conscious
keeping unit (SKU)
- Fair trade – purchasing from suppliers that pay workers
- Deep vs. shallow
a living wage
- Very specific
- Locavore movement – reducing the carbon footprint
- Flavor (noodles)
caused by the transportation of food throughout the
o Lucky me go cup bulalo 40g
world
o Nisin seafood 40g
o Nongshim spicy black 114g ETHNIC MERCHANDISE
o Lucky me chilimansi cup 40g - Prepare meals from scratch, spend more on groceries,
o Nisin yakisoba 70g prefer stores with bilingual staff and signage, and
place importance on fresh food
STOCK-KEEPING UNIT (SKU)
- A scannable bar code, most often seen printed on PRIVATE LABEL MERCHANDISE
product labels in a retail store - A business devoted to creating products that third
- Label allows vendors to automatically track the parties can sell as their own. For example the brand
movement of inventory and sa2les tracking bonus in SM
 - Private-label brands benefit both consumers and
retailers
- Customer Advantage: more choices and finding the
same ingredients and quality as in national brands at a
lower price or higher quality at a similar price to the
national brands
- Retailer Advantage: increased store loyalty, the
ability to differentiate themselves from the
competition, lower promotional costs, higher gross
margins
CHALLENGE IN FINDING NEW LOCATIONS
- 1,229,301 retail outlets in the Philippines – channels
are growing in terms of store count, groceries sees
notable growth followed by convenience stores while
other channels show flat performance
- That’s why there’s a rise in proximity market or
smaller format outlets
MINIMARTS/COMMUNITY STORE
- New format existing in the Philippines

IMPROVING THE SHOPPING EXPERIENCE MERCHANDISE RETAILERS

- Better store ambience
DEPARTMENT STORES
- Customer service
- Broad variety and deep assortment
- Food as theater – in-store restaurants
- Customer service
- Babysitting services
- Organize their stores into distinct departments
- Self-service kiosks
- Pleasing ambiance, attentive service, wide variety of
merchandise under one roof
SUPERCENTERS
- Soft goods – nondurable or consumable, have shorter
- Large stores
life span (cosmetics, clothing, bedding)
- With full-line discount stores
- Hard goods – durable, expected to last several years
- Dry groceries
(appliances, furniture, consumer electronics)
- First tier – upscale, high-fashion chains (exclusive
HYPERMARKET
designer merchandise), excellent customer service
- Also large, same as supercenters
- Second tier – modestly priced, less customer service
- Not common in the US
- Third tier – value-oriented, more price-conscious
- Carry grocery and general merchandise categories and
- To deal with eroding market share: increase the
offer self-service
amount of exclusive merchandise (merchandise not
- Located in warehouse type structure
available elsewhere), increase use if private-label
- Large parking facilities
merchandise (store brands), expand omnichannel and
- Larger proportion of food items (perishables)
social media presence
- Stock fewer SKUs than supercenters
- SM Hypermarket, Puregold
CATEGORY SPECIALISTS
- Big box stores that offer deep assortment but narrow
WAREHOUSE CLUBS
variety
- Offer a limited and irregular assortment of food and
- Self-service approach
general merchandise
- Intense competition
- Little service and low prices
- Category Killers – consumers drawn to deep
- Simple interiors
assortment and competitive prices (buying power)
- Low inventory holding costs
- Mr. DIY, Toy Kingdom, Chris Sports, National
- S&R, Lander’s
Bookstore

CONVENIENCE STORES SPECIALTY STORES

- Provide limited variety and assortment of
merchandise
- Enable consumers shop quickly, without having to
search through a large store and wait in long lines
- Convenient
- Higher prices (operating expenses)
- Services: banking
- 7Eleven, Uncle John’s
DRUGSTORES
ONLINE GROCERY RETAILERS
- Time-poor consumers are willing to pay more to access
options for ordering groceries online and having them
delivered
- Convenient, back check what you ordered, staying on
budget is easier
- Delivery fee, usage fee, quality of product, out of stock
- Online retailers continue to expand
- About 30% of orders are for non-food items
- Slim profit items continue to be a problem
- Limited number of complementary merchandise
categories and provide a high level of service
- Very specific market segments by offering a deep
assortment but narrow variety, and sales associate
expertise
- Among most profitable and fastest-growing firms
- Victoria’s Secret, LVMH, Sephora
- Health and beauty care
- Face competition from pharmacies, some food
retailers, pressure to reduce cost
- Offer wider assortment of merchandise
- Offer more services with drivethru windows, curbside
pickup , in-store clinics
- Mercury Drug, Watsons, Southstar
DIFFERENCES BETWEEN SERVICE AND
CHAPTER 3: MULTICHANNEL AND OMNICHANNEL RETAILING
MERCHANDISE RETAILERS
- Intangibility: something you cannot see or touch RETAIL CHANNEL
- Performance or action - The way a retailer sells and delivers merchandise and
- Simultaneous production and consumption services to its customers
- Perishability - Most common channel used are stores
- Inconsistency - Also use variety of nonstore channels (internet,
mobile, social media, catalogs
TYPES OF OWNERSHIP - Channel – opportunity to complete a transaction, to
sell and deliver merchandise
INDEPENDENT, SINGLE-STORE ESTABLISHMENTS
- Medium – used to communicate information to
- Many retail start-ups are owner-managed,
consumers
management has direct contact with customers and
can respond quickly to their needs
SINGLE-CHANNEL RETAILING
- Very flexible, can react quickly to market changes and
- Retailers sells and deliver merchandise and services to
customer needs
their customers through only one channel
- Negotiate lower prices
- To compete against corporate chains, some join a
MULTICHANNEL RETAILNG
wholesale-sponsored voluntary cooperative group
- Offer more than one channel to sell and deliver
- Everything will be shouldered by owner
merchandise and services to consumers
- Almost all large retailers are that operate stores are
CORPORATE RETAIL CHAINS
multichannel retailers
- Increase in market share, acquire more brands,
centralized decision making
CROSS-CHANNEL RETAILING
- Thrive by acquiring brand and agree to different
- Use multiple channels to make purchases
partnerships
- An approach developed to use several different
- Company that operates multiple retail units under
channels to complete the same purchase
common ownership
- Having multiple channels in turn creates an
- Some are divisions of larger corporations or holding
opportunity for cross-channel retailing
companies
- Customer receive coupon through email, redeems it
in store and buy the product
FRANCHISING
- A contractual agreement in which the franchisor sells
OMNICHANNEL RETAILING
the rights to use its business trademark, service mark,
- Coordinated multichannel retail offering that provides
or trade name
a seamless and synchronized customer experience,
- One-time franchise fee and ongoing royalty fee
using all of the retailer’s shopping channels
- Success rate
- Both parties benefit from the success of the franchise

THE BIG NAMES OF RETAILING

- Herbert Sy
- Rubina Gokongwei

HARD DISCOUNT CONCEPT/DISCOUNTERS

- Limited assortment of products ; stores are not that
big ; BIGGEST IN THE WORLD: ALDI
- Increasing the percentage of private labels offered at RELATIVE STRENGTHS OF RETAIL CHANNELS
low prices ; what sets a discounter apart from other IN-STORE RETAILING
retailers and they will handpick a specific merchandise
- Stores offer several benefits to customers that they
- Establishing and maintaining a high quality/price ratio,
cannot get when they shop through other, nonstore
i.e. high quality at low prices
channels
- Efficient operations
- Pioneered in Germany
TOUCH AND SMELL OF PRODUCTS
- Focus location: Rural Areas ; their rent is not
- Greatest benefit offered by stores is the opportunity
expensive since mostly in rural areas
for customers to use all five senses (touching,
- Core of discounter: lower prices smelling, tasting, seeing, and hearing) when
- ARE HARD DISCOUNTERS POSE A THREAT TO examining and evaluating products
INCUMBENT GROCERS? Hard discounters are gaining - Technological representations do not provide the
traction in the Philippines and since we are a third same level of information customers get when they
world country actually try on the product or smell a candle
PERSONAL SERVICE
- Sales associates have a unique ability to provide
meaningful, personalized information
- When you go to a luxury store such as LV, their sales
associate really knows their products and what to
recommend to their customers due to extensive
training to provide a meaningful and personalized
information
RISK REDUCTION
- The physical presence of the store reduces perceived
risk and increases customers’ confidence that any
problems with a purchase will be corrected
- Customers can easily access people in store to resolve
issues
- You buy an iPhone from the Apple Store, you open it
in the store but it wasn’t working, they will be able to
change it right away
IMMEDIATE GRATIFICATION
- Customers can use merchandise immediately after
they buy it in stores
- You need a last minute gift for a party, you do not
have to wait for a day or two for the delivery of a gift
from Shopee or Lazada
ENTERTAINMENT AND SOCIAL EXPERIENCE
- In-store shopping can be a stimulating experience for
some people, providing a break in their daily routine
and enabling them to interact with friends
CASH PAYMENT
- Stores are the only channel through which consumers
can make cash payments
- Some prefer cash over card or other electronic
payments since it is quicker, resolves the transaction
immediately, and does not result in potential interest
payments or excessive debt
DI KO SURE IF KASAMA TO
INTERNET RETAILING
- Retailers interact with consumers via Internet
- Refer to the channel that involves accessing the
Internet through a traditional computer as the
electronic channel
- Mobile channel also called mobile retailing, mobile
commerce or m-commerce
- Produce a different interface experience with the user
- Addition of internet channels has the potential to
offer a greater selection of products
- Allow retailers to provide more information
- Enable retailers to give customers more personalized
information about products and services
- Offers sellers the unique opportunity to collect
information about products and services
- Internet channels provide an opportunity for retailers
to enter new markets economically
- Provides information that they can use to improve the
shopping experience across all channels
- Increase consumer risk, which represents a potential
threat that retailers must address to ensure
competitive advantage
- Deeper and broader selection
- More information for evaluating merchandise
- Personalization
- Expanded market presence
- Information to improve shopping experience across
channels
MOBILE RETAILING
- Retailers are very interested in developing this
channel’s potential
- Offers the same benefits as computer-based
electronic internet channels, but it also has its own
unique benefits and limitations
- Customers can easily carry their devices in their
purses or pockets
- Can access retail sites from anywhere
- Customer-retailer interaction can be location-
sensitive
- Retailer can determine where a customer is located
and send location-relevant information to the
customer, such as promotions, to encourage
customers to buy other products nearby the store or
go to another area of the store
- Compared with a computer based channel, it has
smaller screen (major disadvantage)
SOCIAL RETAILING
- S-retailing
- Conducting purchase transactions through a social
media site
- Steadily evolving and picking up steam
- Twitter, Pinterest, Instagram has incorporated “buy
buttons” that enable users to click on a featured post
or picture to initiate a sales process
CATALOG CHANNEL
- Non-store retail channel in which the retail offering is
communicated through catalog mailed to customers
- Merchandise categories with the greatest catalog
sales: drugs, beauty aids, computers, software,
clothing, accessories, furniture, and housewares
- Provides safety and convenience benefits
- Consumers can look at merchandise and place an
order from almost anywhere, 24/7, without needing a
computer, mobile device, or internet connection
- Consumers can refer to the information in a catalog
anytime
- Can be easier to browse through than websites
- Consumer groups believe this represents an
unnecessary waste of natural resources
DIRECT SELLING
- A retail channel which salespeople interact with
customers face-to-face in a convenient location
(customer’s home or at work)
- Demonstrate merchandise benefits and/or explain a
service, take an order, and deliver the merchandise
- Highly interactive retail channel
- Considerable information is conveyed to customers
- Costly
- Independent agents are not employed by firms, they
buy merchandise from firms then resell it to
consumers (Example: Avon)
AUTOMATED RETAILING
- Retail channel in which merchandise or services are
stored in a machine and dispensed to customers when
they deposit cash or use credit card
- Vending machines
- Typically placed at convenient, high-traffic locations
- Cold beverages, prepared food service, candy, snacks
CHALLENGES FACING MULTICHANNEL AND OMNICHANNEL
RETAILERS
MULTICHANNEL AND OMNICHANNEL SUPPLY CHAINS AND
INFORMATION SYSTEMS
- Multichannel and omnichannel retailers still struggle
to provide an integrated shopping experience,
because various channels demand various skills as
well as unique resources
- Operational differences
- Walmart and JCPenney
CONSISTENT BRAND IMAGE ACROSS CHANNELS
- Retailers need to provide a consistent brand image of
themselves and their merchandise across all channels
MERCHANDISE ASSORTMENT
- Multichannel and omnichannel retailers offer a
broader and deeper merchandise assortment through
their internet channel than through their store
channel
- Internet channel can have a much larger assortment,
it can satisfy the needs of a larger variety of customer
groups
- Store channel is better suited for selling products with
important “touch-and-feel” attributes
- Internet channel might be just as effective as a store
channel for products with important “look-and-see”
attributes
PRICING
- Customers expect prices to be the same across
channels
- Retailers need to adjust their pricing strategy because
of the competition they face in different channels
- Retailers with stores in multiple markets often set
different prices for the same merchandise to deal with
differences in local competition
- Retailers may have difficulties sustaining regional
price differences when customers can easily check
prices on the internet
REDUCTION OF CHANNEL MIGRATION
- Most common multichannel and omnichannel usage
involves an initial search online, followed by a
purchase in stores
- As long as the store and internet channel represent
the same retailer, the firm is happy
- If customers gather information from one of its
channels, then they but from a channel hosted by a
competitor, the retailer suffers from the frustrating
problem of channel migration
- Showrooming occurs when a consumer goes into a
store to learn about different brands and products
and then searches the internet for the same product
sold for a lower price
- Three approaches retailers can use to reduce
showrooming:
o Providing better customer service
o Offering uniquely relevant information
based on proprietary data the retailer has
collected about the customers
o Promoting private-label merchandise that
can be purchased only from the retailer
CHAPTER 4: CUSTOMER BUYING BEHAVIOR
- An effective retail strategy satisfies customer needs
better than do competitors’ strategies
- Successful retailers are customer centric
- Strategic and tactical decisions revolve around the
experiences achieved by their present and potential
customers
- Understanding customer needs and buying behavior is
critical to formulating and implementing an effective
retail strategy
THE BUYING PROCESS
- Process that consumers go through when making
retail patronage and buying decisions
- Begins when customers recognize an unsatisfied need
- Seek information about how to satisfy their need
- Customers then evaluate the alternatives and choose
a store or internet site to visit or a catalog to view
- After evaluating, customers may make a purchase or
go to another retailer to collect more information
- After purchasing, consumers decide whether the
retailer, channel or product satisfy their need (post
purchase evaluation stage)
- Suggests that the buying process is linear
- First, channel and retailer are selected, and only then
are the specific items selected
- For each of these decisions, customers go through five
stages (need recognition to postpurchase)
1. NEED RECOGNITION
- Unsatisfied need arises when customers’ desired level
of satisfaction differs from their present level of
satisfaction
- Can be as straightforward as
o Realizing your hair has gotten too long and
shaggy
o Feeling the desire for an uplifting experience
after a final exam
o Receiving a message about something a
friend bought
o Getting a shipment from the subscription
service you signed up for to receive monthly
resupplies of your groceries
TYPES OF NEEDS
- Utilitarian and Hedonic
o Motivate customers to go shopping
- May shift depending on the situation, product
category, and elusive shifts in customer values
UTILITRIAN NEEDS
- Buying a suit for job interviews
- Associated with work
- Consumers motivated by utilitarian needs shop in a
more deliberate and efficient manner
- Retailers need to provide adequate information and
an effortless shopping experience
- Male shoppers are more utilitarian when shopping for
apparel
- Men are not as interested in the “hunt” as women
when it comes to shopping
- Trunk Club – more than 100 brands for men
HEDONIC NEEDS
- Shopping for pleasure
- Needs for entertaining, emotional, and recreational
experiences
- Desire excitement, stimulation, status and power,
recreation, and adventure
- Spend more time collecting information and shopping
because they enjoy the process
EXAMPLES FOR HEDONIC:
STIMULATION
- Retailers and mall managers use background music,
visual displays, scents, and demonstrations in stores
and malls to create a carnival-like, stimulating
experience for their customers
- Encourage customers to take a break from their
everyday lives and visit stores
- Exciting graphics and photography
STATUS AND POWER
- Some people choose retailers based in the attention
and respect they receive
- Canyon Ranch offers upscale health resorts they let
their customers experience the center of attention
offering spa services, medical and nutritional
consultations, workshops etc.
ADVENTURE
- Consumers go shopping because they enjoy finding
bargain, looking for sales, and finding discounts or low
prices
- They treat shopping as a game to be “won”
- Off price retailers (Marshalls, Trader Joe’s),
warehouse clubs (Costco), and fast-fashion specialty
retailers (Zara) constantly change their assortment so
that consumers never know what kind of treasure
they will find
CONFLICTING NEEDS
- Most consumer have multiple needs
- Satisfying hedonic needs might conflict with utilitarian
needs
- Needing to stay on budget and need to get a job
- CROSS-SHOPPING – Buying both premium and low-
priced merchandise or patronizing both expense,
status-oriented retailers and price-oriented retailers
STIMULATING NEED RECOGNITION
- Needs are stimulated by an event in a person’s life
- Retailers use advertising, e-mails, direct mail,
publicity, and special events to communicate the
availability of new merchandise or special prices to
stimulate unmet needs
- Visits to WornOnTV can stimulate need recognition by
showing products that celebrities or TV characters
have worn
- Social media campaigns encourage visitors to their
website or page to consider a purchase
- In stores, visual merchandising and salespeople can
stimulate need recognition
2. INFORMATION SEARCH
- Once customers identify a need, they typically seek
information about retailers, channels, or products
- Search starts on the internet and then narrowed by a
salesperson or friends’ opinions
- More information by visiting several retailers and/or
spending more time on the internet getting
information from blogs
- New technologies such as those available through
Flayr, combine reviews and rating from users’ social
networks with their own preferences to make
accurate recommendations about products
SOURCES OF INFORMATION
INTERNAL SOURCES
- Information in a customer’s memory
- Names, images, past shopping experiences
- If they remember only a small fraction of the
information they are exposed to, customers have an
extensive internal information bank to draw on when
deciding
EXTERNAL SOURCES
- Information provided by a host of sources
- Search for products and information using search
engines (Google), websites, traditional media
(advertising), blogs, product demonstrations on
YouTube, and ask friends
 - When customers believe that they are not well
enough informed or their internal information is
inadequate, they turn to external information sources
AMOUNT OF INFORMATION SEARCHED
- Depends on the value customers believe they can gain
from searching vs. the cost of searching (time and
money)
- Value of search stems from the degree to which the
additional information improves the customer’s
purchase decision
- Affected by:
o Characteristics of the individual customer
o Aspects of the market and buying situation
in which the purchase is made
- Two marketplace and situational factors:
o Number of competing brands and retail
outlets
o Time pressure under which the purchase
must be made
- When competition is grater, and more alternatives to
consider, the amount of information search increases
- Decreases with greater time pressures
3. EVALUATION OF ALTERNATIVES:
THE MULTIATTRIBUTE MODEL
- Provides a useful way to summarize how customers
use the information they have collected to evaluate
and select retailers, channels, and products
- Designed to predict a customer’s evaluation on the
basis of:
o Its performance on relevant attributes
o Importance of those attributes to the
customer
BELIEFS ABOUT PERFORMANCE
- Consider the store choice decision confronting a
young, single, professional Milwaukee woman who
needs groceries:
o A superstore near a suburb
o Her local supermarket
o A grocer that operates only an internet
channel (FreshDirect)

REDUCING INFORMATION SEARCH

- Retailer’s objective for customers in the information
search stage is to limit the customer’s search to its
store or website
- Measure of a retailer’s performance:
Conversion rate – percentage of customers who enter
a store or access a website and then buy a product
- Each element of the marketing mix can be used to
increase a retailer’s conversion rate
- Many retailers display items around the checkout area
to encourage on the spot conversions - Customer mentally processes the “objective”
- Services provided by retailers can also limit the search information about each grocery retailer in Part A
once at the retailer’s location - Part B shows her beliefs about these benefits
- Offering credit and having informed salespeople, a - Some benefits combine several objective
retailer can convince retailers that they don’t need to characteristics
collect additional information from other retailers o Convenience benefit combines travel time,
- Everyday Low Pricing (EDLP) – this strategy reduces checkout time, and ease of finding products
information search
o Helps assure customers that they won’t find IMPORTANCE WEIGHTS
a lower price for these products at a
different store the next time they go
shopping
- Many stores offer money-back guarantees if a
competitor offers the same merchandise at a lower
price
- These pricing policies limit the customer information
search
- Overall evaluation of each alternative on the basis of
INTERNET/SOCIAL MEDIA/MOBILE: the importance she places on a benefit can also be
INFORMATION SEARCH AND PRICE COMPETITION represented using a 10-point rating scale (10 – very
- Internet in general, social media, and the increasing important, 1 – very unimportant)
applications for mobile devices have had a profound
impact on consumers’ ability to gather external
information
- Retailers encourage customers to post information
(product reviews, ratings, photos, videos)
- Consumer reviews are emerging as a prime
information source for shoppers
EVALUATING RETAILERS
- A customer’s overall evaluation of an alternative is
related to the sum of the performance beliefs
multiplied by the importance weights
- Single woman: internet grocery has the highest score
(221)
- Parent: supercenter has the highest score (192)
IMPLICATIONS FOR RETAILERS
- Model indicates what information customers use to
decide which retailer to patronize or which channel to
use
- Suggests tactics that retailers can undertake to
influence customer’s store, channel, and merchandise
choices
- Collect the following information
o Alternative retailers that customers consider
o Characteristics or benefits that customers
consider when evaluating and choosing a
retailer
o Customers’ ratings of each retailer’s
performance on the characteristics
o Importance weights that customers attach
to the characteristics
CONSIDERATION SET
- Set of alternatives the customer evaluates when
making a choice of a retailer to patronize
- To be included, retailers develop programs to increase
the likelihood that customers will remember them
- Retailers can increase customer awareness through
communication and location decisions
o Search engine optimization techniques
o Communication programs that link their
products or services to their corporate
name
- Methods to increase the chances that customers will
select a retailer for a visit:
o Increase beliefs about the store’s
performance
o Change customers’ importance weights
o Add a new benefit
4. PURCHASE THE MERCHANDISE OR SERVICE
- Customers don’t always patronize a store or purchase
a brand or item of merchandise with the highest
overall evaluation
- Other consumers make purchase choices based on a
single attribute regardless of the overall evaluation
- Retailers converting positive evaluation to purchases:
o Minimizing the number of real or virtual
abandoned carts in their retailer’s store or
website
o Make it easy to purchase merchandise by
making it readily available on mobile devices
o Reducing actual wait time (more checkout
lanes open and placed conveniently in the
store)
o Send reminder e-mails to visitors about
items in carts they have abandoned
o Providing sufficient information that
reinforces the customer’s positive
evaluation
o Reducing the risk of making a purchase
mistake
o Create a sense of urgency or scarcity to
encourage customers to make a purchase
decision
5. POSTPURCHASE EVALUATION
- Customers uses the product and then evaluates the
experience to determine whether it was satisfactory
or unsatisfactory
- Satisfaction – postconsumption evaluation of how
well a store or a product meets or exceeds customer
expectations
- Becomes part of the customer’s internal information
and affects store and product evaluations and
purchase decisions
- To improve:
o Make sure to build realistic customer
expectations
o Provide information about proper use and
care
o Guarantees and warranties reduce a
negative feeling of risk
o Best retailers make contact periodically with
their customers to make sure they are
satisfied, correct any problems, and remind
customers of their availability
TYPES OF BUYING DECISIONS
EXTENDED PROBLEM SOLVING
- A purchase decision process in which customers
devote considerable time and effort to analyze their
alternatives
- Customers typically engage when the purchase
decision involves a lot of risks and uncertainty
- Financial Risks – arise when customers purchase an
expensive product or service
- Physical Risks – important when customers feel that a
product or service may affect their health or safety
- Social Risks – arise when customers believe a product
will affect hoe other view them
LIMITED PROBLEM SOLVING
- Involves a moderate amount of effort and time
- Customers engage in this type of buying process when
they have had some prior experience with the product
or service and their risk is moderate
- Customers tend to rely more on personal knowledge
than on external information
- One common type: impulse buying or unplanned
purchasing – buying decision made by customers on
the spot after seeing the merchandise
o Retailers encourage customers by using
point-of-purchase (POP) or point-of-sale
 (POS) displays to attract customers’
attention
HABITUAL DECISION MAKING
- Involve little or no conscious effort
- One way consumers cope up with time pressures is by
simplifying their decision-making process
- When need arises, customers may typically respond
with “I’ll buy the same thing I bought last time from
the same store”
- Occurs when decisions aren’t very important to
customers and involve familiar merchandise they have
bought in the past
- Customers are loyal
BRAND LOYALTY
- Customers like and consistently buy a specific brand in
a product category
- Reluctant to switch to other brands if their favorite
brand isn’t available
- Creates both opportunities and problems for retailers
RETAILER LOYALTY
- Customers like and habitually visit the same retailer to
purchase a type of merchandise
- To increase loyalty:
o Select a convenient location
o Offer complete assortments of national and
private-label brands
o Reduce number of stockouts
o Reward customers for frequent purchases
o Provide good customer service
SOCIAL FACTORS INFLUENCING THE BUYING PROCESS
THE ECONOMY
- The state of the national and global economy has
significant effects on the way people buy
- When global or national economies struggle or
undergo recessions, consumers reduce their
purchases or seek more affordable options
- When it flourishes, consumers are willing to spend
more on luxury or hedonic products
FAMILY
- Involve products that the entire family will consume
or use
- When families make purchase decisions, they often
consider the needs of all family members
REFERENCE GROUPS
- Includes one or more people whom a person uses as a
basis of comparison for beliefs, feelings, and
behaviors
- Family, friends, celebrities, and opinion leaders
- Affect buying decisions by:
o Offering information
o Providing rewards for specific purchasing
behaviors
o Enhancing a consumer’s self-image
o Provide information to consumers directly
through conversation (face-to-face or
electronically or indirectly through
observation)
- Store advocates – customers who like a store so much
that they actively share their positive experiences
with friends and family
CULTURE
- Meaning, beliefs, morals, and values shared by most
members of a society
- Often align with his or her reference group
MARKETING SEGMENTATION
- To be cost-effective, retailers identify groups of these
customers and target their offerings to meet the
needs of typical customers in a segment rather than
the needs of a specific customer
RETAIL MARKET SEGMENT
- Group of customers who are attracted to the same
retail mix because they have similar needs
- Internet enables retailers to target individual
customers efficiently and market products to them on
a one-to-one basis
CRITERIA FOR EVALUATING MARKET SEGMENTS
ACTIONABLE
- Customers in the segment must have similar needs,
seek similar benefits, and be satisfied by a similar
retail offering
- Those customers’ needs must differ from the needs of
customers in other segments
- Means that the retailer should know what to do to
satisfy needs for the consumers in the segment
IDENTIFIABLE
- Retailer is able to determine which customers are in
the market segment
- When customers are identifiable, the retailer can
determine:
o Segment’s size
o Consumers to whom the retailer needs to
target its communications and promotions
SUBSTANTIAL
- If a market is too small or its buying power is
insignificant (not substantial), it cannot generate
sufficient profits to support the retailing mix activities
REACHABLE
- Retailer can target promotions and other elements of
the retail mix to consumers in the segment
APPROACHES FOR SEGMENTING MARKETS
GEOGRAPHIC SEGMENTATION
- Groups customers according to where they live
- Can be segmented by countries, area within a country
(cities, states, and neighborhoods)
- Customers typically shop at stores convenient to
where they live and work
- Individual retail outlets usually focus on the customer
segment reasonably close to the outlet
DEMOGRAPHIC SEGMENTATION - Audience used by retailers is described by
- Groups consumers on the basis of easily measured demographics rather than the benefits they seek
objective characteristics (age, gender, income, and
education) COMPOSITE SEGMENTATION APPROACHES
- Most common means of defining segments - No segmentation meets all the criteria
- Can be easily identified, their size can be determined, - Uses multiple variables to identify customers in the
and the degree to which they can be reached by and target segment according to their benefits sought,
are responsive to media can be easily assessed lifestyles, and demographics
- May not be useful for defining segments for some - CVS uses what it calls “CVS personalities” to target
retailers because the motivations for purchasing three composite segments (referred to by a first
transcend simple demographics name) is used to develop a retail strategy for the
market segment
GEODEMOGRAPHIC SEGMENTATION o CAROLINE – 18-24 years old single or new
- Uses both geographic and demographic moms who have lower income but have the
characteristics to classify consumers highest number of items purchased per trip
- Based on the principle that “birds of a feather flock o VANESSA – 35-54 years old women with
together” children, at the peak of the income and
- Same neighborhoods tend to buy the same type of generating the highest spending number of
cars, appliances, and apparel and shop at the same items purchased per trip
types of retailers o SOPHIE – 55 plus empty nester woman with
a median income and a health focus.
PSYCHOGRAPHIC SEGMENTATION
- Methods of segmenting customers based on how they
spend their time and money, what activities they
pursue, and their attitudes and opinions about the
world in which they live
- Self-values – goals for life, not just the goals one
wants to accomplish within a day
o Overriding desires that drive how a person
lives his or her life
o Drive for self-improvement
o Self-image or Self-concept – image people
ideally have of themselves
- Lifestyles – third component of people’s
psychographic makeup, are the way we live
o How we live our lives to achieve goals
- Values of Lifestyle Survey (VALS) – one of the most
widely used consumer segmentation tools
o Examines the intersection of
psychographics, demographics, and
lifestyles
o US and Canada only
o Horizontal: reflect people’s primary
motivation based on their self-image
o Vertical: consumers resources are measured

BUYING SITUATION SEGMENTATION

- Buying behavior of customers with the same
demographics or lifestyle can vary depending on their
buying situation
- Fill-in vs. weekly shopping to segment a market

BENEFIT SEGMENTATION
- Customers seeking similar benefits
- Customer in the same benefit segment would have a
similar set of importance wights for the attributes of a
store or product
- Very actionable
- Benefits sought by customers in the target segment
clearly indicate how retailers should design their
offerings to appeal to those customers
- Aren’t easily identified or accessed