2.

Building and Sustaining Relationships in Retailing

The Key to Long- Term Customer Satisfaction: Meeting Expectations

This requires

a. an in-depth understanding of target shoppers’ desires;

b. the proper mix of merchandise, customer service, and prices for those shoppers; and

c. supportive, ongoing customer interaction.

Value Chain Analysis: An Internal Assessment of Competitive Advantage

Value chain: A channel of distribution involves multiple parties: manufacturer, wholesaler, retailer, and
customer.

The concept of the value chain was popularized by Michael Porter in his 1985 book,
Competitive Advantage. He identified five primary activities in a value chain:

 Inbound logistics: This involves acquiring and receiving raw materials and components from
suppliers.
 Operations: This involves transforming raw materials and components into a finished product.
 Outbound logistics: This involves storing and transporting finished products to customers.
 Marketing and sales: This involves creating awareness of the product or service, generating leads,
and closing sales.
 Service: This involves providing after-sales support to customers.

Value chain support activity

Infrastructure,Human resource management,Technology development,Procurement

Why is value such a meaningful concept for every retailer in any kind of setting?

 Value is desired by all customers; however, it means different things to different customers.
 Retail differentiation is essential so a firm is not perceived as a “me too” retailer.
 A retail value chain represents the total bundle of benefits offered to consumers through a channel
of distribution.
 Some elements of a retail value chain are visible to shoppers, such as display windows, store hours,
sales personnel, and point-of-sale equipment.

There are three aspects of a value-oriented retail strategy

expected retail strategy

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 An expected retail strategy represents the minimum value chain elements a given customer
segment (e.g., young women) expects from a type of retailer (e.g., a mid-priced apparel retailer).
 In most cases, the following are expected value chain elements: store cleanliness, convenient hours,
well-informed employees, timely service, popular products in stock, parking, and return privileges.
 If applied poorly, expected elements cause customer dissatisfaction and relate to why shoppers
avoid certain retailers.

Augmented retail strategy

 An augmented retail strategy includes the extra elements in a value chain that differentiate one
retailer from another.
 As an example, how is Saks different from Sears? The following are often augmented elements:
exclusive brands, superior salespeople, loyalty programs, delivery, personal shoppers and other
special services, and valet parking.

Potential retail strategy

 A potential retail strategy comprises value chain elements not yet perfected by a competing firm in
the retailer’s category.
 For example, what customer services could a new upscale apparel chain offer that no other chain
offers?

There are five potential pitfalls to avoid in planning a value-oriented retail strategy අගය-නැ
ඹුරු සිල්ලර උපාය මාගගයක් සැලසුම් කිරීමම්දී වළක්වා ගත හැකි විභව අන්තරා පහක් ඇත
 Planning value with just a price perspective.

Value is tied to two factors: benefits and prices. All major discounters now accept credit cards because
shoppers want to purchase with them.

 Providing value-enhancing services that customers do not want or will not pay extra for.

Ikea knows most of its customers want to save money by assembling furniture themselves.

 Competing in the wrong value/price segment.

Neighborhood retailers generally have a tough time competing in the low-price part of the market

They are better off providing augmented benefits and charging somewhat more than large chains. විශාල
දම්වැල්වලට වඩා වැඩි ප්රතිලාභ ලබා දීම සහ තරමක් ආරරෝපණය කිරීම වඩා රහාඳය.

 Believing augmented elements alone create value.

Many retailers think that if they offer a benefit not available from competitors that they will
automatically prosper.

 Paying lip service to customer service.

The saying "the customer is always right" suggests that businesses prioritize customer satisfaction and
preferences.

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 Customer Relationships

Loyal customers are the backbone of a business. Thus, it is important that retailers retain their loyal
customers through repeated sales in a trusting relationship.

Loyalty has two unique dimensions— attitudinal and behavioral—and each contributes differently to
retailers’ revenues, profits, and market share.

Customers who are attitudinally loyal will have a higher tendency to spread positive word-of-mouth
recommendations to friends and family on social media, have a higher commitment to the retailer, and
not be reluctant to pay more for products at a particular retailer.

Customers who are behaviorally loyal will have a higher tendency to continue purchasing from a
particular retailer.

In relationship retailing, there are four factors to keep in mind

• Customer base • Customer service • Customer satisfaction and • Loyalty programs and defection rates

THE CUSTOMER BASE

Retailers must regularly analyze their customer base in terms of population and lifestyle trends,
attitudes toward and reasons for shopping, the level of loyalty, and the mix of new versus loyal
customers.

THE CUSTOMER SERVICE

Customer service refers to the identifiable, but sometimes intangible, activities undertaken by a retailer
in conjunction with the goods and services it sells.

retailers must apply two elements of customer service.

1. Expected customer service is the service level that customers want to receive from any retailer,
such as basic employee courtesy.
2. Augmented customer service includes the activities that enhance the shopping experience and
give retailers a competitive advantage.

DEVELOPING A CUSTOMER SERVICE STRATEGY

A retailer must make the following vital decisions.

 What level of customer service is proper to complement a firm’s image?

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 Should there be a choice of customer services?
 Should customer services be free?
 How can customer services be terminated?

Customer satisfaction

occurs when the value and customer service provided through a retailing experience meet or exceed
consumer expectations. If the expectations of value and customer service are not met, the consumer
will be dissatisfied.

“Retail satisfaction consists of three categories

• shopping systems satisfaction, which includes availability and types of outlets;

• buying systems satisfaction, which includes selection and actual purchasing of products;

• consumer satisfaction, which is derived from the use of the product.

Turning around Weak Customer Service

 Long checkout lines

 Insufficient payment option
 Heavy reliance and on self service
 Inedaque store hours
 Limited return policy

Consumer loyalty (frequent shopper)

programs reward a retailer’s best customers, those with whom it wants long-lasting relationships.
These programs have been shown to enhance consumers’ purchase frequencies and volumes.

From the shopper’s perspective, there are five types of reward categories

1. Economic rewards include price reductions and purchase vouchers.

These rewards attract price-sensitive customers and induce them to buy more.

2. Hedonistic rewards

include things such as points that can be exchanged for spa services or participation in games or
sweepstakes.

3. Social-relational rewards

include things such as mailings about special events or the right to use special waiting areas at airports.

4. Informational rewards

include things such as personalized beauty advice or information on new goods or services.

5. Functional rewards

include things such as access to priority checkout counters or home delivery. Consumers who want to
reduce the time they spend shopping will value these most.

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These are the ramifications for retailers: සිල්ලර මවමළන්දන් සඳහා වන ප්රතිවිපාක මම්වා ය:

The nature of a given value delivery system must be related to target market expectations.

Channel member costs and functions are influenced by each party’s role. Long-term cooperation and
two-way information flows foster efficiency.

Non store retailing (such as mail order, phone, and Web transactions) requires a different delivery
system than store retailing.

A value delivery system is as good as its weakest link. No matter how well a retailer performs its
activities, it will still have unhappy shoppers if suppliers deliver late or do not honor warranties.

Elements Contributing to Effective Channel Relationships

Trust, reliability, fairness, communication, proper lead time

There are three basic kinds of service retailing:

 Rented-goods services, whereby consumers lease and use goods for specified periods of time.

Examples are Hertz car rentals, carpet cleaner machine rentals from a supermarket, and video rentals at
Redbox kiosks.

 Owned-goods services, whereby goods owned by consumers are repaired, improved, or

maintained.

Illustrations include watch repair, lawn care, and an annual air-conditioner tune-up.

 Nongoods services, whereby intangible personal services are offered to consumers who then
experience the services rather than possess them.

Some examples are accountants, stockbrokers, travel agents, real-estate brokers, and personal trainers.

Four unique aspects of service retailing impact relationship building and customer retention:

1. The intangibility of many services makes a consumer’s choice of competitive offerings more difficult
than with goods,

2. the service provider and his or her services are sometimes inseparable (thus localizing marketing
efforts),

3. The perishability විනාශ වීම of many services prevents storage and increases risks, and

4. The human nature involved in many services makes them more variable.

Selected Factors Affecting Consumer Perceptions of Service Retailing

 Friendliness of employee
 Qulity of service
 Consistency of service
 Social media
 Service benefits

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 Knowledge of employees
 Availability of desired service
 Ability to costumer ask questions

TECHNOLOGY AND RELATIONSHIPS IN RETAILING

Customer and Supplier Interactions

Technology is changing the nature of retailer–customer and retailer– supplier interactions. If properly
implemented, benefits accrue to all parties. If not, there are negative ramifications.

Customer and Supplier Interactions

There is a downside to scanning: the error rate. This can upset consumers, especially if they perceive
scanning as inaccurate. Yet, according to research on scanning, scanner errors in reading prices occur
very infrequently; although consumers believe most errors result in overcharges, overcharges and
undercharges are equally likely. One way to assure consumers is to display more information at the
point of purchase. ස්කෑන් කිරීම සඳහා අවාසියක් ඇත: රදෝෂ අනුපාතය. රමය පාරිරභෝගිකයින් කලබල විය හැක,
විරශ්ෂරයන්ම ඔවුන් ස්කෑන් කිරීම සාවද්ය රලස සලකන්රන් නම්. එරහත්, ස්කෑන් කිරීම පිළිබඳ පරයය්ෂණවලට
අනුව, කියවීරම් මිරලහි ස්කෑනය රදෝෂ ඉතා කලාතුරකින් සිදු රේ; රබාරහෝ වැරදි නිසා අධික ආරරෝපණ ඇති වන
බව පාරිරභෝගිකයින් විශ්වාස කළද, අධික ගාස්තු සහ අඩු ගාස්තු සමාන විය හැකිය. පාරිරභෝගිකයින්ට සහතික විය
හැකි එක් ක්රමයක් නම් මිලදී ගන්නා ස්ථානරේ වැඩි රතාරතුරු ප්රදශයනය කිරීමයි.

Ethical challenges fall into three interconnected categories:

• Ethics relates to the retailer’s moral principles and values.

• Social responsibility involves acts benefiting society.

• Consumerism entails protecting consumer rights.

Ethics

In dealing with their constituencies (customers, the general public, employees, suppliers, competitors,
and others), retailers have a moral obligation to act ethically.

Most observers would agree that practices such as these are unethical

 Raising prices on scarce products after a natural disaster such as a hurricane.

 Not having adequate merchandise on hand when a sale is advertised.
 Selling alcohol and tobacco products to children.
 Defaming competitors.
 Selling refurbished merchandise as new.
 Selling information from a customer database to other parties

Social Responsibility

• A retailer exhibiting social responsibility acts in the best interests of society—as well as itself.

Consumerism

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• Consumerism involves the activities of government, business, and other organizations to protect
people from practices infringing on their rights as consumers. These actions recognize that consumers
have basic rights that should be safeguarded.

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