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Retail Communication Mix

McGraw-Hill/Irwin Retailing Management, 7/e

2008 by The McGraw-Hill Companies, All rights reserved.

Merchandise Management

Managing Merchandise Assortments Chapter 12 Retail Communication Mix Chapter 16

Buying Merchandise Chapter 14

Merchandise Planning Systems Chapter 13

Retail Pricing
Chapter 15
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Questions
What can retailers build brand equity for their stores and their private-label merchandise? How are retailers using new approaches to communicate with their customers? What are the strengths and weaknesses of the different methods for communicating with customers? Why do retailers need to have an integrated marketing communication program? What steps are involved in developing a communication program? How do retailers establish a communication budget? How can retailers use the different elements in a communication mix to alter customers decision-making processes?

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Objectives of Communication Program


Long-term Build Brand (retailers name) Image Create Customer Loyalty

Short-term Increase Traffic Increase Sales

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Brands
Distinguishing name or symbol, such as a logo, that identifies the products or services offered by a seller and differentiates those products and services from those offered by competitors

The McGraw-Hill Companies, Inc./John Flournoy, photographer The McGraw-Hill Companies, Inc./Bob Coyle, photographer

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Value of Brand Image

Value to Retailers (Brand Equity)


Attract Customers Build Loyalty Higher Prices Leading to Higher Gross Margin Reduced Promotional Expenses Facilitates Entry into New Markets Gap GapKids

Value to Customers
Promises Consistent Quality Simplifies Buying Process Reduces Time and Effort Searching for Information About Merchandise/Retailer

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Building Brand Equity


Create a High Level of Brand Awareness Develop Favorable Associations

Brand Equity

Consistent Reinforcement

Create Emotional Connections


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Tar-Zhay

The McGraw-Hill Companies, Inc./Lars Niki, photographer

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Apple

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Benefits of High Brand Awareness

Aided Recall
Top Mind Awareness

Stimulates Visits to Retailer

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Creating Brand Awareness


Memorable Name
Best Buy

Repeated Exposure

Home Depot

Top-of-mind Brand Awareness

Starbucks

Symbols

Macys

Event Sponsorship
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Retailers Develop Associations with their Brand Name


Brand name is a set of associations that are usually organized around some meaningful themes Brand associations: anything linked to or connected with the brand name in a consumers memory

Merchandise Category Office Depot office supplies Price/quality Neiman Marcus , high fashion merchandise Specific attribute or benefit 7-Eleven convenience Lifestyle or activity Electronic Boutique computer games
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McDonalds Brand Associations


Golden Arches Big Mac

Fast Food

McDonalds
French Fries Clean
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Ronald McDonald

L.L. Bean

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L.L. Beans Brand Associations


New England Practical Friendly

L.L. Bean
Expertise
Outdoors
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Honest

Wal-Mart Associations

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Target Associations

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Consistent Reinforcement
The retailers brand image is developed and maintained through the retailers communication mix
Retail Communication Mix

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Consistent Reinforcement through Integrated Marketing Communication Program Integrated Marketing Communication Program A program that integrates all of the communication elements to deliver a comprehensive, consistent message Providing a consistent image can be challenging for multichannel retailers Need to consider the needs of all channels early in the planning of its communication program

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Integrated Marketing Communications


Present a Consistent Brand Image through all Communications with Customers

Store Design Advertising Web Site

Magalog
The McGraw-Hill Companies, Inc./Andrew Resek, photographer

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Brand Extensions
Gap GapKids and Old Navy Talbots Talbuts Mens Sears Sears Auto Centers and the Great Indoors Pottery Barn Pottery Barn Kids

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

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Extending Brand Name to a New Concept

Pluses Develop Awareness and Image Quickly Less Costs Needed to Promote Extension

Minuses Associations Might Not Be Compatible with Extension

Limited Victorias Secret Abercrombie & Fitch Hollister


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Communication Methods

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Paid Impersonal Communications


Advertising Sales promotions Special events, In-store demonstrations Games, sweepstakes and contests Coupons Boxes of KrustyOs cereal at a New York 7Store atmosphere Eleven stores, temporarily converted into a Website Kwik-E Mart, to promote the Simpson Movie. Community building

Jack Star/PhotoLink/Getty Images

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Store Atmosphere

The combination of the stores physical characteristics (architecture, layout, signs and displays, colors, lighting, temperature, sounds, smells) together create an image in the customers mind

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Mediacart
A shopping cart that delivers point-of-decision advertising Informs the customer about special deals as the customer passes them in the aisle Each video screen is embedded with an RFID chip that interacts with chips installed on store shelves Records shopping habits, dwell times, how shoppers travel through the store

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Community Building
Retailers Community Building Websites offer opportunities for customers with similar interests to learn about products and services that support their hobbies and share information with others

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Paid Personal Communication


Retail salespeople are primary vehicle for providing paid personal communication to customers.

Personal selling salespeople satisfy needs through face to face exchange of information

Email retailers inform customers of new merchandise, receipt of order or when order has been shipped Direct Mail M-Commerce (mobile commerce)

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Unpaid Impersonal Communication


Publicity is communication through significant unpaid presentations about the retailer, usually a news story, in impersonal media.

Newspaper TV coverage Macys Thanksgiving Day Parade

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PR
The Gap, Emporio Armani, and Apple are among several retailers selling red products, a portion of the proceeds go to Product RED, a charity to wipe out AIDS in Africa

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Unpaid Personal Communication


Word-of-mouth
Can be favorable Can be detrimental

Social Shopping

A communication strategy in which consumers use Internet to engage in the shopping process by exchanging preferences, thoughts, and opinions Product/service reviews
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Social Shopping

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Comparison of Communication Methods

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Planning the Retail Communication Program


Steps in Developing a Retail Communication Program

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Setting Objectives
Communication objectives:

Specific goals related to the retail communication mixs effect on the customers decision-making process Long-term: ex) creating or altering a retailers brand image Short-term: ex) increasing store traffic

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Communication Objectives & Stages in the Consumers Decision-Making Process

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Retail and Vendor Communication Programs


Vendor Retailer

Long-term objectives
Product focused

Short-term objectives
Category focused

National
Specific product

Local
Assortment of

merchandise

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Setting the Communication Budget


Marginal analysis Objective and task Rules of thumb - Affordable - Percent of sales - Competitive parity Sales Advertising Advertising Sales

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Setting the Communication Budget


Marginal Analysis Method

Based on the economic principle that firms should increase communication expenditures as long as each additional dollar spent generates more than a dollar of additional contribution Very hard to use because managers dont know the relationship between communication expenses and sales

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Marginal Analysis for Setting Communication Budget

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Objective-and-Task Method
Determines the budget required to undertake specific tasks to accomplish communication objectives

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Illustration of Objective and Task Method for Setting a Communication Budget

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Financial Implications of Increasing the Communication Budget

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Rule of Thumb Methods

Affordable Budgeting Method sets communication budget by determining what money is available after operating costs and profits are budgeted. Drawback: The affordable method assumes that the communication expenses dont stimulate sales and profits.

Percentage of Sales Method communication budget is set as a fixed percentage of forecasted sales.

Drawback: This method assumes the same percentage used in the past, or by competitors, is still appropriate for the retailer.

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Rule of Thumb Methods

Competitive Parity Method this communication budget is set so that the retailers share of communication expenses equals its share of the market. Drawback: This method (like the others) does not allow the retailer to exploit the unique opportunities or problems they confront in a market.

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Allocation of the Promotional Budget


The retailer decides how much of its budget to allocate to specific communication elements, merchandise categories, geographic regions, or long- and short-term objectives Budget allocation decision is more important budget amount decision

High-assay principle: The retailer allocate the budget to areas that will yield the greatest return
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