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 (retailer’s name) Image Create Customer Loyalty

Short-term Increase Traffic Increase Sales

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photographer 16-5 . Inc. Inc./John Flournoy. 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. photographer The McGraw-Hill Companies./Bob Coyle.Brands Distinguishing name or symbol. such as a logo.

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 16-6 .

Building Brand Equity Create a High Level of Brand Awareness Develop Favorable Associations Brand Equity Consistent Reinforcement Create Emotional Connections 16-7 .

/Lars Niki.Tar-Zhay The McGraw-Hill Companies. Inc. photographer 16-8 .

16-9 .

Apple 16-10 .

Benefits of High Brand Awareness Aided Recall Top Mind Awareness Stimulates Visits to Retailer 16-11 .

Creating Brand Awareness Memorable Name Best Buy Repeated Exposure Home Depot Top-of-mind Brand Awareness Starbuck’s Symbols Macy’s Event Sponsorship 16-12 .

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 consumer’s 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 16-13 .

McDonald’s Brand Associations Golden Arches Big Mac Fast Food McDonald’s French Fries Clean 16-14 Ronald McDonald .

Bean 16-15 .L.L.

L.L. Bean’s Brand Associations New England Practical Friendly L. Bean Expertise Outdoors 16-16 Honest .L.

Wal-Mart Associations 16-17 .

Target Associations 16-18 .

Consistent Reinforcement The retailer’s brand image is developed and maintained through the retailer’s communication mix Retail Communication Mix 16-19 .

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 16-20 .

Inc./Andrew Resek.Integrated Marketing Communications Present a Consistent Brand Image through all Communications with Customers •Store Design •Advertising •Web Site •Magalog The McGraw-Hill Companies. photographer 16-21 .

photographer 16-22 ./Andrew Resek.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.

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  Victoria’s Secret Abercrombie & Fitch  Hollister 16-23 .

Communication Methods 16-24 .

sweepstakes and contests Coupons Boxes of KrustyO’s cereal at a New York 7Store atmosphere Eleven stores. to promote the Simpson Movie. Community building Jack Star/PhotoLink/Getty Images 16-25 . In-store demonstrations Games.Paid Impersonal Communications ■ ■ ■ ■ ■ ■ ■ Advertising Sales promotions – Special events. temporarily converted into a Website Kwik-E Mart.

sounds. signs and displays. colors.Store Atmosphere The combination of the store’s physical characteristics (architecture. temperature. lighting. layout. smells) together create an image in the customers’ mind 16-26 .

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 16-27 .

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 16-28 .

 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) 16-29 .Paid Personal Communication ■ Retail salespeople are primary vehicle for providing paid personal communication to customers.

Unpaid Impersonal Communication Publicity is communication through significant unpaid presentations about the retailer. usually a news story. in impersonal media. • Newspaper • TV coverage • Macy’s Thanksgiving Day Parade 16-30 .

and Apple are among several retailers selling red products. Emporio Armani. a portion of the proceeds go to Product RED. a charity to wipe out AIDS in Africa 16-31 .PR The Gap.

and opinions Product/service reviews 16-32 . thoughts.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.

Social Shopping 16-33 .

Comparison of Communication Methods 16-34 .

Planning the Retail Communication Program Steps in Developing a Retail Communication Program 16-35 .

Setting Objectives ■ Communication objectives:    Specific goals related to the retail communication mix’s effect on the customer’s decision-making process Long-term: ex) creating or altering a retailer’s brand image Short-term: ex) increasing store traffic 16-36 .

Communication Objectives & Stages in the Consumers Decision-Making Process 16-37 .

Retail and Vendor Communication Programs Vendor Retailer • Long-term objectives • Product focused • Short-term objectives • Category focused • National • Specific product • Local • Assortment of merchandise 16-38 .

Percent of sales .Competitive parity Sales Advertising Advertising Sales 16-39 .Setting the Communication Budget • Marginal analysis • Objective and task • Rules of thumb .Affordable .

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 don’t know the relationship between communication expenses and sales 16-40 .

Marginal Analysis for Setting Communication Budget 16-41 .

Objective-and-Task Method ■ Determines the budget required to undertake specific tasks to accomplish communication objectives 16-42 .

Illustration of Objective and Task Method for Setting a Communication Budget 16-43 .

Financial Implications of Increasing the Communication Budget 16-44 .

16-45 . Drawback: This method assumes the same percentage used in the past. is still appropriate for the retailer. Drawback: The affordable method assumes that the communication expenses don’t stimulate sales and profits. or by competitors.Rule of Thumb Methods Affordable Budgeting Method – sets communication budget by determining what money is available after operating costs and profits are budgeted. Percentage of Sales Method – communication budget is set as a fixed percentage of forecasted sales.

16-46 . Drawback: This method (like the others) does not allow the retailer to exploit the unique opportunities or problems they confront in a market.Rule of Thumb Methods Competitive Parity Method – this communication budget is set so that the retailer’s share of communication expenses equals its share of the market.

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 16-47 . geographic regions. or long.Allocation of the Promotional Budget ■ The retailer decides how much of its budget to allocate to specific communication elements. merchandise categories.

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