CHAPTER 15 RETAIL COMMUNICATION MIX ANNOTATED OUTLINE INSTRUCTOR NOTES Introduction • The communication program informs customers about the retailer as well as the merchandise and services it offers and plays a role in developing repeat visits and customer loyalty. • Communication programs can have both long-term and short-term effects on a retailer's business. From a long- term perspective, communications programs can be used to create and maintain a strong, differentiated image of the retailer and its store brands. This image develops customer loyalty and creates a strategic advantage. • Retailers frequently use communication programs to realize the short-term objective of increasing sales during a specified time period. Retailers often have sales during which some or all merchandise is priced at a discount for a short time. • Integrated Marketing Communication- involves integrating a variety of communication elements to deliver a comprehensive, consistent message to all customers over time, across all elements of a retail mix and across all delivery channels. II. Methods for Communicating with Customers/ Traditional Media Elements • The classification of communication methods is based on whether the methods are impersonal or personal and paid or unpaid. See PPT 15-5 Ask students why retailers want to communicate with their customers? What do they want to tell them? A. Paid Impersonal Communications • Advertising, sales promotions, store atmosphere, and websites are examples of paid impersonal communications. Ask students to describe the different paid, personal communication they have received from retailers. Which form of paid, personal communication is most effective for communicating information about a sale? Information about the quality of merchandising carried in the store? Why? 1. Advertising • Advertising is a form of paid communication to customers using impersonal mass media such as newspapers, TV, radio, direct mail, and the Internet. See PPT 15-6 and 15-7 Discuss with students the benefits and drawbacks of different types of advertising. For example, why might a retailer choose to run a newspaper advertisement versus a television advertisement? 2. Sales Promotion • Sales promotions are paid impersonal communication activities that offer extra value and incentives to customers to visit a store and/or purchase merchandise during a specific period of time. • The most common sales promotion is a sale. Other sales promotions involve special events, in-store demonstrations, coupons, and contests. • Special events are sales promotion programs comprising a number of techniques built around a common theme, such as a holiday or sporting event. • Some retailers use in-store demonstrations and offer free samples of merchandise to build excitement in the store and stimulate purchases. • Contests are promotional games of skill or chance. They differ from price-off sales in that (1) only a few customers See PPT 15-8 and 15-9 Ask students how they respond to sales promotions? Do sales promotions generate excitement? Do they expect certain retailers to engage in more sales promotion activities than other? Consider Victoria’s Secret. Why does Victoria’s Secret only offer two sales per year when companies like Macy’s offer hundreds? receive rewards and (2) winners are often determined by luck. • Coupons offer a discount on the price of specific items when they're purchased at a store. • Although sales promotions are effective at generating short-term interest among customers, they are not very useful for building long-term loyalty. 3. Store Atmosphere • The store itself provides paid impersonal communications to its customers. Store atmosphere is the combination of the store's physical characteristics, such as architecture, layout, signs and displays, color, lighting, temperature, sounds, and smells, which together create an image in the customer's mind. 4. Web Site • Retailers use their websites to build their brand image; inform customers of store locations, special events, and the availability of merchandise in local stores; and sell merchandise and services. 5. Community Building • Many retailers offer Web sites devoted to community building. They offer an opportunity for customers with similar interests to learn about products and services that support their hobbies and share information with others. The community helps to reinforce the retailer’s image. B. Paid Personal Communications • Paid forms of personal communication are growing as new technologies emerge. All of the personal communication techniques described below can be tailored to individual customers through face-to-face exchange or CRM systems. 1. Retail Salespeople • Retail salespeople are the primary vehicle for providing paid personal communications to customers. • Personal selling is a communication process in which salespeople assist customers in satisfying their needs through face-to-face exchanges of information. Communicating through salespeople is much more expensive than communicating through advertising. Ask students why department stores place more emphasis on paid personal versus impersonal communications. Why do supermarkets do just the opposite? See PPT 15-10. 2. Email • E-mail is another paid personal communication vehicle that sends messages over the Internet. Retailers use e-mail to inform customers of new merchandise, confirm the receipt of an order, and indicate when an order has been shipped. See PPT 15-14 Compare Email communication with Direct Mail. 3. Direct Mail • Direct mail refers to any brochure, catalog, advertisement, or other printed material delivered directly to the consumer. • These communications are frequently targeted to customer groups on the basis of data collected through CRM systems. • Retailers may also purchase a wide variety of lists to help them target customers with specific demographics profiles, interests, and lifestyles. • Although relatively expensive on a per customer basis because of printing and mail costs, along with a relatively low response rate, directly mail is extensively used by many retailers because many consumers respond favorably to these personal messages. See PPT 15-14 4. M-Commerce • As both technology and consumers become more sophisticated, retailers are beginning to add m-commerce (mobile commerce) to their communications programs. • This involves communicating with consumers through their wireless handheld devices like cell phones and PDAs. See PPT 15-13 C. Unpaid Impersonal Communications • The primary method for getting unpaid impersonal communication is publicity. • Publicity is communications through significant unpaid presentations about the retailer (usually a news story) in impersonal media. • Publicity is often used to communicate with employees and investors. Ask students to describe some instances of retailers communicating through publicity. Publicity is cheap. Why don't retailers rely on publicity rather than advertising? D. Unpaid Personal Communications • Finally, retailers communicate with their customers at no cost through word of mouth (communication between people about a retailer). • Word of mouth communications are very effective, but retailers encounter difficulties in harnessing that power in a disciplined, strategic way. • A relative new form of WOM communications is called social shopping, where consumers use the Internet to shop by engaging with other product users, family and friends on product reviews, preferences and opinions. • Many retailers encourage customers to post reviews of products they have bought or used. Research has shown this technique to increase customer Ask students if they have communicated with other students about retail stores. Why did they talk about the retailer? What did they say? Note word-of-mouth is usually about a bad experience, not a good experience. How can retailers stimulate favorable word-of-mouth? loyalty, providing a competitive advantage for sites that use them. E. Strengths and Weaknesses of Communication Methods • Communications methods can be compared in terms of control, flexibility, credibility, and cost. 1. Control • Retailers have more control when using paid versus unpaid methods. • When using advertising, sales promotions, websites, e-mail, and store atmosphere, retailers determine the message's content, and for advertising, e-mail, M-commerce, and sales promotions, they control the time of its delivery. • Retailers have less control over personal selling than other paid communication methods. • Retailers have very little control over the content or timing of publicity and word-of-mouth communications. Ask students about the type of communication over which retailers have the most control. How can retailers control unpaid communications? Mergers, acquisitions, store openings and closing, and financial performance generate publicity. Discuss a recent event and ask students whether or not retailer received benefited from the publicity. 2. Flexibility • Personal selling is the most flexible communication method because salespeople can talk with each customer, discover their specific needs, and develop unique presentations for them. Ask students which form is the most flexible in terms of tailoring the message to the specific customer. 3. Credibility • Because publicity and word of mouth are communicated by independent sources, the information is usually more credible than information in paid communication sources. Ask students which form of communications do customers find most credible -- the one in which they believe the information presented. Have students heard communications about a retailer they did not believe? Why? 4. Cost • Publicity and word of mouth are classified as unpaid communication Ask students if word-of-mouth and publicity are really free? methods, but retailers do incur costs to stimulate them. . • Paid impersonal communications often are economical. • While maintaining a website on a server is relatively inexpensive, it is costly to design, continuously update the site, and promote the site to attract visitors, however, emails and M- commerce can be sent to customers at low cost. • Typically, advertising in mass media advertising is most effective at building awareness. Websites, direct mail, and newspaper advertising are effective for conveying information about a retailer's offerings and prices. Personal selling and sales promotion are most effective at persuading customers to purchase merchandise. Mass media and magazine advertising, publicity, websites, and store atmosphere are most cost-effective at building the retailer's brand image and encouraging repeat purchases and store loyalty. II. Using Communication Programs to Develop Brand Images and Build Customer Loyalty • A brand is a 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 the offerings of competitors. See PPT 15-16 A. Value of Brand Image • Brands provide value to both customers and retailers. • Brands convey information to consumers about the nature of the shopping experience – the retailer's mix – they will encounter when patronizing a retailer. See PPT 15-17 Ask students how brands help them make decisions about products and retailers. One way to analyze the impact of brands on consumer decisions is to consider their decision to pull off an Interstate highway • They also affect the customers' confidence in decisions made to buy merchandise from a retailer. • Finally, brands can enhance the customers' satisfaction with the merchandise and services they buy. • The value that brand image offers retailers is referred to as brand equity. Strong brand names can affect the customers' decision-making process, motivate repeat visits and purchases, and build brand loyalty. • In addition, strong brand names enable retailers to charge higher prices and lower their marketing costs. • Customer loyalty to brands arises from heightened awareness of the brand and the emotional ties toward it. • A strong brand image enables retailers to increase their margins. When retailers have high customer loyalty, they can engage in premium pricing and reduce their reliance on price promotions to attract customers. Brands with weaker images are forced to offer low prices and frequent sales to maintain their market share. • Finally, retailers with strong brand names can leverage their brand to successfully introduce new retail concepts with only a limited amount of marketing effort. and stop to eat at a McDonald's versus some unknown local brand restaurant. B. Building Brand Equity • The activities that a retailer needs to undertake to build the brand equity for its firm or its private-label merchandise are (1) create a high level of brand awareness, (2) develop favorable associations with the brand name, and (3) consistently reinforce the image of the brand. See PPT 15-18 1. Brand Awareness • Brand awareness is the ability of a potential customer to recognize or recall that the brand name is a type of retailer or product/service. Thus brand awareness is the strength of the link between the brand name and the type of merchandise or service in the minds of customers. • Aided recall is when consumers indicate they know the brand when the name is presented to them. • Top-of-mind awareness, the highest level of awareness, arises when consumers mention a brand name first when they are asked about the type of retailer, a merchandise category, or a type of service. • Retailers can build top-of-mind awareness by having memorable names; repeatedly exposing their name to customers through advertising, locations, and sponsorships; and using memorable symbols. • Symbols involve visual images that typically are more easily recalled than words or phrases and thus are useful for building brand awareness. See PPT 15-19 The awareness and associations evoked by the brand in consumers' minds can also be discussed using positioning concepts discussed in Chapter 5. For a hypothetical positioning diagram for women's clothing retailers, draw two separate axis -- fashion versus traditional and high/low service. Ask students to position the leading regional department store, Lerner's, The Gap, The Limited, Sears, K mart, Brooks Brothers, and JCPenney for women's clothing on the diagram. Discuss the various awareness and associations evoked by each retailer. 2. Associations • Brand associations are anything linked to or connected with the brand name in a consumers' memory. • Some common associations that retailers develop with their brand name are (1) merchandise category, (2) price/quality, (3) specific attribute or benefit, and (4) lifestyle or activity. • The brand image is a set of associations that are usually organized around some meaningful themes, such as merchandise category, price/quality, specific attribute or benefit, specific lifestyle or activity. 3. Consistent Reinforcement • The retailer's brand image is developed and maintained through the retailer's communication program as well as other elements of the communication mix, such as merchandise assortment and pricing, the design of its stores and website, and the customer service it offers. • Providing a consistent image can be challenging for multichannel retailers. • To develop a strong set of associations and a clearly defined brand image, retailers need to be consistent in portraying the same message to customers over time and across all elements of its retail mix. • Retailers need to develop an integrated marketing communication program – a program that integrates all of the communication elements to deliver a comprehensive, consistent message. Without this coordination, communication methods might work at cross-purposes. See PPT 15-20 C. Extending the Brand Name • Retailers can leverage their brand names to support their growth strategies. • There are pluses and minuses to extending a brand name to a new concept. An important benefit of extending the brand name is that minimal communication expenses are needed to create awareness and a brand image for the new concept. Customers will quickly transfer the original brand's awareness and associations to the new concept. However, in some cases, the retailer might not want to To illustrate the pluses and minuses of extending the brand name, give students examples of some well-known retailers, such as Wal-Mart, Circuit City, JCPenney, Kroger's, Blockbuster, and query them as to credibility of extending these brands to different hypothetical merchandise categories and retail store concepts. have the original brand's associations connected with the new concept. • These issues also arise as a retailer expands internationally. Associations with the retailer's brands that are valued in one country may not be valued in another. • Retailers communicate with customers using a mix of methods such as: advertising, sales promotion, publicity, store atmosphere and visual merchandising, and personal selling. • In large retail firms, the communication mix elements are managed by the firm’s marketing or advertising department and the buying organization. III. Planning The Retail Communication Program • The four steps in developing and implementing the retail promotion program are setting objectives, determining a budget, allocating the budget, and implementing and evaluating the mix. See PPT 15-20 Review steps in developing a communication program. A. Establish Objectives • Retailers establish objectives for promoting a program to provide (1) direction for people implementing the program and (2) a basis for evaluating its effectiveness. • Some promotion programs have a long- term objective, such as creating or altering a retailer's brand image. Other communication programs focus on improving short-term performance, such as increasing store traffic on weekends. See PPT 15-22 Discuss the goals for a communications program. 1. Communication Objectives • Retailers often use communications objectives rather than sales objectives Review the communication objectives. Ask students what communication problem is to plan and evaluate their communication programs. • Communication objectives are specific goals related to the retail promotion mix's effect on the customer's decision- making process. • To effectively implement and evaluate a communication program, objectives must be clearly stated in quantitative terms. • The target audience for the communication mix needs to be defined along with the degree of change expected and the time period over which the change will be realized. • Even though vendors and retailers have different goals, they frequently work together to develop mutually beneficial outcomes. suggested by this pattern. What would a pattern look like if customers had little knowledge of the store? If customer only shopped during a sale? If customer found the location very inconvenient? Illustrate which methods are more effective at different stages of the decision making process. Why is advertising better than salespeople for creating awareness? Why are salespeople better than advertising for changing attitudes? How would an ad, directed at building awareness, differ from one directed at changing an attitude? Describe the differences between the objectives and nature of the communications programs developed by retailers and vendors. B. Determine The Communication Budget • The second step in developing a retail promotion program is determining a budget. • The economically correct method for setting the promotion budget is marginal analysis. See PPT 15-23 Reviews the methods for setting a budget and illustrate the difference in the logic between marginal analysis and the rules of thumb methods. 1. Marginal Analysis Method • Marginal analysis is based on the economic principle that firms should increase promotion expenditures so long as each additional dollar spent generates more than a dollar of additional contribution. • In most cases, however, it is very hard to do a marginal analysis because managers do not know the relationship between promotion expenses and sales. • Sometimes, retailers do experiments to get a better idea of this relationship. See PPT 15-24 Ask students where the estimates come from. Indicate they are judgments that the manager has now stated explicitly. 2. Objective-and-Task Method • The objective-and-task method determines the budget required to undertake specific tasks for accomplishing communication objectives. • The retailer first establishes a set of communication objectives. Then the necessary tasks and their costs are determined. The sum total of all costs incurred to undertake the tasks is the communication budget. See PPT 15-25 As in the marginal analysis, the relationship between the expenditures and the objective realized is based on the manager's judgment. The method simply quantifies the managers' judgment. By quantifying the judgments, people have a basis for discussing them. 3. Rule-of-thumb Methods • In the previous two methods the communication budget is set by estimating communication activities' effects on the firm's future sales or communication objectives. • The rule-of-thumb methods use the opposite logic by using past sales and communication activity to determine the present communication budget. See PPT 15-27 Ask students why the marginal analysis and objective-and-task methods are more appropriate than the rules of thumb for setting advertising budgets? If the rules of thumb are not good methods, why do retailers use them so frequently? a. Affordable Method • When using the affordable budgeting method, retailers first forecast their sales and expenses excluding communication expenses during the budgeting period. The difference between the forecast sales and expenses plus desired profit is then budgeted for the communication mix. • The major problem with the affordable method is that it assumes that promotion expenses do not stimulate sales and profit. b. Percentage-of-sales Method • The percentage-of-sales method sets the communication budget as a fixed percentage of forecast sales. Retailers use this method to determine the promotion budget by forecasting sales The typical advertising expenditures for food stores are 1.4% of sales. Ask students whether they would expect the typical expenditures for an everyday low pricing during the budget period and using a predetermined percentage to set the budget. • The problem with the percentage-of- sales method is that it assumes the same percentage used in the past, or by competitors, is still appropriate for the retailer. • One advantage of both the percentage- of-sales method and the affordable method for determining a communication budget is that the retailer will not spend beyond its means. supermarket to be above or below 1.4%. Why? What about a convenience store? c. Competitive Parity Method • Under the competitive parity method, the communication budget is set so that the retailer's share of communication expenses equals its share of market. • Like other rule-of-thumb methods, the competitive parity method does not allow retailers to exploit the unique opportunities or problems they confront in a market. C. Allocation of the Promotional Budget • After determining the size of the communication 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. • Retailers often can realize the same objectives by reducing the size of the communication budget, but allocating the budget more effectively. • An easy way to make such allocation decisions is just to spend about the See PPT 15-30 same in each geographic region or for each merchandise category. • Allocation decisions, like budget-setting decisions, should use the principles of marginal analysis. The retailer should allocate the budget to areas that will yield the greatest return. This principle for allocating a budget is sometimes referred to as the high-assay principle. D. Planning, Implementing, and Evaluating Communication Programs – Three Illustrations • The final two stages in developing a retail communication program are implementation and evaluation. 1. Advertising Campaign • A specialty import home furnishing store decided to concentrate its limited budget on a specific segment and use highly distinctive copy and art in advertising. • The advertising program emphasized the store's distinctive image. The newspaper was the major vehicle. • An inexpensive tracking study was used to measure the campaign's effectiveness. Review the communication program developed by the furniture company in the text and how the retailer evaluated the effectiveness of the campaign. 2. Sales Promotion Opportunity • Many sales promotion opportunities undertaken by retailers are initiated by vendors. • To evaluate a trade promotion, the retailer should consider (1) the realized margin from the promotion, (2) the cost of the additional inventory carried due to buying more than the normal amount, (3) the potential increase in sales from the promoted merchandise, (4) the potential loss suffered when customers switch to the promoted Discuss the factors a retailer needs to consider when evaluating a promotion. Discuss how each factor has either a positive or negative effect on the retailer's profits. merchandise from more profitable unpromoted brands, and (5) the additional sales made to customers attracted to the store by the promotion. 3. Special Promotion Using a CRM/Campaign Management Tool • A national retailer used a CRM/Campaign management system to plan, design, evaluate, and implement a special promotion. • Direct-mail and e-mail communication channels were used along with supporting in-store promotions and existing advertising. • A what-if analysis was conducted and the campaign plan was built with all the details and responsibilities of each department. • The action plan included all the required steps in the campaign process, along with costs, dependencies, and deadlines on the marketing production schedule. • The successful campaign was then templated for future use. Management was able to optimize resources and manage deadlines and deliverables, thus increasing productivity, efficiency, and ROI. IV. Summary • A communication program can be designed to achieve a variety of objectives for the retailer such as building brand image, increasing sales and store traffic, providing information about the retailer’s location and offerings, and announcing special activities. • Retailers communicate with customers through advertising, sales promotions, store atmosphere, Web sites, salespeople, email, direct mail, M- commerce, community building, publicity and word-of-mouth. • These elements in the communication mix must be coordinated so customers have a clear, distinct image of the retailer and are not confused by conflicting information. ANSWERS TO “GET OUT AND DO ITS” 2. Go to the homepage for BrandZ at http://www.brandz.com/output and click on the Retail Report. Based on the report, list the top 20 global retail brands. In two or three paragraphs describe what makes a strong retail brand. How were brand equity and financial performance used to measure brand value for these retailers? Here are the top 25 brands from the web page: 3. Retailers and manufacturers deliver coupons through the Internet in addition to mail or in inserts. Go to retailmenot.com for coupons offered over the Internet. How does this coupon distribution system compare with the other two distribution systems? Students should consider push vs. pull communication; reaching a wide target audience; and informing, reminding and persuading customers with a consistent message no matter which media are used. Websites like retailmenot.com compile coupons from multiple retailers into one place making the search for deals easier for consumers. For retailers, using retailmenot.com might get the retailer’s coupon in front of a customer that might not traditionally search for the retailer’s coupons. However, using retailmenot.com also allows customers to view coupons of competing retailers. 4. Trader Joe’s is a gourmet grocery store offering items such as health foods, organic produce, and nutritional supplements. The company has about 400 stores in 37 states where they offer more than 2,000 private-label products. Go to www.traderjoes.com and see how the firm uses its Internet site to promote its retail stores and merchandise. Why does this retailer include recipes and a seasonal guide on its web site? Does the information provided on the web page reinforce the store’s upscale grocery image? Explain why or why not. The web site serves as a newsletter to increase store awareness, describe new products and seasonal merchandise, and provide health information. All of this information is consistent with the store image and atmosphere. The store has the look and feel of a neighborhood grocer that you know and trust. Trader Joe's does not offer a lot of branded items. Most products are the Trader Joe's private label. The employees wear Hawaiian shirt to reflect that shopping at Trader Joe’s will be a fun and unusual experience. 5. Go to the Social Media site for a retailer that you have shopped with during the last few weeks. How was social media used as an element in the retailer’s communication program? What audience is being reached with social media? Is the social media message consistent or inconsistent with other communication elements? Is this a strong or weak strategy? Please explain. Students’ responses here will vary. The population using social medial is growing, but they do need access to recent technology. Some will say that social media should be different than traditional forms of advertising to reach different audiences. Others will say that the message should be consistent so that consumers receive a clear message. A Social Media “How To” for Retailers from Nielsen Media is helpful for a full discussion. http://blog.nielsen.com Summary of this report: As social media continues its meteoric ascent, newly empowered consumers wield more control than ever before. Although retail sales are dominated by brick and mortar stores, the influence of the Internet on offline purchases is becoming increasingly important. Retailers must listen to and engage their customers through social media by participating and encouraging conversations. The end result will improve customer service and will help turn loyal customers into passionate advocates. 6. Go to the homepage for Target’s Pressroom at http://pressroom.target.com/pr/news/news.aspx. How does this retailer use Public Relations to communicate with investors and customers? Is this an effective communication tool for this retailer? Provide support for your response. Target includes information about new stores, corporate information, merchandise, community giving, etc. in their online press room. This is an effective communication tool to inform a wide variety of stakeholders such as consumers, investors, employees, etc. Here are examples of recent press releases: November 06, 2013 Target to Close Store in Chula Vista, Calif. November 06, 2013 Target to Close Store in Chandler, Ariz. November 06, 2013 Target to Close Store in Morrow, Ga. November 05, 2013 Target to Close Store in Leesburg, Fla. November 04, 2013 Target Kicks Off First Holiday Season in Canada 7. Go to www.facebook.com/business to see how to build pages, ads, and sponsored stories, as well as how to take advantage of mobile applications. What are some of the steps that Facebook suggests a person consider when marketing using ads? Facebook works with companies to help them build successful campaigns through its platform. Facebook uses a four-step strategy to help businesses achieve success. The steps include: 1) Building your page. 2) Connecting with people. 3) Engaging your audience. 4) Influencing friends of fans. ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS 1. How do brands benefit consumers? Retailers? In a competitive marketplace with numerous messages, brands are crucial for identifying, differentiating, and recognizing individual offerings or retailers. For the consumers as well as retailers, brands represent evaluations, experiences and meanings associated with a product's consumption or retail mix. Brands convey information to consumers about the nature of the shopping experience – the retailer's mix – they will encounter when patronizing a retailer. Consumers can invoke their past evaluations and experiences as well as what they perceive the brand to represent in terms of quality, etc. These affect consumers' confidence in their decisions to buy merchandise from a retailer. Moreover, given the quality assurance and other signals associated with the brand, consumers' can feel more satisfied with the merchandise and service they buy. For retailers, brand image or brand equity helps affecting consumer decision-making processes and helps them motivate consumers to make repeat visits and purchases. Retailers could leverage their brand image to create emotional ties between consumers and brands and thus, build brand loyalty. Strong brand names help retailers differentiate their offerings from competition and also help them charge higher prices, while lowering the marketing costs associated with promotion and selling. Strong brand image helps retailers increase their margins and reduce their reliance on price promotions to attract consumers. Moreover, once a brand reputation is established, retailers can successfully introduce new retail concepts with limited marketing effort. 2. What are the positive and negative aspects of direct marketing from the customer’s perspective? Positives - Can be delivered many ways - Can identify and track consumers and their responses - Understand customers’ purchases better - Able to carefully target customers - Multi-channel personalized messages - Can inform customers of new merchandise and special promotions, confirm the receipt of an order, and indicate when an order has been shipped. Negatives - Can be ignored - Expensive on a per customer basis - Relatively low response rate For more information you can have students explore the homepage of the Direct Marketing Association: http://www.the-dma.org/index.php 3. What types of sales promotions have been successful with you as a consumer? Which ones have not been successful? Explain your responses. Students’ answers will vary. Most students will likely not respond to traditional ROP coupons. However, many students will respond to coupons delivered over email or through mobile applications. Students might also reflect on how product placement impacts them. Does it seem authentic to them or is it too transparent? 4. What factors should be considered in dividing up the advertising budget among a store's different merchandise areas? Which of the following should receive the highest advertising budget: staple, fad, fashion or seasonal merchandise? Why? The basic principle that should be considered in allocating the advertising budget across merchandise categories is the marginal return -- the greatest bang per buck. The question that needs to be answered is: Which category will generate the most sales and profits from an additional dollar of advertising? Staple items are probably not good candidates for advertising expenditures. This merchandise is frequently bought on a regular basis, needed. Consumers usually are not stimulated to visit a department store in response to ads for this merchandise. On the other hand, fashions are good candidates for high advertising expenditures. Consumers will be motivated to visit a department by ads for this type of merchandise. They typically buy this type of merchandise in a department store and visit department stores to see what the new fashions are. Since timing is such a key issue in selling fad merchandise, investments in advertising should happen only briefly, when they buyer predicts the fad to be catching consumers’ eyes. Seasonal merchandise should also be advertised early in season when the timing is right and consumers’ interests are high for merchandise related to the season. 5. Outline some elements in a communication program to achieve the following objectives: (a) Increase store loyalty by 20 percent. (b) Build awareness of the store by 10 percent. (c) Develop an image as a low-price retailer. How would you determine whether the communication program met each of these objectives? Objective Approach for Achieving Objective Technique for Measuring Objective Increase store loyalty by 20%. Frequent shopper program where customer earn points for making more purchases. Introduce private label merchandise only available at store. Telephone or mail survey taken before and after new program asking customers their degree of loyalty, percent of expenses in category bought from store, and measure of repeat purchases. Build awareness of the store by 10%. Install a large sign in front of store. Hold an event that generates publicity. Radio or bill board advertising emphasizing the name and location of the store. Use social media and guerilla marketing strategies to generate excitement about the brand. Conduct a pre and post survey to assess aided versus unaided recall. Measure site visit increases before and after communication campaign. Measure number of social media likes, hits, and views after campaign. Develop an image as a low-price retailer. Undertake image advertising on TV or in magazines . Use sales promotion strategies like sales and coupons to create awareness and build excitement. Use keywords to increase visibility on web searches. Use a survey to evaluate how customers perceive the retailer. 6. A retailer plans to open a new store near a university. It will specialize in collegiate merchandise such as apparel, accessories, and school supplies. Consider the pros and cons of each of the following media: TV, radio, city newspaper, university newspaper, local magazine, web site, blog and sponsoring an event for this retailer to capture the university market. While student responses will vary, some possible ideas are: The new retailer may want to use newspapers to reach this market. Student newspapers usually have a high student readership and will probably be an excellent choice. The local newspaper may also be a good choice, since the professors, staff, and some of the students will probably read it. Magazines associated with the university may also be a good place to advertise. Special magazines devoted to alumni or athletic events probably will help to focus in on the university market. A direct mailing may be good especially if the store can take advantage of a free campus mail system. Even if a free campus mail system is not available, using the student directory may be a good way to develop a mailing list that specifically targets this population. Radio, especially stations that carry formats popular with college students may be appropriate. If there is a university station, the store should look into purchasing advertising time, since the university students probably constitute the majority of the audience, and the time on these stations is usually relatively inexpensive. In terms of television, if the university has its own station, it may be a good idea to investigate purchasing time. Unless a specific television event related to the university is shown (such as an athletic event) television is probably not the best way to reach this market. Finally, outdoor advertising such as signs and posters around campus may be effective. 7. Why do some online retailers include editorial and customer reviews along with product information on their websites? Explain how this may influence the consumer’s buying behavior. Many retailers offer websites to foster community building efforts. They offer an opportunity for customers with similar interests to learn about products and services that support their hobbies and share information with others. The community helps to reinforce the retailer’s image. Retailers will hear from customers about what is working and what can be improved. This feedback is valuable. Also the retailer collects e-mail addresses and can stay in contact with customers through reviews. Future customers will read these reviews as a “trusted friend” as part of the information search in the buying process. These websites may also be used for social shopping, where consumers use the Internet to shop by engaging with other product users, family and friends on product reviews, preferences and opinions. Many retailers encourage customers to post reviews of products they have bought or used. Research has shown this technique to increase customer loyalty, providing a competitive advantage for sites that use them. 8. Assume you work for a large consumer-packaged goods firm that has learned its latest line of snack foods is moving very slowly off store shelves. Recommend a strategy for listening to what consumers are saying on blogs, review sites, and the firm’s website. Describe how your strategy might provide insights into consumers’ sentiments about the new product line. Customers are more willing to offer reviews on a product online when the context is seemingly anonymous. This is a great opportunity for firms to learn the “real” reason why customers are buying or not buying a product. One strategy for dealing with this is to acknowledge customers’ reviews online. Many retailers often comment directly to customer reviews. In addition, retailers can use the information to tweak the product to respond to customer complaints or reviews. In many instances, this builds trust with customers because it indicates to them that retailers are really listening to their feedback. 9. As an intern for Dunkin’ Donuts, you have been asked to develop a social media campaign for a new glazed muffin. The objective of the campaign is to increase awareness and trail of the new line of muffins. How would you go about putting such a campaign together? Students’ answers will vary. There are several ways to increase awareness and trial of the new muffin. Some suggestions include: 1) Free samples- One tried and true way of selling a new food product is to offer free samples. This allows people to taste the product and decide if they want to buy an entire muffin. 2) Coupons- Coupons that offer a free muffin with the purchase of another item often drive traffic to the stores and encourage people to try the muffin along with the purchase of an item that they know they like. 3) Advertising- When companies like Dunkin’ Donuts introduce a new product, it is often accompanied by advertising, especially television commercials. Solution Manual for Retailing Management Michael Levy, Barton A. Weitz, Dhruv Grewal 9780078028991
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