MKT 122: RETAIL MANAGEMENT

SEMESTER II 2011/2012 LECTURER: DIANA GOBIN

Web, Nonstore-Based, and other forms of Nontraditional Retailing Retailers engage in non-store retailing when they use strategy mixes that are not store-based to reach consumers and complete transactions. It occurs via direct marketing, direct selling, and vending machines. Direct Marketing Direct marketing is a form of retailing in which a consumer is first exposed to a good or service through a non-personal medium and then orders by mail, phone, fax, or computer. Direct marketers fall into two categories: general and specialty. General direct marketing firms offer a full line of products and sell everything from clothing to house-wares. Specialty firms focus on narrower product lines. Direct marketing has a number of strategic business advantages: Reduced operating costs Lower prices Large geographic coverage Convenient to customers Ability to pinpoint customer segments Ability to eliminate sales tax for some Ability to supplement regular business without additional outlets Strategic Business Limitations of Direct Marketing: Products cannot be examined prior to purchase Costs of printing and mailing may be underestimated Low response rates Marketplace clutter exists Long lead time required Industry reputation sometimes negative Under the 30-day rule, there are legal requirements that a firm must follow as to shipping speed. The Federal Trade Commission requires firms to ship orders within 30 days of their receipt or notify customers of delays. If an order cannot be shipped in 60 days, the customer must be given a specific delivery date and offered the option of cancelling the order and getting a refund or continuing to wait for the order to be filled. The rule includes orders placed by mail, phone, fax and computer.

The long-run prospects for direct marketing are strong due to consumer interest in reduced shopping time, 24-hour ordering, the sales of well-known brands, improvements in operating efficiency, and technology. The Customer Database The key to successful direct marketing is the customer data base, with data-base retailing being a way of collecting, storing, and using relevant information about customers. Such information typically includes the persons name, address, background data, shopping interest, and purchase behavior (including the amounts bought, how often and how recently). Emerging Trends Several trends are vital to direct marketers: (1) Their evolving attitudes and activities, (2) Changing consumer life-styles, (3) Increased competition among firms, (4) Greater use of dual distribution channels, (5) Newer roles for catalogs and TV,

Specialog - Enables a retailer to cater to the specific needs of customer segments, emphasize a limited number of items, and reduce catalog production and postage costs. Infomercial - Program-length TV commercial (most often, 30 minutes in length) for a specific good or service that airs on cable television or on broadcast television, often at a fringe time. It is particularly worthwhile for products that benefit from visual demonstrations.

(6) Technological advances, and (7) The growth in global direct marketing. The Steps in a Direct Marketing Strategy A direct marketing plan has eight stages: business definition, generating customers, media selection, presenting the message, customer contact, customer response, order fulfillment, and measuring results and maintaining the data base.

1. Business Definition A company makes two decisions regarding its business definition: Is the firm going to be a pure direct marketer or is it going to engage in a dual distribution channel? Is the firm going to be a general direct marketer and carry a broad product assortment, or is it going to specialize in one goods/service category? 2. Generating Customers A mechanism for generating customers is devised, a firm can Buy a mailing list from a broker, Buy a list on CD-ROM disk from a firm, Send out a blind mailing to all residents in a particular area, Advertise in a newspaper, magazine, web site, or other medium and ask customers to order by mail, phone, fax or computer, Contact consumers who have previously bought from the firm or requested information. 3. Media Selection Several media are available to the direct marketer. They include: printed catalogs, direct-mail ads and brochures, inserts with monthly credit card and other bills (statement stuffers), freestanding displays with coupons, brochures, or catalogs, ads or programs in the mass media (newspapers, magazines, radio, tv), banner ads or hotlinks in the world wide web. 4. Presenting the Message At this point, the firm develops and presents its message in a way that engenders consumer interest, creates (or maintains) the proper image, points out compelling reasons for a purchase, and provides data about the goods and services offered (such as prices, sizes, and colours). The message must also contain complete ordering instructions, including a method of payment,

how to designate the items purchased, shipping charges, and the firms address/phone number/website. 5. Customer Contact A direct marketer decides whether to contact all customers in its database or to seek specific market segments (with different messages and/or media aimed at each). It can classify prospective customers as regulars (those who have purchased on a continuous basis); nonregulars (those who have purchased on an infrequent basis); new contacts (those who have never been sought before by the firm); and non-respondents (those who have been contacted before but never made a purchase). 6. Customer Response Customers can respond to direct marketing in one of three ways: (1) They can buy through the mail, phone, fax or computer. (2) They can request further information, such as a catalog. (3) They can ignore the message. Purchases are generally made by no more than 2 to 3 percent of those contacted. The rate is higher for specialogs, and firms focusing on repeat customers. 7. Order Fulfillment A firm needs a system to process orders. When orders are received by mail or fax, the firm must sort them, determine if payment is enclosed, check whether the item is in stock, mail announcements if items cannot be sent on time, coordinate shipments and replenish inventory. If phone orders are placed, the firm must have a trained sales staff available at times during which people may call. Salespeople answer questions, make suggestions, enter orders, note the payment method, see whether items are in stock, coordinate shipments, and replenish inventory. If orders are placed by computer, there must be a process for handling credit transactions, issuing receipts, and forwarding orders to a warehouse in a prompt, efficient way. Direct marketers that are highly regarded by consumers fill orders promptly, have knowledgeable and courteous personnel, do not misrepresent product quality, and provide liberal return policies. 8. Measuring Results and Maintaining the Database The last step in a direct marketing strategy is analyzing results and maintaining the data base. Most forms of direct marketing yield such clearly measurable results as: The overall response rate, The average purchase amount Sales volume by product category Value of list brokers After measuring results, the direct marketer reviews its customer database and makes sure new shoppers are entered into it, address changes have been noted for existing customers, purchase and customer background information is current and available in various segmentation categories and non-respondents are purged from the database (when desirable). This stage provides feedback for the direct marketer as it plans for each new campaign. Key Issues facing Direct Marketers

In planning and enacting their strategies, direct marketers must consider that many people dislike shopping this way, feel overwhelmed by the amount of direct mail they receive, and are concerned about privacy. Direct Selling Direct selling includes personal contact with consumers in their homes (and other non-store sites) and phone calls by the seller. The strategy mix stresses convenience, a personal touch, demonstrations, and more relaxed consumers. U.S. sales are not going up much due to the rise in working women, the labor intensity of the business, sales force turnover, government rules, and the poor image of some firms. Vending Machines A vending machine uses coin- and card-operated dispensing of goods and services. It eliminates salespeople, allows 24-hour sales, and may be put almost anywhere. Electronic Retailing: The emergence of the World Wide Web The Internet is a global electronic superhighway that acts as a single, cooperative virtual network. The World Wide Web (Web) is a way to access information on the Internet, whereby people turn their computers into interactive multimedia centers. The Web can serve one or more retailer purposes, from projecting an image to presenting information to potential investors. The purpose chosen depends on the goals and focus. There is a great contrast between store retailing and Web retailing. Somewhat more males than females shop on the Web, and purchasers are above-average in income and education. Shoppers are attracted by selection, prices, and convenience. Non-shoppers worry about the trustworthiness of online firms, transmitting credit information, and not seeing products first. The Web offers these positive features for retailers: It can be inexpensive to have a Web site. The potential marketplace is huge and dispersed, yet easy to reach. Sites can be quite exciting. People can visit a site at any time. Information can be targeted. A customer data base can be established and customer feedback obtained. Yet, if consumers do not know a firms Web address, it may be hard to find. Many people are not yet willing to buy online. There is clutter with regard to the number of retail sites. Because Web surfers are easily bored, a firm must regularly update its site to ensure repeat visits. The more multimedia features a Web site has, the slower it may be to access. Some firms have been overwhelmed with customer service requests. Improvements are needed to coordinate store- and Web-based transactions. There are few standards or rules as to what may be portrayed at Web sites. Consumers expect online services to be free and are reluctant to pay for them.

Other non-traditional forms of retailing: Video Kiosks and Airport Retailing

The video kiosk is a freestanding, interactive computer terminal that displays products and other information on a video screen; it often uses a touch screen for people to make selections. Although some kiosks are in stores to upgrade customer service, others let consumers place orders, complete transactions, and arrange shipping. Kiosks can be put almost anywhere, require few personnel, and are an entertaining and easy way for people to shop. Due to the huge size of the air travel marketplace, airports are popular as retail shopping areas. Travelers (and workers) are temporarily captive at the airport, often with a lot of time to fill. Sales per square foot, as well as rent, are high. Gift items and I forgot merchandise sell especially well. Features of Airport Retailing include: Large group of prospective shoppers Captive audience Strong sales per square foot of retail space Strong sales of gift and travel items Difficulty in replenishment Longer operating hours Duty-free shopping possible