Chapter 2: Building and Sustaining Relationships in Retailing

Retail Management: A Strategic Approach Barry Berman and Joel Evans

Objectives
To explain what value really means and highlight its pivotal role in retailers building and sustaining relationships To describe how both customer relationships and channel relationships may be nurtured in todays highly competitive marketplace

Overview
Value and Relationship Customers strongly believe the firm offers a good value for the money and both customers and channel members want to do business with that retailer.

What is Value?
Consumers will demand more for less from the shopping experience They will spend less time shopping (time and budget) They will split the commodity-shopping trip from the value-added shopping trip

Channels of Distribution
Manufacturer Wholesaler retailer customer

Channel Perspective
Value is a series of activities and processes - the value chain - that provides a certain value for the consumer

Consumer Perspective

Value is the perception that the shopper has of the value chain It is the view of all the benefits from a purchase versus the price paid. benefits received vs. price paid

Type of Shopper
Price-Oriented = low prices Service-Oriented = will pay more for superior customer service Status-Oriented = pays a lot to patronize prestigious ones

Why is Value is meaningful for every Retailer?

Customers believe they get their moneys worth. A strong retail effort is required so that the customers perceive the level of value provided in the manner the firm intends Value is desired by all customers; however, it means different things to different customers

Consumer Comparison shopping for prices is easy through ads and the World Wide Web (www). Thus, prices have moved closer together for different types of retailers. A specific value/price level must be set.

Retail Value Chain

It compromises:

Represents the total bundle of benefits offered to consumers through a channel of distribution.

Store location and parking, retailer ambience, customer service, brands/products carried, product quality, retailers in-stock position, shipping, prices, image, and other elements.

3 Aspects of ValueOriented Retail Strategy

the minimum value chain elements EXPECTED a given customer segment

the extra elements in a value chain tha AUGMENTED differentiates one retailer from the othe

comprises value chain elements POTENTIAL not yet perfected by a competing firm in the retailers category

Potential Pitfalls to Avoid in Planning a Value-Oriented Retail Strategy

Planning value with just a price perspective Providing value-enhanced services that customers do not want or will not pay extra for Competing in the wrong value/price segment Believing augmented elements alone create value Paying lip service to customer service

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. Core customers are considered as its best customers.

Kinds of customers
Bad Customers- waste of time and money, never satisfied and almost always cost more to serve than they spend. Good Customers- spend lots of money, comes back more often.

Firm Stages
Mature Firm- more apt to rely on core customers and supplement its revenues with new shoppers. New Firm- faces the dual tasks of attracting shoppers and building a loyal following; it cannot do latter without the former. it is more costly to attract new customers than to serve existing ones, core customers are notcost free. Be careful not to alienate core customers.

Customer Service
Expected Customer Service is the service level that customers want to receive from any retailer such as basic employee courtesy Augmented Customer Service includes the activities that enhance the shopping experience and give retailers a competitive advantage. Customer Service is better when they utilize employee empowerment. workers have the discretion to do what they believe is necessary within reason-to satisfy customer, even if this means bending the rules.

Fundamental Decision
What customer services are expected and what customer services are augmented for a particular retailer? What level of customer service is proper to complement a firms image? Should there be a choice of customer services?

Should customer service be free? How can retailer measure the benefits of providing customer services against their cost? How can customer services be terminated?

Principles of Category Management

Retailers listen more to customers Profitability is improved because inventory matches demand more closely By being better focused, each department is more desirable for shoppers Retail buyers are given more responsibilities and accountability for category results

Retailers and suppliers must share data and be more computerized Retailers and suppliers must plan together

3 Kinds of Service Retailing

Rented goods services Owned goods services Non-goods Services

4 Characteristics of Services Retailing

Intangibility Inseparability Perishability Variability

Customer Advantages to Self-Checkout

Shorter lines Increased Speed Privacy