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Service Marketing in Retail Sector
Service Marketing in Retail Sector
ABVIIITM, GWALIOR
Table of Contents
Service marketing in Retail sector ................................................................................... 2 Contribution in GDP ....................................................................................................... 2 IT and Retailing Services ................................................................................................ 2 Types of products in retail market ................................................................................... 3 Retailer services .............................................................................................................. 3 Transfer mechanism ........................................................................................................ 4 Challenges....................................................................................................................... 4 Levels of retail services ................................................................................................... 5 Major Players of retail sector World Wide ....................................................................... 5 Major Players of Retail Sector in India............................................................................ 5 Retail Marketing Mix ...................................................................................................... 6 Retail marketing planning ............................................................................................... 9 Consumer behavior and retail services .......................................................................... 11 Service design and delivery ........................................................................................... 14 Brand Equity ................................................................................................................. 15 Customer Service .......................................................................................................... 15 Communication Mix ..................................................................................................... 16 Pricing........................................................................................................................... 19 Drivers of service switching .......................................................................................... 21 Common CRM applications in Retailing ....................................................................... 22 Service guarantee .......................................................................................................... 22 Service quality .............................................................................................................. 22 Models used in Retails service sector ............................................................................ 27 List of Case Studies ....................................................................................................... 27
Contribution in GDP
Contribution of total services in worlds GDP is on average 62.9%. The retail sector shares in GDP for some countries are as follows: India USA China Brazil 10% 10% 10% 6%
Retailer services
There are the many types of retailers by marketing strategy: Department stores: A very large stores offering a huge collection of "soft" and "hard goods; often endure a resemblance to a collection of domain stores. A retailer of these stores carries range of categories and has broad variety at average price. They also offer substantial customer service. Specialty stores: A typical specialty store provides attention to a particular type and provides high level of service to the customers. Branded stores come under this format. For example if a customer goes to a Reebok or Gap store then they will find just Reebok and Gap products in the particular stores. Hypermarkets: It provides variety and huge volumes of high-class merchandise at low margins. The operating cost is relatively less than other retail layouts. Discount stores: it tends to offer a wide range of products and services, but they compete on price offers extensive range of merchandise at reasonable and cut-rate prices. Warehouse stores: warehouses that offer low-cost, high-quantity goods loaded on pallets or steel shelves; warehouse clubs charge a association/membership fee; Variety stores: these offer particularly low-cost goods, with limited choice General stores: a rural store that deliveries the main needs for the local public Supermarkets: It is a self-service store containing mainly of grocery and limited products on non-food items. Convenience stores: It is found basically in residential areas. They provide narrow quantity of merchandise at more than regular prices with a quick counter. This store is perfect for 3
emergency and speedy purchases. Malls: It has a variety of retail shops at a single opening. They provide with products, food and entertainment under a roof. E-tailers: The customer can shop and order by the means of internet and the products are dropped at the customer's doorstep. Here the retailers use drop shipping system. They take the payment for the product but the customer gets the product directly from the manufacturer or a wholesaler.
Transfer mechanism
There are numerous means in which consumers can have goods from retailers: Counter service: where products are out of reach of buyers and must be obtained from the seller. Delivery: where goods are transported directly to consumer's homes or workplaces. Ordering by telephone is now common, newspaper, television advertisement or a local restaurant menu. Direct marketing, comprising telemarketing and television shopping channels, are also used to make telephone orders. Door-to-door sales, where the salesperson sometimes travels with the goods for sale. Self-service: where goods may be controlled and examined earlier to purchase.
Challenges
To accomplish and maintain a position in an existing market, a potential retail establishment must overcome the following obstacles: Regulatory barriers including Limitations on real estate purchases: Limitations on foreign investment in retailers. Critical taxation structures. Lack of developed supply chain and integrated IT management. High competitiveness among present market participants, resulting low profit margins. Absence of properly educated and trained work force.
Composition of Key elements of marketing mix The 7P's of the retailing marketing mix are as follows: Place (store location) 6
Channel management Channel structure Retail distribution Retail logistics Retailer image Target market
Product (merchandise) Price People 7 Availability Customer interaction Efficiency Competitiveness Costs Incentives Profitability Status Quality Value for money After-sales services Branding Packaging Product development Product features and benefits Product management
Process Database management Order processing Service delivery Standardization Queuing System
Promotion Advertising Developing promotional mix Direct marketing Public relation Sales management Sales promotions
Physical evidence Exterior design Equipment Interior design Surrounding environment Other tangibles (like business cards, Stationary billing etc.)
Retail marketing plan consists of: Setting objectives Identifying various other options available. Formulate the whole plans Sequencing of all planned retailing activities. Types of retail marketing planning ICT is a key enabler in retail that allowed the retailers to grow at faster rate. As a result the retail sector is having more productivity and having a large number of consumers. Short-term Tactical planning retail marketing position Strategies for a year Objectives for a year Actions budgets and controlling. Coordinating retailing activities within subdivisions
Long-term 9
Major factors affecting the retailer. Forces affecting the retailer. Long-term objectives. Resources required. Regular updates
Strategic retail planning This is the process of having a strategic fit within the retail organizations abilities and its changing and challenging opportunities. developing a clear corporate mission supporting objectives creating business portfolio Coordinating functional strategies.
Corporate level Planning Retail management should plan which business the retailer should stay in and which new areas to pursue. Design a system to troubleshoot the unforeseen situations. Taking advantage of opportunities at right time. Defining the corporate mission and objective.
Approaches to planning Top down approach: In this approach Retail management set its goals and plans for all the level of management. Bottom up approach: In this approach various components prepare own goals and plans and send them up for approval 10
Importance of Retail marketing planning Aggressive and complex marketing environment Each element has conflicting needs External and internal factors Maximizing return on investment Maximizing revenue Maximizing profit Minimizing costs
Steps to be followed to predict consumer behavior Adaptation with the current retail concepts Collecting database from an individual through questionnaires. Analyze and interpret the data obtained from analysis. Obtaining the conclusions Providing suggestions based on analysis made from primary and secondary data.
Factors responsible for the development of the retail sector: 11 Rising incomes improvements in infrastructure Liberalization in the Indian economy Shift in consumer demand to foreign brands
Key challenges for retail industry LOCATION: the retailer must refer to the strategic plan: Exploring alternate areas. Determining the type of store required Evaluating the alternative store sites MERCHANDISE PRICING TARGET AUDIENCE: Consumer Pull SCALE OF OPERATIONS: It includes all the supply chain activities.
Other challenges Absence of developed supply chain Absence of integrated IT management. Cost of business operations Facing competition. Lack of well trained work force. Lack of skills. rapid price changes Restrictions in real estate purchases. Taxation. Uneasy approval for foreign investment
Six types of perceived risk: Functional Will the product perform as we expect it to? Will this product be as good as what it was from time?" 12 Physical Social
What will people think about the product? Psychological Financial Can a customer afford the purchase? Time
Factors that influence actual behavior of the customer Cash (Household Income) Competition Convenience Customer involvement
Customer Expectations Creating Trust Customers Problem Solving Ability Customer Convenience Employs Service Ability Employs Involvement Ensuring Quality Personal Interaction Keeping Promises Physical Evidence Store Interior and Layout
1. Internal process 2. External process Average transaction value Items per receipt Conversion rate
1. Step 1 - Needs leads customers to buy products and services. Need act as catalytic agent which activates the buying decision of customers. 2. Step 2 A customer tries to gather information related to the products or a service based on his needs. A customer can gathers information through the following sources:
Personal Sources family, friends, coworkers etc. Commercial sources - Sales people, Advertisements, Packaging of a particular product, Displays.
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Public sources Radio, Newspaper, Magazine Experiential sources Past experiences of people who have already used the similar type of product.
3. Step 3 In this step we evaluate the many alternatives available. After gathering information customer tries to choose the available best options. 4. Step 4 In this stage customer purchases the product. 5. Step 5 - Post purchase evaluation
Brand Equity
Strategic Positioning: Building store's identity by determining who are the customer to be served What are their needs? What are the learning from past experiences based on need analysis? Merchandise Assortments Success depends on figure out a niche in the marketplace. The focus of the merchandise assortments is on related items only. Visual Merchandising: organized and displayed layouts Design and concept. Pricing
Customer Service
An effective Customer service starts with an approach and strategy whose purpose is not just to sell product but also build a strong and long term relationship with the customers. For the very first time, Customers believes a company when their questions are answered properly, get what they needed at right time, get the product delivered and installed Marketing Marketing consists of all the possible means through which a customer and consumer can be approached through various seminars, newspapers, e-mails, workshops, campaigns etc. Design of logo 15
of a company matters a lot to make the company easy to recognize. Retail communication mix Retail promotion programs main motive is to generate more and more sales. And in order to attain this goal retailers adopt several methods (like persuading, informing and targeting customers. Thus, the key functions of the retail promotion programs are: Information: It is the primary function of a retail promotion program. Retailers provide information to the customers about company, its products and services they offer. Persuading: Persuading involves attracting people to visit their store and purchase its product and services. Reminding: reminding its customers regularly about companys products/ services and benefits, to gain customer loyalty. Paid Impersonal Communications: Sales promotional Advertisement, websites and store atmosphere are perfect examples for paid impersonal communication. Paid Personal Communication: Sales people provide the paid personal communication to the customers. The process of Personal selling involves sales people to assist customers to satisfying their needs by providing the required information. Unpaid Impersonal Communication: To generate unpaid impersonal communication we need publicity. It can be done usually through the means of a news story, in media. Unpaid Personal Communication: retailers communicate with the customers through word of mouth between people about the retail product and services.
Communication Mix
Communication is an essential part of the retail marketing strategies. Mainly, communication is used to provide the required inform to the customers about the retailer and its services. It is also used as a tool for establishing the store image. 4 types of communication mix: Advertising
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1. Advertising is any paid form of non-personal presentation and promotion of ideas, goods and services by an identified sponsor.American marketing association 2. It promotes the sales of the product/services to influence the public views about a company positively, and also get political supports and supporting a particular cause. Features of advertising 1. Competitive act. 2. Mass communication process. 3. Informative action. 4. Non-personal presentation. 5. Persuasive Act. Types of advertising 1. Consumer oriented Or Persuasive Advertisement. 2. Classified Advertising. 3. Financial Advertising. 4. Informative Advertising. 5. Institutional Advertising or Corporate Advertising. Sales Promotion. Sales Promotion consists of diverse collection of incentive tools, mostly short term designed to stimulate quicker or greater purchase of particular product or services by consumers or the trade. The characteristics of Sales Promotion are: Personal Selling. 1. Personal Selling. Objective of Personal Selling. Advantages Of Personal Selling Disadvantages of Personal Selling. 2. Publicity and Personal Relations. Publicity and Public Relation.
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The most common tools are: Advertising Direct Marketing Promotion Personal Public Relations Sales Selling
For advertising a company uses following mediums: Advertisements Brochures and booklets Point of purchase display Posters and leaflets Press
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Pricing
According to the concept of retailing, the retailers dont sell products in wholesale; instead they sells the goods in small units to the end customers. Cost plus Pricing Mechanism
Cost plus pricing mechanism works on the the following principle: Cost Price of the product + Profit (Decided by the retailer) = Final price of the merchandise.
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According to this strategy the retailer adds specific extra amount to actual cost of the product to earn share in the profits. Cost plus Pricing
1. 2. 3.
The profit of the retailers is taken into account. It is an easy way to determine the appropriate price of the products. Increase in retailer price is directly proportional to increase in cost price.
Manufacturer suggests retail pricing strategy, according to that the retailer fixes the price of the goods Competitive Pricing
According to the competition in the retail market with excellent customer service to the customers.
1.
The price of the goods is almost similar to the existing competitors and adds more attractive benefits for the customers.
2. 3.
Pricing Below Competition In pricing below competition, the price of the goods is kept lesser than the competitors. Prestige Pricing (Pricing above competition) In prestige pricing mechanism, the price of the goods is set little bit more than what the competitors offers but only under the following circumstances: 20 Brand image of the store Excellent customer service Exclusive Brands at the store. Merchandise not available at any other store
Psychological Pricing
Certain price which the consumer willingly to pay in exchange with some additional benefits. To sets a psychological price is based on expectations of the customers.
Multiple Pricing In multiple pricing, the retailer sells many products at a single price. Discount Pricing In discount pricing, the retail company sells its goods at discounted price to clear out the stock.
Elements of retail Price In this the cost of the goods and other expenses are involved. These expenses may be Fixed or variable. Fixed costs: Overhead cost expenses that may not vary according to manufacturing cost Variable costs: Expenses that vary with service or goods quality. Actual cost doesnt depends on the number of product produced Depends on advertising or promotion expenses.
Inconvenience. Pricing
Service guarantee
Unconditional: no elements of surprise Comprehensible: easy to understand and awareness of the benefits of the guarantees. Meaningful: make importance to the customers and provide values to service failure. Easy to invoke: more on service provider and less dependent on the customer. Easy to collect: design problem-free guarantees process. Credible: offers made in a believable manner
Service quality
Five key dimensions of retail service quality: 22
Problem solving: Handle the potential problem. Policy: operating hours, Parking and so forth. payment options, store charge cards,
Needs of service quality Competitive pressure. Coordinate processes across many locations. Customer driven processes Horizontal business processes approach. Easily accessible information Employee empowerment Greater information Sharing. Organizational and process flexibility. Rules-based and real - time decision support systems. Quick response. Worldwide relationships.
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FAILURE CATEGORY
DESCRIPTION
policy failures slow /unavailable service system pricing failure packaging errors Out of stock Product defect Alterations and repairs
Service policy Incompetent employees failure Inconsistency in labels and scanner Incorrect labels, missing items Items advertised but not on shelf poor manufacturing quality Incorrect alteration and repair delays
Failure to respond to customer needs and requests Special order or request Damaged or incorrect delivery of special orders, or orders requiring personalization Admitted customer error Customer acknowledging his mistake for making incorrect purchase
Un prompted and un solicited employee actions Mischarged Pricing error, incorrect change, failure to honor, promised sales price Attention failure Moody staff, ignoring the customer, shrinking of responsibility Embarrassments Failure of removing security tags, incorrect size delivery Accused shoplifting Wrongly adjudicate a customer as a shoplifter
Gap 2: improper service quality standards. Commitment to service quality Goal setting Task standardization Perception of feasibility
Gap 3: service performance gap. Employee job fit Perceived control Technology job fit Team work
Gap 5: This gap depends on size and direction of the four gaps Gap 1 Gap 2 Gap 3 Gap 4
For closing retail service quality gap: Gap 1 can be closed by: Understanding customer expectations by doing complaint analysis, research etc. Improve understanding by direct interaction in between company and the customers Improvement in upward and downward communication
Establishing realistic quality goals Improving customer oriented service standards Measuring performance Providing requisite training Reinforcing and Communicating Rewarding managers and employees
Gap 3 is closed by: Better decision-making with accountability develop reward systems for employees developing innovative recruitment Encouraging teamwork. ensuring service performances Resolving conflicts among employees Technical training Troubleshooting problems understanding importance of a particular job
Gap 4 is closed by: Effective advertising Allowing service providers to show advertisements before customers. consistent service standards identifying uncontrollable reasons in service performance Service distinctions
Tools to address retail service quality analysis: 26 Seeking Sustainable Success: Integrating Social Responsibility and Quality in the government sectors and Service. Pareto Chart : Quality Tool Process Optimization Flowchart
Some specific case studies available for the retail services marketing are as follows: Infosys retail solutions case studies: (http://www.infosys.com/industries/retail/casestudies/Pages/index.aspx) Kraft Foods Partners with Infosys to Implement SAP Test Automation Center of Excellence Empowering NOL to Keep Pace with China Customs' Regulations 27
ShoppingTrip360 Caselets IT Process Standardization for a European Retailer Next Generation Loyalty and Procurement System Helps ABS Ramp up Customer Satisfaction Hannaford Brothers: Improving the Odds SYSCO Transforms its Distribution Supply Chain Building a Strategic IT Road Map The Binding Glue for a Large Supply Chain Revamp Enterprise Effectiveness through Yantra Implementation Global PeopleSoft HRMS Upgrade LMUK Builds UK's Largest Loyalty Program APEX Digital Imaging, Inc. :( http://apexdigitalimaging.com/blog/case-study-retail-service/) Supply chain case studies:(http://www.supplychain.rrd.com/wwwGTS/supply-chaincasestudies/retail.asp) Consumer Electronics Retailer Complete Retail Packaging Solutions North America Complete Retail Packaging Solutions Europe Next Generation Route to Market Loncolon Harris case study: (http://www.lincolnharris.com/services/Retail-Services-CS.asp) Automotive Retail Services : (http://www.colliers.com/en-US/AutoRetail/About/CaseStudies) IBM case studies: (http://www01.ibm.com/software/success/cssdb.nsf/topstoriesFM?OpenForm&Site=gicss67retl &cty=en_us) Bernard Chaus innovates with fashion trend analysis ... Using a cloud-based solution backed by IBM to improve retail visibility and decision making Hong Kong Department Stores J. J. Keller and Associates, Inc. ALAIN AFFLELOU achieves a clearer view of performance ... Creating new insight into operational performance with IBM Business Analytics Tele Ticket Service drives improved ticket sales ... Launching new business intelligence services with IBM software and IBM Business Partner Numius 28 Subhiksha Rise & Fall Case Study (http://www.retailmantra.com/subhiksha-rise-fall-case-
study/) TRENT: (http://www.indiaretailing.com/case_study-main.asp) TRENT - Powered by SAP NetWeaver, mySAP ERP A Case study How to fuel an innovationin concept: The NRL thrust A Case study
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