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CHAPTER 2 - Building and Sustaining Relationship in Retailing
CHAPTER 2 - Building and Sustaining Relationship in Retailing
CHAPTER 2 - Building and Sustaining Relationship in Retailing
Retailing
Introduction
to Retailing
Building &
Sustaining
Strategic
Planning in
Information
Gathering &
Relationship Retailing Processing
in Retailing
In chapter two, we explain what value really means and highlight it pivotal role in
retailers’ building and sustaining relationships. This chapter also describes how
relationship between channel members may be nurtured in a highly competitive
marketplace.
This chapter places great emphasis on helping students understand meaning of value,
building and sustaining relationship between the channel members and customers at the
same time highlighting retailers’ ethical performance.
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Chapter Overview
Building and Sustaining
Relationship in Retailing
Learning Objectives
1. Explain what ‘value’ really means and highlight it pivotal role in retailers’ building
and sustaining relationships.
2. Describe how both customer relationships and channel relationships may be
nurtured in today’s highly competitive marketplace
3. Explain the differences in relationship building between goods and services
retailers.
4. Discuss the impact of technology on relationships in retailing.
5. Consider the interplay between retailers’ ethical performance and relationships in
retailing.
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CHAPTER 2
Why is “value” such a meaningful concept for every retailer in any kind of
setting?
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• Customer is consent about the result of the value chain not the process (it not
about how the retailer delivered it but how the customer received it).
• Some elements of a retail value chain are visible to shoppers, such as display
windows, store hours, sales personnel, and point-of-sale equipment. Other
elements are not visible, such as store location planning, credit processing,
company warehouse, and many merchandising decisions. In some cases other
value are of concerned such as ambience for upscale store or numbers of sales
personnel for high-end store.
Planning value with just price perspective – value is tied to two factors:
benefits and price.
Providing value-enhancing services that customers do not want or will not
pay extra for.
Competing in the wrong value / price segment – offering a product or service
with a wrong value / price segment to target market.
Believing augmented elements alone create value. Many retailers think that if
they offer a benefit not available from competitors that they will automatically
prosper. A restaurant that has a limited parking space will have problem
although they offer superb menu that could not be found elsewhere.
Paying lip service to customer service – most firms believe that customers
are always right but the actual fact they not really embrace it.
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• Is the retailer’s value position competitively defensible?
• Are channel partners capable of delivering value-enhancing services?
• Does the retailer distinguish between expected and augmented value chain
element?
• Has the retailer identified meaningful potential value chain elements?
• Is the retailer’s value oriented approach aimed at a distinct market segment?
• Is the retailer’s value-oriented approach effectively communicated to the target
market?
• Can the target market clearly identify the retailer’s positioning strategy?
Does the retailer’s positioning strategy considers trade-offs in sales versus profit?
• Does the retailer set customer satisfaction goals?
• Does the retailer periodically measure customer satisfaction levels?
• Is the retailer careful to avoid the pitfalls in value-oriented retailing?
• Is the retailer always looking out for new opportunities that will create customer
value?
Customer Relationship
Loyal customers are the backbone of a business. In relationship retailing there are four
factors to keep in mind:
1. Customer base
2. Customer service
3. Customer satisfaction, and
4. Loyalty program
The Customer Base – retailers must regularly analyze their customer base in terms of
population and life-style trends, attitudes toward and reasons for shopping, the level of
loyalty, and the mix of new versus loyal customers.
There are various factors that influence shopping behavior:
1. More women than men enjoy shopping, and men shop more quickly than
women.
2. Due to time constraints, consumers now spend and average of only 75
minutes when visiting a shopping mall.
3. Consumer’s most important reason to shop at a given apparel retail store
are product availability, ease in finding products, confidence in products,
ease of shopping, and convenience of the location.
4. Consumer’s most important reason to shop at a given department store
are convenience, price, and assortment and quality of merchandise.
5. Consumer’s most important reason to shop at a given supermarket are
cleanliness, prices, accuracy in price scanning at the check-out counter,
and how clearly prices are labeled.
The Customer Service – refers to the identifiable, but sometimes intangible activities
undertaken by the retailer in conjunction with the goods and services it sells. It impacts
on the total retail experience. Consistent with a value chain philosophy, retailers must
apply two elements of customer service:
1. Expected customer service – the service level that customers want to
receive from any retailer.
2. Augmented service – includes the activities that enhance the shopping
experience and give retailer’s a competitive advantage.
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Retailer must apply the customer service effectively. In order to do this the firms must
first develop an overall service strategy and then plan individual service. Retailer should
or may view the customer service it offers.
1. What customer services are expected and what customer services are
augmented for a particular retailer?
For example credit facilities when buying a car is an expected service,
retailers could not stay in business without them. While augmented service
are extra elements, retailer could serve its target market without such service;
however, using them enhances its competitive standing.
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Some firms let customers select from various level of customer service;
others provide only one level. For example retailer may honor several credit
cards or only its own, trade in is only allowed on some items or all and etc.
The Customer Satisfaction – occurs when the value and customer service provided
through a retailing experience meet or exceed consumer expectations. If the value and
customer service do not meet, the consumer will be dissatisfied. Most consumers do not
complain when dissatisfied. They just shop elsewhere. Why don’t shoppers complain?
1. Because most people feel complaining produces little or no positive
results, so they do not bother to complain.
2. Complaining is not easy. Consumers have to find the party to whom they
should complain, access to that party may be restricted, and written forms
may have to be completed.
In order for the retailer to obtain more feedback, they must make it easier to complain.
Make sure shoppers believe their concerned are being addressed, and sponsor ongoing
customer satisfaction surveys. Retailers should ask such questions as these and then
take corrective actions reflecting their shopper’s feelings:
1. “Please rate our customer service.”
2. “How often does our customer service expectation?”
3. “What do you like most about our customer service?” “What do you like
least?”
The Loyalty Programs – rewarding a retailer’s best customers, those with whom its
wants long-lasting relationships.
Customer Loyalty Program should offer
– Rewards that are useful and appealing and they are attainable in
reasonable time.
– The program honor shopping behavior –the greater the purchase the
greater the benefit.
– Features are unique and not redeemable elsewhere.
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– Rewards stimulate both short and long run purchase.
– Frequent shoppers feel “special”
– Participant rule are publicized and rarely change.
– Customer communication are personalized
Channel Relationships
Within a value chain, the members of a distribution channel (manufacturer, wholesalers,
and retailers0 jointly represent a value delivery system, which comprises all the parties
that develop, produce, deliver, and sell and service particular goods and services. The
ramifications for retailers follow:
Each channel member is dependent on the others. When consumers shop with a
certain retailer, they often do so because of both retailer and the products it
carries.
All value delivery system activities must be detailed and responsibility assigned
to them.
Small retailers may have to use supplier outside the normal distribution channel
to get the products they want and gain adequate supplier support. Although large
retailers may be able to buy directly from manufacturers, smaller retailers may
have to buy through wholesalers that handle small accounts.
A value delivery system is as good as its weakest link. No matter how well a
retailer performs its activities, it will have unhappy shoppers if suppliers delivery
late or do not honor warranties.
The nature of a given value delivery system must be related to target market
expectations.
Channel member costs and functions are influenced by each party’s role. Long-
term cooperation and two-way information flows foster efficiency.
Value delivery systems are complex due to the vast product assortment of
superstores, the many forms of retailing, and the use of multiple distribution
channels by some manufacturers.
Non-stores retailing (such as mail-order, phone, and Web transactions) requires
a different delivery system than store retailing.
Due to conflicting goals about profit margins, shelf space, and so on, some
channel members are adversarial – to the detriment of the value delivery system
and channel relationships.
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Elements Contributing to Effective Channel Relationships ( taken from Berman and Evans,
2004)
Final consumer
orientation
Consistency
Common
positioning goal Activities
performed
Input into
channel decisions
Proper
lead time
Trust
Effective Equitable profit
Relationships distribution
Fairness
Marketing
support
Reliability
Timeliness
Communication of payments
Inventory
Coordination planning
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• The service provider and his or her services are sometimes inseparable
(localizing marketing efforts).
• The perishability of many services prevent storage and increase risks.
• The aspect of human nature involved in many services makes them more
variable.
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Selected Factors Affecting Consumer Perceptions of Service Retailing (taken from
Berman and Evans, 2004)
Readiness to respond
Promptness of service to
customer request
Overall
Clarity of service Services performed
Consumer
benefits right the first time
Perceptions
of
Service
The service Dependability in
Retailing
environment handling problems
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– E.g. raising prices on scarce products after a natural disaster,
– not having adequate stock when a sale is advertised,
– charging high price in low income areas because consumers there do not
have the transportation mobility to shop out their neighborhoods.
• Social Responsibility
– Acts in the best interests of the society.
A retailer exhibiting social responsibility (CR) acts in the best interests of
society – as well as itself. Some forms of CR are virtually cost-free, such as
having employees participating in community events or disposing of waste
products in a more careful way. Some are more costly, such as donation to
charitable groups or giving away goods and services to school etc.
• Consumerism
– Involves the activities of government, business, and other organizations
to protect people from practices infringing upon their rights as consumers.
These actions recognize that consumers have basic right to safety
– One of the most worrisome issues of consumerism “how retailers handle
consumer privacy. A consumer oriented approach, comprising these
elements, can alleviate negative shopper feeling.
There are a lot more issues regarding the consumerism – in Malaysia there
are a lot more to do when consumerism are concern.
Discussion Questions
2. What are the expected and augmented value chain elements for each of these
retailers?
a. Fine Dining Restaurant
b. Fast Food Restaurant
c. Food Hawker / Stall
3. Why should retailer give special attention to its core or existing customers? And
how should it do so?
5. How would you measure the level of customer satisfaction with your college’s
cafeteria?
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