CUSTOMER LOYALTY PROGRAMME

A customer loyalty program is a rewards program offered by a company to customers who

frequently make purchases. A loyalty program may give a customer free merchandise,
rewards, coupons, or even advance released products. The use of loyalty programme is
evident from the fact that the corporate expenditure on loyalty programme is
booming. The following are the bases for loyalty programme:
1. Loyal customers are cheaper to serve: Retailers may not be required to invest,
maintain and communicate with customer(loyal) as they are already predisposed
to
search for information (new arrivals and services)
2. Loyal customers are willing to pay more for a given bundle of offering:
Customers
normally stick into one business entity because of high switching cost and
psychological stress. They therefore will to pay higher prices.
3. They act as Effective marketer for the service offering: The word of mouth
marketing
is very effective, and many stores justify their investment in loyalty programme
by
seeking profits not so much from the loyal customer but from the new customer
the
loyal one brings.

ATMOSPHERICS

Store atmosphere includes the physical characteristics of a retail store used to

create an image to attract customers. It's also known as atmospherics for short.
It is a direct contributor to the customer experience, which is the most important
element of retail today. It is the design of an store via:

Visual Communications
Name, logo and retail identity
Directional, departmental and category signage
Point-of-Sale (POS) Signage
Lifestyle Graphics
Coordinate signs and graphics with store’s image
Create theatrical effects

Lighting
Important but often overlooked element in successful store design
o Highlight merchandise
o Capture a mood
o Level of light can make a difference
Blockbuster
Fashion Departments
Colour
Can influence behaviour
o Warm colours increase blood pressure, respiratory rate and other
physiological
responses – attract customers and gain attention but can also be distracting
o Cool colours are relaxing, peaceful, calm and pleasant – effective for retailers
selling anxiety-causing products
Sound & Scent
Sound
o Music viewed as valuable marketing tool
o Often customized to customer demographics - AIE
o Can use volume and tempo for crowd control
Scent
o Smell has a large impact on our emotions
o Victoria Secret, The Magic Kingdom, The Knot Shop
o Can be administered through time release atomizers or via fragrance-soaked
pellets placed on light fixtures

ADVANTAGES THROUGH CUSTOMER SERVICE

Builds brand loyalty

Complaints are less
Customers are always happy and satisfied
Drives profitable growth
Helps retailers create differentiation and value through their experiences
Increase the image of a store
Increases client base
It is a source of mouth advertisement
Strengthens competitive advantage
Visitors become customers and customers become loyal to stores

STORE LOCATION
Location is the most important ingredient for any business that relies on
customers. It is also
one of the most difficult to plan for completely. Location decisions can be
complex, costs can
be quite high, there is often little flexibility once a location has been chosen and
the attribute
of location have a strong importance on retailer’s overall strategy.

Importance of Location Decision:

Location is a major cost factor because it:
Involves large capital investment
Affects transportation cost
Affects human resources

Location is major revenue factor because it

Affects the amount of customer traffic
Affect the volume of business
A location decision is influenced by the flow of pedestrian and vehicular traffic,
which
determine the footfalls in a retail store. Footfalls refer to the no. of customers
who visit a
store in a defined time period.

Factors affecting store location

 Size and characteristics of market (population)

 Level of competition Access to transportation
 Parking space availability
 Attributes of nearby stores
 Property costs
 Population trends
 Legal restrictions

GAP MODEL FOR IMPROVING SERVICE

SERVICE QUALITY GAP MODEL The gap model (also known as the "5 gaps model") of
service quality is an important customer-satisfaction framework. It identifies five major gaps
that face organizations seeking to meet customer's expectations of the customer experience.
The five gaps that organizations should measure manage and minimize:
 Gap 1 is the distance between what customers expect and what managers think they expect
- Clearly survey research is a key way to narrow this gap.
 Gap 2 is between management perception and the actual specification of the customer
experience - Managers need to make sure the organization is defining the level of service
they believe is needed.
 Gap 3 is from the experience specification to the delivery of the experience - Managers
need to audit the customer experience that their organization currently delivers in order to
make sure it lives up to the spec.
 Gap 4 is the gap between the delivery of the customer experience and what is
communicated to customers - All too often organizations exaggerate what will be provided to
customers, or discuss the best case rather than the likely case, raising customer expectations
and harming customer perceptions.
 Finally, Gap 5 is the gap between a customer's perception of the experience and the
customer's expectation of the service - Customers' expectations have been shaped by word of
mouth, their personal needs and their own past experiences. Routine transactional surveys
after delivering the customer experience are important for an organization to measure
customer perceptions of service.

MERCHANDISING

 Retail Merchandising refers to the various activities which contribute to the sale of
products to the consumers for their end use. Every retail store has its own line of
merchandise to offer to the customers. The display of the merchandise plays an
important role in attracting the customers into the store and prompting them to purchase
as well.
 Merchandising helps in the attractive display of the products at the store in order to
increase their sale and generate revenues for the retail store.
 Merchandising helps in the sensible presentation of the products available for sale to
entice the customers and make them a brand loyalist

RETAIL PRICING

Price is an integral part of the retail marketing mix. It is the factor, which is the source of
revenue for the retailer. The price of the merchandise also communicates the image of the retail
store to the customers. Various factors like the target market; store policies, competition and
the economic conditions need to be taken into consideration while arriving at the price of a
product.

- The first factor to be taken into consideration is the demand for the product and the target
market. Who is this product meant for and what is the value proposition for the consumer. In
some cases, the price of the product is linked to the quality.
- The stores policies and the images or value to be created also influence the pricing of a
product. Retailers who want to create a prestige image may opt for a higher pricing policy,
while the retailer who wants to penetrate the market, may decide to offer a value for money
proposition.

- Competition for the product and the competitor’s price for similar product in the market also
need to be taken into consideration. In case the product is unique and does not have any
competition, it can command a premium price.

- The economic conditions prevalent at the times play a major role in the pricing Policy. For
example, during an economic slowdown, prices are generally lowered to generate more sales.

-Demographics of the audience strongly influence pricing. Demographics are all about the taste
and preferences of the target audience.

DEVELOPING A PRICING STRATEGY

In Cost-oriented pricing, a basic mark-up is added to the cost of the merchandise, to arrive at
the price. Here, retail price is considered to be function of the cost and the mark up. The
difference between the selling price and the cost is considered to be the mark up and should
cover for the operating expenses and the transportation, etc.

Demand-oriented pricing - focuses on the quantities that the customers would buy at various
prices. It largely depends on the perceived value attached to the product by the customer.
Sometimes, a high-priced product is perceived to be of a high quality and a low priced product
is perceived to be of a low quality. An understanding of the target market and the value
proposition that they would look for is the key to demand-oriented pricing.

When the prices adopted by the competitors play a key role in determining the price of the
product, then competition-oriented pricing is said to follow. Here, the retailer may price the
product on par with the competition, above the competitor’s price or below that price.

APPROACHES TO A PRICING STRATEGY

Penetration pricing
is the pricing technique of setting a relatively low initial entry price, usually lower than the
intended established price, to attract new customer’s. The strategy aims to encourage customers
to switch to the new product because of the lower price. Penetration pricing is most commonly
associated with a marketing objective of increasing market share or sales volume.

Price skimming
Skimming involves setting a high price before other competitors come into the market. This is
often used for the launch of a new product which faces little or no competition – usually due
to some technological features. Such products are often bought by "early adopters" who are
prepared to pay a higher price to have the latest or best product in the market.

Predatory pricing
With predatory pricing, prices are deliberately set very low by a dominant competitor in the
market in order to restrict or prevent competition. The price set might even be free or lead to
losses by the predator.

Psychological pricing

Sometimes prices are set at what seem to be unusual price points. They will buy something for
£9.99 but think that £10 is a little too much. The aim of psychological pricing is to make the
customer believe the product is cheaper than it really is. Pricing in this way is intended to attract
customers who are looking for "value".

Going-rate pricing
i.e. setting a price that is in line with the prices charged by direct competitors. Businesses must
accept the going market price as determined by the forces of demand and supply.

TYPES OF RETAILERS

1. Department Store
Department stores are large retailers that carry wide breadth and depth of
products. They
offer more customer service than their general merchandise competitors.
Department stores
are named because they are classified into localized departments such as
clothing, toys, home, groceries, etc.

2) Convenience stores:
Convenience stores are located in areas that are easily accessible to customers.
Convenience
store carry limited assortment of products and are housed in small facilities. The
major seller
in convenience stores is convenience goods and non-alcoholic beverages. The
strategy of
convenience stores employ is fast shopping, consumer can go into a
convenience stores pick
out what they want and check out relatively short time.

3) Discount Stores
As the name suggests, discount stores or factory outlets, offer discounts on the
MRP
through selling in bulk reaching economies of scale or excess stock left over at
the season. The product category can range from a variety of perishable/ non-
perishable goods

4) Specialty Store:
Specialty store carry a limited number of products within one or few lines of
goods and
services. They are named because they specialize in one type of product. Such
as apparel and
complementary merchandise. Specialty retailers tend to specialize in apparel,
shoes, toys, books, auto supplies, jewellery and sporting goods.

5) Malls:
The largest form of organized retailing today. Located mainly in metro cities, in
proximity to
urban outskirts. Ranges from 60,000 sqft to 7,00,000sqft and above. They lend
an ideal shopping experience with an amalgamation of product, service and
entertainment, all under a common roof.

6) Flea Market
A flea market is a type of street market which provides space for vendors to sell
previously-owned merchandise or second-hand goods at low prices.
 STORE LAYOUT AND PLANNING

A retail store layout (is the strategic use of space to influence the customer experience. How
customers interact with your merchandise affects their purchase behaviour.

The interior retail store layout has two important components:

 Store Design: The use of strategic floor plans and space management, including furniture,
displays, fixtures, lighting, and signage.
 Customer Flow: This is the pattern of behaviour and way that a customer navigates through a
store. Understanding customer flow and the common patterns that emerge when customers
interact with merchandise based on the store layout is critical.

Types of store layout:

1. Grid (Straight) Design

• Best used in retail environments in which majority of customers shop the entire store
• Can be confusing and frustrating because it is difficult to see over the fixtures to
other merchandise
• Should be employed carefully; forcing customers to back of large store may frustrate
and cause them to look elsewhere
• Most familiar examples for supermarkets and drugstores

2. Curving/Loop (Racetrack) Design

• Major customer aisle(s) begins at entrance, loops through the store (usually in shape
of circle, square or rectangle) and returns customer to front of store
• Exposes shoppers to the greatest possible amount of merchandise by encouraging
browsing and cross-shopping

3. Free-Flow Layout
• Fixtures and merchandise grouped into free-flowing patterns on the sales floor – no
defined traffic pattern
• Works best in small stores (under 5,000 square feet) in which customers wish to
browse
• Works best when merchandise is of the same type, such as fashion apparel
• If there is a great variety of merchandise, fails to provide cues as to where one department
stops and another starts.
 MULTI-CHANNEL RETAILING

Multichannel retailing is when a company provides numerous ways for customers to purchase
goods and services. This marketing strategy could include selling through traditional outlets
such as catalogues, brick-and-mortar stores, mail, and telephone. But it also includes non-
traditional electronic and mobile outlets like websites, chats, emails, apps, and social networks.
Multichannel retailing is a way to build a brand and reach a lot of consumers. BENEFITS ARE:

 Flexibility for consumers when purchasing and paying for goods and services
 More opportunities to build a brand among diverse audiences
 24-hour access to customers to build brand loyalty
 A greater degree of visibility among various demographics
 Improved analytics to help understand consumer behaviours