Transcript Retail Communications - Warrington College of Business

Chapter 16
Retail Communication Mix
McGraw-Hill/Irwin
Retailing Management, 7/e
© 2008 by The McGraw-Hill Companies, All rights reserved.
Merchandise Management
Managing
Merchandise
Assortments
Chapter 12
Buying
Merchandise
Chapter 14
Retail
Communication
Mix
Chapter 16
Merchandise
Planning
Systems
Chapter 13
Retail
Pricing
Chapter 15
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Questions
■ What can retailers build brand equity for their stores and their
private-label merchandise?
■ How are retailers using new approaches to communicate with their
customers?
■ What are the strengths and weaknesses of the different methods for
communicating with customers?
■ Why do retailers need to have an integrated marketing
communication program?
■ What steps are involved in developing a communication program?
■ How do retailers establish a communication budget?
■ How can retailers use the different elements in a communication mix
to alter customers’ decision-making processes?
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Objectives of Communication Program
Long-term
Build Brand (retailer’s name) Image
Create Customer Loyalty
Short-term
Increase Traffic
Increase Sales
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Brands
Distinguishing name or symbol, such as a logo, that
identifies the products or services offered by a seller and
differentiates those products and services from those
offered by competitors
The McGraw-Hill Companies, Inc./John Flournoy, photographer The McGraw-Hill Companies, Inc./Bob Coyle, photographer
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Value of Brand Image
Value to Retailers (Brand Equity)
Value to Customers
■ Attract Customers
■ Build Loyalty
■ Higher Prices Leading to
Higher Gross Margin
■ Reduced Promotional Expenses
■ Facilitates Entry into New Markets
Gap  GapKids
■ Promises Consistent
Quality
■ Simplifies Buying Process
■ Reduces Time and Effort
Searching for Information
About Merchandise/Retailer
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Building Brand Equity
Create a High
Level of Brand
Awareness
Develop
Favorable
Associations
Brand
Equity
Consistent
Reinforcement
Create Emotional
Connections
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Tar-Zhay
The McGraw-Hill Companies, Inc./Lars Niki, photographer
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Apple
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Benefits of High Brand Awareness
Aided Recall
Top Mind Awareness
Stimulates
Visits to
Retailer
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Creating Brand Awareness
Memorable
Name
Best Buy
Home Depot
Symbols
Top-of-mind
Brand Awareness
Macy’s
Repeated
Exposure
Starbuck’s
Event
Sponsorship
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Retailers Develop Associations
with their Brand Name
Brand name is a set of associations that are usually organized
around some meaningful themes
Brand associations: anything linked to or connected with the
brand name in a consumer’s memory
Merchandise Category – Office Depot – office supplies
Price/quality – Neiman Marcus –, high fashion merchandise
Specific attribute or benefit – 7-Eleven – convenience
Lifestyle or activity – Electronic Boutique – computer games
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McDonald’s Brand Associations
Fast
Food
Golden
Arches
Big Mac
McDonald’s
French
Fries
Ronald
McDonald
Clean
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L.L. Bean
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L.L. Bean’s Brand Associations
New
England
Practical
Friendly
L.L. Bean
Expertise
Honest
Outdoors
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Wal-Mart Associations
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Target Associations
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Consistent Reinforcement
The retailer’s brand image is developed and maintained
through the retailer’s communication mix
Retail Communication Mix
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Consistent Reinforcement through Integrated
Marketing Communication Program
Integrated Marketing Communication Program
■ A program that integrates all of the
communication elements to deliver a
comprehensive, consistent message
■ Providing a consistent image can be challenging
for multichannel retailers – Need to consider the
needs of all channels early in the planning of its
communication program
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Integrated Marketing Communications
Present a Consistent Brand Image through all Communications
with Customers
•Store Design
•Advertising
•Web Site
•Magalog
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
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Brand Extensions
■
■
■
■
Gap  GapKids and Old Navy
Talbots  Talbuts Mens
Sears  Sears Auto Centers and the Great Indoors
Pottery Barn  Pottery Barn Kids
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
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Extending Brand Name to a New Concept
Pluses
■ Develop Awareness and
Image Quickly
■ Less Costs Needed to
Promote Extension
Minuses
■ Associations Might Not
Be Compatible with
Extension
Limited  Victoria’s Secret
Abercrombie & Fitch  Hollister
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Communication Methods
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Paid Impersonal Communications
■
■
■
■
■
■
■
Advertising
Sales promotions – Special events, In-store demonstrations
Games, sweepstakes and contests
Coupons
Boxes of KrustyO’s cereal at a New York 7Store atmosphere
Eleven stores, temporarily converted into a
Website
Kwik-E Mart, to promote the Simpson Movie.
Community building
Jack Star/PhotoLink/Getty Images
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Store Atmosphere
The combination of the store’s
physical characteristics
(architecture, layout, signs and
displays, colors, lighting,
temperature, sounds, smells)
together create an image in the
customers’ mind
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Mediacart
A shopping cart that delivers
point-of-decision
advertising
■ Informs the customer
about special deals as the
customer passes them in
the aisle
■ Each video screen is
embedded with an RFID
chip that interacts with
chips installed on store
shelves
■ Records shopping habits,
dwell times, how shoppers
travel through the store
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Community Building
Retailers’ Community Building
Websites
offer opportunities for
customers with similar
interests to learn about
products and services that
support their hobbies and
share information with
others
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Paid Personal Communication
■ Retail salespeople are primary vehicle for
providing paid personal communication to
customers.

Personal selling – salespeople satisfy needs through
face to face exchange of information
■ Email – retailers inform customers of new
merchandise, receipt of order or when order has
been shipped
■ Direct Mail
■ M-Commerce (mobile commerce)
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Unpaid Impersonal Communication
Publicity is communication through significant
unpaid presentations about the retailer, usually a
news story, in impersonal media.
• Newspaper
• TV coverage
• Macy’s Thanksgiving Day Parade
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PR
The Gap, Emporio Armani, and Apple are
among several retailers selling red
products, a portion of the proceeds go to
Product RED, a charity to wipe out AIDS in
Africa
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Unpaid Personal Communication
■ Word-of-mouth
Can be favorable
Can be detrimental
■ Social Shopping


A communication strategy in which consumers use
Internet to engage in the shopping process by
exchanging preferences, thoughts, and opinions
Product/service reviews
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Social Shopping
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Comparison of
Communication Methods
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Planning the Retail Communication Program
Steps in Developing a Retail Communication Program
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Setting Objectives
■ Communication objectives:



Specific goals related to the retail communication
mix’s effect on the customer’s decision-making
process
Long-term: ex) creating or altering a retailer’s brand
image
Short-term: ex) increasing store traffic
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Communication Objectives & Stages in
the Consumers Decision-Making Process
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Retail and Vendor
Communication Programs
Vendor
Retailer
• Long-term objectives
• Short-term objectives
• Product focused
• Category focused
• National
• Local
• Specific product
• Assortment of
merchandise
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Setting the Communication Budget
• Marginal analysis
Advertising
Sales
• Objective and task
• Rules of thumb
Sales
Advertising
- Affordable
- Percent of sales
- Competitive parity
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Setting the Communication Budget
■ Marginal Analysis Method


Based on the economic principle that firms should
increase communication expenditures as long as
each additional dollar spent generates more than a
dollar of additional contribution
Very hard to use because managers don’t know the
relationship between communication expenses and
sales
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Marginal Analysis for Setting
Communication Budget
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Objective-and-Task Method
■ Determines the budget required to undertake
specific tasks to accomplish communication
objectives
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Illustration of Objective and Task
Method for Setting a Communication Budget
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Financial Implications of
Increasing the Communication Budget
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Rule of Thumb Methods
Affordable Budgeting Method
– sets communication budget
by determining what money is
available after operating costs
and profits are budgeted.
Percentage of Sales Method –
communication budget is set as a
fixed percentage of forecasted sales.
Drawback: The affordable
method assumes that the
communication expenses
don’t stimulate sales and
profits.
Drawback: This method assumes
the same percentage used in the
past, or by competitors, is still
appropriate for the retailer.
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Rule of Thumb Methods
Competitive Parity Method – this communication budget is set so
that the retailer’s share of communication expenses equals its
share of the market.
Drawback: This method (like the others) does not allow the retailer
to exploit the unique opportunities or problems they confront in a
market.
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Allocation of the Promotional Budget
■ The retailer decides how much of its budget to
allocate to specific communication elements,
merchandise categories, geographic regions, or
long- and short-term objectives
■ Budget allocation decision is more important
budget amount decision
High-assay principle: The retailer allocate the
budget to areas that will yield the greatest return
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