chapter2-building and sustaining relationships in gomez elaiza

8/4/2019 Chapter2-Building and Sustaining Relationships in Gomez Elaiza

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Building andBuilding and

SustainingSustainingRelationships inRelationships in

RetailingRetailingRetail Management: A Strategic ApproachRetail Management: A Strategic Approach

Barry Berman and Joel EvansBarry Berman and Joel Evans


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ObjectivesObjectivesTo explain what value really means andTo explain what value really means and

highlight its pivotal role in retailers building andhighlight its pivotal role in retailers building and

sustaining relationshipssustaining relationships

To describe how both customer relationshipsTo describe how both customer relationshipsand channel relationships may be nurtured inand channel relationships may be nurtured in

todays highly competitive marketplacetodays highly competitive marketplace


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OverviewOverview

Value and RelationshipValue and Relationship

Customers strongly believe the firm offers aCustomers strongly believe the firm offers a

good value for the money andgood value for the money and

both customers and channel members wantboth customers and channel members want

to do business with that retailer.to do business with that retailer.


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What is Value?What is Value?Consumers will demand more for less from theConsumers will demand more for less from the

shopping experienceshopping experience

They will spend less time shopping (time andThey will spend less time shopping (time and

budget)budget)

They will split the commodity-shopping trip fromThey will split the commodity-shopping trip from

the value-added shopping tripthe value-added shopping trip


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Channels of DistributionChannels of Distribution

ManufacturerManufacturer

WholesalerWholesaler

retailerretailer

customercustomer


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Channel PerspectiveChannel PerspectiveValue is a series of activities and processes - theValue is a series of activities and processes - the

value chain - that provides a certain value forvalue chain - that provides a certain value for

the consumerthe consumer


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Consumer PerspectiveConsumer PerspectiveValue is the perception that the shopper has ofValue is the perception that the shopper has ofthe value chainthe value chain

It is the view of all the benefits from a purchaseIt is the view of all the benefits from a purchase

versus the price paid.versus the price paid.

benefits received vs. price paidbenefits received vs. price paid


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Type of ShopperType of Shopper

Price-Oriented = low pricesPrice-Oriented = low prices

Service-Oriented = will pay more for superiorService-Oriented = will pay more for superior

customer servicecustomer service

Status-Oriented = pays a lot to patronizeStatus-Oriented = pays a lot to patronize

prestigious onesprestigious ones

Wh i V l i


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Why is Value isWhy is Value is

meaningful for everymeaningful for every

Retailer?Retailer?Customers believe they get their moneysCustomers believe they get their moneys

worth.worth.

A strong retail effort is required so that theA strong retail effort is required so that the

customers perceive the level of value providedcustomers perceive the level of value provided

in the manner the firm intendsin the manner the firm intends

Value is desired by all customers; however, itValue is desired by all customers; however, it

means different things to different customersmeans different things to different customers


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Consumer Comparison shopping for prices isConsumer Comparison shopping for prices is

easy through ads and the World Wide Webeasy through ads and the World Wide Web

(www). Thus, prices have moved closer together(www). Thus, prices have moved closer together

for different types of retailers.for different types of retailers.

A specific value/price level must be set.A specific value/price level must be set.


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Retail Value ChainRetail Value ChainRepresents the total bundle of benefits offeredRepresents the total bundle of benefits offeredto consumers through a channel of distribution.to consumers through a channel of distribution.

It compromises:It compromises:

Store location and parking, retailerStore location and parking, retailerambience, customer service,ambience, customer service,

brands/products carried, product quality,brands/products carried, product quality,

retailers in-stock position, shipping, prices,retailers in-stock position, shipping, prices,

image, and other elements.image, and other elements.


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3 Aspects of Value-3 Aspects of Value-

Oriented Retail StrategyOriented Retail Strategy

EXPECTEDEXPECTED

AUGMENTEDAUGMENTED

POTENTIALPOTENTIAL

the minimum value chain elementsthe minimum value chain elements

a given customer segmenta given customer segment

the extra elements in a value chain ththe extra elements in a value chain th

differentiates one retailer from the othdifferentiates one retailer from the oth

comprises value chain elementscomprises value chain elements

not yet perfected by anot yet perfected by a

competing firm in the retailers categorcompeting firm in the retailers categor


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Potential Pitfalls to Avoid in PlanningPotential Pitfalls to Avoid in Planning

a Value-Oriented Retail Strategya Value-Oriented Retail Strategy

Planning value with just a price perspectivePlanning value with just a price perspective

Providing value-enhanced services thatProviding value-enhanced services that

customers do not want or will not pay extra forcustomers do not want or will not pay extra for

Competing in the wrong value/price segmentCompeting in the wrong value/price segment

Believing augmented elements alone createBelieving augmented elements alone create

valuevalue

Paying lip service to customer servicePaying lip service to customer service


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The Customer BaseThe Customer BaseRetailers must regularly analyze their customerRetailers must regularly analyze their customerbase in terms of population and lifestyle trends,base in terms of population and lifestyle trends,

attitudes toward and reasons for shopping, theattitudes toward and reasons for shopping, the

level of loyalty, and the mix of new versus loyallevel of loyalty, and the mix of new versus loyal

customers.customers.

Core customers are considered as its bestCore customers are considered as its best



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Kinds of customersKinds of customers

Bad Customers- waste of time and money,Bad Customers- waste of time and money,

never satisfied and almost always cost more tonever satisfied and almost always cost more to

serve than they spend.serve than they spend.

Good Customers- spend lots of money, comesGood Customers- spend lots of money, comes

back more often.back more often.


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Firm StagesFirm Stages

Mature Firm- more apt to rely on core customersMature Firm- more apt to rely on core customers

and supplement its revenues with newand supplement its revenues with new

shoppers.shoppers.

New Firm- faces the dual tasks of attractingNew Firm- faces the dual tasks of attracting

shoppers and building a loyal following; itshoppers and building a loyal following; it

cannot do latter without the former.cannot do latter without the former.

it is more costly to attract new customers thanit is more costly to attract new customers thanto serve existing ones, core customers are not-to serve existing ones, core customers are not-

cost free. Be careful not to alienate corecost free. Be careful not to alienate core



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Customer ServiceCustomer ServiceExpected Customer ServiceExpected Customer Service is the serviceis the service

level that customers want to receive from anylevel that customers want to receive from any

retailer such as basic employee courtesyretailer such as basic employee courtesy

Augmented Customer ServiceAugmented Customer Service includes theincludes theactivities that enhance the shopping experienceactivities that enhance the shopping experience

and give retailers a competitive advantage.and give retailers a competitive advantage.

Customer Service is better when they utilizeCustomer Service is better when they utilize

employee empowerment.employee empowerment. workers have theworkers have thediscretion to do what they believe is necessarydiscretion to do what they believe is necessary

within reason-to satisfy customer, even if thiswithin reason-to satisfy customer, even if this

means bending the rules.means bending the rules.


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Fundamental DecisionFundamental Decision

What customer services are expected and whatWhat customer services are expected and what

customer services are augmented for acustomer services are augmented for a

particular retailer?particular retailer?What level of customer service is proper toWhat level of customer service is proper to

complement a firms image?complement a firms image?

Should there be a choice of customer services?Should there be a choice of customer services?


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Should customer service be free?Should customer service be free?

How can retailer measure the benefits ofHow can retailer measure the benefits ofproviding customer services against their cost?providing customer services against their cost?

How can customer services be terminated?How can customer services be terminated?


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Principles of CategoryPrinciples of Category

ManagementManagementRetailers listen more to customersRetailers listen more to customers

Profitability is improved because inventoryProfitability is improved because inventorymatches demand more closelymatches demand more closely

By being better focused, each department isBy being better focused, each department is

more desirable for shoppersmore desirable for shoppers

Retail buyers are given more responsibilitiesRetail buyers are given more responsibilities

and accountability for category resultsand accountability for category results


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Retailers and suppliers must share data and beRetailers and suppliers must share data and be

more computerizedmore computerized

Retailers and suppliers must plan togetherRetailers and suppliers must plan together


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3 Kinds of Service3 Kinds of Service

RetailingRetailingRented goods servicesRented goods services

Owned goods servicesOwned goods services

Non-goods ServicesNon-goods Services


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4 Characteristics of4 Characteristics of

Services RetailingServices Retailing

IntangibilityIntangibility

InseparabilityInseparability

PerishabilityPerishability

VariabilityVariability


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Customer Advantages toCustomer Advantages to

Self-CheckoutSelf-CheckoutShorter linesShorter lines

Increased SpeedIncreased Speed

PrivacyPrivacy


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chapter2-building and sustaining relationships in gomez elaiza

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