IMTS Retail (Retail techniques and promotion) by IMTS INSTITUTE

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RETAIL SALES TECHNIQUES & PROMOTIONS

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RETAIL SALES TECHNIQUES &PROMOTIONS CONTENTS:

UNIT-1 UNDERSTANDING THE RETAIL CUSTOMER

01-13

Introduction ,Retail Activities ,Consumer Behaviour Patterns ,Factors Affecting. Consumer Decision Making Process ,Stages of Consumer Decision Process ,Types of Consumer Decision Making Process ,Influence of Situational Variables on Shopping Behaviour ,Consumer Images of Retail Stores ,A Sample of a Customer Profile and Analysis ,Summary ,Key Words ,Self Assessment Questions ,Further Readings

UNIT 2 MARKETING RESEARCH FOR RETAILING

14-28

. Introduction ,The Goals of Consumer Research ,The Process of Marketing Research in Retailing ,Key Parameters of Marketing Research in Retailing ,Statistical Tools for Marketing Research: An Illustration ,Modelling and Researching Consumer Behaviour ,Summary ,Key Words ,Self Assessment Questions ,Further Readings

UNIT-3 STRATEGIC PLANNING PROCESS

29-52

Structure,Introduction,Steps of the Strategic Planning Process,Importance of Cost Effective Delivery of Planning,Role of Values Scan and Business Culture,Areas of Influence Determining Strategic Planning,Situation Analysis-Identification of Current Issues,Strategy Development,Strategic Problem Solving Diagnostic Model,Performance Audit,Summary,Key Words,Self Assessment Questions,Further Readings

UNIT-4 RETAILS LOCATION

53-65

Introduction ,Importance of Locational Decisions in Retailing ,Aspects of Locational Decisions and Influencing Factors ,Nature of Retail Locations ,Nature of Consumer FOR MORE DETAILS VISIT US ON WWW.IMTSINSTITUTE.COM OR CALL ON +91-9999554621

Goods and Location Decision Area ,Techniques for Locational Assessment and Retail Locational Theories ,Summary ,Key Words ,Self Assessment Questions ,Further Readings UNIT-5 GROWTH STRATEGIES

66-81

What are the Key Growth Imperatives and Enablers ,The Need for Strategy Formulation ,Organisational Objectives Driven by Planning ,Strategic Options Available to Retailers for,Exploring Opportunities ,The Indian Context of Retailing ,Significance of Category Management as an Strategy Tool ,Role of Promotional Mix in Retail Strategy ,Services Retailing: A Growth Area UNIT-6 PROMOTION ANC COMMUNICATION MIX

82-92

Reasons Governing the Change in Customer Attitude ,Retail Marketing Communication ,Basic Tasks of Communication ,Integrated Marketing Communication: The Concept ,Steps for Designing and Effective IMC Strategy ,Positioning of a Retail Store ,Store Atmosphere and Visual Merchandising ,Retail Promotions ,Promotional Objectives ,Types of Sales Promotions ,Role of Salespeople and Sales Promotion Self Assessment Question .

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UNIT -1 UNDERSTANDING THE RETAIL CUSTOMER Understanding the Retail Customer Objectives After reading this unit, you should be able to: have an understanding and familiarization with retail terminology including key retail concepts; know what problems and opportunities retailers face to create consumer pull; understand factors that influence consumer behaviour; have an understanding of consumer decision making processes; understand how various factors influence consumer behaviour and expenditure patterns; understand the influence of situational variables on shopping behaviour; and understand examples in real life case studies of growing retail players. ••••••• Structure Introduction Retail Activities Consumer Behaviour Patterns Factors Affecting. Consumer Decision Making Process Stages of Consumer Decision Process Types of Consumer Decision Making Process Influence of Situational Variables on Shopping Behaviour Consumer Images of Retail Stores A Sample of a Customer Profile and Analysis Summary Key Words Self Assessment Questions Further Readings Understanding retail concepts: An overview

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OBJECTIVE Retailing as we all would appreciate is essentially the marketing concept of a customer-centric approach to developing and implementing a strategy. The growth of organized retailing in India across lifestyle, groceries segments etc. through various formats like convenience stores, hypermarkets, discount stores, supermarkets and malls has created distinct consumer behavioural segments that is posing a major challenge for Indian retailers like elsewhere in the world. For the more astute retailers this presents significant opportunities to build the necessary competencies that can be leveraged for creating a viable business-consumer proposition. Thus demanding evolve best practices across all the aspects of retail operations from customer management at the front-end to vendor management at the back-end thus communicating a consistent image of what it stand for its customers. This brings us to the subject of understanding retailing concepts to evolve a viable and incremental strategy. The retailing concept covers 4 broad areas which precludes strategy: Customer Orientation: Where the retailer studies consumer behaviour and buying trends and fulfills those needs. Goal Orientation: The retailer has clear goals and targets to achieve as per a given formulated strategy. Value driven approach: The retailer makes a careful study of the value of the goods to be sold and its perception in the consumer mind. Price and quality plays an important role here. Coordinated effort: Every activity within the retail space is aligned to a goal to maximize efficiency in servicing the customer and deliver value.

In order to fulfill the consumer needs, retailers undertake various business activities which add value to the offerings in their store. Some of the major activities are given below: Breaking Bulk: Breaking Bulk is believed to derive from the French word retaillerre, meaning 'to cut a piece off'. To reduce transportation costs, manufacturers and wholesalers typically ship large cartons of the merchandise, which are then tailored by the retailers into smaller quantities to meet individual consumption needs. Holding Stock: Retailers also offer the service of holding stock for manufacturers. They maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the manufacturer to regulate production. Retailers too benefit by keeping small; cock with an assurance of replenishment and can work within a budget for a month.

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Additional Services: Providing product guarantees, after sales service and handling customer grievances are some, of the services that add value to th1 product at the retail point. Retailers fulfill orders, promptly process, deliver and install products. 7 Understanding the Retail Customer Sales people are also employed to provide additional information on the functionality and features, usage of the product being sold. Efficient customer service is essential to make the consumers feel comfortable and important.

Activity 1 Pick up any three retailers in your neighbourhood and try to understand the nature of activities carried out by them. List out the activities accordingly. ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… . Retail Customer Behaviour and Role of Services in Retailing Inspite of the Internet making inroads in the shift of shopping behaviour, majority of the customers still prefer to purchase through stores. Stores remain popular because of the following basic reasons: Need to touch and feel the product prior to buying. It allows social interaction and the opportunity to compare brands at one place. It instigates impulse buying by the look and physical feel of the product such as chocolates, snack foods and magazines. Customers also look for ambience and convenience in shopping. Consumer money drives the economy, and retail is where consumers spend their money-such as in boutiques, restaurants, discount stores, and e-tailers. Consumer shopping behaviour can be understood analysing factors such as demographic, psychological, or the lifestyle of the consumer. Retailers are required to have better understanding of consumer benefits their perceptions and attitudes and how they influence the development of successful retail marketing strategies. Effective retailing requires an appreciation of the buying behaviour of consumers. Retailers must understand their consumers better so that they can both respond to and anticipate their needs proactively. Some of the major criteria for the right approach to a customer need are: Creating the right environment Listening to customers Providing rewards to frequent buyers

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Realising the lifetime value of a customer and ensuring loyalty

The concept of life time value customers is employed in relationship building and marketing. The ongoing process of identifying and creating new value with individual customers over a lifetime of a relationship is termed as relationship marketing. This is important as it is much harder to attract new customers than it is to retain old ones. It is a blend of product, quality and services. Most of the prominent retailers such as Shopper's Stop, Pantaloon and a host of others emerging retailers now have loyalty programmes for their regular consumers. • • • • • • • • 8 Retail Planning and Development As you are aware that consumer behaviour follows no fixed pattern and is therefore very difficult to map. However it essentially encompasses, the study of how consumer makes decisions to use their resources like time, money and effort for buying, using and disposing goods and services. In retail, marketers are keen to know the consumers shopping behaviour, which involves an understanding of decision variables like when where, and what to shop. These decisions variables are the factors to be considered by the retailer. According to the consumer needs the retailer's evolve the best possible mix to attract the target consumer. The shopper's response to retail marketing mix has an impact on the firm's success in the long run. Individual consumers consider each element of retail marketing mix in relation to their culture, attitude, previous learning and personal experiences. The consumer is influenced intrinsically by his/her needs, motives, perceptions, and attitudes and extrinsically such as family social class the culture and economic factors which affect his behaviour. These elements would help the retailers to place their retail marketing mix with their respective target segments. It is important to know what and from where the shoppers shop and the reasons that prompt their shopping behaviour. Consumers buy products. Successful products are those that provide the tangible or intangible features necessary to realize the consumer's expectations of benefits. Personal Factors Personality is best defined in general terms; a general response pattern used by individual in coping with their environment. Role-playing: Shopping activities are learned behaviour and are expected or accepted as part of ones position or role, for example if your parents have been shopping at a certain store then you would prefer to shop at the same store. Diversion: It can be a diversion for the consumer from the daily routine and is a form of recreation. A visit to a mall or a shopping center is a diversion shopping as it is not your usual shopping area. Self gratification: Shopping may be motivated not by the expected utility of consumption, but the utility of their buying process itself thus ones emotional state or mood may explain why or when someone shops. Learning of new trends: Shopping provides an individual information about latest trends movements and product symbols reflecting attitude and life style. When you go window-shopping you learn new trends and styles.

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Physical activity: It involves a considerable amount of exercise too when you go for a walk you would also complete your shopping. Sensory stimulation: Provides sensory benefits such as touch and feel of merchandise listening to the sounds (Music) and smelling scents. When you move around a store or a shop. Social Factors Social experience outside home: It can help in seeking new acquaintances encounter with friends or just watching people around. Communication with other's with similar interest: It also provides opportunity for interactions with other consumers or sales people to get to know more information. Peer group attraction: Certain store may also provide a meeting place where members of peer group may gather for instance a visit to the local mall or shopping center to meet your friends or peer group. Status and authority: Shopping provides an opportunity to attain status and power by being waited. Pleasure bargaining: Shopping may offer the enjoyment of gaining a lower price through bargaining or comparison shopping or by visiting special sales offering discounts and rebates.

FACTORS AFFECTING CONSUMER DECISION MAKING PROCESS A consumer's purchase decision tends to be affected by these four factors: Demographic factors: Demographic factors are unique to a person. It involves identification of who is responsible for the decision making or buying and who is the ultimate consumer. All stores have focused themselves on respective segments based on factors such as age, income family size, gender, occupation, etc. For example a designer store of garments is usually located in an up market shopping center or Mall. If this is in a low-income group residential area the store will not be viable. Psychological Factors: Psychological Factors refer to the inner aspects of an individual. An understanding of consumer's psychology guides the retailer's segmentation strategy. Consumers respond differently towards the same retail marketing due to their respective motives, personality, level of involvement and attitude. Motives: Motivation is prerequisite for any action this includes buying. It stimulates the need. If you have a headache buying a medicine is a motivation. The need to have the latest fashion in clothes, mobile phones etc. is also a motivation. Perception: Perception is the process by which consumers attach meaning to incoming stimuli by forming mental pictures of persons, places and objects. Stimulus reception is accomplished through the five senses that is sight, sound, taste, touch and smell. The consumer feels that what he/she sees (hear, feel, taste and smell) is what they get. Learning: Learning is the process of acquiring knowledge through past experiences. If you visit a store and the treatment you receive will be the criteria for repeat visits to the store. If the experience with the sales team was good then you may visit the store even if it is slightly more expensive than the store where the service was bad. Free sampling/trials etc. are also ways of making the consumer learn about a product and its attributes. If the customer sees, hears, feels, tastes or smells a product he/she learns more about the product and its attributes. A retailer must encourage a consumer to touch and feel the product so that his visit could turn into a buying experience. By offering customer

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satisfaction the retailer can be rest assured of having a loyal customer which is easy to retail than to generate a new customer. Attitude: People use their attitude to pass judgment whether is it good or bad, right or wrong. If a customer feels that a store is expensive he/she will avoid going to the store. Reliability, stability, responsibility, dependability and credibility are the all strong messages that a retailer is required to project. Emotions are extremely important as this drives buying. Behavioral traits like: Workaholic Impulsive Self confident Friendliness Adaptability Ambitious Introversion Extroversion

Can be used as measure to represent consumer buying behaviour. Environmental Factors: Environmental factors are both physical and social factors. This includes physical objects (goods and outlets), spatial relationship (location of shopping center and merchandising stores) and social factors (reference groups and opinion leaders). The environmental factors influence consumer wants, learnings, motives etc. which in turn influence affective and cognitive responses and therefore shopping behaviour of the individual. Social Class: Social class is referred to as the classification of members of society into a hierarchy of distinct status and class. Social class is measured by variables such as education, occupation, wealth, and ownership of assets. Market research has established a link between social class and consumer attitudes concerning shopping behaviour. Middle class and higher sections of society prefer to shop for grocery items once a month from a particular shop. They usually prefer stores offering variety and range of choice. Lower sections of society usually purchase on a daily basis. They are also not particular about the shop they purchase from. Social status of an individual plays an important role even in determining the frequency of purchase. Majority of the middle class consumers prefer to buy vegetables in the morning for their freshness despite the prices being on the higher side, on the contrary the lower end sections of the society prefer to buy at dark to get benefit of low prices. Lifestyle: Lifestyle refers to an individuals way/style of living as determined by his/her activities, interests and opinions. Lifestyle is considered to be highly correlated with consumers values and personality traits.

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An individuals lifestyles is influenced by the social group he belongs to and his occupation or e.g., double income no-kids (DINKS) families in metros regularly shop at super malls because of limited time at their disposal and they also look for entertainment while shopping on weekends. Besides they are heavy spenders when compared to families with single income. Activity 2 Make a visit to two malls/supermarkets in your location and observe the nature of consumers buying products. Then prepare a chart of the consumers as per class and other segmentation factors discussed above. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. ..................................... 11 Understanding the Retail Customer 12 Retail Planning and Development The Consumer decision-making process Imagine having to buy yourself a new cell phone. The first step in this process is of course to recognize that you need a new cell phone. Though you may have an idea of which phone you would like to purchase, you probably want to do some research in order to narrow down a few alternatives. You go online to investigate manufacturers, resellers, and independent consumer organisations, you ask friends and colleagues for advice, and you visit a few stores to check yourself. You compare you options and finally decide to purchase what seems to be the best alternative, based on different criteria such as design, features, price, and trustworthiness of the supplier. Once you have the phone in you possession, you assess whether it lives up to your expectations. You might find that the phone is able to deliver what the manufacturer has promised, but the user interface seems to mismatch, and therefore you decide not to buy this brand in future. The decision-making process can be described in five different stages: Depending on the consequences of making a wrong decision, the complexity of this process can range from careful analysis to pure impulse. While an impulse buy, such as buying a packet of chewing gum, can take place instantaneously, complex purchases mostly stretch over a long period of time. This buying process is an iterative process, where people collect information from different sources and repeatedly return to re-evaluate and compare the information they have found. By understanding customer needs and concerns as they progress through the decision making process, marketers can build better and more successful retail marketing mix. In the retail context, a marketer is concerned about shopping decisions such as when, what, how and from whom the consumers purchases and the frequency of purchase. Post purchase behaviour may take the form of cognitive dissonance.

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Activity 3

You have been assigned the task of buying a music system for your home. Keeping in mind each ones interest how will you go about with the buying process. ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ……………………………………………………………… The customer sieve and online retailing The Web as you will agree has turned out to be a great tool for information research, and studies show that the Internet is becoming the primary means by which people get key information. This counts for commerce in particular. People expect to be able to find information about products they are considering buying, even if a company doesn't sell its products online. Considering peoples' high expectations about the information and services available online, it's disturbing to see just how bad commerce web sites are at selling. Researchers have discovered that the online buying process acts as a sieve, where customers are inadvertently filtered out at each stage of their decision-making process. Studies show that out of 100 purchase-ready customers completely intended on buying a product, only 34 will accomplish their goals. “Commerce sites simply fail in supporting the consumer decision-making process, by not taking their customers' information needs into account” At the information search stage, 9% wasn't able to find the products they were looking for because they couldn't identify the right product category or find product options using the search facility. 8% of the shoppers who succeeded in finding products gave up because the product lists didn't provide' enough information to identify purchase options, or because they were confused by going back and forth between product lists and product description pages in order to decide if the products would fit their basic needs. Researchers found that the major problems occur when customers want to evaluate their product alternatives. Only 25% of the shoppers who reached this stage proceeded to the next. Some stopped because they realized that none of 13 Understanding the Retail Customer 14 Retail Planning and Development • • • • • • the products would fit their needs, but most because the product information was so inadequate that they couldn't tell if the products they were interested in satisfied their needs. At the purchase stage, 13% dropped out because they didn't want to go through the required registration process or because they where disappointed by poor shipping charge policies. A-surprisingly high amount of problems appear in the purchase evaluation stage. 11% of the shoppers are either so unhappy with a product that they return it, or didn't receive the product at all, or

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got the wrong product. Some of the shoppers returned a product because it wasn't what they expected, which suggest a failure in setting up the right expectations in the product evaluation stage. Knowing the customers' decision-making process The most interesting thing about consumer decision process, is that while critical usability problems do exist in the design of the commerce site, such as users not being able to find products and bad design of checkouts, the majority of dropouts happened because of inadequate product information: Customers couldn't identify purchase options from the products list. Customers couldn't decide if the products would satisfy their needs. The product presentations and descriptions raised wrong expectations, -which made customers return their purchases.

Commerce sites simply fail in supporting the consumer decision-making process, by not taking their customers' information needs into, account. Designers of commerce web sites, have little chance of knowing exactly which information needs customers have when evaluating specific products. To support the customers' decision-making process, they have to 'do research in order to learn which needs and concerns they have when making a purchase decision. Research of customer needs can be done in several ways. An effective and economical method is to collect information during a workshop with salespeople who are in contact with customers on a daily basis. Generating user profiles and scenarios is a great way of collecting this information. With a more extensive budget, interviews with customers and observations of their shopping behaviours can be conducted, in order to validate the generated profiles and scenarios. No matter how we choose to conduct our research, there are some basic things we need to know about the customers in order to be able to support their decision-making process. Information search online The basic prerequisites for customers to make their way through the information search stage are that they are able to find products and that they can easily identify purchase options from the product list pages. Thus, in order to support the customer decision-making process at this stage, we need to know: Which words will customers use when browsing and searching for purchase options? What basic information do customers need in order to identify purchase options? What educational information do novices need in order to decide which product criteria are important to them?

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15 Understanding the Retail Customer Evaluation of Alternatives The problem at times with consumer decision making process is that there's no one to ask if you have a question. We see how a large number of customers drop out at this stage simply because the product information was so inadequate, that they couldn't decide whether the products they were interested in would fit their needs. A commerce site for online decision making process should act as a skilled offline salesperson, and have answers ready to any question or concern that the customer might have. Some of the critical questions that we need answers to are: What detailed product information does the customers need when evaluating product alternatives? Which product evaluation criteria will customers use and which are most important to the customers? Which concerns will the customers have about the products and how can we address them proactively? How can we encourage customers to contact the sales and support department if they have further questions?

Purchase Decision At this stage emphasis should be on providing the easiest possible way for the customers to carry their orders through. If the products are sold online, we should remove obstacles such as poor registration, exorbitant shipping charges if any. If products are not sold online, customers would want an easy way to find out where and how to buy, or an easy way to contact the sales department. Purchase Evaluation The outcome of the post-purchase evaluation stage is a level of customer satisfaction or dissatisfaction, which is determined by the customer's overall feelings about the product and buying experience. Besides not receiving the product at all or getting the wrong one, many customers returned their purchases because the products didn't live up to their expectations. This problem is a consequence of not encouraging accurate customer expectations at the product evaluation stage. In order to avoid this, we have to make sure that the content presenting the products set up the right expectations. Designing for Customer Decision-malting Once we feel confident about customers' needs and concerns, our next challenge is to decide how to present the information to the customers in a way that supports the decision-making process. Some products will benefit from comparison charts, some from interactive product demos, some needs lots of detailed product images.

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Role of Services in Retailing Though shopping over the phone and through the Internet have increased rapidly in the past few years the majority of Indian consumers still visit stores to shop. The location of the store is also important in the consumer decision process in the retail domain. Since consumers are attracted to a particular store, retailers deed to track amenities of parking, extended hours of operations, special play areas for children, wash rooms, trial rooms etc. Besides efficient customer service is required to make the customer feel comfortable and important. • • • • 16 Retail Planning and Development • • • • Example: Foodworld supermarkets provide home delivery to consumers if the purchase bill is above Rs.2000/month. Thus, on the basis of the nature of decision one can classify the purchases into three categories: Routine Buy: This refers to those transactions where the buyer reorders from a regular store without any modifications and on a routine basis. For instance, newspapers, bread, milk and high frequency items are purchased from shops in the vicinity. Modified Rebuy: This refers to those transactions where buyers want to modify product specifications, prices terms, or suppliers. It usually involves more time and information. For example if a particular store does not have the product a consumer wants, he/she may seek advice from the retailer concerned. Incase he does not give credence to the retailers advice, he may start information search online or other sources to shortlist his purchase decision. New Product Purchase: This refers to those transactions where a consumer purchases a product or considers visiting a retail store for the first time and therefore require extensive information to evaluate the decision making process. Further, on the basis of the effort required for purchase or the level of involvement, one can categorize the nature of consumer decision making into the following four levels: Extensive decision making/problem solving Routine response Limited decision making, and Impulse buying.

These four levels are strongly correlated to the kind of product that is purchased. The 4 levels of consumer decision making are depicted in the figure below: Extensive Decision Making/complex High Involvement This usually happens for unfamiliar, expensive and infrequently bought products examples include purchase decision for cars, homes, computers and education. For such transactions, an individual has to spend a lot of time seeking information 17 Understanding the Retail Customer The information sources one uses for such purchase are mass media, friends and relatives, store personnel etc. For such decisions consumers go through all stages of the buying process.

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Limited Decision Making Ws happens when an individual purchases a product occasionally and is required to look for a different brand or retailer for a product one is used to because of non availability or non-performance. Example: Clothes, utensils, crockery-essentially where the consumer is aware of the product class and not the brand. Routine Response/Programmed Behaviour This is observed in case of low involvement frequently purchased and generally low cost products. They require little search and decision efforts and are purchased automatically. Example: buying grocery items from a particular retailer. Impulse Behaviour This relates to those purchases that do not involve any conscious panning. Examples are soft drinks which occurs due to sighting of the advertisement or the product at the outlet. A particular product does not confine itself to one category of decision making bebaviour product can shift frorn one category to the next. For example selecting a restaurant for dining out for someone not used to it may involve extensive decision making, but on the contrary it would be a limited decision making for someone used to frequent dining out. Therefore most of the eating joints locate their outlets at all possible destination shopping centers. Activity 4 Make a visit to nearest departmental/supermarket and list down all the major categories (for e.g. snacks, home care products). Then categorise which of the products will involve the respective kind of behaviours discussed above. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. ..................................... Consumer Decision Rules Consumer decision rules as you need to understand are basically guidelines for any retailer to help tune his service/product proposition. They are classified into two categories, namely compensatory and non-compensatory. Compensatory Decision Rule On the basis of compensatory decision rule, a shopper evaluates score or brand after scores in a considered set. Example: On the basis of research study while selecting a restaurant a prospective consumer will select 'Haldiram' in comparison to 'McDonalds' and 'Bikaner' on several counts of features desired as shown in table below: Compensatory evaluation of restaurants Features Cuisines available

McDonald's

Haldiram

Bikaner

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Service

Distance

Atmosphere

Total

Price

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UNIT 2 MARKETING RESEARCH FOR RETAILING After going through this, unit you should be able to: define Marketing Research and the process; significance of Marketing Research for Retailing; determine the Critical Drivers for a Successful Retailing Research; and state a few examples of research application. STRUCTURE Introduction The Goals of Consumer Research The Process of Marketing Research in Retailing The Key Parameters of Marketing Research in Retailing Statistical Tools for Marketing Research: An Illustration Modelling and Researching Consumer Behaviour Summary Key Words Self Assessment Questions Further Readings The scope of marketing research in the retailing industry as you would appreciate is important from the aspect of detailing before implementation of the final strategy for retailing. Marketing research involves market/retail research along with market structure study involving suppliers (manufacturers), distributors, third party logistics (contracted by any), competitors. The first marketing research was undertaken by one of the daily tabloid (newspapaer) in U.S for Campbell soups to determine who consumed their range of soups-the rich or the poor. To their surprise they found out the poor section of the society consumed more of their soups. This came out after a study of the garbage used for land-fill was done by the daily tabloid. Research is the systematic process of gathering and analyzing primary, external information for the above stake-holders to minimize risks and capitalize on opportunities on an continuous basis. The use of customer databases is critical for ongoing research initiatives in terms of helping define research problems.

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THE GOALS OF CONUMER RESEARCH As you would appreciate that goals determine the type of study to be undertaken. The two major strategies of consumer research classified as per the goals are: 1. Exploratory, and 2. Conclusive research. 1) Exploratory Research This research framework is used to identify- variables influencing consumers and ascertain how consumers may react to these factors. It is used when not enough is known about the consumers behavioural influences. The two methods used in exploratory research are as follows: Consumer suggestions Focus groups ••••••••• Consumer Suggestions: As we all may appreciate that many solutions to numerous issues faced by consumers are answered through spontaneous suggestions of consumers themselves. Example: Retailers conducting a informal survey through placing "suggestion boxes" near the counter to work out the possibility of consumers throwing ideas or understanding the nature of complaints in a timely fashion. The use of "dial 800" telephone numbers for consumer questions, complaints and suggestions is an example in this context. Focus Groups: This is another popular framework/technique which involves talking to about eight to ten people in an informal group setting applying the principle of group dynamics and free association to solving marketing problems. The process is videotaped with the consent of all conducted by a moderator who guides the discussion facilitating maximum interaction among the group. Focus groups help in the following ways: Understand consumers language and motivations. Understand consumers lifestyles and personalities. Explore a new area as a prelude to a quantitative study. Generate hypothesis about consumers and market situations. Idea generation and refinement. Validate the purpose of an advertisement, packaging, product usage, new concept to determine if there is anything misleading, negative in its purpose.

Thus, it is important to appreciate that the primary objective of exploratory research techniques is hypothesis formulation leading to establishing the relationship between two or more variables.

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2) Conclusive Research Conclusive research builds upon exploratory research in terms of trying to describe consumers behaviour and offer just explanations for its causes. Further it can predict the consumers behaviour and methods of influencing it. Thus , a Consumer research survey uses two types of data. i) Primary Data: This is gathered first hand for a specific problem investigated. ii) Secondary Data: This is the historical data already researched and kept as reference for future use. It can be used to determine if there are any problem areas which need to be understood through primary research. To conclude this section we discuss the aspect of research timeframe in marketing research. Research Timeframe As we all would appreciate Generally in consumer research studies primary data can be collected either at one time or over a period of time. We refer to these research designs as: 1. Cross-sectional design, and 2. Longitudinal design respectively where each has its own purposes. Cross-sectional design is used to study behaviour at any one point of time. For Example: To study the awareness of a particular brand among the target consumer base to determine the effect of an advertising campaign. Longitudinal research design is used to study/analyse the changing consumer behaviour over a period of time. One of the most popular type of longitudinal research study is the use of "Continuous Consumer Panel". This is done by empanellment of consumers whose behaviour across various characteristics is observed. For Example: The study of shopping habits, purchase, use, product/brand buying as well as changing demographic and attitudinal characteristics of a select consumer sample over a period of time to understand their genesis of behavioural change. A sample of research output depicting shopping behaviour characteristics across six shopper typologies is as follows: 23 Marketing Research for Retalling 24 Retail Planning and Development 25 Marketing Research for Retalling Activity I Make a visit to two market research firms in your city/town and try to understand as to how they determine, the research needs and the strategies they use. Report on your discussion here. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. ............

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THE PROCESS OF PA FETING RESEARCH IN RETAILING As you would agree that an effective retail research project involves choosing the right research methods, research instruments and sampling procedures. The broad elements of each of the above three comer stones of retail research are as follows: 26 Retail Planning and Development a) b) c) Research Methods: It involves surveying, observation, purchase intercept techniques and experimentation methods. Research Instruments: It involves structuring questions, scaling answers, wording and sequencing questions. Sampling Procedures: This involves sample framing and sizing. Thus an effective retail research and analysis project involves use of the following basic methods in collecting primary information depending on the nature of the research problem under study. Surveys Method This method helps in generating information directly from appropriate respondents through a telephonic conversation, in person or by mail. In today's context use of personal interview is rather effective in terms of accuracy, involved response, flexibility in questioning, control of interview process so on providing better consumer insights though the cost per sample is high compared to other mode of survey tools. Observation Method The center to this method involves observing overt consumer behaviour through personal or mechanical interventions without investigating his motives, attitudes, beliefs and feelings. For example: The use of kiosk-based research where it is pre-programmed to elicit responses to a set of questions without having to worry about the use of visual stimuli, right skip pattern so on. Further this technology based survey can be used for those products where recent experiences play a crucial role in determining retailing strategy. Thus, it is gradually becoming apparent to retailers that non-human observations helps in eliminating interviewer bias associated with survey method used. Purchase Intercept Technique This technique uses the advantage of observation and the significant information gained through self reporting. It consists of the following steps: Observing customer in-store shopping behaviour. Recording pertinent shopping behaviour information. Interviewing customers immediately about their purchase behaviour.

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Experimentation Method This technique uses cause-and-effect relationship between two or more factors. Experiments are done normally under controlled conditions where the factors understudy are manipulated keeping a set of factors constant. For Example: Imagine a retailer who has increased his price by $10. To see the\ effect of this he may conduct a survey to determine the effect it may have on sales, profits soon where factors like display space, store layout, location, advertising displays are kept constant. Then he may change the particular lay-out of the store which may result in sales going up or down; thereby he will assume that this factor of "lay-out" change would have `effected the sales at the store level. Thus this "before-after design" with the control group used to determine changes that may have occurred is contrary to using without the control group as part of the design. Research Instruments As mentioned in the begining research instruments need to carefully consider aspects of structuring, wording, sequencing questions and scaling answers in the questionnaire. Firstly we took at the process of structuring questions which involves open ended (unstructured) and close ended questions enabling respondents to answer in their own words, thereby providing greater freedom to them in responding. Open-ended questions are mostly used in motivational research to capture their projected feelings about the retailer's merchandising and operational activities. Further the use of open-ended or projective techniques also help. A few of the projective techniques used are as follows: Word Association Test: In this a set of words or phrases are given to respondents for which immediate responses are elicited. Sentence Completion Test: In this technique respondents are asked to finish a set of sentences with blanks. Narrative Projection Test: This is an open ended questionnaire mode where in respondents are provided a description of an situation and are asked to write a paragraph about it. Thematic Apperception Test: In this case respondents are shown a set of cartoons, pictures and asked to put themselves into that situation and tell a story about what is happening so on. It is about what people interpret from various real life scenarios/interactions. Thus, the major purpose of most open-ended questionnaires is that they help in exploring and identifying potential problems through a structured approach that could be included in a structured research. But the difficulty in interpreting responses to open-ended questions makes closed questions a better bet for retailers to administer and control. Scaling Answers: This technique uses the interpretation of answers through asking respondent to do a relative rating/grading by structuring questions reflecting their attitudes and opinions on a subject. The two most commonly used scaling techniques are as follows:

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Likert's summation rating scale: This measures the attitudes and opinions by asking respondents to indicate the extent their level of relative agreement or disagreement involving a set of questions on the subject involved. Semantic differential rating scale: This is a seven point bipolar scale which measures the meanings and attitudes which people have on a subject. The respondent is asked to mark one of the relative positions as per his choice. Thus each position of the semantic scale is assigned which can be interpreted for in' samples to arrive at the arithmetic mean indicating to a set of closely related responses. As we all would appreciate the following thumb rules should be used for structuring questions. 1) Keep questions as short as possible; wording should be easy to understand. 2) Limiting each question to a particular idea, use of concise language. 27 Marketing Research for Retalling

3) Personalized questions to be addressed in a generalised manner at the end of the questionnaire. 4) There should be logical flow in the questionnaire structure. Further one should use an attention getter and an interest grabber for the opening question.

Retail Planning and Development Sampling Procedures Here, we come to the last of the three corner stones of an effective retail research and analysis study. Sampling is done as a representative of the population in question. The three steps involved in choosing the right sample are as follows: Sample Frame: This involves finding the right population fit for the sample specific to subject. For example it could be the population in a town below the age of 25 years so on. Sample Size: This factor is crucial as the no. of respondents can make a huge difference to the out come of the survey. So right sizing of the sample size is crucial. For satisfactory results. Sample Item: This involves choosing what should be the basis of choosing the sample numbers there are generally two types here. Probability sample: In this method each person has a equal chance of being chosen for the survey. Non probability sample: In this case there is no equal probability or chance that a person will be part of the sample space; here the researcher controls the whole selection. The use of probability sampling is preferred as it can be worked upon with analytical techniques giving better results. Continuing your talk with market research firms/market research departments of retail chains/FMCG firms understand the process of marketing research in detail. Report on your discussion here.

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.................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. ..................................................................................................................................................... THE KEY PARAMETERS OF RESEARCH IN RETAILING The key parameters for study of marketing research in retailing as you need to understand are as follows: Demographics: This defines the sex, age and the lifestyle of the customers in focus. The relevance of this criteria in retailing is that from the store point of view its location, merchandise will be detennined by the above factors. In the Indian context this is the important factor affecting retailing today on account of minimal understanding of the dynamics. For Example: Today housewives seek quicker services in terms of picking up their basket of products as they would have kids and house-hold chores to attend to. Or For Example: A Men's garments store would need to be open for long hours on normal days and to keep open on sundays so that male buyers can visit the stores to pick up their wares. Thus the need of the hour is to create the ambience for people of all ages to come and visit the store. Language: Language is one of the soft factors that has a significant effect on the sales outlook of the store. The key is to train the entire sales staff in the set of language(s) spoken by the public visiting the store. This obviously has the capacity to translate into better sales for the store as consumers needs will be better understood. Competitive analysis: For a retailer of any category s), it is important that he has a clear understanding of the competitiveness in his related and complementing categories. This will help him to placate himself strategically with respect to his contemporaries by building on his capabilities. Thus the retailer needs to undertake on a periodic basis self-analysis of his strengths and weaknesses. This needs to be complemented -with competitor analysis to determine their strategic direction and implementation capabilities. For Example: The following is a illustrative list of areas that could be part of the marketing research initiative by the retailer: Determining the objectives of the competitors in terms of their financial goals, performance barometer, market positioning, organisational reward systems and so on. To help gauge competitors strategic intent like geographic areas of operation/ focus, target markets seeked, merchandise offerings, mix7of private and manufacturer labels, services offered. Competitors performance on parameters like sales, profits, market share, financial structure, vendor management systems so on. •••

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Speak to the marketing managers/customer relationship managers of a few of the retail chains in your town/city and understand as to how they design a research brief for their store. Further understand the process and the key variables that are considered. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. ................................................................................................................................................................ Marketing Research for Retalling From a managerial perspective the information obtained from a research study needs to be analysed for decision-making which involves the following steps: Tabulation of data-establishing appropriate categories for the information and data sorting. Generating hypothesis-determining relationships to suggest working hypothesis. Drawing inferences-deducing conclusions about the variables and their relationships. This leads us to some of the statistical tools used in the analysis of research data as follows: Multiple and Partial Regression: They are mathematically defined as prototypes of single criterion/multiple predictor association. Variance: This is mathematically defined as the sum of squared deviations from regression. Factor Analysis: This technique is used to represent a set of observed variables and classify them into measurables. Multidimensional Scaling: This technique is well suited for measuring human perceptions. Using a set of data and trying to find a spatial configuration or pattern of points in certain dimensions whose distances best match the input data. Multidimensional analysis lays emphasis on developing perceptual maps using consumer ratings on prespecified attribute scales, homogenity of perceptions across consumers. Conjoint analysis: This technique like MDS (multi-dimensional scaling) is used for measuring psychological judgements, like consumer preferences. Thus these techniques help in determining the inputs required for formulating an effective marketing strategy. As we all would appreciate studying consumer behaviour can be quite complex, especially the many variables involved and their tendency to interact. A Model-centric approach to understanding consumer behaviour helps in overcoming these difficulties by helping assist in constructing a theory that guides research on consumer behaviour; facilitates learning what is precisely known about consumer behaviour.

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These models help in determining a specific aspect of behaviour. Such as consumers repetitive purchasing of the same brand over a period of time. Others are more comprehensive because they attempt to include a great variety of consumer behaviours. 30 Retail Planning and Development Models of Consumer Behavoiur The models stated henceforth have been classified as traditional and contemporary in nature. The two traditional models are 1. Micro â&#x20AC;&#x201C;economic model and 2. Macro-economic model. 1) Micro-economic Model This model is developed by economists focused on pattern of goods and prices in the entire economy. It involved making a set of assumptions about the nature of â&#x20AC;&#x153;averageâ&#x20AC;? consumer and then developing a theory for explaining the workings of an economy made up of many such people. Focus was placed on the consumer's act of purchase which of course is only a portion of the consumer behaviour. Thus microeconomists concentrated on explaining what consumers would purchase and in what quantities these purchases would be made. The tastes and preferences leading to these purchases were assumed to be known already. So, microeconomists chose to ignore why consumers develop needs and preferences and how consumers rank these needs and preferences accordingly. The resulting theory was based on a number of assumptions about consumers; primarily among them are the following: Consumer's needs are unlimited and thus can't be fully satisfied. Given a limited budget, consumers goals are to allocate their resources in a way that maximizes satisfaction of their needs and wants. Consumers independently develop their own preferences, without the influence of others and these preferences are consistent over a period of time. Consumers use the price of a good as the sold measure of the sacrifice involved in obtaining it. Price plays no other role in the purchase decision. Consumers are perfectly rational in that, given their subjective preferences, they will always act in a manner to maximize their satisfaction. This model though has an influence on understanding the consumer behaviour, it provides a severely limited explanation of consumer behaviour, with a major deficiency being its unrealistic assumptions. Some of the assumptions are as follows: Consumers frequently strive for acceptable and not maximum levels of satisfaction. Consumers lack knowledge regarding products and they often influence each other's preferences. Further they use other variables other than price to assess a product's cost and may frequently use price as a measure of product quality as well as cost. Finally not all consumers choice is rational in nature.

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Thus on account of all these aspects this model cannot be accepted as a comprehensive representation of consumer behaviour. 31 Marketing Research for Retalling 2) Macro-economic Model and Development This model focuses on the aggregate flows in the economy-the monetary value of goods and resources, where they are directed and how they change over a period of time. This model helps macro-economists draw conclusions about the behaviour of consumers who influence these flows through insights ,though it does not generate a unified model of consumers. One of the interests is centered around how consumers divide their income between consumption and savings. This deals with two economic facts: Firstly, higher-income families spend a smaller proportion of their disposable income than do lower income families, but as economic progress raises all income levels over time these proportions do not seem to change. Secondly, the lower income groups do not significantly change the proportion of income devoted to spending as economic progress results in an increase in their income. There are two hypothesis namely: 1. Relative-income hypothesis, and 2. Permanent-income hypothesis which explain the above contradictions. 1) Relative-income Hypothesis This hypothesis explains the apparent contradiction by arguing that people's consumption standards are mainly influenced by their peers and social groups rather than their absolute income levels, Thus, the proportion of a family's income devoted to consumption is expected to change only when an income change. Places the family in a different social setting.This will not happen when all the income levels are rising at the same time. 2) Permanent-income Hypothesis This hypothesis explains why specific individuals are slow in changing their consumption patterns even when their incomes do change suddenly. It proposes that consumers do not use actual income in any period to determine the amount of their consumption expenditures, but instead are influenced by their estimate of some average, long term amount that can be consumed without reducing his accumulated assets. Further, sudden increases or decreases in income are viewed by consumer as temporary and thus expected to have little influence on consumption activity. Contemporary Models The need for contemporary models evolved on account of consumer behaviour emerging into a distinct discipline by itself These models differ from the traditional models in the sense that decision process that the consumer engages in when deliberating about products and services are at variance. The variables used in these models have been drawn from fields of Psychology and Sociology. The three most prominent models are: 1. Nicosia model, 2. Howard-Sheth model, and 3. EngelBlackwell-Miniard model.

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Nicosia Model This model focuses on the complex decision process of consumers engaging in products and services than the actual act of purchase itself 32 Retail Planning and Development The model is viewed as representing a situation where a firm is designing communications to deliver to consumers wherein theirs responses will infix once subsequent actions of the firm. This model contains four major components: 1) The firm's key attributes and outputs/communications and the consumer's psychological attributes. 2) The consumer's search for an evaluation of the firm's output and other available alternatives. 3) The consumer's motivation for purchase. 4) The consumer's storage aspect and use of the project.

This theory assumes that the consumer seeks to fulfill specific goals and that since there is no connect between the consumer and the firm the scope for positive and negative predispositions is minimum. This figure is a summarised view of the Nicosia model of consumer behaviour As the above figure depicts, the firm does a minimum communication to which the consumer is exposed to, the attributes of which determine the consumer's initial attitude towards the firm's brand. This start of the consumer's search for more information leads to his searching internal memory and external reinforcements through visits, knowledge etc. This leads to evaluation and eventual rejection or appreciation of the brand actualizing into purchase. At this point, a number of outcomes can occur-firstly the firm may receive feedback and secondly the consumer's attitudes towards the brand changes as he gains experience with the product over a period of time. This is what offers insights into consumer's predispositions. To sum up this model focuses on the decision-making behaviour of consumers though with limitations. These limitations are as follows: 33 Marketing Research for Retalling

The consumer begins the decision process with no predispositions regarding the firm. There is a overlap between firm attributes and consumer attributes. Retail Planning and Development â&#x20AC;˘ â&#x20AC;˘ Despite these limitations the model has significant influence on how others would attempt understand consumer behaviour. Howard-Sheth Model

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This model serves as a sophisticated comprehensive theory of consumer behaviour. It attempts to depict a rational brand choice behaviour by buyers under conditions of incomplete information and limited abilities. It distinguishes three levels of decision making: Extensive Problem Solving: This is the early stage of decision making in which the buyer has little information about brand and has not yet developed a defined and structured criteria by which to choose among products. Limited Problem Solving: In this stage criteria is well defined but the buyer is still undecided about what sets of brand fall in his gamut. Thereby there is uncertainty in his mind about what brand is best for him. Routinised Response Behaviour: Buyers have well-defined choice criteria and strong predispositions towards a particular brand. There is little confusion in his mind and he is ready to purchase a particular brand with little evaluation 'of alternatives. The model takes into account the fact that the consumer learning takes place over time as he migrates from extensive to routinised problem-solving behaviour. This has been explained using the following four components which are: 1) Input variables 2) Output variables 3) Hypothetical constructs 4) Exogenous variables

Input Variables: These are primarily stimuli which the buyer confronts with respect to the brand and secondary stimuli represented by manufacturers with products in symbolic form. Output Variables: These are the buyer's observable responses to stimulus inputs. They are as follows: Attention: This measures the magnitude of the buyer's information intake. Comprehension: The buyer's knowledge of the brand. Attitude: The buyer's evaluation of a particular brand's potential to satify his innate needs. Intention: The buyer's forecast about what he will buy. Purchase behaviour: The actual purchase act reflecting the buyer's predisposition to buy as modified by any inhibitors. The following diagram is an illustration of the buyer's observable responses to stimulus inputs. 35 Marketing Research for Retalling This model has various hypothetical constructs which can be categorized into two major groups: 1. Perceptual Constructs and 2. Learning Constructs Perceptual Constructs: This deals with the consumer's information processing basis which is driven by his sensitivity to information, perceptual bias and time invested in search for information.

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Learning Constructs: This deals with the buyer's view of the brand potential to satisfy his needs, his decision rules to separate one brand from the other in term of alternatives, his predisposition towards a particular brand manifested as attitude, environmental forces such as price and time pressure and finally the gratification. This model is driven by a lot of exogenous variables which can influence and affect consumer behaviour. The dynamics of this model is that the actual purchase is influenced by the buyer's intentions and inhibitions which are confronted. A purchase leads the buyer to evaluate his or her satisfaction towards the brand which become more routine in nature as his search for external information minimises. Though this model recognizes that the outcomes of consumer's decisions are more than just purchases it has certain limitations. These limitations are as follows: 1) It does not make sharp distinction between exogenous and other variables (endogenous). 2) Some of the variables are not well defined and are difficult to measure. 3) Further it is difficult for all those new to this field on account of its comprehensibility.

3) Engel-Blackwell-Miniard Model This model is one of the most popular representations of consumer behaviour. This model consists of five activities which occur over a period of time: 1) motivation and need recognition, 2) search for information, 3) alternative evaluation, 4) purchase, 5) eventual outcomes. 36 Retail Planning and Development a) b) c) d) The variables are grouped into four general categories: Stimulus inputs Information processing Decision process Variables influencing the decision process

This model recognizes two significantly different modes of operations by consumers. The two modes being i) Extended problem-solving behaviour, ii) limited problem-solving behaviour. i) Extended Problem-solving Behaviour This is characterised by high levels of involvement and/or high levels of perceived risk. The consumer-will explore a range of outlets. Further satisfaction with the brand is crucial for continued commitment.

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ii) Limited Problem-solving Behaviour This is characterized by low levels of consumer involvement and/or low levels of perceived risk This results in a lower level of motivation for brand information search and more of non rigorous evaluation of alternatives. Thus as we would appreciate the need for needs recognition leads to search for information influenced by environmental variables and his own characteristics. The informational inputs stage is subjected to information processing activity which the consumer uses to derive meaning from stimuli. This stimuli leads to capturing his conscious attention influencing his extensive problem solving. This attention stage admits only those stimuli that the consumer thinks/believes are important. The next stage which is comprehension involves deriving meaning from information that has to be attended to that is further processed. The final two steps of information processing are related to the next stage-decision process of alternative evaluation. This stage involves comparing alternative brands based on product-judging standards that have been stored in permanent memory. This eventually leads to acceptance driven by reinforcement of existing beliefs held in permanent memory. Thereby leading to changes in attitudes and intentions of purchase. Though this model is quite flexible and incorporates numerous theories of consumer behaviour it does have certain limitations. The limitations areas follows: 1) The influence of environmental variables is not clearly defined in term of affecting behaviour. 2) The impact of certain variables, role of motives in influencing behaviour is also quite vague.

Talk to a few market researchers from research firms and try to understand the role of the various models discussed above in determining consumer behaviour. .................................................................................................................................................................. .................................................................................................................................................................. ....................................................................................... .................................................................................................................................................................. .............................................................................................................. In this unit we discussed the significance of marketing research for making decisions under uncertain conditions. Then we went on to discuss the strategies under exploratory and conclusive research. We discussed the research designs using cross-sectional and longitudinal design. Then we discussed the process of marketing research involving surveying, observing and experimentation. We next discussed the critical parameters, followed by discussing statistical tools like variance, factor analysis, regression and multi-dimensional scaling techniques. The unit concluded with discussing the consumer behaviour models used for understanding the consumer motives.

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Demographics: The study of statistics used to describe a population Marketing research: This is the process of studying the consumer and competitive dynamics of the market involving suppliers, competitors etc. Psychographics: The study of attitudes, values, lifestyle variables determining the buying behaviour. Regression: This is a quantitative procedure which uses linear equations to analyse key drivers of retail performance. 1) What do you understand by marketing research? Explain its significance to retailing? 2) How does a research proposal differ from a research plan? 3) Elaborate on the consumer research strategies Used by market researchers? Take an example lifestyle departmental store and determine the of consumer research strategy that will need to be used in this case? 4) Draw comparisions between Nicosia, Howard â&#x20AC;&#x201C; Sheth, Engel â&#x20AC;&#x201C; Blackwell - Miniard models of consumer research behaviour?

FURTIIER READINGS Consumer Behaviour-concepts and applications fourth edition) by-David Loudon & Albert J. Della Bitta. Retail management by Chetan Bajaj, Rajnish Tuli and Nidhi V Srivastava. (Oxford University Press). Retailing by Dale M. Lewison (sixth edition-Prentice Hall)

Retail Planning and Development

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UNIT 3 STRATEGIC RETAIL PLANNING PROCESS Objectives After going through this unit, you should be able to: have an understanding of the linkage between identifying organizational mission statement and goals;know how to identify the business and customer domains within which the organization operates;understand how to identify the blue print for accomplishing the organizational mission in retail management;understand the marketing, financial and societal objectives in the context of retail business; andhave an understanding of conducting a portfolio analysis to prepare a strategic plan for continued organizational growth.

Structure Introduction Steps of the Strategic Planning Process Importance of Cost Effective Delivery of Planning Role of Values Scan and Business Culture Areas of Influence Determining Strategic Planning Situation Analysis-Identification of Current Issues Strategy Development Strategic Problem Solving Diagnostic Model Performance Audit Summary Key Words Self Assessment Questions Further Readings

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INTRODUCTION Strategic planning is the process by which the guiding members of an organization envision its future and develop the necessary procedures and operations to achieve that future. The planning process can be viewed as a somewhat circular flow of topics and action steps, where the results from one step initiate study and action in the next step. However, the process does not necessarily always flow in one direction. he planning team. The Issues that arise in a particular step may cause the planning team to go back to an earlier step to do additional work. If daltered to suit the particular needs oimplementation step also does not enthe planning process. esired, the order of the steps can even be f td Analysis of results could easily result in additional analysis or a change in strategic direction.Also,it is recommended that the plan be reviewed on an annual basis to TECHNIQUES PLANNING Strategic Retail Planning Process verify that all the base assumptions are still valid and that the implementation plan isprogressing according to expectations. STEPS OF THE STRA PROCESS d to understand You nee that the process of strategic planning is a time consuming exercise. ing are some of the questions that need to be answered before the start of a strategic planning exercise: the Planning Team? nning team meet? ers? an, the only difference is their approach. Prior to starting a new strategic planning process it will be necessary to access the past the is ive attempt to turn back the clock to the past. The past, no matter how bad, is preferable to the present. And definitely

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e the present, which is preferable to both the past and the future. While the present may have problems it cting the future, an attempt to predict the future and then to plan for that predicted future. Technological change is seen as the the future, designing a desired future and then inventing ways to create that future state. Not only is the future a preferred state, traints, but as obstacles that can be addressed and overcome. The follow 1) Determining who is on 2) What is the planning timetable ? 3) Where and how often will the pla 4) Who will do the research and business analysis? 5) How will information be given to other stakehold 6) Is the CEO committed? Further in all organizations pl planning approach that has been used within the organization and determine howorganization's culture may have been affected. Addressing these cultural issues critical to the success of the current planning process. The four possible approaches to planning are: Reactive: This approach is past oriented,an act better than the future will be. The past is romanticized and there is a desire to return to the "good old days." These people seek to undo the change that has created the present, and they fear the future, which they attempt to prevent. Inactive: This approach is present oriented, an attempt to preserv is better than the past. The expectation is that things are as good as they are likely to get and the future will only be worse. Any additional change is likely to be for the worse and should therefore be avoided. Pre-active: This approach is about predi driving force bringing about the future, which will be better than the present or the past. The planning process will seek to position the organization to take advantage ofthe change that is happening around them. Pro-active: This approach is about creating but the organization can actively control the outcome. Planners actively shape the future, rather than just trying to get ahead of events outside of their control. The predicted changes of the pre-active planner are seen not as absolute cons

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Retail Planning and Development TIME DELIVERY IMPORTANCE OF COST EFFECT OF PLANNING As you would agree that small to medium size companies need the same planning processes as do their larger competitors. Often, the need for planning is even greater g this planning expertise to a company already limited by financial and people resources. ward, a self-evaluation needs to be undertaken to determine what level of internal knowledge ng its ability to create its own future, there must be a way to develop a critical mass of competent people in the required ganizational awareness of its level of learning and the development of a learning plan to move forward. Part of the learning plan is the resources w of the operations managers of the prominent retail chains in your city/town and understand as to how they go about with the strategic planning process ............................................................................................. ......................................................................................................................................... in the smaller company, where the risk of being able to effectively respond to an ever-changing marketplace is limited by internal capabilities. The problem comes down to the cost effectiveness of deliverin To evaluate the level of resources needed to move the planning process for about the planning process already exists. If an organization is serious about developi knowledge areas. This requires an or identification of available internal training resources and acquiring outsidewhen needed. Activity 1 Talk to a fe in their business in detail. ............................................ .................................................................................................................................................................. ...............................................................................................................

ROLE OF VALUES SCAN AND BUSINESS CULTURE ortance of values The imp as you would appreciate is integral to the role of evaluation of Business Culture. The Personal values of the Planning team should be emapthising of Organization should be derived from answering the following: â&#x20AC;˘ organization

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Internal Business Culture Nume organization. Some of the qu 1) Is the organization willing to seriously engage itself Is the org What are the assu 4) What are the assumptions about communicating the stra The Two Models of Business Culture The two models of business culture that can be a style has its advantages and disadvantages and can only be judged within the particular circumstances faced by the organization. The two models are: • Interpersonal Int Risk & feedback Model of Business Culture rpersonal, Interaction Model or Business C This model is centered on the following: Power Culture: Strong leaders are neede of power for personal gain, and political intrigue. Achievement Culture: Rewards results, not unproductive efforts. Work teams are possible downside is sustaining energy and enthusiasm over time. Support Culture: Employee is valued as individual, as well as a worker. Employ external task focus. Role Culture: Rule of the law with clear responsibility and reward system. Prov stifling of creativity and innovation. Risk & Feedback Model of Busines Macho, Tough-guy Culture: High risks, Work-hard & Bet-the-Company Culture: High risk, slow feedback. (Aerospace) ork is done. (Highly regulated, government) e questions to ask • they? • mned or ignored? • r never?

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•) • ne'? Wha • g? Acti t to some of the departmental stores and observe the interaction of the staff with customers. Then try to Identify the type of organizational culture that is ............................. Process Culture: Little to no feedback. Concentration is on "how" w Understanding Culture-Interactiv • Who sets the style and pace? What kind of Role Model are "Do as we do" or "Do as we say?" What behaviour is rewarded, conde Is feedback constant, intermittent, at job completion, o Are improper or unethical practices condoned through silence? What information is shared? (needed vs. desired information) Is upward information flow constrained? (Do you really know? How is superior performance encouraged? What type of performance appraisal system is used? How are the best qualified people recruited? Is training and development offered to everyo Are values backed up by time and money? t is the relative importance of • bottom line results? saving face? power buildin vity 2 Make a visi

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existing and recommend the type of culture they ............................................................................................................

ought

practice.

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Other support perso Contractors (not really employees, but still impact Board of Directors Financial communit lenders (long & short t Interest groups Community (loc Environmentalists, social adv Industry trade groups Public organizations Governmental (specif Media, non-profit (local, vity 3 strategic planning process of their store. …………………………………………… ……………………………………………………………………………………………………………………… …………………………………………………………… SITUATION ANALYSIS - IDENTIFICATION OF CURRENT ISSUES analysis is the process of de Situatio termining the state of an organisation's business for identifying gaps and taking corrective actions. ational analysis are as follows: Env - External nalysis of the following factors that can affect the retailer's business dynamics. Some of the business tools that can be used for situ • Environmental Modeling - External Competition Analysis Knowledge Analysis ironmental Modeling This tool helps us to perform a Macro a

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, employee attitudes toward work, national & world economy, technological developments. 2) s, financing, governmental regulation, products. Competitive Analysis - market segmentation, competitor profiles ors. the same market place? apabilities • n on capital employed • ministration. Thus this rch for opportunities. But it tells us that do not let them dictate your actions as by reacting to the actions of others, that is able to bargain the price of products sourced from established manufacturing brands like tion analysis is used determine the level of knowledge currently existing in the organisation process. There are two types of knowledge, ollowing terms: 1) Raising prices, consumerism Industry - Structure, marketing strategie This tool helps us to answer the following questions about competit 1) Does anyone (or can anyone) provide substitute goods or services to 2) Do we have a early warning system to detect competitor's strategies? 3) Can we create a sustainable differentiation through building internal cacross the following? • cost efficiencies maximizing retur reducing product sourcing cost. reduce expenses in marketing, ad tool helps us to understand competition and sea

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you are moving away from the ability to create your own future. Example: Wal-mart has managed to become a retailing behemoth P&G, Coke, Hienz etc. It has in turn passed on the cost efficiencies attained in sourcing to the end consumer. Knowledge Analysis The third used for situa namely explicit knowledge and tacit knowledge. Explicit knowledge can be defined by any of the f Data Descriptions ontributes to efficiency Policies Leads to competency Procedures hers Easy to replicate by ot Formulas Processes Tacit Knowledge is hidden and not easily seen or recognized as being important. It drives competitive advantage. articulate where age Personal Knowledge Hard to Experience Hard to transfer Know How Hard to copy else Know Why High competitive advant Example : Wal- mart runs of the largest knowledge management systems that makes available sales patterns across its 200mm SKUs which it uses to decide its every day t to one of the departmental stores in your neighbourhood/location, talk to the store manager/marketing manager and prepare a roadmap about how they would merchandising mix and obtain competitive bargains from its numerous suppliers. Activity 4 go about peforming the environmental scanning, competitive and knowledge analysis. ................ .................................................................................................................................................................. ...............................................................................................................

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STRATEGY DEVELOPMENT Before we go on to describe the strategy development phase of planning we need to formulate the mission statement which should speak about the following: • ices am I offering? • aphic, sociological, financial, ethnically) am I catering to? • trategy, distribution strategy. • Forces? Now is essentially a two step process: ing strategic thrusts and secondly determining what culture is required to support the chosen strategy(s). e of three focuses (only one of which is price related): ational excellence - low price, efficient customer service • within a specific segment. This trickles down to defining the organizational strategy. Further most strategies are a result of deliberate planning process or they may emerge as the result of a set of are the result of a combinations of purely deliberate and purely emergent strategies. two types of strategies follows: company's current mission and strategies. The most popular tool used in this process is the • Why am I existing? What goods and serv For Whom - market segmentation (geogr How do I achive this market s What are the present and future possibilities.

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What are my distinctive competencies/Driving we can get on with the Strategy development task which Firstly, identify The basic strategy will fall into on â&#x20AC;˘ Oper Product leadership - product excellence and innovation Customer intimacy - emphasis on customer relationships incremental decisions. Most realized strategies A Brief descriptions of these Deliberate Strategy: This process starts with an analysis of a SWOT (Strengths, weaknesses, opportunities, threats) model. The external environment in terms of opportunities and threats, is analyzed by examining threats to the company's current position and new opportunities (new customers, new s of etitive strategy is formulated that matches opportunities with strengths and plans are made to strengthen areas of tive strategy. Marketing, Human Resource, Financial, Operations, Information Systems, and R & D strategies are developed that support the business cisions are made consistent with the business and functional strategies. When every day decisions do not conform with the business and functional strategies, ve organization into a direction. When decisions are made or problems are solved, they process with various claimants attempting to influence each decision. When there is a strong control system (powerful hierarchy) ies without regard to intended strategy and the organization takes on direction that is a result of the combined affect of these incremental nd level. inesse should we be operating? What is the purpose of each of

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these businesses? The following are generic strategies that can evaluated by the Forward Integration: Gaining ownership or control over distributors or retailers. Backward Integration: Seeking ownership or control of suppliers. Horizontal Integration: Seeking ownership or control over competitors. Diversification Concentric: Adding new or related product lines Conglomerate: Adding new, but unrelated product lines Joint Venture: Two or more sponsoring firms forming a separate organization for applications, unfulfilled customers needs, etc.). The analysis proceeds by examining the company's internal environment in termits strengths and weakness. A mission and comp weakness. The next step is to develop functional strategies that support the overall businesslevel competi unit strategy. Finally, a control system (organizational structure) is designed to insure that operational de the Intended strategy becomes an unrealized strategy. Many strategic plans hataken this route as they sit on shelves of corporate offices in nicely bound volumes. Emergent Strategy: Emergent Strategies are the result of incremental decision making that achieve some degree of consistency over time and launch the have potential strategic impact. As you would remember from the political model of decision making, decision making is, by nature, a political that insures that decision makers satisfy managerial constraints, intended strategtend to become realized. However, when other influences are stronger, or there is no clear direction from above, decisions are made decisions. The execution of strategy happens across the corporate-level, business-level afunctionalCorporate Level Strategy: This involves answering questions like: In particular retail segment bus corporate level team: Integration cooperative purposes Some of the other strategies that can be evaluated are as follows: 49 Market Penetration: Seeking increased market share for present products through Product Development: Seeking increased sales by improving present products. Retrenchment: Regrouping through cost and asset reduction to reverse declining Liquidation: Selling off tangible assets, in parts for their tangible worth.

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Example: The RPG Group's entry into "big box "retailing with "Giant" - hyper n example of concentric diversification. e te in our chosen categories/formats ? business strategies involve determining the basis of customer or client decision making. Generally, they are based on some ive strategy when the market is comprised of many price sensitive buyers, when there are large ts down, technological breakthrough in the industry by other firms (generally firms pursuing this strategy ature the major markets where they operate. ice, time and availability, low maintenance, etc. as the basis for competition. Product development and market ice th strong coordination between R & D and marketing departments. l ntiation. Common risks (potential threats) include there may not exist the necessary price/feature trade-off try ntial, and it not crucial to the success of other major competitors. enhances marketing efforts. Market Development: Introducing present products in new markets. sales and profits. Divestiture: Selling a division or part of organization. market format to complement its foodworld supermarket format chain is a

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The following are the generic strategies that can evaluated by the Business-level team: Business Level Strategy: This involves answering questions like: How should wcompe combination of quality, service, cost, time, and quality of the experience. Cost Leadership Strategies: With this strategy you are competing on price. Your various functional strategies all emphasize cost reduction. This is an effect few ways to achieve product differentiation, when buyers do not care much about differences from brand to brand example: (Coke vs. Pepsi), or when there are anumber of buyers with significant bargaining power. Some risks (potential threats) of pursuing this strategy are that competitors may imitate the strategy, thus driving overall industry profi have low R & D budgets), or buyer interest may swing to other differentiating febesides price. Example: Firms know for this strategy are Wal-Mart, McDonald's which they have deployed in all Differentiation Strategies: Differentiation strategies rely on some basis of product differentiation such as flexibility, specific features, serv research are generally necessary components of a differentiation strategy. Generally, a successful differentiation strategy allows a firm to charge a higher prfor its product. Organizations generally need strong R & D departments wi Also Human Resource strategies must place emphasis maintaining a competitive skilbase and motivating employees toward the basis for differe among customers to justify higher prices, development of a quick copy of the differentiating features without the expensive R & D. Focus or Niche Strategies: A successful focus strategy depends upon an indussegment that is of sufficient size, has good growth pote es or requirements and when rivals are not attempting to specialize in the same target segment. Risks of pursuing a focus ds those Functional Strategies: These strategies help in addressing questions like how do n ustomer? How do we identify customer requirements and changes in customer requirements? Human Resource Strategies: How do we recruit, train, develop, motivate, rry our Operations Strategies: How dove design our processes to produce products and/or Information System Strategies: How do we provide decision makers, at all levels, Technological (R & D) Strategies: How do we develop products consistent with Further, in addition to supporting competitive strategy through the development of e mandate for determining the role-play of the

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board, top management-level, middle-management level teams for an upcoming ' retail venture. Elaborate on the role of each in evaluating and executing the relevant strategy(you may do undertake this activity after talking to a few of the …………… ………………………………………………………………………………………..... Listed below are two of these trends planning as an event versus .continuous Process. planning cycle with data every couple of years. Focus strategies are pursued in limited markets in conjunction with cost leadership and/`" differentiation strategies. Focus strategies are the most effective when consumers have distinctive preferenc strategy include the possibility that numerous competitors recognize the successful focus strategy and copy the strategy, or that consumer preferences drift towarof the market as a whole. Customer groups, geographic areas, and specific product lines are some bases of focus strategies. Multiple strategies combinations of the above competitive strategies. organizational functional units contribute to the business level strategies? How cafunctional strategies be integrated to achieve competitive advantage? They constitute the following strategies: Marketing Strategies: How do we communicate our strengths to the c compensate, and place employees so that behavior is directed toward the competitive strategy and works to build competitive advantage? Financial Strategies: How do we secure financial resources necessary to cacompetitive strategy? service that meet customer requirements as specified in our strategy? with information necessary to make decisions consistent with strategy? customer requirements as specified in strategy? the functional strategies, functional specialists also provide tools and information used in the development of strategy. Activity 5 Assuming that you have been given th "homeware' HR managers of the prominent retail firms in your city/town? ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ………………… .................................................................................................................................................................. ..............................................................................................................

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Changes in the Strategic Planning Process Over the years, approaches to the planning paradigm have changed significantly. Traditional models of planning consisted of a specific The intervening years were periods of strategy implementation. Current thinking views strategy development as a continuous process where systems are put in place to continually monitor the environment and make changes and improvements on an ongoing basis A move from transactional approaches to strategy implementation to transformatioapproaches often referred to as empowerment or employee participation, a process of employee involvement in the planning process which attempt to build commitmenthe mission and nal t to strategy is replacing transactional processes. Further transactional processes tap instrumental sources of employee, while STRATEGIC PROBLEM SOLVING DIAGNOSTIC Transactional processes are typified by planning departments and top management (or consultant) developed plans which are implemented through a reward based control system. transformational processes are based on internal and external self concept, and goal identification bases of employee motivation. MODEL Strategic Diagnostic Model es exist. F declining sales, market share and stymied growth can be caused by fundamental issues with the target domain of the company (markets and bility to implement operational plans, or anywhere in between. o be This is a simple diagnostic approach to diagnose the level at which problems causor example:- a products) down to a firm's ina The model is a basic description of the levels of organizational analysis needed tdone which has been illustrated using the following flow chart: Mission (Domain): Who are customers and what function(s) do we perform Opportunities Core Competencies SWOT Analysis Market Research Techniques Demographic TrendsEconomic Forecasts Political Analysis

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Competitive (Business Level) Strategy: On What basis do we compete? Price Quality Service Time/Availability Basis of customer product decision making Competitive Advantage Market Research Techniques. Functional Strategies Marketing Strategy: How do we communicate our strengths to the customer? How Reputation building Advertising Promotion Pricing. Human Resource Strategy: How do we recruit, train, develop, compensation, and place employees so that behavior is directed toward our competitive level strategy? Employee Ability and Skill Levels Motivation Level and sources of employees. Behavioral Diagnosis Motivational Diagnostic Models Compensation Training & Development Recruitment & Selection Leadership Style & Culture Job Redesign Empowerment. Financial Strategy: How do we secure financial resources necessary to carry our competitive strategy? Operations Strategy: How do we design our processes to produce products and/or Information Strategy: How do we provide decision makers, at all levels, with information necessary to make decisions consistent with strategy? Technology (R&D) Strategy: How do we develop products and services consistent with customer requirements as specified in strategy? PERFORMANCE AUDIT It is essential for you to understand the role of performance audit. It is critical to reviewing and correcting the strategic plan course though it is a time-consuming phase in itself. Performance management is the process of determining the health of the organization in terms of gauging the "soft" systems and "hard" systems put in place. A performance audit may start of asking the following generic questions like: â&#x20AC;˘ Which lines of business are most successful? Which are doing poorly? Are my tacking systems adequate? â&#x20AC;˘ What are my organization's - strengths & weaknesses

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• What are the key factors that influence my company's performance • What are the outside - Opportunities & Threats Some of the key factors that Influence a company's performance are as follows: • The ability of management (all levels) to cope with change. • The nature and effectiveness of the processes used to arrive at major decisions to bring about change. The efficiency of the mechanisms utilized to implement management decisions. ed within the company. • Is risk management system in place to assess/uncover hidden business dangers. Some other aspects that are likely to affect the performance of a business are as . en To what extent have past assumptions changed? impacts in the future? ing. Financial d data to a form Reorganizations unless the underlying issues are adequately identified and fully addressed. e obvious in the financial statements will mean that the problem has grown to full maturity and will likely be reproducing additional "little problems" as Remember: when everything is looking the best, that is the time to pause and search Pers Bein conc often a problem in small com functions based on their availabilty, not because of knowledge or experience. But this pers sses.

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• ents? • To what extent is the "personality" contributing to the situation? • What approach is taken toward problem identification and resolution? • The internal methods employed to determine and track valid objectives. • The effectiveness of the way information is communicat • The quality of the personnel and attention to recruiting and selecting the proper quality and adding to their abilities with further training. follows: Historical Financial Statements Financial statements show past results and not the future (or even the present). They reflect the momentum of previous decisions and cannot be viewed in isolation without consideration of interperiod changes and why the change is taking placeFinancial reports also do not reflect information that may not have been known whthe earlier decisions were made. What are the potential What adjustments should be made when making decisions today? Remember: Financial accounting is different from managerial account accounting's objective is to record past actions within GAAP (Generally AccepteAccounting Procedures). Managerial accounting converts companyneeded for current decision making. If you use outside accounting or auditing services you will likely be getting only "financial" accounting when you need both. Changing assignments will not correct problerns Further not knowing about a problem does not mean it doesn't exist. Ignoring issuuntil they becom the organization tries to cope. for hidden problems. Congratulations may be premature onality Orientation g "people oriented" does not mean that you can't look past the person and entrate on the situation. Concentrating on personality is panies where employees are relatives that may be handling business onality orientation is not limited to family busine A retailer needs to answer the following questions: What criteria are used when choosing individuals for assignm Are there differences between the way different people are evaluated? Rem d. Som

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illustration) : Gap Analysis: This is basically a reality test (Face the facts) which may lead to of vision back or work to bridge the gap. Balanced Scorecard: The balanced scorecard concept is relatively new on the y as a method of implementing and tracking business strategy, with built-in measurements to track progress. Stripped down to its essence the balanced scorecard is the analysis of the cause and ness strategy. d in ys stress on the following drivers of business success: 2) Customer orientation rowth er 5) Identify & obtain locations 6) Develop marketing facility 7) 8) Thus se & effect linka : ember: wearing rose colored glasses does not make the world rose colore e of the commonly used performance management frameworks are(an Gap Analysis Balanced Score Card â&#x20AC;˘ Value-Chain Analysis compromise on both ends, scaling Further it may be impossible to close all gaps simultaneously which calls for Prioritising efforts for implementation provided the entire organization agrees to the full plan.lt demands tracking and course adjustments . business scene, but is rapidly gaining in popularit effect of business processes needed to successfully implement busi

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Perhaps, where the balanced scorecard has gone beyond past implementation processes is the emphasis on factors other than the financial, hence the term "balanced." As such there is more emphasis on leading indicators of future performance along with the tracking of past performance, which are often statefinancial terms. This framework la 1) Financial objectives and measurements 3) Internal processes 4) Learning and capability g Value-Chain Analysis: This framework lays stress on the following drivers of business success: 1) Understand the custom 2) Define the offering 3) Manage the offering 4) Channel management Operate Decide the exit Strategy value-chain analysis uses a drill-down Process in establishing cau ges that drive performance by focusing on the following three variables 3) Measures 6.10 SUMMARY 1) Objective 2) Strategy In th le and relevance of strategic planning in shaping the orga backed by a vision and mission that is understood by almpathy, fluence strategic ng the future course of Further we explained the various strategy evaluation options available to retailers and s. nt describing a few generic models commonly used like Gap analysis, Balanced Score KEY WORDS is unit emphasises the ronisation's future course concerned. We have also discussed the importance of creating an open culture of trust, e shared values.Then we elaborated on the various factors that inplanning and how modeling these issues can help in determini action.

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the course of strategy development development using certain diagnostic modelWe concluded the unit with discussing the role of performance manageme Card etc. Competitive Advantage: The ability to transform a distinctive competence iproduct of service outcome (lower price, better quality, better service, quicker response time, etc.) that makes your product or service more attractive to the customer than yo nto a ur competitors' product or service. A sustainable competitive ort run. : Special capacities, skills, technologies or resources that enable a company to distinguish itself from its competitors and age. izational parlance they constitute the strategy, operations, marketing, intellectual property etc. Mission: Mission is a set of statements that define the exchange relationship between tion served and the function it fulfills or the need it satisfies for that m potential customers whose needs are not being satisfied e Opportunity exists when there is no other organization and Suppliers. SELF 2 ASSESSMENT QUESTIONS 1) Characterize a strategic plan. Describe its purpose? e elements of a strategic planning process? Explain in detail their 3) Compare and contrast between concentric diversification, horizontal and briefly describe the factors to be considered in developing an organizational mission statement? FURTHER READINGS 2) What are th significance? diversification, and conglomerate diversification? 4) Identify

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5) What do you understand by performance management? Explain the three performance management frameworks discussed in this this unit? Retail Management by Chetan Bajaj, Rajnish Tuli and Nidhi V Srivastava. (Oxford University Press). The art of Retailing by A.J.Lamba (Tata McGraw-Hill Publishing).

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UNIT 4 LOCATIONAL DECISIONS After going through this unit, you should be able to: appreciate the importance of store location; understand the process of choosing a store location and to discuss the various criteria's for evaluating locational aspects within them; understand the nature of store locations available to a retailer; appreciate how the types of goods sold influence the locational decision drivers in retailing; understand the concept of trading area and techniqueยง to analyze its potential; and understand the different theories which explain the historical patterns in retailing.

Introduction Importance of Locational Decisions in Retailing Aspects of Locational Decisions and Influencing Factors Nature of Retail Locations Nature of Consumer Goods and Location Decision Area Techniques for Locational Assessment and Retail Locational Theories Summary Key Words Self Assessment Questions Further Readings

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INTRODUCTION The choice of location is the most vital aspect for any business that relies on customers of which retailing is the classic example. Deciding on location is the most complex of the decisions to be taken by a retailer. Firstly the costs are very high and once a location has been selected there is very little flexibility. As you would agree that choosing a wrong location can lead to losses and even closure of the store. This makes the selection of the appropriate location the most critical aspect of retailing. Location of a store in an area depends on its type of business and the type of customers it wants to attract. IMPORTANCE OF LOCATIONAL DECISIONS IN RETAILING The importance of locational decisions as is due to the following factors: 1) Locational choice is a major cost factor. 2) It involves large capital investment (the high cost of land or building if it is being purchased of recurring cost of rent if it is leased). 3) It affects the transportation cost structure (Distance from the manufacturer, distributor etc. affects the total cost of transportation). 4) It has a significant bearing on human resources cost (if the retail store is located away from central locations i.e. areas where public transport is weak the cost of employees will be higher as employees will have to be provided with transportation or paid for transport). 5) It is dependable on the quantum of customer traffic (depending on the number of consumers who frequent the area). 6) It affects the volume of business (if the number of customers visiting the store are low then the volume of business done by the retail store is obviously affected) Locational Decisions Thus a locational decision as you would appreciate is influenced by the flow of vehicular and pedestrian traffic, which determines the footfalls in a retail store. It is very important to take pedestrian and vehicular traffic count of the location before choosing the location. For determining the pedestrian traffic the following aspects are to be considered: 1) Age and gender of the pedestrians passing through the area(exclude very young children). 2) Count by time of day i.e. number of pedestrians passing through the area during different times of the day. 3) Pedestrian interviews i.e. ask random pedestrians their shopping habits etc 4) Spot analysis of shopping trips.

Further determining the vehicular traffic count is very important for convenience stores, Stand-alone stores and areas with limited pedestrian traffic.

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As you would appreciate that it is possible for a store to have good locational characteristics and poor site characteristics and to have good site characteristics and not have good location characteristics. For instance the store may have a good locational mileage i.e. in a prime area with good vehicular and pedestrian traffic, but may have poor site characteristics like not having parking space or the site may have all the facilities required but the pedestrian and vehicular traffic could be low and not generate enough volume of business. Further one needs to appreciate that the location and site should interact in a positive way with a stores merchandise, operations and customer service. For instance if a convenience store is setup in a residential area with ample on site facilities and the location is a high traffic area then the store location can be described as a perfect location. Example 1: Departmental stores like Lifestyle, Shoppers Stop, Pantaloon choose locations having right mix of location and site characteristics. Example 2: Wal-mart, the world's largest retailer realized the issue of finding distributors for its scattered network of stores when it started moving into rural communities. To overcome this it setup regional distribution centers supported by a huge truck fleet to reap advantages of scale. Example 3: Home-depot, the largest home center chain is seeking markets with significant aging suburban houses and apartments as it sees them as prime target for its â&#x20AC;&#x153;do-it-yourself â&#x20AC;? proposition. Talk to a few retailers in your neighborhood and understand the role of location in their business decisions. .................................................................................................................................................................. .................................................................................................................................................................. ...................................................................................... ASPECTS OF LOCATION AL DECISIONS AND INFLUENCING FACTORS The following factors play a significant role in the locational choice of a particular city: Size of the City's Trading Area: A city's trading area is the area from which customers come to the city for shopping. A city's trading area could include its suburbs as well as its neighboring cities and towns. Example: Mumbai, which attracts customers from all over India with its large numbers of trading centers. The Population of the Trading Area: High growth in the population of an area can also increase the retail potential. The Purchasing Power of the. Customers: Cities with a large population of affluent and upper middle class customers can be an attractive location for stores selling high priced products such as designer clothes or even high value cars which have limited retail outlets. The fast growth in the purchasing power and its distribution among a large base of middle class is contribution to a retail boom. Distribution Networks: A city may become specialized in certain lines of trade and attract customers from other city.

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Number, Size and Quality of Competition: It is important to undertake a detailed study about the number of retail players across segments, their sales and quality of services before selecting a city. Example: If a retail chain plans to set up retail discount grocery store they should avoid Kerala as Margin Free Market a retail discount chain has a strong retail presence in the state and has a very strong consumer base. It would be difficult for a retailer to compete in this market. Cost of Land, Rent and Other Retail Development Costs: This is one of the key factors affecting the attractiveness of a city as a prospective retail location. If the cost of rental or the cost of land is very high it would be difficult for a retailer to break even especially if he is dealing in products with lower margins. Evaluation of Factors for Location of the Store Some of the factors that need to be evaluated for identifying the appropriate location of a store are as follows: Qualitative and quantitative dynamics of competitive stores. Prospective retailers to evaluate the product lines carried by other stores, number of stores in that area etc. before _selecting area... Whether the are or shopping center provides easy access routes.

Whether there are any traffic jams or congestion on the routes to the selected location. Whether there are any zoning regulations in the city as per plans of zoning commission and municipal corporations regarding the development of shopping centers, residential areas, flyovers etc.

For instance if a flyover is being developed in front of the location selected the retailer will not be able to attract the vehicular traffic. The retailer should consider the direction in which the city is developing while selecting its location. Additionally, the retailer needs to consider the following aspects too: If there is adequate traffic and if so the potential of the traffic passing the site is good. Whether the volume of vehicular and pedestrian shoppers who pass by the ` specific sites represent potential customers. Does the site have the ability to intercept the traffic flowing past the site. Whether the vehicular or pedestrian traffic moving past the site could be attracted. Further the presence of other shopping centers or stores in the vicinity can also influence the ability of the site to attract traffic. Complementary aspects of adjacent stores Sufficient parking space Vulnerability of the site to unfriendly location

Thus before deciding on the chosen site it should be ensured that there are adequate parking facilities available in the vicinity, especially if the store expects vehicular traffic. The quantum of parking facility required for different types of stores varies as per size of retail store or mall.

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For instance shopping centers require 4 to 5 spaces for every 100 square meter of gross floor space, Supermarkets require 10-15 spaces for every 100 square meter of gross floor space similarly Furniture Stores require ,2 to 3 spaces for every 100 square meter of gross floor space. Finally the retailer also needs to consider if unfriendly competition could emerge in the shape of a large discount store, which resorts to aggressive pricing strategies, which can threaten its viability. Example: In USA many retailers had to close or relocate when Wal-Mart set up its stores in the neighborhood. The same was repeated in India when Margin Free Markets set up its stores, in the wake of which the kirana stores and the supermarkets in the vicinity had to close. Try and meet a few store managers of prominent retail chains in your town/city discuss with them and then prepare a list of activities that need to be undertaken for a proposed "food & groceries" chain of stores coming up across the country with respect to locational aspect? .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .............................................................. .................................................................................................................................................................. ................................................................................................................ NATURE OF RETAIL LOCATIONS The types of retail locations can be classified as follows: Isolated Stores These store have typically no other retail store in the close vicinity. Their location depends on their pulling power of customers. The advantages of isolated stores are that there is no competition, the rentals are low as it is not a commercial area, further it will be able to have better visibility than other stores, constantly upgrade its facilities as per the requirement. The imminent disadvantages of this type of stores are: It is difficult to attract customers as the travel distance may be high, The lack of variety for the customers that has limited choice of merchandise to select from, High cost of advertising as initially a high budget will have to be allocated to attract customers to the store, Further there is no sharing of costs like in a shopping center. The isolated stores are the stores you usually find inside housing colonies, which is the local Kirana store, or on highways as a shopping destination. Example: These stores are typically what we call "mom-n-pap" stores/ convenience surrounded by other non-competitive stores. They can also be specialist stores like "gift stores" located in a densely populated area with no competition,

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Unplanned Markets Unplanned markets are basically the markets that come up with no systematic planning for example the markets in the older part of the cities or where planned markets over the time have become unplanned markets due to poor municipal lades and unplanned growth of the markets. Here you also find that there are multiple stores selling the same products. The advantages of unplanned markets for the retailer are that the rentals are very low, good access to public transport and availability of a variety of goods for the consumer. 62 Retail Planning and Development The disadvantages are difficulty in attracting customers, lack of proper parking facilities, no sharing of costs and lack of space for the setting up larger outlets or for the expansion of the existing outlets. Example: Chandini Chowk market in Deli one of the largest and oldest whole-sale markets attracts retailers, home buyers inspite of its poor approach, lack of parking facilities because of the range and price points it offers for all. Planned Markets The planned markets on the other hand are the shopping complexes, the Malls Etc The advantages of planned markets are that there is a well-rounded assortment of stores making it a one stop shopping experience for the entire family. The malls have very large anchor stores which are either departmental stores or stores which have the crowd pulling capacity. Further in these malls you have a variety of stores, restaurants and services offered. There is high pedestrian traffic in these markets and all the retailers in the market share the costs like lighting up of the market for festivals or running of joint promotions to promote the market, which in malls is also supported by mall management. The disadvantages of such a market are limited flexibility, the rents are higher compared to the earlier described markets, and it creates a highly competitive environment and domination of the market by the anchor stores. Example: The Sahara Mall, Metropolitan Mall in Gurgaon and the upcoming malls across major cities and towns offering shopping, hospitality, entertainment and other personalized services. On the basis of your discussion with the store managers evaluate the following case. A specialised "juices and salads" chain of stores is planning to open outlets across the major metros. Evaluate with detailing as to where it should be located (planned markets, unplanned markets, isolated stores)? ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ….

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NATURE OF CONSUMER GOODS AND LOCATION DECISION AREA Shopping goods usually imply products with a high unit price, which are purchased infrequently and involve more intensive selling effort on part of the store owner. Shopping products we often sold in selected franchise outlets, Further it is the character of the retail store rather than the t)Te of goods it sells that governs the selection of the site. The following are some of the characteristics of buyers of consumer goods: They compare Price, quality and features of such products across stores. While convenience goods are purchased by almost everyone, certain kinds of shopping goods are purchased by only certain -segments of shoppers The consumers buy goods infrequently and plan their purchase Locational Decision in Retailing 窶的ssues It is important for your to understand the role of retail location in the context of business practice. To do this it is important for you to start with the broadest possible view on strategic planning .The assumption being that the organization can control its assets, the environment(s) it operates , but cannot control the environment The following factors affect the choice of a retail location.: Corporate Strategy Wherein the retailer needs to ask himself the following: Question 1: What business (es) should we operate? In what business environments are our core assets most valuable? Question 2: What should we be doing internally, versus outsourcing or not being involved at all? This is implemented through decisions to enter and exit industries, acquire firms/ closure of noncomplementing businesses/vertical or horizontal integration or disintegration so on. Business Strategy Here the retailer needs to answer as to how he will compete in this line of business which leads to explore the following drivers: Product breadth, Target market, and Quality/price etc. Functional Strategies (finance, production, marketing) Wherein the retailer needs to evaluate the best ways for him to serve his target markets with the desired products. Further, geography enters all three levels of strategy wherein the incumbent retailer needs to ask himself the following questions:

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1) Are we a Indian company or a global company? 2) Do we have the assets to compete on the basis of worldwide low costs? 3) Where should we obtain financing, source inputs, locate production, and locate distribution or outlets? Given a production location, what technology and human resource policies can work best here? Given a retail location, what product mix and price points work best for us here? 4) Do we have the logistics to service these chosen markets.? 5) How many retail outlets do we need to cater to our chosen or desired market? , 6) Where do we locate each retail outlet? 7) What is the product mix and level of product adaptation that is required for a -given retail outlet?

However, though location decisions are most often made explicitly at the level of functional strategy they must be in tune to the overall competitive strategy. (So if 65 Locational Decisions • • • you want to become a CEO of a retailing venture you need to gain experience and expertise in additional contexts. Geography is generally a means to an end in an organization). Also the choice of location means a basic economic-geographic trade-off between economies of scale and friction of distance; relative concern for cannibalization versus eliminating competition. More ambitious retailers might change not just the product mix but the entire concept and even the brand name of the stores to serve their chosen market (without weakening brand image/positioning). For this they need to introspect by asking themselves the following questions: Where are our current or desired markets in general located (assuming monopolistic market areas)? How should we go about dividing our market among our various outlets (assuming monopolistic market areas)? How and where should we locate ourselves, what will our market distribution look like, in the context of our competitors?

For instance an excellent site for a shopping goods store is next to a departmental store or between two departmental store where there is a flow of traffic between them. Another good site is between a major parking area and a departmental store. Example: The recent phenomenon that departmental stores like Shoppers Stop and Pantaloon have started being one of the anchor tenants for malls coming up in close proximity is a case in point. A case observed in Mumbai, Gurgaon, Kolkatta on account of small catchment areas and range of complementary products and services offered in the vicinity. Talk to the store managers of a sample of supermarkets in your area and discuss with them as to how they will go about evaluating if they want to be a "groceries discounter". Further try to understand as to what corporate, business and functional decisions need to be taken.

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TECHNIQUES FOR LOCATIONAL ASSESSMENT AND INTAIL LOCATIONAL THEORMS There are a lot of techniques used in choosing of a store location. Some of the techniques used in locational choice assessment are as follows: Judgemental technique: Where there is a heavy relianc e on one's gut feeling through environmental scanning leading to one of the following possibilities of locational imitation of competitors(or nearby competitors). Systematic screening technique: Where the incumbent/existing retailer assumes the size of the market area using general rules of thumb survey of current customers like: 66 Retail Planning and Development â&#x20AC;˘ â&#x20AC;˘

1) What radius or drive time would encompass a certain percentage of all customers? (But would this be the same in a denser, less-dense, or less auto-prone region?) 2) How to identify (and perhaps rank) preferred market areas of the given size? 3) What patterns or indicators to look at in published data on the household income, consumer expenditures, business growth, or population growth by metropolitan area or broadcast media market?

Analog technique: Where the incumbent/existing retailer can look for market-area characteristics that are similar to the market areas of successful, analogous stores using the following techniques: 1) Differential analysis: This involves analysing characteristics like-market areas and nature of stores, their product mix, management strengths, size etc. Thus they go on to differentiate between the mostsuccessful and least-successful locational choices. 2) Regression Analysis: This involves determining the level of profitability (or revenues) across all sites (perhaps sales per square foot) as a function of a set of characteristics, and use the locationspecific variables that are most significant.

Further if the analysis also includes non-geographic variables (age or training or experience of managers, age of the store, years since last renovation, etc.), then he can assume that he has a reasonable level of control on some of the things that make stores disimilar to each other. Note: Regression coefficients can be used to predict the level of profitability or revenues from each alternative format and location proposed for a new store. In case of an incumbent retailer with no existing outlets to benchmark against with the following techniques can be used: Market-area analysis: Where he can seek market areas that have generally desirable characteristics and then gradually build up his data from a small-area data. depending on what he sees is desirable for his product and marketing strategy. This requires: Geo-demographic data (data on the median or average economic and demographic characteristics of inhabitants within small geographic areas), or

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Lifestyle data (data on the location and buying habits of individuals), or Geo-lifestyle data (data that draws inference about the buying habits of the inhabitants of small geographic areas).

Note: These techniques/approaches ignore two important caveats. Firstly, the actual market areas are not "yes/no" delineations. (in real terms, they are not space oriented monopolies) as there are always some customers from outside the primary market area, and customers near the "edge" of the market area who are less likely to use your location than your more proximate customers. Secondly, the actual market areas depend not only on his store/proposed store characteristics but also on his competitors locational dynamics and characteristics. Retail Saturation Coefficient This coefficient measures the potential sales per square foot of store space for a given product line within a particular market area. As a market area evaluation tool, it incorporates both consumer demand and competitor presence. The coefficient of retail saturation depends on the size of the population, per capita expenditure on consumer goods, amount of retail space available for sales, and the maximum value each of these variables can be in a particular market area. This coefficient can take a value of between 0 and 1, but the key question to be asked is whether the retailer would be inclined towards a 0 or 1 value. The formulation of the index of retail saturation is expresses as follows: Retail saturation index /R3Dfor market area i. where P is a measure of population, E is a measure of per capita expenditure (on consumer items in general, or on your particular product category), and .R is a measure of the amount of retail space (or space devoted to your particular product category), each within the market area where max [R / (P E)]is the maximum value of R / (P E,), that can be achieved in any market area. Example 1: In India for instance many consumer good conglomerates and merchandisers are moving towards down town areas for merchandising their goods with several specialist categories such as linen and items relevant to the area for consumption by the local populace. Example 2: McDonalds in India is moving their retail outlets to suburban areas dependent upon the consuming population and the number of footfalls it envisages in the area. The evaluation of this coefficient is therefore important for the retailer to determine the market potential of selling its wares in the area and also McDonalds for setting up a food outlet. Retail Locational Theories Quality and Distance Theory: This theory suggests that the footfalls in a retail space has a direct correlation to the quality of the retailed item and inversely proportional to the distance of the retailer from the consuming populace. The most common measure of "quality" is the size, in square feet of retail space. Distance, of course, can use any number of metrics.

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Land Value Theory: This is used for determining and explaining the arrangement of urban land usage and location of economic activity zones in a given area. It goes on to state that the competition for a given land area will determine the price of the urban land and therefore will have bearing on the nature, quality of the goods merchandised thereby ensuring that the best use of the retail space is effected. Retail Market Identification Retail market identification is the process of understanding the profile of likely customers in a chosen area through the following teehniques: Customer Spotting: This involves observing and mapping the actual customer footfalls through the following data sources: In-store surveys Point-of-sale query (telephone nos.) bank account information redeemed coupons that had been mailed to the customer's address family size car/vehicle ownership The mapping is done by dividing the entire region into zones (Census studies etc.). Then the market penetration is computed as the ratio of the number of observed customers to the number of potential customers (population? number of households?) in each zone. For Example: The identified and mapped zones with market penetrations that meet particular thresholds (60%, 25%, 10%, for example) across criterias like distance from the store, per capita income, etc. could be used for decision making using multiple regression. Spatial Interaction Model: This theoretical model explains the relationship between metrics observed on the amount of demand a product has at the source and its destination, the distance between them and the impact of transport cost on the demand of the product at the retail store. This model helps us to systematically estimate as to how much demand a given outlet will likely draw from each market area. This may help us in estimating whether the sales can be expected to increase with any of the following factors and variables: 1) Attractiveness (e.g., square footage) 2) Demand 3) Distance (or cost of distance) between them 4) Nearby destinations etc..

Geo-demographic Marketing Approach: This approach to marketing recognizes that some part of the retailer's market may be highly fragmented geographically.

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Further customers respond strongly, across various distances, to some specialized attribute of the retailer. While the location of the retailer may not be affected, geographically targeted promotions (e.g., direct mail) may be arranged on the basis of geo-demographic data, targeting individuals by targeting neighbourhoods. Further we can use geographic analog reasoning with the following possible scenarios: 1) Customer spotting to determine the sources of current customers. 2) Identifying the generalized characteristics of the neighbourhoods or zones housing concentrations of current customers. 3) Identifying other neighbourhoods or zones, with similar generalized characteristics, to target.

Activity 5 Visit a few of the stores selling kidswear and toys. After observing the location make a list of the factors which differentiate the location decision of a retailer of kids apparel and accessories and a children toys and gifts shop?: ………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… … SUMMARY The unit discusses the importance of location decision for an existing and one who is prospecting. Then we evaluated various levels of location decision and its determinant factors. Then we went on the discuss about the various types of retail locations followed by the some of the common location assessment techniques used globally. Finally we discussed about the various retail location theories, techniques and aspects of identification.

KEY WORDS Analogue approach: A method of trade area analysis also known as the"similar store" or "mapping" approach.

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Chain store: Any retail organization that operates multiple outlets offering standardized merchandise mix driven by a centralized form of ownership. Location analysis: The use of demographics, economic, culture, demand data etc. to determine the area where a retail store will be placed. Location: It is the area in which the store is situated and its trading area but a site is the building, or pat of the building in which the store is located. Retail Format: The total mix of merchandising and operating tactics, practices used by a retail firm to distinguish and differentiate itself from retail competitors. Strategy: It is the process of identifying organization-specific asses, understanding the organization's environment, and then deciding how to deploy or augment assets to earn the greatest return.

SELF ASSESSMENT QUESTIONS 1) Make a list of the various ways in which local markets areas are delineated? Further describe the variables used in screening of site alternatives? 2) Elaborate on the significance of locational decisions for an upcoming construction specialty mall coming up in your neighbourhood? 3) Describe the role of traffic arteries and lanes in determining the evaluation of a retail site? 4) Describe the role of the two locational theories and retail market Identification in the emerging Indian retail context?

FURTHER READINGS Birkin, M., G.Clarke, M.Clarke, and A.Wilson. 1996. Intelligent GIS: Location Decisions and Strategic Planning. New York: John Wiley & Sons. 69 Locational Decisions 70 Retail Planning and Development Ghosh,A. and S.McLafferty. 1987. Location Strategies for Retail and Service Firms. Lexington, Mass.: Lexington Books. Jones, K. and J Simmmons. 1990. The Retail Environment. London: Routledge. Thrall, G.l.,.C.de) Valle, and G. ffbuzmaoo. 1998. Retail Location Analysis, Step four: identify situation targets. GeolnfoSystems 8(6): 38-43. Thrall, G.I.J.C.del Valle, and G.Hiuznouoo.l9g8.Retail Location Analysis, Step five: assess market penetration. GeolnfoSystems 8(9): 46 - 50.

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UNIT 5 GROWTH STRATEGIES understand what drives growth in retailing, imperatives and enablers for retailing in India; appreciate the need for strategic retail management and planning; evaluate the need for stating organizational objectives that can serve as a focus for the firm's present and future growth plans; identify the existing opportunities available for growth and the relevant strategies that can be evaluated with respect to category /format portfolios; appreciate the importance of category management and promotional mix; and understand the dynamics of services retailing.

What are the Key Growth Imperatives and Enablers The Need for Strategy Formulation Organisational Objectives Driven by Planning Strategic Options Available to Retailers for Exploring Opportunities The Indian Context of Retailing Significance of Category Management as an Strategy Tool Role of Promotional Mix in Retail Strategy Services Retailing: A Growth Area

INTRODUCTION As you would concur that though retailing, an essential part of the supply chain has been a part of the Indian ethos for long, its status has not changed much with the evolution of the Indian economy. The effect of organized retailing is indeed visible in the developed economies, where it is used as a barometer of the pulse of the economic health having spin-off effects on manufacturing and range of services in general. In the Indian context, the scope of employment generation complemented with higher tourism inflows leading to greater spends is also being driven by a growing consumer class with disposable incomes, changing life-styles, increased awareness of consumer rights and acceptability of various retail formats This portends well for the domestic retailing industry. Further the factors driving retailing like better business-operational effectiveness, services orientation etc. promise to herald interesting times for this industry here. As you would agree, the role of strategy is central to evolution and sustenance of a viable operationalbusiness model in retailing. The very drivers of change namely demographics, industry structure, role of IT, sourcing, pricing, consumer service expectations, need for experimentation, proliferation of private brands demand a mix of short-term and long term strategies specific to formats across categories.

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The need for a retail strategy is important from the point of view of focussed resource utilization in this era of consumer activism and competition.This is driven by the fact that the existing multi-level distribution system, even in major metros in the country operates efficiently at margins between 10%15%; whereas super markets on the other hand run on wafer-thin margins after accounting for typical overheads like property, labour, air-conditioning, lighting, interest costs etc. WHAT ARE THE KEY GROWTH IMPERATIVES AND ENABLERS The imperatives for the growth of retailing in India as you need to understand are as follows: Need for Attaining Scale within Local Regions/areas. The existing retailers need to scale up fast, particularly in grocery segment where high over-head costs are justified for slower expansion. The onus will not only be on becoming multi-format in nature but also adopt different models for penetrating second-tier cities and towns with a common back-end. •••••• Example: the RPG group using a common back-end for both its Foodworld groceries supermarkets chain format and its new Giant "hypermarket" format store. Getting the Operational and Sourcing Elements in Place. Sourcing is very much the bane of the local retailing industry, particularly in the food and staples category on account of significant intermediation with no value-addition which needs to be done away with. The aspects of sales density and sales-staff productivity also need attention from an operational point of view.

Need for Greater Funding and Organisational Capabilities Enhancement. None of the existing retailers have the level of sophistication and financial strength for an aggressive rollout, though it is evident they are still in proof of concept stage with capability to scale up faster sooner or later. This does provide the opportunity for new players to steal a march over the current breed of pioneers.

Need to Keep Pace with Globalisation. The fact that the retailing industry has not been open to foreign direct investment (FDI) is indeed a blessing in disguise for the local players to get their acts right in terms of matching the standards of international retailers especially in value based retailing, operational efficiency, category expansion, teehnology and innovation.

The emergence of value-based retailers will be key to the robustness of the local industry as internationally they have been able to establish benchmarks across the following areas:

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Operating practices translated into better prices for consumers enabling higher sales density, productivity, cost optimization. Increased focus on operational efficiency through adapting best practices from other industries like for Example: lean manufacturing practices has helped achieve in-store operational efficiency thereby increasing sales, reducing inventory and cost substantially. The huge consumer franchisee that retailers have managed to create has given scope for them to explore new categories using different formats leveraging their sourcing and technology skills.

You would also support that the above imperatives demand the following key enablers: 1) Ready availability of real-estate with easier zoning provisions. 2) According industry status, allowing FDI investments and removing bottlenecks threatening to impede the growth of this sector. 3) The need for concerted government-private sector efforts to enable creation of more technical institutions for man power training. 4) Reducing taxes on luxury goods to create retail centered tourists destination. 5) Tax rationalisation through implementation of VAT and necessary regulatory streamlining. 6) Facilitate creation of a financial model/framework that looks at core processes like foot-falls generation, conversions and average transaction value, customer acquisition costs, sourcing costs, merchandising costs, shrinkage costs, localization costs. ,

THE NEED FOR STRATEGY FORMULATION The steps involved in the formulation of a viable strategy which we need to identify are: 1) Defining the business scope of the entity with respect to category-consumer market focus. 2) Identification of goals and translating it into objectives driving profitability and brand image. 3) Implementation and revising of plans encompassing aspects of retailing like pricing, location and channel decisions, logistics planning, systems integration and environmental dynamics.

The Need for Strategy-Formulation to Organizational Planning The organizational planning requirements which you need-to understand spans across the following levels: Corporate level Divisional level Operational level Departmental level

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Corporate level planning Development It involves the top management team comprising the CEO,President,vice presidents and their support staffs. This team lays down the broad contours of the organizational intent, internal communications based on their intuition, experience and analytical judgement. Divisional level planning It involves planning at the individual format/category/sub-category level so on. This is necessary as each of the above has a focus market with its own market dynamics, also care needs to be taken that the SBU level planning fits into the overall corporate strategy theme. Operational level planning At this level we need to be aware that plans are formulated for stores depending on category-format mix in terms of merchandise mixes, merchandise logistics systems, store layouts, store HR programs, customer communication policies. Thereby tactical plans in terms of execution and control are executed. Departmental level planning It focusses on implementable aspects of directives identified at Corporate, divisional, operational levels. The departmental managers decide the merchandising plans across categories. Thus a comprehensive strategic retailmanagement initiative as you would appreciate involves the following: Organizational planning strategic planning of processes strategic retail planning

Organization mission environmental, resource capalbilities distinctive capabilities, managerial preferences

Organizational objectives market, financial and social objectives

Organizational opportunities market penetration, development of products, choice of integration, diversification etc.

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Make a visit to your nearest departmental store/supermarket and after mapping out the categories/sub-categories prepare a list of the growth enablers across categories. Follow this up with discussing with store managers/categories managers the broad strategy guidelines and organization structure and key roles responsibility ORGANISATIONAL OBJECTWES DRIVEN BY PLANNING The whole exercise of organization planning should drive in attainment of organizational objectives, which are purposes seeked in terms of market growth, financial viability, social responsiveness. 1) Marketing Objectives This involves gaining customer patronage through directed sales, loyalty programmes, traffic management. Competitive aspects of market share, retail image and vendor relations. •• 2) Financial Objectives • Profitability aspects in terms of returns, Earning Per Share, investor dividends. • Productivity aspects of labour, space optimization and merchandise management.

3) Societal Objectives • Corporate social responsibility and values.

Continuing your discussion with the store manager/consumer relationship manager understand the role of marketing, financial and societal objectives in shaping the organizational objectives. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................... STRATEGIC OPTIONS AVAILABLE TO RETAILERS FOR EXPLORING OPPORTUNITIES Self-analysis is important for every business in today's competitive business environment. A extensive self-analysis will help understand one's strengths and weaknesses to seize opportunities and mitigate risks in the retail environment. This must also include competitors analysis. In performing self-analysis, a retailer must consider the, potential areas for developing his competitive advantage as listed below: Management Capabilities • Capabilities and experience of the management • Depth of management-capabilities in middle management

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â&#x20AC;˘ Management's commitment to retail. Financial Resources Cash flow from existing lines of businesses/categories Ability to raise debt or equity financing

Operational Effectiveness Overhead cost structure Quality of operating system Distribution capabilities Management information systems Security system and inventory control system

Merchandising Capabilities Knowledge and skills of buyers Relationships with vendors Capabilities in developing private label brands and Advertising and promotional capabilities

Store Management Capabilities Ability to select and train sales associates Build commitment of sales associates with respect to the firm

Locational Setup Gain advantage with respect to location and size

Thus, we may all agree with the that the increasing trends of globalization in retailing industry has resulted in firms seeking new opportunities for growth through the following options: Horizontal Integration Where ownership or control of firms is seeked at the same level within the marketing channel. This seemingly provides access to a wider consumer base minimizing the cost of consumer acquisition initially.

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Example 1: In the retail banking sector, essentially a case of financial services the merger of Bank of Madura with ICICI Bank for expanding the clientele of retail customers. Example 2: The acquisition of Grindlays bank by Standard Chartered bank to expand its retail banking Customer base. Vertical Integration Forward integration where the attempt is to acquire organizations or new channel opportunities. This helps in having a control over the end consumer through better understanding of his needs.

Example 1: The acquisition of IPCL by Reliance Petroleum Ltd. To get a foothold into petro-retailing. Backward integration where the attempt is to control the supply systems through ownership/controls of any type. Example : The acquisition of Indus league by pantaloon is case of backward integration. New Product Development Where retailers are exploring new product areas complementing existing ones.

Example: Snowhite which has been traditionally a garments retailer specializing in winter wear has recently pioneered the concept of self-service office stores,which is a limited edition of the international "office depot" stores. Concentric Diversification When firms acquire businesses possessing technological or marketing complementing aspects; this option is considered less risky on account of lower entry barriers.

Horizontal Diversification When firms seek creation of new SBU's appealing to organisation's current customers though they may have to do little with its existing technological know-how.

Example 1: Shopper's stop which began selling apparel and related accessories also started retailing branded jewellery, eye care products and books and music/ video titles. Example 2: The foray of RPG Group into hypermarket format with "Giant" complementing the supermarket format stores: Food World chain with a wider range of SKUs and more bargaining power with manufacturing brand owners. Example 3: The aspect of convenience stores like "convenios" and "in & out" by BPCL and HPCL dealing in daily use grocery items also helps them in space optimization and complements their typically low margins business of gasoline.

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Conglomerate Diversification The firm seeks to expand by adding new businesses that are totally unrelated to its current SBUs with a view to appeal to new markets.

Example: The diversification of the S.Kumar's group which is basically into textile business has forayed into setting up e-commerce franchisee centers though it fizzled out on account of high capital cost and the eventual dot corn bust. New Services (brand extensions) The range of services could be part of providing a complete experience like having a snacks outlet, coffee shop, express service counters etc.

Example: McDonald' having drive-in express counters for faster service complementing the in-house family experience with kids corner's etc. Expansion (strategy) This strategy is the ramp-up of footprint across a region or nationally. The likes of this strategy has been adopted by most of the major retailers across groceries, life-style, home furnishings etc. Example: Raheja's Shopper's Stop, RPG's Food world, Pantaloon etc. 78 Retail Planning and Development THE INDIAN CONTEXT OF RETAILING In India as we would all concur that the retail merchandising has come a long way. Since the days of neighbourhood Kirana stores stocking everything from groceries to stationeries. Southern India actually saw the birth of organized retailing from where it spread its reach across the sub-continent. Almost all the major national retailers have their presence across key southern cities and towns. The presence of many international readymade garment brands forayed the Indian market through franchise route on account of restrictions in setting up direct retailing operations is indeed a indicator of the potential of this sunrise sector. Firms like Benetton, Arrow, VanHeusen, Weekende, Raymonds have taken a significant lead through this route. Further apart from these there has been a emergence of other departmental stores like Ebony, SnowWhite, Big Jo's Jainson's, Landmark, Shoppers Stop etc. These stores typically cover around 10,000-30,000 sq.ft and are multi-level. Most of these stores stock variety of luxury goods ranging from garments, related accessories, books, stationery and electronic items among other things. Further these firms also lay emphasis on marketing their private labels for various product categories along with the national and international labels that they merchandise.This has helped a few of these firms to achieve economies of scale and seek expansion plans for the future. The current breed of retailers across the following formats/categories: Departmental stores (Ebony, Shoppers' Stop, Life Style, Pantaloon etc.)

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Discount stores(Subhiksha, Margin Free Markets) Speciality Stores (Gautier,Vivek's,Titan etc.) Super Markets and Hyper Markets( Food World, Giant, Big Ba7aar). Apparently we seem to be in a position to evaluate the above strategic options on account of the moderate success they have had in their respective formats/ categories. Further the mode of customer engagement also makes available options to retailers whether it is through electronic catalogues (for non-store retailers), direct mailing retailing, direct selling, TV shopping and vending machine retailing. Thus the current crop of local and emerging players will need to evaluate the above discussed strategies sooner or later to avoid being caught napping once the sector is formally open to FDI. Let us also accept the fact that India being a huge agrarian economy needs retail models that are viable in rural areas run by strong private-government partnerships etc. Retailing in Pharma (healthcare), Consumer durables, laundrette services, auto care etc. are fast emerging in the Indian scenario. Visit a few retail chains selling through various formats like Shop-in-Shop, flag ship stores formats. Then identify the scope of various diversification and integration strategies that can be evaluated and implemented after talking to store managers /customer relationship managers. SIGNIFICANCE OF CATEGORY MANAGEMENT AS AN STRATEGIC TOOL Category Management -A Perspective A category as you need to understand is the basic unit of analysis for making merchandising decisions. The role of category management is to systemize product groupings into strategic units or, category so as to meet the consumer and organizational expectations better. We may appreciate that category management drives retailers to device merchandising strategies centered on management of time, cost and merchandise mix. Broadly, the relevance of category management as is seen as driven by multiplicity of brands across product categories and the SKUs width available. Further the role of category management in a evolving market like ours demands long-term relationships,quality,pro-activeness, flexibility to internal and external changes, code of standard practises among all the key-stake holders namely the retailer, vendors/suppliers. The supplier on his part needs to ascertain the following before tying up with any of the retailers. State of the Relationship Whether the relationship is open and honest? What type of dialogue do the two partners have? Is there an acceptable level of trust to allow sharing of information?

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Knowledge of the Retailer The retailer's understanding category dynamacs, objectives and operational style?

Resource availability and Competitor Activity The retailers capacity to expand, his risk appetite quotient assessment'? Whether a new relationship is seeked to offset the influence of a key competitor?

Category Performance Opportunities and Profitability Aspects Whether the category is over or under performing, whether the retailer(s) is in a position to build upon his advantage in that category(s)? Whether the retailer has some measure of how much he needs to invest more in a growing category?

Thus you need to understand that to get an complete overview in terms of assessment and comparison between a number of customers an "Account Attractiveness Scorecard" is recommended for the supplier. 79 Growth Strategies • • • • • • 80 Retail Planning and Development • • • • • • • • • • • This brings us to the concept of "Customer Account Profitability" which enables the supplier to identify and clarify the real trading costs associated with a trade customer. Thus helps us to genuinely measure the customer's actual profit and the value of the trading relationship. CAP (Customer Account Profitability) consists of the seven different cost categories which are as follows: Discounts on trading. Producing costs. Overriders. Promotional costs specific to accounts Costs of distributing and financing. Selling and support costs specific to accounts.

Thereby the net customer contribution is reached after the seven customer related costs have been taken from the gross sales value. CAP when used in combination with other non-financial data can be used as performance measure enabling suppliers/vendors to rate their retail partners and mutually work out performance improving Initiatives. This is done using a decision matrix. Similarly the retailer needs to assess the prospective supplier(s) through the following criterias: Objectivity and Relationship

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The supplier's ability to take an holistic approach to the category role even if it is at times detrimental to his interests. Supplier recognizing that working with him is an investment for the betterment of both in long-term.

Skills, Resources and Trading Reputation Whether he has ample resources to commit for carrying out a category specific plan (ability to analyse data, identify opportunities and contribute to the retailer's category management initiatives). Whether he has proven track record of being a good service provider, invesing in product development and understanding the retailer fit and own label in the category.

Alignment Whether he can be a long term partner aligning his organizational structure, culture, goals and objectives with that of the retailer.

Thus the retailer can evaluate the supplier the same way the supplier evaluates him Further there needs to be clarity on who is driving category management strategy, execution in the retailer structure /organizational hierarchy, the accompanying changes requires internally to make this happen. This needs to be complemented by departmental responsibilities in the supplier's company (ies) across sales team, trade marketing teams, buying and trading teams, category management teams. For example in biscuits-snacks segment where in a typical grocery store may stack ITC's Sunfeast, Britannia's Marie gold, Priya gold biscuits, Parle and other 81 Growth Strategies • • • • • • • • • • • local brands the retailer needs to change the merchandising mix and rganizational focus specific to the category. Thus the essence of category management as we all would appreciate are the following drivers: The stacking to be done as consumers would themselves stock the shelf themselves. The basis should be on time, space and product benefits driving multiple item purchases as it is at core a proprietary set of decisions than a standardised practice. It should strive to maximise consumer value centered around the competitive environment in its area of operations. It is a strategy of differentiation in its area of retail operations. Understanding the cross-categories dynamics and role in influencing buying.

Keeping all the above activities in mind, we can say that these are potential drivers for growth in retailing by using some consumer centric tools like:

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Pricing brand Product sizing Packaging types Understanding usage occasions Product attributes Retail

An illustration of broad category management strategies available for Indian retailers: Traffic builder-draws consumers into the store Transaction builder-increases average size of transaction. Turf builder-defends sales and market share from an aggressive competitor. Profit generatorincreases profits-margin and contribution. Excitement generator/creator-communicates surprise, awe and builds enthusiasm to shopping experience. Cash generator-generates cashflow (normally at lower margins). Image creator-communicates the retailers' desired image he wants to create in the mind of the consumer in areas like innovation, even around a brand, quality, variety and price. Visit a set of departmental stores, supermarkets and list out all the broad categories and subcategories. Extrapolate this to evolve a strategy centered around category management. By drawing out which is a traffic builder, turf builder etc..? ROLE OF PROMOTIONAL MIX IN RETAIL STRATEGY The strategy for the right promotional mix as we all may concur should help in fulfillment of objectives pertaining to increasing store traffic,increasing the shareof-wallet,driving category specific sales thereby helping in development of the store brand. The choice of the various communication vehicles: advertising, sales promotions, public relations campaigns and personal selling depends on the type of product retailing and services retailing offered. The key focus of promotions we need to appreciate is centered around control, flexibility, credibility and cost of managing it. We, thus go about looking into the detailing of each of the communication vehicles. Advertising Persuasive advertising (health and wellness clubs,hospitality industry). Corporate advertising (financial service providers sponsoring a particular magazine or an advertorial circulated to specific corporates about the services rendered by the financial service provider).

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Informative advertising (a practise of consumer durables firms informing prospective consumers of the features and related benefits of the product). Financial advertising (ads released by mutual funds, banking entities, insurance firms informing investors of product features, inherent risks and benefits). Classified advertising (in book catalogues offering sale of products, services etc.) ••••• Sales Promotions Sales promotions is typically the peak season/ off-season activity where there may be a discount on the product or freebies given on purchase. It may also be clubbed with a complementary product or service. The tools of sales promotions is used for new product introduction and to drive down the prospect of significant inventory cost as sales promotions cost eventually less than working capital likely to be locked for excess inventory management. A note of caution is that sales promotion has to be used prudently as repeated use particulary in midpremium and premium brands/niche-categories can adversely effect the brand equity or salience. Public Relations Campaigns The use of this marketing/promotional tool is used for enhancing the corporate brand image in a competitive market/category to differentiate the retailer from his contemporaries. Public relations exercises are targetted towards the key stake-holders namely customers(vendors), consumers, investors, influencers, employees etc. seeking to build a holistic image of the firm's soft and hard competencies in the long-run. 82 Retail Planning and Development Personal Selling Personal selling though some may argue does not happen in the organised retailing, the success of well-known retailers has clearly established the fact that the "personalized selling" experience is what helps maintain consumer interest in the long term and helps the retail brand maintain an above industry growth rate even during economic downturns. As a marketing manager of a new lifestyle departmental store you are entrusted with the task of designing the launch campaign. Prepare a detailed list of activities which you would undertake and the sequence of these activities. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. ................................... SERVICES RETAILING: A GROWTH AREA Services retailing as, you would have learnt appreciate has seen significant growth across financial services, healthcare, hospitality, IT products and entertainment sectors in India. Service retailing encompasses the following aspects:

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Nature of Service Retailing dimensions of service which encompass providing the consume complete information thereby enhancing his experience. continuity of services where the emphasis is on "people, ideas, and information instead of tangibles". There is no distinction between the goods made available and the complementing services provided. Types of Service Retailing offerings like business services, personal services, repair services, health services, social services, educational services, legal services etc. which have their unique operating characteristics depending on the basic skills required to render the particular service.

Importance of Service Retailing The premise for encouraging the growth of services retailing lies in the effect it has on the economic data, primarily GDP and employment numbers.This has significant implications for a nation like India with millions joining the employable age every year.

Strategies in services retailing are centered around the following: creating tangibility through visual representation, physical/mental symbols, name associations and service-line extensions.

Example: McDonald selling Burgers etc through express counters complementing its in-store "family experience" positioning. controlling variability through service counter and quality. making the product and service inseparable through direct-channel (consumers go to suppliers and vice-versa) and indirect-channel delivery system(consumers go to suppliers and vice-versa through a intermediary or service agent). Example (direct channel delivery system): Banks putting up service counters in shopping malls, airport lounges or large departmental store. Example(indirect channel delivery system):insurance agents, travel ticketing agents, stock and employment agents. Negating perishability through lower pricing of services to increase its usage; develop reservation systems to schedule the supply as per consumer demand to maximize the service provider's output and lessen consumer confusion. Enhance profitability through better internal resource utilisation exploring price-setting methods and key determinants depending on circumstances. Communicating to the internal and external audience using the appropriate message and media.

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Thus the role of strategy in services retailing has to be centered around the services mix, support elements and complementary goods. Activity 6 Make a visit to a few hospital, fast-food chains, banks or any other service provider in your Area/Location and speak to the customer services to understand the role of service elements as part of the overall customer expectation determining his experience also try to understand how it affects branding of the product. 8.10 SUMMARY This unit focuses on the role of strategic retail management and planning in depth by the emerging retailers across categories and appropriate corrections that need to taken care which may need revisit of organizational objectives. Further we discussed the various strategies that retailers can adopt. The role of portfolio management as key strategic tool is emphasised. Eventually the role of promotional mix as a key retailing tool has been explained as a criteria for growth and sustainence. We concluded the unit with discussing the significance of services retailing. A mention on the significance of services retailing has touched upon. KEY WORDS Advertising: An indirect, impersonal communication carried by a mass medium and paid for by an identified retailer. Backward Integration: The process of gaining control of one's supply chains. 84 Retail Planning and Development • • • Brand Extensions: The process of leveraging a brand name by bringing more products under its fold. Category: It is defined as "the logical groupings of products for example on lines of consumer taste preferences and product characteristics where a reasonable substitution is seeked by consumer." Category Management: Defined as the process of managing a retail business with the objective of maximizing sales and profits of a category rather than the performance of individual brands so on. Customer Account Profitability: It is defined "as the disciplined approach to quantifying and understanding the relevant aspects of the trading relationship with any prospective/incumbent customer or group of customers. In particular it seeks to set the costs of serving a customer outlet against which it generates. Cash Generator: A strategy for a category to achieve high cash sales and frequency of sales. Cross-category Analysis: An assessment across two or more categories to explore their relative strengths and weaknesses. Demographics: Information about population in terms of age, sex, income, household size etc. Excitement Creator: A strategy for a category which stimulates interests in consumers through impulse appeal, for example it may be a lifestyle opportunity or seasonal offering

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Forward Integration: An expansion strategy aimed at acquiring a greater consume base through acquisition of complementary marketing channels/entities. Hyper Markets: Typically a huge super store format with area averaging 2.2 lakhs square feet featuring a line of products across soft, hard and perishable/ consumable goods. Image Enhancer: A strategy for a category which seeks to enhance the image the retailer wants to create in the minds of the consumer. Inventory: The average level of a stock at a given point of time at a point in the supply chain. Profit generator: A strategy for category to achieve profits higher than any other category. Retailing: The business activity of selling goods, services ora combination of both to the end consumer. Retailing Formats: The process of identifying, evaluating and choosing a particular layout in term of size, location, look for selling a range of merchandise logically grouped under categories so on. Retail Promotion: It is defined "as the integrated communications targeted at informing, persuading the target market about the marketing mix of the retail entity". SELF ASSESSMENT QUESTIONS 1) what is the significance of strategy in retailing industry? 2) State what the organizational mission of a financial services provider will look like?

3) "Lister" a firm into food and groceries retailing across formats can you explain what would be broad contours of the strategic planning exercise and the role definition of top and store level management executives? 4) What would be the guiding objectives of an financial services provider and the guidelines of the planning process? 5) "Prius" a speciality food retailer. It plans to span the whole range of foods retailing from convenience foods, health foods, ready to oat, vegetable and fruits and processed foods. Formulate a category management framework and guideline policy with the role play definition of top level management and store level executives? 6) Create a retailing organisational framework and the process of creating portfolios of products for an entity which wants to migrate from steel manufacturing focus to retailing focus as an SBU? 7) Outline the importance of services retailing and explain what needs to be done to explore its full potential in India?

FURTHER READINGS Retail Management by Chetan Bajaj, Rajnish Tuli and Nidhi V Srivastava.(Oxford University Press). Retailing by Dale M. Lewison (sixth edition-Prentice Hall). Michala Jarvis Jon Woolven. (IGD Business Publication).

Category Management In Action by

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UNIT-6 PROMOTION AND COMMUNICATION MIX describe the basic tasks of communication; discuss the steps involved in developing a strategic IMC strategy; and understand Sales promotion in Retail and its various types.

Reasons Governing the Change in Customer Attitude Retail Marketing Communication Basic Tasks of Communication Integrated Marketing Communication: The Concept Steps for Designing and Effective IMC Strategy Positioning of a Retail Store Store Atmosphere and Visual Merchandising Retail Promotions Promotional Objectives Types of Sales Promotions Role of Salespeople and Sales Promotion Self Assessment Question

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INTRODUCTION From times unknown, retailers have tried to attract the customers towards their products and services and more importantly their store through novel methods. At one point of time, few decades back the retailer seems to know the names of the customers as well as their nature of purchase. On the other hand customers used to associate themselves with the specific store based on the relationship they had, with the retailer. That was an era which was marked by lesser number of stores as well as, equally lesser number of customers. Over a period of time things have changed drastically to make the customers more demanding. To make things grimmer, there has been a quantum jump in the number of stores as well as individual sizes of major stores. All these factors have led to a situation whereby, the customers are on the lookout for the best bargain. The purchase decision is just not based on relationship but on hardcore monetary gain and the experience quotient derived out of the shopping transaction. marketing communication a significantly critical area from the source point of view. This is because, customer visits are perception based in the first instance and there onwards it is based on their own experience. Whether it is a matter of perception for a first-time visit or a satisfying experience within the store and a sense of happiness for transacting with the store, all depends upon the marketing communications strategy of the store, REASONS GOVERNING THE CHANGED CUSTOMER ATTITUDE Scarcity of time: Majority of the families are dual earning and have various commitments to attend. They thus face paucity of time to invest in purchase transactions. With increasing distances a major part of the consumer time is consumed in commuting. This leads to an increase in time cost for the customer. Thus, they have become very conscious about the time factor. Lifestyle and Status: Customers in general have developed 'a great sense of individualism. People follow distinct lifestyles and would not like to compromise there. This leads to an intensive search by the customer for specific product types and styles. Thus the customers would like to confirm whether the retail outlet has a perception amongst the customers which matches their preference. The retailer should take this scenario in his stead and sincerely work to establish a positive image. At the same time it should be his endeavour to communicate to the customer about the range of products and services which can satisfy the customers at prices which suit the customers. RETAIL MARKETING COMMUNICATION All means adopted by a retail store to communicate a store specific message to the customers constitute the retail marketing communication. Therefore we can say, whatever, a store does to communicate to the target audience regarding the visit worthiness of the store can come under the broad heading of retail marketing communication. BASIC TASKS OF COMMUNICATION 1) Intimate the customers about the presence of a store or outlet. 2) Invite them to visit the store and make it really an attractive proposition to do so. 3) Amidst all the media clutter make a consistent effort to remind them to do so.

It has often been experienced that some promotional schemes have been introduced in the market by manufacturer's brand. This is backed by heavy advertising and publicity. However when the customer

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goes to purchase the same brand he either does not find it available or more surprisingly, the store is not aware of the scheme being offered. This anomaly or inconsistency can be minimised by the integration of the communication strategy. The primary function of any marketing communication strategy is to increase footfalls in the store. This footfall can be increased by informing the customer about the store and motivating him to do so. Differentiation from competitors is also a major function or marketing communicationâ&#x20AC;&#x17E; Here it is worth mentioning 36 Retail Mix 37 Promotion and Communication Mix that marketing communication strategy will be very different for large retail chains vis-a-vis single unit retail stores. A large retail chain based on multiple geographical locations has diverse audiences to address to. Thus the communication strategy can be fine tuned as per need of the store. However it is very important to remember that even in case of fine tuning of communication strategy the identity of the store remains the same. Strategy has to be such that the image and identity of the chain remains the same. INTEGRATED MARKETING CONMUNICATION: THE CONCEPT Integrated marketing communication consists of a quiver of communications tools. It includes: It would include all paid forms of nonpersonal presentation of ideas to promote the store. Advertising gives a reason to buy from the specific store to the customers. Here, we can include all the advertisements in the press, television and all other forms of media. The latest type of advertisement in the press is known as advertorial. In this case a detailed report is prepared and presented in the form of a press report in the newspaper, which is actually not so. These reports or other promotional material are presented in an innovative manner so that, the customer (reader) takes it as a genuinely covered press, report. Sales Promotion It includes off-season discounts, off-season sales, free gifts, most valued customer schemes etc. Sales promotion givesâ&#x20AC;˘ an incentive to buy from that store as against the mission of advertising to give a reason to buy. It has been seen over the years that sales promotions have been successful in boosting sales even if, for the promotion period only. Retailers must be cautious while introducing such schemes as, it leads to counter schemes by competitors towards as well as a sharp dip in sales after the promotion is over. Publicity All activities which give some sort of positive or negative image on the basis of activities done by the store come under the broad heading of publicity. For instance, if a big retail store (foes some charitable activity to help some underprivileged cross-section of society and, it generates media interest, which leads to media coverage then, we can term it as publicity. It has been experienced that publicity is more effective in tone for promotion than advertising. However, stores should refrain from getting into controversial areas to avoid any negative publicity which may adversely affect its image amongst the target audience. Direct Marketing All forms of store promotion through brochures, catalogues and Internet can be categorised under the broad heading of direct marketing. Direct marketing has been very popular in Western countries but not so in India. It has been seen that, transactions through the net have not been that popular in India. Reasons can be attributed to problems related to product delivery and payment while transacting through net. However, we must bear this in mind that in comparison to advertising, direct marketing

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proves to be a cheaper and effective medium for store promotion. The greatest advantage of direct marketing is that, it not only draws attention of customers for visiting the store but, also presents an opportunity to buy products over the phone or through the Internet. 38 Retail Mix • • • • Personal selling is an integral part of integrated marketing communication. When a store uses its sales force to give personal attention to the customers and follow-up in a personalised manner it becomes an effective tool for store promotion. At times store personnel do visit customers at their residences to develop an intimacy and obviously, promote the store. Public Relations The image a store develops through its public dealings like interaction with the customers, enthusiasm amongst the store employees and customer's grievance handling mechanism constitutes public relations or PR. The concept of integrated marketing communication (IMC) as it is popularly known simply states that all the tools of marketing communication mentioned above should be used in tandem to achieve the organisational goals. Further, you should appreciate that all these tools have their own unique characteristics to communicate the specific message in a distinct manner. You should understand that all these tools when applied together or in short intervals should never deliver a different message or image of the store. For example if a particular retail store hires top notch models to inaugurate the store backed up with a jazzy advertising campaign, it definitely carves out an image in the minds of the customer. However, if the customers perceive through word-of-mouth communication that the store does not offer such premium products as was expected in line with the image formed, it may result in a sharp decline in footfalls in the store. Similarly after such an advertising campaign if the publicity generated by the activities of the store is unable to match the image, even then it will lead to a fiasco for the store. The bottom line there is all the tools of marketing communication have to perform in a co-ordinated manner as instruments in an orchestra. We can put the retail store at the core of this mix at the time of need arousal, the customer has several questions. These questions can be Which product to buy that satisfies the present need? Which brand of the product buy? Which store to purchase from? Whether to purchase from a single store or compare the offerings at various stores?

Many communication variables influence the decision to do shopping at a particular retail outlet. Given the fact that there that multiple retailers and multiple products trying to convince the customers with the messages, the role of marketing communication becomes very critical. STEPS FOR DESIGNING AN EFFECTIVE IMC STRATEGY For developing a proper IMC strategy a retailer must follow the following steps: 1) Design the marketing objectives 2) Devise the communication objectives to achieve the marketing objectives 3) Situation analysis

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4) Design the marketing communication strategy 5) Prepare the budget 6) Implement the marketing communication strategy 7) Review the results and compare with targeted results 8) Corrective measures

Design the marketing objectives Each retail store understands what it requires, to not only survive in the competitive market but also earn profits. In this context what sort of marketing objectives the store should have is to be decided as the first stage. Marketing objectives may change as per the market situation and level of establishment of the retailer. A well established retail store would not concentrate on spreading awareness amongst the consumer segments where as a new and upcoming store would like to do so. Objectives of a Retail Communication Strategy Communication strategy of any retailer is based on his marketing objectives. It would depend on the retailer whether he is interested in getting a big footfall and many customers visiting the outlet or interested in very specific preference customers visiting and also buying from their store. More importantly some retailers initially aim for a big footfall so that the store gets the maximum visibility; thereon they try to focus on their target segment with specific communication signals. Communication objectives can be both Long term as well short term Long term Communication objectives: These are those communication objectives which any retail entity would not like to change in the short run. These goals are not achievable overnight. At the same time it is worth mentioning that once achieved these goals cannot be won over by competitors in the short run until and unless some thing drastic happens. Long term objectives can be creating a strong brand image for the retailer or creating brand loyalty. Short term Communication objectives: These objectives keep on changing as per the changing market scenario. Such objectives are necessary from a promotion as well as competition perspective. Supposedly the retailer wants to increase footfalls he can design a communication which can attract traffic to his outlet. During the festivals or monsoons one can design strategic communication aimed at specifically increasing the sales. Devising communication objectives The first step in the strategy of designing communication and promotion strategy is to have the marketing strategy in place. Marketing objectives can be designed out of the marketing strategy. A retail store new to the market may like to have a strategy to have a good penetration in the market. For this his objectives can be maximisation of footfalls as well as increasing awareness about his store among the audience. However on the other hand in case of an established retail store the strategy can be well very different from the small store. A well established large store can think about having an up market image in the target segment and therefore go for premium pricing as well as premium branding. Test case can be of a retail store dealing in seasonal goods like garments. Such a store has to have a very different strategy since, his dealing and transactions will be limited to a

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specific duration of the year. Marketing objectives can be for instance, an increase in sale by increasing footfalls, it can also be, restriction on footfalls by having premium pricing of the products available in the store. More important than having a marketing strategy or an objective in place is to communicate the same to the customers in the most convincing and persuasive manner. Once the marketing objectives are in-place, the retailer has to concentrate on 'what to communicate to the customer so as to the marketing objectives which in turn will finally make his marketing strategy successful. Most important part of communication strategy is the fact that, what message is to be given to the customers so that they think in a way, the retailer wants them to. For instance, you must have seen big advertisements of sale given by various retail stores as well as showrooms. However, at the very first instance when you see that advertisement, you have a feeling that this is a false statement. This is due to the fact that over a period of time customers have been exposed to various advertisements and promotion schemes where they have not been benefited to an extent they would like Therefore with that sort of experience curve the customers would never like to get into such a net. The onus therefore lies on the retailer to communicate to the customer in such a way that they are convinced about the origin as well as authenticity of the message. Situation analysis Once the marketing objectives as well as communication objectives are in place next step is to study the market situation. After conducting situation analysis a retailer may come to know that he has to fine-tune his message and change the media vehicle to achieve the communication objectives. It can be possible that, before launching any promotional scheme a retailer comes to know that a competitor is already launching 4 much more aggressive as well as valuable scheme from the customers point of view. If the retailer would have launched his scheme he would have been a big loser after the counter scheme launched by the competitor. Moreover situation analysis also gives vital information to the customer regarding customers propensity to consume, existing retail scenario, entry of new players, as well as exit of old players. Designing a marketing communication strategy Marketing communication comprises of various constituents like advertising, sales promotion, personal selling, direct marketing, event management etc. On the basis of situation analysis the retailer is very well aware about the market situation. Thereon on the basis of marketing objectives as well as communication objectives a retail marketing communication strategy is designed. The marketing communication strategy contains a blueprint of what to do so as to achieve the communication objectives in a way that the marketing objectives are achieved which in turn, fulfils the marketing strategy. All the target segments cannot be communicated with just one mode of communication. Therefore it is an endeavor of the retailer to allocate budget and strategically plan the roles for those communication tools which are required. For instance, in case a retailer is based in a downtown area with middle income and lower middle income population then it presents a unique scenario. Here customers would expect to have the best bargaining in the form of lower prices. Basically they would like to have a value for money. Here the retailer will have to communicate about availability of products at their (affordable) price range in the most convincing manner through a creditable channel of communication. On the other hand in case of an up market store based in one of the posh localities the scenario will be very different. Any retail store where such situations exists will, have to plan for a strategy of maintaining an up market image and delivering goods and services which justifies that image.

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Preparing the, Budget All strategies and objectives of the retailer can go flat for want of funds. Any strategy or marketing objective design should be undertaken in line with available 40 Retail Mix 41 Promotion and Communication Mix a) b) resources. it is of prime importance communication and promotion. Depending upon the turnover of the company as well as the affordability a budget can be designed in consultation with the concerned personnels of the organisation. While planning the budget a retailer has to be very cautious about the short-term and long-term implications of investment. For instance, if a retail store invests excess funds in the fixed assets like building, air conditioning plant etc then availability of working capital will really come under pressure affecting overall sales performance of the store. Implementation of the Communication Strategy This is one of the critical stages of marketing communication strategy. While implementing the strategy any retailer should be very cautious that the implementation is in letter and spirit as devised while at the planning stage. An important point to be mentioned here is the scope for change in strategy at this stage. Retail market is the most dynamic place in today's era. Therefore, even after conducting situation analysis and designing the strategy on that basis a need can arise to make some minor or major changes at the implementation stage. An ideal strategy should be flexible with proper scope to accommodate changes. Moreover sincere assumptions in this regard must be made. Reviewing and Evaluating With the implementation of the plan of action the retailer must impartially look into the results of implementation of the communication strategy. Communication strategy once implemented starts giving results within a reasonable period of time. In case customer are convinced and motivated to the message of the retailer it must translate into increase in footfalls, as well as actual sales. However, the customers can completely reject the stand taken by the retail store by not visiting the store and purchasing their products. However, it is worth mentioning here that with the implementation of any communication strategy it can be expected that competitor stores also launch a counter communication campaign. That may not only minimise the impact of one's communication strategy but completely negate the outcome. A retail store must therefore have a contingency plan ready for such situations. In case a contingency plan is in place then it can immediately be implemented in case such a situation arises. Whenever we speak about a contingency plan we do not intend for one fixed plan. Contingency plans are flexible lines of action against a set of different competitive situations. Conduct a situational analysis for the following: Locally based well established retail store. An upcoming departmental store.

Develop marketing communication strategies in the above situations. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. .................................................................................................................................................................. ..................................................................................................................................................................

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RETAIL SALES TECHNIQUES & PROMOTIONS

STORE ATMOSPHERE AND VISUAL MERCHANDISING Store atmosphere in today's age is the key aspect for communicating a positive and happy image to the customer. This factor makes one feel like visiting a specific store every time. Similarly this factor can also have an adverse impact and may prevent a customer from visiting a store even the second time. Store atmosphere is the ambience created within the retail store. It creates a big impact on the customer. The way the merchandise has been stacked and the specific location for each of the goods form the core of visual merchandising. Customers first observe the products and then take a decision to purchase. The store atmosphere and viewing of the merchandise through its abstract communication, influences the purchase decision and the overall mood of the customer. RETAIL PROMOTIONS With the growth of retailing in India you must be observing that there has been a tremendous rise in various schemes which the retailer opts to boost his sales. You must have visited a retail outlet with the banners about discounts, free gifts, and other such attractive schemes. All these constitute retail sales promotion. Such sales promotion tools are excellent generators of demand is used strategically with a proper timing. 43 Promotion and Communication Mix

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RETAIL SALES TECHNIQUES & PROMOTIONS

PROMOTIONAL OBJECTIVES A retail outlet may have multiple promotional objectives. Long-term objectives of a retail store can be to create a positive store image which has a lasting impact on its customers. More important as it is about this positive image is that it should be a differentiating factor for the store amongst a host of competitors. Short-term objectives can be primarily to attract new customers. Moreover it can also claim for an increase in frequency of visits from the existing customers. TYPES OF SALES PROMOTIONS If we look into types of sales promotion schemes we find there is a definite distinction which draws a line between the two classifications of sales promotion. Before we get into classification you must understand that the sales promotion schemes does not only help the retailer to boost his sales but, also supports the cause of the manufacturer. Therefore it is also the responsibility of the manufacturer to contribute in the endeavour of the retailer. Now coming back to classification the two types of sales promotions can be Sales promotion completely financed by the retailer Sales promotion jointly financed by the retailer and manufacturer Self financed sales promotion schemes Frequent buyer programmes: To boost the frequency and quantum of purchase retailers come out with novels means. This is very much prevalent in daily needs and grocery stores. The monetary figure is kept as the minimum limit of purchase during a given period of time. If any individual customer is able to purchase more than the fixed range he/she is entitled for free gifts, or a discount voucher which entitles the customer to avail discount on future purchase. Such schemes may also involve contests which can be a lucky draw. Loss leader schemes: To attract greater traffic in the store (general and grocery stores, supermarkets and daily needs stores) a retailer offers a prominently popular brand on discount. This discount however, is not offered by the manufacturer. The discount amount is basically the loss to the retailer which she/he beards to have a better traffic in the store. The bottom line in this and there is to generate a better traffic who will not only purchase the brand offered on a discount but also go for other commodities which may not only offset the losses for the retailer, but also on profits. demand for calendars of the New fear or any other novelty items like key-chains, wallets etc. A retailer invests a good amount of money into these articles. The main aim of such gifts is to retain existing customers and also to attract new customers. Jointly financed sales promotion schemes Coupons: There are many instances which can be quoted in this regard. You must have seen and also experienced various discount coupons as well as scratch a gift coupons offered by various manufacturers. Companies like the whirlpool, and Vimal from Reliance have been offering scratch a gift contest for a long time. This has been followed by it majority of players in the consumer durables market especially the consumer electronic goods. This scheme not only benefits to customers but also generates a lot of interest and enthusiasm amongst the customers to try their luck out. In-store displays and demos: Once again, in consumer electronic goods it has been seen over a period of time that companies have invested for increase the attractiveness of the store. Besides this

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RETAIL SALES TECHNIQUES & PROMOTIONS

it also brings in expertise from the organisation to the retail store level which can be very helpful in overall retail display in future. Many manufacturers adopt a different route than in-store displays, which is the root of demonstrations or demos. Many reputed manufacturers have opened up small shop in shops to demonstrate the useage of their products. Revlon has been successfully doing that to position itself as an affordable brand in the retail consumer psyche. Free samples: Long back when Maggie was introduced by NestI6 in India, free sample tax packs were distributed in high status popular schools to enthuse the young customers with the product. It was at that point of time when the concept of noodles was still very new for the customers. Similarly, oriel and Surf Ultra both prominent detergent brands distributed free samples of their detergent powder to motivate and encourage the customers to use their respective brands. Free gifts: As mentioned earlier, (in the sales promotion schemes financed by the retailer) free gifts are offered to the customers as a recognition for their relationship with the store. Such free gifts can also be sponsored by the manufacturer with their brand name and logo embossed on the products to inculcate better top of the mind brand recall. Visit any two retail outlets of your choice and analyse the implications of manufacturer driven promotions for boosting the retail business. ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………… ……………………………..…. ROLE OF SALESPEOPLE IN RETAIL PROMOTION The attitude of a salesperson plays a big role in motivating the customers to buy products from the store. Moreover salespersons play a big role in making the customer make up their mind as well as feel happy about the purchase. Good salespeople can estimate the overall purchase potential of a customer as he steps 44 Retail Mix 45 Promotion and Communication Mix into the store. Especially in products like readymade apparets ,garments ,rextiles, jewellery, suitings customer in a big way looks up to the salesperson for guidance, advice as well as encouragement to buy a specific product. In case of a customer who is dissatisfied, the role of the salesperson becomes even more critical. Salespersons can motivate such customers once again who come into the mainstream of the retail store. They can be instrumental in redressing the grievances of the customer. Happy and cheerful salespersons transform the atmosphere of the store. They can positively change the shopping experience of the customer and motivate him to revisit the store again along with his friends. On the other hand demotivated salespeople as well as inexperienced salespersons can prove to be a liability for the retail store. At any point of time the customer would not like to be entertained by inexperienced and negative 'salespersons. SUMMARY In reality customers' lives have undergone a sea change over the past two decades. Due to dual earning families time has become the most precious and rare commodity. With the growth of media and distinct lifestyles customers are now on the look out for distinct features, colours and preferences regarding different products. Primary function of marketing communication is to intimate the customer community regarding existence of a specific store. More important than just communicating the existence is to persuade the customers to visit. For communicating a retailer has various options in the IMC mix. For a proper IMC mix strategy the retailer must adopt a step be step process. While

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RETAIL SALES TECHNIQUES & PROMOTIONS

adopting any IMC strategy a retailer must be very cautious about his positioning in market and what sort, of image he would like to have in the minds of the customers. Store atmosphere, visual merchandising as well as the role of sales people in retail communication is significant. KEY WORDS IMC: Integrated marketing Communication Retail Communication Strategy: Specific communication strategy adopted by the retailer Store Atmosphere: Atmosphere created within the store by the retailer. Visual merchandising: The way/pattern in which the merchandise is displayed in the store. SELF ASSESSMENT QUESTIONS 1) Can you give some more reasons causing change in customer attitude besides the one given in the unit? 2) What are the options available to the retailer for communicating to the customer? 3) Analyse the retail communication strategy of any major retail chain. 4) Critically evaluate the role of sales people in communicating a positive image to the customers. FURTHER READING Berman Barry, Evans Joel R, (2002) Retail Management- A Strategic Approach 8th Ed (Prentice Hall of India). Levy Michael, Weitz Barton A (2001) Retailing Management, 5th Ed, (McGraw-Hill Irwin). Dunne Patrick M, Lusch Robert F, Griffith David A, (2002) Retailing 4th Ed, (Thomson South Western). Sinha Piyush Kumar and Uniyal Dwarika, Retail Management - An Asian Perspective, Thomson Learning, Singapore, 2005.

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