OUTLET SELECTION

1
OUTLET SELECTION

• Consumer shopping choices
• Electronic Commerce (covered later)
• Store marketing issues
• Dealing with complaints

2
The Evolution of Consumer Outlet Choice
General Store
Super- markets
Category Killers
Internet
Discount Stores
Catalog/ Direct Marketing
Catalog Sales
In-home Shopping
Specialty Stores (where available)
Note Evolutionary pressure ---gt adaptation or
extinction
3
Issues in Outlet Marketing

• Store positioning
• relevant competition
• store image
• Store location/size
• Store brands
• In-store marketing
• P-O-P displays
• Featured promoted brand
• Store brand

4
Store Layout/Atmosphere

• Location of merchandise
• Music/aroma

5
Retailing

• Positioning issues
• Margins
• Retail pricing strategies
• Strategic developments in retailing

6
Positioning Issues

• Some ways to profitability
• Low cost, high volumes, low unit margins, low to
  moderate service (profit on volume)
• Higher priced, higher per unit margins, lower
  sales
• Stuck in the Middle--midlevel retailers (e.g.,
  Sears, J. C. Penney) face competition both from
  above and below

7
Attributes Influencing Retail Outlet Selection

• Outlet image
• Retailer (store) brands
• U.S. vs. Europe
• Retail advertising
• For store
• Co-op, brand supported store ads
• Location
• Size

8
Consumer Shopping Orientations--Segments

• Chameleonsconstantly changing strategies
• Collectors/gatherersstockpilers
• Foragersfocused on desired items

• Hibernantsindifferent and opportunistic will
  postpone shopping
• Predatorsshoppers who dislike shoppers but plan
  ahead to minimize time spent
• Scavengersrecreational shopping

9
Influences on Shopping Behavior

• Point-of-purchase (POP) shoppers
• Promotions
• In-store coupons
• Sales
• Other deals
• Outlet atmosphere

• Stockouts
• Major problem
• Difficult to avoid
• Technology can help predict sales
• Sales personnel

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Margins

• Margins
• Gross sale price - price paid to wholesaler
• Per unit
• Per dollar
• Per unit of space
• Net margin gross margin vs. allocated overhead

• Very large increases in sales volumes are needed
  to break even on low prices

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Two Types of Retail Pricing

• High-low
• High everyday prices
• Frequent sales
• Profit on price discrimination--only some people
  will bother to
• Shop while sale is on
• Switch brands

• Every Day Low Price (EDLP)
• Consistent prices--theoretically no sales, but
  lower non-sale prices
• Typically lower service
• Note that retailers provide for many promotions

12
Strategic Issues

• Importance of convenience
• Increasing power of retailers
• Private label branding
• Lower price but higher margins
• Longer history in Europe

13
Retail Trends

• Power retailers
• Early purchases
• Investment in technology
• Consistent fair prices
• Consistent but modest gross margins

• Category killers Specialize--significant
  selection at low prices

14
Retailing Polarity

• Trend toward either
• Low price--e.g., Wal-Mark, Kmart, Sports
  Authority
• High quality--e.g., Nordstroms, Starbucks

15
Electronic Commerce

• Penetration vs. potential
• Obstacles
• Security
• Trial
• Delayed delivery
• Limited demographics
• Glitches
• Resentment of commercial intrusions

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SERVICE OUTPUTS AND SEGMENTATION

• Service outputs
• Trends
• Segmentation

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SERVICE OUTPUTS DISTRIBUTION FROM THE
CUSTOMERS POINT OF VIEW

• Bulk breaking
• Spatial convenience
• Waiting and delivery time
• Breadth of assortment

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Trends in Consumer Preferences

• Poverty of time (in U.S.)
• Increased knowledge
• Travel
• Information sources
• Polarity of incomes
• Some increase in top incomes in U.S.
• Incomes slowly equalizing Worldwide

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Example Food Customers

• Small families, singles, and yuppies--will shop
  more in convenience store single serving sizes
  more popular
• Value conscious--buy at warehouses
• Time conscious--will pay extra for delivery
• Service conscious--other services demanded

• Resellers--restaurants buy from suppliers
• Institutional--hospitals buy to feed patients
• Families
• Nuclear--may buy from regular food stores will
  favor large sizes

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FOOD CONSUMPTION, MANUFACTURING, AND MARKETING

• Food consumption patterns
• Demographics and trends
• International comparisons
• Issues in food markets
• Food marketing choices

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Food Consumption Patterns

• Increasing consumptionso far
• Pork
• Chicken
• Turkey
• Fish
• Cheese
• Fresh fruit
• Frozen vegetables
• Flour and cereal products
• Soft drinks

• Decliningso far
• Beef
• Eggs
• Whole milk
• Sugar
• Coffee
• No evident trend
• Ice cream
• Butter, margarine
• Fruit juices
• Lamb
• Fresh potatoes

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Possible Effects of

• Adkins Diet
• Increases
• Beef
• Butter
• Cream
• Nuts
• Declining
• Sweetener
• Frozen potato product
• Fresh fruit, vegetables

• Low fat diets
• Increases
• Chicken
• Fish
• Low fat dairy
• Fruit
• Vegetables
• Decreases
• Beef, lamb
• Eggs
• Sweetened products

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U.S. Food Consumption and Demand

• Typical family spends 9-11 of income on food
• Decreasing percentage spent with increasing
  income, but more absolute dollars spent (income
  elasticity lt1)
• Immigration has influenced both food preferences
  and retail formats

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Comparative Food Spending Percentages, 1994

• Philippines 56
• India 51
• Mexico 25 (modest incomes, relatively high
  prices)
• South Africa 28
• Japan 18 (very expensive food but high
  incomes)
• West Germany 17

• Denmark 15 (25 sales tax!)
• France 15
• Netherlands 11
• U.K. 11
• Canada 10

Percentages of total expendituresincludes
non-consumer spending such as government and
industry. U.S. figure 7
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Some Common U.S. Food Outlets

• Supermarkets
• Neighborhood food stores
• Convenience stores
• Drug and discount stores
• Gas stations
• Vending machines
• Food stands, street vendors

• Restaurants
• Cafeterias
• Specialty food stores
• Door-to-door sales
• Online and catalog orders

26
Some International Characteristics

• Japan Strong emphasis on neighborhood stores,
  vending machines
• Europe Large food stores are available, some
  may deliver government protection of smaller
  retailers
• Developing countries Food often bought at open
  markets

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Some Food Demand Issues

• Income elasticity
• Price elasticity
• Normal vs. inferior goods
• Cross-price elasticity
• Trading Up within select categories
• Increased interest in convenience foods
• Conflict between demand for healthier and junk
  foods
• Unplanned purchases and consumption
• Functional foods

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Away-From-Home and Prepared Foods

• 48 of food expenditures on items eaten away from
  home (1999)
• Large part of restaurant meals is for non-food
  costs
• Labor
• Ambiance
• Facilities
• Increase in take-out foods from restaurants and
  stores

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Public Food Programs

• Food stamps were created mostly to promote demand
  for farm products (thus only American products)
• Only a limited amount of food stamp value goes
  toward increased consumption (cash is diverted
  elsewhere)

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Some Food Marketing Issues

• Branding
• Innovation
• Brand extensions and improvements to existing
  product categories
• New product categories
• Consumer brand loyalty The ability to resist
  promotional efforts of competitorsnot consistent
  choice of brand
• Multi-brand loyalty

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POST PURCHASE PROCESSES

• Satisfaction
• Customer commitment
• Word-of-mouth

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Post Purchase Dissonance

• Regret of purchase or question of wisdom of
  purchase ? dissonance reduction strategies
• Return product
• Rationalization
• Consumption guilt

• Influences on magnitude
• Degree of irrevocability /reversal of decision
  (trialability)
• Importance of decision
• Difficulty of choice
• Anxiety proneness of consumer

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Product Use and Non-Use

• Products bought and
• Used as intended
• Stored
• Not-used
• Used for purposes other than intended (use
  innovativeness)
• E.g., baking soda for odor reduction, upset
  stomach
• E.g., WD40 fish bait additive, removal of gum,
  enhanced conduction of electricity, shining of
  boots

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Disposition

• Disposal
• Garbage
• Recycling
• Sale
• eBay Very old products for salee.g., 1980s
  typewriters, CB radios
• Donation/gifting