The retail marketing mix and the retail product

1
The retail marketing mix and the retail product

• the set of controllable tactical marketing tools
  that the firm blends to produce the response it
  wants in the target market (Kotler 1999)

2
The retail marketing mix
3
The retailing product and the product in retailing

• BENEFITS
• Store/product
• Service
• Retail personnel
• Retail experience
• Image/brand
• Loyalty scheme
• COSTS
• Monetary
• Time
• Travel/energy
• Retail experience
• Risk

Total customer benefits Total customer cost
CUSTOMER VALUE PERCEPTION
4
Dimensions of the retailing product

• Service tangibles, reliability, responsiveness,
  empathy, assurance
• Quality product and service, expectations versus
  experience
• Merchandise assortment, variety, image
• Store brand improved image and added value
• Features and benefits facilitating aspects of
  the store
• Atmospherics planned physical messages in the
  design of the buying environment

5
The product in retailing

• Products
• Managing product life cycles
• Merchandising functions and process
• Depth and breadth
• Ranging policy
• Own brands
• Stock turn

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Merchandising and retail marketing

• Satisfy customer needs/wants to meet business
  objectives within context of competitive strategy
• Selection and sale of merchandise which presents
  clear message for consumers
• Identify sources of merchandise differentiation
  to distinguish offer from competitors
• Develop relationships within supply chain as
  source of customer value

7
Merchandising basic functions

• Selection, purchase, stock management, display,
  and sale of a range of products involving
• Select and evaluate products
• Source, select and appraise suppliers
• Negotiate margins, quantities and marketing
  support
• Monitor sales
• Price and markdown

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Refining the merchandising function

• Establish a merchandise plan for each season
  based on past and future trends
• Monitor the performance of suppliers
• Control allocation of stock to branches
• Ensure efficient allocation and replenishment
• Monitor sales and stock and compare with initial
  plan
• Reforecast if necessary
• Repeat orders on high volume items

9
Merchandising category management

• Category management is related to decisions over
  groups of products that are selected and placed
  to satisfy use occasions or consumption patterns.
  This is based upon strategic retailing principles
  that attempt to maximise sales and profits.
  Gilbert

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Traditional approach versus category management
Lunchtime snack
crisps
juice
sandwich
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Merchandise category life cycle analysis
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The merchandise plan
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Ranging policy assortment versus variety

• Product line depth wide choice within generic
  product class (assortment)
• Product line breadth wide choice of generic
  product classes with few brand choices (variety)

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Assortment profiles and merchandise strategies
Cook and Walters 1991
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Assortment profiles and merchandise strategies
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Assortment profiles and merchandise strategies
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Planning range and assortment

• Determined by competitive strategy and objectives
• Customer needs, budget, space availability
• Geographical information systems, customer
  databases and sales data facilitate matching
  merchandise mix to needs of local market
• Shift to understanding of needs and wants at
  local level

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Factors influencing selection and development

• Physical properties tangible benefits
• Packaging functional, aesthetics, brand identity
• Design differentiation, augmentation
• Utility product performance
• Quality reliability, durability, design
• Brand intangible benefits, product category
  loyalty

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Retailer buying process
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Supplier promotional activity
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Share of promotional activity
From The Grocer Magazine
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New product additions

• Fit with existing range
• Growth potential
• Availability and competitive conditions
• Profitability
• Manage abandonment of slow selling lines

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Introduction/trial phase

• Low sales
• Uncertainty of phase length
• High investment means low profits/losses
• Inexperience (customers and sales personnel)
• Vulnerability
• Few distributors (wholesale or retail)
• Possibility of trial basis only

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Growth phase

• Rapid sales increase
• Less vulnerability
• Chance of large profits
• Wider availability of suppliers
• Product in full scale production

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Maturity phase

• Slow down in sales growth
• Intense retail competition
• Emergence of price competition
• Profits begin to decline

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Saturation

• No sales increase
• Profits decline sharply
• Severe price competition
• Leads to decline stage and abandonment

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Retail brand products
a brand name owned by the retailer for a line or
variety of items under exclusive or controlled
distribution (Koskinen 1999)
COUNTRY
Retailer brand share of food sector Switzerland
50 UK 34 Belgium 24 Netherlands 21 Spain
18 France 16 Germany 12 Finland 9
KPMG (2000) Tesco 55,
Sainsbury 61 Asda 58
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Objective of own brand

• customers loyalty is a fundamental reason for
  having own labels. If you have a nucleus of
  products which customers see as having a quality
  image, there is an inevitable dynamic created
• Steenkamp and Dekimpe (1997)

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Drivers of own brand development

• Better margins
• Increased pressure on manufacturers
• Contribution to store image and maintaining store
  loyalty reinforce brand through broad-ranging
  and aggressive own brand strategy
• Opportunity for differentiation and premium
  pricing (MS food, Bodyshop)
• Lower prices to consumer/better price choice
• Control over price, delivery and quality

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Own brand positioning within a category
Manufacturer 3 Prestige
high
PRICE/QUALITY (Tesco Finest)
Retailer Premium
Manufacturer 2 Bastion
Retailer Mainstream
SMART SHOPPER (Tesco)
price
Manufacturer 1 fighter
BARGAIN ORIENTATION (Tesco Value)
Retailer generic
low
low
quality
high