Chapter 16 Retail Communication Mix

McGraw-Hill/Irwin Retailing Management, 6/e

Copyright 2007 by The McGraw-Hill Companies, Inc. All rights reserved.

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Merchandise Management

Managing Merchandise Assortments Retail Communication Mix

Buying Systems

Buying Merchandise

Pricing

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Objectives of Communication Program

Long-term Build Brand Image Create Loyalty Short-term Increase Traffic Increase Sales

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

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Brands
Distinguishing name or symbol, such as a logo, that identifies the products or services offered by a seller and differentiates those products and services from those offered by competitors
The McGraw-Hill Companies, Inc./John Flournoy, photographer The McGraw-Hill Companies, Inc./Bob Coyle, photographer

The McGraw-Hill Companies, Inc./John Flournoy, photographer

Strong Brands Provide Value to Retailers and Their Customers

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Value to Retailers
Attract Customers Build Loyalty Higher Prices Leading to Higher Gross Margin Reduced Promotional Expenses Facilitates Entry into New Markets Gap GapKids

Value to Customers
Promises Consistent Quality Simplifies Buying Process Reduces Time and Effort Searching for Information About Merchandise/Retailer

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Building a Valuable Brand

Heighten Brand Awareness Brand Equity Develop Favorable Associations

Consistent Reinforcement

Create Emotional Connections

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Benefits of High Brand Awareness

Aided Recall Top Mind Awareness

Stimulates Visits to Retailer

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Creating Brand Awareness

Memorable Name Repeated Exposure

Brand Awareness
Event Sponsorship

Symbols

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McDonalds Brand Associations

Golden Arches Fast Food Big Mac

McDonald s
French Fries Clean Ronald McDonald

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Wal-Mart Associations

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Target Associations

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Brand Extensions
Gap GapKids and Old Navy

Sears Sears Auto Centers and the Great Indoors Pottery Barn Pottery Barn Kids

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

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Using Brand Name on New Concept

Pluses Develop Awareness and Image Quickly Less Costs Needed to Promote Extension Minuses Associations Might Not Be Compatible with Extension

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Retail Communication Mix

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Integrated Marketing Communications

Present a Consistent Brand Image through all Communications with Customers

Store Design Advertising Web Site Magalog

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

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Communication Methods

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Paid Impersonal Communications

Games, sweepstakes and contests Advertising Coupons Store atmosphere Website

Jack Star/PhotoLink/Getty Images

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Comparison of Communication Methods

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Paid Personal Communication

Retail salespeople are primary vehicle for providing paid personal communication to customers. Personal selling salespeople satisfy needs through face to face exchange of information Email retailers inform customers of new merchandise, receipt of order or when order has been shipped

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Unpaid Impersonal Communication

Publicity is communication through significant unpaid presentations about the retailer, usually a news story, in impersonal media. Newspaper TV coverage Macys Thanksgiving Day Parade

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Unpaid Personal Communication

Word of mouth:
Can be favorable Can be detrimental

Royalty-Free/CORBIS

Steps in Developing a Retail Communication Program

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Communication Objectives & Stages in the Consumers Decision-Making Process

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Retail and Vendor Communication Programs

Vendor Long-term objectives Product focused National Specific product Retailer Short-term objectives Category focused Local Assortment of merchandise

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Setting the Communication Budget

Marginal analysis Objective and task Rules of thumb - Affordable - Percent of sales - Competitive parity Sales Advertising Advertising Sales

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Financial Implications of Increasing the Communication Budget

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Rule of Thumb Methods

Affordable methods sets communication budget by determining what money is available after operating costs and profits are budgeted. Drawback: The affordable method assumes that the communication expenses dont stimulate sales and profits.

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Rule of Thumb Methods

Percentage of Sales Method communication budget is set as a fixed percentage of forecasted sales. Drawback: This method assumes the same percentage used in the past, or by competitors, is still appropriate for the retailer.

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Rule of Thumb Methods

Competitive Parity Method this communication budget is set so that the retailers share of communication expenses equals its share of the market. Drawback: This method (like the others) does not allow the retailer to exploit the unique opportunities or problems they confront in a market.

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Illustrations of Communication Programs

Advertising Program for a Specialty Home Furnishing Retailer Discounter Promoting a Brand Planning a Direct Marketing Program
McGraw-Hill Companies, Inc./Gary He, photographer

Communication Objectives Furniture Store

Communication Objective Awareness Knowledge What stores sell East Asian furniture? Which stores would you rate outstanding on the following characteristics? Attitude On your next shopping trip for East Asian furniture, which store would you visit first? Visit Question

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Which of the following stores have you been to?

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Evaluation of Program

Before Awareness (% of mentioning store) Knowledge (% outstanding rating) Attitude (% first choice) Visit (% of visited store) 38% 9 13 8

6 Mon 46% 17 15 15

12 Mon 52% 24 19 19

Considerations in Evaluating a Vendor Promotion

Realized margin from the promotion

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Cost of the additional inventory Potential increase in sales from the promoted merchandise Potential loss from switching Additional sales from more customer visits

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CRM Campaign Management System

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Financial Analysis of Easter Promotion

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Implementing Retail Advertising Programs

Developing the Message Selecting the Media Determining Ad Frequency and Timing

Ryan McVay/Getty Images

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Suggestions for Developing Print Ads

Dominant headline

Dominant element Simple layout Specific, complete presentation Distinct visuals Name and address of store

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Types of Advertising Media

Newspapers Magazines Radio TV Direct mail Outdoor Shopping guide Yellow pages

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Media Capabilities

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Communication Objectives and Effectiveness of Media

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Internet Advertising Applications

Retailers in General
Create Awareness Convey Information Brand Building -- Build Store Loyalty

Multi-Channel Retailers
Build Web site Traffic

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Internet -- Advertising Medium

TV, Radio Involvement Reach Targeting Information Delivery Information Richness Measurability Cost Application Push, passive Broad Limited Limited Mm, audio Modest $12/8 per mm Brand Image Awareness Internet Pull, active Narrow Extensive Extensive Multi-Media High $20 mm (banner) Product Evaluation Brand Loyalty

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Types of Internet Advertising

Banners - >50% of Expenditures Rich Media Microsites Sponsorships -Embedded in Site Content Email

Problems with Measuring Effectiveness

Comparison with Other Media for the
Reach
Counting Unique Visitors Use of Cookies

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Frequency
Caching Prevent Cache

Impact GRPs - Reach x Frequency

Comparison of Internet Advertising Sites