Chapter 16

Retail Communication Mix

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin

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Merchandise Management

Retail Pricing

Chapter 15

RetailCommunication

MixChapter 16

Merchandise Planning Systems

Chapter 13

Managing Merchandise AssortmentsChapter 12

Buying Merchandise

Chapter 14

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Questions

■ What can retailers build brand equity for their stores and their private-label merchandise?

■ How are retailers using new approaches to communicate with their customers?

■ What are the strengths and weaknesses of the different methods for communicating with customers?

■ Why do retailers need to have an integrated marketing communication program?

■ What steps are involved in developing a communication program?■ How do retailers establish a communication budget?■ How can retailers use the different elements in a communication mix

to alter customers’ decision-making processes?

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Objectives of Communication Program

Short-termIncrease TrafficIncrease Sales

Long-termBuild Brand (retailer’s name) ImageCreate Customer Loyalty

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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./Bob Coyle, photographerThe McGraw-Hill Companies, Inc./John Flournoy, photographer

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Value of Brand Image

Value to Retailers (Brand Equity)■ Attract Customers

■ Build Loyalty

■ Higher Prices Leading toHigher Gross Margin

■ Reduced Promotional Expenses

■ Facilitates Entry into New MarketsGap 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 Brand Equity

Brand Equity

Create a High Level of Brand Awareness

Create Emotional Connections

Consistent Reinforceme

nt

DevelopFavorableAssociations

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The McGraw-Hill Companies, Inc./Lars Niki, photographer

Tar-Zhay

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Apple

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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

Top-of-mindBrand Awareness

Memorable

Name

Repeated Exposure

SymbolsEvent

Sponsorship

Best Buy

Home Depot Starbuck’s

Macy’s

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Retailers Develop Associations with their Brand Name

Merchandise Category – Office Depot – office supplies

Price/quality – Neiman Marcus –, high fashion merchandise

Specific attribute or benefit – 7-Eleven – convenience

Lifestyle or activity – Electronic Boutique – computer games

Brand associations: anything linked to or connected with the brand name in a consumer’s memory

Brand name is a set of associations that are usually organized around some meaningful themes

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McDonald’s Brand Associations

McDonald’s

Big Mac

Golden Arches

Fast Food

French Fries

Clean

Ronald McDonald

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L.L. Bean

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L.L. Bean’s Brand Associations

L.L. Bean

Friendly

New England

Practical

Expertise

Outdoors

Honest

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Wal-Mart Associations

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Target Associations

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Consistent Reinforcement

The retailer’s brand image is developed and maintained through the retailer’s communication mix

Retail Communication Mix

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Consistent Reinforcement through Integrated Marketing Communication Program

Integrated Marketing Communication Program■ A program that integrates all of the

communication elements to deliver a comprehensive, consistent message

■ Providing a consistent image can be challenging for multichannel retailers – Need to consider the needs of all channels early in the planning of its communication program

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Integrated Marketing Communications

Present a Consistent Brand Image through all Communications with Customers

•Store Design

•Advertising

•Web Site

•MagalogThe McGraw-Hill Companies, Inc./Andrew Resek, photographer

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Brand Extensions

■ Gap GapKids and Old Navy■ Talbots Talbuts Mens■ 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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Extending Brand Name to a New Concept

Pluses■ Develop Awareness and

Image Quickly■ Less Costs Needed to

Promote Extension

Minuses■ Associations Might Not

Be Compatible with Extension

Limited Victoria’s Secret

Abercrombie & Fitch Hollister

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Communication Methods

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Paid Impersonal Communications

■ Advertising■ Sales promotions – Special events, In-store demonstrations■ Games, sweepstakes and contests■ Coupons■ Store atmosphere■ Website■ Community building

Jack Star/PhotoLink/Getty Images

Boxes of KrustyO’s cereal at a New York 7-Eleven stores, temporarily converted into a

Kwik-E Mart, to promote the Simpson Movie.

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Store Atmosphere

The combination of the store’s physical characteristics (architecture, layout, signs and displays, colors, lighting, temperature, sounds, smells) together create an image in the customers’ mind

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Mediacart

A shopping cart that delivers point-of-decision advertising

■ Informs the customer about special deals as the customer passes them in the aisle

■ Each video screen is embedded with an RFID chip that interacts with chips installed on store shelves

■ Records shopping habits, dwell times, how shoppers travel through the store

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Community Building

Retailers’ Community Building Websites

offer opportunities for customers with similar interests to learn about products and services that support their hobbies and share information with others

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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

■ Direct Mail■ M-Commerce (mobile commerce)

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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• Macy’s Thanksgiving Day Parade

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PR

The Gap, Emporio Armani, and Apple are among several retailers selling red products, a portion of the proceeds go to Product RED, a charity to wipe out AIDS in Africa

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Unpaid Personal Communication

■ Word-of-mouth Can be favorable Can be detrimental

■ Social Shopping A communication strategy in which consumers use

Internet to engage in the shopping process by exchanging preferences, thoughts, and opinions

Product/service reviews

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Social Shopping

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Comparison of Communication Methods

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Steps in Developing a Retail Communication Program

Planning the Retail Communication Program

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Setting Objectives

■ Communication objectives: Specific goals related to the retail communication

mix’s effect on the customer’s decision-making process

Long-term: ex) creating or altering a retailer’s brand image

Short-term: ex) increasing store traffic

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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

Advertising Sales

Sales Advertising

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Setting the Communication Budget

■ Marginal Analysis Method Based on the economic principle that firms should

increase communication expenditures as long as each additional dollar spent generates more than a dollar of additional contribution

Very hard to use because managers don’t know the relationship between communication expenses and sales

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Marginal Analysis for Setting Communication Budget

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Objective-and-Task Method

■ Determines the budget required to undertake specific tasks to accomplish communication objectives

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Illustration of Objective and Task Method for Setting a Communication Budget

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Financial Implications of Increasing the Communication Budget

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Rule of Thumb Methods

Affordable Budgeting Method – 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 don’t stimulate sales and profits.

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 retailer’s 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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Allocation of the Promotional Budget

■ The retailer decides how much of its budget to allocate to specific communication elements, merchandise categories, geographic regions, or long- and short-term objectives

■ Budget allocation decision is more important budget amount decision

High-assay principle: The retailer allocate the budget to areas that will yield the greatest return