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8-2
Chapter Objectives
To discuss how information flows in a retail distribution channel
To show why retailers should avoid strategies based on inadequate information
To look at the retail information system, its components, and recent advances
To describe the marketing research process
8-3
Information Flows in a Retail Distribution Channel
• For channel of distribution to work effectively, there should be a free flow of information from the main parties – suppliers(wholesalers and manufacturers), retailer and consumer.
• Collaboration and cooperation is necessary
8-4
Figure 8.1 How Information Flows in a Retail Distribution Channel
Informationand theSupplier
Informationand theRetailer
Informationand the
Consumer
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Suppliers Need To Know
From the Retailer Estimates of
category sales Inventory turnover
rates Feedback on
competitors Level of customer
returns
From the Customer Attitudes toward
styles and models Extent of brand
loyalty Willingness to pay a
premium for superior quality
8-6
Retailers Need To Know
From the Supplier Advance notice of
new models and model changes
Training materials Sales forecasts Justifications for
price changes
From the Customer Why people shop
there What they like and
dislike Where else people
shop
8-7
Consumers Need To Know
From the Supplier Assembly and
operating instructions
Extent of warranty coverage
Where to send a complaint
From the Retailer Where specific
merchandise is stocked in the store
Methods of payment acceptable
Rain check and other policies
8-8
Purpose of Retail Information Systems
• Develop and maintain a system that will provide good information for retailers to make better decisions
• Data gathering is useful and should not be viewed as a one-shot resolution of a single issue.
• A retail information system needs to be utilized
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Retail Information System (RIS)
Anticipates the information needs of retail managers
Collects, organizes, and stores relevant data on a continuous basis
Directs the flow of information to the proper decision makers
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Poor Retail Strategy Decision based on inadequate Information
• Inadequate information can cause a firm to enact bad strategies
• Examples illustrated in text
a. poor intuition (movies theater)
b. continuing what was done before (toy store
c. not reading customers perceptions (florist)
8-11
Advantages of RIS
• Information is organized and company focused
• Opportunities and threats may be discovered earlier
• Strategic elements can be coordinated• New strategies can be developed quicker• Quantitative data results are accessible and
cost benefit analysis done easier.
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Figure 8.2 A Retail Information System
EnvironmentRetailer’s philosophy
Strategic plans
Retail Operations
Data Collection Information Control Center
b. Data Storage and retrieval c. updating of files
Implementation
Feedback
8-13
Database Management
A major element in a RISSystem gathers, integrates, applies, and
stores information in related subject areasUsed for
– Frequent shopper programs– Customer analysis– Promotion evaluation– Inventory planning– Trading area analysis
8-14
Five Steps to Approaching Database Management
Plan the particular database and its components and determine information needs
Acquire the necessary information Retain the information in a usable and
accessible format Update the database regularly to reflect
changing demographics, recent purchases, etc.
Analyze the database to determine strengths and weaknesses
8-15
Figure 8.4 Retail Database Management in Action
Data WarehouseExecutive &
other company employees
Channel Partners
Customers
micromarketingData mining
8-16
Data Warehousing
Data warehousing is where copies of all the data bases in a firm are maintained in one location and accessible to employees at any locale.
Advantages
1. Employees can quickly access information for decision making
2. New data is make available company wide sooner
3. Data inconsistencies are reduced
4. Better data analysis and manipulation are possible
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Components of a Data Warehouse
Physical storage location for data – the warehouse
Software to copy original databases and transfer them to warehouse
Interactive software to allow processing of inquiries
A directory for the categories of information kept in the warehouse
8-18
Data Mining and Micromarketing
Data mining is the in-depth analysis of information to gain specific insights about customers, product categories, vendors, and so forth
Micromarketing is an application of data mining, whereby retailers use differentiated marketing and develop focused retail strategy mixes for specific customer segments
8-19
Figure 8.6 Applying UPC Technology to Gain Better Information
Scanning price at cash register – Give information which can used for inventory management.
Universal Product Codes (UPC)– marking products with a series of thick and thin vertical lines to give them unique ID codes.
Scanning products on shelf/racks provides information to verify inventory and indicate time for price decreases (mark downs)
Electronic Data Interchange (EDI)- retailers and suppliers regular exchange information through computers regarding inventory levels, delivery times, units and etc.
8-20
Marketing Research Process in Retailing
• Marketing research in retailing entails the collection and analysis of information relating to specific issues or problems facing a retailer.
• Marketing research process – embodies a series of activities:
• It is systematic process as outlined on next slide
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Figure 8.7 The Marketing Research Process
Define problem
Implement findings
Make Recommend.
Analyze Data
Generate primary data
Examine secondary
data
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Marketing Research
in Retailing
Issues (problem) definition involves a clear statement of the topic to be studied. Can use both secondary
and primary data
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Secondary Data
Advantages Inexpensive Fast Several sources
and perspectives Generally credible Provides
background information
Disadvantages May not suit current
study May be incomplete May be dated May not be accurate
or credible May suffer from poor
data collection techniques
8-24
Secondary Data Sources
Internal Sales reports Billing reports Inventory records Performance reports
External Databases
– ABI/Inform, Business Periodicals Index, etc.
Government– U.S. Census of Retail
Trade– Statistical Abstract of
the U.S.– Public records
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Primary Data
Advantages Collected for
specific purpose Current Relevant Known and
controlled source
Disadvantages May be more
expensive Tends to be more
time consuming Information may not
be acquirable Limited perspectives
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Primary Decisions
• In-house or outsource?• Sampling method?
– Probability (each person has a known and equal chance of being selected)
– Nonprobability
• Data collection method?– Survey– Observation– Experiment– Simulation
8-27
Data collection method
– Survey- information is systematically gathered from respondents by communicating with them and using a questionnaire
– Observations- present ant past behavior of customers are noted and recorded
– Experiment- one or more elements of a retail strategy mix are manipulated under controlled conditions to determine its effect on sales or etc.
– Simulation-computer program is used to manipulate the elements of a retail strategy mix rather than test in a real setting.
8-29
Mystery Shoppers
Retailers hire people to pose as customers and observe operations from sales presentations to how well displays are maintained to service calls
Observations may be disguised or nondisguised, structured or unstructured, direct or indirect, and human or mechanical.