MKTG 371 OUTLET SELECTION Lars Perner, Instructor 1 OUTLET SELECTION zConsumer shopping choices zElectronic Commerce (covered later) zStore marketing issues

MKTG 371 OUTLET SELECTION Lars Perner, Instructor 1

OUTLET SELECTION

Consumer shopping choices

Electronic Commerce (covered later)

Store marketing issues

Dealing with complaints


The Evolution of Consumer Outlet Choice

General Store

SpecialtyStores (where

available)

DiscountStores

Super-markets

CategoryKillers

CatalogSales

Catalog/Direct

Marketing

Internet

Note: Evolutionary pressure ---> adaptation or extinction

In-home Shopping


Issues in Outlet Marketing

Store positioning relevant competition store image

Store location/sizeStore brandsIn-store marketing

P-O-P displaysFeatured promoted brandStore brand


Store Layout/Atmosphere

Location of merchandise

Music/aroma


Retailing

Positioning issuesMarginsRetail pricing

strategiesStrategic

developments in retailing


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


Attributes Influencing Retail Outlet Selection

Outlet imageRetailer (store) brands

U.S. vs. EuropeRetail advertising

For store Co-op, brand supported store ads

LocationSize


Consumer Shopping Orientations--Segments

Chameleons—constantly changing strategies

Collectors/gatherers—stockpilers

Foragers—focused on desired items

Hibernants—indifferent and opportunistic; will postpone shopping

Predators—shoppers who dislike shoppers but plan ahead to minimize time spent

Scavengers—”recreational shopping”


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


Margins

Margins Gross = sale price -

price paid to wholesaler

Per unitPer dollarPer unit of space

Net margin = gross margin vs. allocated overhead

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


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 onSwitch 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


Strategic Issues

Importance of convenience

Increasing power of retailers

Private label branding Lower price but

higher margins Longer history in

Europe


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


Retailing Polarity

Trend toward either Low price--e.g.,

Wal-Mark, Kmart, Sports Authority

High quality--e.g., Nordstrom’s, Starbuck’s


Electronic Commerce

Penetration vs. potential

Obstacles Security Trial Delayed delivery Limited demographics Glitches Resentment of

commercial intrusions


SERVICE OUTPUTS AND SEGMENTATION

Service outputsTrendsSegmentation


SERVICE OUTPUTS: DISTRIBUTION FROM THE CUSTOMER’S POINT OF VIEW

Bulk breakingSpatial

convenienceWaiting and

delivery timeBreadth of

assortment


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


Example: Food Customers

Resellers--restaurants buy from suppliers

Institutional--hospitals buy to feed patients

Families “Nuclear”--may buy

from regular food stores; will favor large sizes

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


FOOD CONSUMPTION, MANUFACTURING, AND MARKETING

Food consumption patterns

Demographics and trends

International comparisons

Issues in food markets

Food marketing choices


Food Consumption Patterns Increasing

consumption—so far… Pork Chicken Turkey Fish Cheese Fresh fruit Frozen vegetables Flour and cereal products Soft drinks

Declining—so far… Beef Eggs Whole milk Sugar Coffee

No evident trend Ice cream Butter, margarine Fruit juices Lamb Fresh potatoes


Possible Effects of

Adkins Diet Increases:

BeefButterCreamNuts

DecliningSweetenerFrozen potato

productFresh fruit,

vegetables

Low fat diets Increases

ChickenFishLow fat dairyFruit Vegetables

DecreasesBeef, lambEggsSweetened products


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 <1)

Immigration has influenced both food preferences and retail formats


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

expenditures—includes non-consumer spending such as government and industry. U.S. figure: 7%


Some Common U.S. Food Outlets

SupermarketsNeighborhood food

storesConvenience storesDrug and discount

storesGas stationsVending machinesFood stands, street

vendors

RestaurantsCafeteriasSpecialty food storesDoor-to-door salesOnline and catalog

orders


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


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


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


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)


Some Food Marketing IssuesBrandingInnovation

Brand extensions and improvements to existing product categories

New product categoriesConsumer brand loyalty: The ability to

resist promotional efforts of competitors—not consistent choice of brand

Multi-brand loyalty


POST PURCHASE PROCESSES

SatisfactionCustomer commitmentWord-of-mouth


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


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 stomachE.g., WD40: fish bait additive, removal of gum,

enhanced conduction of electricity, shining of boots


Disposition

Disposal Garbage Recycling

Sale eBay: Very old products for sale—e.g.,

1980s typewriters, CB radiosDonation/gifting

Documents

MKTG 371 OUTLET SELECTION Lars Perner, Instructor 1 OUTLET SELECTION zConsumer shopping choices zElectronic Commerce (covered later) zStore marketing issues