CHAPTER 2:

STRATEGIC
PLANNING IN
RETAILING
 Chapter Objectives
• To explain what “value” really means
and to highlight its pivotal role in
retailers’ building and sustaining
relationships
• To describe how both customer
relationships and channel
relationships may be nurtured in
today’s highly competitive
marketplace

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-2
 Chapter Objectives (cont.)
• To examine the differences in
relationship building between goods and
services retailers
• To discuss the impact of technology on
relationships in retailing
• To consider the interplay between
retailers’ ethical performance and
relationships in retailing

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-3
 Definition of Value
• Value = Results + Process Quality
Price + Customer Access Costs
• Results = Overall quality, instructions, ease of
assembly, taste/quality/health, warranty, product
testing by retailer
• Process Quality = Wide aisles, ease of finding,
high in-stock position, fun experience, short
waiting times
• Price= Costs + delivery + assembly + credit
• Customer access costs= warehouse club
membership fees, inconvenient location, poor
store hours, inadequate parking
Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-4
 What is Value? (cont.)
Channel Customer
Perspective Perspective
• Value is a series • Value is a perception

of activities and that the shopper has of

processes (the the value chain.
“value chain”) • It is the view of all the

that provide a benefits from a

purchase versus the
certain value for
price paid.
the consumer.

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-5
 Retail Value Chain
• Represents the total bundle of
benefits offered to consumers
through a channel of distribution
• Store location and parking, retailer
ambience, customer service,
brands/products carried, product quality,
retailer’s in-stock position, shipping,
prices, image, and other elements

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-6
 Potential Pitfalls to Avoid in Planning
a Value-Oriented Retail Strategy
• Planning value solely from a price
perspective
• Providing value-enhanced services that
customers do not want or will not pay extra
for
• Competing in the wrong value/price segment
• Believing augmented elements alone create
value
• Paying lip service to customer service

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-7
 Figure 2-2: A Value-Oriented
Retailing Checklist
• Is value defined from a consumer perspective?
• Does the retailer have a clear value/price point?
• Is the retailer’s value position competitively
defensible?
• Are channel partners capable of value-enhancing
services?
• Does the retailer distinguish between expected and
augmented value chain elements?
• Has the retailer identified potential value chain
elements?
• Is the retailer’s value-oriented approach aimed at a
distinct market?
• Is the retailer’s value-oriented approach consistent?
Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-8
 Figure 2-2: A Value-Oriented
Retailing Checklist (cont.)
• Is the retailer’s value-oriented approach effectively
communicated?
• Can the target market clearly identify the retailer’s
positioning?
• Does the retailer’s positioning consider sales versus
profits?
• Does the retailer set customer satisfaction goals?
• Does the retailer measure customer satisfaction
levels?
• Is the retailer careful to avoid the pitfalls in value-
oriented retailing?
• Is the retailer always looking out for new opportunities
that will create customer value?
Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-9
 Figure 2-3: Sony

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 Customer Service
• Expected • Augmented
customer service customer service
is the service includes the
level that activities that
customers want enhance the
to receive from shopping
any retailer such experience and
as basic give retailers a
employee competitive
courtesy. advantage.

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-11
 Expected Versus Augmented
Levels of Customer Service
• Expected– Must have elements; do
not differentiate retailer. While
absence of these expected values
provides anguish, presence does
not provide satisfaction

• Augmented—Services that can

provide a competitive advantage.
Double warranty, special delivery,
product demonstrations

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-12
Figure 2-4: Classifying
Customer Services

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall
2-13
 Fundamental Decisions
• What customer services are expected and what
customer services are augmented for a
particular retailer?
• What level of customer service is proper to
complement a firm’s image?
• Should there be a choice of customer services?
• Should customer services be free?
• How can a retailer measure the benefits of
providing customer services against their
costs?
• How can customer services be terminated?

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-14
 Table 2-1: Typical Customer Services
• Credit • Gift certificates
• Delivery • Trade-ins
• Alterations/ • Trial purchases
Installations • Special sales
• Packaging/gift • Extended store
wrapping hours
• Complaints/Returns• Mail/phone orders
handling

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-15
 Table 2-1b: Miscellaneous
Customer Services
• Bridal registry • Restrooms
• Interior designers • Restaurants
• Personal shoppers • Babysitting
• Ticket outlets • Fitting rooms
• Parking • Beauty salons
• Water fountains • Fur storage
• Pay phones • Shopping bags
• Baby strollers • Information

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-16
 Figure 2-6: Turning Around Weak
Customer Service

Focus on Empower Frontline

Customer Concerns Employees

Show That You Are Express Sincere

Listening Understanding

Apologize and Rectify

the Situation

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-17
 Principles of Category
Management
• Retailers listen more to customers
• Profitability is improved because inventory
more closely matches demand
• By being better focused, each department is
more desirable for shoppers
• Retail buyers are given more responsibilities
and accountability for category results
• Retailers and suppliers must share data and
be more computerized
• Retailers and suppliers must plan together

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-18
 Figure 2-7: Elements Contributing to
Effective Channel Relationships

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 Three Kinds of Service Retailing
• Rented goods services– leased cars,
hotel rooms, carpet cleaning
equipment
• Owned goods services– plumbing,
appliance repair,
• Non-goods services– haircut,
professional services (physician,
lawyer)

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-20
 Four Characteristics of
Services Retailing
• Intangibility
• Inseparability
• Perishability
• Variability

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-21
 Figure 2-8a: Characteristics of
Service Retailing

Intangibility

• No patent protection possible

• Difficult to display/communicate
service benefits
• Quality judgment is subjective
• Some services involve
performances/experiences
Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-22
 Figure 2-8b: Characteristics of
Service Retailing

Inseparability

• Consumer may be involved in

service production
• Centralized mass production difficult
• Consumer loyalty may rest
with employees

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-23
 Figure 2-8c: Characteristics of
Service Retailing

Perishability

• Services cannot be inventoried

• Lost revenues from unsold services are lost forever
• Effects of seasonality can be severe
• Planning employee schedules can be complex
• Need to balance supply and demand
(yield management pricing)

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-24
 Figure 2-8d: Characteristics of
Service Retailing

Variability

• Standardization and quality control hard

to achieve
• Customers may perceive variability even
when it does not actually occur
• Need to industrialize/mechanize/service
blueprint services to factor out variability

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-25
 Figure A2-1: Lessons in
Service Retailing

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-26
 Figure 2-10: Technology Icons

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-27
 Examples of Consumerism
in Retailing
• Proper testing of items for safety issues
• Programming cash registers not to
accept payment for recalled goods
• Charging fair prices for goods in short
supply--Home Depot plywood example
in hurricane
• Age labeling of toys, warning labels on
goods beyond legal requirements

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-28
 Figure 2-11: Store Sale

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-29
 Figure 2-12: Understanding the
Americans with Disabilities Act

Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 2-30
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