Chapter 20 Integrating the retail strategy Planning procedures and opportunity analysis Planning procedures are enhanced by undertaking

three coordinated activities. The process is then more systematic and reflects input from multiple parties: 1. Senior executives outline the firms overall direction and goals. This provides written guidelines for middle- and lower-level managers, who get input from various internal and external sources. These managers are encouraged to generate ideas at an early stage. 2. Top-down plans and bottom-up or horizontal plans are combined. 3. Specific plans are enacted, including checkpoints and dates. Performance measures Performance measures used to assess effectiveness and setting standards for each of them, a retailer can better develop and integrate its strategy. Among the measures frequently used by retailers are total sales, average sales per store, sales by goods/services category, sales per square foot, gross margins, gross margins return on investment and operating incomes. To properly estimate a strategys effectiveness, a firm should use benchmarking, whereby the retailer sets standards and measures its performance based on the achievements of its sector of retailing, specific competitors, high-performance firms, and/or the prior actions of the firm itself. Measuring tool for service retailing There is one measurement tool is SERVQUAL, which lets service retailers assess their quality by asking customers to react to a series of statements in five areas of performance: Reliability: Providing services as promised. Dependability in handling service problems. Performing services right the first time. Providing services at the promised time. Maintaining error-free records. Responsiveness: Keeping customers informed about when services will be done. Prompt service. Willingness to help customers. Readiness to act on customer requests. Assurance: Employees who satisfy customer confidence and make customers feel safe in transactions. Employees who are consistently courteous and have the knowledge to answer questions.

Empathy: Giving customers individual attention in a caring way. Having the customers best interest at heart. Employees who understand the needs of their customers. Convenient business hours. Tangibles: Modern equipment. Visually appealing facilities. Employees who have neat, professional appearance. Visually appealing materials associated with the service.

To ensure that gaps are minimised in relationship retailing, firms should undertake the following: 1. Customer insight: Analyse known consumer information, such as sales, cost, and profits by segment. 2. Customer profiling: Regularly gather and merge transaction and lifestyle data to get a fuller picture of individual shoppers. Identify noncustomers who fit the profile of the firms best segment. 3. Customer life-cycle model: Study shopper behaviour at various life stages. Look at demographics by segment. Find the cost of serving each life cycle within each segment and the resultant profitability. 4. Extended business model: Based on steps 3 and 4, draw conclusions about which customers to focus on, the best ways to interact with them, and the best strategy to foster relationship. Survey individual customers to find out how to tailor the retail strategy to best satisfy their needs. 5. Relationship program planning and design: Identify all points of contact (eg. In person, pickup, delivery) between the firm and its customers, and the communications that should flow back and forth during each contact. Select processes that please existing customers and attract new ones, promote retention, increase spending, and lift profitability per customer. 6. Implementation: Integrate marketing, customer service, and selling efforts. Control: Using the retail audit A vital evaluation tool is the retail audit, which systematically examines and evaluates a firms total retailing effort or a specific aspect of it. The purpose of an audit is to study what a retailer is presently doing, evaluate performance, and make recommendations for the future.

Undertaking an audit There are six steps in retail auditing. 1. Determining who does the audit One or a combination of three parties can be involved: a company audit specialist, a company department manager, and/or an outside auditor. A company audit specialist is an internal employee whose prime responsibility is the retail audit. Advantages include the auditing expertise, thoroughness and level of knowledge about the firm. Disadvantages include the costs and the auditors limited independence. A company department manager is an internal employee whose prime job is operation management. Advantages: no added personnel expenses and manager is knowledgeable about the firm. Disadvantages: managers time away from the primary job and the potential lack of objectivity. An outside auditor is not retailers employee but a paid consultant. Advantages: auditors broad experience and objective. Disadvantages: high costs per day or hour and the time lag while a consultant gains familiarity with the firm. 2. Determining when and how often the audit is conducted Logical time is the end of the calendar year, the end of the retailers annual reporting year (fiscal year). An audit must be enacted at least annually, although some retailers desire more frequent analysis. IMPORTANT: same period(s), such as January-December, be studied to make meaningful comparisons, projections and adjustments. 3. Determining areas to be audited It reviews various aspects of a firms strategy and operations to identify strengths and weaknesses. Two basic types of audit and they should be used in conjunction with one another because a horizontal audit often reveals areas that merit further investigation by a vertical audit. A horizontal retail audit analyses a firms overall performance, from the organisational mission to goals to customer satisfaction to the basic retail strategy mix. A vertical retail audit analyses -in depth- a firms performance in one area of the strategy mix, such as customer service, merchandise assortment, or interior displays.

4. Developing audit forms An audit form lists the area(s) to be studied and guides data collection. It usually resembles a questionnaire and is completed by the auditor. 5. Conducting the audit Management specifies how long the audit will take. Prior notification of employees depends on managements perception of two factors: the need to compile some data in advance to save time versus the desire to get an objective picture and not a distorted one. With a disguised audit, employees are unaware that it is taking place. It is useful if the auditor investigates an area such as personal selling and acts as a customer to elicit employee responses. With a nondisguised audit, employees know an audit is being conducted. This is desirable if employees are asked specific operational questions and help in gathering data. Some audits should be done while the retailer is open, such as evaluating parking adequacy, in-store customer traffic patterns, the use of vertical transportation, and customer relations. Others should be done when the firm is closed, such as inventory levels and turnover, financial statements and employee records. 6. Reporting audit findings and recommendations to management The last auditing step is to present findings and recommendations to management. It is the role of management to see what adjustments (if any) to make. Decision makers must read the report thoroughly, consider each point. They should treat each audit seriously and react accordingly. Possible difficulties in conducting a retail audit Several obstacles may occur in doing a retail audit. A retailer should be aware of them: An audit may be costly. It may be quite time-consuming. Performance measures may be inaccurate. Employees may feel threatened and not cooperate as much as desired. Incorrect data may be collected. Management may not be responsive to the findings.