AN INTRODUCTION TO

RETAIL MARKETING
Lecture 1
Retail Marketing Strategy
Kunthi A. Kusumawardani
President University
CONTENT
1. Retailing And Marketing
– Need For A Strategic Approach
2. The Development Of Marketing
– Definitions And Concepts Of Marketing
– The Differences Between Marketing And Selling
– Marketing Management Tasks
3. The Adoption Of Marketing
– The Marketing Environment Of The Company
4. Alternative Business Philosophies
5. Marketing Orientation

2
01
RETAILING AND
MARKETING
3
 RETAILING AND MARKETING

Retailing described Change in consumer behavior

as a once-Cinderella business which has is constantly occurring
now evolved as a leader in business
innovation and the management of
complexity (Reid, 1995)

Both partners working, money

management, leisure activity

Effect: higher disposable income,

Retailing comprises
all the activities involved in the marketing
and distribution of goods and services
but less time for routine purchase
Further effect: Intense competition
among retailers
Action needed: Major shift on
banking services
 NEED FOR A STRATEGIC APPROACH

Integrated Positioning Positioning Defined Market Maturity Relationship Marketing

As part of the Positioning as a The maturation of the Relationship

development of retail marketing concept is retail marketplace has marketing schemes
marketing there is a based upon a market led to the development will reduce the long-
need to ensure that position of image, of schemes which term costs of attracting
both the positioning price and quality allow improved customers owing to
of any offer, and the rather than relationship building the retention benefits
image of that offer, geographical position. with the customer they provide.
are sound and
should be perceived
logically linked clearly by the consumer;
being different from others
or offering a particular
type of retail offer
NEED FOR A STRATEGIC APPROACH
Customer loyalty conceptualizes loyalty as the
relationship between relative attitude towards
an entity (product/service/brand/store) and
patronage behavior (Dick & Basu, 1994)
Latent loyalty:
A high relative attitude and a low
repeat patronage is a sign of latent
loyalty. For instance display high
relative attitudes, but patronize other
stores that offer superior promotions
No loyalty:
Low relative attitude and low repeat
patronage signal an absence of
loyalty. Due to new store brand and/or
inability to communicate the distinct
advantages or differences
Loyalty:
Clearly the favored situation for
any retailer. Customer prefers and
visits the same store to purchase
certain merchandise
Spurious loyalty:
Describes a low relative attitude and high
repeat patronage and is characterized by
non-attitudinal influences on behavior. For
example when consumers perceive little
brand differentiation as in a low
involvement purchase
 NEED FOR A STRATEGIC APPROACH

The ability of a
retailer to enhance
and build customer Convenience
loyalty is highly of operation
Few
dependent on: Stockout
Superior
Service Problems
Offering
the right type of
Identifying and reward or scheme
understanding to ensure the
the target market retention of the
bulk of their custom
over the long term
NEED FOR A STRATEGIC APPROACH
Six different kinds of loyalty (Sopanen, 1996)

Incentivized Loyalty
Inertia Loyalty based upon loyalty
where customers do reward schemes for
not seek alternatives accumulating benefits

Price Loyalty
where customers
Convenience Loyalty believe in seeking Emotional Loyalty
Monopoly Loyalty attributed solely to the found in brand loyalty:
out low prices, but
where no choice is location of a retail this is the most elusive
will shift if lower
available outlet to create
prices are identified
elsewhere
 NEED FOR A STRATEGIC APPROACH
How To Achieve
through the decision of retail location and design, service
provision or merchandise selection, technology, financial cost
control, and communication plans

Most Important Aspect

is to do things better than the competition, or in this case
to offer better types of incentives or relationship clubs

Credit Card Payment

It allows to monitor customers in terms of what, when, and where
they purchase so that a retail database can be provided.

Utilizing Personal Data

collected for the scheme along with the
transaction data (data mining)
Loyalty Schemes
is used to improved targeted
grouping (e.g. students, family
with children, OAPs, etc.)

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 02
THE DEVELOPMENT
OF MARKETING
 THE DEVELOPMENT OF MARKETING
Key to the importance Three distinct stages

of marketing within retail has in modern business

been the level of economic practice
growth which has led to
improvements in: production era the sales era
living standards improvement in educational standards the marketing era
enlargement of the population increases in the discretionary time of consumers
 THE DEVELOPMENT OF MARKETING
01
Production Era
if products were priced cheaply
enough they would be bought
Keep supplying the market =
reduce cost = production efficiency
standardization of the production =
lowest price
know more about different markets
02
The Sales Era
companies attempted to sell the
products they believed in
Companies search for more
effective means of selling
Increased competition = need to
and improving their sales
techniques
03
The Marketing Era
provide the products or merchandise
they could sell or people wanted
a consumer-led approach and
improving the marketing mix
customer needs and satisfaction were
the most effective basis for planning
Focus on customer relationship and
increase profit through achieving
lifetime value from customer through
cost-effective retention strategies.
 THE DEVELOPMENT OF MARKETING
Important factors in marketing era:
Demand < Supply leads to oversupply of retail outlets The increase of the distance between the retailer and
consumer
Competition is increasing, selling strategy does not work
need for marketing research on market trends, evaluating levels
Weaker competitors bought out of marketplace
of satisfaction, and understanding consumer behavior
Concentration, contraction and mergers
the centralization of retail decision-making
The larger companies are able to benefit from increased
negotiating and buying strength operational efficiency in such areas as checkout processes,
and shelf and inventory replenishment

Consumer was becoming more affluent
non-price attributes becomes important
development of methods of promotion and image, managing
creating, and changing, consumer quality and services, and
attitudes and beliefs improving store/retail atmosphere
The birth of submarkets and difficulty to reach it
Required improved expertise in the segmentation of
markets and the formulation of different marketing mix
strategies
Segmentation is based upon customer groups, product
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groups and shopping/usage occasions
 DEFINITIONS AND CONCEPTS OF MARKETING

Early Definitions Popular Definition
reflecting the business stressed marketing being a
philosophy and managerial process of
environment of the providing the right product,
time, stressed the in the right place, at the
importance of selling right time and at the right
price.
Marketing
Marketing
as the management
as a social and managerial
process responsible for
process by which individuals
identifying, anticipating
and groups obtain what they
and satisfying customers’
need and want through
requirements profitably
creating and exchanging
(The British Chartered
products and value with
Institute of Marketing,
others (Kotler et al., 1999) 14
1984)
 THE CONCEPT OF VALUE WITHIN RETAILING
Delivering value sought by the
customer is an important aspect of
the marketing approach.
perception of price, quality, and image as
well as the economic and social aspects
of the consumer.
Consumers of today have far more
information and a wide network of
acquaintances to consult for
alternatives
Retail product perceived value is based upon:
actual price asked and the relativity to prices for
same or similar product offered elsewhere
perceived quality of the brand / product
retailer or channel image, and its congruence with
the image of the customer
consumer characteristics by disposable income and
level of difficulty in assessing the benefits / relative
price of the product
experience associated with the purchase or
consumption process
 THE DIFFERENCES BETWEEN
MARKETING AND SELLING

Selling Marketing
Focuses on the need of the seller Focuses on the needs of the buyer
Preoccupied with the seller’s need to Preoccupied with the idea of satisfying
convert his product into cash the needs of the customer by means of
the product and the whole cluster of
things associated with creating,
delivering and finally consuming it
(Levitt, 1960)
 THE DIFFERENCES BETWEEN
MARKETING AND SELLING
from the journey and parking

the number and type of salespeople

sales people’s level of service and demeanor

Marketing has led us

to focus on the the displays on the floor and in the window
full experience
of the customer
the merchandise – by brands, depth and width.

the atmosphere of the retail outlet in terms of music or

other factors which will affect the senses

the checkout or payment and leaving.

 THE DIFFERENCES BETWEEN
MARKETING AND SELLING

ease of parking stock availability the offer of a

modern designs & children’s play
and self-assembly leisure day out
good value areas
take-away packs experience.
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 MARKETING MANAGEMENT TASKS
The marketing function may, therefore, be treated as a system which is
designed to be an interface with the customer.

Marketing Research

Needs
Response
Response (time/effort) Response
Customer Retailer

Communication Product Marketing mix

(merchandise/goods/services offering
/retail environment)
Selected form(s) of
Promotion Price
distribution channel service
Discussion
Retail managers should take heed
of success stories such as that of
Wal-Mart; the late Sam Walton
argued he had one abiding
principle: to give customers what
they wanted.
– Imagine you are visiting your
favorite retail store. In your
opinion, has it already
delivered satisfaction
especially on the experience?

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03
THE ADOPTION OF
MARKETING
 THE ADOPTION OF MARKETING
Weaknesses in historical trends
(O’Reilly’s, 1984)

Ensure that the marketing

surplus floor the intensification a possible serious the sheer scale of retailers’
space capacity of competition as decline in high investment in stores, function is attuned to
arising from rapid retailers’ strategies street property distribution systems, current customer
geographical converge in terms of values; information systems, etc. requirements
expansion may locations, could make them less
cause space retail formats, flexible and more Internet and TV cable
productivity to assortments and vulnerable to those installation
fall private brands; offering new formats,
improved economies and
superior systems to the
market.
 THE MARKETING ENVIRONMENT OF THE COMPANY
Level 3: Company stakeholders
Interest groups will affect the context
of decision-making, e.g. shareholders,
competitors, customers, employees,
unions, government, suppliers,
debtors, local community, banks, etc.
Level 1: The company
Marketing sub-functions need to be well organized
and integrated with other company functions.
Marketing has to communicate the needs of the
market environment as described in levels 2, 3
and 4; and marketing thinking needs to dominate
any strategy formulation.
Level 4: The wider environment
Analysis is required of various forces:
political, economic, social, technological.
Interrelationships of these different forces
and changes in them are powerful market
environment determinants.
Level 2: Company markets
The existing distribution systems and trends in
specific forms of retail selling or outlet will
affect the retail marketplace.
The degree of rivalry, extent of consumer
sophistication and the intensity of competitive
activity will affect market activity choice.
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 04
ALTERNATIVE
BUSINESS
PHILOSOPHIES
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 ALTERNATIVE BUSINESS PHILOSOPHIES
Marketing is a business philosophy which places consumers and their needs at the forefront of all
activities (e.g. discount does not mean customer will get less service)

(a) Product-oriented company

Retail product creation/offer Retail channel management Promotion Sales

(b) Market-oriented company

Marketing research Retail offer formulation Retail channel management Promotion Sales

(c) Integrated company

Marketing research

Retail channel management Promotion Sales

Retail product offer formulation and company-

wide marketing principles incorporated to
provide value and satisfaction
05
MARKETING
ORIENTATION
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 MARKETING ORIENTATION
The factors creating complexity are:
the scarcity of reliable and
comprehensive information;

the continual improvement in

marketing by competitors;
the uncontrollable forces
(e.g. internet, mobile phones, video
kiosk, etc.), and the unstable and
unpredictable character of markets;

the need to consider a vast

number of changing situations the changing nature of
related to the scale of the modern consumers.
retail market and its competitive
forces (e.g. multichannel)
 MARKETING ORIENTATION
Five main areas can be identified which offer a truly marketing-based approach:
It is a management It encourages exchange Long- and short-term planning
orientation or philosophy transactions
efficient use of resources and assets
the organization’s business must Marketers have to develop innovative methods to for the long-term success of a
revolve around the long-term interests encourage exchange to take place and ensure the company, while tactical action will be
of the customers it serves service offers value for money required to keep plans on course
This is achieved through offering The customer will be looking for quality, suitability, This may involve merchandise
merchandise or ways of purchasing value and acceptability planning, trading area and store
which provide benefits of satisfaction planning, market targeting,
Relationship marketing is highly crucial, and marketers
merchandising techniques, own-
must retain the customer over longer periods of time
product development, as well as sales
through club or loyalty programmes
and tactical promotions.

Efficient cost-effective
methods
maximum satisfaction and value to the The development of an
customer at acceptable or minimum cost to integrated company
the company environment
The productive use of any marketing budget Everybody working for the company must
relies on the knowledge and expertise of participate in maximizing the satisfaction level
those employed in the marketing department of consumers
 Discussion
You need to identify the ways in which aspects of
marketing may be changing. You need to think
about this with regard to the marketing mix. For
example, do supermarkets now offer more
clothing or electrical products?
1. Major grocery chains – Giant/Hypermart What is the marketing
2. Banks and building societies emphasis?
3. Petrol stations
4. Chemists
5. Department stores

Can you identify any trends or emphases What are they and do
by type of retailer? they seem successful?

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