Master of Business Administration- MBA Semester 3MK0012 – Retail Marketing

(4 credits)(Book ID: B1222)

ASSIGNMENT- Set 1

1. List the different stages involved in retail environment analysis. Let us discuss a small case first, take a situation when strategic managers feel that a firm is overly dependent on a single customer group, for example, a chain of record shops with principal customers 10 to 20 years old. The firm‟s interactive opportunities might include expanding the product line, heavily emphasizing related product, accepting the status quo, or selling out profitably to a competitor. While each of these options might be possible, a firm with a mission that stressed commitment to continued existence as a growth-oriented, autonomous organization might find that only the first two opportunities are desirable. In that case, these options would be evaluated on the basis of payoff and risk potential, compatibility with or capability for becoming the firm‟s competitive advantage, and other critical selection criteria.

Strategic analysis involves matching possible and desirable interactive opportunities with reasonable long term objectives and targets. In turn, these are matched to the most promising means – referred to as grand strategies – for achieving the desired results. Each of the sets of alternative is then evaluated individually and comparatively to determine the single set or group of sets that is expected to best achieve the company mission. The set which is chosen is known as the strategic choice.

At the initial level, critical assessment of strategic alternatives involves development of criteria to compare one set of alternatives with all others. Similar to the case of making any choice, a strategic selection involves evaluating alternatives that are rarely wholly acceptable or wholly unacceptable. The alternatives are therefore compared to determine which option will have the most favorable overall, long run impact on a firm.

Criteria used in assessing strategic choice alternative are:

Strategic managers‟ attitudes toward risk

Flexibility

Stability

Growth

Profitability

Diversification

Other factors included in the decision-making process are:

Volatility of the external environment

Life-cycle stages of the evaluated products

The company‟s current level of commitment to its organizational structure

Access to needed resources

Traditional competitive advantages as well as the potential reaction of influential external or internal interest groups

The purpose of studying corporate environment or analysing industry structure is to gain an understanding of the competitive relationship among groups of firms that compete for a specific market. The factors that must be studied while analysing the environment are shown in Figure 1.1.

Figure 1.1: Retail Environment Analysis

Market size/age: Is the market relatively small or large, and can it be broadly characterized by its stage of development (start-up, emerging, growth, maturing, declining)?

Number of competitors: What is the level of competition for the market? Are there many small rivals or a few large? How easy is it for new players to enter the industry? Rule of the game: How do firms compete in this market? Do they compete on price, quality, technology, service etc.? What is the average level of profitability? Is it a profitable market or is it a high volume, low margin field?

Industry trends/driving forces: What are the industry trends and how rapidly do they change? Is the industry growing and innovative or stable or slow to change? The rate of market growth is a critical factor because it influences the equilibrium between demand and supply.

Industry attractiveness: The overall attractiveness of an industry is determined by the interaction of these key structural forces. The higher the rate of growth and the weaker the competition, the more attractive the industry.

Industry structure analysis: The initial analysis of industry structure provides a snap of the competitive environment. The strategists also need to anticipate future trends; new development that may change the existing structure.

2. Briefly explain GAP model of service quality

Always there exists an important question: why should service quality be measured? Measurement allows for comparison before and after changes, for the location of quality related problems and for the establishment of clear standards for service delivery. Edvardsen et al. (1994) states that the starting point in developing quality in services is analysis and measurement. Gap Model depicts seven gaps in the service quality concept. This model is an extension of Parasuraman et al. (1985). The gaps are discussed as follows: Gap 1 – Gap between customers’ expectations and management perceptions: it occurs as a result of the lack of a marketing research orientation, inadequate upward communication and too many layers of management.

Gap 2 – Gap between management perceptions and service specifications: it occurs as a result of inadequate commitment to service quality, a perception of unfeasibility, inadequate task standardisation and an absence of goal setting.

Gap 3 – Gap between service specifications and service delivery: it occurs as a result of role ambiguity and conflict, poor employee-job fit and poor technology-job fit, inappropriate supervisory control systems, lack of perceived control and lack of teamwork.

Gap 4 – Gap between service delivery and external communication: It occurs as a result of inadequate horizontal communications and propensity to over-promise.

Gap 5 – Gap between customer expectations and their perceptions of the service delivered: it occurs as a result of the influences exerted from the customer side and the shortfalls (gaps) on the part of the service provider. In this case, customer expectations are influenced by the extent of personal needs, word of mouth recommendation and past service experiences.

Gap 6 – Gap between customer expectations and employees’ perceptions: it occurs as a result of the differences in the understanding of customer expectations by front-line service providers.

Gap 7 – Gap between employee’s perceptions and management perceptions: it occurs as a result of the differences in the understanding of customer expectations between managers and service providers. For the retailers, Gap1, Gap5 and Gap6 are three important gaps, which are more associated with the external customers, since they have a direct relationship with customers. According to Brown and Bond (1995), "the gap model is one of the best received and most heuristically valuable contributions to the services literature". The model identifies seven important discrepancies relating to managerial perceptions of service quality and tasks associated with service delivery to customers. Gap 1, Gap 2, Gap 3, Gap 4, Gap 6 and Gap 7 represent functions of the way in which service is delivered, while Gap 5 relates to the customer and is considered to be the true measure of service quality. Gap 5 is also influenced by Service Quality methodology (SERVQUAL). In the following sub-section, the SERVQUAL approach is demonstrated.

3. Explain the various types of retail store locations. List their pros and cons

4.2 Types of Retail Stores Location Retailers have many store location factors to consider when choosing a place for their business. Here are a few of the more common types of retail locations.

Mall space A mall has many retailers competing with each other under one roof. It hosts a variety of stores and retail formats, from anchor stores to kiosks. There are generally 3 to 5 anchor stores, or large chain stores, and then dozens of smaller retail shops. Typically the rent in a mall location is much higher than other retail locations. This is due to the high amount of customer traffic a mall generates. Figure 4.1 gives you the outside and inside view of Select City Walk mall in Saket, Delhi.

A) Outside View

B)Inside View

Free standing locations This type of retail location is basically any stand-alone building. It can be located in a neighborhood or right off a busy highway. Depending on the landlord, there are generally no restrictions on how a retailer should operate his business. It will probably have ample parking and the cost per square foot will be reasonable. Downtown area

This type of store location may be another premium choice, just like malls. However, there may be fewer rules and more freedom for the business owner. Many communities are hard at work to revitalize their downtown areas and retailers can greatly benefit from this effort. However, the lack of parking is generally a big issue for downtown retailers. Shopping center Strip malls and other attached, adjoining retail locations also have some guidelines or rules for their tenants directing their conduct of business. These rules are probably more lenient than a mall, but make sure you can live with them before signing a lease. Home-based Home based businesses or stores are an inexpensive option but in such a business, growth may be restricted. It, may a times, becomes really hard to separate business and personal life in this setup and the retailer may run into problems if there isn't a separate address and/or phone number for the business. Office building

The business park or office building may be another option for a retailer, especially when they cater to other businesses. Tenants share maintenance costs and the image of the building is usually upscale and professional.

4. List the factors that influence retail store image. Discuss the elements of an interior store design

Can you imagine a retail store where the doorman is unkempt, the salespersons lazy, the merchandise old and the floor untidy. Would one want to even visit such a store, leave alone buy something from there? Doubtful. These are precisely some of the components of a retail image. Retail image deals not only with the interiors of the store, but also with the exteriors and the consumers’ shopping experiences at the store. The retail image has to be created keeping the target audience in mind – the kind of environment that they would like to shop in and the services that they would expect. For example, the kind of ambience needed in a Mercedes store would be different as compared to a Maruti or even a Hyundai store. The Koutons store has a different look as compared to a Wills Lifestyle – the range of products and services offered is also different. The factors affecting the image of a retail store can be classified into Primary and Complimentary factors. The Primary factors are: The product itself/the merchandise features

The place where it is sold or the location of the store

The pricing of the product

The manner in which it is presented to the customers and,

The advertising and promotion for the store

Perhaps the most important factor that affects the store image is the product features or the merchandise itself. For example, if the garments sold by an apparel store lose shape or run colour, it creates a bad image in the mind of the customer. The location of the store and the price of the merchandise sold also communicate the image of the store. For example, stores at Breach Candy or Nepeansea Road are considered up-market, as compared to those in suburbs like Kandivali or Borivali. Similarly, a store at South Retail Marketing Unit 5 Sikkim Manipal University Page No. 91

Extension would communicate a different image as compared to a store in Chandni Chowk or Karol Bagh. The manner in which the merchandise is displayed and presented is an integral part of communication of the image. The price of the product plays an important role in creating the

image. Expensive products are generally perceived to be good. Advertising also helps create an image. The elements which affect the retail image are shown in Figure 5.7.

Store Design Elements Store design has always been used to reinforce other elements of a retail strategy. For example, plush carpeting and marble used in a store denotes high-quality merchandise and may suggest a high-price positioning. Strip lighting and dump bins for merchandise brings the word 'bargains' to mind. However, as retail markets mature, the design of retail space is increasingly being used as a means by which strategic aims are reached. For example, in 2001 Safeway introduced a new store design to reinforce their position as a good-value fresh and quality grocery retailer. Wood paneling, slate tiling and pendent lighting were used in the wines and beers section to create the impression of an up-market wine cellar; baskets and barrels were used in the fruit and _ vegetable section to give the impression of 'market freshness' and chalkboard signage to foster the impression of good prices. It is these small details that help to refocus the attention of the shopper onto revised core values, providing a struggling grocery chain with a new lease of life to compete against other forceful players in the market (Atkinson, 2001). Store design elements include: Exterior elements like marquee, entrances, windows, banners, planters, awnings and lighting

Display areas

Corner shops

Shelves

Ledges

Merchandise walls

Colour and lighting

Sound and aroma

5. Write short note on visual merchandising.

Visual merchandising is concerned with presenting products to customers within the retail space. It is a term sometimes used as an alternative to merchandise display, but these days is generally understood to have a wider definition encompassing all activities concerned with the presentation of the product within the retail outlet, including the choice of store layout, the method of product presentation, the choice of fixture and fittings, the construction of displays, and the use of point-of-sale material. It also has a very close connection with the allocation of space within the outlet. Visual merchandising is more important in some retail sectors than others. For example, fashion and home furnishing retailers have always devoted considerable resources to displaying products in a visually appealing way, whilst discount grocery retailers are much more concerned with space efficiency. However, the need to adapt to style-conscious twenty-first-century customers is as relevant to the way products are presented as the way a store environment is designed.

6 Briefly discuss the strategic retail planning process in.

The Strategic Retail Planning Process The strategic planning process, after considering the HR potential and the Unique Selling Proposition (USP) of a particular store, takes proper shape. Strategic retail planning process divided into the four steps as discussed in subsequent sub-heads. 6.5.1 Deciding the store’s mission and objectives The retail strategic planning process starts with the identification of a store‟s mission for its existence, and hence the scope of the retail store. Themission of a store is, identifying the goods and services that will be offered to customers. It also deals with the issue of how the resources and capabilities of a store will be used to provide satisfaction to customers and how the store can compete in the target market vis-à-vis its competitors. The mission also involves the way of the store‟s functioning. How a store will work and accomplish its day-to-day operations. Once the organization mission has been determined, its objectives the desired future positions that it wishes to reach, should be identified. A store‟s objectives are defined as ends that the store seeks to achieve by its USP and operations. The store‟s objectives may be classified into two parts: (a) External store objectives are those objectives that define the impact of store on its environment, e.g., to develop high degree of customer confidence by providing quality goods at affordable price. (b) Internal store objectives are those objectives that define how much is expected to be achieved with the available resources, e.g., to raise the store turnover by 20% in the coming year. 6.5.2 Situational analysis The objective of doing store‟s situation analysis is to determine where the store is at present and to forecast where it will be if the formulated strategies are implemented. The difference between current and future position is known as planning. And the objective of conducting store‟s situation analysis, normally study in the context of external environment and internal environment. External analysis The purpose of examining the store‟s external environment is to study the opportunities and threats in the retailing environment. The external analysis studies factors that affect the macro-environment of the retailing industry and the task environment. Under external analysis retailer studies these parameters: Economic environment of retailing Inflation

Employment

Disposal income

Business cycle

Energy availability and cost

Others Political/Legal environment of retailing Monopolies legislation

Environmental protection laws

Taxation policy

Employment laws

Government policy

Legislation

Others

Socio-cultural environment of retailing Demographics

Distribution of income

Social mobility

Lifestyle changes

Consumerism

Levels of education

Others

Technological environment of retailing New discoveries and innovations

Speed of technology transfer

Rates of obsolescence

Internet

Information technology

Others

International environment of retailing Growth

Opportunities

Others

Internal analysis The objective of studying the internal environment of its own store is to identify the store‟s capabilities and weakness. The store will try to increase its capabilities, and overcome the weakness that deters the business profit. While doing the internal analysis, the store examines the quality and quantity of its available resources and critically analysis how effectively these resources are used. These resources for the purpose of examining are normally grouped into human resource, financial resources, physical resources and intangible resources. 6.5.3 Formulation of retail strategy After analyzing the store‟s capabilities in terms of HR, finance, physical and intangible resources, a store manager formulates a retail strategy with regards to marketing retail positioning and retail mix. Retail positioning is a plan of the store‟s action for how the retailer will enter the target market and will compete with its main competitors. Retail positioning from a retail store‟s point of view, is a step-by-step plan to create and maintain a unique and everlasting image of the store in the consumers mind. Retail positioning is made possible under these circumstances: By differentiation of store‟s merchandise from that its competitors.

By offering a high level of service after sales at nominal cost

By adopting low pricing policies.

Retail mix The retail mix is the blend of various retail activities that in totally present the whole concept of retailing. The retail marketing and retail positioning strategies are put into effect by this retail mix, the set of controllable elements that a retailer can use to satisfy customer‟s needs and to influence their buying behaviour and compete effectively in the target market. Utmost

care is required on the part of retail manager to select the various elements for a perfect retail mix. The main elements of a retail store that the manager has to consider are: The store‟s location

Merchandise assortment

Pricing policy

Customer service mechanism

Visual merchandising

Personal selling efforts

Advertising efforts

The store‟s internal and external environments. 6.5.4 Strategy implementation and control It is concerned with the designing and management of retail system to achieve the best possible combination of human, financial, physical and service resources of a retail store; to achieve the formulated objectives, without timely and effective implementation also requires scheduling and coordination of various retail activities. The implementation of new retailing strategies sometimes require changes in the way of functioning and duties that can lead to resistance from employees. Therefore, stores should take positive steps to reduce this resistance to change and to convince the employees that it in the long term will be beneficial for both the store and the employees. Strategy control deals in three basic concepts Inspection

Detection

Correction

It means after implementing the retail strategies, a retailer should assess how effectively the strategies are being implemented, how far the strategic objectives are being achieved and what has been left to be achieved in the store‟s objectives list. Therefore, retailers inspect the implemented strategies from time to time and detect any fault in the implementation of various retail elements. If any deficiency is found during the inspection process that has to be corrected with immediate effect without any further loss to the store.

Master of Business Administration- MBA Semester 3MK0012 – Retail Marketing

(4 credits)(Book ID: B1222)

ASSIGNMENT- Set 2Marks 60

Note: Each Question carries 10 marks

1. Define the term positioning. Discuss various positioning approaches.In marketing, positioning has come to mean the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. Positioning may lead to cosmetic changes in the product‟s name, price and packaging but far more important is the psychological positioning of potential products. Also repositioning of existing products is equally important.

The basic idea behind positioning a brand is to create a feeling in consumers that no there is no better substitute for the brand. A brand can be positioned in several ways: offering a specific benefit, targeting a specific segment, price or distribution. Benefit positioning can be used if the brand perceivably differs in its ability to deliver a specific benefit. The power of a benefit position will depend on how many people care about the benefit and how different the brand is in delivering it.

Retail positioning is the fight for a place in the consumers mind. Different retailers work to secure a place in the mind of the target consumer. Retailers need to create an image in the consumer‟s mind relative to their competitors so that consumers shop at their retail shop. The various decisions involved in developing effective positioning are: Market Positioning The market positioning is defined as the process of identifying and selecting markets or segments that represent business potential, to determine the criteria for competitive success. This must be based on the following factors: Though knowledge of needs, wants and perceptions of the target market, and

Benefits offered by the services.

In order to know above factors, marketers must seek answers to the following critical questions: What is important to target market?

How does the target market perceive the service offering?

How does the target market perceive the competition?

What attributes should a service offering use to differentiate itself to make the best use of its resources?

The service provider may have a „wish image‟ but as a matter of fact „no image‟ exists if the customers do not perceive the image of the offering. To understand this, put following questions to yourself: If you don‟t perceive that benefit offered is different from that of competitor, do you think you are being offered something different?

The answer of above questions will lead to the fact that images, benefits, perceptions and differentiation are the perception of the customer, and not the perception of service provider. The evaluation of the image of the offering perceived by the customer can be used to identify the crucial elements, which comprise the benefits. Psychological Positioning

This step involves the use of communication to convey the firm‟s or its offering‟s identity and image to the target market. It converts the needs into images and positions the offering in the customers mind. Psychological

positioning enables marketers to create a unique product image with the objective of creating interest and attracting customers. Since it exists solely in the mind of the customer, it can occur automatically without any effort on the part of the marketers and any kind of positioning may occur. There are two kinds of psychological positioning: Objective Positioning: The objective positioning relates to the objective attributes of the physical product. It is concerned with creation of an image of service offering that reflects physical features and functional features.

Subjective Positioning: Subjective positioning relates to the subjective attributes of the service offering. It is the (mental perceptions) image and other attributes perceived by the tourist and not the physical aspects of the offering.

Positioning approaches There are several approaches to positioning of service offering. They are: Positioning by Attributes, Features or Customer Benefits: Marketers, while using this approach, place emphasis on the benefits of the particular features or attributes of the offering.

Positioning by Price Value: „Value for money‟ can be utilized for positioning the offering effectively. In the international environment price is normally not used for positioning as the customer may not identify lower price with lower quantity.

Positioning by use of Application: Service offering is positioned on the basis of the reason for its use.

Positioning according to Users or Class of Users: This relates to consumer segments using a service offering. Airlines target the executive class, the frequent fliers and the tourists, Holiday resorts target, domestic tourists, on vacations for hill stations and enjoyment, adventures, travelers for trekking and religious travelers for the places of pilgrimage, and corporate bodies for business conferences etc.

Position with respect to product class: The positioning could be based on functional benefits as well as symbolic and emotional benefits. This technique is generally used to associate an offering with experiences that are unique

Positioning against Competition: This positioning approach is used to meet the competition “HEAD-ON” to bring out differences between destinations. This form of positioning had been responsible for many advertising wars in the market place. The international players avoid this approach because it may involve negative statements about other country or regions. But it is regularly employed in products and services marketing.

Positioning by Endorsement: It involves use of celebrities or other product success.

Positioning by Quality Dimensions: RATER (Reliability, Assurance, Tangibility, Empathy and Responsiveness) is usually used for positioning the service. Service firms choose one or combination of more than one quality dimensions to position their offering.

Figure 6.1 lists the factors by which a retail store can be positioned.

2. Write a short note on- psychographic segmentation. Psychographics segmentation When segmentation is based on personality or lifestyle characteristics, it is called psychographic segmentation. Consumers have a certain self-image and this describes their personality. There are people who are ambitious, confident, aggressive, impulsive, conservative, modern, gregarious, loners, extrovert, introvert, etc. Some motorcycle manufacturers segment the market on the basis of personality variables such as macho image, independent and impulsive. Some producers of liquor, cigarettes, apparel, etc., segment the market on the basis of personality and self-image. Marketers, are often not concerned about measuring how many people have the characteristic as they assume that a substantial number of consumers in the market either have the characteristic or want to have it.

Lifestyle: It is an indicator of how people live and spend their time and money. What people do in their spare time is often a good indicator of their lifestyle. For example, John L. Lastovicka, John P. Murray, Erich A. Joachimsthaler, Gaurav Bhalla and Jim Sheurich in their study, were identified two lifestyle segments that were most likely to drink and drive:

good timers and problem kids. Good timers are partygoers, macho and high on sensation seeking. Problem Kids frequently display troublesome behaviours. According to Morris B. Holbrook, people who have an affinity for nostalgia, or the desire for old things, also represent a lifestyle segment and can be a key market for old movies, antiques and books. Surfing on the Internet has also created a new type of lifestyle. Another study by Rebecca Piirto of fashion consumers found six major groups: yesteryears (older consumers), power purchasers (married households with college degree), fashion foregoers, social strivers, dutifuls (highly practical) and progressive patrons (high-income/quality buyers). Consumers in different countries and cultures may have characteristic lifestyles. For example, Indian women are home focused, less likely to visit restaurants, more price-sensitive, spend time preparing meals at home and fond of movies.

AIO inventories are useful additions to demographic data but marketers have found the original AIO inventories as being too narrow. Now, psychographics or lifestyle studies generally include the following: Attitudes include evaluative statements about people, products, ideas, places, etc.

Values refer to widely held beliefs about what is right/acceptable/desirable, etc.

Activities and interests cover behaviours with respect to activities other than occupation to which consumers devote time and effort, such as hobbies, interests, social service, etc.

Demographics cover gender, age, education, occupation, income, family size, geographic location, etc.

Media preferences describe which specific media the consumers prefer to use.

Usage rate focuses on measurements of consumption level within a particular product category and is generally recorded as heavy, medium, light, or non-user. Table 8.2 lists various lifestyle dimensions that are of interest to the marketers. Table 8.2: Lifestyle Dimensions Activities

Interests Opinions Demographics

Work Hobbies Social events Vacation Entertainment Club membership Community Shopping Sports

Family Home Job Community Recreation Fashion Food Media Achievements

Themselves Social issues Politics Business Economics Education Products Future Culture

Age Education Income Occupation Family size Dwelling Geography City size Stage in life cycle

The sample size is often 500 or more individuals who provide this information and are placed in groups whose members have similar response patterns. According to F. W. Gilbert and W. E. Warren, most studies use the first two or three dimensions mentioned above to group individuals. The use of other dimensions provides more complete profiling of each group. Generally, the AIO measurements are product or activity specific. For example, W. A. Kamakura and M. Wedel have reported a study related to fashion clothing which included 40 statements and respondents reported their degree of agreement or disagreement. Five of the statements are mentioned here: I like parties with music and chatting.

I like clothes with a touch of sensuality.

I choose clothes that match my age.

No matter where I go, I dress the way I want to.

I think I spend more time than I should on fashion.

In this study, statements relevant to activities and demographics were also included. General lifestyle studies can be used to spot new product opportunities, while product specific lifestyle analysis may help repositioning decisions regarding existing brands.

The VALS (Values and Lifestyles) Stanford Research Institute (SRI) developed a popular approach to psychographics segmentation called VALS (Values and Lifestyles). This segmented consumers according to their values and lifestyles in USA. Researchers faced some problems with this method and SRI developed the VALS2 programme in 1978 and significantly revised it in 1989. VALS2 puts less emphasis on activities and interests and more on a psychological base to tap

relatively enduring attitudes and values. To measure it, respondents are given 42 statements with which they are required to state a degree of agreement or disagreement. Some examples of the statements are: I am often interested in theories.

I often crave excitement.

I liked most of the subjects I studied in school.

I like working with carpentry and mechanical tools.

I must admit that I like to show off.

I have little desire to see the world.

I like being in charge of a group.

I hate getting grease and oil on my hands.

VALS2 has two dimensions. The first dimension, self-orientation, determines the type of goals and behaviours that individuals will pursue, and refers to pattern of attitudes and activities which help individuals reinforce, sustain, or modify their social self-image. This is a fundamental human need. The second dimension – resources – reflects the ability of individuals to pursue their dominant self-orientation that includes the full range of physical, psychological, demographic and material means such as self-confidence, interpersonal skills, inventiveness, intelligence, eagerness to buy, money, position, education, etc. The questions above are designed to classify respondents based on their self-orientation. Stanford Research Institute (SRI) has identified three basic self-orientations: Principle-oriented individuals are guided in their choices by their beliefs and principles and not by feelings, desires and events.

Status-oriented individuals are heavily influenced by actions, approval and opinions of others.

Action-oriented individuals desire physical and social activity, variety and risk taking. Based on the concepts of self-orientation and resources, Values and Lifestyle typology breaks consumers into eight groups. VALS2 suggests that a consumer purchases certain products and services because the individual is a specific type of person. The purchase is believed to reflect a consumer‟s lifestyle, which is a function of self-orientation and resources. People with most resources are at the top and the ones with least resources are at the bottom of this typology. Each of the eight groups exhibits a distinctive behaviour, decision-making approach and product or media usage attributes. VALS2 represents an interconnected network of segments, which means that adjoining segments have many similar characteristics and can be combined to suit particular marketing objectives .

3. Briefly describe the criteria for effective segmentation. Criteria for Effective Segmentation Marketing managers should ensure that the segmentation passes through six criteria based acid tests. As a student of marketing, you need to understand what makes a good segmentation so that in the event of doing segmentation in your workplace, you can test your decisions on these grounds. These six criteria include identity; accessibility, responsiveness, size, measurability and nature of demand.

1. Identity: The marketing manager must have some means of identifying members of the segment – i.e. some basis for classifying an individual as being or not being a member of the segment. There must be clear differences between segments. Members of such segments can be readily identified by common characteristics, and display similar behavior.

2. Accessibility: It must be possible to reach the different segments in regard to both promotion and distribution. In other words, the organization must be able to focus its marketing efforts on the chosen segment. Segments must be accessible in two senses. First, firms must be able to make them aware of products or services. Second, they must get these products to them through the distribution system at a reasonable cost. 3. Responsiveness: A clearly defined segment must react to changes in any of the elements of the marketing mix. For example, if a particular segment is defined as being cost-conscious, it should react negatively to price rises. If it does not, this is an indication that the segment needs to be redefined. 4. Size: The segment must be reasonably large to be a profitable target. It depends upon the number of people in it and their purchasing power. For example, makers of luxury goods may appeal to small but wealthy target markets whereas makers of cheap consumption goods may sell to the large number of persons who are relatively poor. The idea is that enough potential buyers must exist to cover the costs of production and marketing required in that segment. This is often called as substantiality. 5. Nature of Demand: It refers to the different quantities demanded by various segments. Segmentation is required only if there are market differentiation in terms of demand. The marketing manager should not only be able to find out the total demand but also the differences in demand patterns in each of these segments. 6. Measurability: The purpose of segmentation is to measure the changing behavioral pattern of consumers. For example, the segment of a market for a car is determined by a number of considerations, such as economy, status, quality, safety, comforts etc.

4. How and when can demographic and benefit segmentation be used to maximum efficiency? Benefit Segmentation: By purchasing and using products, consumers are trying to satisfy specific needs and wants. In essence, they look for products that provide specific benefits to them. Identifying consumer groups looking for specific benefits from the use of a product or service is known as benefit segmentation and is widely used by marketers. For example, there are distinct groups of auto buyers. One group might be more interested in economy, the other in safety and still other in status. Segmentation bases, such as demographics are descriptive. These variables are useful but do not consider why consumers buy a product. Benefit segmentation has the potential to divide markets according to why consumers buy a product. Benefits sought by consumers are more likely to determine purchase behaviour than are descriptive characteristics. Marketers should also appreciate that many benefits sought by consumers are subject to change with changing technologies, changing social values and competitive offers. This requires that marketers must constantly reassess benefit segments. The present scenario in the computer market is an example. With the introduction of faster and better products, the benefits consumers seek, are constantly changing. Benefit segmentation can be seen in the toothpaste market; fresh breath, decay prevention and whiter teeth are some examples and the leading brands involved are Colgate Total, Close-Up and Promise. Table 8.3 presents the benefit segmentation of the toothpaste market.

Principal Benefit Sought

Psychographic Characteristi

Behavioural Characteristics

Demographic Characteristi

Brands Much Favoured

cs cs Brightness of teeth (cosmetic)

Outgoing, active fun-loving, high sociability

Smokers Teenagers, youngsters

Close-Up, Promise, Aquafresh

Decay prevention (medicinal)

Health conscious

Heavy users Large families

Pepsodent, Colgate Total, Forhans

Taste (good taste, flavour)

Self-indulgent, hedonistic

Mint lovers Children Aquafresh, Colgate

Low price (economy)

Price-conscious, independent

Heavy users, deal prone

Men, traditional

Neem, Babool, Vicco Vajradanti

8.4.6 Demographic-psychographics segmentation (Hybrid pproach) Demographic and psychographic profiles work best when combined together because combined characteristics reveal very important information about target markets. Demographic-psychographics information is particularly useful in creating consumer profiles and audience profiles. Combined demographic-psychographic profiles reveal important information for segmenting mass markets, provide meaningful direction as to which type of promotional appeals are best suited and selecting the right kind of advertising media that is most likely to reach the target market.

5. Briefly discuss the channel strategies adopted by the retailers. Developing the Marketing Channel Strategy Developing a viable marketing channel strategy involves some important decisions. These are discussed in subsequent sub-sections. 9.4.1 Channel design Designing of the distribution channels deals with the decisions that are associated with forming a new distribution channel or modifying an existing. In designing marketing channels, manufacturers have to decide what is ideal, what is feasible, and what is available. A new firm typically starts as a local operation selling in a limited market. Since it has limited capital, it usually uses existing intermediates. The number of intermediaries in any local market is apt to be limited. Designing a channel system calls for analyzing customer needs, establishing channel objectives, and identifying and evaluating the major channel alternatives. Analyzing customers’ desired service output levels Lot Size: Lot size refers to the total number of units of products that a customer acquires during a transaction period.

Waiting Time: Waiting time is the average time that customers of that channel wait for receipt of the goods. Customer normally prefers fast delivery channels. For example, Withdraw the money from ATM, Sending money to other stations. You need not step into the bank and fall into the line to with draw for above-mentioned things.

Spatial Convenience: It represents the degree to which the marketing channel makes it easy for customer to purchase the Product. For example, Booking the Product through E-Commerce

Selection Utility: The selection utility of a marketing channel refers to the likelihood that the needs of customers will be exactly satisfied. Marketing channels like super markets ensure that they not only carry a

wider assortment of products but also a greater variety or breadth of product assortment.

Service Backup: Service back represents the bundle of services offered by the marketer. Services such as credit facility, free home delivery, Installation free, repairs and so on enhance the image of the marketer which can facilitate to the marketer to acquaint a certain percentage of market shares in the market.

9.4.2 Establishing the channel objectives According to Bucklin, under competitive conditions, channel institutions should arrange their functional tasks so as to minimize total channel cost with respect to desired levels of service out puts. Effective channel planning requires determining which market segment to serve and the best channels to use in each case. Channel objectives vary with product characteristics perishable products require more direct marketing because of the dangers associated with delays and repeated handling. High unit value products such as generators and turbines are often sold through a company sales force rather than through intermediaries. A manufacturer, whether big or small, has to conduct a SWOT analysis of the intermediaries in terms of their strengths and weaknesses in the internal environment and opportunities and threats in the external environments. 9.4.3 Terms and responsibilities of channel members The producer must determine the rights and responsibilities of the participating channel members make sure that each channel member is treated respectfully and given the opportunity to be profitable. Distributor territorial rights Distributors territorial rights are another element in the trade-relations mix distributors want to know where and under what terms the producer will enfranchise other distributors. They would also like to receive full credit for all sales taking places to their territory, whether or not they did the selling. 9.4.4 Motivating channel members Intermediaries must be continuously motivated to do their best job. The terms that lead them to join the channel provide some motivation, but these must be supplemented by training, supervision, and encouragement. 9.4.5 Evaluating channel members The producer must periodically evaluate intermediaries‟ performance against such standards as sales-quota attainment, average inventory levels, customer delivery time, treatment of damaged and lost goods, and cooperation in promotional and training programs. 9.4.6 Types of intermediaries Company sales force The sales force the assets of the organization. Taking the more no of sales force, train them to fit for the needs of the organization and assign the each territory to them to contribute the business. Manufacturers’ agency Hire manufacturer agents in different regions or end-use industries to sell the new test equipment. Industrial distributors Find the potential distributors in all regions and endorse the entire fished goods on to them. Give them the exclusive distribution, adequate margins, Product training to draw he attention of the customer and promotional support. 9.4.7 Evaluating channel alternatives Each alternative needs to be evaluated against economic, control and adaptive criteria. Economic criteria Most marketing managers believe that a company sales force will sell more. Company sales representatives concentrate entirely on the company‟s products. The simple reason can be

customers‟ willingness to deal with sales representatives dealing in several brands of the same product rather than a specialized sales representative dealing in only a single brand. Finally, sales and cost are compared. There is one sales level at which selling costs are same for the two channels. The fixed cost incurred in using a sales agency is lower than that of developing a company‟s sales force. However these costs go up as the sales increase owing to the higher commissions of the sales agency. Control criteria A sales agency is an independent business firm seeking to maximize its profits. The company depends on external services, the less it can control its product and resources. There fore, while selecting an intermediary, a company has to strike a balance between its desire to control important functions of the firm, and the need to market coverage with the help of external agencies. Adaptive criteria To develop a channel there should be some agreement on the commitment levels from both the sides before the actual start of the business. These commitments invariably lead to a decrease in the producer‟s ability to respond to a changing market place. Channel members who operate in a highly turbulent atmosphere will try to structure the channel in a way that will allow them to adapt to the changes by altering their channel strategy. 9.4.8 Modifying channel arrangements Modification becomes necessary when the original distribution channel is not working as planned, consumer buying patterns change, the market expands, new competition arises, innovative distribution channels emerge, and the product moves into later stages in the product life cycle.

A channel alternative is described by three elements: (1) The types of available business intermediaries (2) The number of intermediaries needed (3) Terms and responsibilities of each channel participant.

6. Differentiate between relationship marketing and transactional marketing

Relationship Marketing Transactional Marketing Focus on customer Focus on single sale Efforts on adding more of product benefits Efforts on adding more product features High customer service emphasis Little emphasis on customer service Quality is the concern for all Quality is a concerned only on production High customer contact hence higher commitment with them

Moderate contact with the customer‟s hence limited commitment with them

Thus, customer relationship marketing is different from the old concept of marketing, which used to be based more on increasing the customer base. Relationship marketing focuses on using relational strategies to acquire customers, retain them, and enhance relationship with them. In fact, as per Pareto's Law, 80% of the total sales comes from 20% of the customers, and, thus, relationship marketing attempts to optimize the resources for the retailer by retaining the most profitable of the customers. The retailing industry plays an important role in the success of relationship marketing as it serves as the major link between the supplier and customers. Therefore, it engages, maintains, and enhances the relationship with the ultimate entity of the value chain, which in turn determines the success of all the members of the value chain. The retailers have always acknowledged the importance of long-term relationship with customers in their business. Sub-sequent sub-sections discuss some important aspects of relationship management.

7. Discuss the components of CRM Customer Relationship Marketing (CRM) strategies refer to any effort that is actively made by a seller towards a buyer, and is intended to contribute to the buyer's customer value above and beyond the core product and/or the service provided. This can only be perceived by the buyer after continued exchange with the seller. For instance, if the traditional Indian retailers treat their regular customers in a warm and friendly manner and also provide them with special benefits in terms of home delivery, discounts, etc, then these efforts are an attempt to provide benefits above and beyond the core service performance. From this we can figure out that strategies laid for CRM is a combination of several benefits. Let's familiarize ourselves with the major four components that help in formulating a Customer Relationship marketing strategy. Figure 12.1 shows the four components in a snap shot.

Let's discuss on each of the components starting from, Personalisation Personalization describes the social interaction between service employees and their customers. It refers to the way in which employees relate to customers as people - cold and impersonal at one end, and warm and personal at the other. Consequently, personalization can be regarded as a means of showing recognition and respect for the other party. Some of the common examples of social relationship benefits include feelings of familiarity, personal recognition, friendship, and social support. Such an interaction afforded by shopping sometimes works as a prime motivator for some consumers to visit retail establishments. Communication Communication is without a doubt, an essential condition in the existence of any relationship. A retailer's communication with a buyer conveys his interest in them and serves to strengthen their relationship. So, efforts to „stay in touch‟ with the customers have been identified as the key determinants of relationship enhancement in retailer-customer relationship. It is generally observed that buyer-seller relationships become stronger when the ease and volume of exchange between buyers and sellers increase.Rewards Providing customers with tangible rewards is often referred to as „level one relationship marketing'. This level of CRM relies primarily on pricing incentives and money savings to

secure customers' loyalty. Rewards should be designed to promote long-term behaviour and discourage short-term deal-seeking behaviour. Rewarding efforts refer to structured and planned marketing efforts that should encourage loyal behaviour, distinguishing it from short-term oriented sales promotions. Special treatment benefits A key aspect of relationship marketing is that all consumers do not need to be served in the same way. If a consumer receives personalized, customized service from retailer A, but not from Retailer B, and if this service is valued, then the consumer will be less likely to leave Retailer A for B. The retailers can distinguish between at least two identifiable customers segments: loyal customers and non-loyal customers. The next few sub-sections discuss the other important aspects CRM in the retail sector.