1. McGraw-Hill/Irwin Retailing Management, 7/e © 2008 by The McGraw-Hill Companies, All rights reserved. Chapter 16 Retail Communication Mix

2. 16-2 Merchandise Management Retail Pricing Chapter 15 Retail Communication Mix Chapter 16 Merchandise Planning Systems Chapter 13 Managing Merchandise Assortments Chapter 12 Buying Merchandise Chapter 14

3. 16-3 Questions ■What can retailers build brand equity for their stores and their private-label merchandise? ■How are retailers using new approaches to communicate with their customers? ■What are the strengths and weaknesses of the different methods for communicating with customers? ■Why do retailers need to have an integrated marketing communication program? ■What steps are involved in developing a communication program? ■How do retailers establish a communication budget? ■How can retailers use the different elements in a communication mix to alter customers’ decision-making processes?

4. 16-4 Objectives of Communication Program Short-term Increase Traffic Increase Sales Long-term Build Brand (retailer’s name) Image Create Customer Loyalty

5. 16-5 Brands Distinguishing name or symbol, such as a logo, that identifies the products or services offered by a seller and differentiates those products and services from those offered by competitors The McGraw-Hill Companies, Inc./Bob Coyle, photographer The McGraw-Hill Companies, Inc./John Flournoy, photographer

6. 16-6 Value of Brand Image Value to Retailers (Brand Equity) ■Attract Customers ■Build Loyalty ■Higher Prices Leading to Higher Gross Margin ■Reduced Promotional Expenses ■Facilitates Entry into New Markets Gap  GapKids Value to Customers ■Promises Consistent Quality ■Simplifies Buying Process ■Reduces Time and Effort Searching for Information About Merchandise/Retailer

7. 16-7 Building Brand Equity Brand Equity Create a High Level of Brand Awareness Create Emotional Connections Consistent Reinforcement Develop Favorable Associations

8. 16-8 The McGraw-Hill Companies, Inc./Lars Niki, photographer Tar-Zhay

9. 16-9

10. 16-10 Apple

11. 16-11 Benefits of High Brand Awareness Aided Recall Top Mind Awareness Stimulates Visits to Retailer

12. 16-12 Creating Brand Awareness Top-of-mind Brand Awareness Memorable Name Repeated Exposure Symbols Event Sponsorship Best Buy Home Depot Starbuck’s Macy’s

13. 16-13 Retailers Develop Associations with their Brand Name Merchandise Category – Office Depot – office supplies Price/quality – Neiman Marcus –, high fashion merchandise Specific attribute or benefit – 7-Eleven – convenience Lifestyle or activity – Electronic Boutique – computer games Brand associations: anything linked to or connected with the brand name in a consumer’s memory Brand name is a set of associations that are usually organized around some meaningful themes

14. 16-14 McDonald’s Brand Associations McDonald’s Big Mac Golden Arches Fast Food French Fries Clean Ronald McDonald

15. 16-15 L.L. Bean

16. 16-16 L.L. Bean’s Brand Associations L.L. Bean Friendly New England Practical Expertise Outdoors Honest

17. 16-17 Wal-Mart Associations

18. 16-18 Target Associations

19. 16-19 Consistent Reinforcement The retailer’s brand image is developed and maintained through the retailer’s communication mix Retail Communication Mix

20. 16-20 Consistent Reinforcement through Integrated Marketing Communication Program Integrated Marketing Communication Program ■A program that integrates all of the communication elements to deliver a comprehensive, consistent message ■Providing a consistent image can be challenging for multichannel retailers – Need to consider the needs of all channels early in the planning of its communication program

21. 16-21 Integrated Marketing Communications Present a Consistent Brand Image through all Communications with Customers Store Design Advertising Web Site Magalog The McGraw-Hill Companies, Inc./Andrew Resek, photographer

22. 16-22 Brand Extensions ■Gap  GapKids and Old Navy ■Talbots  Talbuts Mens ■Sears  Sears Auto Centers and the Great Indoors ■Pottery Barn  Pottery Barn Kids The McGraw-Hill Companies, Inc./Andrew Resek, photographer

23. 16-23 Extending Brand Name to a New Concept Pluses ■Develop Awareness and Image Quickly ■Less Costs Needed to Promote Extension Minuses ■Associations Might Not Be Compatible with Extension Limited  Victoria’s Secret Abercrombie & Fitch  Hollister

24. 16-24 Communication Methods

25. 16-25 Paid Impersonal Communications ■Advertising ■Sales promotions – Special events, In-store demonstrations ■Games, sweepstakes and contests ■Coupons ■Store atmosphere ■Website ■Community building Jack Star/PhotoLink/Getty Images Boxes of KrustyO’s cereal at a New York 7- Eleven stores, temporarily converted into a Kwik-E Mart, to promote the Simpson Movie.

26. 16-26 Store Atmosphere The combination of the store’s physical characteristics (architecture, layout, signs and displays, colors, lighting, temperature, sounds, smells) together create an image in the customers’ mind

27. 16-27 Mediacart A shopping cart that delivers point-of-decision advertising ■Informs the customer about special deals as the customer passes them in the aisle ■Each video screen is embedded with an RFID chip that interacts with chips installed on store shelves ■Records shopping habits, dwell times, how shoppers travel through the store

28. 16-28 Community Building Retailers’ Community Building Websites offer opportunities for customers with similar interests to learn about products and services that support their hobbies and share information with others

29. 16-29 Paid Personal Communication ■Retail salespeople are primary vehicle for providing paid personal communication to customers. Personal selling – salespeople satisfy needs through face to face exchange of information ■Email – retailers inform customers of new merchandise, receipt of order or when order has been shipped ■Direct Mail ■M-Commerce (mobile commerce)

30. 16-30 Unpaid Impersonal Communication Publicity is communication through significant unpaid presentations about the retailer, usually a news story, in impersonal media. Newspaper TV coverage Macy’s Thanksgiving Day Parade

31. 16-31 PR The Gap, Emporio Armani, and Apple are among several retailers selling red products, a portion of the proceeds go to Product RED, a charity to wipe out AIDS in Africa

32. 16-32 Unpaid Personal Communication ■Word-of-mouth Can be favorable Can be detrimental ■Social Shopping A communication strategy in which consumers use Internet to engage in the shopping process by exchanging preferences, thoughts, and opinions Product/service reviews

33. 16-33 Social Shopping

34. 16-34 Comparison of Communication Methods

35. 16-35 Steps in Developing a Retail Communication Program Planning the Retail Communication Program

36. 16-36 Setting Objectives ■Communication objectives: Specific goals related to the retail communication mix’s effect on the customer’s decision-making process Long-term: ex) creating or altering a retailer’s brand image Short-term: ex) increasing store traffic

37. 16-37 Communication Objectives & Stages in the Consumers Decision-Making Process

38. 16-38 Retail and Vendor Communication Programs Vendor Long-term objectives Product focused National Specific product Retailer Short-term objectives Category focused Local Assortment of merchandise

39. 16-39 Setting the Communication Budget Marginal analysis Objective and task Rules of thumb ­ Affordable ­ Percent of sales ­ Competitive parity AdvertisingSales Sales Advertising

40. 16-40 Setting the Communication Budget ■Marginal Analysis Method Based on the economic principle that firms should increase communication expenditures as long as each additional dollar spent generates more than a dollar of additional contribution Very hard to use because managers don’t know the relationship between communication expenses and sales

41. 16-41 Marginal Analysis for Setting Communication Budget

42. 16-42 Objective-and-Task Method ■Determines the budget required to undertake specific tasks to accomplish communication objectives

43. 16-43 Illustration of Objective and Task Method for Setting a Communication Budget

44. 16-44 Financial Implications of Increasing the Communication Budget

45. 16-45 Rule of Thumb Methods Affordable Budgeting Method – sets communication budget by determining what money is available after operating costs and profits are budgeted. Drawback: The affordable method assumes that the communication expenses don’t stimulate sales and profits. Percentage of Sales Method – communication budget is set as a fixed percentage of forecasted sales. Drawback: This method assumes the same percentage used in the past, or by competitors, is still appropriate for the retailer.

46. 16-46 Rule of Thumb Methods Competitive Parity Method – this communication budget is set so that the retailer’s share of communication expenses equals its share of the market. Drawback: This method (like the others) does not allow the retailer to exploit the unique opportunities or problems they confront in a market.

47. 16-47 Allocation of the Promotional Budget ■The retailer decides how much of its budget to allocate to specific communication elements, merchandise categories, geographic regions, or long- and short-term objectives ■Budget allocation decision is more important budget amount decision High-assay principle: The retailer allocate the budget to areas that will yield the greatest return