1. Building and Sustaining Relationships in Retailing
Chapter 2
Building and Sustaining Relationships in Retailing
Dr. Pointer

2. Chapter Objectives
To explain what “value” really means and 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

3. Chapter Objectives_2
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

4. Overview
To be successful as a retailer, he/she must apply concepts of value and relation building so that :
a. customers believes retailer offers good value for money and will want to shop often with them over competitors
b. wholesalers will also want to do business because they know customers patronize the retailers

5. What is Value? The bottom line:
Consumers will demand more for less from the shopping experience
They will spend less time shopping
They will split the commodity-shopping trip from the value-added shopping trip
Value is the difference between what is paid for item and the perception of what is received

6. What is Value? Channel Perspective:
Value is a series of activities and processes - the value chain - that provides a certain value for the consumer
Customer Perspective
Value is the perception that the shopper has of the value chain
It is the view of all the benefits from a purchase versus the price paid.

7. 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

8. Retailer Relationship
Relationship retailing seeks to form and maintain long-term bonds with customers, rather than act as if each sales transaction is a new encounter
Customer Relationship is key
Loyal customers are the backbone of a prosperous business

9. 4 Factors Key to Relationship Retailing
Customer Base
Customer Service
Customer satisfaction
Loyalty programs/defection rates

10. Customer Base Analyze customers to see who they are
Population trends – U.S. population is aging,
Various factors influence shopping behavior
- More women than men shop
- Know the important reasons given for shopping at various types of retailers
* apparel retailers *supermarkets
* discounters
Core customers (best customers) – nurture the relationships

11. Customer Service
Customer service refers to the identifiable, maybe intangible, activities done along with products/service to sell products
Expected – service level that customers want to receive
Augmented – activities that enhances the shopping experience and gives a competitive advantage

12. 3 Aspects of Value-Oriented Retail Strategy
Expected
Augmented
Potential

13. Potential Pitfalls to Avoid in Planning a Value-Oriented Retail Strategy
Planning value with just 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

14. 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 delivering value-enhancing services?
Does the retailer distinguish between expected and augmented value chain elements?
Has the retailer identified meaningful potential value chain elements?
Is the retailer’s value-oriented approach aimed at a distinct market segment?
Is the retailer’s value-oriented approach consistent?
Is the retailer’s value-oriented approach effectively communicated to the target market?
Can the target market clearly identify the retailer’s positioning strategy?
Does the retailer’s positioning strategy consider trade-offs in sales versus profits?
Does the retailer set customer satisfaction goals?
Does the retailer periodically 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?

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

16. 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?

17. Fundamental Decisions_2
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?

18. Table 2.1 Typical Customer Services
Credit
Delivery
Alterations/ Installations
Packaging/ gift wrapping
Complaints/ Return handling
Gift certificates
Trade-ins
Trial purchases
Special sales
Extended store hours
Mail and phone orders
Retailers must chose the level. Which of these and how extensive

19. Table 2.1 Miscellaneous Customer Services
Bridal registry
Interior designers
Personal shoppers
Ticket outlets
Parking
Water fountains
Pay phones
Baby strollers
Restrooms
Restaurants
Baby-sitting
Fitting rooms
Beauty salons
Fur storage
Shopping bags
Information
Retailers must chose the level. Which of these and how extensive

20. Figure 2.6 Turning Around Weak Customer Service
Focus on
Customer Concerns
Empower Front-Line
Employees
Show That You Are
Listening
Express Sincere
Understanding
Apologize and Rectify
the Situation

21. Customer Satisfaction
Customer satisfaction occurs when the value and expectations are meet or exceed during the retail experience
Most customers do not complain when dissatisfied. They just shop elsewhere
Retailers need to readily seek consumer feedback to determine level of satisfaction/dissatisfaction
HOW?

22. Loyalty Programs
Loyalty programs (frequent shopper) reward best customers
Chief benefits: Getting a good deal (67%)
Advance notice of sales (30%)
Coupons (31%)
Rebates/cash back (29%)
Rewards must be useful and attainable in a reasonable period of time

23. Must Have Good Channel Relationships
Members of distribution channel jointly represent the value delivery system
Each channel member is dependent on the others to achieve its objective
Value delivery system is only as good as the weakest link – all trade members are key
The nature of the value delivery system is dependent on the target market

24. Category Management can improves relationship
A practice to improve relationships between retailers and wholesalers
Channel members collaborate to manage products by categories

25. Principles of Category Management
Retailers listen more to customers
Profitability is improved because inventory matches demand more closely
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

26. Figure 2.7 Elements Contributing to Effective Channel Relationships
Consumer orientation, common positioning goals, Inputs into decisions,trust, fairness, reliability, good communication, coordination, consistency, activities being performed as promised, proper lead time, equitable profit distribution, marketing support, timeliness of payments, good inventory planning

27. Difference Between Service and Good Retailing
Goods retailing – focuses on sales of tangible products
Service retailing – focuses on transactions in which consumers do not acquire ownership of a tangible product
Some items are a combination of goods and services
Note: customer service and retailing of service are difference concepts

28. 3 Kinds of Service Retailing
Rented goods services- rent or use tangible goods for specific time
Owned goods services – repairs made to goods
Nongoods services – intangible personal services are sold
Service retailing is highly dependent on personal interactions and word of mouth communications

29. Four Characteristics of Services Retailing
Intangibility
Inseparability
Perishability
Variability

30. Figure 2.8a Characteristics of Service Retailing
Intangibility
No patent protection possible
Difficult to display/communicate service benefits
Service prices difficult to set
Quality judgment is subjective
Some services involve performances/experiences

31. 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

32. Figure 2.8c Characteristics of Service Retailing
Perishability
Services cannot be inventoried
Effects of seasonality can be severe
Planning employee schedules can be complex

33. Figure 2.8d Characteristics of Service Retailing
Variability
Standardization and quality control hard to achieve
Services may be delivered in locations
beyond control of management
Customers may perceive variability
even when it does not actually occur

34. Consumers perception of service retailing is dependent on:
Know customer
needs
Convenience
Reliability of self
service tech
Clarity of benefits
Service environment
Promptness of
service
Quality of employees
Service quality and
reliability
Information about
service
Respectful contact
with customers
Service provided
as promised
Dependability in
handling problems
Service performed
right the first time
Readiness to respond
to customer request

35. Technology and Relationships in Retailing
Technology maybe beneficial in promoting good relationships
It facilitates good communications
Technology use may be perceived as cold and impersonal
New Technology must be efficient and cause minimal disruptions to suppliers, employees and customers

36. Examples of Technology Use
Banking
Supplier interactions

37. Consumer Advantages to Self-Checkout
Shorter lines
Increased speed
Privacy
This is used by many retailers now. What is the future of self checkout?

38. Ethical Performance
Retailers must consider their ethical performance in three board areas
1. Ethics
2. Social Responsibility
3. consumerism

39. Ethics
Ethics deals with doing what is acceptable by retailers constituencies (customers, public, suppliers, competitors, and others)
Some examples of ethical practices are?
Many firms have established a code of ethics

40. Social Responsibility
Social responsibility refers to retailers acting in the interest of society as well as themselves
Often being socially responsible may mean increased costs but not for all activities
Retailers know that consumers are aware of how socially responsible they are
Give some examples of socially responsible acts of retailers.

41. Consumerism
Consumerism involves the activities of government, business, and other organizations to protect people from practices that infringing on their rights as consumers or that are dangerous and unsafe..
John F. Kennedy bill of rights…

42. Retailers Must Avoid Practices that Violate Consumers Rights
Some retail practices are covered by legislation, Americans with Disabilities Act (ADA) which mandates disable consumers have access to retailers’ stores
People more apt to patronize firms viewed as customer oriented
Consumers are more knowledgeable, cost conscious and selective these days

43. Retailers Must Avoid practices that violate consumers rights
Large retailers may be viewed as indifferent
Self-service technology can be frustrating
Innovative technology is unsettling
Retailers directly interact with customers and maybe blamed for many problems (often problems are caused by producers)

44. Questions