REVIEW EXAM #2 Chapters 6,7,8,9,11

Chapter 6 FINANCIAL STRATEGY

Strategic Profit Model - measurements Input Measures Output Measures Productivity

Strategic Profit Model

Profit Margin Management Path 40.5% 12.5% $6,333 4.4% 1.8% How to calculate Profit Margin How is it used? What can be done to affect it? 31.6% 9.6%

Asset Management Path 1.1% 3.2%

Strategic Profit Model – how is it used? Corporate Performance Merchandise Management Store Operations Performance over time Compare to competitors

Chapter 7 RETAIL LOCATIONS

Why is location important? The prime consideration in consumer choice Creates sustainable competitive advantage Creates potential long-term financial risk

Location Factors or “trade-offs” Size of Trade Area Occupancy Costs Pedestrian and Vehicle Traffic Restrictions on operations Convenience

Types of Locations Unplanned Areas Planned Areas (Shopping Centers)

Freestanding Sites Size of Trade Area Occupancy Costs Traffic – Vehicle & Pedestrian Restrictions on operations Convenience

City or Town Size of Trade Area Occupancy Costs Traffic – Vehicle & Pedestrian Restrictions on operations Convenience

Neighborhood and Community Shopping Centers Size of Trade Area Occupancy Costs Traffic – Vehicle & Pedestrian Restrictions on operations Convenience

Shopping Malls Size of Trade Area Occupancy Costs Traffic – Vehicle & Pedestrian Restrictions on operations Convenience

Other types of locations Lifestyle Center Fashion/Specialty Centers Outlet Centers

Chapter 8 Retail Site Location

Evaluating Locations Economic Conditions Competition Strategic Fit Operating Costs

Economic Conditions

Competition How many stores currently exist within the same category? Is there an unmet need?

Strategic Fit Where does your target market live? What is their demographic profile? What are their lifestyle characteristics?

Operating Costs Are the operating costs worth the revenue potential? Do the reduced costs of operating in close proximity to other retailers outweigh the increased competition?

Site Characteristics Traffic Flow Location Characteristics Restrictions and Costs

Chapter 9 Human resources

Critical Assets Locations Merchandise Inventory Stores Employees Customers

Objectives Short Term Long-Term Increase Employee Productivity Productivity = Sales/Number of Employees Long-Term Increasing Employee Satisfaction by Reducing Turnover

Creating competitive advantage Effective management Differentiation Create culture (value) that is hart to duplicate

The Downward Spiral FINANCIAL PERFORMANCE ISSUES Low profits High Costs EMPLOYEE RESPONSE Decreased motivation and effort Poor customer service Lower job satisfaction Greater turnover RETAILER RESPONSE Layoffs Freeze hiring and promotions Reduced training Salary freeze Greater use of part-time employees and more outsourcing

Special HR Conditions in retail Part-time employees Expense control Employee demographics International challenges

Organizational Groupings Strategic Management Merchandise Management Store Management Administrative Management

Matching Org Structure to Strategy More centralized – fewer employees Category Specialists Warehouse Clubs Franchise Restaurant Distributed management – more employees Department Stores Specialty clothing stores

Coordinating Merchandise and Store Management Improving buyers appreciation of store environment Making store visits Assigning employees to coordinating roles

Motivating Employees Policies and supervision Incentives Maintaining a culture

Building Employee Commitment Developing skills Empowering Employees Creating Partnering Relationships

CUSTOMER RELATIONSHIP MANAGEMENT Chapter 11 CUSTOMER RELATIONSHIP MANAGEMENT

Customer Relationship Management It costs 3 to 6 times more to sell products and services to NEW customers as it does to sell to existing customer GOAL = increase “share of wallet”

Customer Relationship Management Strategies Programs Systems Focus is on identifying and building loyalty with a retailer’s most valued customers

Loyalty Emotional connection Based on personal attention Exclusive or individually tailored offers or merchandise

CRM Process LEARN ACTION Collect customer data Analyze Customer Data Develop CRM program Implement CRM program Getty Images

Collecting Customer Data Transactions Customer contacts Customer preferences Descriptive information Responses to marketing CUSTOMER DATABASE

Example: Harrah’s casino CUSTOMER DATABASE Rewards program Purchase prediction Integration

Identifying Info Ask during purchase Frequent shopper card Internet purchasing Getty Images

Privacy Protection of personal information and transaction history Getty Images

Analyze Customer Data Identify Segments Identify Best Customers Getty Images

Customer Pyramid

Developing CRM Programs Customer retention Converting good customers Getting rid of unprofitable customers

Customer Retention Frequent shopper program Special customer services Personalization Community

Converting Good Customers Cross-selling Add-on selling

Dealing with Unprofitable Customers High level of returns Not loyal Offer less costly services Charge customers fees for abused services Getty Images

Implementing CRM Programs Close coordination MIS Sales/Marketing Operations (store) Human Resources Currently retailers are organized by product, not customer type Getty Images

EXAM #2 Thursday, 3/27 Chapters 6,7,8,9,11 (not 10)