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Free Essays - Marketing Essays
Retail Marketing and Customer Loyalty
The battle to gaincustomers and more importantly, their loyally is intensifying as the majorretailers continue to position themselves as the main point of contact forshoppers. So, rather than being a Kellog's brand buyer, we are instead becominga nation of Tesco supporters or Asda fans. The competition between brands, own- label, and discount supermarkets continue to coverage on the market. Giventhis contentious environment, retailers are now vying for the consumers'attention and more importantly for consumers' loyalty.
Using theorycovered in the 'Scheme of Work', you are required to analyse the issuessurrounding the steady rise in the attention paid to customer loyalty and howretailers may need to change in order to remain competitive.
As a guideline,your assignment should cover the following issues:
a) Importance ofcontemporary trends in retailing
b) Retailingbuying behaviour
c) Productmerchandising and selling environment
d) Retailpromotion and branding
Introduction
Growing interest in thestudy of retailing has been reflected in the growth of the retail industryitself globally. Potter (1982) indeed described the academic study of retailingas 'the Cinderella of the Social Sciences'. Others such as Gilbert (1999) viewretail or retailing as any business that directs its marketing efforts towardssatisfying the final consumer based on the organisation of the selling of goodsand services. Bearing in mind this definition then it is critical to be aware ofthe role and techniques of retailers placed as they are at the end of thedistribution chain. Retailers set up business in order to trade with the generalpublic and attempt to provide convenient and flexible services which may indeedbe said to be the very essence of retailing. However due to current trends whichhave emerged in the retailing industry the extent to which retailers are ableto offer these essential ingredients to customers has been challenged by avariety of factors.
The most important ofthese trends originates from rapid technological development which has not onlyshaped customer behaviour but also altered the forms of how retailers operate. Anexample of this trend includes the ever widening use of computerised systems.Electronic control of stock has assisted the electronic retailing of stock afeature in line with consumers preferring to order goods through the mail,telephone or Internet (Walter & Hanrahan, 2000). Indeed technologicaldevelopments may arguably be one of the principal contributors to the continuedgrowth of home shopping instead of visits to traditional physical retaillocations. In addition the emerging global market has resulted in intense competitionamong local retailers as well as with and between international competitors(McBrien, 1994). As a result consumers have become less loyal to any oneretailer and have grown more demanding and sophisticated with retailers as aresult seeking to maintain customer loyalty through distinct and high profilebranding strategies. However the success of any branding strategy is influencedby various factors. An integrated marketing mix supported by a clearunderstanding of customer needs is perhaps one of the integral elements of asuccessful strategy in this regards.
Contemporary trends inretailing
As mentioned there aremajor trends for retailing in relation to the development of technology and oneof the most important of these is the meshing of traditional retailingtechniques with new mail, telephone and internet retailing techniques that haveemerged with technological developments. This is because one of the mainfeatures of retailing is selling small quantities of items on a frequent basiswhich means factors such as location, time, payment facilities and merchandiseare vital considerations for a retailer. Traditionally the shopping centre hasplayed an important role in the retail industry due to its popularity withconsumers. Markham (1998) argues that due to the fact consumer's interests arechanging dramatically in terms of fashion, style and usage shops in shoppingcentres have sought to provide up-to-date goods which match these needs.Similarly they have used well-presented merchandise using innovative designtechniques in order to create better shopping environments for their customers.
However smaller retailershave witnessed a trend whereby they have offered also more flexible services tocustomers. Due to the reason that big shopping centres are often placed next tourban concentrations the advantages gained from an urban location are importantbenefits for smaller retailers who are able to provide flexible shopping timesand flexible delivery channels. Such demands have also seen the rise inmail-order retailers for example in response to people's preferences for spendingless time shopping and what time is spent to be spent in a more flexible way.
Mail-order services have been present since the early twentieth century and access to credit was an important part of their growth and success with people in particular working-class communities who were able to purchase more expensive goods with the benefit of credit. As a result the sale of goods via mail order is an established feature of British retailing, (Coopey, O'Connell and Porter, 2005). It is fair to say that the continued success of mail-order retail in Britain is also dependent to a considerable degree on the efficient Royal Mail delivery system which is equipped with a technically advanced distribution procedure. Also manufacturers have sought to take advantage also of directly selling to consumers through the provision of their own catalogues and mail order systems.
This change has createdmore pressure for retailers towards having a greater understanding of thedynamics of consumer behaviour. Retailers have sought to use methods such ascritical incident techniques (CIT) which aims to improve customer satisfactionin order to enhance and maintain store loyalty amongst customers, (Gilbert,1999). Additionally widening access to the Internet has shaped customer well asretailers' behaviour in various ways. More and more people have accepted e-shoppingas a viable method of making their purchases and it is estimated that the scaleof the e-commerce market was about $7.3 trillion in 2004 and would continueincreasing.
This was a dramatic rise from the $145 billion estimated in 1999 reflecting the growing importance of e-commerce, (Suh & Han, 2003). Internet retailing enables marketers to establish one to one relationships with consumers and also to build consumer databases for carrying out online consumer research to quickly respond and adapt to customer preferences, (Peppers & Rogers, 1993). Furthermore consumers have learnt to be more sophisticated in their purchasing habits thus they require for example information on corporate attitudes towards environmental issues and the Internet has become a major source of such information. Also of note is the fact that the Internet provides a free channel to put out information worldwide on a product and has meant also that word-of-mouth has become critical in maintaining a brand image online.
Flowing from this many retailershave put more resources into public relations. This is seen as playing anincreasingly important role in communicating with customers and maintainingbrand loyalty, (Blythe, 2000). For example Marks and Spencer has exploited theuse of mail catalogues as well as online ordering so as to better supportin-store selling. Sir Richard Greenbury (chairman of M&S in1998) suggested thatretail is about 'detail'. These details are those which should provide value toconsumers in every way since customers have no inherent loyalty to one store orthe next, (Houlder, 1998).
New births of smaller independent retailers have catered to specialised markets while major outlets have tended to concentrate resources through acquisition, merger and expansion, (Foord, Bowlby and Tillsley, 1996). Therefore another important trend in the retail industry has been internationalisation in response to the process of globalisation. Global customers are more demanding, well-educated and more brand orientated since they can shop world wide through mail order, telephone or by using the Internet. To conclude then these changes in retailing are dramatic and the pace of change has been intense thus consumers, their attitudes, beliefs and behaviours have to be at the centre of any strategic decision making carried out by retailers.
Buying behaviour
Consumers are individualswho purchase products or services for personal consumption and in the retailcontext it is critical to realize that management can not be effective unlessit has an understanding of the process of how retail consumers make decisionsand act in relation to retail products. Blackwell, Miniard and Engel (2000)define the initial step of this decision-making process as need recognition interms of emotional and psychological needs recognition. However the extent towhich the consumer intends to resolve the problem depends on the relativeperceived importance of the problem to them and the degree of differencebetween the current and desired situation. If the problem recognition is of a sufficientlystrong degree then information search and evaluation of alternatives stageswill occur.
It can therefore be seen that potential customers go through a series of stages before they choose a brand or product to purchase. Hence branding strategies used by retailers need to be aware of elements in these first stages which might have an effect on later choices. Additionally a determinant of the degree to which customers evaluate a brand is their level of involvement, i.e. high levels of involvement mean extensive evaluation processes, (Hawkins, Best and Coney, 1989). Price is often seen as an indicator of involvement level because people spend more time searching and comparing prices.
It is also argued thateach person may assume a different and/or multiple roles in the decision-makingprocess, which are defined as initiator, influencer, decider, buyer and user, (Jobber,2001). In retail contexts women have been identified as the major class ofconsumers, (Domosh, 1996). Men are certainly involved in retailing activityhowever women's involvement has been suggested to be more complex andmeaningful for marketers. Since the mid-19th century women have beentargeted as consumers and Abelson (1989) argues that shopping has become adaily ritual for middle-class women in shaping their social and economicactivities. The changing role of women in social and economic life in terms ofincreased participation in the labour force and hence more purchasing power butless leisure time has altered shopping habits.
As a result their demands for fashion, music and sport goods have increased yet the buying of fashion products is characterised typically by medium to high levels of involvement. Retailers then need to assess branding strategies by using reference groups to identify, maintain and create new fashion images. In line with our previous discussion new technologies especially the Internet has become a major factor in allowing women consumers deal with the time factor of shopping.
Women's' buying behaviourfor retailing goods as such then tend to be influenced by complex factors.However shopping-related lifestyles have become more specific. In addition towomen research has shown that the proportion of older people in the populationhas increased changing the nature of household composition and purchasinghabits also, (Frenie, J., Fernie, S. & Moore, 2003). Older consumers tendto be more at risk of being financially insecure, better educated and less timepressured.
Security in purchasing is not only of concern for this group, for example the housing industry is influenced by interest rates and tax relief on mortgages with impacts across many age groups. Worth mentioning also is the fact that younger generations have been the focus of attention because of the ability to predict purchasing habits they will carry with them into their older years. Webb (1998) argues that young people have now become consumers at a much earlier stage with retailers aiming to maximize this by targeting advertising campaigns at age groups of 15 and upwards.
Merchandising Managementand Selling Environment
The development andimplementation of a merchandise plan is a singularly important aspect of aretail strategy, (Gilbert, 1999). Cobb (1997) explains that traditionallypromote a single manufacturer or brand, which has been developed to multiplesin order to create differentiation. Thus category with different brands workingwith key brands is a feature of modern retailing. A prime example is Duracellas brand leader permit NDI Display to work with the store by creating aspecialist merchandising system. The phases of merchandising are listed asmarketing consideration, merchandise strategy options, type of customer base,financial considerations and merchandise assortment search (Walters &Hanrahan, 2000).
First of all, the marketing considerations concern about the major four elements: product, place, promotion and distribution. In the retail context it is vital to mention the selling environment particularly since it is in relation to the store image, location as well as fashion trends. It is obvious that advantages based on convenient location are vital for retailers however a better shopping environment plays increasing important role.
It is argued that theselling environment comprises elements like customer orientated display ofgoods in a convenient location supported by well-presented merchandise. Aboveall customers have a conception of current fashion and style which retailersneed to match, (Markham, 1998). Research demonstrates that the changes oflifestyle have affected people's shopping behaviour in terms of them being moresensitive about the selling environment. The demands for leisure goods as wellas an entertaining shopping environment in which to purchase these goods needsto be borne in mind by retailers.
Another critical factor in merchandising management is related to availability and flexibility. This is essential in responding to the technological developments in e-shopping. Thanks to modern technology it is easy to control and centralize merchandise management through rapid communication with sales and stock departments. Delivery schemes once the domain of manufacturers can also be controlled by retailers, (Foord, Bowlby and Tillsley, 1996). This allows for the meeting of customer needs quickly through more effective control over stock.
Retail Promotion andBranding
A popular strategy forgaining customer loyalty is through branding strategy. Keller (1998) defines abrand as a set of mental associations held by the consumer in relation to aproduct. This definition focuses on the gain in perceived value brought by thebrand name. Kapferer (2004) points out that brands are conditional assetssupported by economic business models but at the same time are names thatinfluence buyers based on relationships. Word-of-mouth about previousexperiences is essential for customer's future choices and as such publicrelations have become a major part of the promotional mix.
Branding clearly has advantages for the retailer since it helps to differentiate a product from competitor's products. This is true in particular for own-label ranges. Branding also has advantages for the consumer because it is easy to recognize the product and identify with it in terms of the needs they possess. Word of mouth messages about products carried by consumers are not only about traditional product attributes but also deal with other issues of concerns such as for example environmental or ethical ones to do with the company.
The retail marketplace isat the mature stage in the industrial lifecycle. This means that growth hasslowed down while competition has become more intense. Against this backdropretailers thus seek different ways to improve performance by adopting strategicschemes based on relationship marketing which aims to build greater customerloyalty through long term relationships and maximise profits as a result. Christopheret al (1996) develop the idea of a scheme whereby customer loyalty grows throughfocusing on enhancing existing relationships along with winning new customers.
From this point of view effective acquisition and retention are vital for the building of a more efficient competitive position for retailers. To acquire customers for example an incentive to part with their personal information may be necessary for any scheme and current methods used to retain customers need to take account of data analysis of purchasing habits to construct more effective and more tailored loyalty schemes for customers.
In doing this retailoutlets will be more attractive prospects for consumers as a result of launchingloyalty card schemes. It is interesting to mention that early versions of theseschemes were carried out by smaller retailers who wanted to know customers in amore personal sense and reward their loyalty. However this method now isexploited by many major retailers such as Tesco's who offer their loyalty cardin the UK, (Gilbert, 1999). It has been argued that customers are more loyal tothose stores where they do most of their shopping for daily essentials, (Which?Magazine, 1996). Reasons given for this include convenience of location as wellas loyalty schemes. The key issue then for many retailers then is to develop astrategy which can deal with the challenges of retailing by exploiting bothtraditional and innovative means of capturing and retaining customers.
References
Abelson, E. (1989) When Ladies Go A-Thieving:Middle Class Shoplifters in the Victorian Store, Oxford University Press.
Blackwell, R.D., Miniard, P.W. & Engel, J.F.(2000) Consumer Behaviour, Dryden, USA.
Blythe, J. (2000) Marketing Communications, FTPrentice Hall, London UK.
Cobb, R. (1997) Space Exploration, MarketingJuly 17th.
Domosh, M. (1996) The Feminized Retail Landscape:Gender, Ideology and Consumer Culture in 19th Century New York City,in Lowe, M. and Wrigley, N. (eds) Retailing, Consumption and Capital,Longman Group Limited, UK.
Franzen, G. & Bouwman, M. (2001) The MentalWorld of Brands: Mind, Memory and Brand Success, World Advertising ResearchCenter, UK.
Frenie, J., Frenie, S. A & Moore, C. (2003) Principlesof Retailing, Butterworth-Heinemann, Oxford New York.
Foord, J., Bowlby, S. and Tillsley, C. (1996) in Lowe,M. and Wrigley, N. (eds) Retailing, Consumption and Capital, LongmanGroup Limited, UK.
Gilbert, D. (1999) Retail Marketing Management,FT Prentice Hall, London UK.
Hawkins, D.I., Best, R.J. & Coney, K.A. (1989) ConsumerBehaviour: Implications for Marketing Strategy, Mass, Boston.
Houlder, V. (1998) The Value behind Retailing,Financial Times, Feb. 16th.
Jobber, D. (2001) Principles & Practice ofMarketing 3rd edition, McGraw-Hill, London UK.
Kapferer, J. (2004) The New Strategic BrandManagement: Creating and Sustaining Brand Equity Long Term, Kogan Page,London UK.
Keller, K.L. (1998) Strategic Brand Management,Prentice Hall, London UK.
Markham, J.E. (1998) The Future of Shopping:Traditional Patterns and Net Effects, Macmillan Business, UK.
McBrien, B. (1994) The Global Shopper, HeadlineBook Publishing, UK.
Peppers, D. &Rogers, M. (1993) The One to One Future, Doubleday, New York US.
Potter, R.B. (1982) The Urban Retailing System:Location, Cognition and Behaviour, Gower Publishing Company, UK.
Suh, B. & Han, I. (2003) The Impact of CustomerTrust and Perception of Security Control on the Acceptance of ElectronicCommerce, International Journal of Electronic Commerce, Spring, Vol7 no.3.
Walters, D. & Hanrahan, J. (2000) RetailStrategy: Planning and Control, Macmillan Business, London UK.
Webb, B. (1998) New Marketing, in Fernie, J. (ed)The Future of UK Retailing, FT Retail and Consumer, London UK.
Which? Magazine (1996) Food for Thought, Which?Magazine, March.
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