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Retail Marketing and Customer Loyalty
The battle to gain customers and more importantly, their loyally is intensifying as the major retailers continue to position themselves as the main point of contact for shoppers. So, rather than being a Kellog's brand buyer, we are instead becoming a nation of Tesco supporters or Asda fans. The competition between brands, own - label, and discount supermarkets continue to coverage on the market. Given this contentious environment, retailers are now vying for the consumers' attention and more importantly for consumers' loyalty.
Using theory covered in the 'Scheme of Work', you are required to analyse the issues surrounding the steady rise in the attention paid to customer loyalty and how retailers may need to change in order to remain competitive.
As a guideline, your assignment should cover the following issues:
a) Importance of contemporary trends in retailing
b) Retailing buying behaviour
c) Product merchandising and selling environment
d) Retail promotion and branding
Introduction
Growing interest in the study of retailing has been reflected in the growth of the retail industry itself globally. Potter (1982) indeed described the academic study of retailing as 'the Cinderella of the Social Sciences'. Others such as Gilbert (1999) view retail or retailing as any business that directs its marketing efforts towards satisfying the final consumer based on the organisation of the selling of goods and services. Bearing in mind this definition then it is critical to be aware of the role and techniques of retailers placed as they are at the end of the distribution chain. Retailers set up business in order to trade with the general public and attempt to provide convenient and flexible services which may indeed be said to be the very essence of retailing. However due to current trends which have emerged in the retailing industry the extent to which retailers are able to offer these essential ingredients to customers has been challenged by a variety of factors.
The most important of these trends originates from rapid technological development which has not only shaped customer behaviour but also altered the forms of how retailers operate. An example of this trend includes the ever widening use of computerised systems. Electronic control of stock has assisted the electronic retailing of stock a feature in line with consumers preferring to order goods through the mail, telephone or Internet (Walter & Hanrahan, 2000). Indeed technological developments may arguably be one of the principal contributors to the continued growth of home shopping instead of visits to traditional physical retail locations. In addition the emerging global market has resulted in intense competition among local retailers as well as with and between international competitors (McBrien, 1994). As a result consumers have become less loyal to any one retailer and have grown more demanding and sophisticated with retailers as a result seeking to maintain customer loyalty through distinct and high profile branding strategies. However the success of any branding strategy is influenced by various factors. An integrated marketing mix supported by a clear understanding of customer needs is perhaps one of the integral elements of a successful strategy in this regards.
Contemporary trends in retailing
As mentioned there are major trends for retailing in relation to the development of technology and one of the most important of these is the meshing of traditional retailing techniques with new mail, telephone and internet retailing techniques that have emerged with technological developments. This is because one of the main features of retailing is selling small quantities of items on a frequent basis which means factors such as location, time, payment facilities and merchandise are vital considerations for a retailer. Traditionally the shopping centre has played an important role in the retail industry due to its popularity with consumers. Markham (1998) argues that due to the fact consumer's interests are changing dramatically in terms of fashion, style and usage shops in shopping centres have sought to provide up-to-date goods which match these needs. Similarly they have used well-presented merchandise using innovative design techniques in order to create better shopping environments for their customers.
However smaller retailers have witnessed a trend whereby they have offered also more flexible services to customers. Due to the reason that big shopping centres are often placed next to urban concentrations the advantages gained from an urban location are important benefits for smaller retailers who are able to provide flexible shopping times and flexible delivery channels. Such demands have also seen the rise in mail-order retailers for example in response to people's preferences for spending less 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 created more pressure for retailers towards having a greater understanding of the dynamics of consumer behaviour. Retailers have sought to use methods such as critical incident techniques (CIT) which aims to improve customer satisfaction in order to enhance and maintain store loyalty amongst customers, (Gilbert, 1999). Additionally widening access to the Internet has shaped customer well as retailers' behaviour in various ways. More and more people have accepted e-shopping as a viable method of making their purchases and it is estimated that the scale of the e-commerce market was about $7.3 trillion in 2004 and would continue increasing.
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 retailers have put more resources into public relations. This is seen as playing an increasingly important role in communicating with customers and maintaining brand loyalty, (Blythe, 2000). For example Marks and Spencer has exploited the use of mail catalogues as well as online ordering so as to better support in-store selling. Sir Richard Greenbury (chairman of M&S in1998) suggested that retail is about 'detail'. These details are those which should provide value to consumers in every way since customers have no inherent loyalty to one store or the 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 individuals who purchase products or services for personal consumption and in the retail context it is critical to realize that management can not be effective unless it has an understanding of the process of how retail consumers make decisions and act in relation to retail products. Blackwell, Miniard and Engel (2000) define the initial step of this decision-making process as need recognition in terms of emotional and psychological needs recognition. However the extent to which the consumer intends to resolve the problem depends on the relative perceived importance of the problem to them and the degree of difference between the current and desired situation. If the problem recognition is of a sufficiently strong degree then information search and evaluation of alternatives stages will 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 that each person may assume a different and/or multiple roles in the decision-making process, which are defined as initiator, influencer, decider, buyer and user, (Jobber, 2001). In retail contexts women have been identified as the major class of consumers, (Domosh, 1996). Men are certainly involved in retailing activity however women's involvement has been suggested to be more complex and meaningful for marketers. Since the mid-19th century women have been targeted as consumers and Abelson (1989) argues that shopping has become a daily ritual for middle-class women in shaping their social and economic activities. The changing role of women in social and economic life in terms of increased participation in the labour force and hence more purchasing power but less 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 behaviour for retailing goods as such then tend to be influenced by complex factors. However shopping-related lifestyles have become more specific. In addition to women research has shown that the proportion of older people in the population has increased changing the nature of household composition and purchasing habits also, (Frenie, J., Fernie, S. & Moore, 2003). Older consumers tend to be more at risk of being financially insecure, better educated and less time pressured.
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 Management and Selling Environment
The development and implementation of a merchandise plan is a singularly important aspect of a retail strategy, (Gilbert, 1999). Cobb (1997) explains that traditionally promote a single manufacturer or brand, which has been developed to multiples in order to create differentiation. Thus category with different brands working with key brands is a feature of modern retailing. A prime example is Duracell as brand leader permit NDI Display to work with the store by creating a specialist merchandising system. The phases of merchandising are listed as marketing 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 the selling environment comprises elements like customer orientated display of goods in a convenient location supported by well-presented merchandise. Above all customers have a conception of current fashion and style which retailers need to match, (Markham, 1998). Research demonstrates that the changes of lifestyle have affected people's shopping behaviour in terms of them being more sensitive about the selling environment. The demands for leisure goods as well as an entertaining shopping environment in which to purchase these goods needs to 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 and Branding
A popular strategy for gaining customer loyalty is through branding strategy. Keller (1998) defines a brand as a set of mental associations held by the consumer in relation to a product. This definition focuses on the gain in perceived value brought by the brand name. Kapferer (2004) points out that brands are conditional assets supported by economic business models but at the same time are names that influence buyers based on relationships. Word-of-mouth about previous experiences is essential for customer's future choices and as such public relations 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 is at the mature stage in the industrial lifecycle. This means that growth has slowed down while competition has become more intense. Against this backdrop retailers thus seek different ways to improve performance by adopting strategic schemes based on relationship marketing which aims to build greater customer loyalty through long term relationships and maximise profits as a result. Christopher et al (1996) develop the idea of a scheme whereby customer loyalty grows through focusing 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 retail outlets will be more attractive prospects for consumers as a result of launching loyalty card schemes. It is interesting to mention that early versions of these schemes were carried out by smaller retailers who wanted to know customers in a more personal sense and reward their loyalty. However this method now is exploited by many major retailers such as Tesco's who offer their loyalty card in the UK, (Gilbert, 1999). It has been argued that customers are more loyal to those stores where they do most of their shopping for daily essentials, (Which? Magazine, 1996). Reasons given for this include convenience of location as well as loyalty schemes. The key issue then for many retailers then is to develop a strategy which can deal with the challenges of retailing by exploiting both traditional 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, FT Prentice Hall, London UK.
Cobb, R. (1997) Space Exploration, Marketing July 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 Mental World of Brands: Mind, Memory and Brand Success, World Advertising Research Center, UK.
Frenie, J., Frenie, S. A & Moore, C. (2003) Principles of 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, Longman Group Limited, UK.
Gilbert, D. (1999) Retail Marketing Management, FT Prentice Hall, London UK.
Hawkins, D.I., Best, R.J. & Coney, K.A. (1989) Consumer Behaviour: Implications for Marketing Strategy, Mass, Boston.
Houlder, V. (1998) The Value behind Retailing, Financial Times, Feb. 16th.
Jobber, D. (2001) Principles & Practice of Marketing 3rd edition, McGraw-Hill, London UK.
Kapferer, J. (2004) The New Strategic Brand Management: 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, Headline Book 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 Customer Trust and Perception of Security Control on the Acceptance of Electronic Commerce, International Journal of Electronic Commerce, Spring, Vol7 no.3.
Walters, D. & Hanrahan, J. (2000) Retail Strategy: 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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