OUTLET SELECTION

1. OUTLET SELECTION • Consumer shopping choices • Electronic Commerce (covered later) • Store marketing issues • Dealing with complaints

2. The Evolution of Consumer Outlet Choice General Store Super- markets Category Killers Internet Discount Stores Catalog/ Direct Marketing Catalog Sales In-home Shopping Specialty Stores (where available) Note: Evolutionary pressure ---> adaptation or extinction

3. Issues in Outlet Marketing • Store positioning • relevant competition • store image • Store location/size • Store brands • In-store marketing • P-O-P displays • Featured promoted brand • Store brand

4. Store Layout/Atmosphere • Location of merchandise • Music/aroma

5. Retailing • Positioning issues • Margins • Retail pricing strategies • Strategic developments in retailing

6. Positioning Issues • Some ways to profitability: • Low cost, high volumes, low unit margins, low to moderate service (profit on volume) • Higher priced, higher per unit margins, lower sales • “Stuck in the Middle”--midlevel retailers (e.g., Sears, J. C. Penney) face competition both from above and below

7. Attributes Influencing Retail Outlet Selection • Outlet image • Retailer (store) brands • U.S. vs. Europe • Retail advertising • For store • Co-op, brand supported store ads • Location • Size

8. Chameleons—constantly changing strategies Collectors/gatherers—stockpilers Foragers—focused on desired items Hibernants—indifferent and opportunistic; will postpone shopping Predators—shoppers who dislike shoppers but plan ahead to minimize time spent Scavengers—”recreational shopping” Consumer Shopping Orientations--Segments

9. Point-of-purchase (POP) shoppers Promotions In-store coupons Sales Other deals Outlet atmosphere Stockouts Major problem Difficult to avoid Technology can help predict sales Sales personnel Influences on Shopping Behavior

10. Margins Gross = sale price - price paid to wholesaler Per unit Per dollar Per unit of space Net margin = gross margin vs. allocated overhead Very large increases in sales volumes are needed to “break even” on low prices Margins

11. “High-low” High everyday prices Frequent sales Profit on price discrimination--only some people will bother to Shop while sale is on Switch brands Every Day Low Price (EDLP) Consistent prices--theoretically no sales, but lower non-sale prices Typically lower service Note that retailers provide for many promotions Two Types of Retail Pricing

12. Strategic Issues • Importance of convenience • Increasing power of retailers • Private label branding • Lower price but higher margins • Longer history in Europe

13. Power retailers Early purchases Investment in technology Consistent “fair” prices Consistent but modest gross margins Category “killers”: Specialize--significant selection at low prices Retail Trends

14. Retailing Polarity • Trend toward either • Low price--e.g., Wal-Mark, Kmart, Sports Authority • High quality--e.g., Nordstrom’s, Starbuck’s

15. Electronic Commerce • Penetration vs. potential • Obstacles • Security • Trial • Delayed delivery • Limited demographics • Glitches • Resentment of commercial intrusions

16. SERVICE OUTPUTS AND SEGMENTATION • Service outputs • Trends • Segmentation

17. SERVICE OUTPUTS: DISTRIBUTION FROM THE CUSTOMER’S POINT OF VIEW • Bulk breaking • Spatial convenience • Waiting and delivery time • Breadth of assortment

18. Trends in Consumer Preferences • Poverty of time (in U.S.) • Increased knowledge • Travel • Information sources • Polarity of incomes • Some increase in top incomes in U.S. • Incomes slowly equalizing Worldwide

19. Resellers--restaurants buy from suppliers Institutional--hospitals buy to feed patients Families “Nuclear”--may buy from regular food stores; will favor large sizes Small families, singles, and yuppies--will shop more in convenience store; single serving sizes more popular Value conscious--buy at warehouses Time conscious--will pay extra for delivery Service conscious--other services demanded Example: Food Customers

20. FOOD CONSUMPTION, MANUFACTURING, AND MARKETING • Food consumption patterns • Demographics and trends • International comparisons • Issues in food markets • Food marketing choices

21. Increasing consumption—so far… Pork Chicken Turkey Fish Cheese Fresh fruit Frozen vegetables Flour and cereal products Soft drinks Declining—so far… Beef Eggs Whole milk Sugar Coffee No evident trend Ice cream Butter, margarine Fruit juices Lamb Fresh potatoes Food Consumption Patterns

22. Adkins Diet Increases: Beef Butter Cream Nuts Declining Sweetener Frozen potato product Fresh fruit, vegetables Low fat diets Increases Chicken Fish Low fat dairy Fruit Vegetables Decreases Beef, lamb Eggs Sweetened products Possible Effects of

23. U.S. Food Consumption and Demand • Typical family spends 9-11% of income on food • Decreasing percentage spent with increasing income, but more absolute dollars spent (income elasticity <1) • Immigration has influenced both food preferences and retail formats

24. Philippines: 56% India: 51% Mexico: 25% (modest incomes, relatively high prices) South Africa: 28% Japan: 18% (very expensive food but high incomes) West Germany: 17% Denmark: 15% (25% sales tax!) France: 15% Netherlands: 11% U.K.: 11% Canada: 10% Comparative Food Spending Percentages, 1994 Percentages of total expenditures—includes non-consumer spending such as government and industry. U.S. figure: 7%

25. Supermarkets Neighborhood food stores Convenience stores Drug and discount stores Gas stations Vending machines Food stands, street vendors Restaurants Cafeterias Specialty food stores Door-to-door sales Online and catalog orders Some Common U.S. Food Outlets

26. Some International Characteristics • Japan: Strong emphasis on neighborhood stores, vending machines • Europe: Large food stores are available, some may deliver; government protection of smaller retailers • Developing countries: Food often bought at open markets

27. Some Food Demand Issues • Income elasticity • Price elasticity • Normal vs. “inferior” goods • Cross-price elasticity • “Trading Up” within select categories • Increased interest in convenience foods • Conflict between demand for healthier and “junk” foods • Unplanned purchases and consumption • “Functional” foods

28. Away-From-Home and Prepared Foods • 48% of food expenditures on items eaten away from home (1999) • Large part of restaurant meals is for non-food costs • Labor • Ambiance • Facilities • Increase in take-out foods from restaurants and stores

29. Public Food Programs • Food stamps were created mostly to promote demand for farm products (thus only American products) • Only a limited amount of food stamp value goes toward increased consumption (cash is diverted elsewhere)

30. Some Food Marketing Issues • Branding • Innovation • Brand extensions and improvements to existing product categories • New product categories • Consumer brand loyalty: The ability to resist promotional efforts of competitors—not consistent choice of brand • Multi-brand loyalty

31. POST PURCHASE PROCESSES • Satisfaction • Customer commitment • Word-of-mouth

32. Regret of purchase or question of wisdom of purchase  “dissonance reduction strategies” Return product Rationalization Consumption guilt Influences on magnitude Degree of irrevocability /reversal of decision (trialability) Importance of decision Difficulty of choice Anxiety proneness of consumer Post Purchase Dissonance

33. Product Use and Non-Use • Products bought and • Used as intended • Stored • Not-used • Used for purposes other than intended (use innovativeness) • E.g., baking soda for odor reduction, upset stomach • E.g., WD40: fish bait additive, removal of gum, enhanced conduction of electricity, shining of boots

34. Disposition • Disposal • Garbage • Recycling • Sale • eBay: Very old products for sale—e.g., 1980s typewriters, CB radios • Donation/gifting