Marketing 12e - Pride and Ferrell

Part SixPart SixDistribution Decisions

1717Retailing and Direct Marketing

Copyright © Houghton Mifflin Company. All rights reserved. 17 | 2

Objectives

1. To understand the purpose and function of retailers in the marketing channel

2. To identify the major types of retailers

3. To understand direct marketing and two other forms of nonstore retailing

4. To examine major types of franchising and the benefits and weaknesses of franchising

5. To explore strategic issues in retailing


Chapter Outline

• The Nature of Retailing

• Major Types of Retail Stores

• Direct Marketing

• Other Types of Nonstore Retailing

• Franchising

• Strategic Issues in Retailing


The Nature of Retailing

• Retailing– Transactions in which ultimate consumers are the

buyers

• Retailers– Organizations that purchase products for the

purpose of reselling them to ultimate consumers• Retailers add value—shopping convenience, services,

and purchasing assistance to customers• Retailers create utility—time, place, possession, and

form

– Success in retailing comes from having a strong customer focus coupled with desired levels of service, product quality, and innovation.


Major Types of Retail Stores

• General-Merchandise Retailers– A retail establishment that offers a variety

of product lines– Department stores

• Large retail organizations characterized by wide product mixes and organized into separate departments to facilitate marketing efforts and internal management

– Discount stores• Self-service, general merchandise stores

offering brand name and private brand products at low prices


Major Types of Retail Stores (cont’d)

• General-Merchandise Retailers (cont’d)– Supermarkets

• Large, self-service stores that carry a complete line of food products, along with some nonfood products

– Superstores• Giant retail outlets that carry food and nonfood

products found in supermarkets, as well as most routinely purchased consumer products



• General-Merchandise Retailers (cont’d)– Hypermarkets

• Stores that combine supermarket and discount shopping in one location

– Warehouse clubs• Large-scale, members-only establishments

that combine features of cash-and-carry wholesaling with discount retailing



• General-Merchandise Retailers (cont’d)– Warehouse showrooms

• Retail facilities in large, low-cost buildings with large on-premise inventories and minimal services

– Catalog showrooms• A form of warehouse showroom where

consumers can shop from a catalog and products are stored out of buyers’ reach



• Specialty Retailers– Traditional specialty retailers

• Also called “limited-line” and “single-line” retailers

• Carry a narrow product mix with deep product lines (e.g., pet supplies)

• Have higher costs and higher margins• Provide more product selection (first-line

brands), product expertise, and high levels of personal service



• Specialty Retailers (cont’d)– Off-price retailers

• Buy manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts

• Charge less than department stores for comparable merchandise and offer few customer services

• Have established long-term relationships with suppliers for continuing supplies of reduced-price goods

– Category killers• Concentrate on a major product category and compete

on the basis of low prices and product availability


Direct Marketing

• Direct Marketing– The use of telephone and nonpersonal

media to introduce products to consumers, who then can purchase them via mail, telephone, or the Internet

– A type of nonstore retailing

• Nonstore Retailing– The selling of products

outside the confines of a retail facility


Direct Marketing (cont’d)

• Catalog Marketing– A type of marketing in which an

organization provides a catalog from which customers can make selections and place orders by mail, telephone, or the Internet• Consumer advantages are efficiency and

convenience• Marketer advantages are lower location,

facility, selling, and operating costs.• Disadvantages are inflexibility and limited

selection and local service availability.



• Direct-Response Marketing– A type of marketing that occurs when a

retailer advertises a product and makes it available through mail or telephone orders

• Telemarketing– The performance of

marketing-related activities by telephone



• Television Home Shopping– A form of selling in which products are

presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card

• Online Retailing– Retailing that makes

products available to buyers through computer connections


Other Types of Nonstore Retailing

• Direct Selling– The marketing of products to ultimate consumers

through face-to-face sales presentations at home or in the workplace• Party plans: hosting groups to view a product

demonstration and encouraging participants to purchase the products

– Benefits• Personal attention to customer• Convenience of time and place of presentation

– Limitations• High costs make it the most expensive form of selling• Negative consumer view of direct selling


Other Types of Nonstore Retailing (cont’d)

• Automatic Vending– The use of machines to dispense products– Can include items such as candy, chewing

gum, soft drinks, cigarettes, newspapers, and coffee• Advantages: small amount of

space needed and no sales personnel

• Disadvantages: high costs of equipment and frequent servicing


Franchising

• Franchising– An arrangement in which a supplier

(franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration• Franchiser furnishes equipment,

buildings, management know-how, and marketing assistance.

• Franchisee supplies labor and capital and operates the business by the provisions of the franchise agreement.


Major Types of Retail Franchises

• Manufacturer Authorization– Product producer licenses retailers to sell its

brand name product(s)

• Distributor Authorization– Product producer licenses distributors to sell its

brand name product to retailers

• Producer Authorization– Franchiser supplies brand names, production

techniques, or other services to franchisee while maintaining development and control of marketing strategies


Franchising (cont’d)

•Advantages– Enables startup with

limited capital– Provides developed

and proven business to franchisee

– Attracts customers with established brand name

– Allows immediate market entry

– Motivates franchisee to succeed

•Disadvantages– Control over aspects

of the business and its operations by franchiser

– Expense of continuing franchise royalties and advertising fees

– Lack of control of franchisees by franchisor


Strategic Issues in Retailing

• Retail Store Location– Factors affecting location

• Intended target market• Kinds of products• Suitability site for customer

access• Characteristics of existing

retail operations

• Types of Locations– Free-standing structures– Traditional business districts


Strategic Issues in Retailing (cont’d)

• Traditional Shopping Centers– Neighborhood shopping centers

• Usually consist of several small convenience and specialty stores.

– Community shopping centers• Include one or more department stores

(anchors), some specialty stores, and convenience stores.

– Regional shopping centers• Have the largest department stores, the widest

product mix, and the deepest product lines of all shopping centers.



• Nontraditional Shopping Centers– Factory outlet malls

• Feature discount and factory outlet stores carrying traditional brand name products

– Miniwarehouse mall• Loosely planned; lease space to retailers

running retail stores out of warehouse bays

– Nonanchored malls• Do not have traditional department store

anchors; combine off-price and category killer stores in a “power center” format



• Retail Positioning– Identifying an unserved or underserved market

segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment

• Store Image– Atmospherics

• The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying

• Interior layout, colors, furnishings, and lighting• Exterior storefront and entrance design, display

windows, and traffic congestion



• Scrambled Merchandising– The addition of unrelated products and product

lines to an existing product mix, particularly fast-moving items that can be sold in volume

– Intent of scrambled merchandising• Convert stores into one-stop

shopping centers• Generate more customer traffic• Realize higher profit margins• Increase impulse purchases



• The Wheel of Retailing– A hypothesis holding that new retailers

usually enter the market as low-status, low-margin, low-price operators but eventually evolve into high-cost, high price merchants.

Maybry’s

Maybry’s

at the Mall

at the Mall


After reviewing this chapter you should:

• Understand the purpose and function of retailers in the marketing channel.

• Be able to identify the major types of retailers.• Recognize the various forms of nonstore

retailing.• Have examined the major types of franchising

and the strengths and weaknesses of franchising.

• Have explored strategic issues in retailing.

Marketing 12e - Pride and Ferrell

Documents

Transcript of Marketing 12e - Pride and Ferrell