Mkt 346 Test 2

Front 1

Customer Service

Back 1

The set of activities and programs undertaken by retailers to make the shopping experience more rewarding for their customers.

Front 2

Customized Customer Service

Back 2

-Greater benefits to customers
-Greater inconsistency
-Higher cost
-Hard to measure and maintain

Front 3

Standardized Customer Service

Back 3

-Lower cost
-High consistency
-Meets but does not exceed expectations

Front 4

Role of Expectations of Customer Service

Back 4

-Based on prior experience, knowledge
-Vary by store type

Front 5

Customer Delight

Back 5

-Customer receives unexpected services
-A positive service experience
-Results in high level of customer satisfaction

Front 6

Customer Expectations
> Perceived Service

Back 6

= dissatisfaction, bad service

Front 7

Customer Expectations
< Perceived Service

Back 7

= satisfaction, good service

Front 8

Mystery Shoppers

Back 8

Amateur sleuths used to objectively (unemotionally) gauge service

Front 9

National Retail Federation:
Retailers with Best Customer Service

Back 9

1. L.L. Bean
2. Overstock.com
3. Zappos
4. Amazon
5. Lands’ End
6.Newegg
7. JC Penney
8. QVC
9. Coldwater Creek
10. Nordstrom

Front 10

Service Recovery Effort

Back 10

1. Listen to the Customer
2. Provide a Fair Solution (distributive, interactional, procedural)
3. Resolve the Problem Quickly

Front 11

Customer Relationship Management

Back 11

A business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty with a retailer’s most valuable customers.

Front 12

Three Components of Customer Loyalty

Back 12

1. Committed to purchasing merchandise and services from a retailer
2. Resist efforts of competitors to attract the loyal customer
3. Emotional attachment to retailer
-Personal attention
-Memorable positive experiences
-Brand building communications programs

Front 13

Steps in CRM Process

Back 13

1. Collect Customer Data
-Learning
2.Analyzing Customer Data and Indentify Target Makret
3.Developing CRM Programs
-Action
4. Implementing CRM Programs

Front 14

Collecting Customer Data Considerations

Back 14

-Types of Information in the Customer Database
-Approaches for Collecting Information
-Privacy Concerns

Front 15

Customer Database Information Types:
History of Purchases

Back 15

Purchase date, price paid, SKUs bought, whether or not the purchase was stimulated by a promotion

Front 16

Customer Database Information Types:
Customer contacts by retailer (touch points)

Back 16

Visits to web site, inquires to call center, direct mail sent to customer

Front 17

Customer Database Information Types:
Others

Back 17

-Customer preferences
-Descriptive information about customer
-Customer’s responses to promotions

Front 18

Approaches for Collecting: Customer Information

Back 18

1. Ask for identifying information
-Telephone number, name and address
2. Encourage use of frequent shopper cards (loyalty programs)
3. Link checking account number and/or third party credit cards to customer

Front 19

Benefits to Customers for Offering Information

Back 19

-Discounts
-Special Treatment
-Personal Attention

Front 20

Risks to Customers for Offering Information

Back 20

-Disclosure of Information
-Unwanted Sales Contacts

Front 21

Privacy Rights

Back 21

The Constitution does not specifically mention a right to privacy.
However, Supreme Court decisions over the years have established that the right to privacy is a basic human right, and as such is protected by virtue of the 9th Amendment.

Front 22

FTC Guideline for Fair Information Practices:
Customer Control Over Collection

Back 22

-Choice/consent
~Opt-in and opt-out options
-Access/participation
~Customer able to confirm accuracy

Front 23

FTC Guideline for Fair Information Practices:
Customer Control Over Use

Back 23

-Notice and awareness
~comprehensive statement about information storage, manipulation, and dissemination
-Integrity/security
~Controls for theft and tampering

Front 24

FTC Guideline for Fair Information Practices:
Enforcement

Back 24

Mechanism to insure compliance

Front 25

Data Mining

Back 25

technique used to identify patterns in data

Front 26

Analyzing Customer Data

Back 26

-Data Mining
-Market Basket Analysis
-Identifying Market Segments
-Identifying Best Customers

Front 27

Market Basket Analysis

Back 27

Data analysis focusing on the composition of the customer’s market basket
–what items are bought at the same time.

Front 28

Uses for Market Basket Analysis

Back 28

-Adjacencies for displaying merchandise
-Joint promotions

Front 29

Identifying Best Customers

Back 29

-Estimating Lifetime Value
-Classifying customers by Recency, Frequency, and Monetary value of purchases (RFM Analysis)

Front 30

Analyzing Customer Data

Back 30

-Data Mining
-Market Basket Analysis
-Identifying Market Segments
-Identifying Best Customers

Front 31

Market Basket Analysis

Back 31

Data analysis focusing on the composition of the customer’s market basket
–what items are bought at the same time.

Front 32

Uses for Market Basket Analysis

Back 32

-Adjacencies for displaying merchandise
-Joint promotions

Front 33

Identifying Best Customers

Back 33

-Estimating Lifetime Value
-Classifying customers by Recency, Frequency, and Monetary value of purchases (RFM Analysis)

Front 34

Customer Retention Programs

Back 34

-Frequent Shopper Programs
-Special Customer Services
-Personalization
~1 to 1 Retailing
-Community

Front 35

Elements in Effective Frequent Shopper Programs

Back 35

-Tier Based on Customer Value
-Offer Choices of Rewards
~Non-monetary incentives
-Reward all Transactions
-Transparent and Simple

Front 36

Issues with Effective Frequent Shopper Programs

Back 36

-Expense
-Difficulty in Making Changes
-Impact on Loyalty Questionable
-Easily Duplicated – Difficult to Gain Competitive Advantage
~Need to offer “invisible” benefits

Front 37

Converting Good Customers to Best Customers

Back 37

-Cross-selling
-Add-on selling

Front 38

Implementing CRM Programs

Back 38

Systems,databases
+
Close coordination between departments
=
shift in orientation from product centric to customer centric

Front 39

Value

Back 39

Perceived Benefits/Price

Front 40

How can retailers increase value and stimulate sales?

Back 40

Increasing Benefits or Reducing Price

Front 41

4 Factors Retailers Consider when Setting Price

Back 41

-Price Sensitivity
-Competiton
-Cost
-Legal Contraints

Front 42

Price Sensitivity

Back 42

When price INCREASES sales can decrease as fewer customers feel the product is of good value

Front 43

Factors That Affect Customer’s Sensitivity to Price:
(-)

Back 43

-Customer Income
-Need for the Product

Front 44

Factors That Affect Customer’s Sensitivity to Price:
(+)

Back 44

-Availability of Product from Competitors
-Frequency and Amount Spent on Product

Front 45

Types of Price Discrimination:
First Degree

Back 45

-Set unique price for each customer equal to customer’s willingness to pay
~Auctions, Personalized Internet Prices

Front 46

Types of Price Discrimination:
Second Degree

Back 46

-Offer the same price schedule to all customers
~Quantity discounts
~Coupons
~Markdowns
~Early Bird Special
~Over Weekend Travel Discount

Front 47

Types of Price Discrimination:
Third Degree

Back 47

–Charge different groups different prices
~Kids Menu
~Senior Discounts

Front 48

Reasons for Taking Markdowns

Back 48

-slow-moving, obsolete, uncompetitively priced merchandise
-Increase sales and profits through price discrimination
-Generate cash to buy better selling merchandise
-Increase traffic flow and sale of complementary products generate excitement

Front 49

Coupons

Back 49

Documents that entitle the holder to a reduced price or X cents off a product or service.

Front 50

Purpose of Coupons

Back 50

-Reduce price to price sensitive customers who will spend the effort to clip coupons
-Induce customer to try products for first time
-Convert first time users to regulars
-Encourage large purchases
-Increase usage
-Protect market share

Front 51

Rebates

Back 51

Money returned to the customer based on a portion of the purchase price.

Front 52

Rebates-Retailer Prospective

Back 52

-More advantageous than coupons since they increase demand, but retailer has no handling costs.
-Manufacturers like rebates because:
~Many customers don’t redeem.
~They can offer price cuts to customers directly

Front 53

Everyday Low Prices
(EDLP)

Back 53

-Charge the same price all the time
-Set prices between regular non-sale price and deep discount sale prices of a high/low pricing competitor.
-EDLP retailers typically still have some sales.
-The Wal-Mart Effect (Fishman Video)

Front 54

High/Low Pricing

Back 54

-Regular prices are higher than EDLP competitors, but merchandise frequently on sale at lower prices.
-Most store use this

Front 55

Initial Markup

Back 55

-retail selling price initially placed on the merchandise less cost of goods sold

Front 56

Maintained Markup

Back 56

-Actual sales (markdown price) that you get for the merchandise less cost of goods sold

Front 57

Breakeven Point

Back 57

Fixed Cost/(Unit Price-Unit Variable Cost)
-How much do you need to sell to cover your cost exactly?

Front 58

Legal Contraints of Pricing (6)

Back 58

-Price Discrimination
-Predatory Pricing
-Bait and Switch Tactics
-Resale Price Maintenance
-Horizontal Price Fixing
-Scanned Versus Posted Prices

Front 59

How Can Retailers Reduce Price Competition?

Back 59

-Develop lines of private label merchandise
-Negotiate with national brands manufacturers for exclusive distribution rights
-Have vendors make unique products for the retailer

Front 60

Supply Chain Management

Back 60

The integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers.

Front 61

Strategic Importance of Supply Chain Management:
Retailers

Back 61

-Opportunity to Increase Revenues and Reduce Costs
~Transportation Costs
~Inventory Holding Costs

Front 62

Strategic Importance of Supply Chain Management:
Customers

Back 62

-Improves Product Availability
~Fewer Stockouts
~Tailored Assortments

Front 63

Return on assets

Back 63

=Net profit margin x Asset turnover

Front 64

To Improve Return on Assets

Back 64

Efficient Supply Chain Management --> Higher Asset Turnover

Front 65

Supply Chain Management

Back 65

The integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers.

Front 66

Strategic Importance of Supply Chain Management:
Retailers

Back 66

-Opportunity to Increase Revenues and Reduce Costs
~Transportation Costs
~Inventory Holding Costs

Front 67

Strategic Importance of Supply Chain Management:
Customers

Back 67

-Improves Product Availability
~Fewer Stockouts
~Tailored Assortments

Front 68

Return on assets

Back 68

=Net profit margin x Asset turnover

Front 69

To Improve Return on Assets

Back 69

Efficient Supply Chain Management

Front 70

Electronic Data Interchange (EDI)

Back 70

-the computer-to-computer exchange of business documents between retailers and vendors

Front 71

Information Flow

Back 71

1. When customer makes a purchase, sales associate scans UPC code on merchandise and customer credit card/loyalty card
2. Information about purchase is transmitted from POS terminal to the buyer/planner.
3. Information about purchases are aggregated by buyer/planner and sent to distribution center and vendor
4. Buyer/planner communicates with vendor and places a purchase order to re-supply stores.
5. Buyer/planner notifies distribution center about incoming orders and how they are to be distributed to stores
6. Store managers inform distribution center about receipt of merchandise and coordinate deliveries

Front 72

Radio Frequency Identifiers
(RFID)

Back 72

Metal tag (about the size of a pin head) that emits an electronic signal, imbedded in products
-System can keep track of thousands of radio tags from hundreds of yards away (locate misplaced products; deters theft; replaces bar codes)

Front 73

Logistics

Back 73

The part of the supply chain that plans, implements, and controls the efficient, effective flow and storage of goods, services and related information.

Front 74

Reverse Logistics

Back 74

the flow of returned merchandise

Front 75

Physical Flow of Merchandise

Back 75

-Merchandise is sent from vendor either to the retailer’s distribution center or directly to store.
-Retailer send merchandise from its distribution center to its stores.

Front 76

Advantages of Using a Distribution Center

Back 76

-More cost effective
-More accurate sales forecasts
-Less merchandise in the individual store, thus a lower inventory investment system-wide.
-Less out-of-stock

Front 77

When to Use Distribution Centers

Back 77

-Unpredictable merchandise sales
-Frequent replenishment required – high number of units sold per day
-Items shipped to store in less than full case quantities
-Many retail outlets that are not concentrated in one area

Front 78

When to Use Direct Store Delivery

Back 78

-Retailer has only a few outlets
-Many retail outlets are concentrated in metro areas yielding increased efficiency of direct store delivery
-Important to get merchandise in store quickly
~Fashion - first to have latest video game
~Merchandise perishable - produce

Front 79

Logistics Strategy-
Pull

Back 79

Merchandise shipped to stores based on sales and inventory levels in the stores

Front 80

Logistics Strategy-
Push

Back 80

Merchandise shipped to the stores based on forecasted sales rate

Front 81

Bogus Return Schemes

Back 81

-Renting / Wardrobing
-Shoplisting
-Box stuffing
-Price arbitrage

Front 82

Retail Store Ownership

Back 82

-Independent stores (entrepreneurs)
-Corporate Retail Chains
-Franchising

Front 83

Franchisee

Back 83

-Pays up front fee paid to franchisor (franchise fee)
-Pays monthly royalties to franchisor based on sales volume (on-going royalty fee)

Front 84

Franchisor

Back 84

-Provides use of the trademark
-Helps locate and build the store
-Trains franchisee
-Monitors quality control
-On-going support
-Does all the advertising, develops systems and products
-Territory exclusivity granted

Front 85

Questions to Ask Franchisor

Back 85

-Costs
-Average sales/profits per franchise
-Financing
-Training & On-going Support
-Advertising
-Protective territory
-Financial strength of Franchisor
-Site selection assistance

Front 86

Franchise Law:
FTC’s Franchise Rule

Back 86

-Requires franchisors to supply a full disclosure of the information a prospective franchisee needs in order to make a rational decision about whether or not to invest.
-A “cooling-off” period
-Uniform Franchise Circular Offering (UFOC)
~A disclosure document containing extensive information about the franchise.
~To be provided at least 10 days prior to signing any contract or the exchange of money
-All contracts must be provided to prospective franchisee a minimum of 5 days before the actual date of execution of the documents.

Front 87

Risks of Franchise Ownership

Back 87

-Loss of control
-Binding contract
-Branding/Image risk
-Trends
-Franchisor dictates introduction of new products
-Labor
-Working capital needed not well defined

Front 88

Franchise Trends

Back 88

-Do-it-yourself meal preparation
-eBay Consignment Stores
-Kids’ Specialty Services
-Fitness and Weight Loss
-Business Services
-Home Improvement
-Quick-Service Restaurants
-Pet Businesses