CTE3806 Final Exam Study Guide PDF

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Final Exam study guide for CTE3806 Merchandising Principles with Langston. ...

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1 Customer Relationship Management (CRM) Customer Relationship Management ➢ Set of strategies, programs, and systems that focus on identifying and building relationships with valued customers Share of the Wallet ➢ Percentage of customers purchases made from a particular retailer The CRM Process ➢ Objective ○ Build customer loyalty ○ Personal attention and customer service are the best ways to develop loyalty ○ Does this by making customers: ■ Committed to the retailer ■ Have emotional connection ■ Resist competitors Overview of the CRM Process 1. Collecting customer data ➢ Data Warehouse ○ Transactions ■ Complete history of the purchases made by the customer ○ Customer contacts ■ A record of the interactions that the customer has had with the retailer ○ Customer preferences ■ What the customer likes, such as favorite colors, brands, fabrics, and flavors, as well as apparel sizes ○ Descriptive information is stored ■ Demographic and psychographic data describing the customer that can be used in developing market segments ➢ Identifying Information ○ Offer Frequent-Shopper/Loyalty programs ■ Identify and provide rewards to customers who patronize a retailer ○ Ask for Identifying Information ○ Connect Internet and Store Purchasing Data ○ Place RFID Chips on Merchandise ➢ Privacy: Opt in, Opt out, cookies ○ Cookies ■ Small files stored on a customer's computer that identify customers when they return to a website ○ Opt in ■ Retailers get consumers to agree to share personal information ○ Opt out ■ American consumers must explicitly tell retailers not to use their personal information

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Privacy Concerns ■ Customer control over personal information ■ Customer knowledge about the collection and use of information Protecting customer privacy ■ Privacy of most consumer data is not protected in the U.S. ■ Retailers must instill customer confidence

2. Analyzing customer data and identifying target customers ➢ CLV ○ Customer Lifetime Value ■ Approximate worth of a customer to a company in economic terms ■ Overall profitability of an individual consumer ■ Past behaviors are used to predict the worth ➢ Retail Analytics ○ Application of statistical techniques and models to improve retail decisions ■ Data Mining ■ Market Basket Analysis ● The number of times two products get purchased at the same time ■ Targeting Promotions ■ Assortment Planning 3. Developing CRM programs ➢ Frequent Shopper Programs: ○ Effectiveness ■ Not useful for building long-term customer loyalty ■ Easily adapted by competitors ■ Expensive for a retailer ■ Difficult to revise or correct ○ Making them more effective ■ Offer tiered rewards ■ Treat high CLVs as VIPs ■ Incorporate charitable contributions ■ Offer choices ■ Reward all transactions ■ Make the program transparent and simple

4. Implementing CRM programs ➢ Customer Pyramid ○ Platinum, gold, iron, lead (Divided into 4 segments) ■ Platinum is most profitable customers, lead is least

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80-20 Rule ■ 80% of the stores sales come from 20% of the customers ➢ Customer Retention ○ Practice of keeping customers by building long-term relationships ○ 1-to-1 Retailing ■ Developing retail programs for small groups or individual customers ■ Involve best customers in business decisions ➢ Customer Conversion ○ Making good Customers into best customers ○ Add-on selling ■ Offer and sell more products to existing customers ■ Data warehouse can pinpoint opportunities ■ Amazon.com recommends other products ○ Dealing with unprofitable customers ■ Catalog retailers pay more on returned items ■ Some companies flag unreasonable return patterns ■ Ways to “get the lead out” ● Offer less costly services for lead customers ● Charge customers for the services they abuse

Human Resources (HR) and Managing the Store Activities for acquiring & retaining employees ➢ Recruit ○ Preparing a job description ■ Identifies essential activities to be undertaken and is used to determine the qualifications of potential employees ○ Finding potential applicants

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Job Application forms Reference checking Test applicants ● Illegal to test factors that are not job related ○ Preview the job ○ Conduct a personal interview ■ Behavioral interviews ● Asks candidates how they have handled actual situations they have encountered in the past, especially situations requiring the skills outlined in the job description Train & Acculturate ○ Train to do the job ○ Introduce to the firm’s policies ○ Structured program ■ Provides basic skills and knowledge to do the job ○ On-the-job training ■ Employee works in specific jobs under direct supervision of a manager ○ Blended approach ○ Analyze successes and failures Motivate ○ Set goals to motivate employees ■ Provide feedback on performance ○ Rewards Evaluate ○ Who evaluates ■ Evaluation system is usually designed by HR ■ Evaluation itself is conducted by the immediate supervisor ○ How often ■ Evaluations should be done annually or semiannually ○ The format ■ Sales, customer relations, operations and compliance ○ How managers avoid evaluation errors ■ Form an overall opinion ■ Influenced by recent events ■ Attribute performance to employee and not environment ○ Performance measures: ■ Productivity ● Net sales divided by the number of (FTE)full time employees ■ Turnover ● Number of employees who voluntarily leave job during the year divided by the number of positions ■ Engagement ● Emotional commitment to company Reward & Compensate

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Extrinsic ■ Straight Salary Compensation ● Sales people receive a fixed amount of compensation for each hour or week they work ■ Incentive compensation or straight commision ● Reward employees on the basis of their productivity ■ Quota Bonus ● Target level used to motivate and evaluate performance Intrinsic ■ Contests ● Most effective when everyone has the chance to win ■ Job Enrichment ● The redesign of a job to include a greater range of tasks and responsibilities

Leadership ➢ Autocratic ○ Make all decisions on their own and then announce them to employees ➢ Democratic ○ Seek information and opinions from the employees and base their decision on this information ➢ Transformational ○ Get people to transcend their personal needs for the sake of the group Store Management Responsibilities-divided into 4 major categories: Controlling Costs ➢ Managing Employees ○ Labor scheduling ■ Determines the employees assigned to each area of the store during each hour ■ Difficult because traffic varies during the day ○ Many retailers rely on computer software to schedule ➢ Controlling Costs ○ Store maintenance ○ Includes both interior and exterior elements ➢ Managing Merchandise ○ Inventory shrinkage ■ Loss due to employee theft, shoplifting, mistakes, inaccurate records, and vendor errors ➢ Customer Service Organization Structure ➢ Identifies the activities to be performed by specific employees and determines the lines of authority and responsibility in the firm ➢ Four Major Categories: ○ Strategic ■ Develop retail strategy ■ Identify target market

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Administrative ■ Marketing ■ Manage HR ■ Manage supply chain ■ Manage financial performance ■ Visual merchandise Merchandise ■ Buy merchandise ■ Control inventory ■ Price merchandise Store ■ Recruit ■ Hire ■ Plan labor ■ Evaluate performance ■ Sell the merchandise

Organizational Chart ➢ CEO ○ Responsible for overseeing the entire organization ➢ CMO ○ Works with staff to develop advertising, promotion, and social media programs ➢ CFO ○ Works with the CEO on financial issues such as equity-debt structure and credit card operations HR Legal Issues ➢ Employee Privacy

Customer Service Customer Experience ➢ Priority for companies Customer Service ➢ The set of activities and programs undertaken by retailers to make the shopping experience more rewarding for their customers ○ These activities increase the values customers receive ➢ Personalized Service ○ Service providers tailor their services to meet each customer's personal needs ■ Nordstroms ○ Relies on judgment and capability of each service provider ○ Costly to provide ■ Well-trained service providers

7 ■ Sophisticated computer software ➢ Standardized Service ○ Establishing a set of rules and procedures for providing high quality service and ensuring that they get implemented consistently ■ Avoids high costs of personalized service ● IKEA ○ Improves speed and reliability of interaction ○ Distinctly impersonal ○ Increases service quality consistency Customer Evaluation of Service Quality ➢ Compare perception with expectations Perceived Service ➢ Cues used to assess service: ○ Reliability ■ The ability to perform a service dependably, accurately, and as promised ○ Assurance ■ The knowledge and courtesy of employees and their ability to convey trust and confidence ○ Tangibility ■ Associated with the appearance of physical facilities, equipment, personnel, and communication materials ○ Empathy ■ Refers to the caring, individualized attention provided to customers ○ Responsiveness ■ Means to provide customer service personnel and sales associates that really want to help customers and provide that service promptly ➢ Role of Expectations ○ Based on customer’s knowledge and experience, ○ Retailers without omni channel services are not viewed favorably ■ Customers expect good service, even when interactions are online The GAPS Model for Improving Retail Service Quality ➢ Knowledge Gap ○ Knowing what the customer wants ○ Reflects the difference between customer expectations and the firm's perception of those expectations ■ Social Media ■ Surveys, panels, and contests ■ Interact with customers, directly or observation ■ Customer complaints ■ Feedback from store employees ■ Using customer research in a timely manner ➢ Standards Gap ○ Setting service goals

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Pertains to the difference between the firm's perceptions of customers expectations and the service standards it sets ■ Commitment to service quality ■ Defining the role of service providers ○ Measuring service performance ■ Mystery shoppers Commitment to service quality ○ Top management provides leadership/commitment ○ Delivery Gap ○ Meeting and exceeding service goals ○ The difference between the firm's service standards and the actual service it provides to customers ■ Empowerment ● Allowing employees at the firm's lowest levels to make important decisions regarding how service will be provided to customers ■ Provide instrumental support ● Appropriate systems and equipment to deliver the service desired by customers ■ Provide emotional support ● Demonstrating a concern for the well-being of others ■ Provide incentives ■ Improve internal communications ■ Use technology ■ Give information and training Communications Gap ○ Communicating the service promise ○ Refers to the difference between the actual service provided to customers and the service that the firm's promotion program promises ○ Realistic commitments Managing customer expectations ○ Sprint’s Japanese divisions use Pepper robots to greet people

Service Recovery ➢ Service problems and complaints are good sources of information ○ Retailer can make changes to increase satisfaction ○ Can demonstrate a commitment to provide high-quality service ○ Strengthen relationships with customers Providing a fair solution ➢ Distributive fairness ○ Customers perception of the benefits received compared with his or her costs in terms of inconvenience or monetary loss ➢ Procedural fairness ○ Perceived fairness of the process used to resolve complaints

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Store Layout, Design and Visual Merchandising Store Design Objectives ➢ Implement the retailer's strategy (Primary objective) ○ Meet the needs of the target market ○ Build a sustainable competitive advantage ○ Reflection of the store brand/image ➢ Build loyalty by providing a rewarding shopping experience ○ Utilitarian benefits ■ Provided when it enables customers to locate and purchase products in an efficient and timely manner with minimum hassle ○ Hedonic benefits ■ Provided by offering customers an entertaining and enjoyable shopping experience ➢ Increase sales on a visit ○ Store design affects what products consumers buy, how long they stay, and how much they buy ➢ Control costs ○ To increase profits ○ Lights, labor costs, inventory shrinkage, flexibility ➢ Meet legal requirements

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ADA requires aisles to be big enough for wheelchairs

Three Types of Layouts: type of shopping ➢ Grid layout ○ Utilitarian shopping ○ Easy to locate products/minimize time ○ Cost efficient ○ Limits unplanned buying ➢ Racetrack layout ○ Loop with a major aisle that has access to departments ○ Draws customers around the store ○ Different viewing angles/encourage exploration ○ Impulse buying ➢ Free-form (Boutique layout) ○ Fixtures and aisles arranged asymmetrically ○ Intimate ○ Relaxing environment facilitates shopping/browsing ■ Inefficient use of space ■ More susceptible to shoplifting

Store design elements ➢ Signage and graphics ○ Call-to-action signage ■ Placed in strategic locations in the store ■ Can convey how, where, and why to engage with the retailer via QR codes on customers cell phones, via e-mail, short-message services, Facebook, or other digital channels ○ Promotional signage ■ Describes special offers and found within the store or displayed in windows to entice the customer into the store ○ Point-of-sale (POS) signage ■ Signs placed near the merchandise they refer to so that customers know the price and other detailed information ○ Digital signage ■ Visual Content delivered digitally through a centrally managed and controlled network and displayed on a TV monitor or flat panel screen ➢ Feature areas ○ Freestanding displays ■ Fixtures that are located on aisles and designed primarily to attract customers attention and bring them into a department ○ Mannequin ○ End caps

11 ○ Promotional area ○ Cash wraps ➢ Store exteriors ○ Windows ○ Entrances ○ Exterior signage

Space Management Space Productivity: ➢ Sales per square foot ○ A measure of space productivity used by most retailers since rent and land purchases are assessed on a per-square-foot basis. ➢ Sales per linear foot ○ A measure of space productivity used when most merchandise is displayed on multiple shelves of long gondolas ■ Such as in grocery stores.

Location of Merchandise Categories ➢ Strike zone ○ First impression of the stores offerings ➢ Planograms ○ A diagram that shows how and where specific SKUs should be placed on retail shelves or displays to increase customer purchases ➢ Impulse merchandise ○ Near heavily trafficked areas ○ Demand and promotional merchandise ○ Special merchandise ➢ Category adjacencies ○ Encourage unplanned purchases Determining store size ➢ Bigger not always better ➢ Improvements in supply chain management help stores decrease size but still provide inventory ➢ Stores benefit from less rent, fewer employees, lower payroll costs ○ Smaller carbon footprint ➢ Negatives ○ Decreased comfort ○ Little entertainment ○ Reduced selection Creating an appealing store atmosphere

12 ➢ Atmospherics ○ Appealing to 5 senses and creating appealing atmosphere ○ Lighting ■ Highlighting merchandise ■ Mood creation ○ Color ■ Warm vs cool colors ○ Music ■ Can add or detract ■ Consumers behavior ○ Scent ○ Taste ➢ Experiential Retail/Retail-tainment ○ Some stores create theatrical scenes ○ Other stores use minimalist warehouse style ○ Impact on environment depends on shopping goals ■ Task/recreation...