Download cases and ancillary cases

CHAPTER 16
RETAIL COMMUNICATION MIX
CONVERSION NOTES
Berman & Evans
Chapter 18
CASES AND ANCILLARY CASES
CASE 3: Gadzooks Targets the Teen Market
Synopsis:
Gadzooks is a specialty retailer of casual clothing and accessories targeted specifically to
teenagers. The case describes Gadzook's positioning, vision and merchandizing
strategies and demonstrates how Gadzook's is taking advantage of specific niche
opportunities in the teenage market.
CASE 10: American Eagle and Abercrombie & Fitch Battle for the Teen/College Market
Synopsis:
American Eagle and Abercrombie & Fitch are rival retailers vying for a competitive
leadership position among the same segment of the teenage/college student market.
Each, however, pursues a slightly different strategy, even though some similarities have
been the issues for legal contestation. The case details the strategies, merchandising,
operations, and competitive positions of the two retailers.
CASE 23: Borders Bookstore: A Merchandise Display Problem
Synopsis:
Manager of a Borders’ bookstore in a college town is confronted by customers criticizing
the arrangement of books as “ghetto-izing” authors who were not white males.
CASE 30: Lindy's Bridal Shoppe
Synopsis:
Owner of a specialty shop (hypothetical company) must decide whether she wants the
business to grow and how to achieve growth. This case can generate a discussion of
organizational and personnel issues associated with running a small specialty store. It can
also illustrate strategic and implementation decisions made by a retail entrepreneur.
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CASE 31: Starbucks Coffee Company
Synopsis:
Starbucks is the leading retailer of specialty coffee beverages and beans and related food
and merchandise. Starbucks’ mission is to provide people with the opportunity to savor
a good cup of coffee while engaging good conversation in a relaxed atmosphere.
Ancillary Case A16: The Computer Shoppe: Database Retailing
Synopsis:
The Computer Shoppe sells personal computers, peripherals, TV games, software,
calculators, and accessories. This Canadian chain of retailers offers post sales technical
support and services that are second to none in Canada. Since individual franchises have
a lot of autonomy in running their local operations, Fred Webster, a franchise owner, is
taking it upon himself to leverage a database that he has created to increase his sales.
Ancillary Case A17: Loyalty Wars in the British Supermarket Industry
Synopsis:
Tesco, the number two UK supermarket chain launched Clubcard, the first loyalty card
in the UK supermarket scene after a trial of one year in 14 stores. The case analyzes
Tesco’s potential for success with the Clubcard as well as other promotional programs
that they might consider, and how their competitors may respond.
Ancillary Case A35: Wolf Camera
Synopsis:
Wolf Camera was founded in 1974. It is now one of the two largest specialty photo
retailers in the country. Its growth has been the result of a steadfast commitment to
customer satisfaction – providing the best selection of photo and video products and
accessories, followed by the best service at the lowest possible prices.
VIDEO CASES
Video Segment 10: Sears Revitalizes a Brand
Teaching Use:
Illustrates the benefits of a strong brand image
Featured Retailer:
Sears
Summary:
Sears is really an icon of U.S. retailing. During most of the 20th century, the company was the largest
retailer in the world. It pioneered the movement of department stores into suburban enclosed malls. But,
Sears’s market share began declining in the 1970’s due to the growth of discounters such as Kmart and
Wal-Mart and various specialty retailers. In 1990, Wal-Mart overtook Sears to become the largest retailer
in the country. Over the last 10 years, the company faced the challenge of regaining its position of
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leadership and prominence in American retailing. This segment presents the views of Alan Lacy, the
current CEO, about how Sears needs to build the image of its brand. The video also emphasizes the
importance in Sears’ human resource management efforts in reinforcing the brand image.
Video Segment 21: Building a Brand at Rich’s/Goldsmith/Lazarus
Teaching Use:
Development of a brand strategy and image
Featured Retailer:
Rich’s/Goldsmiths, a division of Federated Department Store
Summary:
Rich’s/Lazarus/Goldsmith’s (RLG) is a regional department store chain headquartered in Atlanta,
Georgia, and owned by Federated Department Stores. It employs 17,200 people in 76 stores located in
nine Midwestern and southeastern states with annual sales of $2.2 billion. The division was formed in
1995 when Federated Department Stores merged three regional department store chains. While the stores
in each region continue to carry the name of the regional chains, there’s only one headquarters office.
Rather than using the full name of the division, the video shows the former CEO, Arnie Orlick, outlining
the new brand strategy for the division.
Video Segment 22: Positioning Burdines: The Florida Store
Teaching Use:
Illustrate the approaches that a store-based retailer takes to communicate with
customers -- advertising, store design and visual merchandising
Featured Retailer:
Burdines
Summary:
Burdines is a regional department store chain division of Federated stores located in Florida. Burdines’
long-term strategy always included the possibility of expanding into other Southeast states either through
acquisition or by opening new stores. However, in 1988, a new department store competitor entered the
south Florida market. When Macy’s opened two stores, Burdines began to re-evaluate its long-term
strategy. Note that in 1992, Federated acquired Macy’s; however, both Macy’s and Blooomingdales,
divisions of Federated, compete against Burdines in Florida.
Burdines decided to position itself as The Florida Store and concentrate just on the Florida market. By
identifying itself as the Florida store, Burdines sacrificed the opportunity to expand into other states. To
strengthen its position in Florida, it has developed unique private-label FLA merchandise tailored to the
needs of Floridians. Burdines is repositioning its regional department store chain as The Florida Store.
This repositioning is communicated to customers through the merchandise mix, store design, and
advertising.
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INSTRUCTOR NOTES
ANNOTATED OUTLINE
I. Introduction
See PPT 16-3

The communication program informs
customers about the retailer as well as the
merchandise and services it offers and
plays a role in developing repeat visits and
customer loyalty.

Communication programs can have both
long-term and short-term effects on a
retailer's business. From a long-term
perspective, communications programs can
be used to create and maintain a strong,
differentiated image of the retailer and its
store brands. This image develops
customer loyalty and creates a strategic
advantage.

Retailers frequently use communication
programs to realize the short-term objective
of increasing sales during a specified time
period. Retailers often have sales during
which some or all merchandise is priced at
a discount for a short time.
II. Using Communication Programs to
Develop Brands and Build Customer
Loyalty

See PPT 16-4
A brand is a distinguishing name or
symbol, such as a logo, that identifies the
products or services offered by a seller and
differentiates those products and services
from the offerings of competitors.
A. Value of Brand Image
See PPT 16-5

Brands provide value to both customers
and retailers.

Brands convey information to consumers
about the nature of the shopping experience
– the retailer's mix – they will encounter
when patronizing a retailer.

They also affect the customers' confidence
in decisions made to buy merchandise from
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Ask students how brands help them make
decisions about products and retailers. One way
to analyze the impact of brands on consumer
decisions is to consider their decision to pull off
an Interstate highway and stop to eat at a
McDonald's versus some unknown local brand
restaurant.
a retailer.

Finally, brands can enhance the customers'
satisfaction with the merchandise and
services they buy.

The value that brand image offers retailers
is referred to as brand equity. Strong
brand names can affect the customers'
decision-making process, motivate repeat
visits and purchases, and build brand
loyalty.

In addition, strong brand names enable
retailers to charge higher prices and lower
their marketing costs.

Customer loyalty to brands arises from
heightened awareness of the brand and the
emotional ties toward it.

A strong brand image enables retailers to
increase their margins. When retailers
have high customer loyalty, they can
engage in premium pricing and reduce their
reliance on price promotions to attract
customers. Brands with weaker images are
forced to offer low prices and frequent
sales to maintain their market share.

Finally, retailers with strong brand names
can leverage their brand to successfully
introduce new retail concepts with only a
limited amount of marketing effort.
B. Building Brand Equity

See PPT 16-6, 16-7
The activities that a retailer needs to
undertake to build the brand equity for its
firm or its private-label merchandise are (1)
create a high level of brand awareness, (2)
develop favorable associations with the
brand name, and (3) consistently reinforce
the image of the brand.
1. Brand Awareness

See PPT 16-8, 16-9
Brand awareness is the ability of a potential
customer to recognize or recall that the
brand name is a type of retailer or
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product/service. Thus brand awareness is
the strength of the link between the brand
name and the type of merchandise or
service in the minds of customers.

Aided recall is when consumers indicate
they know the brand when the name is
presented to them.

Top-of-mind awareness, the highest level
of awareness, arises when consumers
mention a brand name first when they are
asked about the type of retailer, a
merchandise category, or a type of service.

Retailers can build top-of-mind awareness
by having memorable names; repeatedly
exposing their name to customers through
advertising, locations, and sponsorships;
and using memorable symbols.

The awareness and associations evoked by the
brand in consumers' minds can also be discussed
using positioning concepts discussed in Chapter
5.
For a hypothetical positioning diagram for
women's clothing retailers, draw two separate
axis -- fashion versus traditional and high/low
service. Ask students to position the leading
regional department store, Lerner's, The Gap,
The Limited, Sears, K mart, Brooks Brothers,
and JCPenney for women's clothing on the
diagram.
Discuss the various awareness and associations
evoked by each retailer.
Symbols involve visual images that
typically are more easily recalled than
words or phrases and thus are useful for
building brand awareness.
2. Associations
See PPT 16-10, 16-11, 16-12

Brand associations are anything linked to
or connected with the brand name in a
consumers' memory.

Some common associations that retailers
develop with their brand name are (1)
merchandise category, (2) price/quality, (3)
specific attribute or benefit, and (4)
lifestyle or activity.

The brand image is a set of associations
that are usually organized around some
meaningful themes.
a. Merchandise Category

The most common association is to link the
retailer to a category of merchandise, e.g.,
Office Depot.
b. Price/Quality
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Ask students to name retailers whose image is
linked to merchandise category, low price, high
price, low quality, high quality, a lifestyle,
convenience, etc.

Some retailers, such as Neiman Marcus,
want to be associated with offering high
prices and unique, high fashion
merchandise. Other retailers, such as WalMart, want associations with offering low
prices and good value.
c. Specific Attribute or Benefit

A retailer can link its stores to attributes
such as convenience (7-Eleven) or service
(Nordstrom).
d. Lifestyle or Activity

Some retailers associate their name with a
specific lifestyle or activity, e.g., The
Nature Company.
3. Consistent Reinforcement

The retailer's brand image is developed and
maintained through the retailer's
communication program as well as other
elements of the communication mix, such
as merchandise assortment and pricing, the
design of its stores and website, and the
customer service it offers.

To develop a strong set of associations and
a clearly defined brand image, retailers
need to be consistent in portraying the
same message to customers over time and
across all elements of its retail mix.

Retailers need to develop an integrated
marketing communication program – a
program that integrates all of the
communication elements to deliver a
comprehensive, consistent message.
Without this coordination, communication
methods might work at cross-purposes.
See PPT 16-13
C. Extending the Brand Name
See PPT 16-14, 16-15

Retailers can leverage their brand names to
support their growth strategies.

There are pluses and minuses to extending
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a brand name to a new concept. An
important benefit of extending the brand
name is that minimal communication
expenses are needed to create awareness
and a brand image for the new concept.
Customers will quickly transfer the original
brand's awareness and associations to the
new concept. However, in some cases, the
retailer might not want to have the original
brand's associations connected with the
new concept.

These issues also arise as a retailer expands
internationally. Associations with the
retailer's brands that are valued in one
country may not be valued in another.

Retailers communicate with customers
through five vehicles: advertising, sales
promotion, publicity, store atmosphere and
visual merchandising, and personal selling.
III. Methods for Communicating with
Customers

See PPT 16-16
The classification of communication
methods is based on whether the methods
are impersonal or personal and paid or
unpaid.
Ask students why retailers want to communicate
with their customers? What do they want to tell
them?
See PPT 16-17
A. Paid Impersonal Communications

To illustrate the pluses and minuses of extending
the brandname, give students examples of some
well-known retailers, such as Wal-Mart, Circuit
City, JCPenney, Kroger's, Blockbuster, and
query them as to credibility of extending these
brands to different hypothetical merchandise
categories and retail store concepts.
Advertising, sales promotions, store
atmosphere, and websites are examples of
paid impersonal communications.
Ask students to describe the different paid,
personal communication they have received from
retailers. Which form of paid, personal
communication is most effective for
communicating information about a sale?
Information about the quality of merchandising
carried in the store? Why?
1. Advertising

Advertising is a form of paid
communication to customers using
impersonal mass media such as
newspapers, TV, radio, direct mail, and the
Internet.
2.

Sales Promotion
See PPT 16-18
Sales promotions are paid impersonal
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communication activities that offer extra
value and incentives to customers to visit a
store and/or purchase merchandise during a
specific period of time.

The most common sales promotion is a
sale. Other sales promotions involve
special events, in-store demonstrations,
coupons, and contests.

Some retailers use in-store demonstrations
and offer free samples of merchandise to
build excitement in the store and stimulate
purchases.

Contests are promotional games of chance.
They differ from price-off sales in that (1)
only a few customers receive rewards and
(2) winners are determined by luck.

Coupons offer a discount on the price of
specific items when they're purchased at a
store.

Although sales promotions are effective at
generating short-term interest among
customers, they are not very useful for
building long-term loyalty.
3. Store Atmosphere

The store itself provides paid impersonal
communications to its customers. Store
atmosphere is the combination of the
store's physical characteristics, such as
architecture, layout, signs and displays,
color, lighting, temperature, sounds, and
smells, which together create an image in
the customer's mind.
4. Website

Retailers use their websites to build their
brand image; inform customers of store
locations, special events, and the
availability of merchandise in local stores;
and sell merchandise and services.
B. Paid Personal Communications
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
Retail salespeople are the primary vehicle
for providing paid personal
communications to customers.

Personal selling is a communication
process in which salespeople assist
customers in satisfying their needs through
face-to-face exchanges of information.

E-mail is another paid personal
communication vehicle that sends messages
over the Internet. Retailers use e-mail to
inform customers of new merchandise,
confirm the receipt of an order, and
indicate when an order has been shipped.
Communicating through salespeople is much
more expensive than communicating through
advertising. Ask students why department stores
place more emphasis on paid personal versus
impersonal communications. Why do
supermarkets do just the opposite?
C. Unpaid Impersonal Communications
Ask students to describe some instances of
retailers communicating through publicity.
Publicity is cheap. Why don't retailers rely on
publicity rather than advertising?

The primary method for getting unpaid
impersonal communication is publicity.

Publicity is communications through
significant unpaid presentations about the
retailer (usually a news story) in
impersonal media.

Publicity is often used to communicate
with employees and investors.
D. Unpaid Personal Communications

Finally, retailers communicate with their
customers at no cost through word of
mouth (communication between people
about a retailer).
E. Strengths and Weaknesses of
Communication Methods

Ask students if they have communicated with
other students about retail stores. Why did they
talk about the retailer? What did they say? Note
word-of-mouth is usually about a bad
experience, not a good experience. How can
retailers stimulate favorable word-of-mouth?
See PPT 16-19
Communications methods can be compared
in terms of control, flexibility, credibility,
and cost.
1. Control

Retailers have more control when using
paid versus unpaid methods.

When using advertising, sales promotions,
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Ask students about the type of communication
over which retailers have the most control. How
can retailers control unpaid communications?
Mergers, acquisitions, store openings and
closing, and financial performance generate
websites, e-mail, and store atmosphere,
retailers determine the message's content,
and for advertising, e-mail, and sales
promotions, they control the time of its
delivery.

Retailers have less control over personal
selling than other paid communication
methods.

Retailers have very little control over the
content or timing of publicity and word-ofmouth communications.
publicity. Discuss a recent event and ask
students whether or not retailer received
benefited from the publicity.
2. Flexibility

See PPT16-3
Personal selling is the most flexible
communication method because
salespeople can talk with each customer,
discover their specific needs, and develop
unique presentations for them.
See PPT16-3
3. Credibility

Ask students which form is the most flexible in
terms of tailoring the message to the specific
customer.
Because publicity and word of mouth are
communicated by independent sources, the
information is usually more credible than
information in paid communication
sources.
Ask students which form of communications do
customers find most credible -- the one in which
they believe the information presented. Have
students heard communications about a retailer
they did not believe? Why?
4. Cost
See PPT16-3

Publicity and word of mouth are classified
as unpaid communication methods, but
retailers do incur costs to stimulate them. .

Paid impersonal communications often are
economical.

While maintaining a website on a server is
relatively inexpensive, it is costly to design,
continuously update the site, and promote
the site to attract visitors, however, emails
can be sent to customers at low cost.

Typically, advertising in mass media
advertising is most effective at building
awareness. Websites, direct mail, and
newspaper advertising are effective for
conveying information about a retailer's
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Ask students if word-of-mouth and publicity are
really free?
offerings and prices. Personal selling and
sales promotion are most effective at
persuading customers to purchase
merchandise. Mass media and magazine
advertising, publicity, websites, and store
atmosphere are most cost-effective at
building the retailer's brand image and
encouraging repeat purchases and store
loyalty.
IV. Planning The Retail Communication
Program

See PPT 16-20
The four steps in developing and
implementing the retail promotion program
are setting objectives, determining a
budget, allocating the budget, and
implementing and evaluating the mix.
Review steps in developing a communication
program.
A. Setting Objectives


Retailers establish objectives for promoting
a program to provide (1) direction for
people implementing the program and (2) a
basis for evaluating its effectiveness.
Discuss the goals for a communications
program.
Some promotion programs have a longterm objective, such as creating or altering
a retailer's brand image. Other
communication programs focus on
improving short-term performance, such as
increasing store traffic on weekends.
See PPT 16-21, 16-22, 16-23
1. Communication Objectives
Review the communication objectives. Ask
students what communication problem is
suggested by this pattern. What would a pattern
look like if customers had little knowledge of the
store? If customer only shopped during a sale? If
customer found the location very inconvenient?

Retailers often use communications
objectives rather than sales objectives to
plan and evaluate their communication
programs.

Communication objectives are specific
goals related to the retail promotion mix's
effect on the customer's decision- making
process.

To effectively implement and evaluate a
communication program, objectives must
be clearly stated in quantitative terms.

The target audience for the communication
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Illustrate which methods are more effective at
different stages of the decision making process.
Why is advertising better than salespeople for
creating awareness? Why are salespeople better
than advertising for changing attitudes? How
would an ad, directed at building awareness,
differ from one directed at changing an attitude?
mix needs to be defined along with the
degree of change expected and the time
period over which the change will be
realized.
Describe the differences between the objectives
and nature of the communications programs
developed by retailers and vendors.
See PPT 16-24
B. Setting The Communication Budget

The second step in developing a retail
promotion program is determining a
budget.

The economically correct method for
setting the promotion budget is marginal
analysis.
Reviews the methods for setting a budget and
illustrate the difference in the logic between
marginal analysis and the rules of thumb
methods.
1. Marginal Analysis Method
See PPT 16-25

Marginal analysis is based on the
economic principle that firms should
increase promotion expenditures so long as
each additional dollar spent generates more
than a dollar of additional contribution.

In most cases, however, it is very hard to
do a marginal analysis because managers
do not know the relationship between
promotion expenses and sales.

Sometimes, retailers do experiments to get
a better idea of this relationship.
Ask students where the estimates come from.
Indicate they are judgments that the manager
has now stated explicitly.
2. Objective-and-Task Method
See PPT 16-26, 16-27

The objective-and-task method
determines the budget required to
undertake specific tasks for accomplishing
communication objectives.

The retailer first establishes a set of
communication objectives. Then the
necessary tasks and their costs are
determined. The sum total of all costs
incurred to undertake the tasks is the
communication budget.
As in the marginal analysis, the relationship
between the expenditures and the objective
realized is based on the manager's judgment. The
method simply quantifies the managers'
judgment. By quantifying the judgments, people
have a basis for discussing them.
3. Rule-of-thumb Methods

Ask students why the marginal analysis and
objective-and-task methods are more
In the previous two methods the
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communication budget is set by estimating
communication activities' effects on the
firm's future sales or communication
objectives.

appropriate than the rules of thumb for setting
advertising budgets? If the rules of thumb are not
good methods, why do retailers use them so
frequently?
The rule-of-thumb methods use the
opposite logic by using past sales and
communication activity to determine the
present communication budget.
a. Affordable Method

When using the affordable budgeting
method, retailers first forecast their sales
and expenses excluding communication
expenses during the budgeting period. The
difference between the forecast sales and
expenses plus desired profit is then
budgeted for the communication mix.

The major problem with the affordable
method is that it assumes that promotion
expenses do not stimulate sales and profit.
b. Percentage-of-sales Method

The percentage-of-sales method sets the
communication budget as a fixed
percentage of forecast sales. Retailers use
this method to determine the promotion
budget by forecasting sales during the
budget period and using a predetermined
percentage to set the budget.

The problem with the percentage-of-sales
method is that it assumes the same
percentage used in the past, or by
competitors, is still appropriate for the
retailer.

One advantage of both the percentage-ofsales method and the affordable method for
determining a communication budget is
that the retailer will not spend beyond its
means.
c. Competitive Parity Method

Under the competitive parity method, the
communication budget is set so that the
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The typical advertising expenditures for food
stores are 1.4% of sales. Ask students whether
they would expect the typical expenditures for an
everyday low pricing supermarket to be above or
below 1.4%. Why? What about a convenience
store?
retailer's share of communication expenses
equals its share of market.

Like other rule-of-thumb methods, the
competitive parity method does not allow
retailers to exploit the unique opportunities
or problems they confront in a market.
C. Allocation of the Promotional Budget

After determining the size of the
communication budget, the retailer decides
how much of its budget to allocate to
specific communication elements,
merchandise categories, geographic
regions, or long- and short-term objectives.

Retailers often can realize the same
objectives by reducing the size of the
communication budget, but allocating the
budget more effectively.

An easy way to make such allocation
decisions is just to spend about the same in
each geographic region or for each
merchandise category.

Allocation decisions, like budget-setting
decisions, should use the principles of
marginal analysis. The retailer should
allocate the budget to areas that will yield
the greatest return. This principle for
allocating a budget is sometimes referred to
as the high-assay principle.
D. Planning, Implementing, and Evaluating
Communication Programs – Three
Illustrations
See PPT 16-28

The final two stages in developing a retail
communication program are
implementation and evaluation.
See PPT 16-29, 16-30
1. Advertising Campaign

A specialty import home furnishing store
decided to concentrate its limited budget on
a specific segment and use highly
distinctive copy and art in advertising.
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Review the communication program developed
by the furniture company in the text and how the
retailer evaluated the effectiveness of the
campaign.

The advertising program emphasized the
store's distinctive image. The newspaper
was the major vehicle.

An inexpensive tracking study was used to
measure the campaign's effectiveness.
See PPT 16-31
2. Sales Promotion Opportunity
Discuss the factors a retailer needs to consider
when evaluating a promotion. Discuss how each
factor has either a positive or negative effect on
the retailer's profits.

Many sales promotion opportunities
undertaken by retailers are initiated by
vendors.

To evaluate a trade promotion, the retailer
should consider (1) the realized margin
from the promotion, (2) the cost of the
additional inventory carried due to buying
more than the normal amount, (3) the
potential increase in sales from the
promoted merchandise, (4) the potential
loss suffered when customers switch to the
promoted merchandise from more
profitable unpromoted brands, and (5) the
additional sales made to customers
attracted to the store by the promotion.
3. Special Promotion Using a
CRM/Campaign Management Tool
See PPT 16-32, 16-33

A national retailer used a CRM/Campaign
management system to plan, design,
evaluate, and implement a special
promotion.

Direct-mail and e-mail communication
channels were used along with supporting
in-store promotions and existing
advertising.

A what-if analysis was conducted and the
campaign plan was built with all the details
and responsibilities of each department.

The action plan included all the required
steps in the campaign process, along with
costs, dependencies, and deadlines on the
marketing production schedule.

The successful campaign was then
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templated for future use. Management was
able to optimize resources and manage
deadlines and deliverables, thus increasing
productivity, efficiency, and ROI.
V. Summary
VI. Appendix 16A: Implementing Retail
Advertising Programs

See PPT 16-34
Implementing an ad program involves
developing the message, choosing the
specific media to convey the message, and
determining the frequency and timing of
the message.
I. Developing the Advertising Message

See PPT 16-35, 16-36
Most retail advertising messages have a
short life and are designed to have an
immediate impact. This immediacy calls
for a copy writing style that grabs the
reader’s attention.
Evaluate several ads that you cut out of the
newspaper or magazines.
A. Assistance in Advertising

Retailers get assistance in developing
advertising campaigns from vendors
through their co-op programs, advertising
agencies, and media companies.
1. Cooperative advertising

Cooperative (co-op) advertising is a
program undertaken by a vendor. The
vendor pays for part of the retailer's
advertising, but the vendor dictates some
conditions for the advertising.

Co-op advertising enables a retailer to
increase its advertising budget.

Co-op advertising programs are often used
to support a vendor’s efforts to discourage
retailers from discounting the vendor’s
products.

Co-op advertising has other drawbacks.
First, vendors want the ad to feature their
products, while retailers are more
483
Ask students the advantages and disadvantages
of cooperative advertising.
interested in featuring their store's name,
location, and assortment of merchandise
and services offered.

In addition, ads developed by the vendor
often are often used by several competing
retailers and may list the names and
locations of all retailers offering their
brands.

Finally, restrictions the vendor places on
the ad may further reduce its effectiveness
for the retailer.

Retailers and vendors can also work
together as partners on a co-marketing
program.
2. Agencies

Advertising agencies are often used by
large retailers to develop ads for store
image campaigns. Many small retailers
use local agencies to plan and create their
advertising.

Agencies also work on other aspects of the
promotion programs, such as contests,
direct mail, and special promotions.
Invite a local ad agency to come to class and
describe an ad campaign they developed for a
retail client. Ask students to discuss the
advantages and disadvantages of using an ad
agency versus having an internal advertising
department design and place ads.
3. Media Companies

The advertising media offer services to
local retailers ranging from planning an ad
program to actually designing the ads.
II. Choosing the Most Effective Advertising
Medium

The media used for retail advertising are
newspapers, magazines, direct mail, radio,
TV, outdoor billboards, the Internet,
shopping guides, and the Yellow Pages.
A. Newspapers

Growth in retail newspaper advertising has
slowed recently as retailers have begun
using other media. Still, 16 of the nation's
25 largest newspaper advertisers are
484
See PPT 16-37, 16-38
Wal-Mart is the largest merchant. Why is
Wal-Mart's advertising budget much small than
Sears and Penney -- companies that are much
smaller than Wal-Mart.? Why does McDonald's
spend very little on newspapers compared to
other retailers?
retailers.

In addition to displaying ads with their
editorial content, newspapers distribute
free-standing inserts -- an ad printed at
the retailer's expense and distributed as an
insert in the newspaper.

Since newspapers are distributed in a welldefined local market area, they are
effective at targeting retail advertising.

Newspapers also offer quick response,
given that there is a short time between the
deadline for receiving the ad and the time
that the ad and the time that the ad will
appear.

Newspapers, like all print media,
effectively convey a lot of detailed
information, but are usually not effective
for showing merchandise because of the
poor reproduction quality.

The life of a newspaper ad is short because
the newspaper is usually discarded after it
is read.

The cost of developing newspaper ads is
very low, but the cost of delivering the
message may be high if the newspaper's
circulation is broader than the retailer's
target market, thus requiring the retailer to
pay for exposures that won't generate sales.
Ask students about the future of retail advertising
in newspapers. What factors might cause it to
increase in the future? Decrease in the future?
Show examples of preprints from local
newspapers. Why does Kmart and JCPenney use
preprints rather than just buying ad space in the
paper? Have a salesperson calling on retail
accounts for local newspaper talk in class.
B. Magazines

Retail magazine advertising is mostly done
by national retailers, but magazine
advertising is increasing with the growth of
local magazines and regional editions of
national magazines.

Retailers tend to use this medium for image
advertising because reproduction quality is
high.

A disadvantage is that the timing of a
magazine ad is difficult to coordinate with
485
Ask students what types of advertising work best
in magazines. What retailers tend to use
magazines rather than other media?
special events and sales.
C. Direct mail

Retailers frequently use the data collected
at POS terminals to target its advertising
and sales promotions to specific customers
using direct mail.

Retailers' lists of credit card customers are
often used as a mailing list.

Retailers can also purchase a wide variety
of lists for targeting consumers with
specific demographics, interests, and
life-styles.

Also, many retailers encourage their
salespeople to maintain a preferred
customer list and use it to mail
personalized invitations and notes.

While direct mail can be very effective due
to the ability to personalize the message, it
is also costly. Many consumers ignore
direct-mail advertising and treat it as junk
mail.
Ask students what types of advertising work best
using direct mail. What retailers tend to use
direct mail rather than other media?
D. Television
Ask students what types of advertising work best
using television. What retailers tend to use
television rather than other media?

TV commercials can be placed on a
national network or a local station.

A local commercial is called a spot.

Retailers typically use TV for image
advertising.

To offset the high production and broadcast
costs, many suppliers provide modular
commercials, in which the retailer can
insert its name or a "tag" after information
about the vendor's merchandise.
E. Radio

Ask students what types of advertising work best
using radio. What retailers tend to use radio
rather than other media?
Many retailers use radio advertising
because messages can be targeted to a
specific segment of the market and
production and placement costs are
486
generally low.

However, one disadvantage of radio is that
listeners generally treat the radio broadcast
as background, which limits the attention
they give the message.
F. Internet

Three uses of the Internet by retailers to
communicate with customers are (1) banner
ads and affiliate programs to generate
awareness and (2) websites to provide
information about merchandise and special
events, and (3) e-mails to target messages.

Banner ads and affiliate programs are very
effective for targeting communication, but
they are not cost effective for building
awareness because the large number of web
sites reduces the number of customers
visiting a site and seeing a particular ad.

However, Internet advertising is an
excellent vehicle for conveying information
to customers.

Retailers can use the Internet to send emails to customers informing them of
special events and new merchandise
Ask students if they pay attention to banner ads
and affiliate programs on the Internet. Have
they ever purchased something as a result?
G. Outdoor Billboards

Billboards and other forms of outdoor
advertising are effective vehicles for
creating awareness for a limited amount of
information to a narrow audience.

Outdoor advertising is typically used to
remind customers about the retailer or to
inform people in cars of nearby retail
outlets.
Ask students what types of advertising work best
using outdoor. What retailers tend to use
outdoor rather than other media?
H. Shopping Guides

Shopping guides are free papers delivered
to all residents in a specific area.

This medium is particularly useful for
retailers who want to saturate a specific
487
Show local shopping guides and review retailers
using guides.
trading area.

Shopping guides are very cost-effective and
assure the local retailer 100 percent
coverage in a specific area.
I. Yellow Pages

The Yellow Pages are useful for retailers
because they have a long life.

The Yellow Pages are used as a reference
by consumers who are definitely interested
in making a purchase and seeking
information.
Show examples of retailer display ads in the
Yellow Pages and evaluate them. Why do small
retailers tend to have display ads in the Yellow
Pages while the national chains do not?
J. Factors in Selecting Media

See PPT 16-39
To convey their message with the most
impact to the most consumers in the target
market at the lowest cost, retailers need to
evaluate media in terms of coverage, reach,
cost, and impact of the advertising
messages delivered through the medium.
Ask students what media they would use if they
opened up a new fast food restaurant near
school, a bookstore, or a bicycle shop. Ask
students to compare the various media in terms
of coverage, reach, cost, and impact for the new
stores.
1. Coverage

Coverage refers to the number of potential
customers in the retailer’s target market
that could be exposed to an ad in a given
medium.
2. Reach

In contrast to coverage, reach is the actual
number of customers in the target market
exposed to an advertising medium.

If on any given day, 60 percent of the
potential customers who receive the
newspaper actually read it, then the reach
of the newspaper would be 36,000 (60
percent X 60,000).

Retailers often run an ad several times, in
which case they calculate the cumulative
reach for the sequence of ads.

When evaluating Internet advertising
488
Ask students when would they want to emphasize
reach versus coverage.
opportunities, the measure used to assess
reach is the number of unique visitors – the
number of different people who access the
web page on which the ad is located.
3. Cost

The cost per thousand (CPM) measure is
often used to compare media. Typically,
CPM is calculated by dividing an ad's cost
by its reach.

CPM is a good method for comparing
similar size ads in similar media, but CPM
can be misleading when comparing the
cost-effectiveness of ads in different types
of media, such as newspaper and TV.

A TV ad may have a lower CPM than a
newspaper ad, but the newspaper ad may
be much more effective at achieving the
ad’s communication objectives, such as
giving information about a sale.
Review the example in the book to calculate cost
per thousand and compare media
4. Impact

Impact is an ad's effect on the audience.

Due to their unique characteristics,
different media are particularly effective at
accomplishing different promotion tasks.

TV is particularly effective at generating an
audience's attention, demonstrating
merchandise, changing attitudes, and
announcing events.

Magazines are particularly appropriate for
emphasizing the quality and prestige of a
store and its offering and for providing
detailed information to support quality
claims.

Newspapers are useful for providing price
information and announcing events.

Websites are particularly effective for
demonstrating merchandise and providing
information.
489
Why is radio so ineffective at gaining attention
and creating recognition for a retailer’s name?
Why is direct mail so effective at providing
information and emphasizing quality? What
media would be best for announcing a sale?
Improving a store’s image?

Outdoor advertising is most effective at
promoting a retailer's name and location.
III. Determining Ad Frequency and
Timing

The frequency and timing of ads
determines how often and when customers
will see the retailer's message.
For what type of messages would a retailer want
high frequency?
A. Frequency

Frequency is how many times the potential
customer is exposed to an ad.

The appropriate frequency depends on the
ad’s objective.

Typically, several exposures to an ad are
required to influence a customer's buying
behavior.
Ask students when it would be best to place ads
for a weekend sale at a local department store. A
week before the sale, a couple days before,
Friday before, Saturday, Sunday? Why? What is
the best day for weekly sales ads placed by a
supermarket? Why?
B. Timing

Ask students to develop a media plan for a new
pizza parlor selecting the media and indicating
the timing of the ads. Assume the pizza parlor
has new home delivery and pick-up near campus,
but, no table service. The restaurant anticipates
annual sales of $200,000 and has budgeted 2%
of sales for advertising.
Typically, an ad should appear on, or
slightly preceding, the days when
consumers are most likely to purchase
merchandise.
490
ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS
1.
How do brands benefit consumers? Retailers?
In a competitive marketplace with numerous offerings, brands are crucial for identifying,
differentiating, and recognizing individual offerings or retailers. For the consumers as well as
retailers, brands represent evaluations, experiences and meanings associated with a product's
consumption or retail mix. Brands convey information to consumers about the nature of the
shopping experience – the retailer's mix – they will encounter when patronizing a retailer.
Consumers can invoke their past evaluations and experiences as well as what they perceive the
brand to represent in terms of quality, etc. These affect consumers' confidence in their decisions
to buy merchandise from a retailer. Moreover, given the quality assurance and other signals
associated with the brand, consumers' can feel more satisfied with the merchandise and service
they buy.
For retailers, brand image or brand equity helps affecting consumer decision-making processes
and helps them motivate consumers to make repeat visits and purchases. Retailers could
leverage their brand image to create emotional ties between consumers and brands and thus,
build brand loyalty. Strong brand names help retailers differentiate their offerings from
competition and also help them charge higher prices, while lowering the marketing costs
associated with promotion and selling. Strong brand image helps retailers increase their margins
and reduce their reliance on price promotions to attract consumers. Moreover, once a brand
reputation is established, retailers can successfully introduce new retail concepts with limited
marketing effort.
2.
How can advertising, personal selling, and promotion, complement each other in an
integrated marketing communications program?
Integrated marketing communications is the strategic integration of multiple communication
methods to form a comprehensive, consistent message. An example of how advertising, personal
selling, and promotion complement each other is Lane Bryant’s integrated approach to target the
African American market. The focus of the program was a five-city mall tour coordinated by
Essence magazine. Radio and TV ads were used to inform customers about the tour and the
special mall event. Prior to the arrival of the tour, direct mail announcements were sent to
consumers in the city announcing the mall event and the presenting Lane Bryant’s offering for
African American customers. Ads with discount coupons placed in the Essence issues
distributed during the tour offered additional encouragement to visit Lane.
3.
As a means of communicating with customers, how does advertising differ from publicity?
Advertising is a form of paid communication to customers using impersonal mass media such as
newspapers, TV, radio, and direct mail. Publicity is communications through significant unpaid
presentations about the retailer (usually a news story) in impersonal media.
491
Retailers have more control when using paid versus unpaid methods. When using advertising,
retailers determine the message's content and the time of its delivery. Retailers have very little
control over the content or timing of publicity. Since unpaid communications are designed and
delivered by people not employed by the retailer, they can communicate unfavorable as well as
favorable information.
Because publicity is generated by independent sources, its information is usually viewed as more
credible than the information in paid communication sources. It is important to note that
generating publicity may be more costly than advertising. Creating a newsworthy event is
typically very expensive, whereas placing an individual ad may not be.
Basis of Comparison
Control
High control - retailer designs
the ads
Flexibility
Limited flexibility -Same
message delivered to all people
in audiences for media. themes
and messages can be changed,
but changes can not be made
very quickly.
Low credibility --consumers
know that advertising is try to
sell something.
Modest cost --retailers pays for
developing the ads and placing
them in media.
Credibility
Cost
4.
Advertising
Publicity
Low control -newspapers and
magazine determine what is
written about event or issue
Limited flexibility -Same
message delivered to all people
in audiences for media.
High credibility –consumers feel
the information is from an
independent source.
Low cost -- Retailer does not
pay the media for the delivering
the message, although there may
be significant cost in developing
a news worthy event.
Why is the newspaper the favorite medium used by retailers for advertising? What are the
advantages and disadvantages of newspaper advertising? Why is the use of newspaper
decreasing and use of direct mail increasing?
Advantages are 1) since they are distributed in a well-defined local market area, they are
effective at targeting that market; 2) they offer quick response, since the deadline for receiving
the ad and the time that the ad will appear is short; 3) the ad can be retained by consumers; 4) the
ad can contain detailed information about the merchandise, such as price. Disadvantages are 1)
the life of the ad is short, since the newspaper is usually discarded after it is read, 2) while the
cost of developing a newspaper ad is low, the cost of delivering the ad may be high if the
newspaper has a circulation broader than the retailer’s target market.
Newspaper advertising despite all of its advantages is on the decline. This is primarily due to the
fact that advertisers have more media to choose from in the past, and that younger people are
much more likely to get information from media such as television or even radio than from the
print media. Direct mail has been on the incline because technological advancements have made
492
large databases relatively easy and cost effective to maintain. Also, direct mail messages can be
tailored to very distinct market segments (POS terminal data).
5.
For which of the following growth opportunities do you think the retailer should use its
brand name when pursuing the opportunity? Why?
(a) McDonald's starts a new chain of restaurants to sell seafood in sit-down environment
competing with Red Lobster.
(b) Sears starts a chain of stand-alone stores that sell just home appliances.
(c) Blockbuster starts a chain of stores selling consumer electronics.
When extending a brand name to support growth opportunities, careful attention must be placed
to the associations that consumers place on the current brand image as well as the extent to which
the new growth opportunity is consistent with merchandise/concept for which the brand name is
currently known in the market.
(a) McDonald's is primarily known as a fast-food restaurant emphasizing convenience as its major
differentiating feature, apart from food quality and service. It is debatable if consumers would be
able to transfer McDonald's reputation of convenience, quality and service to a sit-down
restaurant competing with Red Lobster. It may take more time, effort and money for McDonald's
to convey and convince customers that McDonald's seafood restaurant provides great food and
great service. In fact, it may be more cost-effective for McDonald's to open a seafood restaurant
under a different name and create brand awareness and image for the new brand in the new
market.
(b) Sears is known for its reputation for selling home appliances and many of its private brands are
leaders in their respective product categories. The Kenmore brand image evokes a history of
quality and reliability and the Sears name has sufficient pull among consumers of home
appliances. Given this synergy between the new retail concept/merchandise and the brand
associations, Sears could use its existing brand names for the new concept.
(c) Blockbuster is a market leader in the home video rental business. But, at the same time,
Blockbuster's expertise in motion pictures is limited to the rental and sales to home consumers.
Thus, the Blockbuster name is more associated with a specific type of retail concept – that of
rentals – than with movies or electronics. There may be more positive associations if
Blockbuster simply rents out consumer electronics (something that it already does in a limited
way) than sell consumer electronics.
6.
What factors should be considered in dividing up the budget among a store's different
merchandise areas? Which of the following should receive the highest advertising budget:
fashionable women's clothing, men's underwear, women's hosiery, or kitchen appliances?
Why?
The basic principle that should be considered in allocating the advertising budget across
merchandise categories is the marginal return -- the greatest bang per buck. The question that
needs to answered is: Which category will generate the most sales and profits from an additional
dollar of advertising?
493
Men's underwear and women's hosiery are probably not good candidates for advertising
expenditures. This merchandise is frequently bought on impulse. Consumers usually are not
stimulated to visit a department store in response to ads for this merchandise.
On the other hand, women's fashion is a good candidate for high advertising expenditures.
Consumers will be motivated to visit a department by ads for this type of merchandise. They
typically buy this type of merchandise in a department store and visit department stores to see
what the new fashions are.
Also the image of a department store is often based on the nature of its fashionable merchandise,
not its men's underwear, women's clothing, or kitchen appliances.
7.
Outline some elements in a promotion program to achieve the following objectives:
(a) Increase store loyalty by 20 percent.
(b) Build awareness of the store by 10 percent.
(c) Develop an image as a low-price retailer.
How would you determine whether the program met the objective?
(See Chart Below)
Objective
Approach for Achieving
Objective
Frequent shopper program
where customer earn points
for making more purchases
Introduce private label
merchandise only available at
store
Technique for Measuring
Objective
telephone or mail survey taken
before and after new program
asking customers their degree
of loyalty, percent of expenses
in category bought from store.
build awareness of the
store by 10%.
install a large sign in front of
store
hold an event that generates
publicity
radio or bill board advertising
emphasizing the name and
location of the store
develop an image as a
low-price retailer.
undertake image advertising
on TV or in magazines
telephone or mail survey taken
before and after new program
asking customers to name of
the store they would consider
(unaided recall) and then
indicate whether o not they
know of these stores (aided
recall)
telephone or mail survey taken
before and after new program
asking customers to describe
the fovcial stores and other
stores on a set of characteristics
increase store loyalty by
20%.
8.
Retailers use TV to build a brand image. TV advertisers have identified many types of
markets based on the day, time, and type of show during which their ads may appear.
During which days, times, and types of shows would retailers advertise fresh produce and
meat, power drills, beer, and health club memberships? Why?
494
Fresh produce and meat -- This merchandise is typically bought by female homemakers -- people
who prepare full meals. Thus a retailer would want to advertising on program watched by
females and time the advertisements so that they are seen just before the consumers plan to go to
the store to buy food for preparing a meal. Perhaps day-time talk shows and soap operas would
be good candidates for advertising this merchandise.
Power drills and beer are bought, used, and consumed primarily by men. Thus a retailer might
consider advertising these products on TV coverage of sporting events. The power tools might
also be advertised on a program about home repairs like This Old House or Home Improvements.
In terms of timing, the ads might be placed just before the beginning of a weekend when the
repairs are generally done.
Health Club memberships might be advertised on exercise shows. Might consider advertising
after consumer consumes have engaged in some "unhealthy" behaviors such as eating excessively
during holidays or not getting much exercise during the winter.
9.
Some retailers direct their advertising efforts toward reaching as wide an audience as
possible. Others try to expose the audience to an advertisement as many times as possible.
When should a retailer concentrate on reach? When should a retailer concentrate on
frequency?
To change customer attitudes or emphasize a particular image, it is important to expose
customers, and potential customers, many times to an ad; thus, the retailer should emphasize
frequency. Alternatively, the goal of an sale ad would be to inform as many people as possible
of the sale; thus, the retailer should emphasize reach.
10.
A retailer plans to open a new store near a university. It will specialize in collegiate
merchandise such as T-shirts, fraternity/sorority accessories, and sweat shirts. What
specific advertising media should the new store use to capture the university market?
While student responses will vary, some possible ideas are: The new retailer may want to use
newspapers to reach this market. Student newspapers usually have a high student readership and
will probably be an excellent choice. The local newspaper may also be a good choice, since the
professors, staff, and some of the students will probably read it. Magazines associated with the
university may also be a good place to advertise. Special magazines devoted to alumni or
athletic events probably will help to focus in on the university market. A direct mailing may be
good especially if the store can take advantage of a free campus mail system. Even if a free
campus mail system is not available, using the student directory may be a good way to develop a
mailing list that specifically targets this population. Radio, especially stations that carry formats
popular with college students may be appropriate. If there is a university station, the store should
look into purchasing advertising time, since the university students probably constitute the
majority of the audience, and the time on these stations is usually relatively inexpensive. In
terms of television, if the university has its own station, it may be a good idea to investigate
purchasing time. Unless a specific television event related to the university is shown (such as an
495
athletic event) television is probably not the best way to reach this market. Finally, outdoor
advertising such as signs and posters around campus may be effective.
11.
Cooperative (co-op) advertising is a good way for a retailer to extend an ad budget. Why
isn't it always in a retailer's best interests to rely extensively on co-op advertising?
Cooperative advertising can be overly restrictive, in that the retailer may be forced to spend a
certain amount of space or time devoted to a particular product. In addition, the manufacturer
may require that a certain ad be used which may also be used by competing retailers. Finally,
manufacturer imposed time restrictions and media selection restrictions may not be convenient to
or conducive for the retailer.
496
ANCILLARY LECTURES AND EXERCISES
Ancillary Lecture 16-1: The Internet As An Advertising Medium
The following lecture notes can be used with PowerPoint slides 16-40 to 16-48.
PPT #
16-40
Title
U.S. Expenditures on
Advertising
16-41
Internet Advertising
Applications
16-42
Internet –
Advertising Medium
16-43
Types of Internet
Advertising
Problems with
Measuring
Effectiveness
16-44
16-45
Internet Ad
Measurement Models
16-46
Measuring
Effectiveness Internet
Marketer Perspective
Generating Traffic
for Site
Effectiveness of
Traffic Building
Approaches
16-47
16-48
Comments
Internet advertising is a very small percent of the advertising
expenditures for all U.S. firms across all industries now but expected
to grow significantly. How does the use of different media by
retailers differ from the other industries? Retailers tend to use more
newspaper advertising since they primarily use advertising to
promote sales rather than build an image of their store.
Multichannel retailers are using the Internet to build traffic.
However, the nature of the advertising expenses has shifted from
banners to affiliate programs.
The Internet is a unique medium. While most media push messages
to a passive consumer, the Internet allows consumers to actively
seek, or pull advertising. The Internet is much better at targeting
messages and personalizing them, but it has a narrow reach
compared to TV. The Internet is also unique in terms of
measurability – the advertiser knows which site each visitor came
from. Thus Internet advertising allows a performance based fee
(click throughs, purchases by visitors clicking through) rather than a
flat fee for the placement of an ad.
These different types are in order from the least effective to the most
effective in stimulating traffic and purchases.
It is difficult to compare the effectiveness of Internet advertising
with other media using the typical reach and frequency measures.
The Internet measure of reach, its unique visitors and the measure of
frequency pages downloaded. The unique visitor measure is effected
by the use of cookies and differ IP addresses. The pages
downloaded measure is affected by caching. While Internet
measures of effectiveness can be erroneous, they are useful for
comparing the effectiveness of ad placements as different sites.
The two approaches for measuring the effectiveness of Internet
advertising are using a panel of consumers and tracking their Internet
usage or counting visitors and page downloads on specific site. Each
approach has its problems and limitations.
These are measures that e-retailers use to assess traffic at their site
and relate to the communication goals discussed in the chapter.
This slide lists the approaches for generating traffic to a site.
This slide lists the approaches for assessing how well an e-retailers
traffic building strategies are working.
497
NOTES
498