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Marketing II
The Chang School-Ryerson University
Continuing Education
CMKT 200 Fall 2005
Instructor: Armand Gervais
Email: [email protected] preferred
Web: www.ryerson.ca/~agervais
Office: Bus 308
Phone: 416-979-5000 Ext 4215
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Lecture 8 Agenda
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Simulation report Due December 6 at the
beginning of class
See website for details
Final exam in class on Dec. 10 9-11 a.m.
Cover all chapters and readings cover after first
exam and simulation.
Chapter 17
Break
Simulation
To Do’s for next weeks class
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
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Identify retailers in terms of the utilities they
provide.
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Explain the alternative ways to classify retail
outlets.
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Understand the many methods of non-store
retailing.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
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Classify retailers in terms of the retail
positioning matrix.
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Develop retailing mix strategies over the life
cycle of a retail store.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
RETAILING
SMART, CHIC, AND CHEAP: TARGET
HITS THE BULL’S-EYE!
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Target Ad
Smart, chic, and cheap
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
THE VALUE OF RETAILING
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Consumer Utilities Offered by Retailing
The Global Economic Impact of Retailing
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Levis Original Spin:
Created to customer specifications
What happen to Levis Brand?
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
FIGURE 17-2 Retail sales ($billion), by type of
business
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
1. When Levi Straus makes jeans cut to a
customer’s exact preferences and
measurements, what utility is provided?
A: form utility
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
2. Two measures of the importance
or retailing in the global economy
total sales
are _________ and
number of employees
___________________.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
CLASSIFYING RETAIL OUTLETS
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Form of Ownership
Independent Retailer
 Corporate Chain
 Contractual System
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© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Radio Shack
Franchising opportunities
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
FIGURE 17-3 The top five franchises
Tim Horton’s has 60% share in Canada
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
CLASSIFYING RETAIL OUTLETS
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Level of Service
Self-Service
 Limited Service
 Full-Service
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© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
CLASSIFYING RETAIL OUTLETS
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Merchandise Line
Depth of Line
 Breadth of Line
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© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
FIGURE 17-4 Breadth versus depth of merchandise
lines
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
IKEA
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
CLASSIFYING RETAIL OUTLETS
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Breadth of Line (cont)
Scrambled merchandising
 Hypermarket
 Intertype competition
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© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
FIGURE 17-5 Supercenters are a popular store
format.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
1. Centralized decision making and
purchasing are an advantage of
chain ownership.
______
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
2. What are some examples of new forms
of self-service retailers?
A: Federal Express’s self-service
package shipping stations, and the
self-service scanning system being
installed at K-Mart.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
3. Would a shop for big men’s clothes
carrying pants in sizes 40 to 60 have a
broad or deep product line?
A: Deep product line
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Vending Photo
One form of non store retailing
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
NONSTORE RETAILING
FIGURE
17-6 Forms
of nonstore
retailing
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Cost of Returns for Retailers
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Between 5-30% of merchants sales ends up
being returned
In the U.S. $200 Billion worth or merchandise is
returned annually
The cost of handling and disposing of this
merchandise is $35 billion
Visa returns peak in December and January at
3%
Source: Globe & Mail January 19, 2005
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
NONSTORE RETAILING
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Automatic Vending
Direct Mail and Catalogs
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
L.L. Bean
Specialty catalogs
appealing to
market niches
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
NONSTORE RETAILING
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Television Home Shopping
Online Retailing
Telemarketing
Direct Selling
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Television Home Shopping
Placing orders over the phone or Internet
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Internet Café
Access to the Web
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
1. Successful
catalog
retailers
often
specialty
niche
send ________ catalogs to _____
markets identified in their databases.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
2. How are retailers increasing consumer
interest and involvement in online
retailing?
A: Tactics such as virtual models
encourage consumer interaction and
increase involvement.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
3. Where are direct selling retail sales
growing? Why?
A: Direct selling is likely to grow in
market where the lack of effective
distribution channels and lack of
consumer knowledge about
products increase the need for a
person-to-person approach.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
RETAILING STRATEGY
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Positioning a Retail Store
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Retail Positioning Matrix
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
FIGURE 17-7 Retail positioning matrix
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
RETAILING STRATEGY
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Positioning a Retail Store (cont)
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Keys to Positioning
Retailing Mix
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
FIGURE 17-8 The retailing mix
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
RETAILING STRATEGY
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Retailing Mix (cont)
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Retail Pricing
Shrinkage
 Off-price retailing
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Winners
Target
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
RETAILING STRATEGY
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Retailing Mix (cont)
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Store Location
Central business district
 Regional shopping centers
 Community shopping center
 Strip location
 Power center
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Retail Image and Atmosphere
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
1. What are the two dimensions of the
retail positioning matrix?
A: Breadth of product line and value
added.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
2. How does original markup differ from
maintained markup?
A: Original markup is the initial
selling price less retailer cost.
Maintained markup is the final
selling price less retailer cost.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
3. A huge shopping strip with
multiple anchor stores is a
power
______ center.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
THE CHANGING
NATURE OF RETAILING
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The Wheel of Retailing
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
FIGURE 17-9 The wheel of retailing
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Taco Bell Express
Coming full cycle in the wheel of retailing
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
THE CHANGING
NATURE OF RETAILING
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The Retail Life Cycle
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
FIGURE 17-10 The retail life cycle
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
BP Connect: Store Front
Integrating the convenience store and gas station
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
BP Connect: Solar Power Canopy
Panels generate 20% of electrical power needs
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
BP Connect:
E-Commerce
Pump
Wide variety of
online options
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
BP Connect: Inside Store View
Wide, open aisles to create
clean-looking environment
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
BP Connect: Wild Bean Café
Sandwiches, hot and cold drinks,
and a small dining area
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
BP Connect: Internet Kiosks &
ATM
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
BP Connect Print Ad
Announcing the conversion of Amoco to BP Connect
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
BP Connect
Print Ad
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
FUTURE CHANGES IN RETAILING
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Multichannel Retailing
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Multichannel retailers
The Impact of Technology
Changing Shopping Behavior
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
1. According to the wheel of retailing,
when a new retail form appears, how
would you characterize its image?
A: A low-status, low-margin, low-price
outlet.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
2. Market share is usually fought
maturity
out before the ________ stage of the
retail life cycle.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Concept Check
3. What is a smart card?
A: A smart card looks like a credit card
but store information about bank
accounts and customer purchases
on computer chips.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Internet Exercise
1 Try each of these shopping bots. Find the
best price for a Wilson tennis racket, a Sony
TV, and Guess jeans. How did the two agents
differ? What shipping and handling charges
would apply? Why do they make different
recommendations?
DealTime
mySimon
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
VIDEO CASE 17-1
Mall of America
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Why has Mall of America been such a marketing
success so far?
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
VIDEO CASE 17-1
Mall of America
2
What (a) retail and (b) consumer trends have
occurred since Mall of America was opened in 1992
that it should consider when making future plans?
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
VIDEO CASE 17-1
Mall of America
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(a) What criteria should Mall of America use in
adding new facilities to its complex? (b) Evaluate (1)
retail stores, (2) entertainment offerings, and (3) hotels
on these criteria.
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
VIDEO CASE 17-1
Mall of America
4
What specific marketing actions would you
propose that Mall of America managers take to ensure
its continuing success in attracting visitors (a) from the
local metropolitan area and (b) from outside of it?
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Drug Sales
$250
$200
$150
OTC drugs
Prescription
Billions
$100
$50
$0
1999
2000
2001
2004
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
DTC Advertising Spending
$8
$7
$6
$5
Billions $4
$3
$2
$1
$0
1994
1996
1999
2000
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
2004
2005 est.
Does Advertising work?
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Four Categories of drugs account for 31% of advertising spending:
Oral Antihistamines, antidepressants, drugs to lower cholesterol, and anti-ulcerants
1990-1998 visits to doctors remain stable at 14 million per year in 1999 jumped to 18
million
Advertising appears to have changed behaviour
In 1989 45% of patients ask for a drug by brand name by 1995 it was 93%
10 Million people requested an advertised drug
35% ask their doctor for information on a particular drug and 20% asked to have the
drug prescribed! The doctor prescribed the drug 75-84% of the time
Celebrex and Vioxx are heavily promoted and cost over $2 a pill. Ibuprofen cost
pennies and is just as effective
145 million was spent advertising Vioxx causing sales to jump 300% to 1.5 Billion
Summary DTC advertising has increased dramatically and has coincided with
significant increases in sales of the advertised drugs
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
To Do’s for Next Class
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Begin to study for Exam
Complete the assigned readings download through library
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin