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MAR 3023-961 Basic Marketing Fall 2003—St. Petersburg Retailing Rich Gonzalez University of South Florida October 22, 2003 URLs Agenda October 22, 2003 Assignment A—Update Quiz # 4

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MAR 3023-961

Basic Marketing

Fall 2003—St. Petersburg


Rich GonzalezUniversity of South Florida

October 22, 2003

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AgendaOctober 22, 2003

  • Assignment A—Update

  • Quiz # 4

  • Retailing

  • Neiman Marcus Video/Discussion

  • Class Exercise

  • For October 29

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Assignment A

  • Any problems, questions?

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For Today: October 22

Chapter 16 – Direct Marketing, Retailing, Wholesaling(Note Video Case on Neiman Marcus on page VC-19)

“Retail Sales Improved in September, Shelly Branch,WSJ, October 10, 2003

Q: “What aspect of retailing do you hate the most?”

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For October 29

Chapter 15 – Distribution Channels

“Wal-Mart, Driving Workers and Supermarkets Crazy, Steven Greenhouse, N.Y. Times, October 19, 2003

What are some reasons that Wal-Mart is so powerful? (Based on Chapter 16 and Chapter 15 concepts.

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State of Retailing

Shelly Branch, WSJ

  • Good Performers?

  • Advertising—Madonna, Missy Elliott

  • Abercrombie & Fitch

  • Holiday 2003--- + 5.7 %

  • Retail 2003 --- + 4.1 %

  • BIG Retailers Getting BIGGER

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#1--The purpose of a business is to create a customer.

#2--It is the customer who determines what a product/service is.

#3--Know your customer(s).

#4—Brand is is the interface between the marketer and the customer.

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Quiz 4Q6 -- Bonus

6. The Neiman Marcus catalog is called:

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Quiz 4Q1

1. 1. In recent years, a new line of limited line retailer has emerged. Borders, Sports Authority, Bed Bath & Beyond, Circuit City, Office Depot are examples of a type of retailer. Name this type of retailer.

category killer Chap 16, p478

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Quiz 4Q2

3. A clothing retailer initially prices a suit at $199.99 but the garment does not sell. The wholesale cost of the product is $100, providing a margin of $100 (rounded). ... markdown the garment by 20% to stimulate sales. The new price is:

A) $ 79.99.

B) $119.99.

C) $159.99.

D) $139.99.

E) $89.99.

C Chap 16, p 471, p B-3

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Quiz 4Q3

3. When two different companies with strong brand names join together to sell a product, it’s an example of:

A) target marketing leverage.

B) strong-base branding.

C) co-branding.

D) power branding.

E) bilateral brand equity (BBE).

C. Chap 12, p 358

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Quiz 4Q4

4. A generic brand’s products are offered in plain packages, at low prices and often have no name on them.

a. True

b. False

A. Ch. 12, p 348

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Quiz 4Q5

5. The opening vignette to Chapter 16 details how Prada in New York uses _______ to pamper its customers.

A) wine and cheese stations.

B) Upscale Customers Attendants (UCA).

C) limousine service.

D) sophisticated network technology.

E) gold plated shopping carts..

D: Chap 16 p 465

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Quiz 4Q6 -- Bonus

6. The Neiman Marcus catalog is called:

“the Book” p VC-20

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#1--The purpose of a business is to create a customer.

#2--It is the customer who determines what a product/service is.

#3--Know your customer(s).

#4—Brand is is the interface between the marketer and the customer.

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Traditional, Technology and Transitional

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Let’s Lead Off With a Case

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  • Manhattan NY

  • Technology: What Kinds?

  • Wireless Networks

  • RFID

  • Video

  • Information About Accessories

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Brand Preference

The stage of brand acceptance at which the consumer selects one brand over competing offerings based on previous experience with it.

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Brand Insistence

The stage of brand acceptance at which the consumer refuses to accept alternatives and searchers extensively for the desired good or service.

Store brand loyalty---Anyone loyal to a store?

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Brand Equity

The added value that a certain brand name gives to a product.

Generated by performance, social image, value, trustworthiness of the brand.

Neiman Marcus has high level of brand equity.

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Dimensions of Brand Equity: The Young & Rubicam Mode





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Elements of Brand Equity

  • Brand Awareness

  • Brand Loyalty

  • Quality

  • Brand Affiliations

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Brands Affiliated With N-M

Gucci, Armani, Burberry, Stueben, Bose, Moschino, Elie Tahari…

Not: Bic, Pioneer, Aiwa, Martha Stewart,

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Elements of the Marketing Mix within an Environmental Framework












What factors have affected retail?

What factors have affected K-Mart?

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Revenues (billions)

Who’s afraid of a little country store from Arkansas?

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Wal-Mart—Last 10 Years ($58.24)


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Target—Last 10 Years ($39.11)


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2002 Revenues—Retailers 7T4

$ 247Wal-Mart

$ 36Sears

$ 31Kmart

$ 40Target

$ 32J.C. Penney

$ 15 Federated Dept. Stores

$ 58Home Depot

$ 3Neiman Marcus

(revenues in billions)

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  • Will they make it?

  • “Does America need Kmart?”

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Evolution of Retailing

  • Traced to trading posts such as the Hudson Bay Company and peddlers

  • First Retail Institution in the U.S. was the General Store

  • Supermarkets appeared in the early 1930s

  • Discount stores arrived in the 1950s

  • Convenience food stores emerged in the 1960s

  • The 1980s saw the first off-price retailers

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Wheel of Retailing

  • Hypothesis that each new type of retailer gains a competitive foothold by offering lower prices than current retailers, while maintaining profits through reduction of services

  • Once established, more services are introduced and prices rise

  • It then becomes vulnerable to new, lower price competitors

Kind of like a life cycle...

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Wheel of Retailing

The hypothesis that each new type of retailer gains a competitive foothold by offering lower prices than current suppliers charge, maintaining profits by reducing or eliminating services. Retailers then adds more services, with prices rising gradually. Then another low-cost retailer enters...

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The Wheel of Retailing

Market Opportunity

Low Prices,

Low Services

Market opportunity

Add Services,

Prices Rise

Add More Services,

Prices Rise More

This is ALWAYS true.

Why do services get added?.

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Retail Choice

Product Selection

Special Services

Helpful Salespeople

Fairness in Dealing



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All activities involved in selling goods and services to ultimate consumers, mostly in or around stores.

Are vending machines retail?

Are virtual Internet stores retail?

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First Vending Machine

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Brick and Mortar

Retail stores which have a physical location.

Is Borders brick and mortar?

Think Click and Mortar.

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Clicks and Bricks

  • Barnes & Noble, Circuit City, Best Buy

  • Virtual, physical, or hybrid?

  • Shopping....digitized?

  • Consumer access to “internal” information

  • i.e., checking store inventory

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Lets try Circuit City’s In-Store Express Pick Up

  • Sony CDP-CX355

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Consumers Accessing Information

  • Is this valuable for consumers?

  • Some people—say customers don’t need this

  • What will happen when retailers can tell which products are being looked at?

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Where Have all the Small Stores Gone? 7T3

  • Bakeries

  • Drug stores

  • Record stores

  • Grocery stores

  • Hardware stores

  • Candy stores

  • Filling stations

5% stores do 54% of business

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Retail Image

Consumers total perception of a store and the shopping experience it provides.

What happens if the image is inconsistent?

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An amount that a retailer adds to the cost of a product to determine its selling price.

Always know what the base is!

Referred to as an amount or as a percentage?

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  • The amount of the markup typically results from marketing decisions:

  • The services performed by the retailer.

  • The inventory turnover rate.

  • 3. Profitability objectives

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Markup on Selling Price

Markup Percentage on = Amount Added to Cost

Selling Price Selling Price

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Markup on Cost

Markup Percentage on = Amount Added to Cost

Cost Cost

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Inventory Turnover

A major performance metric:

Inventory = $ Annual Sales

Turnover $ On Hand Inventory

Inventory turns for Kmart = 3.8

Inventory turns for retailers = 6.1

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An amount by which a retailer reduces the original selling price of a product.

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Planned Shopping Center

A group of retail stores planned, coordinated, and marketed as a unit.

Think Countryside, Brandon Town Center, University Mall, Citrus Park

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The Battle for Shelf Space

  • Stockkeeping unit (SKU): specific product offering within a product line that is used to identify items within the line

  • Slotting allowances: fees paid by manufacturers to secure shelf space from retailers for their products

© PhotoDisc

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Selling Up

A retail sales technique that tries to convince a customer to buy a higher-priced item than he or she had originally intended.

Bait and switch?

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Suggestion Selling

A retail sales technique that attempts to broaden a customer’s original purchase to add related items, special promotional products.

Think the big “A”

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Accessories - Cell Phone 8T3

  • Faceplates

  • Head Set

  • Leather Case

  • Car Power Supply

  • Hands Free Car Kit

  • Extra Battery

  • Keyboard

  • Belt Clip

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The combination of physical characteristics and amenities that contribute to a store image which are experienced by customers.

How is it to walk into the new International Mall in Tampa?

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Classifications of Retailers

Classification Schemes

Shopping Effort

Services Provided

Product Lines

Location of Transactions

Form of Ownership

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Types of Retailers: Classified by Shopping Effort


Convenience Retailers

Shopping Stores

Specialty Retailers

Same as the product categories?

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Types of Retailers: Classified by Services Provided


Self-Service Retailers

Self-Selection Retailers

Full-Service Retailers

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Neiman Marcus Video

  • Worksheet—Jot down some reactionsideasthoughtscriticisms—what you don’t likepraises------what you do likequestions---something distinctive?

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Neiman Marcus--Service

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Neiman Marcus

  • Is N-M Focused On One Segment?

  • Multiplicity of Services


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  • 3 Distinctive Features of N-M That Can Be Copied To Another Retail Strategy

    1. Focus on Customer needs & wants

    2. Loyalty program--Innovative

    3. Merchandising Performance

Class Discussion

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Types of Retailers: Classified by Form of Ownership


Chain Stores

Independent Retailers

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Specialty Store

A retailer that typically handles only part of a single product line.

Think length of product line---”Batteries Plus.”

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Specialty Store in a Store

  • Sushi Bar


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Limited-line Store

A retailer that offers a large assortment within a single product line or a few related product lines.

also known as product-category

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Category Killer

A retailer that combines huge selection and market sensitive prices within a single product line.

Who is your favorite category killer?

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Department Store

A large store that handles a variety of merchandise, including clothing, household goods, appliances, and furniture.

Do category killers affect these?

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Outlet Mall

A shopping center that houses only off-price retailers.

(This has changed somewhat.)

Ellenton Mall is the local example. Orlando has ______?

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A large store, though still smaller than a hypermarket that combines groceries with discount store merchandise.

The WalMart concept.

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Home Shopping

A retailing method based on promotions through cable television networks to sell merchandise through telephone orders for home delivery.

Will this be replaced by Internet shopping?

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Chain Store

A group of stores that operate under central ownership and management to market essentially the same product line.

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  • Scrambled Merchandising: concept in which a retailer combines dissimilar product lines in an attempt to boost sales volume

© PhotoDisc

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Vending Machines

A method of “automatic merchandising” whereby devices are used to dispense goods and services and to receive payment from buyers, without a human seller.

Vending machines originated in the 1930-40s. T/F?

How many vending machines in the U.S.?

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Chap 16 End

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