The Retail communication mix

AUGUST 2, 2010
in SALES/MARKETING MANAGEMENT

Communication is an integral part of the retailer’s marketing strategy. Primarily,

communication is used to inform the customers about the retailer, the merchandise
and the services. It also serves as a tool for building the store image. Retail
communication has moved on from the time when the retailer alone communicated
with the consumers. Today, consumers can communicate or reach the
organizations. Examples of this include toll free numbers, which retailers provide
for customer complaints and queries. Another example is the section called
Contact Us on the websites of many companies.

It is believed that every brand contact delivers an impression that can strengthen or
weaken the customer view of the company. The retailer can use various platforms /
channels for communication. The most common tools are:

1) Advertising
2) Sales Promotion
3) Public Relations
4) Personal Selling
5) Direct Marketing
The tools are illustrated in Figure below

Retail Communication Mix >>

Sales promotion>> Advertising >> Direct marketing>> Personal Selling >> Public
Relations

Let us now examine each of these tools in detail:

Advertising can be defined as any paid form of non-personal presentation and

communication through mass media. It is popularly believed that one of the main
aims of advertising is to sell to a wide mix of consumers and also to induce repeat
purchases. However, a retailer may use advertising to achieve any of the following
objectives:
1) Creating awareness about a product or store
2) Communicate information in order to create a specific image in the customer’s
mind in terms of the store merchandise price quality benefits etc.
3) Create a desire to want a product.
4) To communicate the store’s policy on various issues.
5) Help to identify the store with nationally advertised brands.
6) Help in repositioning the store in the mind of the consumer.
7) To increase sales of specific categories or to generate short term cash flow – by
way of a sale, bargain days, midnight madness etc.
8) Help reinforce the retailer’s corporate identity.
The retailers for advertising may use any one or a combination oft the following
mediums:

1) Press advertisements
2) Posters and leaflets, brochures booklets
3) Point of purchase displays
4) Advertising can also be done through mediums like radio, television, outdoor
hoardings and the internet.
Determining the Advertising / Promotional budget

While there is no definite formula for determining the advertising or the overall
promotion budget the following are the main methods that may be employed to
determine the advertising budget. ‘

The percentage of Sales method:

This is perhaps the most commonly used method for determining the budget. Here,
the budget is a fixed percentage of sales. The biggest advantage of this method is
that it is simple to apply and it allows he retailer to set an affordable limit on
promotional activity. This method however, takes little consideration of the market
conditions of any special advertising needs.

The Competitive Parity Method

Here the budget is based on the estimated amount spent by the competition. There
is risk that it could be based on wrong information and again there is little
consideration for market conditions or growth opportunities.

The research approach or the Task and objective Method

The budget is determines on the basis of a study of the best forms of advertising
media and the costs of each. The retailer formulates advertising goals and then
defines the tasks necessary to accomplish these goals. Next, the management
determines the cost for each task and adds up the total to arrive at the required
budget. Here, he advertising expenses are linked to the retailer’s objectives and the
effectiveness of some forms of advertising can be measured and compared to costs.

The incremental Method

The budget is simply based on the previous expenditure.

What can be afforded?

The budget allocated for advertising or for promotion is based on the basis of the
money that can be allocated by the retailer for this purpose.

While determining which method s to be adopted, a retailer needs to take into

consideration the market that the firm is operating in , its current market position
and how important advertising is in that market.
PERSONAL SELLING:
CONSUMER BUYING BEHAVIOR

CONSUMER BUYING vs. ORGANIZATIONAL BUYING

Final (or ultimate) consumers purchase for:

personal,
family, or
household use

Organizational consumers purchase for:

further production,
usage in operating the organization, and/or
resale to other consumers

Consumer Buying Behavior

the decision processes and acts of final household consumers associated with
evaluating, buying, consuming, and discarding products for personal consumption

Consider the purchase an automobile. You generally will not consider different
options until some event triggers a need, such as a problem needing potentially
expensive repair. Once this need has put you "on the market", you begin to ask your
friends for recommendations regarding dealerships and car models. After visiting
several dealerships, you test drive several models and finally decide on a particular
model. After picking up your new car, you have doubts on the way home, wondering
if you can afford the monthly payments, but then begin to wonder if instead you
should have purchased a more expensive but potentially more reliable model. Over
the next five years, the car has several unexpected breakdowns that lead you to want
to purchase a different brand, but you have been very happy with the services of the
local dealership and decide to again purchase your next car there.

In this particular case, the following generic model of consumer decision

making appears to hold:
=====>need recognition
In this particular case, the following generic model of consumer decision
making appears to hold:
=====>need recognition
=====>information search
=====>evaluation of alternatives
=====>purchase decision
=====>postpurchase behavior

Now consider the purchase of a quart of orange juice. You purchase this product when
you do your grocery shopping once per week. You have a favorite brand of orange
juice and usually do your grocery shopping at the same store. When you buy orange
juice, you always go to the same place in the store to pick it up, and never notice what
other brands are on the shelf or what are the prices of other brands. How is it that the
generic model above works differently in this second scenario? Why does it work
differently? Why would we generally need the ministrations of a sales person in the
sale of a car, but we generally do not need the help of a salesperson in the purchase of
orange juice?

How can the marketer of orange juice get a consumer like you to exert more effort
into information search or to consider alternative products? How is it that the marketer
of your brand got you to ignore alternative competing brands? What is the
involvement of salespeople insales promotions that might be associated with products
such as orange juice?

Consumer behavior researchers are not so interested in studying the validity of the
above generic model, but are more interested in various factors that influence how
such a model might work.

INFLUENCES ON THE GENERIC MODEL

external
o group
-e.g., cultural, family, reference group influences
o environmental/situational
-e.g., time of day, temperature and humidity, etc.
inernal
o lifestyle, personality, decision making process, motivation, etc.
GROUP INFLUENCES ON CONSUMER BEHAVIOR

Culture
the set of basic values, beliefs, norms, and associated behaviors that are learned by a
member of society

Note that culture is something that is learned and that it has a relatively long lasting
effect on the behaviors of an individual. As an example of cultural influences,
consider how the salesperson in an appliance store in the U.S. must react to different
couples who are considering the purchase of a refrigerator. In some subcultures, the
husband will play a dominant role in the purchase decision; in others, the wife will
play a more dominant role.

Social Class
a group of individuals with similar social rank, based on such factors
as occupation,education, and wealth

Reference Groups
groups, often temporary, that affect a person's values, attitude, or behaviors

E.g., your behaviors around colleagues at work or friends at school are

probably different from your behaviors around your parents, no matter your
age or stage in the family life cycle. If you were a used car salesperson, how
might you respond differently to a nineteen year old prospect accompanied
by her boyfriend from one accompanied by two girlfriends?
opinion leader
a person within a reference group who exerts influence on others because of
special skills, knowledge, personality, etc.
o You might ask the webmaster at work for an opinion about a
particular software application. Software manufacturers often give
away free beta copies of software to potential opinion leaders with
the hope that they will in turn influence many others to purchase the
product.

Family
a group of people related by blood, marraige, or other socially approved relationship

ENVIRONMENTAL/SITUATIONAL INFLUENCES ON CONSUMER

BEHAVIOR
circumstances, time, location, etc.
Do you like grapes? Do you like peas?

You might like grapes as a snack after lunch, but probably not as a dessert after a
fancy meal in a restaurant. You might like peas, but probably not as a topping on your
pancakes. Everyday situations cause an interaction between various factors which
influence our behaviors. If you work for tips (a form of incentive related to
commission) as a waiter or waitress, you must certainly be aware of such interactions
which can increase or decrease your sales.

If you are doing your Saturday grocery shopping and are looking for orange juice, you
are probably much more sensitive to price than if you stop at the quick store late at
night, when you are tired and cranky, after a late meeting at the office. A prospect
shopping for a new automobile while debating the wisdom of a necessary expensive
repair to his car might be more interested in what cars are on the lot than in shopping
for the best deal that might involve a special order.

INTERNAL INFLUENCES ON CONSUMER BEHAVIOR

 
personality
a person's distinguishing psychological characteristics that lead to relatively consistent
and lasting responses to stimuli in the environment

We are each unique as individuals, and we each respond differently as consumers. For
example, some people are "optimizers" who will keep shopping until they are certain
that they have found the best price for a particular item, while other people are
"satisficers" who will stop shopping when they believe that they have found
something that is "good enough." If you are a salesperson in a retail shoe store, how
might you work differently with these two personalities?

 
lifestyle and psychographics

lifestyle is a pattern of living expressed through a person's activities, interests,

and opinions
psychographics is a technique for measuring personality and lifestyles to
developing lifestyle classifications
 
motivation: multiple motives

Consumers usually have multiple motives for particular behaviors. These can be a
combination of:

manifest
known to the person and freely admitted
latent
unknown to the person or the person is very reluctant to admit

Note: different motives can lead to the same behavior; observing behavior is not
sufficient to determine motives.

What are the thoughts of John's friend?

What is John's manifest motive?
What might be his latent motive?

How might a salesperson discover these motives? What features should a salesperson
emphasize?

 
involvement
has to do with an individual's

intensity of interest in a product and the

importance of the product for that person

The purchase of a car is much more risky than the purchase of a quart of orange juice,
and therefore presents a higher involvement situation. This modifies the way that the
generic model works.

As involvement increases, consumers have greater motivation to comprehend and

elaborate on information salient to the purchase. A life insurance agent, for example,
would typically be more interested in contacting a young couple who just had a baby
than an eighteen year old college student - even though the new parents might be
struggling to make ends meet while the student is living more comfortably. Although
the annual investment into a policy is much lower if started at a younger age, most
young college students are not open to thinking about long term estate planning. A
young couple with a new child, however, is much more open to thinking about issues
associated with planning for the child's future education, saving to buy a house, or
even saving to take an extended vacation upon retirement.

TYPES OF CONSUMER PROBLEM-SOLVING PROCESSES

 
routenized

used when buying frequently purchased, low cost items

used when little search/decision effort is needed
e.g., buying a quart of orange juice once per week

limited problem solving

used when products are occasionally purchased

used when information is needed about an unfamiliar product in a familiar
product category

extended problem solving

used when product is unfamiliar, expensive, or infrequently purchased

e.g., buying a new car once every five years

 
Under what sorts of conditions would the assistance of a salesperson be needed? Not
needed?

POST-PURCHASE CONSUMER BEHAVIOR

 
satisfaction

After the sale, the buyer will likely feel either satisfied or dissatisfied. If the buyer
beleives that s/he received more in the exchange than what was paid, s/he might feel
satisfied. If s/he believes that s/he received less in the exchange than what was paid,
then s/he might feel dissatisfied. Dissatisfied buyers are not likely to return as
customers and are not likely to send friends, relatives, and acquaintences. They are
also more likely to be unhappy or even abusive when the product requires post-sale
servicing, as when an automobile needs warranty maintenance.

The above idea can be modeled as Homans' basic exchange equation:

Profit = Rewards - Costs

Unfortunately, even a buyer who "got a good deal" with respect to price and other
terms of the sale might feel dissatisfied under the perception that the salesperson made
out even better.

This idea is called equity theory, where we are concerned with:

Outcomes of A
Inputs of A

vs.

Outcomes of B
Inputs of B

Consider, for example, that you have purchased a used car for $14,000 after finding
that the "e;blue book" value is listed at $16,000. You are probably delighted with the
purchase until you accidentally meet the prior owner who had received a trade-in of
$10,000 on the car just a few days before. That the dealer appears to have received
substantially greater benefit than you could lead to extreme dissatisfaction, even
though you received good value for the money spent.

(Note that the selling dealer might actually have paid $12,000 for the car at a
statewide dealer's auction, and then might have incurred another $1,000 in expenses
associated with transporting the car and preparing it for sale. Management of buyer
perceptions is very important!)

An issue related to this is attribution theory. According to attribution theory, people

tend to assign cause to the behavior of others. Mary's life insurance agent advises her
to purchase a whole life policy, while her accountant advises her, "buy term insurance
and invest the difference.". The reason, explains the accountant, "is that insurance
agents receive substantially higher commission payments on sales of whole life
policies."
If Mary believes that the insurance agent is recommending a product merely because
he receives a higher commission, she will likely be displeased with the relationship
and will not take his recommendation. If the agent is able to show Mary that the
recommended product is the best solution for her situation, then she will likely
attribute his recommendation to having her best interests in mind and will not be
concerned about how it is that he is compensated for his services.

 
cognitive dissonance
has to do with the doubt that a person has about the wisdom of a recent purchase

It is very common for people to experience some anxiety after the purchase of a
product that is very expensive or that will require a long term commitment. Jane and
Fred, for example, signed a one year lease on an apartment, committing themselves to
payments of $1500 per month. A week later, they are wondering if they should have
instead leased a smaller $900 apartment in a more rough part of town; they are not
sure if they really can afford this much of a monthly obligation. Dick and Sally, on the
other hand, ultimately rented the $900 apartment, and now are wondering if the
savings in rent will be offset by noisy and sometimes unsafe conditions in this
neighborhood.

Perhaps neither couple would be experiencing this anxiety if their landlords had given
them just the smallest of assurances that they had made a good decision. After a close
on products that are expensive or that require a long term commitment, the
salesperson should provide the prospect with some reasons to be happy with the
decision. Allow the car buyer to reinforce her own positive feelings by calling her a
week after the purchase to ask how things are going. Call the new life insurance
policy holder after two months to see if there are any questions; a lack of questions
can only help the buyer to convince himself that he did the right thing.