SALES AND RETAIL MANAGEMENT

Introduction to Sales Management

Sales Management

It is the attainment of salesforce goals in an effective and efficient manner through planning,
staffing, training, leading and controlling organizational resources.

Evolution of Sales Management

Industrial revolution that took place in the 18th century gave rise to the expansion of market which
required professional approach in selling. The history of salesmanship is as old as human civilization. The
business and trade of buying and selling goods flourished over centuries and centered only on some
specific cities of the world.

The first sales people

The first sales people in the US were Yankee peddlers who carried clothing, spices, and

household articles from one part to another part. These move from one village to village and sell sarees,
dress materials and spices mostly in the rural markets because rural housewives have lessor mobility than
urban housewives.

Pack Peddlers

The pack peddlers in India traded with the tribal Indians and exchanged knives, beads and

ornaments and handicrafts. They sold colored sugar water as medicine and cheated people from smaller
gains. In the beginning of the 19th century, these peddlers started using horse driven carts and wagons and
started stocking heavier goods.

Greeters and Drummers (Intermediary to buyer)

Wholesalers and manufacturers hired greeters and drummers who would seek out and invite

retailers to visit the display of the owner. The drummers would meet the passengers form incoming train
and ship with great fanfare to beat their competitors. In the next phase, the drummers started visiting
customer’s place of business. There were fewer than 1000 traveling sales people before 1860 in the US who
were basically credit investigators and took orders for goods.
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Selling Techniques

The techniques of modern sales management and selling techniques were refined by John Henry
Patterson, widely known as the father of modern sales management. He ran the National Cash Registry. He
asked his best sales people to demonstrate their sales techniques to other salespeople. The best sales
approach was printed in a sales primer and distributed to all the other sales people to follow

Modern Sales Management

Today the process of sales management has undergone numerous changes in terms of strategy,
practice and technological adoption to achieve the desired goal. A sales person has become the

information provider. The real sales activity is now in retaining customers rather than just closing the sale.
This relationship approach has changed the scope of sales management and research has found that is costs
five times more to register a new customer than to sell a product or service to an existing customer.

The Domain of Sales Management

The domain of sales management has become multidisciplinary in which sales manager has to
manage a diverse workforce and complex technologies. Sales manager have to perform duties such as
recruiting, selecting, training, motivating, forecasting, controlling and administering people. They have to
manage and satisfy multiple and satisfy multiple stakeholders such as customers, suppliers, sales

representatives and top management with the objective of increasing sales and profitability.

Importance of Sales Management

• The amount spent on selling product is very high.

• Salesforce is the primary contact points so much attention to be given for improving the ability of
selling through training and motivation.

• Personal selling is the most commonly used method of promotion.

• In most industrial markets, personal selling comprises the majority of the promotional budget and
is a significant part of overall budget.

• Customers consider salesperson as the company selling product.

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• With the advent of internet technology and web based platforms for interaction with customers,
personal selling has become a method of marketing communication which fosters personalized and
interactive dialogue with customers.

Personal selling

It is a personal communication of information to influence a prospective customer to buy something- a

good, service, or idea that satisfies an individual’s needs.

Types of Personal Selling

Personal selling can be broadly classified into three categories.

• Industrial selling

o Selling to reseller

o Selling to business user

o Institutional selling

o Selling to Government

• Retail selling

• Service selling

Emerging trends in sales management

To be successful in a changing marketing environment it is important that sales managers

understand emerging trends in the following areas:

• Global perspective

Global competition is intensifying Domestic companies who never thought about foreign competitors
suddenly find them in their salesforces to meet foreign competition in their country and improving their
company’s personal selling efforts in other countries. Sales managers selling goods and services in the
global market place face challenges, different requirements for buying, and different styles of negotiation
and so on. Sales managers must also consider opportunities as many global markets are emerging and

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growing rapidly. A company need not be large to sell globally. Small and medium sized organizations can
sell in global niche markets.

• Revolution in Technology

Digital revolution and the management of informational have greatly increased the capalities of

consumers and marketing organizations. Buyers today can get information on products, compare

supplier’s prices and place orders on the internet in a matter of seconds. They can access online a great
amount of information about almost anything. Marketing organizations also have a new set of

capabilities. Companies can collect more information about capabilities. Companies can collect more
information about markets, customer, prospects and competitors by using the internet. They can establish
website and communicate information about the company, its products and services to the needs of

individual customers.

To compete effectively, salespeople and sales managers will have to adopt to the latest technology.
Some of the technological innovations for sales management are portable and desktop computers, mobile
phones, video conferencing and videotape presentations. Technology can make some sales activity

efficient and cost effective.

• Customer Relationship management

Combining relationship marketing with information technology has resulted in customer relationship
management or customer relationship marketing. Interestingly, the concept of relationship marketing

came about earlier by bringing quality, customer service, and marketing together.

Relationship marketing aims at build long term, mutually satisfying relations with key parties-

customers, distributors and suppliers in order to retain their long term preference and business. CRM
enables companies to provide excellent real time customer service by focusing on meeting the individual
needs of each valued customer by the use of CRM software packages.

• Salesforce diversity

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The demographic characteristics of the salesforce are changing and are becoming more varied. For
example, more women are taking up careers in selling and sales management. In addition, today

salespeople are more educated, with college degree and some of them holding postgraduate degrees. Sales
manager will have to manage a salesforce consisting of women, more educated and less educated

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salesperson, as well as senior people. The needs or expectations of the varied salesforce will be different
and consequently the motivational tools will not be the same.

• Team Selling Approach

The practice of team selling is widely followed by most companies in recent years. Team selling
approach is used when a company wants to build a long term mutually beneficial relationship with major
customer, who have high sales and profit potential. It is also used for selling a technically complex product
or service to a prospective customer. The composition of the team includes members from top management,
technical specialist, customer service, inside salesperson and salesperson or manufacturer’s representative.
Team selling requires the joint selling effort of several persons, and hence, designing an effective
compensation plan can be a challenging task.

• Managing multi-channels

Multi channel marketing system occurs when an organization uses two or more marketing channels to
reach one or more customer segments. Major benefits of a multi channel marketing system are:

a. Lower channel cost (ex: selling by phone instead of visits by salesperson to small sales potential
customer)

b. Increased market coverage.

c. Customized selling-selling technically complex products and services by the company’s technical
salesforce.

Multi channels may also lead to conflict and control problems as two or more channels may
compete for the same customer. The successful sales manager will have to effectively manage the
conflicts between channel members by using various techniques like co-operation, exchanging

person, mediation.

• Ethical and Social Issues

Sales managers have social and ethical responsibilities. Sales people face ethical issues such as
bribery, misleading, and high-pressure sales tactics. Giving payment or gift to get an order, misleading the
customer by exaggerating the benefits of a product and using high-pressure tactics of committing wrong
delivery schedules to a customer needing urgent delivery of a raw material are example of unethical

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behavior of salesperson.

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Today sales manager have no choice but to ensure ethical standards from the salesforce otherwise
they may be out of business or even land up in legal problems.

• Sales Professionalism

Today’s top sales people are largely made, not merely born. Selling has increased in complexity,
because composition is more intense, customers are more sophisticated and products and services have
become more technical. Success mostly comes to those salesperson who have a combination of natural
ability and acquired skills. A study on what do buyers like most in a salesperson indicated qualities like
reliability, credibility, professionalism, integrity and product knowledge as most valued. The knowledge,
skills and the right attitudes to meet complex and competitive market conditions of today are required by
the professional salesperson through intensive training and practice. Some of the successful organizations
have their own centers for training and management development. Today’s companies spend a lot of money
each year to train salespeople in the art of selling and to make them professional.

Elementary study of Sales Organization

A sales organization is an organization of individual either working together for the marketing of
products and services, manufactured by an enterprise or for products that are procured by the firm for the
purpose of reselling.

A sales organization defines the duties, roles and the rights and responsibilities of sales people
engaged in selling activities meant for the effective execution of the sales function.

Factors influencing structure

• Product and service related factors

• Organization related factors

• Marketing mix related factors

• External factors

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Organizational principles

A sales manager needs to understand the various organizational principles that help in the smooth
functioning of the organization, supports the work of the team and helps the team to respond to market
opportunities.

• Span of control

Number of subordinate and sales staff under the supervisor of a sales Manager is known as span of
control. When new recruits have to be handled Narrow span of control can be used or else wider span of
control is preferred.

• Centralization and Decentralization

The extent of control authority of the top management decides the level of centralization. Highly

centralized organization-Every decision will be made by the top management. Decentralization helps
organization to be competitive at the respective market level.

• Integration and co-ordination

The organization across departments integrated to serve customer with effective co-ordination.

Types of sales Organization

• Line sales organization

It is the simplest sales organization structure. All managers, from top sales manager to middle level
managers, have line authority. Line authority means people in management positions have formal

authority to direct and control immediate subordinate. Line managers are responsible to achieve target.

Head marketing

Sales Manager

Area sales manager 1 Area sales manager 2 Area sales manager 3 Area sales manager 4

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Salespeople Salespeople Salespeople Salespeople

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Line and Staff organization

In this type of organization structure, a group of specialists are made available to the top sales or

marketing executive. These specialists, called staff are experts in certain support activities such as

marketing research, sales training, and advertising or integrated marketing research, sales training, and
advertising or integrated marketing communication and marketing logistics. Staff manager don’t have any
authority to issue directives to salespeople, who report to line sales managers.

Head marketing

Marketing service manager sales manager Marketing research manager Promotional manager

Area sales manager-1 Area sales manager-2 Area sales manager-3 Area sales manager-4

Sales People Sales People Sales People Sales People

Functional sales organization

In this sales organization, the principle of specialization is fully used. Each staff specialist manager, such
as marketing research manager and promotion manager, has line authority of his/her function over

salespeople. Example, marketing research manager can sales manager can directly issue instructions to all
salespeople through area sales managers to obtain certain market information.

Head Marketing

Marketing service Manager sales manager marketing research manager promotional manager

Area sales manager

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Salespeople

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• Horizontal Organization

This organization structure removes management levels (hierarchy) and also departmental boundaries. The
support functions like strategic planning, human resource, and finance are looked after b a small team of
senior executives. All other people in the organization are the members of cross functional teams, which
perform many core processes like product design, sales and production or operation. These teams also work
with customer teams to solve the customer’s problems.

Advantages are reduction in supervision, unnecessary tasks and costs and substantial improvement in
efficiency and customer responses with enthusiasm.

Research design team operation team

Customer research production

Product /service design quality assurance
Systems engineering

Planning team
Strategic Planning
Accounts, Finance
Human Resource
Chief operation officer
Customer support team customer satisfaction

Service sales and marketing

Training pricing, promotion
Information channels, logistics

Qualities and Responsibilities of sales manager

Qualities
• He should be good communicator, catalyst, and planner
• He should be a prognosticator, and skillful manipulator.

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• He should be an amalgamator, a consolidator, and orchestrator directing efforts of many towards

the achievement of common goal.

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• He should be a successful mentor who understands each individual’s needs, self fulfillment and
economic growth
• He should be an innovator and creator of new ideas and promotion.
• He should be an over achiever rising to the challenge of new forecast each year.
• He should be capable of handling unanticipated difficulties and events.
• He should be an opportunist and a worthy advisor.
• He should be a team-mate and referee.

Responsibilities
• Sales planning and budgeting
• Estimating demand and forecasting of sales.
• Determination of size and structure of the sales organization.
• Recruiting, selecting, and training of sale’s people
• Allocating of salesforce and setting sales quota
• Compensating, motivating and leading the salesforce.
• Analyzing sales volume cost and profit
• Measuring and evaluating salesforce performance.
• Monitoring marketing environment.

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Selling skills and Selling Strategies

Selling skills

These are the sum total of aptitudes and skills such as communication skills, listening skills,
conflict resolution skills, problem solving skills and negotiation skills.

Selling and Business style

The entire customer doesn’t buy the products in the same way. The buying styles vary depending
upon the buyer’s capability to pay, the quantity of purchase, the buyer’s ability to take risk, the bargaining
power of the buyer in the market, the competitive landscape in the industry and many other factors. Research
has shown that the way people respond to an innovation varies in the marketplace.

• Innovators and laggard

People who are adventurous and have high risk capital are the overnight buyers. These buyers are
the innovators in the marketplace, who mostly buy on impulse and consider non-functional reasons for
making a choice. This set of people is followed by another group who accept new products and

innovations after observing the innovators using it. Majority of such people take time to make a buying
decision. There is another set of people who but only after everybody has started using the product. These
laggards start buying a product when another new product is on the doorstep.

In many organizations buying is centralized, whereas in many others buying decisions are

undertaken by a committee or a similar form of set up. Market conditions in terms of the number of
competitors in the market, the prevailing level of competition, the quantity of purchase by the buyer the
switching cost involved in buying from a competitor’s firm, etc, will decide the nature of buying.

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Selling Situations

A typically selling situation explains what kind of customers a salesperson is going to face and what kind
of customers a salesperson is going to face and what kind of sales approach will help him in closing a sale
in that situation.

• The sales Task and Function

The salesperson has to undertake various tasks during the process of selling. We have classified the
different kinds of salespeople in the introductory on the basis of sales responsibility and functions. When a
salesperson gives a sales presentation or makes a sales call he communicates with the customer and
basically performs the communication function. But the customer may have queries, doubts and he wishes
the salesperson is involved in listening function.

By providing information about other existing products of the company and new products that are
likely to come to the market, a salesperson also performs the information dissemination function.

In non standardized markets, where there is no list price involved in buying and selling, the
salesperson needs to negotiate with customers and bargain wherever possible for the benefit of the

organization and thus he is involved in the negotiations and bargaining function.

• Maintenance Selling

Typically, maintenance selling involves the art of servicing the existing accounts, securing

promotional cooperation, counting inventory and taking replenishment orders, and delivering the

products. In the advertising world, these kinds of salespeople are called client servicing executives who
provide service to clients and also take the orders as and when required. There is no question of

prospecting for this kind of salespeople as it is done with the exiting customers. In the IT sector, these
sales people are posted at the client site and are responsible for solving the client’s problems. In high tech
product categories also we find service and maintenance salespeople.

• Developmental selling

Salespeople engaged in developmental selling are called business developmental sales executives

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as they try to contact the potential customers and build business for the firm. They are the real salespeople
who try to do prospecting from the leads either available in the organization or collected by them and then
take the prospect through the whole process of selling to realize a sale.

Selling skills

While it is very difficult to find out a set of characteristics for guaranteed success in selling, hard
work, working smartly in business, ability to set goals, level of maturity, communicative ability, honesty,
integrity, can make a successful salesperson. In some situations these skills can be developed through
training and practice. Selling skills are a set of characteristics that are necessary for a salesperson to posses,
failing which he may not be successful in selling.

The essential skills for successful selling are

Problem solving skills Communication Skills

Selling Skills

Negotiation Skills Listening Skills

Conflict Management

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Selling Process

Pre-sale preparation

Prospecting

Pre-approach before the interview

Approach to the customer

Sales presentation

Handling customer objections

Sales presentation

Sales presentation

There is need for two way communication between the salesperson and the prospect during a
sales presentation. Here, the salesperson presents his products and services before the prospect and makes
effort to create and modify their interest into sales realization for the company. While giving sales

presentations, the salesperson should always try to link the features and attributes of the product with the
customer needs so that the gap or conflict and level of customer objection can be reduced in the

subsequent stages.

• Approaches to sales presentation

➢ Attracting customer objection

➢ Creating interest

➢ Arousing desire and building conviction

• Methods of sales presentation

➢ Canned presentation

➢ Organized presentation

➢ Tailored presentation
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Handling Customer Objections

Customers make objections after or during the presentations. These objections are many times

excuses for not buying. Objections normally pause the sales process because the customer either has not
fully understood the product and its benefits, or is not fully in agreement with the salesperson.

➢ Start with your highest expectations

➢ Avoid conceding first

➢ Be sure the customer understands the value of a concession

➢ Make concessions in small amounts

➢ Admit mistakes and make corrections willingly

➢ Be prepared to withdraw a concession

➢ Avoid split the difference strategy

➢ Do not advertise willingness to concede.

Methods of handling customer objection

• Superior feature method

• Yes… but method
• Reverse English method
• Indirect denial method
• Pass out method
• Comparison method
• Direct denial method
• Another angle method

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Management of sales territory and sales quota

Sales management is defined as a group of present and potential customers assigned to an

individual sales person, a group of sales person, a branch, a dealer, a distributor or a marketing

organization at a given period of time.

Size of sales territory
There are various factors influence the size of a sales territory
Density of the population, population spread within the territory, nature and demand of the

product, mode of physical distribution, the selling process and transport and communication facilities.
If the product is a consumer durable with a longer shelf life, the company may prefer to have a larger
territory compared to smaller territories for the perishable commodities. Territories can be established on
the basis of the nature of the product, namely consumer, industrial and durable and non-durable.
When companies decide to go through intermediaries they prefer to have a larger territory. On the
other hand, industrial buying, where bulk order booking is done by a salesperson, or in situations where a
company also handles the retailers, the size of the territory is kept small.

Designing the Sales territory

Select the basic geographic control units

Decide on the criteria for allocation

Decide on the starting point

Combine control units adjacent to starting point

Compare territories on allocation criteria and conduct workload analysis

Assign salesforce to new territories

Sales Quota

Sales quotas are the targets that salespeople try to achieve within a specific period of time, which
contributes towards achieving the organizational goal regarding sales forecasts.
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Procedure for setting quota

A successful procedure for setting quotas in organizations is a process built on one-to-one discussion
between the sales managers with each salesperson serving a territory. This procedure is the most

democratic way of handling the targets and motivating subordinates to achieve the organizational goal.
They are

• Scheduled planning

• Conferencing with each salesperson

• Arriving at a summarized written quota statement

Types of sales quota

• Sales volume quota

• Sales budget quota

• Sales activity quota

• Combination quota

Methods of setting sales quota

• Quotas based on sales forecasts and Potentials

• Quotas based on forecast

• Quotas based on past sales or experience

• Quotas based on executive judgment

• Quotas based on salesperson judgment

• Quotas based on compensation

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Recruitment and Selection of salesforce

Recruitment

It is the planned process whereby the scientific principles of management is utilized for finding
out and filling up the positions in the right territory with the right people.

The section and recruitment of efficient people is always a competitive advantage for an organization.

Hiring process

There are three stages

• Manpower planning (examine labour turn over, positive equipment analysis, hiring objective,
deciding number of people required for particular time)

• Recruitment stage (identifying best source for generating pool of candidates)

• Selection (screening, interview)

Planning for recruitment

✓ Strategic position analysis

✓ Turnover

✓ Job Analysis

✓ Job Qualification and Job Description

Salesforce Recruitment

Recruitment forms the first stage in the process of hiring a salesforce and is followed by selection
and ends with placement and socialization. The purpose of recruitment is to locate the sources of

manpower to meet the job recruitments and the man specifications.

Sources of recruitment

An important decision to be made at this stage is regarding the source of recruitment. The sources
of recruitment are divided into two types

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Internal sources of Recruitment

➢ Lateral and upward moves

➢ Interns and cooperative students

➢ Employee referral programmes

External sources of recruitment

➢ Other industry sources

➢ Educational institutions and campus recruitments

➢ Advertising

➢ Employment agencies

➢ Walk-ins

➢ Networking

➢ Web sources

Selection of a sales person

Selection is the process of making a ‘hire’ or ‘no hire’ decision regarding each applicant for a job. The sales
manager obtains the database mechanism that determines overall quality of the human resources in an
organization.

Selection procedure

➢ Inviting a blank application

➢ Personal interviews

➢ Reference checks

➢ Physical examinations

➢ Intelligence

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➢ Personality

➢ Aptitude and skills

➢ Determination of terms of service

➢ Appointment

➢ Initial orientation

Training the salesforce

Sales training is a process of providing the salesforce with specific skills for performing their task
better and helping and helping them to correct deficiencies in their sales performance

When a new product is introduced into the market, the market situation undergoes a change with
the entry of a new competitor or a new technology. In this case, the new product either moves across the
life cycle or salespeople are asked to perform the job in a new way. The salesforce needs to be trained to
meet these new kinds of situation. Training provides the necessary skill to the salespeople to perform a job
better and correct any lacunae in the salesforce while executing their job responsibilities.

The training process

A sales manager has to design a training programme that will help in improving the skill and
efficiency levels of the salesforce. For the purpose of the optimum benefit to the organization, the sales
training programme should be designed by following a scientifically planned and designed process. The
training process consists of three phases namely, the training need assessment and development, conduct
of training programme, and the evaluation stage.

Training need assessment

Design and conduct of a training programme

Evaluation of a training programme

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Training need assessment

Organizational level analysis

Task level analysis

Individual level analysis

Designing and conduct phase

• Location

• Job instruction training

• Presentation options

Types of training

➢ Cross-functional training

➢ Team training

➢ Creativity training

➢ Literacy training

Evaluation Phase

This is last stage in the training process where the effectiveness of the training programme is
assessed. The effectiveness of a training programme is measured either in monetary or non-monetary terms.
The criterion by which the assessment is done reflects the needs for which the programme was designed.
For example, a training programme is designed to improve selling skills and can be measured by analyzing
the increase in the all conversion ratio of a salesperson. The training programme is also designed to increase
the sales performance of salesperson in the territory where they are working.

Training Methods

• Structure the lecture

• Reinforce the message

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• Aid concentration

• Material used for the lecture

• Make memorable for the participants

• Deliver with dynamism

• Use questions

• Visual support

• Participative

• Conferences

• Seminars

• Discussions

• Role play

• Case study

• Work shop

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Module- 3

Salesforce motivation and compensation

Nature of motivation

• The meaning of the word motivation is to move or activate. Motivation is an internal feeling and
an energetic force within salespeople that drives them to behave in a certain way. It produces goal-
directed action harnesses human energy towards the goals of the sales organization.

• The higher is the level of inducement, the higher is the likelihood of an individual contributing
the organization.

• Motivation has a system orientation, which means that the goal of the individual is shaped by the
forces within the individual and its interaction with the surrounding environment.

• If goal-directed action always leads to a certain rewards, the individual is likely to repeat the same
action again and again. But if the goal-directed action does not lead to any expected reward the
individual is less likely to pursue this action with similar intensity.

• Motivation is complete process in which needs get satisfied and generated newer and modified
needs. Motives are hypothetical constructs,, which Can be observed in some situations. Many times,
one can find out the reasons why salespeople work overtime. The reasons may be either monetary
benefits or observable financial rewards, and it may also be the intrinsic motivation that guides the
individual for over commitment.

Importance of sales motivation

• Sales organization is made of human beings working at different levels and every organization
needs people in order to function.

• Employees in organization posses a huge amount of information based on the experience about
structures and processes of the sales organization and market.

• The success of the sales organization depends on the ability and the style of functioning of the
sales manager to motivate the sales people to achieve organizational goals.

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• The nature of the job itself is a strong source of demotivation and the sales manager has to keep
salespeople continuously motivated for achieving organizational goals.

• Efficient salespeople posses good knowledge about their job and can sell goods and services to
the satisfaction of the customers.

Process of Motivation

Motive

Behavior

Goal

Factors in the Motivation

• Changes in marketing environment

• Conflicting company objectives

• Unique nature of the sales job

• Separate motivational package

Compensation

It is the financial and non-financial method of rewards to the salesperson .

Financial rewards

• These constitute the current spendable income, future income, profit sharing, retirement, etc.

Non-Financial benefits

• There are rewards that do not directly involve money. These include promotions, recognition,
programmes, personal growth and development, security, sales contest, and expense accounts.

Types of compensation plan

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• Financial Compensation

– Straight Salary plan

– Straight commission plan

– Bonus and Incentives

– Salary plus incentive plan ( combination plan)

– Drawing account and Commission plan

– Allied method

• Non-Financial Compensation

– Promotions

– Recognition programmes

– Fringe benefits

– Expense Accounts

– Perks

– Sales Contests

Evaluation of sales force by performance appraisal process

Deciding on the criteria for measuring performance

Deciding on the conduct of the performance appraisal

Deciding on evaluation of individuals and teams

Comparisons of actual performance with standards

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Deciding on the frequency of the performance with standards

Deciding on the frequency of performance appraisal

The external variables and their influence

Deciding on the criteria for measuring performance

• Relative and absolute judgment

• Trait-based

• Outcome based

• Behavior based

• Performance Rating

• Force Choice Scales

• Behavioral Observation Scales

• Call reports

• Silent call monitoring scores

• Activity Reports

• Combinational methods

Deciding on the conduct of the performance appraisal

• Biases

• Base rate information

• Availability Heuristics

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• Anchoring

• Hindsight bias

• Regression effects

• Fundamental attribution error

• Deciding on evaluation of individual and teams

• Comparison of actual performance with standards

• Deciding on the frequency of the performance appraisal

• The external variables and their influences

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Part – B

Module-5

Retail Management

Retailing consists of activities involved in selling goods and services to ultimate consumers for
personal consumption.

Retailing is a set of business activities that add value to the products and services sold to

consumers for their family or personal use.

Retail management

Retail management is the process of understanding the environment especially customer and

competition, developing and implementing effective strategies. Retail management mainly involves

merchandise management and store management.

Characteristics of Retailing

• Average amount of sales transaction is much less than manufacturer, so there is need for tightly
controlling the costs, maximizing the number of customers, emphasizing more on special

promotion, etc.

• Survey shows that large number of buyers makes impulse purchasing, this behavior indicates the
value of in store displays the ability to forecast is difficult.

• All retailers offer assortment of products, but they also specialize in the assortment they offer.

• The bulk items shipped by manufacturer are offered in smaller quantities tailored to individual
customers.

• Holding inventory-products are available at the disposal of consumers so they can keep small
inventory at home.

• There is direct end user interaction and retailing increases the value of products and services.

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• Location is critical factor in retailing.

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Retail industry in India

The retail industry is the largest industry accounting for over 10%. It is the second largest

employer after agriculture. There are 12mm retail outlets in India. Retailing in India is gradually inching
its way toward becoming next booming Industry.

The Indian population is witnessing a significant change in its demographics. A large working
population with median age of 24 years, nuclear families in urban areas along with increasing working
population and emerging opportunities in services sector are going to be the key driver of the organized
retail sector in India.

The revamping exercise of Indian retail industry goes with departmental stores, hypermarket,
supermarket, and specialty store. Western style malls have began appearing in the metros and second ring
cities alike introducing the Indian consumer to a shopping experience like never before.

India has been ranked 2nd in a Global Retail Development Index 30 countries. It has estimated
India’s total retail amount at US 202.6 billion dollar which is expected to grow at a compounded 30% over
next 5 years and the revenues are expected to triple from current US 7. 7 billion dollar to US 24 billion
dollar.

The retail Industry is divided into organized and unorganized sector. Organizational retailing refers
to trading activities undertaken by licensed retailers i.e. those who are registered for sales tax, income tax,
etc. unorganized on the other hand, refers to the traditional format of low cost retailing.

Role of retailing trends in Retailing

The retail industry is changing rapidly due to various reasons

1. Spatial convenience

Number of working women has fueled an intense demand for convenience. The quest for
convenience on the part of consumers shown by

• Frantic growth of convenience store fueled by the entry of petroleum marketers AM/PM
store.

• Exploding popularity of online shopping operators.

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• Diversification of vending machine into food-clothing and videotapes

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2. Increased power of retailer

At one time, colgate dominated retailers. Now the retailers tend to dominate them. The
reasons for this reversal are many. Retailers have many new products from which to choose when
deciding what to stock on their selves. Further the IT has diffused throughout retailing to such an
extent that virtually all major retailer can capture item-by-item data via scanning devices at that
electronic point of sale terminal. This knowledge of information has permitted retailer to calculate
the (DPP) Direct Portfolio of Individual Items, track what moves and what does not move well in
their stores. So the manufacturers struggled to get space in the shelves of retailers. They offer
pricing concession, slotting allowance etc., to promote products.

3. Growing Diversity of Retail formats

4. Consumers can now purchase same merchandise from wide variety of retailers, they are

department store, specialty store, convenience store, category killer, Mass merchandiser,

Hypermarket.

5. Traditional Kirana stores, small independent stores across product categories are very common
retail format in India. Particularly in small townships.

6. E-Commerce: the amount of retail business conducted on the Internet is growing every year.
Companies like Amazon.com which helped pioneer the retail E-commerce.

7. Department store with varied merchandising operations.

8. Franchise: territory rights are also sold to franchisees. Various distribution and other services are
provided by contract to franchisees for fee. Ex, McDonalds, Blockbuster video.

9. Warehouse club (wholesale club): appeal is to price conscious shopper. Size is 60000 sq. ft. or
more. Product selection is limited and products are usually sale in bulk size.

10. Mail order catalog: non-store selling through the use of literature sent to potential customer.
Usually has a central distribution centre for receiving and shipping direct to the customer.

11. Specialty discounter-Category Killer:

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Offers merchandise in one line (e.g. sporting goods, office supplies, children merchandise) with
great depth of product selection at discounted prices. Store usually range in size from 50,000 to
75,000 square feet.

Emergence of organized retailing

Organized retailing in India represents fraction of total retail market. In 2001, organized retail trade
in India was worth Rs.11, 228. 7 billion. The modern retail formats are showing robust growth as several
retail chains have established a base in metropolitan cities, especially in south India, and are
spreading over India at a rapid pace. However, space and rentals are providing to be the biggest

constraints to the development of large formats in metropolitan cities since retailers are aiming at prime
locations.

In urban India, families are experiencing growth in income but dearth of time. More and more
women are taking up corporate jobs, which is adding to the family’s income and leading to better

lifestyles. Rising incomes has led to an increased demand for better quality products while lack of time has
led to a demand for better quality products while lack of time has led to a demand for convenience and
services.

Rural India continuous to be serviced by small retail outlets. Only 3.6 million outlets cater to more
than 700 million inhabitants of rural India. Here, provision stores, ration shops are the most popular vehicles
of retailing. Apart from this, there are periodic or temporary markets, such as haats, peeth and mealas, that
come up at the same location at regular time intervals.

The Mckinsy report predicts that FDI will help the retail business to grow to US dollar 460-470
billion by 2010. There has been a strong resistance to FDI in retailing from small traders who fear that
foreign companies would take away their business, lead to the closure of many small trading businesses,
and result in large scale unemployment. Therefore, Govt has discouraged FDI in retail sector.

Retail location and Retail layout

Retail Location

Location is the most important ingredient for any business that relies on customers. It is also one
of the most difficult to plan for completely. Location decisions can be complex, costs can be quite high,
there is often little flexible once a location has been chosen and the attribute of location have a strong impact
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on retail overall strategy.

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Importance of location decision

Location is a major cost factor because it:

• Involves large capital investment

• Affects transportation cost

• Affects human resource

Location is major revenue factor because it

• Affects the amount of customer traffic

• Affect the volume of business

Levels of location decision and its determining factors

1. Selection of a city

Factors to be considered for selection of city

• Size of the city’s trading area: a city’s trading is the geographic region from which
customers come to the city for shopping. A city’s trading area would comprise it suburbs
as well as neighboring cities and towns. Cities like Mumbai and Delhi have a large trading
are as they draw customers from far off cities and towns.

• High growth in population in the trading area can also increase the retail potential.

• Total purchasing power and its distribution: Cities with a large population of affluent
and upper middle class customers can be a attractive location for stores selling high
priced purchasing power and its distribution among a large base of middle class is

contribution to a retailing boom around major cities in India.

• Total retail trade potential for different lines of trade: A city may become specialize in
certain lines of trade.

• The retailer also considers, number, size, quality of completion before selecting a city.

• Development cost.

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2. Selection of an Area or Types of location within a city

Evaluation of the following factors required

• Customer attraction power of a shopping district or a particular store (commercial street,

Bangalore)

• Product lines carried by other stores, number of stores in the area.

• Availability of access routes-There should not be traffic jam and congestion

• Nature of zoning regulations: Retailers should examine the plans of zoning commissions
and municipal corporations regarding the development of shopping centers, residential
areas, flyovers.

• Direction in which the city is spread. For ex. Mumbai’s suburbs abd Navi Mumbai are
growing at a fast rate.

3. Section of a specific site

• Adequacy and potential of traffic passing the site. The volume of vehicular traffic and
pedestrian shoppers who pass by the specific site should be assessed since they represent
the potential customers.

• Ability of the site to intercept the traffic following past the site. The vehicular or

pedestrian traffic moving past the site would be attracted only if it represents the segment
the store is targeting.

• Complementary nature of adjacent stores: A store selling school uniforms would have
greater potential if adjacent stores sell school books, stationary etc.

Types of Location

1. Free standing location: where there is no other retail outlets in the vicinity of the store and
therefore depend on its own pulling power and promotion. Dhabas on highways.

2. Neighborhood stores: located in residential neighborhoods and serve a small locality. They sell
convenience products like groceries.

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3. Highway stores: located along highways or at the intersections of two highways and attract

customers passing through these highways. Fast food restaurants, dhabas with good parking
facility.

4. Business associated location: these are locations where a group of retail outlets offering a variety
of merchandise work together work together to attract customers to their retail area but also compete
against each other for the same customers.

It can further classified into two:

1. Unplanned business districts

i. Downtown or central business district

ii. A CBD usually have trade area that varies according to the size of the city or town. CBDs
in major metro like Delhi and Mumbai we find two or more CBD’s each serving different
segments. Commercial street, Bangalore, Chikpet, Bangalore.

iii. Secondary business District: They are composed of an unplanned cluster of stores often
located on a major intersection of a city. Koramangala in Bangalore.

iv. Neighborhood Business District: Stores located in neighborhood business district form a
small cluster and serve neighborhood trading area. (cities and towns)

v. Suburban business district: stores located on the town’s periphery have lower rents, often
rely on traffic generated by the downtown and may sometimes offer parking facilities.

2. Planned shopping centers

i. Regional shopping centre malls

Regional shopping centers or malls are the largest planned shopping centered: often they
are anchored by two or more major department stores, have enclosed malls, serve a large
trading area and have high rents.(spencer Plaza in Chennai)

ii. Neighborhood / community shopping centre

Usually has a balanced mix of store including a few grocery stores a chemist, a variety

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store and a few other sotres.

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iii. Periodic Markets:

Another peculiar types of market found in India is the periodic market, which is

established at particular places on a particular day in a week. Most of these markets operate
in evening hours. These markets are mostly associated with the name of day it is held on.

Layout

Layout- the logical arrangement of the physical facilities of a business that contributes to efficient
operations, increased productivity and higher sales.

Study: Look and feel of employees work spaces is third most important consideration (after salary and
benefits) when deciding whether or not to accept or to quite a job.

Layout: External Factors

• Size must be adequate to accommodate business needs

• Appearance must create the proper image or personality for the business in the customer’s eyes.

• Entrances must invite customers to come in.

• Create effective window displays and change them often: they can be powerful sales tools

• Must comply with Americans with Disabilities Act (ADA)

• Pay attention to the business sign, the most direct method of reaching potential customers.

Three retail Layout Patterns

• Grid

o Rectangular with parallel aisles, formal, controls traffic flow, uses selling space
efficiently.

o Supermarkets and self-service discount stores.

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• Free-form

o Free-flowing, informal, creates “friendly” environment, flexible

o Small specialty shops

• Boutique

o Divides store into a series of individual shopping areas, each with its own theme,
unique shopping environment.

o Small department stores.

Layout guidelines

• Know your customer’s buying habits and plan your layout accordingly.

• Display merchandise as attractively as your budget will allow

• Display complementary items together

• Recognize the value of floor space: never waste valuable selling space with non-selling
functions.

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Module-6

Retail Market Segmentation

Market and Market Segmentation

A market is the group of potential customers with similar needs who are willing to exchange
something of value with sellers.

Market Segmentation

It is the process of dividing the heterogeneous total market into small groups of customers who
share a similar set of wants.

Marketer Approaches

The marketer has the option of either approaching the entire customers with a uniform marketing
approach or adopting a differential approach for different set of customers.

The proliferation of distribution channels and retail formats is increasing competition and forcing
retailers to focus their selling efforts on select group of customers. Marketers usually identify niches by
dividing a segment into sub segments, those with children and those without children. Segmentation helps
the retailer to customize the product or service and tailor its promotional campaign.

Benefits of Market Segmentation

➢ Development of marketing mix: It helps retailers in developing a customized marketing

programme in terms of product offering, pricing strategy and promotional programme.

➢ Store location Decision: The retailer outlets can be located where there is a concentration of the
target people.

➢ Understand consumer behavior: It helps a retailer to gain insight into why the target group acts
the way it does.

➢ Merchandising Decisions: Merchandising is essentially the skill that decides which item will on
the shelves. An understanding of the target is essential.

➢ Promotional campaign

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➢ Positioning: the shoppers stop and cross roads have targeted the upper income class while

Westside has targeted the larger base of middle and upper middle class.

Criteria for Effective Market Segmentation

For market segmentation to be effective, the identified segments may satisfy the following

➢ Homogenous within- The segments into which the market is divided should be homogenous
within. The customers in a segment should have similar needs and wants and follow similar
buying behavior as much as possible so that their needs can be addressed through a uniform
marketing programmer.

➢ Heterogeneous within: The customers in different segments should be as different as

possible with respect to their needs and buying behavior. This will help a retailer to focus its
effort on its identified target segments.

➢ Substantial: The market segment that a retailer plans to target must be large enough and
have enough discretionary income to help the retailers to be profitable. Stores like Bombay
stores and lifestyle, which target higher income groups should ensure that there is a

significantly large population of such high income groups should ensure that there is a
significantly large population of such high income groups in their trade area before locating
a store. Respect to their needs.

➢ Actionable: The segmenting dimensions should be useful for identifying customers and

deciding on Marketing Mix variables

➢ Accessible: The target segment must be reachable so as to serve them effectively. A mall in
a city suburb, like Korammangala in Bangalore must be accessible to its target population.

➢ Measurable: The size, purchasing power and the characteristics of the market segment must
be measurable. The retailer needs to determine the size of the target segment and estimate its
purchasing power to develop an effective marketing programme.

Dimensions of Segmentation

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In segmenting the total market, the retailer must first decide which combination of segmenting dimension
to use. A few dimensions are demographic; others are geographic, psycho graphical and behavioral.

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➢ Geographic Segmentation

Market is divided into geographical units such as nations, regions countries, cities or

neighborhoods.

Retailers in India have often segmented markets by cities and focused on metro and large
cities.

Subiksha-Chennai at short distances, serving the nearby colonies.

➢ Demographic Segmentation

Market is divided into groups based on demographic variables such as age, religion, gender,
income, family size, social class, occupation, educational level and marital status.

Retailer segment the market on variable which reflect interest, need and ability of the

customer.

In India most market research agencies prefer to segment on the basis of socio economic class
rather than on income basis.

➢ Psychographic Segmentation

Divides buyers into different groups based on their lifestyle, personality, or values.

Life style is a distinct mode of living. It gets reflected by various activities performed (work,
social, and hobbies) interest (family, job, anf fashion) and opinion (politics, education, and
social issues).

Indian coffee houses provide good quality coffee at a very modest price. It targets customers
above 40 years interested in discussing politics, intellectual issues or business matters while
sipping coffee.

On the other hand, café coffee Day target youngsters from high income families looking
for fun, with their up-market décor and attractive layout.

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➢ Behavioral Segmentation

Customers are divided into groups based on the way they respond to, use or know a
product. Products and services are purchased for a variety of reasons. Marketers can
compile information on behavioral variables such as occasions, benefits, user status,

usage rate, etc.

Customer Profile

After deciding on target segments, a retailer must develop detailed profiles of customers in the identified
target segments. Market research may be necessary to develop profile.

• Customer Demographic

Data about the target segment may be collected on demographic characteristics such as age, sex, income
levels, educational background and professional background.

• Family Decision Making

In such situations, different family members can play different roles as initiators, influencers, deciders,
buyers, consumers and evaluators

• Psychographic

The retailer has to profile consumer’s lifestyle and values. The various activities pursued by target

segment such as sports, adventure, worship, etc, as well as their interest, hobbies, opinions, and values
may be profiled to get a better understanding of the target segment.

The customer of café coffee day are youngsters who like to move around in groups, live a fast active life
and entertain friends.

• Purchasing Behavior of the target population

The retailer should also develop a detailed understanding of the purchasing behavior of the selected target
segment. It should compile information regarding purchase motivation the cultural influences on

purchasing behavior.

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• Purchase motivation

The decision to buy or not to buy often comes from what one anticipates as the consequences of one’s
decision. The retailer should understand the purchase motivation of the target segment. For example, a
young man may buy a fashionable brand of shirt from shoppers stop to announce to his colleagues and
friends that has come of age.

• Source of purchase

Customer’s choice of shopping locations depends on time utility and place utility. Time utility refers to
availability of products and services at convenient hours or in case of urgent requirements. Place utility
refers to the benefits of shopping at particular shopping locations due to availability of wide range

products, low prices.

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Module-7

Product and Merchandise Management

Product and merchandise management is the key activity in the management of retail business. It
has immense cost and profit implication. A related issue is the management of retail brands and the decision
to offer retailers private labels along with or instead of national and local brands.

While product management deals with issues related to the kind of products sold by the retailer,
merchandise management concerns itself with the selection of the right quantity of the products and
ensuring its availability at the right place and time. Merchandise plan is drawn in keep in mind that
influences shopping behavior and the strategic and cost concern of the retailer.

Role of product in retail business

Products are critical to a retail firm’s existence and profitability. Product, in retailing context, is
defined as anything sold and purchased in a retail transaction. Hence, it could constitute goods, services,
places, and events, etc.

Identification of the products to be sold forms the core component of the retailer’s business plan.
Product management by the retail firm is critical to the satisfaction of consumer needs. Selection of the
product is designed to meet some unmet needs of the customer. For example every shopping centre, whether
planned or unplanned, has at least one eating outlet, a grocery shop and a chemist shop.

Product management is also an implementation of the segmentation strategy of the retailer who
attempts to attract the target segment the product profile and specific pricing strategies.

The product selection process

It involves a review of the performance of the existing product range. These relates to the type of
products to be retailed, life cycle of the products, trends in the product category and its strategic fit with the
retail business. Product range review assists retailers to go in for possible decision such as

i. Deletion of the product

ii. Increase in variety and range

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iii. Identification of new suppliers

iv. Additions to product features

v. Review and revision of promotional campaign.

Merchandise Management

The primary function of retailing is to sell merchandise. One of the most strategic aspects of the
retail business is to decide the merchandise mix and quantity to be purchased.

Merchandise management is the process by which a retailer attempts to offer the right quantity of
the right place and time while meeting the retail firm’s financial goals. Merchandise management is the
analysis, planning, procurement, handling, and control of the merchandise investment of a retail
operation.

Component of merchandise management

➢ Analysis

➢ Planning control

➢ Acquisition

➢ Handling

The merchandise budget plan

The four important components of the merchandise budget plan:

i. Projected sales

Expected or projected rupees volume of sales for each merchandise or department. Sales
forecasting helps the management in a forecast of expected sales. The product category life
cycle describes the primary form of sales pattern over a time. The understanding of the life
cycle while developing sales forecast. The special categories of product life cycle are style,
fashion, fad, staple, and seasonal.

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ii. Inventory plan

Inventory plan provides information regarding sales velocity, inventory available, ordered
quantity, inventory turnover, sales forecast and quantity of order for specific SKU (stock
keeping units). It helps to devise the stock support levels for a specific sales period.

iii. Estimated reduction

Retail reductions are classified into three

a. Markdowns (reduction in the original list price to encourage sale of the product)

b. Discounts (reduction in the original retail price given to special customers)

c. Shortages are reduction in the total value of inventory that results from damages to

merchandise

iv. Estimated purchase level

At this stage a retailer is supposed to devise an actual budget for planned purchase. Here a
retailer or planner use information compiled at the initial stages of merchandise budget

planning.

Retailing Channel

A retailer can depend on one supplier or a combination of suppliers. There are number of alternatives
that a retailer might consider as a suitable source of supply:

i. Manufacturers and Primary producers

This category sells cars, two wheelers, gasoline and other products and consumer durable
from company owned stores. Large retailers regularly deal directly with a product

manufacturer. Manufacturers will normally have sales office or a showroom either attached to
a production unit or in a location convenient for retail customers.

ii. Wholesalers

Wholesalers accept small orders from retailers. They actually take ownership of the goods
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between the producers and the retailer. They supply the retailers from their own stocks rather

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than from the producers stock, acting as agents. They usually make attractive profits from the
merchandise they selled to the retailers.

iii. Agents

Provide purchasing and delivering facility to the retailers against negotiated commissions on
the percentage to the total value of the goods purchased. This is very common source to retailers
in the semi-urban areas or in and around major trading centers. Retailers depend on agents for
weekly or fortnightly purchases from the major trading centers.

iv. Other Retailers

This category comprises who operate a larger scale. They cater to the needs of the immediate
consumers along with the small retailers form contiguous areas, running their stores in

interior localities of urban areas or in the rural areas.

v. Government and semi-Government source

Public distribution system acquires its entire stock of goods from the central government of
India through various official state bodies such as the Food Corporation of India, Mother dairy
and safal.

Criteria for the selection of suppliers

Retailers regularly confront with the issue of locating a new supplier for the existing merchandise or
identifying a new supplier for fresh merchandise introduced.

i. Product range and quality

Retailers will asses the product range available with the supplier and the standard maintained
while manufacturing or delivering. Retailers will consider the following parameters to judge
the standing of a particular supplier. Technically capability, design experts, quality

benchmarks, samples and nil-effect delivery.

ii. Price

Retailers will always have relative assessment of the different suppliers while deciding the

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At the same time, retailers as per the norms prevailing in their industry look
purchase.

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forward to credit terms, payment options, penalties, discounts, and price levels and price
points.

iii. Delivery

In order to avoid sales loss a retailers is generally interested in assessment of suppliers

capacity to deliver ordered goods in time and as per specification. Retailers also evaluate the
performance of the suppliers or gather information on these parameters to ascertain delivery
capacity, such as minimum order requirements, lead times, workforce ability, and response and
ability to collaborate on consumer-led response initiative.

iv. Service

This encompasses all those facilities and support extended by the supplier to add value to the
goods, assistance in the sales of goods. It includes pre and post sales service by the supplier.
Retailers will be interested to assess the working of the supplier on parameter such as

innovation, speed of new product or variant introduction, sampling service, marketing

support (advertising and promotion) and handling queries and complaints.

Product Movement or Retail Movement

Retail logistics is the organized process or managing the flow of merchandise from the source of
supply to the consumer from the producer/ manufacturer, wholesaler/intermediary through to the

warehouse, transport to the retail units the merchandise is sold and delivered.

The retail logistics system will include the following:

➢ Physical movement of goods

➢ Holding of those goods at stock keeping units

➢ Holding of stock in sufficient quantities to meet the demand

➢ Management and administration of the distribution system

Importance of information in the supply chain

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The logistics system ensures that all the activities of SCM are carried out on logical sequence on
a specific timetable.

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➢ The cost structure in retail logistics

Everyone in the organization have to consider the components of distribution right from the
manufacturer through the intermediaries’ upto the time goods are sold through the retail outlet.

➢ Storing and transmitting of information

Data warehouse:

When customers make purchase at the retail outlet, all the data obtained at the point of sale is put
into a huge database known as a data warehouse. This can be used for developing and replenishing
merchandise management.

Electronic data Interchange:

It is the computer exchange of business documents from retailer to vendor. Many retailers

requires vendor to make a notification of deliveries before they actually take place. The retailer requires
vendor to make a notification of deliveries before they actually take place. The retailer’s computer

receivers an Advanced shipping Notice, from the supplier in advance of shipping. This will inform the
retailer what to expect in the shipment and if accurate, the retailer can do away with procedure of opening
and checking the merchandise.

Retail Pricing

Setting the right price will result in increased revenue to the retail firm. The prime objective of retail
pricing is to achieve profitability which is influenced by two factors. They are profit margin of the

offering and cost of merchandising.

Factors influencing pricing

Porters model can help to understand the influences of Retail Pricing

1. Customer

Customer’s price sensitivity is influenced by many factors. For ex: café coffee day offer the coffee
at the same price of Rs.35 (minimum) in all its branches of urban and semi urban areas, though it
is a general assumption that semi urban customers wont go for highest prices. But in order to

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maintain, its positioning strategy, coffee day maintained the same price and attracting its target
customers through its ambience.

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2. Suppliers

In order to maintain the image of the brand and achieve the goal of the firm, sometimes the
manufacturer may arise when the manufacturers decide to introduce a new model and that

hampers the movement of retailer’s old stock. Reputed retailer’s have more bargaining power
when they buy bulk items from the manufacturer. Also sometimes retailers seek, for price

guaranteed i.e. if the prices of sold items to retailer go down.

3. Competitor

It affects the freedom to fix price. The range varies from being perfect to monopoly. Retailers
generally avoid price based strategy because it may end up in price war.

4. Government

There are legal issues relating to price discrimination. The retailer can charge different price to
different customer only when the distance is the justifying factor.

Vertical price fixing: the retailer to set price at manufacturer suggested price.

Horizontal agreement: agreement between retailer competitors

Predatory pricing: this pricing is considered as illegal as it intends to drive away the competition.

Retail pricing strategy

i. Every Day Low Pricing (EDLP)

Everyday low pricing is popularized by Wal Mart, Home department. In India, this strategy is
followed by Big Bazar. But the bulk volume is necessary to negotiate with the manufacturer
for price concession so that it can be offered at reduced price to the customer. Low prices are
stable and not subject to one time sale. The strategy is that it continues to offer products below
MRP.

Advantages: Less reliance on price reduction to change, Reduced advertisement, informed

customer service, better inventory management.

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ii. High-Low Pricing

Prices that are sometimes above their competitors EDLP. It uses ad to promote frequent sales.
Also use ‘sale’ to respond increased competition.

Advantages: Some merchandise can be used to target different segments; Enthusiasm is

created among customers (impulse purchase), image of quality is created (high price-no

compromise on quality); EDLP is difficult to implement, so it has advantage over that.

iii. Loss Leader Pricing:

Fast moving products offered at low price as to attract buyers and to persuade them to buy
other products also.

iv. Skimming

Sets relatively high price for a product or service at first and then lower price over time.
Effective only when the firm is facing inelastic demand.

v. Penetration pricing

Setting a relatively low initial entry price so as to increase market share. The retailer has to be
very careful with this strategy as it may establish long term price expectation and that makes it
difficult to eventually raise prices. The solution is to set the initial price at the long term price
but include an initial discount coupon.

vi. Price lining

It refers to the offering of merchandise at a number of specific but pre-determined prices.

Prices may be held constant over a period of time.

vii. Psychological pricing

It intended to have special appeal to customers

a. Prestige pricing: High prices to convey distinct and exclusive image for the product.
Charging high price for a product where it is judged this in itself this in itself give it prestige.

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b. Reference pricing: It uses consumer’s frame of reference that is established through

previous experience of purchasing. Eg: sports items.

c. Traditional pricing: Ti uses historical/long standing prices (sports products)

d. Odd-Even pricing: eg: Rs.9.95 to denote lower price or a “good deal” Rs.10 imply high
quality.

e. Multiple unit pricings: Encourage additional sales and increase profits. Gross margin that
is sacrificed in unit sales is more than offset by the savings that occur from reduced selling
and handling expenses.

f. Bundles pricing: Practice of offering two or more different products at one price. Used to
increase both unit and rupee sales by brining traffic in to the stop.

g. Pre-emptive pricing: Setting low prices in order to encourage or deter potential new
entrants.

h. Extinction pricing: has overall objective of eliminating competition and involves setting
very low prices in the short term in order to undercut competition.

Retail promotion

Retail promotion is broadly defined as all communication that persuades, and or reminds the target
market or other prospective segment about marketing mix of the retail firm. The retailer seeks to

communicate with customers to achieve a number of objectives.

a. Increasing store traffic by encouraging new shoppers to visit store.

b. Increasing the share of wallet for all shoppers

c. Increasing the sale of a given product category

➢ Retail advertising

The AMA defines Advertising as any paid form of non personal presentation of ideas, goods, services
by an identified sponsor. Advertising is recognized as an indispensable tool of promotion. Based on the

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conceptualization, advertising can be understood as follows:

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1. Paid form of communication

2. Non personal presentation of message (face to face direct contact with customer)

3. Issued by an identified sponsor.

• Objectives of advertising

✓ To promote new product, to support personal selling programme

✓ To reach out to people not accessible to salesperson.

✓ To enter new market, to manage competition.

✓ To enhance goodwill of the retail firm and to improve dealer relation

✓ To warn the public against imitation of the retailers product.

Sales promotion

Sales promotion refers to communication strategies designed to act as a direct inducement, an

added value or incentive for the product to customers.

Sales promotion provides extensive tactical measures to marketers to manage internal or external
impediments to sales or profits. Internal impediment (unsold stock); External impediment (competition)

Objective of sales promotion

➢ Assist the other communication activities undertaken by the store.

➢ To encourage new triers by offering free trail

➢ To encourage repeat purchase

Supplier originated sales promotions

Sales promotion can originate from two sources- suppliers or retail store itself.

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In-store activities

➢ Price-off pack

The product is sold at reduced price from its normal selling price. This is in the form of discount.

➢ Premiums:

These are in the form of small gifts that a customer gets on purchasing a product. Its attached to the
pack or inside the pack.

➢ Self-liquidating premiums

Customer has to write to the suppliers for the gifts, enclosing empty packets, bottle crowns, etc of the
product plus some money. Basically the customer provides some proof of the purchase. For ex: Rin gift
hunt, Rs. 5 lacks worth of educational gift to children (requires customer has to fill the form and submit
to the nearby store)

➢ Personality promotions

Many companies use show- business personalities to endorse their products. The suppliers tend to
associate the charisma associated with these personalities. For ex: T.N Shesan the former election
commissioner was used by safal vegetables since he did not appear for any other product and he had an
honest and upright image.

➢ Co-operative promotions

Two or more products share and fund in joint store promotion. Shaving foam and after shave lotion.

Sampling: Free sample, and sometimes the demonstrator may also be present to explain the product.
The product may be entirely new and customers may have little knowledge about them.

➢ Multipack:

Two or more packs are attached and sold for a better and attractive price than the price of the items
singly. Maggi noodles packet free with the purchase of four or one gets three soaps at the price of two.

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➢ Buy one get one free

The customer can get two units of the product at the price of one.

Steps in Retail promotion

1. Set goals: it should be determined by the particular need of a specific promotion scheme and
contextual factors like time of the year-Diwali, Christmas, Wedding season.

2. Analyze benefits

3. Design the offer- the sales promotion can be designed around one or combination of the

following:

Premium or value adding/experience (dinner with celebrity)/discount involves price reduction.

4. Identifying the source of sales promotion (inserts, flyer distribution, displays, joint promotions,
events)

5. Designing the response and follow up

Publicity

Publicity means any communication that fosters a favorable image for the retailer among its public.
It can be personal or non personal, paid or non-paid and sponsor controlled or non- sponsor controlled.
Publicity is a non personal form of promotion where messages are transmitted through mass media, the
time or space provided by the media is not paid for, and there is no identified commercial sponsor.

Types of publicity

a. Planned publicity

A retailer outlines its activities in advance, strives to have media report on them, and anticipated
that certain events will result in media coverage. Community services like donations and social
sales and introduction of new goods or services of the activities which lead to media coverage.

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b. Unexpected publicity

It takes place when the media reports on a firm without any advance notice about the media
coverage. TV and nespaper reporter may anonymously visit stores and rate their performance for
their coverage.

c. Complementary publicity

Sometimes media reports about a firm in a complimentary manner with regards to the excellence
of its retailing practices.

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Module-8

Relationship Marketing in Retailing

Relationship Marketing refers to all marketing activities directed towards establishing, developing
and maintaining successful relational exchanges.

• Relationship marketing draws upon number of areas (customer quality, customer service, social
interaction)

• Relationship marketing implemented through various components (rewards, customer services

and involvement of customers in planning and execution of retail strategy)

• Customer service is the vital part of Relationship Marketing.

The evolution of Relationship Marketing

➢ Customer relationship management (CRM) originated in two unrelated places.

i. USA- Database Marketing was used when the marketers directed their efforts to increase
selling effectiveness. Information Technology and Statistical analog was also used for this
purpose.

ii. Scandinavia and Northern Europe- The Relationship Marketing was emphasized in B2b
marketing.

In the later half of 1990, there was a shift from Database marketing to Relationship Marketing.
Marketers and retailers started using IT to communicate with customers and that helped them to base their
product offering.

➢ Relationship Marketing emerged out of 2 major consideration

1. Macro level (at the macro level there was an increased necessity to maintain relationship with
employees, customers, suppliers and Government)

2. Micro level (at the micro level there was a shift from Transaction focus to Relationship

Marketing)

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➢ Transaction marketing:

It focuses on single sale, product features, little emphasis on customer service and moderate customer
contact.

➢ Relationship Marketing:

It focuses on customer orientation, high emphasis on customer service, high commitment.

Related to this is Pareto’s law which states that 80% of the company revenue comes from the 20% of the

loyal customers. The fact is that acquiring a new customer cost 5 times of retaining an existing customer.
Relationship Marketing attempts to optimize the resources for the retailing by retaining customers.

Relationship Marketing Strategies

1. Personalization

It describes the social content of the interaction between service employees and their customers.
It can be regarded as a means showing recognition and respect ex: feeling of familiarity, personal
recognition, friendship and friendship and social support by retailer. Sometimes retailers

recognition customers calling by their name.

2. Special Treatment benefit

Relationship marketing does not tell to maintain relationship with all customers. Customer focus
and selectivity is the key aspect of Relationship marketing. It emphasizes relationship with the loyal
customers. Differentiation required between loyal and non loyal one. Up gradation and service
augmentation are the ways to provide special Treatment benefit to the loyal customers.

3. Communication benefits

Efforts must be taken “stay in touch” with customers is the key determinants of Relationship
Marketing. Companies use Direct mail, e-mail and telephone and SMS service to keep in touch
with the customers.

4. Rewards

Pricing incentives, money savings, free gift are the ways to reward loyal customers. Rewarding

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efforts must be more functional and economical.

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Retail Research

Marketing research specifies the information required to address the marketing issues (marketing
opportunities, evaluate marketing actions, monitor marketing performance), design the method of

collecting information’s, manages and implements the data collection process, analysis and

communicated findings and their implications.

Retail research can help retailers to take important decisions such as market positioning, which
retail format will be most suitable for the particular target market, how best to display merchandise and so
on.

At the retail level, research is used for concept testing, business feasibility analysis, identifying the
correct product mix, understanding the target market profile, understanding and analyzing consumer
behavior.

Qualitative Research method

It is used to find out what is in consumer’s mind. The retailer will be able to get oriented to the
range and complexity of consumers activity and concerns. Such data may help retailer to know more
about things (feelings, thoughts and intentions, past behavior) which cannot be directly observed or

measured.

Focus group study is used to identify the most likely product positioning and to know the cues on
the various features which go into the shopping such as ambience, shopping needs and requirements, style
preferences.

➢ Three major types

1. Exploratory research

It defines the problem in detail; suggest hypotheses, used for generating ideas for new product.

2. Orientation Method-Getting to know the consumer’s best view and vocabulary.

3. Clinical : gaining insights of issues which otherwise might be impossible to pursue structured
research methods.

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Qualitative research can take the form of Focus Group Discussion, projective techniques (word
association test, third person role playing and sentence completion test)

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Quantitative research through survey

Survey can help to understand the consumer’s behavior

Current shopping pattern, to know the size of the market, the retail formats currently being used,
size of the core target.

The surveys in many forms is one of the most widely used and well know method of acquiring
marketing information’s by communicating with the group of customers through questionnaire or

interview. It is efficient and economical.

Observation method of Research

It is used to provide information on current behavior. The research design can be; casual or systematic.

It will be easy to observe the following information:

• What is the in store traffic pattern?

• What is the customers’ reaction to displays, visual merchandising?

• What is the pattern of customer’s movement?

• What is the reaction to private labels?

• Which are frequently asked questions by the customers?

Forms of observation

1. Direct observation

The retailer may use an observation disguised as a shopper to observe how long customer spend
time in the display area.

2. Contrived observation

Buying teams disguised as customers will try to find out what happens during normal interaction
between the customer and the retailers.

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3. Content analysis

It is used to analyze the content or message of advertisement

4. Humanistic Enquiry

It involves immersing the researcher in the system under study. The researcher maintains two
dairy

i. Theory construction which records in detail the thoughts, premises, hypotheses

ii. A detailed date and time sequenced notes which are kept on the technique used for enquiry with
special attention to biases or distortion.

5. Behavior recording services

It helps to overcome deficiencies of human observers. People meter, eye movement recorders
voice pitch analysis.

Retail Audit

It helps to ascertain the sales personnel’s efficiency at the point of sale or to find out the average time
taken on a normal day or during the weekend.

Retail process Audit

Such retail process audit helps to examine store efficiency in terms of operating processes or reduces the
cycle time. For instance with the help of retail process audit, the retailer can work out ways to improve
customer service delivery and to improve performance.

Retail store Audit

While visiting the store, the retail auditor will collect observable information such as the shelf prices,
display space, the presence of special display and in store promotion activities. The retailers can use retail
store audit results to project and arrive at nationwide and regional estimate of total sales, inventories, etc.

Consumer purchase panel audit

It helps to understand how much product is moving through the distribution channel. Two methods
for collecting this data:

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1. Home audit approach: Panel member aggress to permit an auditor to check the household stock of
certain product categories at regular intervals

2. Mail Dairy Method: The panel member records a detail of every purchase made in certain

categories and returns the completed dairy by mail at regular intervals.

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