CHAP 10: RETAIL COMMUNICATION MIX

Learning objectives

 Identify the traditional media elements

 Identify the new media elements
 Understand how retails use communication programs to develop brand image and build customer
loyalty
 List steps involved in developing a communication program

I. Using communication programs to develop brand images and build customer loyalty
A brand is a distinguishing name or symbol, such as a logo, that identifies the products or services
offered by a seller and differentiates those products and services from the offerings of competitors.
1. Value of Brand Image
The value that a brand image offers retailers is referred to as brand equity

 Strong brand names can affect the customer’s decision-making process, motivate repeat visits and
purchases, and build loyalty.
 Strong brand names enable retailers to charge higher prices and lower their marketing costs.
 Strong brand image also enables retailers to increase their margins.
 Retailers with strong brand names can leverage their brands to introduce new retail concepts with
only a limited amount of marketing effort.
Value to Retailers (Brand Equity):

 Attract customers
 Build loyalty
 Higher prices leading to higher gross margin
 Reduced promotional expenses
 Facilitates entry into new markets Gap ➔ GapKids

Value to Customers:

 Provide in advance shopping experience

 Promises consistent quality
 Simplifies buying process
 Reduces time and effort searching for information about a product/retailer

2. Building Brand Equity

The activities that a retailer needs to undertake to build brand equity for its firm or its private-label
merchandise are
a) Create a high level of brand awareness
Brand awareness refers to a potential customer’s ability to recognize or recall that the brand name is a
particular type of retailer or product/service.
 Brand awareness is the strength of the link between the brand name and the type of merchandise or
service in the minds of customers.
Aided recall occurs when consumers indicate they know the brand when the name is presented to them.
Top-of-mind awareness, the highest level of awareness, occurs when consumers mention a specific
brand name first when they are asked about the type of retailer, a merchandise category, or a type of
service.
b) Develop favorable associations with the brand name,
Brand associations are anything linked to or connected with the brand name in a consumer’s memory.
Some common associations that retailers develop with their brand name are as follows:

 Merchandise category: The most common association is to link the retailer to a category of
merchandise.
 Price / quality: Some retailers, such as Saks Fifth Avenue, want to be associated with offering
unique, high-fashion merchandise. Other retailers, such as Walmart, want associations with low
prices and good value.
 Specific attribute or benefit: A retailer can link its stores to attributes, such as 7-Eleven’s
association with providing convenience or Nordstrom’s connection with offering a high level of
customer service.
 Lifestyle or activity: Some retailers associate their name with a specific lifestyle or activity.
The brand image consists of a set of associations that are usually organized around some meaningful
themes.
c) Consistently reinforce the image of the brand.
Integrated Marketing Communication Program
Integrated marketing communication program—a program that integrates all the communication
elements to deliver a comprehensive, consistent message to all customers over time, across all elements of
their retail mix, and across all delivery channels.
Providing a consistent image can be challenging for multichannel retailers – Need to consider the needs
of all channels early in the planning of its communication program
The goal of a retail communication strategy is to plan all of the elements to work together.
II. Methods of communicating with customers

1) Direct Marketing
Direct marketing is marketing that communicates directly with target customers to generate a response
or transaction.
Traditional direct marketing includes mail and catalogs sent through the mail; today it also includes
Internet-enabled methods such as e-mail and mobile marketing.

 Direct Mail: includes any brochure, catalog, advertisement, or other printed marketing material
delivered directly to the consumer through the mail or a private delivery company.
 E-mail: is a direct marketing communication vehicle that involves sending messages over the
Internet. E-mail, like other forms of electronic communications (e.g., Web sites, m-commerce),
can be personalized to the specific consumer and thus is similar to communications delivered by
salespeople.
 Mobile marketing: is marketing through wireless handheld devices, such as cellular telephones,
and m-commerce or mobile commerce involves completing a transaction via the cell phone.

2) Online Marketing (Web sites, blogs, and social media)

 Web Sites: Retailers are increasing their emphasis on communicating with customers through
their Web sites. Retailers use their Web sites to build their brand images; inform customers of
store locations, special events, and the availability of merchandise in local stores; and sell
merchandise and services.
 Blogs (Weblog): contains periodic posts on a common Web page. A well-received blog can
communicate trends, announce special events, and create word-of-mouth, which is
communication between people about a retailer.
 Social Media: is media content distributed through social interactions. Three major online
facilitators of social media are YouTube, Facebook, and Twitter.
 3) Sales Promotions
Sales promotions are special incentives or excitement-building programs that encourage consumers to
purchase a particular product or service; they are typically used in conjunction with other advertising or
personal selling programs.
Types of Sales Promotion

* POP: Point-of-Purchase

4) Personal Selling
Personal selling is a communication process in which sales associates help customers satisfy their needs
through face-to-face exchanges of information.
5) Advertising
Advertising entails the placement of announcements and persuasive messages purchased by retailers and
other organizations that seek to inform and/or persuade members of a particular target market or audience
about their products, services, organizations, or ideas.
Example: there are more than $20 billion spend for advertising Amazon, Apple or Best buy

 Newspapers:
o A freestanding insert (FSI), also called a preprint, is an advertisement printed at the
retailer’s expense and distributed as an insert in the newspaper. However, there are so
many FSIs in some newspapers that readers can become overwhelmed. As a result, some
retailers have reduced the number of FSIs they use because of the clutter and because
younger readers, who may be their primary target markets, don’t regularly read
newspapers.
o Newspapers, like magazines, effectively convey a lot of detailed information. Readers
can go through an advertisement at their own pace and refer to part of the advertisement
when they want.
 Magazines:
  Television:
o Television commercials can be placed on a national network or local station.
o A local television commercial is called a spot.
 Radio
 Co-op Programs:
o Co-op (cooperative) advertising is a promotional program undertaken by a vendor and a
retailer working together.

6) Public Relations (PR)

Public relations (PR) involves managing communications and relationships to achieve various
objectives, such as

 Building and maintaining a positive image of the retailer,

 Handling or heading off unfavorable stories or events,
 Maintaining positive relationships with the media.
In many cases, public relations activities support other promotional efforts by generating “free” media
attention and general goodwill.
Another very popular PR tool is event sponsorship. Event sponsorship occurs when corporations support
various activities (financially or otherwise), usually in the cultural or sports and entertainment sectors.

III. Planning the Retail Communication Program

Four steps involved in developing and implementing a retail communication program

1. Establish Objectives
Retailers establish objectives for their communication programs to provide (1) direction for people
implementing the program and (2) a basis for evaluating its effectiveness.
Communication objectives are specific goals related to the retail communication mix’s effect on the
customer’s decision-making process.

 The communication objectives and approaches used by vendors and retailers differ, and the
differences can lead to conflicts. Some of these points of conflict are as follows:
o Long-term versus short-term goals.
 Long-term: ex. creating or altering a retailer’s brand image
  Short-term: ex. increasing store traffic
o Product versus location.
o Breadth of merchandise.

2. Determine the Communication Budget

a) Marginal Analysis Method
Marginal analysis is based on the economic principle that firms should increase communication
expenditures as long as each additional dollar spent generates more than a dollar of additional
contribution.
In most cases, it’s very hard to perform a marginal analysis because managers don’t know the relationship
between communication expenses and sales.
b) Objective-and-Task Method
The objective-and-task method determines the budget required to undertake specific tasks to accomplish
communication objectives.
c) Rule-of-Thumb Methods

 Affordable Budgeting Method:

o When using the affordable budgeting method, retailers first forecast their sales and
expenses, excluding communication expenses, during the budgeting period
o Sets the communication budget by determining what money is available after operating
costs and profits are subtracted.
o The major problem with the affordable method is that it assumes that communication
expenses don’t stimulate sales and profit.
 Percentage-of-Sales Method:
o Sets the communication budget as a fixed percentage of forecast sales.
o Problem: it assumes that the same percentage used in the past, or used by competitors, is
appropriate for the future.
 One advantage of both the percentage-of-sales method and the affordable method for determining a
communication budget is that the retailer won’t spend beyond its means.

 Competitive Parity Method:

o The communication budget is set so that the retailer’s share of its communication
expenses equals its share of the market.
o Problem (same to the other rule-of-thumb methods): the competitive parity method
doesn’t allow retailers to exploit the unique opportunities or problems they confront in a
market.

3. Allocate the Promotional Budget

The retailer decides how much of its budget to allocate to specific communication elements, merchandise
categories, geographic regions, or long- and short-term objectives.
Research indicates that allocation decisions are more important than the decision about the amount to
spend on communications. 53 In other words, retailers often can realize the same objectives by reducing
the size of the communication budget but allocating it more effectively.
Allocation decisions, like budget-setting decisions, should use the principles of marginal analysis.
High-assay principle: The retailer should allocate the budget to areas that will yield the greatest return.

4. Plan, Implement, and Evaluate Communication Programs—Two Illustrations

This final section of the chapter illustrates the planning and evaluation process for two communication
programs:

 An advertising campaign by a small specialty retailer

 Sales promotion opportunity confronting a supermarket chain.
 Many sales promotion opportunities undertaken by retailers are initiated by vendors
 To evaluate a trade promotion, the retailer considers:
o The realized margin from the promotion.
o The cost of the additional inventory carried due to buying more than the normal
amount.
o The potential increase in sales from the promoted merchandise.
o The potential loss suffered when customers switch to the promoted merchandise from
more profitable private-label brands.
o The additional sales made to customers attracted to the store by the promotion.

1. How can brand strategy, advertising, personal selling, public relations, direct marketing, and
sales promotion complement one another in an integrated marketing communication program?
How can a retailer’s customer relationship management program support these activities?
An integrated marketing communication program is a strategic process to collaborate promotional
techniques like brand strategy, advertising, personal selling, public relations, direct marketing, and sales
promotions. It is done by market research and critical evaluations of systems to cater to customer needs.
Retailer's customer relationship management program supports these activities because retailers can
approach customers and convey the product's features. It helps by creating a platform to establish
interaction between the customer and the product.

2. What are the positive and negative aspects of direct marketing from the customer’s perspective?

From the customers perspective, the positive aspects of direct marketing can be described by stating that
new customers can be attracted towards the firms products with the use of direct marketing which builds
better relationships with them. The viability of the product and its appeal for the customers gets tested
when products are directly marketed to the customers. Direct marketing helps customers to get aware of
the deep content and characteristics of products which increases the selling of the product and the firms’
sales.

On the other hand, the negative aspects of direct marketing from the customers perspectives can be
described by stating that direct marketing is taken as a disturbance and intrusion by some customers
which makes them annoyed towards the direct marketer. Sometimes, people do not find selling platforms
of emails and telephone appropriate and it irritates them which creates a negative brand image of the
direct marketer.

3. What factors should be considered in dividing up the advertising budget among a store’s
different merchandise areas? Which of the following should receive the highest advertising budget:
staple, fashion, or seasonal merchandise? Why?

The factors that should be considered in dividing up the advertising budget among a stores different
merchandise areas can be described by stating that the firm has to recognize the corporate objective
behind launching the advertisement whether the seller wants to sell the product for the time being in the
seasonable manner or it wish to create a lasting impression and attraction for the customers. The strategies
of the competitors also determine the type of advertising budget the sponsored will undertake. The seller
has to pay more attention towards advertising of those merchandise that are highly profitable for the store
as well as are ignored by the competitors in their advertising strategies.

Among staples, fashion, or seasonal merchandise, the highest advertising budget should be offered to
fashion. This is because fashion is something that changes very frequently and there are several
competing fashionable products that are launched everyday by the different firms. This is the reason the
sellers should create major budget for advertising fashionable clothes and everything that is sold on the
basis of fashion aspect. The customers should be made aware of the fashionable items offered by the
seller so that the customers can be attracted to buy them.

However, when it comes to staples and seasonable merchandise, it is very obvious that customers are
bound to buy staples and the products that are offered within every season. Like the customer cannot deny
to buy groceries and healthcare products as these come under frequent buying and are needed by the
customers. Same is with seasonable products like a customer has to buy umbrellas and gumboots in rainy
season. So, even if the marketer does not advertise such products, they are bound to be bought by the
customers which decreases the need for advertisement of such products when they are compared with the
advertisement of fashion products.

4. Outline some elements in a communication program that can be used to achieve the following
objectives: (a) Increase store loyalty by 20 percent. (b) Build awareness of the store by 10 percent.
(c) Develop an image as a low-price retailer. How would you determine whether the communication
program met each of these objectives?

The following are the elements in a communication program to achieve the following objectives:

(a) To increase the stores loyalty by 20 percent, the retailer can introduce loyalty rewards for the
customers wherein the customers would be offered discount or price reduction in their purchases and are
offered points at every purchase made by them. These points can be redeemed for cash by the customers
and will reduce the bill of the products bought by the customers.

(b) To build stores awareness by 10 percent, the retailer can use various marketing communication
mediums like stores advertisement in newspaper, lifestyle magazines, etc. The firm can also make use of
radio marketing which will create stores awareness to a large scale.

(c) To develop an image of low-price seller, the retailer can run various communication programs like it
can organize frequent sales which can communicate the customers that the store sells discounted
products.
To determine whether the communication program has met each of the given objectives, the retailer has
to evaluate and check the increase in the number of customer loyalty membership of the store. The firm
also has to check whether there is a substantial increase in the customer footfall in the store which will
suggest the increase in the stores awareness and the retailer will be considered as a low-price seller.
5. Retailers use television advertising to build brand image. Television advertisers have identified
many types of markets on the basis of the day, time, and type of show during which their ads may
appear. During which days, times, and types of shows should retailers advertise the following
categories of merchandise: grocery, paint, beer, cars, and health club member-ships? Why?
6. Why do some online retailers include editorials and customer reviews along with product
information on their Web sites? Explain how this may influence the consumer’s buying behavior.
Some online retailers include editorials and customer reviews along with product information on the
websites. This type of promotion and information provided by the retailer might influence the consumers
buying behavior in a way that when customers buy products online, there is no physical evidence that can
allow the buyer to get properly assured about the products performance and its quality. The customer is
always under some kind of doubt whether to trust the product or not.
At this situation, when retailers put customer reviews and editorials related to the product and its
performance, it creates large amount of trust among the customers and clears most of the doubts and
discrepancies that carry related to the product and its source. Customer reviews help the potential buyers
to know about the product personally and to get aware of its actual performance. Similarly, editorials
describe the product and the retailer in comprehensible which help the customers to know the products
characteristics and its performance in depth. This way the consumers buying behavior gets influenced
with the use editorials and customer reviews.