Wholesaling and Retailing R.A.

Cortez MKTG 106

SOLE-SPONSORED SALES PROMOTIONS

Just like advertising sales promotions are an expensive to the retailer that may or may not be shared with others. With solesponsored sales promotions, the retailer has complete control over the promotion but is also completely responsible for the costs. Although there may be some overlap in the sponsorship of these promotions, retailers generally consider these sales promotions to be solesponsored: 1. Premiums are extra items offered to the customer when purchasing a promoted product. Premiums are used to increased consumption among current consumers and persuade non users to try their promoted product. Generally, the retailer is solely responsible for such programs, although some exceptions may occur. An example of a success premium is when McDonald`s give away a free toy with the purchase of a Happy Meal. 2. Contest and sweepstakes, which face legal restrictions in some states, are designed to create an interest in the retailer`s product and encourage both repeat purchases and brand switching. Although such programs produce only one grand price winner, the selection of a prize that will appeal to a segment of the market and the addition of smaller prizes make such promotions very popular with business but also to track their customers. 3. Frequent buyer programs are still rapidly growing as retailers begin to appreciate the importance of combining this promotion with their database system to solidify their relationship with the customer.

JOINT-SPONSORED SALES PROMOTIONS

Jointly sponsored sales promotions offers retailers the advantage of using OPM other people`s money. Although in some control, the cosponsor`s monetary offering to the retailer mote than makes up for it. Retailers consider these promotions to be jointly sponsored: 1. Coupons offer the retail customer a discount on the price of a specific item. In 1997, American manufacturers offered consumers more than 269 billion money-off coupons worth more than $ 180 billion. Although only two percent of these coupons are redeemed, this represents a win-fall worth more than $500 million to retailers because they receive, on average, a 10 cents coupon handling fee from the manufacturers. Recently, Proctor and Gamble has been testing various programs to lower everyday prices and discontinue coupons. However, this more has meet strong consumer, retailer, newspaper and political opposition. 2. In-store displays are a promotional display that seek to generate traffic, highlights individual items, and encourage impulse buying. Such displays offer manufactures audience for their products in the retailer`s store. As a result, the manufacturer is willing to pay for the right to rent the space necessary for this display from the retailer. 3. Demonstration and sampling are in-store presentations on reducing the consumer`s perceived risk of purchasing a product. These presentations on the ease, convenience and product superiority are paid for by the manufacturer at a price that is usually higher than the retailer`s cost for providing that service. Joint demonstrations and sampling promotions do not have to just be with the retailer`s supplies or other retailers. Every spring, retailers, especially malls, invite landscapers and other lawn care experts into their grounds to promote their own merchandise for sale, many of these lawn professionals also bring samples of their work to place either in the mall hallways or parking lot. This really a case of using OPM because the retailer and malls do not have to use their money for this promotion, the lawn care folks are willing to do it as a form of promotion for themselves.

EVALUATING SALES PROMOTIONS

Because sales promotions are intended to help generate short-term increases in performance, they should be evaluated in terms of their sales and profit-generating capability. As with advertising, sales promotions can also be evaluated with sophisticated mathematical

models. However, the development and use of use of such models is usually not cost-effective.

PUBLICITY MANAGEMENT

Publicity was defined at the outset of this chapter as non-paid-for communications of information about the company or products, generally in some media form. This definition is actually misleading.

Wholesaling and Retailing R.A. Cortez MKTG 106

MANAGING HUMAN RESOURCES

EMPOWERMENT Occurs when employees are given the power in their jobs to do the things necessary to satisfy customers and make things right for them. An empowered retail employee: 1. Seeks to understand customer problems 2. Desires to develop a relationship with the customer 3. Understand the value of customer loyalty 4. Encourage by the management or solve the customer problem TASK ANALYSIS Process of identifying all the tasks that retailer needs to perform and breaking those task into jobs. Four steps to be follow: 1. MARKETING FUNCTIONS

 The starting point for good human resource planning is for the retailer to decide which and how much of the eight marketing functions will use: buying selling, storing, transporting, sorting, financing, information gathering, and risk taking. Because this marketing function can be shifted and divide, no single institution in the marketing channel will typically perform all the functions. As retailers assume the more functions, they will require more human resources.

2. IDENTIFYING TASKS The retailers must identify all the tasks that will need to be performed. Functions are broad classifications of activities; tasks are specific activities. 3. MAPPING TASKS INTO JOBS Retailers want a job to be comprised of a relative similar set of tasks. Because most retail tasks are not similar, retailers will need to find those tasks that are most similar and grouped them together. 4. DEVELOPMENT OF JOB DESCRIPTIONS AND JOB SPECIFICATIONS The human resource managers should know what the job applicant should be able to do, the skills required to do the job, and the kind of training that should be provided to the employee. The job descriptions and specifications also can help determine the sources that should be used to recruit applicants, the selection procedures that should be used in evaluating applicants and the training and development that should be given new employees to maximize performance.

LONG RANGE ANALYSIS One to five years

volume and number of stores, which depends on the availability of good human resources. Retailers should pay particular attention to the speed and predictability of sales growth, the geographic dispersion of growth, and the amount of growth related to line of trade diversification.

SHORT RANGE ANALYSIS This is less than one year and in many cases may be weekly, monthly and seasonal. The retailers prefer this kind of time frame, because for example: the seasonal trends, it is easy to predict if such product are salable or not. SOURCES OF RETAIL EMPLOYEES 1. Competitors 2. Walk-ins 3. Employment agencies 4. Schools and Colleges 5. Former employees 6. Advertisements 7. Recommendations SCREENING AND SELECTION Screening is the process that is used to sort the potentially good potentially bad employees and typically involves for screening devices. APPLICATION BLANKS All applicants should fill out an application blank. The application blank should capture conveniently and compactly the individuals identify, training, and work history that will relate to his or her performances of the job tasks.

Wholesaling and Retailing R.A. Cortez MKTG 106

Introduction to Retailing

Retailing Defined

Retailing is the selling of goods and services to the final or ultimate consumers. A retailer is any business establishment that directs its marketing efforts toward the final consumer for the purpose of selling goods or services.

Classification of Retailers

1. Goods retailer 2. Service retailer

What distinguishes a retailer sale from other types of sales is the buyers reason for buying. In a retail sale, the buyers purchase the product for personal use. On the other hand, in a business sale, the buyer purchases the product for resale at a profit or for uses in a business. Character of Retailing as:

1. Marketing institution

a. goods retailer

b. service retailer

2. Producer/Consumer link

a. assortment gap having the right product b. quality gap in right quantities c. space gap in the right place d. time gap at the right time 3. Channel member a. channel levels a.1 extended channel producer- wholesalerretailer-consumer a.2 limited channel producer-retailer-consumer a.3 direct channel member producer consumer

b. channel teams

b.1 full member institution ownership of goods goes to wholesaler or retailer at the time of the transaction. b.2 limited member institution marketing intermediaries do not take title to the involved product where wholesaler act as agents and retailers as consignment sellers. b.3 non-member facilitating institution- provided support functions in the areas of the advertising , research, transportation, storage, financial , risk-taking, consulting service. The neither take title to the goods involved in neither the transaction nor the sale or purchased of such goods.

PERSONNAL INTERVIEW

-those who applicants who possess the basic characteristics needed to perform a job should be personally interviewed. It allows the retailer to assess how well qualified the applicants for the job. An interviewed is subjective; one can obtain information or at least gain insight into the attitude, personality, motives and job aspiration of the interviews. TESTING -sometimes testing is given to those who pass the personal interviews. The purpose of testing is to know ones intelligence, interest, leadership potential, personality traits, or honesty. REFERRENCE CHECKS -as a general rule, retailer should not ask for a check the reference the applicant has provided until the applicant has been screened or filtered through the preceding stages. If reference was obtained and verified on all initial applicants, the cost will be excessive.

Wholesaling and Retailing R.A. Cortez MKTG 106 TRAINING AND DEVELOPMENT OF EMPLOYEES

Retailers wanting the best return in their human resources investment should provide training and development for both new and existing employees. Training is not a one-time happening however. Retailers today view training as a process of conducting education. Employees are taught not just technical skills but administrative and people skills as well. Training and development programs enable to know where they are and how they are doing.

Evaluating Employees

Performance appraisal and review is the formal systematic of how employees are performing their jobs in relation to established standards and the communication of that assessment to employees. Employees play a great deal of importance on appraisals, and the way the appraisal system operates affect morale and organizational climate in significant ways. Informal appraisal tend to take place on an ongoing basis within retail firm as supervisors evaluate their subordinates work on daily basis and as subordinates appraises each other as well as their supervisors. Retailers of all sizes should try to use objective criteria for the appraisal and review process wherever possible. Larger retail operations use a committee, frequently consisting of the vice president of human resources and one or more two other executives, to evaluate each employee. Some retailer, especially smaller ones, sometimes forego the formal evaluation process and judge a sales person on the basis of dollar sales, number transactions, errors, on-time performance, ratio of returned merchandise, and customer complaints.

Motivating Employees Human resource management goes beyond selecting, training and compensating the employees. It also involves motivating them to improve current performance. A successful retailer today must constantly motivate all employees to strive for higher sales figure, to decrease expenses, to communicate company policies to the public, and to solve problems arise. This is too achieved through the proper use of motivation. Motivation is the drive that a person has to excel at the activities, such as job, it undertakes.

Content Theories

Hierarchy of Needs Model theorizes that individuals have lower levels physiological and safety needs which are first satisfied and then higher level of needs of belongings or social esteem and self actualization are pursued.

Herzbergs Two-Factor Theory argues that two factors encourage people to work hard: hygiene factors which are extrinsic to the individual and motivators which are intrinsic to the individual. Theory X is a theory of management that views employees as unreliable and thus must be closely supervised and controlled and given economic inducement to perform properly. Theory Y- is a theory of management that views employees as self-reliant and enjoying work and thus can be empowered and delegated authority and responsibility. Process Theories Expectancy Theory- suggests that an employee will expend effort on some task because the employee expects that the effort will lead to a performance outcome which will lead to a reward or bonus which the employee finds desirable or valued. Goal setting- is the process where management and employees establish goals which become the basis for performance appraisal and review. Human Resource Compensation Compensation is one of the major variables in attracting, retaining, and motivating human resources. Competitive compensation is just as important to retaining to retaining good employees as it is to attracting to them. Compensation- Includes direct dollar payments (wages, commissions, an bonuses) and indirect payments (insurance, vacation time, retirement plans). Fringe benefit package- is a part of the total compensation package offered many retail employees and may include health insurance, disability benefits, life insurance, retirement plans, child care, use of an auto and financial counseling.

Common Type of Compensation Programs for Sales force

1. Straight salary- is a compensation plan where the individual receives a fixed salary per time period regardless of the level of performance.

2. Salary plus Commission- is a compensation plan where the individual receives fixed salary per time period and commission which is usually based on sales the individual generates. 3. Straight Commission- is a compensation plan where the compensation is limited to a percentage commission on each sale generated.

Four Types of Supplemental Benefits 1. Employee Discounts 2. Insurance and retirement Benefits 3. Child Care 4. Push Money Compensation Plan Requirements 1. Fairness 2. Adequacy 3. Prompt and regular Payments 4. Customer interest 5. Simplicity 6. Balance 7. Security 8. Cost-effective

Job Enrichment Is the process of enhancing the core job characteristics of employees to improve their motivation, productivity, and jog satisfaction?

Five Core job Characteristics that should be increased: 1. Skill Variety 2. Task Identity 3. Task Significance 4. Autonomy 5. Job Feedback

Retail Information System Retail information system (RIS) is a blue print for the continual and periodic systemic collection, analysis, and reporting of accurate and relevant data about any past, present or future developments that could or already have influenced retailers performances is capable of providing knowledge as ameans of gaining a differential advantage in future competitive wars, retailer would like to develop a strategy so good that the only way it can copy by competition is with a lot of time and money. RIS used to gather the necessary knowledge about the marketplace so that the strategic plan can be made and executed. PROMINENT FEATURES OF THE RIS 1. Both continual and periodic collection of relevant data should occur. 2. The data collection activities should be systematic relevant 3. Analysis and reporting of data should be analyzed and put into a reportable format 4. The data can be about the past, present, and future, all of which can be rel.evant for retail decision making.

Need for Information: In retail planning and management model it shows clearly that strategies can only be developed management has used its RIS to conduct (SWOT) analysis. The management can achieve high performance result by monitoring of business.

Amount of information: The area of COMPETITIVE INTELLIGENCE is one of the fastest growing business activities in the modern world, the expense of such activities would not only be in term of money to secure the best estimate if the information but also in the time needed to gather and analyze it. Extended period of time affect your decision strategies.

Sources of retail information: 1. INTERNAL INFORMATION- Information that is within the retailers recorded and thus is already available for analysis. Retailers are able to generate database from a wide range of information the normal course of their business (operating of income statement, sales record, credit reports, shipping record, ect.) The Automatic Identification System Equipment were used by retailers, the example of these were the barcodes and scanner bar coding and other type of sources of marking by vendors such as preticketing and prelabelling, provides savings to retails. By using (EDI ) Electronic Data Intercharge, retailers are able to manipulate scanner data toplan consumer-driven merchandise, it is based on computer-to-computer communication between a retailers and its supplies.

2. EXTERNAL INFORMATION- is obtaining from sources outside the firm. This information concludes the following: a. Published Statistics- A vast amount of statistical data is published by a variety of public and private sources b. Standard Retailing Information Services- compilation data about market trends and consumer behavior produced by research agencies and sell to interested retailers. c. Research reports-found in various trade and business journals d. Internet-the tool of choice by retailers gathering external data. Sources of Online Retailing Information 1. Government Data Sources- (Bureau of Census, Economic analysis) 2. Private Data Sources - (smart business supersite[http;//www.smartbiz.com]) helps buss. Run better.

3. Search Engineers- Yahoo! (http;//yahoo.com)

Problem Identification Subsystem These are parts of RIS that monitors and scans changing trends behavioral, environmental, and operating performance. Problem Solving Subsystem This is a part of RIS that provide information to help solve problem that may arise in the retail enterprise.

PROBLEM IDENTIFICATION SUBSYSTEM: The central goal is to highlight for the retailer, on a continuing basis, the major problem that the retailers about to encounter or presently encountering.

Behavioral Trends: How to know the behavior of the customers in a casual manner? 1. Retailers read trade press or business magazines 2. Search for the Internet to obtain information on future consumer trends 3. Simply listen to customer complaints 4. Informally converse with the customers need, wants and level of satisfaction 5. Look at local economic forecast

CRUCIAL CONSUMER BEHAVIOR VARIABLES: 1. Purchase Probabilities- allow the retailer to keep apprised of the products that it should stock and promote 2. Consumer attitudes- significant determinant of patronage behavior, changing attitudes can forewarn the retailer of problem on the horizons

3. Information in Customer Satisfaction- it is based whether the customers visit the store was rewarding( a good experience) or unsatisfying (a bad experience)

CUSTOMER DISSATISFACTION- IS THE RESULT DISCREPANCIES BETWEEN: 1. what the consumers actually expected and what the retailer thought the consumer wanted in terms of services and merchandise 2. what the retailers thought the consumer wanted and what the store actually delivers in terms of services and merchandise 3. what the retailers promise in their promotional messages and what is delivered

IMPORTANCE / PERFORMANCE ATTITUDINAL ANALYSIS HIGH PERFOMANCE friendly personnel quality merchandise to return merchandise stores layaways service easy well stocked

professional staff

HIGH PERFOMANCE PERFOMANCE

HIGH

informative advertising

accepts many types of credit cards conventional store hours convenient parking

LOW PERFORMANCE

MONITORING THE MARKETING CHANNEL The retailer is part of a larger marketing channel system, which few retailers can totally control. Most retailers is part of a marketing channel system, which few retailers can totally control. Most retailers must adapt to the behavior of other organizations in the channel. Therefore , the behavior of channel members should be monitored. In Chapter 5 , we discussed some of the intricacies of adapting to the marketing channel. Here, let us focus on obtaining information on alternative merchandise supply sources, alternative facilitating agencies, financial performance of channel partners, and channel conflicts. If retailers become too dependent on a few sources of merchandise, then their ability to bargain and negotiate with suppliers will be hampered. The suppliers may even try to dictate how the retailers should conduct their business. The best way to avoid this unfortunate circumstance is to be continually aware of alternative supply sources. Even if they should not became complacent and stop looking for better deal. High priority should be placed on designing on ongoing system of information collection to alert the retailer to the best deals. For instance, many supermarkets constantly evaluate their present wholesale sources of supply against alternative sources. This helps them assess the terms of their present suppliers. Also, present suppliers will de more cooperative if their competitors. Customer surveys are an effective tool when retailers use vendors to supply services such as housekeeping and/or food service.

MONITORING COMPETITORS

Almost any retailer executive will tell you that they are more interested in what their competitors are doing than in how channel partners or consumers are behaving, but all three behaviors are equally important. All executives (whether small or large) have some means of monitoring competitors activities. At the simplest level, this may consists of reading or listening to competitors ads and shopping their stores personally to inspect merchandise, prices, displays, and analysis of data on over or under storing, pricing, merchandising mixes, promotion, market share and trading areas. As discussed in chapter 4 when a particular market area, typically a town or city, is over stored competitors will complete more aggressive for expenditures. When a market is under stored, the opposite occurs. Not surprisingly, therefore, over or more under stored a market is, the greater the profit potential and vise versa. Once the bundle has been established, the retailer should compute price indices shows its price for each item compared with the price each of its major competitors is charging. These indices should be constructed regularly, probably weekly or monthly. When analyzed on a longitudinal basis, trends in these prices indices will vividly demonstrated the extent to which the retailer is continuing t be price competitive.

ENVIRONMENTAL TRENDS MONITORING THE SOCIOECONOMIC ENVIRONMENT Events in the socioeconomic environment, which were discussed in Chapter 3, that should be monitored can be categorized into demographic, psychographic, and economics trends. Major demographic trends that may be particular useful are changing household size, educational levels, age of distribution of household members, population growth, and geographic migration. Psychographic trends that maybe particularly insightful are changes in leisure-time activities, work habits, and religious, family, and cultural values. Economic trends that should be followed are changes in disposable personal income, in household expenditure patterns, in discretionary income, and in the use of credit.

MONITORING THE LEGAL ENVIRONMENT although a disquieting fact to most retailers, the legal environment is always in a state of flux. To avoid costly legal errors, the retailer should design its RIS to keep it

alerted of change in that environment. In fact, the larger the retailer, the higher priority this area should receive. No retailer manager or store owner can be accepted to monitor all the relevant changes in the legal environment. Fortunately, all the major retailer trade association devote a fair amount of space in their publications to the retailer implications of pending legislation at both federal and state levels. Probably, the legal area of most immediate practical concern to the retailers is tax law. Changes in tax laws will generally have a significant effect on the most major retail decisions. For example, a favorable change in the investment tax credit can make store remodeling or expansion an attractive plan. Tax laws can influence other decision such as inventory valuation methods, executive compensation plans, or recording of credits sales. As a result, retailers need to monitor tax legislation continually.

MONITORING THE TECHNOLOGICAL ENVIRONMENT

Technology is the application of science to develop new method of doing things. It is always at work slowly but continually to change the nature and scope of retailing. The retailer can monitor the technological environment at two stages: the basic science stage or applied science stage. In either case, the retailer will want to monitor technology as related to four areas of innovation: management techniques, merchandising techniques, equipment and fixtures, and construction and building. A retailer desiring to monitor any of the four areas at the basic science stage could read the academic journals in the underlying disciplines. For example, to monitor management and merchandising at the basic science level, the retailer might read such periodicals as the Journal of Finance, Journal of Retailing, Journal of Marketing, or Administrative Science Quarterly. Unfortunately, most topics and concepts discussed in the academic, business- related journals take a long time t get to the applied science stage, because many practical problems of implementation remain to be worked out. Similarly, the retailer could read the academically oriented publications in engineering, computer science, and architecture to obtain a glimpse of future technology in equipment and buildings. But again, the lead-time between the basic science stage and the application would probably be too great to be of any practical value.

OPERATING PERFORMANCE TRENDS MONITORING ASSETS

The accounting system should be designed to be part of the RIS, because it can be an important vehicle for portraying financial operating performance trends. An RIS should have the capability to monitor the retailers assets continually. At the most basic level, the retailer may design the RIS to construct a balance sheet at the end of each operating period ( typically, a month or a quarter ) for assessing the magnitude and composition of its assets. By comparing the current balance sheet with prior ones, retailers can examine the growth of their assets. More detailed analysis of period-to-period balance sheets and the general ledgers used to construct them will provide information on the sources and uses of capital. The balance sheet is one of the most useful pieces of information available to retailers because problems shoe up on the balance sheet first, and then percolate to the income statement. For example, an excessive amount of inventory or accounts receivable usually forewarns of trouble because or customer receivables will have to be written off due to nonpayment.

MONITORING REVENEUS AND EXPENSES By monitoring revenues and expense; retailers are able to readily identify any significant gaps in planned profit levels and develop appropriate remedial actions. Probably no retailer does this better than Walmart, which monitors sales and labor costs on a daily basis at over 3000 stores and immediately, takes corrective action if performance is sub-standard. It also has 24 terabytes of storage (second only to the US Government) which enables it to store historical data for future analysis, retailers will to design their RIS to regularly generate a detailed income statement.

OPERATIONS MANAGEMENT PROBLEMS Operations problems are those that are related to operations planning and management model (Exhibit 16.5). Operations problems involve day-to-day management activities. Most can be quickly and effectively solved by an experienced and talented retail manager. However, for the occasional unique problem, special information is needed. Most

operations problems are related to assets, revenues, or expenses. Let us briefly examine these problem areas.

Operations problems may be related to any of the individual assets that the retailer must manage on the day-today basis. Consider the following problems: Inventory is disappearing from the stockroom daily. There has been a significant showdown in customers paying their bills. The store roof has developed a leak. The air conditioning system repeatedly breaks down. To solve these problems properly, the manager mar require information that is not readily available; he or she will thus need to use the RIS. Let us illustrate a typical problem in more detail. Assume that you are a store manager, and the air conditioner regularly breaks down. Would you conclude that all that needs to be done is to replace the old air conditioner with a new unit? We hope not. Careful analysis of the technological environment will reveal that there is a wealth of new air conditioning technology, which can have a significant effect on operating costs. At the same time, these lower operating costs must be compared with the higher initial cost of a technologically superior air conditioning system. Also, there may be other, less tangible costs and benefits. What will be the effect of a new air conditioning system on whether to replace an air conditioner cannot be properly solved in the absence of substantial information. Other operating problems that arise can be related to various revenue and expense items. And the ability to solve these problems may require more information than the manager has at his or her disposal. What might be some of these problems? Consider the following: Sales of a previously popular merchandise line drop 8 percent Employee overtime hours rise by 14 percent in a single month Gross margin declined by 3 percent

ADMINISTRATIVE MANAGEMENT PROBLEMS

Administrative problems arise in relation to the acquisition and management of the resources that the retailer needs to carry out its strategy. In this regard, three types of resources are especially important: financial, human, and location. The problem identification subsystem of the RIS can help retailers identify financial resource problems that the problem solution subsystem of the RIS can help them to solve. For example, monitoring of economic trends by using the problem identification subsystem may alert a retailer to the fact those interest rates are rapidly raising are accepted to remain high for at least a year. At the same time, monitoring of the balance sheet may alert the retailer to the fact that a 10 million bond issue is maturing in six months. This pair of events should trigger problem recognition. The problem, which must be solve with the help of the problem solution subsystem, is how to generate 10 million in capital to retire the bond issue and subsequently restructure the balance sheet. Obviously, additional information will need to be collected to solve this perplexing problem. In the past, although many manufacturers and utility firms have shown an uncanny ability to issue bonds just before interest rates increased, retailers havent always monitored rates as well as they have the consumer market.