Chapter 4

Retail marketing mix

Retail Marketing

• The process of promoting products and services to customers through various channels of
distribution in order to drive sales.

• Example: shopping malls, shopping websites.

Product

• Product, in the marketing context, is anything which is offered to the market for exchange or
consumption.

• A product formally defined as “an offering of commercial intent having tangibles and
intangible features that goes to satisfy needs, wants and desires of the consumers”.

• In other words it can also said that a seller offers to a buyer in return of a particular
predefined amount of payment in a particular mode.

Decisions related to selection of goods (Merchandise Management Revisited):

The retailers need to consider the following factors while deciding what products to sell.

1. Product diversity:

Keep product offering simple in the beginning. If product line is narrow and focused, then marketing
efforts can be just as tightly focused. It will bring the best results for marketing

2. Trends:

When it comes to selecting products to sell based on what’s popular, timing is extremely important.
New trends and products can be a great boost to business. The retailer needs to be at the beginning
of the product lifecycle in order to be successful.

3. Marketability:

Before considering what product to sell, the retailers need to determine what market to sell. The
retailer needs to know customer wants. The product selection doesn’t have to appeal to all of the
population but it should be something you can convince a large percentage of shoppers.

4. Enhanced Quality:

When deciding which products to sell in store, ask yourself the following question. Is this product
something. I would give my dearest friend? If not, you may want to keep looking. Product quality is
extremely vital when your reputation is on the line.

5. Consumables:

The retailers need to choose a product with recurring sales value. A consumable item that needs to
be replaced on a regular basis is one way a retailer can establish long term sales. By establishing a
customer will continue to come to buy more products. Additionally, satisfied customers are more
open to recommendation for related products.
6. Profit Margin:

Selling big ticket items is generally more profitable. It requires more credibility to sell. The retailers
need to calculate direct and indirect costs of selling goods. They need to ensure the required profit
margins are earned.

7. Competition:

Competition is healthy and there are ways other than volume and price a smaller store can compete
with larger retailers. The unique product has less competition.

8. Private label Products:

One way to guarantee having a truly unique product line is to make the item yourself. Another way is
to partner with a small business. It will allow branding an item made by another person.

Decisions related to delivery of Services

In the context of a management, the delivery of services is a critical aspect of providing a positive
customer experience and driving business success. Here are some specific decisions related to the
delivery of services in retail management:

1. Store Layout and Visual Merchandising:

Decide on the layout of the store to ensure ease of navigation for customers and efficient use of
space. Plan visual merchandising strategies to showcase products effectively and attract customers'
attention.

2. Customer Service Approach:

Determine the level of customer service you want to provide. This includes factors like personalized
assistance, self-service options, and after-sales support.

3.Staff Training and Customer Interaction:

Train retail staff in customer service skills, product knowledge, and effective communication. Decide
how staff should interact with customers, including greeting, assisting, and handling inquiries or
complaints.

4.Inventory Management:

Make decisions about inventory levels, restocking schedules, and inventory turnover rates to ensure
products are available when customers need them.

5. Omni-channel Strategy:

Determine how to integrate different sales channels (brick-and-mortar, online, mobile app) to
provide a seamless shopping experience for customers.

6.Returns and Exchanges Policy:

Establish a clear policy for returns and exchanges to manage customer expectations and streamline
the process.

7. Promotions and Pricing:

Decide on pricing strategies and promotional offers to attract customers while maintaining
profitability.

8. Technology Integration:

Choose and implement technology solutions such as point-of-sale (POS) systems, inventory
management software, and customer relationship management (CRM) tools.

9.Queue Management:

Decide on queue management strategies to minimize wait times during peak hours and enhance the
overall shopping experience.

10. Loyalty Programs:

Determine if you want to implement a loyalty program to reward repeat customers and encourage
brand loyalty.

11.Feedback Collection:

Establish methods for collecting customer feedback, such as surveys, reviews, and in-person
interactions, to understand their needs and concerns.

12.Staffing Levels and Scheduling:

Make decisions about staffing levels based on peak hours, special events, and seasonal demand.

13. Health and Safety Measures:

Implement health and safety protocols, especially in light of events like the COVID-19 pandemic, to
ensure the well-being of both customers and staff.

14. Localized aStrategies:

Consider tailoring your service delivery decisions based on the preferences and behaviors of
customers in different geographic locations.

15. Data Analytics:

Utilize data analytics to gain insights into customer behavior, preferences, and purchasing patterns,
and use this information to refine your service delivery strategies.

16. Sustainability Initiatives:

Make decisions about eco-friendly practices, such as reducing plastic usage, recycling, and promoting
sustainable products

Pricing

• Price is what customers are willing to pay for services. How much a customer has to pay
depends on the value he perceives in the service offer.

• The payment can be in the forms- money, barter or return services.

Factors influencing pricing-

1. Retail Business Model:

Retail model influences pricing strategy of a retail organization. The pricing pattern followed by
discount retailer is different from departmental stores. Similarly, pricing strategy followed by non-
store retailer is different from brick and mortal business.

2. Uniqueness of the product:

Retailers take perceived value of any product into account before setting a price. It is important to
understand that normally customers feel that low price means poor quality. If an asset is priced too
low, buyers get the feeling that materials used in creation of inferior quality. Therefore, a retailer has
to maintain a fine balance between recognized value of a product and its price.

3. Market demand for the product:

It is a key aspect of retail pricing strategy. If the supply of a product is less than demand, then prices
shoot up quickly, there is mad rush among customers, which lead to increase in price.

4. Competition level:

The level of competition plays an important role in determining the price of a product. When a
competitor sells its product at a lower price, it may affect the business of the former. It is natural for
retailers to study the competition in the market before finalizing the price of their own product.
However, it becomes negligible when a company enjoys a monopoly in the market.

5. Economic condition:

Economic factors such as labour cost, inflation rate, exchange rate of currency, economic slowdown,
and the government’s monetary policy influences the pricing of a product.

6. Credit/ Instalment facilities:

Trade credit, instalment credit and purchase through credit card can also influence pricing strategy of
a retailer.

Approaches to pricing

A business can use a variety of pricing strategies. The price can be set to maximize profitability for
each unit sold or from the market overall. It can be used to defend an existing market from new
entrants. It helps to enhance market share within a market or to enter a new market.

1. Penetration Pricing-

Penetration pricing includes setting the price low with the goals of attracting customers and gaining
market share. The price will be raised later once this market share is gained.

2. Price skimming-

Price skimming is the practice of selling a product at a high price, usually during the introduction of
new product when the demand for it is relatively inelastic. This approach is used to generate
substantial profits during the first months of the release product.

Eventually, a company that engages in price skimming must drop its prices, as competitors enter the
market and under cut its prices. Thus, price skimming tends to be a short- term strategy designed to
maximise profits.

3.Leader pricing (loss leader)-

Loss leader pricing is an aggressive pricing strategy in which a store sells selected goods below cost in
order to attract customers. Firms following this strategy believe that the loss arising out of the sale of
such selected goods may be made good by additional purchase of profitable goods.

4.Price Bundling-

A marketing play in which several products are offered for sale in one combined unit that if often
marked at a reduced price compared to the sum of their separate purchase prices. Fast food meals
and cable television connection effectively use this technique by putting multiple products together
to make a more attractive deal. This is also called package deal pricing.

5. Odd Pricing (Psychological Pricing) –

Price designed to have a positive psychological impact. There are certain price points where people
are willing to buy a product. The retail prices are often expressed as “odd prices”: a little less than a
round number, eg Rs.19.98, Rs.2.98

6. Multi unit pricing-

It is a strategy of offering a lower price per unit for the purchase of two or more products of the
same type, when brought together than when units are brought singly. For example company may
charge Rs.200 for a T-shirt. If two T-shirts are purchased, shop may charge him only 370.

7. Every day low pricing (EDLP)-

It is a strategy of a retailer to charge lower price (than other retailers in the market), continuously for
the goods sold by them.

8. One-price policy (single pricing)-

It is a pricing strategy in which the same price is offered to every customer who purchases the
product under the same conditions. A one price policy may also mean that prices are set and cannot
be negotiated by customers.

9. Variable pricing-

This is a common approach used by retailers when the costs of offering certain goods and services
and the level of market demand justify it. The objective is to optimise overall profit by offering the
best prices at each point of sale. A common example of variable pricing is when a retailer offers
different prices on its website than it does in stores.

10.Mark -up pricing-

Markup refers to the amount of profit that a seller adds to the cost price of a product to arrive his
selling price. Fpr example, a seller buys a product at Rs.5 and sells it at Rs. 10, the mark is Rs.5

11.Product Line Pricing-

It is a product pricing strategy to be used when a retailer has more than one product in a line. For
example, most computer manufacturers have basic models, business models and premium high
graphic and/ or gaming models. Each of those model levels has its own price point.

12. Geographic Pricing-

It involves setting different prices for different territories because of different transport costs.
13.Target Pricing Business-

It is the method whereby the selling price of a product is calculated to produce a particular rate of
return on investment for a specific volume of production. It is used most often by public utilities, like
electric and gas companies and companies whose capital investment is high, like automobile
manufacturers.

14. Price Discrimination-

It is the practice of setting a different price for the same product in different segments to the market.

15. Value based Pricing-

Value based pricing is also called value optimized pricing. It is the practice of setting the price of a
product or service at its perceived value to the customer. This approach does not take into account
the cost of the product or service, not existing market prices.

Value based pricing tends to result in very high prices and correspondingly high profits for those
companies that can persuade their customers to agree to it.

16. Markdown Pricing-

It is the temporary reduction in the selling price of an item to stimulate its demand or to drive a
competitor out of the market. In this permanent markdowns are created to remove a slow-selling
item from the inventory.

Seasonal markdown is applicable on products that are primarily sold during a particular time of the
year, such as clothing, gradening products, sporting goods and holiday- specific items may see price
reduction at the conclusion of its prime selling season.

Price Sensitivity

It is amount by which changes in a product’s cost and tend to affect consumers demand for that
product. In other words, it reflects how purchase behaviour of a consumer changes with changes in
price.

Factors influencing price sensitivity:

1. Unique value effect: Buyers have less price sensitivity if the product is unique. Many
associations offer a wide variety of programs and services. Some are distinct in the
marketplace, other are more commonplace. By determining to what extent products and
services are uniques, you can begin to determine whether or not the market will respond to
changes in price.
2. Substitute awareness effect: