Chapter 16

Retail Communication Mix

McGraw-Hill/Irwin
Retailing Management, 7/e © 2008 by The McGraw-Hill Companies, All rights reserved.
Merchandise Management

Managing Buying
Merchandise Merchandise
Assortments
Chapter 12 Chapter 14

Retail
Communication
Mix
Chapter 16

Merchandise Retail
Planning Pricing
Systems
Chapter 15
Chapter 13

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Questions

■ What can retailers build brand equity for their stores and their
private-label merchandise?
■ How are retailers using new approaches to communicate with their
customers?
■ What are the strengths and weaknesses of the different methods for
communicating with customers?
■ Why do retailers need to have an integrated marketing
communication program?
■ What steps are involved in developing a communication program?
■ How do retailers establish a communication budget?
■ How can retailers use the different elements in a communication mix
to alter customers’ decision-making processes?

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Objectives of Communication Program

Long-term Short-term
Build Brand (retailer’s name) Image Increase Traffic
Create Customer Loyalty Increase Sales

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Brands

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 those
offered by competitors

The McGraw-Hill Companies, Inc./John Flournoy, photographer The McGraw-Hill Companies, Inc./Bob Coyle, photographer

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Value of Brand Image

Value to Retailers (Brand Equity) Value to Customers

■ Attract Customers ■ Promises Consistent
■ Build Loyalty Quality
■ Higher Prices Leading to ■ Simplifies Buying Process
Higher Gross Margin ■ Reduces Time and Effort
■ Reduced Promotional Expenses Searching for Information
■ Facilitates Entry into New Markets About Merchandise/Retailer
Gap  GapKids

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Building Brand Equity

Create a High Develop

Level of Brand Favorable
Awareness Associations

Brand
Equity

Consistent Create Emotional

Reinforcement Connections

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Tar-Zhay

The McGraw-Hill Companies, Inc./Lars Niki, photographer

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Apple

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Benefits of High Brand Awareness

Aided Recall Stimulates

Visits to
Top Mind Awareness Retailer

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Creating Brand Awareness

Memorable Repeated
Name Exposure
Best Buy

Top-of-mind Starbuck’s
Home Depot
Brand Awareness

Event
Symbols Macy’s Sponsorship

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Retailers Develop Associations
with their Brand Name

Brand name is a set of associations that are usually organized

around some meaningful themes

Brand associations: anything linked to or connected with the

brand name in a consumer’s memory

Merchandise Category – Office Depot – office supplies

Price/quality – Neiman Marcus –, high fashion merchandise

Specific attribute or benefit – 7-Eleven – convenience

Lifestyle or activity – Electronic Boutique – computer games

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McDonald’s Brand Associations

Golden
Arches
Fast
Big Mac
Food

McDonald’s

French
Fries Ronald
McDonald
Clean

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L.L. Bean

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L.L. Bean’s Brand Associations

New
England
Practical Friendly

L.L. Bean

Expertise Honest

Outdoors

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Wal-Mart Associations

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Target Associations

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Consistent Reinforcement

The retailer’s brand image is developed and maintained

through the retailer’s communication mix
Retail Communication Mix

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Consistent Reinforcement through Integrated
Marketing Communication Program

Integrated Marketing Communication Program

■ A program that integrates all of the
communication elements to deliver a
comprehensive, consistent message
■ 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

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Integrated Marketing Communications

Present a Consistent Brand Image through all Communications

with Customers

•Store Design
•Advertising
•Web Site
•Magalog

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

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Brand Extensions

■ Gap  GapKids and Old Navy

■ Talbots  Talbuts Mens
■ Sears  Sears Auto Centers and the Great Indoors
■ Pottery Barn  Pottery Barn Kids

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

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Extending Brand Name to a New Concept

Pluses Minuses
■ Develop Awareness and ■ Associations Might Not
Image Quickly Be Compatible with
■ Less Costs Needed to Extension
Promote Extension

Limited  Victoria’s Secret

Abercrombie & Fitch  Hollister

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Communication Methods

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Paid Impersonal Communications

■ Advertising
■ Sales promotions – Special events, In-store demonstrations
■ Games, sweepstakes and contests
■ Coupons
Boxes of KrustyO’s cereal at a New York 7-
■ Store atmosphere Eleven stores, temporarily converted into a
■ Website Kwik-E Mart, to promote the Simpson Movie.
■ Community building

Jack Star/PhotoLink/Getty Images

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Store Atmosphere

The combination of the store’s

physical characteristics
(architecture, layout, signs and
displays, colors, lighting,
temperature, sounds, smells)
together create an image in the
customers’ mind

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Mediacart

A shopping cart that delivers

point-of-decision
advertising
■ Informs the customer
about special deals as the
customer passes them in
the aisle
■ Each video screen is
embedded with an RFID
chip that interacts with
chips installed on store
shelves
■ Records shopping habits,
dwell times, how shoppers
travel through the store

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Community Building

Retailers’ Community Building

Websites
offer opportunities for
customers with similar
interests to learn about
products and services that
support their hobbies and
share information with
others

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Paid Personal Communication

■ Retail salespeople are primary vehicle for

providing paid personal communication to
customers.
 Personal selling – salespeople satisfy needs through
face to face exchange of information
■ Email – retailers inform customers of new
merchandise, receipt of order or when order has
been shipped
■ Direct Mail
■ M-Commerce (mobile commerce)

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Unpaid Impersonal Communication

Publicity is communication through significant

unpaid presentations about the retailer, usually a
news story, in impersonal media.

• Newspaper
• TV coverage
• Macy’s Thanksgiving Day Parade

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PR

The Gap, Emporio Armani, and Apple are

among several retailers selling red
products, a portion of the proceeds go to
Product RED, a charity to wipe out AIDS in
Africa

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Unpaid Personal Communication

■ Word-of-mouth
Can be favorable
Can be detrimental

■ Social Shopping
 A communication strategy in which consumers use
Internet to engage in the shopping process by
exchanging preferences, thoughts, and opinions
 Product/service reviews

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Social Shopping

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 Comparison of
Communication Methods

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Planning the Retail Communication Program

Steps in Developing a Retail Communication Program

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Setting Objectives

■ Communication objectives:
 Specific goals related to the retail communication
mix’s effect on the customer’s decision-making
process
 Long-term: ex) creating or altering a retailer’s brand
image
 Short-term: ex) increasing store traffic

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Communication Objectives & Stages in
the Consumers Decision-Making Process

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Retail and Vendor
Communication Programs

Vendor Retailer

• Long-term objectives • Short-term objectives

• Product focused • Category focused

• National • Local

• Specific product • Assortment of

merchandise

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Setting the Communication Budget

• Marginal analysis Advertising Sales

• Objective and task

• Rules of thumb Sales Advertising

- Affordable

- Percent of sales

- Competitive parity

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Setting the Communication Budget

■ Marginal Analysis Method

 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
 Very hard to use because managers don’t know the
relationship between communication expenses and
sales

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Marginal Analysis for Setting
Communication Budget

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Objective-and-Task Method

■ Determines the budget required to undertake

specific tasks to accomplish communication
objectives

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Illustration of Objective and Task
Method for Setting a Communication Budget

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 Financial Implications of
Increasing the Communication Budget

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Rule of Thumb Methods

Affordable Budgeting Method Percentage of Sales Method –

– sets communication budget communication budget is set as a
by determining what money is fixed percentage of forecasted sales.
available after operating costs
and profits are budgeted.

Drawback: The affordable Drawback: This method assumes

method assumes that the the same percentage used in the
communication expenses past, or by competitors, is still
don’t stimulate sales and appropriate for the retailer.
profits.

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Rule of Thumb Methods

Competitive Parity Method – this communication budget is set so

that the retailer’s share of communication expenses equals its
share of the market.

Drawback: This method (like the others) does not allow the retailer
to exploit the unique opportunities or problems they confront in a
market.

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Allocation of 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
■ Budget allocation decision is more important
budget amount decision

High-assay principle: The retailer allocate the

budget to areas that will yield the greatest return

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