Reading: Retail Strategy
Just when we have finally mastered the marketing mix that includes the four Ps, we arrive at the retail strategy. The retail marketing strategy includes all of the elements of the traditional marketing mix:
- Retailers buy product from producers or wholesalers that will most appeal to their target market.
- Retailers set a price that delivers value for the product and the complete shopping experience.
- Retailers promote their offering, which includes the shopping experience, the products, the pricing, and broadly, the retail brand.
- Retailers create the right place, which is the point of purchase for the buyer.
In delivering the best retail experience through the right place, two additional Ps come into play: presentation and personnel.
Think of a physical store where you enjoy shopping. What is it about the store that you like? You might like the way the store looks, feels, sounds, or smells. It might have products that draw you in and make you want to interact with them. You may just like the store because it’s familiar and convenient—you know where to find the things you need. All of these descriptions fall into two categories. They refer either to the atmosphere of the store or the layout of the store.
The atmosphere describes the feeling, tone, or mood of the store. Often, as a shopper it is difficult to identify exactly what creates the atmosphere in a good shopping experience. (It is much easier in a bad shopping experience.) The store’s decor plays a role in the atmosphere. Are the fixtures decorative or merely functional? Is the shopper invited to linger on a couch or inviting chair, or is he encouraged to simply purchase and leave?
One important element of the atmosphere is density. How has the retailer packed elements into the space? Retailers manage the density of employees, fixtures, and merchandise. The shopping experience requires more employees if there is a high need for service or information. High-end clothing sales generally provide a higher level of service, with sales associates available to advise on fit and fashion choices and to bring the shoppers different sizes and clothing options in the dressing room. A car purchase is not one that generally involves the same type or style of service, but there is a high need for information that translates to a higher density of sales employees to explain features, financing, and availability.
The density of merchandise and fixtures also has a significant impact on the atmosphere of the store. If the shoppers value service, or the retail brand requires a high-end experience, then the retailer generally has less density of merchandise and fixtures. If the shopper most values service outputs of assortment and convenience, then the retailer will use a higher density of merchandise. For example, grocery shoppers may have different standards for the quality of fixtures they prefer relative to the price of the grocery items, but generally they prefer a higher-density shopping experience. The shopper is trying to collect many different products from all areas of the store and would rather have shelves stacked than have to wander much farther through a store with more empty space. Convenience is the dominant factor driving the presentation of products.
Finally, the layout, display, and positioning of the merchandise have a significant impact on sales behaviours. Grocers have conducted studies to optimize the layout of the store and the position of items on the shelves. Stores are designed in a logical pattern, so that they are easy to navigate and optimize spending. Higher-margin items are placed at eye level, while those that are inexpensive and commonly purchased are at the bottom of the shelf. The produce section was once the entry point for every grocery store. Today, that spot is more likely to be occupied by high-end novelty items (expensive chocolates, clothing, paper items, floral arrangements). Still, the produce section continues to be the first food section that buyers are steered toward. This is intended to facilitate meal planning before the shopper arrives at the meat and dairy departments.
In a retail environment, the layout is designed to create comfort and convenience and, at the same time, drive sales.
Moving the presentation to an online shopping experience can be even more difficult. Retail Web sites emphasize site design, navigation, information, and checkout experience. Amazon has set the standard for ease of purchase with its one-click checkout solution. Amazon is well known for providing through, accurate product photos that give a complete view of each product from every angle. Still, the online atmosphere is more difficult to differentiate than the traditional in-store experience.
Retail employees are the face of the brand to the shopper. This is true of a sales associate who helps with a purchase decision, a waitperson in a restaurant, a hotel check-in clerk, or a checker in a grocery store who efficiently rings up purchases. Retail employees fill a weighty role in the brand for two reasons. First, they do work that has the potential to add immense value to the purchase process. When an employee is helpful and efficient with the selection and/or purchase of a product, it’s an important and necessary aspect of the buyer’s retail experience. The retail employees working directly with customers have a much more personal and profound impact on the brand experience of each shopper than the senior executives of the company or even store managers, who have less customer contact.
In order to support employees to be successful, effective retailers will:
- Demonstrate care in hiring to ensure that customer-facing employees will represent the retailer’s brand values
- Train employees to be knowledgeable about the products and efficient in their jobs
- Carefully manage operations so that staffing levels match the desired retail experience
- Compensate employees in a way that rewards good service and effective sales
Sales employees are most likely to have some variable compensation or have some portion of their paycheck tied to their ability to drive sales. These incentives can be a direct commission on sales or a less direct financial or benefits bonus for the store meeting its goals.
The following video shares how one retail giant, Costco, understands the importance of treating its employees well in order to ensure good customer service and a positive shopping experience every time.
You can view the transcript for “Success for CostCo” (opens in new window).