Chapter 14

1. Reframing Retail Strategy Chapter 14

2. Learning Objectives Describe the three eras of retailing and what distinguishes them Define service according to a service-dominant logic and explain the four principles of service-dominant logic Explain how customer centricity is essential in contemporary retailing Discuss the central importance and imperative of continuous learning in retailing

3. Three Eras of Retailing To market Marketing to customers Marketing with customers LO 1

4. To Market • Time period prior to 1900 • Merchandise and goods moved primarily by railroads and by waterways • Major challenge was bringing merchandise to the market • Largest retailers were the department stores • Marshall Field in Chicago • Macy’s in New York City LO 1

5. Marketing to Customers • As transport and communication systems improved, it became easier to transport goods to the market • Successful retailers expanded their stores geographically giving rise to chain stores • Used price and promotion to market to and sell to customers • Golden age of advertising LO 1

6. Marketing to Customers The mass merchandising formula spread rapidly over several decades Low margins led to more store traffic, coupled with high inventory selfservice intensity Over time lost its competitive advantage LO 1

7. Exhibit 14.1 - Retail Resource Trinity Model LO 1

8. Exhibit 14.2 - The Retail Resource Efficiency Cycle LO 1

9. Marketing with Customers Active collaboration between retailers and their customers, suppliers and other stakeholders Long-term relationships became part of retail planning Operand resources - Those that humans act upon or do something to in order to create effects LO 1

10. Marketing with Customers • Operant resources - Those that can act on and produce effects • Employee skills and knowledge, the core competences of an organization or its dynamic capabilities LO 1

11. Marketing with Customers • Price to book ratio: Where price is the price of a share of stock and book is the book value of a share of stock • Higher price to book ratio, the higher the intangible assets relative to tangible assets LO 1

12. Service-Dominant Mindset • Better telecommunication resulted in better relationships with suppliers, employees, and customers • Service - Application of knowledge and skills through deeds, processes, and performances for the benefit of another • Its is a transcending concept • IHIP characteristics - Service is intangible, heterogeneous, inseparable and perishable LO 2

13. Service Can Take on Three Forms Direct • Provided directly from one person to another Indirectly • Goods become service appliances Education • Retailer provides information or demonstrations of products LO 2

14. Principles of Service-Dominant Logic Service is the basis of human exchange People are always cocreators of value All people are resource integrators Each person uniquely determines value LO 2

15. Service as Basis of Exchange • Service is the fundamental basis of exchange and the basis of all competition • Competing on intangibles provides the retailer a competitive advantage • Intangibles are hard to copy unlike tangible resources that can be easily copied or purchased in the marketplace LO 2

16. Value Co-Creation Service-dominant mindset views the customer as using what the firm sells to do something valuable or to create value Retailers that recognize that customers incorporate what they sell into the value co-creation process are able to use this knowledge in their communication LO 2

17. Resource Integration • Customers integrate three major types of resources as they co-create value in their daily lives • Market resources • Public resources • Private resources LO 2

18. Value as Unique • Retailers use information technology to know the precise economic value of each customer • Measured as the total sales revenue or profit from a customer over a particular time period such as one to three years • Recognizing and capitalizing on the unique experiencing of value by each customer is one of the biggest challenges in retailing LO 2

19. Customer-Centric Retailing Customer-centric view suggests that the retailer begins not with its capabilities and skills but with developing a deep understanding of its customers or potential customers Density: Best combination of resources that are mobilized to a time and place for a particular individual to pursue opportunities at an optimal value LO 3

20. Customer-Centric Retailing • Density is facilitated via the Internet • Like Google • Customer centricity - Implies the customer is an active participant in the process of creating resources and solutions LO 3

21. Exhibit 14.6 - Customer as an Operant Resource LO 3

22. Engagement • Three processes occur that can help facilitate engagement • Interfacing - Interaction can be hard surfaced if it is a tangible interface or soft surfaced if it is an intangible interface • Experiencing - Experiences are the cognitive and affective responses that result from interfacing • Connecting - If interfacing and experiencing is successful, then the customer will connect or bond with the retailer LO 3

23. Co-Production and Co-Creation • Two ways customers are active participants • Co-production: Active involvement of the customer in the retailer’s core activities • Co-creation: Everyone who purchases a tangible or intangible market offering and uses the offering is viewed as a co-creator of value LO 3

24. Relieving and Enabling • Customers would like to get relieved of their work enabling the retailers to tap the opportunity • A retailer should consider designing an assortment so as to enhance enabling customers • Enablers can be information technology based like a website LO 3

25. Dialogue • Dialogue is to learn together, and it is very consistent with a marketing with mental model • This communication allows customers to solve problems and pursue opportunities together with retailers LO 3

26. Value Propositions Statements of how the retailer plans to positively affect customers or also employees, suppliers, and other stakeholders LO 3

27. Developing a Learning Mindset • Actual results can fall short of planned results for a variety of reasons: • Environmental factors • Economic sluggishness • Aggressive competition • When actual results are below plan, it can be viewed as: • A control problem • An opportunity to learn LO 4

28. Single- Double- and Triple-Loop Learning • Single-loop learning - Deals with methods of correcting a situation • Doing the right things to achieve goals • Double-loop learning - Deeper form of learning • Retailer may be achieving goals, but the goals may reflect not the right things on which the retailer should focus LO 4

29. Single- Double- and Triple-Loop Learning Triple-loop learning - Deals with the right business model LO 4

30. Reframing • Obtaining customer-centric view in order to reframe the retailer’s business begins with a consideration of how to create more density for the customer • Involves analyzing how to reconfigure resources of the current retail business model specifically around changes in form, time, place, and possession LO 4

31. Reframing Form reconfiguring - Deals with the physical structure of the retail enterprise Time reconfiguring - Business can be reframed in terms of the time it performs certain activities and offers service LO 4

32. Reframing Place reconfiguring - Reframing can be undertaken in terms of geographic location Possession reconfiguring - Where and how a customer takes physical possession of the merchandise can also be a source of reframing LO 4