Chapter 8 Information Gathering and Processing in Retailing

Chapter 8 Information Gathering and Processing in Retailing Dr. Pointer’s Notes

Chapter Objectives 1. To discuss how information flows in a retail distribution channel 2. To show why retailers should avoid strategies based on inadequate information 3. To look at the retail information system, its components, and recent advances 4. To describe the marketing research process 8 -2

Information Flows in a Retail Distribution Channel • For channel of distribution to work effectively, there should be a free flow of information from the main parties – suppliers(wholesalers and manufacturers), retailer and consumer. • Collaboration and cooperation is necessary 8 -3

Figure 8. 1 How Information Flows in a Retail Distribution Channel Information and the Supplier 8 -4 Information and the Retailer Information and the Consumer

Suppliers Need To Know From the Retailer v Estimates of category sales v Inventory turnover rates v Feedback on competitors v Level of customer returns 8 -5 From the Customer v Attitudes toward styles and models v Extent of brand loyalty v Willingness to pay a premium for superior quality

Retailers Need To Know From the Supplier v Advance notice of new models and model changes v Training materials v Sales forecasts v Justifications for price changes 8 -6 From the Customer v Why people shop there v What they like and dislike v Where else people shop

Consumers Need To Know From the Supplier v Assembly and operating instructions v Extent of warranty coverage v Where to send a complaint 8 -7 From the Retailer v Where specific merchandise is stocked in the store v Methods of payment acceptable v Rain check and other policies

Purpose of Retail Information Systems • Develop and maintain a system that will provide good information for retailers to make better decisions • Data gathering is useful and should not be viewed as a one-shot resolution of a single issue. • A retail information system needs to be utilized 8 -8

Retail Information System (RIS) v Anticipates the information needs of retail managers v Collects, organizes, and stores relevant data on a continuous basis v Directs the flow of information to the proper decision makers 8 -9

Poor Retail Strategy Decision based on inadequate Information • Inadequate information cause a firm to enact bad strategies • Examples illustrated in text a. poor intuition (movies theater) b. continuing what was done before (toy store c. not reading customers perceptions (florist) 8 -10

Advantages of RIS • Information is organized and company focused • Opportunities and threats may be discovered earlier • Strategic elements can be coordinated • New strategies can be developed quicker • Quantitative data results are accessible and cost benefit analysis done easier. 8 -11

A Retail Information System Figure 8. 2 Environment Retailer’s philosophy Strategic plans Data Collection Information Control Center b. Data Storage and retrieval c. updating of files Implementation Feedback 8 -12 Retail Operations

Database Management v A major element in a RIS v System gathers, integrates, applies, and stores information in related subject areas v Used for – – – 8 -13 Frequent shopper programs Customer analysis Promotion evaluation Inventory planning Trading area analysis

Five Steps to Approaching Database Management 1. Plan the particular database and its components and determine information needs 2. Acquire the necessary information 3. Retain the information in a usable and accessible format 4. Update the database regularly to reflect changing demographics, recent purchases, etc. 5. Analyze the database to determine strengths and weaknesses 8 -14

Figure 8. 4 Retail Database Management in Action Executive & other company employees Data mining 8 -15 Data Warehouse Channel Partners micromarketing Customers

Data Warehousing Data warehousing is where copies of all the data bases in a firm are maintained in one location and accessible to employees at any locale. Advantages 1. Employees can quickly access information for decision making 2. New data is make available company wide sooner 3. Data inconsistencies are reduced 4. 8 -16 Better data analysis and manipulation are possible

Components of a Data Warehouse v Physical storage location for data – the warehouse v Software to copy original databases and transfer them to warehouse v Interactive software to allow processing of inquiries v A directory for the categories of information kept in the warehouse 8 -17

Data Mining and Micromarketing v Data mining is the in-depth analysis of information to gain specific insights about customers, product categories, vendors, and so forth v Micromarketing is an application of data mining, whereby retailers use differentiated marketing and develop focused retail strategy mixes for specific customer segments 8 -18

Figure 8. 6 Applying UPC Technology to Gain Better Information Scanning price at cash register – Give information which can used for inventory management. Universal Product Codes (UPC)– marking products with a series of thick and thin vertical lines to give them unique ID codes. Scanning products on shelf/racks provides information to verify inventory and indicate time for price decreases (mark downs) Electronic Data Interchange (EDI)- retailers and suppliers regular exchange information through computers regarding inventory levels, delivery times, 8 -19 units and etc.

Marketing Research Process in Retailing • Marketing research in retailing entails the collection and analysis of information relating to specific issues or problems facing a retailer. • Marketing research process – embodies a series of activities: • It is systematic process as outlined on next slide 8 -20

The Marketing Research Process Figure 8. 7 Define problem Examine secondary data Generate primary data Implement findings Make Recommend. Analyze Data 8 -21

Issues (problem) definition involves a clear statement of the topic to be studied. Can use both secondary and primary data 8 -22 Marketing Research in Retailing

Secondary Data Advantages v Inexpensive v Fast v Several sources and perspectives v Generally credible v Provides background information 8 -23 Disadvantages v May not suit current study v May be incomplete v May be dated v May not be accurate or credible v May suffer from poor data collection techniques

Secondary Data Sources External Internal v Databases v Sales reports – ABI/Inform, Business v Billing reports Periodicals Index, etc. v Inventory records v Government v Performance reports – U. S. Census of Retail Trade – Statistical Abstract of the U. S. – Public records 8 -24

Primary Data Advantages v Collected for specific purpose v Current v Relevant v Known and controlled source 8 -25 Disadvantages v May be more expensive v Tends to be more time consuming v Information may not be acquirable v Limited perspectives

Primary Decisions • In-house or outsource? • Sampling method? – Probability (each person has a known and equal chance of being selected) – Nonprobability • Data collection method? – – 8 -26 Survey Observation Experiment Simulation

Data collection method – Survey- information is systematically gathered from respondents by communicating with them and using a questionnaire – Observations- present ant past behavior of customers are noted and recorded – Experiment- one or more elements of a retail strategy mix are manipulated under controlled conditions to determine its effect on sales or etc. – Simulation-computer program is used to manipulate the elements of a retail strategy mix rather than test in a real setting. 8 -27

Survey Methods v In-person v Over the telephone v By mail v Online 8 -28 v Disguised v Non-disguised

Mystery Shoppers v Retailers hire people to pose as customers and observe operations from sales presentations to how well displays are maintained to service calls v Observations may be disguised or nondisguised, structured or unstructured, direct or indirect, and human or mechanical. 8 -29

Questions 8 -30