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Roberto Vona » 7.The management of marketing operations

Lesson content

Learning outcomes

Introduce the tools, techniques and models normally used to perform management control in retail companies.

Lesson content

Tactical management choices.
Quality referencing: width and depth of product range.
Type of retail company and product range policy.
Fine tuning and Basket analysis.
Quantity referencing: stock management.
The effects of “stock break”.
The GMROI.
Commercial brands and the effects of private labelling.
Visual merchandising, the merchandising plan and product categories according to Nelson.
Shelf management: sales criteria, the SLIM method, the market share standard, the marginality standard.
Pricing depending on business and product type.
Loyalty cards.

Quality referencing

Two issues:

1 - how wide to make the assortment and the resulting importance of a good logistics service for customers, who increasingly demand one-stop shopping modes;

2 - the depth of the merchandise mix, with related choices regarding the “amount” of information to include in the distribution formula adopted.

In grocery, the choices concerning the number of caregories, brands and product variants to be included in the assortment, are inevitable once a decision has been made on the type of distribution to use.

Basket analysis: Technical analysis of the contents of individual receipts to identify products often purchased together to aid stock management.

Limits:

it is mainly based on internal data;
it doesn’t register customer satisfaction;
it doesn’t consider the brands not included in the product range;
it provides no information on potential customers.

Constraints and opportunities in stock-related decisions

Range of products, business type and cost of stock

Grocery

Simpler management aimed at ensuring a good supply system rather than selecting references upstream or what products to deal in.

Goals

To help reduce out-of-stock risk, businesses could use distribution centres to improve the logistics of materials and information flow.

Non Grocery

Competitive advantage comes from looking for and selecting the right supplier. The information offered by the width and/or exclusiveness of the assortment is created by identifying those companies who are able to bring the goods to the market; know-how is a source of differentiation.

Goals

Reduce the need for working capital and fixed assets to a minimum.

The GMROI

Private labelling

Commercial brands in the past

Make the range of products and points of sale more appealing;

Encourage price comparison and (price leadership competition);

Implement assortment policies based on well-known products combined with continual promotions;

Maximise the speed of reinvestiment in stock;

Make industry responsible for guaranteeing the quality of the products.

Product sector and private labelling

Features of the product sectors in favour of private labelling:

maturity of demand;
poor percepition of brand-related differentiation;
existing production capacity that can offer quality standardisation within the time and costs agreed.

Private labelling (cont.)

The new management choices

Rethinking referencing policies from a category management perspective;

Intensifying private labellingusing the brand-logo, often to the detriment of well-known industrial brands;

Simplifying and rationalising decisions concerning the merchandise mix and incoming logistics, to achieve better margins and productivity through:

“efficient” integration of certain marketing activities, previously handled by manufacturers;
shorter shelf-time for goods.

Visual Merchandising and Merchandising Plan

Management of the display area and enhancement of the product range, with the aim of helping the customers’ search in the shop.

Nelson’s product category classification:

categories generating demand flow autonomously;
categories deriving their demand flows from being placed next to other products;
categories developing business by means of flows of different origin.

Merchandising Plan

Identifying the best references for marketing, and their positioning in the point of sale to respond to needs the customer reveals through their purchasing behaviour.

→ It helps customers in their search.
→ It improves readability and access to the product range.
→ It is developed based on positioning of the traffic-generating references within the point of sale.

Shelf management and Loyalty Cards

Shelf Management: Defining quantity and quality of the display area given to each reference.

Methods

Sales criteria;

Surface area proportional to turnover, weighted as per growth in sales rates;

SLIM Method (Store Labour and Inventory Management);

Search for logistic efficiency;

Market share criterion;

(Gross or net) margins criterion.

Loyalty cards: They may be “membership” cards or may be used to collect “points” → Point-collecting cards.

Goals

Increased turnover with equal client base, achieved by stimulating the average expenditure level of high-potential customers;

Expanded market thanks to the spontaneous, free-of-charge sponsorship provided by loyal, satisfied customers;

Increased overall margins thanks to one-to-one marketing initiatives offered to the most demanding returning customers, who are usually willing to accept price increases in exchange for better services;

Lower penetration and commercial development costs.