Chapter 88

Information Gathering and Processing in Retailing

Dr. Pointer’s NotesDr. Pointer’s Notes

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Chapter Objectives

To discuss how information flows in a retail distribution channel

To show why retailers should avoid strategies based on inadequate information

To look at the retail information system, its components, and recent advances

To describe the marketing research process

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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

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Figure 8.1 How Information Flows in a Retail Distribution Channel

Informationand theSupplier

Informationand theRetailer

Informationand the

Consumer

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Suppliers Need To Know

From the Retailer Estimates of

category sales Inventory turnover

rates Feedback on

competitors Level of customer

returns

From the Customer Attitudes toward

styles and models Extent of brand

loyalty Willingness to pay a

premium for superior quality

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Retailers Need To Know

From the Supplier Advance notice of

new models and model changes

Training materials Sales forecasts Justifications for

price changes

From the Customer Why people shop

there What they like and

dislike Where else people

shop

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Consumers Need To Know

From the Supplier Assembly and

operating instructions

Extent of warranty coverage

Where to send a complaint

From the Retailer Where specific

merchandise is stocked in the store

Methods of payment acceptable

Rain check and other policies

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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

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Retail Information System (RIS)

Anticipates the information needs of retail managers

Collects, organizes, and stores relevant data on a continuous basis

Directs the flow of information to the proper decision makers

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Poor Retail Strategy Decision based on inadequate Information

• Inadequate information can 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)

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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.

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Figure 8.2 A Retail Information System

EnvironmentRetailer’s philosophy

Strategic plans

Retail Operations

Data Collection Information Control Center

b. Data Storage and retrieval c. updating of files

Implementation

Feedback

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Database Management

A major element in a RISSystem gathers, integrates, applies, and

stores information in related subject areasUsed for

– Frequent shopper programs– Customer analysis– Promotion evaluation– Inventory planning– Trading area analysis

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Five Steps to Approaching Database Management

Plan the particular database and its components and determine information needs

Acquire the necessary information Retain the information in a usable and

accessible format Update the database regularly to reflect

changing demographics, recent purchases, etc.

Analyze the database to determine strengths and weaknesses

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Figure 8.4 Retail Database Management in Action

Data WarehouseExecutive &

other company employees

Channel Partners

Customers

micromarketingData mining

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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. Better data analysis and manipulation are possible

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Components of a Data Warehouse

Physical storage location for data – the warehouse

Software to copy original databases and transfer them to warehouse

Interactive software to allow processing of inquiries

A directory for the categories of information kept in the warehouse

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Data Mining and Micromarketing

Data mining is the in-depth analysis of information to gain specific insights about customers, product categories, vendors, and so forth

Micromarketing is an application of data mining, whereby retailers use differentiated marketing and develop focused retail strategy mixes for specific customer segments

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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, units and etc.

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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

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Figure 8.7 The Marketing Research Process

Define problem

Implement findings

Make Recommend.

Analyze Data

Generate primary data

Examine secondary

data

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Marketing Research

in Retailing

Issues (problem) definition involves a clear statement of the topic to be studied. Can use both secondary

and primary data

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Secondary Data

Advantages Inexpensive Fast Several sources

and perspectives Generally credible Provides

background information

Disadvantages May not suit current

study May be incomplete May be dated May not be accurate

or credible May suffer from poor

data collection techniques

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Secondary Data Sources

Internal Sales reports Billing reports Inventory records Performance reports

External Databases

– ABI/Inform, Business Periodicals Index, etc.

Government– U.S. Census of Retail

Trade– Statistical Abstract of

the U.S.– Public records

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Primary Data

Advantages Collected for

specific purpose Current Relevant Known and

controlled source

Disadvantages May be more

expensive Tends to be more

time consuming Information may not

be acquirable Limited perspectives

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Primary Decisions

• In-house or outsource?• Sampling method?

– Probability (each person has a known and equal chance of being selected)

– Nonprobability

• Data collection method?– Survey– Observation– Experiment– Simulation

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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.

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Survey Methods

In-person Over the telephone By mail Online

Disguised Non-disguised

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Mystery Shoppers

Retailers hire people to pose as customers and observe operations from sales presentations to how well displays are maintained to service calls

Observations may be disguised or nondisguised, structured or unstructured, direct or indirect, and human or mechanical.

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Questions