How do you know that you have the right product mix?
1. What are the signs that you have the right product mix?
If you follow a dynamic clustering / grouping approach and in turn
develop the correct product mix for your different clusters, you should see a
steady increase in sales and foot traffic as customers become loyal to your
brand and return to your stores.
That’s because they know that they will find the perfect assortment of a
specific product category in your stores that they are looking for.
Customers are also less likely to walk out of your store because they
could not find what they wanted. Dynamic clustering considers the specific
customers for that store(s) needs and wants and their shopping behaviour.
For example, a customer who is looking for a travel-sized shampoo will
go to a retailer which they know has a very wide and deep assortment of hair
care products - who they know will also stock different sizes of shampoos.
2. What are the signs that you don’t have the right product mix?
On the other hand, not having the right product mix can have a negative
impact on your sales as customers will likely leave your store unsatisfied with
your offering and decide to take their business elsewhere.
For example, a very brand conscious customer who buys a specific type of
toothpaste will rather go to a competitor if they know your store does not have
a very long and wide assortment of toothpaste and thus, not that specific
brand.
By looking at data from your POS (Point of Sale) systems, you can
identify which brands are the most popular with your target market for each
cluster and ensure that brand is stocked in those stores, especially if the
shopper profile of those stores is a brand conscious shopper.
Not having the right product mix will also decrease foot traffic and
lead to poor customer loyalty.
Consistently failing to meet the customer’s needs and expectations will
inevitably result in a bad reputation as well. Retailers need to make their
target customers aware of what products you stock and what you are able to
offer them to keep satisfaction as high as possible.
Unnecessary stock holding can also occur
when clusters do not have an optimally developed product mix. Retailers might
end up with stock that they can’t sell because the target market isn’t
interested in it.
This can be avoided by looking at sales
data and identifying which products and brands are the most popular in a
certain cluster and focussing on stocking only those. Of course, a retailer can
stock other products that aren’t as popular. If they do, they must be careful
about how much they stock.
Retailer Marketing Decisions
With the changes in the marketing environment,
consumer preferences, and technology advancement, retailers are looking for new
marketing strategies to operate profitably. Retailers face major marketing
decisions about their target markets and positioning, product assortment and
services, price, promotion, and place.
Retailer
marketing decisions are;
1.
Target Market and Positioning Decision
2.
Product Assortment and Services Decision
3.
Price Decision
4.
Promotion Decision
5.
Place Decision
1. Target
Market and Positioning Decision
Retailers must begin with defining their
target markets. Well defined target markets enable the retailers to decide
how they will position themselves in these markets. A retailer should seek answers to some
important questions.
·
Should the retail store concentrate on upper level,
middle level, or down-level shoppers?
·
Do target shoppers desire variety, depth of
assortment, convenience, or low prices?
To make appropriate and consistent
decisions about product assortment, services, pricing,
advertising, store decor, and any other decisions to support their positions,
retailers must first precisely define and accurately profile their markets.
2. Product
Assortment and Services Decision
Retailers must make decisions on three
important product variables- product assortment, services mix, and store
atmosphere.
Product assortment
The retailers’ product assortment
decisions must aim at matching target shoppers’ expectations. Decisions
regarding product assortment include its width and depth.
Thus, a restaurant can offer a narrow
and shallow assortment (small lunch counter), a narrow and deep assortment
(delicatessens), a wide and shallow assortment (cafeteria), or a wide and deep
assortment (large restaurant).
Another element of the product
assortment is the quality of the goods. The customer considers not only the
range of choice but also the quality of the products.
To compete with the competitors having
similar product assortment and quality level, the retailer must find other ways
to differentiate itself from them. It can pursue any of several
product-differentiation strategies.
It can offer products that no other
competitor carries. It may use its own private brands or may sell national
brands on which it holds exclusive distribution right.
Service mix
Retailers must also decide on a service
mix to ensure maximum customer satisfaction.
Besides typical customer services,
modern retailers may offer such services as home delivery, credit, and
conversation. A retailer can use service mix as a key tool of nonprice
competition for differentiating him from others.
Stores Atmosphere
The store’s atmosphere is another
important consideration for a retailer. The store’s physical layout and
atmosphere should be properly planned to suit the target market and induce
customers to buy.
For example, a restaurant should be
quiet, cosy, and clean. Modern retailers are increasingly working to create a
shopping environment that matches their target markets.
3. Price Decision
A retailer’s price policy plays an
important role in positioning. In formulating price policies, retailers must
consider their target market, product, service assortment, and competition.
Although all retailers would like to
charge high markups and achieve high volume, they are rarely achievable
simultaneously.
Most retailers, such as specialty
stores, seek high markups on lower volume. Retailers like mass merchandisers
and discount stores seek low markups on higher volume.
Retailers also must pay attention to
pricing tactics. Most retailers will put a low price on items to serve as
“traffic builders” or “loss leaders.” On some occasions, they run storewide
sales.
On others, they plan markdowns on
slower-moving merchandise.
For example, shoe retailers may expect
to sell 50 percent of their shoes at the normal markup, 25 percent at a 40
percent markup, and the remaining 25 percent at cost.
4. Promotion Decision
Retailers use advertising, personal
selling, sales promotion, and public relations as promotion tools. They
advertise in print media (newspapers, magazines) and electronic media (radio,
television). Advertising can be supplemented by circulars and direct-mail
pieces.
Salespeople are trained properly to
carry out personal selling jobs. Sales promotions may include in-store
demonstrations, displays, and visiting celebrities.
Retailers also perform public relations
activities. These include press conferences and speeches, store opening,
newsletters, and public service activities.
5. Place Decision
A retailer’s location is the key to its
ability to attract customers and succeed in business. The costs of building or
leasing store premises have a significant bearing on the retailer’s profits.
So, for a retailer, site-location
decisions are crucial. Small retailers may not be able to pay much attention to
selecting locations.
However, large retailers generally
utilize the services of specialists who select locations using advanced
methods.
How Can Retail
Stores Expand Their Business?
Retail stores are a common business found in the economic
marketplace. These businesses often sell various goods or services to consumers
for meeting their needs or wants. Many retail stores look to expand their
operations as they continue to increase sales and establish themselves in the
business environment. Business expansion can take many forms; business owners
often spend ample amounts of time and effort reviewing expansion opportunities
before choosing the right opportunity.
Facts
Business owners may need to review financing options,
current and future consumer demand or the number of competitors in the business
environment before expanding their business. These external forces may create
difficult business scenarios for retail stores looking to expand their
operations. Business owners must be reasonably assured that expanded operations
will generate increased profits rather than creating a drag on current business
operations.
Open New Location
A common expansion method for retail stores is to open a
new location in the economic marketplace. Business owners may use this
expansion method to reach consumers and other physical location or saturate the
market with their products. Opening a second location may be the most expensive
option for expanding retail operations. Finding a new location, renovating the
space to the business needs and hiring additional employees for the new store
are just a few situations business owners must consider.
Diversify Products
Retail business owners may decide to diversify their
product lines offered to consumers. This may take a specialized retail store
into a more general shopping experience for customers. Diversifying products
allows retail business owners to find new profit lines and hedge their bet
against business risk. Because consumers often change their purchasing habits
or behavior, companies may need to offer a variety of goods or services to
ensure consumers continue shopping their retail location.
Create Online Presence
The increasing use of business technology may allow retail
stores to create an online website for selling goods or services. Using a
retail website allows companies to target markets or demographic groups in
different regions or international markets. Retail websites are usually
inexpensive to set up in may not require significant capital investment from
retail business owners. Retail business owners may also use retail websites to
provide product information to current consumers and allow them to pre-order
specialized products.
Considerations
Business owners should carefully review the initial
capital outlays of the expansion methods they are reviewing. Owners may also
need to use market intelligence when deciding how to expand current operations.
Market intelligence involves looking at competitors to see if they are
expanding or contracting their operations. This review may tip off business
owners regarding significant changes in the economic market and the financial
impact of new business operations.
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