Retail Customers. Tutorial 7

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1 Tutorial 7 To Students: Please read through Lecture Notes and Tutorial Questions before you attend the lesson. All groups will be assigned questions for presentation. Please take turns to present. Retail Customers MCQ 1. The easiest way for a retailer to differentiate itself in the eyes of consumers is to: a. satisfy the customer's needs and wants better then the competition. b. use a unique name. c. use market segmentation to break up Singapore's homogeneous markets into more heterogeneous population bases. d. offer no "transaction" services. e. sell below cost. ANS: A REF: p is determined by whether the total shopping experience has met or exceeded the customer's expectation. a. Customer service b. Customer-orientation rating c. Transaction performance d. Customer satisfaction e. Customer posttransaction analysis ANS: D REF: p Some retailers claim that the declining level of customer satisfaction may not actually be a bad sign. These retailers suggest that. a. the decline is a function of rising expectations by the consumer b. many consumers don't care about satisfaction; they care only about low prices c. customers can never be satisfied, and as such it is typically not as important to worry as much about satisfaction as it is to worry about sales levels d. there is a negative relationship between customer satisfaction and sales e. pollsters don't know how to measure satisfaction ANS: A REF: p is the dividing of a heterogeneous consumer population into smaller, more homogeneous groups based on their characteristics. a. Target marketing b. Customer satisfaction c. Market segmentation d. Customer services

2 2 e. Operations management ANS: C REF: p Gen Y consumers were born between the years. a b c d e ANS: D REF: p. 74 OBJ: LO involves tailoring merchandise in each store to the preferences of its neighborhood. a. Neighborhood targeting b. Micromarketing c. Target marketing d. Benefit analysis e. Customer targeting ANS: B REF: p. 78 OBJ: LO Which of the following statements apply to members of the college-educated market? a. They are especially watchful of price, quality and advertised claims. b. The size of this group is expected to undergo a substantial decrease in the next decade. c. They are less sophisticated, discriminating and more dependent than other consumers of their age and income level, when making retail purchases. d. With the advent of the Internet, they will have no need for in-store salespeople. e. Their buying behaviors do not differ from those of other consumers of their same age who are not college educated. ANS: A REF: p. 80 OBJ: LO refers to households that are made up of married couples, with each partner earning an income, and who do not have children. a. Traditional b. Mingles c. Duals d. Singles e. Dinks ANS: E REF: p. 82 OBJ: LO Dinks would be a good target market for which type of retailer? a. Family vacation packages. b. School supplies. c. Restaurants/entertainment. d. Large 3 or 4 bedroom homes. e. Toys. ANS: C REF: p OBJ: LO Disposable income is: a. all personal income after taxes and retirement savings.

3 b. all personal income after savings. c. all personal income minus the money needed for necessities food, clothing, housing, etc. d. all personal income after taxes minus the money needed for necessities. e. all personal income after taxes. ANS: E REF: p. 85 OBJ: LO Regarding women in the labor force, retailers should: a. realize that full-time working women tend to do more in-home shopping than any other group. b. remember that special services are more important than price in capturing the time-pressed shopper's store loyalty. c. realize that price is the most important factor determining store selection. d. remember that this segment works hard during the week and wants to enjoy the weekend; thus, retailers should avoid having weekend sales. e. realize that household incomes for dual wage earner couples are falling in comparison to other households. Thus, retailers should ignore this market. ANS: B REF: p. 87 OBJ: LO Regarding the use of credit, retailers should: a. remember that customers desire the extra benefits (free airline miles or rebates) that many credit cards offer. b. be aware that some big-named retailers are now co-branding their names with these third party issuers. c. remember that by accepting credit cards, the retailer may increase sales and profits. d. be willing to accept third-party cards. e. All of the above statements are true. ANS: E REF: p. 87 OBJ: LO Retailers can use their understanding of to improve their profit performance. a. consumers use of credit b. their target customer's buying behavior c. the nation's gross domestic product d. the business cycle e. the average consumer's personal income ANS: B REF: p. 89 OBJ: LO 3-4

4 4 CASE STUDY Use with Chapter 11, Customer Relationship Management, Chapter 19, Customer Service. Vanessa O Connell, Posh Retailers Pile on Perks for Top Customers, The Wall Street Journal, April 26, They have always relied on premier customers for high-end sales, but department store retailers are pumping up their already famous reward programs to focus even more on these big spenders. Neiman Marcus, Saks Fifth Avenue, and others want to gain a greater share of wallet from the top 100, ,000 customers. Can these businesses survive on just the top tier? Neiman Marcus s top 100,000 customers spend more than $12,000 per year at the store, whereas the rest of its customers spend more like $600 per year. This year, its InCircle rewards program is offering a limited-edition Lexus for customers who earn five million points. Nordstrom introduced a tiered rewards system with perks like free shipping, vacations, and invitations to red carpet events. And Saks Fifth Avenue is offering perks and big rewards in a similar manner. Both retailers are testing credit cards for use at any store rather than store-specific credit cards, which makes it easier for customers to gain points and, ultimately, rewards. However, other department stores, such as Barney s New York, do not offer rewards but rather send out gift certificates based on point levels. For some customers, perks and rewards encourage them to be more loyal to the retailer, but others prefer to just take a discount in the store. Loyalty programs with extensive rewards are costly to retailers, but Neiman Marcus believes that its loyalty program is both growing and worthwhile. Retailers studies show that customers prefer special privileges and perks rather than gift certificates and discounts. So what will it be? Questions: 1. What are retailers doing to spice up their loyalty programs? Suggested Ans: Neiman Marcus, Nordstrom, and Saks Fifth Avenue are offering better rewards and perks to top-spending customers. Neiman Marcus and Saks are testing a program that allows customers to accrue reward points from dollars spent at other stores as well. Barney s New York has a different approach to loyalty programs; it sends customers a gift certificate based on the dollars they spend in the store. HC- Group 1 1.In order to retain the customers loyalty, retailers are coming up with innovative methods. Some retailers are giving perks to their loyal customers, perks such as free shipping, free vacation and even, invitations to red carpet events. Retailers partner credit card companies such as Mastercard for customers to accumulate points easily through usage of the credit card. And when they accumulate a certain amount of points, they can exchange their points for rewards e.g. Air tickets. However, some retailers prefer giving out gift certificates and discounts, such as G2000 and barney s new York. They believe that it would be more worthwhile for customers to take a discount in the store than to gain points for rewards. Though loyalty programs are costly to retailers, they believe it is worthwhile in the long term. Studies have shown rewards have

5 triumph in retaining the loyalty of customer, but all these loyalty programs all have one aim. And that is to gain long term profit. BN- Group 1 1. The retail industry is saturated; monopolistic competition is faced by the department store retailers. Therefore, high profit retailers are trying to differentiate themselves by developing strategic plans that provide an advantage that competitors can overcome only with a substantial investment of time and money. Instead of just changing pricing decisions which has a negatively sloping demand curve due to the law of diminishing marginal returns, non-pricing action seeks to shift the demand curve to the right making it more inelastic. Thus, more profits for the retailer. It can be seen in the case study that the premier customers spend $12,000 per year compared to the others which spend about $600 per year which is a huge difference in money spent, thus being able to secure this top tier customers would mean profit. In the case study, companies used non-pricing decisions like offering rewards like limited-edition cars to them for customers who earned a certain amount of points. Perks like free shipping, vacations and invitations to events are also used. They are also making it easy for consumers to accumulate points by using credit cards. Other stores offer discounts. 2. As a consumer, do you prefer special privileges and rewards or discounts and coupons? Suggested Ans: Actually, I would prefer the coupon, but then again, I m more like the average rather than the top-tier customer. Perhaps this type of preference reflects the segmentation retailers are trying to capture by offering fantastic rewards to target markets that have plenty to spend and therefore don t worry much about discounts. MA- Group 4 Q2. As a consumer, do you prefer special privileges and rewards or discounts and coupons? This answer can be analyzed from different angles. Rich people who like to show off would prefer privileges and rewards over discounts and coupons. Do not be mistaken, privileges may mean having a VIP status or being an honorary member for the retail store. Let s say, a store have a new season of branded bags up for sale, a lot of people are queuing up before the opening. Now, the rich person would want the privilege to enter the shop first and avoid queuing under the sun for the new bag. Another group of people, who takes advantage of every single possible thing, would choose discount and coupons. Rewards may seem materialistic but that would depend on the person themselves. However, monetary gains would stay a common trait throughout. Thus this particular group of people would jump upon any chance of monetary saving opportunity they see. MA- Group 5 Q2. As a consumer, I will most likely prefer having special privileges and rewards rather than discounts and coupons. How about an example to illustrate this. =) Imagine being a no.1 Man Utd fan. Loving the club s jersey and such which are mostly distributed by the retailer Nike. One fine day Nike put a nationwide offer Be a big spender and get to meet Man Utd s players live! As compared to, Be a big spender and get to buy Man Utd jersey for half the price! As a consumer, the first offer excites me more. Special privileges like these create reason to shop.