CHAPTER 13: BUILDING CUSTOMER LOYALTY: CUSTOMER RELATIONSHIP
MANAGEMENT AND SERVICE STRATEGIES ___________________________________ 2
INTRODUCTION ________________________________________________________________ 2
USING COMMUNICATION PROGRAMS TO DEVELOP BRANDS AND BUILD CUSTOMER
LOYALTY ______________________________________________________________________ 3
VALUE OF BRAND IMAGE _______________________________________________________ 3
BUILDING BRAND EQUITY ______________________________________________________ 5
BRAND AWARENESS ________________________________________________________ 5
ASSOCIATIONS _____________________________________________________________ 6
CONSISTENT REINFORCEMENT _______________________________________________ 6
EXTENDING THE BRAND NAME __________________________________________________ 7
METHODS OF COMMUNICATING WITH CUSTOMERS __________________________________ 8
DIRECT MARKETING ___________________________________________________________ 9
DIRECT MAIL _____________________________________________________________ 10
EMAIL ___________________________________________________________________ 10
MOBILE MARKETING_______________________________________________________ 11
TRENDING MOBILE MARKETING THEMES _____________________________________ 11
ONLINE (DIGITAL) MARKETING _________________________________________________ 18
SALES PROMOTIONS __________________________________________________________ 18
COUPONS ________________________________________________________________ 19
REBATES _________________________________________________________________ 21
PREMIUMS _______________________________________________________________ 21
SAMPLES _________________________________________________________________ 21
POINT-OF-PURCHASE (POP) DISPLAYS ________________________________________ 21
SPECIAL EVENTS __________________________________________________________ 22
POP-UP STORES ___________________________________________________________ 22
PERSONAL SELLING __________________________________________________________ 22
ADVERTISING ________________________________________________________________ 23
DIGITAL _________________________________________________________________ 23
NEWSPAPERS _____________________________________________________________ 23
MAGAZINES ______________________________________________________________ 24
TELEVISION ______________________________________________________________ 25
RADIO ___________________________________________________________________ 25
PODCASTS________________________________________________________________ 25
CO-OP PROGRAMS _________________________________________________________ 25
OUTDOOR BILLBOARDS ____________________________________________________ 26
PUBLIC RELATIONS ___________________________________________________________ 26
STRENGTHS AND WEAKNESSES OF COMMUNICATION METHODS ______________________ 27
CONTROL ___________________________________________________________________ 28
FLEXIBILITY _________________________________________________________________ 29
CREDIBILITY ________________________________________________________________ 29
COST_______________________________________________________________________ 29
PLANNING THE RETAIL COMMUNICATION PROCESS ________________________________ 29
ESTABLISHING OBJECTIVES ____________________________________________________ 30
COMMUNICATION OBJECTIVES ______________________________________________ 30
CONSUMER RIGHTS ________________________________________________________ 32
DEVELOPING THE PROMOTIONAL MESSAGE ______________________________________ 33
FACTORS IN SELECTING MEDIA______________________________________________ 34
COVERAGE _____________________________________________________________ 34
REACH _________________________________________________________________ 34
COST __________________________________________________________________ 34
IMPACT ________________________________________________________________ 35
DETERMINING PROMOTIONAL FREQUENCY AND TIMING ____________________________ 36
FREQUENCY ______________________________________________________________ 36
TIMING __________________________________________________________________ 36
DETERMINING THE COMMUNICATION BUDGET ____________________________________ 37
MARGINAL ANALYSIS METHOD _____________________________________________ 37
OBJECTIVE-AND-TASK METHOD _____________________________________________ 38
RULE-OF-THUMB METHODS _________________________________________________ 40
AffORDABLE METHOD ____________________________________________________ 40
PERCENTAGE-OF-SALES METHOD ___________________________________________ 40
COMPETITIVE PARITY METHOD_____________________________________________ 41
ALLOCATING THE PROMOTIONAL BUDGET ________________________________________ 41
PLANNING, IMPLEMENTING, AND EVALUATING COMMUNICATION PROGRAMS ___________ 42
ADVERTISING CAMPAIGN __________________________________________________ 43
SALES PROMOTION OPPORTUNITY ___________________________________________ 43
SPECIAL PROMOTION USING A CRM/CAMPAIGN MANAGEMENT TOOL _____________ 44
SUMMARY ____________________________________________________________________ 46
KEY TERMS ___________________________________________________________________ 47
CHAPTER 13: BUILDING CUSTOMER LOYALTY: CUSTOMER
RELATIONSHIP MANAGEMENT AND SERVICE STRATEGIES
INTRODUCTION
A critical step in the retail management decision-making process is developing
and implementing a communication program to:
 build appealing brand images
 attract customers to stores and Internet sites
 encourage customers to buy merchandise
The communication program informs customers about the retailer as
well as the merchandise and services it offers, and plays a role in
developing repeat visits and customer loyalty.
Communication programs can have both long-term and short-term effects on a
retailer’s business. From a long-term perspective, communication programs can
be used to create and maintain a strong, differentiated image of the retailer and
its store brands. This image develops customer loyalty and creates a strategic
advantage. Thus, brand-image–building communication programs complement
the objective of a retailer’s CRM (customer relationship management)
program.
On the other hand, retailers frequently use communication programs to realize
the short-term objective of increasing sales during a specified time period. For
example, retailers often have sales during which some or all merchandise is
priced at a discount for a short time, for example, at the end of a season.
Grocery stores usually place weekly ads with coupons that can be used to save
money on purchases made during the week.
USING COMMUNICATION PROGRAMS TO DEVELOP BRANDS AND
BUILD CUSTOMER LOYALTY
A brand is the symbolic embodiment of all the information connected to the
product and/or retailer and serves to create associations and expectations
around it. A brand often includes a logo, fonts, colour schemes, symbols, and
sound, which may be developed to represent implicit values, ideas, and even
personality. In a retailing context, the name of the retailer is a brand that
indicates to consumers the type of merchandise and services offered by the
retailer. Some retailers develop private-label brands or store brands that are
exclusively sold through their channels. In some cases this private-label
merchandise bears the retailer’s name, such as Shoppers Drug Mart aspirin.
In other cases, special brand names are used, such as Hudson’s Bay’s Black
Brown 1826, Shoppers Drug Mart’s Life, and Canadian Tire’s Mastercraft.
A retailer develops a brand by associating an image with the product and
services that is branded into the consciousness of consumers. A brand is
therefore one of the most valuable elements in a retailer’s advertising strategy.
One goal in brand recognition is the identification of a brand without the
name of the company present. It is therefore important that a brand be
protected legally by patent or copyright. For example, the well-known brand
of Apple is recognized for innovation in technology and has created immense
success in the branding of iPhone and Apple Music.
Brand energy is the concept that links the idea that the brand creates value
through meaningful experiences rather than a focus on merely generating
profits. The energy that flows throughout the business develops a consistent
way of thinking, feeling, and behaving toward the retailer and its products and
services in all employees; an example is Patagonia, where customers
embrace its environmental philosophy.
Attitude branding is the choice to represent a feeling that is not
necessarily connected with the product or retailer—for example,
Nike: “Just Do It”; The Body Shop: “Cruelty-Free Beauty”; and Dove: “Real
Beauty.” A great brand adds a sense of purpose to the experience.
VALUE OF BRAND IMAGE
Brands provide value to both customers and retailers. Brands convey
information to consumers about the nature of the shopping experience—the
retailer’s mix—they will encounter when patronizing a retailer. They also affect
customers’ confidence in decisions made to buy merchandise from a retailer.
Finally, brands can enhance customers’ satisfaction with the merchandise and
services they buy. Consumers feel different when wearing jewellery bought
from Birks than from Claire’s or lingerie from La Senza than from Walmart.
The value that brand image offers retailers is referred to as brand equity. Strong brand names can
affect the customer’s decision-making process,
motivate repeat visits and purchases, and build loyalty. In addition, strong
brand names enable retailers to charge higher prices and lower their
marketing costs.
Customer loyalty to brands arises from heightened awareness of the brand
and the emotional ties toward it. For example, some brands such as Canadian
Tire are so well known by consumers that they are typically in a consumer’s
consideration set. In addition, customers identify and have strong emotional
relationships with some brands. For example, Winners has an image of
offering fashionable merchandise at bargain prices. Going to Winners is a
cool experience, and everybody now considers it cool to save money. High
brand awareness and strong emotional connections reduce the incentive of
customers to switch to competing retailers.
A strong brand image enables retailers to increase their margins. When retailers have high
customer loyalty, they can engage in premium pricing and
reduce their reliance on price promotions to attract customers. Brands with
weaker images are forced to offer low prices and frequent sales to maintain
their market share.
Finally, retailers with strong brand names can leverage their brand to
successfully introduce new retail concepts with only a limited amount of
marketing effort. For example, The Gap has efficiently extended its brand to
GapKids and BabyGap. Virgin has extended its brand name into numerous
areas including air and space travel, wines, and mobile services, to name a
few!
A strong brand name creates a strategic advantage that is very difficult for
competitors to duplicate. Many of the most brilliant marketers can be found
in Canada, and many others around the world look to Canadian companies
for best practices. For example, Hootsuite, a social media company currently
operating in Vancouver, B.C., offers services to over 18 million people
worldwide and to more than 800 of the top Fortune 1,000 companies.
Hootsuite offers software that allows businesses to manage multiple social
media platforms with one software package. Founder and CEO Ryan Holmes
saw the opportunity to create a better social media experience for businesses, and today
Hootsuite is the world’s most widely used social relationship
platform.
BUILDING BRAND EQUITY
The activities that a retailer needs to undertake to build brand equity for its
firm or its private-label merchandise are as follows:
 create a high level of brand awareness
 develop favourable associations with the brand name
 consistently reinforce the image of the brand
BRAND AWARENESS
Brand awareness is the ability of a potential customer to recognize or recall
that the brand name is a type of retailer or product/service. Thus, brand
awareness is the strength of the link between the brand name and type of
merchandise or service in the minds of customers. There is a range of
awareness from aided recall to top-of-mind awareness. Aided recall occurs
when consumers indicate they know the brand when the name is presented to
them. Top-of-mind awareness, the highest level of awareness, arises when
consumers mention a brand name first when they are asked about the type of
retailer, a merchandise category, or a type of service. For example, Best Buy
has top-of-mind awareness if a consumer responds “Best Buy” when asked
about retailers that sell consumer electronics. High top-of-mind awareness
means that a retailer typically will be in the consideration set when customers
decide to shop for a type of product or service.
Retailers build top-of-mind awareness by having memorable names; by
repeatedly exposing their name to customers through advertising, locations,
and sponsorships; and by using memorable symbols. Some brand names are
easy to remember. For example, the name Home Depot, because “Home” is in its brand name, is
memorable and closely associated with home
improvements, as is Canadian Tire with the automotive reference and the fact
that this is a Canadian company.
Tim Hortons has high awareness because of the large number of stores it has.
Customers walk and drive by the stores all the time. The sheer number of
stores provides substantial exposure to its brand. Most Canadians are well
aware of the popular “Roll up the Rim to Win” promotion.
Symbols involve visual images that typically are more easily recalled than
words or phrases and thus are useful for building brand awareness. For
example, the images of Colonel Sanders and the golden arches enhance the
ability of customers to recall the names KFC and McDonald’s.
Many Canadian retailers are finding that sponsorships are a cost-effective
means of increasing their exposure as well as helping the communities that
they serve. Take Tim Horton’s; through Timbit Sports, they provide
sporting opportunities for over 12,000 children across North America.
Another Canadian icon, Canadian Tire, provides various sports-related
opportunities for children via its Jumpstart program.
ASSOCIATIONS
Building awareness is the first step in developing brand equity, but the value
of the brand is largely based on the associations that customers make with the
brand name. A brand association is anything linked to or connected with the
brand name in a consumer’s memory. For example, some of the associations
that consumers might have with McDonald’s are golden arches, fast food,
clean stores, hamburgers, french fries, Big Mac, and Ronald McDonald. In
the case of McDonald’s, these links are so strong that when a consumer
thinks of fast food, hamburgers, or french fries, they also think of McDonald’s. These strong
associations influence consumer buying behaviour.
For example, when consumers think about camping, MEC might immediately
come to mind, stimulating a visit to a MEC store or its website.
Some common associations that retailers develop with their brand name are
as follows:
 Merchandise category – The most common association is to link the retailer to a category
of merchandise. For example, Staples would like to have consumers associate its name
with office supplies. Then, when a need for office supplies arises, consumers immediately
think of Staples.
 Price/quality – Some retailers, such as Holt Renfrew, want to be associated with offering
high prices and unique, high-fashion merchandise. Other retailers, such as Walmart, want
associations with offering low prices and good value.
 Specific attribute or benefit – A retailer can link its stores to attributes such as
convenience (7-Eleven) or service (Harry Rosen).
 Lifestyle or activity – Some retailers associate their name with a specific lifestyle or
activity. For example, Urban Outfitters, a retailer offering edgy clothing, records, and
home décor, is a trendy lifestyle brand. Best Buy is associated with computers, software,
and small office equipment.
The brand image is a set of associations that are usually organized around
some meaningful themes. Thus, the associations that a consumer might have
with McDonald’s might be organized into groups such as kids, service, and
type of food. MEC nurtures its brand image of selling high-quality, functional
products and providing helpful service for outdoor activity.
CONSISTENT REINFORCEMENT
The retailer’s brand image is developed and maintained through the retailer’s
communication program as well as other elements of the communication
mix, such as merchandise assortment and pricing, the design of its stores and
website, and the customer service it offers. To develop a strong set of
associations and a clearly defined brand image, retailers need to be consistent,
presenting the same message to customers over time and across all of the
elements of the retail mix.
Rather than creating unique communication programs for sales associates,
retailers need to develop an integrated marketing communication program—a
program that integrates all of the communication elements to deliver a
comprehensive, consistent message. Without this coordination, the
communication methods might work at cross-purposes. For example, the
retailer’s TV advertising campaign might attempt to build an image of
exceptional customer service, but the firm’s sales promotions might all
emphasize low prices. If communication methods aren’t used consistently,
customers may become confused about the retailer’s image and therefore not
patronize the store.
An example of this was Koodo’s character called “El Tabador.” Koodo uses
an integrated marketing communication program to reinforce its brand image
associated with fun-loving teenagers and young adults. In 2010, an IMC
campaign introduced a new champion to the cell phone market known as El
Tabador. “A four-inch-tall animated luchador (an iconic Mexican wrestler),”
El Tabador “would save customers from the injustice of long-term contracts
with hard-hitting offers and new plans.” The campaign was used in various
media at the same time, including print, outdoor, television, POS, an online
mockumentary with wrestler Bret “Hitman” Hart, social media, and tiny
muchacho action figures.
Another spokesperson currently being used in the Canadian retail market is “Gary” from
Canadian Tire. Gary was introduced to the Canadian consumer in the fall of 2012. At that time,
Canadian Tire wanted a consistent message it could deliver across the plethora of Canadian Tire
product offerings. The company wanted to move away from micro ad campaigns and focus their
advertising dollars more on a macro campaign level across the country. Gary has been seen in
numerous commercials pitching basically everything Canadian Tire sells in their various
departments, including automotive, outdoor living, and tools and hardware (to name a few).
EXTENDING THE BRAND NAME
Retailers can leverage their brand names to support their growth strategies. For example, IKEA
used its strong brand image to successfully enter the Canadian home furnishing retail market;
Laura introduced a Laura II collection for women wearing plus-sizes and Laura Petites for small
sizes; and the Pottery Barn launched its Pottery Barn Kids catalogue to target children. In other
cases, retailers have pursued growth opportunities using a new and unrelated brand name. For
example, The Gap used the brand name Old Navy for its value concept, and A&E added a
clothing line known as Hollisters.
There are pluses and minuses to extending a brand name to a new concept. An important benefit
of extending the brand name is that minimal communication expenses are needed to create
awareness and a brand image for the new concept. Customers will quickly transfer the original
brand’s awareness and associations to the new concept. However, in some cases, the retailer
might not want to have the original brand’s associations connected with the new concept. For
example, Abercrombie & Fitch decided to invest in building new and different brand images for
Gilly Hicks and Hollister Co. rather than branding them with a similar name.
These issues also arise as a retailer expands internationally. Associations with the retailer’s
brands that are valued in one country may not be valued in another. For example, French
consumers prefer to shop at supermarkets that offer good service and high-quality grocery
products, whereas German shoppers prefer supermarkets that offer low prices and good value.
Thus, a French supermarket retailer with a brand image of quality and service might not be able
to leverage its image if it decides to enter the German market.
Retailers communicate using a mix of methods, such as advertising, sales promotion, publicity,
email, blogs, and social media such as Twitter, Facebook, Pinterest, and YouTube. In large retail
firms, the communication mix elements examined are managed by the firm’s marketing or
advertising department and the buying organization. The other elements, such as store
atmosphere and salespeople, are managed by store personnel and the head office. The following
sections of this chapter examine the methods that retailers use to communicate with their
customers and how they plan and implement their communication programs to build brand
equity as well as short-term sales.
METHODS OF COMMUNICATING WITH CUSTOMERS
For any communication campaign to succeed, the firm must deliver the right
message to the right audience through the right media, with the ultimate goal
of profiting from long-term customer relationships rather than just short-term
transactions. Reaching the right audience is becoming more difficult,
however; as the media environment grows, it becomes more complicated and
fragmented.
No single type of media is necessarily better than another. The goal of a retail
communication strategy is to use media so that the sum exceeds the total of
individual media types. However, advances in technology have led to a variety
of new, along with traditional, media options for consumers, all of which vie
for consumers’ attention. Print media have also grown and become more
specialized. This proliferation of media has led many retailers to shift their promotional dollars
from advertising to direct marketing, use of Internet sites,
and other forms of promotion in search of the best way to deliver messages to
their target audiences.
We now examine the individual elements of a retail communication strategy
and the way each contributes to a successful communication campaign
(see Exhibit 14–1). The elements can be viewed on two axes: passive and
interactive (from a consumer’s perspective), and offline and online. Note that
as the retailers’ repertoire of communication elements has expanded, so too
have the ways in which retailers can communicate with their customers; so,
for instance, direct marketing appears in three of the four boxes. Firms have
also expanded their use of traditional media (e.g., advertising, public
relations, and sales promotions) from pure offline to a combination of offline
and online.
DIRECT MARKETING
Direct marketing is measurable, trackable, database-building marketing that
communicates directly with target customers to generate a response or
transaction. Direct marketing contains a variety of traditional and new forms
of marketing communication initiatives and is represented in three of the four
quadrants in Exhibit 14–1. Traditional direct marketing includes mail and
catalogues sent through the mail; today, it also includes Internet-enabled
methods such as email and mobile marketing.
The increased use of customer databases has enabled retailers to identify and
track consumers over time and across purchase situations, and this has
contributed to the growth of direct marketing. Retailers have been able to
build these databases, thanks to consumers’ increased use of credit and debit
cards, store-specific credit and loyalty cards, online shopping, contesting, and social media
groups, all of which require the buyer to give the seller personal
information that becomes part of its database. Because firms understand
customers’ purchases better when they possess such information, they can
more easily focus their direct marketing efforts (call to action) appropriately.
A call to action is the portion of the marketing or sales message that prompts
potential consumers to perform a desired action within the desired time
frame. Call-to-action phrases often use action verbs such as sign up, click
here, register today, call now, or buy now. For example, American Eagle
recently sent out this call to action via email to its AERewards customers: Get
‘em while they are hot! Take an extra 50% off AE’s summer sizzling clearance
sale.
Direct marketing retailers try to carefully target their customers so that they
will be more receptive to their messages. The PC Optimum card, for example,
has a digital deals program that sends weekly email deals and online printable
coupons for items that cardholders have purchased previously, as well as
identifies items that are in the current circular that match previous purchasing
behaviour. “Generic marketing messages just don’t resonate as much as we’d
like them to,” said David Harrington, the retailer’s vice president of business
analytics and Optimum. “Customers demand much more of us. We have
already got [them] as an engaged cardholder—it is kind of our obligation to
send [targeted messaging] back to [them].” These different forms of direct
marketing demonstrate how this communication method can vary on both
the interactivity and digital/traditional dimensions of Exhibit 14–1.
DIRECT MAIL
Direct mail includes any brochure, catalogue, advertisement, or other printed
marketing material delivered directly to the consumer through the mail or by
a private delivery company. Retailers have communicated with their
customers through the mail for as long as the mail has existed. The direct
mail piece can go to all customers, to a subset of customers according to their
previous purchases, or even on a personalized basis to individual customers.
Retailers frequently use data collected at point-of-sale (POS) terminals to
target their direct mail promotions. For example, Hudson’s Bay keeps a
database of all purchases made by its credit card and loyalty card customers.
With information about each customer’s purchases, the retailer can then
target direct mail about a new perfume to customers with a history of
purchasing such merchandise. Further, many retailers encourage their
salespeople to maintain preferred customer lists and use them to mail out
personalized invitations or notes.
Retailers also can purchase a wide variety of lists that help them target
consumers with specific demographic profiles, interests, and lifestyles. For
example, a home furnishings store could buy a list of subscribers to
Architectural Digest in its trading area and then mail a catalogue or specific
information about home furnishings to those upscale consumers. Canada
Post offers direct mail business solutions for businesses that do not have
access to internal lists or consumer data.
Although relatively expensive on a per-customer basis (because of printing,
mail costs, and a relatively low response rate), direct mail is still extensively
used by many retailers because people respond favourably to personal
messages.
EMAIL
Email is a direct marketing communication vehicle that involves sending
messages over the Internet. Email, like other forms of electronic
communications (e.g., websites, m-commerce), can be personalized to the
specific consumer and thus is similar to communication delivered by
salespeople. However, when the same message is delivered electronically to all
recipients, electronic communications more closely resemble advertising.
Retailers use email to inform customers of new merchandise and special
promotions, confirm the receipt of an order, and indicate when an order has
been shipped.
Email marketing can reduce the time and effort involved in structuring a
direct-to-consumer campaign versus using common offline direct marketing
communication (print postal mailings or telesales) techniques. Email allows
for real-time messaging and personalized messages to consumers. Retailers
can send unique birthday or anniversary messages to customers or send
individual deals to customers based on their buying habits (e.g., PC Optimum
program from Loblaws). Because email takes less time to create and send
than more traditional marketing mediums, communication with consumers
can happen more frequently. Finally, email marketing has an exponentially
greater ability to track sales and user engagement. Retailers are able to track
how many people open an email, how many customers click a link in an
email, which specific link within the email is clicked, and whether the email
even made it to the customer’s inbox.
MOBILE MARKETING
Mobile marketing, also called m-commerce or mobile commerce, is marketing
through wireless handheld devices, such as cellular telephones, and involves
completing a transaction via cellphone. Retailing View 14.2 provides
insights into upcoming trends retailers need to consider when developing
their mobile strategy. Smartphones have become far more than tools for
placing calls; they offer a kind of mobile computer with the ability to obtain
sports scores, weather, music, videos, and text messages, as well as to
purchase merchandise. Smartphone usage has increased significantly, and by
2025 it is projected that 88.19 percent of people (33 million) in Canada will
be using a smartphone. Ninety-nine percent of the Canadian population has
access to wireless services.
TRENDING MOBILE MARKETING THEMES
Themes that could potentially influence a company’s retail
mobile journey over the next several years include the following:
1. Apps become an integrated component of digital retail marketing strategy.
Business of Apps indicates that mobile apps have outpaced traditional TV
advertising in terms of ad dollars spent. In 2020, apps ad expenditure reached
$113 billion, while TV ads reached $70 billion. Marketers continue to influence
time-deprived consumers and “travelling road warriors,” and liberate online
shoppers via apps. For example, using the Canadian Tire app, customers can scan
any page of the hard copy catalogue to access a number of additional features,
including videos and tutorials on how to use the product.
2. Mobile budgets and resources get serious. Canadian Tire has invested over $300
million in data equipment and software housed in Winnipeg, Manitoba, to
improve their digital experience with Canadian customers.
3. Indoor movements of customers in bricks-and-mortar rise in prominence. A report
recently released by the Canadian Marketing Association indicated that almost 60
percent of respondents use beacon technology to enhance their shopping
experience in a retail setting. In addition, over 80 percent of consumers are aware
this technology exists.
4. Optimization of content is finding its home in the “technology stack.” As
indicated by author Michael Della Penna, “Content management and optimization
across channels becomes a required component of any technology stack. While
many marketers look to content as a critical component of their strategy, more
often than not, brands lack the ability to effectively and efficiently optimize and
distribute this content across channels.”
5. M-commerce is moving in a positive direction. Canadian e-commerce
transactions via mobile platforms continues to trend positively. Statista is
forecasting that m-commerce retail spending will equate to US$57 billion in 2025.
6. Marketing is taking a hybrid route based on mobile, movement, and real-time
exposure. Marketers need to think to rethink how they will communicate their
message to consumers. Three important elements are movement, mobile, and
locale. The message will have to access consumers via both physical and digital
channels. Digital marketing author Michael Della Penna indicates, “On the
physical front, marketers have more tools at their disposal to target customers on
the pre-visit via geo-fencing, during a visit through interactions with beacons, and
post-visit with multichannel retargeting. Additionally, advancements in real-time
mobile messaging enable orchestration with other channels including email,
display, and even direct mail.”
Based on application usage, the top three retail uses of smartphones are:
 creating a list for shopping
 locating stores
 identifying store deals or coupons
Based on browser usage, the top three retail uses of a smartphone are:
 locating stores
 finding product prices
 researching product attributes
Retailers’ success with mobile marketing rests on how mobile phones are
integrated with a store’s omnichannel retailing strategy, which is consistent
with consumer attitudes toward using mobile devices (see Exhibit 14–2).
In response, firms are steadily improving customers’ potential experience with
their mobile interfaces by creating applications for consumers. For example,
McDonald’s Pick-n-Play used a mobile Web URL to allow consumers to
control a game of Pong on an interactive billboard to win coupons.
Retailing View 14.3 describes another innovative use of mobile marketing.
Google Shopper ( google.com/shopping) lists the prices for any item the
consumer searches for at various local and online retailers. NearbyNow’s and
Amazon’s mobile applications allow users to buy products and complete their
transactions though their cellphones.
Foursquare targets mobile phone users and sends them marketing messages
based on GPS technology. Previous usages included video game aficionados.
Foursquare awards points to consumers who try local retailers, enabling them
to unlock “badges” and earn titles, such as “Mayor” of a particular
venue. The badges and titles entitled the recipient to discounts or special
offers. For example, Starbucks Mayors can unlock their offers to get a $1
discount on a Frappuccino. Currently, Foursquare works with a number of
companies, including Airbnb, Apple Maps, Samsung, TripAdvisor, Spotify,
AccuWeather, and Uber. These companies use Foursquare Places. The
application is based on GPS locations, so users can recommend nearby
retailers to friends in the area. Furthermore, the application’s data analytics
capabilities allow retailers to track the impact of mobile marketing campaigns.
Tim Hortons’ Chill to Win contest was an online contest with two
ways to play for a chance to win prizes. On the game cup was a label,
which contained an alphanumeric code (PIN code). This PIN code could be
played at the Peel ’n’ Play online game or on the customer’s mobile device
(smartphone or tablet).
The foundation of mobile marketing is short codes, which were introduced in
Canada in July 2003. 18Short codes allow consumers to interact with retailers
via text messaging. Instead of sending text messages to the regular ten-digitphone number,
cellphone users send it to a short code, a five- or six-digit
number or word/brand name. A short code becomes a common short code
(CSC) when the same code is activated across multiple mobile phone
networks, which greatly extends its reach to many more mobile phone
customers. Retailers can lease dedicated short codes for a period of three,
six, or twelve months.
Cost varies for random short codes (completely random in selection) and
selected short codes (specifically requested codes). For example, Victoria’s
Secret uses a selected short code: text “start” to ANGEL (26435) and expect
exclusive discounts via text message from the retailer. Canadian Tire uses a
random short code for its Jumpstart mobile donation campaign: “Give kids a
sporting chance! You can help the Canadian Tire Jumpstart program by
texting the word JUMP to short-code 45678 on your mobile phone. A $5
donation will be made on your behalf to the children which will be added
your phone bill!” Exhibit 14–3 shows the increased acceptance of short
code texting and the number of organizations consumers are willing to “optin” with.
Quick response (QR) codes are a specialized version of a twodimensional (2D) barcode. Quick response codes are intended to
be scanned by the camera on a mobile phone, providing a fast and easy way
to transfer information. There are several different types of 2D barcodes,
but the QR code format is the most used. QR codes have no licensing
restrictions—so they will always be free—and are supported by a variety of
readers.
Retailers use QR codes in a variety of ways: product information, app-based
user perks, discounts, sweepstakes, incentives, endorsement of the retail
brand, check-in, instructions, sharing via social media, price comparison, and
direct online shopping. Some QR codes are even linked to store inventories
and can tell you the quantity, size, and colour currently in stock of the
product scanned.
Customers can use the QR reader on their smartphones to get detailed
information about the product they are considering. They can read consumer
reviews, compare features with similar products, and in some cases, even
email details to a friend who might be giving advice. (See Exhibit 14–4 to see how QR codes are
used by Canadian shoppers.) Many stores have
designed their own smartphone apps. While signs could just publicize the
apps, the QR codes make it quick and easy to acquire the app. In many cases,
these apps go beyond just providing product information and include styling
advice, loyalty programs, social media, or check-in incentives and locationbased discounts.
Incentivizing consumers to interact with the brand using a mobile phone by offering discounts,
special offers, and opportunities to win prizes or gifts with
purchase with a QR code not only promotes reciprocity but also enables the
transaction to occur in one step. Stores use QR codes to connect to social
media by sharing, as well as by checking in on sites such as Foursquare and
Facebook. A check-in explicitly endorses a product or retail brand to those
connected to a user’s profile. QR codes are also showing up in-store on shelftalkers and price tags. QR codes provide the opportunity to add much more
technical data than can fit on a retail package or tag. Best Buy uses QR codes
to link the user to a specific mobile-optimized page for the product, while
Sephora uses QR codes to offer demonstrations and instructions for
cosmetics. Videos of this nature can also engage the consumer if a
salesperson is not available for immediate assistance.
According to a ClickIQ survey of 900 shoppers, half of all people who
purchase products online first go to a bricks-and-mortar store to do their
research. Known as showrooming, this buzzword refers to the growing
number of customers who browse the wares of traditional bricks-and-mortar
retailers; feel, touch, and smell the merchandise; and then take out their
smartphones and price around until they find the product they want for the
lowest price—usually from an online retailer such as Amazon that doesn’t
have anywhere near the same overhead. This trend makes it critical for
retailers to provide an integrated shopping experience across multiple
touchpoints through the path to purchase in order to maintain customers’
loyalty to the brand and its products and services.
Retailers can harness QR code technology to add value for consumers and
harness showrooming to impact their revenue, as in the following examples:
 Cross-sell – A consumer can scan a QR code for a TV, and instantly receive a promotion
for a free HDMI cable with the purchase of the TV in-store.
 Bundling – If consumers scan multiple QR codes during a single in-store visit, they could
receive an offer for a gift card if a specific set of products or dollar amount is purchased
in the store during that store visit.
 Behavioural – A consumer that has scanned a QR code for a particular product type on a
previous visit could trigger an alert if they scan a product in that product group during a
subsequent visit. The alert could inform the customer that a brand within that product
group is on sale.
 Location/time specific – Location data could be passed on if available to show exclusive
deals only available at a specific store location, or content could be changed based on the
time of day or weather.
 Endless aisle – Scanning a QR code for a jacket could provide a list of alternative sizes
and colours that aren’t stocked in that store. The consumer could then be offered the
option of ordering the version she wants with just a few clicks on her smartphone or
tablet and have it delivered to the store or her home.
In a previous advertising campaign, Walmart Canada has used the
concept of mobile stores inside 50 bus shelters in the city of Toronto.
Customers used their mobile devices to scan posters with QR codes at these
choice bus shelters to buy select items, including Pantene shampoo, Pampers
diapers, and Tide detergent. The campaign was scheduled to run for four
weeks and, according to Simon Rodrique, vice president of e-commerce for
Walmart Canada, “allow[ed] [Walmart] to help Torontonians shop for
essentials on the go, anywhere, at any time.”
Mobile shopping via smartphone is gaining traction with Canadian
consumers. In 2021, Canadian consumers spent approximately $29.9 billion
(34 percent of total retail commerce) on retail goods and services via their
digital devices. Add to that the fact that people are spending more and more
time on mobile apps (approximately 70 percent of smartphone users have
downloaded apps to their phones 32). As of 2021, there were 4.32 billion unique mobile internet
users; this represents over 90 percent of the global
internet population employing a mobile device online.
ONLINE (DIGITAL) MARKETING
Online marketing, also known as digital marketing, is used to inform
consumers about specific brands, services, and products. More common
platforms and tactics used to communicate messages include social media,
blogs, websites, online videos, display ads, email, and search engine
optimization (marketing). Consumers view these forms of communication via
computers, tablets, mobile, or other electronic devices that access the
internet. 34A more detailed review of this marketing communication method
will be explored in Chapter 15.
SALES PROMOTIONS
Sales promotions are special incentives or excitement-building programs that
encourage consumers to purchase a particular product or service; they are
typically used in conjunction with other advertising or personal selling
programs. Like personal selling and telemarketing, sales promotions are a
form of traditional/engaging communications (refer back to Exhibit 14–1).
Many sales promotions, such as free samples or point-of-purchase (POP)
displays, attempt to build short-term sales; others, such as loyalty programs,
contests, and sweepstakes, have become integral components of retailers’
long-term customer relationship management (CRM) programs, which they
use to build customer loyalty. The tools used in sales promotions, along with
their advantages and disadvantages, are presented in Exhibit 14–5 and
discussed below.
COUPONS
Coupons offer a discount on the price of specific items when they’re
purchased. Coupons are issued by manufacturers and retailers in newspapers,
on products, on the shelf, at the cash register, over the Internet, and through
the mail. Retailers use coupons because they are thought to induce customers
to try products for the first time, convert first-time users to regular users,
encourage large purchases, increase usage, and protect market share against
competition. Some retailers have linked coupons directly to their loyalty programs. Drugstore
giant Shoppers Drug Mart, for instance, tracks its
customers’ purchases from its Optimum loyalty card and gives them coupons
that are tailored just for them.
Coupon promotions, like all temporary promotions, may be stealing sales
from a future period without any net increase in sales. For instance, if a
supermarket runs a coupon promotion on sugar, households may buy a large
quantity of sugar and stockpile it for future use. Thus, unless the coupon is
used mostly by new buyers, the net impact on sale is negligible, and there will
be a negative impact on profits due to the amount of redeemed coupons and
cost of the coupon redemption procedures. Coupons may annoy, alienate,
and confuse consumers and therefore do little to increase store loyalty.
Some stores, such as Loblaws, are making coupons more effective by
customizing coupon content to alter customers’ purchasing habits. For instance, if a customer
typically spends a small amount during each shopping
trip, the customer will receive coupons that encourage larger purchases, such
as “buy one, get one free.” If another customer spends a lot each time she
shops but shops sporadically, that customer will get coupons that expire
relatively quickly. Unique coupons will also encourage customers to try new
brands within categories that they normally purchase, or products that
complement their usual purchases, such as shampoo to customers that
purchase hair colour.
Shopping bot sites, such as MyCoupons.com, provide customers with a
large selection of coupons by bringing all the coupons available throughout
the Internet onto one website. For instance, a customer might go to The Bay
and find a KitchenAid mixer for $199.99. A cellphone scan of the bar code
through ShopSavvy.com might find the same item at Walmart, which is a
kilometre away, for $179.99. Then the customer might visit MyCoupons.co
m and see that Walmart is offering a $20 coupon, thus saving the customer
$40 in a matter of minutes.
A new breed of coupon, printed from the Internet or sent to or accessed via
mobile phones, is packed with information about the customer who uses it.
While the coupons look standard, their bar codes can be loaded with a
startling amount of data, including identification about the customer, Internet
address, Facebook page information, and even the search terms the customer
used to find the coupon in the first place. For instance, if a customer comes
into a store with a coupon for T-shirts, the information on the coupon could
reveal whether the customer was searching for “underwear” or “muscle
shirts.”
REBATES
Rebates provide another form of discounts for consumers off the final selling
price. In this case, however, the manufacturer, instead of the retailer, issues
the refund as a portion of the purchase price returned to the buyer in the
form of cash. Retailers generally welcome rebates from vendors because they
generate sales in the same way that coupons do but the retailers incur no
handling costs.
Many products, such as consumer electronics, offer rebates that may lower
the price of the item significantly. Some vendors enjoy the added exposure of
appearing on consumer websites, such as PriceGrabber.com, which sorts
products by price and then links the customer to the retailer’s website.
Vendors offer such generous rebates because the likelihood that consumers
will actually apply for the rebate is low. Other firms, such as Staples and
Apple, have simplified the rebate redemption process with “Easy Rebates.
PREMIUMS
A premium offers an item for free or at a bargain price to reward some type of
behaviour, such as buying, sampling, or testing. Such rewards build goodwill
among consumers, who often perceive high value in them. Premiums can be
distributed in a variety of ways: They can be included in the product
packaging, such as the toys inside cereal boxes; placed visibly on the package,
such as a coupon for free milk on a box of Cheerios; handed out in the store;
or delivered in the mail, such as the free-perfume offers Victoria’s Secret
mails to customers.
SAMPLES
Samples offer potential customers the opportunity to try a product or service
before they make a buying decision. Distributing samples is one of the most
costly sales promotion tools but also one of the most effective. Quick-service
restaurants and grocery stores frequently use sampling. For instance,
Loblaws, Sobeys, Metro, and Walmart all provide samples of products to
customers. Costco uses so many samples that customers can often have an
entire meal!
POINT-OF-PURCHASE (POP) DISPLAYS
Point-of-purchase (POP) is a merchandise display that is located at the point
of purchase, such as the checkout counter in a supermarket. Retailers have
long recognized that the most valuable real estate in the store is at the POP.
Customers see products like a magazine or a candy bar while they are waiting
to pay for their items and impulsively purchase them. In the Internet version
of point-of-purchase display, shoppers are stimulated by special merchandise,
price reductions, or complementary products that Internet retailers feature on
the checkout screen.
SPECIAL EVENTS
A special event is a sales promotion program comprising a number of sales
promotion techniques built around a seasonal, cultural, sporting, musical, or
other special event. Special events can generate excitement and traffic to the
store. Apparel and department stores do trunk shows, made-to-measure
events, and fashion shows. Sporting goods stores do demonstration of
equipment, while grocery stores might have cooking classes. Bookstores do
readings and book signings. Car dealerships can have rallies or shows of new
or vintage models. Even if the sales registered during the event aren’t
significant, the long-term effect can be quite beneficial.
POP-UP STORES
An extreme type of sales promotion is a pop-up store. Pop-up stores are
temporary storefronts that exist for only a limited time and generally focus on
a new product or limited group of products offered by a retailer. They are also
used by some retailers during the holiday season to increase exposure and
convenience shopping for their customers without having to invest in a longterm lease.
Gucci, the Italian leather retailer and manufacturer, has opened pop-up stores
named Gucci-Icon Temporary in New York’s SoHo, Miami Beach, Tokyo,
London, Berlin, Paris, and Hong Kong. The stores featured limited-edition
sneakers retailing for $500 to $600, with classic Gucci design elements and
some special features like a silver or gold dog tag.
Although most sales promotions are effective at generating short-term interest
among customers, they aren’t very useful for building long-term loyalty.
Customers who participate in a promotion might learn more about a store
and return to it, but typically customers attracted by sales promotions are
interested in the promoted merchandise, not the retailer. Unfortunately, when
a specific promotion is effective for a retailer, competing retailers learn about
it quickly and offer the same promotion, which prevents the innovating
retailer from gaining any long-term advantage.
PERSONAL SELLING
Personal selling is a communication process in which sales associates help
customers satisfy their needs through face-to-face exchanges of information. It
is a form of traditional/engaging communication ( Exhibit 14–1). The cost
of communicating directly with a potential customer is quite high compared
with other forms of promotion, but it is simply the best and most efficient way
to sell certain products and services. Customers can buy many products and
services without the help of a salesperson, but salespeople simplify the buying
process by providing information and services that save customers time and
effort. In many cases, sales representatives add significant value, which makes
the added expense of employing them worthwhile.
ADVERTISING
Advertising entails the placement of announcements and persuasive messages
purchased by retailers and other organizations that seek to inform and/or persuade members of a
particular target market or audience about their
products, services, organizations, or ideas. Data collected from the
Television Bureau of Canada indicates that currently, the internet receives the
lion’s share of ad dollars, accounting for 58.1 percent of total advertising
expenditures. Television comes next at 20.9 percent, while radio and
newspapers each accounts for approximately 9 percent of a Canadian
company’s ad budget.
Ad expenditures in Canada are expected to be $19.13 billion in
2024; 69 percent ($13.14 billion) of that spending will be
earmarked for digital devices accessing the internet.
Mass advertising can entice consumers into a conversation with retailers,
although it does not necessarily require much action by consumers, which
places it on the passive end of the spectrum. Traditionally, advertising has
been passive and offline (e.g., ads on TV, in magazines, and in newspapers;
see Exhibit 14–1). However, recently there has been a growth in online
advertising. This section reviews advertising’s traditional media and examines
a method of lowering the retailer’s advertising cost through cooperative
advertising with vendors.
DIGITAL
Based on all the advertising methods, organizations spend the most money on
digital advertising. Over the past decade, the increase in digital ad spending
has been significant in Canada. In 2013, digital ad spending in Canada was
$1.9 billion. Ad spending will be $7.3 billion by 2023, almost four times more
spent on digital ads in just ten years! Digital advertising includes methods
such as paid and display ads, search engine optimization, and remarketing.
With the average adult user spending 5.9 hours with digital media per day, the
amount of money spent on this medium should continue to grow.
NEWSPAPERS
Retailing and newspaper advertising grew up together over the last century.
But the growth in retail newspaper advertising has slowed recently as retailers
have begun using other media. Still, 57 percent of newspapers’ advertising
dollars are generated by retailers. 44In addition to displaying ads with their
editorial content, newspapers distribute freestanding inserts. A freestanding insert (FSI), also
called a preprint, is an advertisement printed at the retailer’s
expense and distributed as an insert in the newspaper. However, there are so
many FSIs in some newspapers that readers can become overwhelmed. As a
result, some retailers have reduced the number of FSIs they use because of
the clutter and because young readers, who may be their primary target
markets, don’t regularly read newspapers.
Because newspapers are distributed in well-defined local market areas, they
are effective at targeting specific retail markets. Newspapers also offer a quick
response. There is only a short time between the deadline for receiving the
advertisement and the time that the advertisement will appear. Thus,
newspapers are useful for delivering messages on short notice.
Newspapers, like magazines, effectively convey a lot of detailed information.
Readers can go through an advertisement at their own pace and refer to part
of the advertisement when they want. But newspaper ads aren’t effective for
showing merchandise, particularly when it’s important to illustrate colours,
because of the poor reproduction quality.
The life of a newspaper advertisement is short because the newspaper is
usually discarded after it has been read. In contrast, magazine advertising has
a longer life because consumers tend to save magazines and read them several
times during a week or month.
Finally, the cost of developing newspaper ads is relatively low. However, the
cost of delivering the message may be high if the newspaper’s circulation is
broader than the retailer’s target market, requiring the retailer to pay for
exposure that won’t generate sales. In a study conducted by the Newspaper
Association of America (NAA) on how America shops and spends, findings
clearly demonstrate the power of newspapers and news websites and the
influence this media has on consumer purchasing and planning behaviours.
Here are some of the insights and highlights from that study:
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Six in ten consumers used newspapers in the past week to plan shopping and purchasing
decisions.
Eight in ten consumers took action on a newspaper insert (in the last 30 days), including
comparison shopping, sharing with others, and taking it to purchase.
Sixty-four percent of consumers use coupons from a newspaper versus 53 percent from
direct mail.
Newspaper website visitors are (compared to adults overall) 40 percent more likely to
have purchased something online or in-store in the past 30 days, 62 percent more likely to
go online for coupons, 79 percent more likely to use a mobile phone in a store to
comparison shop, and 80 percent more likely to use a shopping app on a mobile device.
MAGAZINES
Advertising in magazines is mostly done by national retailers such as Proctor and Gamble and
Nestle. With the growth of local magazines, regional editions of national magazines, and
specialized magazines, local retailers can take advantage of this medium. Retailers tend to use
this medium for image advertising because the reproduction quality is high. Due to the lead
time—the time between submitting the advertisement and publication—a major disadvantage of
magazine advertising is that the timing is difficult to coordinate with special events and sales.
TELEVISION
Television commercials can be placed on a national network or a local station. A local television
commercial is called a spot. Retailers typically use TV for image advertising, to take advantage
of the high production quality and the opportunity to communicate through both visual images
and sound. Television ads can also demonstrate product usage. For example, TV is an excellent
medium for car, furniture, and consumer electronics dealers.
In addition to its high production costs, broadcast time for national TV advertising is expensive.
Spots have relatively small audiences, but they may be economical for local retailers. To offset
the high production costs, many vendors provide modular commercials, in which the retailer can
insert its name or a “tag” after information about the vendor’s merchandise.
RADIO
Many retailers use radio advertising because messages can be targeted to a specific segment of
the market. Some radio stations’ audiences are highly loyal to their announcers. When these
announcers promote a retailer, listeners are impressed. The cost of developing and broadcasting
radio commercials is relatively low. There also seems to be a trend that fewer dollars are being
dedicated to radio ads.
One disadvantage of radio advertising, however, is that listeners generally treat the radio
broadcast as background, which limits the attention they give the message. Consumers must get
the information from a radio commercial when it’s broadcast; they can’t refer to the
advertisement for information they didn’t hear or remember.
PODCASTS
While radio may be losing ad dollars, podcasting is gaining interest with an increased
consumption rate amongst Canadians. About 38 percent of Canadians (over age 12) devote 3.5
hours per week to listening to podcasts. In 2022, U.S. podcast ad revenue was worth
approximately $1.3 billion, with over 78 percent of listeners open to ads or sponsorship
messages. Spotify (a leader in audio streaming and media services) is one of the leaders in
exclusive podcast content offerings.
CO-OP PROGRAMS
Co-op advertising (or cooperative advertising) is a promotional program undertaken by a vendor
and a retailer working together. The vendor pays for part of the retailer’s advertising but dictates
some conditions. For example, Ford wanted to get their 3,200 U.S. dealerships to do more digital
advertising. In order to achieve this goal, Ford was willing to pay 50 percent of the digital media
cost a dealership incurred. In addition to lowering costs, co-op advertising enables a retailer to
associate its name and well-known national brands and use attractive artwork created by national
brands.
Co-op advertising has some drawbacks though. First, vendors want the ads to feature their
products, whereas retailers are more interested in featuring their store’s name, location, and
assortment of merchandise and services offered. This conflict in goals can reduce the
effectiveness of co-op advertising from the retailer’s perspective. Second, ads developed by the
vendor often are used by several competing retailers and may list the names and locations of all
retailers offering their brands. Thus, co-op ads tend to blur distinctions between retailers. Third,
restrictions that the vendor places on the ads may further reduce their effectiveness for the
retailer. For example, the vendor may restrict advertising to a period of time when the vendor’s
sales are depressed, but the retailer might not normally be advertising during that time frame.
OUTDOOR BILLBOARDS
Billboards and other forms of outdoor advertising are effective vehicles for creating awareness
and providing a very limited amount of information to a narrow audience. Thus, outdoor
advertising has limited usefulness in providing information about sales. Outdoor advertising is
typically used to remind customers about the retailer or to inform people in cars of nearby retail
outlets. For example, La Senza used sexy images on billboards in the Toronto area to promote
Christmas sales of lingerie.
PUBLIC RELATIONS
Public relations (PR) involves managing communications and relationships to achieve various
objectives, such as building and maintaining a positive image of the retailer, handling or heading
off unfavourable stories or events, and maintaining positive relationships with the media. In
many cases, public relations activities support other promotional efforts by generating “free”
media attention and general goodwill. The practice of PR is no longer dominated by one-way
communication that seeks to simply transfer content from the retailer to the consumer. Retailers
are getting creative with their PR strategies in light of the opportunities social media offers them.
Many retailers are now using social media platforms such as Twitter, Facebook, blogs, Pinterest,
Instagram, and others to promote, inform, and give feedback to engage in two-way conversations
with their customers.
Clothes retailer Kenneth Cole, in a bid to encourage sales, started a provocative campaign on its
own site asking customers to make a stand on controversial topics such as war, gay marriage, and
guns. In the same fashion, the campaign encouraged customers to buy clothes based on what
they think they look good in among what they wear. From a public relations perspective, it can
be said that the retailer is brave to align such deep, serious societal issues with the current trends
and choice of clothes people choose to wear; the opposite can also be said, that the retailer is
insensitive and repulsive to even push out a campaign like this. What made matters worse was a
tweet during the Arab Spring uprising in Egypt that jokingly claimed the uproar in Cairo was due
to the new spring collection that Kenneth Cole was pushing out, essentially encouraging people
to buy more clothes while people were dying in Egypt.
For years, Walmart did little to promote itself as a positive social force, believing its low prices
would speak for themselves. But it was increasingly subjected to public criticism from labour
unions and environmentalists, so Walmart hired its first public relations firm. The public
relations firm set up a war room to respond quickly to attacks or adverse news. Internet blogs and
grassroots initiatives were developed to stimulate popular support for Walmart. The firm also
looked for proactive opportunities to demonstrate Walmart’s social consciousness.
Over the past 27 years, Walmart has donated and raised more than $500 million to Canadian
charities, focusing on helping fellow Canadians and families when needed. Some of the areas of
contribution include:
 60 million meals to Food Banks Canada
 $53 million to Breakfast Club of Canada, helping feed Canadian students in public school
systems
 $54 million to The Canadian Red Cross, supporting disaster relief funding
 $169 million to Children’s Miracle Network, improving and saving the lives of sick
children
Retailers also benefit when celebrities wear their fashions. For instance, when photos were
posted on the Internet of former First Lady Michelle Obama wearing a J.Crew cream-coloured
cardigan and “dazzling dots” skirt on a visit to a cancer centre in London, the retailer’s website
sold out almost immediately. Similarly, the placement of designer apparel at media events like
the Oscars benefits the retailer, the designer, and the celebrity. And nothing happens by accident.
Public relations people on both sides help orchestrate the events to get the maximum benefit for
both parties.
Another very popular PR tool is event sponsorship. Event sponsorship occurs when corporations
support various activities (financially or otherwise), usually in the cultural or sports and
entertainment sectors. Some retailers sponsor sporting events such as the Kia Toronto Football
Academy, while others buy naming rights to a sporting venue, such as the Scotiabank Arena,
which is home to the Toronto Maple Leafs hockey club, the Toronto Raptors basketball club, and
the Toronto Rock lacrosse team.
When retailers and vendors use product placement, they pay to have their product included in
non-traditional situations, such as in a scene in a movie or television program. Dodge’s
relationship with the movie franchise “The Fast & Furious” is well documented and has
continued with the release of their most recent movie, “The Fate of the Furious.” In this movie,
Vin Diesel (Dominic Toretto in the film) drives a Dodge Charger. The advertising value of the
placement equates to approximately $24 million. The company spent over half its annual product
placement total in that single film.
STRENGTHS AND WEAKNESSES OF COMMUNICATION METHODS
Communication methods differ in terms of control, flexibility, credibility, and
cost, as shown in Exhibit 14–6.
CONTROL
Retailers have more control when using paid versus unpaid communication
methods. When using advertising, sales promotions, online marketing, direct
marketing, and store atmosphere, retailers determine the message’s content;
for advertising, direct marketing, and sales promotions, they control the time
of its delivery. Since each salesperson can deliver different messages, retailers
have less control over personal selling than other paid communication
methods. Retailers have little control over the content or timing of publicity
and word-of-mouth communications. Since unpaid communications are
designed and delivered by people not employed by the retailer, they can
communicate unfavourable as well as favourable information. For example,
news coverage of food poisoning at a restaurant or discrimination at a hotel
can result in significant declines in sales.
FLEXIBILITY
Personal selling is the most flexible communication method, because
salespeople can talk with each customer, discover their specific needs, and
develop unique presentations for them. Direct mail and online marketing are
also very flexible because they can be personalized to specific customer
interests. Other communication methods are less flexible. For example,
traditional ads tend to deliver the same message to all customers.
CREDIBILITY
Because publicity and word-of-mouth are communicated by independent
sources, their information is usually more credible than the information in
paid communication sources. For example, customers see their friends and
family as highly credible sources of information. In contrast, customers tend
to doubt claims made by salespeople and in ads since they know retailers are
trying to promote their merchandise.
COST
Publicity and word-of-mouth are classified as unpaid communication
methods, but retailers do incur costs to stimulate them. Paid impersonal
communications often are economical. For example, a full-page ad in the
Toronto Star costs about two cents per person to deliver the message in the
ad. In contrast, personal selling, because of its flexibility, is more effective
than advertising, but it is more costly. A ten-minute presentation by a retail
salesperson paid minimum wage costs the retailer over a 100 times more than
exposing a customer to a newspaper, radio, or TV ad. Although maintaining a
website on a server is relatively inexpensive, it is costly to design, to
continuously update the site, and to promote the site to attract visitors. Direct
marketing communication can be sent to customers for about $2 per person
reached, but the people reached are more targeted and therefore the spend
could be more cost-effective than other communication methods.
Due to the differences just described, communication methods differ in their
effectiveness in performing communication tasks and their effectiveness in
different stages of the customer’s decision-making process. Typically, mass
media advertising is most effective at building awareness. Online, direct, and
newspaper advertising are effective for conveying information about a
retailer’s offerings and prices. Personal selling and sales promotion are most
effective at persuading customers to purchase merchandise. Mass media and
magazine advertising, publicity, online (websites, social media), and store
atmosphere are most cost-effective at building the retailer’s brand image and
encouraging repeat purchases and store loyalty.
PLANNING THE RETAIL COMMUNICATION PROCESS
Almost every retail business needs to promote itself in some way, reaching out
to customers and potential customers. Exhibit 14–7 illustrates the four
steps in developing and implementing a retail communication program:
establishing objectives, determining a budget, allocating the budget, and
implementing and evaluating the mix.
ESTABLISHING OBJECTIVES
Retailers establish objectives for communication programs to provide the
following:
 direction for people implementing the program
 a basis for evaluating its effectiveness
Some communication programs have a long-term objective, such as creating
or altering a retailer’s brand image. Other communication programs focus on
improving short-term performance, such as increasing store traffic on
weekends.
COMMUNICATION OBJECTIVES
While retailers’ overall objective is to generate long- and short-term sales and
profits, they often use communication objectives rather than sales objectives
to plan and evaluate their communication programs. Communication
objectives are specific goals related to the retail communication mix’s effect
on the customer’s decision-making process.
Exhibit 14–8 shows hypothetical information about customers in the target
market for a Zehrs grocery store. This information illustrates goals related to
stages in the consumer decision-making process. Note that 95 percent of thecustomers are aware
of the store (the first stage in the decision-making
process) and 85 percent know the type of merchandise it sells. But only 45
percent of the customers in the target market have a favourable attitude
toward the store, 32 percent intend to visit the store during the next few
weeks, 25 percent actually visit the store during the next two weeks, and 18
percent regularly shop at the store.
In this hypothetical example, most people know about the store and its
offerings. The major problem confronting the supermarket is the big drop
between knowledge and favourable attitude. Thus, the store should develop a
communication program with the objective of increasing the percentage of
customers with a favourable attitude toward it.
To effectively implement and evaluate a communication program, objectives
must be clearly stated in quantitative terms. The target audience for the
communication mix needs to be defined, along with the degree of change
expected and the time period over which the change will be realized.
For example, a communication objective for the grocery store’s program
might be to increase—from 45 percent to 55 percent within three months—the
percentage of customers within a ten-kilometre radius of the store who have a
favourable attitude toward the store. This objective is clear and measurable. It
indicates the task the program should address. The people who implement
the program know what they’re supposed to accomplish.
The communication objectives and approaches used by vendors and
retailers differ, and these differences can lead to conflicts. Some of
these points of conflict are as follows:
 Long-term versus short-term goals – Most communication done by vendors
(manufacturers) is directed toward building a long-term image of their products. On the
other hand, most retailer communication is typically used to announce promotions and
special sales that generate short-term revenues.
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Product versus location – When vendors advertise their branded products, they don’t care
where the customer buys them. On the other hand, retailers don’t care what brands
customers buy as long as they buy them in their store.
Geographic coverage – Since people tend to shop at stores near their homes or
workplaces, most retailers use local newspapers, TV, and radio to target their
communication. On the other hand, most vendors sell their brands nationally and thus
tend to use national TV and magazines.
Breadth of merchandise offered – Typically, vendors have a relatively small number of
products to advertise. They can devote a lot of attention to developing consistent
communication programs for each brand they make. Retailers offer a much broader set of
products and often focus on building short-term sales.
Even though vendors and retailers have different goals, they frequently work
together to develop mutually beneficial outcomes. An example is a
coordinated program between Shoppers Drug Mart and Coppertone. The
program offered a two-dollar-off coupon to the customer with the purchase of
Coppertone sun care products. The addition of shelf-talker signs on shelves
creates awareness by providing information about the promotion and
encouraging customer participation. The co-marketing promotion benefits
both Shoppers Drug Mart and Coppertone by building sun care customers’
loyalty.
CONSUMER RIGHTS
In designing any consumer communication package, one of the objectives is
to acknowledge and comply with consumer rights requirements. No retailer
wants bad publicity as a result of consumer advocacy groups’ negative press.
Advances in consumerism have come in the form of federal and provincial
legislation designed to protect the consumer and establish standards for
manufacturers and retailers. The Consumers’ Association of Canada (consumer.ca) seeks to
uphold the following consumer rights:
 The right to choice – Consumers must have a choice of products offered by a variety of
manufacturers and retailers. In fact, competition usually provides the benefit of lower
prices to the consumer (Competition Act).
 The right to be informed – Consumers must have access to complete information about a
product before buying it. For example, consider the importance of fabric content and care
labelling, food ingredients and nutritional content (which are of extreme importance to
people with food allergies), and information that will describe the potential dangers of
using a product. Detailed information can be an asset in the case of lawsuits (Packaging
and Labelling Act, Textile Labelling Act, Weights and Measures Act).
 The right to safety – The product must be safe for its intended use. This means that the
product must be accompanied by instructions for its proper use and carry a guarantee of
product quality and reliability as tested by the manufacturer. Federal agencies will take
action to force businesses to recall defective products and issue public warnings (Food
and Drug Act, Hazardous Products Act).
 The right to be heard – Someone will listen to consumers’ complaints and take
appropriate action to solve the problems. Many retailers have added customer service
centres in the store to address customer concerns, and maintain a toll-free telephone
number and/or a website so that customers can contact a service representative for
immediate assistance.
DEVELOPING THE PROMOTIONAL MESSAGE
Most retail promotional messages have a short life and are designed to have
an immediate impact. This immediacy calls for a copywriting style that grabs
the reader’s attention. Exhibit 14–9 outlines specific suggestions for
developing local newspaper ads.
FACTORS IN SELECTING MEDIA
To convey their message with the most impact to the most consumers in the
target market at the lowest cost, retailers need to evaluate media in terms of
coverage, reach, cost, and impact of the advertising messages delivered
through the medium.
COVERAGE
Coverage refers to the number of potential customers in the retailer’s target
market that could be exposed to an ad in a given medium. For example,
assume that the size of the target market is 100,000 customers. The local
newspaper is distributed to 60 percent of the customers in the target market,
90 percent of the potential customers have a TV set that picks up the local
station’s signal, and 5 percent of the potential customers drive past a
billboard. Thus, the coverage for newspaper advertising would be 60,000; for
TV advertising, 90,000; and for the specific billboard, 5,000.
REACH
In contrast to coverage, reach is the actual number of customers in the target
market exposed to an advertising medium. If, on any given day, 60 percent of
the potential customers who receive the newspaper actually read it, then the
newspaper’s reach would be 36,000 (or 60 percent of 60,000). Retailers often
run an ad several times, in which case they calculate the cumulative reach for
the sequence of ads. For example, if 60 percent of the potential customers
receiving a newspaper read it each day, 93.6 percent (or 1 minus the
probability of not reading the paper three times in a row [0.40 × 0.40 × 0.40])
of the potential customers will read the newspaper at least one day over the
three-day period in which the ad appears in the paper. Thus, the cumulative
reach for running a newspaper ad for three days is 56,160 (or 93.6 percent ×
60,000), which almost equals the newspaper’s coverage.
When evaluating Internet advertising opportunities, the measure
used to assess reach is the number of unique visitors—the number of
different people who access the Web page on which the ad is located.
COST
The cost per thousand (CPM) measure is often used to compare media.
Typically, CPM is calculated by dividing an ad’s cost by its reach. Another
approach for determining CPM is to divide the cost of several ads in a
campaign by their cumulative reach. If, for instance, in the previous example,
one newspaper ad costs $500 and three ads cost $1,300, the CPM using
simple reach is $13.89, or $500/(36,000/1,000). Using cumulative reach, the
CPM is $23.15, or $1,300/(56,160/1,000). Note that the CPM might be
higher using cumulative reach rather than simple reach, but the overall reach
is also higher, and many potential customers will see the ad two or three
times.
CPM is a good method for comparing similar-size ads in similar media, such
as full-page ads in the National Post and the Barrie Examiner. But CPM can be
misleading when comparing the cost-effectiveness of ads in different types of
media, such as newspaper and TV. A TV ad may have a lower CPM than a
newspaper ad, but the newspaper ad may be much more effective at achieving
the ad’s communication objectives, such as giving information about a sale.
IMPACT
Impact is an ad’s effect on the audience. Due to their unique characteristics,
different media are particularly effective at accomplishing different
communication tasks. Exhibit 14–10 shows the effectiveness of various
media for different communication tasks. TV is particularly effective at
getting an audience’s attention, demonstrating merchandise, changing
attitudes, and announcing events. Magazines are particularly appropriate for
emphasizing the quality and prestige of a store and its offering and for
providing detailed information to support quality claims. Newspapers are
useful for providing price information and announcing events. Websites are
particularly effective for demonstrating merchandise and providing
information. Outdoor advertising is most effective at promoting a retailer’s
name and location.
DETERMINING PROMOTIONAL FREQUENCY AND TIMING
The frequency and timing of promotions determine how often and when
customers will see the retailer’s message.
FREQUENCY
Frequency is how many times the potential customer is exposed to a
promotional message. Frequency for Internet advertising is typically assessed
by measuring the number of times a Web page with the message is
downloaded during a visit to the site.
The appropriate frequency depends on the message’s objective.
Typically, several exposures to a promotional message are required to
influence a customer’s buying behaviour. Thus, campaigns directed toward
changing purchase behaviour rather than creating awareness emphasize
frequency over reach. Ads announcing a sale are often seen and remembered
after one exposure. Thus, sale ad campaigns emphasize reach over frequency.
TIMING
Typically, a promotional message should appear on, or slightly precede, the
days consumers are most likely to purchase merchandise. For example, if
most consumers buy groceries Thursday through Sunday, then supermarkets
should advertise on Thursday and Friday. Similarly, consumers often go
shopping after they receive their paycheques at the middle and the end of the
month. Thus, advertising should be concentrated at these times.
DETERMINING THE COMMUNICATION BUDGET
The second step in developing a retail communication program is
determining a budget (see Exhibit 14–7). The economically correct
method for setting the communication budget is marginal analysis. Even
though retailers usually don’t have enough information to perform a complete
marginal analysis, the method shows how managers should approach budget-setting programs.
The marginal analysis method for setting a communication budget is the
approach retailers should use when making all of their resource allocation
decisions, including the number of locations in a geographic area, the staffing
of stores, and the floor and shelf space devoted to merchandise categories.
MARGINAL ANALYSIS METHOD
Marginal analysis is based on the economic principle that firms should
increase communication expenditures so long as each additional dollar spent
generates more than a dollar of additional contribution. The marginal
analysis method is used to determine how much should be spent on the
retailer’s communication program.
In Exhibit 14–11, the first column indicates 21 different
communication expense levels. The retailer estimates store sales
(column 2), gross margin (column 3), and other expenses (columns 4 and 5).
Then the retailer calculates the contribution excluding expenses on
communications (column 6) and the profit when the communication
expenses are considered (column 7). To estimate the sales generated by
different levels of communications, the retailer can rely on judgment and
experience, or might analyze past data to determine the relationship between
communication expenses and sales. Historical data also provide information about the gross
margin and other expenses as a percentage of sales.
Notice that at low levels of communication expenses, an additional $5,000 in
communication expenses generates more than a $5,000 incremental
contribution. For example, increasing the communication expense from
$15,000 to $20,000 increases contribution by $10,800 (or $48,400 −
$37,600). When the communication expense reaches $65,000, further
increases of $5,000 generate less than $5,000 in additional contributions. For
example, increasing the budget from $65,000 to $70,000 generates only an
additional $4,050 in contribution ($125,350 − $121,300).
In this example, the retailer determines that the maximum profit would be
generated with a communication expense budget of $65,000. But it notices
that expense levels between $55,000 and $70,000 all result in about the same
level of profit. Thus, the retailer makes a conservative decision and establishes
a $55,000 budget for communication expenses.
In most cases, it’s very hard to do a marginal analysis because often retail
managers don’t know the relationship between communication expenses and
sales. Note that the numbers in Exhibit 14–11 are simply the retailer’s
estimates; they may not be accurate.
Sometimes retailers do experiments to get a better idea of the relationship
between communication expenses and sales. Say, for example, a catalogue
retailer selects several geographic areas in Canada with the same sales
potential. The retailer then distributes 100,000 catalogues in the first area,
200,000 in the second area, and 300,000 in the third area. Using the sales
and costs for each distribution level, it could go through an analysis like the
one in Exhibit 14–11 to determine the most profitable distribution level.
Other methods that retailers use to set communication budgets are the
objective-and-task method and rules of thumb, such as the affordable,
percentage-of-sales, and competitive parity methods. These methods are less
sophisticated than marginal analysis but easier to use.
OBJECTIVE-AND-TASK METHOD
The objective-and-task method determines the budget required to undertake
specific tasks for accomplishing communication objectives. To use this
method, the retailer first establishes a set of communication objectives. Then
the necessary tasks and their costs are determined. The sum total of all costs
incurred to undertake the tasks is the communication budget.
Exhibit 14–12 illustrates how the retailer uses the objective-and-task
method to complement the marginal analysis. The retailer establishes three
objectives:
 to increase the awareness of the store
 to create a greater preference for the store among customers in the target market
 to promote the sale of merchandise remaining at the end of each season
The total communication budget the retailer requires to achieve these
objectives is $55,300.
Besides defining the objectives and tasks, the retailer must also recheck the
financial implications of the communication mix by projecting the income
statement for next year using the communication budget (see Exhibit 14–13). This income
statement includes an increase of $25,300 in
communication expenses over last year. Upon examination, the retailer feels
that this increase in the communication budget will boost annual sales from
$500,000 to $650,000. Based on the retailer’s projections, the increase in
communication expenses will raise store profits. The results of the marginal
analysis and the objective-and-task methods suggest a communication budget
between $55,000 and $65,000.
RULE-OF-THUMB METHODS
In the previous two methods, the communication budget is set by estimating communication
activities’ effects on the firm’s future sales or communication
objectives. The rule-of-thumb methods discussed in this section use an
alternative logic.
AffORDABLE METHOD
When using the affordable budgeting method, retailers first forecast their sales
and expenses, excluding communication expenses, during the budgeting
period. The difference between the forecast sales and expenses plus desired
profit is then budgeted for the communication mix expenses. In other words,
the affordable method sets the communication budget by determining what
money is available after operating costs and profits are budgeted.
The major problem with the affordable method is that it assumes that the
communication expenses don’t stimulate sales and profit. Communication
expenses are just a cost of business, like the cost of merchandise. When
retailers use the affordable method, they typically cut “unnecessary”
communication expenses if sales fall below the forecast rather than increase
communication expenses to increase sales.
PERCENTAGE-OF-SALES METHOD
The percentage-of-sales method sets the communication budget as a fixed
percentage of forecast sales. Retailers use this method to determine the
communication budget by forecasting sales during the budget period and
using a predetermined percentage to set the budget. The percentage may be
the retailer’s historical percentage or the average percentage used by similar
retailers.
The problem with the percentage-of-sales method is that it assumes the same
percentage used in the past, or by competitors, is still appropriate for the
retailer. Consider a retailer that hasn’t opened new stores in the past but
plans to open many new stores in the current year. It must create customer
awareness for these new stores, so the communication budget should be much
larger in the current year than in the past.
Using the same percentage as competitors also may be inappropriate. For
example, a retailer might have better locations than its competitors. Due to
these locations, customers may already have a high awareness of the retailer’s
stores. Thus, the retailer may not need to spend as much on communications
as competitors with poorer locations spend.
One advantage of both the percentage-of-sales method and the affordable
method for determining a communication budget is that the retailer won’t
spend beyond its means. Since the level of spending is determined by sales,
the budget will go up only when sales go up and the retailer generates more
sales to pay for the additional communication expenses. When times are
good, these methods work well because they allow the retailer to
communicate more aggressively with customers. But when sales fall,
communication expenses are cut, which may accelerate the sales decline.
COMPETITIVE PARITY METHOD
Under the competitive parity method, the communication budget is set so that
the retailer’s share of communication expenses equals its share of the market.
For example, consider a sporting goods store in a small town. To use the
competitive parity method, the owner–manager would first estimate the total
amount spent on communications by all of the sporting goods retailers in
town. Then the owner–manager would estimate his or her store’s market
share for sporting goods and multiply that market share percentage by the
sporting goods stores’ total advertising expenses to set its budget. Assume
that the owner–manager’s estimate of advertising for sporting goods by all
stores was $5,000 and the estimate of his or her store’s market share was 45
percent. On the basis of these estimates, the owner–manager would set the
store’s communication budget at $2,250 to maintain competitive parity.
Like the other rule-of-thumb methods, the competitive parity method doesn’t
allow retailers to exploit the unique opportunities or problems they confront
in a market. If all competitors used this method to set communication
budgets, their market shares would stay about the same over time (assuming
that the retailers developed equally effective campaigns).
ALLOCATING THE PROMOTIONAL BUDGET
After determining the size of the communication budget, the third step in the
communication planning process is allocating the budget (see
Exhibit 14–12). In this step, the retailer decides how much of its budget to
allocate to specific communication elements, merchandise categories,
geographic regions, or long- and short-term objectives. For example, a
department store must decide how much of its communication budget to
spend in each area where it has stores. Hudson’s Bay decides how much to
allocate to appliances, hardware, and apparel. The sporting goods store
owner–manager must decide how much of the store’s $2,250 communication
budget to spend on promoting the store’s image versus generating sales during
the year and how much to spend on advertising and special promotions.
Research indicates that allocation decisions are more important than the
decision on the amount spent on communications. In other words, retailers
often can realize the same objectives by reducing the size of the
communication budget but allocating the budget more effectively.
An easy way to make such allocation decisions is just to spend about
the same in each geographic region or for each merchandise
category. But this allocation rule probably won’t maximize profits because it
ignores the possibility that communication programs might be more effective
for some merchandise categories or for some regions than for others. Another
approach is to use rules of thumb, such as basing allocations on the sales level
or contribution for the merchandise category.
Allocation decisions, like budget-setting decisions, should use the principles
of marginal analysis. The retailer should allocate the budget to areas that will
yield the greatest return. This approach for allocating a budget is sometimes
referred to as the high-assay principle. Consider a miner who can spend his
Page 581time digging on two claims. The value of the gold on one claim is assayed at
$20,000 per tonne, whereas the assay value on the other claim is $10,000 per
tonne. Should the miner spend two-thirds of his time at the first mine and
one-third of his time at the other mine? Of course not! The miner should
spend all of his time mining the first claim until the assay value of the ore
mined drops to $10,000 a tonne, at which time he can divide his time equally
between the claims.
Similarly, a retailer may find that its customers have a high awareness and
very favourable attitude toward its women’s clothing but may not know much
about the store’s men’s clothing. In this situation, a dollar spent on
advertising men’s clothing might generate more sales than a dollar spent on
women’s clothing, even though the sales of women’s clothing are greater than
the sales of men’s clothing.
PLANNING, IMPLEMENTING, AND EVALUATING COMMUNICATION PROGRAMS
The final stage in developing a retail communication program is
implementation and evaluation (see Exhibit 14–12). In this final section of
the chapter, we illustrate the planning and evaluation process for three
communication programs—an advertising campaign by a small specialty
retailer, a sales promotion opportunity confronting a supermarket chain, and
a communication program emphasizing direct marketing undertaken by a
large retail chain.
ADVERTISING CAMPAIGN
South Gate West (a fictitious company) is one of several specialty import home-furnishings
stores competing for upscale shoppers. The store has the appearance of both a fine antiques store
and a traditional home-furnishing shop, but most of its merchandise is new Asian imports.
The owner realized that their communication budget is considerably less than the budget of the
local Ashley HomeStore. (Ashley HomeStore is a large international import home-furnishings
chain.) They decide to concentrate their limited budget on a specific segment and use highly
distinctive copy and art in their advertising. Their target market is experienced, sophisticated
consumers of housewares and home decorative items. The owner’s experience indicates the
importance of personal selling for more seasoned shoppers because they make large purchases
and seek considerable information before making a decision. Thus, the retailer spends part of the
communication budget on training sales associates.
The advertising program that the retailer develops emphasizes the store’s distinctive image. They
use the newspaper as the major vehicle. Competitive ads contain line drawings of furniture with
prices. The ads emphasize the imagery associated with Asian furniture by featuring off-thebeaten-path scenes of Asian countries with unusual art objects. This theme is also reflected in the
store’s atmosphere.
To evaluate the communication program, the retailer needs to compare the results of the program
with the objectives they developed during the first part of the planning process. To measure the
campaign’s effectiveness, they conduct an inexpensive tracking study. Telephone interviews are
performed periodically with a representative sample of furniture customers in the store’s trading
area. Communication objectives are assessed using the following questions:
Communication Objective — Question
Awareness — What stores sell East Asian furniture?
Knowledge — Which stores would you rate outstanding on the following characteristics?
Attitude — On your next shopping trip for East Asian furniture, which store would you visit
first?
Visit — Which of the following stores have you been to?
Here are the survey results for one year:
 Awareness (percentage mentioning store): 38% before, 46% six months after, 52% one
year after
 Knowledge (percentage giving outstanding rating for sales assistance): 9, 17, 24
 Attitude (percentage first choice): 13, 15, 19
 Visit (percentage visited store): 8, 15, 19
The results show a steady increase in awareness, knowledge of the store, and choice of the store
as a primary source of East Asian furniture. This research provides evidence that the advertising
is conveying the intended message to the target audience.
SALES PROMOTION OPPORTUNITY
Many sales promotion opportunities undertaken by retailers are initiated by vendors. For
example, Colgate-Palmolive might offer the following special promotion to Loblaws: During a
one-week period, Loblaws can order Fab laundry detergent in the 2-kg size at 15 cents below the
standard wholesale price. However, if Loblaws elects to buy Fab at the discounted price, the
grocery chain must feature the 2-kg container of Fab in its Thursday newspaper ad at $1.59 (20
cents off the typical retail price). In addition, Loblaws must have an end-aisle display of Fab.
Before Loblaws decides whether to accept such a trade promotion and then promote Fab to its
customers, it needs to assess the promotion’s impact on its profitability. Such a promotion may
be effective for the vendor but not for the retailer.
To evaluate a trade promotion, the retailer considers the following:
 the realized margin from the promotion
 the cost of the additional inventory carried due to buying more than the normal amount
 the potential increase in sales from the promoted merchandise
 the potential loss suffered when customers switch to the promoted merchandise from
more profitable private-label brands
 the additional sales made to customers attracted to the store by the promotion
When Fab’s price is reduced to $1.59, Loblaws will sell more Fab than it normally would. But
Loblaws’ margin on the Fab will be less because the required retail discount of 20 cents isn’t
offset by the wholesale discount of 15 cents. In addition, Loblaws might suffer losses because
the promotion encourages customers to buy Fab, which has a lower margin than Loblaws’
private-label detergent that customers might have bought. In fact, customers may stockpile Fab,
buying several boxes, which will reduce sales of Loblaws’ private-label detergent for some time
after the special promotion ends. On the other hand, the promotion may attract customers who
don’t normally shop at Loblaws but who will visit to buy Fab at the discounted price. These
customers might buy additional merchandise, providing a sales gain to the store that it wouldn’t
have realized if it hadn’t promoted Fab.
SPECIAL PROMOTION USING A CRM/CAMPAIGN MANAGEMENT TOOL
A national retailer with 580 store locations uses its CRM/campaign management system to plan,
design, evaluate, and implement a special Canada Day promotion. The diagram of the system is
shown in Exhibit 14–14. The retailer has a customer database with purchase information
complemented with additional customer information acquired through external sources.
After an initial planning meeting, the retailer decides to use direct mail, mobile marketing, and
email communication channels with supporting in-store promotions and existing advertising.
Customers need to bring in a coupon to take advantage of the special promotion. The goal of the
campaign is to generate a 10 percent increase in sales during the Canada Day period.
Using the campaign management tool in the system, the retailer examines a number of what-if
scenarios, enabling the team to chart out all of the tasks, costs, and related deadlines to determine
projected ROI. Initially, they want to target customers who have visited the stores and made a
purchase within the last nine months. During the target market segmentation evaluation process,
they determine that the counts are too low and increase the target criterion to customer purchases
within the last 12 months. Using this criterion, the communication program is directed to 2.6
million customers. A review of past holiday promotion programs suggests a response rate of 2.5
percent.
Based on the 2.5 percent response rate for 2.6 million customers, the number of people projected
to visit the stores is 65,000. The special promotion is a $49 item, but the average sale once
people are in the store is $99. On the basis of this information, the Canada Day event special
promotion is targeted to generate gross sales between $3.1 million and $6.4 million.
The cost for the direct mail piece is $0.65/piece and the email piece is $0.03/email. To mail and
email 2.6 million customers, the cost is $1,768,000. In determining the product costs on the
special promotion item, a 75 percent markup is used. The campaign profitability margin is
projected to be between $600,000 and $3.1 million. The financial analysis developed by the
planning tool is shown in Exhibit 14–15.
Once the what-if analysis is completed and the campaign plan is built with all of the details and
responsibilities of each department, it is set into action. The action plan includes all the required
steps in the campaign process, along with the costs, responsibilities, and deadlines on the
marketing production schedule. By putting the plan into production, all of the tasks are sent to
the people responsible for completing them, so that deadlines and costs are tracked. Each
department receives a series of tasks specific to that department’s deliverables:
 The creative department is assigned the responsibility of designing the direct mail piece
with the coupon. It also designs the email piece with a print coupon. Once the design
process is completed and approved, the artwork is sent to the print vendor for printing
and the marketing department for email distribution.
 The database marketing department is responsible for sending the list of customers in the
target market analysis (the customers who have visited a store and made a purchase in the
last 12 months) to the mail vendor. Each record in the customer database has a unique
identifier so that the results of the campaign will be properly tracked and analyzed.
 The store promotions department has to make sure that the in-store promotional materials
are consistent with the message in the campaign. Media services also have to verify
consistency in all media with the campaign message.
During the entire campaign process, a management view of the financial information and
campaign deliverables/deadline information is available. As the stores report their customer
sales, management’s reports are automatically generated, and the response ROI is analyzed to
determine if the marketing campaign was successful. The information from all of the customer
touchpoints is collected, processed, and added to the customer database. The successful
campaign is then templated for future use to save time in the planning phase for the next holiday
campaign. The matrix solution allows management to optimize resources and manage deadlines
and deliverables, thus increasing productivity, efficiency, and ROI.
SUMMARY
In today’s economy, where good news is often quickly matched by an equal
portion of bad news, effectively competing and winning customers every day
is vital to a retailer’s success. The best retailers maintain their loyal customers
and win new ones, pursuing larger market share by communicating through
education, building brand awareness, and developing experiential
involvement. Consumers today are both online and offline, and sometimes
online while shopping offline. Online they are sharing, friend-validating,
researching, learning, and developing a point of view. Offline there is
touching, brand comparing, and brand associating.
The communication program can be designed to achieve a variety of
objectives for the retailer. Objectives include building a brand image of the
retailer in the customer’s mind, increasing sales and store traffic, providing information about the
retailer’s location and offering, and announcing special
activities. Retailers need to be where their customers are with both their
messaging and their products and/or services.
Retailers communicate with customers through advertising, sales promotions,
websites, store atmosphere, publicity, personal selling, email, and word-of-
mouth. These elements in the communication mix must be coordinated so
that customers will have a clear, distinct image of the retailer and won’t be
confused by conflicting information. Also, consumer rights requirements
must be acknowledged and complied with.
Many retailers use rules of thumb to determine the size of the promotion
budget. Marginal analysis (the most appropriate method for determining how
much must be spent to accomplish the retailer’s objectives) should be used to
determine whether the level of spending maximizes the profits that could be
generated by the communications mix.
The largest portion of a retailer’s communication budget is typically spent on
advertising and sales promotions. A wide array of media can be used for
advertising. Each medium has its pros and cons. Newspaper advertising is
effective for announcing sales, social media is good for short and concise
targeted messages, and TV ads are useful for developing an image. Sales
promotions are typically used to achieve short-term objectives, such as
increasing store traffic over a weekend. Most sales promotions are supported
in part by promotions offered to the retailer by its vendors. Publicity and
word-of-mouth are typically low-cost communications, but they are very
difficult for retailers to control.
Direct marketing contains a variety of traditional and new forms of marketing
communication initiatives, including Internet-enabled methods such as
mobile marketing. The increased use of customer databases has enabled
retailers to identify and track consumers over time and across purchase situations, contributing to
more personalized promotional activity.
KEY TERMS
Advertising: Paid communications delivered to customers through nonpersonal mass media
such as newspapers, television, radio, direct mail, and the Internet.
Affordable budgeting method: A budgeting method in which a retailer first sets a budget for
every element of the retail mix except promotion and then allocates the leftover funds to a
promotional budget.
aided recall: When consumers indicate they know the brand when the name is presented to
them.
attitude branding: The choice of a symbol that represents a feeling that is not necessarily
connected with the product or retailer.
Blog: A public website where users post informal journals of their thoughts, comments, and
philosophies; also called weblog.
Brand: A distinguishing name or symbol (such as a logo, design, symbol, or trademark) that
identifies the products or services offered by a seller and differentiates those products and
services from the offerings of competitors.
Brand association: Anything linked to or connected with the brand name in a consumer’s
memory.
Brand awareness: The ability of a potential customer to recognize or recall that a particular
brand name belongs to a retailer or product/service.
Brand energy: The concept that links the idea that a brand creates value through meaningful
experiences rather than a focus on generating profits.
Brand equity: The value that brand image offers retailers.
Call to action: The portion of the marketing or sales message that prompts potential consumers
to perform a desired action within the desired time frame.
Communication objectives: Specific goals for a communication program related to the effects
of the communication program on the customer’s decision-making process.
Competitive parity method: An approach for setting a promotion budget so that the retailer’s
share of promotion expenses is equal to its market share.
Co-op advertising: A program undertaken by a vendor in which the vendor agrees to pay all or
part of a promotion for its products; also called cooperative advertising.
Cost per thousand (CPM): A measure that is often used to compare media. CPM is calculated
by dividing an ad’s cost by its reach.
Coverage: The theoretical number of potential customers in the retailer’s target market that
could be exposed to an ad in a given medium.
Cumulative reach: The cumulative number of potential customers that would see an ad that
runs several times.
Direct mail: Any brochure, catalogue, advertisement, or other printed marketing material
delivered directly to the consumer through the mail or by a private delivery company.
Direct marketing: A form of non-store retailing in which customers are exposed to merchandise
through print or electronic media; they then can purchase the merchandise by telephone, mail, or
over the Internet.
Email: A paid personal communication vehicle that involves sending messages over the Internet.
Freestanding inserts (FSI): An advertisement printed at the retailer’s expense and distributed as
an insert in the newspaper; also called a preprint.
Frequency: The number of times a potential customer is exposed to a promotional message.
High-assay principle: A method of allocating a communication budget that uses the principles
of marginal analysis. The retailer should allocate the budget to areas that will yield the greatest
return.
Impact: An ad’s effect on the audience.
Integrated marketing communication program: The strategic integration of multiple
communication methods to form a comprehensive, consistent message.
Marginal analysis: A method of analysis used in setting a promotional budget or allocating
retail space, based on the economic principle that firms should increase expenditures as long as
each additional dollar spent generates more than a dollar of additional contribution.
Mobile marketing: Communicating with and selling to customers through wireless handheld
devices, such as cellular telephones; also called m-commerce or mobile commerce.
Objective-and-task method: A method for setting a promotion budget in which the retailer first
establishes a set of communication objectives and then determines the necessary tasks and their
costs.
Percentage-of-sales method: A method for setting a promotion budget based on a fixed
percentage of forecast sales.
Personal selling: A communication process in which salespeople help customers satisfy their
needs through face-to-face exchanges of information.
Point-of-purchase (POP): An area where the customer waits at checkout.
Premium: A type of sales promotion whereby an item is offered free of charge or at a bargain
price to reward some type of behaviour, such as buying, sampling, or testing.
Public relations (PR): A retail communication tool for managing communications and
relationships to achieve various objectives, such as building and maintaining a positive image of
the retailer, handling or heading off unfavourable stories or events, and maintaining positive
relationships with the media.
Reach: The actual number of customers in the target market exposed to an advertising medium.
Rule-of-thumb method: A type of approach for setting a promotion budget that uses past sales
and communication activity to determine the present communications budget.
Sales promotions: Paid, impersonal communication activities that offer extra value and
incentives to customers to visit a store or purchase merchandise during a specific period of time.
Samples: A small amount or size of a product given to potential customers as an inducement to
purchase.
Short code: A five- or six-digit number or word used for messaging.
Showrooming: Visiting a bricks-and-mortar store to research a product before purchasing it
through electronic means after browsing online for the best price.
Social media: Media content distributed through social interactions; major online facilitators of
social media include YouTube, Facebook, Pinterest, and Twitter.
Special event: Sales promotion program comprising a number of sales promotion techniques
built around a seasonal, cultural, sporting, musical, or other event.
Top-of-mind awareness: The highest level of brand awareness; arises when consumers mention
a brand name first when they are asked about a type of retailer, a merchandise category, or a type
of service.