Chapter 8
Information Gathering and
Processing in Retailing
Dr. Pointer’s Notes
Chapter Objectives
To discuss how information flows in a
retail distribution channel
To show why retailers should avoid
strategies based on inadequate
information
To look at the retail information system,
its components, and recent advances
To describe the marketing research
process
8-2
Information Flows in a Retail
Distribution Channel
• For channel of distribution to work
effectively, there should be a free flow of
information from the main parties –
suppliers(wholesalers and manufacturers),
retailer and consumer.
• Collaboration and cooperation is necessary
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Figure 8.1
How Information Flows in a
Retail Distribution Channel
Information
and the
Supplier
8-4
Information
and the
Retailer
Information
and the
Consumer
Suppliers Need To Know
From the Retailer
 Estimates of
category sales
 Inventory turnover
rates
 Feedback on
competitors
 Level of customer
returns
8-5
From the Customer
 Attitudes toward
styles and models
 Extent of brand
loyalty
 Willingness to pay a
premium for superior
quality
Retailers Need To Know
From the Supplier
 Advance notice of
new models and
model changes
 Training materials
 Sales forecasts
 Justifications for
price changes
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From the Customer
 Why people shop
there
 What they like and
dislike
 Where else people
shop
Consumers Need To Know
From the Supplier
 Assembly and
operating
instructions
 Extent of warranty
coverage
 Where to send a
complaint
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From the Retailer
 Where specific
merchandise is
stocked in the store
 Methods of payment
acceptable
 Rain check and other
policies
Purpose of Retail
Information Systems
• Develop and maintain a system that will
provide good information for retailers to
make better decisions
• Data gathering is useful and should not be
viewed as a one-shot resolution of a single
issue.
• A retail information system needs to be
utilized
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Retail Information System (RIS)
Anticipates the information needs of
retail managers
Collects, organizes, and stores relevant
data on a continuous basis
Directs the flow of information to the
proper decision makers
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Poor Retail Strategy Decision
based on inadequate Information
• Inadequate information can cause a firm to
enact bad strategies
• Examples illustrated in text
a. poor intuition (movies theater)
b. continuing what was done before (toy store
c. not reading customers perceptions (florist)
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Advantages of RIS
• Information is organized and company
focused
• Opportunities and threats may be
discovered earlier
• Strategic elements can be coordinated
• New strategies can be developed quicker
• Quantitative data results are accessible and
cost benefit analysis done easier.
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A Retail
Information System
Figure 8.2
Environment
Retailer’s
philosophy
Strategic plans
Data Collection
Information Control Center
b. Data Storage and retrieval c. updating of files
Implementation
Feedback
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Retail
Operations
Database Management
A major element in a RIS
System gathers, integrates, applies, and
stores information in related subject areas
Used for
–
–
–
–
–
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Frequent shopper programs
Customer analysis
Promotion evaluation
Inventory planning
Trading area analysis
Five Steps to Approaching
Database Management
 Plan the particular database and its
components and determine information needs
 Acquire the necessary information
 Retain the information in a usable and
accessible format
 Update the database regularly to reflect
changing demographics, recent purchases,
etc.
 Analyze the database to determine strengths
and weaknesses
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Figure 8.4 Retail Database
Management in Action
Executive
&
other company
employees
Data
mining
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Data Warehouse
Channel
Partners
micromarketing
Customers
Data Warehousing
Data warehousing is where copies of all the data bases in a firm
are maintained in one location and accessible to employees
at any locale.
Advantages
1. Employees can quickly access information for decision
making
2. New data is make available company wide sooner
3. Data inconsistencies are reduced
4.8-16Better data analysis and manipulation are possible
Components of a Data
Warehouse
Physical storage location for data – the
warehouse
Software to copy original databases and
transfer them to warehouse
Interactive software to allow processing of
inquiries
A directory for the categories of information
kept in the warehouse
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Data Mining and Micromarketing
Data mining is the in-depth analysis of
information to gain specific insights about
customers, product categories, vendors, and
so forth
Micromarketing is an application of data
mining, whereby retailers use differentiated
marketing and develop focused retail
strategy mixes for specific customer
segments
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Figure 8.6 Applying UPC Technology
to Gain Better Information
Scanning price at cash register – Give information
which can used for inventory management.
Universal Product Codes (UPC)– marking products
with a series of thick and thin vertical lines to give them
unique ID codes.
Scanning products on shelf/racks provides information
to verify inventory and indicate time for price decreases
(mark downs)
Electronic Data Interchange (EDI)- retailers and
suppliers regular exchange information through
computers regarding inventory levels, delivery times,
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units and etc.
Marketing Research Process
in Retailing
• Marketing research in retailing entails the
collection and analysis of information
relating to specific issues or problems facing
a retailer.
• Marketing research process – embodies a
series of activities:
• It is systematic process as outlined on next
slide
8-20
The Marketing
Research Process
Figure 8.7
Define
problem
Examine
secondary
data
Generate
primary data
Implement
findings
Make
Recommend.
Analyze
Data
8-21
Issues (problem)
definition involves
a clear statement
of the topic to be
studied. Can use
both secondary
and primary data
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Marketing
Research
in
Retailing
Secondary Data
Advantages
 Inexpensive
 Fast
 Several sources
and perspectives
 Generally credible
 Provides
background
information
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Disadvantages
 May not suit current
study
 May be incomplete
 May be dated
 May not be accurate
or credible
 May suffer from poor
data collection
techniques
Secondary Data Sources
External
Internal
 Databases
 Sales reports
– ABI/Inform, Business
 Billing reports
Periodicals Index,
 Inventory records
etc.
 Performance reports  Government
– U.S. Census of Retail
Trade
– Statistical Abstract of
the U.S.
– Public records
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Primary Data
Advantages
 Collected for
specific purpose
 Current
 Relevant
 Known and
controlled source
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Disadvantages
 May be more
expensive
 Tends to be more
time consuming
 Information may not
be acquirable
 Limited perspectives
Primary Decisions
• In-house or outsource?
• Sampling method?
– Probability (each person has
a known and equal chance of
being selected)
– Nonprobability
• Data collection method?
–
–
–
–
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Survey
Observation
Experiment
Simulation
Data collection method
– Survey- information is systematically gathered
from respondents by communicating with them
and using a questionnaire
– Observations- present ant past behavior of
customers are noted and recorded
– Experiment- one or more elements of a retail
strategy mix are manipulated under controlled
conditions to determine its effect on sales or etc.
– Simulation-computer program is used to
manipulate the elements of a retail strategy mix
rather than test in a real setting.
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Survey Methods
 In-person
 Over the telephone
 By mail
 Online
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 Disguised
 Non-disguised
Mystery Shoppers
Retailers hire people to pose as
customers and observe operations
from sales presentations to how
well displays are maintained to
service calls
Observations may be disguised or
nondisguised, structured or
unstructured, direct or indirect, and
human or mechanical.
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Questions
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