A
Additional Markup - An amount added to a cost price in calculating a selling price, especially an
amount that takes into account overhead and profit.
Additional Markup Percentage -The percentage of net sales from the total dollar additional
markup.
Addition to Retail Percentage -The percentage of the price increase from the original price.
Advertising The promotion of goods or services for sale through impersonal media, such as radio
or television.
Affinity - Occurs when the stores in a particular location benefit from each other’s presence.
All-You-Can-Afford Method - A budget strategy in which retailer’s do not factor promotion
into the budget, instead uses any leftover funds after each element of the strategy mix is
budgeted for as the promotional budget.
Analog Model - A computerized tool used to compare similar existing stores, competitors in the
new store’s prospective location, and the expected market share to help select a site location.
Application Blank - A preliminary tool to screen job applicants. It provides basic data on the
applicant.
Assets - Items of monetary value the retailer owns.
Asset Turnover - Net sales divided by total assets. It is calculated as a performance measure.
Assortment - A selection of products that are chosen based on a number of attributes (including
consumer need, retailer strategy) that maximizes efficiency and commercial return within a
category or store
Assortment Display - A display which a retailer exhibits a wide range of merchandise. The
display may be wither open or closed.
Assortment Merchandise - The variety of products a retailer must carry to give the customers a
selection
Atmosphere - The image a store develops with its physical characteristics, elements to attract
customers to the store.
1 Atmospherics - See Atmosphere.
Attitudes (Opinions) - A person’s feelings about any topic, be it negative, positive or neutral.
Augmented Customer Service - Any action retailers may take to gain a competitive edge by
enhancing the customer’s experience.
Automatic Markdown Plan - A timed plan to control the amount and timing of markdowns on
merchandise in stock.
Automatic Reordering System - The combined inventory with reorder point calculations
automated by a computerized application.
B
Bait Advertising - An illegal retailer tactic of advertising a product or service at very low prices,
and then intentionally tries to convince the customer to purchase a more expensive version, with
no intention of selling the originally advertised product.
Bait-and-Switch Advertising - See Bait Advertising.
Balanced Tenancy - Similar to affinity, Balanced Tenancy is a state which occurs when the
stores in a planned shopping center complement each other in the product’s quality and variety
they offer.
Balance Sheet - Reflects the principle of assets equal liabilities plus net worth in an itemized
display of the retailer’s liabilities, assets and net worth at a specific time.
Base Volume- estimate of sales volume to occur in the absence of any merchandising
Base Sales- The demand for a product without influence of merchandising
Basic Stock List - A list that describes the inventory level, brand, color, style category, package,
size and any other detail for every staple item the retailer carries.
Basic Stock Method - A tool for planning to maintain an Inventory level above that which the
retailer expects to sell over a specific period of time.
Battle of the Brands - Refers to manufacturers and retailers competing for profit and shelf
space. Manufacturers, private and generic brands compete for more shelf space and control.
2 Benchmarking - The process of retailers setting their own standards of performance, based on
achievements of competitors, high performance firms, and /or the retailer’s own prior actions.
Bifurcated Retailing - The popularity of mass merchandising and niche retailing has resulted in
a decline of the middle of the market retailing.
Book Inventory System - Also known as a perpetual inventory system, it keeps a running total of
the value of all the inventory, at cost as of any given time. This is achieved by recording
purchases and adding them to the existing inventory value. Sales are subtracted to arrive at the
new current inventory value, at cost.
Bottom-Up Space Management Approach - Describes a style in which planning starts at the
individual product level and moves up to the category, total store and then overall company
level.
Box (Limited-Line) Store - Limited number of product lines; very limited assortment of brands
and sizes; few national brands; few perishables; products displayed in boxes with sides and tops
cut off; very low prices; little atmosphere and few services; very little promotion
BPI - See Buying Power Index.
Budgeting - Based on expected performance retailer’s plan expenditures for a given time.
Bundled Pricing - A single basic price that combines several elements.
Business Format Franchising - When a franchisee receives assistance in many other aspects of
running the business besides the simple right to sell goods and services. Assistance can be in site
location, accounting, quality control, practices, and training as well as assistance with specific
problems.
Buying Power Index (BPI) - An index comprised of weighted measures of disposable income,
sales data and market factors for a specific region. The index is used by manufacturers and
distributors to determine the revenue potential of a particular region.
C
Canned Sales Presentation - A repetitive and memorized speech, given to any customer
interested in an item for sale.
Capital Expenditures Case Display - Payment by a business for basic assets such as property,
fixtures, or machinery, but not for day-to-day operations such as payroll, inventory, maintenance
3 and advertising. Capital expenditures supposedly increase the value of company assets and are
usually intended to improve productivity.
Cash Flow - the excess of cash revenues over cash outlays in a given period of time (not
including non-cash expenses).
Category Killer - Large companies that put less efficient and highly specialized merchants out of
business. Category killers can attain this status by being cheaper, easier, bigger, or more popular
than the competition.
Category Management - The strategic management of product groups through trade partnerships
which aims to maximize sales and profits by satisfying consumer and shopper needs
CBD - See Central Business District.
Census of Population - Demographic data that is organized geographically.
Central Business District (CBD) - The term CBD or Central Business District is the central
district of a city, usually typified by a concentration of retail and office buildings.
Centralized Buying Organization - A type of buying in which a chain retailer makes all
purchase decisions from one office. It usually engages in some level of centralized (or
coordinated) purchasing and decision-making.
Chain - More than one store unit that is under common ownership.
Channel Control - When one member of the distribution channel is powerful enough to control
the decisions made in that channel.
Channel of Distribution - The chain of businesses or intermediaries through which a good or
service passes until it reaches the end consumer. A distribution channel can include wholesalers,
retailers, distributors and even the internet. Channels are broken into direct and indirect forms,
with a "direct" channel allowing the consumer to buy the good from the manufacturer and an
"indirect" channel allowing the consumer to buy the good from a wholesaler. Direct channels are
considered "shorter" than "indirect" ones.
Chargebacks - A penalty by a customer against a supplier whose goods do not meet the terms of
the sales agreement.
Class Consciousness - Class consciousness describes an awareness or knowledge of social
standing and caste systems, often based on wealth or family background and history.
4 Classification Merchandising - A subdivision of a selling department; a dissection of a
department's inventory, purchase, and/or sales figures for the purpose of closer control and more
accurate financial data.
Club - A very large retail outlet that offers members low prices for buying in bulk. Warehouse
clubs, including Costco, Sam's Club, and BJ's Wholesale Club, typically require an annual
membership fee and offer few frills.
Cognitive Dissonance - Often referred to as Buyer’s Remorse. Cognitive Dissonance is the
psychological discomfort consumers feel after they make a purchase and are not convinced they
made the best choice. This can be remedied with good money-back guarantees, honest
advertisement and customer care.
Collaborative Planning, Forecasting, and Replenishment (CPFR) - CPFR is a business
practice that combines the intelligence of multiple trading partners in the planning and
fulfillment of customer demand. It links sales and marketing best practices to supply chain
planning and execution processes. The objective is to increase availability to the customer while
reducing inventory, transportation and logistics costs.
Combination Store - One of the major retailer types, which combines supermarket and general
merchandise sales in one facility, with general merchandise typically accounting for 25 to 40
percent of total sales. Normally these stores have large selling space and are expanded version of
supermarkets.
Combined performance index- is a combination of several metrics, such as dollars sales and unit
sales, which will give you an overview of a product’s true impact on the category
Community Shopping Center - General merchandise or convenience- oriented offerings. Wider
range of apparel and other soft goods offerings then neighborhood centers. The center is usually
configured in a straight line as a strip, or may be laid out in an L or U shape, depending on the
site and design. Usually consist of discount stores, supermarkets, and drug, large-specialty
discount (toys, books, electronics, home improvement/furnishings or sporting goods, etc.).
Compensation - Is wage and salary payments as well as benefits including health and life
insurance, retirement payments, and any other non-cash compensation.
Competition-Oriented Pricing - The practice of determining pricing based on the pricing of the
competition.
Competitive Advantages - An advantage that a firm has over its competitors, allowing it to
generate greater sales or margins and/or retain more customers than its competition. There can be
many types of competitive advantages including the firm's cost structure, product offerings,
distribution network and customer support.
5 Competitive Parity Method - Advertising-expense budgeting method based on what a brand's or
firm's competitors are estimated to be spending. This method assumes the other firms have the
same marketing objectives and know what they are doing.
Computerized Checkout - Used by large and small retailers to efficiently process transactions
and monitor inventory. Cashiers ring up sales or pass items by scanners. Computerized registers
instantly record and display sales, customers get detailed receipts, and inventory data are stored
in a memory bank.
Concentrated Marketing - Growth strategy in which resources of a firm are focused on a welldefined market niche or population segment.
Conditional formatting- Formatting of data, in reports or computer programs, that changes based
on specific criteria
Consignment Purchase - With the provision that payment is expected only on completed sales
and that unsold items may be returned to the one consigning.
Constrained Decision Making - Whereby franchisors limit franchisee involvement in the
strategic planning process.
Consumer Behavior - Is the study of individuals, groups, or organizations and the processes they
use to select, secure, and dispose of products, services, experiences, or ideas to satisfy needs and
the impacts that these processes have on the consumer and society.
Consumer Cooperative - Are enterprises owned by consumers and managed democratically
which aim at fulfilling the needs and aspirations of their members. They operate within the
market system, independently of the state, as a form of mutual aid, oriented toward service rather
than pecuniary profit. Consumers' cooperatives often take the form of retail outlets owned and
operated by their consumers, such as food co-ops. .However there are many types of consumers'
cooperatives, operating in areas such as health care, insurance, housing, utilities and personal
finance (including credit unions).
Consumer Decision Process - The consumer's decision process consists of six basic stages:
stimulus, problem awareness, information search, evaluation of alternatives, purchase, and post
purchase behavior. A stimulus is a cue (social, commercial, or noncommercial) or a drive
(physical meant to motivate or arouse a person to act).
Consumerism - Is a social and economic order that encourages the purchase of goods and
services in ever-greater amounts.
6 Consumer Loyalty (Frequent Shopper) Programs - Are structured marketing efforts that
reward, and therefore encourage, loyal buying behavior — behavior which is potentially
beneficial to the firm.
Contingency Pricing - A flexible pricing plan in which the customer does not pay the retailer
until the service is completed in a satisfactory way.
Control - During semiannual or annual review, this is the phase of evaluation in which the firm’s
strategy and tactics are evaluated.
Controllable Variables - The elements of the business, like hours of operation and sales
personnel, that the retailer can directly affect.
Control Units - The categories of merchandise that data is gathered for.
Convenience Store - Are generally open long hours, strategically located and carry a wide range
of food, toiletries, alcoholic and soft drinks, tobacco products, and newspapers. They are usually
small, with average service s and atmosphere at above-average prices.
Conventional Supermarket - Primarily food stores that are departmentalized, and carry a wide
range of food and related products. General Merchandise offerings are limited here.
Cooperative Advertising - Cooperative advertising is the sharing of costs for locally placed
advertising between a retailer or wholesaler and a manufacturer.
Cooperative Buying - Method of taking advantage of making quantity purchases from suppliers
by pooling the resources of a group of retailers.
Core Customers - The type of customer, whom a retailer defines, that the retailer will strive to
nurture a long lasting relationship.
Corporation - A legal entity which, formally under state law incorporates a retail firm separately
from the individual stockholders.
Cost Complement - Term is used in retail marketing. It refers to average relationship of cost to
retail value for all merchandise available for sale during a given time period.
Cost Method of Accounting - A legitimate method of accounting which requires the retailer’s to
record the cost of each item on an accounting sheet, and/or merchandise tags or containers.
When the inventory is done, item costs must be learned,
Cost of Goods Sold - Refers to the inventory costs of those goods a business has sold during a
particular period. Costs are associated with particular goods using one of several formulas,
7 including specific identification, first-in first-out (FIFO), or average cost. Costs include all costs
of purchase, costs of conversion and other costs incurred in bringing the inventories to their
present location and condition. Costs of goods made by the business include material, labor, and
allocated overhead. The costs of those goods not yet sold are deferred as costs of inventory until
the inventory is sold or written down in value.
Cost-Oriented Pricing - A method of setting prices that takes into account the company's profit
objectives and that covers its costs of production. For example, a common form of cost-oriented
pricing used by retailers involves simply adding a constant percentage markup to the amount that
the retailer paid for each product.
CPFR - See Collaborative Planning, Forecasting, and Replenishment.
CPI- See combined preformance index
Cross-Merchandising - Is the practice of marketing, or displaying products from different
categories (or store departments) together, in order to generate additional revenue, known
sometimes as add-on sales, or incremental purchase. This can often be done in conjunction with
customer-centric strategies, aimed at improving the overall customer experience.
Cross-Shopping - Describes when a consumer shops for a specific product category from more
than one retailer, and visit many retailers on a single shopping trip.
Cross-Training - Trains employees and personnel on tasks required of more than on job within
the organization.
Culture - A common history, vision, set of norms, beliefs and shared customs.
Curving (Free-Flowing) Traffic Flow - The traffic-flow pattern of the store is then set. A
straight (gridiron) traffic flow places displays and aisles in a rectangular or gridiron pattern. A
curving (free-flowing) traffic flow places displays and aisles in a free-flowing pattern.
Customary Pricing -­‐ A method of determining the price for a good or service based on the
perceived expectations of customers. Customary pricing is generally used for products with a
relatively long market history of being sold for a particular amount, and is driven by intuitive
notions of value on the part of buyers.
Customer Loyalty - Likelihood of previous customers to continue to buy from a specific
organization. Great attention is given to marketing and customer service to retain current
customers by increasing their customer loyalty. Organizations employ loyalty programs which
reward customers for repeat business.
8 Customer Satisfaction - The degree of satisfaction provided by the goods or services of a
company as measured by the number of repeat customers.
Customer Service - All interactions between a customer and a product provider at the time of
sale, and thereafter. Customer service adds value to a product and builds enduring relationship.
Cut Case - A very informal way of presenting the merchandise, usually just an open box.
D
Data-Base Management - Data base management is the task of storing data in a data base and
retrieving information from those data. There are three aspects to it: entering data, modifying or
updating data, and presenting reports.
Data-Base Retailing - The basis of a retail information system, used to gather, store, integrate,
and apply store information related to specific subject areas.
Data Mining - Is the process that attempts to discover patterns in large data sets. It utilizes
methods at the intersection of artificial intelligence, machine learning, statistics, and database
systems.
Data Warehousing - Is a database used for reporting and data analysis. It is a central repository
of data which is created by integrating data from multiple disparate sources. Data warehouses
store current as well as historical data and are commonly used for creating trending reports for
senior management reporting such as annual and quarterly comparisons.
Dead Areas - Areas in the store that are odd, and are not useful to set up normal displays.
Dealer Brands – A product in a supermarket that has a label with the name of the supermarket
on it and is usually cheaper than other similar products
Debit Card System - The system which allows the retailer to deduct the price of the goods or
services rendered to the customer immediately from the customer’s account and deposit it into
the retailer’s account.
Decentralized Buying Organization - Allows retailer’s to make purchase decisions locally or
regionally.
Demand-Oriented Pricing - An approach which helps retailers determine the range of prices that
are acceptable to a target market.
9 Demand volume-
Demographics - Easily identifiable and measurable, demographics are population data that is
both objective and quantifiable.
Department Store - Is a retail establishment which satisfies a wide range of durable goods and
products to the consumer's personal and residential needs; and at the same time offering the
consumer a choice of multiple merchandise lines, at variable price points, in all product
categories.
Depth of Assortment - Refers to how many variations of a particular product a store carries
Destination Retailer - Popular retailer (catalog, store, or website) from whom customers,
attracted by its ambience, price, and/or variety, will make a special effort to buy.
Destination Store - Giant retail store combining the attributes of several categories of stores: the
size of a mass merchandiser, the variety and scope of a department store, and the low prices of a
discount store. So called because consumers are willing to travel a good distance to shop in it.
Also called category killer store.
Differentiated Marketing - A sales growth strategy in which several market niches or population
segments are targeted with different products for each niche or segment.
Direct Marketing - A form of advertising in which physical marketing materials are provided to
consumers in order to communicate information about a product or service. Direct marketing
does not involve advertisements placed on the internet, on television or over the radio. Types of
direct marketing materials include catalogs, mailers and fliers.
Direct Product Profitability (DPP) - It is a measure of profitability commonly used by the
retailers, and it was first used in the retail food industry. Direct product profit (DPP) equals an
item’s gross margin rupees, plus discounts and allowances earned, less direct handling, selling,
and inventory holding costs. DPP focuses on the contribution profit of individual retail items in
individual stores. It enables the retailer to develop results for brands, categories, departments,
stores etc., thus forming the basis for merchandising decisions.
Direct Selling - Is the marketing and selling of products directly to consumers away from a fixed
retail location. Peddling is the oldest form of direct selling. Modern direct selling includes sales
made through the party plan, one-on-one demonstrations, and other personal contact
arrangements as well as internet sales. A textbook definition is: "The direct personal
presentation, demonstration, and sale of products and services to consumers, usually in their
homes or at their jobs.
10 Direct Store Distribution (DSD) - Means that a distributor sells and delivers store by store,
stopping at each store or account to drop products and sometimes even merchandise those goods.
Discretionary Income - Income remaining after deduction of taxes, other mandatory charges,
and expenditure on necessary items.
Distributed Promotion Effort - A strategy retailers utilize in order to promote throughout the
year.
Diversification - Used to extend business activities into disparate fields. And offer various
different goods and/or service categories.
Diversified Retailer - A retailer who has multiple product lines under one ownership, also
known as a conglomerate.
Dollar Control - Planning and monitoring the financial investments made in merchandise of a
specific period of time.
Downsizing - When business close or sell off unprofitable stores.
DPP - See Direct Product Profitability.
Drug – Referring to retail community pharmacy means an independent pharmacy, a supermarket
pharmacy, a chain pharmacy or a mass merchandiser pharmacy having a state license to dispense
medications to the general public at retail prices as a pharmacy.
DSD - See Direct Store Distribution.
Dual Vertical Marketing System - Use several types of channels simultaneously, as when you
have consumer and business to business markets. Set up 2 or more Marketing channels to attract
the same target market or different target markets.
Dump Bin - Marked down products, usually clothing, books and other non-perishable items
offered together in a case display.
Duplication- retailer offers a number of products with similar attributes. A number of products
are offered that meet the shopper’s need, but there is little difference between the products. With
many similar products available, the customer may become confused.
E
11 Ease of Entry - When retailers encounter relatively low capital requirements and simple
licensing provisions.
EBI - See Effective Buying Income.
Economic Base - Major industries within a geographic market area that provide employment
opportunities essential to support the community.
Economic Order Quantity (EOQ) - The ideal quantity per order (in units) that will minimize the
total costs of processing the order and holding inventory.
ECR - See Efficient Consumer Response.
EDI - See Electronic Data Interchange.
EDLP - See Everyday Low Pricing.
Effective Buying Income (EBI) - Commonly known as disposable personal income. It makes
up the money that consumers actually have to spend towards goods and services, and after their
basic taxes are paid and basic needs are met.
Efficient Consumer Response (ECR) - A supply chain management system that requires the
sharing of the retailer's sales and advertising information with the supplier which is used to
generate orders shipped from the supplier based upon projected customer demand. The goal is to
reduce inventory and associated handling costs at the retailer.
Electronic Article Surveillance - A security system for preventing theft in retail stores that uses
disposable label tags or reusable hard tags attached to the merchandise. An alarm is triggered
when walking through detection pedestals at the store exit if a disposable tag was not deactivated
or a reusable tag was not removed at the checkout counter. Also called "single bit RFID tags"
because the tag is either on or off, the primary EAS technologies are radio frequency (RF),
acousto-magnetic (AM) and electromagnetic (EM).
Electronic Banking - Banking transactions conducted through computerized systems, as
electronic funds transfer by automated-teller machines, intended to speed operations, reduce
costs, etc.
Electronic Data Interchange (EDI) - EDI is a standardized method for transferring data
between different computer systems or computer networks. It is commonly used for e-commerce
purposes, such as sending orders to warehouses, tracking shipments, and creating invoices.
Electronic Point-of-Sale System - Self-contained, computerized equipment that performs all
tasks of a store checkout counter. It allows payments by bank or credit cards, verifies
12 transactions, provides sales reports, coordinates inventory data, and performs several other
services normally provided by employees.
Employee Empowerment - Placing the authority to make critical decisions with those closest to
the problem, for example, those in the work area directly affected. This is an effort to improve
customer service, allowing the employee to make decisions, within reason to satisfy the
customers.
Ensemble Display - A display which coordinates merchandise and groups it together in an
interior display.
EOQ - See Economic Order Quantity.
Equal Store Organization - A strategy which treats each store as a sales unit, with equal
operational status, with the headquarters performing the buying function for all the stores.
Ethics - The compass that enables a retailer, or any other entity, to behave in a fair, honest and
trustworthy manner.
Evaluation of Alternatives - The consumer’s consideration of the various options available to
resolve an identified need or want.
Everyday Low Pricing (EDLP) - Is a pricing strategy promising consumers a low price without
the need to wait for sale price events or comparison shop. EDLP saves retail stores the effort and
expense needed to mark down prices in the store during sale events, and to market these events;
and is believed to generate shopper loyalty.
Exclusive Distribution - Situation where suppliers and distributors enter into an exclusive
agreement that only allows the named distributor to sell a specific product. For example, Apple
had an exclusive distribution deal with AT&T to provide the iPhone to consumers.
Expected Customer Service - The process of ensuring customer satisfaction with a product or
service. Often, customer service takes place while performing a transaction for the customer,
such as making a sale or returning an item. Customer service can take the form of an in-person
interaction, a phone call, self-service systems, or by other means.
Experiential Merchandising - Tactic whose intent is to convert shopping from a passive;
activity into a more interactive one, by better engaging the customer.
Experiment - Research of which one or more elements of the strategy are manipulated under
control conditions
13 Extended Decision Making - Expensive, complex items with which the Consumer has had little
or no experience require this form of decision making. Extended Decision Making is usually
required when choosing a college, a house, a first car, or a location for a wedding.
External Secondary Data - Is obtained from outside sources.
F
Factory Outlet - Usually low-rent site leased by a factory to sell its end-of-line, canceled orders,
irregulars or damaged stock direct to the customer at reduced prices.
Fad Merchandise - A product, especially a fashion, that comes quickly to the attention of an
eager public, achieves peak sales in a relatively short time, and rapidly declines in popularity,
that is, a popular product with a particularly short life cycle.
Family Life Cycle - A series of stages through which the typical family passes, including
bachelor stage, young marrieds, full nest, empty nest and sole survivor.
Fair share analytics- process for measuring the amount of display space or promotion activity a
product should receive, based upon its sales contribution to the overall product category.
Fashion Merchandise - Products that may have cyclical or seasonal sales due to changing tastes
and life-styles.
Feedback - Information about reactions to a product, a person's performance of a task, etc., used
as a basis for improvement.
FIFO Method - Stands for "first-in-first-out," is an inventory costing method which assumes that
the first items placed in inventory are the first sold. Thus, the inventory at the end of a year
consists of the goods most recently placed in inventory. FIFO is one method used to determine
Cost of Goods Sold for a business .
Financial Leverage - A general term for any technique to multiply gains and losses.[1] Common
ways to attain leverage are borrowing money, buying fixed assets and using derivatives.
Financial Merchandise Management - A control in which the retailer specifies exactly which
products are purchased, how many and when.
Flea Market - A flea market or swap meet is a type of bazaar that rents space to people who
want to sell or barter merchandise ranging from low quality items to bargain priced items of the
highest quality or used goods. Not usually associated with retail.
14 Flexible Pricing - Method of selling where the prices are open to negotiations between buyers
and sellers, and allow for bargaining within a certain range.
Focus Market- Also known as a narrow market or niche industry segment
Floor-Ready Merchandise - Goods shipped by suppliers to retailers with all necessary tags,
prices, security devices, etc. already attached, so goods can be cross docked rapidly through
retail DCs, or received directly at stores.
Food-Based Superstore - Is a retailer that caters to complete grocery needs, it is more diversified
then a conventional supermarket, but is not as big and diversified as a combination store. It is in
between those two store types.
Forecasts - The use of historic data to determine the direction of future trends. Forecasting is
used by companies to determine how to allocate their budgets for an upcoming period of time.
Formal Buying Organization - A distinct retail task and separate department
Franchising - Is a form of marketing and distribution in which the franchisor grants to an
individual or company (the franchisee) the right to run a business selling a product or providing a
service under the franchisor's business format and identified by the franchisor's trade mark or
brand. A modern franchise includes a format for the conduct of the business, a management
system for operating the business and a shared trade identity.
Free-Flowing Traffic Flow - See Curving Traffic Flow.
Frequency - The number of times that an individual or household sees a
particular marketing message within a given timeframe.
Frequent Shopper Programs - See Consumer Loyalty Programs.
Fringe Trading Area - Refers to the most widely dispersed customers. The Fringe is not part of
the primary or secondary trading areas.
Full-Line Discount Store - A type of store with specific characteristics, including a broad
assortment of merchandise; a centralized checkout; minimal store staff; no catalog ordering
available; a mix of private-brand durable goods, and well-known manufacturer-brand durable
goods; hard goods account for a higher percentage of sales than traditional department stores;
inexpensive equipment, fixtures and building, not focused on atmosphere; and not much
emphasis on credit sales as in the full-service store counterparts.
Functional Product Groupings - The method of categorizing and displaying merchandise based
on the product’s common end use.
15 G
Gap Analysis -The process through which a company compares its actual performance to its
expected performance to determine whether it is meeting expectations and using its resources
effectively.
Generic Brands - A type of consumer product that lacks a widely recognized name or logo
because it typically isn't advertised. Generic brands are usually less expensive than brand-name
products due to the lack of promotions, which can inflate the cost of a good or service. Generic
brands are designed to be substitutes for more expensive brand-name goods.
Geographic Information Systems (GIS) - GIS is the merging of cartography, statistical analysis,
and database technology, for the purpose of graphically depicting trading-area demographics
such as data on customer purchases, and listings for competitor’s locations.
GIS - See Geographic Information Systems.
GMROI - See Gross Margin Return on Investment.
Goal-Oriented Job Description - Explains a job role’s basic functions, and the relationship each
role to the overall goals, the relationship between roles and the way information flows.
Goods Retailing - A focus on the sale of tangible goods, as opposed to services.
Goods/Service Category - Includes industries and companies focused on manufacturing,
distributing and marketing finished products that will be used by the general public.
Go-To-Market Strategy - is specifically tailored around a product launch, and has additional
components due to the need to have a strong feedback loop with the product development team.
Graduated Lease - A lease in which the rent increases over a specific period of time.
Gravity Model - Used to define the trading areas. The computer site-selection tool operates with
the premise that people prefer to go to stores that are closer and more.
Gray Market Goods - Is a term which refers to brand name goods, bought in foreign markets and
they are often sold at low prices by unauthorized dealers.
Gridiron Traffic Flow - See Straight Traffic Flow.
Gross Margin - A company's total sales revenue minus its cost of goods sold, divided by the
total sales revenue, expressed as a percentage. The gross margin represents the percent of total
16 sales revenue that the company retains after incurring the direct costs associated with producing
the goods and services sold by a company. The higher the percentage, the more the company
retains on each dollar of sales to service its other costs and obligations.
Gross Margin Return on Investment (GMROI) - An inventory profitability evaluation ration
that analyzes a firm’s ability to turn inventory into cash above the cost of the inventory. It is
calculated by dividing the gross margin by the average inventory cost and is used often in the
retail industry.
Gross Profit - A company's revenue minus its cost of goods sold. Gross profit is a company's
residual profit after selling a product or service and deducting the cost associated with its
production and sale.
H
Hidden Assets - Those assets which are reflected on the retailer’s balance sheet at lower values
relative to their actual worth, due to depreciation. Often this would be a warehouse or store
building.
Hierarchy of Authority - An organization's chain of command, specifying the relative authority
of each manager.
Hierarchy of Effects - Marketing term for the sequence of five steps a consumer passes through
from the initial exposure to a product or advertisement to the purchase decision: awareness,
interest, evaluation, conviction, and purchase.
Hi-Lo - Version of customary pricing whereby a retailer will maintain higher everyday prices on
most items and selectively promote items at lower prices through weekly ads/promotions.
Horizontal Cooperative Advertising Agreement - Shared advertising by two or more members at
the same level of a distribution channel, each paying part of the total cost.
Horizontal Price Fixing - An illegal practice by which two competitors agree to a fixed price of
a certain item. This is illegal because it restricts capitalism and keeps prices at an artificial level.
Horizontal Retail Audit - An evaluation of one process or activity across several groups or
departments within an enterprise. A horizontal audit is appropriate for processes and activities
that are similar across a number of functional groups in a company, in order to assess the
effectiveness of the common approach.
17 Household Life Cycle - The household is the basic unit of analysis in many social,
microeconomic and government models. The term refers to all individuals who live in the same
dwelling
Huff's Law of Shopper Attraction - Huff's model provides a series of probabilities of consumers
choosing to visit one center as opposed to another in terms of the attractiveness of each center
(measured by floor space) and a deterrence factor (measured by traveling time to the center).
Human Resource Management - All methods and functions concerning the mobilization and
development of personnel as human resources, with the objective of efficiency and greater
productivity in a company.
Human Resource Management Process - Are the activities involved in the recruitment,
selection, training, compensation and supervision for the purpose of hiring, developing and
retaining employees.
Hybrid - Version of customary pricing whereby a retailer offers hi-lo pricing on most items in
the store, but maintains a selection of key items at consistently low prices.
Hypermarket - A retail store that combines a department store and a grocery supermarket. Often
vary large establishments, hypermarkets offer a large variety of products such as appliances,
clothing and groceries. The hypermarket concept was pioneered in Europe.
I
Image - The perception that consumers have of a particular store and of the experience of
shopping there.
Impulse Purchases - Spur of the moment, completely unplanned decision to buy, made just
before a purchase. Studies show there is a strong emotional factor involved in impulse
purchases.
Income Statement - See Profit-and-Loss Statement.
Incremental Budgeting - A budgeting approach where the prior year experience sets a base line
for a new budget; changes are made based on new information but the base need not be rejustified in detail
Incremental item- contributing to the retailers financial objective which often adds to variety or
assortment. Adds value.
18 Incremental Method - A promotional budgeting approach where a percentage is either added or
subtracted from the current year’s budget to determine the next years promotional budget.
Incremental Volume- estimates of sales achieved during the presence of retailer merchandising
Incremental Promoted VolumeIncremental Sales- Sales achieved as a result of retailer merchandising
Independent - A non-multiple retailer operating separately and outside of a larger company
chain.
Infomercial - Infomercials are direct response television commercials which generally include a
phone number or website. There are long-form infomercials, which are typically between 15 and
30 minutes in length. The Infomercial is most effective with products that sell best with strong
visual representation.
Informal Buying Organization - Has the personnel handle both buying and other retail tasks, as
it does not consider buying a distinct retail function.
Information Search - During a consumer’s information search they will determine what
alternatives they have to solve the issue at hand, and where to buy the solution from. As well as
learning the characteristics of the alternatives. This search may be internal or external.
Initial Markup (at Retail)- Iis the difference between the cost of a good or service and its selling
price.[1] A markup is added on to the total cost incurred by the producer of a good or service in
order to create a profit. The total cost reflects the total amount of both fixed and variable
expenses to produce and distribute a product.
Initial Public Offering (IPO) - The first sale of stock by a private company to the public. IPOs
are often issued by smaller, younger companies seeking the capital to expand, but can also be
done by large privately owned companies looking to become publicly traded.
Inside Buying Organization - Occurs when the merchandise decisions are made by the retailer’s
own permanent employees.
Intensive Distribution - Method of distribution where products are given maximum exposure
through positioning in as many outlets as possible.
Internal Secondary Data - Is data that has already been generated and/or collected by a business
during its normal course of activity.
19 Internet - A global computer network providing a variety of information and communication
facilities, consisting of interconnected networks using standardized communication protocols
Inventory Management -The overseeing and controlling of the ordering, storage and use of
components that a company will use in the production of the items it will sell as well as the
overseeing and controlling of quantities of finished products for sale. A business's inventory is
one of its major assets and represents an investment that is tied up until the item is sold or used in
the production of an item that is sold. It also costs money to store, track and insure inventory.
Inventory Shrinkage - Material or goods lost through deterioration, obsolescence, pilferage,
theft, and/or waste.
IPO - See Initial Public Offering.
Isolated Store - Is a retail outlet which is located right on the street or highway, not together
with any other retailers to share traffic with.
Issue (Problem) Definition - In a quantitative marketing research process , this step involves
defining the topic to be studied.
Item Price Removal - The strategy of removing the prices from the individual items, and only
marking the price on the shelves, this practice is banned in several states.
J
Job Analysis - The formal process of identifying the content of a job in terms activities involved
and attributes needed to perform the work and identifies major job requirements.
Job Motivation – Describes the driving force within people that pushes them to aspire to work
related goal.
Job Standardization-Uniformity in the tasks of similar job positions in different departments of
an organization
L
LBO - See Leveraged Buyout.
Leader Pricing- A pricing and promotional strategy in which temporary price cuts are made on a
few items to attract customers.
20 Leased Department - When a business has given another retailer the right to sell specialized
products and services in a small space within a department store, office building, or hotel.
Leveraged Buyout (LBO) - Acquiring a company by using a large sum of borrowed money and
using equity as collateral.
Liabilities - A company's legal debts or obligations that arise during the course of business
operations.
Life-Styles - The habits, attitudes, tastes, moral standards, economic level, etc., that together
constitute the mode of living of an individual or household or group. Determines how they
spend their time and money.
LIFO Method - LIFO assumes that an entity sells, uses or disposes of its newest inventory first.
If an asset is sold for less than it is acquired for, then the difference is considered a capital loss. If
an asset is sold for more than it is acquired for, the difference is considered a capital gain.
Lift- a measure used to indicate an increase in volume that was due to some type of activity.
Limited Assortment Strategy – Involves reduce costs and maintain low prices by offering a
limited assortment
Limited Decision Making - Consumer decision-making used for products that are purchased
occasionally. Also used when a buyer needs to acquire information about an unfamiliar brand in
a familiar product category.
Limited-Line Store - See Box Store.
Logistics - The process of planning, implementing, and controlling the efficient, effective flow
and storage of goods, services and related information from their point of origin to point of
consumption for the purpose of satisfying customer requirements.
Loss Leaders - Describes the concept that an item is offered for sale at a reduced price and is
intended to "lead" to the subsequent sale of other items, the sales of which will be made in
greater numbers, or greater profits, or both. It is offered at a price below its minimum profit
margin—not necessarily below cost.
M
Maintained Markup (at Retail) - The final markup on an item based on the actual selling price,
expressed as a percentage.
21 Maintenance-Increase-Recoupment Lease - Can be used with either a percentage or fixed-rate
lease. Allows landlord to increase the rent if insurance, property taxes, or utility bills increase
beyond a certain point
Manufacturer (National) Brands - Describes a product that is produced and controlled by the
manufacturer. Because they are usually well-known they require very limited retailer investment
and often are high quality products.
Markdown - A permanent reduction of price from the full original price or suggested retail price
of an item offered to end-users. Often used to move inventory out of the store to make room for
new merchandise.
Market Coverage- The degree to which a product or service meets the needs of the market.
Markdown Percentage - The discount expressed as a percentage of the retail sales price
Marketing Concept - Management philosophy according to which a firm's goals can be best
achieved through identification and satisfaction of the customers' stated and unstated needs and
wants.
Marketing Research in Retailing - Involves the systematic gathering, recording, and analyzing
of information about specific issues related to the marketing of goods, services, organizations,
people, places, and ideas.
Marketing Research Process - Consists of a series of activities: defining the issues or problem to
be studied; examining secondary data; generation primary data, if necessary; analyzing
information; making recommendations; and implemented findings.
Market Penetration - Depth of sales of a particular product in a given market. The deeper the
penetration, the higher the volume of product sales.
Market Segment Product Groupings - A form of organizing various items together based on
their appeal to a given target market.
Market Skimming - A marketing strategy in which an organization set prices high to create the
perception of value and position the product or service higher in the minds of consumers. They
would use this high price/value perception to capture, or skim, the top-paying customers from
their competitors.
Markup - An amount added to a cost price in calculating a selling price, especially an amount
that takes into account overhead and profit.
22 Markup Percentage (at Cost) - The difference between retail price and merchandise cost as a
percentage of the merchandise cost.
Markup Percentage (at Retail) - The difference between retail price and merchandise cost as a
percentage of the retail price.
Markup Pricing -­‐ Calculating all the costs associated with a product and then determining a
markup percentage to cover the costs and expected profits.
Marquee - The sign which displays a store name and logo.
Mass Customization - Production of personalized or custom-tailored goods or services to meet
consumers' diverse and changing needs at near mass production prices. Enabled by technologies
such as computerization, internet, product modularization, and lean production, it portends the
ultimate stage in market segmentation where every customer can have exactly what he or she
wants.
Massed Promotion Effort - Communication concentrated in peak periods, like holidays.
Mass Marketing - Is a market coverage strategy in which a firm decides to ignore market
segment differences and appeal the whole market with one offer or one strategy.
Mass Merchandising - A strategy used by a retailer or retail store that seeks to sell large
quantities of goods quickly through such means as discounting, customer self-service, or
unadorned display and packaging, as in a warehouse.
Mazur Plan - A Mazur plan is a retail store management technique first used in 1927. Under this
plan, the store functions/activities are broadly divided into four major category areas –
merchandising, publicity, store management and accounting and control. Hence, it is also known
as the four-function plan.
Megamall - A huge enclosed mall three or four times the size of an ordinary regional shopping
center and including retail space, hotels, restaurants, entertainment facilities, and amusement
park-type amenities.
Membership (Warehouse) Club - A retail store, usually selling a wide variety of merchandise, in
which customers are required to buy large, wholesale quantities of the store's products, which
makes these clubs attractive to both bargain hunters and small business owners. The clubs are
able to keep prices low due to the no-frills format of the stores. In addition, customers may be
required to pay annual membership fees in order to shop.
23 Memorandum Purchase - A merchandise purchase in which the retailer does not pay for the
items until they are sold, and therefore may return the unsold merchandise. The retailer is
responsible for the merchandise if it should be damaged.
Merchandise Available for Sale - The term for beginning inventory, purchases, and
transportation charges.
Merchandising - The activity of promoting the sale of goods at retail merchandising activities
may include display techniques, free samples, on-the-spot demonstration, pricing, shelf talkers,
special offers, and other point-of-sale methods. According to American Marketing Association,
merchandising encompasses "planning involved in marketing the right merchandise or service at
the right place, at the right time, in the right quantities, and at the right price."
Merchandising Philosophy - The philosophy is that guide all merchandise decisions a retailer
makes including: Target market, store type, competitive advantage, costs, competitors and
product trends.
Mergers - The combining of two or more entities into one, through a purchase acquisition or a
pooling of interests. Differs from a consolidation in that no new entity is created from a merger.
Micromarketing - A marketing strategy in which advertising efforts are focused on a small
group of highly-targeted consumers. Micromarketing requires a company to narrowly define a
particular audience by a particular characteristic, such as ZIP code or job title, and tailor
campaigns for that particular segment. It can be a more expensive technique due to
customization and lack of an economy of scale.
Micromerchandising - A subset of micro-marketing focused on customizing assortments,
quantities, and displays for each store.
Minimum Price Laws - A price floor set by the government or some other agency. The price is
not allowed to fall below this level (although it is allowed to rise above it). These laws are meant
to control the use of loss leaders and predatory pricing.
Model Stock Approach - A method of determining space allocation for departments in a retail
store. It is based upon an analysis of an ideal stock necessary to achieve projected sales volume,
of how much stock should be displayed versus how much should be kept in reserve space, of
how much physical space will be required to display the merchandise, and of how much physical
space will be needed for any service requirements.
Model Stock Plan - An outline of the composition of an ideal stock in terms of general
characteristics or assortment factors, usually with optimum quantities indicated in an amount that
reflects balance in relation to expected sales.
24 Monthly Sales Index - Is found by dividing each month’s sales by average monthly sales, and
dividing by 100. It is a measure of sales seasonality.
Mother Hen with Branch Store Chickens Organization - A scenario which occurs when the
headquarter executives run the branches. This strategy works when there are not many branches
and the of branch customers match those of the headquarters.
Motives - Drive consumer’s behaviors and purchasing choices.
Multiple-Unit Pricing - Allows retailers to give discounts to customers who buy products in
quantity.
Mystery Shoppers - Are hired by retailers to go to the store and act as an average shopper, to
provide valuable freed back from the customer’s perspective
N
Narrow & Deep Assortment Strategy- retailer offers a limited number of products and brands,
with a broad number of SKUs in each product line.
Narrow & Shallow Assortment Strategy- retailer offers a limited number of products with a
limited number of SKUs in each product line.
National Brands - See Manufacturer Brands.
NBD - See Neighborhood Business District.
Need-Satisfaction Approach - A sales approach which focuses on speaking directly to the
particular needs of each customer.
Neighborhood Business District (NBD) - The unplanned contiguous placement of businesses on
primary streets in the neighborhood that are reliant upon neighborhood residents, while also
serving customers from other communities. Typically, NBDs are composed of retail stores,
restaurants, personal services, and other similar "walk-in" customer oriented businesses. These
businesses and services are in a confined geographic area
Neighborhood Shopping Center - Is a planned shopping area, with supermarket or drugstore
anchors, serving 3,000 – 50,000 people within a 10 minute drive of the location.
Net Lease - In commercial real estate, a net lease requires the tenant to pay, in addition to rent,
some or all of the property expenses which normally would be paid by the property owner
25 (known as the "landlord" or "lessor"). These include expenses such as real estate taxes,
insurance, maintenance, repairs, utilities and other items.
Net Profit - Often referred to as the bottom line, net profit is calculated by subtracting a
company's total expenses from total revenue, thus showing what the company has earned (or
lost) in a given period of time (usually one year). also called net income or net earnings.
Net Profit Before Taxes - Net sales or total receipts of a business minus all expenses except
taxes.
Net Profit Margin - Aftertax net income divided by net sales, a measure of management's
ability to carry a dollar of sales down to the bottom line for the stockholders. In other words, net
profit margin refers to that which is left for the owners from a dollar of sales after all expenses
and taxes have been paid.
Net Sales - The amount of sales generated by a company after the deduction of returns,
allowances for damaged or missing goods and any discounts allowed. The sales number reported
on a company's financial statements is a net sales number, reflecting these deductions.
Net Worth -Is the total assets minus total outside liabilities of the retailer.
Never-Out List - Used when a retailer plans stock levels for best sellers. The goal is to purchase
enough of these products so they are always in stock.
Niche Retailing - Allows retailers to identify customer segments and deploy unique strategies to
address the desires of those segments.
Nongoods Services - A section of services retailing in which personal services/experiences are
offered to customers.
Nonprobability Sample - A research approach which entails that the researcher selects the
stores, products or customers to sample based on judgment of what the researcher feels is
appropriate for the study.
Nonpromoted volume – amount of sales without any promotion in place.
Non-incremental item – an item that does not contribute to the retailer’s financial objectives and
is most often a candidate for deletion. May likely be a duplicate item that confuses consumer.
Non-incremental promoted volumeNon promoted sales – Amount of sales made without promotions in place.
26 Nonstore Retailing - Is retailing done without conventional storebased locations. Non-store
retailing includes such services as vending machines, direct-to-home selling, telemarketing,
catalog sales, mail orders, and television marketing programs.
O
Objective-and-Task Method - Way of allocating funds to advertising based on the desired
results, the steps that must be taken to achieve those results, and the projected costs of each
Objectives - In retail refer to the long and short term performance goals in areas such as sales,
profits, customer satisfaction and retailer’s company image.
Observation -A research style which past or present behaviors are observed and recorded.
Odd Pricing - Establishing a price that is immediately below an even dollar amount. For
example, a shirt is priced at $17.99 rather than $18.00. Odd pricing is used to give the impression
of greater value.
Off-Price Chain - A retail store that sells quality merchandise at reduced prices compared to
other stores. Off-price stores are often located in strip malls and include the chains T. J. Maxx,
Steinmart, and Ross.
Off-Retail Markdown Percentage - The markdown as a percentage of the original price of an
item or category of items. For example, an item originally retails for $10 and is marked down to
$5; the off retail percentage is 50%.
One-Hundred Percent Location The retail site in a major business district that has the greatest
exposure to a retail store's target market customers. This is dependent on the type of store. A
location that is labeled one-hundred percent for one store may be less than that for a different
store.
One-Price Policy - A store that offers all merchandise at a fixed price, the same to all customers,
as opposed to bargaining or negotiating a price.
Open Credit Account - Credit relationship in which the buyer pays upon the receipt of goods.
Open-to-Buy - The residual balance of current purchase allotments; total planned purchases for a
period, less receipts and merchandise on order.
Operating Expenditures (Expenses) - The expenses related to the production of goods or
services, but not including taxes and other expenses inherent to the operation of the business.
27 Operations Blueprint - A plan to help define objectives and the tasks necessary to achieve them.
Operations Management - Is an area of management concerned with overseeing, designing, and
controlling the process of production and redesigning business operations in the production of
goods and/or services. It involves the responsibility of ensuring that business operations are
efficient in terms of using as few resources as needed, and effective in terms of meeting
customer requirements.
Opinions - See Attitudes.
Opportunistic Buying - Involves negotiating prices for merchandise for which sales are lower
than expected, close-out items, returned items or out of season items.
Opportunities - The advantageous circumstance, or combination of circumstances which allow a
retailer to capitalize on a situation that the competitors have not discovered yet.
Opportunity Costs - The loss of potential gain from other alternatives when one alternative is
chosen.
Option Credit Account - An account which allows partial payments and does not accrue interest
if the bill is paid in full when due.
Order-Getting Salesperson - The salesperson who is involved with the sale from the start; from
informing the customer about the product and persuading them to buy, to processing the
transaction. They actively sell to the customer.
Order-Lead Time - The period between placing an order with the manufacturer to the time that
those items are put out on the shelves, completely ready to sell to the customer.
Order-Taking Salesperson - The salesperson who is passively involved in the sale. They
participate in placing the products on the shelves, address any basic questions about the products
a customer may have, and ring up the sales. They do not actively sell to the customers.
Organizational Mission - Represents the retailer’s overall sense of direction and their position
within the marketplace. It dictates how the retailer interacts with consumers, employees,
suppliers, and other entities.
Organization Chart - A graphical representation of the company hierarchy.
Outshopping - Occurs when a customer goes outside of their local trading area to make
purchases.
28 Outside Buying Organization - Is a company that takes over the buying function for a retailer,
for a fee.
Outsourcing - A practice used by companies to reduce costs by transferring portions of work to
outside suppliers rather than completing it internally.
Overstored Trading Area - A market condition that exists when a geographic market area has
too many stores to yield a fair return on investment for many of them.
Owned-Goods Services - Describes the service of maintaining, repairing or improving an item
which the consumer already owns.
P
Parasite Store - A store that depends on the flow of customers from events external to those
generated by the store itself.
Pareto Chart – Named after Vifredo Pareto, is a type of chart containing bars and a line graph
where variances are displayed by the number of their occurrences. The variances are shown in
their descending order to identify the largest opportunities for improvement.
Partnership - Occurs when two or more people own an unincorporated retail company, each
having financial interest in the venture.
Perceived Risk - A consumer’s subjective judgment of risk associated with the purchase of a
specific good, or specific retailer, regardless of whether it is true or not.
Percentage Lease - An arrangement in which the rent is directly related to the retailer’s sales.
Percentage-of-Sales Method - An advertising budget method in which advertising expenses are
established as a fixed percentage of past, current, or future sales revenue levels.
Percentage Variation Method - A technique for planning dollar inventory investments that
assumes that the percentage fluctuations in monthly stock from average stock should be half as
great as the percentage fluctuations in monthly sales from average sales; method used when the
retailer has a high annual inventory turnover rate (i.e., six or more times a year).
Performance Measures - The basis for determining retailer effectiveness. Factors to take into
consideration are total sales, average sales per store, sales by goods/service category, sales per
square foot, gross margins, gross margin return on investment, operating income, inventory
turnover, markdown percentages, employee turnover, financial ratios, and profitability.
29 Perpetual Inventory System - See Book Inventory System.
Personality - The combination of characteristics or qualities that form an individual's distinctive
character.
Personal Selling - Delivery of a specially designed message to a prospect by a seller, usually in
the form of face-to-face communication, personal correspondence, or a personal telephone
conversation. Unlike advertising, a personal sales message can be more specifically targeted to
individual prospects and easily altered if the desired behavior does not occur.
Physical Inventory System -A process where a business physically counts its entire inventory, software can speed the physical inventory process. When using a cost method of inventory
valuation, counting the full inventory is important to reach a gross profit.
Planned Shopping Center -A retail location consisting of centrally-owned or managed facilities.
It is planned and operated as an entity, ringed by parking, and based on balanced tenancy.
Planogram - A schematic drawing of fixtures that illustrate product placement. It is the medium
of communicating a range layout to distributor or store. Traditional planograms show each SKUs
position within a fixture, shelf heights, length of fixture and fixture adjacencies. Planograms may
also include the direction of shopper flow and number of facings per SKU.
PMs - Push Money is a cash premium, prize, or additional commission for pushing or increasing
sales of a particular item or type of merchandise.
Point of Indifference - The point between two geographical trading areas. It is here that a
consumer would be indifferent about shopping in either area.
Point-of-Purchase (POP) Display - On- and off-shelf display material or product stocking
generally at the retail level that is used to call special attention to the featured product. It is
sometimes referred to as point-of-sale display.
POP Display -See Point-of-Purchase Display.
Positioning - Where a retailer communicates with consumers to establish a distinct position for
its brand in their minds. Synonymous with market positioning
Post-Purchase Behavior - Involves all the consumers' activities and the experiences that follow
the purchase, including whether the consumer makes further purchases.
Power Center - An unenclosed shopping center with 250,000 square feet (23,000 m2) to
750,000 square feet (70,000 m2) of gross leasable area that usually contains three or more big
box retailers, category killers and various smaller retailers (usually located in strip plazas) with a
30 common parking area shared among the retailers. It is likely to have more money spent on
features and architecture than a traditional big box shopping center. It is common to have a
Power Center contain several complementary stores.
Power Retailer -See Category Killer.
Predatory Pricing - The practice of selectively pricing a product below that of competition so as
to eliminate competition, while pricing the product higher in markets where competition does not
exist or is relatively weaker.
Prestige Pricing - A psychological pricing strategy of using high price to elevate the positioning
of an organization’s products and services and increase the perceived value to the consumer.
Pre-Training - Time frame before the actual job training begins, in which the new employee is
taught about the policy, history and culture of the company, as well as given an orientation on
work hours, compensation, duties and the company hierarchy.
Price Elasticity of Demand - A measure of the sensitivity of demand to changes in price. It is
formally defined as the percentage change in quantity demanded relative to a given percentage
change in price.
Price Index- A measure that allows us to make direct sales comparisons among products of
disparate size and selling price.
Price Lining - A pricing strategy in which prices are used to sort products into “lines” based on
attributes such as quality, prestige, or style.
Price-Quality Association The idea that many consumers believe high prices mean high quality,
while low prices mean low quality.
Primary Data - The information collected specifically for the purpose of the investigation at
hand.
Primary Trading Area - Accounts for 50 to 80 percent of a store’s customers, this area is closest
to the store and represents the highest density of customers with the highest per capita sales.
Private Label or Private (Dealer, Store) Brands - Are those that are owned by a retailer. These
brands are usually less expensive than national brands, they are not sold by competitive retailers
and they help to gain customer loyalty to the particular store.
Probability (Random) Sample - A sample in which each population element, such as a store, a
product or customer has a known, nonzero chance of being included in the sample.
31 Problem Awareness - The first stage of the buyer decision process in which the consumer
recognizes a problem or need.
Problem Definition - See Issue Definition.
Productivity - A measure of the economic output per unit of input of some resource, in retail it
refers to the efficiency in which strategy is carried out.
Product Life Cycle- The course of a product's sale and profits over its lifetime. The traditional
cycle has four stages: introduction, growth, maturity, and decline.
Product/Trademark Franchising- Is the agreement in which the franchisees get to work under
the franchise identity, by agreeing to sell their products or services.
Profit-and-Loss (Income) Statement - The summary listing of a store’s total revenues and
expenses within a specified time period.
Promoted Volume- total sales in stores where any merchandising was present
Promotional Calendar- A tool showing what marketing events are happening when and where,
as well as the results.
Promotional Analysis- The process of identifying a target audience for the offering.
Prototype Stores - Are part of a strategy in which many outlets in a chain have relatively uniform
construction, layout and operations standards.
Publicity - The form of public relations that entails non personal communication that is
transmitted through various media but not paid for by an identified sponsor.
Public Relations - That form of communication management that seeks to make use of publicity
and other nonpaid forms of promotion and information to influence the feelings, opinions, or
beliefs about the company, its products or services, or about the value of the product or service
or the activities of the organization to buyers, prospects, or other stakeholders.
Purchase Act - The exchange of money or the arrangement to pay money at a future date, for
goods or services. Variables may include place of purchase, terms and the availability of that
good or service.
Purchase Motivation Product Groupings - Answer to the consumer’s desire to buy products,
coupled with the amount of time the consumer is will to spend shopping.
Psychographic – The study of personality, values, attitudes, interests, and lifestyles.
32 Q
QR Inventory Planning - See Quick Response Inventory Planning.
Quick Response (QR) Inventory Planning - A finished product inventory management system
that times replenishment to actual daily sales. Under this system, the retailer maintains lean
inventories through frequent store deliveries of small lots. Point-of-sale information is exchanged
daily between the retail outlet and distributors or manufacturers in order to time product delivery
closer to actual demand.
R
Rack Display - The display inside the store that presents the products in an appealing way.
Random Sample - See Probability Sample.
Rationalized Retailing - Occurs when there are strict operating procedures in place for every
phase of the business and there is a strong centralized management base.
Reach -The percentage of people in the target market exposed to an ad campaign during the
given period.
Recruitment - Actively creating lists of job applicants for potential employment with the retailer.
Reference Groups - A reference group is one that the individual tends to use as the anchor point
for evaluating his/her own beliefs and attitudes. One may or may not be a member and may or
may not aspire to membership in a reference group; nevertheless, it can have great influence on
one's values, opinions, attitudes, and behavior patterns.
Regional Shopping Center - Provides for general merchandise, apparel, furniture, and home
furnishings in depth. Typically, it has one or two full-line department stores larger than 100,000
square feet and total center store area ranging from 300,000 square feet to 850,000 square feet. It
is a class of planned shopping centers, usually with major department store units and with
usually 50 to 100 stores, serving a very large trading area. It is larger than a community shopping
center.
Regression Model - A computerized site selection tool which specifies the ROI and associated
cash flow that could be expected for a business with a given market position, competitive
conditions, and other specified conditions.
33 Reilly's Law of Retail Gravitation - A model used in trade area analysis to define the relative
ability of two cities to attract customers from the area between them.
Relationship Retailing - Is the conscious aim to develop and manage long-term and/or trusting
relationships with customers, not just treating each sale as a one-time transaction.
Rented-Goods Services - The specific area of service retail which includes leases and the
consumer’s use of goods for a specific period of time.
Reorder Point -The pre-determined level, that when reached indicates it is time for new stock to
be ordered.
Resident Buying Office - An office that represents many retailers in the same line of business in
the central wholesale market providing information about market developments and guidance in
purchasing and actual placing of some orders for their clients.
Retail Audit - The systematic evaluation of a retail organization to determine strengths and
weaknesses, study its objectives, and improve performance. Helps determine if objectives are
being met.
Retail Balance - Describes the mix of stores, within a given area.
Retail Information System (RIS) - Are the enterprise back- and front-office software solutions
upon which the majority of retailers rely to manage and support their daily tasks. These systems
typically record product performance, which allows the buying personnel to make accurate
merchandise purchasing decisions. Moreover, retail systems have capabilities for tracking
inventory, capturing sales data, and managing retail prices.
Retailing - All activities involved in selling goods or services directly to final consumers for
their household and personal non business use
Retailing Concept - Consists of four main elements; goal-oriented, coordinated effort and valuedriven, customer orientation.
Retail Institution - Describes the structure of the business in terms of classification of
ownership, such as service versus goods retail strategy mix, nonstore-based retail strategy mix,
store-based retail strategy mix.
Retail Life Cycle - A theory of retail competition that states that retailing institutions, like the
products they distribute, pass through an identifiable cycle. This cycle can be partitioned into
four distinct stages: innovation, accelerated development, maturity, and decline.
34 Retail Method of Accounting - An accounting procedure for estimating the value of a store's
merchandise. This method calculates a store's total inventory value by taking the total retail value
of the items that were originally in inventory, subtracting the total sales, then multiplying that
dollar amount by the cost-to-retail ratio (the percentage by which goods are marked up from their
wholesale purchase price to their retail sales price).
Retail Organization - Refers to how the company is structured, organizing the necessary tasks,
resources, policies, authority, rewards and responsibilities in such a way that most effectively
meets the needs of the target market, management and employees
Retail Performance Index - Summarizes five-year trends in revenue and profit growth, as well
as a six-year average return on assets.
Retail Promotion - Any form of communication from the retailer that serves to inform, remind,
or persuade the target market about the organization.
Retail Reductions - Factors such markdowns, employee and other discounts and stock shortages
that cause a lower retail value of a retailer’s inventory; from the beginning inventory to end
inventory.
Retail Strategy - A plan that details how a business intends to offer its products or services to
consumers and influence their purchases. For example, a typical retail strategy might illustrate
how best to place and display a company's products in retail outlets and how to attract optimal
consumer interest at those locations with such things as price discounts, placement, retailer
incentives and signs.
Return on Assets (ROA) - Ratio measuring the operating profitability of a (non-financial) firm,
expressed as a percentage of the operating assets. ROA indicates a firm's ability to efficiently
allocate and manage its resources but (unlike 'return on equity') ignores the firm's liabilities.
Return on Net Worth - Determination of the ratio of an individual or business taxpayer's income
to their overall net worth.
Reverse Logistics - Stands for all operations related to the reuse of products and materials. It is
"the process of planning, implementing, and controlling the efficient, cost effective flow of raw
materials, in-process inventory, finished goods and related information from the point of
consumption to the point of origin for the purpose of recapturing value or proper disposal. More
precisely, reverse logistics is the process of moving goods from their typical final destination for
the purpose of capturing value, or proper disposal.
Revolving Credit Account -­‐ A revolving credit account is one in which a lender agrees to loan
you credit up to a certain credit limit for an unlimited period of time. You have the option of
35 repaying some or all of the money when the bill comes due. As long as you stay under your
credit limit, you are free to borrow more.
RIS - See Retail Information System.
ROA - See Return on Assets.
Robinson-Patman Act - This is an amendment to the Clayton Act that prohibits price
discrimination when the effect "may be substantially to lessen competition or create a
monopoly"; prohibits payments of broker's commission when an independent broker is not
employed; forbids sellers to provide allowances or services to buyers unless these are available
to all buyers on "equally proportional terms"; and prohibits a buyer from inducing or receiving a
prohibited discrimination in price.
Routine Decision Making - Occurs when a customer buys out of habit, and skips over steps in
the purchasing process.
S
Safety Stock - A quantity of stock planned to be in inventory to protect against demand
fluctuations or out-of-stocks
Sale-Leaseback - Occurs when retailers build new stores and sell them to real estate investors,
who then lease the buildings back to the retailers on a long term basis.
Sales Opportunity Grid - An organized way for retailers to rate the promise of new goods,
services, procedures, and/or store outlets across a variety of criteria.
Sales-Productivity Ratio - Is a calculation that helps determine what items are selling and
creating more profit, therefore this ratio can be used to assign floor space based on profit per
foot.
Sales Promotion - The paid media and nonmedia marketing pressure applied for a
predetermined, limited period of time at the level of consumer, retailer, or wholesaler in order to
stimulate trial, increase consumer demand, or improve product availability.
Saturated Trading Area - Is an area which has a balanced amount of retailers at the right mix to
both satisfy the needs of the population, and be profitable to the retailers.
SBD - See Secondary Business District.
36 Scenario Analysis - Is a way for retailers to project possible future outcomes, by examining key
factors that will affect the company in the long-run. The retailer then prepares contingency plans
based on alternate scenarios.
Scrambled Merchandising - A deviation from traditional merchandising that involves the sale of
items not usually associated with a retail establishment's primary lines - e.g., supermarkets
handling nonfood items, drug stores selling variety goods and sometimes, hardware.
Seasonable Merchandise - Products that exhibit higher demand from shoppers and
merchandising activity from retailers during specific seasons of the year, such as back-to-school,
Halloween or the holidays.
Secondary Business District (SBD) - A planned shopping area that is smaller than the central
business district (CBD) & revolves around at least one department or variety store at a major
street intersection.
Secondary Data - Data which is already in existence. It is normally used for a purpose other than
that for which it was collected.
Secondary Trading Area - Has more widely dispersed customers, outside of the primary trading
area, this geographic area adds 15 – 25 percent of a store’s customers.
Selective Distribution - Allows manufacturers to maintain more control over the way their
products are sold and discourages price competition among sellers of the products by distributing
their products only to those wholesalers and retailers who follow the manufacturer's guidelines.
Self-Scanning - A customer-operated point-of-sale (POS) station. Customers pay for and bag
their own merchandise without interacting with a human cashier, although a support person is
typically nearby and available.
Segment – Any division of an organization authorized to operate, within prescribed or otherwise
established limitation, under substantial control by its own management.
Segmentation Circle- Selection of products that meet the separate needs of each market segment
or sub-segment.
Semantic Differential - An attitudinal scaling device which employs survey techniques which
retailers can use to identify factors underlying consumer patronage decisions.
Separate Store Organization - Occurs when each store outlet is responsible for its own buying
responsibilities. The benefit is that customer feedback is used quickly. The downside is that
managers in the main store and in the branch outlet may overlap.
37 Service Retailing - The area of retailing in which customers rent goods, have their owned goods
serviced, or purchase intangible non-goods.
SERVQUAL - Is a service quality framework, which allows retailers to measure the scale of
quality in the service sectors by gauging customers reaction to statements in five performance
areas: reliability, responsiveness, assurance, empathy, and tangibles.
Simulation - Is the imitation of the operation of a real-world process or system over time. It is
used to test the retail strategy mix elements.
Single-Source Data Collection - Is the measurement of TV and other media/marketing exposure,
and purchase behavior, over time for the same individual or household [1]. This measurement is
gauged through the collection of data components supplied by one or more parties overlapped
through a single, integrated system of data collection. The means by which these data are stored
is known as a single-source database
Situation Analysis - Is a marketing term, and involves evaluating the situation and trends in a
particular company's market. Situation analysis is often called the "three c's", which refers to the
three major elements that must be studied: Customers, Costs, and Competition.
Slotting Allowances - A fee paid by a manufacturer to a retailer to provide shelf space — or, a
"slot" — for a new product. The payment ostensibly covers the administrative and labor-related
costs of adding a new item to the system, as well the potential lost sales involved in making
room for an unproven product.
Smart Card - A plastic card containing a microprocessor that enables the holder to perform
operations requiring data that is stored in the microprocessor; typically used to perform financial
transactions.
Social Class - Is a set of concepts in the social sciences and political theory centered on models
of social stratification in which people are grouped into a set of hierarchical social categories.
Social Responsibility - Involves a concern for the consequences of a person’s or institution’s acts
as they might affect the interests of others. Corporate social responsibility balances a company’s
short-term profit needs with society’s long-term needs.
Sole Proprietorship - The simplest, oldest, and most common form of business ownership in
which only one individual acquires all the benefits and the risks of running an enterprise. In a
sole-proprietorship there is no legal distinction between the assets and liabilities of a business
and those of its owner, unlike an incorporation.
Solutions Selling - A common, but loosely-used description for a customer-orientated selling
method. Dependent on identifying needs to which appropriate benefits are matched in a package
38 or 'solution'. The term is based on the premise that customers don't buy products or features or
benefits - they buy solutions (to organizational problems).
Sorting Process - The collection of an assortment of goods and services from different sources,
buying them in sufficiently large quantities, and offering them to consumers in small units.
Specialog - A catalog which caters to specific needs of a particular customer segment, it
emphasizes a limited number of items. This allows retailers to cut down catalog production and
postage costs.
Specialty Store - Is stores which specialize in a specific range of merchandise and related items.
Most stores have an extensive depth of stock in the item that they specialize in and provide high
levels of service and expertise.
Staple Merchandise - Is the primary product sold by the retailer.
Stimulus - A spur or incentive that elicits a response.
Stock-to-Sales Method - Stock-to-Sales = Beginning of Month Stock ÷ Sales for the Month. It is
an inventory planning method to maintain the ratio of inventory to sales.
Stock Turnover - Is a measure of the number of times inventory is sold or used in a time period
such as a year. The equation for inventory turnover equals the cost of goods sold divided by the
average inventory.
Storability Product Groupings - Is a way to organize and group products so as to handle, store
and display the items together, according to their classification.
Store Brands - See Private Brands.
Storefront - The façade and the portion of a building at the first floor of a retail frontage that is
made available for retail use.
Store Maintenance - Any and all activities necessary for managing the physical retail facility.
Straight Lease - A lease specifying the same, a fixed amount, of rent that is to be paid by the
retailer periodically during the entire term of the lease. This is typically paid out in monthly
installments.
Straight (Gridiron) Traffic Flow - The store traffic flow pattern which presents aisles with
displays in a rectangular or gridiron pattern.
39 Strategic Profit Model - Multiplies a company's net profit margin by its rate of asset turnover to
arrive at its return on assets and this figure is then multiplied by financial leverage to obtain
return on equity and plan or control assets.
Strategy Mix - Refers to a retailer’s particular mix of the following: Store location, operating
procedures, pricing tactics, good and or services offered, promotional methods, store atmosphere
and customer services.
String - Refers to a shopping area located along a street or highway, consisting of an unplanned
group of retail stores, often possessing similar or compatible product lines.
Subsegment – A segment that is a piece of, and subordinate to, a higher-level segment.
Supercenter - A large combination supermarket and discount general merchandise store.
Supermarket - A supermarket, a large form of the traditional grocery store, is a self-service shop
offering a wide variety of food and household products, organized into aisles. It is larger in size
and has a wider selection than a traditional grocery store, but is smaller and more limited in the
range of merchandise than a hypermarket or big-box shop with a minimum annual sales of $2
million.
Supervision - In retailing provides employees with a supporting job environment to facilitate
accomplishment.
Supply Chain - A supply chain is a system of organizations, people, technology, activities,
information and resources involved in moving a product or service from supplier to customer
Survey - A research method of systematically gathering information from respondents through
communication.
Survey of Buying Power - Are reports on demographic data, broken down by geographic
locations reporting on total annual retail sales by area, annual retail sales for specific product
categories, annual effective buying income, and five-year population and retail sales projections.
T
Tactics - The activities that occur in the short-term operations of a retailer.
Target Market - The particular segment of a total population on which the retailer focuses its
merchandising expertise to satisfy that submarket in order to accomplish its profit objectives.
40 Terms of Occupancy - Encompass whether the location is owned or leased, what type of lease,
what the costs of operations and management are also any taxes, zoning restrictions and
voluntary regulations associated.
Theme-Setting Display - Enhance the atmosphere or mood because the retailer depicts the
product offering in a thematic manner.
Threats - Can potentially or actually affect the retailer adversely, whether they react to the threat
or not. The threat may consist of environmental or marketplace factors.
Top-Down Space Management Approach - Is when a retailer takes the total available store
space, or the overall space of the company if it is a chain, and divides the available space into
categories. From there, the retailer drills down to the in-store product layouts.
Total Retail Experience - Describes to total experience the retailer provides to the customer,
creating either positive or negative impressions the organization makes on the customer.
Trading Area - The geographic region in which a good or service is available and from which a
company generates most of its sales.
Trading-Area Overlap - Occurs when the same customers are served by more than one store in
different locations. The trade areas then encroach on one another.
Traditional Department Store - Is a large retail store carrying a wide variety of merchandise in
the average to very god range, and moderate to above average prices. Characteristically
providing medium to high levels of customer service and organized into various departments for
sales and administrative purposes.
Traditional Job Description - A format which contains specific required information such as
title, supervisor and subordinates, any committee assignments. Also included are the specific
roles and tasks to be performed on an ongoing basis.
Training Programs -Enable new and existing personnel to improve themselves, and perform
their tasks better.
U
Unbundled Pricing - Is a la carte pricing. Unbundling the seemingly monolithic components into
their sub-parts and pricing them separately. It involves identifying individual components that
have a cost and value associated with them, and pricing them separately.
41 Uncontrollable Variables - Those business aspects, such as competition, laws, and the economy
which a retailer has no choice but to adapt to.
Understored Trading Area - A market condition that exists when a geographic market area has
too few stores to provide satisfactorily for the needs of the consumer.
Undifferentiated Market coverage strategy – Ignoring segmentation variables and targeting
entire markets with one brand
Unit Control - The control of stock in terms of merchandise units, rather than in terms of dollar
value.
Unit Pricing - Labeling merchandise with unit prices as well as total prices. A practice that is
required by many states.
Universal Product Code (UPC) - A national coordinated system of product identification by
which a ten-digit number is assigned to products. The UPC is designed so that at the checkout
counter an electronic scanner will read the symbol on the product and automatically transmit the
information to a computer that controls the sales register. The code is called OCR-A.
Unplanned Business District - A cluster of retail stores within the city in which there is a
structured internal pattern of locations, achieved by the independent decisions of stores operating
within the land market.
UPC - See Universal Product Code.
Usage Rate - A measure of the quantity of a product consumed by a user in a given period, users
may be subdivided as heavy, moderate and light.
V
Value - The power of any good to command other goods in peaceful and voluntary exchange.
Value Chain - A series of value-added process activities that incorporates demand creation and
management linked with the associated supply management.
Value Delivery System - Is made up of all the activities involved in developing, producing,
delivering, selling and servicing specific goods and services.
Variable Markup Policy - A retailer strategy in which markups vary by merchandise category.
Variable Pricing - Occurs when retailers alter prices in reaction to costs or customer demands.
42 Variety Store - A retail establishment that offers a wide assortment of inexpensive and frequently
purchased merchandise, including health and personal care items, candy, boxed or packaged
food, shoe repair and housewares.
Vending Machine - A machine which dispenses items such as snacks, beverages, alcohol,
cigarettes, lottery tickets, cologne, and consumer products to customers automatically, after the
customer inserts currency or credit into the machine. This machine allows for 24/7 sales without
the need for sales personnel.
Vendor-Managed Inventory (VMI) - A family of business models in which the buyer of a
product provides certain information to a supplier of that product and the supplier takes full
responsibility for maintaining an agreed inventory of the material, usually at the buyer's
consumption location (usually a store). A third-party logistics provider can also be involved to
make sure that the buyer has the required level of inventory by adjusting the demand and supply
gaps.
Vertical Cooperative Advertising Agreement - Advertising in which the retailer and other
previous marketing channel members (e.g., manufacturers or wholesalers) share the cost.
Vertical Marketing System - The channel systems consisting of horizontally coordinated and
vertically aligned establishments that are professionally managed and centrally coordinated to
achieve optimum operating economies and maximum market impact. The three types of vertical
marketing systems are administered vertical marketing system, contractual vertical marketing
system, and corporate vertical marketing system.
Vertical Price Fixing - An agreement between producers and retailers to maintain the producers'
recommended retail price; vertical price fixing is resale price maintenance, a practice now illegal
in Australia.
Vertical Retail Audit - A study of a selected sample of retail outlets, provided as subscriptionbased service by market research firms. Retail-audit service providers gather information on a
brand's sales volume, sales trends, stock levels, effectiveness of in-store display and promotion
efforts, and other associated aspects.
Video Kiosk - An interactive, freestanding computer terminal which displays products and
related information, often on a touchscreen to allow people to make selections.
Visual Merchandising - A situation in which reliance is upon the use of informative labels,
descriptive signs, or a self-service type of display, as opposed to dependence upon a salesperson
for information.
VMI - See Vendor-Managed Inventory.
43 Volume – The quantity or number of goods or services in normal operations of a company in a
specified period
W
Want Book - The information collected by retail salespeople to record out-of stock or requested
merchandise. A term also used for a notebook in which store employees record the names of
items called for by customers but are not in stock.
Want Slip - A slip on which the salesperson records customer requests for items that cannot be
supplied from stock.
Warehouse Club - See Membership Club.
Warehouse Store - A large discount retailer that offers merchandise in a no frills or warehouse
type of environment
Web - See World Wide Web.
Weeks' Supply Method - A method of stock planning whereby one plans for a certain number of
weeks' supply. In utilizing this method, it is assumed that the same stock turnover can be
maintained throughout the selling season; thus, inventory carried is in direct proportion to
expected sales.
Weighted Application Blank - A weighted application is a form whose responses are assigned a
numerical value that correlates to the skills, knowledge, and abilities needed to perform the job.
Individual items of information are validated against performance and turnover measures and
given appropriate weights.
Wheel of Retailing - A theory of retail institutional change that explains retail evolution with an
institutional life cycle concept.
Wholesaling - All transactions in which the purchaser is actuated by a profit or business motive
in making the purchase, except for transactions that involve a small quantity of goods purchased
from a retail establishment for business use, which is considered a retail purchase.
Wide and Deep Assortment Strategy- retailer offers a large selection of products and brands,
with a large number of SKUs in each product line.
Wide and Shallow Assortment Strategy- retailer offers a large assortment of products and
brands, with a limited number of SKUs in each product line.
44 Width of Assortment - Refers to the number of product lines (distinct goods or services) a
retailer carries.
WOM - See Word of Mouth.
Word of Mouth (WOM) - The process by which people express their opinions and productrelated experiences to one another.
World Wide Web (Web) - A portion of the Internet that consists of a network of interlinked Web
pages. This is the aspect of the Internet most familiar to users.
XYZ
Yield Management Pricing- A demand-based variable pricing technique typically executed by
computer programs by service firms, to determine what combination of prices will yield the
highest total revenues for a given period.
Zero-Based Budgeting - Is an approach to planning and decision-making which reverses the
working process of traditional budgeting. In traditional incremental budgeting, departmental
managers justify only variances versus past years, based on the assumption that the "baseline" is
automatically approved. By contrast, in zero-based budgeting, every line item of the budget must
be approved, rather than only changes.
45