www.ebook3000.com This page intentionally left blank www.ebook3000.com UNIVERSITY OF TORONTO PRESS Toronto Buffalo London © University of Toronto Press 2016 Rotman-UTP Publishing Toronto Buffalo London www.utppublishing.com Printed in Canada ISBN 978-1-4426-3717-7 Printed on acid-free, 100% post-consumer recycled paper with vegetablebased inks Library and Archives Canada Cataloguing in Publication Murray, Kyle B (Kyle Bayne), 1973–, author The American retail value proposition : crafting unique experiences at compelling prices / Kyle B Murray Includes bibliographical references and index ISBN 978-1-4426-3717-7 (hardback) Marketing – United States. Retail trade – United States. I Title HF5415.1.M87 2016 658.8'700973 C2016-901907-1 University of Toronto Press acknowledges the financial assistance to its publishing program of the Canada Council for the Arts and the Ontario Arts Council, an agency of the Government of Ontario Funded by the Financé par le Government gouvernement du Canada of Canada www.ebook3000.com To Colleen, Julia, and Lilly This page intentionally left blank www.ebook3000.com Brief Table of Contents Detailed Table of Contents ix Foreword by Bryan Pearson xv Part 1: An Introduction to the Retail Value Proposition Crafting Value Segmentation and Differentiation 15 Part 2: The Shopping Environment Locations and Formats 31 Inside the Store 45 Omnichannel Retailing 64 Part 3: Product Selection Buying and Merchandise Management 79 Category Management 99 Part 4: Customer Engagement Managing Customer Relationships 115 Customer Valuation 130 10 Customer Loyalty 147 viii Brief Table of Contents Part 5: Putting It All Together 11 Retail Pricing 163 12 Propositions: Pitfalls and Potential 179 Acknowledgments 187 Notes 191 Index 199 www.ebook3000.com Detailed Table of Contents Brief Table of Contents vii Detailed Table of Contents ix Foreword by Bryan Pearson xv Part 1: An Introduction to the Retail Value Proposition Crafting Value Big Hairy Audacious Retailing Legendary Performance The Engine That Drives the Economy The Retail Value Proposition 10 Environment 11 Selection 12 Engagement 13 Retail Pricing 13 Measuring Success 13 Segmentation and Differentiation 15 Market Segmentation 16 Segmentation Variables 17 Four Criteria for Evaluating Market Segmentation 19 Target Market Selection and Positioning 20 Differential Advantage Analysis 22 Vertical and Horizontal Differentiation 23 Actionable Segmentation and Consumer Personas 24 Measuring Success 26 200 Index Angel Customers & Demon Customers (Selden; Colvin), 131–2 Ann Taylor, 79 Apple: annual sales, 7; assortment variety/breadth/depth, 84t; and consumer accommodation of retailer, 125; consumer advocacy and, 128; customer relationships, 123–4; glass cube format, 40; Johnson and, 5; and omnichannel retailing, 65, 72; and personal data, 159; showrooming by, 69; Walmart compared to, 165, 184 Apple Stores: breadth/depth of products on-site vs on website, 83; rectangular in-store design, 52 Armstrong, Lance, 86 assortment: breadth, 81, 82, 84t, 96, 100; defined, 81; depth, 81, 83, 84t, 100; national brands removed from, 95–6; variety, 81, 82, 83, 84t See also selection atmospherics, 41–2, 55–6 augmented reality, 67–9 BabyGap, 80 Banana Republic, 80, 171–2 Barnes and Noble (B&N): individual customer data, 158; membership fee, 154; Membership program, 134–5; and RFM data, 135 Barneys New York, 18 Bebo, 66 Best Buy: and angel vs demon customers, 147–8, 149–50; and electronic price competition, 73; entrance/transition zone, 50; and market segmentation, 20; Reward Zone loyalty program, 149–50, 151 best practices, 180–1 big-box stores: category management in, 117; formats, 38–9; numbers of products, 49; in trade area, 39 big hairy audacious goals (BHAGs), 6–8, 14, 119 Blank, Arthur, 183–4 Blue Nile, 70 BMW dealerships, 72 boomerang shoppers, 54, 62 brand image/reputation: and omnichannel retailing, 73–4; private labels and, 92; segmentation and, 21 brand management: customer management vs., 94–6; and positioning, 23 brand(s): building, 182; coalition loyalty programs and, 152–3; copycat, 92–3; customer engagement and, 94; familiar, 17; national vs private labels, 91, 92, 93, 95–6, 105, 171; packaging, 59; portfolio management, 91–4; price, and switching, 171; private labels and equity, 92; product grouping by, 100; profitable customer segments and, 95; and proprietary loyalty programs, 151; store formats and, 40–2; store locations and, 40–2; vertical differentiation and, 23 Brandt, Andrew, 15, 16 British Petroleum (BP), Gulf of Mexico oil spill, 144 Build-A-Bear, 159 Built to Last (Collins; Porras), Burke, Raymond, 53 Bush, George W., www.ebook3000.com Index 201 buying: cycles, 89–91; market, 89–90; process, and success, 96–7; and ROI, 97–8; specification, 90; timing and, 99; trends and, 99 Caesar’s Entertainment, 118, 119 Calcott, Phil, 156 capabilities matrix, 26 Caribou Coffee, 32, 124–5 cash-and-carry approach, 45 cash-wrap area: and customer satisfaction, 48; design, 60–1; directional signs in, 57; number of cash registers in, 48, 60; time spent in, 48, 57, 60–1; video screens in, 61 catalog businesses, 33, 64, 75 catastrophic critical incidents (CCIs), 139, 144–5 categories: assessment, 105–6, 110; choices for particular stores, 112; defining, 101–4; omnichannel retailing and, 66, 70; and placement, 51; review, 111–12; roles, 104–5, 108–9, 110, 117; scorecards, 106–8, 110, 111–12; seasonal, 105, 109; segmentation and, 81–2; and selection decisions, 81–2; specific and complementary, 104; strategies, 108–9, 110; SWOT-style analysis, 111; tactics, 109, 117 category management: about, 96, 100–1; in big-box stores, 117; and category assessment, 105–6; category captains and, 110–11; collaboration in implementation, 110–11; and collaboration on price-based promotions, 171; and competitor performance, 111–12; consumer-centric, 111; consumer focus in, 112; customer management vs., 117; defined, 100; as individual business units, 112; manufacturer-retailer collaboration in, 110–11; plan implementation, 109–11; product vs customer focus in, 116–18; SWOT-style category analysis, 111 celebrities, 85–6 Charney, Dov, 144 Chrysler recalls, 144 Clark, Taylor, A Double Tall Tale of Caffeine, Commerce, and Culture, 31 CLV See customer lifetime value (CLV) Coca-Cola: and dynamic pricing, 174–5; perceptual bias, vs Pepsi, 126 Collins, James, Built to Last, Colvin, Geoffrey, Angel Customers & Demon Customers, 131–2 competencies: in differential advantage analysis, 22–3; and ROI generation, 21, 22 competition: benefits of, 9; category management and, 111–12; competitor capability matrices, 22–3; and customer engagement, 185; customer relationship and, 123; customer satisfaction and, 141–2; differentiation vs customer relationships/engagement in, 13; innovations and, 122; location and, 32, 34, 36–7; omnichannel retailing and, 71; packaging and, 59; perceived value and, 14; pricing and, 57, 164, 165, 166, 177–8, 182; private labels and, 92; product portfolio and, 85; in retailing, 8, 202 Index 9; stock-outs and, 83; and target market selection, 20–1 competitive advantage: CLV and, 139; customer relationship building and, 130; differentiation vs customer relationships/ engagement in, 13; focus on small segments of shoppers for, 112; loyalty programs and, 150; negative critical incidents and, 140; sustainable, 8, 13 consumers See customers, and headings beginning customer convenience: aisles and, 55, 61; ESE and, 49; location and, 32–4, 43; omnichannel retailing and, 70, 71; self-service grocery stores and, 46; shelf management and, 61; time spent in store and, 62 conversion: calculation of, 43; location and, 43, 44; in omnichannel retailing, 75–6; traffic and, 43, 44 cost-based pricing, 166–7, 168, 177 Costco: assortment variety/breadth/ depth, 84t; business model, 184; as destination store, 104; impact on trade area, 37; membership fee, 154; online jewelry selling, 70; perceptual bias and, 126 coupons: as advertising tools, 62; instore, 57; online, 66; out-of-store, 61–2; and willingness to pay, 170 critical incidents See catastrophic critical incidents (CCIs); negative critical incidents customer behavior predictions: CLV and, 136–9; RFM models for, 134–6 customer-centricity: and category assessment, 105–6; and category management, 100, 111; difficul- ties in changing to, 25; focus on products vs., 131; importance in success, 183; and net-promoter score, 133–4; product management and, 112; retailers and, 112; and retail value proposition, 180; and shareholder value, 120; in supply chain, 95–6 customer data: aggregate-level vs knowledge of individual customers, 148–9; category management and, 102–3; collection, 148–9; loyalty programs and, 149–56; mass customization of, 156, 158–9; omnichannel retailing and, 72–3, 76; personalized, 156, 157–8, 159; and privacy, 159–60; proprietary loyalty programs and, 151; psychographic information, 149; scanner panel, 148–9 customer engagement: about, 13; and brands, 94; competition and, 185; differentiated shopping experience vs., 13; as intangible element of ESE, 183; and netpromoter score, 134; omnichannel retailing and, 72–3; in retail value proposition, 13, 15, 16 See also customer relationships customer equity: CLV and, 138; coalition loyalty programs and, 153 customer expectations: and customer relationships, 142–3; customer relationships and retailer tolerance/ forgiveness, 125; exceeding, 121–2, 130–1; experience vs., 121–2, 123; and innovations, 121–2; and loyalty, 155; market research and, 121 customer experience: environment and, 12; ESE and, 49–53; www.ebook3000.com Index 203 expectations vs., 121–2, 123; impact of location on, 31–2; lighting/atmospherics and, 55–6; omnichannel retailing and, 71–2; omnichannel retailing and communication of, 74–5; and retailercustomer relationship, 123–4; and shopping environment, 31–2; stores focused on products vs., customer knowledge: analytics vs data in, 118; and competitors’ pricing, 177; of groups vs individual, 16–17; local independent stores vs large retail chains, 185; in retail value proposition, 16; and ROI, 20 customer lifetime value (CLV), 136–9, 143, 149 customer loyalty See loyalty, customer customer management: angel vs demon customers and, 133; brand management vs., 94–6; category management vs., 117; product management vs., 115–16; of satisfaction distribution, 145–6 See also demon customers; detractors customer needs/desires: category assessment and, 105–6; focus on, vs products, 26; and product category definition, 101 customer preferences: Amazon/ Netflix and data regarding, 73; environment and, 17; factors affecting, 183; and horizontal differentiation, 24; individual, 117–18; information collection regarding, 135; and segmentation, 16–17 customer relationships: advocacy in, 127–8; with angel vs demon customers, 148; building, 122–8, 130–1; CCIs and, 145; competition and, 13, 123; customer acquisition costs and, 137; customer expectations and, 125, 142–3; customer experience and, 123–4; and customer loyalty, 155; and efficiency, 124, 142–3; employee engagement in, 128–9; habitual, 123–4; as interpersonal, 122–3; negative critical incidents and building of, 142–3; passion-based, 123–5, 127; perceptual bias in, 125–6; and profitability, 120; relationship management matrix, 141–2; retailer proactivity in, 140, 141; and revenue, 120; and ROI, 131; service failures and, 141; tolerance/forgiveness in, 125; trust in, 126–7 See also customer engagement; retention of customers customers: core/primary/secondary/tertiary, 35–6; demographic/ geographic information and potential, 36; and evolution of retail value propositions, 183–4; focus on right, 131; power of consumers, 96; products vs., 94; segmentation and consumer personas, 24–6; spotting, 36 customer satisfaction: aggregate levels, 145–6; choice and, 49–50; and CLV, 137–8; and competition, 141–2; and habitual shopping, 123; Harrah’s and, 118–20; loyalty programs and, 137–8; management of distribution in, 145–6; as means to end, 119; with product quality/pricing vs service levels, 53; and profitability, 138; relationship gap, 120–8; retailer 204 Index differentiation on, 141; and ROI, 131; stock-outs and, 83 customer segments See segments, customer customer understanding See customer knowledge Dell, electronic retailing, 65 Delta, Crossover Rewards, 150, 152 demographics: and potential customers, 36; in segmentation, 17–18 demon customers, 60, 132, 133, 139–45, 147, 149 design, in-store: cash-wrap area, 60–1; entrance/transition zone, 50–1; and lighting/atmospherics, 55–6; and probability of purchase, 50, 53; and traffic flow, 52–3 destination stores, 104, 105 detractors, 133–4, 139, 145 DeWalt, 59 Dick’s Sporting Goods, 18 differential advantage analysis, 22–3 differentiation: and competition, 13; customer relationships/engagement vs., 13; environment and, 11; horizontal, 23, 84, 100; in-group homogeneity, 19; of market segments, 19; out-group heterogeneity, 19; price-based, 100; vertical, 23, 24, 84, 100 discount stores, 181 Disney Stores, activity zones, 55 Dorosin, Jeremy, 145, 146 A Double Tall Tale of Caffeine, Commerce, and Culture (Clark), 31 Drexler, Millard (Mickey), 79–80, 85, 86, 94 Drucker, Peter, 119 dynamic pricing, 167–8, 174–7 eBay, and dynamic pricing, 174 efficiency: customer relationships and, 124, 142–3; grid layout and, 51; in-store design and, 53; pricing and, 164–5; shopping lists and, 61; time spent shopping and, 48–9, 62 electronic retailing: history of, 64–5; personalization of, 157–8; and revenue, 65; and stock-outs, 83 See also omnichannel retailing employee engagement, in customer relationships, 128–9 engagement with customer See customer engagement entrance/transition zone, 50–1 environment: about, 11; as combination of decisions, 31; customer and, 31–2; and customer experience, 12; customer preferences and, 17; and differentiated shopping experience, 11; evaluation of, 63; focus on, vs customer, 115; personalized, 156, 157–8; physical vs electronic media, 31; and probability of purchase, 47–9; in retail value proposition, 11, 15, 62; signage and, 56–7; and success, 47 See also atmospherics; design, in-store; lighting environment, selection, and engagement (ESE): and category tactics, 109; and convenience, 49; LCBO and, 24–5; omnichannel retailing and, 70–4, 75; and price/ pricing, 11, 12f, 164, 177–8, 180; and relationships with angel vs demon customers, 148; in retail value proposition, 10, 11, 12f; and shopping, 49–53; and success, 26, 183; and value, 155 www.ebook3000.com Index 205 ESE See environment, selection, and engagement (ESE) everyday low prices (EDLOP), 172–4, 177 Facebook: influence on consumer behavior, 66; and promotion, 86 See also social networking Ferraro, Rosellina, 47–8, 54, 61 five-and-dime store model, 179–80, 181 flow of customers See traffic flow/ patterns focus on customer See customercentricity Ford, Henry, 159 formats, store See store formats Fornell, Claes, 120 Gallup, on employee engagement, 129 Ganz, 68, 69, 184 Gap: brand vs customer relationship, 95; Drexler and, 79–80, 85, 86; horizontal differentiation, 84 General Motors (GM), 94; annual sales, 7; discount program, 182; Oldsmobile brand, 94; Toyota compared to, 181 The Generic Man, 128 geographic information/ segmentation: about, 18; and potential customer spotting, 36; and size of store, 39 Google: AdWords, 66; and Groupon, 66; and personal data, 159 gravitational/demand gradient models, 36–7 gross margin: buying process and, 97–8; return on inventory (GMROI), 97, 106–7; return on space (GMROS), 98, 106–7 Groupon, 66 Handy Dan Home Improvement, 184 Harrah’s Las Vegas hotel and casino: customer-centricity, 118–20; and customer data, 149; and customer satisfaction/loyalty, 119–20 Hayward, Tony, 144 Hermès, 18, 19 high-low promotional pricing, 170–2, 177 Home Depot: customer expectations and, 121; evolution of, 184; as former regional player, 184; learning from, 181; location decisions, 32, 36–7; Lowe’s vs., 36–7, 181; store format, 38 horizontal differentiation, 23 Humby, Clive, Scoring Points, 156 Hunt, Terry, Scoring Points, 156 IKEA: and consumer accommodation of retailer, 125; in-store design, 52–3; interior design, 56 Industria de Diseño Textil, 86–7 in-group homogeneity, 19 Inman, Jeff, 47–8, 54, 61 innovations: and competition, 122; customer expectations and, 121–2 Inside the Mind of the Shopper (Sorensen), 48–9 in-store design See design, in-store in-store environment See environment Internet: and advertising, 66; history of use, 65 See also electronic retailing; social networking inventory: average cost, 97; gross margin return on (GMROI), 97; individualized customer data and, 158–9; loyalty programs and, 150; self-service grocery stores and, 45; turns, 97, 106–7 206 Index JCPenney: brand vs customer relationship, 95; Johnson and, 5–6 Jill’s Table, 128, 129 Jobs, Steve, 5, Johnson, Ron, 5–6, 95 Johnson & Johnson, 144 Jordan, Michael, 86 JP Morgan Cazenove, 150 Kahneman, Daniel, 168–9 KinzCash, 67 Kmart, 9, 184 knowledge of customer See customer knowledge Kroger: category management, 101, 102–3; and cost- vs value-based pricing, 168; perceptual bias and, 126 Kumar, Nirmalya, Private Label Strategy, 96 layouts, store See store layouts lighting, 55–6 Liquor Control Board of Ontario (LCBO): and Air Miles Rewards program, 15–16; and consumer knowledge/personas, 24–5; and customers’ needs/desires vs products, 17; and ESE, 24–5; and focus on products vs customers’ needs/desires, 26 LivingSocial, 66 location(s): alternative, 42; and attraction of customers, 18; big-box, 32, 38–9; and brands, 40–2; choice of, 32, 34–5, 42–3; and competition, 32, 34, 36–7; complementary businesses and, 34–5; and convenience, 32–4, 43; and conversion, 43, 44; customer segments and, 34; customer spotting and, 36; effects on revenue/profitability, 42, 43; geographic area selection, 34; gravitational/demand gradient models, 36–7; identification/ evaluation of potential sites, 35; impact on customers, 31–2; leases with exclusivity clauses, 32; loyalty programs and, 150; potential sales estimate and, 37; and rise of retailing, 33–4; segmentation research and, 37–8; size and, 42; and store format, 35, 38–40; trade areas and, 35–8; and traffic generation, 43 loss leaders, 166, 168 Loveman, Gary, 119, 120 Lowe’s: cash-wrap area, 60; Home Depot vs., 36–7, 181; location decisions, 32, 36–7 loyalty, customer: customer relationships and, 155; to Harrah’s, 119–20; loyalty programs and, 155; and prices, 126; private labels and, 92; retail value proposition and, 155; shareholder value vs., 119; stock-outs and, 83 loyalty programs: as assets vs liabilities, 154–5; and category scorecards, 107; coalition, 150, 152–3, 155; and competitive advantage, 150; and customer data collection, 16, 107, 149–56, 159–60; and customer loyalty, 155; customer satisfaction and, 137–8; evolution, 155–6; membership fees, 153–4; partnership model, 150, 151–2, 155; proprietary, 150, 151, 155; relevance, 156–9; retailer repositioning vs rewarding customer www.ebook3000.com Index 207 loyalty, 15; and RFM data, 134–5; trial and error in, 155–6; types, 150–3; use of points/discounts, 156; and volume discounts, 149 lululemon: brand association with location, 41; consumer advocacy, 128; and cost- vs value-based pricing, 168; critical incident facing, 144; customer expectations and, 121; customer relationships, 123–4; differentiation from competition, 128; evolution of, 184; and yoga community, 87–8; yoga pants as right product at right time, 79 LUSH Cosmetics, and cost- vs value-based pricing, 168 MAC Cosmetics, consumer advocacy and, 128 Macy’s: horizontal differentiation in, 84; and Marshall Field’s, 42; and omnichannel retailing, 71–2, 73; remaining relevance over time, 184; as trusted brand, 73 Maple Leaf Foods, and listeriosis, 144 Marble Dry Goods Palace, 33, 163, 164 Marcus, Bernie, 183–4 markdowns, 177 marketing See advertising; promotion(s) market segmentation See segmentation markups, 166–7, 168, 177 Marshall Field’s: format, 33, 41; internal design/atmospherics, 41–2, 55; location, 33 Mason, Andrew, 66 mass customization approach, McCain, Michael, 144 McDonald’s: and efficiency, 49; exclusivity leases, 32 Men’s Wearhouse, 84 Method, 59 Microsoft store, activity zones in, 55 Montgomery Ward, catalog business, 33, 64, 75 MySpace, 66 Napster, 65 national brands, 92–4, 95–6, 105, 110, 171 negative critical incidents, 139, 140–5 Nespresso, 18 Netflix: and customer preference data, 73; and evolution of omnichannel retailing, 65; tailoring to specific customers, 157–8 net-promoter score, 133–4, 139 new products, 85, 172 Nike, 86 Nordstrom: omnichannel retailing, 71, 73; as trusted brand, 73 Old Navy, 80 Oldsmobile brand, 94 omnichannel retailing: and advertising, 66, 74–5; and augmented reality, 67–9; brand reputation in, 73–4; and competition, 71; and convenience, 70, 71; conversion in, 75–6; customer conversations in, 74–5; and customer data collection, 72–3, 76; and customer engagement, 72–3; customer segments and, 70–1; defined, 65; entertainment industry and, 65; and environment, 71–2; ESE 208 Index in, 70–4, 75; evolution of, 65–7; experimentation in, 75; and loss of focus on core customers, 75; measuring success in, 75–6; and price-based competition, 73–4; and product categories, 66, 70; and product information, 70; and product selection, 72; retailer response to, 69–70; retailers’ fears regarding, 73–5; and ROI, 73, 75; and shopping experience, 71–2; and showrooming, 69; traffic and, 75–6; travelers and, 65 one-to-one marketing, 16 online shopping See electronic retailing out-group heterogeneity, 19 packaging, 59 The Paradox of Choice (Schwarz), 49–50 The Partnering Group (TPG), 101, 103f Pauwels, Koen, 171 Peapod, 71 Penney, JC See JCPenney Pepsi, perceptual bias vs Coke, 126 perceived value: and competition, 14; between customer segments, 172; defined, 10; prices and, 10–11, 13, 176–7, 181; promotions and, 171–2; retail value propositions and, 10–11; strategic management of, 10; and value-based pricing, 168–70 personal shoppers, 130–1 Phillips, Tim, Scoring Points, 156 Piggly Wiggly: about, 45–6; numbers of stores, 33; and personalized shopping, 157 placement, product See product placement planograms, 58, 90 Point of Purchase Advertising Institute (POPAI), 47–8 Porras Jerry, Built to Last, positioning: brand development/ management and, 23; within horizontal differentiation, 24; repositioning, and value, 15; target market selection and, 20–6; within vertical differentiation, 23, 24 potential sales: estimate of, 37; square footage and, 63 See also probability of purchase(s) Prada, 18, 19 preferences See customer preferences price(s)/pricing: about, 13; in buying cycle, 90; and category tactics, 109; comparisons, 66, 73–4; compelling, 164; competition and, 57, 61, 73–4, 164, 165, 166, 177–8, 182; copycat, 177; cost-based, 166–7, 168, 177; coupon shoppers and, 61–2; customer loyalty and, 126; defined as money price, 165; discounts, 167, 170; discrimination, 61–2, 174, 175–6; dynamic, 167–8, 174–7; and efficiency, 164–5; equilibrium, 165; ESE and, 11, 12f, 164, 180; everyday low (EDLOP), 172–4, 177; and fairness, 176–7; fixed/set, 163; haggling over, 163–4; highlow promotional, 170–2, 177; and loss leaders, 166, 168; low/lower, 45, 46, 56–7, 179–80; markdowns, 167, 172, 177; markups, 166–7, 168, 177; matching, 177–8; maximum, 174; national brands vs private labels, 93, 171; new products and, 172; omnichannel retailing and, 73–4; online coupons and, 66; www.ebook3000.com Index 209 perceived value and, 10–11, 13, 168–70, 176–7, 181; and probability of purchase, 164; and profitability, 164–5, 167, 171; promotions based on, 171; retail selling, 166–7; and retail value proposition, 11, 12f, 13, 177; and sales promotions, 171; self-service grocery stores and, 45, 46; sensitivity, 61–2, 171, 177; supply/demand and, 165–6; and value, 164; value-based, 167–70; value vs., 10, 165, 181–2; vertical differentiation and, 23, 84 private labels, 91, 92–4, 95–6, 99, 105, 171 Private Label Strategy (Kumar; Steenkamp), 96 probability of purchase(s): in-store design and, 50, 53; in-store environment and, 47–9; management of, 47–9; price and, 164; store layouts and, 53; time spent shopping and, 47–8 See also potential sales product assortment See assortment product categories See categories product information/reviews: Internet and, 66; mobile devices and, 61; omnichannel retailing and, 70; packaging and, 59 product placement: and aisle traffic, 54; lighting/atmospherics and, 55; national brands vs private labels, 93; and open spaces, 54; product categories and, 51; shelf value zones and, 57–8; store layouts and, 40; and unplanned purchases, 54 product selection See selection profitability: angel vs demon customers and, 60, 131–2, 133; customer relationships and, 120; customer satisfaction and, 119, 138; customers vs shopping environment/assortments and, 131; format and, 42; high-low pricing and, 172; of individual vs total lifetime customer transactions, 136–7; location and, 42, 43; loyalty programs and, 154; markdowns and, 177; pricing and, 164–5, 167, 171; product selection and, 85; retail value proposition and, 14, 182; revenue and, 14, 43; RFM data and, 135; segmentation and, 17, 26–7; square footage and, 43, 50, 63; sustainable growth in, 14; time spent shopping and, 62 See also revenue promoters, customers as See netpromoter score promotion(s): in buying cycle, 90; in-store, 57; loyalty programs and, 150; mismanagement of, 182–3; price-based, 171 See also advertising psychographic information: CLV models and, 138; in customer data collection, 149 psychographic segmentation, 18, 20 purchases: numbers of distinct items per year/per household, 49; planned vs unplanned, 46–8, 51, 54, 61, 132; routine/habitual, and product category roles, 104–5 See also probability of purchase(s) radio-frequency identification (RFID) tags, 57 recency, frequency, monetary spend (RFM) variables, 134–6, 149 210 Index Reebok: consumer advocacy and, 128; and FLASH, 128 Regal Entertainment Group, 173–4, 175, 176 REI: activity zones, 55; customer relationships, 123–4 Reingold, Jennifer, relationships with customers See customer relationships Restoration Hardware: assortment variety/breadth/depth, 83, 84t; “gallery/showroom” approach, 83; omnichannel retailing, 69, 72, 83 retailing: buying cycles in, 89–91; and economy, 9–10; history of, 33–4, 45–6, 91–2; organization structure, 81, 82f, 90; small independent stores as future of, 184–5; transparency of, 8; unpredictability of, 183 retail price(s)/pricing See price(s)/ pricing retail value proposition(s): about, 8–9, 10–13; advertising vs., 182; best practices and, 180–1; customer-centricity, 180; customer engagement in, 13; and customer loyalty, 155; customer segments in, 115; customer understanding in, 16; environment in, 11, 62; ESE in, 10, 11, 12f; individual/unique, 183–4; mismanaging marketing and, 182–3; and perceived value, 10–11; pitfalls, 180–3; price/ pricing in, 11, 12f, 13, 177; and price-value confusion, 181–2; and profitability, 14, 182; segmentation and, 16; selection in, 12; shopping environment and, 15; and success, 185; and sustainable growth, 115 See also customer engagement; environment; selection retention of customers: CLV and, 136, 137; loyalty programs and, 154 See also customer relationships return on investment (ROI): buying decisions and, 97–8; category scorecards and, 107; competencies to generate, 21, 22; customer relationship building and, 131; customer satisfaction and, 131; knowledge of individual consumers and, 20; marketing and, 182; market segmentation and, 16–17, 19, 20, 27; metric, 27; owners/ investors and, 14; partnership loyalty programs and, 152; RFM model and, 135; sales channels/ omnichannel retailing and, 65, 73, 75; signage and, 56; value-based customer segments and, 135 revenue: customer loyalty/ satisfaction and, 119–20; customer relationships and, 120; format and, 42; lighting/atmospherics and, 55–6; location and, 42, 43; online/mobile vs in-store shopping, 65; pricing and, 164; product selection and, 85; and profitability, 14, 43; square footage and, 43, 50; Walton’s target for Walmart, 14 See also profitability RFM variables See recency, frequency, monetary spend (RFM) variables Road Runner Sports, 157 Rockville Soccer Supplies, 22–3, 24, 25, 26 www.ebook3000.com Index 211 Rodeo Drive, Beverly Hills, 32 Rust, Roland, 138 Safeway, category management, 101 Saunders, Clarence, 45–6, 157 Schultz, Howard, Schwarz, Barry, The Paradox of Choice, 49–50 Scoring Points (Humby; Hunt; Phillips), 156 Sears: brand vs customer relationship, 95; category scorecards, 107–8; as destination store, 104; Walmart vs., Sears Canada, Elf program, 130–1 Sears Roebuck catalog business, 33, 64 segmentation: about, 16–20; accessibility of segments, 19; actionable, 24–6; behavioral variables, 18–19; and brand image, 21; and consumer personas, 25–6; criteria for evaluating, 19–20; demographics and, 17–18; differential advantage analysis and, 22–3; differentiation of segments, 19; evaluation of potential value, 20–1; evolution over time, 21; geographic information and, 18; and location, 34; and product categorization, 81–2; and product category definition, 101–2; and profitability, 17; psychographic information in, 18; research, 37–8; and retail value proposition, 16; and ROI, 16–17, 19, 20, 27; scheme to attract angel customers, 147–8; variables, 17–19, 62 segments, customer: and aisle width/open spaces, 55; and brands, 95; category assessment and, 105–6; category scorecards and, 107; distinct response profiles, 20; focus on, for competitive advantage, 112; individual customers vs., 117–18; and in-store environment, 62; and location, 34; loyalty programs and direct marketing to, 150; and net-promoter score, 133–4; omnichannel retailing and, 70–1; and passion-based relationships, 124; perceived value between, 172; and product categorization, 81–2; product grouping by, 100; and product information on packaging, 59; and product variety, 83; profiles, 149; profitable vs unprofitable, 26–7; and response to negative critical incidents, 141–2; in retail value proposition, 115; selection and positioning, 20–6; sizability of, 20; small independent stores and, 185; and store format, 38; target, defined, 117; value-based, 135 Selden, Larry, Angel Customers & Demon Customers, 131–2 selection: about, 12; assortment, 81–4; brand portfolio management, 91–4; buying cycles and, 89–91; c elebrities and, 85–6; and consumer choice, 79; in entrance/ transition zone, 50; fashion/ preference changes and, 85–7; focus on, vs customer, 115; knowledge of customers and, 116–18; new products, 85; omnichannel retailing and, 72; post-market report, 90; pre-market outlines/shopping lists, 89, 90; product c ategories 212 Index and, 81–2; in retail value proposition, 12; risk in, 83; SKUs in, 89; stable vs unstable sales trends and, 84–5; subculture relationships and, 87–8; and success, 79, 91; and success vs failure, 80; trickledown trend management, 85–7; trickle-up trend management, 87–9 See also assortment sell-through, 97, 106–7 Sephora, Beauty Insider rewards program, 151 7–11 Convenience Store, assortment variety/breadth/depth, 84t shareholder value, customer centricity/loyalty vs., 119, 120 shelf-space management: and convenience, 61; loyalty programs and, 150; store layouts and, 40 shelves/shelving: kids/pets and, 59; planogram/modular, 58; pyramid-shaped, 54; sight and grab, 58–9; stoop and stretch, 58; value zones, 57–9, 63; varieties of, 52 ShopperScientist LLC, 48 Shoppers Drug Mart, Optimum loyalty program, 150 shopping environment See environment shopping experience See customer experience shopping lists: and customers’ purchase decisions, 46; and efficiency, 61; and planned vs unplanned purchases, 61 showrooming, 69 Shugan, Steven, 155 signage, 56–7 SKUs See stock keeping units (SKUs) Snowden, Edward, 74 social networking: influence on consumer behavior, 66; and negative critical incidents, 140; and promotion, 86 Sony, PlayStation example, 143 Sorensen, Herb, Inside the Mind of the Shopper, 48–9 Spies, Kordelia, 56 Srinivasan, Shuba, 171 Starbucks: assortment variety/ breadth/depth, 82, 84t; BHAG regarding, 7, 8; brand association with location, 41; brand vs customer relationship, 95; consumer advocacy and, 128; and cost- vs value-based pricing, 168; creation as exceeding customer expectations, 121; customization by, 159; differentiation from competition, 128; and difficult times, 8; Dorosin espresso machine dispute with, 145, 146; espresso as right product at right time, 79; and exclusivity leases, 32; habitual customer relationships with, 123–4; and location, 31, 32; mass customization approach, 7; numbers of stores, 7, 8; passion-based customer relationships with, 123–4 Starwood, Crossover Rewards with Delta, 150, 152 Steenkamp, Jan-Benedict, Private Label Strategy, 96 Stewart, Alexander Turney, 33, 163, 164 stock keeping units (SKUs), 83, 84–5, 89, 117 stock-outs, 83, 97, 106–7, 125 store formats: alternative, 42; and brands, 40–2; choice of, 38–40, www.ebook3000.com Index 213 42–3; effects on revenue/profitability, 42; elements of, 38; growth and variety of, 39; layout, 39–40; location and, 35, 38–40; size, 38–9; target segments and, 38 store layouts: aisles, 40, 51–2 (see also aisles); and flow of customers, 40; grid, 51–2; and probability of purchase, 53; and product placement, 40; racetrack, 52; rectangular, 39, 52; and shelf management, 40 (see also shelf-space management; shelves/shelving); size and, 39–40; in supercenters, 52; types of, 39–40 Streamline, 71 success: of buying process, 96–7; environment and, 47; ESE and, 26, 183; measurement of, 13–14; product management and, 81; product selection and, 80, 91; retail value proposition and, 185; in short vs long term, 79; unplanned purchases and, 47 supercenters, 52, 181 supply/demand, and price, 165–6 Target: architectural designs by region, 38; as destination store, 104; Gap vs., 80; Johnson at, 6; learning from, 181; omnichannel retailing, 71; Sears vs., 95; Walmart vs., 181 Teavana, activity zones, 55 Tesco: Clubcard loyalty program, 150, 151, 156, 158, 159–60, 184; “hole in the basket” program, 158; omnichannel retailing, 71; and personal customer data, 159–60 Thaler, Richard, 169–70 Thomas the Tank Engine, lead paint in toys, 144 Tiffany’s: catalog business, 33; sales per square foot, 43 T.J Maxx, 180 Tom Ford, 84 Toyota: consumer forgiveness/ tolerance of, 125; GM compared to, 181; recall, and Congressional hearings, 144 Toys “R” Us, 17–18 trade areas, 35–8 See also location(s) traffic flow/patterns: activity zones and, 55; density/frequency tracking, 57, 62; direction of, 50–1; grid layout and, 51–2; in-store design and, 52–3; shelving and, 54; store layouts and, 40 traffic generation: category tactics and, 109; and conversion, 43, 44; location and, 43; marketing and, 182; sales and, 172 traffic rates, in omnichannel retailing, 75–6 trends: stable vs unstable sales, 84–5; and timing of buying decisions, 99; timing of introduction of products, 87; trickle-down, 85–7; trickle-up, 87–9 Tversky, Amos, 168–9 Twitter, 66, 86 Tylenol, tampering, 144 Underhill, Paco, 47, 56; Why We Buy, 40 United Airlines, loyalty program, 154 United States Census Bureau, 37, 149 value: advertising and creation of, 182–3; ESE and, 155; evolving propositions, 183–4; maximization of, 10; price vs., 10, 165, 181–2; 214 Index pricing and, 164; promotions and perception of, 171–2; repositioning and, 15 See also perceived value value-based pricing, 167–70 van Doorn, Jenny, 141, 142f Verhoef, Peter, 141, 142f vertical differentiation, 23, 24 Virgin airlines, consumer advocacy and, 128 Walgreen, Charles R., Sr., 120–1 Walgreens: Balance Rewards loyalty program, 151; continuing relevance of, 184; customer service anecdote, 120–1; numbers of stores, 33 Walmart: annual sales, 7; Apple compared to, 165, 184; assortment variety/breadth/depth, 84t; beginnings of, 41, 179; BHAG regarding, 7, 14; bicycle example of category management, 103–4, 108–9, 116–17; brand association with location, 41; competitiveness of, 9; creation of, 180–1; and difficult times, 8; as former regional player, 184; Gap vs., 80; “Great Value” label, 95–6; grocery business, 105; omnichannel retailing, 71, 73; and one-stop shopping, 32; online jewelry selling, 70; perceptual bias and, 126; and private labels vs national brands, 95–6; Sears vs., 95; and size of segments, 20; store format, 38; Target vs., 181 Walton, Sam, 7, 14, 180–1 Walton’s Five and Dime store, 179 Wanamaker’s, 33 Webkinz, 67–8 Webvan, 71 White, Shaun, 86 Whole Foods: customer relationships with, 123–4; and organic food business, 88 Why We Buy (Underhill), 40 WikiLeaks, 74 Wilcox, Jill, 128 Williams-Sonoma, activity zones, 55 Wilson, Chip, 41 Winer, Russell, 47–8, 54, 61 Woods, Tiger, 86 Woolworth, Frank Winfield, 179 Woolworths: about, 179–80, 184; closure of, 180; price vs value and, 181 W Shop, 67 Yahoo!, and Groupon, 66 Yellow Pages, 66 Zappos, 70 Zara, 86–7 www.ebook3000.com ... address whether a retailer is offering the right kind of value to the right customer at the right time, and explain how to both craft and evaluate retail value propositions The Retail Value Proposition. .. The Retail Value Proposition The world’s leading retailers create value for their customers by crafting unique experiences at compelling prices The Retail Value Proposition is organized around... An Introduction to the Retail Value Proposition Crafting Value Big Hairy Audacious Retailing Legendary Performance The Engine That Drives the Economy The Retail Value Proposition 10 Environment 11