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Module – 6

Relationship marketing and International retailing

Relationship marketing refers to all marketing activities directed towards establishing,

developing and maintaining successful relational exchanges.

 Relationship marketing draws upon number of areas(customer quality, customer

service, social interaction)
 Relationship marketing implemented through various components(rewards, customer
services and involvement of customers in planning and execution of retail strategy)
 Customer service is the vital part of Relationship Marketing

THE EVOLUTION OF RELATIONSHIP MARKETING:

Customer Relationship Management (CRM) originated in two unrelated places.

USA- Database Marketing was used when the marketers directed their efforts to increase
selling effectiveness. Information Technology and Statistical analogy was also used for this
purpose.

Scandinavia and Northern Europe – The Relationship marketing was emphasized in B2B
marketing.

In the later half of 1990, there was a shift from Database marketing to Relationship
Marketing. Marketers and Retailers started using IT to communicate with customers and that
helped them to base their product offering.

Relationship Marketing emerged out of 2 major considerations

1. Macro level( At the macro level there was an increased necessity to maintain
relationship with employees, customers, suppliers and government)
2. Micro level(At the micro level there was a shift from Transaction focus to
Relationship marketing

Transaction Marketing: - focuses on single sale, product features, little emphasis on customer
service and moderate customer contact.

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Relationship Marketing:-focuses on customer orientation, high emphasis on customer service,

High commitment. Related to this is Pareto’s Law which states that 80 % of the company
revenue comes from the 20% of the loyal customers. The fact is that acquiring a new
customer cost 5 times of retaining an existing customer. Relationship Marketing attempts to
optimise the resources for the retailing by retaining customers.

Relationship Strategies in Relationship Marketing:

1. Personalisation: It describes the social content of the interaction between service

employees and their customers. It can be regarded as a means of showing recognition
and respect ex: Feeling of familiarity, personal recognition, friendship and social
support by retailer. Sometimes retailers recognize customers calling by their name.

2. Special Treatment Benefit: Relationship marketing does not tell to maintain

relationship with all customers. Customer focus and selectivity is the key aspect of
Relationship marketing. It emphasizes relationship with the loyal customers.
Differentiation required between loyal and the non-loyal one. Up gradation
and service augmentation are the ways to provide special Treatment benefit to the
loyal customers.

3. Communication Benefits: Efforts must be taken to “Stay in touch” with customers- is

the key determinants of Relationship Marketing. Companies use Direct mail, e-mail
and telephone and SMS service to keep in touch with the customers.

4. Rewards: Pricing incentives, money savings, free gift are the ways to reward loyal
customers. Rewarding efforts must be more functional and economical.

Relationship marketing in organised vs. unorganised retail sector:

Organised Retailers can be classified as in store retailer and Non store retailer.

Organised Retailer provide standardized service, large retail format with high quality
ambience, well trained sales staff, wide range of merchandising.

Unorganised Retailers: (Kirana stores and Central Business district of a city)

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 The USP (Unique selling Preposition) of this unorganized retailer is locational

convenience and customized service.
 They establish comfortable relationship, and the customers inform about their
changing needs on a regular basis. Sometimes the retailers are considered to be the
part of their family
 Relationship efforts of unorganized retailer are not only confined to Grocery but also
garment, jewellery and durables. Customers depend on retailers than on brands. This
is the result of relationship.

Loyalty Programme:

The use of loyalty programme is evident from the fact that the corporate expenditure on
loyalty programme is booming.

The following are the bases for loyalty programme.

1. Loyal customers are cheaper to serve: Retailers may not be required to invest ,
maintain and communicate with customer(loyal) as they are already predisposed to
search for information ( new arrivals and services)
2. Loyal customers are willing to pay more for a given bundle of offering: Customers
normally stick into one business entity because of high switching cost and
psychological stress. They therefore will to pay higher prices.
3. They act as Effective marketer for the service offering: The word of mouth marketing
is very effective, and many stores justify their investment in loyalty programme by
seeking profits not so much from the loyal customer but from the new customer the
loyal one brings.

RETAIL RESEARCH

Retail Research: Marketing research specifies the information required to address the
marketing issues (marketing opportunities, evaluate marketing actions, monitor marketing
performance) design the method of collecting information, manages and implements the data
collection process, analyses and communicated findings and their implications.

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Importance of research in retailing:

 Retail research can help retailers to take important decisions such as market
positioning, which retail format will be most suitable for the particular target market,
how best to display merchandise and so on.
 At the retail level, research is used for concept testing, business feasibility analysis,
identifying the correct product mix, understanding the target market profile,
understanding and analyzing consumer behaviour.

Methods of retail research:

Qualitative Research Methods:

It is used to find out what is in consumer’s mind. The retailer will be able to get oriented to
the range and complexity of consumer activity and concerns. Such data may help retailer to
know more about things (feelings, thoughts, and intentions, past behaviour) which cannot be
directly observed or measured.

Focus group study is used to identify the most likely product positioning, and to know the
cues on the various features which go into the shopping such as ambience, shopping needs
and requirements, style preferences.

3 Major types:

1. Exploratory Research: defines the problem in detail, suggest hypotheses, used for
generating ideas for new product.

2. Orientation Method: getting to know the consumer’s best view and vocabulary.

3. Clinical: Gaining insights of issues which otherwise might be impossible to pursue

structured research methods.

Qualitative research can take the form of Focus Group Discussion, Projective techniques
(Word association test, third person role playing, and sentence completion test)

Quantitative Research through survey:

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Survey can help to understand the consumer’s behaviour: Current shopping patter, to know
the size of the market, the retail formats currently being used, size of the core target.

The survey in many forms is one of the most widely used and well knows method of
acquiring marketing information by communicating with the group of customers through
questionnaire or interview. It is efficient and economical.

Observation Method of Research:

-used to provide information on current behavior. The research design can be: Casual or
systematic.

It will be easy to observe the following information:

 what is the in store traffic pattern

 what is the customers reaction to the displays, visual merchandising
 what is the pattern of customers movement
 why is the reaction to private labels
 which are frequently asked questions by the customers

Forms of observation:

1) Direct observation: the retailer may use an observer disguised as a shopper to observe
how long customer spend time in the display area.

2) Contrived observation: Buying teams disguised as customers will try to find out what
happens during normal interaction between the customer and the retailers.

3) Content Analysis: used to analyse the content or messages of advertisement

4) Humanistic Enquiry: It involves immersing the researcher in the system under study
.The researcher maintains two dairy.

1) Theory construction which records in details the thoughts, premises, and hypothesis.

2) A detailed date and time sequenced notes which are kept on the technique used for
enquiry with special attention to biases or distortions

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5) Behaviour recording devices: help to overcome deficiencies of human observers. People

meter, Eye movement recorders, voice pitch analyses.

Brand management in retailing:

Of the top 10 strongest brand in the world five are retail brand. Brand management possess
several challenges to the retailer. The key issues are:

1. Brand management of the retail outlet, and

2. Deciding whether or not to opt for the strategy of self own branding.

The 10 strongest brands in the world:

Coco-cola, McDonalds, Sony, Nike, Microsoft, Wal Mart, Ford, Levis, Gap and Amazon

A retailers brand is valuable since it enhances reach and endurance with the consumer and
ensures more focused strategic plan. The elements of store brand are

1. Format

2. Location

3. Visual Merchandising

4. Experience

5. Price

6. Product assortment

7. Service

Own Branding:

Own branding occurs when a retailer sells products under the retail organizations house
brand name. Own branding can be of two types, integrated own branding (occurs when the
retailer also manufactures the branded retail products.

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eg.Raymonds, Bose, Sony retail outlets) and Independent Brand (occurs when the retailer
procures the products from other suppliers though, they are sold under the label of the retail
house e.g. grocery, garments, shoes).

Significance of Own Branding:

Private labels have showed an increase in tern of both value and volume across countries.
Private label share of the product categories such as food, drink, personal care ranged
between 5% and 20% in value terms in most countries. A well run private label brand
enhances store profitability by increasing pressure on branded manufactures.

Internationalisation of retailing

Evolution of International Retailing:

The geographic shift in consumer spending over the last decade has been enormous, resulting
in a change of priorities for many retailers. Rising incomes, improved infrastructure and
fewer tariffs have made a number of emerging markets both more accessible and more
attractive. The lure of high growth rates fuelled interest and investment into these markets,
sparking a sharp rise in the number of market entries from retailers across the world. Many
developed markets, on the other hand, have faced long periods of stagnation and in some
cases, decline. This has forced retailers from these markets to reconsider domestic store
expansion and look for opportunities in new market Exacerbated by the rise of e-commerce,
the growth in the size and number of internet retailers has made saturated markets even more
competitive. These two forces of attraction and repulsion have propelled the
internationalisation of retail.

1. Domestic saturation and the high growth nature of emerging markets are the biggest
drivers of the internationalisation of retail.
2. Acquisition of supply chain infrastructure and local knowledge mean grocery retailers
are best suited to inorganic international growth.
3. Vertically integrated retailers stand a much greater chance of success when
internationalising compared to multi-brand retailers.
4. High growth opportunities from luxury brand retailers will be geographically different
from the rest of the retail world.

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5. The shortage of international home improvement and gardening retailers proves that
some retail concepts are harder to export than others
6. Despite the importance of internet retailing, real growth abroad requires stores.

Motives of International retailing:

There are numerous reasons why to proceed internationally, however the objective of every
company for going international is to expend its business, searching new market and expand
its customer base. There are several reasons listing below for entering in international market:
1. Growth and Profitability - A lot of companies turn to global markets for growth.
Introducing new products internationally can broaden their customer base, sales and revenue.

2. Economics of Scale - Expanding size and scope of markets help to achieve economies of
scale. International approaches give economies of scale while sharing of costs and risks
between markets. Economies of scale occur when the unit cost of a product declines as
production volume increases.

3. Risk Diversification - Several companies move worldwide so that they can diversify.
Selling products in numerous countries reduces the company’s exposure to economic as well
as political instability within the country.

4. Uniqueness of Product or Services - The product with distinctive attributes isn’t likely to
meet competition in the abroad markets and enjoy massive options throughout worldwide
marketplaces.

5. Spreading R& D costs - Through spreading the marketplace, a firm rapidly recovers the
cost incurred in R&D. it is especially true with regard to products including higher cost
associated with R&D. As result of the large marketplace and also due to larger coverage of
the right market segments in international markets, it facilitates speedy recovery of such
costs.

6. Resources and Ideas - Due to unavailability of resources in domestic country or at better

competitive rate companies turn into global market. Also companies proceed internationally
to collect the different ideas in the different lifestyle of various countries as well as to
broaden their workforce.

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7. Employees - All organization wants skilled and well trained employees, as Company goes
to worldwide marketplace to find alternate source of the labour at lower cost.

International Retail Environment:

1. Political factors:
a. How stable is the political environment in the prospective country?
b. What are the local taxation policies? How do these affect your business?
c. Is the government involved in trading agreements, such as the European Union
(EU), the North American Free Trade Agreement (NAFTA), or the
Association of Southeast Asian Nations (ASEAN)?
d. What are the country’s foreign-trade regulations?
e. What are the country’s social-welfare policies?

2. Economic factors:
a. What are the current and forecast interest rates?
b. What is the current level of inflation in the prospective country? What is it
forecast to be? How does this affect the possible growth of your market?
c. What are local employment levels per capita, and how are they changing?
d. What are the long-term prospects for the country’s economy, gross domestic
product (GDP) per capita, and other economic factors?
e. What are the current exchange rates between critical markets, and how will
they affect production and distribution of your goods?

3. Socio cultural factors:

a. What are the local lifestyle trends?
b. What are the country’s current demographics, and how are they changing?
c. What is the level and distribution of education and income?
d. What are the dominant local religions, and what influence do they have on
consumer attitudes and opinions?
e. What is the level of consumerism, and what are the popular attitudes toward
it?
f. What pending legislation could affect corporate social policies (e.g., domestic-
partner benefits or maternity and paternity leave)?

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g. What are the attitudes toward work and leisure?

4. Technological factors:
a. To what level do the local government and industry FUND research, and are
those levels changing?
b. What is the local governments and industry’s level of interest and focus on
technology?
c. How mature is the technology?
d. What is the status of intellectual property issues in the local environment?
e. Are potentially disruptive technologies in adjacent industries creeping in at the
edges of the focal industry?

5. Environmental factors:
a. What are the local environmental issues?
b. Are there any pending ecological or environmental issues relevant to your
industry?
c. How do the activities of international activist groups (e.g., Greenpeace, Earth
First!, and People for the Ethical Treatment of Animals [PETA]) affect your
business?
d. Are there environmental-protection laws?
e. What are the regulations regarding waste disposal and energy consumption?

6. Legal factors:
a. What are the local government’s regulations regarding monopolies and private
property?
b. Does intellectual property have legal protections?
c. Are there relevant consumer laws?
d. What is the status of employment, health and safety, and product safety laws?

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