Chapter 14

Reframing Retail Strategy

Learning Objectives

• Describe the three eras of retailing and what distinguishes them

• Define service according to a service-dominant logic and explain the four principles of service-dominant logic

• Explain how customer centricity is essential in contemporary retailing

• Discuss the central importance and imperative of continuous learning in retailing

Three Eras of Retailing

To marketTo market

Marketing to customersMarketing to customers

Marketing with customersMarketing with customers

LO 1

To Market

• Time period prior to 1900• Merchandise and goods moved primarily by

railroads and by waterways• Major challenge was bringing merchandise to

the market• Largest retailers were the department stores• Marshall Field in Chicago• Macy’s in New York City

LO 1

Marketing to Customers

• As transport and communication systems improved, it became easier to transport goods to the market• Successful retailers expanded their stores

geographically giving rise to chain stores• Used price and promotion to market to and sell to

customers

• Golden age of advertising

LO 1

Marketing to Customers

• The mass merchandising formula spread rapidly over several decades

• Low margins led to more store traffic, coupled with high inventory selfservice intensity

• Over time lost its competitive advantage

LO 1

Exhibit 14.1 - Retail Resource Trinity Model

LO 1

Exhibit 14.2 - The Retail Resource Efficiency Cycle

LO 1

Marketing with Customers

• Active collaboration between retailers and their customers, suppliers and other stakeholders

• Long-term relationships became part of retail planning

• Operand resources - Those that humans act upon or do something to in order to create effects

LO 1

Marketing with Customers

• Operant resources - Those that can act on and produce effects• Employee skills and knowledge, the core

competences of an organization or its dynamic capabilities

LO 1

Marketing with Customers

• Price to book ratio: Where price is the price of a share of stock and book is the book value of a share of stock• Higher price to book ratio, the higher the

intangible assets relative to tangible assets

LO 1

Service-Dominant Mindset

• Better telecommunication resulted in better relationships with suppliers, employees, and customers

• Service - Application of knowledge and skills through deeds, processes, and performances for the benefit of another• Its is a transcending concept• IHIP characteristics - Service is intangible,

heterogeneous, inseparable and perishable

LO 2

Service Can Take on Three Forms

• Provided directly from one person to another

Direct

• Goods become service appliances

Indirectly

• Retailer provides information or demonstrations of products

Education

LO 2

Principles of Service-Dominant Logic

• Service is the basis of human exchange• People are always cocreators of value• All people are resource integrators• Each person uniquely determines value

LO 2

Service as Basis of Exchange

• Service is the fundamental basis of exchange and the basis of all competition

• Competing on intangibles provides the retailer a competitive advantage• Intangibles are hard to copy unlike tangible

resources that can be easily copied or purchased in the marketplace

LO 2

Value Co-Creation

• Service-dominant mindset views the customer as using what the firm sells to do something valuable or to create value

• Retailers that recognize that customers incorporate what they sell into the value co-creation process are able to use this knowledge in their communication

LO 2

Resource Integration

• Customers integrate three major types of resources as they co-create value in their daily lives• Market resources• Public resources• Private resources

LO 2

Value as Unique

• Retailers use information technology to know the precise economic value of each customer• Measured as the total sales revenue or profit from

a customer over a particular time period such as one to three years

• Recognizing and capitalizing on the unique experiencing of value by each customer is one of the biggest challenges in retailing

LO 2

Customer-Centric Retailing

• Customer-centric view suggests that the retailer begins not with its capabilities and skills but with developing a deep understanding of its customers or potential customers

• Density: Best combination of resources that are mobilized to a time and place for a particular individual to pursue opportunities at an optimal value

LO 3

Customer-Centric Retailing

• Density is facilitated via the Internet• Like Google

• Customer centricity - Implies the customer is an active participant in the process of creating resources and solutions

LO 3

Exhibit 14.6 - Customer as an Operant Resource

LO 3

Engagement

• Three processes occur that can help facilitate engagement• Interfacing - Interaction can be hard surfaced if it

is a tangible interface or soft surfaced if it is an intangible interface

• Experiencing - Experiences are the cognitive and affective responses that result from interfacing

• Connecting - If interfacing and experiencing is successful, then the customer will connect or bond with the retailer

LO 3

Co-Production and Co-Creation

• Two ways customers are active participants• Co-production: Active involvement of the

customer in the retailer’s core activities• Co-creation: Everyone who purchases a tangible

or intangible market offering and uses the offering is viewed as a co-creator of value

LO 3

Relieving and Enabling

• Customers would like to get relieved of their work enabling the retailers to tap the opportunity

• A retailer should consider designing an assortment so as to enhance enabling customers• Enablers can be information technology based like

a website

LO 3

Dialogue

• Dialogue is to learn together, and it is very consistent with a marketing with mental model• This communication allows customers to solve

problems and pursue opportunities together with retailers

LO 3

Value Propositions

• Statements of how the retailer plans to positively affect customers or also employees, suppliers, and other stakeholders

LO 3

Developing a Learning Mindset

• Actual results can fall short of planned results for a variety of reasons:• Environmental factors• Economic sluggishness• Aggressive competition

• When actual results are below plan, it can be viewed as:• A control problem• An opportunity to learn

LO 4

Single- Double- and Triple-Loop Learning

• Single-loop learning - Deals with methods of correcting a situation• Doing the right things to achieve goals

• Double-loop learning - Deeper form of learning• Retailer may be achieving goals, but the goals may

reflect not the right things on which the retailer should focus

LO 4

Single- Double- and Triple-Loop Learning

• Triple-loop learning - Deals with the right business model

LO 4

Reframing

• Obtaining customer-centric view in order to reframe the retailer’s business begins with a consideration of how to create more density for the customer• Involves analyzing how to reconfigure resources of

the current retail business model specifically around changes in form, time, place, and possession

LO 4

Reframing

• Form reconfiguring - Deals with the physical structure of the retail enterprise

• Time reconfiguring - Business can be reframed in terms of the time it performs certain activities and offers service

LO 4

Reframing

• Place reconfiguring - Reframing can be undertaken in terms of geographic location

• Possession reconfiguring - Where and how a customer takes physical possession of the merchandise can also be a source of reframing

LO 4