BUILDING AND SUSTAINING

RELATIONSHIPS
VALUE AND VALUE CHAIN
• In channels of distribution , there are several parties-
manufacturers, wholesalers, retailers and customers.
• These parties are satisfied with their interactions
when they have similar beliefs about the value
provided and received.
From point of view of manufacturers, wholesalers,
retailers : value is a series of activities and processes-
a value chain- that provides a certain value for the
consumer.
It is the total of the tangible and intangible product and
customer service attributes offered to shoppers.

From customer’s point of view:

value is the perception the shopper has of a value
chain. It is the customer’s view of all the benefits from
a purchase formed by the total retail experience. Value
is based on the perceived benefits received vs the price
paid. It varies by the type of shopper. Price oriented
shoppers want low prices, service oriented shoppers
will pay more for superior customer service and status
oriented shoppers will pay a lot for prestigious stores
IMPORTANCE OF ‘VALUE CONCEPT’
• Customers must always believe that they get their
money’s worth
• A strong retail effort is required so that customers
perceive level of value provided in the manner the
firm intends to.
• Value is desired by all consumers. But it means
different to different people.
• Consumer comparison shopping for prices is easy
through ads and www. Thus, prices have moved
closer for different types of retailers
 RETAIL VALUE CHAIN
• A retail value chain represents the total bundle
of benefits offered to consumers through a
channel of distribution. It comprises of store
location and parking, retail ambience, level of
customer service, products/brands carried,
product quality, retailer’s in stock position,
shipping, prices, retailer’s image etc
• Some elements of a retail value chain are
visible to shopper’s such as display windows,
Store hours, sales personnel, point of sale equipment.
Other elements are not visible such as store location
planning, credit processing, company warehouses etc

There are 3 aspects of a value-oriented retail strategy:

1. Expected retail strategy: represents the minimum
value chain elements a given customer segment
expects from a type of retailer. Eg: store cleanliness,
convenient hours, well informed employees, timely
service, popular products in store, parking etc.
if applied poorly, they cause consumer
dissatisfaction and avoidance
2. Augmented retail strategy: includes the extra
elements in a value chain that differentiate
one retailer from another. Elements are:
exclusive brands, superior salespeople, loyalty
programs, delivery. These features
compliment expected value chain elements.
3. Potential retail strategy: comprises value
chain elements not yet perfected by a
competing firm in the retailer’s category. Eg-
24X7 store hours, product customisation, free
delivery etc
PROBLEMS TO AVOID IN PLANNING A
VALUE ORIENTED RETAIL STRATEGY
1. Planning value with just a price perspective:
value is tied to two factors-benefit and prices
2. Providing value enhancing services: that
customers do not want or will not pay extra
for.
3. Competing in the wrong value/price segment:
neighbourhood retailers generally spend time
competing in low price part of market
4. Believing augmented elements alone create
value: Retailers have to provide the basic plus
some augmented value
5. Paying lip service to customer service: having
a high turnover of salespeople, charging for
returned goods
 RETAILER RELATIONSHIPS
• Retailers seek to form and maintain long term
bonds with customers rather than act as if
each sales transaction is a new one. For
relationship retailing to work, value driven
relationships are needed with other channel
members as well as customers. In relationship
retailing, there are four factors to keep in
mind:
1. Customer base: Retailers must regularly analyse
their customer base in terms of population and
lifestyle trends, attitudes towards and reasons for
shopping, level of loyalty and the mix of new vs
loyal customers
A retailer’s desired mix of new vs loyal customers
depends on that firm’s stage in it’s life cycle, goals
and resources as well as competitor’s actions. A
mature firm relies on it’s core customers and
supplements its revenues with new shoppers. A
new firm faces the task of attracting shoppers and
building a loyal following
2. Customer service: it refers to the identifiable
but sometimes intangible activities undertaken
by a retailer along with goods and services that
it sells. It impacts on the total retail experience.
Expected customer service: is the service level
that customers want to receive from any retailer
such as basic employee courtesy
Augmented customer service: includes the
activities that enhance the shopping experience
and give the retailers a competitive advantage
3. Customer satisfaction: it occurs when the value and
customer service provided through a retailing
experience meet or exceed customer expectations. If
the expectations are not met, customer is
dissatisfied. Retailer satisfaction consists of:
a) Shopping systems satisfaction: includes availability
and types of outlets
b) Buying systems satisfaction: includes selection and
actual purchasing of the product
c) Consumer satisfaction: derived from the use of the
product
4. Loyalty programs: consumer loyalty programs
reward a retailer’s best customers, those with
whom it wants long lasting relationships. The
programs honor shopping behavior i.e greater
the purchases, greater the benefits
 DIFFERENCE IN RELATIONSHIP BUILDING BETWEEN
GOODS AND SERVICE RETAILERS

• Goods retailing focuses on sale of tangible products.

Service retailing involves transactions in which
consumers do not purchase or acquire ownership of
tangible products. There are three kinds of service
retailing:
1. Rented goods services: where consumers lease and
use goods for specified period of time. The goods are
returned when the rental period is up. Ownership is
not obtained.
2. Owned goods services: where goods owned
by consumers are repaired, improved or
maintained
3. Non goods services: where intangible
personal services are offered to consumers
who experience services rather than possess
them in return for a fee. Eg: stockbrokers,
travel agents, personal trainers etc.
Service retailing is much more dependent on
personal interactions and word of mouth
communication than good retailing.
 ETHICS IN RETAILING
Ethical challenges include:
• ethics relating to the retailer’s moral
principles and values.
• Social responsibility- involves acts benefitting
society
• Consumerism- includes protecting consumer
rights
Ethics: in dealing with customers, general public,
employees, suppliers etc retailers have a moral
obligation to act ethically. A failure to be ethical may
lead to adverse publicity, lawsuits, loss of customers.
Certain behaviours can be seen as:
• Rising prices on scarce products after a natural
calamity
• Not having adequate stock when a sale is advertised
• Charging high prices in low income areas because
consumers do not have transportation mobility to
shop out
• Defaming competitors
Social responsibility: a retailer exhibiting social
responsibility acts in the best interest of society.
Some forms of social responsibility can be having
employees participate in corporate events, disposing
off waste in a more careful way, making donations to
charitable groups etc

Consumerism: involves the activities of govt., business

and other organizations to protect people from
practices against their rights as consumers. These
actions recognize that consumers have basic rights
that should be protected.