Chapter 11

What is customer relationship management?

Customer relationship management (CRM) is a business philosophy and set of strategies,

programs and systems that focuses on identifying and building loyalty with a retailers most
valued customers. Based on the philosophy that retailers can increase their profitability by
building relationships increase their profitability by building relationships with their better
customers, the goal of CRM is to develop a base of loyal customers who patronize the retailer
frequently.
1. What is customer loyalty?
Many definitions about customer loyalty among which are (1) committed to purchasing
merchandise and services from a retailer. (2) The result of consistently positive experience
emotional, physical attribute-based satisfaction and perceived value of an experience, which
includes the product or service. (3) Other definition, customer loyalty is both an attitudinal
and behavioural tendency to favor one brand over all other, whether due to satisfaction with
the product or service, its convenience or performance, or simply familiarity and comfort
with the brand. In our understanding, customer loyalty is a combination of attitude and
behavior of consumers or buyers who stick with one brand (product or service).
3. How is customer loyalty related to customer relationship management?
Customer loyalty, the objective of customer relationship management, is more than
having customers make repeat visits to a retailer and being satisfied with their experiences.
Customer loyalty to retailer means that customers are committed to purchasing merchandise
and services from the retailer and will resist the activities of competitors attempting to attract
their patronage.
Loyal customers have an emotional connection with the retailer.Their reasons for
continuing to patronize a retailer go beyond the convenience of the of the retailers store or
the low prices and specific brands offered by retailer. They feel such goodwill toward the
retailer that they will encourage their friends and family to buy for it.
Programs that encourage repeat buying by simply offering price discounts can be easily
copied by competitors. In addition, these types of price-promotion programs encourage
customers to always look for the best deal rather than develop a relationship with one
customer, However , when a retailer develops an emotional connection with a customer , it is
difficult for a competitor to attract that customer.
Emotional connections develop when customers receive personal attention. For
example many small, independent restaurants build loyalty by functioning as neighbourhood
cafes, where waiters and waitresses recognize customer by name and know their preferences.
Dorothy Lane Market in Dayton, Ohio, for example, uses a sophisticated customer database
management system to lavish attention on its customers. Loyalty club members who spent the
most over the previous year receive a handwritten note from the CEO. When a major
roadway slowed business from customers living in a particular area, Dorothy Lane mailed out
maps to affected residents detailing a detour to help encourage customers to return.

4. Why do retailers want to treat customers differently?

Retailers need to treat customers differently because not all the customers are the same.
They can be different in terms of wants, needs and preference. Some of the customers are
more valuable than the others. Therefore, retailers need to treat them differently. Besides, a
strong business relationship is like a strong personal relationship. Treating the customers
differently also make the customers feel satisfied with their wants and this will make them are
more loyalty. Customers loyalty can make the customers committed to purchasing
merchandise and services from the retailer and will resist the activities of competitors
attempting to attract their patronage.
5. Can sales be increased by having good relationship with certain customers only?
Yes. Having good customer relationships even though with certain customers can drive
sales, sustainability and growth, especially in today's business. Companies that build and
maintain good customer relationships help create value for customers and achieve long-term
customer loyalty. The stronger the relationship, the longer the customer will continue to do
business with the company. To retain customer, four approaches can be used which are
frequent shopper programs, special customer service, personalization and community. These
strategies will yield improvements in sales by enhancing the relationship with the company's
most valuable customers.

Chapter 12
1. How are merchandise management processes different for staple and fashion merchandise?
Staple merchandise consists of the items that are regularly purchased, displayed and sold
by the retailer meanwhile fashion merchandise consist of the items those usually have
unpredictable demand and limited sales record. The merchandise management processes are
different for staple and fashion merchandise because for staple merchandise it has easier
forecasting demand compare to the fashion merchandise. Staple merchandise items are daily
items that not influenced by season and others factor compare to fashion merchandise, the
items have cyclical sales and become outdated very easily with the changes in the customers
taste and preference, liking and disliking. This makes, staple merchandise management
processes are more easy and straightforward. It is easier to administer the staple merchandise
because can predict the demand easily. Meanwhile in the fashion merchandise processes, it is
more difficult. This is because the item has unpredictable and unstable demand that makes
relatively difficult to forecast sales.
2. How does a buyer evaluate vendors?
Vendors or called by the name of supplier in two categories ie evaluate the process-based
evaluations and performance-based evaluations.
The process-based evaluation is an assessment of the suppliers production or service
process. Typically, the buyer will conduct an audit at the supplier site to assess the level of
capability in the supplier systems.
The performance-based evaluations are based on objective measure of performance. Have
three general types of supplier evaluation system in use today are;
The categorical method involves categorizing each supplier performance in
specific areas defined by list of relevant performance variables. The buyer
develops a list of performance factors for each supplier and keeps track of each
area by assigning a grade in simple terms, such as good, neutral and
unsatisfactory. At frequent meeting the buying organization and the supplier, the
buyer will then inform the supplier of its performance.
The cost-ratio method evaluates supplier performance by using standard cost
analysis. The total cost of each purchase is calculated as its selling price plus the
buyers internal operating costs associated with the quality, delivery, and service
elements of the purchase.
The linear averaging method is probably the most commonly used evaluation
method. Specific quantitative performance factors are used to evaluate supplier
performance. The most commonly used factors in goods purchases are quality,
service (delivery) and price, although any one of the factors named may be given
more weight than the others.
In general, the guiding factors in determining which system is best are ease of
implementation and overall reliability of the system. It must be pointed out the interpretation
of the results from any of these three is a matter of the buyers judgment.

3. Describe a merchandise management process for an ordinary retail store of your choice.

Forecast Category Sales

Develop an assortment plan

Determine appropriate
inventory level and product
availability

Develop a plan for managing

inventory

Allocate merchandise for stores

Buy merchandise

Monitor and evaluate

performance and make
adjustments
Diagram above shows the merchandise management process for Giant. First, customers
forecast category sales, develop an assortment plan for merchandise in the category, and
determine the amount of inventory needed to support the forecasted sales and assortment plan
in Giant. Secondly, customers develop a plan outlining the sales expected for each month, the
inventory needed to support the sales, and the money that can be spent on replenishing sold
merchandise and buying new merchandise. Along with the plan, the customers or planners
decide what types and how much merchandise should be allocated to each store. Third,
having developed a plan, the customer negotiates with vendors and buys the merchandise.
Customers continually monitor the sales of merchandise in the category and make
adjustments.

4. Increasing inventory turnover is an important goal for a retail manager. What are the
consequences of turnover that is too slow? What about if it too fast?
Inventory turnover and the sales-to-stock ratio help assess the buyers performance in
managing this asset. Retailers want to achieve a high inventory turnover can actually decrease
GMROI. Thus, buyers need to consider the trade-offs associated with managing their
inventory turnover.
Increasing inventory turnover can increase sales volume, improve salesperson morale,
reduce the risk obsolescence and markdowns and provide more resources to take advantage
of new buying opportunities. Higher inventory turnover increases sales because new
merchandise is continually available to customers and new merchandise sells better and faster
than old merchandise. New merchandise attracts customers to visit the store more frequently
because they see new things. When inventory turnover is low, the merchandise begins to look
worn out. Increasing the amount of new merchandise also improves sales associate morale.
Salespeople are excited about and more motivated to sell the new merchandise, and thus,
sales increase, increasing inventory turnover even further.
The value of fashion and other perishable merchandise starts declining as soon as it is
placed on display. When inventory is selling quickly, merchandise isnt in the store long
enough to become obsolete. As a result, sale price discounts are reduced and gross margins
increase.
Finally, when inventory turnover increase, more money can previously invested in
inventory is available to buy new merchandise. Having money available to buy, merchandise
late in a fashion season can open up profit opportunities.

Chapter 13
1. What options in branding are available for general retailers?
There are three options in branding are available for general retailers such as national
brands, private-label brands and licensed brands.
National brands also known as manufacturer brands are products designed, produced and
marketed by a vendor and sold to many different retailers. The vendor is responsible for
developing the merchandise, producing it with consistent quality, and undertaking a
marketing program to establish an appealing brand images.
Private-label brands also called as store brands, house brands, or own brands, are
products developed and managed by retailers. Retailers typically develop the specifications
for their private-label products and then contract with manufacturers, often located in
countries with developing economies, to produce the products. But the retailers, not
manufacturers, are responsible for promoting the brand. Private-label merchandise is
available for sale only from the retailer that develops the brands.
Licensed brands are brands for which the owner of a well-known brand name (licensor)
enters into a contract with a licensee to develop, produce, and sell the branded merchandise.
Licensees may be either retailers who license the name and then contract with manufacturers
to produce the licensed products or a third party that has the merchandise produced and then
sells it to the retailers.
2. How do the retailers prepare for and conduct negotiations with their vendors?
The retailers prepare for and conduct negotiations with their vendors by considering the
history of what has occurred between the retailer and vendor in the past. In this way, a vendor
may be more likely to take care of old problems and accept new demands if a long-term,
profitable relationship already exist. Retailers need to assess where things are today. For
example, if the merchandise doesnt sell, a good vendor should arrange to share the risk of
loss. Retailers need to set goals in six areas which are additional mark-up opportunities, terms
of purchase, transportation, delivery and exclusivity, communications and advertising
allowances. Besides, retailers have to know the vendors goals and constraints by providing a
continuous relationship, testing new items, facilitating good communications and providing a
showcase to feature their merchandise. Retailers should plan to have at least as many
negotiators as the vendor. Lastly, retailers should choose a good place to negotiate and be
aware of real deadlines.
3. Why are retailers building strategic relationships with their vendors?
A retail business owner has different relationships to monitor and maintain. Customers
are the primary relationship as they create revenue, but the relationship with a vendor can be
a valuable business asset. Work hard to pay your vendor invoices early or on time and
maintain a positive relationship, with many points of contact within each vendor, to maximize
your vendor relationships.

Payment Terms
A retail business can be difficult to run on cash terms. If all of your vendors
require payment in full at the time of delivery, then you will need to find
alternative sources of funding to keep your business going. A strong relationship
with your vendors can result in credit terms that will allow you to purchase
product now and pay for it in 30 days, or whatever your credit terms may be. This
allows you to get product on your shelves without having to borrow money from a
bank or other lender and pay interest.

New Product
A good vendor relationship can get you the most widely advertised new products
at discount prices or before other retailers can sell them. For example, if you are a
book retailer with good vendor relationships, you can ask your vendors to get your
business involved in a well-publicized marketing campaign for a popular book.
Your location would develop a reputation of being the retailer that sells all of the
best new products before any other retailer, and that gives you a significant
advantage over the competition.

Product Delivery
Customer demand drives retail sales, and if you are not able to keep product on
your shelves then you will have a difficult time maintaining customer traffic.
When you have a good relationship with your vendors, you can request expedited
shipping on popular products. You can have your vendors confirm your delivery
dates and know exactly when you will have product on your shelves, and be able
to get product in a hurry when your supply starts to run low.

Returns
Product rotation and customer returns can cost your retail business money. Restocking fees for products you return to the manufacturer can add up, and shipping
charges back and forth for returned product can also get expensive. Restocking
fees are charges applied by the vendor to returned product that is not damaged.
When you maintain a strong relationship with your vendors, you can negotiate a
restocking agreement that is more favorable for your business and you can ask
your vendor to help absorb some of the shipping costs involved in returned
product.