978-1337116800 Chapter 14 Solution Manual Part 1

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Chapter 4: Retailing

Chapter 14

Retailing

This chapter begins with the learning outcome summaries followed by a set of lesson plans for

instructors to use to deliver the content.

• Lecture (for large sections) on page 4

• Group Work (for smaller sections) on page 6

Review and Assignments begin on page 6

 Review questions

 Application questions

 Application exercise

 Case assignment

Great Ideas for Teaching Marketing from faculty around the country begin on page 17

Chapter 4: Retailing

Learning Outcomes

14-1 Explain the importance of the retailer within the channel and the U.S. economy

Retailing represents all the activities directly related to the sale of goods and services to the

14-2 List and understand the different types of retailers

Retail establishments can be classified according to the type of ownership, level of service,

14-3 Explain why nonstore retailing is on the rise and list the advantages of its different

forms

Nonstore retailing enables customers to shop without visiting a physical store location. It adds a

14-4 Discuss the different retail operations models and understand why they vary in

strategy and format

Retail formats are co-aligned with unique operating models that guide the decisions made by

Chapter 4: Retailing

14-5 Explain how retail marketing strategies are developed and executed

Retail managers develop marketing strategies based on the goals established by stakeholders and

14-6 Discuss how services retailing differs from goods retailing

The fastest-growing part of our economy is the service sector. Although distribution in the

14-7 Understand how retailers address product/service failures and discuss the

opportunities that service failures provide

No retailer can be everything to every customer, and by making strategic decisions related to

14-8 Summarize current trends related to customer data, analytics, and technology

Retailers are constantly innovating. They are always looking for new products and services (or

Key Terms

Atmosphere

Drugstore

Retail channel

omnification

Automatic vending

Factory outlet

Retailer

Back stock

Floor stock

Retailing mix

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Beacon

Franchise

Retailing

Big data analytics

Franchisee

Self-service

technologies

(SST)

Brand cannibalization

Franchisor

Shop-at-home

television

network

Category killer

Full-line discount store

Shopper

analytics

Chain store

Gross margin

Shopper

marketing

Click-and-collect

Independent retailer

Specialty

discount store

Convenience store

Layout

Specialty store

Department store

Microtargeting

Supercenter

Destination store

Nonstore retailing

Supermarket

Direct mail

Off-price retailer

Telemarketing

Direct marketing (DM)

Online retailing (e-tailing)

Used goods

retailer

Direct retailing

Restaurant

Warehouse club

Discount store

Lesson Plan for Lecture

Brief Outline and Suggested PowerPoint Slides

Learning Outcomes and Topics

PowerPoint Slides

LO1 Explain the importance of the retailer within

the channel and the U.S. economy

14-1 The Importance of Retailing

1. Retailing

2. Learning Outcomes

3. Learning Outcomes (continued)

4. Importance of Retailing

5. Retailing

LO2 List and understand the different types of

retailers

14-2 Types of Retailers and Retail Operations

6. Types of Retailers and Retail

Operations

7. Classifications of Retail Operations

8. Classification of Retail Operations

Based on Ownership Arrangement

9. Classification of Retail Operations

Based on Level of Service and

Chapter 4: Retailing

Learning Outcomes and Topics

PowerPoint Slides

Product Assortment

10. Exhibit 14.1: Types of Stores and

Their Characteristics

11. Types of In-Store Retailers

Operations

12. Categories of Discount Stores

LO3 Explain why nonstore retailing is on the rise

and list the advantages of its different forms

14-3 The Rise of Nonstore Retailing

13. Rise of Nonstore Retailing

14. Nonstore Retailing

LO4 Discuss the different retail operations

models and understand why they vary in

strategy and format

14-4 Retail Operations Models

15. Retail Operations Models

16. Retail Operating Models

LO5 Explain how retail marketing strategies are

developed and executed

14-5 Executing a Retail Marketing Strategy

17. Executing a Retail Marketing

Strategy

18. Retail Marketing Strategy

19. Defining a Target Market

20. Exhibit 14.2: The Retailing Mix

21. Retail Promotion Strategy

22. Place

23. Presentation of a Retail Store

24. Personnel

LO6 Discuss how services retailing differs from

goods retailing

14-6 Retailing Decisions for Services

25. Retailing Decisions for Services

26. Retailing Decisions for Services

LO7 Understand how retailers address

product/service failures and discuss the

opportunities that service failures provide

14-7 Addressing Retail Product/Service

Failures

27. Addressing Retail Product/Service

Failures

28. Service Recovery

Chapter 4: Retailing

Learning Outcomes and Topics

PowerPoint Slides

LO8 Summarize current trends related to

customer data, analytics, and technology

14-8 Retailer and Retail Customer Trends and

Advancements

29. Retailer and Retail Customer Trends

and Advancements

30. Emerging Technologies Used by

Retailers

31. Shopper Marketing and Shopper

Analytics

32. Developments in Retail Management

33. Key Terms

34. Key Terms

35. Summary

36. Summary

Suggested Homework

• The end of this chapter contains assignments for the JCPenney case.

• This chapter’s online study tools include flashcards, visual summaries, practice quizzes,

and other resources that can be assigned or used as the basis for longer investigations into

marketing.

Lesson Plan for Group Work

Application question 1 lends itself well to group work. For this activity, divide the class into

small groups of four or five people. Students from each group should read the question and then

use their textbooks, or any work that was completed previously, to perform the exercise. Then

each group should discuss or present its work to the class.

Class Activity—Retail Location

Objective: This exercise should aid students in understanding the multitude of factors that must

be considered when selecting a site for a store.

Tell the class that the object of this exercise is to find the optimal location for a new retail

establishment. Select a store type that appeals to college students—a bar, bike shop, pizzeria, etc.

Chapter 4: Retailing

Divide the class into “location consultant groups” with you, the instructor, being the client. If the

class is extremely large, you may want to have two or three types of retail stores. Each store

should have three to four groups looking for a location. The students need to find an actual

available location to recommend. The report to the client (instructor) should include description,

square footage, leasing terms or price, and a justification for the selection of the site. The group

offering the site that is selected by the client receives bonus points.

Review and Assignments for Chapter 14

Review Questions

1. Discuss the possible marketing implications of the recent trend toward supercenters,

which combine a supermarket and a full-line discount store.

Supercenters have been created to meet the needs of today’s customers for convenience,

variety, and service. Customers can truly have one-stop shopping for both food and

2. Explain the function of warehouse clubs. Why are they classified as both wholesalers

and retailers?

Although students’ answers will vary, they should address some of these points.

3. What advantages does franchising provide to franchisers as well as franchisees?

Benefits for franchisees include the use of a known name, product, and/or business

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Benefits for franchisers include the receipt of the franchise fee and royalty fees, and growth

into new areas.

Application Questions

1. In order to fully appreciate the role retailing plays in the U.S. economy, it may be

helpful to review a selection of press articles related to the retailing industry. Search

for articles pertaining to retailing. Read a selection of articles, and report your

findings to the class.

Student answers will vary depending on the articles read. You may wish to have students

2. Form a team with three classmates to identify the different retail stores in your city

where pet supplies are sold. Team members should split-up and visit all the different

retailing outlets for pet supplies. Prepare a report describing the differences in

brands and products sold at each of the retailing formats and the differences in store

characteristics and service levels. For example, look at brands that are sold via mass

merchandisers versus independent specialty stores or other venues. Suggest why

different products and brands are distributed through different types of stores.

Answers will vary widely based on the variety of locations visited by students.

3. Go to the Gift Center at online wine retailer wine.com’s website

http://www.wine.com/. How does this site help shoppers select gifts?

Student answers may differ depending on their experience with the product category.

4. How much does the most powerful computer with the fastest modem, most memory,

largest monitor, biggest hard drive, and all the available peripherals cost at

http://www.dell.com? Then visit a store like Best Buy or Circuit City and price a

comparable computer. How can you explain any price differences between the two

retail operations? Explain any differences in features that you encountered. What

conclusions can you draw from your research?

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elements. Students may also mention interactivity as an element that creates atmosphere

online. For example, blogging areas, message boards, live interaction, ability to post

content, and so forth can all contribute to an online store’s atmosphere.

Application Exercise

After reading the chapter, you can see that differences in retailing are the result of strategy. To

better understand the relationship between strategic retailing factors and consumer perceptions,

you can conduct a simple observation exercise. First, pick a product to shop for, and then

identify two stores where you have never shopped as places to look for your product. The two

stores must be different types of retailers. For example, you can shop for a new HDTV at Best

Buy (category leader) and at local electronics stores (specialty retailers). Once you have

identified what you are looking for and where you’re going to look, visit each store and record

your observations of specific strategic retailing factors.

Purpose: To have students think intentionally about differences in retailing establishments by

comparing two stores at which they have never shopped.

Setting It Up: Because this involves excursions, you may wish to set this up as a paired

exercise. Alternatively, you can pick the product for which the students will shop and direct

teams to research the item, each at a different type of retailer. Teams can share results, and the

class can see the comparisons and draw conclusions as a whole.

Activities

1. Go through each store and make careful observations on the following:

• Location: Where is each store? How congested is the area of town where each store

is located? What influence does the neighborhood have on your impression of the

store? Would you travel to this store under normal circumstances? Write a detailed

paragraph on the location of each store.

• Exterior atmosphere: How convenient is parking? Is parking adequate? How are

other issues concerning parking (cleanliness and size of the lot, size of spaces, well-

lit, etc.)? What kinds of stores are around the store you are visiting? Do you think

being located next to them increases traffic at your store? Are direct competitors

nearby? Is the building modern or historic? Is it attractive, clean, and appealing? Is

the entrance inviting to shoppers?

• Interior atmosphere: Compare the following attributes at each store: aisle width;

lighting; number of customers; noise (background music, loudspeakers, etc.); store

layout; signage; accessibility of the cashier; number of products available (depth and

width of assortment); ability to inspect the product before purchase; quality of the

fixtures (shelves, lights, etc.); availability of salespeople and their knowledge about

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the product; willingness of salespeople to help.

• Product: Is your product available? If not, is there a satisfactory substitute? What is

your perception of the quality of goods offered? Why do you think as you do?

• Price: What is the price of the product/brand at this store? Is the price prominently

displayed? How do the prices at the two stores compare? How does the price

compare to your expectations?

2. From which of these two stores would you actually purchase the item? Why, specifically?

List the factors that played a role in your decision. Which factor is most important to you?

If you would not purchase the item at either store, why not?

3. What are the three most important differences you observed between the stores?

4. Using the results of your research, write a short paper that outlines your observations.

Conclude your paper with your answers to questions 2 and 3.

This exercise was inspired by the following Great Idea in Teaching Marketing:

Amy R. Hubbert, University of Nebraska at Omaha

Discovery of Strategic Retailing Factors

The purpose of this assignment is to give students in the Principles of Marketing course an

opportunity discover for themselves the influence of strategic retailing factors (e.g., location,

atmospherics, etc.) on consumer perceptions. The project involves individual, detailed

observation at two very different types of retail outlets and a four- to five-page summary of the

findings. An in-class activity enables groups of students to compare and contrast their findings

and reinforces the understanding of strategic retailing factors.

Each student selects an item categorized as a “shopping product” for which to shop. Students

describe the product attributes desired as specifically as possible. If it is a branded product, the

brand being sought is named. The intent of this aspect of the assignment is to ensure students

start out with a clear conception of the specific product for which they are shopping. Students

then select and compare two retailers who offer this product.

Two issues are critical in the selection of specific stores. First, retailing factors will be most

salient if two very different stores are compared. Therefore, each student chooses two types of

retailers (specialty store, department store, discount store, or category killer) and visits one store

of each type. Second, it is imperative that students choose stores where they have never shopped.

Retailing factors will be most apparent, and observed most objectively, in unfamiliar stores.

Chapter 4: Retailing

Each student visits the two stores he or she selects and records observations of specific strategic

retailing factors at each store. The following guidelines encourage attention to detail and provide

an outline for the discussion:

A. Location Factors

What is the type of location (traditional business district, community shopping center, etc.)? How

congested is this part of town in general? What influence does the neighborhood have on your

impression of the store? Would you travel to this store under normal circumstances to shop for

your product?

B. Exterior Atmospherics

a. How convenient is it to get into the parking lot from the street? For example, do you

have to drive by and make a U-tum or can you turn in at a stoplight?

b. How adequate is the parking? What other parking issues do you notice? For example, is

there a parking lot? Are the slots wide or too narrow? Is it a short or long walk to the

entrance? Are there are other cars in the lot (if not, how does that make you feel)? How

adequate is visibility? Describe the pedestrian traffic in the parking lot and to the store.

c. Do you think nearby stores increase the number of customers to the store you are

visiting, or is it more likely to be the other way around? Are there direct competitors

nearby?

d. Does the building have a modern appearance? Does it have an attractive appearance? Is

the entrance inviting to potential shoppers? Explain.

C. Interior Atmospherics

a. Aesthetics: Discuss aisle width in general and in comparison to the other store. Note the

lighting. Is it too bright or too dim? Is it used to emphasize the merchandise? How

crowded does the store seem? Too deserted? Too crowded? Describe any odors you

detect. What is the noise level? Is there background music? If yes, note the volume, tape

quality, and appropriateness of the music.

b. Layout: How prominent is the department in which your product is located? How long

did it take you to find the department/product? Are more/better signs needed? How large

is this department compared to others in the store? How accessible is a cashier’s station?

Is someone immediately available to take payment? If not, how long would you have to

wait?

c. Display: How deep and wide are the product lines compared to others in the store, the

other store, and your own expectations? What sources of information/promotion about

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your product are available? Are you able to inspect the very unit you would purchase, or

is it sealed in its package, located in a warehouse, etc.? What are your perceptions of the

quality of the fixtures, shelving, etc.?

d. Personnel: Are salespeople available to help? If yes, by what clues are the sales staffs

recognizable? Is a salesperson willing and/or able to help you right away? Is the

salesperson knowledgeable about the products and services offered?

D. Product

Is your product available at the store? Is there a satisfactory substitute? What are your

perceptions of the quality level of the goods offered? Specifically identify the factors on which

you base these perceptions.

E. Price

What is the price of the product/brand you would purchase from this store? Is the price

prominently displayed? How does the price compare to the other store’s price? How does the

price compare to your expectations?

Students conclude their papers with reflections on the following questions:

a. From which of these two stores would you actually purchase the item? Why, specifically?

List the factors that play a role in your decision. Which factor is most important to you? If

you would not purchase the item at either store, why not?

b. What are the three most important differences you observed between the stores?

On the due date, an in-class activity offers the opportunity for students to share and compare

their findings. Small groups of four to five students are formed. Each group member names their

product and identifies the types of retailers and specific stores visited. Groups identify and

discuss key differences among types of retailers. Based on their discussion, each group identifies

the three most important benefits offered by each type of retailer and lists these on the

chalkboard. The activity concludes with a class-wide discussion of strategic retailing factors and

how these relate to retail positioning and customer satisfaction.

Case Assignment: Kroger Co.

In 1883, Barney Kroger used his life savings (a total of $372) to open a grocery store on Pearl

Street in downtown Cincinnati, Ohio. He ran his retail business with a simple principle: Be

particular. Never sell anything you would not want yourself. Over 130 years later, Kroger is one

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of the world’s largest retailers with more than 2,700 stores falling under two dozen company

banners.

Over its century of growth, mergers have been key to Kroger’s continued success. In 1983,

Kroger merged with Dillion Companies Inc. in Kansas to become a coast-to-coast operator of

food, drug, and convenience stories. In 1999, the company merged with Fred Meyer, Inc. to

create a supermarket chain with the widest variety of formats and the broadest geographic

coverage in the food retailing industry.

In 2014, Kroger completed its merger with Harris Teeter, a regional chain in the Mid-

Atlantic region and the District of Columbia. In addition to acquiring more than 200 stores,

Kroger gained the prototype for Harris Teeter’s online grocery service.

Kroger took this prototype and ran with it, and in late 2014, the company began testing

ClickList, their option for online grocery shopping. The concept took off, with working moms

calling it a “game changer” due to the fast service.

Kroger ClickList customers shop online for their groceries, choosing from a catalog

featuring 40,000+ items, including fresh meat and produce. After confirming the order, shoppers

reserve a pickup date and time. At the designated time, they pick up their order by parking in one

of the designated ClickList spots. Store attendants personally select the groceries prior to the

designated time and at pickup, they load the groceries into the customer’s vehicle. Customers can

pay without even turning off their engine. The service costs $4.95 for regular orders and $7.99

for expedited ones.

ClickList transactions must be paid for with a credit or debit card. Government benefits

(including WIC and SNAP) cannot be accepted. Cash, checks, and gift cards also cannot be

accepted for ClickList payments, but patrons can use their KrogerPlus Card to receive

purchasing rewards.

By 2016, Kroger had expanded ClickList services to Nashville, Tennessee; Atlanta,

Georgia; Louisville, Kentucky; Cincinnati, Ohio; Murfreesboro, Tennessee; central Virginia; and

central Indiana locations. Kroger had to make physical changes to stores offering ClickList, such

as adding refrigerators and freezers, designating a pickup area in the parking lot, and adding

exterior doors to allow attendants the most direct access to pickup areas. They also had to add

employees to fill the orders and manage grocery pickup and payment.

Chapter 4: Retailing

While Kroger may have been the first to enter the click-and-collect grocery business, they

are unlikely to be the last. Walmart has been testing its own click-and-collect service for

groceries. And Amazon may be taking steps to enter the into the drive-up grocery game. (The

grocery market is worth $800 billion.)

Amazon already offers AmazonFresh, home delivery of more than 500,000 items, including

fresh groceries for same-day or next-day delivery. AmazonFresh is only available in Seattle,

areas of northern and southern California, New York City, Philadelphia, Baltimore, and

Stamford, Connecticut. AmazonFresh costs $299 for an annual membership. AmazonPrimeNow

is also expanding into new markets with two-hour home delivery of select products ordered from

Amazon.com.

Amazon has made no official statement about their future plans in the grocery business.

Only time will tell how successful Kroger’s ClickList will actually become and what competition

it will face in the future.

Sources: “ClickList,” Kroger, accessed October 20, 2016,

https://www.kroger.com/onlineshopping/signin?redirectUrl=https%3A%2F%2Fwww.kroger.co

m%2Fstorecatalog%2Fservlet%2FOnlineShoppingStoreSetup; H. Peterson, “Kroger has a game–

changing new grocery service, and moms are freaking out about it,” Business Insider, February

17, 2016, accessed October 20, 2016, http://www.businessinsider.com/moms-are-going-crazy-

for-krogers-new-clicklist-service-2016-2; “History of Kroger,” Kroger, accessed October 20,

2016, http://www.thekrogerco.com/about-kroger/history-of-kroger; “Will Amazon mimic

Kroger’s ClickList?,” Cincinnati.com, August 26, 2016, accessed October 20, 2016,

http://www.cincinnati.com/story/money/2016/08/25/amazon-may-planning-click-and-collect-

grocery/89366546/.

TRUE/FALSE

1. Kroger Co. is one of the world’s largest grocery retailers.

2. Kroger locations are franchises.

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3. Kroger locations are considered convenience stores.

4. Kroger’s ClickList is an example of nonstore retailing.

5. Picking and packing groceries is easier for Kroger employees than customers because they

have access to the floor stock and the back stock.

MULTIPLE CHOICE

1. Kroger Co. is what type of retailer?

a. department store

b. specialty store

c. supermarket

d. warehouse club

2. Which of the following is NOT one of the Ps of the retailing mix?

a. presentation

b. performance

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c. personnel

d. price

3. By adding the ClickList service, Kroger made adjustments to all of the following elements of

their retailing mix EXCEPT:

a. personnel

b. product

c. presentation

d. place

4. Customers are commenting that the most important improvement to Kroger’s customer service

by the addition of ClickList is the:

a. minimization of wait times.

b. management of service capacity.

c. improvement to service delivery.

d. establishment of channel-wide network coherence.

5. Kroger can use __________ gathered from ClickList orders to determine which products they

should keep more or less of in stock.

a. beacons

b. shopper marketing

c. click-and-collect

d. shopper analytics

Great Ideas for Teaching Chapter 14

James S. Cleveland, Sage College of Albany

Discussion Board Topics to Encourage Participation

Chapter 4: Retailing

Discussion board questions provided to students to encourage them to engage in thinking and

writing about the content of the Principles of Marketing course usually take the form of a

provocative statement to which students are asked to respond. An example of this would be “All

PR is good PR.”

Discussion topics such as this one are abstract and often require that the instructor provide an

initial reply to show students what is expected of them in their own replies. For students with

limited work experience, this approach may be quite appropriate. For adult students with

extensive experience as employees and consumers, however, the abstract nature of such topics

can be frustrating.

Below are a series of discussion board questions to use with experienced, adult students. These

questions are designed to encourage them to use their experiences as employees and consumers

as doorways to better understand the course material, and to make their own responses more

interesting to themselves and to the other students in the class who will read and comment on

them.

Each question has three parts.

1. First, there is a sentence or two from the students’ textbook introducing the topic. By using

the text author’s own words, students are able to locate relevant material in the text easily,

the text content is reinforced, and confusion resulting from the use of variant terms or

expressions is minimized.

2. Second, there is a reference to text pages the students should review before proceeding.

Since the goal of the exercise is for students to apply the course content to their own

experiences, reviewing the content first is important.

3. Third, there is a request for the students to think about or remember some specific situation

in their experiences to which they can apply the text material, and a question or questions

for them to address in their replies.

Here are additional such discussion board questions developed for Chapter 14 of MKTG11. Each

is written to fit the same text cited above but could easily be rewritten and revised to fit another

text.

Series A

1. Organizations have three options for distribution intensity: intensive distribution, selective

distribution, or exclusive distribution.

2. Review the information about levels of distribution intensity from section 14-2 in your

text.

3. Then select a product you recently purchased. At what level of distribution intensity is this

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product distributed? Why do you think this might be the case? Explain your answer.

Series B

1. Because consumers demand convenience, nonstore retailing is currently growing faster

than in-store retailing.

2. Review the information about nonstore retailing from section 14-5 in your text.

3. Then consider five recent purchases. Have any of them been through nonstore retailing? If

so, list the type of nonstore retailing that was used, and explain why you chose that method

over traditional stores. If not, classify the type of stores you purchased from and why you

chose those over nonstore retailing options.

David M. Blanchette, Rhode Island College

Franchise Expo

This exercise has several purposes. Directly, students have the opportunity to internalize and

apply concepts related to obtaining and operating a retail franchise. Secondarily, students can

practice their negotiation and management skills. Ideally the exercise is done in groups of two to

four, but it can be easily done with individuals as well. The time devoted to the exercise is very

flexible, and it can be done in as little as one hour or as long as one semester.

After presenting information to the class about franchising, students are separated into groups.

Some groups are “franchisors,” and some are potential “franchisees.” The premise is that there

will be a franchise expo in which franchisors sell franchises to prospective franchisees.

(Normally, the number of potential franchisees will exceed that of franchisors to encourage

competition and negotiation, but this is up to the instructor.)

Franchisors initially need to determine the franchise they have for sale. A common restriction

here is that the franchise cost must be relatively low, as the franchisee groups are recent college

graduates and of relatively modest means. Franchisors can invent franchises or sell existing

franchises (if preferred, the instructor may assign or give available franchises for sale).

Depending on the time devoted, franchisors can research these franchises to learn about their

characteristics, or simply make up characteristics that would be logical for the franchise.

Specifically, franchisors need to determine the offer to potential franchisees as well as the

selection criteria they will use to determine which franchisee offers to accept. Time permitting,

franchisors may develop (or have the option of developing) an offering circular, earnings

representations, applications, etc., consistent with the Franchise Rule. Their task, then, is to

prepare materials and standards to be used to attract and retain desirable franchisees.