GNVQ Business Unit 5Jane Sanders1 GNVQ BUSINESS Unit 5 Retailing Customer Incentives.

GNVQ Business Unit 5Jane Sanders 1

GNVQ BUSINESS

Unit 5Retailing

Customer Incentives

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Introduction

Surveys have been carried out to find out what customers want from particular outlets

Retail outlets use a variety of incentives and sales promotion methods to increase sales

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Customer Incentives

• Pricing strategies

• Discounts

• Loyalty schemes

• Sale items

• Multi-packaging

• Free offers

• Credit terms

• Delivery terms

• After-sales service

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Pricing strategies

Cutting prices on selected goods – strategy used by major supermarkets

Tesco – Value Campaign Morrisons – Price mission plus Used for goods classed as ‘price

sensitive’ ‘Loss leaders’ to attract customers in

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Other pricing strategies

Using ‘odd’ pricing e.g. ₤9.99 and not ₤10.00 to denote ‘good value’

Operating promotional zones e.g. baskets of marked down products to attract customers – often situated near the door

Sales and ‘marking down’ to get rid of end of season goods

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More common strategies

Offering a money-back guarantee if same goods can be found cheaper locally within a time period

Promoting new products at a lower introductory price or free trial size – aim to attract customers to buy a new line or to a different type of product – once established prices are raised

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And finally …….

Differential pricing – Tesco value goods, Tesco ordinary goods and Tesco Finest goods!

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Discounts

Prices are fixed in most retail outlets Often available on expensive items, e.g.

cars, computers Particularly for cash payment Usually the customer has to request it

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Discounts cont./..

Usually offered when a customer spends a large amount on several items

Some retailers may offer to throw in extra items rather than give a discount e.g. leads or earphones

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Loyalty Schemes

Retailers aim is to reward regular shoppers

Although monetary benefit to customer is small

Companies benefit from the amount of data they have about their ‘regular’ customers

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Retailer benefits

By knowing the buying habits of its customers

By creating sophisticated databases to allow them to ‘target market’ particular customers, known as:– Precision retailing– Market basket analysis

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Sale Items

Non-food retail outlets traditionally hold seasonal sales in January and July to clear out their stock ready for the new season.

Generates more business at the quieter times – after Christmas, during summer holiday season

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Other reasons for ‘sales’

• to get rid of surplus stock

• to dispose of damaged or shop-soiled items

• to promote one particular item for a limited period

• to increase sales at other quiet times of the year

• as an incentive to regular customers

• to sell off stock if relocating or closing down

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Trade Descriptions Act 1987

Check what the Act states

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Multi-packaging

• Classic example would be a computer which is often sold with free software and other peripherals to make it more attractive

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More Multi-packaging

‘buy two, get a third free’ free linked products, e.g. free A4 lined

paper with lever arch file reduced price offers on linked goods multi-packs

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Free offers

Promotions which offer items completely free– Usually you have to collect tokens,

vouchers or receipts– May have to purchase several other items

first

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Credit terms

Offered to encourage customers to purchase expensive goods

Free credit – 0% APR, usually for a set period of time

Credit or payment ‘holiday’ – ‘buy today, pay nothing for 6 months’

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Delivery terms

Larger outlets selling expensive items usually offer a free delivery

Stores selling flat-packed, cheaper items usually make a delivery charge

Some retail outlets like Next offer mail order ‘Direct’ service for a small charge

Stores need to be flexible about delivery

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After-sales service

Particularly important for large expensive items like washing machines or cars

Offer a maintenance service Offer a service for faulty good

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Reference

Nuttall, Chris J. Business for Intermediate GNVQ (2nd Edition) 2000, Harper Collins Plublishers Ltd