GNVQ Business Unit 5 Jane Sanders 1 GNVQ BUSINESS Unit 5 Retailing Customer Incentives
Mar 31, 2015
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