Avoiding Retail Strategies Based on Inadequate Information

Retailers may rely on nonsystematic or incomplete ways of gathering information due to time and costs, as well as a lack of research skills. But the results can be devastating. For example:

  • Using intuition. A movie theater charges $10 for tickets at all times. The manager feels that because all patrons are seeing the same movie, prices should be the same for a Monday mati­nee as a Saturday evening. Yet, by looking at data stored in the theater’s information system, she would learn attendance is much lower on Mondays. Because people prefer Saturday evening performances, they will pay $10 to see a movie then. Weekday customers have to be lured, and a lower price is a way to do so.
  • Continuing what was done before. A toy store orders conservatively for the holiday season because prior year sales were weak. The store sells out 2 weeks before the peak of the season, and more items cannot be received in time for the holiday. The owner assumed that last year’s poor sales would occur again. Yet, a consumer survey would reveal a sense of optimism and an increased desire to give gifts.
  • Copying a successful competitor’s strategy. A local bookstore decides to cut the prices of best-sellers to match the prices of com. The local store then loses a lot of money and goes out of business because its costs are too high to match the chain. The firm lost sight of its natural strengths (personal service, a customer-friendly atmosphere, and long-time community ties).
  • Devising a strategy after speaking to a few individuals about their perceptions. A family-run gift store decides to have a family meeting to determine the product assortment for the next year. Each family member gives an opinion, and an overall “shopping list” is then compiled. Sometimes, the selections are right on target; other times, they result in a lot of excess inventory. The family would do better by also attending trade shows and reading industry publications.
  • Automatically assuming that a successful business can easily expand. A Web retailer does well with small appliances and portable TVs. It has a good reputation and wants to add other product lines to capitalize on customer goodwill. However, adding custom furniture yields poor results. The firm did not first conduct research, which would have indicated that people buy standard, branded merchandise via the Web but are reluctant to buy custom furniture that way.
  • Not having a good read on consumer perceptions. A florist cuts the price of 2-day-old flow­ers from $17 to $5 a dozen because they have a shorter life expectancy, but they don’t sell. The florist assumes bargain-hunting consumers will want the flowers as gifts or for floral arrangements. What the florist does not realize (due to a lack of research) is that people perceive the older flowers to be of poor quality. The extremely low price actually turns off customers!

What conclusion should we draw from these examples? Inadequate information can cause a firm to devise and enact a bad strategy. These situations can be avoided by using a well-conceived retail information system and properly executing marketing research.

Source: Barry Berman, Joel R Evans, Patrali Chatterjee (2017), Retail Management: A Strategic Approach, Pearson; 13th edition.

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