1. Sample Practice Questions Selected from the Dunn & Lusch Text
Important Note: the following guidelines and exercises are provided for your reference as part of your
preparations for the coming examinations.
You are to take note that the listing of the questions and short answers below are NOT meant to
indicate a spotting exercise. It is very possible that NONE of these questions may come out as identically
indicated. But what is important that with your detailed reading FROM THE PRESCRIBED TEXTBOOK of
the assigned chapters and the practice of the back of chapter questions and even the short case studies,
you should be adequately prepared to attempt the examination questions.
Chapter 10
Retail Pricing
1. How does a store’s location affect the price it can charge?
SOLUTION: (360) The location of the retail store has a significant effect on prices that can be charged.
The closer the store is to competitors with comparable merchandise and customer service, the less
pricing flexibility the retailer has. The distance between the store and the customer is also important.
Generally, if the retailer wants to attract customers from a greater distance, it must either increase its
promotional efforts or lower prices on its merchandise. This is because of the increased travel costs (in
both time and dollars) consumers incur when they are located farther from the store. Travel costs cut
into the amount the customer is able or willing to pay for the merchandise, thus forcing the retailer to
lower prices to attract more distant customers.
2. Is pricing really an interactive decision? Provide an example of how pricing should interact with
the services offered by the retailer.
SOLUTION: (359-363) Decisions regarding pricing objectives should be interactive with other retail
decisions. Specifically, the decision to price an item at a certain level should be related to the retailer’s
decisions on lines of merchandise carried, location, promotion, credit and check cashing, customer
services, the desired store image, and the legal constraints. Merchandise – Retailers should not set
prices without carefully analyzing the attributes of the merchandise being priced. Merchandise should
have properties that differentiate it from comparable merchandise at competing retailers (when pricing
that merchandise differently). Location – The location of the store and the distance from the customers
and competitors affect the price that can be charged. Promotion, Credit and Check cashing also increase
demand and thereby affect the prices that the retailer can charge. Customer Services – Retailers that
offer many customer services (delivery, gift wrapping, alterations, more pleasant surroundings, sales
assistance) tend to have higher prices.
3. When should a retailer use the penetration pricing objective?
SOLUTION: (365) Penetration is a pricing objective in which price is set at a low level in order to
penetrate the market and establish a loyal customer base. For example, a new hair salon may offer very
low prices at first to gain customer interest and business. By using the penetration pricing strategy, the
hair salon can get its new customers to become loyal by providing the desired services and after a
period of time the salon can shift its pricing objective toward sustained profitability.
4. If a retailer wants to use an above-market pricing policy, how should that retailer’s retailing mix
be different from the competition?
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2. SOLUTION: (369-370) Should a retailer want to employ an above-market pricing policy, that retailer’s
retailing mix will need to vary from competitors on factors other than price. The merchandise offered
may include specialty items, unusual items, or prestigious brands. The services provided may be of a
broader range and higher quality than competitors. The location may be more convenient or the store
may be open when other stores are closed. Whichever retailing mix elements are different, retailers
who choose to compete using an above-market pricing policy, will need to appeal to sectors that value
non-price factors more than price it.
5. What is the difference between variable and flexible pricing? Does the demand for the item
being sold affect either of these strategies?
SOLUTION: (370-371) Variable pricing is used when differences in demand and cost force the retailer to
change prices in a fairly predictable manner. Prices charged are higher during peak sales period. For
example, flowers prices increase during Valentine’s Day. Similarly, prices are lowered in times of bleak
sales periods like Tuesday and Wednesday nights in restaurants. It is mainly used with products or
services which have seasonality.
Flexible pricing is the practice of offering the same products and quantities to different customers at
different prices. Retailers generally use flexible pricing in situations calling for personal selling. The
advantage of using flexible pricing is that the salesperson can make price adjustments based on the
customer’s interest, a competitor’s price, and a past relationship with the customer, or the customer’s
bargaining ability. Flexible pricing seeks to match levels of supply and demand. The disadvantages
include increase in costs and decrease in revenues, as customers begin to bargain for everything.
Similarly, the risk of losing customers is higher in flexible pricing because customers feel irritated if they
know about the difference in prices and tend to shift to a store which offers one-price policy.
6. Despite the lack of supportive research, odd-numbered pricing is still used in retailing today.
Shouldn’t gas stations drop those 0.9 cents from their posted prices and round them to the nearest
penny?
SOLUTION: (372-373) Odd pricing is the practice of setting retail prices that end in the digits 5, 8, or 9.
The intent is to psychologically lower, in the shopper’s mind, the price of the item. This happens because
consumers tend to notice the digits left of the decimal and overlook the ones after it. Whether or not
this is true is debatable because the research on this topic is inconclusive. However, odd pricing can be
profitable to the retailer. It can reduce employee theft by forcing clerks to ring-up sales in order to give
change to customers. Students may also point out the highly price-conscious nature of consumers when
shopping for gasoline. If only one station changed its pricing strategy by dropping the 0.9 cents from
their posted price it could damage sales if competitors opt not to. Thus, some students may view odd
pricing as effective while others view it as ineffective.
7. Would you prefer to buy a car from a dealer using a flexible or a one-price policy? Why?
SOLUTION: (370-371) Flexible pricing means offering the same products and quantities to different
customers at different prices. Some customers who like to negotiate might prefer this type of policy.
Most customers prefer a one-price policy. This is not true in countries where a flexible pricing policy is
prevalent. In the United States, flexible pricing is widely used in the sale of automobiles and jewelry. But
for most items one-price policy is followed so as to avoid loss of customers to competitors. As this is a
preference question, either a flexible or one-price preference is acceptable.
8. What type of retailer is most likely to use leader pricing?
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3. SOLUTION: (374) When leader pricing is used, a high-demand item is priced low and advertised heavily
in an effort to attract consumers into a store. The items selected for leader pricing should be widely
known and purchased frequently. In addition, information should be available that will permit
consumers to make price comparisons. Generally retailers who want to increase store traffic using these
low priced items or loss leaders, those items priced below their cost, use leader pricing. Nowadays,
some retailers such as supermarkets regularly feature leader items. Convenience stores and national
discount retailers also follow leader pricing.
9. In the United States, a loss leader is generally accepted as legal. Yet in other countries such a
policy is illegal. What should it be?
SOLUTION: (374) Loss leader strategy is considered illegal in several countries and economically
damaging for various reasons. First a loss leader strategy is basically predatory in nature, designed to
ultimately force competitors out of business. In the United States, antitrust and trade regulation
statutes are designed to protect competition, not individual competitors. Also, legitimate marketplace
competition inevitably results in economic winners and losers. Secondly, small businesses get
economically damaged due to the pricing strategy adopted by larger competitors, who are willing to
take losses or razor-thin profit margins on some products in order to expand their customer bases.
Thirdly, suppliers sometimes object to loss leader pricing, despite the greater volume of sales that the
practice often spurs within a given store. These increases may be offset by drops in sales at other stores
where the brand is still priced high. As this question is opinion based, students could argue that it is a
marketing strategy to increase competitiveness or that it should be considered illegal.
CALCULATION QUESTIONS :
NOTE THAT CHAPTER 10 HAS MANY COMPUTION QUESTIONS
YOU ARE NOW REQUIRED TO REFER TO MY POWERPOINT LECTURE NOTES
YOU MUST PRACTICE EVERY QUESTION AND STUDY THE ANSWERS – COVERING MARK-UPS,
MAINTAINED MARKUPS AND MARKDOWNS
YOU NEED TO MEMORIZE ALL THE FORMULA IN CHAPTER 10
AND BE SURE TO BRING IN A CALCULATOR FOR THIS EXAM !
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4. Chapter 12
Customer Services and Retail Selling
End-of-chapter Practice Questions (selected)
1. Your store manager just told you that since profits have been falling over the past year, he has
recommended to the owners that they could increase profits by cutting back further on customer
services. After all, customers don’t really expect service anymore. Agree or disagree with this statement
and explain your reasoning.
SOLUTION: (434-438) As the chapter points out, high-quality service must be a fact of life for all retailers.
In recent years, however, the intense competition from discounters caused many retailers to lower
customer service levels as a means of staying price competitive. These retailers felt that reduced service
levels would lower their operating costs. As a result, many shopping trips do not meet the expectations
of consumers and result in unsatisfying experiences. So, it appears that today’s customers still expect
service.
Successful retailers view customer services as a way to gain an advantage over the competition. Even
discounters are beginning to empower employees to do whatever is reasonable to take care of the
customer.
2. Should the level of service offered by a retailer be directly proportional to the gross margin
obtained from the sale of the merchandise? In other words, the more profitable the item, the greater
the service level that should be extended. Explain the reasoning behind your answer.
SOLUTION: (437-438) The chapter argues that the second and most important task is converting the
customer from your trading area who has decided to try your store into a loyal (and thus profitable)
customer. Due to significant cost cutting following the recent period of retailer consolidation and
retrenchment, this is even more difficult. While this implies that the first task – getting customers from
your trading area into your store, is the easier task of the two. Nonetheless, merely getting consumers
into your store will not be cost-effective if they are not converted into paying customers. Retailers
should design their customer service program around pretransaction, transaction, and posttransaction
elements of the sale in order to obtain a differential competitive advantage. Serving the customer
before, during, and after the transaction can help create new customers and strengthen the loyalty of
present customers. Customer service can play a significant role in building a retailer’s sales volume.
Thus, the first task in retailing may be easier than the second, but they steps must be done collectively
to be cost-effective. The level of customer service offered does not have to depend on the gross margin
obtained from the sale of the merchandise. There are various other factors which decide the level of
service to be provided. They include retailer’s characteristics, serviced offered by competition, type of
merchandise sold, price image, income of target market and cost of providing these services.
3. Should online customers expect the same type of service that bricks-and-mortar customers get
from retailers selling similar merchandise? Explain the reasoning behind your answer.
SOLUTION: (434-441) Customers of different retail formats demand different levels of service. As the
text indicates, customer service levels, and resulting satisfaction, are based upon customer
expectations. Service is one attribute a retailer uses to position itself within the market. As such,
consumers set their expectations based upon retail format. The consumer that opts for shopping online
may not expect the same type of personal selling and product availability that the consumer of the same
goods and services purchased at a bricks-and-mortar retailer might. Likewise, a customer that shops at a
bricks-and-mortar retailer might prefer the convenience of getting a product now, rather than waiting
for it to be shipped.
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5. 4. A major discounter was recently quoted as saying that he “no longer worries about dwell time.
After all, low price is the only factor that drives sales.” Do you agree or disagree with this statement?
What is your reasoning?
SOLUTION: (447) Dwell time refers to the amount of time a consumer must spend waiting to complete a
purchase. This time greatly influences the customer’s expectations and evaluations of the retailer.
Customers understand that certain waiting periods are required, especially for services, which cannot be
produced ahead of demand. However, they must perceive that the line or waiting time is shortening. In
recent years, the frustration of waiting to complete the transaction – the dwell time – has become a
threat to retailers. Long waits can cause customers to stop patronizing a retailer. Thus, concern about
dwell time is warranted for price may drive customers in, but it is only one of many factors that will
cause them to return.
5. Some discounters not only have a “no layaway” policy but also will only accept cash. They don’t
accept checks or credit and debit cards. Will this hinder these stores in the marketplace? Because of the
slowing economy and the high fees banks charge on the cards, as well as bad checks, is the trend moving
away from accepting these forms of payment? What would you suggest retailers do? Explain your
reasoning.
SOLUTION: (444-445) Nowadays, due to the economic slowdown, most stores are not offering layaway
services or credit. These stores will definitely face a reduction in number of customers, who were used
to credit payments. But in a sense it is reducing the economic risks of the retailer. The retailer could limit
the credit services to the most loyal and high income customers. But this might lead to dissatisfaction
among other customers. Otherwise, the retailers could come to an agreement with the banks for lesser
fees. But in the present situation, most banks will be unlikely to take such risks. Retailers could provide
discounts or combination offers for non-credit purchase ad focus on promoting these offers as value-for-
money. In times of cash crunch, people are bound to flock to such stores.
6. How does the type of customer affect the level of customer service a retailer should offer?
SOLUTION: (455-458) The type of customer will have an influence on the type and level of services that a
retailer will provide. Six factors to be considered in this regard are:
1. cost of providing the service - the retailer should be aware of the cost of providing a
service and how much sales will have to be generated to provide that service.
2. store characteristics - store size, store type (e.g., discounter, department store), and
store location
3. type of merchandise handled - a men’s clothing store will probably have to provide an
alteration service; a large purchase in dollars usually requires the retailer to offer credit terms or the
retailer should take MasterCard or Visa charge cards
4. price image of the store- customers will expect more services from a store with a high
status or high quality image than what would be expected from a discounter or warehouse store
5. income of target market customers - generally, as income rises in the target market,
more services can and should be offered
6. services offered by competition- generally, offer a comparable set of services (or
suitable substitutes) of competition. If this can not be done, lower prices
It is the task of the retailer to study these factors and to arrive at a service mix that will keep present
customers happy and secure new customers, while at the same time increasing long-term profits.
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6. 7. Shouldn’t all retailers seek to exceed their competition’s level of customer service? Explain the
reasoning behind your answer.
SOLUTION: (456-457) The retailer does not always have to meet or exceed a competitor’s level of
service. On the other hand, the services offered by competition will influence the level and variety of
services a retailer will offer. The retailer has to make a basic decision: compete directly by offering
comparable services or offer consumers lower prices. Even, a convenient location may be considered a
service.
8. Develop a list of predictor variables you would use to screen applicants for a sales position in (a)
a jewelry department in a high-prestige department store, (b) a used-car dealership, (c) a health club,
and (d) an antique shop.
SOLUTION: (459-460) The most commonly used predictors in selecting retail salespeople are
demographics, personality, knowledge and intelligence, and prior work experience. There are a number
of demographic predictors that would be important for these different positions. For the jewelry
department in a high-prestige department store we would want middle class to upper class employees.
For the health club we would want employees that look healthy and young for their age. For the antique
shop and used-car dealership demographics would probably not be critical. For all the salespeople we
would want them to have a friendly, confident, stable and empathetic personality. Collectively, the
salespeople would find it helpful if they had knowledge of the product or service being sold. Also,
employees with experience in a particular position and retail sector can prove to be a valuable asset, if
they are available in the candidate pool.
9. A men’s clothing store chain has analyzed the annual sales per salesperson in 10 of its stores
nationwide. The sales per salesperson range from a low of $121,000 to a high of $248,000. Develop the
list of factors that might help to explain this wide variation.
SOLUTION: (entire chapter) Here are some potential hypotheses.
1. The smaller the store, in terms of square feet of selling space, the lower the sales per
employee.
2. Stores located on communities with a lower per capita income have lower sales per
employee.
3. Discount department stores located in communities with heavy competition from
conventional department stores will have lower sales per employee.
4. One store has a far less seasoned and experienced staff than the other store.
5. The training available at one location is far less developed and robust than that found at
the alternate location.
Regardless of the hypothesis, the retailer needs good data to further analyze the annual sales per
salesperson. Measuring a number of factors, including information regarding the hypotheses above, will
assist in truly explaining the wide variation between these two stores.
10. When you are shopping for yourself, do you appreciate it when the salesperson uses suggestion-
selling techniques? Does the type of merchandise make a difference in your answer?
SOLUTION: (470) The chapter discusses the alternate perspectives on suggestion selling. Many
customers appreciate suggestion selling because it often eliminates a second shopping trip. However, it
may also decrease a consumer’s satisfaction with the retailer as some customers view suggestion selling
as an annoyance.
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7. 11. What should retail salespeople know about customer choice criteria?
SOLUTION: (461-463) The retail salesperson should also learn how to identify the customer’s choice
criteria and how to respond to them. There are four choice criteria situations:
1. No Active Product Choice Criteria - The best sales strategy when the customer does not
have a prior criteria set is to educate the customer on the best choice criteria and how to weigh them.
2. Inadequate Or Vague Choice Criteria - When the criteria are inadequate or vague, the
range of products that will satisfy them is often wide. The easiest option for the salesperson is to show a
particular product that fits a customer’s choice criteria. With a little emphasis there would not be any
trouble selling the product. However, the customer may have trouble believing that the product the
salesperson selected is the best one to meet his or her needs. The customer may therefore choose to
shop around at other locations. If the salesperson is interested in building repeat business and customer
goodwill and has a wide range of products to sell, then the salesperson should help the customer define
the problem and help refine the choice criteria. Thus the customer and the salesperson should work
together in defining the criteria of a good product and then select the product that best fits the criteria.
3. Choice Criteria In Conflict – Sometimes, a customer has conflicting criteria because of
two reasons: wanting two or more mutually exclusive attributes in the same product; the salesperson
should downplay one of the attributes and emphasize the other. The next case is if a single attribute
possesses both positive and negative aspects. The best selling strategy is to enhance the positive aspects
and downplay the negative aspects.
4. Explicit Choice Criteria - When the customer has well-defined, explicit choice criteria,
the best selling strategy is for the salesperson to illustrate how a specific product fits these criteria.
12. Why is selling so much more important for retailers of services than it is for retailers selling
physical products?
SOLUTION: (467-470) Selling is more important in the retailing of services. First of all, it is difficult for
retailers of services to attract new customers since they cannot try the product, inspect it, or test it.
Second, once customers have purchased the service, they only know if it didn’t satisfy them or solve
their problem. This makes it important that a retailer of services understands what benefit (not the
product) that the customer is buying. Third, not only is it important to know what benefit is sought, but
the service provider must consider how to help the customer achieve that benefit - a different task from
simply providing the service.
Fourth, the salesperson must determine how to change the service so as to produce positive customer
satisfaction. Finally, the retail salesperson must remember that with services the goal is to preclude
dissatisfaction, since that is the best-remembered aspect of a service purchase.
Consumers never forget a poor service job. Research suggests that future sales opportunities depend
mostly on the trust and satisfaction established. The ability to convert these opportunities into sales
hinges more strongly on conventional salesperson characteristics, such as expertise and similarity.
13. Why is it so important that a retailer’s sales personnel be taught that each customer must be
contacted by a sales associate each time the customer enters the store? Don’t some customers just
want to be left alone to look around?
SOLUTION: (471) First, in stores that purport to offer service, there can be no sale if the shopper has no
contact with a salesperson or a cashier. Increasing the number of shoppers who are approached
increases the number of shoppers who are likely to buy. Second, there are times when shoppers are just
looking around. However, if these shoppers are looking around for a salesperson, a motivated
salesperson can prevent walkouts and generate more sales by approaching the customers first.
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8. Chapter 14
Managing People
1. Explain why a retailer’s investment in having the inventory desired by its target market is not
sufficient by itself to offer a sustainable competitive advantage over the competition.
SOLUTION: (527,531) It is relatively easy for competing retailers to duplicate the tangible resources of
each other. People, however, are more difficult to replicate and thus become a source of differential
competitive advantage. People add value either by reducing costs or by increased level of customer
interaction. Thus to be successful, a retailer should be able keep his operating costs as low as possible by
keeping labor expenses (which is the retailer’s greatest expense other than the cost of merchandise) and
turnover low. Also the way the customer is treated while making the transaction decides if the
transaction is going to take place or not. So the retailer needs employees who love their work. Thus it is
of utmost importance to build good customer and employee relationships as they can have a synergistic
as well as a multiplying effect.
2. Should a retailer view its employees as a “cost” or as an “investment?” Support your reasoning.
SOLUTION: (527) To be successful, retailers must view labor costs, as well as the expenses of attracting
and retaining customers, not as costs but as investments in obtaining a sustainable competitive
advantage. Investments in tangible assets will not produce a profitable return unless the retailer is
willing to invest in recruiting, motivating, and retaining the right people. These people are the retailer’s
employees and customers because a store without employees and customers can not generate sales.
Retailers often fail to give the same care to their investments in intangible assets, such as employees
and customers that they do to their tangible investments. Land, buildings, technology, equipment and
fixtures, and merchandise are all easy to buy and sell in the marketplace, so in the end, retailers gain
little relative advantage by their tangible presence.
3. In retailing, customers and employees are distinct groups and have little in common. Agree or
disagree and explain your answer.
SOLUTION: (528-529) As pointed out in the chapter, customers and employees both perform retail tasks
and they both service the other. It is important to remember that employees must not only serve
customers, but also other employees. These points support the interdependency of customers and
employees. However, it may also prove useful for discussion to highlight the differences between the
groups and how they interact with each other. The student could focus on treating the customers like
employees in terms of recruitment, motivation and compensation. Similarly the treatment of employee
as an internal customer should also be mentioned.
4. What does it mean to “empower” a retail employee? Give examples from your personal
experience of situations where you felt a retail employee was not properly empowered.
SOLUTION: (528-529) Empowerment simply means giving the employee the “power to make things right
for the customer.” An empowered retail employee 1) Seeks to understand the customer’s problem, 2)
Desires to develop a relationship with the customer, 3) Understands the value of customer loyalty, and
4) Is allowed or encouraged by management to solve the customer’s problems. Student examples will
vary, but may include a time when a waiter or waitress provided another entrée when the first did not
meet expectations (without delay or management consultation) or when an airline representative gave
out free drink coupons to customers that needed to be re-routed, etc.
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9. 5. What are the sources that a department store could use to recruit employees? Would the same
sources be effective for use by a cell phone retailer such as a Sprint store?.
SOLUTION: (534) Sources of employees include competitors, walk-ins (both in person at the store and
online at the retailer’s website), employment agencies (including online at websites such as
monster.com), schools and colleges, former employees, advertisements, recommendations, and
customer referrals. A Sprint store could source its employees from almost all of the same sources.
However, the possibilities of finding employees for Sprint at schools and colleges would be limited to
part-time employees and less in number.
6. Develop a list of predictor variables you would use to screen applicants for a sales position in (a)
a jewelry department in a high-prestige department store, (b) a used-car dealership, (c) a health club,
and (d) a fast-food chain.
SOLUTION: (537-540) Answers can vary but should focus on listing effective criteria for screening and
selecting candidates.
To hire an effective salesperson, one could look at the application form or the resume for details such as
demographics, prior work experience, language skills, achievements with regard to sales, education and
screen them for a personal interview. At the interview, certain personality traits such as honesty,
intelligence, work ethic, pleasantness, ability to handle pressure, ability to handle different types of
customers, interests, passion to work as a salesperson could be checked. Irrespective of the industry or
type of retailer, a salesperson needs certain basic skills like ability to sell, to convince customers,
customer service ability, knowledge on product and store policies, etc.
(a) For a salesperson at a jewelry department, in a high-prestige department store, middle class or upper
middle class individuals with high integrity, pleasing personality, ability to do suggestion selling, and
knowledge on jewelry, latest trends should be the ideal candidate.
(b) For a salesperson at a used-car dealership, depth of technical knowledge on cars, maintenance and
repairing, personal experience with driving used cars, financial knowledge to convince the customer
about the best buying options are some specific skills the interviewer should analyze.
(c) For a salesperson at a health club, pleasing personality, youthful appearance, knowledge on the
services offered are the predictor variables to be used to screen applicants.
(d) For a salesperson at a fast food chain, finger dexterity, ability to catch up things on a fast pace, ability
to serve customers in times of need, multi language skills are some traits to use for screening
candidates.
7. Do a search on Google using your name and school (or hometown). Did you find anything that
might embarrass you? What can you do about it? Now do the same on myspace.com.
SOLUTION: (Reference 539-540) Answers will vary.
8 Why might each of the following retailers—movie theater, hospital, amusement, theme park,
and health club—desire to screen out certain customers? Employees?
SOLUTION: (535-536,541) When retailers screen or select customers, they must be sure not to violate
any equal opportunity or discrimination laws. However, reasons for screening and selecting customers
include:
1. the inability to adequately service certain customers
2. the deterioration of a retailer’s atmosphere if customers of a certain type are admitted
3. the inability to profitably service customers.
For instance, people who behave in a rude manner would spoil the moods of those who come to watch
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10. a movie or to have treatment at a hospital. Screening employees and hiring the right person is very
important because, it not only leads to loss of customers but also other employees at times. And in a
retailer offering services rather than goods or merchandise it becomes even more significant since the
service level is entirely at the hands of the employee. Also, in service oriented retailing, the customer
employee interaction decides the image of the retailer.
9. Explain why turnover is costly in retailing regardless of whether it is employee turnover or
customer turnover.
SOLUTION: (542-543) A critical job for retailers is to retain its current employees. In an economy with a
low unemployment rate, if an employee does not like something about the job, its training, or even his
or her co-workers, then that employee can easily go elsewhere. New employees are costly to train and
risky to hire because they may not perform as expected. With the median retention rate of hourly
supermarket employees being 97 days and the cost of replacing was $4,291 for a union store and $3,372
for a nonunion store.. Turnover is a problem and a major cost not only in the realm of retail employees;
a similar problem exists regarding customers. It costs a retailer five times as much to recruit a new
customer as it does to retain an existing one.
10. Why must training be an ongoing operation?
SOLUTION: (543) Training must be ongoing because employees will not enjoy their jobs without the
necessary knowledge to perform their assigned tasks. When employees aren’t happy at work, they
switch jobs. Therefore, retailers today must view training as a process of continuing education.
11. How can a retailer expect consumes to buy its products when its own employees shop
elsewhere? As a result of this question, some clothing retailers have considered requiring that their
employees only wear store brands when working. Disregarding any possible legal issues, what would
this do to employee motivation? How would you handle this problem?
SOLUTION: (547-548) Student answers will vary, but the responses should focus on the application of
motivation. It is good to mention about economic incentives and noneconomic motivators of employees
The noneconomic motivators that the student needs to focus are team spirit or esprit de corps, voice,
scheduling, feedback, etc.
12. What is customer relationship management and how can it be used to develop more profitable
customer relationships?
SOLUTION: (532, 546) Customer relationship management (CRM) is comprised of an integrated
information system where the fundamental unit of data collection is the customer, supplemented by
relevant information about the customer, including purchasing behavior. CRM is allowing the retailer to
evaluate the profitability of each of its customers by linking the identification of the customer to actual
purchase data. This information gives retailers the ability to decide which customers should be offered
special services or special prices. The frequent shoppers who form the 20 percent of customers, but
generate the 80 percent of revenues are those who the retailer should build strong relationships with by
using affinity programs, loyalty card, send birthday cards, coupons, special offers to loyal customers etc.
For them, price shopping is a decision made in the store about what brand to buy and not a decision
about where to shop. They really wish the retailer would use its CRM-developed loyalty program to
make them feel special. And they focus on people, relating to store employees far more than other
shoppers do. Therefore, the critical building blocks for CRM include some type of customer identification
process coupled to product or service identification codes.
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11. 13. If you were to go to work for a retailer today, what would be the most important supplemental
benefit the retailer could offer you? Would this benefit change as your lifestyle changed?
SOLUTION: (553-554) Students can give any number of responses. Benefits such as tuition
reimbursement, PMs, and employee discounts could be mentioned. As a student ages, and their lifestyle
changes, benefits such as medical insurance and retirement benefits become more important. The
instructor should get students to indicate the types of supplemental benefits they would desire when
they enter the workplace.
14. What factors in the retailer’s control have a positive effect on employee productivity?
SOLUTION: (555) Retailers have long recognized that paying attention to job characteristics and
descriptions, work scheduling, job sharing, and employee input programs will have a positive effect on
employee productivity and satisfaction. In specific, job enrichment programs, which are intended to
increase employee productivity, are done. Job enrichment involves increasing skill variety, task identity,
task significance, autonomy and job feedback. Job-enrichment programs have their base in motivation
theory, which suggests that job factors themselves - job challenge, independence, and responsibility -
are powerful motivators. Retailers using the job enrichment program must be careful in presenting it to
the employees; otherwise the employees may feel that they are being asked to do too many tasks
without being compensated for the extra workload. Some other factors within a retailer’s control that
are not mentioned but the students may suggest: work scheduling, job sharing, and employee input
programs.
15. What is a “value proposition?” How does a retailer’s value proposition relate to customer
retention and building profitable long-term relationships?
SOLUTION: (555) A value proposition is the promised benefits a retailer offers in relation to the cost the
consumer incurs. The attributes of price, merchandise, physical characteristics, sales promotions,
advertising, convenience, services, and store personnel are part of the value proposition. If the value
proposition is not sufficiently high, customers will patronage other retailers where they can get a better
overall deal. The relationship between the value proposition and the level of work customers are asked
to perform will also determine the pricing power that a retailer has. Thus, the value proposition will
assist in determining the type and health of relationships that a customer has with a retailer and the
level of profits earned.
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