The thoughts here could apply to retail bankin or any form of retail consumer service business. Also visit my blog http://olusfile.blogspot.com for more insightful essaysg
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Building the Retail Business-Opportunities and Challenges
1. Growing the Retail Business in
Nigeria- Opportunities, the
Challenges and Way Out
Jan 2009
Olu Akanmu
www.olusfile.blogspot.com
olu.akanmu@yahoo.com
2. Outline
Retail Definition and Retail Business Model
Retailing and Business Volatility
Building the Retail Business
Segmentation and Value Propositions
Customer Segment View versus Product View
of a Retail Business
Taking Products and Services to the Market
Strong Brands and Communication
Execution and Organization Structure of the
Retail Business
3. What is retailing?
Direct Consumer Sales and Relationships
through little or no intermediary
Not exactly what the fmcg companies are
doing? FMCG is not classic retailing
Individual Product/ Brand Sales versus
Customer Shopping Basket View
Hotel and theme park story
Retailing is done at Shoprite, Airlines,
Banking, DSTV, Telecoms and fmcg with new
thinking
4. The Retail Business Model
Revenue is a function of
Customer Base
Size and Quality
How many people come to shop in my store daily? How do I make
more people to shop in our stores?
Who are they and what is the size of their pocket/ wallet?
Transaction Volume
Product Purchase Volume and Frequency
How full is their shopping basket when they come to my store?
How can I make it fuller?
How many piun-piun sound do we hear when they are crossing
the till point? (Fees and Income)
How often do they come to shop in my store?
Customer Loyalty and Retention
Do they shop somewhere else and why?
How do I make them to shop with me and no other?
How will I keep them for life
5. The Retail Business Model
Key Drivers
Customer Acquisition
Product Usage
Cross Selling or Upselling of new products
and services
Share of Customer Wallet
Customer Loyalty and Retention
6. The Retail Business Model
How can you move your customers
from “transactions” to
“relationships”
Data, Information and Analytics are
critical
7. Retailing and Business
Volatility
A retail franchise is costly to build in the short term,
but tends to be a stable, less volatile business in the
medium to long term.
Its cashflows when built are more predictable and
less risky..
In corporate business (business to business), one
stakeholder can terminate a relationship and a strong
revenue in one day. In retail, 100,000 customers
cannot walk away at the same time !
It is important to build a strong retail franchise to
reduce the risk of business volatility.
8. Building the Retail Business
Segmentation, Needs and Market Gaps
Segment your market and understand their needs
Homogenous groups with distinctive behaviour or needs that can
be targeted cost-effectively for market action?
What segmentation variable would you use to segment your
market?
You need to use a relevant segmentation variable for your kind of
business
The choice or combination of segmentation variable you use, could
reveal unique insights that your competitors have not seen.
Slice your orange in a unique way
Are there market gaps or poorly satisfied needs
Do you have the resources and capabilities to fill the market
gap?
Can you fill this market gap in a sustained way?
9. Segmentation and Industry
Commoditization
Segmentation reveals unique customer
insights for product and service developments
When you see, competitors do the same
things, compete in the same way, and
mutually destroy their industry value by
constant price wars, it is because someone
has not taken a leap to see something unique
that others have not seen, the basis of which
new differentiated products and services
could be designed.
10. Value Proposition
Based on unique insights identified in the
segmentation process, a firm will develop
unique customer value proposition
Wining Value Propositions is “I am New
Horizons. This is your need and this is how I
can meet it to your delight, and this is how
I meet your need differently and
uniquely than my competitors. This is
what I can do for you that you cannot
get somewhere else..”
11. Making the Value Propositions
Tangible
Products and Brands
Services
Channels
Customer Experience
Pricing
Price for value. If you are truly different, you can
charge a premium but ensure you share the value
you created with customers, so that even at you
price premium, the customer will always see value
in your product.
12. Unique versus better
People tend to use unique and better as synonyms of
each other
Better is not enough
Better is easily matched
Synonyms of better are improve, enhance
Uniqueness is strategy
Synonyms of uniqueness
Sole, one of its kind, unmatched
It is unique products and services that makes you to
win on a sustained basis in the market
It is hard to find uniqueness given rapid technology
and knowledge diffusion in the modern world
13. Finding Differentiation in a
Product Commoditized Industry
Customer
Experience
Service
Core
Build augmented value
product
around your core product
Find uniqueness in
augmented product..service,
Channels
Experience, channels
14. Delivering the Value
Propositions
Ensure your management systems,
processes, back office, technology,
people, capital are aligned with the
value proposition you want to deliver.
The back office of Shoprite is a complex
logistic and inventory system that
delivers fresh meat and other products
in the right quantity daily over 365 days
16. Customer Shopping Basket
View
Products, yes but look at the total shopping basket
Some products on their own may not look profitable but
when a customer is already acquired and you cross sell
them, they increase your profitability
Hotel and Theme Park Story
Customer Profitability is more important in retail than
product profitability
Customer revenue (total shopping basket- acquisition
cost- cost of retention-cost of service delivery)
17. Customer LifeTime Value
Was Glo stupid when it priced its sim card
five years ago at N1?
In a retail business, sometimes the cost of
acquisition of customers are high, but taking
a long time view, if you keep those
customers, they can become extremely
profitable in the coming years because
acquisition cost for retained customers is
zero.
This is why strong retailers are paranoid
about customer base..!
18. Customer Profitability
Align cost to serve to customer value
Do not treat all your customers the
same way
Why airlines have first class and economy
It does not mean you should deliver crap
to the economy class
Use channel differentiation to align cost
to serve to customer value
20. Build a Strong Brand
A brand is “bundle of promise that is unique”
about a product. Brand says I am more than the
“ordinary or the common”.
It gives the customer a re-assured confidence to
choose you over others
It is a stamp of quality
Brands are critical in a commoditized world
It will help you to charge a premium because you
have helped the customer to reduce the risk of bad
choice.
Strong brands in banking.. PHB, Zenith, GTB..
21. Four Brand Equity Dimensions
(Aakers)
Brand Awareness Perceived Quality
Recognition and recall Most critical measure of
brand equity
Familiarity and opinion
Degree of price premium
Brand Loyalty Esteem and respect
Satisfaction at recent usage
Consistently exceed my
Brand Associations
expectations Different from others in
relevant ways
Regular usage even when
alternatives are available It is an interesting
personality. We do have a
Will recommend it to others
relationship
Will pay a premium for it over
Perceived value-value for
alternatives
money relative to its price
Market share
I trust the firm behind the
brand
22. Building Strong Brands
Ensure that your service delivery is in tandem with
your brand promise
Branding is more than advertising
Internal brand communications is as important as external
brand communications
Your staff must understand the promise your brand has
made to customers and what they must do individually to
deliver it at every point of customer engagement
Appoint a custodian for your brand or sub-brands
with the authority to compel internal alignment with
brand promise
23. Taking Product and Services
to the Market
It is not enough to have a great product, it must be
supported by an excellent “go-to-market” strategy
If your value proposition is right, you have done half
of the job, the rest is to ensure that the value
proposition is well communicated
Advertising, Pubic Relations
Sales Promotion
Sponsorships
Personal Selling.. Strong Sales Force
Direct Marketing..
In- Store Marketing and Sales
24. Precise Bombing
The more targeted your communication, the
more effective it will be.. ( Precise bombing is
better than scatter bombing)
Use the right media that your audience
consume
Choose a good communication partner
If your audience is small and not mass,
approach them directly. It is more effective
than advertising.
25. Execution
Strategy is a mere statement of
intention unless it gets done..
Translate product, channel, pricing and
customer experience strategy into clear
activity programs and a calendar of
action of what, who, how and when..
Review at milestones, objectives and
performance gaps, program calendar
26. Organization Structures
Product or Category Management
Customer Segment Management
Channel Management
Different Combinations of the above