Local Retail Market Monitoring: Strategic Implications

Charles W. King, Purdue University
ABSTRACT - Monitoring of the local retail market competitive structure for the retailer's particular product category and the retailer's position and store image within that competitive milieu is essential to the retailer's strategic planning. This paper discusses the retailer's strategic planning needs, the concept of local retail market monitoring as a routine research procedure and presents an example of pragmatic local retail market monitoring with a discussion of strategic implications.
[ to cite ]:
Charles W. King (1978) ,"Local Retail Market Monitoring: Strategic Implications", in NA - Advances in Consumer Research Volume 05, eds. Kent Hunt, Ann Abor, MI : Association for Consumer Research, Pages: 688-692.

Advances in Consumer Research Volume 5, 1978      Pages 688-692

LOCAL RETAIL MARKET MONITORING: STRATEGIC IMPLICATIONS

Charles W. King, Purdue University

ABSTRACT -

Monitoring of the local retail market competitive structure for the retailer's particular product category and the retailer's position and store image within that competitive milieu is essential to the retailer's strategic planning. This paper discusses the retailer's strategic planning needs, the concept of local retail market monitoring as a routine research procedure and presents an example of pragmatic local retail market monitoring with a discussion of strategic implications.

RETAILING: THE STRATEGIC MARKETING PROBLEM

The basic strategic marketing problem confronting the retailer centers around the classic issue of market positioning. The retailer's strategic objective is to develop an integrated marketing program encompassing a wide range of marketing elements to create a market position within his competitive environment.

To establish a market position, the retailer strives to develop store personality or image. The store image should be analytically defined and designed to appeal to and be compatible with the store's target customers. The store image is the product of a set of components or attributes that are important in determining customer patronage within a particular retailing competitive market.

Consumer perceptions of store images, however, are very time related. Store images can change significantly over time due to changing retailer strategies, new competitive entries or other exogenous market variables. The stability of store images over time can also vary sharply across product categories. Each week, for example, the price image of an aggressive supermarket is under scrutiny in its featured, end-of-week prices. Supermarket price image therefore, can be very volatile.

The fashion image of a major department store, by comparison, may change only modestly over several seasons. Even under heavy strategic focus, the fashion image of a retailer may be an extremely stable, difficult to change dimension of retail patronage.

The critical question is, how is the retailer's store image actually perceived by the target customers compared with the firm's competitors in the local market over time?

LOCAL RETAIL MARKET MONITORING: A CONCEPTUAL OVERVIEW

To address the issue of retailer market position and customer perceptions, the retailer needs an on-going local retail market monitoring program. The concept of local retail market monitoring is a direct extension of traditional store image research.

Historical Store Image Research: The State of the Art

Since the now classic Martineau (1958) conceptualization of the "store personality or image", store image research has become extremely topical among leading retailers and marketing academics. Over the past 19 years, great strides have been made in gaining management interest in the concept of store image as a key market variable and as a pragmatic strategic merchandising tool.

Over that period too, empirical store image research developed as well. Historical store image research, however, has been largely single sample survey and cross sectional in research design. The research has tended to be exploratory in topic content with too little historical linkage or futuristic continuity.

More importantly, across the store image research, there has been little standardization in field methodology or measurement instrumentation. Consequently, despite a relatively large literature, there has been only a limited amount of generalization across the field until recently.

From the historical store image research to date, however, has emerged an expanding research tradition. Analysis of that tradition indicates that:

1) A conceptual framework for understanding and researching store imagery has evolved;

2) A cadre of increasingly sophisticated empirical researchers in leading retailing organizations and in academia has entered the store image research arena;

3) The historical research has identified major "general" dimensions of retail patronage or store image such as merchandise selection or assortment, merchandise quality, merchandise pricing, locational convenience, merchandise styling(fashion), service(general) and salesclerk service;

4) The research has indicated that the key determinants of retail patronage vary across product categories. Therefore, store image research, to be most effective to retailing management must be both "general" and tailored and focused to be product category "specific";

5) An operational field research design and measurement methodology for cross-study research comparability has evolved in the published literature. [For representative and significant literature and industry trade practice reviews, see Wyckham, Lazar and Crissy (1971), Lindquist (1974-1975), May (1974-1975) and Ring (1977).] [Several leading research oriented retailers have made impressive progress in adapting this store image research tradition to their specific proprietary image monitoring needs.]

The Concept of Local Retail Market Monitoring

Local retail market monitoring, as advocated here, is intended to produce a comprehensive analysis of the basic competitive retail market structure for a particular product category over time. The monitoring system must measure the retailer's historical and current market position and store image perceptions among its target customers.

Equally importantly, the monitoring system must also measure shifts in the relative positions of competitors in the local retailing arena as the market structure changes. The system must track both the number and market positioning of the major retailers and the changing strategies operative in the market over time.

In its ultimate form, the local retail market monitoring system would produce a comprehensive perceptual "image map" of a local retail market place. Based on that map, shifts in consumer perceptions and the resulting changes in retail market positioning could be tracked. The causes for the shifts could then be explored by more focused research.

More specifically, the local retail market monitoring methodology proposed here would expand and systematize the more traditional store image research. Within a particular product category, the local retail market monitoring research paradigm would:

1) Identify the major "general" and product "specific" determinants of retail patronage that should be monitored;

2) Develop and standardize an operational measurement battery designed to track consumer perceptions on those selected key dimensions;

3) Design an economically viable consumer survey research plan for soliciting consumer perceptions of retail store images;

4) Implement an on-going, systematic local retail market monitoring program using standardized field methodology and measurement instruments;

5) Based on the initial monitoring survey, prepare a comprehensive perceptual store image map--a based-line description--of the local retail market structure in the subject product category;

6) Routinely repeat the standardized market monitoring survey and analysis procedure to track changes in the perceptual store image map reflective of changing competitive conditions;

7) Based on changes in the perceptual store image map, direct more focused, in-depth research on specific problem areas and re-direct the retailing strategy accordingly;

8) Continue the routine market monitoring and retail market monitoring and retail strategy adaptation.

LOCAL RETAIL MARKET MONITORING: A PRAGMATIC EXAMPLE

The Toronto Male Fashion Research Program: On-Going Local Retail Market Monitoring

In 1974, the author launched exploratory research in the integration of traditional fashion adoption research with the developing area of store image and retail patronage analysis in the Toronto, Ontario, Canada fashion retailing environment. Ultimately the 1975 Toronto Male Fashion Research Project was formalized and implemented. [For a discussion of the evolution of the Toronto Male Fashion Research Program, see King and Ring (1975)]

The 1975 research built on and integrated established research methodologies in the fashion segmentation, retail store image and lifestyle/AIO areas. The central thrust of the research focused on segmentation of the male fashion market ranging from the highly involved fashion change agent down to fashion disinterested/uninvolved consumer. Based on fashion interest/involvement segmentation measures, general and specific shopping/buying behavior was monitored across each of the major Toronto men's wear retailers.

A critical feature of the 1975 Toronto Male Fashion Research Project that had major impact on the strategic significance of the research was the author's commitment to retailer involvement. The major retailers who were to be subjects under study in the project were all solicited to contribute to the design and pragmatic analysis of the research results.

In terms of research funding too, the research effort was conceptualized as a joint academic/industry project. Purdue University and the University of Toronto contributed to the project through doctoral fellowships, University supplied computer time and professional support.

Industry funds, however, were solicited from local subject Toronto retailers to support the data collection and analysis costs. These costs were shared across all sponsoring firms. Therefore, to attract adequate field research funding from retailing management, the research design and analysis plan had to reflect strategic value to the sponsors at the outset of the research planning.

The basic field methodology involved two surveys of 1000 males each executed via a mail, self administered questionnaire based on area probability samples in Census Metropolitan Toronto. The two surveys were conducted in April - May, 1974 and April - May, 1975 to support longitudinal analysis of changes in store images over the 12 month period.

The concept of local retail market monitoring has been adopted by many of the major men's wear retailers in Toronto, largely as an out-growth of involvement in this research project. The 1975 project was launched as a one-survey extension of the 1974 pilot study. From that effort, a doctoral dissertation was produced (Ring, 1977).

At this point, however, the research effort has been syndicated as a commercial venture and expanded beyond its original academic objectives. The program is now entering its fifth year of operation and has proven the validity of local retail market monitoring as a pragmatic planning tool.

A Two-Dimensional Perceptual Store Image Map

The objective of this section is to present an illustrative example of the output of this local retail market monitoring research procedure. Recall the critical strategic question posed at the outset of this paper: how is the retailer's store image actually perceived by the target customers compared with the firm's competitors in the local market over time?

Toward that goal, a geometric representation--a two-dimensional perceptual store image map--has been prepared. The map presents consumers' perceptions of the major Toronto men's wear retailers on the two retail patronage dimensions of store fashionability and value for the money over time from April-May, 1974 through April-May, 1975.

FIGURE 1

TWO DIMENSIONAL PERCEPTUAL SPACE: STORE POSITIONS ON FASHIONABILITY AND VALUE FOR THE MONEY: 1974 - 1975

Store fashionability and value for the money were selected as the dimensions for the perceptual mapping example. These variables were identified as key determinants of retail patronage among consumers in this product category.

Methodologically, consumers were asked to select the store with the "best value for the money in men's fashions'' from a pre-selected set of retail stores. Likewise, the consumers were also asked to rank the same retail stores in terms of th store "best for conservative, everyday men's wear", "best for current, up-to-date men's wear" and "best for the very latest, most fashionable men's wear."

The consumer responses on these two dimensions were analyzed for each store to define a specific retailer's store image on those two dimensions for 1974 and again for 1975. The positions of the stores in 1974 are designated by hexigon figures. The positions of the stores in 1975 are designated by circles. In Figure 1, the 1974 and 1975 maps have been presented as an overlay. The shifts in retailer image and market position on these two dimensions over time are clearly visible.

Strategic Implications of the Perceptual Store Image Map: Retail Market Structure Analysis

[Professor Douglas J. Tigert, University of Toronto and Professor Lawrence J. Ring, University of Virginia were co-researchers in the initial development and analysis of the two-dimensional perceptual store image map.]

At the outset, the two dimensional perceptual map presented in Figure 1 is acknowledged to be a simplistic approach to data analysis. In that simplicity, however, lies its value. The basic concepts involved and the amount and direction of change are graphically presented and are readily understood by the retail manager.

More complex analytical procedures have also been employed on the same data. Ring and King (1977) used multiple discriminant analysis to produce a multi-dimensional map descriptive of the competitive structure in the Toronto men's wear market. That analysis employs a much more sophisticated computational technique but the results agree very closely with the more simplistic two dimensional map. While the multiple discriminant analysis has more academic appeal, at the pragmatic strategic management level, the more complicated mapping technique may confuse the non-quantitative retailing manager.

Turning to the analysis of Figure 1, for ease of interpretation, Figure 1 can be viewed as being comprised of four distinct quadrants. Each quadrant represents a significantly different retail store image.

Quadrant I in Figure 1, the upper right hand quadrant included those retailers perceived as offering both high fashionability, "the very latest, most fashionable men's wear", and good value for the money. Quadrant II, the upper left had quadrant, included those retailers perceived as offering high fashionability but poor value for the money. Quadrant III, the lower left hand quadrant, included those retailers perceived as offering low fashionability, conservative, everyday men's wear, and poor value for the money. Quadrant IV, the lower right hand quadrant, included those retailers perceived as offering low fashionability but good value for the money.

Several strategic implications immediately emerge from Figure 1. The overall market structure is well defined in the two dimensional fashionability/value for the money variable space. All of the chains except Discount /Department Store i and Fashion Specialty Chain 2 in 1974 and Discount/Department Store 2 in 1975 were positioned in either Quadrant IV, low fashionability and good value for the money, or Quadrant II, high fashionability and poor value for the money. [All of the retailers researched were chain operations with multiple stores. The term store and chain are used interchangeable in the text. The research, however, dealt with the overall perceptual image of the chain.]

Note that in both 1974 and 1975, Quadrant I, high fashionability and good value for the money was "under occupied." Only Fashion Specialty Chain 2 was positioned in that Quadrant in 1974 and the Quadrant was empty in 1975. The vacancy in that Quadrant clearly represents a unique market opportunity for store positioning.

The vacancy in Quadrant I, high fashionability and good value for the money, may be the result of various factors. Consumers may see an incompatibility between high fashion and good value for the money. In that case, it would be extremely difficult for a retail chain to develop the appropriate store image and occupy that market position. Alternatively it may be that no existing firm has made an overt strategic attempt to position itself as a retailer of very fashionable merchandise with good value for the money.

In either case, the strategic implication is that there is a potential opportunity in Quadrant I, high fashionability and good value for the money, for either new men's wear retailers or for a shifted positioning of existing retailers.

Looking further at the aggregate market structure, in 1975, the end points of the competitive market space are clearly marked by Fashion Specialty Chains 1 and 2, Department Store 3 and Discount/Department Store 2. Fashion Specialty Chains 1 and 2 clearly lead the high fashionability dimension. Department Store 3 occupies the end point position of the low fashionability and good value for the money store image dimension.

In 1975, Discount/Department Store 2 dominates the unenviable Quadrant III, poor value for the money and low fashionability. Interestingly, after the 1974 data were reported to the management of Discount/Department Store 1, the firm's management withdrew that operation from the Toronto market, closed or renamed the outlets and launched a new strategic store image development and market positioning program. The critical strategic question facing Discount/Department Store 2 is - is the discounter image of low fashionability with relatively poor value for the money a tenable strategic market position in the Toronto market?

While the end point positions are clearly differentiated, the store images of the retailers in the middle of the map are not well defined. This is particularly true for Fashion Specialty Chain 5 and Department Store 1 in 1975. These firms lack a clarity of offering. Neither of the firms have particularly strong positions on either the fashionability dimension or the value for the money dimension.

By comparison, the positions of Department Stores 2 and 3 have been relatively consistent across 1974 and 1975. Both department stores were well anchored in Quadrant IV, low fashion leaning toward good value for the money though both department store chains modestly improved their value for the money perceptions over the 1974-1975 period.

ADAPTIVE COMPETITIVE STRATEGIES BY THE INDIVIDUAL RETAILER OVER TIME: A LONGITUDINAL EXAMPLE

The perceptual mapping exercise is also particularly useful in alerting a retailer to changing conditions in the market structure. In response to these identified market position shifts, a retailer can devise an adaptive competitive strategy to respond -- reposition himself.

The strategic positioning of Fashion Specialty Chain 1 over the 1974-1975 period is an illustrative case. In 1974 when the first exploratory, base-line study was reported to the cooperating retailers in the research program, the management of Fashion Specialty Chain 1 was surprised--stunned--at the store image and market position of their firm.

Fashion Specialty Chain 1 was perceived as offering high fashionability but poor value for the money. The firm, in fact, held an end point position of this store image.

In terms of relative competitive posture, Fashion Specialty Chain 1 was an arch rival of Fashion Specialty Chain 2. Fashion Specialty Chain 2, however, had been perceived by the consumer sample to be tied for the top position on high fashionability but with dramatically higher value for the money. Fashion Specialty Chain 2, in fact, was the dominant retailer in Quadrant I, high fashionability and good value for the money.

Over the 1974-1975 period, the management of Fashion Specialty Chain 1 developed and launched an aggressive competitive strategy designed to reposition the firm in relation to its key competitor, Fashion Specialty Chain 2. The strategic maneuver involved an integrated program of assortment modification, consumer advertising, price point realignment, salesclerk training and display merchandise modernization.

The end result of the extensive repositioning effort was reflected in the 1975 local retail market monitoring survey. Fashion Specialty Chain 1 had dramatically improved its value for the money position while maintaining its fashionability image. Likewise, over the ensuing year, Fashion Specialty Chain 2, the key competitor, had slipped from its position of 1974.

In 1975, Fashion Specialty Chain 2 did still hold a modest lead in value for the money. The responsive strategy of Fashion Specialty Chain 1 had been successful in repositioning the firm relative to the total market structure and, in particular, relative to its major competitor, Fashion Specialty Chain 2.

CONCLUSIONS

The major strategic problem facing the retailer involves market positioning. The retailer must develop an integrated marketing program to position his firm within his changing competitive environment. Local retail market monitoring is a key element in the retailer's strategic planning.

Local retail market monitoring is an extension of traditional store image research into an on-going, more systematic and standardized research program. Local market monitoring can produce a perceptual store image map of an aggregate retail market structure, locate the individual firm within that map, and identify opportunities unfilled in the market structure. Likewise, local retail market monitoring can track changes in the firm's position over time as a result of competition or as a result of purposive strategy changes by the retailer.

REFERENCES

Charles W. King and Lawrence J. Ring, "The 1975 Toronto Male Fashion Research Project: A Descriptive Overview," Institute for Research in the Behavioral, Economic, and Management Sciences, Purdue University, Paper No. 526, 1975.

Jay D. Lindquist, "Meaning of Image," Journal of Retailing, 50(Winter 1974-1975), 29-38.

Eleanor G. May, "Practical Applications of Recent Retail Image Research," Journal of Retailing, 50(Winter 1974-1975), 15-20.

Pierre Martineau, "The Personality of the Retail Store," Harvard Business Review, 36(January-February 1958), 47-55.

Lawrence J. Ring, "The Male Fashion Consumer: An Analysis of Fashion Involvement and Retail Patronage Determinants,'' Unpublished Doctoral Dissertation, Purdue University, West Lafayette, Indiana, 1977.

Lawrence J. Ring and Charles W. King, "A Multiple Discriminant Analysis Approach to the Development of Retail Store Positioning," Advances in Consumer Research, Vol. V, (1977, Proceedings).

Robert G. Wyckham, William Lazer, and W. J. E. Crissy, "Images and Marketing: A Selected and Annotated Bibliography,'' (Chicago: American Marketing Association, 1971).

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