Definition of Retail Marketing

Retail is the sale of goods and services from businesses to an end user (called a customer). Retail marketing is the process by which retailers promote awareness and interest of their goods and services in an effort to generate sales from their consumers. There are many different approaches and strategies retailers can use to market their goods and services (see below).

Retail Marketing Mix: The Four Ps of Retail Marketing

Retailers use various advertising and communication tools to grow awareness and consideration with future customers. Finding the right marketing mix can lead to profitable growth and a higher return on investment. By considering the right advertising strategy retailers can persuade consumers to choose to do business with their retail brand. The fundamental approach used by modern retailers in marketing their products is the Four Ps of Retail Marketing.

Product: There are two primary types of merchandise. Hard or durable goods like appliances, electronics, and sporting equipment. And soft goods like clothing, household items, cosmetics, and paper products. Some retailers carry a range of hard and soft items like a supermarket or a major retail chain while many smaller retailers only carry one category of goods, like a boutique clothing store.

Price: Pricing is a key element of any retail strategy. The retail price needs to cover the cost of goods as well as additional overhead costs. There are four primary pricing strategies used by retailers:

1. Everyday low pricing: The retailer operates on thin margins and attracts customers interested in the lowest possible price. This strategy is used by big box retailers like Wal-Mart and Target.

2. High/low pricing: The retailer starts with a high price and later reduces the price when the item’s popularity fades. This strategy is mainly used by small to mid-sized retailers.

3. Competitive pricing: The retailer bases the price on what their competition is charging. This strategy is often used after the retailer has exhausted the higher pricing strategy (high/low pricing).

4. Psychological pricing: The retailer sets the price of items with odd numbers that consumers perceive as being lower than they are. For example, a list price of $1.95 is associated with spending $1 rather than $2 in the customer’s mind. This strategy is also called pricing ending or charm pricing.

Place: The place is where the retailer conducts business with its customers. The place can be a physical retail location or a non-physical space like a catalog company or an e-store. While most retailers are small, independently owned operations (over 90%), over 50% of retail sales are generated by major retailers often called “big box retailers” (see the list of the top 20 big box retailers below).

Promotion: Promotion is the final marketing mix element. Promotions include personal selling, advertising, sales promotion, direct marketing, and publicity. A promotional mix specifies how much attention to pay to each tactic, and how much money to budget for each. A promotion can have a wide range of objectives, including increasing sales, new product acceptance, creation of brand equity, positioning, competitive retaliations, or the creation of a corporate image.

The Four Ps Revisited: Customer-Oriented Retail Marketing

In recent years, to address the need to take a more customer-oriented approach to marketing, the 4 Ps of Retail Marketing have been revised and replaced by the 4 Cs: Consumer, Cost, Communication, and Convenience.

Consumer (versus Product): Instead of focusing on the product the retailer wants to sell, a smart retailer studies the wants and needs of its consumers before going to market. The more clearly a retailer understands the wants and needs of its customer base, the greater chance it will have of attracting customers and increasing sales.

Cost (versus Price): In retail, a cost is the value of money that has been used up to produce something. Factors that influence cost include the customer’s cost to change to a new product and the customer’s cost for not selecting a competitor’s product.

Convenience (versus Place): The Internet has made Place less of a factor in consumer purchasing decisions. Convenience addresses the ease of completing a transaction including the ease of finding information about a product, finding the right product, and purchasing a product.

Communication (versus Promotion): Communications includes a range of efforts including advertising, public relations, grassroots efforts, social media, and any other form of communication between the company and the consumer.

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The Top 20 Retailers in 2022

In some parts of the world, the retail industry is still dominated by small family-run stores, but this market is increasingly being taken over by large retail chains. The retail landscape continues to evolve, with e-commerce giants and discount chains playing an increasingly prominent role. Here’s a look at the top 20 retailers in 2022 based on total company revenues according to the National Retail Federation [NRF]:

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The reason that Apple and other industry-dominating organizations, like Harley-Davidson and IKEA, consistently beat out their competition is that they have a deep, comprehensive understanding of who their best customers are.

Truly knowing your customers requires moving beyond demographic data into the nuanced realm of human nature, a zone where imagery, color, and emotional tone are more powerful than logic or price. Up to 90 percent of all customer behavior is unconscious.  We come hard-wired with deep seated wants, needs, and desires that play a critical role in every decision we make—whether or not we’re aware of them.

It is by delving into the unconscious motivators that guide an organization’s best customer’s decision making process that a dominant organization can realize an unbeatable competitive advantage: predictability.  When you understand what causes your customers to act the way they do, you can predict, with a high degree of certainty, how they’ll react to any change in the customer-brand relationship. That could mean a new product, a new marketing message, or the way you set up your physical retail space or website. Knowing customer reactions ahead of time allows you to pick the most profitable endeavors and side-step the mistakes—before you make them.

What does this look like in the real world? Here are four ways dominant organizations have leveraged their superior customer understanding:

#1 – Wendy’s Is Winning

Once upon a time, Burger King had the #2 position in the fast food market sewn up tight.  Lately, however, it’s not so good to be the king.  An inability to correctly identify, understand, and connect with their target market has resulted in lackluster performance at home and overseas, while an ill-advised marketing campaign featuring a creepy, cartoonish King alienated more customers than it attracted. Meanwhile, Wendy’s is winning by honing in on the profitable upscale end of the fast food marketplace and determining, in great detail, what those customers want and continually evolving their menu to delight those customers.  The recipe works: today Wendy’s is very close to capturing the #2 position.

#2 – Volkswagen’s Victory

It is no coincidence that Volkswagen is highlighting their car’s safety record at the exact point when the majority of their most loyal customers are starting their families.  We all come equipped (standard issue!) with the need to nurture; this is one of those biologically drivers humanity relies upon to ensure the continuation of the species. There is no point at which this drive is stronger than when one is in the presence of a small infant. The marketing campaign for the Jetta is aimed directly at the unconscious, with strong, nurturing men—at times holding actual babies—discussing the safety and security the brand offers.  Sales of the Jetta have been record breaking.

#3 – Snickers Gets Satisfaction

Snickers was struggling to find their place in a crowded market. One big problem was they were attempting to sell candy bars to people who didn’t particularly want candy bars. The company analyzed their sales patterns, hoping to discern who was buying their candy. This research revealed that peak purchasing times happened mid-afternoon; construction workers on break and kids on their way to basketball practice valued the role Snicker’s plentiful peanuts played in quieting rumbling stomachs. This was a pivotal insight. Snicker rebranded itself not as another type of candy, but as a hunger buster. The tag line, “Hungry? Why wait?” helped emphasize the primary value that was already causing people to choose Snickers, an approach that was so effective that today, Snickers is the world’s leading candy bar.

#4 – Rolls Royce Wins Big

As the Chinese marketplace continues to evolve, dominant organizations are already taking steps to establish their presence efficiently and effectively.  Rolls Royce delved deeply into the culture of China, immersing itself in the country’s metaphorical language and powerful symbology before designing their Special Edition Year of the Dragon Phantom.

The maroon car, which comes with custom embroidery and gold painted dragons, does an admirable job embodying luxury for consider a consumer base that has been raised with markedly different experiences, iconography, cultural narratives, values, and mores than that of the maker.  Each one cost $1.2 million.  The entire production run sold out in less than 2 months.