Welcome to the the Ivey HBA Retail Marketing Management blog. Retail marketing is an exciting, dynamic, important, and very visible aspect of the overall field of marketing. Throughout the year, students will be posting comments regarding contemporary retailing issues. Although this is intended to be used by Bus 4411 students, industry marketing professionals are also invited to join in if they like.

Thursday, February 12, 2009

What's Your RVP?

Evaluating Why Retailers Sometimes Turn Away Business

http://www.youtube.com/watch?v=g_rlhF8NmKE - skip straight to 8:40/10:49.

When I first saw this scene in Pretty Woman, I remember thinking “Why would they do that to her?” She literally told them that she had money to spend, and they would not let her. From a business perspective, it made no sense to me. Then again, I was 11.

Fast-forward 10 years. The other day in class, a peer of mine asked whether online dating could be considered “mass customization”. At first, we all laughed at the notion of one person being “customizable” to the masses. But his question got me thinking: if certain companies have “experience” as their RVP and treat people as their inventory… Can the customers begin to define the product?

Take a restaurant, for example. If the people they serve play a strong role in create an atmosphere that promotes their RVP, the restaurant that focuses on experience inevitably relies on their customers – not just in terms of word-of-mouth, but also in terms of complete ambiance – to deliver their product. This is exactly why some fancy restaurants refuse business from people wearing jeans. Why else would they say, “We won’t take your money”? Certainly not because they enjoy throwing away revenues. It’s because if they didn’t turn down that business now, they would risk losing future business by bringing those people in and disturbing the environment. By doing that, they are prioritizing the company’s long-term cash flows. This actually demonstrates that their priorities as retailers are intact!

So it all makes sense now; the saleswomen on Rodeo Drive didn’t want to drive out other customers or deter potential customers by waiting on the outlier. To them, it was obvious by the way Vivian dressed that she had much less expensive taste. Their average customers probably enjoy achieving a sense of “upper-classiness” when shopping in that store, and Vivian’s presence would steal from their experience.

The conclusion drawn that some people can contribute to a certain RVP, while others cannot begs the question: do we all have our own separate RVPs? I would argue… Yes! And I’m not just talking about our separate personality traits or what makes us unique.

What benefits do you think your friends get by hanging out with you? How often do you hear them say, “Wow, I can’t believe we got that great deal!” or “Oh, you’re not at home? Alright, I guess I’ll see you later.”? Do you think they call you up with something in mind and invite you out because they know you’d be down for anything, or are they bored out of their minds and just want do something – anything – as long as they don’t have to leave the building?

I know most people would say, “it depends” or “we all have a little bit of each RVP component”. But let’s face it: nothing is ever black or white, so the mere fact that we are more of one thing than another is something that companies can study and capitalize on.

And we’re seeing exactly that happen! Retail companies are beginning to target specific customer segments so nice and so heavily that corporate marketing strategies use customer relationship management techniques to literally drive certain people (perhaps the less loyal customers, or the ones who contribute the least profit dollars) out of their stores. It now seems evident to me that as marketing becomes more aggressive, our individual personality traits play a greater role in determining exactly which stores we are attracted to.

Here are some examples:

Price (Ivey accounting professor Chris Sturby – notoriously “frugal”. You will save money just by being around him.)

Convenience (The “hanging-out-in-residence” scene.)

Selection (Lovers of variety, as well as those with frequent and extreme mood swings.)

Experience (People who love to push the envelope.)

Some might argue “But we all bring out different things in each other; the RVP we bring to the table in relationships varies with the people who we are around.” This is true - and that’s exactly why some retailers get it wrong the first time. We don’t always portray our dominant traits right from the get-go. This is why retailers need to take the time to study and understand their customers prior to making predictions about whether or not they will yield significant cash flows in the long term.


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