RETAILING
Customer Incentives
Name:
Date of test:
Customer Incentives Used in Retail Outlets
Key words: - Pricing Strategies discounts sales free offers multi-buys loyalty schemes delivery after sales service samples credit
An Incentive is a benefit offered to encourage people to act in certain ways. Businesses often use ‘incentives’ to attract customers. Retailers are in competition with other businesses selling similar products. It is therefore important for retailer to attract customers with incentives that will encourage them to shop at their stores rather than going to the competitors.
Customer Incentives
Activity 1: list the incentives that a business can use to attract customers.
Pricing Strategies
Pricing strategies are used by businesses to set prices for goods to enable them to make a profit. These pricing strategies also have to act as an incentive to attract customers.
a) Competition Based Pricing
b) Penetration Pricing
c) Skimming
d) Sales
Activity 2: Answer the following questions
1. Which Pricing strategy would be used by a business when it sets its prices at the same level as other stores selling the same product?
(1 mark)
2. Which pricing strategy puts high prices on anew product and then lowers the price?
(1 mark)
3. Explain what penetration pricing is and why the price starts off low and then is raised?
(4 marks)
Discounts
A discount is a reduction in the normal price because of the way the customers buys the product. Discounts are very common, especially between manufacturers and retailers. If a retailer buys sufficient qualities, they will usually get a discount i.e. 10% of the price. Discounts to customers usually take place for the following reasons: -
Other Customer Incentives
The examples given on the previous pages all relate to the pricing of a product. But there are other incentives that retail businesses use to attract customers. Some of these examples will also affect the prices of products in one way or another.
a) Multi-buys
b) Free Offers and Samples
Activity 3: Answer the following questions:
1. Give an example of a Multi-buy that is used by each of the following retail outlets: -
a) Supermarket
b) Greengrocer
c) Clothes shop
d) Fast food restaurant
Loyalty/Reward Schemes
A loyalty or reward scheme is any incentive that makes the customers loyal to one business rather than another. For example, Tesco have a Club Card which gives discounts, free offers, coupons, etc to customer. A customer would earn ‘points’ when they buy their regular shopping which can be used to a discount on their shopping bill or to get free offers. Below is an example of a loyalty scheme from Sainsbury’s:
Activity 4: Research Tesco and Boots loyalty schemes and complete both tables.
Information / Tesco (www.tesco.com)Name of Loyalty Card
What is Clubcard?
How do customers Earn points? How many?
How does the customer spend the points? Which Products
How does the customer join the scheme
What other deals can you get with the Tesco Clubcard / Clubcard
Information / Boots (www.Boots.com)
Name of Loyalty Card
What is Advantage card?
How do customers Earn points? How many?
How does the customer spend the points? Which products?
How does the customer join the scheme? / Advantage Card
After Sales Service
After sales services are services provided to customer after they have bought a product. Providing credit and delivery are both services that take place after the customer has been into the store to buy the goods. There is a wide range of after sales service that retailers provide. These include: -
Activity 5: Complete the table. Some have already been done for you.
After Sale Service Type / DefinitionDelivery
Follow up advice/helplines
Common with electrical equipment such as washing machines but sometimes has to be paid for by the customer. Some stores selling bicycles offer a check on the cycle after 2 or 3 weeks.
Credit Facilities
Common with equipment such as computer software i.e. Windows XP. Customers are offered new versions at lower prices if they have bought the earlier version at the full price.
Warranties/Guarantee
Information on new products/keeping customers informed / This helps to keep customers informed of new products or in some cases product recalls if they are found to be faulty. This service can make the customer feel valued and not forgotten once the sale has been closed
Activity 5: Answer the following questions.
1. Give four examples of products from different types of retailer that are likely to be delivered to a customer’s home.
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2. Give 3 different reasons why delivery is offered.
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3. List 3 examples of after sales services that are likely to be offered by a store selling
Hi-fi equipment. Explain how each will benefit the customer.
After sales service type / Benefit to customer1