A STUDY OF ADMINISTRATIVE POLICIES AND
PRACTICES IN FOOD DISTRIBUTION
PART I

Thesis for that Deg?» of M. A.
MICHIGAN STATE UNEVERSI‘E'Y
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"The Food Distribution Curriculum at
Michigan State University is under the
sponsorship of the National Association
of Food Chains."

A STUDY OF ADMINISTRATIVE
POLICIES AND PRACTICES
IN FOOD DISTRIBUTION

PART I

By
ROBERT r. CLOAR

AN ABSTRACT

submitted to the College of Business and Public Service
of Michigan State University of Agriculture and
Applied Science in partial fulfillment of
the requirements for the degree of

MASTER OF ARTS

Department of General Business
Curriculum in Food Distribution

1957
,c;9 //”
Approved f a W

ABSTRACT

Because of increased competition within the food
industry, management has had to reduce the margin of error
to continue to operate profitably. The information obtained
from marketing research studies provides a basis from which
management can make a more intelligent decision about mar-
keting problems. Simply stated, marketing research is any
activity concerned with finding out how to do things better.

the problem of selecting new food products is becomtng
increasingly difficult because of the lack of shelf space,
increased interest rates on borrowed capital, and the lack of
consumer acceptance of many new products. As new methods of
preservation are developed from scientific research, changes
in equipment, merchandising procedures, and sales trends of
individual products will be experienced by the food industry.

As a result of increased volume and wdde areas of
geographical operation, management has become divorced from
the actual operation at the store level. To obtain the
necessary control of operations, management has had to rely
more upon accounting and operating reports. The internal
auditing department has also provided an excellent means of
obtaining control and reporting followbthrough on company
policies and procedures.

The question of leasing versus purchasing of real estate

and equipment must be answered in view of the special

circumstances of each organization. An organization can not
Thope to successfully follow the policies of another company
because of the many differences in operation. Leasing offers
an opportunity to liquidate capital that is invested in fixed
assets and also increase the ratio of current assets to cur-
rent liabilities. However, other factors should be considered
before a decision is made to lease real estate and equipment.

The formulation of operating policies is necessary if
an organization is to realize success over a long period of
time and to develop a consistent personality for the company.
Competition will be an important factor to consider in de- ‘
veloping policies affecting price, but competition should not
determine the internal pricing structure of an organization.
The proof of an effective operating policy is in the desir-
able results obtained through actual performance.

The newspaper has continued to be the number one adver-
tising medium by which super markets have distributed the
selling message to the consumer. An important reason for
this is the fact that the newspaper reaches the public at a
lower cost per individual than does any other advertising
medium. However, waste circulation is a factor that must be
given serious consideration by many super market operators
when utilizing the newspaper as a means of distributing the
selling message.

Radio and television have proved to be an effective

‘means of supplementing primary sources of advertising such

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as newspapers. Thus far many food retailers have not
utilized television advertising because such problems as
cost and programing have prevented this advertising medium
from being an effective means of promoting sales and profit.
In the development of any advertising program, manage—
ment should remember that : (1) advertising can not sell
merchandise that people do not want to buy, (2) advertising
can not succeed unless used continuously, and (3) an adver-
tising program can not succeed without the support of the

entire store personnel.

 

A STUDY OF ADMINISTRATIVE
POLICIES AND PRACTICES
IN FOOD DISTRIBUTION
PART I

By
ROBERT r. CLOAR

A THESIS

Submitted to the College of Business and Public Service
Michigan State University of Agriculture and
Applied Science in partial fulfillment of
the requirements for the degree of

MASTER OF ARTS

Department of General Business

Curriculum in Food Distribution
1957

Q7

 

AC KN OWLEDG EMENTS

The author wishes to express sincere gratitude and
appreciation to those who have made this thesis and school
year possible.

A great portion of indebtedness is expressed to the
Kroger Company for their preparative interest in allowing
the writer the opportunity to complete this study. Without
their assistance this study would not have been possible.

The writer is also indebted to Mr. Warren L. Engle, Divisional
Vice President, The Kroger Company, Carbondale, IllinOis, for
his confidence and initial recommendations to attend this
course at Michigan State University.

The writer is deeply appreciative to Dr. E. A. Brand,
Director of the Curriculum in Food Distribution. As an
advisor, his guidance and counsel were invaluable in the
Preparation of this thesis and as an educator, his inspiring
influence in a quest for greater knowledge.

No list of acknowledgements would be complete without
publicly recognizing the encouragement, assistance, and
untiring effort of the author's wife, Doris. The secretarial
”0’1! Provided by her throughout the school year, for this
thesis, and additional course work, has contributed greatly

to the completion of this school year.

The writer would also like to thank Peggy Curry for her
many kindnesses and considerations throughout the school year.

11

TABLE OF CONTENTS

SECTION I
CURRENT AND FUTURE TRENDS IN FOOD DISTRIBUTION

CHAPTER PAGE
I CONTRIBUTIONS OF MARKETING RESEARCH TO THE FOOD
INDUSTRY 0 O O O O O O O O O O O O O O O O O O O 1
IntrOdUCtion e e e e e e e e e e e e e e e e e e 1
Marketing Research Defined . . . . . . . . . . . 2
Market Research vs. Marketing Research . . . . . 2
Analysis of Business Records . . . . . . . . . . 3
Limitations of Marketing Research . . . . . . . 5
Marketing Research Activities of Food Chains . . 6
Management StUdieS e e e e e e e e e e e e e e 6
Merchandising and sales promotion studies . . 8
Store operation StUdieS e e e e e e e e e e e 10
Miscellaneous StUdieS e e e e e e e e e e e e 11
Summary e e e e e e e e ee e e e e e e e e e e e 2
II (SURRENT AND FUTURE TRENDS IN STORE SIZE . . . . . 1h

IntrOdUCtiOn e e e e e e e e e e e e e e e e e In
Dimensions of the 1956 Super Markets . . . . . 16

III CURRENT AND FUTURE TRENDS IN STORE LOCATION . e . 18

IntrOdUCtion e e e e e e e e e e e e e e e e e 18
Construction Expense . . . . . . . . . . . . . 18
Whfire are New Stores Locating e e e e e e e e e 19
:Downtown Locations e e e e e e e e e e e e e e 20
Summary e e e e e e e e e e e e e e e e e e e 21
IV CURRENT AND FUTURE TRENDS IN NEW FOOD ITEMS e e e 22
Introduction e e e e e e e e e e e e e e e e e 22
Growth of New Food Items . . . . . . . . . . . 2?
Importance Of New FOOd Items 0 e e e e e e e e 2S
‘Direct Effect of New Items on Brand Leadership . 25
Problems Created by New Food Items . . . . . . 26
'Life Of a New Product 0 e e e e e e e e e e e e 27
‘Direct Effects of New Food Items on the Food
IndUStry e e e e e e e e e e e e e e e e e e 30
Frozen fOOdS e e e e e e e e e e e e e e e e 31
DehYdration e e e e e e e e e e e e e e e e e 31
AntibIOtics e e e e e e e e e e e e e e e e e 32
Irradiation e e e e e e e e e e e e e e e e e 32
e e e e e e e e e e e e e e e e e 32

Summary . . .

111

CHAPTER

V CURRENT AND FUTURE TRENDS IN PACKAGING . . . . e e

Introduction . . . . . .

The Role of Packaging in Today's Super Market

The Merchandising Responsibility of the Package.
Growth of Packaging in the Food Industry . . .

Emphasis on Display Value

Summary

0 O O

Developments Directly Affecting Food Packaging

VI REFINED CONTROL TECHNIQUES . . e e e e e .

Introduction e e e e e e e e e‘e e e e e

Internal Auditing
The Physical Inventory

Cash Control . . . . . .
Voids and refunds . .
Accounting control . .

Summary e e e e e e e O

VII ‘LEASING OF REAL ESTATE AND

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Internal auditing and internal

control

.0...

EQUIPMENT

Introduction e e e e e e e e e e e
Capital Factors Influencing the Decision

Lease e e e e e e 0
Advantages of Leasing .
Invisible costs . . .
‘Disadvantages of Leasing
Conclusion . . . . . . .

SECTION

AMERCHANDISING AND SALES

VIII OPERATING POLICIES . . . .
Introduction . . . . . .

What is a Policy . . . .

Rules vs. Policies . . .
The Relationship Between

the Clientele of the Sh

Operating Policy Areas

Quality e e e e e e e
Variety e e e e e e e
Freshness . . . . . .
Friendliness e e e e e
Cleanliness . . . . .

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II

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PROMOTION

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POLICIES

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68
68
68
69

7O
71

3‘3
71,
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CHAPTER PAGE

SerV1ce to the CUStomer e e e e e e e e e 75
Honesty and fair dealing . . . . . . . . . 75
Internal and external appearance of the
Store e e e e e e e e e e e e e e e e e 76
Price e e e e e e e e e e e e e e e e e 76
COhClUSion e e e e e e e e e e e e e e e e 77

IX FUNCTIONS OF THE MERCHANDISE MANAGER . e e e e e 79

Introduction e e e e e e e e e e e e e e e 79
Specific Functions and Responsibilities . . . . 79
Conclusion e e e e e e e e e e e e e e e e e e 82

X FUNCTIONS OF THE SALES PROMOTION MANAGER . . . e 8%
IntrOdUCtion e e e e e e e e e e e e e p e e e 81+
Kroger's Philosophy of Sales Promotion . . . 85
Importance of Sales Promotion Department . . . 86
$8198 Promotion Planning e e e e e e e e e e e 8
Sales Promotion Organization . . . . . . 8
Sales Promotion and Merchandising Policies . . 89
COflClUSiOfl e e e e e e e e e e e e e e e e e e 91

XI THE USE OF NEWSPAPERS IN SALES PROMOTION e e e e 92
IntrOdUCtion e e e e e e e e e e e e e e e e e 92
Why use the NQVSPEPGT e e e e e e e e e e e e e 93
COSL per Reader e e e e e e e e e e e e e e e 93
Advertising Cost Trends in Newspapers . . . . . 96
Progress of Newspaper Advertising for Food

Stores e e e e e e e e e e e e e e e e e e e 97
Purposes of Food Chain Advertising . . . . . . 99
A.& P StUdy e e e e e e e e e e e e e e e e 100
Institutional Advertising . . . . . . . . . . . 101
The weekly Merchandise Ad . . . . . . . . . . . 103
Meal Planning and Recipes . . . . . . . . . . . 105
.Advertising Dominance e e e e e e e e e e e e e 106
irrends in Early week Advertising . . . . . . . 108
{Summary e e e e e e e e e e e e e e e e e e e e 109

XII AN ANALYSIS OF RADIO AS A SALES PROMOTION DEVICE. 111

Introduction e e e e e e e e e e e e e e e e 111
Characteristics of Radio as an Advertising

“Edium e e e e e e e e e e e e e e e e e 112
Radio Study Conducted by Cassady and Williams . 113
Emotional Appeal e e e e e e e e e e e e e e e 115
Merits of Radio to Food Stores . . . . . . . . 116
HOH’tO Choose a Radio Station e e e e e e e e e 117
Cooperative Advertising Allowances for Radio

Advertisers e e e e e e e e e e e e e e e e e 118

V

CHAPTER

Why Use Mere Than One Advertising Medium for

‘ Sales PPOMOtiOD e e e e e e e e e e e e e e
Disadvantages Of Radio e e e e e e e e e e e

XIII AN ANALYSIS OF TELEVISION AS A SALES PROMOTION

DEVICE . . 0 . . . . 0 . 0 O . . . 0 . 0 . 0

Introduction e e e e e e e e e e e e e e e e

Growth of Television . . .
Why Television Has Not Been

Retailers e e e e e e e e
Syndicated Film Programs .
Spot Announcements . . . .
The CommerCIal e e e e e e
Cooperative Allowances . .
Ratings and Rating Services
COHCIUSion e e e e e e e e

XIV PROMOTIONAL TOOLS . . . . e e
IntrOdUCtion e e e e e e

TRADING STAMPS

Future of Trading Stamps .
Legislation e e e e e e e e
PREMIUMS
Premiums and Their Problems
Types of Premiums . . . .
CONTESTS
Purposes of Contests . . .
Standard Types of Contests
Promoting the Premium . . .
COHCIUSIOH e e e e e e e e

XV TENS USE OF DISPLAYS IN SALES PROMOTION

Introduction . . . .

IBenefits of Special Displays

FUmctions of Displays . . .

Manufacturer' 3 Display Material

Types of Store Displays

Shelf Display e e e e e e e
Mass Display . . . . . . .
Why Special Displays . . .
Selection of Location . . .

Market Research Studies on Point-cf-Purchase

Accepted by
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Displays e e e e e e e e e e e e e e e
Prime Objectives of Point-of-Purchase Displays.
Summary e e e e e e e e e e e e e e e e e e e e

vi

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PAGE

119
120

121

121
121

123
126
128
128
no
132
13b.

' 136

136

CHAPTER PAGE
XVI IN-STORE PROMOTION POLICIES . . . . . . . . . . . 167

IntrOdUCtion e e e e e e e e e e e e e e e e e 167
my III-Store PPOIDOtiOnS e e e e e e e e e e e e 167
Opposition to In-Store Promotions . . . . . . . 168
COHCIUSIOH e e e e e e e e e e e e e e e e e e 169
BIBLIOGRAPHY e e e e e e e e e e e e e e e e e e 171

vii

 

LIST OF FIGURES

FIGURE '. PAGE
FiguralOoeeeeeeeeeeeeeeeeeeeee16

Figure2......................o 29

viii

 

PREFACE

This study is divided into two sections, Current and
Future Trends in Food Distribution and Merchandising and
Sales Promotion Policies. The material in both sections has
been discussed from the administrative point of view.

In Section I, Current and Future Trends in Food Distri-
bution, the writer has presented current information affecting
some of the major phases of food distribution. Through a
view of current situations and develOpments, the student and
the food retailer can have a better foundation from which to
judge the future progress of the food industry. .

Section II, Merchandising and Sales Promotion Policies,
is concerned with the administrative concept of sales pro-
motion and related policy areas.

The aim of this study is to provide a supplement to
students enrolled in General Business I+37, Food Chain Adminis-
tration. Because of the scope of subject areas pertaining to
this study, the writer has been forced to avoid a detailed
discussion of each topic in itself. The purpose of this study
is to provide a more extended survey of administrative practices
and Policies rather than to develop an exhaustive study on a

Specific subject area in this field.

ix

 

The writer chose this study because an opportunity was
afforded to obtain further knowledge from a broader subject
area. This study also presented the opportunity to acquire
information concerning administrative practices and policies
in the field of food distribution. The information obtained
from the research associated with this study should be invalu-
able as the writer plans a career in this field.

Due to the lack of continuity in subject matter of the
chapters, separate introductory headings have been utilized.

 

SECTION I

CURRENT AND FUTURE TRENDS IN FOOD DISTRIBUTION

CHAPTERI

CONTRIBUTIONS or MARKETING RESEARCH
ro THE roon INDUSTRY

mtgodgction
The retail food industry has grown into a highly

technical and competitive industry in the past several dec-
ades. Increased competition has contributed to the declining
net profit margins in the food industry. As net profit margins
have decreased, food chains have had to reduce their margins of
error to continue to operate successfully and profitably.
."'Because efficient distribution and marketing will be vital to
the producing of profits, business generally is being driven
to a quest for facts as a sound basis for solving its urgent
problems."1

Marketing research studies have contributed immeasur-
‘bly to help solve problems associated with business activities.
“at problems can be studied through marketing research? An
answer to the preceeding question may give the reader some
1408 as to the scope and value of marketing research in a
f00¢! chain. In the latter pages of this chapter the writer
“111 describe some of the marketing research activities of
r°°d chains.

‘

1
Donald M. Hobart (ed.) Marketing Resea c Pr ct ce
(New York: The Ronald Press Company, ), p. . ”

mrketing Research Defined

The American Marketing Association defines. marketing
as "those business activities involved in the flow of goods
from production to consumption."2 From this definition the
reader can begin to visualize the scope of the marketing
function.

With the preceeding definition of marketing in mind
the writer would like to define marketing research. The
American Marketing Association defines marketing research as,
"The gathering, recording, and analyzing of all facts about
problems relating to the transfer and sale of goods and ser-
vices from producer to consumer."3
Market Research gg._Marketing Research

To clear any misunderstanding of terms, a differentiation
between market research and marketing research is essential.

The difference between these two kinds of research

must start with a definition of the first word in each
term. Market is defined as a group of individuals
willing to buy a product and service and able to pay
for it. Marketin refers to the methods of getting
the product to the consumer.

This means that market analysis [3r research7 is
the procedure of evaluating the desire of a group of
People to buy, its ability to buy, and the effect that
distribution methods have upon making the goods avail-
able to the market.

Marketing analysis [3r researcfl, on the other‘

hand, is the type of study in which the methods of
Marketing are considered. These may include such

M;

21bid., p. 3.

or 3"Report of The Definitions Committee," The JOurnal
—_.Ma ket n , Vol. XIII, (October, 19MB), p. 210.

points as advertising effectiveness, the effectiveness
of methods of retail selling, etc.

My}; 2; Business Rgcogdg

To some, the term marketing research automatically means
making surveys. Contrary to some opinions, marketing research
is also the critical comparison of census, trade association,
or other published data to the internal figures of a specified
business.

Many food chains are conducting marketing research un-
knowingly. An analysis or comparison of accounting records is
still very much a part of marketing research.5 When manage-
ment analyzes business records as compared to norms for the
industry, an integral part of marketing research is being
conducted. Analysis of past and present business records
provides a base for determining the presence of trouble in an
organization. “nether such analyses and comparisons are made
by company personnel or marketing consultants, the result is
still marketing research.

Any analysis of business records usually follows two
or three steps: (1) the computation of ratios and other sta-

tistical measurers is the first; (2) the comparing of these

k

~—

hm Wren S. Heidingsfield and Albert B. Blankenship,

Market and 9lkiarketi___n_g Agglzgig, (New York: Henry Holt and
“PM. p pp. "

5Robert J. Holloway, "Marketing Research is More Than
Mere," Th Journal of Market n , Vol. XVII, (January,
1953), .—'§9, """"""'"'

measurements with standards or 'normal' figures for the in-
dustry; (3) further research if necessary.6

A single figure or measure has little or no value to
the analyst. Only when business figures are compared to other
data can any significant measurement be taken. For example,
a sales figure of one million dollars for a super market is
of little value unless other internal figures of the company
or store are known. To obtain any significance from the sales
figure, other data such as profit, size of store, sales per
customer, industry averages, etc. need to be known.

One word of caution-mwhen comparing internal figures
to other measurements, the comparable data must measure the
same elements. For example, X food chain reports an adver-
tising expense of nine-tenths of one percent. Y food chain
reports an advertising expense of two per cent of gross sales.
Regardless of the difference in reported advertising cost,
both companies may have approximately the same advertising
expense if accounting practices were standardized. X food
chain subtracts advertising allowances from the cost of ad-
vertising. Y company enters advertising allowances on the
account records as purchase discounts. Y company charges
the labor cost of the advertising department to the advertis-
1118 cXpense and X company does not charge the labor cost of
the advertising department as advertising expense. Through

¥

61bid., p. 39.

this difference in accounting procedures, internal figures can
vary greatly from chain to chain.
Lfimitgtiggg 2; Marketing Research

The data obtained from research studies will not solve
marketing problems unless the information is intelligently
analyzed. Management should remember that one of the most
important functions of marketing research is "to provide a
basis of Judgement so that management can maximize profits
and minimize risk in the field of distribution in an economy
in which price is one of the determining elements affecting

choice."7

Eketing Mcg not substitute £9; mature Judge-

ment. The data collected from research studies are simply

 

important management tools from which more intelligent decisions
can be made by mature, experienced people. The information
obtained from marketing research should be analyzed and studied
so that management can make better decisions. Better manage-
ment decisions can be made after the facts provided by accu-
rate marketing studies are analyzed rather than relying on
experience and impressions unsupported by specific information.
The infermation obtained from marketing research studies does
not prove a right way or a wrong way, rather the specific data
obtained from marketing studies give management a basis from

which more intelligent decisions can be made.

A

7
Willard M. Fox To Use Market Research :0 z Prtofi
(“9" York: Prentice-Hallie"? , p. 5.

Marketing Research Activities 9;,Fbod Chains
‘William Applebaum classifies the marketing research

activities of food chains in four major classifications:
management, merchandising and sales promotion, store opera-
tions, and miscellaneous. other types of marketing research
are conducted but these four major classifications include
most marketing studies used by food chains. Many marketing
research studies can be classified under more than one of
these categories. For example, marketing studies concerning
special displays may include elements of merchandising and
sales promotion and studies concerning the cost of erecting
the display may be classified under store operations.

A sample of some of the marketing studies of food
chains classified under the four categories of management,
merchandising and sales promotion, store operations, and

miscellaneous are as follows.8

1. Management Studieg
figg;g_§glgg_ggg,Profitg. Annual analyses of trends in
sales and profit of individual stores are made. Stores are
classified by sales volume, type of store, location charac-
teristics, etc., from these reports a basis can be made for
Iflamning locations, remodeling stores, and changing patterns

or operations for individual stores.

g

s BInformation from: william Applebaum and Richard F.
”81‘! "Marketing Research Studies in a Grocery Chain "

J i of Marketing Vol xvn (Jul 5'
flag __ . y 1952) pp. 53- 5.
335,7 ass A ress g van by Mr. Rilliam’ApplebEum, May 21,,

figluation 9; Competitive Super Markets. Marketing

researchers analyze trends in population, food sales, number
and type of food stores, new store openings, closing and re-
modelings. Information obtained from these studies gives
management a criterion upon which to Judge their competitive
position within the trading areas. These studies also give
management a basis to estimate the sales of competing super
markets. These studies in addition to census and sales tax
figures, will reveal the percentage of the food dollar that
each food chain is receiving in a given trading area.

rCompeting super markets can be checked for quality,
price, and value of perishable merchandise. Information
obtained from these checks may influence a decision to raise
I or lower prices on similar merchandise. These checks can
help to keep management informed of competitive merchandising
and operating practices. Decisions should be made, on a sound
business basis rather than follow competitive practices and
policies.

Mg! m Locatigs. Marketing research studies have
been used by many food chains to serve as a basis for esti-
mating sales potential of proposed site locations. Information
obtained from studies can serve as a basis for management to
evaluate the advantages and disadvantages of proposed site
locations. Because of the competitive situation in many trad-
1118 areas food chains must approach the problem of site

selection on a more scientific or systematic basis than in the

past. Gone is the day when the successful operator could
select a site for a new super market from a city map or an
automobile. Granted, there is no true "scientific" method
of selecting new store locations, but marketing research
studies can provide basic information to management that will
reduce the margin of error in selectingnew locations.
Wu '5 0 www. snare;-
W W Marketing researchers are able to
exchange ideas and techniques with non-competiting food chains.

By exchanging confidental information on a mutual basis, mar-
keting personnel can recommend changes in management, store
operations, and merchandising procedures based on the experi-
ence of the other cooperating food chains.

Recommendations and changes in operations can be based
on the cooperative research figures of the National Association
of Fbod Chains and Super Market Institute. However, for com-
petitive reasons, chains are reluctant to devulge confidental
information to the cooperative programs of trade organizations.
A group of non-competing food distributors can exchange spe-
cific and confidental information that can be of great benefit
to the members of the "gentleman's pack".

II. Merchandising gnd §_a_l_._e_s,-g;omotiog Stgdies
Some of the areas in which marketing research studies

have been applied in the field of merchandising and sales

Promotion are :

ma; Digplgzs and gelf Displgzs. Experiments under-
takm independently and in cooperation with manufacturers help

to ascertain the effectiveness of special displays in the

super market. Results of studies show display effectiveness
for each product tested and for combinations of products, by
type of display, length of display period, store volume groups,
and product sales results following immediately after the
tests.

§pgcia1 Promotiong. Fbod chains can analyze the cost
and return (in sales volume and attraction of customers) for
special "deals" and promotions. Special "gimmicks" can be
very effective in creating extra sales, but the cost of pro-
motions such as coupons, contests, free merchandise, etc. must
be analyzed from a pre-determined objective (sales volume or'
attraction of customers) to accurately measure the results of
the promotion.

Cgmmggity Analysis. Studies of specific products to
determine trends in sales and gross profits on a store and
company basis have been made. These analyses form a basis
for: (l) decisions on extent of lines carried, (2) allocation
of selling space, and (3) sales and profit quotas for indi-
vidual stores.

ggigigg,§tudie§. Controlled experimentation on the
effects of varying retail prices on sales and profits of
specific product groups can provide a basis from which manage-
ment can formulate pricing policies. Management can determine

the price that will yeild the highest dollar profit through
controlled studies in the stores. Marketing studies can also

10

reveal the effects of multiple pricing on the sales movement
of a product.
III. spar; Qperatiog Studio;

Food chains operators have increased productivity and
established more efficient work methods through research
studies within their own companies and with the assistance
of the United States Department of Agriculture. Areas of
research study classified under store operations by William
Applebaum would include: I

£roductivitz,Agg;x§;g. Analysis of sales per man hour,
sales per square foot, sales per cash register, etc. has given
management a basis to estimate productivity. Marketing re-
search studies of labor productivity provide food executives
a basis from which to evaluate personnel performance, per-
sonnel training programs, operating and merchandising deci-
sions.

Through marketing research studies, executives of food
chains have obtained more insight into the sales effective-
ness, operating efficiency, investment and expense of store
equipmmnt and fixtures. The advantages and disadvantages of
various makes of store equipment are studied in order to
recommend the equipment best suited for the operation of the
Ibod chain.

Accuracy an}; Effigigncx 2; W. Studies have

been conducted concerning the total time each customer spends

1lithe store and how that time was divided between shopping,

11

waiting in line, and actual check-out time. The findings of
such studies provide a basis for improving the check-out
operation.

Studies evaluating the performance of checkers can dis-
close their weaknesses and mistakes. After analyzing the
weaknesses of the checkers, training programs can be estab-
lished for periodic checkups and corrective training.

IV. Miscellggeous Studies

“alliam Applebaum classifies all marketing research
activities not related to management, store operations, and
merchandising under the category of miscellaneous. Some of
the studies classified in this group would include:

Cugtomez Egying_§;bi§_. Marketing studies have been
very successful in determining the origin of customers, fre-

quency of store visits, and mode of travel to the stores.
Other detailed information such as the size of purchases, items
purchased, and departments patronized can be determined from
marketing research studies. With this information, management
can develop a foundation for planning store layout, selecting
store location, and allocating shelf space.

chkaging Studies. One of the controversial subjects
in.the_food industry today is that of centralized packaging
V3. store packaging. Management has turned to marketing re-
searchers to analyze the cost of packaging at various segments
tu'the distribution channel. Studies of specific items or
commodity groups are being conducted to determine whether

12

packaging in consumer units should be handled at the store,

at a central point for a number of stores, or by other concerns.
Sales tests of items packaged at various points are being con-
ducted in coordination with the cost analysis. From the
information obtained from these studies, managements can
determine the most economical methods of packaging for their
particular organization.

No attempt has been made to list all the areas in which
marketing research studies have contributed to more successful
operations in food chains. Rather the writer has presented
a brief sample of some of the marketing research studies in
order to give the reader more insight to the contributions
and scope of marketing research in the food industry.

QEEEEZI

Research is nothing more than trying to find out
today how to do things better tomorrow, through syste-
matic gathering, recording and analysis of facts.

Hhen good research is intelligently used, it can help
business operate at a'profit--this year, next year and
in the years after. Good res arch is an ingredient
essential to business health.

Simply stated, marketing research is any activity con-
cerned with finding out how to do things better. William
ADPlebaum states that the food industry needs marketing re-
search because problems are multiplying faster than the
members of the food industry are solving them. Mr. Applebaum

¥

9W11113m Applebaum, "The Concept of Industry Coopera-
aive Marketing Research," f 2%? £21”. 22222-11}? Market 1
bu 0 ‘”""*£‘

esearch i the Food D st Industry, icago: Super
Fri-Etna. 1535.7“, pfi—L—J. -

13

continues by stating that a well planned marketing research
program is an important tool that management can use to raise
net profits without increasing gross profit margins.10

The information obtained from marketing research studies
is not conclusive. Such information gives management specific
facts to serve as a basis for intelligent decisions. Market-
ing research is a management tool to help provide information
about what the situation is, what the situation should be,
and what changes or corrective action can be taken with what

. —_ ---‘_..
fl“_ ”5'va -‘V "-n' ‘ 4:

probable effects. "The best research in the world does not
mean a thing, unless it is used with understanding and a proper
appreciation of its limitations and its true functions."11

The contributions received from marketing research
studies thus far emphasize the future role that marketing
research holds to the progress of the food industry. Because
Of increased competition, there will be narrower margins for
error and narrower limits for unsound judgement. The need
for basic information or scientifically determined facts will
be even greater in the future than in the present.

1°Speech given by Mr. William Applebaum to Food Dis-

§3§gut10n Curriculum, Michigan State University, May 21,

11Fox, 9.2- 2—1.12." p. 5"“

 

CHAPTER II

CURRENT AND FUTURE TRENDS
IN STORE SIZE

Introduction

No appraisal of the food industry's progress is complete

12 are being

without a picture of the rate at which super markets
constructed. The rate of construction holds the key to the
trends of future development in the food retailing industry.
Because of conflicting data from trade surveys as to the num-
ber of super markets constructed last year, this study accepts
the balanced figure of approximately 2250 new super markets
erected last year.13

Are super markets reaching the saturation point? This
question is often raised by marketing men, financiers, and
Others watching the rapid expansion of the food industry. Are

mDer markets becoming too large in size? This question is of

12The writer's definition of a super market is: A de-
Plrtmentalized retail establishment having the four basic
eDartments-u-self-service grocery, meat, produce, and dairy--
Vith total minimum sales of $375,000 yearly. Super grket
W and Progpesspve Gpocer classify any store, chain,
°P n ependent, wit a m n mum sa as volume of $375,000 per
3391', as a super market. '

13Pro ressive Groc r estimates that 2500 new super mar-
keta were construct-ed n 956. "Twenty-fourth Annual Survey
0f Food Retailing," sive Grocer, (April, 1956), p. 60.
Max M Merchangisg estima'tes Ehat some 1980 new super
‘81“ ets were construcfed In 1956. "Super Market Boom," _S__u,p_e_r_

t We. (April. 1957), p. 107.

_l+_‘_._._-c i -a'
}M.‘ s!”'! .
I" - e. b. ‘

15

vital concern to many food store operators and chain executives.

Research reveals that the number of families available
to each super market has definitely been declining. In 19%
there was one market for every 5659 families. In 1950 there
was one super market for every 301% families. And in 1956 there
was one super market for every 2129 families. These figures
do not imply that each super market had a corresponding number
of families as customers, rather they indicate the ratio of
super markets to families in the United States. These figures
do indicate the increasing number of super markets in the
United States. However, the super markets did not control such
a large share of the food sales in the United States in 19‘+0.
In 1956, 27,100 super markets, chains, and independents, con-
trolled 62 per cent of the food sales for a total of 26.):
billion dollars. Whereas, in 191:0 there were 6,175 super
markets controlling only two billion dollars of the food sales.
Naturally, the number of families available to each super mar-
ket would be more in who because there are some three times
a! many super markets now as there were in 19lt~0.1h

The writer has presented the above figures concerning
the ratio of families available to super markets for three
reasons: (1) to prove the fact that super markets have not
reIlched a saturation point, (2) to show the growth of consumer

‘

1”Figures from "Twenty-fourth Annual Survey of Food

gagging." :_[_pid, p. 61 and "Super Market Boom," pp. 215.,

16

acceptance of super markets, and (3) to show that statistical
data often reveal more information that is outwardly pre-
sented to the reader.
Qimepsiops 9:, $319. 1916 Sppgp Markets

The super market structure has continued to grow in m
size. The new units built in 1955 averaged 12,000 square 11
feet. 0f the stores constructed in 1955, about 35 per cent
contained 15,000 square feet or more. But in 1956, ’+3.6 per
cent of the new super markets constructed had at least 15,000
square feet. (See Figure I for a breakdown of the new super

markets, built in 1956 according to size).

 

 

gize 0? Market For Cenf 0? Average Size Average
__ View grkets in 39. Ft. Selling Area

 

 

Small (undegttc; 5000 5.5 3990 3170
8 e e
Mbdium ( q.,f:o)10 ,000 .2t.7 7150 5350
Large (10,000 .go 15,m 26.2 12,030 8920
Extra large (15 000 to 23.7 16,700 12,010
20,000 sq.f mt
Colossal (20 000s sq. ft. 19.9 28,130 17,960
an over
FIGURE 1‘

*“Super Market Boom," o . gi§., p. 110.
A more complete breakdown shows that chains with over
100 units concentrated overwhelmingly £71.? per cen£7 on the

'181'80' and 'extra large' units. This means that almost 72

 

17

per cent of the new markets built in 1956 by food chains with
over 100’units ranged in size from 10,000 to 20,000 square
feet.15

Some operators express the Opinion that some super mar-
kets are being constructed too large to facilitate customer
convenience. Admittedly, no one can say with accuracy how'
large a super market has to be before it becomes an inconveni-
ent shopping unit. What is the right size? Will markets the
size of Eavey's in Fort wayne, Indiana become predominate by
1967? Rather than prognosticate on the future, the writer has
gathered current information on the dimensions of super mar-
kets constructed in 1956 to help the reader make a more
intelligent decision concerning store size in the future.

15mm. , p. 12%.

 

 

CHAPTER III

CURRENT AND FUTURE TRENDS
IN STORE LOCATION

gtroductiog
All retail food store organizations, whether they be

_wn"fiz':“

chain or independent, are faced with the location problem.
Regardless of the size of a planned new store, the location :3“,
must be a good choice because the sales and profits realized
depend to a large extent upon the nearness to living units and
svailibility to automobile traffic. Another way of stressing
the importance of location is: Although good locations can
attest deficiencies in management, poor locations can very
seriously handicap the most skillful merchandisers.
Qggtmctim m
Regardless of the tight money situation and increased
competition for the food dollar, the grocery chains have con-
tinned to expand at a vigorous rate. Reports show that in
1956 a total of $509 million was expended for super market
construction, modernization, and equipment. These expendi-
tures were up lh.k per cent from record figures of $hh5 million
amended in 1955.16

—__

16S. O. Kaylin, "Retailing's Role in America's Pro-
3’988," __gig Store Age, (January, 1957), p. 205.

— _.._..- ___-.__.

19

The importance of proper location can be be illustrated
by the tremendous investment required for the average super
market Opened in 1956. "The average size new super market
opened in 1956 cost around $200,000 to $250,000 to build and
required an over-all investment of around $350,000 to
W,000."17 Such factors as current and future population
trends, competition, traffic patterns, construction cost,
current food purchases of families within a market area, and
other pertinent problems must be carefully analyzed in order
to make a more intelligent decision affecting such a large
investment of capital.

mere m 193 Stores Locating?

Approximately one-third of the new super markets opened

in 1956 were located in shepping centers. W Grocer

estimated that 27.5. per cent of the super markets built in

18

1956 were located in new shopping- centers. Chain Store Age

reveals that 35 per cent of the new supers went into shopping
center locations,19 and Super Market Institute estimates that
about half (#8 per cent) of the new super markets in 1956 were
part of a new shopping center.20 Since suburban population is

‘

17Don Parsons, Executive Director Super Market Insti-
tute, «Competition Within Trade Intensifies," 9351; m Age,
(January, 1957), P- 203.

18"Super Market. Boom,". 92. gig” p. 12%.
19s. o. Kaylin, _1_o_g. 21;.

2°Dozn Parsons, 10c. cit.

k!
‘ .
1
I
i

|

I

\
W
I
I
A
1
g
\
I
u
I

 

20

growing six times faster than urban population, the trend to
locate super markets in shopping centers and other suburban
locations can expect to increase even more in the future.
ghgyg.§§ggg‘ggg,estimates that food chains will open
approximately 2500 new stores in 1957, of which about 900
will be located in shopping centers. Available data do not
exist as to where the remaining 1600 planned stores for 1957
wdll be located. However, trends seem to indicate that the
vast majority of these planned units will be located in
suburban areas, rather than in downtown locations.
nggtown Location;

Many food chains are abandoning downtown locations.
Limited parking, excessive traffic, and rapid development of
suburban communities have forced many food chains to discon-
tinue plans for new downtown locations, except in new apart-
ment development areas. Many food chains are closing downtown
units. Already some food chains report that their downtown
locations have been closed in some cities. The shopping
cantor is here to stay. Food chains can be expected to follow
the trend of locating new super markets in suburban and
neighborhood locations.

The super market has already captured a large market in
suburban shopping areas. In the last few years there has been
a great change in the selection of locations for new super
markets. Super market operators can be expected to continue

t0 locate near new residential areas.

 

 

21‘

Summarz

The selection of locations for new super markets is
becoming an increasingly important facet of food retailing.
A.final decision affecting the location of a new store will
involve an investment of approximately $h00,000 or more. No
amount of layout, design, equipment, or managerial ability
can create a successful store in a poorly located area. Food
chains are approaching the problem of site location on a more
systematic basis so that the shopper of the future will be
provided with better shopping facilities. Accessibility and
parking facilities are already a must.

Population and construction growth in suburban areas
combine to pose a bright future for the planned shopping cen-

ter. Continued growth of shopping centers and other suburban
locations is inevitable.

I
' .
l
I
l
L
F‘
I
.A
t‘
1‘
1
E
is;

 

 

CHAPTER IV

CURRENT AND FUTURE TRENDS
IN NEW FOOD ITEMS

0
1
I
o’
i
I
z
'1
I

- 2

Introduction
Just as population, income, and employment have in-

creased steadily for the last 20 years, so have the number of
new food items. This increase is a reflection of the progress
made by manufacturers and retailers of food products.

May has there been such a great increase in the number
of new food items? Does the retailer want new food items?

Any answer to the above questions is sure to incite contro-
versy from members of the food industry.

If the industry is to continue to receive the same
proportion of the consumer dollar, the addition of new food
items is necessary. Another important reason for the develop-
ment of new food items is the consumer acceptance of conveni-
ence food items. As income and economic levels have risen,
the eating and cooking habits of the American family have also
changed. Would the consumer have accepted frozen concentrates,
cake mixes, and canned gravies twenty years ago? Even though
frozen meats and‘dehydrated potatoes have not been accepted
t° the Greatest extent today, there is a possibility for

creator consumer acceptance in the future.

 

 

23

Aggressive food store operators are aware of the in-
creased business derived from new food products. However,
not all new products win enough consumer acceptance to main-
tain a steady volume of sales. Because of this fact, food
retailers must be selective in the addition of new products.
9mm 9.2.1121: 2.299. .1322;

"The National Association of Food Chains estimates as
many as 6000 new items were offered to individual buyers of
food chains in 1956. "21 However, many of these items were
non foods such as household items.

Several factors contribute to the "age of innovation
in new food products" in the food industry. The first impor-
tant reason for the growth of new food items is the favorable
consumer acceptance of convenience, novel, and quick-cook
foods. Another important reason for the present trend of in-
creased food items is the manufacturer's need for new products
to keep a proportionate share of the competitive market.

The modern housewife is constantly searching for time-
saving conveniences. Only with the introduction of new food
items did the housewife realize she could save a considerable
amount of time in the preparation of meals. The post-war
housewife has constantly been looking for new food items that
will offer the family variety and new adventure in eating.

¥

21""l'he Mid-Century of New New Products " Super krket
Me e di in , (February, 1957).’P. 69. ’

fl A ngm' n."
Il‘eV ' 5 '
l
-

._ 4.... .er- a a'..- \

 

2l+

"Only eight years ago a housewife's daily food pre-
paration time for an average family took two hours and twenty

minutes. Today, because much of the food she buys is pre-

pared to one degree or another, that time has been cut exactly

in half-none hour and ten minutes."22

The A. C. Nielsen Company conducted a survey to deter-
mine the sales increase from 1952 to 1956 of food products
classified into three categories: (1) products with major
built-in conveniences, (2) products that experience some
important changes and (3) products that had few new develop-
ments.
Me 9.2 is: £9.29. lama

Manufacturers were possibly aware of the importance of
new food items before food retailers were. "whether for food
or household products, the story is the same--from new items
comes new life. The president of Colgate-Palmolive Company
said probably 70 per cent of present sales volume comes from
new products that did not exist ten years ago. The same will
be true ten years from now".23

According to the survey taken by the A. C. Nielsen
Company, items classified as having major built-in conveni-
ences registered a 33 per cent increase in dollar sales from
1952 to 1956. In the same period, product groups which

y

221b1d.

23 "The Mid-Century of New, New Products," 123. gig.

F"fi!

 

“.nu.s.‘fi. -va . _._r

25

experienced some important changes such as additional types,
flavors, sizes, etc., experienced a 30 per cent increase in
sales. On the other hand, products that had few new develop-
ments gained only 11 per cent in sales.2h
Milffect gLMItemg 9;} Brad Leadezship
. A further analysis by A. C. Nielsen Company discloses
that since 19h0, 31 per cent of the top grocery brands lost
their leadership and another 21.5 per cent watchedtheir con-
sumer franchise-dwindle.25 Why did 31 per cent of the t0p
twands in 19M0 lose leadership by 1956? J. 0. Peckman in an
address to the Grocery Manufacturers Association said that,
"23 per cent of these brands lost leadership because of com—
petition from a radically new product, 31 per cent because
of an improved product, another 23 per cent because competing
products were able to provide new developments in the form of
flavors, colors, sizes, etc., and only 23 per cent because of
being out-advertised and out-promoted."26

what does the above statistical data mean to the food
retailer? Theoretically, a retail food store that failed to
stock new'food items to satisfy current consumer wants could

_..___.

2l+'. C. Nielsen, Jr., "How Long Should You Live With A

gew§§roduct," Sung; Magket Merchandising, (February, 1957).

251'1618811, QEe 9.132., pe 72e

0 26Statement by J. 0. Peckman, Reprinted in "The sad-
entury'of New, New Products," 0 . g;§., pp. 69-70.

E
L...

 

. #_ .fl—.-
‘. . is A .
I
D
.
II
n
:'

 

assuming no other factors contribute to an increase or decrease

26
have realized a 31 per cent decrease in business since l9lt0,
of business.

m Crgated by 133 Food Items 1
New food items have created many problems for retail F1
food chains. The matter of accepting or rejecting a new food

-~__.——..‘a-

item has not been simple. Yes, progressive food distributors i i

want new food products if the products can develop a consumer

 

franchise. However, many grocery manufacturers are guilty of

‘1‘. —-—a—- is". m

introducing new products because someone else has the product
or without conducting adequate market research to determine
consumer acceptance of the product.

Almost as fast as new items are taken on, old ones are
discarded. According to a survey of eight food chains by
m m, 15 per cent more items were added than dis-
continued in a recent two year period. The eight chains
added 1+292 grocery items and discontinued 3725 grocery items
in the same- two years.27 Nearly 8000 decisions were involved
in deciding what items to add and discontinue. This does not
include the countless number of decisions required to decline
new products or keep older ones.

The problem of inadequate shelf space must be considered
when making decisions affecting new products. A policy fol-
1°V9d by many food chains is that an old item must be

¥

27"Slow Movers Can Build Traffic," Super Market Lie;-
W. (February, 1957), p. 55.

 

 

31"“ w

27

discontunued if a new product is accepted. This means that
manufacturers often face a double Jeopardy when they intro-
duce a new line. Some of the problems manufacturers face in
introducing new food items are: (1) they must be prepared to
_accept the suicide of older, established products and (2)
they must gamble on the success of new ones. As a result,
nmny grocery manufacturers have begun to conduct extensive
research before submitting a product to the retailer.
§gpg£,ggrkgt Megchggdiging asked several manufacturers
how much time is necessary before a new product is established.
There seemed to be a general agreement that a new product re-
quires three years to reach maturity. Also a period of six
months to a year is required to get national distribution
for a new product. .

' Food chains and their buying committees have the respon-
sibility of selecting only those new items with proven con-
sumer acceptance. As a result, manufacturers have begun to
introduce new products on a more scientific basis. Granted,
there is no "scientific" way to insure consumer or retailer
acceptance, but market research provides a more logical
approach to the introduction of new products.
Lila.2£.a.flss:£:z$haai

The A. C. Nielsen Food Index Report groups new products
into four classifications, according to the length of time

nOeded to determine the ultimate sales directions. (See
Figure II). ' U

‘ I
P‘

O

I

I

i

1

I

l

I

I,“

1". ..
W

 

28

The products in group "A" are not likely to develop the
consumer acceptance necessary to maintain a high sales volume
and are usually recognized by the buyers as having poor sales
potential. ‘

”The greatest pitfall to the retail buyer or the buying
committee lies with products which fall into group "B" in the
chart."28 These products seemingly have a sales potential
with encouraging initial sales. At the peak of the intro-
ductory period, the sales volume declines rapidly. The
products in this classification do not develop enough consumer
acceptance to receive repeat purchases. What characterizes
such products? One of the most important factors is that the
product fails to live up to the customer's expectations. A
Strong advertising claims in relation to the actual perfor-
mance of the product is also a contributing factor for the
poor performance after a brief period of success.

.New products which subsequently level off as shown in
group "C", usually fail to show large volumes. However, the
Products in this group offer less risk to the retailer because
the inventory investment and shelf space allocation can be
reduced gradually to adjust to the leveled-off sales volume.

The brands in group "D" are the most successful new
Products that enjoy a spectacular growth before the sales
volume levels off. An example of products in this classifi-

cation is Tide detergent which has enjoyed steady sales over

‘

28Ibid., p. 73.

 

29

a period of years. These are the brands that retailers feature
in weekly ads because of the consumer acceptance.

Regardless of the number of new food items introduced
weekly, monthly, or yearly, the vast majority ends up in groups
"A" and "B". A few can be classified in group "C" and a very,

very few in group "D".

 

 

 

 

 

Group "A" Group "B" Group "C" Group "D"
Never get Sales decline Sales peak Spectacular
off the following in- following in- growth over
ground troductory troductory extended per-
period and de- effort-~and iod before

v cline further subsequently leveling off

0 in following level off

L months

0

M

E

O

F

S

A

L

E

S
m

Length 0 ins

This chart summarizes the general trends of hundreds of new
Products introduced in recent years as measured by Nielsen
Food Index Reports. '

FIGURE 2*

GENERALIZED EXPERIENCE OF NEW PRODUCTS

’Nielsen, 193. gi_.

tun-r a

,1
.
3
1
I
g
3
l.
.

 

 

mm

3O

mam ts ammonia-smegma“ ustr
Estimates reveal that approximately 75 per cent (by
weight) of all food eaten by Americans required some refrige-
ration between production and the time of eating. Facilities
for such preservation are often inadequate. According to one

survey, spoilage of fruits and vegetables at the retail level

 

and in the home ranged from 18 to 35 per cent. Other losses
are less evident, for instance, deterioration of flavor,

attractiveness and feed values.29

.3...
1
1
E

The influx of perishable and non perishable food items
will necessitate more equipment at the retail level. Refrige-
ration, shelving, and storage facilities will have to be
increased if new food items are developed at the rapid pace
as evidenced from 1952 to 1956.

Research and development to improve the preservation
of perishable foods will also result in new food products.
The new food‘products developed from scientific research will
bring about revolutionary changes in food distribution. Many
of the innovations in the preservation of perishable food
products will help decrease food prices to the benefit of the
consumer as well as the food industry. Other developments
will increase the quality of foods. Still other scientific
developments will shift a proportion of the final preparation

01' food products from the consumer back to the manufacturer.

§

6 29nMarketing’u The Yearbook of W, (Washington:
overnnent Printing Office, I955), p. .

 

31

Some of the areas in which scientific development is being
conducted include:

E:gzgg,£29§g. "Previous to world war II, frozen foods
were still novelities, but by 1955 frozen foods (excluding
ice cream) accounted for over four per cent of total super
market sales. Industry leaders believe that sales may reach
eight to ten per cent by 1960. more than half of present
dollar volume stems from fruit Juices and vegetables."30
The expansion experienced in frozen foods has already affected
food chain administrative policies greatly. New equipment,
merchandising procedures and new concepts in stores size have
resulted from the fast growth and development of frozen foods.
The future is unlimited for frozen foods. Further expansion
can be expected in prepared foods, prepared meals, and spe-
ciality foods. Scientific research is constantly experiment-
ing with food lines that are not obtainable in a frozen state
at the present time.

Qghzdratiog. The future of dehydrated products is
uncertain. Hitherto, dehydration processes have not developed
a satisfactory taste in the finished product. "The perfection
of various dehydrated processes now being developed in govern-
ment and private laboratories will reduce the cost in food
Preservation, packaging, transportation, and storage."31

_‘

3°William Applebaum and David Carson "Supermarkets

gacizghe Future," fiarvgrd Businegg R v e , March-April, 1957),

31Ibid.

 

~_..._‘...—.--‘-‘ ‘1'.-

 

 

 

32

Antibiotics. Scientific and developmental research is
being conducted in the field of antibiotics. The develop-
ment of one antibiotic, subtilin, is believed to have strong
possibilities for improving the taste and appearance of
canned vegetables. Antibiotics have been developed to pro-
long the shelf life of poultry and fish. Future developments
in the field of antibiotics may help the food chain sell
perishable foods at a lower cost to the consumer.

Igzggigtygn.__0ne of the most recent innovations to
improve the preservation of perishable foods is irradiation.
Scientific research indicates that the exposure of food for
a few seconds to the proper amount of atomic radiation will
destroy the bacteria which cause decay. There is a possi-
bility that food treated by atomic exposure may stay fresh
for weeks, months, or even years without refrigeration.
Offeflavor, off-color, and objectionable odor are still to
be overcome; however, researchers express a bright future in
the field of irradiation.

If and when technology in irradiation is perfected,
how”will retail food distributors be affected? Surely,
revolutionary changes in equipment, merchandising procedures,
and sales trends will be experienced when perishable foods
will become, within limits, imperishables.

Man
The problem of seeking a balance between variety of

mlarchandise and limitations in super market shelf space and

Mme]

 

33

inventories has become of utmost importance to food chains.
New products, countless brands, a multiplicity of sizes,
(flavors, and price varieties necessitates that management
initiate buying policies adequate to cope with the increas-
ingly difficult problem of selecting new food products.

Progressive food chains are aware of the importance of
new food items but the "death rate" of new products requires
that management carefully evaluate the pros and cons of a
new food item before tying up capital and shelf space.

Scientific research is constantly being conducted to
open new fields in food processing. With the development of
irradiation, food chains can expect to reduce refrigeration
expense both in handling and at the store level. Frozen food
sales may decrease considerably when irradiated foods are
developed.

New food items can not be accepted or rejected solely
on the basis of sales and profit, because "Only about 30 per
cent of the items carried in the average super market sell
at least one unit a day. The other 70 per cent may sell any-
where from one unit in two days to one unit in two months."32
Many of the so-called "slow’movers" are necessary to build
and maintain customers who want variety and assortments in
their food stores.

New food items with sales potential and those with
little merit will continue to be marketed by manufacturers.

 

32mm. Movers Can Build Traffic,” igg. 2g.

‘ufia'fi-t-
'.

‘u-A v“ +Q'I. . e

3h

Management of food chains must anticipate customer wants and
future trends to help make a more intelligent decision con-

cerning the addition or discontinuation of new food items.

 

CHAPTER V

CURRENT AND FUTURE TRENDS IN PACKAGING

Igtggguctiog
The development of packaging and package merchandise

has been one of the most significant trends in modern mer-
chandising. The packaging of goods formerly sold in bulk
has resulted in benefits to the consumer and has provided

a means of establishing product identification and achieving
mass distribution.

The broad levels of achievements in packaging today
represent many years of gradual advancements in the develop-
ment and improvement of packaging material, methods, and
equipment. new have the new developments been applied to the
food industry? How have new developments in packaging helped
to advance mass distribution and make for more efficient
selling in the super market? How has the impact of new'de-
velopments in packaging been felt in the food industry? What
changes will be made in the food industry asia result of
future developments in packaging? This chapter on packaging
will deal with the answers to these questions.
massamammuda maniacal-.92

The increase of self-service in today's modern super
markets puts most of the burden of selling on the package and

the point-of—sale material. However, under today's

 

36

merchandising conditions there is less and less possibility
of using manufacturer display material. Now the package itself

must attract the customer, identify the brand, and close the

3819 e

Today the self-selling package is widening out into
a number of distinct and meaningful types-~the conveni-
ence package, dispensing package unit package, strip
package, multiple package, fractional package, picture
package, visibility package, re-use package and working
package. Each is finding a bigger and better niche for
itself in taking on and helping build profitable markets
in such booming fields as those designated by the terms
convenience foods, do-it-yourself, leisure, hobbies,
the baby market, the gift market, the homemaker and
gardener groups, the teenagers, the oldsters market,
etc.

There is a tendency to think the advances in self-service
packages have developed suddenly. To the contrary, the develop-
ment of self-service packages has been a slow process just as
consumer education has taken a long time to build to a level
where self-selling packages could function to the best advan-
tage.

Egg Convggiencg Eggkggg. Convenience packages like
convenience foods and similar products are closely tied in
with a trend that has been going on for many years but has
Greatly increased during the post-war years. The convenience
Product and the convenience package could scarcely exist one
Without the other. The convenience package has proven to be
equally effective as a sales producer for non foods.

‘

33"Packaging in Today's Market," Modern 2222225125
Easzglgpggig Issue (1955), p. 1%.

 

Li _ _.._.—.—.
1 . .. ;

twuxa-‘e -m' .

37

Recent examples of outstanding packages in the con-
venience field would include: frozen dinners, soft drinks in
throw-away metal cans, corn bread mix in aluminum baking pans,
aerosol window cleaner, a popcorn package in which the corn is
popped, and lemon Juice for salads in a unit-of-use poly-
ethylene squeeze container.

Some of the above packages could be classified as a
working package. Hany packages such as the frozen dinner con-
tainer and the pop-it-in-the-package container [for popcorn
provide protection and sales facility, but the package pro-
vided a plus element, the working package. This type of
package is one of the most important entries to the big and
growing special merchandising field. The package is designed
to be used by the consumer in the preparation of the product.
Recently, designers have begun to develop packages that will
work for the retailer also. New innovations such as better
stacking closures for glass Jars and various wax containers
and shipping containers with easy-opening, tear-strip devices
have greatly assisted the food retailer in the Job of dis-
tributing food.
as. W W 1b 2: 9.1.: 42.49.? Ice

"The first and still the most important contribution
a package can make toward the successful merchandising of a
Product is adequate protection of the product throughout the
enacted normal span of distribution and packaged use. All

Other merchandising considerations must be predicated on the

 

 

 

 

38

assumption that the package will deliver the product to the
ultimate consumer in a desirable condition."3h On the other
hand, once adequate package protection has been established,
the designer is free to concentrate on the merchandising
aspects with regard to distribution and competitive sale of
the product.

' "A package to be an effective merchandising instrument
must clearly identify brand and/or product. At the same time
the package must be so constructed and designed so as to
perform one or more of the following functions: arrest atten-
tion, stimulate buying impulses, facilitate satisfying product
use, and encourage repeat sales."35

The self-service method of distribution which predomi-
nates in super markets today requires the package to be
designed to fit the type of display that is most likely to
be used in the sale of the product. The appeal of the pack-
age after the shopper has picked up the product for close
examination is one thing, but more important is the ability
of the design to attract the shapper in the first place and
to identify the product under any and all types of display
conditions.

Package designers have begun to establish brand identity
on several sides of the package. A manufacturer who continues

‘

3""The Package and It's Target " Laden Packgging
2212mm Lane. (1955). p. 21. ’

35mm.

 

 

.. :Il'.. .
. I..r¢.l lib. :1. a

4

I

fit.

 

39

to design the package without regard for the retailer's cramped
shelving may find the product being displayed without concern
for proper product identification. Thus far, there has been
no over-all standard for super market shelf height and depth.
Dimensions differ between stores of a single chain and they
differ between the departments or sections within a store.
Manufacturers have begun to design packages so as to present

a selling message regardless of the display position.

The Lily-Tulip Cup Corporation, which sells paper bever-
age cups by the millions through food stores, found their
package design was not giving the proper merchandising aid
at the point-of-purchase. The standard package is six cello-
phane-wrapped, nested cups with printed or applied paper
labels on the wrap. When the package was first introduced,
Lily-Tulip expected the food 'stores to display the cups in
stacks right-side up on the shelf, and consquently the label
was placed accordingly. However, dealers soon found that the
stacks would stand more firmly when placed up-side down on
the broad top of the cup, rather than on the tapered end of
the base. No amount of reasoning from the Lily-Tulip Cor-
poration convinced dealers to discontinue displaying the cups
up-side down. Unsuccessful in changing the display procedure,
Lily-Tulip corrected the situation very simply by merely
reversing the label. Now the label reads right-side up when

the cups are up-side down.

 

 

MO

The previous example is one of the many cases of pack-
age design to facilitate dealer convenience of handling and
stocking.

New food items were discussed earlier, and closely

connected with the acceptance of new products are the merchan-

dising responsibilities, characteristics, and sales potential frTi
of a package design. Below are some merchandising check points 1 I
of packages that buyers, buying committees and other food store é

executives should analyze while considering new products. i y

I. Buying Habits
A. What are retail habits or practices with
respect to products of this character?
1. Unit of purchase?
2. Storage prior to placing on sale?
3. Display on shelf, counter or window?
a) Is shape and size of package adapted
to mass display?
b) Is single unit attractive?
c) Will package be seen above and below
eye level? Which panel displayed?

II. Size Considerations
A. Are package sizes properly adapted to--a)
Distribution methods?, b)Consumer habits?
B. How would changes of size affect--a) Con-
sumer convenience?, b) Quantity of purchase
or use?

III. Competition

A. How does product compare with competition,
direct and indirect?

B. How does package compare--a) materials
used?, b) sizes and shapes, colors and
designs? c) features-~desirab1e or un-
desirable?

IV. Package Appearance-~for identity:

A. Are all necessary features incorporated
and are they treated properly with res-
pect to relative position and emphasis?

B. Is brand name unmistakable in position,
style?

C. Does package adequately feature trade
name?

an" . u

.. Fa... Legit; .J
. ; a

all

..
""h‘l

 

 

1.1

D. Is product name (as distinguished from
brand) featured to give immediate product
identity? ,

E. Does the package reflect the outstandin
qualities of the product?

V. Package Appearance--for inviting attention:

A. Are colors and design--

a) In good taste?

b) Appropriate for product, retail outlet
and consumer?

c) Comparable with competition?

B. Does the package make a strong impression--

a) From a distance?
b) From a closer view?
c) On shelf?
C. Does package carry a self-selling story?
D. Does the package have remembersnce value?36

mmmmmmw str
"The food industry is the oldest and largest consumer
of packaging. No industry has more zealously expolited the
use of packaging in every conceivable way."37 Food sales
reached a new'high of $h2.5 billion in 1956 which represented
an 8.7 per cent increase-over 1955.38 This increase in food
sales was accomplished through increased population, new pro-
ducts, new built-in services, new packages, and new promotions.
A recent survey taken by M99935 gggkgging indicates
that food manufacturers on the average spend 2% cents of every
sales dollar on packaging.39
36"Merchandising Check Points," Ibig,, p. 23.

37"Still Room to Grow,” Modern Packaging, (November,
1955), p. h.

33nTwenty-fourth Annual Survey of Food Retailing,"
22' 21:50: P0 570

39"What Does Packa " 33 gg
ging Cost? modern Pack 1
(March‘ 199+), p. 127. , ,

 

M2

Egphggig on Dis 1a Va alm
Another survey of the grocery manufacturing industry

taken by the Folding Paper Box Association indicated display
value or customer attention was the most important factor in

- accepting or rejecting a new package design."0 The emphasis
placed on display reflects the trend for food manufacturers
to consider such factors as proper shelf sizes, display fac-
ings, recipes, related-item selling deals, and special offers.
W Digectlx gfgcting £9391, Packaging

The grocery manufacturing executives interviewed in the
Folding Paper Box survey revealed some significant trends that
will change consumer packaging in the food industry. Nearly
one-fourth (23.1 per cent) believe that the use of "giant or
large" sizes and "multi-unit" packs will influence changes
in consumer packaging. One out of seven executives (13.9
per cent) feel that the desire for more attractive packages
will cause changes in existing packages. A trend to smaller
sizes is predicted by 8.8 per cent of the executives inter- ‘
viewed.M

When the executives were asked the question, "what
forces package changes", only about one-sixth (16 per cent)
stated that their newest package was adopted as a result of
requests or meeting the requirements of retailers. The

—__

no.3.
hind the Packaging Decision " Modern chkaging
(Jury, 1956), P. 167s ’ ,

thigureS from Ibide’ D. 78o

1+3

greatest majority (75 per cent) feel the consumer plays a
more important role in food package planning than does the
retailer.“2

A greater variety in sizes of packages is expected in
the future for the retail food store.‘ Laminated One-ounce
polyethylene-cellophane packets of lemon Juice have helped
to develop a broader market for Sunkist products.

Food canners are now packing a greater variety of sizes
than ever. Some grocery manufacturers have already marketed
a.k6 ounce can of pork and beans. The trend toward "king-
size" packages will develop even more because of larger family
groups. The soap industry has already experienced the addition
of ”king-size" and 'home-laundry size" packages. Other indus-
tries will design smaller packages in order to find a larger
nmmket for their products. One company has already tested a
one-pound unit of flour.

Film bags have been developed that can withstand ex-
tremely low temperatures for frozen foods and high tempera-
tures for cooking. Foods packaged in a new polyester-laminate
bag can be cooked in the original bag, simply by dropping the
bag into boiling water.

Aluminum foil containers will be utilized by an increas-
ing number of grocery manufacturers in the future.

—

l”imam” p. 167.

h),

Laminated glassine pouches, which are heat-sealed,
have been developed for individual servings of puddings and
cocoa. .

Realistic reproduction by means of modern printing
developments will give new life and sales appeal to both new
and old packages alike.

Kraft bags with polyethylene linings have been developed
for packers of dried fruits.
films!

Some retailers and consumers contend the "built-in
kitchen services" as provided from convenience foods and food
packaging have raised the price of all convenience food pro-
ducts. Such items as frozen orange Juice, baby foods, and
cake mixes have reduced rather than raised consumer cost.
Two-thirds of the drop in raw farm food prices since 1952
have been passed on to the consumer through the creation of
new’markets and mass distribution obtained from new products
and packages.l+3

Through developments in self-service retailing, the
package now has an added responsibility, that of selling.

For a package to be an effective merchandising instrument,
several functions must be performed: arrest attention, stimu-
late buying impulses, facilitate product preparation, and
encourage repeat sales.

-_L

p 1’31mm 3. Willis, "Background For Packaging," Modern
w, (my, 1956), De “Os

1+5

Because of cramped shelving, various display methods,
and lack of standards in shelving dimensions, products must
’have multiple identity surfaces on the package. Packages are
being designed to present a selling message regardless of the
display position of the product.

As new developments are being made in other facets of
the food industry, so is progress being achieved in the pack-
aging field. New methods and materials are being utilized by
grocery manufacturers to present products of higher quality
to the consumer.

The food store can look for a greater variety in sizes

and types of packages offered to the consumer in the future.

CHAPTER VI

REFINED CONTROL TECHNIQUES

Introdgctiog

In today‘s economy, in which many companies have
expanded in both size and volume, management has become
. more and more divorced from the actual operation. As a
result of voluminous and "far-flung" operations, management
must rely more and more on accounting and operating reports
in which to formulate policies and procedures.

Through control techniques, management must be able
to correct a condition found to be in error or prevent such
a. condition from arising.

"Many food chains have grown beyond the size where
they can be managed by decisions arrived at through direct
observationalonewu" These large chain organizations need
to‘use control techniques. Control to guide the action of the
01.“animation and control to give timely and adequate infor-
nation that will help management “keep their fingers on the
”139 of the organization".

’6 rm 1 mamas

"Internal auditing in its most restrictive sense is

mditing carried on by persons who are employees of the

x

u,
Arnold F. Bach "Control Means Action, " ard
% evie , Vol. XiXII,(Ju1My-August, 1951+), pp. 57-98.

1|} , ....n>......t.ll.l.f . II...I.I IL. .lif.’

”4m x h;

 

 

“7

company being-audited."u5 Internal auditing was almost un-
known in the food industry ten years ago, but today is
recognized as an important adJunct of the food chains because
of the money that has been saved through an internal audit
system.”6
The term "internal auditing" does not describe the

scape of the activities which are properly included in a
system of internal auditing for food chains. Auditing is a
methodical system of accounting for assets, both fixed and
current. However,.in the food chains, management has found
that the internal auditors provide an excellent means of
followbup on company rules and policies. Because of the in-
creasing complexities of food chain operation there has
<Ieveloped a need for a system to insure that company policies
are understood and accurately followed. .One author amply
defined internal auditing as:

The organized activity on the part of management to

assure itself of proper adherence to company procedures

and policies, and to secure the benefits of a systematic

and objective verification and constructive analysis and

appraisal of the accountinga financial, and other aspects
10f the company‘s-operation. 7 ‘

l*5v % 2 E 2
ictor Z. Brink er al Co tr 1 Thro t rnal
Aflflédzygg, (Chicago: La Sal e tens on ivers y, 9 , p. 1.
De ”GBertram.D. Shepard, "Developing an Internal Auditing

p Pgrtment," £93121; NAP-C W fe , (June, 199+),
’ 0

“7371“, 22s ”is, P. 9e

#8

Integgal Auditing gng_lnterna1 Control - Internal
auditing is sometimes referred to as internal control.
Internal auditing developed from management's endeavors to
make the internal operations of the corporation as efficient
as possible.

The activities of the internal auditor soon became
varied in order to give management the functional control
needed at the store level. The activities of the internal
auditor usually recognized today may be classified as follows:

1. Verification of financial and operating data.
2. Analysis
3. Compliance
. Protecting company assets
5. Detection of fraud and error
6. Appraisal
7. Training compggy personnel
8. Miscellaneous

Each of these functional activities will be briefly
discussed to show the reader the importance of the internal
auditing system to management.

1. Verification of finanacial and operating dhta.
Dnternal auditing of the store operation provides an excel-
19113‘ Opportunity to establish the reliability and accuracy
0f the store's financial data. Infrequent checks by an
1nturned auditing team not only helps to uncover fraud and
dishonesty, but are most useful in verifying the financial

P°Sition of the company assets. Through infrequent audits

\_

“Ibideg p. 10s

‘+9

of the store inventory and cash, management can keep posted as
to the efficiency of the store manager.

2. Analysis. In many cases analysis is part of the
method by which verification is accomplished. The important
contribution of the internal auditor in this area is to study
the accounting and operating procedures which are being
verified.

3. Compliance. Management, to an increasing extent,
is being separated from the actual store operations because
of increased size and geographical breadth of the business
organization. Because of the lack of understanding, inclinal-
ation, self determination, improper training, or inadequate
supervision, many instructions or policies are not carried
out in the manner in which management desires. The compliance
activities of the internal auditor gives management some means
of knowing the extent to which policies and rules are being
followed.

1:. Protecting company assets. In all internal auditing
oDurations the auditor seeks to protect the financial interest
0f the company. The internal auditor is also assigned the
1'0813cmsibility of making visual checks on company property and
“luipment.

5. Detection of fraud and error. Modern accounting
Water” with controls and cross-checks can do much to prevent
fraud and error. Internal auditing therefore works in coordi-
nation with the accounting system to make fraud and error more

and more improbable and unlikely.

 

 

 

'50

6. Appraisal. Through close observation of the
accounting procedures in the store, the internal auditor can
give suggestions for easier and improved methods of accounting.

7. Training company personnel. The internal auditor
can contribute a great deal to make employees more efficient

in accounting and control techniques. Trainees and new store
managers often need assistance in preparing the weekly sales
report and other weekly accounting necessities. The internal
auditor can be invaluable in giving assistance to these
employees.

8. Miscellaneous. Internal auditors can check to see
that merchandise is priced accurately. Through infrequent
visits the internal auditor may be able to give suggestions
for improving store cash security. 1
E2 W Inventogz

Primarily, internal auditors were introduced in the
food industry to record physical inventories of individual
stores and to verify cash reports.

Most food chains have experienced the era of laborious,
time-consuming inventory procedures. Managers and district
mamElzcrs, with years of tenure in the food business, frequently

I"Patios: the nights and week-ends spent in recording an inven-
t”? with pencil and paper. As stores and chains increased in
312° and volume, management recognized the need to employ full-
ti“ employees to record the physical inventories of stores on

a more frequent and consistent basis.

 

L

51

New advances in tabulating equipment have mechanized
the inventory process to a considerable extent. Frieden calcu-
lators with movable tables have greatly speeded up the process
of recording the physical inventories in the stores.

Management soon found that the store auditors provided

' ‘11

an excellent means for auditing cash, payrolls, and records

while the physical inventory was being recorded. In addition

,4-_..7a.A__ _

to auditing, management soon added another important function

and responsibility to the store auditors. Store auditors pro-

TT‘“

vided an excellent means of reporting follow-through on pricing
and other company policies.

While the store auditors record the physical inven~
tories, all shelf prices are checked for accuracy. The check
of shelf prices has a two-fold purpose: (1) to discourage and
prevent store managers and department managers from increasing
prices to disguise faulty operations and (2) to reveal errors
or mistakes in pricing or stamping in order that corrective
action may be taken. Most food chains require errors in pric-
ing be corrected before the internal auditors leave the store.

Some chains do not notify their store managers in ad-
vance of an inventory, but schedule visits on an infrequent
basis. The chains that follow this procedure feel that the
auditors are able to observe and record conditions that are
tYP1cal for each store. Store auditors have also been
assign“ the responsibility of making infrequent checks in

the stores to verify cash.

I

' i

\IIIIIHJ Loan 1.3.». a. ...|J1.IJ

 

 

52

No attempt has been made to describe all of the detailed
activities of the store auditors. Through the activities des-
cribed, the reader can better understand some of the control
techniques employed by management.
magmas;

The construction of larger stores has brought about

expanded sales volume and larger amounts of cash to be handled

 

in each store. Extended store hours and a shorter employee
work week have necessitated that more employees handle the 5
cash in each store. As a.result, management has had to employ '
procedures that will maintain the necessary cash control at
the store level.
The cash register readings from which gross sales are
determined provide the first element of cash control. By
adJusting gross sales for voids, refunds, and cash adJust-
rents, the net sales can be obtained. After the net sales
have been determined, they must be accounted for either in
cash, deposits, coupons, payouts, or accounts receivable.
Since cash, deposits, coupons, payouts, and accounts receiv-
able represent net sales, there must be some method of con-
trolling each area to insure accurate records and balances.
To achieve maximum control, responsibility for each of the
elements must be assigned to the store manager, or an employee
designated by him. The store manager is usually responsible
for the over-all cash security of the store, but most opera-
tions permit the manager to delegate responsibility within the

“Ore for the security and control of cash.

 

 

 

‘53

112193 gig Refun 5. "Proper control of voids and refunds
is essential, as any laxness in this area can lead to serious
loss.""’9 The manager, or someone designated by him, should
approve all voids and refunds. The primary reason for approv-
ing voids and refunds is to reduce the opportunity for checkers A:
to falsify refund and over-ring reports, since net sales are
partially accounted for through void and refund reports.
Unless a system of checks and controls is initiated .at this
point, cash shortages can be concealed by falsification of
void and refund reports. Anyone other than the manager
authorized to approve voids should not be allowed ‘to operate
a register. Preper control measures in the area of voids and
refunds can help to eliminate loss from fraud, error, and
carelessness or lack of system which can result in consider-
able financial loss.

Management must continue to develop methods which will
enable the store manager to keep a better control of cash
with the least amount of technical advice. The controls de-
veloped and given to the store manager must serve the control
needs at the store. level and still provide adequate infor-
mation to management concerning cash security.

Close accounting of the funds is necessary to minimize
mistakes and peculations in cash handling. Because cash is

_

“9Richard M. O'Keeffee, "latest Techniques in Control

of Store Cash," fifth rigs Contzollegg Confegence, (May,
1955) s Po l"’Se

5:,

the most vulnerable of assets, there must be air-tight pro-

tection over cash receipts.
Control forms are an important tool in the functioning

of an accounting system. Well planned accounting forms will
not only help in controlling cash but will serve as a basic
accounting record and provide information management must have
to run a business intelligently. Such information would in-
clude up-to-date sales records, information from which to
predict future sales and budgets, and sales figures from which
to declare estimated weekly profits.

W ngtgol. Data obtained from cost accounting
records have aided management in interpreting business activi-
ties in such a manner that greater knowledge and control is
available for all operations. Basically, cost accounting
"deals with the processes of measuring, classifying, recording,
reporting, and interpreting business cost in such a manner
that unit cost of products or services may be obtained.”0
Through an analysis of various costs pertinent to a particular
segment within a food chain, the well-trained executive can
quickly reveal operating discrepances.

By virtue of cost information in the hands of key
executives, corrective action may be recommended immediately

\

”Theodore Lang Walter B. McFarland and Michael Schiff,
2‘34; W (New ork: The Ronald Press Company, 1953),

 

31! - EEJ.£.1+IT>J
‘ :1 . ,il.’v. I . r
.

. w

..

o
'

 

 

55

to save further unnecessary expense. To obtain any benefits
from accounting data, management must be able to analyze and
interpret factual data into a meaningful evaluation of oper-
ations. For example, the mere fact that the labor cost for
1: store is 9.5 per cent is of little value unless management F1
can take this information and analyze the significance of 5"
this figure under existing conditions. As a result of an

_ ____._‘..-.__..——i~ as" anti
' J '_ -xa. - "

‘1-“4 ‘ '

intelligent comparison of normal cost to existing cost, man-
agement can quickly recommend corrective action if necessary.
Thus, top management is able to obtain the necessary control
without detailed association with operational tasks of the
business. The example previously cited is an extreme case

but conveys the need for intelligent interpretation of factual
data to obtain maximum control from management.

Other kinds of decisions arise in the operation of a
food chain which call for other types of accounting infor-
mation. These decisions or questions are essentiallyuwhat
will happen to cost if methods of operation were changed in
a certain way? The proposed change may be the addition of
now equipment, the remodeling or closing of a store. In each
case, management must choose between alternative courses of

a<>1sion. By comparison of present cost and profit to the ex-
Pected results of each alternative, management can choose the
course of action which promises to be most advantageous. With
information obtained from accountants and controllers, manage-
InGrit can hope to control the successful operation of the busi-
11938 through intelligent decisions.

56

M
As a result of voluminous and "far-flung" operations,

management must rely more and more upon accounting and
operating reports to obtain the necessary control of operations.

we area of control used by management is the internal
audit team. A good internal audit department goes beyond the
"counting of cans" and checking of cash and accounts. The
audit team should inquire into the operating and accounting
procedures as outlined through policies by top management.
Through observations on inventory conditions (over or under
stocks, obsolete merchandise, etc.), pricing and general
store security by the internal auditor, management can obtain
unbiased reports concerning the follow-through of company
policy .

Extended store hours, shorter work week and increased
store volume, have resulted in more employees handling the
cash in each store. Because cashfiis the most vunerable asset
to fraud and dishonesty, management must maintain prOper cash
controls to prevent losses. A well planned control form will
not only help in controlling cash but can also provide the
basis'for other pertinent information.

Through factual data obtained from accounting reports,

management can make critical comparisons of specific operating

c081: so as to obtain a maximum of control within the business.

——-.—- ww‘xm v
' < A

 

CHAPTER VII

LEASING OF REAL ESTATE AND EQUIPMENT

Introduction

The primary purpose of this chapter is to evaluate some
of the factors to be considered before a decision is made to
lease real estate and equipment. The information in this
chapter is intended to give the reader a criterion for evalu-
ating the relative advantages and disadvantages of this
marketing tool, leasing.

For this study leasing is defined as N. . . an agreement
between two contracting parties, whereby one party, the lessor,
gives to another party, the lessee, the use of his property
for a stipulated period of time on a rental basis. The title
of the property remains with the lessor; use and possession
pass to the lessee."51 The lessor's compensation, sometimes
referred to as rent or fee may be either fixed or on a contin-
gent basis. When the rent or fee is fixed, the lessee agrees
to pay an annual rental or fixed monthly payments to the
lassor. ‘

One of the main reasons why the lessor chooses to rent
on a contingent basis is the desire to obtain a higher rental

‘

t51W. Baynard Taylor, Financial Policies 2;: Business

éhIter rise (second edition; New York: AppIOton. Century,
ro—ft'l—‘Es, c., 1956), p. 592.

 

wasi 1. . Rs ‘

 

 

 

58

figure than could be obtained from a fixed rental schedule.
Also if there is uncertainty as to the value of the property

to the lessee, the rental terms may be on a contingent basis.
The contingent charge for real estate is usually based on a
percentage of gross sales. In the case of equipment the rental
charges are usually based on the volume of production, number

of miles, etc., if there is no fixed charge.

Capital Egctors Influencing the Decisiog £2.L§§§2

For purposes of this study, the definition of working
capital as found in A Dictionary for Accountants will be used.
Working capital is the "capital in current use in the operation
of the business: the excess of current assets over current
liabilities; not current assets."52 From this definition one
can conclude that any capital that is circulating, or any
current asset that is not fixed would be considered as working
capital.53

The amount of capital that is readily ayailable for
investment purposes will be an influencing factor affecting
‘the decision to lease. "There must be an alternate Opportunity
to use money at an attractive profit return before a food chain
Should lease rather than own."9"’ This may be a sound "rule of

‘

521mm L. Kohler, A ctionar g9; Account t (New
Y01-k: Prentice-Hall, Inc., 2 , s. v. f'Work ng ap tal".

53For a more detailed study on working capital see F. W.
gfileller, Jr., "Corporate Working Capital and Liquidity " _’1_'_h_e_
M g Business, Vol. XXVI, (July, 1953), pp. 157- 72.

9’Theodore J. Whitacre, "The Financial Aspects of Owning
:8. leasing," fifth NAFC gggtrollers Co for , (May, 1955),

 

out

5?: VII!

.nLA.

 

‘ flmmflilbm.‘

 

 

59

thumb" procedure but the capital which management can free by
liquidating its investments in real estate and equipment and

convert to working capital may aid the company in obtaining

outside money for capital investment. ". . . The presence of

ample working capital is likely to result in more advantageous
interest rates because of better credit rating. Or . . .
public issues will be more rapidly underwritten and purchased
more widely when backed by a firm which enjoys the kind of
credit rating that is possible if there is ample working
capital."55

Another valid reason for leasing is the need for in-
creased return on the capital invested in the business.
Leasing offers an opportunity. to acquire the equivalent of
investment capital at a fixed rate of return in the form of
rent. If the business earns a. higher rate of return than the
rate charged by the lessor as rent, a higher net rate of return
is earned by the business. However, if the business is able
to acquire investment capital at a lower rate of interest than
Owners of real property charge for the use of the property,
owning will be more economical and a better rate of return on
”’king capital will be the result.

Some of the factors that management should carefully

e"SJ-name in order to intelligently answer the problems of
1°a31n3 are:

\

”John W. Rollins, "Trend to Fleet Leasing," Harvard
11193 Review, Vol. XXXII, (July-August, 1951+),Ip. IIE.

 

60

I. Cost Considerations
A. Will current operating cost be reduced?

B.

C.
D.

E.
F.

1. Office equipment

2. Real estate

3. Transportation or distribution facilities

Are there tax advantages from income tax de-

ductions, including additional deductions from

accurate depreciation?

Can depreciation be accurately reflected for

real estate and various types of equipment?

Can accounting cost and bookkeeping overhead

be reduced?

Can insurance cost be reduced?

Can reductions be made in the "invisible"

costs?

1. Employee man-hours saved

2. Accident reduction from use of new equip-
ment preperly maintained

II. Investment Considerations

A.
B.
C.

D.

Will leasing be a sound source of working
capital?
Will there be more liquidity, greater financial
flexibility?
Will there be a better credit rating due to
increase in ratio of current assets to current
liabilities, thereby facilitating further
financing and expansion?

ill the profit return of working capital,
0 tained by liquidating investments in fixe
assets, be greater than through-ownershipfi? 6

By answering these questions, management can reach a

more orderly and intelligent decision on the question of

leasing. Unique situations in each food chain requires further

aI’IDI‘a:lsal by top management before a decision to lease is

reached,

W 2!. Loasing
"The lease permits a corporation to expand without

burderliaag its financial structure or sinking its own capital

g

‘_

5530111”, E. 9_i_§.

 

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61

in fixed assets which may prove unprofitable."57 Often times

more profit can be realized if working capital is invested in

a circulating asset rather than a fixed asset. For example,

more gross profit and a higher rate of return might be obtained

if capital was invested in inventories for'new stores rather

than in a fixed asset such as real estate.
One- of the important advantages of leasing buildings
and equipment is to liquidate capital that is invested in

fixed assets. "One good source of interest-free working

capital can sometimes be found right in the fixed asset side
of the balance sheet by liquidating equipment and replacing it

with leased facilities. Often in fact, the ratio. of current

assets to current liabilities will be two or three times
greater as a— result."58 Many food chains have found that

leasing real estate offers the greatest chance of expansion

because less investment capital is required. The capital

normally required to own the real estate can be used to stock
and equip other stores if a lease agreement is used.

A recent survey conducted by Super Market Institute
revealed that 71: per cent of the new super markets are leased,

Vith the remaining 26 per cent owned by the chains themselvesj9

__

57Taylor, loc. cit.

58Rollins, 32. gig" p. 113.

599'0m1n N
g vs. leasing Facts About New Su er Markets
22m E lgfl, (Chicago: Super Market Institute}, . .

man-nu.) : ‘A :a,

 

 

62

These figures clearly indicate the acceptance of leasing real
estate in the food industry.

Many corporations lease certain types of equipment to
minimize the risk of ownership. Various types of equipment

are subject to a greater risk of ownership because of losses

 

incurred from rapid technological advances. Rather than absorb F
the loss on equipment that becomes obsolete before its mechan-

ical life is used up, many chains have begun to lease rather

than own certain types of equipment.
Financially, the leasing of tabulating equipment will

‘Hwn - —,-x—Ja—MM“O
".I.
r

not Justify itself.60 However, the rapidity with which certain
pieces of tabulating equipment become obsolete due to techno-
logical advances, some form of insurance is necessary for the
depreciation losses incurred from ownership. leasing agree-
ments place the risk of ownership with the lessor.

Invisible Eggtg. Through leasing arrangements some
companies can reduce some of their "invisible costs”. The
ternr, "invisible cost" refers to the costs that are usually
difficult to allocate to any particular subdivision of com-
pany activity. Included would be accounting and bookkeeping
costs, unproductive man hours due to faulty equipment, etc.

iLeasing agreements can reduce some of the accounting
0V”head within a company. For example, when a company

Operates its own fleet of trucks, they are usually conducting

\
60
Whitacre, 92. 935., p. 10.

L
“ u“

 

VI

 

 

63

a transportation business within a business. This means that

the accounts and records of the transportation department be

carried twice, once for the entire operation and once for the
transportation operation. When leasing, much of the transpor-
tation accounting overhead disappears. Under most leasing

contracts, transportation costs are clear and conclusive there-

by eliminating much of the record-keeping accompanied with

omership.
Disadvantages 9}: Leasing

Regardless of the advantages of leasing agreements

there are sound reasons why corporations choose to own real

estate and equipment. Frequently, leasing may not be advan-

tageous because of the availability of low interest investment

capital. In some areas the real estate values and construction

rates are relatively cheap.

Prefer to own rather than to lease their real estate.

Because of this factor some chains
Also

the absence of interested lessors in certain areas may force

food chains to own their own real estate. "The unavailability

Of the right leasing plan, adaptable to the company's particular
Problems, may make ownership the wiser course.”61

. Under the terms of many leasing contracts the lessor
assumes the reaponsibility for the maintenance and repair of
the leased property. Trucks, automobiles, and other types of

equipment are frequently leased under a lesser maintenance

\
61

 

R0111n3, 22o Meg Do 111‘“

6%

contract. This type of contract tends to encourage abuses

and wasteful tendancies from many lessee parties. As a

result, the lessor must charge for the normal amount of .

abuses through increased rental charges. Unless some plan

is devised to protect the careful user, he is penalized for

the abuses of other reckless users. Without some form of

compensation to the lessee that is a careful user, ownership

of such equipment may prove more profitable.
Another disadvantage of leasing is the revised de-

preciation schedules on capital equipment in the tax law of
199*. The old schedules, figured on a fixed straight-line
write-off each year of the depreciable life, did not recog-
nize the fact that machinery and equipment lose their value
fastest in the early years-“the years of its greatest earning

capacity. "The new law permits this straight-J ine depreciation

but now offers several faster, graduated schedules which per-

mit big depreciation in the early years and scaled down

deductions as the term progresses. These new schedules now

Permit depreciation expenses every bit as advantageous as

rental expenses charged under lease programs."62

Many food chain operators prefer to own rather than
lease because the user has no rights to the property after the

—_

t 62W. J. Rekstis, Jr., "Pay-As-You-Depreciate Is Superior
CO Leasing," fie Commercialand Financial Chronicle, Vol.
I'm“ (July 19, 19535, p. 2 2.

"’7'

Cl

181an

saline-in.’

fir 44:.

65

leasing agreement.63 Some feel that true leasing is a form of

long-term financinguwith the disadvantage that the user has

no rights to the property after the leasing period. Thus, after

paying the equivalent of the purchase price, the lessee still
does not own the property.
Some food chain operators prefer to own their own real

estate to escape the long-term lease agreements now predominate
Many Operators do not want to risk high
Many

in leasing contracts.
rental payments for such an extended period of time.

favor the ten year lease period, but financial institutions

are now requiring fifteen to twenty year leases.6k A survey
taken by Super Market Institute revealed that the typical lease
for new super markets opened in 1956 extended over a twenty
year period as compared to fifteen years in 199+ and 1955.

One out of five new super markets paid rent amounting to more
than: one and one-half per cent of sales in 1955 and one out of

three super markets paid rent amounting to one and one-half

per cent of gross sales in 1956.65

‘

63The writer is referring to a true lease-~the long-
term lease. This type of lease means that there is no pur-
chase option, either written or implied. At the end of the
19330 period, the lessee has no rights whatever to the
PrOperty. Types of leases that allow the lessee to take
titles ‘to.the property at the end of the rental period are

not considered true leases.

6"»:hitecre, 9p. git” p. 27.
65"19‘56's 'Typical' New Super 21,200 Square Feet,"

Pm I‘Ossive Grocer (Ma
WE y 1957) p. 7h citing 1956 Super
r e s itute Survey.’ , ’

 

 

 

66

Through the formation of separate realty subsidiaries,
some food chains have financed their own real estate. Some of
the reasons why food chains have organized separate realty
subsidiaries are:

1. A chain is already in the real estate business to

some extent through the negotiation of leases, etc. The for-

 

mation of a separate realty subsidiary prevents confusion of
the main interest of the business, selling, and merchandising.
2. Separate subsidiaries prevent the drawing of working

“Ir-si‘.’ .s'

capital from the merchandising operation.

 

3. In the long run a corporation will acquire sub-
stantial real estate equities as the mortgages are amortized
through rental payments to the separate realty subsidiary.

k. Frequently lower rentals are obtainable through
mmneui realty subsidiaries than through other lessors.

5. Some companies invest profit sharing and pension
funds in the separate realty subsidiary. The separate sub-
sidiary finances new store locations with these profit sharing
811d pension funds. As a result, the employees are part owners
01‘ many of the buildings in which they work. Thus the employees

5% to cooperate more in the care and maintenance of the real
estate.

6. Some executives feel that the realty corporation66

th 6é’liost realty subsidiaries are owned or controlled by
fire; Parent. company, but are incorporated and issue separate
ancial reports. ‘ *

Cut

‘ Tahitian-#3 i

irE

67

can obtain maximum mortgage loans from insurance companies
01- other mortgage finance institutions.67

For these reasons many food chains have increased their
censorship equity in real estate properties through rental pay-

merrts to a separate realty corporation that is owner or con-

trolled by the parent company. f‘
Conclusion i

That the prospective buyer will examine comparative
cost of purchasing versus leasing in relation to his
special circumstances is greatly to be desired. Further-
more before reaching a conclusion, the buyer preferably
should have determined that there is a need in his par-
ticular case for the many extra services and other
privileges available under leasing, because all these
factors are reflected in the rental schedule if it is
actuarial valid. ‘

"K‘-nfikn Kc"; » r

Wm". .
1
5

Another note of caution is sounded lest the buyer pay
a.premium for insurance against uncertainties which
either may be remote in his case, or may be faced more
economically by accepting them through outright purchase
than by hedging unnecessarily through a lease or may be
:resolved entirely if the buyer makes an honest effort to
‘umderstand them. The buyer misuses the lease in those
cases where necessary analysis and decision are con-
‘Veniently shirked or postpgged by seeking escape through
‘the adoption of the lease.

( 67mm Own Or To Rent," Chain Store Age, Vol. mu,
Jul-Y, 1956), p. 1&8. ,

Ha. 68Russell B. McNeill, "The Lease As A Marketing Tool,"
£11191 Masts. 32112:. Vol. XXII, (Summer, 191.»), p, #30,

OK

5495*; .'

 

.ifit‘.--.

SECTION II

MERCHANDISING AND SALES PROMOTION POLICIES

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CHAPTER VIII

OPERATING POLICIES

Introductio

‘ "An important element in effective consumer relations
is the intelligent interpretation of sound policies by retail
store management."1 The formulation of policies is vital in
the planning of work for specific areas in a food chain organi-
zation. An organization may realize success over a short
period of time without the formulation of policies, but for
long range success, management must initiate policies that
will build a consistent personality for the company.
imam l9. A Ballet? '

A policy is "a systematized course of action that can
be applied to a given problem or group of problems"2 and can
either be written or implied.3 Policies enable the executive
team to control and direct the activities of the organization
in order to achieve the planned objective of the company.

An important function of policies within an organization
13 t0 give uniformity of Operating procedures throughout an

E

1Wenzil K. Dolva and Donald K. Beckley, _i;h_e_ Retailer
(New York: Prentice-Hall, Inc., 1950), p. 280. ""'""""

2Fred Hooson "You Cannot Escape Store Policy," Journal
9!; 11mm, Vol. i’omr, No. 2, (April, 19%), p. 77.

Th 3Paul H. Nystrom, Fashion Merchandisin (New York:
9 Ronald Press Company, I9325, pp. 9 - .

s
s
2.
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. nevus r , D . . , . .

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69

entire company. Through the initiation of policies, manage-
ment can give the employees a basis from which to make deci-
sions about the work situation. For example, management may
establish the limits in which a work situation may be executed.
Thus, management is able to Obtain a considerable degree of
uniformity throughout the entire operation.

Rules yg. Policies

To clarify terms, a distinction should be made between
rules and policies. A rule prescribes a definite solution or
course of action in a given situation. "A rule tells exactly
what to do or what not to do. In contrast a policy is rela-
tively broad in scope and indicates the areas in which the
activity should be carried out.""’ For example, the rule that
no produce will be bought at the store level from outside
vendors provides only one course of action, namely that pro-
duce will be ordered through the distribution center only.
Wereas, a policy would not determine the precise solution.

If the preceeding rule was converted to a policy, the
statement might read as follows: Produce will be ordered through
"'0 distribution center, however, if local conditions are such
that home-grown produce will equal or excel the quality and
f1"Witness standards of the company, than local purchases may
b0 made upon the approval of the store manager. Local purchases

must be sold at a price in accordance with competitive price

—-_

 

i,
G. R. Terry Princi les 9;; Mana ement (Homewood
Illinois: Richard D: Ira-Ln, Inc., 1 . p. 71. '

_ _,.____._-... urn-mun '
i «5. .Hi _-' ‘V‘a ‘ ’ <
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. _.;

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70

levels and yet return at least the average mark up of the
produce department. Local purchases may be merchandised for
extra profit if the selling price does not exceed competitive
price levels.
Management frequently initiates rules, yet calls them
policies. There is an important psychological reason why
specific rules are often referred to as policies.

Rules seem

to infer what people "can not do". There is usually a nega-

tive approach associated with rules. However, the same rule
can be labeled a policy and avoid some of the negative re-
action. For example, a company policy on check cashing may
be ' stated as follows: According to company policy, personal
checks in excess of fifty dollars shall not be cashed. (From
the previous definition, the preceeding statement is actually
a rule, not a policy). However, by labeling the previous rule
as a policy management is able to avoid some of the negative
approach of the following statement. X Company - Rule Number
“2: Do not cash personal checks in excess of fifty dollars.
1% fielatiogship Between Opggating Policiesflg _'I_'_h_e_ Clientele
2; mg Shepping g3; _

In large market areas a super market can not expect to
appeal to all of the buying public. Differences of nationali-
ties, religions, and income brackets create various segments

within the food buying public. Management must select a seg-

ment or segments of the food market, analyze their shopping

i

ifs Ii” Iglli. PEOI‘hl—J‘

.«
1w

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,‘ av

71

habits, and initiate operating policies that will enable the
organization to better serve the consumers to whom the selling
efforts are directed.

Management will need to know the shopping habits of the
clientele of the market area then develop policies in accord-
ance with the characteristics of the consumers in the shopping
area. A national chain with wide distribution can obtain
uniformity of store appearance, standards, and work methods
and still have enough flexibility in policies to adjust to
local conditions. For example, a super market located in a
h1gri income suburban development area would operate differently
than a super market located in a rural community. Policies,
affecting quality, variety, service, and price would be dif-
ferenit even though both super markets belonged to the same
chaixh.
war t1 P_°1_1_91 Areas

Broadly speaking, food store operating policies would
relate to the following areas:

:1. The quality of merchandise to be sold.

2. The extent of variety and assortment within the
retail store. I

3.. The importance of freshness within the retail unit.

tr. Friendliness.

5. Cleanliness.

6. The amount of service offered to the consumer.

7B The importance of honesty and fair dealings with

the customers.

72

8. Internal and externalappearance of the store.

9. The emphasis placed upon price.

Quality - One of the most important areas in any operat-
ing policy is that of quality. Policies affecting the quality
of merchandise to be stocked are a determining factor‘in de-
veloping a store personality. Management must evaluate the
habits of the clientele in the shopping area and adopt policies
consistent with the desires of the people to be served.

To operate successfully a food chain can not establish
a policy affecting quality without regard for the clientele
to be served. One exception, however, is when a retail out-
let follows a given policy in all of their locations. For
example, Robert Hall Clothing Stores do not alter their policies
affecting quality in any of their locations. The policies of
this company are designed to serve a particular consumer group
for all of their locations.

Many food chains are flexible in that the same quality
Steall'ldazrds are not maintained for different geographical loca-
t101'18. Other chains are consistent in their quality standards
and attempt to locate in areas where there is sufficient
aweptance from a particular segment of the market. Chains
following both policies have continued to operate successfully.

Variety - Policies affecting variety are closely con-
nected with those of quality. For example, the customers
attracted from a policy to carry only top quality merchandise
“mild probably demand complete variety also.

F a- as.» d“.._ 3‘“. -.'
l
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.', '

3?
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,

4,

73

Policies affecting variety are initiated to meet the
desires of the clientele to be served and also to guide the
action of buyers within the organization. Thus, we say that
operating policies affect both internal and external (the
employees and the consumers) relationships. A policy affect-
ing variety becomes an important nucleus around which a store
personality develops. At the same time such a policy serves
as a basis for the employees to make decisions about the work
situation.

Freshness - "In and of itself, a policy possesses no
force to produce results."6 Policies directed at maintaining
high standards of freshness are only as effective as the
follow-through procedures of management. Why do some food
stores appear to have high standards of freshness while other
markets are only mediocre in freshness standards. The answer
lies not in the lack of policies, but the extent to which they
are enforced.

Any food store operator realizes the importance of main-
taining fresh products at all times. However, the lack of
enforcement from tap management reduces the effectiveness of
existing policies on freshness.

Another important phase concerning freshness policies
18 the standards required of suppliers. "Many food chains will
not accept perishable products regardless of price concessions,
unless certain freshness standards are maintained. Some food

g

6Terry, 92. gig" p. 183.

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organizations will lower their freshness standards to purchase
merchandise at a discount. Buyers of food chains should always
ccuisider company policies on freshness when contemplating special
purchases from over-loaded suppliers.

Friendliness - The effectiveness of policies concerned
with friendliness toward the customers are primarily a matter
of the degree to which they are emphasized.

Management is quick to realize the benefit of maintain-
ing friendly relations with the customers. However, friendly
relations are not maintained merely by the initiation of a
policy. Meetings, contests, reminders, bulletins, and pam-
phlets are a few of the ways in which management can emphasize
the importance of maintaining friendly relations with the cus-
tomers. Two of the best ways that management can facilitate
friendliness is to be selective in recruiting procedures and
81Ve the employees good working conditions.

Cleanliness - Another important operating policy in
retail food stores is that of cleanliness. If management has
demonstrated through the formation of policies that cleanli-
ness‘ is an essential feature of food store operation, then
Standards must be developed to stress the importance of this
area. For example, a policy or rule affecting cleanliness
could specify that, (1) windows be washed once a week, (2)
floors be cleaned and waxed twice a month, (3) refrigerated

cases washed once a week, etc.

Oi.

m
u

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. hi) APlgigeihl‘ .:17:3w.w
. N

 

75

Management can stress the importance of cleanliness
through clean-up contests, infrequent cleanliness inspections,
and comments during store visits concerning cleanliness.

Service 1:3 1:333 Customer - Management must decide upon
the extent of service to be offered to the customer. Addi-
tional customer services are becoming more predominate in food
retailing. Management must evaluate the cost of these addi-
tional services with regard to such factors. as (1) attraction

of customers, (2) retention of old customers, (3) additional

3
i.
i
3'.
%

mark-up required to pay for the new services or, (a) loss in
net profit to administer extra services.

Not only must management be concerned with new customer
services, but other factors such as (l) easy-to-reach shelves,
(2) easy-to-read prices, (3) speed and accuracy of check-out
Operation, (h) uncluttered aisles, etc. must be considered
in policy formulation.

11939;; a_n_g_ Egg; Dealings - Management must convey the
1mFortance of honesty and fair dealings with the customer
through the initiation of strict policies. The employees must
realize that the customers are to receive every ounce that they
pay for. In the quest for additional profit, management some-
tMiss fails to emphasize that every dollar must be an honest
dOllar. ‘

weak employees will sometimes resort to dishonest tactics
in an effort to maintain profit margins. Management must be
firm in insisting that the customer (receive sixteen ounces in

"91‘? pound" .

 

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76

Internal and External Appearance 2;: the Store - Manage-
ment is able to obtain a great deal of uniformity among stores ‘
by developing policies concerned with the internal and external
appearances of the stores. Because of different sizes, loca-
tions and ages of store buildings, all features can not be
uniform in appearance. However, a store personality can be
developed through the formulation of policies affecting such
factors as: (1) use of window signs, (2) display procedures,
both inside and outside, and (3) standard procedure of product
groupings. These are a few of the ways in which management
can establish a uniform store personality through policies.

Brigg. - "Determining the price at which the product or
products are sold is one of the most significant policy-making
functions. Price affects the gross and net income, customer
relationships, public relations, sales, stability of employ-
ment, and the competitive position of the company.".7

Numerous price questions must receive consideration in
Policy formulation, some of them are:

1. Determination of a pricing policy during a period
Of advancing or declining prices.

2. A decision on the question of underselling competi-
tion and on the wisdom of adapting a "we shall never be know-
11181? under sold" policy.

3. The number of price lines to be carried.

. 7
R. N. Owens, oduction 1:2 siness Polic (Home-
V°°ds Illinois: Richard D. Iran, Inc., 5555, p. .

Fl

n1 rifle".

 

 

77

h. The relationship between prices on comparable mer-

chandise in the various units operated.

5. The effect of competition on internal pricing
p011C165e

The answers to the above questions must be solved through
the formulation of policies best suited for the operational
needs of the company. One organization can not hope to suc-
cessfully follow the pricing policy of another company because
of the difference in the cost of operation, marketing channels,

organizational structure, and other operating factors.

Granted, competition is an important factor to consider
in setting prices, but competition should not determine the
internal pricing structure.

Conclus ion

Effective operating policies can serve as a basis for

answering many problems within an organization. The proof of

an effective operating policy is in the desirable results

obtained through actual performance.

Management must develop policies that will direct the
efforts of the organization to serve the needs of the customers.
In formulating policies, management must ask the question, "does
the policy help the manager to perform his Job, or does the use

of the policy result in confusion, “aimless wondering, and
futility?"8

k

8

Terry, loc. cit.

0L

Illulsr

78

With the passage of time a policy may become outmoded,

in that the policy no longer accomplishes the intended pur-

pose. A periodic appraisal of policies in view of the original

ob Jectives may necessitate the abandonment or modification of

the policy to better serve the current needs of an organization.

CK

_..__ “as“ -.t

i : slaps...“ meIN.Ac.zf¢1—L.‘Fflln.wrimhn.. ”

CHAPTER IX

FUNCTIONS OF THE MERCHANDISE MANAGER

Introduction

 

The growth and expansion characteristic of many food
chains have necessitated the addition of an executive to
handle many of the added responsibilities. As 'the chains
grew larger a need developed to have an executive to coordi-
nate and supervise the merchandising operation. The name
given to the executive holding this position was merchandise
manager.

Because of the differing concepts and functions of the
merchandise manager within different organizations, the writer
will relay the specific functions and responsibilities of the
merchandise manager as outlined by the Kroger Company. These
are 2

l. The merchandise manager is responsible to the
dIVisional vice president for maximum sales and gross profit
consistent with sound merchandising practices.

2. The merchandise manager coordinates and augments
the functions of the grocery sales manager, meat sales mana-
ger, produce sales manager, advertising sales promotion

manager, and traffic manager.

In.

t . . . Vina“ Hiflmwfl Buzz». 7“...» I“

.c
‘ .
0.

w...

 

80

3. The merchandise manager is responsible to the
division vice president for the continuous development of
long range merchandising programs, as well as immediate or
short range plans.

h. The merchandise manager is responsible to the
divisional vice president for a continuous program to improve
the caliber of the merchandising organization. He also aids
and counsels in the selection of new personnel for the mer-
chandising department with the thought in mind of selecting
people who have top level management potential. Other respon-
sibilities in this area would be to aid and counsel in the

improvement of existing personnel.

5. Of importance, is the responsibility to the divi-
sional vice president for supplementing and coordinating the
efforts of all merchandising members to further the reputation
and acceptance of the company in existing trade areas. One of
the prime responsibilities is to implant the thought in the
customer's mind that the company name is synonymous with value
and fair treatment.

6. Another important function of the merchandise mana-
Ser is to anticipate new trends in merchandising in hopes of
giving the company a competitive advantage.

7. The responsibility of developing "firets" to the
customers, such as: passing on market breaks of worthwhile
commodities quickly, more items that register value with, the

customer, and special customer services and extra conveniences.

81

8. The coordination of regular weekly merchandise
meetings, period meetings, special "sales event" meetings,
and emergency merchandising meetings is an important function
of the merchandise manager.

9. The responsibility for coordination of tests on
special and new items or ideas, such as: outside bakery pro-
ducts, soft goods, hardware and vending machines is vested
with the merchandise manager.

10. The merchandise manager. is responsible to. the
divisional vice president to initiate quick action in order
to reverse unsatisfactory sales or profit trends. The mer-
chandise manager must also have the ability to coordinate pro-
motional plans for problem stores, remodeled stores, or new
stores.

11. The merchandise manager is also responsible to the
division vice president for channeling general information
1mDortant to the over-all business through proper channels.
Some important areas would include: (1) public relations
information, (2) possible new store locations, (3) information
concerning unusual competitive activity, 0+) new competition,
and (5) stamp plan acceptance.

12. The responsibility for close coordination of pur-
chasing and selling effort is also an important function of
the merchandising manager. As available space in stores and
warehouses shrink due to the tremendous increase of new items,

this responsibility becomes increasingly important. High

Ci

4‘sx

 

 

82

interest rates and the lack of space are two factors that are
forcing food chains to keep inventories at a minimum. The
merchandise manager is responsible for both the buying and
the selling functions. Since the people performing these two
functions report to the merchandise manager, their activities
can be directed in a more organized manner.9

2295;122:211.

The apecific duties and functions of the merchandise
manager will vary in accordance with the needs of a food chain.
Organizational charts of various food chains reveal that the
merchandise manager usually reports directly to the top execu-
tive of the distribution office, who is the divisional vice
president, branch manager, divisional manager, etc.

The functions of the merchandise manager goes beyond
that of planning and coordinating. His effort must be directed
also at communicating the results of plans as they affect per-
sonnel in the follow-through or action phase of the operation.
The merchandise manager's function as the coordinator is not
only in the planning stage, but also by the nature of communi-
cation in setting the plan into action.

The above description of the functions and responsibilr
itles of the merchandise manager are not inclusive for any one-

company or the food chains. Since the position of merchandise

 

9c. Olaf Talla, Vice-President, Detroit Division, The
Kroger Company, l"Merchandise Manager's Responsibilities,"
(Personal Correspondence) .

' - 23L:

ii."

“:A

 

.. , a. 1.....2 . 1 .11 41.1.. a... n1}. i“

an

3.

83

manager is relatively new among the food chains, some companies
have not outlined his specific functions. Rather, many of the
functions and responsibilities attached to the Job are in a
direct relationship with the ability and capacities of the
individual. The executive position of the merchandise mana-
ger is becoming even more important as chains increase in
size and volume. The executive in this position must be able
to coordinate various activities to increase the efficiency
of the organization. Above all, this executive must have an
intimate knowledge of those activities for which he is

responsible.

 

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CHAPTER X
FUNCTIONS OF THE SALES PROMOTION MANAGER

W

According to John Aspley there are two main operating
divisions in retailing, they are: (1) sales planning and
administration, and (2) sales promotion and advertising.10
"mile the two divisions are closely interwoven, they call
for different aptitudes, techniques, and experiences. The
executive responsible for sales may, and usually does, dele-
gate the advertising and sales: promotional operations to others
skilled in the use of those techniques."11

The sales promotion manager is a coordinator of the
advertising, merchandising, and selling operations. Because
of this duty the sales promotion department is usually recog-
nized as one of the more important segments in food retailing.
A definition of this broad term, sales promotion, may aid in
a better understanding of the importance and responsibilities
of this department. Sales promOtion has been defined by the
American Marketing Association as "Those sales activities that

y

10
John Cameron Aspley e Sales Promotion mdbook
(Chicago: The Dartnell Corporagan, I53 , p. .

11mid.

8‘5

supplement both personal selling and advertising, coordinate
them and help to make them more effective."12

Some people do not think of sales promotion as an effort
to develop an effective selling program on a continuing pail-g.
When the term sales promotion is mentioned, some people auto-
matically think of a single sales campaign. Granted, sales
promotion embraces the activity of developing periodical sales
campaigns. However, the sales promotion department is also

concerned with improving and assisting the selling program on

a day-to-day basis.
anemia salami; sale. _____nPromotio
"One of the outstanding sales promotional activities is

that of Kroger Company, operating a national chain of food
stores."13 The Kroger Company supplies to every employee in
upper management a pocket card which sums up the company's
philosophy of sales promotion. The cards reads as follows:

1. Create the value.

2. Plan distribution so the product is a value at the

point of sale and at the point of use.
3. Present the value to the organization and to the

customer.
I-I'. Follow through to maintain the value at point of 1%
sale and point of use to continue successful sales.

An important phase of this philosophy of sales promotion
is that of selling the value to the organization. Concerning

12"Report of the Definitions Committee," on. git" p. 21%.

13A8pley, 9-20 2L9}, p. 320 .

I’M—Ride, p0 330

86

this factor, Steven A. Douglas, Director of Sales Promotion
for the Kroger Company says:

we think of sales promotion as a concept rather than
a department of the business. we sell everyone on our
company, its policies, and its products Just as hard as
we can, and usually before we sell the consumer. we
never expect any employee to promote or sell anything by
instruction or direction. we sell the em 10 ee on the
idea first, and arouse his enthusiastic desire to in turn
sell 'Mrs. Smith', as we refer to the customers in all
our promotions. This 'sell the man who sells the cus-
tomer' idea is carried through all our promotions. Ours
is a highly competitive industry and we believe that our
success during the coming years will require the same
accent on real value, well distributed and with careful
followbthrough, that successful selling has always re-
quired, only more of it.1

Importgpcp p; §ales Epomoplop Department

Pinpointing the exact functions of the sales promotion
idepartment is difficult because of the differing management
concepts as to its purpose.

Sales promotion steps in to utilize advertising,

to condition the sales force, to inspire and inform the
distributor, the retailer, and the consumer. The final
step is to create the right atmosphere at the point of
sale; and the clincher is to get the consumer to open
his wallet and buy. The anti-climax is to be sure the
consumer stays sold and becomes a booiger for your pro-
duct long after he made his purchase.

In the sales promotion department of companies the
specific functions of the sales promotion manager may vary.
However, the United States Euployment Service gave the fol-
lowing Job description of a sales promotion manager.

'15Statement by Steven A. Douglas, Aspley, lpg. gig.

16"Sales Promotion Defined,” ___!3_____Pri t9?“ .23: (January 28'
1955). p. 77.

Sales Promotion Specialists (56.h.20)

87

Sale promotion specialists plan and direct sales,
that is they predetermine the sales effort needed and
control the sales effort during the course of the
operations. They also control advertising campaigns
and expenditures. The best kind of formal training
for specialists in this field appears still to be the
subject of some doubt. It is clear, however, that
special knowledge of advertising, marketingii

a

and scheduling, together with de
the particular product is.required.

Sales promotion is nny,or fill of the following component

parts.
Sales letters
Inquiry answering letters
Follow-up letters or post
cards
Direct mail
Slide films
Visual presentations
Distributor promotion
Sales organizers

Product evaluator charts
§ales Promotion Planing

ilgd fami

Bag stuffers

Catalog savers

Catalog sheets

Mats [for adver-
tisin57

Radio ommercials

T.V. Commercials

Consumer direct
mail

Packaging

Market research18

programing,
arity with

“a-.- a an
.

3"57'

Testing sell-
ing themes 3
Store demon-
strations
Store displays

Other types
of adver-
tising, both
in store and
by other
media

Such a broad listing indicates the many variables that

can be included in a sales promotion program.

Regardless of

the various Jobs included in this department, there are ten

ha81¢: steps to be followed in sales promotion planning.

-—_

17Reprinted in Aspley, gp.‘git., p. 56.
18"Sales Promotion is a Management Problem,” Printer's

12:. (January 28. 1955), p. 73.

va‘

. T . .. Edits-334.41% _ u flu... kl. .. a
, .w

88

1. Definition of the problem and establishment of specific
objectives to be realized.
2. Review of past experience.
3. Setting up the necessary budget.
. Development of basic promotional idea.
5. Review of available media and application of basic
promotional idea.
6. Assignment of basic responsibilities.
7. Schedule of follow ups.
8. Progress reviews.
9. Final review and presentation of the finished plin.
10. Review and write up the results after the event.
[The followbthrough on this step is im ortant to
serve as a guide for future promotion§,.

53.193 W Organization

The organizational structure of the sales promotion
department is usually determined by the size and the way in
which a company distributes its products. Thus, a local or
regional chain operating from one office or distribution center
would require a different sales promotion setup than larger
food chains such as Aw& P, Safeway, and.Kroger.

"A study of sales promotional organization of several
hundred companies in various industries shows two different
approaches. One group centralizes all sales promotional
activities in a home office organization, responsible for
Planning, production and the execution of all undertakings
01' a promotional nature. Others decentralize sales promo-

A tier: so far as planning and execution are concerned but cen-
tPallize preduction."2° Where a company operates several

—‘

19c. M. Edwards and w. R. Howard, Retail Advertising
Sales Promotion (New York: Prentice-Hall, Inc., 9 ,
mm 5.

2°Aspley, 22. are, p. 53.

89

regions, divisions, or branches each unit may develop its own
sales promotion department to best serve the needs of the
market and yet receive suggestions and other services from the
central office.

Each super market operator is striving to obtain a
greater proportion of the food dollar spent in his trading
area. The problem of determining the exact point at which
the right amount of quality in the product, coupled with the
right price to return the highest net profit is in part per-
formed by the sales promotion department. One of the func-
tions of the sales promotion department is to interpret and
transfer to management the buying habits of the consumer.
"Present retail sales promotions are based on two objectives--
(1) to reach a larger market, and (2) to cultivate those mar-

kets more agressively."21

£1.23. Uwotio as. W W

Intelligent promotion begins with a thorough analysis
or basic merchandising (appeals and objectives of the particular
food store organization. For example, the general character
Qf'the organization determines the type of advertising used.
M1119 an agressive organization favors sensational and highly
Promotional types of advertising, a well established retailer

may IItilize a more conservative type of advertising.

_

21 Edwards and Howard, 29,. 941., p. L+80.

 

I|—-——p--- 4.1.4:“ “‘09 T: $ 0 2'
.~ v A g
‘ ' .l '-
v

90

"Various kinds of sales research yield information per-
tinent to promotion planning. Advertising effort is most
effective when used to announce and feature wanted merchandise
that sells readily. Maintenance of a best-seller list reveals
goods that warrant special promotions."22 In return, the
buyers need to have a knowledge or items that are not moving
.aatisfactorily. Thus, the slow moving merchandise can be
reduced quickly to make room for faster moving items.

A thorough analysis of the market area gives the sales
promotion manager a better knowledge of who the customers are,
where they live, and their shopping habits. "In recent years,
chain store organizations have shown increased interest in the
buying pattern of individual customers and customer groups.
Studies of this kind often show, for~example, that many of the
stores' customers are patronizing certain departments regu-
larly, yet they seldom buy from the others. Of course, no
organization can hope to completely 'tie up' the trade of all
who buy from it. Nevertheless, analysis of this nature is
valuable, for it does uncover many unnecessary weaknesses and

many promotion opportunities.n23

 

22
Paul L. Brown Retniling Princi les and gngctices
(New'York: The Ronald Press mpany, I§5§5, p. 56 .
23Dona1d P. Blankertz, "Mr. Retailer, that Do You

KnowéAbout Ybur Customers?", ggnnnnl,gf R tail.n , (1950),
13.2. .

91

Obviously, in today's economy, advertising has become
an integral part of food chain merchandising. This has been
due to a number of factors; partly to the evolution of the
chains themselves, and partly also to the growth of the science
of advertising. The increased amount of competition has also
spurred a rapid growth in the use of various types of adver-
tising media as a promotional tool. I

The newspaper has continued to be the number one adver-
tising medium to coordinate the merchandising and selling
activities of food chains. Other important advertising media
would include radio, television, direct mail, hand bills,
outdoor advertising, and other miscellaneous types of adver-
tising.

Conclugion

whether the promotional activity is centralized or
decentralized, the success of the sales promotion department
depends upon the man who heads the activity. The sales pro-
motion manager is the coordinator as well as the promoter of
everything between all phases of top management on one hand,
and selling to the ultimate consumer on the other hand. The
sales promotion manager must be the type of man who combines
these qualities:

1. Personal sales ability and sales experience.
2. A broad background in the use of advertising and
promotion techniques.

3. A Vigorous, agressive mind that thinks constantly
in terms of how the company can make more sales.

k. The common-sense approach that the increased sale
must be made at a prone?“

auStatement by Philip S. Salisbury,_Editor of S le
Management magazine, Reprinted in Aspley, 22. 2i§., p. 53.

 

CHAPTER XI

THE USE OF NEWSPAPERS IN SALES PROMOTION

Intzoduction
Tabulations from Printen's Ink_reveal that newspapers

continued to receive the greatest percentage of the adver-
tising dollar in 1956. Advertisers spent a total of 3 3/h
billion dollars for newspaper advertising which represented
oneuthird of the total advertising expenditure in 1956.25 V

The importance of the newspaper as an advertising medium
for food retailers is evidenced by the percentage of the adver-
tising budget devoted to newspaper advertising. Super markets
have continued to appropriate the greatest percentage of their
advertising budget for this medium. Thus far the newspaper
has offered the super market one of the best means of telling
customers what is on sale, informing customers of new products
and.also of building the prestige and reputation of the com-
pany itself.

The super market industry recognizes today more than
ever, the need for an adequate advertising program to present
.a selling message to the consuming public. The food industry
is aware of the contributions of advertising to the mass mer-
chandising plans in effect throughout the food chains.

25"Advertising's Biggest Year Ever," Printer's Ink,
(February 8, 1957), pe 22o

 

 

93

Now the super market operator is searching for new ways
and methods to indentify and distinguish his stores. Every
operator wants to emphasize new points of service and unique
,features that give his operation a mark of. individuality, so
he may be set apart from his competitors in the community or
trading area in some way.
my Egg Tn; Newspnper?

"Of the homes in the United States, 93 per cent are
reached by the circulation of the newspaper."26 This helps
to explain in part why super markets utilize newspaper adver-
tising to such a great extent. Almost every family buys or
sees at least one newspaper a day.

.Another important reason why the food industry chooses
to utilize the newspaper to such a great extent is the com-
parative cost of distributing the selling message to the con-
sumer. However, the economical advantage of the newspaper
depends upon factors other than the cost of advertising space.
sum; 29; 322933.

"The newspaper reaches the public at a lower cost to
the advertiser per individual than does any other medium.
However, every newspaper has a certain amount of circulation
in areas so remote from trading centers that its advertising
is of little or no value to the retailer."27

263dwards and Howard, 92. 943., p. 385.

273331.. Pp. 387, 392.

9i+

waste circulation is a factor that must be given serious
consideration when comparing the cost per reader with other
types of advertising media. The newspaper may prove to be
most economical for some food store operators and very costly
for others because of waste circulation. To the super market
operator who must depend upon the accessibility of his store
to the circulation of the newspaper for the results the ad-
vertising produces, waste circulation is a factor of great
importance.

Newspaper advertising rates are based on total circu-
lation. Because of this fact many small food retailers can
not afford to advertise in the newspaper. For example, a
super market or superette located in one section of a large
city may have a very small trading area. In such an instance
only ten to fifteen per cent of the. newspaper's total circu-
lation may be distributed in the trading area of the store.
Since the advertising rates are based on total circulation,
the cost per reader within the trading area of the store is
very high.

To offset this disadvantage, smaller food retailers
have Joined together in cooperative advertising groups. In
a cooperative advertising program, smaller food retailers .
located in non-competing trading areas have been able to re-
duee the advertising cost per reader.

Smaller retailers have also cooperated in establishing
advertising media known as shopping publications where

95

newspaper circulations have been wastefully large. Shopping
publications can either be owned by the merchants or by an
independent publisher who sells space to the retailers.
Direct mail and hand bills have been two other ways that
small food retailers have reduced the advertising cost per
reader in their trading area.

Two methods have been devised for comparing the cost
per reader for various newspapers. One method is known as*
the milline rate. "The milline rate is the rate per line per
million of total circulation, or the cost of reaching one
million readers with one line of advertising."28 This rate
is determined by multiplying the rate per line by one million
and dividing the result by the circulation. For example, a
newspaper having a rate of 25 cents per line and 200,000 cir-
.cnlation, has a milline rate of $1.25, which is arrived at by
the following equation:

.25 (line rate) x 1,000,000

200,000 (circulation)
Recently local advertisers found the milline rate did

= $1.25 milline rate

not give the true cost of distributing the selling message to
the potential customers within the store's trading area. As
a result, another common denominator known as the tru-line
rate was introduced to measure the cost of distributing the

¥

28Edwards and Howard, 92, 311., p. 396.

96

selling message to the readers within the trading area. "The
tru-line rate is the rate per line per million of circulation
within the trading area."29 This rate is determined by multi-
plying the rate per line by one million and dividing the
result by the circulation of the paper within the trading area
while the milline rate is the rate per million of total cir-
culation. If a newspaper has 100 per cent of its circulation
in the trading area, its tru-line rate is the same as the
milline rate. However, a newspaper with such a circulation

is rare, indeed. For example, a newspaper with a circulation
of 250,000 may have only 200,000 of that circulation within
the trading area. In such an instance the tru-line rate would
be $1.25 assuming a rate of 25 cents per line. The following
equation will describe how the tru-line rate was arrived at.

.25 (line rate) x 1,000,000
i_, 8 31.25

250,000 (circulation) - 50,000 (circulation outside
trading area)

 

Both the tru-line and milline rates should be considered by
management when comparing the readership costs of various
newspapers.
AQvertising 99;; Trends inINewgpapers

Management should consider cost trends in determining
their advertising appropriations for newspapers and other

media. Under present economic conditions, advertising budgets

291pm.

97

will have to be increased if an organization plans to use the
same amount of space as in the previous year.

Newspaper advertising rates are going up, reflecting
cost increases in newspaper production. At the same time,
newspaper audiences have not been increasing as fast as the
advertising rates. The results-the advertising cost per
reader in newspapers has been increasing. "For every 3100
invested in newspapers in 1950, advertisers in 1956 have to
spend $128 to buy a schedule equal to the 1950 purchase. For
this additional cost of 28 per cent the advertiser gets an
audience that is six per cent larger than the one available to
.him in 1950. An obvious increase-in cost."30
gzngress n; Newgpaner nnventising gnn,znng,§£gnnn

"Food advertising is the most thoroughly criticized
advertising in the world."31 Outside experts are quick to
criticize food advertising and claim the ads are devoid of
every idea except price. In part these criticisms are true
because many advertising departments fail to establish any
impression other than price through a newspaper ad. Analyses
of super market advertising will quickly reveal the dominance
of price advertising in the food industry. Why has this

 

3°"Advertising Cost Trends in 8 Meier Media" Pr nter'
fiépiugiisar ' ___aGu1d .2 Mains is: £52. “no?“ 59
s P0

31‘w’illiam J. Quinn, "Advertising in Action, " Summm
Report NARC Management Clinic, ales Promotion an__c_l_ ngvertising,
(January, 1955), De l"'20

98

approach been used when "Many research surveys clearly prove
the customers do not remember over twenty prices."32 Obser-
vations of one marketing study conducted on newspaper reader-
ship and recall reveals that readers remember less than five
prices from a newspaper advertisement.33 An impression can
be established in the reader's mind much gnnigngwith an idea
than with all the price advertising one can do. The first
answer in reply to the previous statement is that price ads
have been used successfully for over 50 years. Perhaps one
of the hardest things to do is "argue with success".

To express the pros and cons of price advertising would
necessitate a voluminous publication. "There are some adver-
tising men who say, and with truth, that price advertising is
bad only when it is disorderly and ads nothing to the cus-
tomer's knowledge. To be effective price advertising should
be read easily. Prices should be clearly seen, be newsworthy
and make the over-all ad attractive."3'+

Included in the twenty largest retail outlets in the
united States are nine food chains. Three food chain organi-
zations are among the t0p five merchandising firms. "The

3222;29’ p. #2.

33For competitive reasons the source of this marketing
study wishes to remain anonymous.

3l""Price Copy Needn't be Ugly,” Super Mg; m-
m, (February, 1956)! P0 85.

_.._...l.s......a_t

. , . .. . Eutiziwue 92355.net?”
r

d.
wl

99

food chains are rapidly becoming the world's largest adver-
tisers."35 The food chains may not be the world's best
advertisers but the growth and the sales records of many food
chain organizations speak for themselves.

Eggpgses 9;,Eggg,§gaggpAdvertising

Food chain advertisers strive to accomplish several
purposes in their advertising program. Some of the purposes
of an advertising program would include: (1) to attract new
customers to the store, (2) to re-sell the old customers, (3)
to increase the purchases of each customer, (h) to establish
the name of the company among the consumers, (5) to establish
a company reputation that will be synonymous with quality,
variety, friendliness, value, etc. This can be accomplished
in part by institutional advertising.

One of the first purposes of any food store advertising
program is to draw customer traffic. Many different copy
approaches can be taken to accomplish this goal. If the pur-
pose of a newspaper ad is to draw customer traffic, the layout
and plans should be carefully checked to see if the ad will
achieve the desired results. If price appeal is used to draw
customer traffic, the right product must be coupled with the
right amount of quality at the right time with the right amount
of quantity.

Many food chains recognize the needs for appeals other

than price in the advertising program to attract consumers.

 

”Quinn. .1.<.>_<.:.. 21.2.

100

Price is not forgotten nor is it over-emphasized. The many

surveys that place price appeal in fifth or sixth place have
not convinced advertising managers to forget price appeal in
advertising promotions.

A a .1: mad;

Do families exposed to newspaper advertising patronize
grocery stores in greater proportion than families not so
exposed? The answer to this question has been of great con-
cern to many food store operators. The A.& P food chain in
association with the research department of Richmond, Virginia
Newspapers, Inc. conducted a six month experiment seeking to
determine if families exposed to newspaper advertising patronize
grocery stores in greater proportion than families not so
exposed.

The sales experiment in food.stores advertising was
conducted for a period of six months. During this time, A.& P
eliminated its usual page of advertising in the Richmond zigzag
Dispatch, a morning newspaper, and concentrated the advertising
program in the Richmond Em 9332.12, an evening newspaper.

After the advertising program had been concentrated in
the evening papers for six months, survey families were so;
lected in sets of three, and one set per block, in random
‘blocks throughout the city. Each of the sets met two basic
requirements: "(1) In each set, at least one but not all
families patronized A 8: P; (2) in each set, at least one but

:not all.families, subscribed to the morning newspaper only."36

 

36% a P Study Proves Ads in Dailies Win Patrons,"
311.29.: 91W. (December 12, 1953), p. 13.

 

hirimvfim... E5 "41.“? mi... 3‘

4

\ii'VIM

_ ‘c'.

101

Altogether, a total of 116 sets of families with the

above requirements were chosen. (Remember, each set included

 

three families). In each set family location and presumably
income were the same. Thus the research department concluded
any differences in A.& P patronage within the group would
reflect primarily the effects of the newspaper advertising. r-“*1
Interviews revealed that 65 per cent of the families " "
that subscribed to only the evening newspaper were A.& P ,

patrons. Fifty one per cent of subscribers to both the even-

 

ing and morning newspapers patronized A.& P. 0f the families .;__g
that subscribed only to the morning newspaper, 19 per cent
patronized A.& P. (Remember that the morning or control paper
did not have any A & P advertising during the six month per-
iod). The statistical odds of picking a sample with so low a
percentage of A.& P patrons among "morning only" subscribers
and so high a percentage among "evening only" subscribers was
20,283 to one.37

The research conducted revealed the following conclusion
of a positive nature: "There were more than three times as
many A.& P patrons among families exposed to newspaper adver-
tising of that firm than among families who, for a period of
six months, had not been exposed to such advertising."38

Weasel. L____&dvert181n . ,.
In recent years institutional advertising in the food

 

37Figures from Ibid.
331nm.

102

industry has been utilized to a much greater extent. Such

food chains as Wrigleys, Jewel Tea, Alpha Beta, and Bettendorfs
are only a few of the many food retailers that have shown pro-
gress in the field of institutional advertising. The basic
philosophy in this type of advertising program is to break
away from price lines and sell the customers on a service,
idea, or build a reputation for the company or store. Insti-
tutional advertising has been an important means of relaying

to the consumer some of the customer conveniences in the store.

Mr. Ervin Levinson, Advertising and Sales Promotion
Manager of wrigleys Stores, Inc., has reported great success
with a combination of recipes, illustrations, color, price,
and institutional copy in newspaper advertisements.39 This
new type of advertising has not abruptly taken the place of
regular-price line advertising but is gradually being blended
into the advertising program.

The wrigley merchandising team believes that the insti-
tutional story can best be told in separate institutional ads.
A series of special institutional newspaper advertisements are
used to present a confidence-inspiring story about the store,
a department, a service, or a particular product.

Some of the institutional advertising approaches fea-
tured by the wrigley food chain have received immediate sales

response from the consumers. wrigleys ran a full-page color

 

39Statement by Ervin Levinson, Sales Promotion Director
of wrigle 's Stores, Inc., Detroit, Michigan, (Personal
Interviewg.

 

 

rah-.LA‘ LL ‘
I

A

l

«l

s

'x ' J - ‘
\«nrw'

 

103

ad using institutional copy. The ad had colored illustrations
of salads, vegetables, and various salad dressings. Included
in the copy were recipes for salad mixes and suggestions for
summer salads. Prices of various salad vegetables were placed
at the bottom of the advertisement.

The ad broke on Tuesday and the sales results were quite
amazing. "The normal movement from the produce warehouse on
Thursdays averaged between 17 and 18 thousand packages. The
shipments from the produce warehouse increased to approximately
32,000 packages on Thursday after the full-page institutional
ad was run on Tuesday. There were also some 15,000 requests
for recipes of salads and salad mixes which were mentioned
in the advertisement.”0
11333 103311 Merchandise A;

Great emphasis should be placed on the weekly merchan-
(11 se ad. This is the ad the customers are exposed to the
most. Also, the customers become to expect this ad every week
to obtain information about weekly specials. A well-planned
weekly advertising program offers an opportunity to develop
a personality and reputation for a food chain.

One of the greatest opportunities to increase reader-
ship is to develop an ad that will convey a real selling
message. "Most food store advertising (so-called) is simply

“b11311? .1133, 32,152,929 $911 1%. Real advertising is what

_¥

l"3n: g.

10H

creative selling mdnds make to put in white space.”1 Clyde
Bedell, author of the previous statement, does not underesti-
mate the importance of price while constructing effective
newspaper advertisements; however, other appeals and selling
messages must be coupled with the prices of featured items.

When advertisers buy space in a newspaper they are not

a..‘ib..l

buying advertising. Thus far the advertisers are only buying
the opportunity to advertise. "If there is not arresting,

interesting, effective selling in the message to be printed,

‘a—M ‘_ -M‘L as .a 91’ I

it is not good advertising no matter who runs it, where, how
.often, how big, or to how many poeple."t*2 The newspaper does
not have the responsibility to insure the readership of ads.
The responsibility of the newspaper is to present to the adver-
tiser an audience interested enough in the paper to pay sub-
scription rates.

How then have food chains improved their advertising
program? What have some organizations done to insure better
readership of their newspaper advertising? Many food chains
have begun to employ professional advertising personnel with
a good knowledge of advertising research. Marketing research
studies conducted toward advertising techniques have done much
to serve as a basis for improving the advertising program of

‘-

klClyde Bedell, "New 'Specs' For Advertising," How 19
§;%§)More Profitably, (Chicago: Super Market InstituteI—fiay,
9 Do 31. ‘

“21bid.

105

food chains. Only by a thorough understanding of the desires,
motives, appetites, likes and dislikes of the consumer can a
good advertiser hope to construct an ad with customer appeal.
iosiiimaissassssmie

An area overlooked for a long period of time in food

on,

store advertising was the presentation of recipes and meal
suggestions for the housewife. Often in salesmanship courses

one has heard that insurance salesmen do not sell life insur-

. l T? l. #_._.._- #“C‘A ‘s'i
. . A
- I .

ance, rather they sell protection to the widow. Neither does
a good shoe clerk sell shoes, rather he sells foot comfort. 3
In the same way food store advertising can sell an idea about
a product or the company rather than the product itself. Only
recently have the food stores mentioned meals, quality and
satisfaction along with food products in the weekly ads.
The average housewife has to prepare over a thousand
meals a year besides other special luncheons and party snacks.
Where does the housewife get her ideas to plan and prepare so
many meals? would the housewife welcome ideas and suggestions
for the preparation of her meals? If you prepared over a
thousand meals a year, you would} Today many weekly food ads
feature recipes, menu suggestions and hints for easier house-
keeping, Weekly features can be planned so as to suggest
entire meals for the housewife.
There are a multitude of different ways to make food
'tOre advertising appealing. Attention can be attracted in a

Great many ways. For example, unusual type, vivid

:4.-

s. ‘

106

illustrations, clever headlines, and curosity catchers of all

sorts can be used.
Best of all, however is the direct appeal to the reader's
instinctive and acquired interests. Where such interest
can be awakened, the advertiser‘s message will be care-
fully considered, on its own account. Advertising that
makes a direct interest-appeal carries with it a degree
of force obtainable by no other method, since it strikes
directly at the reader's impulses to action. The mess-
age itself gets attention, and the reader is not dise
tracted from thinking about the store advertised by

admiration far the cleverness or originality of the
composition. 3

Advertising Dominance

Some regional and national food chains strive to be the
dominate advertiser among the competing super markets. An
analysis of over-all newspaper advertising linage in a defined
market area will reveal that one or two operators utilize more
newspaper space than competitors.

Because of the geographical breadth of such chains as
A.& P, Safeway, and Kroger, greater results can be obtained
in the long run by establishing their company name to the
public. The previous statement does not imply that smaller
food chains can not establish a company name through consis-
tent advertising. However, the geographical area of operation
for smaller chains is proportionately smaller and the number
of transient customers obtained from consistent advertising in

other areas is small. As previously mentioned, one of the

 

k3W’a1ter D. Scott The Ps cholo of Advertisin
Revised bylb. T. Howard,’(N35 York: 53§§,-Mea an Company,
931 ’ pe 1.

“AA—u is I’- uA-Ag‘ ‘

'. 1):.‘4.

 

107

purposes of food chain advertising is to obtain new customers.
Some educators estimate that individual stores can lose as
high as 20 per cent of their customers because of the shifting
papulation. Through a consistent and dominating advertising
program a company name may be established to exert an influence
on the consumer's choice of super markets upon moving to new
areas. Also consistent advertising will help to attract new
customers that are not acquainted with the local markets.

A basic conclusion drawn by Adams concerning the cumu-

'...~— .- A—n'. —— ‘1‘- ...“ “‘1'“-
I As ‘.. i’ ' _-‘ . 5 . - ’ '
‘ i

lative effect of repetition in advertising was that "four
appearances are not worth four times as much as one, in atten-
tion value, but only about two and one-half times as much."hh
It is also important to note a study by Strong in which he
concluded within the limits of his experiment a half page
presented once is worth more than a quarter-page presented
twice when the same audience is reached by both quarter-

pages. One important exception is the.fact if different
audiences are reached by each quarter-page (in which case there
would be no real repetition), the quarter-page used twice would
be best of the two. The conclusion of Strong‘s study was that
a combined larger size advertisement has the advantage over

smaller sizes repeated to the same—audience.h5

 

“Aubert T. Poffenberger P cholo _ip_ Advertising
(Chicago: A. W. Shaw Company, 1623;, p. 2%.

_ hsIbide’ Po 2u2e

 

108

31993.5. in ELL! Keg}; Advertising
Supermarket Egg; surveyed a number of cities to deter-
mine the extent of early week advertising. At least one, and
often times more super markets in an area were found to sched-
ule continuous early-of-thedweek advertising. However, con-
clusions were drawn that "success in changing shoppers' habits F—

appears to be an exceedingly slow process, but some retailers

is“ re

apparently believe it is worth the—effort."M6 The survey shows

that super markets in some areas are still advertising early in

‘._._ M,‘- *-—-—_. § -.

the week and in other areas many operators have dropped early-
week advertising. The net result has been a slight decrease
in earlydweek advertising.

A reduction in newspaper advertising has been one way
many chains are trying to fight rising costs and declining
profits. Traditional week-end shopping and Friday payroll
schedules have been all important in discouraging the early
shopper. With regard to Menday ads, a spokesman for one chain
said, "their only benefit is to keep our name in the paper.“+7
Another chain spokesman told the writer the only reason we
participate in Monday advertising is because competitors con-
tinue to do so. The spokesman continued by stating that his
chain.wmuld drop Monday advertising if the major competitors
‘ would do likewise.“8

 

“é"Early week Ads Cut in Some Areas,” §ppepmarket gggg,
(MBPCH 25, 1957), p0 Se

I~‘7Ibici., p. 10.

M8Personal InterviewbSource wished to remain anonymous.

109

The 1957 consumer analysis report by the Milwaukee
Jopppal shows a significant change in consumer shopping habits
since 1953, even though Friday and Saturday continue to be
the most important days. "In 1953 the study showed that only
17.6 per cent of the shoppers did most of their snapping
Monday through Thursday. However, in 1957 2h.8 per cent of
the shoppers said their big shopping day was one of the days
from Menday through Thursday."k9 The survey included only the
Milwaukee shopping area.

Super markets in some local areas have been quite suc-
cessful in attracting early-week shoppers, but most chains
report the cost of obtaining early-week shOppers has been much
higher than the cost of obtaining week-end shOppers.

Summapz

The newspaper has continued to be the number one medium
by which super markets have distributed the selling message to
the consumer. Food stores have received much criticism for
poorly constructed ads and the continued use of price copy.
Many of the criticisms have been Justified, but many of the
advertising critics have failed to give proper recognition for
better advertising techniques developed among many of the food
chains. Outside observers are quick to criticize the layout
and copy approaches of food advertisers. Management is aware

of the needed improvements in the advertising program and

 

”9"Early week Ads Cut in Some Areas," Ipig., p. 10.

'0”.

\V‘Nm'l A a.

110

'welcomes any positive suggestions or methods to improve exist-
ing advertising conditions. However, new methods must develop
through a gradual process, and to many observers, food adver-
tising is in a process of improvement now.

If ideas can be used along with price as a basis for

establishing impressions upon the reader's minds, food store F

—‘ -i

advertising can (1) build the prestige of a store, (2) can
better the social level or health level of the readers, and

(3) can make shopping a more pleasurable adventure for the t

 

consumer.

In the development of any advertising program manage-
ment should remember that "(1) advertising can not sell
merchandise that people do not want to buy, (2) advertising
can not succeed unless used continuously, and (3) an adver-
tising program can not succeed without the support of the

entire store personnel."50

 

50Edwards and Howard, pp. pi§., p. 13.

CHAPTER XII

AN ANALYSIS OF RADIO
AS A SALES PROMOTION DEVICE

Introductigg
Advertising media other than newspapers are used effec-

tively by food chain organizations to present the selling

message to the public. Top management must determine the

‘t—h-e- u ‘r—s_—.J—_e__‘.‘.—-.' - L0!) a' I”!
A A ‘_ .‘i

effectiveness of various advertising media and allocate an
advertising budget accordingly. The purpose of this chapter
is to evaluate the effectiveness of radio so a more intelli-
gent decision may be made concerning the use of radio as a
sales promotion device.

‘ Generally, food retailers do not consider radio to be
their primary source of advertising. The radio received five
and seven tenths per cent of the advertising dollar spent in
1956.51 To actually determine the true value of radio as an
advertising medium will be difficult because many times radio
is used as a supplement or jointly with newspapers, television,
hand bills, direct mail, and window promotions. As any other
advertising media used to convey the selling message, radio

has both advantages and disadvantages.

 

51"Advertising's Biggest Year Ever," pp. cit., p. 22.

112

Qhapacteristics pgthdio Ag Ap,Advertising Medium

Some exclusive characteristics of radio that are not
present in other types of advertising media are:

l. The advertiser must build and maintain an audience
for his program mainly through his own efforts. Radio can
.not guarantee audiences as magazines and newspapers do. Ad-
vertisers who use spot announcements do not have a chance to
build up their audience through their own efforts. Rather,
they rely on the promotional techniques used by the station
itself or the pulling power of regular programs that may come
before or after the spot announcement.

2. Such factors as talent and desirability of available
time are barriers to retailers trying to appeal to a specific
group.

3. Radio must make its impression through the ear.

h. Radio has a more intimate appeal that other adver-
tising media, except television, because the selling message
is presented orally. The human voice is able to convey
emotion, spirit, and enthusiasm that are not available in
other types of advertising media except television.

"Much has been written about the use of radio by adver-
tisers, but there exists relatively little information of a
definitive nature which throws light on the special advantages

and disadvantages of radio as an advertising medium."52 One

 

52R. Cassady, Jr. and R. M. Williams, "Radio As An
Advertising Medium," Harvard Business Review, (January,
1911-9), D. 62s

15*A-NCMHH—J‘ m.afi—A J
'. A x. .
u

113

problem of vital concern to the food store is to define the
areas of sales promotion in which radio can be used effectively
as an advertising medium and in what areas, if any, is the
utilization of radio undesirable?
£39.19. ppm Conducted By Cassadz _a_n__<_1_ Williams
A study was made by Cassady and Williams which analyzed F
radio time, newspaper and magazine space on the basis of the
types of goods and services advertised.53 Rather than present .
statistical data from this study, generalizations based on the
collective Judgement of a large number of business executives ;
may be more informative. .
Food retailers, as do manufacturers, seem to follow the
.same pattern concerning the extent that various types of media
are used. "General Mills, for example, out of its advertising
appropriation for magazines, newspapers, and network radio
spent 6h.l per cent on network radio in l9h7, while Pillsbury
spent only 16.2 per cent on this medium."51+ Cases can be
observed in which food retailers differ in theiropinions.
concerning the use of radio Just as these two manufacturers
in the same industry.
The study of Cassady and Williams indicated that radio
is considered ideal for promoting mass-consumer items of low

unit price whose sale may be motivated by the use of emotional

 

j

533ee a. Cassady, Jr., and a. M. Williams, "Radio As An
Advgrtising Medium," flgrvgrd Business Review, (January, l9h9),
pe 2e

11h

appeals. Food, drug, and soap items fit excellent into the
emotional appeal category.

"while the radio does not seem to be particularly well
fitted for retail advertising, it can be used with some effec-
tiveness evidently for the publicizing of retail institutions
which feature low price merchandise even of a durable type
or which stress easy payment, and can be used even to some
degree to promote a limited number of specific items of

merchandise.”5h

[HP-HM-L..__—_—u..—a— ._-n...n.>
. . ~ 3 .

Of particular importance to the food retailer is the
fact that food items are usually sold on a price basis at the
retail level. This places one limitation on radio as an ad-
vertising medium for food retailers since an emotional appeal
can not be interJected into price advertising. Some seasonal
items in short supply seem to have a strong emotional appeal;
therefore, radio may be effectively utilized for promoting
special sales of seasonable products. Food retailers have
found radio to be a most effective advertising media in some
localities while realizing poor results in other areas. The
experience in one area should not be the determining factor
in formulating policies concerning the use of radio in dif-
ferent locations.

Regardless of the fact that radio is limited in certain
types of sales promoting, this advertising medium can still

be utilized to advantage for mass announcements or for other

 

5“1hid., p. 77.

115

variable types of advertising. Reports indicate, "the
practicability of radio as an advertising medium depends to a
considerable extent on the specific Job to be done; thus it
might be ineffective in attempting to familiarize the public
with a label which has Just been introduced but quite effec-
tive when used to promote the sale of a brand with which con-
sumers are already familiar."55

Epopiopal Appgpl

The emotional appeal that can be obtained from radio

‘rl‘.’ ‘-——* .A— "—N" .— ”nun at”. 'VW
~ , , I . o
I

gives a more persuasive than informative presentation. The
opportunity for each advertisement to accomplish its obJec-
tive is brief. This fact limits the effectiveness of radio
while using descriptive or informative copy concerning a new
product. Once a program or spot announcement is off the air
it is gone for good, whereas, a printed advertisement may
exert its influence over a longer period of time. If the
radio fails to make an emotional appeal or create consumer
confidence, the chances for making a sale are lessened
considerably.

Determining the actual extent of radio advertising by
food retailers is difficult because most statistics are
based on gross billing for network radio. Food retailers
advertise more on local stations than on networks, according

to the study by Cassady and Williams. Because of this fact,

 

55Ibid., p. 78.

116

the figures or statistics based on gross network billing would
be of little significance to this study.

Due to the inability of listeners to remember a large
number of individual prices, many food chain organizations
utilizing radio as an advertising medium have limited the
number of prices mentioned in each announcement. The limi-
tation of mentioning prices has lead to the use of institu-
tional copy. Customer services provided in modern super
markets make good copy for effective radio advertising. Radio
copy that mentions such things as free parking, air condition-
ing, friendly and courteous service, etc. appeal to the
listener.

___sM°r1t 9.; Bags 19. Bass! sizzles.

Like other media, radio deserves the consideration of
food retailers for a number of reasons. The spoken work makes
radio advertising not only more personal but more persuasive
and interesting. Radio is a flexible medium. The retailer
can contract for a few seconds (30 to 60 seconds) or for a
much longer period. Also the deadline requirements for radio
capy offer the food retailer a chance to present a selling
message on a much shorter notice than in other types of adver-
tising media.

Because radio copy can be "aired" quickly, special sales
on perishable products can be conveyed to the customer much
quicker than by newspaper. Retailers realize quick results

from spot announcements. Because of deadline schedules, copy

‘u_._ -uF—c'l . i fi—u’ u- M. mfi' .

117

and layout preparation, production and delivery time, there
is a lapse of approximately #8 hours before the consumer is
exposed to a newspaper ad.
The use of spot announcements gives the advertiser a
better spread of time than could be obtained from programs.
Most food retailers use spot announcements because the cost F“
is less than a regularly sponsored program.
H_9_w_ 1'9 Choose A Radio Station 5
Factors to consider in choosing a radio station to ;
handle the advertising program include--coverage, audience A
ratings, time availabilities, network affiliation, services
offered, station policies, and the cost. Food operators are
sometimes deceived by coverage figures of different radio
stations. The number of homes covered within a given area is
more important than homes covered in outlying areas. Con-
sumers, as a general rule, will not drive longer than 15
minutes to purchase their food needs. A station with low
area coverage can have a large audience within the trading
area of a store. Because of this fact, signal strength
should not be the determining factor in choosing a radio
station to handle the advertising program.
Three principal methods of determining coverage have
been used: "(1) Signal strength, (2) receipts of audience
mail, and (3) research findings or listening habits of

118

representative samples of set owners."'56 The latter has proven
to be the most scientific way of determining the listening
audience. Such firms as the A. C. Neilsen Company can be
employed to survey audiences for radio listening. Thus far,
the survey ratings have been one of the most effective means

of obtaining an unbiased report of audience listenership and
market coverage.

Coopepative Advertising Allowances Epp_§ggip Advertisers

Food retailers have been able to defray a considerable

.. . ..~___--.—q_—.-m antigen”,
. . ., —— . _ 1

amount of their newspaper advertising expense through cooper- ml
ative advertising allowances from food manufacturers and
producers. The availability of such funds has not been as
great for the users of radio advertising as for newspaper
advertising. This partially accounts for the reason food
retailers do not advertise as extensively by radio as by
newspaper.

The Radio Advertising Bureau is an organization sup-
ported by local, regional, and clear channel radio stations.
The purpose of this bureau is to seek and encourage more
manufacturers and producers to give advertising allowances to
retail outlets for radio advertising. The Radio Advertising
Bureau publishes a book for the members which lists all manu-
facturers and producers giving advertising allowances to

retailers for advertising their products. Some manufacturers

 

56A. w. Frey, Advertising (New York: The Ronald Press
Company, 1952), P0 36 e

119

defray 75 per cent of the cost of spot announcements through
advertising allowances, however, many of the allowances may
not be this high. Retail outlets should inquire through their
local radio station as to whether advertising allowances can
be obtained from manufacturers represented in the retail store.
Eh: Egg Mpg; Thgp gag Advertising Mpgipp_§pg,§glgg Promotion

A policy for sales promotion that is very pOpular today
is the utilization of various types of advertising media.

A -- ,r_.__l,_-__,.....,.l

Radio and newspaper work very well as a team in reaching the
general consumer. This is pointed out by studying the dis- i—-
advantages of radio. The advantages of newspapers usually solve
any of the disadvantages given by retailers for not using
radio as an advertising medium. Newspapers may have a large
circulation, but radio can add to the number of people reached
in a given area. Radio will reach the listeners in cars which
television can not do; consquently, the advantages of using more
than one advertising medium should be considered.
pigadv§ptages pf’fipgig
Radio can not picture a product. This is one big draw-
back in the promotion of certain items. However, many of the
items in the food store are so familiar to the consumer that
eye appeal is not too important in advertising.
The advertiser has such a short time in which to express
the selling message that many of the detailed facts of the
merchandise can not be presented. This situation also works

to the advantage of the advertiser. The primary reason people

120

listen to the radio is for information, pleasure, and relax-
ation. If a sponsor presents announcements that feature super-
lative claims or detailed descriptions of excessive length,
listeners can easily turn the dial to other programs.
"Experience has proved that women do not obJect to advertising
sponsored by a retailer, provided, of course, the messages are
timely and interesting and give the listeners information they
wish about stores and merchandise."57 '

Qonclusion
For the food industry, which relies on the housewife

‘mu 7m"-.ua-—n -¢:-e- i‘u-fll

to make the majority of purchases, the morning hours have been
used to the greatest advantage to attract the maJorityuof
women. Regardless of present administrative policies concern-
ing the use of radio as an advertising medium, there is a
large audience from which to attract potential customers.
Radio should not be expected to accomplish results that are
Physically impossible. Thus far radio has proved to be an
effective supplementary means of presenting the selling mess-
age to obtain results. One or two announcements can not be
exFooted to obtain great results, however, "Difficulty will
arise while trying to say exactly what is enough in order to
Obtain the desired results."'58

¥

 

57Edwards and Howard, pp. 933., p. L+18.

R ”Statement from Mr. Lee Raymond, Account Executive,
Radio Station WJIM, lensing, Michigan. Address presented to
91:43.11 Advertising Class, March 5, 1957.

CHAPTER XIII

AN ANALYSIS OF TELEVISION
AS A SALES PROMOTION DEVICE

Introductiop
flew will television affect the advertising program of

food chain organizations? Are the results obtained from
television more costly than advertising through other media?
Food chain operators are seeking the answer to these and many
other questions concerning this relatively new medium of
advertising. The rapid growth of television adds another
debatable subject to management in deciding where, how much,
and what kind of activity is most useful in the promotion of
profitable sales in the super market. I
M 91 Televigiop

The phenomenal growth of television is best illustrated
by the total number of television sets in use in the united
States. "In 19h? there were some 8,000 sets in use, by mid-
way of 1955 there were approximately 35,000,000 television
sets in use throughout the united States."59 This audience
offers the advertiser a large recipient for the selling message.

Deciding whether or not to advertise on television is a

problem that requires much thought and analysis. Regardless

 

59"TV Manufacture by Years," _fijfig§§ Telecasting Yepr-
Mk:- Mgrketpook Issue, p. 17.

 

 

 

. . , . enuresis M. iii. mire. «wines. m

122

of the coverage of a particular station, other important

questions must be considered before an intelligent decision

 

can be made by a food chain organization concerning the use
of television as an advertising medium. Little or no imagi-
nation is necessary to recognize the advantages of television
for advertising purposes. By registering the message both F__1
orally and visually, television combines the strong points of |
radio and other major media. No other medium has been able to

reach into the home with both sound and moving pictures. "A

I" aw .u-wzu his;

Ybung and Rubicam house advertisement stated that 'television L—+*
is every form of entertainment--circuses and concerts, vaude-
ville, theatres, movies, lectures, and newsreels--all funneled
down to a small picture in a family living room'."60

The mention of the above advantages of television does
not solve all the advertising problems faced by food chains.
unlike manufacturers, retailers are interested in selling
thousand of items of all categories. Retailers are usually
interested in advertising a group of prices or products.

Small food chains or independents with very few stores
in an area or town may find the dollar cost of television
advertising extremely high for the number of potential cus-
tomers reached. Thus far the greatest users of television
advertising in the food industry are chain organizations with
a large number of stores within range of the station signal.

 

6°A.‘w. Frey, pp. pip., p. 381.

 

123

This reduces the cost of reaching potential customers for each
super market within the station signal.

The innovation of television has provided a method for
retailers to display and demonstrate the selling message.
Television offers the super market a salesman that can talk to
a mass of people on a personal basis. With the personal sales-
manship obtained from television, many of the advertising
problems of super markets appear to be solved.

Egg Television §§g_§pp Been Apcepted By More Retailers
"Despite all these apparent advantages, television has "

‘-..a Mo. nadir“? —.~ t‘“‘"“*‘. ‘1.

never been embraced by retailers as an advertising medium.
On the whole, this group had looked upon television with some-
what skeptical eyes. It has approached the medium cautiously
and to a great extent avoided-its-use."61 Mr. Irving Settel,
Television Sales Promotion Consultant for such firms as Du
Mont TV Network, Peck Advertising Agency, and Concord's, Inc.,
conducted a survey among retailers in an effort to determine
why television has not been accepted by more retailers as an
advertising medium. Included below are eight basic reasons
revealed from this study:

1. Space advertising, such as in newspaper and direct
mail gives retailers a better opportunity in which to sell
the large number of items which they stock. Multiple item

 

61Irving Settel "Why Retailers Bypass Television,"
Journal p_f_‘_ Retailing, (Winter, 1955-56), p. 181.

12%

advertising is more difficult on television, where the limi-
tations of time and money prevent long display and demonstration.
2. Television's inability to present wide selections of
merchandise would suggest that the advertising would be insti-
tutional. However, many operators feel television should be
used in the same way as other promotional media-~for immediate V“i
sales. Many food organizations have not been able to appro-
priate adequate funds in the advertising budget for institutional 1
advertising. Two factors have contributed to this situation.
First, determining the results obtained from an institutional ;1_
advertising program is difficult. Since the results are not
immediate, determining the effectiveness of institutional capy
is uncertain. Secondly, competitive situations have not allowed
some retailers who are interested in an institutional adver-
tising program to divert funds away from immediate sales pro-
motion techniques.
3. The most desirable time periods on television were
not (and are not) available to retailers. In many instances
the better time periods are already occupied by manufacturers.
h. A great amount of planning is required to produce
effective programs and commercials. Many stores have indi-
cated the money used for television production could be put
to better use in newspaper advertising.
5. Local shows produced by retailers could not compete

with network shows in building and maintaining audiences.

125

6. Radio advertising is much cheaper and for every
dollar spent offers more time than television advertising.
Some retailers have found if the same amount of money spent
for television advertising was diverted to other types of
media, greater results could be obtained than previously
experienced from television.

7. Newspaper advertising, the old standby of the food
store, continued to reach the largest audience for every
advertising dollar spent.

8. Mbst food store operators consider the cost of
television too high and feel the money spent can not produce
as many customers as newspaper, direct mail, and radio
advertising.62

"According to a report made by the University of
Illinois, the average retailer who has been using television
advertising has had to cut back his newspaper and radio bud-
gets to allow for the medium. If he were to promote his
merchandise by means of regular channels _i_p_ addition to
television, his budget would have to be increased substan-
‘tiallyu Most retailers are unable or reluctant to do this."63

The cost has been a prohibitive factor for many re-
tailers interested in advertising on television. Even in

markets where there are two or three stations competiting

 

62Ibid.
631bid., pp. 181-182.

   

Iago—ewe...” Mmhr‘m-‘ ”it?“ 1

 

126

for the retailers' business, the price has been beyond range
for many food stores. In addition to time charges, other
factors such as program cost and talent cost can sometimes
double or triple the time expenditure.

Despite the reluctance of some retailers to use high-
cost television, reports indicate more money is being spent
on retail advertising than ever before. "The American News-
paper Association recently reported at a New York convention
that newspaper advertising revenue for retailers was on a
continuous upswing. Direct mail associations have also re-
ported a rise in retail advertising, assuring members that
television has failed and will continue to fail to deflate
this rise. In other words, the large increases in retail
advertising expenditureslmwe strangely failed to encompass
television, the medium of visual demonstration."6h
mdicgted gills; Progrppg

Regardless of the high cost of television, some operators
report much success from syndicated TV film programs at a
nominal cost. "8th costing over $20,000 a week to produce
and.rivaling network shows in quality and audience size are
‘being sponsored by Supers at a cost of approximately $100 per
episode."65 This would not include the cost of station time,

only cost of the film.

 

6"Ihid., 182.

65"Film TV Serials Provide Publicity Vehicle for Supers,"
fipfngm M rc andisin , Vol. XX, No. 1+, (April, 1955),
p. 3 e

‘4.“ 'm .. us.” - T-v ‘- "'""".E

127

Syndicated film programs are usually a half hour in
length and are comprised of 26 or 39 episodes. They are sold
city-by-city for origination by the local station. Since the
film is run in a specific city rather than over a whole net-
work, syndicated film programs are practicable for local
market advertising. The same program can be purchased by a
national or regional chain organization for several cities.

"In Seattle, a chain reports a sale increase of 30 per
cent over the previous year at the end of four months of TV
syndicated film sponsorship."66 Although much success has
been reported by many food chain organizations as the result
of using syndicated TV film programs, the writer is doubtful
whether other operators would receive such an increase merely

from the utilization of television advertising. Millers

Super Markets of Denver sponsors four major musicals and three

mystery programs per week, each one costing over $20,000 to
produce originally. "Me-Too" Stores in Cedar Rapids, Iowa
make use of the same general types of television programs.
Safeway Stores sponsor the "Life of Riley" in five western

67 The KrOger Company uses such shows as "Highway

cities.
Patrol" and "Men of Annapolis" in their trading areas.
The local sponsor pays a price based on the size of

the market which the television station covers plus local

 

Lg. ”aw “flannel-u ‘

128

time rates. Even those costs are very nominal and represent
only a small fraction of the film's original cost. Such shows
have enabled super markets and food chain organizations to
sponsor television shows with a high level of Showmanship at

a low cost.

spot ggpguncpmgpts

Other operators suggest variations as to how television
may best be used. "The operator of an Ohio chain, with three

years continuous experience in television, prefers not to

12:”??- - .=..—-.—.rr“*_- f‘““‘.""‘ “‘1.

purchase whole television shows, but buys, instead, spot
announcements, particularly 30 second and one minute spot
announcements, adjacent to high-rated day time television
shows."68 As in radio, spot announcements offer certain
advantages over sponsored television programs as a means of
reaching prospective buyers with a selling message. Spot
announcements are easier to schedule since there are more
opportunities to "air"'them. For the same money more announce-
:ments can be had than through expenditures for programs. In
‘utilizing spot announcements on television the advertiser de-
pends solely upon the audience of programs either before or
after the commercial has been run.
In; Commepcial

The matter of spot announcements or commercials is of

great importance. Because of limited experience in television

 

68"Television Advertisin " Super Market Merchgpdisipg,
Vol. XIX, NO. ‘2, (February, 195E5’ p. e

129

advertising, many food chains do not give enough attention to
developing effective commercials. A popular program with a
large audience does not determine the effectiveness of a com-
mercial. Research on commercials conducted by the Schwerin
Research Corporation can give important data to advertisers

interested in obtaining the most from their television adver-

rfiafiw .LJ
E

tising. Many advertisers still accept the fact that if they
build a good audience for their program, somehow the commercial

will sell the merchandise. The studies indicate, "a poor com-

!st—r~.,— - .

mercial isn't made any more effective because it gets a large
audience."69 The Schwerin research study also indicates the
vast importance of the proper placing of commercials or spot
announcements in relationship to the type of program or enter-
tainment. A study conducted for one client in which the same
set of commercials was tested in twenty five different tele-
‘vision programs revealed that, "On the average, the commer-
cials gained almost twice as much remembrance in one type of
program as they did in another type. In other'words, viewers
pay much closer attention to a commercial when it is in the
right setting."7o '

According to the Schwerin research study, one adver-
tiser found his food product commercials had a much higher
recall from the viewers when placed in a pleasant variety show

as opposed to a tense dramatic program.

 

69”
TV's Big Problem: Neglected Commercials," Printep'p
m, (March 11, 1955), p. 32.

7°;hi .

130

An article on extra product plugs in the March 195%

issue of the Schwerin Research Bulletin comes to the following

conclusions:

TV commercials made by Schwerin Research Corporation:

1. Mentioning your product during the entertainment can

adversely affect liking for the merchandise itself.
2. Mentioning your product during the entertainment can

adversely affect attention to your commercial. m”
3. Mentioning other advertisers' products during the t

entertainment cap adversely affect the attention to
your commercial. 1

Following are some conclusions drawn from a study of

Here's what happens when ...

rd..- .‘ AU?- 9 3m"? .1171? '

AN EXCELLENT PROGRAM IS COMBINED WITH A POOR COMMERCIAL:
Program loses interest and excitement.

A GOOD COMMERCIAL IS SET IN A DULL AND INSIPID PROGRAM:
Commercial's value is dissipated.

COMMERCIAL APPEARS IN RIGHT PROGRAM SETTING: Viewers
pay closer attention to commercial.

EXTRA PRODUCT PLUGS ARE INSERTED IN SHOW: Adverse
effect on liking for show and on attention to commercial.

OTHER ADVERTISERS' PRODUCTS ARE PLUGGED DURING ENTER-
TAINMENT: Adverse effect on your own commercial. 2

:stnszsiizs.illesssses

Many manufacturers and producers have initiated cooper-

.ative advertising allowances to retailers utilizing television

.as an advertising medium. Such allowances reduce the adver-

tising expense for the retailer and the manufacturer can obtain

cheaper advertising rates through a local retailer than through

 

711bid., p. 3h.
721bid.

 

IA.»

2.1 ... Jun 7. CI-.vv4-.+..1....

131

a national advertising agency. Some of the methods used are
(l) alternate sponsorship, (2) shared sponsorflflps and (3)
participation.

Alternate sponsorship is the sharing of the over-all

cost of the program by two advertisers, the manufacturer and

the retailer, sponsoring the entire show on alternate weeks. ELI]
Each advertiser gets all the commercial time on the particular é ‘
show. In some cases there are agreements whereby the adver- A
tiser who is off is allowed one commercial on his alternate's a
program. tori

Most cooperative allowances could be classified under
the shared sponsorship method. The manufacturer or producer
agrees to pay a certain percentage of the program or spot
announcement cost. Commercial time for the manufacturer's
products is allocated in length and position according to
agreements or contracts between the two parties. .Such allows
ances not only help defray the cost of advertising time but
offer an excellent chance to feature the manufacturer's pro-
duct and reduce the promotional cost.

The participation program belongs entirely to the net—
work or the station. The retailer can either buy a portion of
the show from five minutes up, or he can buy announcements or
spots at station breaks. One advantage of this type of adver-
tising is the audience obtained from the program. However, as
previously mentioned in the Schwerin research studies, the

audience size would not be an accurate yardstick to determine

listener recall of the commercial.

 

 

 

.v
m

is

.",.r"k

 

.. ,-
...-Auxr-I‘

132

Many manufacturers and national producers are beginning

to realize the abuse and waste connected with cooperative news-

 

paper advertising allowances. "Some contracts are so designed
that permit retailers to collect from four to ten times the
amount actually spent for newspaper advertising of the manu-

facturer's products."73 Such a condition may arouse the i A

-..... .a
a .

question, are contracts, as mentioned above, actually intended

3‘ .-“a‘i'.

for advertising allowances or as a form of purchase discounts?
Assuming manufacturers wish to protect and improve their g

national brand-name in cooperative advertising investments, ;-’

how then can this be accomplished? "One manufacturer reported

greatly increased sales at the retail level with a cooperative

advertising program on television. The sales increases ob-

tained from cooperative television advertising were much higher

than ever before obtained from other types of cooperative

advertising allowances."7h As manufacturers increase television

advertising allowances, managements of food chains can increase

their television time at a lower cost and can also see how

television can supplement their own various promotion plans.

mg; 313g Mg Services
"The principal indicator of the effectiveness of a

television program is audience size."75 The same is true of

 

73The writer obtained this information from a national
chain but was asked to keep the source anonymous.

5 7""Co-0p Advertising," Printer's Isis: (March 11: 1955):
p. 3 e

75"Checkpoints For The Television Advertiser," Printer's
M ggveptising ua , 1951+, p. 189.

 

133

any one particular station in a multiple station market. Cur-
rently there are four basic systems of audience measurements.
Food chain organizations should be aware of the different

systems and research organizations involved in measuring audi-

 

ence size. A choice of one station over another in a metro-

politan area may in part be determined by the ratings of the 5‘"?

;
ii
3
i
I
i
y
I.
5'.
in
‘3
I,
1
i
k

audience size of the particular station.
Four methods used to obtain audience size are:

1. Electronic recorder.
2. Telephone coincidental.
3. Diary.

. Roster recall.76

L

The electronic recorder is an electronic attachment on
selected television sets which record over a 2% hour period
at what time and for how long a receiver is turned on, as
well as the channels to which the TV set is tuned.

Telephone coincidental utilizes the inquiries made from
a cross section of television homes in a given area to deter-
mine the audience size. This system can also be used to
determine the audience size of a particular program if so
desired.

The diary method supplies diary forms to selected set
owners who are asked to keep a complete record of television
viewing in the household over a specified period of time.

The roster recall is a method whereby a house-to-house

canvass is made at varying hours of the day. Interviewees

 

76Ibid.

 

13%

are asked to identify programs viewed during a preceeding
time period from a printed list.

The most popular organizations used to measure station
and program audience sizes are the American Research Bureau
and the A. C. Neilsen Company. Other agencies such as Pulse,
Trendex and Videodex are used in certain market areas to
determine audience size, composition, sets in use, viewers
per set, etc.

Small food organizations with a limited number of stores
in a particular area may find the station with the smallest
audience can give the cheapest rates in terms of the number
of homes reached in the market area of the store. Many
stations can deliver a strong signal within a radius of 100
to 150 miles. A super market is not likely to draw customers
from a large trading area.77 Stations determine rates by the
number of homes reached and by the cost of reaching those
homes using a base figure on one thousand homes. Chains with
a great penetration of stores within the radius of the station
signal can profitably use a more powerful station with which
to advertise than retailers with a limited number of stores
‘within the radius of a station signal.

Conclusion
What will be the policies of management concerning the

future of television as an advertising medium for food stores?

 

77Mr. S. 0. Kaylin, Editor of Administrative Section of

Chain Storg 5&5, estimates a customer will make a 15 minute
r ve a pure se groceries at a particular super market.

F“:

.. walnu- urn 1n "3' "WISF‘uf

ET”;
1

 

 

135

"The trend seems to be that some of the larger chain stores
are moving slowly into television in increasing numbers, but
cautiously.”8 Larger organizations with greater advertising
budgets will be able to test television in order to provide

 

the answers they seek. The smaller units will probably avoid

television to a large extent until some of the basic problems i “a

have been solved. ?
unquestionably, television holds many hopes for retail W

food store advertisers. However, the place of television in

 

future sales promotion programs will depend upon other factors. l_l}
Such problems as cost and programing will have to be solved
before food chain organizations can economically and effec-
tively use this advertising medium in promoting sales and
profit.
Several years may lapse, but subsquently food chain
organizations will find their way to television. "New develOp-
ments, better programing techniques and lower cost will help
the retail advertiser to make this medium increasingly effec-
tive in promoting retail sales and in bringing customers to

the store."79

 

78$Btt01’ 9-2. flee p0 1920
79Ib1d.

 

CHAPTER XIV
PROMOTIONAL TOOLS

Introduction

-JJ

Food chain organizations have utilized forms of pro-
motional devices other than newspaper, radio, and television

that have supplemented both personal selling and advertising,

.... ._.. . '4
‘ ‘fi‘u‘f'm' .fl'f—“ma-fl» “I

coordinated them for a more effective selling program. Pro-

1“

motional tools such as trading stamps, premiums, and contests
have been used very effectively by many food chain organizations.

One decision facing management is whether premiums, ‘
contests, or trading stamps should be used as promotional
devices. Opinions vary in the numerous food chains as to
the extent these promotional tools should be used. Rather
than discuss the pros and cons of the above promotional de-
vices, the writer will discuss these areas from a promotional
viewpoint.

I. TRADING STAMPS

One of the greatest areas of controversy concerning
promotional devices if the decision or policy affecting the
issuance of trading stamps. Granted, there are advantages
and disadvantages connected with this promotional device;
however, this could be said of almost any type of promotional

effort used to increase sales.

 

137

One fact to be agreed upon is--stamps are a promotional
device. The recent emphasis on trading stamps has created

considerable interest among food operators. Some report un-

 

equaled success with the innovation of a stamp plan. Others

do not feel such a plan offers their customers an important

 
   

reason for trading at their particular store year in and year

.v-rP—r"
; a - \.

fie-”*uumrfim mi 1“

out. Just as arguments arise concerning the effectiveness of
other promotional devices such as newspaper, radio, television,
and coupons, there is considerable debate amongleaders of the
food industry as to the effectiveness of trading stamps as a
promotional device. Likewise, some food chain operators in-
sist that television advertising is an effective means of
promoting sales while others will argue that the high expense
of television is economically unsound. Because of valid evi-
dence in support of either stand, the issue of trading stamps
should be given careful consideration by management.

Practically any type of promotion will necessitate an
investment of money. Sales and profits are usually considered
to be the return on the investment of any promotional activity.
ZDhe best laid promotional program can fail to get a return on
‘the investment unless there is adequate planning and prepar-
ation with follow-through at the store level.
figure of; Trading Stamp;

What is the future of trading stamps as a promotional
device for food retailers? What effect will legislation

have upon the issuance of trading stamps? Recent hearings and

t y .Yn‘r‘hs illbrtslllg
do

138

controversies_have started a fevor of political debate con-

cerning trading stamps.

Legislation

"Federal Trade Commission attorneys appear to be con-

 

sidering whether or not to issue a complaint against one or

more of the leading companies in the trading stamp field."80

r—r—CE

This does not necessarily mean a complaint is being readied.
However, investigations have been held during the past year to

determine if the issuance of trading stamps has in any way

3
1
i
:3
I 1
'5

violated the law. The Federal Trade Commission is primarily
concerned with violations under section five of the Federal
Trade Commission Act, pertaining to unfair methods of compe-
tition, which include deceptive advertising. "The deception
'with regard to trading stamps would be the advertising of free
premiums for the stamps if, in fact, they are paid for through
increased prices of the merchandise."81
Legislation directed to outlaw, to curtail, or in some
'way'to regulate trading stamps.has been introduced in many
state legislatures. Many other states are expected to intro-
ciuce bills that will in some way affect trading stamps in their

:respective states. Some of the states that have introduced

jlegislation concerning trading stamps are:

 

8°Marvin Caplan, "Complaint Eyed by F.T.C. on Stamp
Men," figpermarket News, (February 18, 1957) , p. h.

811bid.

 

139

Te essee - Tennessee legislature has passed a bill
that wil v rtually kill the use of trading stamps as a
promotional device in the state. Effective August 1,
1957, the priviledge tax on companies issuing trading
stamps will increase to $600 for each redemption store
'within the state. The new law will levy a two per cent
tax on the gross sales of all retail stores issuing
trading stamps. The tax will not have to be paid by
any store that issues its own stamps and redeems them at
face value in cash or merchandise.

California - Three bills have been introduced to
curtai e issuance of trading stamps. One measure
was introduced which would outlaw gift enterprises and
trading stamps, and another bill was introduced which
would tax the companies to a point where they could not
afford to operate. A new bill was introduced that would
require any revenue derived from unredeemed stamps be
passed on to the State Treasury under the laws of escheat.

 

...... .. T
.;LFJ

$11v~2§m-ieo.-s an; ' Mr .
1’;

~‘I‘a‘-

‘1'. -. -_ \

£933 - Trading stamp companies would be required to
pay ten per cent of their gross receipts to the state.
Also the stamp companies would be required to buy a 8100
license and post a $20,000 bond. The retailer issuing
the stamps would be required to pay a ten dollar license
so.

Wyoming - A different legislative approach has been
taken in wyoming. A bill has been introduced which
would outlaw exclusive distribution of trading stamps.
The measure would provide that all retail establishments
could buy and offer any brand of stamps used by any other
retailer in the state. This bill is being introduced in
an attempt to eliminate exclusive franchises that retailers
hold with stamp companies. Many retailers who have owner-
ship in a stamp company could see their competitor use the
same stamp plan if such a bill were passed.

kans - Trading stamps would virtually be outlawed
in Ar ansas under the terms of a bill that has been
'introduced. This preposal would levy a tax on retailers
issuing stamps from $300 to thOOO a year. Stamp companies
‘would also have to pay a minimum tax of five per cent on
their gross receipts, with a minimum tax of $5000.

Minnesota - Persons or organizations issuing trading
stamps wou d be required to redeem them for cash or mer-
chandise under a proposed bill. The cash value would
have to be imprinted on each stamp.

 

lkO

Kansas - Two bills have been introduced in Kansas.
One bill would abolish the resent trading stamp license
fees ranging from $h000 to 7000 per store.

Another bill proposes to outlaw trading stamps in
Kansas.‘ This bill would make it a misdemeanor to give
trading stamps. An effort to outlaw firms that provide
stamps to merchants is included in this same bill. The
Kroger Company was the first to introduce trading stamps
in Kansas a little over a year ago. A case was brought
against the Kroger Company stating this firm had violated
the trading stamp law in Shawnee County. This case was
dismissed when the Kroger Company paid $71,000 for licenses
in its Eastern Kansas stores.

New Mexico - One bill introduced here would make
trading stamps unlawful, another would make them invalid

if not redeemed within three years from the date of
issue.

South Carolina - A resolution passed unanimously in
thi§_§tZtE—EEII§ffor the strict law enforcement of an ~
ififiioiain°tfiiztfifitiréfifls zfiat’i’ii‘stflzfifigmm “‘1"

Wflth these and many other states proposing legislation

against the issuance of trading stamps, the future of this
promotional device is yet to be decided. Valid supports for
either side of the question concerning trading stamps can be
found. The question of trading stamps will have to be answered
‘by each chain operator or store owner. If an Operator or chain
organization can effectively utilize this type or promotion
without adding to the cost of doing business, then trading
stamps can be Justified. I

II PREMIUMS

As stated earlier, sales promotions are "those sales

activities that supplement both personal selling and

 

‘82"Bills Outlawing, Regulating Stam s in Many States,"
Supermarket News, (February h, 1957), pp. , 11+,

 

Malt]
d
U

1H1

advertising ..." Super markets have utilized premiums to a

great extent as a supplementary method of attracting sales.

This form of promotion has been recognized and utilized as a
sales stimulus by food store operators for a considerable

time. As any other type of promotion, the primary purpose of

   

premiums is to induce customers to patronize a particular
store in the hope of winning new and permanent customers.
Usually the sales promotion department will handle the

entire premium campaign. Sometimes an outside agency may be

{as-u: .21; “.-.—a-pw—a—s “en‘- fl.‘ : .IIE ’r
. _ _ .

called in to handle the bulk of the promotion because of in-
adequate facilities or because of the size or nature of the
premium promotion.
Premiums are used in the following ways to help solve
sales problems or to create new sales:
1. Stimulating sales of established brands.
2. Introducing new products.
3. Open new territories.
k. Meeting competition.
5. Sustaining volume in dull seasons.
6. Clearing out laggard stocks.
7. Getting the whole line in.
8. Inducing larger purchases.
9. Creating loyal customers.
10. Securing data.
11. Traffic builders for special events.

. 1H2

Premiums and Thgi£.Prob1ems

Manufacturers have, for many years, offered premiums
as an inducement for consumers to buy their merchandise.
"American civilization has now reached the point where cereal
packages and soap wrappers are a form of currency. For one
or more box-tops, plus a modest sum, a citizen can obtain a
tulip-shaped cranberry sauce cutter, a pair of nylons, a ring
to detect pirate gold, or a 32 piece dinner set, all are
premiums. They are distributed free or at cost to induce the
public to buy a particular product and entertain a friendly
feeling toward it."83

Food chains were quick to see the vast impact that
premiums had on a particular manufacturer's product. Some
of the problems faced by super markets using premiums are:

1. To educate the personnel to use this new form of
sales promotion.

2. To maintain a workable balance between the premiums
offered by manufacturers and those currently being used by
the retail organization.

3. To use discretion as to the amount of manufacturer
and private premiums that will be used.

h. To clearly define and be able to recognize exactly
what a premium is, how it is marketed, and for what use the
premium is intended. A promotion objective should be defined

concerning what the premium is expected to accomplish. Some

 

83"The Boquop Business," Life, (March 1%, l9h9), Do 127.

 

I... a.‘“‘ wmm‘ufil '-
t d ' . . l

1H3

premiums are expected to return a profit, some to draw cus-
tomer traffic and some to build and maintain good will.
Tyngg n; Premiums

Getting a good premium promotion started in today's

competitive market means calling upon the time-tested tech-

 

niques and even inventing some new ones. There are many types

E
z

%
é.
A
t
‘ .
i
!
4‘.
J
'1
c

of premium plans currently in use and the personnel involved
in their promotion and sale should become familiar with the
different types. The most common types are:

1. Direct Premiums - This is the simplest and oldest

1:

form of premium merchandising used by manufacturers. The
premium is given to the customer on condition of purchase
and delivered at the time of purchase. An example of this
type of premium is the staple item that includes a decanter
or water glass within the package or attached therein. Glass-
‘ware packed in oat cereal and linen towels packed in soap
jpower are premiums used by two grocery manufacturers.

2. Continuity Plnn - Continuity in premium promotions,
‘when obtained, is a very valuable asset. Manufacturers feel
that one of the surest ways of achieving continuity is through
a coupon plan. A variety of premiums may be offered in re-
turn for a number of coupons issued with the product. This
is a long term plan and 2.9.295. to attract some brand loyalty.
This type of premium plan has been employed by the Raleigh
Cigarette Company. Raleigh started their coupon program in

1932. Their sales showed tremendous increase and the company

\

 

lkh

attributed much of their success to the use of a premium coupon
in each pack of cigarettes. The wartime shortage knocked out
premiums and Raleigh dropped the program. Despite a steady
increase in cigarette smoking, Raleigh sales slipped badly.
Raleigh put the coupon back in the pack and once again sales
started to climb steadily.8k

Many food stores have used a dinnerware promotion as a
premium plan. Such a promotion is planned on a continual
basis for a given number of weeks or months. Typically, under
such a plan, an operator will give a piece of dinnerware each
week with a ten dollar purchase or an accumulation or pur-
chases equal to ten dollars within the same week. The customer
does not have to pay extra to obtain the dinnerware. These
promotions are usually planned to last long enough to allow
a customer to get a sixqpiece place setting for six people.
This type of promotion is costly but its objectives are to get
new'customers, increase the purchases of the present customers
and acquaint the customers with the store during the life of
the promotion. If these results are accomplished, the cost of
such a promotion can be offset by the increased business.

3. finlgeliguidators - The self-liquidator is a promotion
that usually costs the promoter little more than the adver-

tising time and space. The consumer pays for the merchandise.

 

81} "Billion Dollar Box Top," Pa ent, (May, 1951), p. lh2.

 

 

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lkS

If the promotion is handled through the mail, the consumer
usually absorbs the cost of handling and postage in addition
to the cost of the merchandise. An example of the self-
liquidator is the remittance of wrappers or box tops to the

manufacturer with a stipulated sum of money and receiving,

 

 

in return, an item offered at a reduced rate.

Super markets have used this type of promotion effec-
tively. Self-liquidator promotions are usually run for a
continued period of weeks or months. Such items as dinnerware, g
silverware, aluminum ware, cutlery, encyclopedias, and earthen- sewef
ware have been used by retailers as self-liquidator premium
promotions. Some of these items are priced very attractively.

The retailer expects to recover his merchandise cost rather
than make a profit on all these promotions. However, some of
these premium promotions return a profit to the retailer-~yet
offer the consumer a savings.

h. Juvenile Qggnnn - The power of children to influ-
ence their parent's spending is evidenced every day in the
super market. The outstanding example is undoubtly breakfast
cereals. Incorporated in this type of merchandising is the
TV hero, sports characters, or novel toys that capture young
imaginations. These offers can be dispensed through package
enclosures, direct premiums, or a continuous coupon plan.

5. Cnntainer Premiums - Some food chain operators and
manufacturers have found that their package or container can

be designed for re-use by the consumer. In part, the high

lh6

expense of packaging can be offset by developing a reusable
container for the consumer as a premium. Thus, with little
or no additional cost the consumer has a dessert dish, a
lemonade glass, a water decanter, etc. Many of the food
chains that manufacture their private brands of merchandise
are turning to this type of premium to promote the sale of

their products.
6. antest - The unlikely chance of winning a large

.. ..--..
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prize, perhaps one chance in 100,000 or more, lures milliOns
of American women every year to participate in contests. Lsn:*
Completing the 25 word Jingle and enclosing a box top is big
business.
III CONTESTS

There are many problems to be solved when contests are
'used as a promotional device. The first problem is to decide
if a contest will answer the promotional objectives desired.
In the case of a food chain, the product to be promoted in
the contest is one of the first problems. Frequently retail
:food.chains run promotional contests that do not promote any
particular product, rather the purpose of the contest is to

increase traffic for the entire store.

Cost figures are certainly of prime importance in setting
up any contest. The over-all cost must be analyzed in relation
to the consumer appeal. Contest estimates should include
expenditures for prizes, advertising and promotion, Judging,

and unusually heavy correspondence.

 

1%?

Contests have become so wide spread as promotional
devices by manufacturers and retailers that outisde companies
have been established to eliminate various problems of con-.
tests to the promoter. These companies specialize in such

tasks as Judging entries, setting up specific rules for the

 

 

contest and handling the correspondence concerning the con-

fa
,.

test. If an outside company is not employed to administer a
contest, attention should be given to see that rules comply

with all federal, state, and local laws. Simplicity of rules

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is necessary so the entrants will have no difficulty in
understanding them.
Eggnoses 2; Contests

A contest must solve the promotional objectives in
mind before there can be an economical Justification for the
contest. Several promotional goals may be achieved by con-
tests. Some of the principle purposes of contests are:

1. ' 19 provide n13 naggn n\_1_s_n_ nendndnggnkn n Eta-2.-
2.9.9.12 n 3292 customgr - Continuous advertising may sell the
customer on the merit of a store, but without an added shove
the potential customer may never shop with any regularity.
Many customers continue to shop at a particular store because
of habit. A customer may realize that another store has good
values with excellent shopping facilities, but hesitates to
shOp there unless some added stimulus entices them to do so.

Contest promotions can often accomplish this objective.

 

lh8

2. 22 create and increase store traffic - Any time
traffic is increased in a retail business the chances of
increasing sales are excellent, provided the traffic is of

the right type. A contest should be planned so as to attract

 

people with purchasing power. 3 ‘7

3. ‘29 stimulate interest n§_the trade - Customers may

tire of the same old product and the same old store, even

.m..—*T‘T—“~ e A ._ 'I
In

though both may be good. A contest will often stimulate new

interest.
Contests that require the label of a product as an

133.“...

townmrfl

entry blank can often stimulate enthusiasm and increase con-

sumption of a particular product. Contests awarding vacations

 

and other valuable prizes have proven to be a successful
means of creating new interest and maintaining the loyalty
of present customers. The writer does not intend to infer
that contests will discourage customers from trading else-
where. However, contests can provide an added stimulus to
hold many customers.

h. 22 ovencome seasonal nlnnnn.- Some retailers have
tried to overcome the traditional sales slump of summer
through the promotion of contests that award attractive
prizes. Manufacturers also use contests to offset seasonal
slumps for certain products. Due to the nature of many pro-
ducts, sales drop during certain periods of the year. At one
time the cold cereal industry realized a sales increase in

the summer only to find that sales would decrease in the

lh9

winter. Through various types of promotions, manufacturers
have increased the consumption of cold cereals in the winter
to a point where there is no longer a seasonal slump. Con-
tests are one type of promotion that can help to achieve this
goal.
5. Lo 83.9. neg nnnenl Lg advertising - A contest pro- 1
vides an excellent advertising theme. Such themes can be
utilized to build up listening and reading audiences.

Contests have proven successful in testing the effec-

n'w' _ ‘e- -. 'pf‘l K-.. A .e a ‘ i .
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III A

 

tiveness of different advertising media._ Promotions offer 1 ~
the Opportunity to compare the audiences and effectiveness of

various advertising media. When comparing the effectiveness

 

of advertising media, different addresses will be given for
the applicants to use in sending in entry blanks. The news-
papers may tell their audience to sent entries to department
N of the particular company. Radio may request their audi-
ence to send entries to department R of the company, etc.
This gives the company a means of evaluating the effective-
ness of different advertising media. If there is more than
one newspaper in a town, retailers can insert the same coupon
or entry in both papers with some small insignificant symbol
to differentiate between the two newspapers. The entries
‘received from each newspaper can be one criterion for Judging
the readership.

6. Tn,gn£n;npdisnlazs ;n_§nnnn§ - The advertiser with

something new to offer will usually come out on top in

 

r ...!E‘Ii‘l magi."
a,

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150

competition for store display space. Aggressive retailers
may tie in with the contest if they feel the promotion has
the potential to increase traffic and sales.

7. 19 introduce neg nroducts 9n neg n§__e_§_ f9; ging ro-

ants - One caution concerning contests for new products is

 

the prize may often attract more attention than the new 3' 1

product.
8. .22 meet n competitive situation - A spectacular t

 

contest is sometimes quite useful in offsetting a competitive f 1
promotion. Such a contest is geared so as to prevent present ev«~5
customers from being attracted to a competitor because of
some promotion he may be employing.
9. gunmen tSQMeQJAIm-Mmu-
facturers have contests that require applicants to submit
labels from two or more products. Consumers may be persuaded
to buy more than they normally do in order to obtain enough
labels or entry blanks.
10. In gtimulate Eng gnlgg organization - Contests can
be of such magnitude, especially on a local basis, that much
enthusiasm can be generated among store employees through
group meetings and discussions. Many food chains promote
contests between different stores for increasing store sales

or increasing the sale of a particular product.85

 

Bignynggnin Ink Refresher Course in dvertisin , Selling

and Merchandising (Maw York: Printer's Ink Pu lis ing Com-
pany, s PP. 52-515

 

Standard Tznnn,n£|Contests

There may be more than one promotional objective of a
contest, therefore, a contest can be planned so several pur-
poses or objectives are accomplished at one time. Regardless
of the results, a contest should be Judged on the basis of
the original objectives. For example, a contest may be
successful as a counter-attack to a competitive promotion
and unsuccessful in increasing total store sales.

An advertiser must choose the type of contest that will
best achieve his objectives. "Through careful selection of
the type of contest he can fairly, accurately predetermine
the result. He can design a contest that will tend to appeal
to entrants in the particular group he wishes to reach.
Similarly, an advertiser can reach a special audience by
designing contest regulations and offering prizes that have
special appeals."86 There are many varieties of contests
but most of them fall into the standard patterns outlined
below:

1. write a letter about the product.

2. Complete a sentence.

3. Submit material for use on radio programso-Appli-
cents may furnish questions, Jokes, stories or

stunts that can be reproduced for a program.

h. write a last line for a verse.
5. Suggest a name for a product or an animal.
6. Suggest new uses.
7. Write an essay.
8. Solve puzzles.
9. Fill out an engyy blank from which the winner will
be drawn from.
86Ibid., p. 55.

87Ibid., pp. 56-57.

 

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' . I

152

The most popularly accepted contest is the one that
requires the entrants to do nothing but sign their name and
leave the rest to chance. Food chains have found this type
of contest to be an effective promotion to attract customer
traffic. Many people are not interested in contests requir-
ing them to think of a name or write a Jingle. Whereas, many rm“1
consumers can be attracted to a store to sign their name on i
a blank for a drawing of an attractive prize. Such a contest é
does not require skill or effort, only luck. 1
Ezomoting £22 Pnemium 5
Most premiums are promoted through combined newspaper
and radio advertising. Recently, television advertising has
been utilized to a considerable extent to promote premiums.
"The amount of space given the premium in an advertisement
varies from 80 per cent premium and 20 per cent product to
practically all products."88
‘ Great care is necessary in handling premium advertising
to receive full benefits from the promotion and to assure
that the money spent for premium advertising is used advan-
tageously.
Before any premium program can be a success, a great
amount of c00peration is necessary at store level. Sales
promotion departments have found no amount of planning,
advertising, pro-testing, etc. can offset poor followbthrough

at the store level. "Unless the retail outlets are fully

 

88Ibid., p. 106.

153

acquainted with the project before it becomes effective,

there is a possibility that the campaign will be weakened
at its most vital spot, at the point of sale where contact
with the consumer is established."89 Management must make

 

sure the store knows the full details concerning the premium

promotion.

' Conclusion

Premiums are not a "cure-all" for a sales deficiency.

J

Advertising and Selling listed six conclusions that sales

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promotion managers should consider when using premiums as
a sales promotion device:

1. Don't apply premiums to a product unless the product
is really good.

2. Premium promotions rarely stop a declining sales
Curves

3. Sales gains on old established products are usually
temporary.

h. Some sales gains made on new products are long-lasting
if the product is of tap quality for the price paid
by the consumer.

5. Successive and frequent premium offers on the same
priduct generally produce smaller and smaller re-
su t3 0

6. Results vary widely with the product.90

 

891bid., p. 100.

90nBasic Premium Objectives," Advertising an,S 111 a
(January, 191+8), Po 82-

 

 

J ' r7

CHAPTER XV

THE USE OF DISPLAYS IN SALES PROMOTION

Introduction

As previously defined, "sales promotion includes those
sales activities that supplement both personal selling and
advertising, coordinate them and help to make them more
effective."91 Of great importance in any sales promotion
program is the use of in-store displays. The proper use of
displays is potentially one of the most powerful sales pro-
motion forces at the food chain‘s disposal.

"Five percent of the total store sales are the result

of special displays."92 The importance of special displays

is far greater than can be expressed in a specified percentage

of store sales. Many customers are brought to the store be-
cause of values derived from merchandise on special display.
Items located near the display or related items elsewhere in
the store, may show marked increased in sales. Due to the
side benefits received from effective displays, the true

value of a special point-of-purchase display is difficult

to measure.

 

91"Report of the Definitions Committee," loc. Egg.

92"The 1955 Chain Store Age Display Manual," Chain
Sagas Ass. (February. 1955), p. 76. “""“"'

PM“ ~

[Pat-um ...“..n-‘Q -\ .51. :1)“

 

155

Benefitg 2: Special Disnlazs
The self-service system employed by the food chains

stresses even more the importance of displays at the point-of-
purchase. With the customers selecting their own merchandise,

effective displays can exert a strong force in influencing

  

purchases. Since there is no clerk or salesman to assist the

 

customer with each purchase, the customer consciously or un-

consciously looks for information to use as a guide in the

selection of products.

!.'%-w" Wight - w“ mv‘PLWJ'L ._

.vhv Cb'

If there is a problem of sales deficiency, displays
alone will not act as a solution. There is no guarantee a
display will increase the sale of a product or group of pro-
ducts. There are several problems to be solved before any
organization can get the most from store displays. Problems
to be considered are (1) type of display best suited for the
promotion, (2) selection of items to be displayed, (3) selec-
tion of the location for the display, (M) type and amount of
point-of-purchase material to accompany the display and (5)
{duration of the display. These and other problems need to be
solved before an intelligent decision can be made concerning
any special display.

Functions 9;; Displays
Displays, whether promoted by manufactures, distributors,

or by the super market itself, have a three-fold Job in modern
merchandising. Below are variousqualification displays must

posses to perform their intended duty.

 

156

1. People, such as passers-by, must be stopped and

induced to come inside by an attention-arresting window dis-

play or store front.

2. After the people are inside the store they must be
exposed to buying suggestions by strategically located dis-

plays and want-creating signs and literature.

3. Those who come in to buy something, can be induced
to buy a larger supply or additional purchases by smart pack-
aging and display at the point where the purchase will be
made. Seasonable products, multiple pricing, freezers and

special sale prices have helped to increase the purchase of

many food products on display

Mnnngacturer's Display Material
There are a hundred different types of display materials

currently being supplied by manufacturers, dealers, brokers,
and other national advertisers. Among the most common of

these display materials are:

1. Floor displays - Floor displays usually consist of
out-outs with easel backs so they can be placed at strategic

locations.
2. Counter displays - Counter displays usually consist

of some fixture, case, or rack that can be utilized to display
one or more products. Manufacturers of cigaretts, baby food',

hardware items, and chewing gum provide racks to the retailers

for display purposes.

 

157

3. Window streamers - Window streamers and signs are
usually furnished free to food stores by suppliers on request.
Often signs and streamers will automatically accompany ship-

ments of merchandise during special promotions by the

 

manufacturer.

N. Dump bins and other containers - Manufacturers Ff???

usually design dump bins and other display material to supple-

. '.'..._‘ |‘ an

ment special promotions. Often such units have false bottoms f
to give the appearance of a bountiful diSplay without re-
quiring too much merchandise. £__4g
5. Dummy cartons - Package good manufacturers as well
as meat distributors develop giant-size replicas of the pro-
duct or package which can be placed throughout the store.
Manufacturers have increased their output of promotional
material to such an extent that management of chain organi-
zations has had to be more restrictuve on the distribution of
this material directly to the store. Many food chains now
require that all manufacturer's display material be distri-
buted or approved at the distribution office.
Tress. 2.1: 5.3.02.2 12.1.13 8 1a 8
In-store displays can be constructed to depict various
merchandising and advertising themes. One of the most impor—
tant displays utilized by the food outlet today is the related
display.
What does management hope to accomplish through the use

of related displays? What are the specific contributions

158

which management believes the related display has furnished
to the retail food industry? The answer to the above ques-
'tions were advanced by several food companies in a letter
survey taken by S. A. Gavrilides.

l. The most important contribution of the related dis-
play is its ability to increase sales and consequently

Pl‘OfitS e Bra—q
2. A related display can help the housewife in her meal g a
planning. , “k

3. New products can be conveniently introduced through
the related display. These new products may either
be private or national brands.

h. A tie-in of a new or old product needing support ,
with an established product may help to expand and - J
create a permanent demand for such an item. a}

5. Related displays aid in merchandising the over-all
store by bringing together various departments. 9

6. The related display helps to beautify the store. 3

 

The pricing factor is a major decision while consider-
ing a related display. In most cases, when two or more items
are combined in a related item display, the collective price
is somewhat lower than if the items were sold individually.
However, many times the related items are not priced as one
but merely displayed together. In such cases there is usually
no price reduction. The relation of one item to another in
a special display is often times enough to increase the
lovement of a product.

‘finplg Display
Chains have recently found some of their stores were

sacrificing customer maneuverability in the store for display

 

93Spyros A. Gavrilides, "Merchandising Through Related
Displays in the Food Business," (unpublished Master's thesis,
IMichigan State University, East Lansing, 1952), pp. 86-87.

 

1 59 1

space. As a result, some food chains have inagurated policies

 

that reduce the number of floor displays.

 

Ribbon displays have proven quite effective in merchan-
dising products on the shelf. Ribbon displays, the facing of
the same product on all the shelves in a vertical position,

is one means of giving emphasis or mass appearance to items

 

stocked on the shelves. A ribbon display is often used for
sale merchandise, seasonal items, such as tea, and high profit

1L6M8e

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The Marketing Service of the United States Department
of Agriculture conducted a study to determine the effect of
extra displays in the produce department. The study revealed
"when the aisle displays were removed and the produce in them
displayed elsewhere, which meant, of course, there were smaller
displays of each item, customers purchased 16 per cent more
items and spent, on the average 12 per cent less time in the
produce department."91+

This study revealed that aisle displays restricted the
flow of traffic from one side of the department to the other,
particularly on busy days and at busier times of the day.

"Customer congestion, because of aisle displays, was
the main cause of sales not being made. Rather than fight
the crowd, shoppers went through the produce department shopping

 

91*"Extra Produce Displays May Cut, Not Build Sales,"
Progressive Grocer, Vol. XXXVI, No. R, (April, 1957),
P0 0

160

one side of the aisle display, missing completely the merchan-
dise on the other side."95 The removal of the aisle displays
reduced the total produce display space by about ten per cent.
Hewever, the freer movement of shoppers and general elimination

of congestion resulted in a 16 per cent increase in the number

 

of items purchased per customer. Purchases were increased Efffifi'
nearly 20 per cent over a normal congested Friday with the E
-removal of the islands. This study bears out the assumption :
that the congestion from poorly located displays can be more 1
harmful than helpful. L
unnn Display

One of the promotional sales techniques used by the
food stores to create extra sales is mass display. Customers
are generally more willing to buy from a large display than
from a partially full or small display.

Mass displays have a dramatic appeal that stop the
customer and make her take a second look. If the customer
looks for a few seconds longer than usual, the chances of
making a sale are increased. There is something about a mass
display that seems to draw or attract. Many customers buy
from a large display because of the eye appeal, quantity,
price or some psychological reason obtained from the mass
appearance.

Difficulty would arise while trying to establish a

standard definition of mass display. The mass display of

 

”Ins. . p. 93.

161

ten or fifteen years ago would be considered only a token
display in the big stores of today. The growth of the store
and the increase in the number of items makes it necessary to
use a larger mass to get the same effect for an individual
item. Also, mass display for a slow mover is practically no
display at all for a top seller. For example, canned tomatoes
and okra would not be in the same class while referring to
mass display.

39! Special Displnys?

There are several reasons why special displays are
planned and constructed. Reasons for using special displays
include:

1. To increase total sales of the store or of a

product group.

2. To increase sales of logically related items.

3. To beautify the store.

h. To help make the customer's shopping trip more

interesting and exciting.

5. To create an atmosphere of price.

6. Associate the store with well-known brands.

7. To give special emphasis to a particular depart-

ment.

8. Stimulate the sales of profitable‘and impulse

merchandise.

9. To capitalize on new trends and nationally

advertised promotions.

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162

10. Influence customer traffic patterns.

11. Increase the sale of slow-moving merchandise.

12. To participate in national or community themes.
Selection 9; Location

One of the key decisions to be made in building special
displays is the location of the display. The sales of the
item on display are most dependent upon the location chosen
for the display. Every store has particular areas that give
the best sale results from a display. There is no definite
rule for locating the "hot spot" in each store, but the store
manager and other members of management can locate the area
best suited for maximum sales returns for a display by experi-
menting with various display locations.

The choice location for one item may not prove to be
as effective for displaying an entirely different product.
Customers seem to develop patterns or moods for buying in
different areas of the store. The natural flow of traffic,
speed of traffic, customer stepping places, and visibility
of the location are some of the factors to consider in lo-
cating natural display areas. However, the above factors do
not tell what merchandise will sell best at a particular
location. Through experience and experiments, management
can soon develop patterns that will reveal quite accurately
the general areas for displaying different product commodities.

"Display locations primarily affect the sale of items

on display, but in the long run they can give the customer an

 

163

over-all impression of the store."96 An atmosphere of low
price can be obtained if the low price items get the best
display spots. Also, an atmosphere of variety and complete
lines can be obtained if fancy lines are displayed in the
best locations.

Food chain organizations have differing opinions as

fig
5:
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it.
35

to»what type of product should be displayed at the "hot spot"
in each store. Some organizations feel as if the key traffic

item or the featured price item should be displayed in the

[W -...» mamW. ,., . ‘I—~. -.

"hot spot". Some organizations are quite firm in stressing
the policy that only high profit merchandise be displayed in
the key traffic locations. In other cases, management chooses
to allocate portions of the store to be used only for the dis-
play of certain product groups.

Whatever the policy concerning the location of displays,
the point to remember first and foremost iso-special displays
are designed to sell merchandise. If items are knowingly
«displayed in locations that are not the most favorable spot
:for the item, the benefits to the entire store (through the
impression created) must be greater than the relative loss in
volume for the particular item. "When the fine points are
analyzed, the basic rule that displays are located where the
merchandise sells best still holds as the key factor in

locating special display3.u97

 

96"Where Special Displays?," QQQ;Q_§£2§2,A&2, (February,
1955) 9 P0 82'

97Ibid., p. 120.

16h

,yggkgt‘agsearch Studies gg,Point-Q§-Purcggse Displays
Dr. Ernest Dichter, president of the Institute for

Research in Mass Motivations, Inc., emphasizes that point-
of-purchase displays must sell the customer immediately be-
cause the customer is not in a reasoning mood.98 "All the
customer can do is react emotionally and quickly, and you
have either made your point or you have not. At point-of-

purchase you do not get a second chance. Untold thousands

. -t ‘3'"? ‘12}

are spent and lost each year because the manufacturer and the

{was ,
{

retailer have not considered what the point-of-purchase
display was for, what goal he wanted to accomplish."99
grime Objectives 9; Point-gg-Purchasg Displays

The Institute for Research in Mass Motivations contends
there are three over-all objectives of point-of-purchase dis-
plays other than the physical factors such as attracting
attention. The three big over-all objectives are:

1. To climax the 'conditioned reflex' of advertising,
where such advertising has been proved (through
exhaustive test) effective in making up the con-
sumer's mind.

2. To break the 'conditioned reflex' when another
product may have had more or equal effectiveness
in influencing the buying public.

When the product is new, or the goal is to activate a
latent desire to splurge, there is a third objective.

g

98Ernest Dichter, "The Point of Point of Purchase,"
£222.!grketing, reprint, (May-June, l95h), p. l.

99Ibid. ‘

165

3. 'Why not...?' Why not try something you have never
tried before? Why not pamper yourself? why not get

a luxury item you did not dare buy until now?

To accomplish any of the above objectives, management
must know where the product stands in the consumer's mind.
One of the five basic mistakes found in point-of-purchase
displays is apt to appear unless management knows definitely rfl_aq
what frame of reference the consumer will take from the pro-
duct on display. Included below is a list of the most common
mistakes the Institute for Research in Mass Motivations has

found in point-of—purchase displays.

 

l. Ignorance of what the consumer thinks.
2. Aggravation of the misery of choice.
3. Lack of psychological identification.
. Failure to break the fgiditioned reflex.
5. Lack of finalization.
fi!!!é£2.

Some chains have successfully grouped products in the
weekly ad in such a way that one product suggests the use of
another. Store managers should be oriented to display mer-
chandise in this same manner in the super market. The super
market offers one of the greatest opportunities in the retail
field to capitalize on psychological displaying of products.
For example, catsup displayed at the meat counter sells catsup
as well as meat. Likewise, mushrooms displayed directly in

the meat case immediately suggest a meal to the customer.

 

looIbid.
101Ibid.

166

Meal planning suggestionsfrom psychologically grouped products
can help to increase the movement of a relatively slowbmoving
item. Management groups are aware of such possibilities, but
they must orient and boost creative thinking at the store
level to achieve maximum results from point-of-purchase displays.
Merchandise to be displayed must be carefully chosen
and properly located. Experience, good taste, and a study
of consumers' eating habits are of immense help in avoiding
failure in point-of-purchase displays. Much of the attrac-
tion derived from a display depends upon the items brought
together. Good choice of products, creative thinking, and a
development of goals and objectives will provide a strong

support for a successful display.

 

 

_i.‘M.- i. ..‘L r

 

CHAPTER XVI

IN-STORE PROMOTION POLICIES

Introduction

 

Promotions planned by the branch or divisional mer-
chandising team to be used in all the stores are known as
branch, company, or divisional promotions. All of the stores
feature the item to be promoted and the advertising is usually
scheduled in the headquarter office. The merchandising board
plans and develops weekly promotions that will best serve the
majority of the stores within the area of operation.

Many chains are organized to give the local store mana-
ger the automony to schedule, plan, and execute in-store pro-
motions that can best serve the needs of the local situation.
The competitive situation in a local area may be of such
nature that the weekly sales plan is not adequate to serve
the needs of the store.

gay? Lg¢Store Promotions

Many chain organizations encourage in-store promotions
to stimulate creative thinking among the store managers and
store personnel. Some operations cover such large territories
that the merchandising teams can not keep abreast of local
situations. To give flexibility to the organization, to meet

local situations and to increase the promotion of high profit

 

 

168

items, store managers are given encouragement and training
in developing in-store promotions.

Who should best know the competitive situation in a
local area? Who should know what items create the most traffic
for a particular store? The person who should have the answer
to the above questions is the local store manager. To follow -_F‘*
a logical pattern, why not give the store manager the training t” 'U
and authority to meet many of the local problems?

The publicized decentralization program of the Kroger
Company supports the theory of vesting power in a well-trained L
store manager to develop in-store promotions. The decentrali-
zation program encourages decisions at the level that will be

affected by the outcome of the decision.

Qpposition to IgyStore Promotions
There are some sound reasons forwarded for not encour-

aging in-store promotions. Some chain organizations do not
mallow’their store managers to develop special store promotions
or alter the weekly sales plan. Those who do not allow
:flexibility of in-store promotions feel the merchandising
board is better qualified to plan and schedule promotions

for the entire branch or division.

The store managers in some organizations are not dele-
gated the authority to make local deciisions affecting
promotions, price, and advertising because of limited knowledge
concerning store operations. If management does not keep the

store managers informed as to profit, mark-up, and operating

 

169

cost, an intelligent decision would be difficult to make at
the local level where the results may directly affect the
profit of the operation.

Conclusion

Policies concerning in-store promotions must be made
to fit the organization. If the store managers and depart- eartra
ment managers have been trained and developed to accept i}
responsibility and have the knowledge upon which to base
decisions affecting the local situation, by all means they

“Q 1'.'. ‘an.’ A

 

should then plan and develop in-store promotions. If the 5 .W

[7

store manager has an adequate knowledge of gross margins and
other operating figures, he should be encouraged to develop
special promotions and sales for his particular store. Extra
sales and profits are awaiting the organization that will

choose and develOp men to use their creative imagination.

 

 

 

BIBLIOGRAPHY

171

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176

C. PUBLICATIONS OF THE GOVERNMENT, LEARNED SOCIETIES,
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D. UNPUBLISHED MATERIAL

Gavrilides, Spyros A. "Merchandising Through Related Displays
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