Chapt.2- Retail Customer behavior

7/28/2019 Chapt.2- Retail Customer behavior

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RETAIL ENVIRONMENT &CUSTOMER BUYING

BEHAVIOR

CHAPTER- 2

Changing environment &

theories



CHANGING ENVIRONMENT

Change is required for continuous growth. And the picture of retail also changed with thetime all over the Globe….

Traditional Retail developed in form of Organized retailing. Systematic process of merchandising sales, enhanced the grossrevenue for the retailers…

Not only the structure but the orientation alsochanged with the time i.e. CUSTOMERSATISFACTION

The Retailers are keeping large Assortment,Sufficient Inventory, Convenient Layout for

complete customer value….



Changing customer demand, new

technologies, intense competition and

social changes create new opportunities

and will bring undreamt of changes in

the structure of the industry.

The Internet and web technologies have

created a myriad of opportunities for theweb based business model for retailing..

Changes are majorly related with

Demographic , change in customer value, Technological change…



DEMOGRAPHIC CHANGE Demographic attributes includes the following

Age, Income, Gender, Occupation, Family sizeetc associated with customers…

These variables are used to help the retailer

better select the target markets, or marketsegments.

Per-capital income changed the consumptionand buying pattern of customers. Increment in

income, curving customers from traditionalretailing to organized retailing…

All demographic data gain importancedepending on the application. The three mostcommon demographic variables are age,

ethnicity and income



Age Groups The study of age groups and how theybehave in the consumer market is calledGenerational Marketing….

Marketers have given some names of peopleor customers of different era like

1946-64..People are called “BabyBoomers”, so named because of greatnumber of births following the WW-II..they arealso called “me generation” as their focus on

accomplishment.1965-76, people fall in a group called “Generation X”. Members of generation Xthat are attending college are also considerednontraditional students they are the groups

trusting network news, political parties etc.



1977-995 People born in between thisperiod are called “Generation Y”,members of this generation are describedas materialistic, selfish and disrespectful,

but technologically capable and aware of world issues.

The overall concept for retailers in lookingat these age categories is to gain insightinto the market…

1. If we talk about baby-boomersgeneration…the data indicate that they areconcerned with maintaining youthfulness.products like “erase wrinkles” or “grow hair”

and health related items.2. Generation X are cynical consumers. they

want a lot of product information andexpertise when making purchase decision



3. Generation Y is popularly known as world of cell

phones, CDs, computers, MTV; as a result, they

are highly educated, creative and

technologically competent. This group has

been described as “generation X on fastforward, with self-esteem”. They like to have

interactive shopping experiences and are very

concerned about the environment.

Particulars Y Gen Xers Boomers

Turn to family & Fr 56% 55% 58%

Listen to music 67% 49% 44%

Pray or meditate 30% 36% 39%

News and Inform. 32% 29% 34%

Exercise 35% 21% 24%

Eat comfort foods 27% 27% 21%



RACE & ETHNIC GROUPS As the 21st century continues, race and

ethnicity are playing larger roles in definingthe consumer.

A “Race” is a group of Individuals sharingcommon genetic traits that determinephysical characteristics

An “Ethnic Group” is any group that isdefined or set off by race, religion, nationalorigin etc.

The major ethnic groups in US are referred to

as Hispanic, African American, Asian American…

The retailers need to understand the racialand ethic demographics of its market so it can

better develop an effective product mix andcommunication strategy.



INCOME

Lower income consumers are less likelyto buy luxury items and tend to be more

practical in their purchase than other

income groups…

Middle class consumers generally spend

more on meals and basic amenities…

Upper-income category often referred to

as the affluent, more than other group,

are likely to buy luxury items, spend on

travel, eat meal outside the home and

own a house



Changes in “CUSTOMER VALUE”

Excellent retailers, understand that their job is not merely satisfy their customersbut to excite them and induce them to

return to the store.New shopping experiences should becreated to stimulate the customer’sreturn to the store or online site to makeadditional purchases. Thus value become the basis for the customer’sdifferentiation between one retailer and

another.



Ques: What makes one bank differentfrom another?....(all offer same productsbut you prefer specific bank or its

branch)Ques: Telecom companies offer thesame services, yet you choose one over another. What entices you to makethose selections…

THE ANSWER.. IS YOURPERCEPTION OF THE VALUE, THAT

THE COMPANY PROVIDES TO YOUValue is a concept that the customer defines. What one customer considers

valuable, other may not.



So how can retailers create value in

customer’s minds?

Value- “an amount, as of goods,

services, or money, considered to be a

fair and suitable equivalent for

something else.”

What makes customer “valuable”? Earl

Naumann, who has written extensively

on customer service, suggests that the

concept of value can be seen within a“customer value triad”…



Value based prices

Product Quality Service Quality The triad consist of 3 separate variables:

Product and service quality provide the “pillar”

of the triad and are the bases for value based

pricing.When a retailer provide poor service or have

product of poor quality, value based pricing

fails…

TOTALCUSTOMER VALUE

If h i li i i i i



If the price line is set in an inconsistentmanner, sales will decline.

High product quality is important, but not

enough to ensure total customer value.. All three variables must be in place toachieve true integration in customer value.

4 CUSTOMER VALUE

1. The customer’s perception of the valueprovided by the retailer.

2. The equity, both financial and informational,that the customer provides to the retailer.

3. The importance of developing strongrelationships with customers

4. The integrations and utilization of technologyto support customer relationship andincrease customer equity.



Advantages/Retailing Value Outputs

1. Understanding customer choices

2. Identifying customer segments3. Increased competitive options (e.g.

increased product line )

4. Avoidance of Price Wars5. Improved Service quality

6. Strengthened retail communications

7. A focus on what is meaningful to customers

8. Customer loyalty

9. Improved Brand Success

10. Stronger Customer relationships



Technological changes

INTERNET IN ACTION

The next e-mail you receive may be from your

Local MALL. Many mall owners are harnessing

Web capabilities to generate sales. In this

Communication format, consumers interested

In receiving information about promotions sign up

for an e-mail notification program. When various

retailers from the local mall are having sales or

special deals, the consumers gets an e-mail

notification. One company achieving success with

e-mail notification to customers is Taubman and

Johnstown of Bloomfield Hills, Michigan. Taubman& Johnstown has an “e-bulletin” program that

informs subscribers about sales, promotions, and

new merchandise at the company’s malls. More than

4,50,000 shoppers receive the bulletin. Many retailers

believe the program has contributed to an increase insales



•E-TAILING & E-COMMERCE

E-Tailing includes buying and selling

items over the Internet, using credit anddebit cards, and facilitating the

integration of all retail functions. The

Internet provides and easy way to bring

buyers and sellers together at a

reasonable cost. eBay, the company

that hosts the “world’s largest garage

sale”, allows its customers the luxury of shopping at any time of the day at an

economical cost.



Theories and Models of Retailing

1- DIALECTIC Process: Anevolutionary

theory based on the premise that retail

institutions evolve. The theory suggeststhat new retail formats emerge by

adopting characteristics from other

forms of retailers in much the same way

that a child is the product of pooled

genes of two different individuals.

2 GRAVITY M d l A h b h



2- GRAVITY Model: A theory about the

structure of market areas.

The model states that the volume of purchase

by consumers and the frequency of trips to theoutlet are a function of the size of the store

and the distance between the store and the

origin of the shopping trip.

3- RETAIL ACCORDIAN Theory: A theory of retail institutional changes that suggests that

retail institutions go from outlets with wide

assortment to specialized, narrow, line store

merchants and then back again to the more

general, wide assortment institution. It is also

referred to as the general-specific-general

theory.

C C



4- RETAIL LIFECYCLE Theory: A

theory of retail competition that states

that retailing institutions, like the

products they distribute, pass throughan identifiable cycle. The cycle can be

partitioned into 4 distinct stages: (1)

Innovation (2) Accelerateddevelopment (3) Maturity and (4)

decline.

5- WHEEL of Retailing theory: Atheory of retail institutional changes that

explains retail evolution with an

institutional life cycle concept.

6 NATURAL S l ti Th A th f



6-NATURAL Selection Theory: A theory of retail institutional changes that states thatretailing institutions that can most effectivelyadapt to environmental changes are at onesthat are most likely to prosper or survive.

7-Central Place Theory: A model that rankscommunities according to the assortment of goods available in each. At the bottom of theHierarchy are communities that represent thesmallest central places (centers of commerce). They provide the basicnecessities of life. Further Up the hierarchy

are the larger central places, which carry allgoods and services found in lower-order central places plus more specialized onesthat are not necessary/ common.



Buying Behavior and process

Buying Behavior is the decisionprocesses and acts of people involved

in buying and using products….

Need to understand:why consumers make the purchases

that they make?

what factors influence consumer purchases?

the changing factors in our society.

C B i B h i f t th



Consumer Buying Behavior refers to the

buying behavior of the ultimate consumer. A

firm needs to analyze buying behavior for:

Buyers reactions to a firms marketing

strategy has a great impact on the firms

success.

The marketing concept stresses that a firm

should create a Marketing Mix (MM) that

satisfies (gives utility to) customers, therefore

need to analyze the what, where, when andhow consumers buy.

Marketers can better predict how

consumers will respond to marketing

strategies.



Consumer Buying ProcessSix Stages to the Consumer Buying DecisionProcess. Actual purchasing is only one stage

of the process. Not all decision processes leadto a purchase. All consumer decisions do notalways include all 6 stages, determined by thedegree of complexity

The 6 stages are:1. Problem Recognition (awareness of need)--

difference between the desired state and theactual condition. Deficit in assortment of products. Hunger--Food. Hunger stimulatesyour need to eat.Can be stimulated by the marketer throughproduct information--did not know you weredeficient? i.e., see a commercial for a new pair

of shoes, stimulates your recognition that youneed a new pair of shoes.

2 Information search-



2.Information search--

• Internal search, memory.

• External search if you need more information.Friends and relatives (word of mouth).Marketer dominated sources; comparisonshopping; public sources etc.

• A successful information search leaves abuyer with possible alternatives, the evoked

set .3. Evaluation of Alternatives--need to

establish criteria for evaluation, features thebuyer wants or does not want. Rank/weightalternatives or resume search. If not satisfiedwith your choice then return to the searchphase.. Information from different sourcesmay be treated differently. Marketers try toinfluence by "framing" alternatives.

4 Purchase decision Choose buying



4.Purchase decision--Choose buyingalternative, includes product, package,store, method of purchase etc.

5.Purchase--May differ from decision,time lapse between 4 & 5, productavailability.

6.Post-Purchase Evaluation- outcome:Satisfaction or Dissatisfaction.Cognitive Dissonance, have you madethe right decision. This can be reduced

by warranties, after salescommunication etc.

After eating an Indian meal, may thinkthat really you wanted a Chinese mealinstead.

T f B i D i i



Types of Buying DecisionExtended Problem Solving- It is a purchasedecision process in which customers devote

considerable time and effort to analyzing their alternatives. Customer typically engage inextended problem solving when the purchasedecision involves a lot of risk and uncertainty.

They also engage in extended problemsolving when they are making a buyingdecision to satisfy an important need or whenthey have little knowledge about the product

or service. Retailers stimulates sales fromcustomers engage in ext. pro. Solv. Providingthe necessary in a readily available andeasily understood manner and by offering

money-back-guarantees.

Limited Problem Solving It involves



Limited Problem Solving- It involvesmoderate mount of effort and time.Customers engage in this type of buying

process when they had some prior experience with the product or serviceand their risk is moderate. In thesesituations, customers tend to rely more

on personal knowledge than theexternal information. The majority of customer decisions involve limitedproblem solving.

One common type of limited problemsolving is IMPULSE buying, which is abuying decision made by customers on

the spot after seeing the merchandise.

Habitual Decision Making: It is a



Habitual Decision Making: It is apurchase decision involving little or noconscious effort. Today’s customer

have many demands on their time.When the need arises, customers mayautomatically respond with, “ I will buythe same thing I bought last time from

the same store.” Typically, this habitualdecision-making process is used whendecisions aren’t very important tocustomers and involve familiar merchandise they have bought in thepast. When customer are loyal to abrand or a store, they are involved in

habitual decision making.



…..end of Unit III

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Chapt.2- Retail Customer behavior