Lesson 6 - Retail Buying Behavior

Customer Buying Behavior

Thursday, January 9, 14

Questions

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How do customers decide which retailer to go to and what merchandise to buy?

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What social and personal factors affect customer purchase decisions?

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How can retailers get customers to visit their stores more frequently, and buy more merchandise during each visit?

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Why and how do retailers group customers

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Stages in the Buying Process

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Types of Needs

• Utilitarian Needs

–

satisfied when purchases accomplish a specific task. Shopping needs to be easy, and effortless like a grocery store.

• Hedonic needs –

satisfied

when purchases accomplish a need for entertainment, emotional, and recreational experience as in department stores or specialty stores.

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Hedonic Needs that Retailers can Satisfy

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Hedonic Needs that •

Retailers can Satisfy

Stimulation

•

Ex: Background music, visual displays, scents

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Hedonic Needs that • •

Retailers can Satisfy

Stimulation

•

Ex: Background music, visual displays, scents

Learn new trends and fashions

•

Ex: The Body Shop – learn how can live an environmentally friendly lifestyle

Thursday, January 9, 14

Hedonic Needs that • • •

Retailers can Satisfy

Stimulation

•

Ex: Background music, visual displays, scents

Learn new trends and fashions

•

Ex: The Body Shop – learn how can live an environmentally friendly lifestyle

Satisfy need for power and status

•

Ex: Upscale brands

Thursday, January 9, 14

Hedonic Needs that • • • •

Retailers can Satisfy

Stimulation

•

Ex: Background music, visual displays, scents

Learn new trends and fashions

•

Ex: The Body Shop – learn how can live an environmentally friendly lifestyle

Satisfy need for power and status

•

Ex: Upscale brands

Self-rewards

•

Ex: personalized makeovers

Thursday, January 9, 14

Hedonic Needs that • • • • •

Retailers can Satisfy

Stimulation

•

Ex: Background music, visual displays, scents

Learn new trends and fashions

•

Ex: The Body Shop – learn how can live an environmentally friendly lifestyle

Satisfy need for power and status

•

Ex: Upscale brands

Self-rewards

•

Ex: personalized makeovers

Adventure

•

Treasure hunting for bargains, new styles (fast fashion)

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Conflicting Needs •

Ex: hedonic needs (wearing a DKNY suit to enhance selfimage) conflict with her budget, and her utilitarian need to get a job.

•

Customers make trade-offs between their conflicting needs

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Cross shopping -The pattern of buying both premium and low-priced merchandise or patronizing both expensive, status-oriented retailers and price-oriented retailers

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How do we Stimulate Need?

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How do we Stimulate Need? Suggestions by Sales Associates Advertising and Direct Mail Visual Merchandise in store Special Events in the Store Signage Displays Free food sample Thursday, January 9, 14

Information SOURCES OF INFORMATION Internal Past experiences Memory

External Consumer reports Advertising Word of mouth

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Search

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Information

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Search

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Amount of Information Search Depends on the value from searching (how it improves purchase decision) vs. the cost of searching (time and money)

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Technology

Factors Affecting Amount of Information Search • Product Characteristics • Complexity • Cost • Customer Characteristics • Past experience • Perceived risk • Time pressure • Market Characteristics and Situational Factors

• • Thursday, January 9, 14

Number of alternative brands Time pressure

Reducing Information Search

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Retailer’s objective for customers in the information search stage is to limit the customer’s search

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One measure of a retailer’s performance on this objective is the conversion rate

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How Can Retailers Limit the Information Search?

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How Can Retailers Limit the Information Search?

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Provide good assortments

•

Provide services

•

•

Informed sales associates

•

Credit

Everyday low pricing

Retailers encourage customers

•

to spend time

The more time customers spend shopping, the more they will buy.

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Customers who spend 40 mins in a store are more than twice as likely to buy than someone who spends 10 mins. Also, they typically buy 2x as many items.

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Stores use food and personal service

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Websites provide enjoyable experiences with technologies

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Evaluation of Alternatives •

Customers see a retailer, product, or service as a collection of attributes or characteristics

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Predict a customer’s evaluation of a retailer, product, or service based on

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Its performance on relevant attributes

•

the importance of those attributes to the customer

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Multiattribute Attitude model

Information about Retailers Selling Groceries

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Information Used in Evaluating Retailers

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Information

•

Needed to Use

Alternative Consumer Considering

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Characteristic/Benefits Sought in Making Store and Merchandise Choices

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Ratings of Alternative Performance on Criteria

•

Importance of Criteria to Consumer

Multi-Attribute Model

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Information Used in Buying Suit

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Getting into the

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Consideration set: the set of alternatives the customer evaluates when making a selection

•

Retailers develop programs influencing top-of-mind awareness

Consideration Set

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Get exposure on search engines like Google

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Try to be the top of the page

•

More stores in the same area

Methods for increasing the chance of store visit after getting into the consideration set

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Increase Performance Beliefs of Your Store

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Decrease Performance Beliefs About Competitor

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Increase Importance Weight of Attributes on which You Have an Advantage

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Add a New Benefit on which You Excel

What should they do?

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Purchasing

•

The highrated item may not be available in the store.

•

How can a retailer increase the chances that customers will convert their merchandise evaluations into purchases?

Merchandise or Services Customers do not always purchase a brand with the highest overall evaluation.

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Converting Merchandise or Services Evaluations into Purchases

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Measure: the number of abandoning carts in stores and at websites

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Methods to reduce it:

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Don’t stock out of popular merchandise

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Reduce waiting times at checkout

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Digital displays offering entertainment (Disney)

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Easy navigation and check-out at websites (amazon.com)

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Offer liberal return policies, money back guarantees, and refunds if same merchandise is available at lower prices from another retailer

Postpurchase Evaluation

SATISFACTION

•

A post-consumption evaluation of how well a store or product meets or exceeds customer expectations

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•

Becomes part of the customer’s internal information that affects future store and product decisions

•

Builds store and brand loyalty

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Extended Problem Solving

• • •

High financial or Social Risk

Limited Problem Solving

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Some Prior Buying Experience

Habitual Decision Making

•

Store Brand, Loyalty

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•

Extended Problem Solving

• • •

High financial or Social Risk

Limited Problem Solving

•

Some Prior Buying Experience

Habitual Decision Making

•

Store Brand, Loyalty

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Types of Buying Decisions

Extended Problem Solving Consumers devote time and effort analyzing alternatives

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Financial risks – purchasing expensive products or services

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Physical risks – purchases that will affect consumer’s health and safety

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Social risks – consumers will believe product will affect how others view them

© Royalty-Free/CORBIS

Thursday, January 9, 14

What Retailers Need to do for Customers Engaged in

Extended Problem Solving

© Royalty-Free/CORBIS

Thursday, January 9, 14

What Retailers Need to do for Customers Engaged in

Extended Problem Solving Provide a Lot of Information -Use Salespeople rather than advertising to communicate with customers

Reduce the Risks -Offer Guarantees -Return Privileges © Royalty-Free/CORBIS

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Limited Problem Solving Purchase decisions process involving moderate amount of effort and time

•

Customers engage in this when they have had prior experience with products or services

•

Customers rely more upon personal knowledge

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Majority of customer decisions involve limited problem solving

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What do Retailers Need to do for Customers Engaged in Limited Problem Solving?

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What do Retailers Need to do for Customers

• •

•

Engaged in Limited Problem Solving? It depends… If the Customer Is Coming to You, Provide a Positive Experience and Create Loyalty

• • •

Make Sure Customer is Satisfied Provide Good Service, Assortments,Value Offer Rewards to Convert to Loyal Customer

If the Customer Goes to Your Competitor’s Store, Change Behavior

•

Offer More Convenient Locations, Better Service and Assortments

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Encouraging Impulse Buying

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Encouraging Impulse Buying

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Impulse buying: one common type of limited problem solving

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Influence by using prominent point-ofpurchase (POP) or point-of-sale (POS)

• •

Have Salespeople Suggest Add-ons

• •

Use Signage in Aisle or Special Displays

Have Complementary Merchandise Displayed Near Product of Interest

Put Merchandise Where Customers Are Waiting

Habitual Problem Solving

Purchase decision process involving little or no conscious effort

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For purchases that aren’t important to the consumer

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For merchandise consumers have purchased in the past

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For consumers loyal to brands or a store

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•

•

Customer Loyalty

Brand Loyalty

• •

Committed to a Specific Brand

•

May Switch Retailers to Buy Brand

Reluctant to Switch to a Different Brand

Store Loyalty

• •

Committed to a Specific Retailer Reluctant to Switch Retailers

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What Retailers Need to do for Customers to Engage in Habitual Decision Making

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What Retailers Need to do for Customers to Engage in Habitual Decision Making IT DEPENDS

•

•

If the customer habitually comes to you, reinforce behavior

• • •

Make sure merchandise in stock Provide good service Offer rewards to loyal customer

If the customer goes to your competitor’s store, break the habit

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Offer special promotions

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Social Factors Influencing the Buying Decision Process

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Family Influences Buying Decisions

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Purchases are for entire family to use

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Whole family participates in decision making process

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Retailers work to satisfy needs of all family members

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A reference group is one or more people whom a person uses as a basis of comparison for beliefs, feelings and behaviors. Reference groups affect buying decisions by:

• •

Offering information

•

Enhancing a consumer’s self-image

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STORE ADVOCATES - Customers that like a store so much that they actively share their positive experiences with friends and family

Providing rewards for specific purchasing behaviors

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Reference Groups

Culture Culture is the meaning, beliefs, morals and values shared by most members of a society Western culture: individualism Eastern culture: collectivism

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Subcultures are distinctive groups of people within a culture

Criteria for Evaluating Market Segments • • • •

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Actionable Identifiable Substantial Reachable

Methods for Segmenting Retail Markets Geo-demographic

Geographic

Lifestyle Thursday, January 9, 14

Segmenting Markets

Benefits

Demographic

Buying situations