Lesson 6 - Retail Buying Behavior

Customer Buying Behavior
Thursday, January 9, 14
Questions
How do customers decide which retailer to go to and what merchandise to buy? What social and personal factors affect customer purchase decisions? How can retailers get customers to visit their stores more frequently, and buy more merchandise during each visit? Why and how do retailers group customers
Stages in the Buying Process
Types of Needs
Utilitarian Needs Hedonic needs
satised when purchases accomplish a specic task. Shopping needs to be easy, and effortless like a grocery store. satised
when purchases accomplish a need for entertainment, emotional, and recreational experience as in department stores or specialty stores.
Hedonic Needs that Retailers can Satisfy
Hedonic Needs that
Stimulation
Retailers can Satisfy

Ex: Background music, visual displays, scents
Hedonic Needs that

Stimulation

Ex: Background music, visual displays, scents Ex: The Body Shop learn how can live an environmentally friendly lifestyle
Learn new trends and fashions
Hedonic Needs that

Stimulation

Satisfy need for power and status

Ex: Upscale brands
Hedonic Needs that

Stimulation


Ex: Upscale brands
Self-rewards
Ex: personalized makeovers
Hedonic Needs that

Stimulation


Ex: Upscale brands
Self-rewards
Ex: personalized makeovers
Adventure
Treasure hunting for bargains, new styles (fast fashion)
Conflicting Needs
Ex: hedonic needs (wearing a DKNY suit to enhance selfimage) conict with her budget, and her utilitarian need to get a job. Customers make trade-offs between their conicting needs Cross shopping -The pattern of buying both premium and low-priced merchandise or patronizing both expensive, status-oriented retailers and price-oriented retailers
How do we Stimulate Need?
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
Information
SOURCES OF INFORMATION
Internal
Past experiences Memory
Search
External
Consumer reports Advertising Word of mouth
Information
Search
Amount of Information Search Depends on the value from searching (how it improves purchase decision) vs. the cost of searching (time and money) Technology
Factors Affecting Amount of Information Search Product Characteristics Complexity Cost Customer Characteristics Past experience Perceived risk Time pressure Market Characteristics
and Situational Factors

Number of alternative brands Time pressure
Reducing Information Search
Retailers objective for customers in the information search stage is to limit the customers search One measure of a retailers performance on this objective is the conversion rate
How Can Retailers Limit the Information Search?
How Can Retailers Limit the Information Search?
Provide good assortments Provide services
Informed sales associates Credit
Everyday low pricing
Retailers encourage customers
The more time customers spend shopping, the more they will buy.
to spend time
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.
Stores use food and personal service Websites provide enjoyable experiences with technologies
Evaluation of Alternatives

Customers see a retailer, product, or service as a collection of attributes or characteristics Predict a customers evaluation of a retailer, product, or service based on
Multiattribute Attitude model
Its performance on relevant attributes the importance of those attributes to the customer
Information about Retailers Selling Groceries
Information Used in Evaluating Retailers
Information Needed to Use Multi-Attribute Model
Alternative Consumer Considering Characteristic/Benets Sought in Making Store and Merchandise Choices Ratings of Alternative Performance on Criteria Importance of Criteria to Consumer
Information Used in Buying Suit
Getting into the Consideration Set
Consideration set: the set of alternatives the customer evaluates when making a selection Retailers develop programs inuencing top-of-mind awareness

Get exposure on search engines like Google 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
Increase Performance Beliefs of Your Store Decrease Performance Beliefs About Competitor Increase Importance Weight of Attributes on which You Have an Advantage Add a New Benet on which You Excel
What should they do?
Purchasing Merchandise or Services

Customers do not always purchase a brand with the highest overall evaluation.
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?
Converting Merchandise or Services Evaluations into Purchases
Measure: the number of abandoning carts in stores and at websites Methods to reduce it:
Dont stock out of popular merchandise Reduce waiting times at checkout
Digital displays offering entertainment (Disney)
Easy navigation and check-out at websites (amazon.com) Offer liberal return policies, money back guarantees, and refunds if same merchandise is available at lower prices from another retailer
SATISFACTION
Postpurchase Evaluation
Becomes part of the customers internal information that affects future store and product decisions Builds store and brand loyalty
A post-consumption evaluation of how well a store or product meets or exceeds customer expectations
Extended Problem Solving
High nancial or Social Risk
Limited Problem Solving Some Prior Buying Experience
Habitual Decision Making Store Brand, Loyalty
Types of Buying Decisions
High nancial or Social Risk
Limited Problem Solving Some Prior Buying Experience
Habitual Decision Making Store Brand, Loyalty

Consumers devote time and effort analyzing alternatives
Financial risks purchasing expensive products or services Physical risks purchases that will affect consumers health and safety Social risks consumers will believe product will affect how others view them
Royalty-Free/CORBIS
What Retailers Need to do for Customers Engaged in
Royalty-Free/CORBIS
What Retailers Need to do for Customers Engaged in

Provide a Lot of Information
-Use Salespeople rather than advertising to communicate with customers
Reduce the Risks

-Offer Guarantees -Return Privileges
Royalty-Free/CORBIS
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 Majority of customer decisions involve limited problem solving
What do Retailers Need to do for Customers Engaged in Limited Problem Solving?
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 Satised Provide Good Service, Assortments,Value Offer Rewards to Convert to Loyal Customer
If the Customer Goes to Your Competitors Store, Change Behavior Offer More Convenient Locations, Better Service and Assortments
Encouraging Impulse Buying
Encouraging Impulse Buying

Impulse buying: one common type of limited problem solving Inuence by using prominent point-ofpurchase (POP) or point-of-sale (POS)

Have Salespeople Suggest Add-ons Have Complementary Merchandise Displayed Near Product of Interest Use Signage in Aisle or Special Displays Put Merchandise Where Customers Are Waiting
Habitual Problem Solving

For purchases that arent important to the consumer For merchandise consumers have purchased in the past For consumers loyal to brands or a store Purchase decision process involving little or no conscious effort
Brand Loyalty
Customer Loyalty
Committed to a Specic Brand Reluctant to Switch to a Different Brand May Switch Retailers to Buy Brand
Store Loyalty
Committed to a Specic Retailer Reluctant to Switch Retailers
What Retailers Need to do for Customers to Engage in Habitual Decision Making
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 competitors store, break the habit Offer special promotions
Social Factors Influencing the Buying Decision Process
Family Influences Buying Decisions
Purchases are for entire family to use Whole family participates in decision making process Retailers work to satisfy needs of all family members
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:
Reference Groups
Offering information Providing rewards for specic purchasing behaviors Enhancing a consumers self-image STORE ADVOCATES - Customers that like a store so much that they actively share their positive experiences with friends and family
Culture
Culture is the meaning, beliefs, morals and values shared by most members of a society
Western culture: individualism Eastern culture: collectivism
Subcultures are distinctive groups of people within a culture
Criteria for Evaluating Market Segments

Actionable Identiable Substantial Reachable
Methods for Segmenting Retail Markets

Geo-demographic
Geographic
Segmenting Markets
Demographic
Lifestyle
Benefits
Buying situations

Lesson 6 - Retail Buying Behavior

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Lesson 6 - Retail Buying Behavior

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Customer Buying Behavior

Stages in the Buying Process

Utilitarian Needs Hedonic needs

Hedonic Needs that Retailers can Satisfy

Hedonic Needs that

Retailers can Satisfy

Hedonic Needs that

Retailers can Satisfy

Learn new trends and fashions

Hedonic Needs that

Retailers can Satisfy

Learn new trends and fashions

Satisfy need for power and status

Hedonic Needs that

Retailers can Satisfy

Learn new trends and fashions

Satisfy need for power and status

Hedonic Needs that

Retailers can Satisfy

Learn new trends and fashions

Satisfy need for power and status

How do we Stimulate Need?

How do we Stimulate Need?

Number of alternative brands Time pressure

Reducing Information Search

How Can Retailers Limit the Information Search?

How Can Retailers Limit the Information Search?

Provide good assortments Provide services

Informed sales associates Credit

Everyday low pricing

Retailers encourage customers

Multiattribute Attitude model

Information about Retailers Selling Groceries

Information Used in Evaluating Retailers

Information Needed to Use Multi-Attribute Model

Information Used in Buying Suit

Getting into the Consideration Set

What should they do?

Purchasing Merchandise or Services

Converting Merchandise or Services Evaluations into Purchases

Dont stock out of popular merchandise Reduce waiting times at checkout

Digital displays offering entertainment (Disney)

Extended Problem Solving

High nancial or Social Risk

Limited Problem Solving Some Prior Buying Experience

Habitual Decision Making Store Brand, Loyalty

Extended Problem Solving

Types of Buying Decisions

High nancial or Social Risk

Limited Problem Solving Some Prior Buying Experience

Habitual Decision Making Store Brand, Loyalty

Extended Problem Solving

What Retailers Need to do for Customers Engaged in

Extended Problem Solving

What Retailers Need to do for Customers Engaged in

Extended Problem Solving

Reduce the Risks

Limited Problem Solving

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

What do Retailers Need to do for Customers

Engaged in Limited Problem Solving?

Encouraging Impulse Buying

Encouraging Impulse Buying

Habitual Problem Solving

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

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

If the customer habitually comes to you, reinforce behavior