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 the time all over the Globe. Traditional Retail developed in form of Organized retailing. Systematic process of merchandising sales, enhanced the gross revenue for the retailers Not only the structure but the orientation also changed with the time i.e. CUSTOMER SATISFACTION 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 the web 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 size etc associated with customers These variables are used to help the retailer better select the target markets, or market segments. Per-capital income changed the consumption and buying pattern of customers. Increment in income, curving customers from traditional retailing to organized retailing All demographic data gain importance depending on the application. The three most common demographic variables are age, ethnicity and income

Age Groups
The study of age groups and how they behave in the consumer market is called Generational Marketing. Marketers have given some names of people or customers of different era like 1946-64..People are called Baby Boomers, so named because of great number of births following the WW-II..they are also called me generation as their focus on accomplishment. 1965-76, people fall in a group called Generation X. Members of generation X that are attending college are also considered nontraditional students they are the groups trusting network news, political parties etc.

 1977-995 People born in between this period are called Generation Y, members of this generation are described as materialistic, selfish and disrespectful, but technologically capable and aware of world issues. The overall concept for retailers in looking at these age categories is to gain insight into the market 1. If we talk about baby-boomers generationthe data indicate that they are concerned 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 and expertise 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 fast forward, with self-esteem. They like to have interactive shopping experiences and are very concerned about the environment.

Particulars Turn to family & Fr Listen to music Pray or meditate News and Inform. Exercise Eat comfort foods

Y Gen 56% 67% 30% 32% 35% 27%

Xers 55% 49% 36% 29% 21% 27%

Boomers 58% 44% 39% 34% 24% 21%

RACE & ETHNIC GROUPS

As the 21st century continues, race and ethnicity are playing larger roles in defining the consumer. A Race is a group of Individuals sharing common genetic traits that determine physical characteristics An Ethnic Group is any group that is defined or set off by race, religion, national origin etc. The major ethnic groups in US are referred to as Hispanic, African American, Asian American The retailers need to understand the racial and ethic demographics of its market so it can better develop an effective product mix and communication strategy.

INCOME
Lower income consumers are less likely to 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 customers but to excite them and induce them to return to the store. New shopping experiences should be created to stimulate the customers return to the store or online site to make additional purchases. Thus value become the basis for the customers differentiation between one retailer and another.

Ques: What makes one bank different from another?....(all offer same products but you prefer specific bank or its branch) Ques: Telecom companies offer the same services, yet you choose one over another. What entices you to make those selections THE ANSWER.. IS YOUR PERCEPTION OF THE VALUE, THAT THE COMPANY PROVIDES TO YOU Value is a concept that the customer defines. What one customer considers valuable, other may not.

So how can retailers create value in customers 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

TOTAL CUSTOMER VALUE

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

1. 2. 3. 4.

If the price line is set in an inconsistent manner, sales will decline. High product quality is important, but not enough to ensure total customer value.. All three variables must be in place to achieve true integration in customer value. 4 CUSTOMER VALUE The customers perception of the value provided by the retailer. The equity, both financial and informational, that the customer provides to the retailer. The importance of developing strong relationships with customers The integrations and utilization of technology to support customer relationship and increase customer equity.

Advantages/Retailing Value Outputs

1. Understanding customer choices 2. Identifying customer segments 3. Increased competitive options (e.g. increased product line ) 4. Avoidance of Price Wars 5. 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 companys malls. More than 4,50,000 shoppers receive the bulletin. Many retailers believe the program has contributed to an increase in sales

E-TAILING & E-COMMERCE

E-Tailing includes buying and selling items over the Internet, using credit and debit 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 worlds 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: An evolutionary theory based on the premise that retail institutions evolve. The theory suggests that 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 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 the outlet 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.

4- RETAIL LIFECYCLE Theory: A theory of retail competition that states that retailing institutions, like the products they distribute, pass through an identifiable cycle. The cycle can be partitioned into 4 distinct stages: (1) Innovation (2) Accelerated development (3) Maturity and (4) decline. 5- WHEEL of Retailing theory: A theory of retail institutional changes that explains retail evolution with an institutional life cycle concept.

6-NATURAL Selection Theory: A theory of retail institutional changes that states that retailing institutions that can most effectively adapt to environmental changes are at ones that are most likely to prosper or survive. 7-Central Place Theory: A model that ranks communities according to the assortment of goods available in each. At the bottom of the Hierarchy are communities that represent the smallest central places (centers of commerce). They provide the basic necessities of life. Further Up the hierarchy are the larger central places, which carry all goods and services found in lower-order central places plus more specialized ones that are not necessary/ common.

Buying Behavior and process

Buying Behavior is the decision processes 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.

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 and how consumers buy. Marketers can better predict how consumers will respond to marketing strategies.

Consumer Buying Process

Six Stages to the Consumer Buying Decision Process. Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexity The 6 stages are: 1. Problem Recognition (awareness of need)-difference between the desired state and the actual condition. Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to eat. Can be stimulated by the marketer through product information--did not know you were deficient? i.e., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes.

2.Information search- Internal search, memory. External search if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc. A successful information search leaves a buyer with possible alternatives, the evoked set. 3. Evaluation of Alternatives--need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. If not satisfied with your choice then return to the search phase.. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives.

4.Purchase decision--Choose buying alternative, includes product, package, store, method of purchase etc. 5.Purchase--May differ from decision, time lapse between 4 & 5, product availability. 6.Post-Purchase Evaluation- outcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc. After eating an Indian meal, may think that really you wanted a Chinese meal instead.

Types of Buying Decision

Extended Problem Solving- It is a purchase decision process in which customers devote considerable time and effort to analyzing their alternatives. Customer typically engage in extended problem solving when the purchase decision involves a lot of risk and uncertainty. They also engage in extended problem solving when they are making a buying decision to satisfy an important need or when they have little knowledge about the product or service. Retailers stimulates sales from customers engage in ext. pro. Solv. Providing the necessary in a readily available and easily understood manner and by offering money-back-guarantees.

Limited Problem Solving- It involves moderate mount of effort and time. Customers engage in this type of buying process when they had some prior experience with the product or service and their risk is moderate. In these situations, customers tend to rely more on personal knowledge than the external information. The majority of customer decisions involve limited problem solving. One common type of limited problem solving is IMPULSE buying, which is a buying decision made by customers on the spot after seeing the merchandise.

Habitual Decision Making: It is a purchase decision involving little or no conscious effort. Todays customer have many demands on their time. When the need arises, customers may automatically respond with, I will buy the same thing I bought last time from the same store. Typically, this habitual decision-making process is used when decisions arent very important to customers and involve familiar merchandise they have bought in the past. When customer are loyal to a brand or a store, they are involved in habitual decision making.

..end of Unit III