Transcript Chapter 4 Customer Buying Behavior McGraw-Hill/Irwin Retailing Management, 7/e Copyright © 2008 by The McGraw-Hill Companies, Inc.

Chapter 4
Customer Buying Behavior
McGraw-Hill/Irwin
Retailing Management, 7/e
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
The World of Retailing
Introduction to Retailing
Types of Retailers
Multi-Channel Retailing
Customer Buying Behavior
4-2
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 into
market segments?
4-3
Illustration of Buying Process
Eva Carlyn, a student at the University
of Washing, is beginning to interview
for jobs. For the first interviews on
campus, Eva planned to wear the blue
suit her parents bought her three years
ago. But after looking at her suit, she
realizes that it’s not stylish, and it
shows signs of wear. She wants to
make a strong first impression during
her interviews, so she decides to buy a
new suit.
© Digital Vision
4-4
Illustration (Continued)
Eva surfs the Internet for tips on dressing for
interviews (www.collegegrad.com and
www.jobsearch.about.com) and looks through
catalogs to see which styles are offered. However,
she decides to go to retail store to try things on, and
to have the suit in time for her first interview next
week. She usually shops at Abercrombie & Fitch and
American Eagle Outfitter, but neither sells business
suits. Before going to the mall, she goes to
BrandHabit.com, a site that enables her to examine
and compare the suits currently available at the mall.
Armed with a list of possibilities, she goes directly to
the stores that she reviewed on BrandHabit.com.
4-5
Illustration (Continued)
She likes to shop with Britt,
but Britt is in Paris for the
semester. Since she values
Britt’s opinion, Eva shares
her shopping list with Britt on
Kaboodle.com.
© Ingram Publishing/AGE Fotostock
4-6
Illustration (Continued)
Evan wanders into Macy’s, as a
salesperson approaches her in the
career women’s department. After
asking her what type of suit she wants
and her size, the salesperson shows
her three suits. Eva photographs them
with her cell phone, and text
messages them to Britt in Paris. Britt
likes all three, so Eva tries them on
again. However, after messaging Britt
more photos, all three individuals
decide the 2nd suit is the most
appropriate for the interview.
© Bananastock/Punchstock
4-7
Illustration (Continued)
Eva is happy with the aesthetics of the
suit: its color, fit, fabric, and length.
Although, she is about the costs of dry
cleaning, and she realizes she’s spending
more money than she had planned. Then
Eva decides to buy it after another
customer in the store tells her she
appears very professional in the suit.
As the salesperson walks with Eva to the cash register,
they pass a display of scarves. The salesperson stops,
picks up a scarf, and demonstrates to her how well the
scarf complements the suit. As a result, Eva also decides
to buy the scarf.
4-8
Stages in the Buying Process
4-9
Types of Needs
■ Utilitarian Needs –satisfied
when purchases accomplish a
specific task. Shopping needs
to be easy, and effortless like
Sam’s or a grocery store.
■ Hedonic needs – satisfied
when purchases accomplish a
need for entertainment,
emotional, and recreational
experience as in department
stores or specialty stores.
4-10
Hedonic Needs that Retailers can Satisfy
■ Stimulation

Ex: Background music, visual displays, scents
■ Social experience

Ex: Mixed-use developments, lifestyle centers
■ Learn new trends and fashions

Ex: The Body Shop – learn how can live an environmentally friendly lifestyle
■ Satisfy need for power and status

Ex: Canyon Ranch – upscale health resorts
■ Self-rewards

Ex: personalized makeovers
■ Adventure

Treasure hunting for bargains
4-11
Conflicting Needs
■ Ex: Eva’s hedonic needs (wearing a DKNY suit
to enhance self-image) conflict with her budget,
and her utilitarian need to get a job.
■ Customers make trade-offs between their
conflicting needs
■ Cross shopping
4-12
Stimulating Need Recognition
Suggestions by Sales Associates
Advertising and Direct Mail
Visual Merchandise in store
Special Events in the Store
Signage
Displays
Free food sample
Stockbyte/Punchstock Images
4-13
Information Search
■ Amount of Information Search Depends on the value
from searching versus the cost of searching
■ Factors Affecting Amount of Information Search



Product Characteristics
• Complexity
• Cost
Customer Characteristics
• Past experience
• Perceived risk
• Time pressure
Market Characteristics
• Number of alternative brands
4-14
Sources of Information
Internal
Past experiences
Memory
Digital Vision / Getty Images
External
Consumer reports
Advertising
Word of mouth
© Dynamic Graphics/Picture Quest
4-15
How Can Retailers Limit the Information
Search?
■
■
■
■
■
Information from sales associates
Provide an assortment of services
Provide good assortments
Everyday low pricing
Credit
Royalty-Free/CORBIS
4-16
Retailers encourage customers
to spend time
■ The more time customers spend shopping, the
more they will buy.

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


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Talbots: attention of a sales associate, light snack
City Furniture: Chocolate cookies
Gymboree: television playing kids’ videos
■ Websites provide enjoyable experiences with
technologies
4-17
Evaluation of Alternatives
■ Multiattribute attitude model:


Customers see a retailer, product, or service as a
collection of attributes or characteristics
Predict a customer’s evaluation of a retailer, product,
or service based on
• Its performance on relevant attributes
• the importance of those attributes to the customer
4-18
Information about Retailers Selling
Groceries
4-19
Information Used in Evaluating Retailers
4-20
Information Needed to Use Multi-Attribute
Model
■ Alternative Consumer Considering
■ Characteristic/Benefits Sought in Making Store
and Merchandise Choices
■ Ratings of Alternative Performance on Criteria
■ Importance of Criteria to Consumer
4-21
Information Eva Used in Buying Suit
4-22
Information Needed to Use
Multi-Attribute Model
■ Alternative retailers consumers can consider
■ Characteristic/Benefits Sought in Making Store
and Merchandise Choices
■ Ratings of Alternative Performance on Criteria
■ Importance weights that consumers attach to
the merchandise
4-23
Getting into the Consideration Set
■ Consideration set: the set of
alternatives the customer
evaluates when making a
selection
■ Retailers develop programs
influencing 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
(e.g., Starbucks)
4-24
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 Benefit on which You Excel
4-25
Purchasing Merchandise or Services
Customers do not always purchase a brand with the
highest overall evaluation.
The McGraw-Hill Companies, Inc./Jill Braaten, photographer
■ The high-rated item may not be
available in the store.
■ How can a retailer increase the
chances that customers will
convert their merchandise
evaluations into purchases?
4-26
Converting Merchandise or Services
Evaluations into Purchases
■ Measure: the number of
abandoning carts in stores and at
websites




Don’t stock out of popular
merchandise
Reduce waiting times at checkout
• Digital displays offering
entertainment (Disney)
• Apple stores – cell check-out
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
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
■ Methods to reduce it:
4-27
Postpurchase Evaluation
■ Satisfaction

A post-consumption evaluation of how well a store or
product meets or exceeds customer expectations
■ Becomes part of the customer’s internal
information that affects future store and product
decisions
■ Builds store and brand loyalty
4-28
Types of Purchase Decisions
■ Extended Problem Solving
-High financial or Social Risk
■ Limited Problem Solving
-Some Prior Buying Experience
■ Habitual Decision Making
-Store Brand, Loyalty
4-29
Extended Problem Solving
Consumers devote time and effort analyzing alternatives
■ Financial risks –
purchasing expensive
products or services
■ Physical risks – purchases
that will affect consumer’s
health and safety
■ Social risks – consumers
will believe product will
affect how others view
them
4-30
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
4-31
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
(c) Brand X Pictures/PunchStock
4-32
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
4-33
Encouraging Impulse Buying
■ Impulse buying: one common type of
limited problem solving
■ Influence by using prominent point-ofpurchase (POP) or point-of-sale (POS)



PhotoLink/Getty Images

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
4-34
Habitual Problem Solving
Purchase decision process involving little or no conscious effort
■ For purchases that aren’t important to
the consumer
■ For merchandise consumers have
purchased in the past
■ For consumers loyal to brands or a
store
4-35
Customer Loyalty
■ Brand Loyalty



Committed to a Specific
Brand
Reluctant to Switch to a
Different Brand
May Switch Retailers to Buy
Brand
■ Store Loyalty


Committed to a Specific
Retailer
Reluctant to Switch Retailers
4-36
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
 Offer special promotions
4-37
Social Factors
Influencing the Buying Decision Process
4-38
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
Kids in the U.S. spend over $200 billion on personal items. They directly
influence the purchase of another $300 billion worth of items such as food
and clothing.
4-39
Reference Groups
A reference group is one or more people whom a person uses as a basis
of comparison for beliefs, feelings and behaviors.
(c) image100/PunchStock
Reference groups affect buying decisions by:
■ Offering information
■ Providing rewards for specific purchasing behaviors
■ Enhancing a consumer’s self-image
4-40
Reference Groups
■ Eva…. looks to


Soccer player Mia Hamm and tennis player Maria
Sharapova for the selection of athletic wear
Jessica Simpson for casual fashion advice
■ Store advocates:



Customers that like a store so much that they actively
share their positive experiences with friends and
family
Victoria Secret
Alpha Moms
4-41
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
4-42
Criteria for Evaluating Market Segments
■
■
■
■
Actionable
Identifiable
Substantial
Reachable
4-43
Methods for Segmenting Retail Markets
Geo-demographic
Geographic
Lifestyle
Segmenting Markets
Benefits
Demographic
Buying situations
4-44
Geo-demographic Segmentation
“Birds of a feather Flock Together”
PRIZM (Potential Rating Index by Zip Market – Claritas (www. Claritas.com)
ESRI Tapestry
Town and Gown
Latino America
College Town Singles
Hispanic Middle Class
Foreign Films (+)
Boxing (+)
Dogs (-)
Dance Music (+)
Sewing (-)
Barbequing (-)
Coca Cola (+)
Avocados (+)
Fast Food (+)
Cosmopolitan (+)
Friends (+)
Touched By an Angel (+)
Sports Illustrated (+)
4-45
Distribution of Gray Collar Aging Couples Near
Suburbs
4-46
VALS2 American Lifestyle Segments
4-47