10. Seasonality is off.17
Attitudes by Market Segment: Research has shown that shoppers may be classified into several types based on their outlook to shopping. For example, according to one classification, shoppers can be broken into four types. “Thrifties” are most interested in price and conven-ience. They are apt to shop at Wal-Mart. “Allures” want a “fun, social shopping experconven-ience.”
They gravitate toward retailers such Bloomingdale’s and Limited Brands. “Speedsters” want to shop quickly. They shop disproportionately at Target and Costco. “Elites” want quality merchandise, an unhurried shopping experience, and the ability to be educated about prod-ucts. They patronize retailers such as Neiman Marcus and Amazon.com. Many “retailers don’t know how their customers prefer their shopping experience and compete by doing what their competitors do. But that doesn’t work. Customer insight will allow a retailer not only to survive but to thrive against even the toughest competition.”18
Attitudes Toward Private Brands: Many consumers believe private (retailer) brands are as good as or better than manufacturer brands: “For American consumers, private brands are brands like any other brands. In a new nationwide study by Ipsos-MORI, seven out of ten shoppers believe that the private-label products they buy are as good, if not better, than their national-brand counterparts. Four in ten now identify themselves as ‘frequent’ store-brand shoppers, and nearly one-half of all consumers say that their typical market basket contains 25 percent or more of private-brand products.”19
Where People Shop
Consumer patronage differs sharply by type of retailer. Thus, it is vital for firms to recognize the venues where consumers are most likely to shop and plan accordingly. Table 7-3 shows where people shop.
Many consumers do cross-shopping, whereby they (1) shop for a product category at more than one retail format during the year or (2) visit multiple retailers on one shopping trip.
ETHICS
IN RETAILING Selling to the Poor Can Be Good—For the Consumer and for Business
Although there is a market of 4 billion people in the world who live on less than the equivalent of $3,000 per year, many businesses wrongfully assume that this market is not economically viable. David Dean, an industry consultant, has identified people with monthly household incomes of between $63 and $700 as the “next billion” potential con-sumers. Nonetheless, according to various marketing experts, selling to the poor requires a different perspective from selling to middle-class consumers in affluent countries.
Retailing to the poor means that firms should offer small package sizes. India, China, Africa, and the Philippines are examples of countries where the sale of single-serve packs of shampoo, detergents, tea, and ketchup are common. Henkel (www.henkel.com), a
German consumer products marketer, for example, sells dishwashing detergent in miniature packages for one rupee (less than 2 cents).
Another product aimed at this market segment is a sim-ple mobile phone that contains a built-in flashlight. The flash-light is an important feature in countries with daily electrical outages. As C. K. Prahalad (author of The Fortune at the Bottom of the Pyramid) notes, retailers also need to consider pay-per-use options—such as Internet access at 10 cents per hour—or monthly payment options.
Sources: Julia Bonstein, “European Firms Eye Developing World,” www.
businessweek.com/globalbiz (January 16, 2008); and Kim Shiffman,
“Your Next Big Thing: Selling to the Poor,” www.canadianbusiness.
com/entrepreneur/managing (December 2007).
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TABLE 7-3 Retailers Where Primary Household Shoppers Purchase at Least Once Per Month (percentage of primary household shoppers)
Where America Shops:
Supermarkets 79
Discount department stores/supercenters 60
Power centers 60
Drugstores 56
Online shopping sites 42
Local neighborhood food stores 36 Home improvement centers/hardware stores 31
Regional malls 30
Membership clubs 27
Deep discount food stores 17
Apparel stores 16
Traditional department stores 15
Consumer electronics stores 14
Downtown shopping districts 8
Where the World Shops:
Canada China France Germany Great Britain Japan Spain
Apparel stores 18 42 28 23 48 40 47
Consumer electronics stores 20 32 15 32 24 43 14
Deep discount food stores 34 40 45 84 63 38 28
Drugstores 77 45 55 78 38 81 50
Home improvement centers/hardware stores 31 24 31 26 21 49 25
Hypermarkets/supercenters 62 90 82 63 77 36 64
Local neighborhood food stores 60 90 56 60 66 47 59
Membership clubs/cash and carry stores 22 37 3 10 9 7 8
Supermarkets 86 82 70 81 93 91 95
Traditional department stores 22 49 16 38 51 31 39
Sources: Compiled by the authors from TNS Retail Forward, Strategic Focus: Global Shopper Insights into Shopping Frequency (Columbus, OH: April 2008), various pages; and TNS Retail Forward, American Shopperscape 2008 (Columbus, OH: July 2008), p. 5.
The first scenario occurs because these consumers feel comfortable shopping at different for-mats during the year, their goals vary by occasion (they may want bargains on everyday clothes and fashionable items for weekend wear), they shop wherever sales are offered, and they have a favorite format for themselves and another one for other household members.
Visiting multiple outlets on one trip occurs because consumers want to save travel time and shopping time. Here are cross-shopping examples:
䉴 Some supermarket customers also regularly buy items carried by the supermarket at convenience stores, full-line department stores, drugstores, and specialty food stores.
䉴 Some department-store customers also regularly buy items carried by the department store at factory outlets and full-line discount stores.
䉴 The majority of Web shoppers also buy from catalog retailers, mass merchants, apparel chains, and department stores.
䉴 Cross-shopping is high for apparel, home furnishings, shoes, sporting goods, and personal-care items.
The Consumer Decision Process
Besides identifying target market characteristics, a retailer should know how people make decisions. This requires familiarity with consumer behavior, which is the process by which
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FIGURE 7-5
The Consumer Decision Process
(b)
(a)
Note: Solid arrows connect all the elements in the decision process and show the impact of demographics and lifestyle upon the process. Dashed arrows show feedback. (a) shows the impact of lifestyle on certain demographics, such as family size, location, and marital status. (b) shows the impact of a purchase on elements of lifestyle, such as social class, reference groups, and social performance.
Post-purchase behavior
Stimulus Problem
awareness
Information search
Evaluation of alternatives
Purchase
Demographics Lifestyle
A. The Decision Process
B. Factors Affecting the Process
people determine whether, what, when, where, how, from whom, and how often to purchase goods and services. Such behavior is influenced by a person’s background and traits.
The consumer’s decision process must be grasped from two different perspec-tives: (1) what good or service the consumer is thinking about buying and (2) where the consumer is going to purchase that item (if the person opts to buy). A consumer can make these decisions separately or jointly. If made jointly, he or she relies on the retailer for support (information, assortments, and knowledgeable sales personnel) over the entire decision process. If the decisions are made independently—what to buy versus where to buy—the person gathers information and advice before visiting a retailer and views the retailer merely as a place to buy (and probably more inter-changeable with other firms).
In choosing whether or not to buy a given item (what), the consumer considers fea-tures, durability, distinctiveness, value, ease of use, and so on. In choosing the retailer to patronize for that item (where), the consumer considers location, assortment, credit avail-ability, sales help, hours, customer service, and so on. Thus, the manufacturer and retailer have distinct challenges: The manufacturer wants people to buy its brand (what) at any location carrying it (where). The retailer wants people to buy the product, not necessarily the manufacturer’s brand (what), at its store or nonstore location (where).
The consumer decision process has two parts: the process itself and the factors affecting the process. There are six steps in the process: stimulus, problem awareness, information search, evaluation of alternatives, purchase, and post-purchase behavior. The consumer’s demographics and lifestyle affect the process. The complete process is shown in Figure 7-5.
The best retailers assist consumers at each stage in the process: stimulus (newspaper ads), problem awareness (stocking new models), information search (point-of-sale displays and good salespeople), evaluation of alternatives (clearly noticeable differences among products), purchase (acceptance of credit cards), and post-purchase behavior (extended warranties and money-back returns). The greater the role a retailer assumes in the decision process, the more loyal the consumer will be.
Each time a person buys a good or service, he or she goes through a decision process. In some cases, all six steps in the process are utilized; in others, only a few steps are employed.
For example, a consumer who has previously and satisfactorily bought luggage at a local store may not use the same extensive process as one who has never bought luggage.
The decision process outlined in Figure 7-5 assumes that the end result is a purchase.
However, at any point, a potential customer may decide not to buy; the process then stops.
The Federal Citizen Information Center facilitates consumer decision making for such products as food by providing free online information (www.pueblo.
gsa.gov/food.htm).
ISBN 0-558-55519-5
Nonprofit Consumer World is an online,
noncommercial guide with more than 2,000 sources to aid the consumer’s information search (www.
consumerworld.org).
A good or service may be unneeded, unsatisfactory, or too expensive. Before discussing the ways in which retail consumers use the decision process, we explain the entire process.
Stimulus: A stimulus is a cue (social or commercial) or a drive (physical) meant to motivate or arouse a person to act. When a person talks with friends, fellow employees, and others, a social cue is received. The special attribute of a social cue is that it involves an interpersonal, noncommercial source. A commercial cue is a message sponsored by a retailer or some other seller. Ads, sales pitches, and store displays are commercial stimuli.
Such cues may not be regarded as highly as social ones by consumers because they are seller-controlled. A third type of stimulus is a physical drive. It occurs when one or more of a person’s physical senses are affected. Hunger, thirst, cold, heat, pain, or fear could cause a physical drive. A potential consumer may be exposed to any or all three types of stimuli. If aroused (motivated), he or she goes to the next step in the process. If a person is not sufficiently aroused, the stimulus is ignored—terminating the process for the given good or service.
Problem Awareness: At problem awareness, the consumer not only has been aroused by social, commercial, and/or physical stimuli but also recognizes that the good or service under consideration may solve a problem of shortage or unfulfilled desire. It is sometimes hard to learn why a person is motivated enough to move from a stimulus to problem awareness. Many people shop with the same retailer or buy the same good or service for different reasons; they may not know their own motivation, and they may not tell a retailer their real reasons for shopping there or buying a certain item.
Recognition of shortage occurs when a person discovers a good or service should be repurchased. A good could wear down beyond repair, or the person might run out of an item such as milk. Service may be necessary if a good such as a car requires a repair.
Recognition of unfulfilled desire takes place when a person becomes aware of a good or service that has not been bought before or a retailer that has not been patronized before.
An item (such as contact lenses) may improve a person’s lifestyle, self-image, and so on in an untried manner, or it may offer new performance features (such as a voice-activated computer). People are more hesitant to act on unfulfilled desires. Risks and benefits may be tougher to see. When a person becomes aware of a shortage or an unfulfilled desire, he or she acts only if it is a problem worth solving. Otherwise, the process ends.
Information Search: If problem awareness merits further thought, information is sought. An information search has two parts: (1) determining the alternatives that will solve the problem at hand (and where they can be bought) and (2) ascertaining the charac-teristics of each alternative.
First, the person compiles a list of goods or services that address the shortage or desire being considered. This list does not have to be formal. It may be a group of alternatives the person thinks about. A person with a lot of purchase experience normally uses an internal memory search to determine the goods or services—and retailers—that are satisfactory.
A person with little purchase experience often uses an external search to develop a list of alternatives and retailers. This search can involve commercial sources such as retail salespeo-ple, noncommercial sources such as Consumer Reports, and social sources such as friends.
Second, the person gathers information about each alternative’s attributes. An experienced shopper searches his or her memory for the attributes (pros and cons) of each alternative.
A consumer with little experience or a lot of uncertainty searches externally for information.
The extent of an information search depends, in part, on the consumer’s perceived risk regarding a specific good or service. Risk varies among individuals and by situation. For some, it is inconsequential; for others, it is quite important. The retailer’s role is to provide enough information for a shopper to feel comfortable in making decisions, thus reducing perceived risk. Point-of-purchase ads, product displays, and knowledgeable sales person-nel can provide consumers with the information they need.
Once the consumer’s search for information is completed, he or she must decide whether a current shortage or unfulfilled desire can be met by any of the alternatives. If one or more are satisfactory, the consumer moves to the next step in the decision process.
The consumer stops the process if no satisfactory goods or services are found.
Evaluation of Alternatives: Next, a person selects one option from among the choices.
This is easy if one alternative is superior on all features. An item with excellent quality and
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FIGURE 7-6