Purchase Act
Consumer’s purchase or nonpurchase Retailer’s purchase terms • Price
• Cash vs. credit acceptance Retailer’s place of purchase
• Store • Home • Office/school • World Wide Web
Retailer’s good/service availability
• Stock on hand • Delivery
a low price is a certain pick over expensive, average-quality ones. However, a choice may not be that simple, and the person then does an evaluation of alternatives before making a decision. If two or more options seem attractive, the person determines the criteria to evaluate and their importance. Alternatives are ranked and a choice made.
The criteria for a decision are those good or service attributes that are considered relevant. They may include price, quality, fit, durability, and so on. The person sets standards for these characteristics and rates each alternative according to its ability to meet the standards. The importance of each criterion is also determined, and attributes are usually of differing importance to each person. One shopper may consider price to be most important while another places greater weight on quality and durability.
At this point, the person ranks alternatives from most favorite to least favorite and selects one. For some items, it is hard to rate attributes of available alternatives because they are technical, intangible, new, or poorly labeled. When this occurs, shop-pers often use price, brand name, or store name as an indicator of quality and choose based on this criterion. Once a person ranks alternatives, he or she chooses the most satisfactory good or service. In situations where no alternative is adequate, a decision not to buy is made.
Purchase Act: A person is now ready for the purchase act—an exchange of money or a promise to pay for the ownership or use of a good or service. Important decisions are still made in this step. For a retailer, the purchase act may be the most crucial aspect of the decision process because the consumer is mainly concerned with three factors, as high-lighted in Figure 7-6:
1. Place of purchase—this may be a store or a nonstore location. Many more items are bought at stores than through nonstore retailing, although the latter are growing more quickly. The place of purchase is evaluated in the same way as the good or the serv-ice: alternatives are listed, their traits are defined, and they are ranked. The most desirable place is then chosen. Criteria for selecting a store retailer include store location, store layout, service, sales help, store image, and prices. Criteria for selecting a nonstore retailer include image, service, prices, hours, interactivity, and convenience. A consumer will shop with the firm that has the best combination of criteria, as defined by that consumer.
2. Purchase terms—these include the price and method of payment. Price is the dollar amount a person must pay to achieve the ownership or use of a good or service. Method of payment is the way the price may be paid (cash, short-term credit, long-term credit).
3. Availability—this relates to stock on hand and delivery. Stock on hand is the amount of an item that a place of purchase has in stock. Delivery is the time span between placing an order and receiving an item and the ease with which an item is transported to its place of use.
ISBN 0-558-55519-5
If a person is pleased with all aspects of the purchase act, the good or service is bought. If there is dissatisfaction with the place of purchase, the terms of purchase, or availability, the consumer may not buy, although there is contentment with the item itself:
Karen wanted to buy a stereo. But, after a month of trying, she gave up: “The sys-tem I wanted was sold in only three stores and through an online firm. Two stores overpriced the stereo by $75. The third had a good price, but insisted I drive to the warehouse to get the stereo. The Web retailer had a good deal, but it ran out of the model I wanted. When I heard that, I decided to keep my old stereo.”
Post-Purchase Behavior: After buying a good or service, a consumer may engage in post-purchase behavior, which falls into either of two categories: further purchases or re-evaluation. Sometimes, buying one item leads to further purchases and decision making continues until the last purchase is made. For instance, a car purchase leads to insurance;
a retailer that uses scrambled merchandising may stimulate a shopper to make further pur-chases, once the primary good or service is bought.
A person may also re-evaluate a purchase. Is performance as promised? Do actual attrib-utes match the expectations the consumer had? Has the retailer acted as expected? Satisfaction typically leads to contentment, a repurchase when a good or service wears out, and positive rat-ings to friends. Dissatisfaction may lead to unhappiness, brand or store switching, and unfavor-able conversations with friends. The latter situation (dissatisfaction) may result from cognitive dissonance—doubt that the correct decision has been made. A consumer may regret that the purchase was made at all or may wish that another choice had been made. To overcome cogni-tive dissonance and dissatisfaction, the retailer must realize that the decision process does not end with a purchase. After-care (by phone, a service visit, or E-mail) may be as important as anything a retailer does to complete the sale. When items are expensive or important, after-care takes on greater significance because the person really wants to be right. Also, the more alterna-tives from which to choose, the greater the doubt after a decision is made and the more impor-tant the after-care. Department stores pioneered money-back guarantees so customers could return items if cognitive dissonance occurred.
Realistic sales presentations and ad campaigns reduce post-sale dissatisfaction because consumer expectations do not then exceed reality. If overly high expectations are created, a consumer is more apt to be unhappy because performance is not at the level promised.
Combining an honest sales presentation with good customer after-care reduces or eliminates cognitive dissonance and dissatisfaction.
Types of Consumer Decision Making
Every time a person buys a good or service or visits a retailer, he or she uses a form of the decision process. The process is often undertaken subconsciously, and a person is not even aware of its use. And, as indicated in Figure 7-5, the process is affected by consumer charac-teristics. Older people may not spend as much time as younger ones in making some deci-sions due to their experience. Well-educated consumers may consult many information sources before making a decision. Upper-income consumers may spend less time making a decision because they can afford to buy again if they are dissatisfied. In a family with children, each member may have input into a decision, which lengthens the process. Class-conscious shoppers may be more interested in social sources. Consumers with low self-esteem or high perceived risk may use all the steps in detail. People under time pressure may skip steps to save time.
The use of the decision process differs by situation. The purchase of a new home usually means a thorough use of each step in the process; perceived risk is high regardless of the con-sumer’s background. In the purchase of a magazine, the consumer often skips certain steps;
perceived risk is low regardless of the person’s background. There are three types of decision processes: extended decision making, limited decision making, and routine decision making.
Extended decision making occurs when a consumer makes full use of the decision process. A lot of time is spent gathering information and evaluating alternatives—both what to buy and where to buy it—before a purchase. The potential for cognitive dissonance is great.
ISBN 0-558-55519-5
CAREERS IN RETAILING
In this category are expensive, complex items with which the person has had little or no expe-rience. Perceived risk of all kinds is high. Items requiring extended decision making include a house, a first car, and life insurance. At any point in the process, a consumer can stop, and for expensive, complex items, this occurs often. Consumer traits (such as age, education, income, and class consciousness) have the most impact with extended decision making.
Because their customers tend to use extended decision making, such retailers as real-estate brokers and auto dealers emphasize personal selling, printed materials, and other communication to provide as much information as possible. A low-key informative approach may be best, so shoppers feel comfortable and not threatened. In this way, the consumer’s perceived risk is minimized.
With limited decision making, a consumer uses each step in the purchase process but does not spend a great deal of time on each of them. It requires less time than extended decision making because the person typically has some experience with both the what and the where of the purchase. This category includes items that have been bought before but not regularly. Risk is moderate, and the consumer spends some time shopping. Priority may be placed on evaluating known alternatives according to the person’s desires and standards, although information search is important for some. Items requiring limited decision making include a second car, clothing, a vacation, and gifts. Consumer attributes affect decision making, but the impact lessens as perceived risk falls and experience rises. Income, the importance of the purchase, and motives play strong roles in limited decision making.
This form of decision making is relevant to such retailers as department stores, spe-cialty stores, and nonstore retailers that want to sway behavior and that carry goods and services that people have bought before. The shopping environment and assortment are very important. Sales personnel should be available for questions and to differentiate among brands or models.
Routine decision making takes place when the consumer buys out of habit and skips steps in the purchase process. He or she wants to spend little or no time shopping, and the same brands are usually repurchased (often from the same retailers). This category includes items that are bought regularly. They have little risk because of consumer experience. The key step is problem awareness. When the consumer realizes a good or service is needed, a repurchase is
Chris: Regional Director of Loss Prevention
While in college, Chris worked in mall security—before obtaining an internship at a bank. For the internship, he did internal auditing and operational processes work.
Upon college graduation, he was promoted to assistant bank manager.
Shortly thereafter, Chris attended a career fair where he talked with a recruiter for a specialty store chain that specialized in high-end men’s suits. He dropped off his résumé because he had a personal interest in the inves-tigative side of the auditing process that had been part of his responsibilities at the bank—digging in and finding the details. He wanted to explore how he could apply this personal interest in his professional life. Chris was hired as a loss prevention (LP) analyst. In this position, he had the opportunity and the challenge to develop the LP department from the ground up. There was only one other person in the department when Chris started. He enjoyed the work.
Chris had been with the company three years when a headhunter called. An up-and-coming specialty store chain was recruiting a District LP Manager, and Chris was offered and accepted this new challenge. Later on, after switching companies again, Chris’ boss recognized his responsibility and the initiative Chris took in implementing projects above and beyond his job description. Because of Chris’s work ethic and performance, this next position was created for him in order to retain Chris and develop his career path. As Senior Regional LP Manager, Chris had staff reporting directly to him and took on more of an LP-policy role.
At the age of 35, five years ahead of his personal schedule, Chris became Regional Director of LP, thus achieving his goal of a having a director-level title by age 40. He currently earns more than $100,000 per year, plus generous fringe benefits.
Source: Reprinted by permission of the National Retail Federation.
ISBN 0-558-55519-5
often automatic. Information search, evaluation of alternatives, and post-purchase behavior are unlikely. These steps are not undertaken as long as a person is satisfied. Items involved with routine decision making include groceries, newspapers, and haircuts. Consumer attributes have little impact. Problem awareness almost inevitably leads to a purchase.
This type of decision making is most relevant to such retailers as supermarkets, dry cleaners, and fast-food outlets. For them, these strategic elements are crucial: a good location, long hours, clear product displays, and, most important, product availability. Ads should be reminder-oriented. The major task is completing the transaction quickly and precisely.
Impulse Purchases and Customer Loyalty
Impulse purchases and customer loyalty merit our special attention.
Impulse purchases arise when consumers buy products and/or brands they had not planned on buying before entering a store, reading a mail-order catalog, seeing a TV shop-ping show, turning to the Web, and so forth. At least part of consumer decision making is influenced by the retailer. There are three kinds of impulse shopping:
䉴 Completely unplanned. Before coming into contact with a retailer, a consumer has no intention of making a purchase in a goods or service category.
䉴 Partially unplanned. Before coming into contact with a retailer, a consumer has decided to make a purchase in a goods or service category but has not chosen a brand or model.
䉴 Unplanned substitution. A consumer intends to buy a specific brand of a good or service but changes his or her mind about the brand after coming into contact with a retailer.
With the partially unplanned and substitution kinds of impulse purchases, some decisions take place before a person interacts with a retailer. In these cases, a shopper may be involved with extended, limited, or routine decision making. Completely unplanned shopping is often related to routine decision making or limited decision making; there is little or no time spent shopping, and the key step is problem awareness.
According to recent research from OgilvyAction, (1) “A little more than 39 percent of U.S. shoppers really wait until they’re in the store to decide what brand to buy.” (2) “About 10 percent change their minds about brands in the store.” (3) “Twenty-nine percent buy from categories they didn’t intend to buy from.” (4) “Almost 20 percent leave a product they’d planned to buy on the shelf.”20
Impulse purchases are more influenced by retail displays than are pre-planned purchases.
As the chief executive of Procter & Gamble, the huge consumer products manufacturer, said:
“More and more of our communication is moving to store. And the reason it’s moving to store is that more and more consumers are saying that they’re making their purchase decisions in store. And in a period where you have a fair amount of food price inflation, we think more of that shopping list, whether it’s just in [a shopper’s] head or actually written down, is being decided in the store.”21See Figure 7-7.
In studying impulse buying, these are some of the consumer attitudes and behavior patterns that retailers should take into consideration:
䉴 In-store browsing is positively affected by the amount of time a person has to shop.
䉴 Some individuals are more predisposed toward making impulse purchases than others.
䉴 Those who enjoy shopping are more apt to make in-store purchase decisions.
䉴 Impulse purchases are greater if a person has discretionary income to spend.22 When customer loyalty exists, a person regularly patronizes a particular retailer (store or nonstore) that he or she knows, likes, and trusts. This lets a person reduce decision mak-ing because he or she does not have to invest time in learnmak-ing about and choosmak-ing the retailer from which to purchase. Loyal customers tend to be time-conscious, like shopping locally, do not often engage in outshopping, and spend more per shopping trip. In a service setting, such as an auto repair shop, customer satisfaction often leads to shopper loyalty;
price has less bearing on decisions.
It can be testing to gain customer loyalty—a retailer’s greatest asset. As the chairman of America’s Research Group says: “What classifies as customer loyalty today only lasts until the next, better deal comes along. More people shop somewhere only because that L.L. Bean (www.llbean.
com) has some of the most loyal customers around.
See why.
ISBN 0-558-55519-5
Stimulating Impulse Purchases
Could you pass by this vending machine without making a purchase?
Source: Reprinted by permission.
place has the best selection and price of the moment. If someone else comes along with a better offer, loyalty just isn’t an issue.”23Applying the retailing concept certainly enhances the chances of gaining and keeping loyal customers: customer orientation, coordinated effort, value-driven, and goal orientation. Relationship retailing helps also!
Consider this:
The biggest problem with loyalty programs is that most retailers adopt a one-size-fits-all approach: They use monetary rewards to encourage repeat pur-chases. But product discounts won’t change buying behavior in the long run in shoppers who value things like personalized service, convenience, or shopping pleasure more. These types of consumers may change their behavior to access the price promotion, but they likely will revert back to their regular brands or buying habits shortly thereafter, resulting in, at best, a temporary change in sales and market share. A more effective way to woo customers and maintain their patronage is to offer them individualized rewards, based on what they value. By offering different types of rewards to different groups of shoppers, companies set themselves apart and give people a reason to keep coming back. Providing access to a speedy checkout lane, for example, would be a more powerful way to win the loyalty of a person who hates grocery shopping than would a discount on a future purchase.24