Retail Management

Part : 03
Targeting Customers Chapter-07
and
Gathering Information

Identifying and Understanding

Consumers

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 Chapter Objectives
 To discuss why it is important for a retailer to properly
identify, understand, and appeal to its customers.
 To enumerate and describe a number of consumer
demographics, lifestyle factors, and needs and desires
– and to explain how these concepts can be applied to
retailing.
 To examine consumer attitudes toward shopping and
consumer shopping behavior, including the consumer
decision process and its stages.
 To look at retailer actions based on target market
planning.
 To note some of the environmental factors that affect
consumer shopping.
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 What Makes Retail Shoppers Tick?
 The quality of retail strategy depends on how well a
firm identifies and understands its customers and
forms its strategy mix to appeal to them.

 This entails identifying consumer characteristics,

needs, and attitudes, recognizing how people make
decisions; and then devising the proper target market
plan. It also means studying the environmental
factors that affect purchase decisions.

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 What Makes Retail Shoppers Tick?

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 Consumer Demographics and Lifestyles

 Demographics  Lifestyles

 Consumer data  Ways in which

that is objective, consumers and

quantifiable, families live and
easily identifiable, spend time and
measurable. spend money

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 Consumer Demographics and Lifestyles
 Consumer Demographics : Demographics are objective,
quantifiable, easily identifiable, and measurable
population data.
 Both groups of consumers and individual consumers
can be identified by such demographics as gender, age,
population growth rate, life expectancy, literacy,
language spoken, household size, marital and family
status, income, retail sales, mobility, place of residence,
occupation, education, and ethnic/racial background.
 These factors affect people’s retail shopping and
retailer actions.
 A retailer should have some knowledge of overall
trends, as well as the demographics of its own target
market.

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 Consumer Demographics and Lifestyles
 Consumer Lifestyles : Lifestyles are the ways in which
individual consumers and families (households) live
and spend time and money.
 Consumer lifestyles are based on social and
psychological factors, and influenced by
demographics.
 As with demographics, a retailer should first have
some knowledge of consumer lifestyle concepts and
then determine the lifestyle attributes of its own
target market.

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 Consumer Demographics and Lifestyles
Social Factors
Reference
Culture
Groups

Social Lifestyle Time

Class Utilization

Household Family
Life Life
Cycle Cycle

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 Consumer Demographics and Lifestyles
Social Factors
 The social factors that are useful in identifying and
understanding consumer lifestyles include the followings.

a. Culture : It is a distinctive heritage shared by a group of

people that passes on a series of beliefs, norms, and
customs.

b. Social Class : It involves an informal ranking of people

based on income, occupation, education, and other
factors.

c. Reference Groups : They influence people’s thoughts and

behavior, like Aspirational Groups (a person does not
belong but wishes to join), Membership Groups (a person
does belong), and Dissociative Groups (a person does
not want to belong).
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 Consumer Demographics and Lifestyles
Social Factors
d. The Family Life Cycle : It describes how a traditional
family moves from bachelorhood to children to
solitary retirement. At each stage, attitudes, needs,
purchases, and income change.

e. Time Utilization : It refers to the activities in which a

person is involved and the amount of time allocated
to them. The broad categories are work,
transportation, eating, shopping etc.

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 Consumer Demographics and Lifestyles
Psychological Factors

Personality Attitudes

Perceived Lifestyle Class

Risk Consciousness

Purchase
Importance

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 Consumer Demographics and Lifestyles
Psychological Factors
 The psychological factors that are useful in identifying and
understanding consumer lifestyles include the followings.
a. Personality : It is the sum total of an individual’s traits,
which make that individual unique. They include a person’s
level of self confidence, innovativeness, sociability,
autonomy, emotional stability, and assertiveness.
b. Class Consciousness : It is the extent to which a person
desires and pursues social status. A class-conscious person
values the status of goods, services, and retailers.
c. Attitudes : These are positive, neutral, or negative feelings a
person has about different topics on consistent basis. They
are also feelings consumers have about a given retailer and
its activities.
d. Perceived Risk : It is the level of risk a consumer believes
exists regarding the purchase of a specific good or service
from a given retailer, whether or not the belief is correct.

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 Consumer Demographics and Lifestyles
Psychological Factors
e. The importance of a purchase : It affects the amount
of time consumer will spend to make a decision and
the range of alternatives considered. If a purchase is
important, perceived risk tends to be higher, and the
retailer must adapt to this.
 Note : A retailer can develop a lifestyle profile of its
target market by answering those questions and then
using the answers in developing its strategy.

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 Retailing Implications of
Consumer Demographics and Lifestyles
 Demographic and lifestyle factors need to be considered
from several perspectives, like the followings.

a. Gender Roles : The huge number of working women is

altering lifestyles significantly. Due to trend toward
working women, the lifestyles of males are also changing.

b. Consumer Sophistication and Confidence : Many

shoppers are now more knowledgeable, and
cosmopolitan; more aware of trends in taste, styles, and
goods and services; and more sophisticated.

c. Poverty of Time : The increase in working women, the

desire for personal fulfillment, the daily job commute,
and the tendency of some people to have second jobs
contribute to many consumers feeling time-pressured.

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 Retailing Implications of
Consumer Demographics and Lifestyles
d. Component Lifestyles : In the past, shoppers were
typecast, based on demographics and lifestyles. Now,
it is recognized that shopping is less predictable and
more individualistic. It is more situation-based.

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 Retailing Implications of
Consumer Demographics and Lifestyles

Blurring Gender Roles

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 Consumer Needs and Desires
 When developing a target market profile, a retailer
should identify key consumer needs and desires.
 From a retailing perspective, ‘needs’ are a person’s
basic shopping requirements consistent with his or
her present demographics and lifestyle.
 ‘Desires’ are discretionary shopping goals that have
an impact on attitudes and behavior.
 Example : A person may need a car to get to and from
work. The person may desire a Porsche but be
satisfied with a Saturn that can be serviced on the
weekend and fits within the budget.

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 Consumer Needs and Desires
 To address the question, like “Do different market
segments have special needs?”, we will look at three
particular market segments that attract retailer
attention.
a. In-Home Shopping : The in-home shopping is not
always a captive audience. Shopping is often
discretionary, not necessary. Convenience in ordering
an item, without traveling for it, is important. These
shoppers are often active store shoppers, and they
are affluent and well-educated.
b. Online Shopping : People who shop online are often
well-educated and have above-average incomes. Web
shopping encompasses more than just purchasing
online. Online shoppers can reach items, checkout
prices, and place orders. Some shoppers have items
shipped to them, while others go to the store.
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 Consumer Needs and Desires
c. Outshopping : Out-of-hometown shopping or
Outshopping is important for both local and
surrounding retailers. The former want to minimize
this behavior, whereas the latter want to maximize.
 Outshoppers are often young, members of a large
family, and new to the community.
 They enjoy fine foods, like to travel, are active, like to
change stores, and read out- of-town newspapers.

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 In-Home Shoppers
 Shopping is discretionary,
not necessary

 Convenience is important

 Active, affluent, well-

educated

 Self-confident, younger,
adventuresome

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 Online Shoppers
 Use of Web for decision-
making process as well as
buying process

 Convenience is important

 Above average incomes,

well-educated

 Time scarcity is a motivator

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 Outshoppers
 Out-of-hometown shopping

 Young, members of a large

family, and new to the
community

 Income and education vary

 They like to travel, enjoy

fine food, are active, and
read out-of-town
newspapers

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 Shopping Attitudes and Behavior
 Now we will look at people’s attitudes toward
shopping, where they shop, and the way in which they
make purchase decisions.

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 Shopping Attitudes and Behavior
a) Attitudes Toward Shopping
 Considerable research has been done on people’s
attitudes toward shopping. Such attitudes have a big
impact on the ways in which people act in a retail
setting.
 Shopping Enjoyment : In general, people do not enjoy
shopping as much as in the past. So this is a challenge
for retailers. Many shoppers enjoy bargain hunting,
window shopping, being pampered by salespeople, and
the opportunity to get out of the house or office.
 Attitudes Toward Shopping Time : Retail shopping is
often viewed as a chore. Time-pressed by family and
work responsibilities, they spend fewer hours cruising
the mall in search of the perfect item, and look to get
what they need as quickly as possible. This trend has
been dubbed as “precision shopping”. The upside of
precision shopping is that consumers spend more
money each time they visit a store.
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 Shopping Attitudes and Behavior
a) Attitudes Toward Shopping
 Shifting Feelings About Retailing : There has been a
major change in attitudes toward spending, value,
and shopping with established retailers. The same
shopper who buys commodity goods at a wholesale
club, may also buy expensive apparel at Nordstrom.
 Why People Buy or Do Not Buy on a Shopping Trip : It
is critical for retailers to determine why shoppers
leave without making a purchase. According to Kurt
Salmon Associates, here are the top 10 reasons why
shoppers leave an apparel store without buying
(Detailed on Next Slide).

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 Shopping Attitudes and Behavior
a) Attitudes Toward Shopping
Top Reasons for Leaving an Apparel Store Without
Buying

 Cannot find an appealing style

 Item is out of stock
 Nothing fits
 No sales help is available
 Cannot get in and out of the store easily
 Prices are too high
 In-store experience is stressful
 Cannot find a good value
 Store is not merchandised conveniently
 Seasonality is off

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 Shopping Attitudes and Behavior
b)ofWhere
Type Retailer People Shop % Shopping
Where America Shops
• Supermarkets 72

• Discount department stores/supercenters 66

• Drugstores 61
• Convenience stores 59

• Apparel stores 36

• Home improvement centers 31

• Membership clubs 29

• Book/music stores 22
• Retail
Consumer electronics stores
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 Shopping Attitudes and Behavior
b) Where People Shop
Cross-Shopping
 Many consumers do ‘Cross Shopping’, whereby they

i. They shop for a product category at more than one

retail format during the year.

ii. Visiting multiple retailers on one shopping trip.

 The first scenario occurs because these customers feel
comfortable shopping at different formats during the
year, their goals vary by occasion, they shop wherever
sales are offered, and they have a favorite format for
themselves and another one for other household
members.
 Second scenario occurs because consumers want to
save travel time and shopping time.
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 Shopping Attitudes and Behavior
c) 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 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 Decision Process has two parts : the
process itself, and the factors affecting the process.
 There are six steps in the process (See Next Slide).
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 Shopping Attitudes and Behavior
c) The Consumer Decision Process

Demographics Lifestyle

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 Shopping Attitudes and Behavior
c) The Consumer Decision Process
 The best retailers assist consumers at each stage in
the process, like the followings.

a. Stimulus (Newspaper Ads)

b. Problem Awareness (New Models)
c. Information Search (Point-of-Sale displays and good
salespeople)
d. Evaluation of Alternatives (clearly noticeable
differences among products)
e. Purchase (acceptance of credit cards)
f. Post-Purchase Behavior (extended warranties and
money-back returns)

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 Shopping Attitudes and Behavior
c) The Consumer Decision Process
Types of Consumer Decision Making
 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, often used
subconsciously and a person is not even aware of its
use.
 In some cases, all six steps in the process are utilized,
in others, only a few steps are employed, like in
repeat purchases.

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 Shopping Attitudes and Behavior
c) The Consumer Decision Process
Types of Consumer Decision Making
 There are three types of decision processes.

i. Extended Decision Making

ii. Limited Decision Making
iii. Routine decision Making

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 Shopping Attitudes and Behavior
c) The Consumer Decision Process
Types of Consumer Decision Making

Extended High

Limited RISK & TIME

Routine Low

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 Shopping Attitudes and Behavior
c) The Consumer Decision Process
Types of Consumer Decision Making
i. Extended Decision Making : It occurs when a
consumer full use of the decision process.
 A lot of time is spent gathering information and
evaluating alternatives before a purchase.
 In this category are expensive, complex items with
which the person has had little or no experience.
 The perceived risk of all kinds is high.
 In this case, retailers like real estate real-estate
brokers and auto dealers emphasize personal selling,
printed materials, and other communication to
provide as much information as possible.
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 Shopping Attitudes and Behavior
c) The Consumer Decision Process
Types of Consumer Decision Making
ii. Limited Decision Making : In this case, the 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 since
the person typically has some experience about the
purchase.
 The risk is moderate, and the consumer spends some
time shopping.
 Items requiring limited decision making include clothing,
a vacation, and gifts.
 This form of decision making is relevant to such retailers
as department stores, specialty stores, and nonstore
retailers.
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 Shopping Attitudes and Behavior
c) The Consumer Decision Process
Types of Consumer Decision Making
iii. Routine Decision Making : It takes place when
consumer buys out of habit and skips steps in the
purchase process.
 The consumer wants to spend little or no time
shopping, and the brands are usually repurchased
(often from the same retailers).
 This category includes items that are purchased
regularly, like groceries, newspapers, and haircuts,
and there is little risk because of consumer
experience.
 This type of decision making is relevant to such
retailers as supermarkers, fastfood outlets etc.
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 Impulse Purchases and Customer Loyalty
 Impulse Purchases : Impulse purchases arise when
consumers buy products they had not planned on
buying before entering a store, reading a catalog,
seeing a TV shopping show, turning to the Web, and
so forth. At least part of the decision making is
influenced by the retailer.
 There are three kinds of impulse shopping.

i. Completely Unplanned
ii. Partially Unplanned
iii. Unplanned Substitution

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 Impulse Purchases and Customer Loyalty
i. Completely Unplanned : A consumer has no intention
of making a purchase in a goods or service category
before he/she comes into contact with a retailer.

ii. Partially Unplanned : A consumer intends to make a

purchase in a goods or service category but has not
chosen a brand or model before he or she comes into
contact with a retailer.

iii. 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.

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 Impulse Purchases and Customer Loyalty
 Impulse purchases are more influenced by retail
displays than are preplanned purchases, therefore
Point-of-Purchase (POP) displays play an important
role in this regard.
 With about 70% of all purchase decisions in mass
merchandisers made in the store, an increasing
number of brand marketers and retailers invest in
displays.

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 Impulse Purchases and Customer Loyalty

Stimulating Impulse Purchases

Could you pass by this

vending machine without
making a purchase?

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 Retailer Actions

a. Mass Marketing : Selling goods and services to a broad

spectrum of consumers. Like ‘Kohl’s Department
Stores’ which is one of the fastest-growing General
Merchandise retailers in the United States and is
capitalizing on a mass marketing approach.
b. Concentrated Marketing : Focusing on one specific
group. Like ‘Wet Steal’ which is a 425-store apparel
chain that caters to young women.
c. Differentiated Marketing : Aiming at two or more
distinct consumer groups, with different retailing
approaches for each group. Like ‘Gap Inc.’ has applied
differentiated marketing by launching ‘Banana
Republic’ (for upscale consumers), ‘Gap’ (for middle
market), and ‘Old Navy’ (for low end consumers).
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 Environmental Factors and Consumers
 Several environmental factors influence shopping
attitudes and behavior, including the followings:
 State of the Economy
 Rate of Inflation
 Infrastructure for Shopping
 Price Wars
 Emergence of New Retail Formats
 People Working at Home
 Regulations on Shopping
 Changing Social Values and Norms
 Although all of these elements may not necessarily
have an impact on any particular shopper, they do
influence the retailer’s overall target market.
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 Activity

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