1

Retail CustomersRetail Customers

Chapter 3

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.

2

Learning ObjectivesLearning Objectives

• Explain the importance of population trends to the retail manager.

• List the social trends that retail managers should regularly monitor and describe their impact on retailing.

• Describe the changing economic trends and their effect on retailing.

• Discuss the consumer shopping/purchasing model, including the key stages in the shopping/purchasing process.

3

Retail MixRetail Mix

• The combination of merchandise, assortment, price, promotion, customer service, and store layout that best serves the segments targeted by the retailer.

Introduction

4

Customer SatisfactionCustomer Satisfaction

• Occurs when the total shopping experience of the customer has been met or exceeded.

Introduction

5

Retail GrowthRetail Growth

Starbucks Coffee has experienced explosive growth over the last five years and thus has had to put considerable effort into planning for and recruiting human resources at all levels in the organization. In fact, Starbucks was the first American retailer to provide its part-time employees (65 percent of its workforce) full health care benefits and stock options.

Introduction

6

Consumer SpendingConsumer Spending

Exhibit 3.1

7

Customer ServicesCustomer Services

Include the activities the retailer performs that influence (1) the ease with which a potential customer can shop or learn about the store’s offering, (2) the ease with which a transaction can be completed once the customer attempts to make a purchase, and (3) the customer’s satisfaction with the purchase.

Introduction

8

Market SegmentationMarket Segmentation

Market Segmentation

Is the dividing of a heterogeneous consumer population into smaller, more homogeneous groups based on their characteristics.

Introduction

9

Current Trends Affect the Way theCurrent Trends Affect the Way the

Exhibit 3.2

PopulationTrends

SocietalTrends

EconomicTrends

Consumer Shopping/Purchasing

Model

Consumer Behaves

10

Question to PonderQuestion to Ponder

Given the wide variety of population, social, and economic trends, and the importance to retailers of targeting specific consumer groups, what segments provide the greatest opportunities for new retailers today?

11

Population TrendsPopulation Trends

• Population Growth

• Age Distribution

• Geographic Trends

LO 1

12

Population TrendsPopulation Trends

• Population Variables

Include population growth trends, age distributions, and geographic trends.

LO 1

13

Number of Births by YearNumber of Births by Year

LO 1

14

Where did the term Melting Pot originate?Where did the term Melting Pot originate?

LO 1

The Melting Pot is the name of a play about immigrants written by Israel Zangwell. In the

play, which opened in Washington D.C. in 1908, one of the characters declared:

“America is…the great melting pot where all the races of Europe are melting and reforming Germans and Frenchman, Irishmen and Englishmen, Jews and Russians into the crucible he will be the fusion of all races, the coming superman.”

15

Boomers, Xers and YersBoomers, Xers and Yers

LO 1: Exhibit 3.3

16

Texas Consumers’ Percentage of NationalTexas Consumers’ Percentage of National

LO 1: Exhibit 3.4Average Usage

17

Texas Consumers’ Percentage of NationalTexas Consumers’ Percentage of National

LO 1: Exhibit 3.4Average Usage

18

Geographic TrendsGeographic Trends

Micromarketing Merchandising

Is the tailoring of merchandise in each store to the preferences of its neighborhood.

LO 1

19

Geographic TrendsGeographic Trends

Metropolitan Statistical Areas

Are freestanding urban areas with populationd in excess of 50,000.

LO 1

20

Generation Gap in the Information AgeGeneration Gap in the Information Age

LO 1

Those who say... Under 30Age 50or over

Change brings exciting opportunitiesThey want to be their own bossThey own a computerThey’ve used E-mailThey have Internet accessSocial Security will not be available to themMedicare will not pay any of their health expensesTechnology brings more confusion and complications than it does exciting opportunitiesIt is difficult to use computers

78%

72%85%

15%

52%54%23%

18%

58%58%46%40%28%21%14%

6%

38%53%

21

Global RetailingGlobal Retailing

LO 1

22

Global RetailingGlobal Retailing

LO 1

23

Social TrendsSocial Trends

• Education

• State of Marriage and Divorce

• Makeup of the American Household

• Changing Nature of Work

LO 2

24

U.S. Education LevelsU.S. Education Levels

LO 2

25

MarriageMarriage

  1970 2000

% never married ages 30-34

Men < 10% Men 30%

Women 6% Women 22%

Median age of marriage

Men 23 Men 26

Women 21 Women 25

26

Makeup of American HouseholdsMakeup of American Households

LO 2100

80

60

40

20

0 1990 2000 2010 Year

Other

Living Alone

Single Parents

Other Married

Married with Children

P

erc e

nt

SOURCE: U.S. Bureau of the Census, Statistical Abstract of the United States: 1996 (116th edition) Washington, D.C., 1996. Based on data contained in Tables 60, 61, 66, 67,68.

27

Makeup of American HouseholdsMakeup of American Households

“ Mingles” Unmarried CouplesIncreased 167% since 19807% of couple households

LO 2

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Changing Nature of workChanging Nature of work

In 200013 Million self-employed individuals5.5 Million home-based business

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Makeup of American HouseholdsMakeup of American Households

Boomerang Effect

Occurs when grown children return home to live with their parents.

LO 2

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Economic TrendsEconomic Trends

• Income Growth

• Personal Savings

• Women in the Labor Force

• Widespread Use of Credit

LO 3

31

2000 Median Household income2000 Median Household income

All $37,000African-American $29,500Hispanic $28,600Caucasian $48,100Asian-Pacific Islander $54,100

32

Share of Aggregate Income Received by Each Fifth and the Top 5 Percent of U.S. Households, 1970-2000Share of Aggregate Income Received by Each Fifth and the Top 5 Percent of U.S. Households, 1970-2000

LO 3: Exhibit 3.5

33

Changing Purchasing Habits of AmericanChanging Purchasing Habits of American

LO 3

25

20

15

10

5

01970 1980 1990 2004 Year

Pe

rce

nt

Medical

Recreation

Food

Clothing

SOURCE: Vision for the New Millennium . . .(Atlanta: Kurt Salmon Associates, 1997). Used with permission

Households

34

Economic TrendsEconomic Trends

Disposable Income

Is personal income less personal taxes.Discretionary Income

Is disposable income minus the money needed for necessities to sustain life.

LO 3

35

Spenders and Savers as a % of TotalSpenders and Savers as a % of Total

LO 3

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Year

Per

cen

t

40

35

30

25

20

15

Spenders ( Age 20 to 44)

Savers ( Age 45 to 64)

SOURCE: Based on data from U.S. Bureau of the Census, Population Paper Listings PPL. 41, Current Population Reports P25-1130, U.S. Census of Population (1970), volume 1, Part B, Census of Population (1980) volume 1, part B.

Population 1965 to 2025

36

The % of Women Age 16 and Over in theThe % of Women Age 16 and Over in the

LO 3

62.60%

57.50%

46.30%

37.70%

33.90%

35.80%

2000

1990

1975

1960

1950

1945

62.60%

57.50%

46.30%

37.70%

33.90%

35.80%

2000

1990

1975

1960

1950

1945

Work Force

37

Growth in Consumer CreditGrowth in Consumer Credit

LO 3

38

Square Feet of Retail Space Per CapitaSquare Feet of Retail Space Per Capita

Amount of space needed to support Market Demand

20

16

12

8

4

‘72 ‘74 ‘76 ‘78 ‘80 ‘82 ‘84 ‘86 ‘88 ‘90 ‘92 ‘96 ‘98 ‘00

LO 3

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Consumer Behavior ModelConsumer Behavior Model

• Stimulus

• Problem Recognition

• Active Information Gathering (Search)

• Evaluate Alternatives

• Purchase

• Post-Purchase Evaluation

LO 4

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Consumer Behavior ModelConsumer Behavior Model

• Stimulus

Refers to a cue that is external to the individual or a drive that is internal to the individual.

• Cue

Refers to any object or phenomenon in the environment that is capable of eliciting a response.

• Drive

Refers to a motivating force that directs behavior.

LO 4

41

Consumer Shopping/ Purchase ModelConsumer Shopping/ Purchase Model

LO 4: Exhibit 3.6

StimulusProblem

Recognition

Active Information Gathering (Search)

Evaluate Alternatives Purchase

Post-Purchase Evaluation

Problem Solving

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Consumer Behavior ModelConsumer Behavior Model

Passive Information Gathering

Is the receiving and processing of information regarding the existence and quality of merchandise, services, stores, convenience, pricing, advertising, and any other factors that a consumer might consider in making a purchase.

LO 4

43

Consumer Behavior ModelConsumer Behavior Model

Problem Recognition

Occurs when the consumer’s desired state of affairs departs sufficiently from the actual state of affairs, placing the consumer in a state of unrest.

LO 4

44

Degrees of Consumer Problem Solving in Shopping/PurchasingDegrees of Consumer Problem Solving in Shopping/Purchasing

LO 4: Exhibit 3.7

Strong None or Weak

None or Weak

Strong

RetailerPreference

BrandPreference

HabitualProblemSolving

LimitedProblemSolving

LimitedProblemSolving

ExtendedProblemSolving

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Consumer Behavior ModelConsumer Behavior Model

Active Information Gathering

Occurs when consumers proactively gather information.

LO 4

46

Consumer Behavior ModelConsumer Behavior Model

Attributes

Refers to the characteristics of the store and its products and services.

LO 4

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Consumer Behavior ModelConsumer Behavior Model

Evaluate Alternatives

Occurs when consumers make judgments regarding the individual product attributes of a retailer and/or product.

LO 4

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Consumer Behavior ModelConsumer Behavior Model

Purchase

The purchase stage may include final negotiation, application for credit if necessary, and the determination of the terms of purchase.

LO 4

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Consumer Behavior ModelConsumer Behavior Model

Post-Purchase Evaluation

Consumer perceptions toward the retailer and/or product purchased after use and evaluation.

LO 4

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Consumer Behavior ModelConsumer Behavior Model

Post-Purchase Resentment

Arises when after the consumer becomes dissatisfied with the product, service, or retailer and thus begins to regret the purchase was made.

LO 4