Retail Marketing Management

RM 4

Retail buying behaviour

There is only one boss, the customer and he can fire everybody in the company, from Chairman on down, simply by spending his money somewhere else.

- Sam WaltonFounder, Walmart

Customer orientation

Co-ordinated effort

Goal orientation

Concept of retailing ? Communicate with consumers

- Feedback & information sharing

Consistent strategy

Attractive displays

Meaningful & achievable goals

Provide a retail experience

The Marketing Concept in Retailing

The Retail Customer

1. Generational Cohort People within the same generation, have similar purchase behaviors because they have shared experiences & are in the same stage of

their life cycle.

The US consumer classification

Silver Streakers Born before 1946

Baby Boomers 1946 – 1964Generation `X’ 1965 – 1976Generation ‘Y’ 1977

Consumer classification

Silver Streakers

- The aging baby boomers

- Likely to require special attention

- Take their time to decide

- Do not prefer frequent changes

- Have time at hand to shop – possibly money too

- Income from one member retired or working

- Purchases more investment oriented e.g. property, durables, gifts

Baby Boomers Generation YCold war eraNuclear threatMother’s careFather knows bestTV dinnersNetwork TVFreeloveLP’s

Regional wars eraTerrorist threatsDay careFather isn’t homeLow fat fast food cable TV CondomsCD’s

The Retail Customer (contd…)

2. Cultural DiversityInherent character of the city in terms of composition of buyers & their regional or social needs may be varied.

It will affect retailing or not? Needs may be varied Needs may be more specific Income levels may be different Spending habits will be different Shopping patterns may vary Staffing requirements will vary Communication will have to be different.

The Retail Customer (contd…)

3. Income Levels Polarisation of income levels Highest income groups are growing faster Middle income groups – purchasing power is rising

4. Changing Role of Women No longer confined to the house Sharing of household responsibilities between all

family members including shopping Short on time “time poor society”

Relevance of Family Life Cycle to RetailingStage Characteristics Relevance & Traits

Bachelor (M/F) Independent, young, early career, entry level earnings.

Clothing, car stereo, travel, entertainment, status consc.

Newly married Two incomes, relative independence, present & future oriented

Furnishing, travel, clothing, durables, fun & entertainment.

Full Nest I One child <6, 1-1½ incomes, limited independence future oriented.

Items related to child, family use items, economy.

Full Nest II Youngest child > 6 but dependent, 1½ - 2 incomes one spouse establishment, future oriented.

Savings, home, education, vacations, children related prod., luxuries & comfort.

Full Nest III Youngest child at home but independent, highest income slab, thinking retirement.

Expensive durables, replacement of durables, comfort & luxury.

Relevance of Family Life Cycle to Retailing (contd…)

Stage Characteristics Relevance & Traits

Empty Nest I No child at home, good income, thinking retirement.

Retirement home, travel, entertainment, clothing, self gratification

Empty Nest II Retirement, limited income & expenses, present oriented

Travel, recreation, new home, health related items, comfort at fair price

Sole Survivor I One spouse alive, employed, good income, present orient.

Job & friends, travel, clothing, health, recreation.

Sole Survivor II One spouse, retired, low income Travel, recreation, health related items, security, economy, social activity.

Addressing Consumer Needs

To develop a profile of the target market some questions that need to be answered.

How far is a customer willing to travel How important is convenience Preferred timings – evenings / weekends Preferred level of customer service Nature & extent of variety / assortment required. Level of goods / service quality desired How important is price How can perceived risks be reduced Do different segments have different needs.

The better a retailer addresses the desired needs of it’s target market the more motivated (likely to purchase) the customer will be.

Insights into Buying Behaviour

A study of 12 cities & 5000 households revealed:

People spend 60% of their leisure time shopping

Of this 54% time is spent in non grocery items

Like to shop at places with polite & friendly staff

77% prefer to buy from a store <2 km away

Spending Priorities of Consumers- India

Apparel Grocery Footwear Books & music Savings & investment Personal care items Vacations Accessories Home textiles Eating out

Late hour shopping behaviour

15% people in Bang / Delhi prefer late shopping

15-20% in Chandigarh / Nagpur / Lucknow / Pune / Calcutta / Hyderabad prefer late shopping

25 – 35 % in Jaipur / Ludhiana / Mumbai / Cochin / Chennai / Ahmedabad prefer late shopping hours.

Retail Experience ?

Consists of all elements in a retail offering that encourages or inhibits consumers during their contact with a retailer viz. Parking, floor help, displays, visibility, brands carried, prices, availability, delivery facilities, check-out procedures & time etc.

Customer service- Expected services - Basic level- Augmented services - Exceeding existing levels

Retail Experience ?

+ve -ve

More floor helpMore checkout countersBetter store layoutLesser stock outsProper signage in the storeFriendly staff

Congested aislesMissing itemsIllegible price labelsCheckout delays

Employee empowermentEmployees have discretion to take spot decisions including waiving company rules viz: replacement of merchandize, delivery, - essentially anything that in the employees perception will satisfy a customer, within reasonable limits.

Proper understanding of consumer buying behaviour & training of floor staff assumes importance.

Relationship selling - Seek & establish long term bonds with customers- Get into a `win-win’ situation, both for buyer & seller- Use databases to forecast customer preferences & meet

expectations, leading to customer delight - relationship selling assumes importance

The Buying Process Need recognition

Search for information

Evaluation of alternatives

Post purchase behaviour

Need recognition Functional needs Psychological needs

Associated with personal gratification customer get from shopping / At specific outlet

1. When do psychological needs become more important2. What can a retailer do to benefit from it or use it to it’s advantage

.

Types of Buying Decisions

Customer recognizes an un-satisfied need Seek information about how to satisfy the need

Where to buy from - Store choice

What to buy - Product choice

How to buy - Process choice

Evaluate various alternatives Make the purchase Use & post purchase behaviour

Process Choice

3 types of customer decision-making processes Extended problem solving Limited problem solving Habitual decision making

Extended Problem solving

A purchase decision process in which customers devote considerable time and effort in analysing alternatives

Features Customers experience following risk

Financial risk - High value purchase

Physical risk - Safety / health

Social risk - How others view them

When customer are making important purchase decisions Where customer lack information

Limited Problem Solving

A purchase decision process involving a moderate amount of effort & time.

Features Customers engage in this type of behaviour when they have had prior

experience Customers consider the risk, of buying from a store, as moderate. Rely on personal knowledge rather then seek external information.

Impulse purchase is a form of limited problem solving purchase.

Retailing task ?

Limited Problem Solving

Retailers task? Reinforce when customer is buying first time to induce

repeat visit Retain customers through information sharing, value-

added offering, variety, superior service Strong brand image & brand values of the store `Hassle – free returns’ policy – psychological impact Improve ambience / displays to induce impulse buying.

In the U.S. 60% of all supermarket decisions are un-planned i.e. impulse purchases

U.S companies spend $13 b each year on P.O.P displays to stimulate impulse buying.

Customer Service

• A customer, recovering from knee surgery and walking with a cane, was Christmas shopping. When the customer asked for an item in most stores, the salesperson would point and say disinterestedly, “over there”. However, the customer’s experience was different at The Container Store. After determining the product the customer wanted, the salesperson replied, “ it’s in the back of the store. I’ll go get it for you.” Before the salesperson returned, two other salespeople cheerfully asked the customer if they could be of service.

• The Container Store is one of America’s most successful retail chain because it has employees who delight in helping customers solve problems & who possess the freedom and confidence to do so.

Habitual Decision Making

A purchase decision process involving little or no conscious effort

Feature Usually when buying familiar merchandize Customers display store &/or brand loyalty when buying merchandize Customers are pressed for time

The retailing task ?

Habitual Decision Making

Retailing tasks?

To improve / reinforce store loyalty, offer superior retail buying experience

Merchandise selection must reflect popular choices, to respond to brand loyal customers

Location & peripherals like parking are critical to save on time

Hassle-free check-outs Customer loyalty programs to induce repeat visits Superior customer service

Assignment

Compare the experience of buying any item – a computer, a book, a durable – on the net & at a store.

• How is the experience different, in what way & why

• What can a retailer do to enhance the quality of the experience

• Must be done on the basis of first hand experience

• Submission next class-group assignment