Retail Book Chap04

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93 CHAPTER 4 CUSTOMER BUYING BEHAVIOR

Transcript of Retail Book Chap04

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CHAPTER 4 CUSTOMER BUYING BEHAVIOR

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ANNOTATED OUTLINE INSTRUCTOR NOTES

I. The Buying Process

• As discussed in Chapter 1, an effective retail strategy satisfies customer needs better than do competitors’ strategies. Thus, understanding customer needs and buying behavior is critical for effective retail decision making.

• The buying process (the steps consumers go through when buying a product or service) begins when customers recognize an unsatisfied need. The process ends when customers make a purchase, use the product, and then decide whether the product satisfies their needs during the postpurchase evaluation stage.

• Retailers attempt to influence consumers as they go through the buying process to encourage them to buy the retailer’s merchandise and services. Each stage of the buying process is addressed in the following sections.

• Customers may not go through the stages in the same order as presented. The amount of time spent at each stage may differ depending on the type of decision being made.

PPTs 4-2 through 4-6 provide a detailed example of each stage of the buying decision process.

PPT 4-7 illustrates the stages in the buying decision process both for selecting a retailer and for selecting merchandise.

Ask students to describe the steps they went through to purchase high price merchandise such as a suit for job interviews, or a laptop. List the steps and relate each step to the steps in the store selection and merchandise selection process. Ask students to describe the steps they went through to purchase low price merchandise such as cereal, shampoo, etc. List the steps and compare them with the buying process for high price merchandise.

A. Need Recognition

• The buying process is triggered when people recognize they have an unsatisfied need.

• Unsatisfied needs arise when a customer's desired level of satisfaction differs from his or her present level of satisfaction.

• Visiting stores, surfing the Internet, and purchasing products are approaches to satisfying different types of needs.

Ask students how and when they recognized the need for a product they had never purchased before. Ask them how they analyzed how important that need was to them at that time.

1. Types of Needs

• The needs motivating customers to go shopping and purchase merchandise can be classified as utilitarian or hedonic.

See PPT 4-8

Ask students to provide examples of utilitarian and hedonic needs. Are utilitarian needs more important than hedonic needs? Why or why not?

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• Utilitarian needs are focused on accomplishing a specific task.

• Hedonic needs are consumers’ needs for an entertaining, emotional and recreational experience.

• Successful retailers attempt to satisfy both the utilitarian and hedonic needs of their customers. For utilitarian shoppers, retailers make the shopping experience easy and effortless. For hedonic shoppers, retailers attempt to provide a more stimulating and social experience.

• Some hedonic needs that retailers can satisfy include:

• Stimulation. Retailers and developers use background music, visual displays, scents, and demonstrations in stores and malls to create a carnival-like, stimulating experience for their customers.

• Social Experience. Regional shopping malls in many communities are now social meeting places, especially for teenagers. Mall developers satisfy the need for social experiences by providing places for people to sit and talk in food courts.

• Learning New Trends. By visiting retailers, people learn about new trends and ideas.

• Status and Power. Some customers have a need for status and power that is satisfied through shopping.

• Self-reward. Customers frequently purchase merchandise to reward themselves when they have accomplished something or want to dispel depression.

Adventure. Some consumers go shopping because they enjoy finding bargains, looking for sales, and finding discounts or low prices. They treat shopping as a “game” to be won.

See PPT 4-9

Ask students to indicate what benefits they got from their last shopping trip. Do their parents seek different benefits than they seek? Relate these benefits to stimulation, social experience, learning new trends, self-reward, and status and power.

2. Conflicting Needs

Ask students to describe a situation in which they

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• Most customers have multiple needs. Moreover, these needs often conflict. Typically customers make tradeoffs between their conflicting needs.

• Because needs cannot be satisfied in one store or by one product, consumers may appear inconsistent in their shopping behavior.

• The pattern of buying both premium and low-priced merchandise or patronizing expensive, status-oriented retailers and price-oriented retailers is called cross-shopping.

had conflicting needs.

Ask students if they ever engage in cross-shopping. Some examples of cross-shopping for products could be: (1) buying a stereo system or a printer from a specialty store but buying the cables from a lower status retailer either at a store or through the Internet; (2) buying an expensive pair of shoes at a department store, but buying socks at a discount store; or (3) buying a mattress at a value priced retailer but buying bed sheets from a department store.

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3. Stimulating Need Recognition

• Customers must recognize unsatisfied needs before they are motivated to visit a store and buy merchandise. Sometimes these needs are stimulated by an event in a person’s life.

• Retailers use a variety of approaches to stimulate problem recognition and motivate customers to visit their stores and buy merchandise.

• Advertising, direct mail, publicity, and special events communicate the availability of merchandise or special prices.

• Within the store, visual merchandising and salespeople can stimulate problem recognition.

• One of the oldest methods for stimulating needs and attracting customers is still one of the most effective – using store displays facing high traffic sides of the store.

See PPT 4-10

Ask students to provide illustrations of how retailers stimulated their need to visit a store and/or buy merchandise. List things retailers can do to stimulate needs.

As students if they went into a store primarily because of a window display. Did they buy the product displayed that they were interested in? Why or Why not?

B. Information Search

• Once customers identify a need, they may seek information about retailers and/or products to help them satisfy the need.

1. Amount of Information Searched

• In general, the amount of information sought depends on the value customers feel they'll gain from searching versus the cost of searching.

• The value of the search is how it improves the customer's purchase decision. The cost of the search includes both time and money.

• Factors influencing the amount of information searched for include (1) the nature and use of the product being purchased, (2) characteristics of the individual customer, and (3) aspects of the market and buying situation in which the purchase is made.

• Marketplace and situational factors affecting

See PPT 4-11

Give examples of purchase decisions for which consumers need a lot of information (durables, medical treatment, etc.) and purchase decisions made with limited information (nondurables).

Ask students if they have searched the Internet for information about a product, brand or price. Did they feel that obtaining information from the Internet was better than if they had engaged in physical visits? Why or Why not?

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information search include (1) the number of competing brands and retail outlets, and (2) the time pressure under which the purchase must be made.

• When competition is greater and there are more alternatives to consider, the amount of information searched for may increase. The amount decreases as time pressure increases.

2. Sources of Information

• Customers have two sources of information: internal and external.

• Internal sources, are information in a customer’s memory such as the names, images, and past experiences with different stores.

• External sources are information provided by ads and other people. When customers feel that their internal information is inadequate, they turn to external information sources.

See PPT 4-12

Ask students to indicate various sources of information they use to locate an apartment to rent. What sources can apartment owners influence?

3. Reducing the Information Search

• The retailer's objective at this stage of the buying process is to limit the customer's information search to its store or website. Each element of the retailing mix can be used to achieve this objective.

• First, retailers must provide a good selection of merchandise so customers can find something to satisfy their needs within the store.

• Services provided by retailers can also limit the search.

• Everyday low pricing is another way retailers increase the chance that customers will buy in their store and not search for a better price elsewhere.

See PPT 4-13, 4-14

Ask students how retailers provide enough information so customers will not need to visit other outlets before making a purchase decision.

C. Evaluation of Alternatives: The Multi-attribute Model

• The multi-attribute attitude model provides a useful way for summarizing how customers

See Ancillary Lecture # 4-1 and Ancillary Exercises 4-1 and 4-2.

Have students use a multi-attribute model to make

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use the information they have about alternative products, evaluate the alternatives, and select the one that best satisfies their needs.

• The multi-attribute attitude model is based on the notion that customers see a retailer or a product as a collection of attributes or characteristics.

• The model is designed to predict a customer's evaluation of a product or retailer based on (1) its performance on relevant attributes and (2) the importance of those attributes to the customer.

• Retail buyers can also use the multi-attribute model to evaluate merchandise and vendors.

choice between buying fashionable clothing from a catalog and from a specialty store. Then make the comparison of basic jeans.

See PPT 4-15

1. Beliefs about Performance

• The customer mentally processes the “objective” information about each retailer and forms an impression of the benefits each store provides.

• Some benefits combine several objective characteristics.

• The degree to which each store provides benefits is represented on a 10-point scale, where 10 means the retailer performs well in providing the benefit and 1 means poor performance.

Ask students what factors they consider in making a store choice to purchase groceries, rent a videotape, buy a DVD, eat a meal, etc.

2. Importance Weights

• The customer forms an overall evaluation of each store based on the importance he/she places on each benefit the store provides.

• The importance a customer places on a benefit can also be represented using a 10-point rating scale, with 10 indicating that the benefit is very important and 1 indicating that the benefit is very unimportant.

• The importance of a store’s benefits differs for each customer and may also differ for each shopping trip. In general, customers can differ on their beliefs about the store’s performance as well as their importance

After listing the factors considered for a specific store choice, demonstrate how the importance weights differ across people by having students vote on what is most important in their decision. Show how weights can vary depending on the purchase situation. For example, ask students what are the most important characteristics of a restaurant when they want a quick bite between classes, when they want to take their parents to dinner during a campus visit, and when they want to impress a date?

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weights.

3. Evaluating Stores

• Research has shown that customers’ overall evaluation of an alternative (store) is closely related to the sum of the performance beliefs multiplied by the importance weights.

• The multi-attribute attitude model doesn't reflect customers' actual decision processes, but it does predict their evaluation of alternatives and their choice. In addition, the model provides useful information for designing a retail offering.

• The same model can also be used to describe how a customer evaluates and selects merchandise in a store.

• In general, customers don’t thoroughly evaluate each alternative as suggested in the multiattribute model. They simply buy merchandise that’s good enough or very good on one particular attribute. They don’t spend the time necessary to find the very best product.

See PPT 4-16

4. Implications for Retailers

• The model indicates what information customers use to decide which store to visit.

• To develop a program for attracting customers, the retailer needs to do market research to collect (1) alternative stores that customers consider, (2) characteristics or benefits that customers consider when evaluating and choosing a retailer, (3) customers’ ratings of each store’s performance on the characteristics, and (4) the importance weights that customers attach to the characteristics.

• The retailer can use several approaches to influence the customer to select its store (as noted below).

See PPT 4-17

See PPT 4-18

a. Getting into the Consideration Set

• The retailer must make sure that its store is included in the customer's consideration set.

See PPT 4-19

Ask students for their consideration sets for grocery purchases. What could a grocery store do to get into the students' consideration sets?

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The consideration set is the set of alternatives the customer evaluates when making a selection.

• To be included in the consideration set, the retailer must develop programs to increase the likelihood that customers will remember its store when they’re about to go shopping.

• After ensuring that its store is in the consideration set, the retailer can use four methods to increase the chances that the store will be selected for a visit. The retailer can (1) increase the belief about its store's performance, (2) decrease the performance belief for competing stores in the consideration set, (3) increase customers' importance weights, or (4) add a new benefit.

The choice rule described in the text is a linear compensatory rule--good performance on one characteristic can overcome poor performance on other characteristics. Other choice rules involve using cutoff--minimum acceptable performance. Ask students if they can think of a situation in which they use cutoffs.

b. Changing Performance Beliefs

• The first approach involves altering customers’ beliefs about the retailer’s performance -- increasing the retailer's performance rating on a characteristic.

• It is costly for a retailer to improve its performance on all benefits. Thus, a retailer should focus efforts on improving performance on benefits that are important to customers in its target market.

• A change in performance belief on an important benefit results in a large change in customers’ overall evaluations.

• Another approach is to try to decrease customers’ performance ratings of a competing store. This approach may be illegal and usually isn't very effective because customers typically don’t believe a firm’s negative comments about its competitors.

Ask students to indicate when their beliefs about a store's performance changed. Why did the belief change? What can retailers do to change beliefs? Why is it harder to change beliefs about a competitor's store than your store? Use automobiles to illustrate how importance weights change over time. Horsepower and size were very important 20 years ago. Now reliability and gas mileage are important. Ask students if it is easier to change performance beliefs or importance weights? Why?

Ask students if they have come across advertisements used by a store to compare itself with others in the same area. How was this comparison done – projecting oneself in a positive image or projecting the competitor in some negative way? Discuss the approach taken by stores that directly compare themselves to their competitors? How do students feel about this approach?

c. Changing Importance Weights

• Altering customers' importance weights is another approach to influencing store choice.

• A retailer would want to increase the

Ask students to give an example of a retailer that has tried to change an importance weight on an attribute– either to make it more important because they are doing really well on that dimension or less important to customers because they are doing a poor job.

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importance customers place on benefits for which the retailer has superior performance and decrease the importance of benefits for which it has inferior performance.

• Typically, changing importance weights is harder than changing performance beliefs because importance weights reflect the customers' values.

d. Adding a New Benefit

• Retailers might try to add a new benefit to the set of benefits that customers consider when selecting a store.

• The approach of adding a new benefit is often effective because it’s easier to change customer evaluation of new benefits than old benefits.

Ask students to think of a retailer that has offered a new benefit--a benefit that customers previously did not consider when selecting a store.

D. Purchasing the Merchandise

• Customers don't always purchase a brand or item of merchandise with the highest overall evaluation. The item offering the greatest benefits may not be available in the store or the customer may feel that the risks outweigh the potential benefits.

• Some of steps that retailers take to increase the chances that customers can easily convert their positive merchandise evaluations into purchases are: (1) have a complete assortment for customers to buy; (2) reduce the risk of purchasing by offering liberal return policies or refunds if the same merchandise is available at a lower price from another retailer; (3) offer credit; (4) make it easy to purchase merchandise by having convenient checkout terminals; and (5) reduce the actual and perceived waiting time in lines at checkout terminals.

See PPT 4-20, 4-21

Ask students if they have bought from a retailer who has a very good (no questions asked) return policy and offers to meet competitors’ prices. If they have bought from such retailers, what impact did such policies have on their purchase decisions?

E. Post-purchase Evaluation

• The buying process does not end when a customer purchases a product. After making a purchase, the customer consumes or uses the product and then evaluates the experience to determine whether it was satisfactory or unsatisfactory.

Ask students to describe a situation in which they were dissatisfied after visiting a retailer. What could the retailer have done to satisfy them? Ask students to describe a satisfying experience. What did the retailer do to create this satisfying experience?

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• Satisfaction is a post-consumption evaluation of how well a store or product meets or exceeds customer expectations.

• The post-purchase evaluation becomes part of the customer’s internal information that affects future store and product decisions.

• Consistently high levels of satisfaction build store loyalty – an important source of competitive advantage for retailers.

II. Types Of Buying Decisions

• Three types of customer decision-making processes are extended problem solving, limited problem solving and habitual decision-making.

Ask students how they went about collecting information, deciding on purchase and making the purchase once they realized that they needed any of the following: (1) a music CD (2) jeans (3) sneakers (4) stereo system (5) apartment to rent.

If various product categories are used to generate discussion, the instructor may wish to use one side of the blackboard to list the comments generated about each product purchase decision. Later, as the lecture proceeds, different types of problem solving, different types of information search and evaluation, different influences on purchase, and different purchase contexts and post-purchase satisfactions could be elaborated for each of the products on which a discussion was generated at the outset.

See PPT 4-22 for a review of the types of customer decision-making processes.

A. Extended Problem Solving

• Extended problem solving is a purchase decision process in which customers devote considerable time and effort to analyzing alternatives. Customers typically engage in extended problem solving when the purchase decision involves a lot of risk and uncertainty.

• There are many types of risks, which include financial risk, physical risks, or social risks.

• Consumers engage in extended problem solving when they are making buying decisions to satisfy an important need or when they have little knowledge about the product or service.

See PPT 4-23, 4-24

Ask students to provide an example of when they engaged in extended problem solving. When did they evaluate several retailers? Why did they evaluate several? Ask students for examples of financial, physical, and social risks.

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B. Limited Problem Solving

• Limited problem solving is a purchase decision process involving a moderate amount of effort and time. Customers engage in this type of buying process when they have had some prior experience with the product or service and their risk is moderate.

• In these situations, customers tend to rely more on personal knowledge than on external information. They usually choose a retailer they have shopped with before and select merchandise they have bought in the past.

• The majority of customer decision making involves limited problem solving.

• One common type of limited problem solving is impulse buying, which is a buying decision made by customers on the spot after seeing the merchandise.

• Retailers encourage impulse buying behavior by using prominent displays to attract customer attention and stimulate a purchase decision based on little analysis.

See PPT 4-25, 4-26

Ask students to provide an example of when they engaged in limited problem solving.

REFACT: Seventy percent of all supermarket purchases are unplanned, impulse purchases.

By a show of hands, ask the class who shops with a "list" and who does not. Then ask each group about their purchases, impulse or planned.

See PPT 4-27

C. Habitual Decision Making

• Habitual decision making is a purchase decision process involving little or no conscious effort. This decision process is used when decisions aren’t very important to customers and involve familiar merchandise they have bought in the past.

• Brand loyalty and store loyalty are examples of habitual decision making. Brand loyalty occurs when customers like and consistently buy a specific brand in a product category.

• Store loyalty means that customers like and habitually visit the same store to purchase a type of merchandise.

See PPT 4-28, 4-29, 4-30

Ask students to provide an example of when they engaged in habitual decision-making (you might focus on the store choice decision, not the merchandise selection decision). Have students describe a situation when they switched from habitual decision making to limited or extended problem solving. Why did they switch? What can retailers do to get students who are not presently patronizing to do so?

Ask students to give examples of 1 or 2 items for which they are brand loyal. Compare the selections the students identified. What are the similarities and differences? What features of the product make the individual so brand loyal.

Ask students their favorite store to buy jeans. Group the students together who answered with the name of the same store. Ask what makes them

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so brand loyal to that specific store. Compare their answers to the alternative answers offered. Compare and contrast the similarities and differences.

III. Social Factors Influencing Buying Decisions

• Buying decisions are affected by the customer’s social environment – the customer’s family, reference groups, and culture.

See PPT 4-31 for an overview of the factors influencing customers’ buying decisions.

A. Family

• Many purchase decisions are made for products that the entire family will consume or use. Retailers must understand how families make purchase decisions and how various family members influence these decisions.

• When families make purchase decisions, they often consider the needs of all family members. In some situations, all family members may participate in the decision-making process. In others, one member of the family may assume the role of making the purchase decision.

• Children play an important role in family buying decisions.

• Retailers can attract consumers who shop with other family members by satisfying the needs of all family members.

See PPT 4-32

Ask students to give an example of a purchase decision they made that was influenced by members of their family. One decision might be the choice of college to attend. How did the family influence the decision?

B. Reference Groups

• A reference group is one or more people that a person uses as a basis of comparison for their beliefs, feelings, and behaviors. A consumer might have a number of different reference groups, although the most important reference group is the family.

• These reference groups affect the buying decision process by: (1) offering information, (2) providing rewards for specific purchasing behaviors, and (3) enhancing a consumer’s self-image.

See PPT 4-34

Ask students to give examples of their purchase decisions that are influenced by their reference group. What are the different reference groups that influence their decisions?

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• Reference groups provide information to consumers directly through conversation or indirectly through observation.

• Some reference groups influence purchase behaviors by rewarding behavior that meets with their approval.

• By identifying and affiliating with reference groups, customers create, enhance, and maintain their self-image.

C. Culture

• Culture is the meaning, beliefs, morals, and values shared by most members of a society.

• As retailers expand beyond their domestic markets, they need to be sensitive to how cultural values affect customer needs and shopping behavior.

• Subcultures are distinctive groups of people within a culture. Members of a subculture share some customs and norms with the overall society but also have some unique perspectives. Subcultures can be based on geography, age, ethnicity, or lifestyle.

See PPT 4-33

III. Market Segmentation

• To increase their efficiency, retailers identify groups of customers (market segments) and target their offerings to meet the needs of typical customers in that segment rather than the needs of a specific customer.

• A retail market segment is a group of customers whose needs are satisfied by the same retail mix because they have similar needs.

• The Internet enables retailers to efficiently target individual customers and market products to them on a one-to-one basis.

Ask students why retailers segment markets. What are examples of retailers who clearly appeal to a specific segment of customers? Describe the segment or segments of customers that buy Red Bull, shop at Toys R’ Us, buy hybrid cars,, and eat at McDonald’s.

A. Criteria for Segmenting Markets

• Four criteria for evaluating whether a retail segment is a viable target market are (1) actionability, (2) identifiability, (3)

See PPT 4-35

Having described the segments above, evaluate each of the segments on the criteria listed.

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accessibility, and (4) size.

1. Actionability

• The fundamental criteria for evaluating a retail market segment are (1) customers in the segment must have similar needs, seek similar benefits, and be satisfied by a similar retail offering, and (2) those customers’ needs are different from the needs of customers in other segments.

• Actionability means that the definition of a segment must clearly indicate what the retailer should do to satisfy its needs.

Ask students if this segment is actionable. Can a product or retail offering be developed that will appeal to this segment and not to other types of customers? Would you use unique advertising and media to influence this segment?

2. Identifiability

• Retailers must be able to identify the customers in a target segment.

• Identifiability is important because it permits the retailer to determine (1) the segment’s size and (2) with whom the retailer should communicate when promoting its retail offering.

Ask students how they would identify people in this segment? Sometimes retailers do not need to specifically identify customers in their target segment. They promote their stores to everyone and interested customers select to visit the store. What is the advantage and disadvantage of using self-selection versus targeted promotions?

3. Accessibility

• Accessibility is the ability of the retailer to deliver the appropriate retail offering to the customers in the segment.

Ask students how they would reach people in this segment to tell them about a product or retail store.

4. Size

• A target segment must be large enough to support a unique retailing mix.

B. Approaches for Segmenting Markets

• No one approach is best for all retailers. They must explore various factors that affect customer buying behavior and determine which factors are most important.

• The methods for segmenting retail markets are discussed below.

See PPT 4-36

1. Geographic Segmentation.

• Geographic segmentation groups customers based on where they live. A

Ask students for examples of retailers who use geographic segmentation.

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retail market can be segmented by countries and by areas within a country such as states, cities, and neighborhoods.

• In the U.S., many food retailers concentrate on regions of the country.

• Segments based on geography are identifiable, accessible, and substantial.

• When customers in different geographic segments may have similar needs, it would be inappropriate to develop unique retail offerings by geographic markets.

Discuss differences in merchandise students may expect to see at a sporting goods store in Florida versus a sporting goods store in Vermont.

2. Demographic Segmentation.

• Demographic segmentation groups consumers based on easily measured, objective characteristics of consumers, such as age, gender, income, and education.

• Demographic variables are the most common means to define segments because consumers in these segments can be easily identified and accessed.

• Demographics may not be useful for defining segments for some retailers.

Examples of retailers focusing on demographic segments are Home Depot (homeowners), Limited Express (young women), McDonald's (families with young children).

Ask students for other examples.

3. Geodemographic Segmentation

• Geodemographic segmentation uses both geographic and demographic characteristics to classify consumers. This segmentation is based on the principle that “birds of a feather flock together.”

• The most widely used tool for geodemographic segmentation is PRIZM (Potential Rating Index by Zip Market) developed by Claritas.

• Geodemographic segmentation is particularly appealing to store-based retailers because customers typically patronize stores close to their neighborhood.

Ask students if they can identify the different groups of people in their neighborhood based on demographics and behaviors.

4. Lifestyle Segmentation

• Lifestyle or psychographics refers to how people live, how they spend their time and

See PPT 4-37

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money, what activities they pursue, and their attitudes and opinions about the world they live in.

• Retailers today place more emphasis on life-styles than on demographics to define a target segment.

• The most widely used lifestyle tool is the Value and Lifestyle Survey (VALS2) conducted by SRI Consulting Business Intelligence. The segments are described by two dimensions: (1) the consumers’ resources including their income, education, health, and energy level, and (2) personal orientation or what motivates them – principles, status, or actions.

• Lifestyle is useful because it identifies what motivates buying behavior. On the other hand, it is difficult to identify and access consumers in specific lifestyle segments.

Ask students to classify themselves, their parents, their grandparents in terms of lifestyle segmentation. What is the lifestyle of a couch potato? What retailers focus on this segment? What can retailers do to appeal to this segment.

4. Buying Situation Segmentation

• Buying behavior of customers with the same demographics or life-style can differ depending on their buying situation.

Contrast the differences in the buying situation target segments for convenience stores and supermarkets.

5. Benefit Segmentation

• Another approach for defining a target segment is to group customers seeking similar benefits. In the multi-attribute attitude model, customers in the same benefit segment would have a similar set of importance weights on the attributes of a store or a product.

• Benefit segments are very actionable. But customers in benefit segments aren’t easily identified or accessed.

Relate benefit segments back to the Multi-attribute model. A benefit segment is composed of customers who attach a high importance weight to a specific characteristic or benefit.

6. Composite Segmentation Approaches

• No one approach meets all the criteria for useful customer segmentation.

• Composite segmentation plans use multiple variables to identify customers in the target segment. They define target customers by benefits sought, lifestyles, and

Ask students to describe different groups of women (or men) shopping for moderate to good quality leisure clothing, based on their lifestyles, demographics, and benefit sought. What retailers target each segment more so than others?

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demographics.

V. Summary

VI. Appendix - Consumer Behavior Toward Fashion

• To profitably sell fashionable merchandise, retailers need to (1) understand how fashions develop and diffuse through the marketplace and (2) use operating systems that enable them to match supply and demand for this volatile merchandise.

• Fashion is a type of product or a way of behaving that is temporarily adopted by a large number of consumers because the product or behavior is considered to be socially appropriate for the time and place.

See PPT 4-38

A. Customer Needs Satisfied by Fashion

• Fashion gives people an opportunity to satisfy many emotional and practical needs.

• Fashion can be used to communicate with others

• People use fashions both to develop their own identity and to gain acceptance from others.

See PPT 4-39

Ask students what they consider to be an article of clothing that they are wearing that is a fashion. Try to get them to say what made them purchase it.

B. What Creates Fashion?

• Fashion is affected by economic, sociological, and psychological factors.

• Economic factors. Fashion merchandise is luxury. Thus demand is greatest in countries with a high level of economic development and market segments with the greatest disposable income.

• Sociological factors. Fashion changes reflect changes in our social environment, our feelings about class structure, roles of women and men and the structure of the family.

• Psychological factors. Consumers adopt fashion to overcome boredom.

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C. How Do Fashions Develop and Spread?

• Fashions are not universal. A fashion can be accepted in one region, country, or age group and not in another.

• The five stages in the fashion cycle are: (1) creation, (2) adoption by fashion leaders, (3) spread to large consumer groups, (4) saturation, and (5) decline in acceptance and obsolescence.

See PPT 4-40

1. Creation

• New fashions arise from a number of sources – couture fashion designers, creative consumers, celebrities, and even retailers.

Ask students to name a fashion that came from: a designer, a creative group of consumers, a celebrity, or a retailer.

2. Adoption by Fashion Leaders

• The fashion life cycle really starts when the fashion is adopted by leading consumers. These initial adopters of a new fashion are called fashion leaders or innovators.

• Three theories have been proposed to explain how fashion spreads within a society: (1) trickle-down theory, (2) mass-market theory, and (3) sub-culture theory.

• Trickle-Down theory suggests that the fashion leaders are consumers with the highest social status - wealthy and well educated. Fashion trickles down to consumers in lower social classes. When the fashion is accepted in the lowest social class, it is no longer acceptable to the fashion leaders in the highest social class.

• Manufacturers and retailers stimulate this trickle-down process by copying the latest styles displayed at designer fashion shows and sold in exclusive specialty stores. These copies, referred to as knock-offs, are sold at lower prices through retailers targeting a broader market.

• Mass-Market theory suggests that fashions spread across social classes. Each social class has its own fashion leaders who play a key role in their own social network. Fashion information "trickles across" social

Have students give examples of where a fashion came from: tickle-down, mass-market, or subculture.

See PPT 4-41, 4-43, 4-43

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classes.

• Consumers can often distinguish between hype and buzz. Buzz is genuine, street-level excitement about a hot new product; while hype is artificially generated world of mouth, manufactured by public relations people.

• Subculture theory is based on the development of recent fashions. Subcultures of mostly young and less affluent consumers started fashions for such things as colorful fabrics, T-shirts, sneakers, jeans, black leather jackets, and surplus military clothing. These fashions started with people in small, lower income consumer groups and “trickled up” to mainstream consumer classes.

3. Spread to Large Consumer Groups

• During this stage, the fashion is accepted by a wider group of consumers referred to as early adopters. The fashion becomes increasingly visible, receives greater publicity and media attention, and is readily available in retail stores.

• The relative advantage, compatibility, trialability, and observability of a fashion affect the time it takes for the fashion to spread through a social group.

• Compatibility is the degree to which fashion is consistent with existing norms, values, and behaviors.

• Complexity refers to how easy it is to understand and use the new fashion.

• Trialability refers to the cost and commitment required to initially adopt the fashion.

• Observability is the degree to which the new fashion is visible and easily communicated to others in the social group.

Pick a successful fashion and evaluate it on 4 factors at left.

4. Saturation

• In this stage, fashion achieves its highest

See PPT 4-44

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level of social acceptance. Almost all consumers in the target market are aware of the fashion and have decided to either accept or reject it.

5. Decline in Acceptance and Obsolescence

• When fashions reach saturation, they have become less appealing to consumers. Because most people have already adopted the fashion, it no longer provides an opportunity for people to express their individuality.

Have students give examples of fashions that were, but no longer are “in.”

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ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS

1. Does the customer buying process end when a customer buys some merchandise? Explain your answer.

No, the customer buying process does not end when a customer buys some merchandise. One of the most important stages of the buying process is the Post Purchase Evaluation. This stage happens after making their purchases. Customers consume or use the merchandise and then evaluate their experiences to determine whether it was satisfactory or unsatisfactory. The post purchase evaluation becomes part of the customer’s internal information that affects future store and product decisions. A satisfied customer may make repeat purchases, where an unsatisfactory experience can motivate customers to complain to the retailer and decide to patronize other stores.

2. What would make a consumer switch from making a habitual choice decision to eat at Wendy’s to making a limited or extended decision?

Consumers may switch from making a habitual purchase decision to a limited or extended problem-solving decision under several circumstances. Conversations with family members or friends may cause a consumer to reevaluate a habitual purchase decision. In addition, a convincing advertisement and/or promotional activity may cause a consumer to abandon a habitual purchase decision. Finally, news releases about product research may also affect consumer’s attitudes regarding habitual decision making activities.

3. Using the steps in the consumer buying process (Exhibit 4-1), describe how you (and your family) used this process to select your college/university. How many schools did you consider? How much time did you invest in this purchase decision? When you were deciding on which college to attend, what objective and subjective criteria did you use in the alternative evaluation portion of the consumer buying process?

To answer this question, students need to consider the following steps in the decision making process:

Need recognition—What stimulates the student to first think about going to college? What types of needs was the student attempting to satisfy by going to college?

Information search—What information did the student collect about college and the different colleges? Who provided the information—the colleges through the mail, school counselors, friends, family, visits to the colleges?

Evaluation of alternatives—What were the characteristics on which the students compared the various colleges? Did the student use something like a multi-attribute model to compare the strengths and weaknesses of various alternatives?

Choosing a college—What were the key factors influencing the final choice and what was the final choice?

Post-choice evaluation—How satisfied is the student with the choice? Would the student recommend the college to a friend?

A habitual decision would be choosing the same college that a sibling or parent went to without much thought. Extensive problem solving would be searching for a lot of information and making a detailed comparison of alternatives.

4. Why is geodemographic segmentation used by retailers to locate stores?

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Geodemographic segmentation uses both geography and demographics to classify

consumers. While demographic characteristics, such as "affluent" and "white-collar professional" may be useful in and of itself for merchandising decisions, it provides little insights as to where to find a predominant segment of consumers with these demographic characteristics. On the other hand, merely geographic information such as a region, city or even zip code area may be useful for location and expansion strategies, they are often too broad to be useful for specific retail store location decisions. The combination of both demographics and geography not only enables in the identification of specific classes of consumers, but also helps in understanding where more or less of any specific class of consumers may be located. For example, one can readily observe that affluent people within a city tend to live in specific neighborhoods. Using more precise zoning techniques (such as ZIP+4) and more precise buying and consumption habits of specific demographic groups, it is possible to more clearly identify the major clusters of consumers in a given narrow area. Since consumers tend to patronize their neighborhood stores more often, the location of retail stores targeting specific customers can be more effective when using geodemographic segmentation.

5. Any retailer's goal is to get a customer in its store to stop searching and buy a product at its outlet. How can a sporting goods retailer ensure that the customer buys athletic equipment at its outlet?

A sporting goods retailer can ensure that a customer buys athletic equipment in their store, by helping customers decrease their information search. In general, retailers want to reduce the information search of customers when they are in the store. The sporting goods retailer needs to limit the necessary information needed to make a decision to the information in the store so that the customer will make a purchase decision in the store. To do this, the retailer should first provide a good selection of merchandise so customers can find something to satisfy their needs within the store. Second, retailers should hire an educated staff to provide the needed information to customers when deciding on their equipment. Third, retailers should provide special services to reduce the decision process. This could include the availability of credit and delivery. Lastly, retailers could provide everyday low pricing to increase the chance that customers will buy in their store and not search for a better price elsewhere.

6. A family-owned used record store across the street from a major university campus wants to identify the various segments in its market. What approaches might the store owner use to segment its market? List two potential target market segments based on this segmentation approach. Then contrast the retail mix that would be most appropriate for the two potential target segments.

• Target segment defined on demographics might be:

* Students (younger segment)

* Faculty, Staff and Administrators (older segment)

* Local residents with different demographic profiles such as gender, age, and education.

• Target segments based on lifestyle might be:

* Interest in outdoor recreation (travel, camping, fishing)

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* Interest in indoor hobbies and activities (leisure, entertainment, cooking, sewing, home repairs)

* Adventuresome

• Target segment based on benefits sought and usage situation might be:

* Eclectic tastes in music

* Interest in music from yesteryears

* Use of music for relaxation and/or entertainment

* Aid to nostalgia

Note that the target segment determines the nature of the merchandise offered. For example, a target segment of students for used music means that the store has to get information about tastes of the current batch of students at the university, what types of music they would be looking for used versus new, and their price preferences. Also the store needs to offer services like buying back music CDs/tapes/records from students. This will serve at least two purposes: (1) replenishing stock of used music, (2) getting people back into the store. The store will be designed so that the music is well categorized according to type (blues, classic rock, jazz, etc.) and artists/groups (B.B. King, Sting, Miles Davis). Not much personalized service needs to be provided, but the store could have facilities where the students can sample the quality of the product by playing it.

On the other hand, selling research-oriented books to the general public (local residents) means that the store will have a wider variety of music but not too many copies of each album. The store will have to provide services like special ordering, especially since the local residents may be willing to wait for their choice of used music album.

7. How would you expect the buying decision process to differ when shopping on the Internet compared to shopping in a store?

The buying experience for consumers would be different when shopping at an electronic retailer, compared to shopping in a store. Some of these differences are in convenience, social and entertainment experience, ability to “touch and feel,” international ability, “on the spot” fulfillment, and merchandise differences. First, a large difference when shopping at an e-retailer compared to a bricks and mortar store, is the convenience level. With an e-retailer, consumers are able to shop and buy from their homes or offices and have it shipped to wherever they would like. The consumer can also search very easily for a product on the website with little time and confusion by using special search boxes set up by the e-retailer. The buying process in a bricks and mortar store can often take much more time, because the consumer has to drive to the store, park, and search for the product. Consumers often must follow signs, talk to salespeople, or use maps to find the product they need.

Second, however, some consumers prefer a bricks and mortar store just for the social and entertaining shopping experience. In a bricks and mortar store, a consumer can go with a group of friends, stop and eat, and enjoy the surrounding activities. An e-retailer does not provide the same social and emotional experience.

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Third, when shopping on an e-retailing site, the consumer does not have the ability to touch and feel the product, where a bricks and mortar store lets you try things on, feel the material, or even flip through a book to read the last page.

Fourth, e-retailers allow the consumer to shop internationally within seconds. Consumers can search for products from all over the world, or go to specifically international retailers not found in their country. A consumer would have to spend a great deal of time and money to shop in multiple countries.

Fifth, consumers have the ability to take their products home from a bricks and mortar store at the Point-of-Sale. E-retailers much ship their products, which can often take days or weeks.

Lastly, the buying experience is different with regard to the types of merchandise the consumers are willing to buy. Often consumers will not order heavy packages over the Internet, because they would be expensive and timely to ship. Even foods or other perishable goods are more likely to be purchased in a bricks and mortar store than through an e-retailer.

8. Using the multi-attribute attitude model, identify the probable choice of an automobile repair outlet for a young, single woman and for a retired couple with limited income (See the table that follows). What can the national retail chain do to increase the chances of the retired couple patronizing its dealership? You can use the multiattribute model template found in the Online Learning Center to analyze this information.

Importance Weight Performance Beliefs

Characteristics Young Single

Retired couple

Local Gas Station

National Service Chain

Local Car Dealer

Price 2 10 9 10 3 Time to Complete Repair

8 5 5 9 7

Reliability 2 9 2 7 10 Convenience 8 3 3 6 5

Using the multiattribute model (importance weights multiplied by price and summated over all the characteristics), we get the following overall evaluation scores for each outlet by each segment:

Segment Local Gas Station National Service Chain

Local Car Dealer

Single Woman 86 154 122

Retired Couple 142 226 170

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The probable choice of an automobile repair outlet for a single woman would be the local car dealer. The probable choice for a retired couple with limited income would be a national service chain.

ANCILLARY LECTURES AND EXERCISES

Lecture # 4-1 THE MULTI-ATTRIBUTE MODEL

Instructors’ Note: This lecture can be used to demonstrate a model designed to predict a customer’s evaluation of a product or store based on their performance on several attributes and the importance of those attributes to the customer. PowerPoint slides are available to accompany this lecture.

Introduction

• The Multi-attribute model is based on the notion that customers see a store or a product as a collection of attributes or characteristics.

• Customers collect and review information about alternative products or stores, evaluate the alternatives, and select one that best satisfied their needs.

• A multi-attribute attitude model provides a useful way to look at customer's evaluation process.

• The model is designed to predict a customer's evaluation of a product or a store based on their performance on several attributes and the importance of those attributes to the customer. Buyers can also use the multi-attribute model to evaluate merchandise and vendors.

Beliefs about performances

• A customer considering shopping at three stores mentally processes the "objective' information about each of the stores and forms an impression of the benefits the store provide.

• His beliefs about these benefits may be a combination of several objective characteristics. For example, the convenience benefit is a combination of travel time, checkout time and check-cashing privileges. Price of the groceries and double coupons affect the perception of the economy of shopping at the stores.

• The degree to which the store provides the benefits is represented on a 10-point scale. 10 means that the store performs well in providing the benefits; 1 means that the store performs poorly.

Importance weights

• A customer may develop an overall evaluation of each store based on the importance he/she places on each of the benefits provided by the stores. For example, the importance a customer places on a benefit can also be represented using a 10 point rating scale, with 20 indicating that the benefit is very important and 2 indicating that the benefit is very unimportant.

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• Using this rating scale, the importance of the store benefits for a young woman and a parent with four children are shown in the accompanying exhibit, along with the performance beliefs previously discussed.

Choice of Alternatives

• For the young woman, the Internet grocer has the highest score, and thus the most favorable evaluation. However, the Supercenter has the highest score for the parent, who would probably buy the family's weekly groceries there.

• Note that even though the Multi-attribute model does not reflect the customers' actual decision process, it does predict their evaluation of alternatives and their choice

• The model provides useful information for designing a retail offering.

• The same model can also be used to describe how a customer evaluates and selects merchandise in a store. This demonstrates that, generally, once customers find a product that will satisfy their needs, they will stop searching.

Implications for retailers

• First, the model indicates what information customers use to make their decision about which store to visit. Thus, to develop a program for attracting customers, the retailer needs to do market research to collect the following information listed below.

1. Getting into the consideration set

The retailer must make sure that its stores are included in the customer's consideration set. The consideration set is the set of alternatives the customer evaluates when making a selection. To be included in the consideration set, the retailer must develop programs to increase the likelihood its store will be remembered and thought about when customers are about to go shopping. After ensuring that its store is in the consideration set, the retailer can use 4 methods to increase the chances that the store will be selected for a visit. 1) Increase the belief about its store's performance. 2) Decrease the performance belief for competing stores in the consideration set 3) Increase customers' importance weights 4) Add a new benefit.

2. Changing performance beliefs

The first approach involves altering customer's beliefs about the performance of the retailer--increasing the retailer's performance rating on a characteristic. For example, the supermarket would want to increase its overall rating evaluation by improving its ratings on all four benefits. The supermarket could improve its rating on economy by lowering prices and improve its rating on store environment by modernizing the store, making sure the store is clean and neat. It is very costly for a retailer to improve its performance on all benefits. Thus, a retailer typically needs to focus efforts on improving performance on benefits that are important to customers in its target market. A change in performance belief on an important benefit results in a large change in customers’ overall evaluation. Another approach is to try to decrease customers' performance ratings of a competing store. This approach may be illegal and usually isn't very effective because customers typically don't' believe a firms' negative comments about its competitors.

3. Changing importance weights

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Altering customers’ importance weights is another approach to influencing store choice. A retailer would want to increase the importance customers place on benefits on which the retailer has superior performance or decrease the importance on benefits on which it has inferior performance. Typically, changing importance weights is more difficult than changing performance beliefs because the importance weights reflect the customers' values.

4. Adding a new benefit

The retailer might try to add a new benefit to the set of benefits that customers consider when selecting a store. For example, since JCPenney is the only national department store, customers can purchase a gift at their local store and send it to a person in another part of the country knowing that the recipient can exchange it at their local store if desired. This approach if adding a new benefit is often effective because it's easier to change customer evaluation of new benefits than old benefits.

ANCILLARY EXERCISE # 4-1: USING THE MULTIATTRIBUTE MODEL FOR CHOOSING A STORE

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Instructor’s Note: This exercise is intended to give students the opportunity to use the Multi-attribute Model found in the text. Instructors might want to use this lecture as a stimulus to a class discussion on the topic.

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Instructions

• Pick a student who has recently made a store choice decision -- such as choosing a store to buy a record, rent a videotape, buy groceries, or eat a meal.

• Then go through the following steps:

• Have the student indicate the two or three retailers he/she considered and write these names on the top of the two columns.

• Have the student indicate factors he/she considered in choosing the retailers.

• Typical factors are convenience (location), price of merchandise, availability of specific items, offering credit or taking a check, service, etc.

• List these benefits offered on the row in the left-hand column.

• Ask the student which characteristics or benefit is the most important to him/her and give benefit a 10 in the importance weight column.

• Then have the student indicate the importance of the other characteristics using a 10 point scale where 10 means very importance and 1 means not very important.

• Now have the student rate each retailer on each characteristic using a ten-point scale where 10 means excellent performance and 1 means poor performance.

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• Now multiple the importance weights times the performance beliefs for each characteristic and calculate a total score for each retailer.

• Ask the student which store he/she went to.

• The student typically will have gone to the retailer with the highest score.

ANCILLARY EXERCISE # 4-2

Using the multi-attribute attitude model and the following information, identify the probable choice of a retail store for a young single businesswoman and for a retired couple with limited income buying a TV set.

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IMPORTANCE WEIGHTS PERFORMANCE BELIEFS

CHARACTERISTIC YOUNG SINGLE

RETIRED COUPLE

DISCOUNT STORE

DEPART- MENT STORE

CATEGORY SPECIALIST

Price 2 10 9 3 10 Services 5 8 5 17 9 Assortment 9 2 2 10 7 Shopping environment 6 2 3 8 6 young single 79 177 164 retired couple 140 122 208

The young single person would get more benefits from the department store and thus choose it over the discount store and the category specialist. The retired couple would choose the category specialist.

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ADDITIONAL ASSIGNMENTS AND EXERCISES

Exercise 4-1

Consumer Buying Behavior – Reading Assignment

Background Music Read the following article. After answering the questions below, be prepared to discuss in class.

Pressler, Margaret Webb. “Hitting the Right Notes; The Developing Science of Retail Background Music.” The Washington Post, October 5, 2003. F5. (National Newspapers)

1. What impact can background music have on consumer buying behavior in the retail environment? 2. How should retailers select the “best” background music?

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Exercise 4-1 with Answers

Consumer Buying Behavior – Reading Assignment

Background Music Read the following article. After answering the questions below, be prepared to discuss in class.

Pressler, Margaret Webb. “Hitting the Right Notes; The Developing Science of Retail Background Music.” The Washington Post, October 5, 2003. F5. (National Newspapers)

1. What impact can background music have on consumer buying behavior in the retail environment? - Speed at which consumers shop or eat - Willingness to spend - Perception of the store - How much time is spent in the store - Which product is purchased – wine example in the article - If the customer likes the music in the store, they hardly notice it - Complain if too loud or if they dislike the format/style 2. How should retailers select the “best” background music? - Matches the demographics of the shoppers - Appropriate for the type of store - Fits the mood of the shoppers – holiday gift giving example in the article - Suitable for the time of day

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Exercise 4-2 Consumer Buying Behavior – Reading Assignment

Shop Like a Man Please read the article listed below. After answering the questions, be prepared to discuss in class.

Wilson, Marianne. “The Masculine Mystique.” Chain Store Age, June 2001, v77, i6, p110. (Business & Company Resource Center)

1. “Men shop differently than women.” Explain what this means in terms of consumer buying

behavior.

Men Women

2. Why are women, “beginning to shop a little bit more like men”?

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Exercise 4-2 with Answers

Consumer Buying Behavior – Reading Assignment

Shop Like a Man Please read the article listed below. After answering the questions, be prepared to discuss in class.

Wilson, Marianne. “The Masculine Mystique.” Chain Store Age, June 2001, v77, i6, p110. (Business & Company Resource Center)

1. “Men shop differently than women.” Explain what this means in terms of consumer buying

behavior.

Men Women ♂ Shop on a needs or replacement basis ♂ Need a new shirt or a pair of khakis ♂ Go for quality over price ♂ Simple experience ♂ Tend to be brand loyal, less likely to look

for other stores or brands

♀ Retailers target women in the first place ♀ Shop for an outfit ♀ More price oriented ♀ Roam and explore ♀ Will consider other stores and brands

2. Why are women, “beginning to shop a little bit more like men”? - Women are increasingly time-starved - Want shopping to be fast and easy - Too much clutter is a turnoff for both genders - Want convenience