Chapter 77Identifying and Understanding Consumers

Dr. Pointer NotesDr. Pointer Notes

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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 list and describe a number of consumer demographics, lifestyle factors, and needs and desires – and to explain how these concepts can be applied to retailing

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Chapter Objectives _2

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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Overview

• The success of retailer’s strategy depends on how well the firm develops a retail strategy to appeal to target market

• Need to identify appropriate consumers• Understand different consumer characteristics,

their needs, attitudes• Recognize how decisions are made by target

market• The following factors are key to identifying and

understanding target market

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Figure 7.1 What Makes Retail Shoppers Tick

Retail Shoppers

Life-Styles

Demographics

Environmental Factors

Retailer Actions

Shopping Attitudes and Behavior

Needs and Desires

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Demographics and Lifestyles

Demographics– consumer data

that is objective, quantifiable, easily identifiable, measurable

Lifestyles– ways in which

consumers and families live and spend time and spend money

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Helpful Facts for Understanding U.S. Demographics

Typical household has an annual income of $45,000

Top 1/4 of households earn $75,000 or more

Lowest 1/6 of households earn under $15,000

High incomes lead to high discretionary income

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Helpful Facts_2

There are 5 million more females than males

Three-fifths of females age 16 and older are in the labor force

Most U.S. employment is in services25% of all U.S. adults age 25 and older

have at least graduated from a four-year college

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Helpful Facts_3

One –sixth of people move each, yet 60% stay in same county

There are many ethnic groups. Blacks, Hispanics, and Asian represent 30% of U.S. population

Each group represents a large target market

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Consumer Life-Styles

• Consumer life-styles are based on social and psychological factors and are affected by demographics.

• Culture – distinctive heritage shared by a group of people that passes on a series of beliefs, norms, and customs

• Major subcultures are within the broader culture• Social class ranking of people based on education,

income, occupation and other factors

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Understanding Consumer Lifestyles: Social Factors

Lifestyle

CultureReference

Groups

Social Class

FamilyLife Cycle

Time Utilization

HouseholdLife Cycle

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Consumer Life-Styles

• Reference groups- any group or individuals a persons looks to for direction in behaving. They influence thoughts, behavior;

• Family life cycle – how a traditional family moves form bachelorhood to children to solitary retirement

• Time utilization – activities in which a person is involved and the amount of time allocated to them (work, transportation, eating, recreation, entertainment, parenting, sleeping, etc

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Understanding Consumer Lifestyles: Psychological Factors

Lifestyle

Personality Attitudes

PerceivedRisk

PurchaseImportance

ClassConsciousness

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Psychological Factor

• Personality- sum total of a person’s traits that make the unique. Consistent response to environmental stimuli.

• Class consciousness – extent to which a person desires and pursues social status.

• Attitudes – feels that a person holds toward an object

• Perceived risk – level of risk that person holds regarding the purchase of a product from a retailer

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Figure 7.2 The Impact of Perceived Risk on Consumers

Consumers

Types of riskFunctionalPhysicalFinancial

SocialPsychological

Time

Factors affecting Perceived Risk

NewnessBudget

ExperienceNumber of alternatives

Social visibility

OutcomesPurchase new

productStick with old brand

Talk to friendsSeek more info

nonpurchase

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Retail Implications of consumer demographics

Because of changing life-styles, more husband and wives shop together. More men are doing non traditional work around the house

Component life-styles – consumers are less predictable

Such as cleaning, shopping, babysitting

Consumer sophistication and confidence – more knowledgeable shoppers who are more cosmopolitan (more aware of trends)

Poverty of time – people are time-pressed because of work, commuting, family responsibilities and etc

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Consumer Profiles

• Need to have a profiles of your retail customers. As and Example:

• Typical outlet shopper is married, career women who’s 43 yr, HH income of $53K, shops 4 times a yr at outlets and spends more than 100 per visit

• Heavy shoppers drive sales and represent 33% of all shoppers

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Consumer Needs and Desires

• What are the key consumer needs that they are trying to fill

• Needs a person’s basic shopping requirements which are consistent with demographics and life-style

• Desires are discretionary shopping goals that affect attitudes and behavior

• Consumer motives, reasons for their shopping behavior ( pg 169)

• Three major shopping market segments –in-home,online and outshoppers

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In-Home Shoppers

• Shopping is discretionary, not necessary

• Convenience is important• Active, affluent, well-

educated• Self-confident, younger,

adventuresome• Time scarcity is not a

motivator

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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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Out- Shoppers

• Out-of-hometown shopping

• Male, 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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Attitudes Towards Shopping

Shopping EnjoymentAttitudes toward Shopping TimeShifting Feelings About RetailingWhy People Buy or Not on a Shopping

TripAttitudes by Market SegmentAttitudes toward Private Brands

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Top Reasons for Leaving an Apparel Store Without Buying

Cannot find an appealing styleCannot find the right sizeNothing fitsNo sales help is availableCannot get in and out of the store easilyPrices are too highIn-store experience is stressfulCannot find a good value

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Table 7.3 Where America Shops: Household Purchases

0102030405060708090

Discount MailOrder

Self-ServiceShoes

ApparelStores in

Malls

OutletStores

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Table 7.3 Where America Shops: Weekly Purchases

0

10

20

30

40

50

60

SupermarketsConvenienceFull-Line DiscountDrugstoresMembership Clubs

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Cross-Shopping

Shopping for a product category at more than one retail format during the year

Visiting multiple retailers on one shopping trip

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The Consumer Decision Process

• After understanding how to describe consumers using demographic factors, retailers should know some thing about how they make purchase decisions

• Consumer decision process consist of the activities consumers do in making the decision to obtain, consume and dispose of goods and services

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The Consumer Decision Process

Need/Problem Awareness

Information Search

Eval of Alternatives

Purchase

Post Purchase Eval

Demographics

Lifestyle

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Key Factors in the Purchase Act

Retailer’s place of Purchase

Retailer’s purchase terms

Retailer’s goods

and service availability

Consumer’spurchase or nonpurchase

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Purchasing Act

• Place of purchase – Store, home, mall,office,online

• Purchasing Terms – price, cash, credit• Good and services – instock, delivery time• Post Purchase behavior• Cognitive dissonance• Satisfaction is based on?

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Types of Consumer Decisions

High

RISK & TIME

Low

Extended

Limited

Routine

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Types of Decision making

• Extended- consumer makes full use of all steps in consumer decision model

• Limited- consumers use each step but don’t spend a long time at each step

• Routine decision – consumer buys out of habit and skips many of the steps in the model

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Types of Impulse Shopping

Completely unplannedPartially unplannedUnplanned substitution

Impulse purchase is defined as a sudden urgent to buy without consideration of consequences of actions

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Devise a Marketing Strategy

After choosing the target market method, the target market is selected.

The target market is evaluated for needs, psychological factors and social, situational factors.

Next the retailing mix is then shaped

The major retail strategies focuses on being a retailer with a mass merchandise strategy, retailer with concentrated marketing strategy or one with a differentiated strategy

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Possible Retailer Approaches

Mass MarketingKohl’s Department Stores

Concentrated MarketingZutopia

Differentiated MarketingFoot Locker

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Retail Strategies

• Mass marketing strategy – goes after a broad array of customers with good quality merchandise (between discounter and Traditional dept store)

• Concentrated marketing strategy –focuses retailing effort at only one segment

• Differentiated strategy – appealing to different target markets with different retailing mixes

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Environmental Factors and Consumers

State of the EconomyRate of InflationInfrastructure for ShoppingPrice WarsEmergence of New Retail FormatsPeople Working at HomeRegulations on ShoppingChanging Social Values and Norms

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Questions