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CONSUMER PREFERENCES AND BUYING PATTERNS

OF STUDENTS AT TSHWANE UNIVERSITY OF TECHNOLOGY

WITBANK CAMPUS

by

MELANIE WIESE

Submitted in fulfillment of the requirements for the degree

MAGISTER TECHNOLOGIAE: MARKETING

in the

Department of Marketing

FACULTY OF ECONOMIC SCIENCES

TSHWANE UNIVERSITY OF TECHNOLOGY

Supervisor: Prof JW de Jager

Co Supervisor: Mr GAP Drotsky

January 2004


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DECLARATION BY CANDIDATE

I hereby declare that the dissertation submitted for the degree M Tech: Marketing, at Tshwane

University of Technology, is my own original work and has not previously been submitted to any

other or quoted are indicated and acknowledged by means of a comprehensive list of references.

M.Wiese

Copyright Tshwane University of Technology 2004


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ABSTRACT

This study focuses primarily on the decision-making process and the resulting buying patterns

and preferences of students at Tshwane University of Technology, Witbank campus. The

demographical profile of students, their media and expenditure patterns as well as their

preference for retail shops on campus were investigated.

Personal interviews were used to collect the final data through a structured questionnaire. A

sample of 368 respondents were taken from a population of 1173 by making use of quota

sampling, based on gender, academic year and study course.

The student population is almost an equal distribution of male and females, with the majority of

students being black and between the ages of 20 24 years. Students media patterns include;

magazines (True Love & Drum), TV (E - TV & SABC 3), radio (Jacaranda & Metro) and

newspapers (Witbank News & Sowetan). The average students main source of income is their

parents and students have between R317 and R489 spending money per month. The majority of

students spend their money on clothing, groceries and transport. Students indicated that they

would like to shop at retailers on campus such as fast food outlets, entertainment providers,

bookstores and cell-phone stores.

Students mainly make use of their own previous experiences as a source of information and

usually search for information to obtain a better price. They follow the brand first, store second

decision-making sequence and make use of price and quality to evaluate available alternatives in

the market place. When choosing a retailer features like quality, services and easy return policies


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are very important to students. The majority of students indicated that they do change their minds

once inside a retailer, mainly because of special in-store price deals. Students prefer to shop close

to where they stay or at big shopping centers and usually shop over weekends. Students pay cash

or make use of lay-buy facilities. The majority of students indicated that they usually experience

guilt after a unneeded or expensive purchase. Students usually play the role of information

gatherers and product users in their families and dispose of products /packaging by throwing it

away.

The information obtained through this study should help retailers to identify opportunities and to

develop effective marketing strategies for the student market.


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EKSERP

Die studie fokus op die besluitnemingsproses, aankooppatrone en voorkeure van studente by

Tshwane Universiteit van Tegnologie, Witbank kampus. Studente se demografiese profiel,

media- en bestedingspatrone sowel as hul voorkeure vir kleinhandelaars op kampus is ook bepaal.

Persoonlike onderhoude is met behulp van n gestruktureerde vraelys uitgevoer met 368

respondente uit n populasie van 1173 studente deur middel van kwota steekproeftrekking

gebaseer op geslag, akademiese jaar en studierigting.

Daar is bykans n gelyke verdeling van mans en vroue studente met die grootste groep, swart

studente tussen die ouderdom van 20 24 jaar. Studente het hul media patrone soos volg

aangedui: Tydskrifte (True Love & Drum), TV (E-TV & SABC 3), radio (Jakaranda & Metro) en

koerante (Witbank News & Sowetan). Die meerderheid studente voel positief oor kitskoswinkels,

vermaak, boekwinkels, banke, sellulrefoon en lugtydverskaffers op kampus. Die gemiddelde

student se hoofbron van inkomste is hul ouers. Studente het tussen R317 en R489 per maand

sakgeld wat hul op klere, vervoer en kruideniersware bestee.

Studente maak gebruik van hul eie vorige ervarings as die hoofbron van inligting en soek

gewoonlik na inligting as hul n beter prys daardeur kan verkry. Studente volg die handelsnaam

eerste, winkel tweede besluitnemings volgorde en maak gebruik van prys en kwaliteit on die

beskikbare alternatiewe in die markplek te evalueer. Eienskappe soos kwaliteit, diens en n


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maklike omruilbeleid is baie belangrike eienskappe vir studente as hul n kleinhandelaar moet

kies. Die meerderheid studente het aangedui dat hul wel van besluit verander binne in winkels as

gevolg van spesiale prysaanbiedings. Studente verkies om by kleinhandelaars te koop naby hul

huise of by groot winkelsentrums, en koop gewoonlik oor naweke. Studente maak gebruik van

kontant of brekoop fasiliteite. Die meerderheid studente het aangedui dat hul gewoonlik n

skuldgevoel ervaar na n onnodige of duur aankoop. Studente speel gewoonlik die rol van

inligtingsoekers en produkgebruikers in hul families en wil produkte en /of die verpakkings

weggooi na gebruik.

Die inligting verkry uit die studie behoort kleinhandelaars in die Witbank omgewing in staat stel

om geleenthede te identifiseer en omn effektiewe bemarkingstrategie daarvolgens op te stel.


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ACKNOWLEDGEMENTS

I would like to express my sincere gratitude and appreciation to:

Prof. J .W. de Jager and Mr G.A.P Drotsky, my supervisors, for their positive attitude and

guidance.

Technikon Pretoria for financial assistance.

Mr E. Sibanda from the Department Statistical Support, for his help with the statistical

manipulations.

The participants and respondents who honestly and reliably completed the survey

questionnaire.

Mr M. Dieperink, for language editing.

My parents, for all their support and encouragement throughout my studies.

My parents-in-law, for taking a interest in my studies.

My children, Melandri and Jandr, who gave me the freedom to complete this study.

My husband, Ben, for his continued motivation and support throughout my research.


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LIST OF FIGURES

PAGE

FIGURE 2.1: Marketing strategy and consumer behaviour 30

FIGURE 3.1: Overall model of consumer behaviour71

FIGURE 3.2: Process of problem recognition...96

FIGURE 4.1: Sampling methods139

FIGURE 5.1: Gender of respondents.154

FIGURE 5.2: Age of respondents..155

FIGURE 5.3: Race of respondents.156

FIGURE 5.4: Academic year in 2002158

FIGURE 5.5: Home language of respondents159

FIGURE 5.6: TV viewing patterns.164

FIGURE 5.7: Programme type165

FIGURE 5.8: Daily viewing time of respondents..166

FIGURE 5.9: Source of income.167

FIGURE 5.10: Average spending money per month..170


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FIGURE 5.11: Average number of days spend on campus175

FIGURE 5.12: Preference for shopping facilities on campus176

FIGURE 5.13: Products students would prefer to buy oncampus179

FIGURE 5.14: Other needs/preferences regarding retailerson campus188

FIGURE 5.15: Shopping companions.190

FIGURE 5.16: Reasons for making use of shoppingcompanions.192

FIGURE5.17: Conformity on brands..193

FIGURE 5.18: Family roles194

FIGURE 5.19: Source of information.198

FIGURE 5.20: Reasons why respondents search forinformation.199

FIGURE 5.21: Decision making sequence 203

FIGURE 5.22: Decision making styles..204

FIGURE 5.23: Decision making styles..205


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FIGURE 5.24: Preference for novelty205

FIGURE 5.25: Changed purchased intentions.. 206

FIGURE 5.26: In-store influences that changes purchase

decisions

209

FIGURE 5.27: Buying behaviour of students210

FIGURE 5.28: Payment methods used by students213

FIGURE 5.29: Transport methods.215

FIGURE 5.30: Preferred shopping days.216

FIGURE 5.31: Shopping locations.217

FIGURE 5.32: Students tendency to experience guilt..219

FIGURE 5.33: Reasons for experiencing guilt..222

FIGURE 5.34: Post-purchase dissonance..223

FIGURE 5.35: Disposition options224


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LIST OF TABLES

PAGE

TABLE 5.1: Registered study course of respondents.157

TABLE 5.2: Magazine readership.161

TABLE 5.3: Newspaper readership162

TABLE 5.4: Preferred radio station163

TABLE 5.5: Source of income versus gender.168

TABLE 5.6: Source of income versus race.168

TABLE 5.7: Average amount of spending money.171

TABLE 5.8: Average amount of spending money versus race..171

TABLE 5.9: Monthly spending of respondents..173

TABLE 5.10: Shopping on campus versus gender..177

TABLE 5.11: Shopping on campus versus age...177

TABLE 5.12: Shopping on campus versus race..178

TABLE 5.13: Supporting a fast food outlet versus gender181

TABLE 5.14: Supporting a fast food outlet versus race.181


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TABLE 5.15: Supporting a fast food outlet versus age182

TABLE 5.16: Supporting a banking outlet versus gender..182

TABLE5.17: Supporting a banking outlet versus

race...183

TABLE 5.18: Supporting a banking outlet versus age183

TABLE 5.19: Supporting a entertainment outlet versus gender.184

TABLE 5.20: Supporting a entertainment outlet versus race.185

TABLE 5.21: Supporting a entertainment outlet versus age185

TABLE 5.22: Supporting a cell phone outlet versus gender..186

TABLE 5.23: Supporting a cell phone outlet versus race186

TABLE 5.24: Supporting a cell phone outlet versus age.187

TABLE 5.25: Preference for shopping on campus according to

race191

TABLE 5.26: Preference for shopping on campus according to


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gender.191

TABLE 5.27: Family role (information gather) versus race.195

TABLE 5.28: Family role (information gather) versus gender.196

TABLE 5.29: Family role (product user) versus race...196

TABLE 5.30: Family role (product user) versus gender.197

TABLE 5.31: Important features in store selection.201

TABLE 5.32: Changing their minds versus gender.207

TABLE 5.33: Changing their minds versus age..207

TABLE 5.34: Changing their minds versus race.208

TABLE 5.35: Comparison of buying patterns between collegestudent in USA and Tshwane University of Technology,Witbank students214

TABLE 5.36: Shopping frequency of students at different retailerstores..210

TABLE 5.37: Tendency to experience guilt according to gender.220

TABLE 5.38: Tendency to experience guilt according to age..220


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TABLE 5.39: Tendency toe experience guilt according to race...221


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CHAPTER 1

INTRODUCTION, PROBLEM DEFINITION AND OBJECTIVES

1.1 INTRODUCTION

South African retailers face new opportunities and threats due to constant changes in the

marketing environment. Competition from overseas companies entering the South African

market, the government that is forcing the pace of change in meeting basic consumer needs,

the development of new consumption patterns as well as changes in the existing consumption

patterns because of social upliftment programmes and redistribution of income, are just some

of the changes taking place. All these changes are taking place in a very short time and are

ultimately causing retailers to lose touch with the needs of their customers. Consequently a

major challenge facing retailers is to develop and implement appropriate corporate and

marketing strategies to achieve sustainable success in the domestic multicultural environment.

Retailers will also need to search for opportunities and new markets to which they can sell in

order to grow and survive in todays competitive arena.

Tshwane University of Technology, Witbank campus has moved to new premises. This

relocation offers a big opportunity for retailers in the Witbank area who is interested in serving

the student market. Not only is there a huge concentration of potential consumers in one place

but the students may be a feasible market segment which retailers have overlooked until now.

If retailers have the necessary knowledge about students buying behaviour they can decide if


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Witbank campus students represent a feasible market segment and, if so, the information

obtained should enable them to develop a marketing strategy specifically aimed at the needs,

wants and preferences of the student market.

1.2 FORMULATION OF THE PROBLEM

McDaniel & Gates (2001:23) define a marketing research problem as a statement of specific

information needed by a decision-maker to help solve a management decision problem, thus

the marketing research problem is information oriented.

The abovementioned authors state that there are three key questions that always have to be

answered at the problem definition stage:

Why is the information being sought?

Does the information already exist?

Can the question really be answered?

There is a lack of research data relating to, decision-making, consumer preferences and buying

patterns of students at Tshwane University of Technology, Witbank campus, as a customer

group. Retailers need information about customers in their market environment in order to

effect meaningful changes in existing retail. Statistical information such as number of

students, income and age structures may be useful to determine market potential, but the retail

sector needs information on student decision-making and resulting buying patterns and


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preferences to enable retailers to develop effective marketing strategies to satisfy the specific

needs of the student market.

According to Zikmund & dAmico (2001:130) a research process is not only focused on a

problem: it may also be focused on an opportunity. Therefore the relocation of Tshwane

University of Technology, Witbank campus to new premises presents opportunities for

retailers in the Witbank area.

1.3 PURPOSE OF THE STUDY

This study focuses on the decision-making process and resulting preferences and buying

patterns of students at Tshwane University of Technology, Witbank campus. It provides

information that may help retailers to identify opportunities and to help them to decide if the

student market is a potentially profitable segment, after the evaluation of the size, growth,

accessibility and responsiveness of the student market. It provides answers to questions about

the buying patterns of students and provide retailers with the necessary information to develop

effective marketing strategies with answers on questions such as:

Which products do students currently buy?

Which products would they like to buy on campus?

How often do students buy certain products?

Where do students buy their products? (Shopping patterns)

What are they willing to pay and what can they afford?


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Which media are they exposed to? (Media patterns)

Which factors influence the decision-making process of students?

Spending patterns of students.

Demographical profile of students.

This study attempts to provide answers to the above questions in order to assist retailers in

making decisions about aspects such as positioning, repositioning, branding, outlets,

distribution channels, product modification, pricing strategies and methods and

communication media with the student market.

Questions related to consumption patterns are often referred to as direct or market

classification, which according to Barrie & Furnham (1992:16) allows direct targeting of the

marketing activities and media planning. According to Du Plessis & Rousseau (1999:4) the

customer is the focal point during the marketing actions and customers behaviour is critical

for the marketer to predict future buying behaviour, and develop strategies and actions to

accommodate customer needs, aspirations, perceptions and values.

Based on this information it is necessarily to study the decision-making process and buying

patterns of students at Tshwane University of Technology, Witbank campus to determine

which products they buy, how they choose to buy certain products and services and how they

are motivated to make such purchasing decisions.


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1.4 OBJ ECTIVES OF THE STUDY

According to McDaniel & Gates (2001:23) a marketing research objective can be defined as

the specific information needed to solve a marketing research problem. The abovementioned

authors state that specific information is needed to answer the marketing research problem.

Lamb, Hair & McDaniel (2004:250) point out that managers must combine this information

with their own experience and other information, to make a proper decision.

Kent (1993:320) states that research objectives are there to spell out what the research is

designed to explore, measure and explain and agrees with Aaker, Kumar & Day (2000:71) that

objectives may be spelled out in terms of a hypothesis or even be formulated as a question.

1.4.1 Primary objective

The primary objective of the study is to determine the buying patterns, decision-making

process and preferences regarding products, price, distribution and promotional activities of

students at Tshwane University of Technology, Witbank campus, to enable retailers to develop

an effective marketing strategy.

1.4.2 Secondary objectives:

To investigate the integration between marketing and consumer behaviour through a

literature study.


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To investigate the consumer preferences, buying patterns and the decision-making process

through a literature study.

To investigate the demographical profile of students at Tshwane University of

Technology, Witbank campus.

To determine the media usage and exposure (media patterns) of students to provide

information to retailers to develop an effective promotional campaign.

To analyse the students expenditure patterns.

To determine the need for retail shops on campus.

1.5 RESEARCH METHODOLOGY

Kotler (2003:129) state that: Research, in the broadest sense, is search for truth. Consumer

research attempts to discover the truth about consumers. Hair, Bush & Ortinau (2000:10)

define consumer behaviour research as theories and methods based on a combination of

cognitive, social, economical, statistical, cultural and behavioural psychology in order to

understand consumer choice and behaviour. It can therefore be defined as the gathering,

recording and analysis of facts about problems relating to final households. Consumer

research helps retailers to understand the buying environment, identify problems and

opportunities, and develop and evaluate the course of marketing action to reach existing and

potential target markets. Hoyer & MacInnis (2001:47) state that research relating to consumer

decision-making focuses on analysing purchase motives, needs, buying habits, attitudes

towards brands, perceptions of stores and cultural and social influences. For the purpose of

this study the focus is on analysing consumer behaviour with specific focus on the decision-


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making process and resulting buying patterns and preferences of students at the Tshwane

University of Technology, Witbank campus.

According to McDaniel & Gates (2001:20) and Dillon, Madden & Firtle (1994:41) all research

approaches can be classified into three general categories:

Exploratory research is used to gain insight into the general nature of a problem. This type

of research also provides information on possible decision alternatives and relevant

variables that need to be considered.

The purpose of descriptive research purpose is to provide an accurate picture of a

particular aspect of the market and consumer environment. According to Churchill & Peter

(1998:112) this type of research is helpful to describe the characteristics of a certain group,

to estimate the proportion of people who behave in a certain way and to make specific

predictions.

Casual research is utilised when a researcher wants to indicate that one variable cause or

determines the value of other variables.

In this study descriptive and exploratory research are used to focus on the behaviour of

students as a consumer group. The research methodology used in this study is briefly

discussed in the rest of the chapter, because a detailed discussion is done in chapter four.


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1.5.1 Source of data

According to Kotler (2003:127) it is always advisable to do desk research, which entails

scanning of all available secondary data sources, before engaging in primary data. This

approach will guide the researcher in identifying unanswered questions and prevent him/her

from replicating research without the necessary background knowledge of what has already

been achieved. Relevant literature as well as previous research on the topic were used to

supply the necessary background for this study.

1.5.1.1 Secondary data

According to Lamb et al. (2004:250) and Aaker et al. (2000:76) secondary data can be defined

as information already compiled and readily accessible to the researcher who knows how to

find and use it. Jackson (1994:20) sees secondary data as data that already exist and have been

collected in the past for some purpose unconnected to the project at hand.

In order to understand the customer better, and specifically the decision-making process and

buying patterns and preferences of students of the Witbank campus, a literature study on

consumer behaviour was done from available secondary sources. The literature review

consisted of an extensive review of journal articles, research reports and textbooks covering a

wide range of disciplines: marketing (definition, marketing concept, marketing strategies),

retailing (definition, retailing and the consumer), consumer behaviour (definition, internal and

external factors influencing buying patterns and the decision making process), research

methodology and statistics.


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Although much data on marketing, consumer behaviour and retailing are available, only

limited data was available on the student market. The available secondary sources of data on

students buying patterns and decision- making were not sufficient for the purpose of this

study and primary data was required to support the secondary information.

1.5.1.2 Primary data

Jackson (1994:21) defines primary data as data specially collected by the researcher to meet

the particular needs of the project. Martins et al. (1996:122) and Hoyer & MacInnis (2001:27)

state that primary data is obtained through qualitative methods: telephone, mail and personal

interviews. In this study focus groups were used initially to determine the questions and

multiple-choice options that were used in the final questionnaire, while personal interviews

were used to collect the final data through a structured questionnaire.

1.5.2 Data collection method

In this study a quantitative research tool, the questionnaire, were used. This tool is more

systematic and structured and aims at obtaining information from respondents in a direct and

open manner. According to Hair et al. (2000:237) results obtained from personal interviews

are easily quantifiable and the questionnaire and personal interview have a potentially high

degree of reliability. Martins et al. (1996:146) point out that the personal interview consists of

an interviewer asking questions for one or more respondent in a face-to-face situation. Shao

(1999:183) points out that interviews may be structured, consisting of direct questions to

obtain factual data, or indirect (semi structured), allowing more flexibility on the part of the


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interviewer in setting questions in an indirect manner, or probing for answers. The personal

interview provides an opportunity for obtaining more information than through telephone or

mail questions.

1.5.3 Sampling

Dillon et al. (1994:220) define sampling as the identification of a group of individuals or

households who can be reached by mail, by telephone or in person and who possesses

information relevant to solving the marketing problem at hand. According to Martins et al.

(1996:252) the following five steps are evident in sampling:

1.5.3.1 Defining the population

Shao (1999:73) defines a population or universe as the aggregate of all the elements. A

population must be defined in terms of elements (students), time and size (Witbank).

1.5.3.2 Identifying the sample frame

Hair et al. (2000:330) define a sample frame as a list of population members used to obtain a

sample. A frame may be a register of industries, a telephone directory or even a map. In this

study a headcount list of registered students at the Witbank campus, provided by Tshwane

University of Technologys Strategic Information and Planning Directorate, was used.


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1.5.3.3 Selecting the sampling method

According to McDaniel & Gates (2001:335) selecting the sampling method involves the

choice between probability and non-probability sampling methods. The selection depends on

the objective of the study, financial resource available, time limitations and the nature of the

problem under investigation. Aaker et al. (2000:375) point out that in a probability sample, all

population members have a known probability of being in the sample. Non- probability

samples are a form of sampling where there is no way of determining exactly what the chance

is of selecting any particular element or sampling unit into the sample and include convenient

sampling, quota sampling and judgemental sampling.

According to McDaniel & Gates (2001:338) and Jarboe (1999:87) quota sampling involves the

selection of specific numbers of respondents who possess certain characteristics known or

presumed to affect the subject of the research study. In this study quota sampling was used

based on gender, academic year and study course.

1.5.3.4 Sample size

According to Martins et al. (1996:257) and Shao (1999:365) the sample size of a study refers

to the number of respondents to be interviewed. A sample of 368 respondents were taken from

a student population of 1173 at the Tshwane University of Technology, Witbank campus,

based on the sample calculation done by the Statistical Department of Tshwane University of

Technology. (Appendix A)


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1.5.4 Questionnaire

McDaniel & Gates (2001:289) and Lancaster, Withey & Ashford (2001:39) define a

questionnaire as a set of questions designed to generate the data necessary to accomplish the

objectives of the research project. As previously mentioned a structured questionnaire with

mainly structured responses were used in this study to make it as easy as possible for the

respondents to provide the necessary information.

1.5.5 Fieldwork

Hair et al. (2000:40) point out that the role of the interviewer in marketing research is the

collection of primary data through the administration of the questionnaire, the asking of

questions and the recording of answers. Lancaster et al. (2001:42) point out that like the

questionnaire the interviewer is a very important link in the survey chain.

In this study the researcher personally conducted the interviews. She has the necessary

information on the study and interviewing skills and therefore no additional training was

deemed necessary.

1.5.6 Analysing the data

Lamb et al. (2004:267) state that after the researcher has completed the fieldwork by gathering

the data needed to solve the research problem, the data must be manipulated, or processed.

The purpose is to place the data in a form that will answer the marketing managers questions.


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According to Zikmund & dAmico (2001:142) this step consist of three parts:

(1) Editing

According to Shao (1999:76) editing consists of checking completed questionnaires or other

data collection forms for omission, incomplete or otherwise unusable response, illegibility and

obvious inconsistencies. The researcher checked that the majority of questions were completed

and that the handwriting of the respondents were legible.

(2) Coding

Perreault & McCarthy (1996:114) point out that coding is the establishing of meaningful

categories for responses collected by means of surveys or other data collection forms, so that

the responses can be grouped into usable classifications. In this study pre-coding was used,

which Jarboe (1999:78) defines as the assignment of codes to the different responses on the

questionnaire before the questionnaires are distributed. In this study the codes V1 - V210 (V =

variable) were assigned to the responses of the questionnaire.

(3) Data analysis

Zikmund & dAmico (2001:142) define this stage as the statistical and qualitative

considerations of data gathered by research. In this study the analysis of the data is done in

chapter five by making use of tables, figures, cross tabulations and chi-square tests.


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1.6 OUTLINE OF THE STUDY

Chapter one contains the formulation of the problem, purpose of the study, objectives of the

study and research methodology.

Chapter two reviews the literature on the integration of marketing and consumer behaviour.

Marketing, consumer behaviour and retailing are defined and the marketing concept is

explained. The process of formulating a marketing strategy, with emphasis on the four

marketing mix instruments (price, product, promotion and place), is discussed.

Chapter three investigates the consumer buying behaviour model by explaining the internal

and external factors that influence consumer behaviour (buying patterns and preferences) as

well as the steps in the decision-making process.

The research methodology is discussed in chapter four and explains the source of data used,

data collection - and sampling methods, questionnaire design as well as the preparation and

analysing of the data.

Chapter five concentrates on the results of the empirical research performed and analysis of

the findings from the study.

A summary, conclusion and recommendations based on the study form chapter six.


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CHAPTER 2

THE INTEGRATION OF CONSUMER BEHAVIOUR AND

MARKETING

2.1 INTRODUCTION

The aim of this chapter is to explore the literature available on marketing and to investigate the

link between marketing and consumer behaviour. To be a successful retailer, like any other

business, retailers should know the marketplace and how to research it. Lack of marketing

knowledge and skills have proven detrimental to the functioning of any business. According

to Van der Walt, Strydom, Marx & Jooste (2000:12) a well formulated marketing plan will

assist a retailer in achieving its goals of maximizing profit on the long term and providing

customer satisfaction.

Asseal (1995:23) describes marketing as a process of delivering a market offering, using the

companys resources, to specific groups of customers in exchange for money. An important

component of this process is associated with the buying behaviour of consumers in the target

market. Du Plessis & Rousseau (1999:3) state that it is imperative to know how the different

segments perceive your products and what the values, needs and expectation of these

consumers are.

Although understanding their consumers is an important component of a retailers market

analysis, retailers must also focus on determining internal influences in order to identify their


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own capabilities, strengths and weaknesses.

According to Hawkins, Best & Coney (2001:14) retailers must consider the external influences

in their business environment and should try and answer questions such as: What is the effect

of inflation, recession, interest rates, new technological products and the internet on their

business? Dunne, Lusch & Gable (1995:6) agree with Hawkins et al. (2001:14) and add that

the behaviour of competition, the behaviour of consumers as well as social trends must be

continuously monitored by retailers. These effects influence consumers buying decisions

and therefore their behaviour towards purchasing. South Africas business environment as

well as the international arena has become increasingly turbulent in recent times. Competition

is much stronger than before, with more and more retailers joining the market. Now, more

than ever before it is imperative to understand the actions and strategies of competitors. After

retailers have analysed their market they can identify potentially profitable segments and then

choose a target market.

Lamb et al. (2004:104) point out that to survive in this competitive environment a retailer must

have a competitive advantage, which means the retailer provide the target market with more

value than competitors. In order to provide superior value to students retailers need to

anticipate and react to students needs. Thus understanding students behaviour is the basis for

marketing strategy formulation. Students reaction to the retailers marketing strategies will

determine a retailers success or failure.

This studys aim is to provide the necessary information for retailers on the buying patterns,

preferences and decision-making of students, to enable retailers to formulate effective


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marketing strategies. This chapter will first define marketing and consumer behaviour and then

focus on the importance for retailers of understanding consumer behaviour in order to develop

successful marketing strategies.

2.2 DEFINITION OF MARKETING, CONSUMER BEHAVIOUR & RETAILING

2.2.1 Marketing

Marketing plays a major role in any business and is viewed by Jones (1999:1) as a process that

starts with identifying customer groups, finding out about their needs and wants, matching

what the business can offer with what the customer wants and then effectively communicating

and selling to the customer. Jones (1991:2) and Kotler (2003:5) agree that marketing is much

more than selling, advertising and sales promotion. Although the primary aim of marketing is

to satisfy the needs of customers, it involves a cluster of activities such as product/service

innovation, design, development, distribution, advertising, selling and how the product/service

is acquired and used by the customer. Baker (1999:9) regards marketing as the process of

planning and executing the conception, pricing, promotion and distribution of ideas, goods and

services to create exchange that satisfies individual and organizational objectives. Mercer

(1992:12) agrees with the above definitions but points out that the key element of marketing,

unlike other business activities, is looking outward: It is firmly centred with the customer. The

key aspect of marketing is a state of mind. It requires that, when taking marketing decisions,

the business owner must approach these decisions from the viewpoint of the customer. The

customers needs and wants will drive these decisions. The most difficult part of marketing,

the key to success, is that of adapting to the customers viewpoint. According to Czinkota,


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Kotabe & Mecer (1997:4) the American Marketing Association formally defines marketing as:

The process of planning, executing the conception, pricing, promotion and distribution of

ideas, goods and services to create change that satisfies individual and organizational

objectives.

Although the abovementioned definition emphasizes the importance of the exchange concept,

Mowen (1995:6) points out that it neglects the concept that marketing aims to fulfil the needs

and wants of consumers. In Mowens view downplaying a consumer focus is a setback for

marketing. Understanding consumer behaviour can assist the retailer in obtaining the

information on consumers needs and wants, which will enable him to develop the most

effective marketing strategies. Mowen (1995:7) continues by stating that the importance of

understanding consumer behaviour is found in the definition of marketing as a human activity

directed at satisfying needs and wants through a human-exchange process.

From these definitions emerge two key marketing activities: First the marketer attempts to

satisfy the needs and wants of the target market and secondly marketing involves the study of

the exchange process between two parties and the exchange of resources. Consumers receive

products and services from companies in return for monetary and other methods of

compensation. For a retailer to create a successful exchange, he must understand the factors

that influence the consumers buying behaviour. Baker (1999:8) states that marketing is the

whole business seen from the point of view of its final result, that is, from the customers point

of view.

For the purpose of this study marketing is defined as the process of planning and executing the


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conception, pricing, promotion and distribution of ideas, goods and services to create

exchanges of resources between two parties to reach the organisations objectives but

ultimately to satisfy the needs of the customers.

2.2.2 Consumer behaviour

Berman & Evans (2001:15) use the previously discussed definitions of marketing to define

consumer behaviour as the study of buying units and the exchange process involved in

acquiring, consuming and disposing of goods, serves, experiences and ideas.

Hawkins et al. (2001:7) define consumer behaviour as the study of individuals, groups or

organisations and the processes they use to select, secure, use and dispose of products,

services, experiences, or ideas to satisfy needs and the impacts that these processes have on the

consumer and society.

Peter & Olson (2002:6) see consumer behaviour as the dynamic interaction of affect and

cognition, behaviour, and the environment by which human beings conduct the exchange

aspects of their lives.

The link between marketing and consumer behaviour is not just evident in the definitions

discussed above but also in the marketing concepts that indicate the important role of the

consumer and understanding the consumers buying behaviour, to ensure success for retailers.

For the purpose of this study consumer behaviour is defined as the study of the buying


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behaviour (acquiring, consumption and disposing of goods, services and ideas) of final

consumers individuals and households who buy goods and services for personal

consumption.

2.2.3 Retailing

Because this study focuses on supplying information to retailers in the Witbank area, a brief

explanation of retailing is necessary. Terblanche (1998:22) points out that a retailer is a

business that focuses its marketing efforts on the final consumer. It also takes many forms,

such as shop retailers, sales over the telephone, door-to-door sales as well as vending

machines. According to Dunn et al. (1995:4) retailing can be defined as the final activities and

steps needed to place merchandise in the minds of consumers or to provide services to

consumers. Cox & Brittain (1996:3) see retailing as the sale of goods and services to the

consumer for personal, family or household use.

For the purpose of this study retailing is defined as the business activities or steps required to

sell goods and services to final consumers for use or consumption by themselves, their

families or their households.

2.3 THE MARKETING CONCEPT

According to Van der Walt et al. (2000:20) the marketing concept is a management

philosophy with the basic premise that a business needs to research the needs and wants of

customers and then produce products or services that will satisfy these needs and wants.


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Churchill & Peter (1998:12) describe the marketing concept as an organization that satisfies

customer needs and wants as a means to achieve their own objective of maximizing profit.

Although it seems simple, it is complex in the sense that changes within the economic, social,

political and technological environment constantly leads to changing customer needs and

wants. According to Lamb, Hair & McDaniel (2004:17), retailers who want to survive in the

future will have to be customer focused, market driven, global in scope and flexible in its

ability to deliver superior value to customers whose preferences and expectations change

continuously as they are exposed to new product offerings. Foxall & Goldsmith (1998:7) feel

that consumer orientation stems from retailers adoption and implementation of the 4 Ps

(Price, Product, Promotion and Place), but adds that the adoption and implementation of the

marketing concept has four major implications:

The success of any firms depends above all on the consumer and what he is willing to

accept and pay for.

The firm must be aware of what the market wants, preferably well before production

commences.

Consumer wants must be continually monitored and measured so that, through product and

market development, the firm keeps ahead of competitors.

Top management must achieve the integration of all components of the marketing strategy

into a single strategic plan, based upon knowledge of consumer behaviour.

Mowen (1995:4) underlines the importance of the marketing concept by stating that the

marketing concept embodies the view that an industry is a customer-satisfying process, not a


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goods-producing process. An industry begins with the customer and its needs, not a patent,

raw material, or selling skill. The general acceptance of the concept that a business functions

to fulfil consumers needs and wants through understanding their exchange partner

(customer) makes the study of consumer behaviour essential. Mowen (1995:5) and Churchill

& Peter (1998:13) agree that the basic idea of the marketing concepts is to give the customers

what they want. However, consumers are not always sure of their wants or what they are being

offered, and are much more open to persuasion than is commonly acknowledged by the

marketing concept. Du Plessis & Rousseau (1999:204) summarize their viewpoint of the

marketing concept by stating that instead of trying to change the world, the philosophy

suggests that the retailer should find out what the world wants and try to change it. The central

idea of the concept is that the whole company should look outwards to find out what the

customer wants.

According to Kotler (2003:20), the above-mentioned definitions of the marketing concept

indicates that there are four basic principles on which the marketing concept is based:

Consumer orientation / Target market

Long-term maximisation of profitability.

The integration of all business activities directed at profit and the satisfaction of consumer

needs, demands and preferences.

Social responsibility.

If retailers want to be successful in todays dynamic, competitive arena they should adhere to


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principles of the marketing concept, especially being consumer oriented, when doing business.

The abovementioned principles will be discussed in the next section.

2.3.1 Customer orientation

According to Kotler (2003:20) retailers have to carefully choose their target markets and then

prepare a tailored marketing program. Engel, Blackwell & Miniard (1995:36) view consumer

orientation, as the first principle of the marketing concept, indicating that all actions should be

aimed at satisfying consumer needs, demands and preferences. Although this implies that the

consumer objective is to achieve total need satisfaction, it does not mean that a retailer must

provide for unrealistic consumer needs. According to Van der Walt et al. (2000:21) the retailer

can provide need satisfaction only as far as its resource enable it to do so. Achieving the

profitability objective must also be taken into account in the endeavour to provide for

consumer needs. However, failure to appreciate what the consumer wants creates opportunity

for competitors and can adversely affect profit. Cox & Brittain (1996:4) identified several

functions that a retailer can offer their customers:

Convenient location.

An assortment of merchandise appropriate to the particular market.

Reducing bulk so that small quantities can be sold.

Helping to effect change of ownership.

Providing information not only to customers but also to suppliers.


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Providing credit and hire purchase facilities.

Providing some facility for social interaction.

Holding stock for instant availability at relatively stable prices.

Providing guarantees, after sales services and dealing with customer complaints.

A customer-oriented retailer decides who the target customer is and then finds out what their

needs and wants are. The net result should be the creation of goods and services that satisfy

customers expectations. According to Foxall & Goldsmith (1998:8) companies must start out

with the customers utility, what the customer buys, what the realities of the customer are and

what the customers values are this is what marketing is all about. This study attempts to

gather the necessary information to enable retailers to uncover the needs and wants of the

student market in Witbank and to decide which functions they must provide for the students to

satisfy their needs.

2.3.2 Integration and coordination of activities

Machado & Niewenhuizen (1996:42) define a system as an integrated whole a group of

related units working together to achieve a joint objective. This second dimension suggests

that marketing activities should be closely coordinated with each other and with the other

functional areas such as production, finance, human resource and purchasing. The marketing

concept has been a useful mechanism in helping to unify the independent functional areas to

increase customers satisfaction and improve profits.


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All four marketing instruments (prices, product, promotion & distribution) should complement

and reinforce one another in such a way that the student market will prefer the retailers

marketing offerings to that of competitors in Witbank.

2.3.3 Maximizing long-term profit

According to Strydom et al. (1997:21) it is of crucial importance in the free market system to

achieve long-term profitability. Maximizing profitability is the primary objective of a profit

seeking enterprises and can be achieved only through the consideration of consumer needs.

The third objective is directed at achieving the market share, return on investment and

personal goals of the owners of the business. Marketing plans and corporate goals must be

closely coordinated to ensure profitability.

According to Zikmund & dAmico (2001:20) the pure marketing concept disregards

environmental changes and problems and focuses on short-term customer satisfaction rather

then on the long-term well being of society. Involvement and concern for the environment and

the society in which the marketing task is performed are typical characteristic of a strategic

approach to marketing management. The retailer should therefore strive to obtain the goodwill

of the society rather than only the support of the student market. Kotler (2003:22) agrees with

this view of the pure marketing concept by stating: It asks if the firm senses, serves and

satisfies individual wants, and is always doing what is best for consumers and society in the

long run. The pure marketing concept ignores the possible conflict between short-term

consumer wants and long-term welfare.


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The above discussion shows the importance of adding a fourth dimension to the marketing

concept social responsibility to ensure a retailers long-term survival.

2.3.4 Social responsibility

Lancaster et al. (2001:21) point out that social responsibility does not just involve external

groups such as the authorities, consumers and the public, it is also the responsibility towards

an enterprise's own employees and goes much further than mere welfare programs. All

employees must be made aware of the importance of marketing. Van der Walt et al. (2000:23)

state that one way of making employees aware of the importance of marketing is to use

informal marketing programs. Informal marketing programs inform employees about

marketing objectives, the nature of environmental threads, successes that have been achieved

and even the content of marketing communication messages. Social responsibility also means

retailers will abstain from any action that is in conflict with current norms of society or moral

and ethical standards. Contravention of the norms may lead to a loss of goodwill and

consumer resistance. The retailer must further show responsibility by adherence to formal

rules and regulations. Spending money on social responsibility projects results in a lot of

criticism. Some marketers feel that as a profit seeking enterprise its responsibility is only for

profits for its shareholders, since deliberate profit seeking will ultimately benefit society as a

whole. Dividends acquiring to shareholders is regarded as wasted on projects aimed at the well

being of society. Although these are valid arguments, Van der Walt et al. (2000:24) and

McGolddrick (1994:56) defend their viewpoint by stating:

Projects aimed at well-being do have marketing advantages. By sponsoring a retailer can


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establish brand loyalty for its product in specific target markets, like Pick n Pay

sponsoring the Olympic Games and providing retailers with exposure in the community.

An imaginative and unusual social responsibility program can result in favourable

publicity because it is regarded as newsworthy by the mass media.

By demonstrating social responsibility the retailers in Witbank can earn the goodwill of the

public. This has a long-term dimension that can favourably influence the future profit position

of a retailer.

2.3.5 Application of the marketing concept

Since the marketing concept focuses on the customer and its needs, it is also applicable to

retailers because they all serve customers. Like every good concept the value of the marketing

concept lies in its use and application by retailers. According to Moerdyk (2001:43) the

marketing concept is often just words framed on the wall of a company like we care for our

customer, instead of a genuinely caring attitude. Moerdyk feels that it is too often just a cute

saying in the reception area that actually means nothing. The marketing concepts four

principles definitely have merit and phrases like We care and The customer is king are all

extremely valid concepts that can work as a sound business strategy. It is just that consumers

nowadays dont believe them anymore. In addition, companies who use those concepts dont

believe them either because most companies regard these concepts as a quick fix. Retailers

must be true in their attempts to run their business according to the marketing concept,

otherwise students will see through their facade. In the discussion of the marketing concept

and the four underlying fundamentals, it is clear that the marketing concept has certain


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implications for consumer behaviour and the understanding of consumer buying behaviour.

According to Asseal (1995:9) and Mowen (1995:16) the following implications of the

marketing concept can be identified:

Providing a spur to consumer behaviour research. Due to the fact that consumer

satisfaction is one of the four fundamental principles underlying the marketing concept,

and understanding of the consumer will enable maximising profit in the long run.

Creating a more customer oriented framework for marketing strategies because marketing

strategy will only be successful if the price, product, promotion and place are coordinated

with the customers needs in mind.

Encouraging measurement of the factors that influence consumers to purchase, in order to

use those factors to make effective decisions and choose successful marketing strategies.

Emphasising market segmentation in order to satisfy needs better with a market offering

specially develop for a specific group of customers.

Emphasising product positioning to meet consumers needs.

Products are developed and advertised to establish qualities that set them apart from

competitors and to relate these qualities to the needs of a defined market segment.

From this it is clear that by accepting the marketing concept, retailers have recognized that

consumer behaviour has a direct bearing on the formulation of a marketing strategy.


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2.4 MARKETING STRATEGY AND CONSUMER BEHAVIOUR

Berman & Evans (2001:218) point out that a retailers ability to devise and apply a sound

strategy depends on how well that firm identifies and understands its customers, and forms its

retailer strategies to appeal to customers. This entails identifying the characteristics, needs and

attitudes of consumers as well as recognizing how people make purchase decisions and then

devising an appropriate market stratetgy.

Hawkins et al. (2001:14) point out that a marketing strategy basically answers the question:

How will we provide superior customer value to our target market? The answer requires the

formulation of a consistent marketing mix.

From the previous two sections it is evident that retailers need to study and understand their

consumers behaviour. Lamb et al. (2004:12) state that if retailers have the necessary

knowledge about students, they can evaluate the feasibility of serving them as a target market

and develop an effective marketing strategy, which will result in maximizing long-term profit

while simultaneously satisfying their needs. According to Hawkins et al. (2001:7) an effective

marketing strategy is based on knowledge of consumer behaviour. This process, as seen in

Figure 2.1, begins with the analysis of the market, the retailer is considering. It requires a

detailed analysis of the retailers capabilities, strengths and weaknesses, competition, the

economical and technological forces affecting the market and the current and potential

customers in the market. Based on the consumer analysis portion of the first step, the retailer

identifies groups of individuals with similar needs. The identified market segments, in step

two can then be described in terms of demographics, media preference and geographic


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FIGURE 2.1: MARKETING STRATEGY AND CONSUMER BEHAVIOUR

OUTCOME

Customer SatisfactionSalesProduct/brand image

CONSUMER DECISIONPROCESS

Problem recognitionInformation searchAlternative evaluationPurchase andUsePost purchase process

MARK ETING STRATEGY

ProductPricePromotionPlace/Distribution

MARKET SEGMENTATION

Identify product-related need setsGroup customers with similar need setsDescribe each groupSelect attractive segment(s) to targetProduct positioning

MARKET ANALY SIS

CompetitorsCompany

ConsumerConditions

Source: Adapted from Hawkins, Best & Coney (2001:8)


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location. One or more of these segments are then selected as target markets, based on the

retailers capabilities relative to those of its competition, taking into account current economic

and technological conditions. The third step entails the marketing strategy formulation. Lamb

et al. (2004:12) point out that this step involves the determining of product features, price,

communications and distribution that will provide the customer with superior value. The total

product is then presented to the target market, which constantly engages in processing

information and making decisions to enhance and maintain their lifestyles. The decision

making process of consumers and outcomes will be discussed in chapter three. The other three

components ofFigure 2.1: market analysis, market segmentation and marketing strategy will

now be discussed.

2.4.1 Market analysis

According to Strydom et al. (2000:34) a retailers objective is to provide superior value to

customers. In order to provide superior value a retailer must know (a) how consumers

determine value, (b) its own capabilities, (c) its competitors capabilities with respect to

customer value creation and (d) relevant economic, physical and social environments.

The environmental factors/ market conditions (economic, physical & social) that can impact

on retailers in South-Africa, and specifically in the Witbank area, will now be analysed.

2.4.1.1 Conditions

In order for retailers to understand the environment in which they operate, Cox & Brittain


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(1996:34) point out that the larger forces in society should be studied to detect social and

economic trends and the effects of technology as well as government policies.

According to Mowen (1995:19) an environmental analysis consists of the assessment of the

various external forces that act upon the firm and its markets. Through environmental analysis,

retailers can identify potential marketing opportunities and liabilities. The state of the

economy, physical environment, government regulations, social-cultural changes and

technology can affect consumers needs and expectation as well as a retailers capabilities and

the competitive arena.According to Walker, Boyd, Mullins & Larreche (2003:25) retailers do

not function in isolation and therefore they are influenced by the external market conditions in

the country in which they operate. Conditions in the external environment constantly change

and these changes either result in a favourable situation, which retailers can utilise to expand

and grow, or it may result in a negative situation which threatens the existence, survival or

growth of the retailer. It is vital that retailers in the Witbank area constantly scan the

environment in order to be prepared to make use of these opportunities or to defend

themselves against possible threats.

These social and economic trends that can lead to opportunities or threats for retailers will now

be discussed.

(1) Urbanization

According to McCann (2000:6) Africa is undergoing rapid urbanization. It is predicted that by

the year 2010, 60 percent of the African population will be living in cities. No country can


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build an infrastructure that fast, so squatter settlements are likely and retail media will thus be

able to reach more people. The increase in urbanization will amplify television penetration in

cities. According to ABSA: Economic Perspective (2001:7) the fast rate of urbanization in

Africa has now become a variable retailers must consider. The economists continue by stating,

An annual influx of about one million blacks in urban areas is likely to occur over the next

two decades. In the year 2000 about 74% of the South African urban population was black,

rising to a possible 81% by 2004.

Increasing in urbanization accompanied by employment could result in wage increases and

increased purchasing power, which increase the capacity of customers to consume more and

more goods and services. According to Malumu (1992:67) an increase in disposable income

means an increase in the range of demand, which impacts on retailers sales.

(2) Economy

Frain (1992:34) states that a retailer or any other firms activities will be affected by changes

in the value of money (inflation rate), the general level of economic prosperity, and the cost of

resources. According to ABSA: Economic Perspective (2003:1) their was a decline in the

average growth rate from 3.8% in 2002 to 1.8% in 2003. In 2004 the economy is expected to

respond positively to lower interest rates and the growth rate is expected to pick up to 2.4% in

2004 and in 2005 the economy is expected to achieve a 3% average growth rate. According to

ABSA Corporate and Merchant Bank (2003:84) the Rand is expected to return to a gradual

weakening trend in 2004. The domestic economy was in a downward sweeping phase due to

worldwide economic downslide but according to ABSA: Economic Perspective (2003:13) the


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economy will recover slowly from the recent growth slump. This will lead to stronger export

and eventually will cause an increase in consumer spending, which is good for retailers. The

increase in the petrol price, which leads to other increases, is another negative aspect affecting

possible consumer spending. Inflation showed a rise on a year-to-year basis from 9.2% in

2000 to 14.2% in 2002 but ABSA forecasts a decline to 1.4% in 2004. If the inflation rate

decreases, consumers can buy more with their money and retailers sales improve. According

to ABSA: Economic Perspective (2003:20) households will try to maintain their standard of

living by decreasing savings from 12% of disposable income in 1970 to 0,4% in 2002 and is

expected to remain at a low average level of 0.3% for the period 2003 - 2004. On the other

hand an increase in consumer borrowing occurred from 42% in 1979 to over 52.4% in 2002

and a average of 51.5% - 53.29% is expected for the period 20032007. According to Coetzee

(2002:42) South Africa had the highest unemployment rate of developing countries, 23.3% for

1999. Unemployment is currently estimated as 30% - 42% of the total workforce. From the

abovementioned it seems that if consumers are unemployed, their purchasing power decreases

and that leads to retailers markets shrinking.

Slabber (2002:254) states that higher interest rates and high inflation reduce consumers

disposable income and that retailers will feel these effects rapidly. Inflation, unemployment

and the exchange rate (discussed above) have a big impact on all businesses selling goods and

services, because as soon as the economy and customer are influenced, business will feel the

results in increased cost, and a decrease in their sales and profits.

Economists argue that as some peoples living standard improve, the poor are getting even

poorer. This may impact negatively on retailers selling to the lower-income groups of which


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may include students.

(3) Social Trends

The Intelligence Factory (2001:3) states that people are better informed now than ever before.

Students are stimulated by new ideas and sensations, and react more quickly and in greater

volume to fashion changes. This puts greater pressures on retailers, no mater what they are

selling. Retailers must be able to recognize an emerging trend early to capitalize on it.

According to Walker (2003:91) factors affecting consumers choice, and social changes are of

great interest to retailers. All consumer goods companies are directly influenced and

sometimes speedily affected by changes in the states and attitudes of consumers.

There is currently an increase in women between the ages 20 40 joining the work force.

These women have dual responsibilities in terms of career/studies and household, and

therefore require goods and services that will make their task easier. Ample opportunities exist

for retailers to satisfy the needs of these women and to help them to cope with their dual

responsibilities. In recent times a substantial number of single households has developed,

which means more opportunities for retailers to explore in terms of satisfying their needs.

According to Statistics South Africa (2002) a massive socio economic shift has taken place

over the past few years. The study shows remarkable growth in expenditure by Asians and

Blacks, modest growth for Coloureds and virtually none for Whites. Retailers that focused on

white market segments will have to rethink their choice of target market. Spending by black

households on housing and electricity has increased by 23% per annum compared to an

increase of only 5% among whites. Furniture and household spending increased by 13% for


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blacks and decreased by 0.4% for white consumers.

The Population of South Africa was estimated as 44,819,778 during the 2001 census and

according to ABSA: Long-term Prospects for South Africa (2003:11) Africa is expected to

continue to show the highest population grow at a average rate of 2.3% compared to the rest of

the world, 80% being black and almost 10 % being white in South Africa. This means that

markets are growing and that there is a bigger group of potential customers out there for

retailers to sell to. As the population and disposable incomes of different racial groups change,

so will their buying patterns change. The above figures indicate the number of people who will

need basic consumer goods such as food and clothing. This offers retailers tremendous

opportunities to explore and invest in meeting those needs

According to Malumo (1992:33) an educated and longer living customer provides a longer

lasting and more accessible market to the retailer. Increased development often means

increased health and education for the general population. Although this sounds good in theory

the effect of AIDS on health care and population growth must be taken into account.

According to the Department of Health: Summary report 2002, South Africa is regarded as

having one of the highest HIV/AIDS (Acquired Immune Syndrome) prevalence rates in the

world with a estimate of 4.7 million South African living with HIV/AIDS. The study

conducted by the Department of Health found that HIV prevalence in the South African

population to be 11.4% with the 1525 age group, which is the age group the majority of

students belong to, being most vulnerable to infection. They envisage that by the year 2005,

about half a million people would have died of AIDS, which will reduce the population

growth rate to 1,7% per annum. The US Census Bureau predicts that by 2010, life expectancy


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will have declined from 60 years to around 30 years in the worst affected countries, of which

South Africa is one. The social and economical implication is far reaching. Health care

expenditure, poverty and cost of labour, productivity, income distribution and ultimately lower

economic growth will impact on every business worldwide. Household spending affected by

AIDS will change from spending on non-durables to services, especially health care.

A decline in the population growth will have a negative impact on non-durable and to a lesser

extent semi-durable consumption, as these expenditure components are influenced by the size

of the population and will negatively influence the profitability of retailers. Retailers need to

be aware of the fact that students form part of the age group that is the most vulnerable to

AIDS/HIV infection and as seen from the above discussion can influence their buying

behaviour.

2.4.1.2 Consumer analysis

According to Cox & Brittain (1996:33) potential customers should be studied to determine

their motivations: how, why, what and where they buy and if there are needs which are not

being totally satisfied.

According to Hawkins et al. (2001:9) it is not possible to react to customers needs and desires

without a complete understanding of their behaviour. Knowing customers current needs is

reasonably complex but can be determined through research. According to Penstone

(1998:115) consumer insights indicate that, psychologically, the black middle class is

remarkably the same as the traditional white middle class. The author states that while there is


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some difference between the white and black middle class, the gap is narrowing. Ives

(1999:122) asserts that the evolving black middle class segment is expected to continue to

surge to become the countries most formidable consumer group. This view is supported by the

AMPS study, which indicates this social- economic shift. Knowing your customer, according

to Dunn et al. (1995:69), will provide the necessary information that will enable retailers to

develop long-term strategies and objectives. In order for retailers to understand their

consumers they need information on the following characteristics:

Demographic characteristics such as, age, gender, income and marital status are

essential descriptors that help retailers know their customer. Although they do little to

tell us how customers think or what they actually do they give retailers labels for

certain customer groups, which help retailers to track and analyse the same customers

through different segmentation schemes. According to Berman & Evans (2001:220) it

is important for retailer to determine the following:

- What are the prime age groups to which the firm appeals?

- Is the target market predominately male /female?

- Is the target market lower, middle of higher income?

- How many consumers are there in the target market?

- What is the customers level of education?

- Ethnic/racial background: Does the target market consist of a distinctive racial or

ethnic subgroup.


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Another variable that provides insight into customers is their economic characteristics,

i.e. measures of prosperity or lack thereof in the environment that a retailer seeks to

operate.

Psychographical characteristics are the measure of attitude, interest and opinions of the

population. These characteristics help retailers to understand trends and difference

between consumer segments, identify unserved market needs and understand market

positioning image.

Behavioural characteristics describe the annual shopping behaviour and buying

patterns of consumers such as recognizing a need for merchandise, selecting a store

and comparing prices and purchases. Behavioural information can help retailers

enhance their sales productivity.

This study will provide the necessary demographic information as well as economical and

behavioural characteristics of students at Witbank campus, to enable retailers to better

understand the student market.

2.4.1.3 Company analysis

A retailer must fully understand his own ability to meet customers needs. According to Asseal

(1995:43) this involves evaluating all aspects of the firm, including its financial condition,

general managerial skills, production capabilities, research and development capabilities,

technological sophistication, reputation and marketing skills. Marketing skills include aspects


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such as new product development, advertising abilities, service capabilities, marketing

research ability and market and consumer knowledge. In order to select the appropriate

strategies, retailers must analyse both the internal and external environment.

One way of accomplishing the above-mentioned environmental scanning is to do a SWOT

analysis. Kotler (2003:104) define it as a systematic evaluation of the organizations internal

strengths and weaknesses and external opportunities and threats. Strengths of retailers may

include customer loyalty, financial resources or the ability to produce goods and service at a

relatively low cost. Possible weaknesses may include high cost, lack of financing, brands that

are not well known or a poor location. According to Berman & Evans (2001:71) in order to

succeed a retailers strategy must anticipate and adapt to the changing business environment.

A good retailer fully utilizes emerging opportunities and threats, which are identified in the

external environment. Cox & Brittain (1996:33) points out that factors to be considered in

determining strengths and weaknesses include variables such as the retailers location,

merchandise, personnel, store layout, management capacity, financial aspects, market share

position, retailing mix and operations. Terblanche (1998:92) agrees with Cox & Brittain

(1996:33) and adds that with respect to the above areas of strength or weaknesses, retailers

must ask themselves the following questions in respects of each area:

How good are we in this area of operation or activity?

How do we compare to our competitors with respect to this area?

Which area has unique capabilities that can be turned into a sustainable competitive

advantage?


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Will we be able to maintain this strength under competitive pressures?

Which areas have weaknesses that can inhibit our performance?

Retailers will be able to deal with some threats without major inconvenience or loss of profit,

while other threats could mean the end of a business. However, it is important that retailers

should list all possible threats and consider measures to deal with each.

The SWOT analysis needs to be done by each retailer and will assist the retailers in Witbank

to differentiate their business from those of the competition.

2.4.1.4 Competitor analysis

It is not possible for a retailer to meet the customers needs better than the competition without

an understanding of competitors capabilities and strategies. It is important for retailers to

identify a competitive gap. Czinkota et al. (1997:294) state that a competitive gap refers to the

differences in effectiveness of a firms marketing strategy relative to its competition in the

same product market. According to Mowen (1995:19) retailers must try to answer the

following questions in order to acquire knowledge on competition:

If we are successful, which competitors will be hurt? (lose sales or sale opportunities)

Of those firms that are affected, which have the capabilities (financial resources and

marketing strengths) to respond?

How are they likely to respond: reduced prices, increased advertising or the introduction of


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a new product?

Is our strategy robust enough to withstand the likely action of our competitors or do we

need additional contingency plans?

According to Baker (1999:22) retailers need to anticipate competition from existing

competitors, new entrants, substitute products, suppliers and buyers on a global basis.

Retailers in the Witbank area have to investigate the number and size of competitors locally as

well as nationally and evaluate competitors strengths and weaknesses to gain a competitive

advantage.

2.4.2 Market segmentation

Once a retailer is aware of whats happing in the environment, who the competition is and who

the customers are, the retailers can move on to the next step, as reflected in Figure 2.1. A

retailer must keep in mind his own capabilities, look at the heterogeneous market and try to

group customers in homogenous subgroups in order to satisfy their needs better than

competitors. In marketing theory, segmentation is a central component of strategic or target

marketing. According to Du Plessis & Rousseau (1999:49) it is not the only part, but rather the

first part of a three-phase process called STP marketing: Segmenting, targeting and

positioning.


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2.4.2.1 Definition and importance of segmentation

A strategy of market segmentation requires identifying customers with similar needs or

characteristics and targeting these segments with a product offering. Foxall & Goldsmith

(1998:16) define segmentation as the necessity of subdividing the large mass market into

smaller segments containing a relative homogenous group of consumers. According to Asseal

(1995:411) the basis for segmentation is grouping customers according to similarities in what

they want (benefits and attitudes) and who they are (demographics, lifestyle and personality).

In addition to segmenting, marketers must position their product to meet the needs of these

segments. Before targeting market segments for marketing effort retailers must first identify

these groups. Once the needs, brand attitudes, demographics and lifestyle characteristics of a

target market are identified marketers can develop products and a marketing strategy to appeal

to them.

Foxall & Goldsmith (1998:49) argues that segmentation is important because retailers need to

create a marketing mix that reflects consumers subjective, perceptual and cognitive

processing of information about such matters as their lifestyle, values and motivation.

Segmentation and selection of the markets make the allocation of corporate resources more

efficient in the sense that funds and manpower are allocated to relatively smaller groups of

consumers than would be the case if the whole market were targeted. Strydom et al.

(2000:105) state that a large, growing segment may be allocated a greater proportion of the

marketing budget, while a shrinking one may be scaled down. Segmentation makes the design

of marketing strategy more effective because the retailer has the sense of directing resources at

specific identifiable groups of people instead of a diverse collection of individuals. According


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to Foxall & Goldsmith (1998:9) effective market segmentation is impossible without thorough

consumer research that leads to an incisive understanding of the economy as well as social and

(where relevant) psychological position of the consumer. Therefore, the identification of the

needs and characteristics of target groups is a prerequisite to product positioning. In addition,

the success of positioning strategies depends on how the target segments react to the

marketing strategies directed at them.

According to Dunn et al. (1995:69) market segmentation helps retailers to understand who

their customers are, how they think, and what they do, enabling them to build a meaningful

picture of consumer needs, desires, perceptions, shopping behaviour and the image these

consumers have of the retailer in comparison with other retailers.

The study of consumer behaviour will provide retailers with information so they can decide

which basis of segmentation to use, which techniques to use to develop customer profiles and

to help them to determine if the student market is a feasible market segment.

2.4.2.2 Bases for segmentation

Retailers can utilise different variables when segmenting the student market. Gilbert et al.

(1998:205) point out that in choosing a basis of segmentation, retailers rely on their knowledge

of the market and current trends in purchasing and marketing research. According to Asseal

(1995:413) there are five bases for segmentation:


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(1) Benefit segmentation

Here retailers first identify the needs or benefits consumers seek and then segment consumers

by differences in benefits sought. According to Van der Walt et al. (2000:114) consumers may

seek different benefits like economy, convenience or prestige when buying a specific product

from retailers. Czinkota et al. (1997:208) define benefit segmentation by pointing out that

different customers, or groups of customers, look for different combinations of benefits, and it

is these groupings of benefits that then define the segment. Retailers can segment on the basis

of quality, for example Pep Stores aiming at the lower quality end of the clothing market. The

price of products, charging goods to their accounts and loyalty status are other examples of

possible benefits sought by the student market.

The information obtained from this study attempts to identify the benefits students seek.

(2) Behavioural segmentation

According to Cox & Brittain (1996:73) behavioural segmentation is the grouping of customers

according to certain aspects of their behaviour in relation to the store. One such example is

occasion-segmentation, where customers are grouped according to when they develop a need.

Identifying the characteristics of users and non-users of your products to determine if they are

the target market is called behavioural segmentation.

According to Mowen (1995:236) the following variables can be used in behavioural

segmentation:


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Brand usage (non-user, ex-user, potential user, regular user). According to Gilbert et al.

(1998:215) existing customers may be more profitable to serve than potential customers,

but serving only existing customers limits growth potential.

Product category usage: In many situations, the consumers most likely to purchase a

product are those who have purchased the same or similar product in the past.

Level of product use (heavy, light).

Information on the brand usage and level of usage of students can provide retailers with the

necessary information to apply behavioural segmentation.

(3) Response elasticity

A third type of segmentation, according to Asseal (1995:414), is response elasticity. Marketers

may wish to identify consumers by their responsiveness to a marketing strategy. Examples are

brand switching, user frequency and the influence of advertising. In essence: Is the consumer

sensitive to change?

(4) Demographic segmentation

According to Terblanche (1998:102) demographics are suitable for segmenting retail markets:

Age is one variable that can be used, for example the teenage market contains many

buyers of music tapes and compact discs.


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Gender: Clothing retailers can specialise on the basis of gender, for example ladies

boutiques.

Ethnic groups: Ethnic groups may in some instances have particular food requirements.

Income: Low-income groups may shop at Pep Stores, who aims for the lower income

groups, while higher income groups shop at Stuttafords.

Educational level is also a useful tool for bookstores or even computer equipment firms

to segment the market.

The age, gender, ethnic group, income and educational level are all demographical variables

that retailers in the Witbank area can make use of to segment the students market.

(5) Generation-based segmentation

Mowen (1995:54

finaniial ascepts

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