2 QuestionsHow do customers decide which retailer to go to and what merchandise to buy?What social and personal factors affect customer purchase decisions?How can retailers get customers to visit their stores more frequently, and buy more merchandise during each visit?Why and how do retailers group customers into market segments?
4 Types of NeedsUtilitarian Needs –satisfied when purchases accomplish a specific task. Shopping needs to be easy, and effortless like Sam’s or a grocery store.Hedonic needs – satisfied when purchases accomplish a need for entertainment, emotional, and recreational experience as in department stores or specialty stores.
5 Hedonic Needs that Retailers can Satisfy StimulationEx: Background music, visual displays, scentsSatisfy need for power and statusEx: Canyon Ranch – upscale health resortsAdventureTreasure hunting for bargains
6 Information SearchAmount of Information Search Depends on the value from searching versus the cost of searchingFactors Affecting Amount of Information SearchProduct CharacteristicsComplexityCostCustomer CharacteristicsPast experiencePerceived riskTime pressureMarket CharacteristicsNumber of alternative brands
8 How Can Retailers Limit the Information Search? Information from sales associatesProvide an assortment of servicesProvide good assortmentsEveryday low pricingCreditRoyalty-Free/CORBIS
9 Evaluation of Alternatives Multiattribute attitude model:Customers see a retailer, product, or service as a collection of attributes or characteristicsPredict a customer’s evaluation of a retailer, product, or service based onIts performance on relevant attributesthe importance of those attributes to the customer
11 Getting into the Consideration Set Consideration set: the set of alternatives the customer evaluates when making a selectionRetailers develop programs influencing top-of-mind awarenessGet exposure on search engines like GoogleTry to be the top of the pageMore stores in the same area (e.g., Starbucks)
12 Methods for increasing the chance of store visit after getting into the consideration set Increase Performance Beliefs of Your StoreDecrease Performance Beliefs About CompetitorIncrease Importance Weight of Attributes on which You Have an AdvantageAdd a New Benefit on which You Excel
13 Purchasing Merchandise or Services Customers do not always purchase a brand with the highest overall evaluation.The high-rated item may not be available in the store.How can a retailer increase the chances that customers will convert their merchandise evaluations into purchases?The McGraw-Hill Companies, Inc./Jill Braaten, photographer
14 Postpurchase Evaluation SatisfactionA post-consumption evaluation of how well a store or product meets or exceeds customer expectationsBecomes part of the customer’s internal information that affects future store and product decisionsBuilds store and brand loyalty
15 Types of Buying Decisions Extended Problem SolvingHigh financial or Social RiskLimited Problem SolvingSome Prior Buying ExperienceHabitual Decision MakingStore Brand, Loyalty
16 Extended Problem Solving Consumers devote time and effort analyzing alternativesFinancial risks – purchasing expensive products or servicesPhysical risks – purchases that will affect consumer’s health and safetySocial risks – consumers will believe product will affect how others view them
18 Limited Problem Solving Purchase decisions process involving moderateamount of effort and timeCustomers engage in this when they have had prior experience with products or servicesCustomers rely more upon personal knowledgeMajority of customer decisions involve limited problem solving(c) Brand X Pictures/PunchStock
19 Make Sure Customer is Satisfied What do Retailers Need to do for Customers Engaged in Limited Problem Solving?It depends…If the Customer Is Coming to You, Provide a Positive Experience and Create LoyaltyMake Sure Customer is SatisfiedProvide Good Service, Assortments, valueOffer Rewards to Convert to Loyal CustomerIf the Customer Goes to Your Competitor’s Store, Change BehaviorOffer More Convenient Locations, Better Service and Assortments
20 Encouraging Impulse Buying Impulse buying: one common type of limited problem solvingInfluence by using prominent point-of- purchase (POP) or point-of-sale (POS)Have Salespeople Suggest Add-onsHave Complementary Merchandise Displayed Near Product of InterestUse Signage in Aisle or Special DisplaysPut Merchandise Where Customers Are WaitingPhotoLink/Getty Images
21 Habitual Problem Solving Purchase decision process involving little or no conscious effortFor purchases that aren’t important to the consumerFor merchandise consumers have purchased in the pastFor consumers loyal to brands or a store
22 If the customer habitually comes to you, reinforce behavior What do Retailers Need to do for Customers Engage in Habitual Decision MakingIt depends…If the customer habitually comes to you, reinforce behaviorMake sure merchandise in stockProvide good serviceOffer rewards to loyal customerIf the customer goes to your competitor’s store, break the habitOffer special promotions
23 Customer Loyalty Brand Loyalty Committed to a Specific Brand Reluctant to Switch to a Different BrandMay Switch Retailers to Buy BrandStore LoyaltyCommitted to a Specific RetailerReluctant to Switch Retailers
24 Social Factors Influencing the Buying Decision Process
25 Family Influences Buying Decisions Purchases are for entire family to useWhole family participates in decision making processRetailers work to satisfy needs of all family membersKids in the U.S. spend over $200 billion on personal items. They directly influence the purchase of another $300 billion worth of items such as food and clothing.
26 Reference GroupsA reference group is one or more people whom a person uses as a basis of comparison for beliefs, feelings and behaviors.Reference groups affect buying decisions by:Offering informationProviding rewards for specific purchasing behaviorsEnhancing a consumer’s self-image(c) image100/PunchStock
27 CultureCulture is the meaning, beliefs, morals and values shared by most members of a societyWestern culture: individualismEastern culture: collectivismSubcultures are distinctive groups of people within a culture
28 Approaches for Segmenting Markets Geographic segmentation groups customers according to where they live.Demographic segmentation groups consumers on the basis of easily measured, objective characteristics such as age, gender, income, and education.
29 Approaches for Segmenting Markets Geodemographic segmentation uses both geographic and demographic characteristics to classify consumers.Lifestyle, or psychographics , refers to how people live, how they spend their time and money, what activities they pursue, and their attitudes and opinions about the world in which they live.
30 Approaches for Segmenting Markets Buying situations can influence customers with the same demographics or lifestyle.Benefit segmentation groups customers seeking similar benefits.