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7 Chapter 7 Identifying and Understanding Consumers Dr. Pointer Notes.

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1 7 Chapter 7 Identifying and Understanding Consumers Dr. Pointer Notes

2 7-2 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

3 7-3 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

4 7-4 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

5 7-5 Figure 7.1 What Makes Retail Shoppers Tick Retail Shoppers Life-Styles Demographics Environmental Factors Retailer Actions Shopping Attitudes and Behavior Needs and Desires

6 7-6 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

7 7-7 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

8 7-8 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 services  25% of all U.S. adults age 25 and older have at least graduated from a four-year college

9 7-9 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

10 7-10 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

11 7-11 Understanding Consumer Lifestyles: Social Factors Lifestyle Culture Reference Groups Social Class Family Life Cycle Time Utilization Household Life Cycle

12 7-12 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

13 7-13 Understanding Consumer Lifestyles: Psychological Factors Lifestyle PersonalityAttitudes Perceived Risk Purchase Importance Class Consciousness

14 7-14 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

15 7-15 Figure 7.2 The Impact of Perceived Risk on Consumers Consumers Types of risk Functional Physical Financial Social Psychological Time Factors affecting Perceived Risk Newness Budget Experience Number of alternatives Social visibility Outcomes Purchase new product Stick with old brand Talk to friends Seek more info nonpurchase

16 7-16 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

17 7-17 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

18 7-18 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

19 7-19 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

20 7-20 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

21 7-21 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

22 7-22 Attitudes Towards Shopping  Shopping Enjoyment  Attitudes toward Shopping Time  Shifting Feelings About Retailing  Why People Buy or Not on a Shopping Trip  Attitudes by Market Segment  Attitudes toward Private Brands

23 7-23 Top Reasons for Leaving an Apparel Store Without Buying  Cannot find an appealing style  Cannot find the right size  Nothing fits  No sales help is available  Cannot get in and out of the store easily  Prices are too high  In-store experience is stressful  Cannot find a good value

24 7-24 Table 7.3 Where America Shops: Household Purchases

25 7-25 Table 7.3 Where America Shops: Weekly Purchases

26 7-26 Cross-Shopping  Shopping for a product category at more than one retail format during the year  Visiting multiple retailers on one shopping trip

27 7-27 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

28 7-28 The Consumer Decision Process Need/Problem Awareness Information Search Eval of Alternatives Purchase Post Purchase Eval Demographics Lifestyle

29 7-29 Key Factors in the Purchase Act Retailer’s place of Purchase Retailer’s purchase terms Retailer’s goods and service availability Consumer’s purchase or nonpurchase

30 7-30 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?

31 7-31 Types of Consumer Decisions High RISK & TIME Low Extended Limited Routine

32 7-32 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

33 7-33 Types of Impulse Shopping  Completely unplanned  Partially unplanned  Unplanned substitution Impulse purchase is defined as a sudden urgent to buy without consideration of consequences of actions

34 7-34 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

35 7-35 Possible Retailer Approaches  Mass Marketing  Kohl’s Department Stores  Concentrated Marketing  Zutopia  Differentiated Marketing  Foot Locker

36 7-36 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

37 7-37 Environmental Factors and Consumers  State of the Economy  Rate of Inflation  Infrastructure for Shopping  Price Wars  Emergence of New Retail Formats  People Working at Home  Regulations on Shopping  Changing Social Values and Norms

38 7-38 Questions


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