Chapter 3 Retail Customers Retailing, 6th Edition. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved.

Learning Objectives Explain the importance of population trends to the retail manager. List the social trends that retail managers should regularly monitor and describe their impact on retailing. Describe the changing economic trends and their effect on retailing. Discuss the consumer shopping/purchasing model, including the key stages in the shopping/purchasing process.

Introduction Retail Mix: The combination of merchandise, assortment, price, promotion, customer service, and store layout that best serves the segments targeted by the retailer.

Introduction Customer Satisfaction: Occurs when the total shopping experience of the customer has been met or exceeded.

Consumer Spending Exhibit 3.1

Introduction Customer Services: Include the activities the retailer performs that influence (1) the ease with which a potential customer can shop or learn about the store’s offering, (2) the ease with which a transaction can be completed once the customer attempts to make a purchase, and (3) the customer’s satisfaction with the purchase.

Current Trends Affect the Way the Consumer Behaves Exhibit 3.2

Introduction Market Segmentation: Is the dividing of a heterogeneous consumer population into smaller, more homogeneous groups based on their characteristics.

Dollars & Sense Retailers who focus on understanding a well-defined niche and serving that market with a differentiated offer will be more profitable than their competitors.

Population Trends Population Growth Age Distribution Geographic Trends LO 1

Population Trends Population Variables: Include population growth trends, age distributions, and geographic trends. LO 1

Number of Births by Year LO 1

Population Growth If current average projections are correct, the United States population will increase only about 1% a year, from 295 million in 2005 to 336 million in 2020 and to 420 million by 2050, or 37% over 40 years. The majority of this growth will be a result of immigration. LO 1

Age Distribution In 1980 the median age was 30, but by 2005 it had risen to over 35 years. The group of early baby boomers today accounts for almost 28% of the population. As Seniors (60+) live longer, the group will become more segmented. LO 1

Age Distribution Baby busters or Generation X, those born between 1965 and 1977, is a declining percentage of the population. Generation Y or Echo boomers, those born between 1978 and 1994, are emerging as a major buying force in the economy. LO 1

Boomers, Xers and Yers Exhibit 3.3 LO 1

Geographic Trends Micromarketing Merchandising: Is the tailoring of merchandise in each store to the preferences of its neighborhood. LO 1

Texas Consumers’ Percentage of National Average Use Exhibit 3.4 LO 1

Geographic Trends Metropolitan Statistical Areas: Are freestanding urban areas with populations in excess of 50,000. LO 1

Geographic Trends The proportion of the population residing in metropolitan areas has increased dramatically, form 64% in 1950 to 79% today. LO 1

Geographic Trends Urban or Metropolitan population varies by state. California, Massachusetts, New Jersey are over 90% urban/metro. Maine, Mississippi, Vermont, and West Virginia are less than 50% urban/metro. LO 1

Geographic Trends Typically, Americans change residence about a dozen times in a lifetime. Of those who move each year, about 64% remain in the same county, about 21% move to a new county but same state, and approximately 18% move to a new state. LO 1

Social Trends Education State of Marriage and Divorce Makeup of the American Household Changing Nature of Work LO 2

Social Trends The education level of the average American is increasing. In 2003, 85% of those over 25 had a high school degree and 27% had a college degree. In 2006 there were 23% more women enrolled in college than men. LO 2

Social Trends Married couples are one of the slowest growing household types not only in this country but also worldwide. Not only are people postponing marriage, some are choosing not to marry at all. LO 2

Social Trends Since 1960, the U.S. divorce rate has increased by 250%. LO 2

Social Trends 52% of all households have no children. Between 1980 and 2003 the “home-aloners” increased by 45%. “Mingles” Unmarried Couples: Increased 167% since 1980 7% of couple households LO 2

Social Trends Boomerang Effect: So called because the parents think the children have left for good, but they keep coming back. It is estimated over the next decade 40% of children will return to their parents after they have previously left. LO 2

Social Trends In 2003, there were nearly 10 million self-employed individuals and estimated 6 million home-based businesses in the United States. LO 2

Economic Trends Income Growth Personal Savings Women in the Labor Force Widespread Use of Credit LO 3

Share of Aggregate Income Received by Each Fifth and the Top 5% of U.S. Households, 1980-2002 Exhibit 3.5 LO 3

Economic Trends Is personal income less personal taxes. Disposable Income: Is personal income less personal taxes. LO 3

Economic Trends Discretionary Income: Is disposable income minus the money needed for necessities to sustain life. LO 3

Economic Trends Savings, expressed as a percentage of disposable income, have dwindled from a post-World War II high of 8.8% in 1981 to 4.6% in 1995 to a dismal 1.7% in 2001. In 2003, the rate was 2.1% LO 3

Economic Trends In 1970, 43% of all women over the age of 16 were in the labor force; today it is 60%. 76% of all women ages 25 to 34 are currently on the labor force. The percentage of working married women with preschoolers increased from 30% in 1970 to 60% in 2003. LO 3

Economic Trends Consumers in 2006 were staggering under an estimated $2.2 trillion in consumer debt. LO 3

Consumer Behavior Model Stimulus Problem Recognition Active Information Gathering (Search) Evaluate Alternatives Purchase Post-Purchase Evaluation LO 4

Consumer Shopping/ Purchase Model Exhibit 3.6 LO 4

Consumer Behavior Model Stimulus: Refers to a cue that is external to the individual or a drive that is internal to the individual. LO 4

Consumer Behavior Model Cue: Refers to any object or phenomenon in the environment that is capable of eliciting a response. LO 4

Consumer Behavior Model Drive: Refers to a motivating force that directs behavior. LO 4

Consumer Behavior Model Passive Information Gathering: Is the receiving and processing of information regarding the existence and quality of merchandise, services, stores, shopping, convenience, pricing, advertising, and any other factors that a consumer might consider in making a purchase. LO 4

Consumer Behavior Model Problem Recognition: Occurs when the consumer’s desired state of affairs departs sufficiently from the actual state of affairs, placing the consumer in a state of unrest. LO 4

Degrees of Consumer Problem Solving in Shopping/Purchasing Exhibit 3.7 LO 4

Consumer Behavior Model Habitual problem solving: Occurs when the consumer relies on past experiences and learning to convert the problem into a situation requiring less thought. The consumer has a strong preference for the brand to buy and the retailer from which to purchase it. LO 4

Consumer Behavior Model Limited Problem Solving: Occurs when the consumer has a strong preference for either the brand or the store, but not both. LO 4

Consumer Behavior Model Extended Problem Solving: Occurs when the consumer recognizes a problem but has decided on neither the brand nor the store. LO 4

Consumer Behavior Model Active Information Gathering: Occurs when consumers proactively gather information. LO 4

Consumer Behavior Model Set of Attributes: Refers to the characteristics of the store and its products and services. LO 4

Consumer Behavior Model Evaluate Alternatives: Occurs when consumers make judgments regarding the individual product attributes of a retailer and/or product. LO 4

Consumer Behavior Model Purchase: The purchase stage may include final negotiation, application for credit if necessary, and the determination of the terms of purchase. LO 4

Consumer Behavior Model Post-Purchase Evaluation: Consumer perceptions toward the retailer and/or product purchased after use and evaluation. LO 4

Consumer Behavior Model Post-Purchase Resentment: Arises when after the purchase the consumer becomes dissatisfied with the product, service, or retailer and thus begins to regret the purchase was made. LO 4

Additional Slides

Population Trends Population Growth Age Distribution Geographic Trends LO 1

Social Trends State of Marriage and Divorce Education Makeup of American Households Changing Nature of Work LO 2

Economic Trends Income Growth Personal Savings Women in the Labor Force Widespread Use of Credit LO 3