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

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

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

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

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

Demographics and Lifestyles consumer data that is objective, quantifiable, easily identifiable, measurable Lifestyles ways in which consumers and families live and spend time and spend money

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

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

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

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

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

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

Understanding Consumer Lifestyles: Psychological Factors Personality Attitudes Lifestyle Class Consciousness Perceived Risk Purchase Importance

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

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

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

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

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

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

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

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

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

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

Table 7.3 Where America Shops: Household Purchases

Table 7.3 Where America Shops: Weekly Purchases

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

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

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

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

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?

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

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

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

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

Possible Retailer Approaches Mass Marketing Kohl’s Department Stores Concentrated Marketing Zutopia Differentiated Marketing Foot Locker

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

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

Questions