0 Retail Customers Chapter 3 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.

1 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.

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

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

4 Retail Growth Starbucks Coffee has experienced explosive growth over the last five years and thus has had to put considerable effort into planning for and recruiting human resources at all levels in the organization. In fact, Starbucks was the first American retailer to provide its part-time employees (65 percent of its workforce) full health care benefits and stock options. Introduction

5 Consumer Spending Exhibit 3.1

6 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. Introduction

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

8 Current Trends Affect the Way the Exhibit 3.2 Population Trends Societal Trends Economic Trends Consumer Shopping/ Purchasing Model Consumer Behaves

9 Question to Ponder Given the wide variety of population, social, and economic trends, and the importance to retailers of targeting specific consumer groups, what segments provide the greatest opportunities for new retailers today?

10 Population Trends Population Growth Age Distribution Geographic Trends LO 1

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

12 Number of Births by Year LO 1

13 Where did the term Melting Pot originate? LO 1 The Melting Pot is the name of a play about immigrants written by Israel Zangwell. In the play, which opened in Washington D.C. in 1908, one of the characters declared: “America is…the great melting pot where all the races of Europe are melting and reforming Germans and Frenchman, Irishmen and Englishmen, Jews and Russians into the crucible he will be the fusion of all races, the coming superman.”

14 Boomers, Xers and Yers LO 1: Exhibit 3.3

15 Texas Consumers’ Percentage of National LO 1: Exhibit 3.4 Average Usage

16 Texas Consumers’ Percentage of National LO 1: Exhibit 3.4 Average Usage

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

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

19 Generation Gap in the Information Age LO 1 Those who say... Under 30 Age 50 or over Change brings exciting opportunities They want to be their own boss They own a computer They’ve used They have Internet access Social Security will not be available to them Medicare will not pay any of their health expenses Technology brings more confusion and complications than it does exciting opportunities It is difficult to use computers 78% 72% 85% 15% 52% 54% 23% 18% 58% 46% 40% 28% 21% 14% 6% 38% 53%

20 Global Retailing LO 1

21 Global Retailing LO 1

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

23 U.S. Education Levels LO 2

24 Makeup of American Households LO Year Other Living Alone Single Parents Other Married Married with Children Percent SOURCE: U.S. Bureau of the Census, Statistical Abstract of the United States: 1996 (116th edition) Washington, D.C., Based on data contained in Tables 60, 61, 66, 67,68.

25 Makeup of American Households “ Mingles” Unmarried Couples Increased 167% since % of couple households LO 2

26 Makeup of American Households Boomerang Effect Occurs when grown children return home to live with their parents. LO 2

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

28 Share of Aggregate Income Received by Each Fifth and the Top 5 Percent of U.S. Households, LO 3: Exhibit 3.5

29 Changing Purchasing Habits of American LO Year Percent Medical Recreation Food Clothing SOURCE: Vision for the New Millennium...(Atlanta: Kurt Salmon Associates, 1997). Used with permission Households

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

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

32 Spenders and Savers as a % of Total LO Year Percent Spenders ( Age 20 to 44) Savers ( Age 45 to 64) SOURCE: Based on data from U.S. Bureau of the Census, Population Paper Listings PPL. 41, Current Population Reports P , U.S. Census of Population (1970), volume 1, Part B, Census of Population (1980) volume 1, part B. Population 1965 to 2025

33 The % of Women Age 16 and Over in the LO 3 Work Force

34 Growth in Consumer Credit LO 3

35 Square Feet of Retail Space Per Capita Amount of space needed to support Market Demand ‘72 ‘74 ‘76 ‘78 ‘80 ‘82 ‘84 ‘86 ‘88 ‘90 ‘92 ‘96 ‘98 ‘00 LO 3

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

37 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

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

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

40 Consumer Shopping/ Purchase Model LO 4: Exhibit 3.6 Stimulus Problem Recognition Active Information Gathering (Search) Evaluate Alternatives Purchase Post- Purchase Evaluation Problem Solving

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

42 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

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

44 Degrees of Consumer Problem Solving in Shopping/Purchasing LO 4: Exhibit 3.7 Strong None or Weak Strong Retailer Preference Brand Preference Habitual Problem Solving Limited Problem Solving Limited Problem Solving Extended Problem Solving

45 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 Problem Solving

46 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 Problem Solving

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

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

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

50 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

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

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

53 Additional Slides

54 Population Trends LO 1 Geographic Trends Age Distribution Population Growth

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

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