1. Consumer Behavior, Electronic Commerce, and Channel Strategy
Chapter 19
Consumer Behavior, Electronic Commerce, and Channel Strategy
McGraw-Hill/Irwin
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

2. Introduction
From an economic perspective, channels of distribution are thought of as providing:
Form utility
Time utility
Place utility
Possession utility

3. Store-Related Affect and Cognition
Store image
Is what consumers think about a particular store.
Includes perceptions and attitudes based on sensations of store-related stimuli received through the five senses.
Developing a consistent store image is a common goal of retailers.

4. Store-Related Affect and Cognition (cont.)
Store atmosphere
Primarily involves affect in the form of in-store emotional states that consumers may not be fully conscious of when shopping.
Environmental stimuli affect consumers’ emotional states, which in turn affect approach or avoidance behaviors.
The four types of approach or avoidance behaviors are physical, exploratory, communication, and performance and satisfaction approach.

5. Exhibit 19.2 - A Model of Store Atmosphere Effects

6. Store Atmosphere (cont.)
Pleasure and arousal were found to influence consumers’ stated:
Enjoyment of shopping in the store.
Time spent browsing and exploring the store’s offerings.
Willingness to talk to sales personnel.
Tendency to spend more money than originally planned.
Likelihood of returning to the store.

7. Store-Related Behavior
Store contact
Involves the consumer locating, traveling to, and entering a store.
A number of variables are concerned with obtaining store contacts.
Store location decisions are strongly influenced by heavy traffic and pedestrian patterns, which facilitate store contact.
Visibility of the store and its distance from consumers are used to select locations that can increase store contact.

8. Store-Related Behavior (cont.)
Store loyalty
Repeat patronage intentions and behavior.
Strongly influenced by the arrangement of the environment, particularly the reinforcing properties of the retail store.
Is a major objective of retail channel strategy and has an important financial impact.

9. Store Environment
Three major decision areas in designing effective store environments:
Store location
Store layout
In-store stimuli

10. Store Location
Good locations allow ready access, can attract large numbers of consumers, and can significantly alter consumer shopping and purchasing patterns.
Store location decisions represent long-term financial commitments, and changing poor locations can be difficult and costly.
Retail location models are quite sophisticated and can deal with a variety of criteria.

11. Store Location (cont.) General approaches to store location
Checklist method - Attempts to systematically evaluate the relative value of a site compared to other potential sites in the area.
Analog approach - Identifies an existing store or stores similar to the one to be located.

12. Store Location (cont.)
Regression models - Commonly used to investigate the factors that affect the profitability of retail outlets at particular sites.
Location allocation models - Involve the simultaneous selection of several locations and estimation of demand at those locations to optimize some specified criteria.

13. Store Layout Grid layout Free-form layout
The grid layout is more likely to be used in department and specialty stores to direct customer traffic down the main aisles.
Free-form layout
This arrangement is particularly useful for encouraging relaxed shopping and impulse purchases.

14. Exhibit 19.3 - Examples of Grid and Free-Form Store Layouts

15. Exhibit 19.4 - Advantages and Disadvantages of Grid and Free-Form Layouts

16. In-Store Stimuli Signs and price information Color
Benefit sign
Price-only sign
Color
Warm colors
Cool colors
Shelf space and displays
Normal display, expanded display, and special display

17. In-Store Stimuli (cont.)
Music
The tempo of background music influences consumer behavior
Scent
Scents vary in terms of how pleasant they are perceived to be, how likely they are to evoke physiological responses, and how strong they are.
Ambient scent can influence feelings about stores and their products.
Neutral and pleasant scent categories can be diffused in a store to influence consumers.

18. Nonstore Consumer Behavior
Consumer purchase mode refers to the method a consumer uses to shop and purchase from store or nonstore alternatives.
Choices made among the various consumer purchase modes are influenced by many factors.

19. Catalog and Direct Mail Purchases
Have grown dramatically with the increase in dual-income families and the general need for consumers to save time.
Catalogs have some disadvantages for consumers.
Catalog prices are higher and consumers have to pay shipping charges.
Do not allow the consumer to experience the feel, fit, or other sensory stimuli of a product directly.

20. Catalog and Direct Mail Purchases (cont.)
Waiting time to receive merchandise.
Unsatisfactory product returned at consumer’s own expense.

21. Vending Machine Purchases
Provide merchandise in convenient locations and are often available for purchases twenty-four hours a day.
Product prices are typically higher.
Recovery of money may not be possible when vending machines fail to deliver the merchandise.

22. Television Home Shopping
Allows consumers to purchase conveniently from their homes by telephone and can offer and demonstrate products.
It also allows better visual display than catalogs.
Limitations:
Consumers must watch the channel when the merchandise is offered.
Consumers must pay shipping charges
Less informative than experiencing products directly in stores.

23. Direct Sales Purchases
Salespeople can provide in-depth product usage information.
Merchandise is often priced higher than similar merchandise in stores.
Consumers’ must spend time watching the demonstration and discussing products.
Pressure by overzealous salespeople to purchase unneeded products.

24. Electronic Exchanges
Involve consumers in collecting information, shopping, and purchasing from Web sites.
Is the fastest growing purchase mode.

25. Exhibit 19.5 - A Comparison of Six Consumer Purchase Modes

26. Electronic Commerce
The process by which buyers and sellers conduct exchanges of information, money, and merchandise by electronic means, primarily on the Internet.
Electronic commerce often requires consumers to seek out marketers by going to particular Web sites.

27. Consumer Strategies for Electronic and Store Exchanges
Consumers can both shop and purchase electronically, making a pure electronic exchange.
They can use the store-aided electronic exchange.
Consumers can collect information online and then go to a brick-and-mortar store or dealer to make a purchase.
They can shop and purchase in stores without using the Internet at all.

28. Exhibit 19.6 - Point-and-Click and Brick-and-Mortar Consumer Strategies

29. Consumer Electronic Exchanges and Multichannel Marketing
The use of the Internet for collecting information about products and brands and purchasing has grown rapidly in recent years.
Many retailers now use a multichannel distribution strategy which allows consumers to purchase in stores, online, from catalogs and in other ways.

30. Channel Strategy
Different members of a distribution channel may be primarily concerned with influencing different consumer behaviors.
The starting point for designing effective channels is an analysis of consumer-product relationships.

31. Exhibit 19.8 - Channel Design Criteria

32. Commodity
The nature of the product or service offered to the consumer.
Key consumer-related questions in considering the nature of the product or service are:
What consequences or values the product or service provides the target market?
How much time and effort target-market consumers are willing to expend to shop for, locate, and purchase the product?
How often target-market consumers purchase the product?

33. Conditions
The current state of and expected changes in the economic, social, political, and legal environments in which the firm operates.
This information is critical in channel design because channels typically involve long-term commitments by the firm that may be difficult to change.

34. Competition
The size, financial and marketing strengths, and market share of a firm’s competitors are major concerns in designing effective marketing strategies.
For channel decisions, a key issue is how major competitors distribute products and how their distribution system influences consumers.

35. Costs
Costs can be viewed as a constraint on the firm’s ability to distribute products and services and to serve and influence consumers.
Firms seek distribution systems that minimize total distribution costs at a particular level of customer service.

36. Coverage
Seldom can every member of a selected target market receive sufficient marketing coverage to bring about an exchange.
Coverage refers to the number of outlets in a particular geographic area in which the product or service will be sold.

37. Competence Frequently overlooked criterion in designing channels:
Firm’s competence to administer the channels.
Perform channel tasks at all levels to ensure effective distribution to the consumer.

38. Control
In general, there is greater control in direct channels because no intermediaries are involved.
Franchised channels also involve greater control than indirect channels because the franchiser places strong contractual constraints on the franchisee’s operations.

39. Characteristics of Intermediaries
In addition to such factors as the size, financial strength, and marketing skills of intermediaries, consumer perceptions of intermediaries can be crucial in channel strategy.
If no acceptable intermediaries are available, the firm must market directly, encourage the development of intermediaries, or forgo entering a particular market.

40. Summary
Channels of distribution have a very important impact on consumer affect, cognition, and behavior.
The two most critical store-related affect and cognitions for channel strategy are store image and store atmosphere.
The store-related behaviors, store contact and store loyalty, are primary objectives of retail channel strategy.

41. Summary (cont.)
Store environment entails store location, store layout, and in-store stimuli.
The six consumer purchase modes include stores, catalogs/direct mail, vending machines, direct sales, TV home shopping, and electronic exchange.
It is the consumer and their relationships with other criteria that determine appropriate channel strategy.