1. Consumer Shopping Behavior Retailing MKTG 3346 Professor Edward Fox Cox School of Business/SMU

2. All Those Decisions… lTrip tBuying or browsing? tSpecific need, or inventory replenishment lRetailer tWhere to shop (order matters)? tMall/retail center vs. nearby store lIn-Store tWhat product categories? tWithin each category, which products to consider? tWhat about “impulse,” or unplanned items? tBuy or defer?

3. Consumer Shopping Decisions Store Choice Category Selection Brand Choice Purchase Quantity

4. Trip Purpose(s) of the Trip purpose(s) of the trip lBefore determining where to shop, the consumer must determine the purpose(s) of the trip tTransaction tInformation tEntertainment lTransaction… tReplenishment Which retailer do I prefer? Routine tSpecific item Where are desired items available? For transaction-focused shopping, convenience, price, and assortment are key criteria for store choice

5. Trip Purpose(s) of the Trip lInformation… tProduct search Assortment is the primary criterion tPrice search Expected prices are the key criterion lEntertainment… tRetailer advertising tRetailer reputation tMall operators often stage entertainment to create excitement and draw customer traffic For information- and entertainment-focused shopping, proximity of a store to other stores (e.g., mall, “restaurant row”) is often a key criterion

6. Trip Purpose(s) of the Trip Purpose Shopper Classification Transaction Information Entertainment Buyer (Goal Directed) Browser Consumers browse in apparel and department stores; not grocery and drug stores

7. Trip and Retailer Where to Shop and What to Buy Needed items, or shopping lists, often affect the choice of store Store choice “Where to shop” Category Selection “What to buy”

8. Trip and Retailer Where to Shop and What to Buy lIf the purpose is replenishment … Neighborhood StoreLow-Price Store Shoppers buy less than half as much on a trip to the neighborhood store, compared to a low-price stores

9. Trip and Retailer Where to Shop and What to Buy If the purpose is replenishment … Shoppers engage in two types of trips: l“Stock up” tSpend more tMainly on the weekend l“Fill in” tDriven by specific item(s) tRandom occurrences

10. Retailer Store Choice Consumers report that their choice of store is driven by: Convenience tProximity to the shopper’s home tOne-stop shopping convenience tProximity to other stores (e.g., on the mall) ‚Price ƒVariety and assortment „Service

11. Retailer Shopper’s Evaluation of Retailer Prices price image The general evaluation of a retailer prices is known as price image lConsumers can’t evaluate all the prices in a store, so price image depends on: tPrices of items that the consumer has considered buying Are prices usually lower than competitors? Consumers can’t easily evaluate how much lower Better known brands are thought to have a greater effect on the retailer’s price image tPrices of sale items Most salient to shoppers Often displayed, too

12. Retailer Shopper’s Evaluation of Retailer Assortment lRetailer assortment can be difficult for consumers to evaluate lIt depends on the differences between products offered, as well as the number of products offered lThe shopper’s general evaluation of a retailer product assortment is based on: tThe number of SKUs offered tWhether preferred or “favorite” brands are available tShelf or floor space devoted to the category

13. Retailer Multi-Store Shopping lSelecting a store may mean selecting more than one tPrice or value search – order of store visits matters tConsumers meet different needs at non-competing retailers on the same trip t“Cherry picking” lThe store(s) visited previously may change the probability of visiting that store tomorrow tCategory-specific store preferences tConsumers may tradeoff price and convenience differently from trip to trip Multi-Store shopping is an important reason for retailers to locate their stores near other stores

14. Retailer Multi-Store Shopping lOver time, consumers may shop at many stores that sell similar items Correlations of Logarithm of Household Packaged Goods Expenditures Data Source: IRI panel of 189 panelists from Oct 1995 - Oct 1997

15. In-Store What to Buy – Shopping List lBefore shopping, customers often prepare a shopping list of items sought tOn paper US (1995) – 55% of grocery shoppers prepare shopping lists Europe (1997/8) – 70% of grocery shoppers prepare shopping lists tMental lIn apparel and other non-CPG shopping, fewer items are sought so shopping lists are primarily mental

16. In-Store What to Buy – Shopping List lShopping lists may be more or less specific tProduct category tBrand – Though most customers use shopping lists, only 25% of brands purchased are pre-selected tSize Shopping lists, particularly mental lists, usually include only the product category (not the brand)

17. In-Store What to Buy – Factors Influencing Purchase Decisions lMost purchase decisions are made in-store tUS POPAI – 65% in the 1980s; 81% in the 1990s tEurope Retail Marketing Services – 75% in 1997/8 8% category selected for purchase, but not brand 4% pre-selected brand was substituted 64% unplanned purchases “P-O-P is significant as the ‘last three feet’ of a brand’s marketing campaign, and serves as the ‘closer’ for in-store purchasing decisions as well as an influencer for impulse purchases” “P-O-P is significant as the ‘last three feet’ of a brand’s marketing campaign, and serves as the ‘closer’ for in-store purchasing decisions as well as an influencer for impulse purchases” POPAI, 1995

18. In-Store What to Buy – Factors Influencing Purchase Decisions % ReportingPromotional Influence 86% In-Store Ads / Displays 53%Billboards / Posters 45%Radio 32%Television Advertising 30%Newspaper Advertising 28%Direct Marketing / Couponing 5%Magazine Advertising Source: POPAI, 1995

19. In-Store What to Buy – Unplanned Purchases lItems for which purchase was not anticipated are considered “unplanned purchases” tImpulse tNon-impulse Reminder Suggestion lImpulse purchases can be stimulated tMerchandising around cash-wraps, entrances and other high- traffic areas tStore atmospherics (e.g., colors and smells) tDisplays

20. In-Store What to Buy – Unplanned Purchases lPurchases which suggested/reminded by retailer are influenced by: tDisplay tSignage – e.g., shelf tags tCross-merchandising lFrom the retailer’s perspective, these are “add-on” sales lThe number of unplanned purchases increases with both variety and assortment offered by the retailer The bigger the store, the more unplanned purchases

21. In-Store What to Buy – Unplanned Purchases Unplanned purchases may be limited by the shoppers’ budget constraints and time constraints Browsers make more unplanned purchases

22. In-Store Brand/Product Choice – Consideration Sets lTo avoid spending all day in the store, shoppers limit their consideration to relatively few items Consideration set tWhat – Consideration set is the subset of available products that is evaluated when making a choice tWhy – limited cognitive resources tHow – screen items unlikely to be of interest before evaluating them

23. In-Store Brand/Product Choice – Consideration Sets lHow/when is the consideration set formed Need Recognition Information Search Evaluation of Alternatives Intention to Purchase Purchase Decision Consideration Set

24. In-Store Brand/Product Choice – Evaluation Factors lPrice/value tCompared with what is on the shelf (in-store) tCompared with competitors (out of the store) tCompared with recalled prices lQuality tPerformance (e.g., fabric weave and weight, cut) tConformance (e.g., durability, workmanship) tImage lFamiliarity / information – Reduces uncertainty of evaluation Brand can be a proxy for quality, if quality is unknown and can be a primary factor in determining the image associated with a product

25. In-Store Brand/Product Choice – Consumer Evaluation lRetailers can affect consumers’ product evaluations by tPricing Vs. competitors Between items on the shelf tAssortment Number of items Quality of items Brand(s) of merchandise lRetailers may try to “up-sell,” or influence shoppers to purchase a higher-margin product, but they are more likely to pursue customer loyalty or “add-on” sales

26. In-Store Brand/Product Choice – Consumer Evaluation lBrands are often a key component of the retailer’s positioning Barney’s New York JCPenney Donna Karan Dolce & Gabanna Giorgio Armani Jil Sander http://www.barneys.com Arizona Lee L.E.I. Vanity Fair http://www.jcpenney.com

27. In-Store Brand/Product Choice – Private Label lRetailers may offer their own brands, known as “private labels” tOffer consumers more choice alternatives tOffer consumers lower-priced alternatives to the national brand May appeal to more price-sensitive shoppers tOffer products that have higher margins than national brands tOffer products that are exclusive to the retailer

28. In-Store Brand/Product Choice – Private Label lIn general, shoppers prefer national brands to store brands, though: tSome retailers offer exclusively private labels The Gap Land’s End tPrivate label penetration varies by category 64% of egg sales 58% of milk sales 30% of sour cream sales tPrivate label has higher penetration in certain countries Britain

29. In-Store Brand/Product Choice – Private Label lPrivate label examples

30. In-Store Purchase Quantity lPurchase quantity is driven primarily by promotional discounts lThe limited time availability leads customers to stockpile lSpecific promotions encourage larger quantity purchases: tOf individual items Buy one; get one free 3 for the price of two Trial size with purchase tOf goods in the store Volume discounts Frequent flyer-type programs