1. Consumer Buying Behavior, Search, and Factors Affecting External Search Effort

2. Overview Consumer decision process with a focus on consumer search. Reaction from retailers—do retailers like to be “shopped” or “searched?” Market structure that results from search. Search costs, demographics, and segmentation.

3. Problem Recognition Search Alternative Evaluation Purchase Purchase Evaluation Purchase Act Interpersonal Determinants Cultural Influences Social Influences Family Influences Personal Determinants Needs and Motives Perception Attitudes Learning Self-Concept Feedback An Integrated Model of the Consumer Decision Process

4. Customer Buying Behavior Extended problem solving: used to buy products which represent risk (financial, physical, social). Consumers spend time and effort in making the purchase. Limited problem solving: consumers are experienced with the product and risk is perceived to be limited.

5. Comparison of Extended and Limited Problem Solving Extended Seek information through literature, sales people. Seek opinions of family, friends. Want warrantees, guarantees. Limited Minimal effort. Use personal knowledge instead of seeking external information. Subject to impulse buying.

6. Customer Buying Behavior Habitual decision making: low-risk routine purchasing decisions. Determined by: --Brand loyalty. --Store loyalty.

7. Retail Market Segmentation A group of customers whose needs are satisfied by the same retail mix because they have similar needs and go through similar buying processes.

8. External Search Effort “The degree of attention, perception, and effort directed toward obtaining environmental data or information related to the specific purchase under consideration.”

9. n Search continues up to the point where the anticipated gains from search are exceeded by the costs: n Stores visited and n Alternatives products sought George Stigler, 1961

10. Gains of Search: Shopping can be worthwhile! A consumer gains come from: – Finding new merchandise New brands, Sizes Flavors – Learning about new products – Learning the distribution of prices.

11. Shopping is not free. Costs of search are: Travel costs Time Energy, physical and psychological Search for the lowest price—then go back any buy.

12. Market Environment: Factors increasing search Increasing number of alternatives Number of brands in the market Number of retail firms in competition Wide distribution of prices Geographic concentration of stores Regional malls Downtown shopping districts

13. Marketers can increase search by increasing the amount of information in the market Advertising Point-of-purchase Sales personnel Packaging Experienced consumers Independent information sources

14. Product: Factors increasing search n Relatively high prices – Automobiles – negotiated prices – allowance for trade-in n Highly differentiated products – Furniture, brands unimportant n "Positive" products – Products which are enjoyable to shop for, rewards, boats, for example.

15. Potential Payoff/Product Importance Price Perceived Risk Social Visibility Status of Decision Making Activity Style and Appearance Importance Length of Commitment Necessary

16. Demographic Segmentation Age. Sex. Ethnicity. Income. Family size. Education.

17. Consumer Characteristics n Learning and experience (decreases search), process can become routinized. n Shopping orientation – Purposeful – Recreational n Age, gender, household life cycle -- What are the costs of time at different demographic stages?

18. Individual differences Ability to judge (+) Tolerance for ambiguity (+) Enjoyment and perceived search benefits (+) Education (+)

19. Situational Factors n Time availability, more time -- shopping can occupy that available time. n Purchase for self (versus gift) decreases the search. n Pleasant surrounding increases time spent shopping.

20. What about convenience goods? With respect to price, weekly expenditures on grocery items, health and beauty aids, and prescription drugs are significant components of the household budget. How does external search effort or process evolve within a changing household?

21. “Buying a new car” What is the purpose of a salesman? Do car dealerships appreciate customers who leave the negotiation phase to visit another dealer? Why is Saturn a different car buying experience?

22. Distribution intensity Shopping good High search Convenience good Limited search Number of stores carrying Sales

23. Comparison of price and qualityVery littleConsiderableVery little Importance of convenient location CriticalImportantUnimportant Purchase frequencyFrequentLess frequentInfrequent Planning time involved in purchaseVery littleConsiderableExtensive CONSUMER FACTORS Factor Convenience Products Shopping Products Specialty Products Marketing Impact of the Consumer Products Classification System

24. Importance of store image Number of retail outlets Distribution channel length Promotion Price UnimportantVery importantImportant ManyFew Very few; often one per market area LongRelatively shortVery short Advertising and promotion by producer Low Personal selling and advertising by both producer and retailer Relatively high Personal selling and advertising by producer and retailer High MARKETING MIX FACTORS Factor Convenience Products Shopping Products Specialty Products Marketing Impact of the Consumer Products Classification System

25. Retailer Reaction to “Search” Retailers prefer to “reward” consumer search for variety—finding different products. Retailers prefer to “defeat” consumer search on price—matching competitors on identical items. Opportunities for suppliers who can maintain differentiated assortments for retailers.

26. Changing Nature of Search What would happen if search on price had almost no cost? Can you think of a current scenario? What happens to consumer search when retail competition becomes increasing concentrated? –Price distribution? –Product variety?