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Chapter 7

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

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Chapter 7

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

  2. 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

  3. 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

  4. 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

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

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

  7. 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

  8. 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

  9. 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

  10. 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

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

  12. 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

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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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

  21. 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

  22. 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

  23. 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

  24. Table 7.3 Where America Shops: Household Purchases

  25. Table 7.3 Where America Shops: Weekly Purchases

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

  27. 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

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

  29. 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

  30. 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?

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

  32. 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

  33. 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

  34. 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

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

  36. 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

  37. 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

  38. Questions

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