Ch 7

Helpful facts for understanding US demographics

Typical household has an annual income of $50,000 Top 1/5 of households earn $100,000 or more Lowest 1/5 of households earn $20,000 or less High incomes lead to high discretionary income There are 5 million more females than males 3/5ths of adult females are in the labor force Most US employment is in services 30% of all US adults have at least a 4-year college degree

Post-purchase behavior:

after buying a good or service, a customer may engage in post-purchase behavior. 2 categories: -further purchases -re-evaluation(disatisfaction-cognitive dissonance)

Purchase (purchase act):

an exchange of money or promise to pay for the ownership or use of a good or service. Key factors in the purchase act: -Place of purchase: evaluated the same as the good/service -Purchase terms: price of payment & method of payment -Availability: stock on hand and delivery Criteria for selecting a store retailer include: -location -store layout -services -sales help -store image -prices Criteria for nonstore retailer include: -image -service -price -hours -interactivity -convenience

Impulse shopping

arises when consumers buy products and/or brands they had not planned n buying before. 3 Types of impulse shopping: -Completely unplanned: no plan period -Partially unplanned: plan to buy but not sure on brand/model -Unplanned substitution: intent to buy a certain brand/model and doesn't

Mercenary loyalty:

can pay customers for their loyalty loyalty cards

Cognitive dissonance:

doubt that the correct decision has been made. To overcome it: the retailer must realize that the decision process does not end with the purchase. After-care: by phone a service visit, or email

Demographics:

See tables 7-1 and 7-2 on page 175 Retailers can get demographic info from hundreds of sources (from CIA world fact book to "demographics" magazine). NOTE: there is a difference between disposable and discretionary income.

Personality

Some total of an individual's traits, which makes that individual unique.

Problem awareness

Stage in the decision process at which the consumer not only has been aroused by social, commercial, and/or physical stimuli, but also recognizes that a good or service under consideration may solve a problem of shortage or unfulfilled desire.

Evaluation of alternatives

Stage in the decision process where a consumer select one good or service to buy from a list of alternatives.

Consumer decision process

Stages a consumer goes through in buying a good or service: -Stimulus -Problem awareness -Information search -Evaluation of alternatives -Purchase -Post-purchase behavior Demographics and lifestyle factors affect this decision process.

Extended decision making

occurs when a consumer makes full use of the process. a lot of the time is spent gathering information and evaluating alternatives. The potential for cognitive dissonance is great. Expensive/complex items: house, car, life insurance Perceived risk of all kinds is high.

Cult loyalty:

rejecting the bran would be like rejecting your own values

Problem awareness:

the consumer not only has been aroused by social, commercial, and/or physical stimuli but also recognizes that the good or service under consideration may solve a problem of shortage or unfulfilled desire. Many people shop with the same retailer or buy the same good or service for different reasons; they may not know their own motivation, and they may not tell a retailer the real reason for shopping there or buying a certain item. When a person becomes aware of a shortage or an unfulfilled desire, he or she acts only if it is a problem worth solving. -Otherwise, the process ends.

NOTE:

All of the factors included with demographics and lifestyles aren't mutually exclusive. VALs II is a tool that you may have used looked at in principles of marketing. It combines several factors to develop a consumer profile.

Online shoppers:

Are online shoppers and are often well-educated and have above-average incomes

Impulse buying

Arise when consumers buy products and/or brands they had not planned on buying before. 3 types: -Completely planned: no plan period -Partially planned: plan to buy but not sure on brand/model -Unplanned substitution:intent to buy a certain brand/model and doesn't

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

understanding consumer lifestyles: Psychological factors

Ch 7 PP Slide 10

Perceived risk and consumers figure 7-3

Ch 7 PP Slide 11

understanding consumer lifestyles: Social factors

Ch 7 PP Slide 9

Cognitive dissonance

Doubt that occurs after a purchase is made, which can be alleviated by customer after-care, money-back guarantee, and realistic sales presentations and advertising campaigns.

Social class

Involves an informal ranking of people based on income, occupation, education, and other factors. People often have somewhere values in each social class.

Perceived risk

Level of risk a consumer believes exists regarding the purchase of a specific good or service from a given retailer, whether or not the believe is actually correct.

Attitudes towards shopping

Level of shopping enjoyment. Shopping time Shifting feelings about retailing Why people buy or not on a shopping trip Attitudes by market segment Attitudes toward private brands

True loyalty:

when customers feel compelling reasons to resist offers from competitive offers

Ch 7 Instructor's Notes

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Ch 7 LO/Summary

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Ch 7 Terms

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Culture

Distinctive heritage shared by a group of people. It passes on beliefs, norms, and customs.

Cross-shoppers:

(1) shop for a product category at more than one retail format during the year -occurs because these consumers feel comfortable shopping a different format during the year, -there goals very by occasion, -they shop wherever sales are offered, -they have a favorite format for themselves and another one for other household members (2) visit multiple retailers on one shopping trip -One trip occurs because consumers want to save travel time and shopping time Some examples of cross-shopping are on pg 184

Focus on saving time

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Attitude toward private brands

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Reduction in shopping environment

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Shopping attitudes and behavior

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Ch 7 PowerPoint

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Several environmental factors influence shopping attitudes and behaviors:

-State of the economy -Consumer confidence about the future -Country of residence (industrialized versus developing) -Cost of living in the persons region or city of residence -Rate of inflation (how quickly prices are rising) -Infrastructure where people shop, such as traffic congestion, the crime rate, and the ease of parking -Price wars among retailers -Emergence of new retail formats -Trend toward more people working at home -Government and community regulations regarding shopping hours, new construction, consumer protection, and so forth -Evolving societal values and norms

Online shoppers

-Use the web for decision making process as well as buying process -Convenience is important -Above average incomes, well-educated -Time scarcity is a motivator

The importance of a purchase...

... to the consumer affects the amount of time he or she will spend to make a decision and the range of alternatives are considered. If a purchase is important, perceived risk tends to be higher, and the retailer must adapt to this.

What makes retail shoppers tick figure 7-2

1. Demographics 2. Lifestyles 3. Needs & desires 4. Shopping attributes & behaviors 5. Retailer actions 6. Environmental Factors ➡ Retail Shoppers

Culture

A distinctive heritage shared by a group of people that passes on a series of beliefs, norms, and customs. The US culture stresses individuality, success, education, and material comfort; there are also various subcultures (such as African, Asian, and Hispanic Americans) due to the many countries from which residents have come.

Information search

Consist of two parts: -determining alternatives to solve the problem at hand (and where they can be bought) and -learning the characteristics of alternatives. It may be internal or external.

Do you know some of the environmental factors that affect consumer shopping.

Consumer attitudes and behaviors are swayed by: -the economy, -the inflation rate, -the infrastructure were people shop, and -other factors. Retailers also need to consider how the standard of living is changing.

Stimulus

Cue (social or commercial) or drive (physical) meant to motivate or arouse a person to act.

Lifestyle: social factors

Culture Social class Reference groups Family life cycle Household life cycle

Learning Objectives

Define demographics like lifestyle factors and there affect on retailing operations. Examining environmental factors that includes retailing. Design and implement decision support system for retailing organizations. Site location analysis and the variables that help in picking the correct site location.

Demographics and lifestyles

Demographics -consumer data that is objective, quantifiable, easily identifiable, and measurable Lifestyle -ways in which consumers and families live and spend time/money

To mention and describe a number of consumer demographics, lifestyle factors, and needs & desires— and to explain how these concepts can be applied to retailing.

Demographics are easily identifiable and measurable population statistics. Lifestyles are the ways in which consumers live and spend their time and money. Consumer demographics include gender, age, life expectancy, literacy, languages spoken, income, retail sales, education, and ethical/racial background. Social factors include culture, social class, reference groups, the family life cycle, and time utilization. Psychological factors include personality, class consciousness, attitudes, perceived risk, and purchase importance. There are several demographic and lifestyle trends that apply to be feeling. These involve gender roles, consumer sophistication and confidence, the poverty of time, and component lifestyles. When preparing a target market profile, consumer needs and desire should be identified. Needs are basic shopping requirements, and desires are discretionary shopping goals. A retail strategy geared toward satisfying customer needs is appealing to their motives—the reasons for behavior. The better needs and desires are addressed, the more apt people are to buy.

Family life cycle

Describes how traditional family moves from bachelorhood to children to solitary retirement. At each stage: attitudes, needs, purchases, and income change. Retailers must also be alert to: many adults who never marry, divorced adults, single parent families, and childless couples.

Purchase act

Exchange of money or a promise to pay for the ownership or use of a good or service. Purchase variables include the place of purchase, terms, and availability of merchandise.

Customer loyalty

Exist when a person regularly patronizes a particular retailer (store or nonstore) that he or she knows it, likes, and trust.

Directly related to the decision process of consumers, there are 3 types of decision processes, based on how much time & effort is put into the decision.

Extended Limited Routine

Class consciousness

Extent to which a person desires and pursues social status.

Class consciousness

Extent to which a person desires and pursues social status. It helps determine the use of reference groups and the importance of prestige purchases. A class-conscious person values the status of goods, services and retailers.

Retailer strategies to reduce perceived risk by shoppers

Functional: product usage testing by retailer; especially private labels. Double check returned "B" goods. Simulate wear for new goods. Physical: safety testing, reduce salt and fat in food products Financial: money back guarantee and exchange privileges Social: co-branding of private label products with major high-quality national brands (Kirkland by Starbucks) Psychological: showing empathy for consumer Time: double money back guarantee; Saturn dealers picking and returning recalled cars

Post-purchased behavior

Further purchases or re-evaluation based on a purchase.

Illustrations of life styles

Gender roles Consumer sophistication & confidence Poverty of time Component lifestyles

Family lifecycle

How a traditional family moves from bachelorhood to children to solitary retirement.

Information search:

If a problem awareness merits further thought, information is sought. an information search has 2 parts: -determining the alternatives that will solve the problem at hand (and where they can be bought) -ascertaining the characteristics of each alternative.

Three special market segments

In-home shoppers Online shoppers Outshoppers

Disposable income

Income remaining after deduction of taxes and other mandatory charges, available to spend or save it as one wishes.

Household life cycle

Incorporates life stages for both family and non-family households.

Household lifecycle

Incorporates the life stages of both family and nonfamily households.

Reference groups

Influence people's thoughts and behavior. They may be classified as aspiritual, membership, and dissociative.

Reference groups

Influence people's thoughts and behaviors: -Aspirational groups: A person does not belong but wishes to join -Membership groups: A person does belong -Dissociative groups: A person does not want to belong. Face-to-face groups, such as families, have the most impact. Within reference groups, there are opinion leaders whose views are well respected and sought.

Social class

Informal ranking of people based on income, occupation, education, and other factors.

To examine consumer attitudes toward shopping and consumer shopping behavior, including the consumer decision process and its stages.

Many people do not enjoy shopping and no longer feel higher prices reflect value. Different segments have different attitudes. More people now believe private brands are of good quality. Consumer patronage differs by retailer type. People often cross-shop, whereby they shop for a product category at more than one retail format during the year or visit multiple retailers on the same shopping trip. The consumer's decision process must be grasped from two perspectives: -the good or service the consumer thinks of buying and -where the consumer will buy that item. These decisions can be made separately or jointly. The consumer decision process consist of stimulus, problem awareness, information search, evaluation of alternatives, purchase, and post purchase behavior. It is influenced by a persons' background and traits. A stimulus is a cue or drive meant to motivate a person to act. No problem awareness, the consumer now only has been aroused by a stimulus but also recognizes that a good or service may solve a problem of shortage or unfulfilled desire. In extended decision making, a person makes full use of the decision process. In a limited decision making, each step is used to, but not in depth. In routine decision making, a person buys out of habit and skips steps. Impulse purchases occur when shoppers make purchases they had not planned before coming into contact with the retailer. With customer loyalty, a person regularly patronizes the retailer.

Discretionary income

Money left after paying taxes and buying necessities.

Consumer needs and desires:

Needs are a persons basic shopping requirements consistent with his or her present demographics and lifestyle. Desires are discretionary shopping goals that have an impact on attitudes and behavior. It is an interesting stat that over the past few years, consumers are spending proportionately less on basic needs it, but are spending more on discretionary purchases (less on needs and more and desires). These discretionary purchases are guided by emotions and that would explain why emotional appeals are so huge in marketing right now.

Evaluation of alternatives:

Next, a person selects one option from among the choices to evaluate. An item with excellent quality and a low price is a certain pick over expensive, average-quality ones.

In-home shoppers:

Not always a captive audience Shopping is often discretionary Convenience in ordering without traveling for it Are often active store shoppers Are affluent and well educated Are self-confidence, younger, and venturesome Like in store shopping but have low opinions of local shopping May be unable to comparison shop, are concerned about services such as returns, and may not have a sales person asked questions

Demographics

Objectives, quantifiable, easily identifiable, and measurable population data.

Extended decision making

Occurs when a consumer makes full use of the decision process, usually for expensive, complex items with which the person has had little or no experience.

Limited decision making

Occurs when a consumer uses every step in the purchase process but does not spend a great deal of time on each of them.

Impulse purchases

Occurs when consumers buy products and/or brands they had not planned to before entering a store, regarding a catalog, seeing a TV shopping show, turning on the web, and so forth.

Cross-shopping

Occurs when consumers shop for a product category through more than one retail format during the year, or visit multiple retailers on one shopping trip.

Outshoppers:

Out-of-hometown shopping -Local retailers want to minimize this behavior -Surrounding retailers want to maximize it Are often young, members of a large family, and new to the community Income and education very by situation Differ in their lifestyles Enjoy fine foods, like to travel, are active, like to change stores, and read out-of-town newspapers

To look at retailer actions based on target market planning.

Retailers can deploy: -mass marketing, -concentrated marketing, or -differentiated marketing

Lifestyle: psychological factors

Personality Class consciousness Attitudes (opinions) Perceived risk

Attitudes (opinions)

Positive, neutral, or negative feelings a person has about different topics.

Current economic issues

Real 17% unemployment rate (10% unemployment and 7% under employed, stopped linking, accepted early retirement offer) Low levels of consumer confidence High foreclosure rate (particularly Nevada, Texas. California, Florida) plus high underwater loans(nationwide) Many fixes are temporary--"cash for clunkers" auto rebates, first time home-buyer incentives, mortgage renegotiation

Motives

Reasons for consumer behavior.

Time utilization

Refers to the activities in which a person is involved and the amount of time allocated to them. The broad categories are: work, transportation, eating, recreation, entertainment, parenting, sleeping, and (retailers Hope) shopping. Today, many consumers allocate less time to shopping.

Routine decision making

Takes place when a consumer buys out of habit and skips steps in the purchase process.

Routine decision making

Takes place when the consumer buys out of habit and skips steps in the purchase process. Wants to spend little to no time shopping Same brands usually purchased and in the same places. Items regularly bought: groceries, newspaper, haircuts

Perceived risk

The level of risk a consumer believes exists regarding the purchase of a specific good or service from a given retailer, whether or not the belief is correct. There are six types: -Functional: will a good or service perform well? -Physical: can a good or service hurt me? -Financial: can I afford it? -Social: what will peers think of my shopping here? -Psychological: am I doing the right thing? -Time: how much shopping effort is needed? Perceived risk is high if: - a retailer or it's brand new, -a person is on a budget or has a little experience, -there are many choices, and -an item is socially visible or complex

Attitudes (opinions)

The positive, neutral, or negative feelings a person has about different topics. They are also feelings consumers have about a given retailer and its activities. Does the consumer feel a retailer is desirable, unique, and fairly priced?

Consumer behavior

The process by which people determine whether, what, when, where, how, from whom, and how often to purchase goods and services.

Personality

The sum total of an individual's traits, which make that individual unique. They include: a persons level of self confidence, innovativeness, autonomy, sociability, emotional stability, and assertiveness.

Main Objectives

To enumerate and describe a number of consumer demographics and lifestyle factors, needs and desires, and related to retailing. To examine consumer shopping behavior, including the consumer decision process and its stages. To know some of the environmental factors that affect consumer shopping. Discuss how information flows in a retail distribution channel. To look at the retail information system, it's components, and recent advances. Describe the marketing research process.

To discuss why it is important for a retailer to properly identify, understand, and appeal to its customers.

To properly develop a strategy mix, a retailer must identify the characteristics, needs, and attitudes of consumers; understand how consumers make decisions; and enact the proper target market plan. It must study environmental influences, too.

Lifestyles:

Ways in which individual consumers and families (household) live and spend time and money. They are based on social and psychological factors and are influenced by demographics.

Outshopping

When a person goes out of his or her hometown to shop.

Lifestyles

Where is the individual consumers and families (households) live and spend time and money.

Limited decision making

a consumer uses each step in the process but does not spend a great deal of time on each item. Items that have been bought before but not regularly: second car, clothing, vacation, gifts Risk is moderate

Stimulus:

a cue(social or commercial) or a drive(physical) meant to motivate or arouse a person to act. When a person talks with a friend, fellow employee, and others, a social cue is received. A commercial cue is a message sponsored by a retailer or some other seller. -ads, sales pitches, store displays A third type of stimulus is a physical drive. -hunger, thirst, cold, heat, pain, or fear

Customer loyalty

exists when a person regularly patronizes a particular retailer that he or she knows, likes, and trusts. time-conscious Can be placed into 4 categories: Inertia loyalty Mercenary loyalty True loyalty Cult loyalty

Consumer decision process

has two parts: the process itself and the factors affecting the process. There are six steps in the process: Stimulus Problem awareness Information search Evaluation of alternatives Purchase (purchase act) Post purchase behavior NOTE: the time spent in each step & the decision process as a whole depends upon the demographics, life-styles, and in large part on the situation. **The process can also be stopped t any point.

Inertia loyalty:

its inconvenient to switch brands/retailers airlines, banks, grocery store no incentive to stay