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Customer Buying Behaviour

Customer Buying Behaviour

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Published by: preeyankagupta on Nov 28, 2009
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How consumers purchase products provides terrific direction for a retailer.

It helps the retailer decide what categories to carry as well as how to place, price and promote categories. The components of buying behavior provide a simple but extremely powerful formula for driving sales successes down to the category, brand and item level. Knowing your customer also means you can choose the right level of service, store ambience and facilities.

Today’s customers know what they want. They are savvy purchasers, understand quality, are valuedriven and practical A retailer must respond to the way a customer shops, or be left far behind

What influences a customer, during the shopping process and as he makes his decisions?


What is the customers shopping influenced by?
Life styles Needs and desires Shopping Attitudes and behavior Retailer actions Environmental factors

Retail shoppers Demographics

What are demographics? Demographics are objective, quantifiable, measurable population data.

• Groups of customer are identified by variables such as gender, age, literacy, language spoken, households, marital status, income, place of residence, employment status, occupation, education level, ethnic background. • These variables strongly affect peoples’ retail shopping and retailer actions • For example, if the demographics of the stores’ customer are – 25 to 35 years – Mostly female – Married with children – Working professional Then the retailer would possibly look at extended shopping hours, conveniences such as quick checkout, home delivery, a child care centre, a café in store etc

• Retailers must compile and analyze demographic data about people living in their particular trading areas and those most likely to shop with them

A retailer could identify its target market based on combinations of these demographic factors and plan its retail strategy accordingly – Market size- how many consumers are in the target market? – Gender- Is the target market mostly male or female or equal proportion? – Age- What are the prime age groups to which the store appeals? – Marital and family status- Are consumers single or married? Do families have children? – Income- Is the target market lower income, middle income or upper income? Is income available for luxury purchases? – Retail sales- what is the retail sales potential for the retailer’s goods and services? – Occupation- In what occupations are people working? Are they professionals, factory workers etc?

• Life styles are the ways in which individual consumers and families live and spend time and money

• A retailer must have knowledge of various life style concepts and determine the life style attributes of its own target market • A retailer can develop a life style profile of its target market by answering these questions and use the answers to develop retail strategy – Culture- what cultural values norms and customs are most important to the target market? – Social class- Are consumers lower, middle or upper class? – Reference Groups- To whom do people look for purchasing advice? How can the retailer target opinion leaders – Time utilization- how do people spend time? How do they view time spent in shopping? – Class consciousness- are customers status conscious? What does this mean for purchases? – Attitudes- How does the consumer feel about the retailer and its offerings (positive or negative)

Implications for retailers
• Gender roles affect shopping habits For e.g.. If women are largely shopping for Men's shirts, then a retailer can cross-merchandise and display ladies wear near the Shirts section in the store • Level of consumer sophistication and confidence affect shopping habits. E.g.If the target market is well educated, has a good knowledge of international brands through travel abroad, has money to spend on luxury items etc, a retailer might change the merchandise categories and introduce a high value designer item/ high value branded item

Implications for retailers
• Poverty of time affects shopping For e.g.. If the customer profile is DoubleIncome-No-Kids family, the retailer might decide to offer late night shopping hours for preferred customers. He might increase the number of checkout queues to ensure quicker checkout. He might decide to stock convenience foods such as frozen meals. • Retailers can derive consumer profiles for their store and offer the right pricing/merchandise and services for their primary profiles

Customer needs
• Retailers look at the following questions and match the needs of the target profiles
– How far will the customer travel to reach the retailer – Is convenience important – What store hours are desired? Are evening shopping and weekend shopping desired? – What level of customer service is preferred? – How much of range (of products) is required? – What level of goods/ service quality is preferred – How important is price? – What are the special needs of the targeted profile?

Shopping attitudes and behavior
• Do your customers enjoy shopping? Are they looking for ease of shopping and quick service or do they want to browse and window shop leisurely? • How do they perceive time spent in shopping – a chore or an pleasurable activity? • What do they feel about sales and retailer pricing policies? Do they believe that high prices reflect quality or are they practical shoppers who think that good bargains can be had at discount stores?

Consumer Decision making process
• Each time person buys a good or service, he or she goes thru a decision process. • The decision process has 6 steps • There are also factors, like demographics and lifestyle that affect the decision making process • A good retailer assists the customer at each stage of the decision making process

Consumer Decision making process
Stimulus/cue Problem awareness Information search Evaluation of alternatives Purchase Life-style Post purchase behavior


Stages in Customer Decision Making process
• Stage 1: The stimulus or cue is a drive meant to motivate a person to shop. This could be an advertisement, or a talk with friends who recommend the store, or a store display • Stage 2: Problem awareness: here the customer who has been motivated/cued also recognizes that the goods or service (in the store) may solve a problem or unfulfilled desire. This could be a shortage or an item (the customer has run out of a product he uses) or an untried product/service.

Stages in Customer Decision Making process
• Stage 3: Information search: Here the customer finds different alternatives that will fit his need, and tries to understand the characteristics of each alternative. The search can be internal (informal process in the customers’ mind only) or it can be an external search, where the customer interacts with and search in advertisements, with retail sales person, friends/family etc. A search may be quick (e.g buying a new trouser) or long e.g. when buying a car or house.

Stages in Customer Decision Making process
• Stage 4 : Evaluation of alternatives: Once the customer has enough information, s/he can select an option from among the choices available. Each alternative will have different attributes and the customer ranks them according to the importance in his mind. Different customer consider different criteria for decision making e.g.. Price, quality, fit, durability, warranty etc • Stage 5: Purchase Act: After choosing the best alternative, the person pays for the goods/ service. Here the decisions a customer makes are regarding price, method of payment, delivery time. If he is satisfied, he goes thru with the purchase.

Stages in Customer Decision Making process
• Stage 6: Post purchase behavior: At this stage the purchase is re-evaluated by the customer. In some cases, buying one item will lead to further purchases. E.g. a car purchase leads to buying insurance. The person may re-evaluate the item bought as follows:
– Does the product perform as promised? – Do the attributes match the customers; expectations? – Has the retailer performed as expected?

Here, if dissatisfied, the customer may experience a doubt that a correct decision has been made; he may regret the purchase. Here the retailer needs to reassure the customer and solve his problems if any

Types of decision making
• Extended decision making: the customer uses the full 6 stages of decision making, spends considerable time in evaluating alternatives, gathering information before the purchase is done. The items are usually expensive, complex items, e.g. a house, a car. • Limited decision making: this occurs when the customer uses all 6 stages of the decision making process but does not spend much time at each stage. Items here are mostly those that were purchased before by the consumer but not regularly bought, and the consumer may spend some time shopping e.g. clothes, gifts, a vacation. • Routine decision making: this takes place when the customer purchases out of habit and spends very little time on the shopping process. Usually same brands are repurchased since items are regularly bought. E.g. groceries, newspapers, etc

Retailer Actions: Impulse purchases
• Impulse purchases occur when a customer buys a product he had not planned on buying when he entered the store. Here a large part of the decision making process is influenced by the retailer. • Hence the retailer can use displays, especially in the checkout counter/queue where the customer is waiting, to motivate a person to buy impulse items such as candy, magazine, batteries etc.

Customer Loyalty
• Customer loyalty is another aspect of consumer behavior. Here a person visits a store regularly and buys regularly. The customer trusts the retailer, and tends to spend more per shopping trip than the average customer. • Customer satisfaction is important to develop loyalty • A retailer has to offer good “value” to convert a satisfied customer to a loyal customer

The New age consumer in India
• Rising incomes: people have more disposable income to spend on activities such as shopping. • Explosion of media has caused the average Indian consumer to be aware of products, brands, new services and has pulled up the expectation levels of the customer • Change in women and family structure. More working women and nuclear families have increased the need for convenience shopping.

The New Age Customer in India: not just products, lifestyles & Brands
• Hugo Boss, Valentino, Armani, Versace, Swarovski, Omega… • Never mind the prices, but we will match our lifestyles with our favourite celebrities and heroes. Spending is in, saving is out

The New Age Customer
• The consumer is being exposed to a new kind of shopping experience which is redefining his/her expectations from shopping and other services.

Time Poverty of The New Age Customer
• 47% Indians want to have more time than money, implying time poverty comparable to Europe and USA • Scarcity of time is putting pressure on shopping time.

The New Age Customer in India
• Has a need for all-in-one offer: options readily at hand, close by, convenience and great “freedom of choice" under one roof! • Consumers are moving from “buy what we make” to “make what we want”

Now the Consumer is King, Really!
• Customers are walking away from stores that don't offer them service, an enjoyable experience or value for money. • Leisure is already an integral part of shopping expectations. Quality of environment and experience is becoming very important • Need for customer service to encourage consumers to come back again and again and buy more. • Retailers are asking themselves: "Is the overall experience I provide so unique that customers cannot imagine going elsewhere to shop?"

New Age Customer:Shopping patterns
• Customer are beginning to think: “Rather than go out to shop, I will shop when I am out.” They now want
– Choice of alternative shopping locations – Range of products in a given location

The New Indian Customer is looking for a retail experience
• Consumers no longer think "expensive looking" means "expensive". • Need is for an enhanced look and feel of the shopping environment.
– Hence retail ambiences are getting upgraded – Even the poky neighborhood kirana stores are becoming super kiranas

The New Age Customer is a butterfly
• Less likely to stay loyal. Major brand names can lose or gain significant market share in a relatively short space of time. • Flitting from one product to another, educated and experienced, and familiar with a growing choice of products and services. • Businesses that do not provide a high level of service and well-designed products, information and value for money – will lose their customers.

In Conclusion
• Once retail professionals understand how consumers view the shopping process, they can find ways to drive more traffic to their store and improve its performance.

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