RETAIL MANAGEMENT

UNIT -2 CONSUMER BEHAVIOUR IN RETAIL BUSINESS

Consumer behaviour is the study of how individual customers, groups or organizations select,
buy, use, and dispose ideas, goods, and services to satisfy their needs and wants. It refers to
the actions of the consumers in the market place and the underlying motives for those actions

CONSUMER BEHAVIOUR-MEANING

In other words; The term consumer behaviour is understood as the behaviour that consumer
display in searching for purchasing, using, evaluating and disposing of products and services
that they expect will satisfy their needs.

CONSUMER BEHAVIOUR-DEFINITION

“Consumer behaviour is the study of how people buy, what they buy, when they buy and why
they buy” BY:- KOTLER

Buying Decision Process.

Consumer buying process describes the process a customer goes through when buying a
product.

Need Recognition and Problem

awareness

Information Search

Evaluation of Alternatives

Purchase

Post-Purchase Evaluation
Introduction to buying process

The purchase is only the visible part of a more complex decision process created by the
consumer for each buying decision he makes. Therefore, it is necessary for the marketer to
consider the whole buying process rather than just the purchase decision. The consumer
decision making process involves the following 5 steps: 1. Problem reorganization 2.
Information search 3. Evaluation of alternatives. 4. Purchase decision 5. Post-purchase
evaluation.

1. Need/Want/Desire is recognized:

In the first step the consumer has determined that for some reason he/she is not satisfied (i.e.,
consumer's perceived actual condition) and wants to improve his/her situation (i.e.,
consumer's perceived desired condition). For instance, internal triggers, such as hunger or
thirst, may tell the consumer that food or drink is needed. External factors can also trigger
consumer's needs. Marketers are particularly good at this through advertising, in-store
displays and even the intentional use of scent (e.g., perfume counters). At this stage the
decisionmaking process may stall if the consumer is not motivated to continue. However, if
the consumer does have the internal drive to satisfy the need they will continue to the next
step.

2. Search for Information :

Assuming consumers are motivated to satisfy their need, they will next undertake a search for
information on possible solutions. The sources used to acquire this information may be as
simple as remembering information from past experience (i.e. memory) or the consumer may
take considerable effort to locate information from outside sources (e.g., Internet search, talk
with others, etc.). How much effort the consumer directs toward searching depends on such
factors as: the importance of satisfying the need, familiarity with available solutions and the
amount of time available to search. To appeal to consumers who are at the search stage,
marketers should make efforts to ensure consumers can locate information related to their
product. For example, for marketers whose customers rely on the Internet for information
gathering, attaining high rankings in search engines has become a critical marketing
objective.

3. Evaluate Options :

Consumers' search efforts may result in a set of options from which a choice can be made. It
should be noted that there may be two levels to this stage. At level one the consumer may
create a set of possible solutions to their needs (i.e., product types) while at level two the
consumer may be evaluating particular) products (i.e., brands) within each solution. For
example, a consumer who -needs to replace a television has multiple solutions to choose from
such as Plasma, LCD and CRT televisions. Within each solution type will be multiple
brands from which to choose. Marketers need to understand how consumers evaluate product
options and why some products are included while others are not. Most importantly,
marketers must determine which criteria consumers are using in their selection of possible
options and how each criterion is evaluated. Returning to the television example, marketing
tactics will be most effective when the marketer can tailor their efforts by knowing what
benefits are most important to consumers when selecting options (e.g., picture quality, brand
name, screen size, etc.) and then determine the order of importance of each benefit.

4. Purchase:

In many cases the solution chosen by the consumer is the same as the product whose
evaluation is the highest. However, this may change when it is actually time to make the
purchase. The "intended" purchase may be altered at the time of purchase for many reasons
such as: the product is out-of-stock, a competitor offers an incentive at the point-of-purchase
(e.g., store salesperson mentions a competitor's offer), the customer lacks the necessary funds
(e.g., credit card not working), or members of the consumer's reference group take a negative
view of the purchase (e.g., friend is critical of purchase). Marketers whose product is most
desirable to the consumer must make sure that the transaction goes smoothly. For example,
Internet retailers have worked hard to prevent consumers from abandoning online purchase
(i.e., online shopping carts) by streamlining the checkout process. For marketers whose
product is not the consumers selected product, last chance marketing efforts may be worth
exploring, such as offering incentives to store personnel to "talk up" their product at the
checkout line.

5. After-Purchase Evaluation:

Once the consumer has made the purchase they are faced with an evaluation of the decision.
If the product performs below the consumer's expectation then /she will re-evaluate
satisfaction with the decision, which at its extreme may result in the consumer returning the
product while in less extreme situations the consumer will retain the purchased item but may
take a negative view of the product. Such evaluations are more likely to occur in cases of
expensive or highly important purchases. To help ease the concerns consumers have with
-their purchase evaluation, marketers need to be receptive and even encourage consumer
contact. Customer service centres and follow-up market research are useful tools in helping to
address purchasers' concerns

INFLUENCE OF GROUP AND INDIVIDUAL FACTORS

Typically, it is a combination of certain group and individual(or psychological factors that

influences the consumption behaviour of buyers.

Consumers do not make purchase decisions in vacuum. Their buying behaviour are
influenced by culture, social, personal and psychological factors. Most of these factors are
“uncontrollable” and beyond the hands of marketers however, they have to be considered
while trying to understand the complex buyer behaviour.

1. CULTURAL FACTORS:
Culture factors have the deepest influence on consumer behaviour. Hereunder we will discuss
about culture, subculture and social class.
o CULTURE;
Culture is the most fundamental determinant of a person’s wants and behavior.
Right from the time of his birth, a child grows up in a society a certain set of
values, perceptions , preferences, behaviour and customs, through a process of
socialization involving the family and other key institutions. Today, we can see
that a lot of importance and value is given to success and achievements, efficiency,
pragmatism, material comfort, individualism, freedom, etc. All these will have a
bearing on a child growing up and will and also be seen in his buying behaviour.
For example: assume a young college going teenager, is currently interested in
finding a new leisure time hobby which may be useful to him in the future also.
This need had led to the purchase of a camera an taking up photography as a
hobby. However, there are many characteristics in the background which
influences his purchase decision. The young boy has been raised in a society,
where modern technology has helped in development of small, compact easy to
operate cameras. The young boy feels comfortable to operate such cameras and
society also accepted photography as a leisure time activity.
Marketers are always trying to see if there is a cultural shift and develop
products accordingly. Some of the prominent cultural shifts today are
 Leisure time:
Most of the couples are working and hence seeking more ways to increase leisure
time to spend on holidaying and sports. They are interested in the purchase of time
saving home appliances and services like washing machines, ovens, hotel, eating
lighter and many more natural foods.
 Health conscious:
People are becoming health conscious and are getting involved in activities such
as exercise, jogging, yoga, eating lighter and more natural foods
 Informality:
People are adapting a more relaxed and informal lifestyle. This can be seen in their
choice of clothing, furnishing and entertaining.
o SUBCULTURE;
Each culture will contain smaller group of subculture variables that provide more
specific identification and socialization for its members. In other words, to segment
larger societies into smaller subgroups (subcultures) that are homogenous in relation
to certain customs and ways of behaviour. These sub cultural divisions are certain
socio-cultural and demographic variables like nationality, religion, geographic,
Locality, caste, age etc. Each subculture may have certain distinct tastes, preferences
and lifestyle.
In the above example, the young boy’s interest in various goods may be the
influences of his religion, caste and geographical background. These factors will
influence his food preference, clothing choices and recreation activities. His
subculture(age, sex, etc.)may be attaching different meaning to picture taking and this
could influence his interest. His subculture identifications may influence his interest
in cameras.
o SOCIAL CLASS;
Social class may take the form of caste system where the members of different
castes are reared for certain roles and can’t change their caste membership. Social
 class also influences buying behaviour. Social classes show distinct product and brand
preferences in purchase decisions related to clothing and jewellery, leisure activity
and automobiles. Higher social class customers may prefer to purchases clothes and
toys for their children from Kemp fort weekender at Bangalore, whereas lower social
class customers may prefer to shop at small retail outlets. The social classes also
differ in their media exposure, with higher social class consumers having greater
exposure to magazines and newspapers. Whereas, when lower class consumers read
magazines, they may show an orientation towards reading film magazines. Thus, the
marketing manager must design an advertising layout suitable to the target social
class.
Going back to our example, the young boy may have come from a higher social
class background and his family may be owning expensive camera. The idea of
purchasing a small compact camera may also be in line with what his friends, with a
higher social background already have. Social class is a very important factor
influencing the buying motive behind consumer behaviour.

2. SOCIAL FACTORS:
A consumer’s behaviour is also influenced b social factors such as the
consumer’s reference groups, family and social role and status.

o REFERENCE GROUP;
A person’s reference group are those that have direct or indirect influence on the
person’s attitudes and behaviour. Groups having direct influence on a person could
comprise of people with whom the person interacts on a continuous basis, such as
family, friends, neighbours and colleagues. Sometimes a person may also be directly
influenced by some social organisations such as religious organisations, professional
associations and trade unions. And, sometimes consumers are also influenced by
groups to which they do not belong (aspirational groups) or a (dissociative) group
whose values or behaviour an individual rejects.
A reference group can influence the consumer by introducing him/her to new
lifestyle by influencing the person’s attitudes and self concept because he/she
normally desires to “fit in”. Further, the group also creates pressures for conformity to
groups attitudes and behaviour that may affect the person’s actual product/brand
choice.
Each group also has an “opinion leader”. The marketer tries to influence to
relevant consumers by directing messages at the opinion leaders on the basis of
identifying certain personal characteristics associated with opinion leadership. The
more cohesive the group, the more effective its communication process, and higher
the person who esteems it, the more influential it will be in shaping the person’s
product and brand preference. The young boy’s decision to buy a camera and his
brand choice may be strongly influenced buy some of his group’s friends who belong
to the gym he goes to exercise daily and may influence him to buy a particular brand
of camera.
o FAMILY;
Members of the buyer’s family can exercise a strong influence on the buying
behaviour. Marketers are interested in the roles and relative influences of the husband,
 wife, children and parents on the purchase of a variety of products and services. The
marketer is interested in knowing which member normally has the greater influence
on the purchase of a particular product or service. In a nuclear family, either the
husband is more dominant, sometimes the wife is more dominant or they may have
equal influences. The following observation has been made in most of the cases.
category In the purchase of products
Husband dominance Automobiles, TV, Comp etc.
Wife dominance Washing machines, Home appliances etc..
Equal dominance Housing, Recreation activities etc.

At the same time, the dominance of a family member varies from different sub
decisions within a product category. For example, if a couple are planning to purchases an
automobile, the decisions related to “when to buy” may be primarily made by the
husband but regarding “what colour to buy” may be a joint decision.

So, it is the responsibility of the marketer to develop a marketing communication

which may be directed differently at the particular influencing personality at the various
stages of the buying process.

o ROLE AND STATUS;

A person is a member of many groups-family, clubs, organisations, etc.,
simultaneously and the person’s position in each group can be defined in terms of role
and status.
Say for example: Mrs. Mehta is a senior marketing executive in a firm and she is
planning to purchase a ‘microwave oven’. With her parents, she plays the role of a
daughter, in her family, she plays the role of a wife and mother, in her firm, she plays
the role of a senior marketing executive. A role consists of the activities that a person
is expected to perform according to the people around them. Each of Mrs. Mehta’s
role will influence some of her buying behaviour. Each role will reflect a status
accorded to the role by the society. The role of a senior, marketing executive has more
status in the society than the role of daughter. So, as a senior marketing executive,
Mrs. Mehta will buy the kind of clothes that adds dignity to her role and may prefer to
wear informal clothes. People often choose products to communicate their status in
society.

3. PERSONAL FACTORS:
A consumer’s purchases decisions are also influenced by personal
characteristics namely the buyers age and stage of life cycle, occupation, economic
circumstances, lifestyle, personality and self concept.

o AGE AND STAGE OF LIFE CYCLE;

 People’s choice of goods and services changes over their lifetime. This change
can be observed right from childhood to maturity especially in taste and preferences
related to clothes, furniture and recreation activities.
The stages of life cycle can be said to be a psychological feelings of a certain
performances taking places as they go through life,, and experiencing sudden changes,
in the consumption pattern. For example, in the case of Mrs. Mehta, as a satisfied wife
and Sr.marketing executive she may be moving to be an unsatisfied person searching
for a new hobby ‘cooking. Too much dependence on the ‘cook’ and being served the
same type of food daily may have prompted her to try a new changing consumption
interest that could be related to the stage of life cycle.
o OCCUPATION;
A person’s occupation has a direct effect on his choice of goods and services.
A clerk will purchase products which are economical and not burn his pocket.
Whereas a top executive will purchase expensive goods and services. Marketers will
have to identify which occupational group will be interested in their products and
work out marketing strategies to communicates about their products and services to
the relevant occupational group and induce a positive motive among the particular
consumer category.
o ECONOMIC CIRCUMSTANCES;
A person’s economic circumstances consist of his/her spendable income
(amount, stability and time pattern) saving attitude towards spending versus saving.
In other words, income, savings, credit and assets are the elements of
person’s purchasing power. However, this must be backed by the willingness to buy.
With increase in per capita income and improved standards of living, a willingness on
the part of the consumer to purchase products, has been noticed. So, the marketer has
to do proper market analysis and research and produce, price and promote their
products and services, so as to motivate people to purchase the same.
o LIFESTYLE;
“A person’s lifestyle refers to the person’s pattern of living expressed
through his/her activities, interest and opinions”
Lifestyle of a person conveys more about him than if one were to consider
only his social class or personality. Knowing a person’s social class will help in
inferring about what the person’s behaviour is likely to be. If one fails to see him/her
as an individual, similar personality will indicate certain psychological characteristics
about the person but now through much light on their interest, opinion or activities.
An understanding of a person’s lifestyle will help in giving a profile of whole
person’s pattern of living and interacting with the world.
Thus, the marketing manager will have to work out a marketing strategy
which will indicate the relationship between a product brand and lifestyle of the
product user. Advertising managers work out layout through story board which will
be symbolic to lifestyle of the target market.
For example: multimedia presentation of ‘Raymonds’ is to indicate the
lifestyle of ‘A complete man’, who takes care of his family members, a well groomed
person with a quest for the best ad performs all the activities with an aura of
confidence.
o PERSONLITY AND SELF CONCEPT;

Each person has got a distinctive personality which will influence his/her
buying behaviour. Personality be defined as “the person’s distinguishing psychological
characteristics that lead to relatively consistent and enduring responses to his/her own
environment”.

Personality can be used to analyse consumer behaviour because marketers

have seen that there exists a correlation between personality types and product/brand
choices. Some of the traits used to describe a person’s personality are: self-
confidence, dominances, aggressive, defensiveness, achievement, deference, etc.
While on personality, ‘self concept’ is a related term. It refers to the
person’s image of himself or self image. Each person carries a self image of him/her
and will purchase goods and services that match the self image. If Mrs. Mehta may
see herself as a confident, sociable and achievement oriented women: she will favour
the purchase of a ‘microwave oven’ the brand which will match her self image. Thus,
marketers have to develop and communicate brand images that will match the self
image of the target customers.

4. PSYCHOLOGICAL FACTORS:
For the purpose of understanding consumer’s buying behaviour, 4 major
psychological determinants-motivation perception, learning and beliefs and attitudes are
discussed as under:

o MOTIVATION;
MOTIVATION can be said to be the inner drive that is sufficiently pressing and
directs the person to seek satisfaction of the need. Satisfaction of the need reduces the
felt tension.
Psychologist, Sigmund Freud has tried to explain motivation. He says people are
generally conscious about the real psychological forces influencing their behaviour.
The repressed urges within an individual are never forgotten. They emerge in dreams
and are often unknowingly uttered and will be seen in the behaviour of the person.
Mrs. Mehta wants to purchase a microwave oven and may describe her
motive as a necessity/hobby. At a deeper level, she may be buying as expensive
microwave oven to impress, others with her cooling skills. At a still deeper level, she
may be buying the microwave oven to feel, carefree and independent from hassles of
being dependent on cook. Maslow’s theory of needs is another attempt to explain
motivation. Abraham Maslow seeks to explain why people are driven by particular
needs at particular times and on why people differ in ways of satisfying their needs.
 needs
need
onneeds
need
needs s
gical
actualisati
Esteem
Safety
Social
Self
Physcolo
MASLOW’S HIERARCHY OF NEEDS
Maslow says a person will try to satisfy his most important needs first. Once
he satisfies this need. It ceases to be important. Then he will be motivated, so satisfy
the next level of most important need.
For example: Mrs. Mehta’s interest in microwave oven might come from a
strong need for more esteem as compared to others or its might come from a need for
self actualization ,i.e., to actualize her potential as an expert in cooking which can be
expressed through cooking Indian cuisine on a microwave oven. Thus, marketers will
have to keep in mind the role played by needs and motivation while working on the
buying motive of the target consumers.
o PERCEPTIONS;
“Perception is the process of selecting, organizing, and interpreting or attaching
meaning to events happening in environment”.
How a motivated person acts will depend on how he/she perceives the situation. For
example: Mrs. Mehta might, consider a fast talking ‘microwave oven’ salesman as an
insincere and aggressive person. Whereas, another microwave oven purchaser might
perceive the same salesman to be helpful and knowledgeable person.
o LEARNING;
When people act, they learn. Learning describes changes in an individual’s
behaviour arising from experience. Most human behaviour is learned. Learning
theorists say that a person’s learning is produced through the interplay of drives,
stimuli, cues, responses and reinforcement.
Continuing with the earlier mentioned example, Mrs. Mehta’s drive towards self
actualization becomes a motive when it is directed towards a particular drive reducing
stimulus object here a microwave oven will be re-inforced.
Thus, marketers should try to build up the demand for their products by
associating it with strong drives using motivating cues and providing positive re-
inforcements. Conversely, the marketer must also ensure the consumer will not shift
away from a favourable brand due to negative re-inforcement.
 o BELIEFS AND ATTUTUDES;
Through learning, people acquire certain beliefs and attitudes and in turn this
influences their buying behaviour.
A belief is a thought that a person holds about something. People act based on
their beliefs. These beliefs help in building up product and brand images.
An attitude can be said to be “person’s enduring favourable or unfavourable
cognitive evaluation, emotional feelings ad action tendencies towards some objects or
idea.
Attitudes make people behave in a fairly consistent way towards similar
object. People do not interpret and react too everything in a fresh way. A person’s
various attitudes settle into a coherent pattern and to change, one may require difficult
adjustment in many other attitudes. Thus, the marketer should try to link his products
into existing attitudes rather than trying to change people’s attitudes.
For instance, a person who lost his parents in a road accident, when they were
travelling by car may develop a phobia for car travel or a specific attitude, a dislike
for travelling by a car. This could lead to several behaviour patterns like preference to
travel by bus , train or even air travel. Thus, the advertiser/marketer has to make all
efforts to inculcate positive attitudes and a positive image within the consumer
through a proper communication programme.
The above discussions have shown that there are many determinants which
act n consumer behaviour. The consumer’s choice is dependent upon his cultural,
social, personal and psychological factors. Very often, it becomes very difficult for
the marketer to influence these factors. However, these may help in identifying
consumers who will be more interested in their products or services. So the marketer
has to use suitable marketing strategies that will attract strong consumer response.

CONSUMER SHOPPING BEHAVIOUR

Shopping Personality Type

All people engage in some form of shopping every now and then. Motivation for shopping may differ
from one person to another, but one thing is certain: each person has their own unique shopping habits
that are closely linked to their personality and spending power. Shopping personalities can be
classified as:

1) The Touchy-Feely Shopper: He is a type of shopper who would like to touch, pick and feel
the product before he buys it. Research shows that if a customer touches or picks up
merchandise he is more likely to buy it. That is why retailers purposely put items like coats,
sweaters, and other fancy and necessary items in easy-to-touch locations.
2) The Mall Lingerer: These shoppers take their time going through a store before purchasing
goods.
3) Guerrilla shoppers: The guerrilla shopper is the opposite of the mall lingerer. This person
waits until the last minute, especially around the holiday season, and then runs around
frantically, trying to get all the shopping done in one shot. This person also shops
 infrequently. They are more likely to overspend if they do shop once, rather than making
several small trips.
4) The Sale Junkie: These people are subjected to a spillover effect. If they see one bargain,
they think everything in the store is a bargain, making them to spend more money.
5) The Social Shopper: This type enjoys shopping with friends and almost never shops alone,
they tend to make a lot of impulsive purchases.

Another study, the McKinsey & Co. Report,2008, advocates that in an emerging market
like India, INCOME becomes the most important driver for consumption. McKinsey’s study
identified 5 distinct consumer segments based on real annual disposable income.

 GLOBALS: The richest people in the country who can afford a global lifestyle and
are earning a disposable income of Rs. 1 million per annum
 STRIVERS: Highly successful people in the cities, town with a disposable income of
Rs.5,00,000 to Rs.1 million per household.
 SEEKERS: This segment consist of the most varied economic group including newly
recruited (fresh out of college) employees, traditional white collared employees, mid-
level government officials, medium scale businessman and traders. This group have
an annual disposable income of Rs.2,00,000 to Rs.5,00,000 per household.
 ASPIRERS: People belonging to this segment have an annual income of Rs.90,000 to
Rs.2,00,000 per household and spend about half their earnings on basic necessities.
This segment includes small shop keepers, farmers and low skilled workers from
industries
 DEPRIVED: This group consists of the poorest households in the country, with each
household earning less than Rs.90,000 as annual disposable income and barely able
to make their two ends meet.
Depending upon the consumer segment the marketer has identified as the target
market, the shopping behaviour of those belonging with vary depending upon the
money they are willing to spend and what they are aspiring to buy.

CUSTOMER SERVICE AND CONSUMER SATISFICATION

What is meant by ‘Customer service’?
Retailing is an amalgamation of products and services involving a mix of certain
tangible features and intangible services. Retailing as a service channel includes
certain tangible features such as physical surroundings, signs, displays, merchandise,
uniforms, changing rooms etc. Apart from the beneficial utility of an ideal location of
purchase goods and services retailing also involves the intangible services such as
type and timing of the service delivery, other consumer and the nature if a retail sales
transaction, ability of the sale staff to personalize and interact with the customers
properly and add extra value to retail environment. In retailing since we are dealing
with an amalgam-a mixture-of a good and service with specific characteristics, retail
marketing will also work on different principles of marketing at the marketplace.
Customer service can be referred to those set of activities and programmes
undertaken by retailers which will increase the value of customers received from the
merchandise and services they purchase and also make their shopping experience
more interesting and rewarding.
 The key to customer service is the involvement of all the employees of the retail
outlet as well as all elements of the retailing mix to provide services which will
increase the value of merchandise for the customer. For instance, the employees
responsible for the design and visual merchandising will help the customer to
experience delight in the in-house attractive setting and finding the merchandise in the
store. If the employees are able to provide personalized services to the customers by
directly interacting with them, they(customers) will feel like visiting the outlet again
and again.

THE CONCEPT OF “CUSTOMER SATISFACTION”

Satisfaction is a very important aspect of the evaluation stage in the purchase process.
Satisfaction can be referred to as the buyer’s state of being sufficiently rewarded in a
buying situation in terms of the brand’s potential to satisfy the consumer’s motives.
Typically, the consumer may have certain expectations prior to the purchase which
maybe related to the anticipated benefits from the performance of the product/service
or whether the cost will match the expenditure to be incurred towards the time and
money spend or the social benefits to be obtained from the purchase. If the after usage
the customer’s expectations will match the benefits accrued from the purchase, then
he will experience the customer satisfaction otherwise he will be dissatisfied.
WORKING TOWARDS ENHANCING CUTOMER SATISFACTION
In the existing business environment, markets are turbulent and customer needs
fast changing, organisations should opt for ways to add value to their customer by
offering products and services just the way they want it. When the customer has to
choose from a large and bewildering number of options, features, pricing structures
and delivering methods, offering a unique product to every individual customer will
go a long way in adding value to the consumer decision-making process.
Customer satisfaction is a continuous process which does not begin or end with
a purchase. It covers the entire ”ownership experience” from selecting a product, to
purchase, through aftercare to repeat purchase. Clearly, there are 3 phases in the
customer satisfaction process, namely:
 Pre-sales: During this stage, the customer’s expectations are developed
through the various information sources like advertising, word-of-mouth
and so on.
 During Sales: When the customer is engaged in experiencing the sales
process, i.e. how the sales person deals with enquires and sell products.
 After-sales Period: This refers to the period after the customer has
started using the products.
Thus, customer’s expectations and their experience will together determine the
level of satisfaction. These expectations are inclusive of:

 Pre-sales Period:
Availability of clear and useful information on:
 The products or service.
  Its quality aspects.
 Its core benefit or advantages.
 Its price.
 Its availability at sales outlets.
 The procedure of obtaining it.

 During Sales Period:

 Opportunity to inspect the products.
 Provision of an attractive sales environment.
 Courteous and attentive service.
 Reasonable and reliable delivery.
 Enhancing quality of goods and services.
 Prompt redressal in case of complaint received.
 Freedom to choose without undue sales pressure.
 After-sales Period:
 If required, necessary support or advice be provided
 Prompt replacement or refund, if necessary`
 A smooth and straightforward complaint redressal procedure.
 Efficient repair and maintenance services.
 Efficient and effective consumer follow-up process.
From the above discussion, it is seen that consumer satisfaction goes beyond the core
product or service offering. Marketing decision-makers have to start by trying to understand
the elements which together will determine the satisfaction levels. Then list the elements in a
proper sequence to identify what is to be done so as to increase the customer’s satisfaction
level. This can be done only if te marketers involve a system which facilitates interactions
with their customers. These interactions will prove to be equally important as the quality of
the core product or service offered by the company in the long run.

RETAIL PLANNING PROCESS

Generally, the retailer will source the merchandise for the stores from various manufacturers
(brands) or have his own in-store(private label) brands. Depending on this decision, the
retailers will work out a branding strategy as well as the assortment plans. For this purpose,
the retailer has to develop the strategic retail planning process.

The strategic retail planning process involves a set of steps the retailers goes through while
developing a strategic retail plan. It explains how retailers select target market segments,
determines the appropriate retail format and then build-up sustainable competitive advantages
in the form of steps. These steps are as follows:

STEP 1: Define the Business Mission

The first step in the retail planning process is to define the business missions. The mission
statement is usually a broad description of retailer’s objectives and the scope of activities it
plans to undertake. It will indicate the general nature of the target segment and the retailer
formats which the company will consider.

STEP 2: Conduct a Situation Audit

Once the mission statement and objectives are set, the next step in the strategic planning
process is to have a situation audit. Situation audit means do an analysis of the opportunities
and threats in the retail environment as well as the strengths and weakness of the retail
business relatives to competitors.

While trying to analyse the opportunities and threats in the retail environment, the
retailers may have to consider the market forces, competitive force and the environmental
forces,. The market forces which could affect the consumers and their buying behaviour
includes- market size and growth, sales cyclicality and seasonality. Market size (large,
growing, mature markets, etc.), will be an indicator of whether the retailer will be able to
generate revenues to cover his investments. The competitive factors affecting retail markets
includes: barriers to entry (due to scale of economies, customer loyalty and availability of
locations), bargaining power of vendors and level of competitive rivalry. The environmental
factors affecting retail market includes the technological, economic, regulatory and social
changes which can affect the market’s attractiveness.

While performing the situation audit, the retailer will have to do a self analysis in
terms of management capability, financial resources, operative strengths, merchandise
capabilities, stock management capabilities, location strengths, loyal customers etc., in order
to determine the potential areas for developing the competitive advantages.

STEP 3: Identify Strategic Opportunities

After doing the situation audit, the retailer will have to identify strategic
opportunities for increasing retail sales. These could include growth strategies for the retailer
such as- market penetration, market expansion, diversification strategy etc.

STEP 4: Evaluate Strategic Opportunities

Once the situation audit is done, the next step involves making an evaluation of the
opportunities in order to determine the retailer’s potential to build-up a sustainable
competitive advantage and reap long-term benefits. Typically, evaluating strategic
opportunities calls for looking into market attractiveness and the strengths and weakness of
the retailers. Such an evaluation will enable the retailer to make proper investments looking
to the market opportunities and then build-up a strong competitive position.

STEP 5: Establish Specific Objectives and Allocate Resources

The retailer’s overall objective is included in the mission statement. The specific objectives
are goals against which progress towards achieving the overall objective van be measured.
The specific objectives include 3 components:

 The performance sought in terms of a numerical index against which progress can be
measured.
 The time period within which goal is to be achieved.
 The level of investment required to achieve the objective.
The performance will be measured by looking into the return on investment

STEP 6: Develop a Retail Mix to Implement Strategy

The sixth step in the strategic retail process involves developing a retail mix for the strategic
opportunity in which investment will be made and to control and evaluate the performance.
The retail mix will include planning merchandise assortments, buying systems and
merchandise, planning the retail communication mix and customer service, store
management, visual design and merchandising, etc.

STEP 7: Evaluate Performance and Make Adjustments

The final step in the planning process relates to evaluating the results of the strategy and
implementation programmes. Evaluating the strategy and implementation programmes will
revea whether the retailer is meeting or not the objectives set. If the objectives are being met,
changes are not required. But if the objectives are not met, a reanalysis is done to review the
implementation programmes and if necessary a new situation audit is worked out.

Thus, the strategic planning process will help the retailer to evaluate alternatives
using financial theory and market attractiveness (or competitive position matrix).
IMPLEMENTATIONS

The development of a business plan typically involves 7 steps starting with the mission
statement which forms the cornerstone for the plan. The various steps that go into the
business plans are given below;

1. Develop mission statement.

2. Identify the targeted market.
3. Determine the specific product/service that is to be provided to the target market.
4. Determine the various sources that will be required to match the market and the
product/service offering.
5. Examine the likely impact of the external and internal factors on the business
decisions.
6. Make the arrangements to obtain the necessary financial support for the business.
7. As the business evolves start revisiting the above steps on an ongoing basis.
To ensure effective implementations, a business must take care to see that whatever
changes are initiated in the strategic plan are incorporated in the budgeting, promotion
schemes and information systems. Further, it also calls for integrating the plans on the basis
of a daily, weekly and monthly routine.

So as to avoid pitfalls during the implementation stage, the following actions need to be
followed;

o Be aware and avoid certain operational mistakes: planning entails futuristic

mistakes. It could bring to light conflicts within the organisation which may affect
the flow of information and the decision-making process. Thus, care needs to be
exercised to avoid some of the common mistakes listed below:

 Lack of communication about the strategic plan to all employees

throughout the organisation.
 No concrete action to ensure that operative plans are concurring to the long
term plan.
 Communication about the plan expressed in a tough language not easily
understood by employees
 Absence of benchmarking the business plan with that of the competitors.
 Management treating the plan as an end in itself.
o Reach out to all stakeholders: The management must clearly communicate and
share the long term business plan with all the employees of the organisation in a
two way communication process. This will, apart from creating a lot of positive
vibes, also help in the generation of good suggestions and ideas which may turn
out to be beneficial in the long run for the business.
Measure periodically the progress through keeping a track on revenge
generation, gross and net sales, return on investment, employee morale, customer
satisfaction and the increase in the number of new customers.
Factors to Consider in Preparing a Business Plan

An attempt is made to understand what factors are to be taken into consideration by the
businessman while working out the business plan, although there could be slight variations
depending upon the type of business.

AWARNESS / PRODUCT KNOWLEDGE

Before actually venturing into the business, awareness or having a thorough knowledge
about the product/service is very important. Only if the businessman has understood the
product/service he plans to sell, will be able market well. It is also mandatory that he be
aware of all the aspects related to the product/service offering, specifically, hoe it is to be
manufactured, the cost likely to be incurred in its making, the consumer market targeted, who
are the likely competitors of your product ( or services) etc.

MARKET RESEARCH

Carrying out a market research will help the business man learn more on the
product/service he is interested to do business in. market research requires the businessman to
look into various secondary sources of information (like published data in known journals,
syndicated search engines, industry manuals etc.). He may also consider carrying out a pre-
market survey to get a feel of the likely prospects off the particular product/service one is
interested too launch.

MARKETING STRATEGY

On the basis of the information received from the market research, the businessman’s
decision can be influenced by the marketing strategy he works out. This will be a marketing
plan clearly stating the marketing goals, objectives, priorities and the time frame within in
which the project is to be completed. Additionally, decisions related to the marketing budget,
keeping in mind the market range, staff to be involved (their salary and other expenses), the
media to be used for advertising and promotional programmes expenses all have to
determined.

TOTAL COST

Apart from the start-up costs, another factor which can influence the business plan
decision is working out the fixed and variable costs to be incurred throughout the life of the
business. These can be termed as the total costs which will be inclusive of location costs,
rentals, machinery and equipment costs, inventory, payroll, supplies, license, insurance etc.

AVAILABILITY OF FINANCE

Typically start-ups as well as established companies will require significant amount

of finance as working capital and for long-term investment purpose. Thus, availability of
finance in the form of loan/credit from a financial institution or a venture capitalist is another
important factor which needs to be worked out in a business plan.

LEGAL / REGULATIONS

Starting one’s own business mandates being aware of the legal aspects of running
the business. Right from ‘naming’ the business organisations, through type of business , tax
liabilities to be adhered to, obtaining licenses permits, authorised officials permissions etc.,
all are regulations and require hiring the services of legal experts. Thus, the ‘regulations’
factor can also affect the business man’s plan.

FORMAT OF BUSINESS PLAN

(1)Executive summary:
This section is a brief overview of the whole business plan.
 Description of business: provide some information about the product or
service the company wishes to offer.
 The market: what markets the company is intending to target?
 Growth potential: what is the potential for company’s business?(what
company expects to achieve in one to three year’s time?)
 Utilisation of finances: what will the loan/overdraft/investment be used for? ,
profits, sales
 Source of funding and its repayment: loan, bank overdraft, personal funds?
 Assistance required: what assistance would be required to help launch
company’s project?
(2) Enterprise Description:
It is important that the company demonstrates clear understanding of the
business it would like to be in the company should also explain the business
concept and the reasons why it thinks it will be successful.
 Provide an overview of business idea and its innovativeness.
 What inspired the company to choose this line of business.
 Why company believes that there is a real need for its product or
service?
 Where the company sees its business in the medium and long term?
(3)Product or service description:
 Provide a detailed description of the product or service.
 What innovative features the company’s product or service
offers?
 List three unique selling points offered by its product or
service.
 How will its product or service satisfy client needs and
expectations?

(4)Industry analysis:
This section helps company to understand the industrial environment it intends to work in by
this company can identify important changes that are likely to take place in the intended
market.

 How many companies already operate in this sector?

 Can the company perceive any important changes in this sector?
 Is the company aware of Political, Economical, Social, Technological ,Legislative or
Environmental changes that could seriously affect its business in the medium or long
term? this is known as the PESTLE analysis.
(5)competition analysis:
 Who are the most important competitors?
 What are their main strengths and weaknesses?
 What are the competitors’ pricing policies?
 Can the company list main competitors and their estimated market share?

(6)SWOT Analysis:

This section enables the company to look closely at the internal strengths and
weaknesses of its business, and to identify external threats and potential
opportunities. SWOT stands for:

S = Strengths

W =Weaknesses

O =Opportunities

T =Threats.

Strengths:

Characteristics of the business,or project team that give it an advantage over

others.

Eg:(high quality,competitivepricing,customer care etc)

Weaknesses:

Are characteristics that place the team at a disadvantage relative to others.

Eg:(lack of funds, lack of management skills, unskilled workforce)

Opportunities:

External chances to improve performance in the environment

Eg:(new markets, export potential, joint venture proposal)

Threats:
 External elements in the environment that could cause trouble for the business or
project

Eg:(imported products, new entrants, political and economic changes)

(7) Marketing sub-plan:

The product:

 List three important features that make company’s product or service

worth having . Eg: design, functionality, reliability.
 In what aspects can the product or service offered be described as
innovative?
 Does the company has any plans to add more product or service to its
current portfolio?

The customer:

 Is the business dependent on one main customer or will it sell to a wide variety of
customers?
 What measures will it employ to identify consumer requirements with regard to its
product or service?
 Has the company plans to have a uniform approach to all customer groups or will it
vary its strategies accordingly?

The place:

 Where do the plan to sell its product or service?

 Directly from the factory
 From a showroom
 E-commerce
 Other
 If the company feels that the customers will find it difficult to access its
products, can it suggest ways of improving the situation?
 Mention three ways in which the competitors facilitate access to their product
or service for their customers.

The method:

 What methods of advertising the company intends to use its product or

service?(newspapers, television, radio, sponsorship)
 How the company prices its product? explain the reasons behind the
pricing strategies.
 Is the company intending to offer credit to its customers? explain the
reasons behind its decisions

(8) Operations sub-plan:

  Is the company already has business premises or is the company planning
to buy/lease/rent them in the near future?
 Give details of equipments/machinery/vehicles the company requires to
operate its business.
 Prepare a list of main suppliers and their credit terms.
 Is the company intends to operate a quality management system of any
sort? is the company planning to apply for quality certification?
 Ensure that the company has comforted with health and safety and/or
environmental regulations relevant to the business.

(9) human resources sub-plan:

 Describe company’s management structure.

 What type of skills and/or experience is the company looking for?
 What measures the company plans to adopt to ensure employee loyalty?
 What plans the company has to develop management team as business
continues to expand.

(10) The budget:

The budget provides the financial planning detail for every aspect of the business. Eg:
employee costs, rent, IT investments, machinery costs, sales value, direct material costs,
shipping and freight charges, etc. the ultimate target that should result from the budget is the
budgeted net profit. it is a key tool for operating the business, and by facilitating comparison
of actual performance versus budgeted performance, its highlights the operating variances to
management.

The budgeted net profit, after taxation, when expressed as a percentage of the net investment
in the business, gives the Return Of Investment(ROI)

It should give the projection of revenue expected by the company for certain number of
future years, say 3 to 5 years.

(11) Liquidity:

Liquidity is fundamental to every business in relation to being able to trade and meet
obligations.

Management monitors the risks in liquidity by tracking cash movements with a Cash Flow
Forecast ensuring adequate cash or facilities to raise money to carry out the business. it
should state:

 How will the company keeps control of its cash flow?

 How will the company finance the changes it may need to make in its business?

(12) Financial sub-plan:

  Calculate the break-even points of its business and how soon the company can
reach it. it should take into consideration all the costs involved
Direct costs (eg: labour, material, shipping costs)
Indirect costs (eg: rent and service charges)
 Over what period will loan/overdraft be repaid and are these repayments included
in the Cash flow forecast?
 Has the company taken account of tax consideration in its calculations?

MEANING OF RISK

A risk is an uncertainty that is affiliated with a particular circumstance that could render a
business inoperable or cause financial insecurities for the company. It is the process of
determining whether a particular uncertain circumstance has the potential to threaten your
business operations.

MEANING OF RISK ANALYSIS

Risk analysis is the process of defining and analyzing the dangers to individuals, businesses
and government agencies posed by potential natural and human-caused adverse events . A
risk analysis report can be either quantitative or qualitative.

1Risk identification

The first step in the enterprise risk analysis process is to identify the internal and external
threats. For convenience, these threats can be classified into three broad categories. These are

1. General business risk that are faced by all companies.

2. Industry-specific risk that are faced by companies within the industry
3. Company-specific risk faced by the company
2. Risk related to general

General enterprise business risks are shared by most business but their significance varies by
company. In the case if start-ups or early stage companies, management must gain experience
in managing operational, marketing and other problems that arise. Potential threats include:

a) Unexpected quality control problems

b) Distribution
c) Marketing
d) Promotion
3 . Risks related to industry

Enterprise strategies for competing effectively should in the competition and marketing plan
sections of business plan. In the competition section, major competitors and their strengths
and weaknesses are discussed, as well as the company’s strategic positioning. Uncertainties
are especially high for companies selling internally consumed products such as food,
beverages and pharmaceutical.

Risks related to company

In the case of start-ups there are many uncertainties. It may be associated with raising start up
Capital and maintaining sufficient funding. In many cases operations cannot commence until
sufficient funds are raised to fund the acquisition of property, plant and equipment and initial
working capital requirements. All companies have uncertainties associated with recruiting,
retaining and managing human resources. In human resources section of the business plan,
the company should discuss plan to recruit additional Key employees and senior management
that are critical to achieving its forecast and operational goals.