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Research Topic: Relationship between Store Patronage and Price sensitivity
London School Of Commerce
I would like to thank my Dissertation Supervisor ………………without whose able guidance and continuous support this research work would not have been possible. I would also like to thank my Course Leader …………..and my other Professors who have helped me in completion of my course work. In the end I would also like to thank my family and friends for there continuous help and support during this demanding time.
Table of Contents S No. Topic Page No.
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Abstract Chapter 1 – Introduction Customer Value and satisfaction Aims and Objectives Chapter 2 – Literature Review Retail Industry Customer Buying Behaviour Price Sensitivity Price Promotion Techniques Store Patronage & loyalty Theories of Retail Change Chapter 3 – Research Methodology Qualitative Research Quantitative Research Questionnaire Chapter 4 – Research & Findings Chapter 5 - Conclusion References
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Appendix – I
store loyalty. retail competition.Abstract To investigate the relationship between Price and Store patronage. The idea is to find out the relationship between price and store patronage? Our results show that price is not the most important factor which can lead to a customer change its loyalty. store patronage. Key Words: store brands. 4 . The nature of the relationship will help answer the question: How important is price for a customer when he is loyal to a particular store. The objective is to find that how changing price affects store patronage. It basically depends on for what reason has the consumer selected the store which he patronises.
am going ‘Tesco’ for shopping. the reason why the particular topic was chosen. One of the most important factors that drives the retail industry today is the “price”. the dissertation chosen is focused on the retail and consumer market. Since price factor is an integral part in success or failure of any company in today’s dynamic business environment. from the customer point of view.. Business Success is not determined by the producer but by the customer. It is the whole business seen from the point of view of its final result i. Marketing is so basic that it cannot be considered a separate function. This chapter also describes what areas have been covered in this dissertation along with the way in which this dissertation has progressed.. Introduction This chapter is the introduction to the dissertation where the reader gets to understand the topic of dissertation.. Since marketing is more focused on affecting the ultimate consumers. So the aim was to study the pricing strategies of these companies and finding out rationale behind them. It also gives the reader an insight of the overall dissertation by providing a brief overview on each chapter in the dissertation.e.Chapter 1 Introduction Where are you going mate? I. there is both qualitative and quantitative data available on the issue to be researched as a lot of researchers have been attracted by this area of research.. This 5 . you wanna come?……… Why do you always go to Tesco? Why not anywhere else?..
Defining Customer Value & Satisfaction Peter Drucker insightfully observed that a company’s first task is “to create customers”. This is the question how the customers make their choices. This has been discussed in details in further literature review. prices and supplies.is as defined by Peter F. It is through these concepts that an organisation tries to gain customer loyalty. the several alternatives of the customer constitute his product choice set. transaction & relationships. markets & marketing & marketers. cost & satisfaction are crucial in the final product choice. offering & exchanging products of value cost & satisfaction exchange. Human needs are continually shaped by social forces. the additional needs associated with the product is called the need set. Therefore Marketing is a social & managerial process by which individuals & groups obtain what they need & want through creating. people’s needs are few their wants are many. Customer rank the products from need – satisfying to the last need satisfying value is the consumers estimate of the products overall capacity to satisfy his or her needs. Needs are not created by their society or by marketers. Wants & desire for specific satisfiers of these deeper needs. There are different needs and wants of people at different stages of their life. But today’s customers face a vast array of product and brand choices. There are other scholars who define marketing as the criteria & delivery of a standard of living. A human need is a state felt deprivation of some basic satisfaction. Drucker. The value of each actual product would depend on how close it comes to the ideal product. 6 . they exist in the very texture of human biology & the human condition. The concept of value.
and price that makes products from some vendors more attractive than others. The buyer for a large construction company wants to buy a tractor. The Customer-Value Perspective on Business Success CVI’s services help clients develop strategies for enhancing the value of their products to their customers. mobility and income. in order to accomplish a desired purpose or goal. The competing salespeople carefully describe their respective offers to the buyer. with help of a product and service offering. features. service. a combination of quality. understanding how customers perceive the products of various competitors targeting high-profit customers formulating strategies that enable the company to deliver high value to targeted customers.It is believed that customers estimate which offer will deliver the most value customers are value maxi misers within the bounds of search costs and limited knowledge. 7 . These include techniques for: • • • • measuring customers’ needs and wants. They form an expectation and this affects their satisfaction and their repurchase probability. Powerful techniques are available that help companies deliver high value. Customer delivered value can be explained in terms of an example. He will buy it from either Caterpillar or Komatsu. Customer Value Gardial and Woodruff (1996) define customer value as customers’ perception of what they want to happen in a specific use situation. Customers look for value.
CVI’s goal is to move customer value from a slogan to a science. Meeting customers' needs start with a customer satisfaction survey. If the performance falls short of expectations. This feeling can be a reaction to an immediate use situation or an “overall” reaction to a series of use situation experiences. the customer is dissatisfied. and Tool Base sources can 8 . The satisfaction level is a function of the difference between perceived performance and expectations. these techniques fall under the heading Customer Value Management. A customer could experience one of three broad levels of satisfaction. If the performance matches the expectations.• identifying who has to do what in order to implement a value-improvement strategy Collectively. The companies that lead customer where they want to go (but don't know it yet) create the future and do more than satisfy customers. If the performance exceeds expectations. the customer is satisfied. Customer Satisfaction Customer satisfaction is a customer’s positive or negative feeling about the value that was received as a result of using a particular organisation’s offering in specific use situations. they constantly amaze them. Most managers support customer value as a goal. (Gardial and Woodruff. the customer is highly satisfied pleased of delighted. Those who have actually made a commitment to value are the ones who have realized superior growth and profitability. 1996) Satisfaction is the level of a person’s felt state resulting from comparing a product’s perceived performance in relation to a person’s expectations.
it won’t attract enough buyers although it will satisfy those who buy. statements made by friends and associates and marketers and competitor information and promises. In doing so. Why is this so important? Because expectations directly relate to the consumer's perception of value. the reality is that organizations have found it to be increasingly difficult. While this sounds simple.get you started. In order to do that more and more customer value needs to be created. and in ideal circumstances. The challenge lies in trying to match. For example. If marketers raise expectations too high. One of the long-standing cornerstones of marketing philosophy has been the principle of identifying and satisfying customer needs and wants. the buyer is likely to be disappointed. the marketer can expect the return to come in the form of customer delight. But hotel guests still encountered a host of problems and Holiday Inn had to withdraw this campaign. In today's hyper-competitive marketplace. ran a campaign a few years ago called “No Surprises”. Meet expectations and the customer will most likely deem the transaction as satisfactory and worthwhile. On the other hand if the company sets expectations too low. surpass customer expectations. The marketer must exceed expectations. Customer Expectations Expectations are formed on the basis of the buyers past buying experience. Because if you can satisfy your customer then only he will think of becoming loyal to the brand or store. These companies are aiming for TCS – Total Customer Satisfaction. 9 . the endeavour should focus not just on meeting expectations but surpassing them. Holiday Inn. The organisation or the product has to live upto customers’ expectation or more than that. Some of today’s most successful companies are raising expectations and delivering performances to match.
being overly conservative in an initial claim may make a marketer non-competitive from the start. even delight.and perhaps even a “WOW. the promises and claims. at minimum. While lofty claims raise customer expectations and enhance the probability of purchase in the early stages of the consumer decision cycle. Overall. Nardelli is credited with being conservative in projecting earnings for Wall Street analysts and then over delivering earnings by a large margin. of adopting such a strategy. This strategy of under promising and over delivering is being adopted by some organizations that have come to recognize the value of taking a long-term perspective in the sustained effort of keeping the customer satisfied. the current head at Home Depot. An article in Fortune magazine (March 22.” which will likely extend into customer loyalty and over time strengthen the most desirable point on the continuum: the marketer/customer relationship. companies seem keener than ever to promise almost anything in order to sell their products. the securities market reaction has been overwhelmingly positive. and with a little effort. This has been met with the “WOW” that marketers strive for. The successful marketer realizes that the smart strategy is to accurately portray the product and service attributes with the expectation that. On the surface. thus moving the customer further into the relationship. Business owners and company executives are often myopic in their belief that they 10 . On the other hand. Robert Nardelli. So why do you so rarely feel like you're getting a special deal? The answer lies in the mismatch between what is promised and what is delivered. 2004) credits WIU alumni Mr. Mr. the deals. this short-sighted approach leads customers to quickly discover that the product does not live up to its billing. Customers now face baffling times—all the choices. The market reality is that few organizations understand this phenomenon. the product will satisfy.
The reality is that customer expectations are regularly defined by their interactions with the direct competition. Further. sustained customer relationships are a result of superior value. No wonder firms with such a value system are amazingly successful. and often by organizations in non-affiliated industries. relentless attention to detail and an organizational culture that has been able to imbibe into its employees the importance of sending its customers away smiling. In the end. these expectations are dynamic and constantly evolving. prompt service. It's also no surprise that they're amazingly rare.define customer expectations. the indirect competition. 11 . This represents a difficult challenge.
Channels Product Target Market of Distribution . Source: Gilbert A. Marketing research is a much broader activity than most people realise. Churchill.: Austen Press. To be sure. Communic ation. Marketing: Creating value for consumers (Burr Ridge. p-17. consumer survey and focus groups are very important marketing research tools. III. There is much more to it than simply asking ultimate customers what they think or feel about some product or ad.Price. and J. 12 . Paul Peter. an organization may need to employ other methods. Jr. However in an effort to learn about the consumer and complete effectively in the market place. 1995).
Jr. Observation. either personal observation or mechanical observation. is also a legitimate marketing research activity. 13 . Marketing research is the function which links the consumer and the customer to the organization through information – information used to identify and define marketing problems.The scope of marketing research activities goes beyond simply asking individual consumers for their likes and dislikes. 5) Design sample and collect data. (1995). 7) Prepare the research report. The specific stages are: 1) Formulate Problem. a new package. For every marketing research it is very important to keep these factors into consideration. 4) Design data collection forms. or a product. Churchill. some very productive research involves no more than the study of readily available data. some involves the systematic testing of an ad. monitor marketing performance. Marketing research is divided into some basic stages. 6) Analyse and interpret the data. The fundamental point is that marketing research is a pervasive activity that can take many forms. 2) Determine research design. because its basic purpose is to help marketing managers make better decisions in any of their areas of responsibility. 3) Determine data collection method. refine and evaluate marketing action. At the same time. and improve our understanding of marketing as a process. generate. (Gilbert A.
it amassed a market share twice that of its closest competitor and double the number of retail stores compared to its closest rival. UK retail market has developed at the rate of 4% annually over the past 5 years. Expert also concluded that the gross retail sales of grocery. particularly the numerous large supermarket chains that function on slender profits. Armed with income of more than 2 billion and an output of 34billion in 2005. food and beverage represented 67% and the percentage stake of non-food grocery extended to 15% of the gross retail sales in 2005. Thus it's expected that the operation of the retail sector is greatly impacted by the consumer tastes and purchasing trends. Consequently.3 billion GBP in the year 2005. "UK Food Retailing Market Forecast (20052010)" observes that the UK food retailing market touched 120. Tesco is a frontrunner in the UK food retailing market with above 30% contribution to the market in 2005. Analysis is done to know whether this strategy works in changing the customer preferences or not. It is obvious from the situation in UK retail market that significant participants like TESCO have been capable of yielding a satisfactory operation in the past years.The sustained financial growth of UK has raised the standard of living of the masses.5 billion GBP. 14 . RNCOS' market research report named. Aims and Objectives/ Hypothesis: Stores these days are cutting down the prices to attract more and more number of customers towards themselves. Individuals are willing to shell out extra money for the oomph factor. Convenience Stores comprised about 21% of market segment or 24. This type of growing market presents a huge dare for its participants.
To achieve the aim to this research work the literature has been studied in a particular manner. There is a lot of literature that has been written on retail industry. To know how customer relationship management helps in attaining consumer loyalty.The aim of this dissertation is to find out: Whether a change in price can make a consumer change or shift his/her brand or store loyalty? The objectives. Understanding the need of a consumer is an integral part marketing activity of retail organizations. even after the high level of competition these days? Chapter two is the literature review. To understand the concept of brand or store patronage it is very important to study what factors influence the buying decision of a consumer. It starts with study of the retail industry to understand what exactly does “retail” means. Especially FMCG companies and firms who sell consumer goods have to focus on customer needs keeping in mind the changing fashions. Customer Relationship Management or 15 . • • • Knowing how important is price for today’s consumer? To understand the concept of store patronage. Then the focus shifts to consumer buying behaviour. are formulated as follows: • To study the retail industry and understanding its emphasis on lowering the prices of products. along with the latest developments and scope in future in the industry. which will help in attaining the aim of the dissertation. • Does a consumer actually become loyal to a brand or a store.
Some customers look for a cheap product. Price sensitivity influences a consumer’s shopping preferences and ultimately his final buying decision to a great extent. Selection of primary and secondary data. changes that are caused due to changes in fashion and consumer preferences. Another area on which literature has been studied in this research work is the concept of retail change. The concept of loyalty cards and discount coupons are also studied and discussed. and the reason why quantitative research was selected as the main mode of research.CRM is a field which has been in limelight in the past few years. Customers belonging to different income groups react differently to change in prices. The literature review then talks about store patronage and loyalty. How is loyalty created. increased and the benefits that both consumers and organisations get out of creating and increasing store/brand loyalty. Retail change talks about different stages in retail life cycle. basically knowing how these strategies affect consumer’s psyche. This stream of business focuses on maintaining good business relations with existing customers. Both quantitative and qualitative research is discussed in brief. Chapter three is about the research methodology used. CRM helps a company in achieving customer loyalty along with word of mouth publicity. source and 16 . That the reason that “price” is one of the most important factors that guides a companies marketing strategy these days. Focus is also on understanding different reactions from consumers to these pricing strategies. some want value for money and a few consumers choose the product for its snob value or status value. The study also focuses on different pricing techniques that stores and companies use these days to attract consumers. It talks about different approaches that can be used to conduct the research.
It’s in this chapter that the research question is answered. Cross tabulation charts.methods of collection are also discussed. have been used to analyse the data. This chapter talks about how the objectives and aims of the dissertation were achieved. Graphical and tabulated data has been presented in this chapter. Chapter four is research and findings where all the information collected through means of questionnaire is processed and final results are studied. which is widely used for marketing researches worldwide and is believed to be reliable. Chapter five is conclusion of the dissertation. The limitations and problems that were faced while doing this research work. 17 . The software used to process the data is SPSS. Other details related to research methodology are discussed in details in the chapter. The results and findings are also mentioned in the conclusion along with the recommendations made. frequency table etc.
" For example.Chapter 2 Literature Review Retail Industry According to the Oxford English Dictionary.com. and other ‘fantastic’ offers. Merriam-Webster Online Dictionary says that retail is "to sell in small quantities directly to the ultimate consumer." and so on. new year discounts. or away from a fixed location and related subordinated services." states Wikipedia. in an article published. Retail at/for is used when talking about what is sold at a particular price. the beneficiaries are the end consumers in the US.upi. It would be impractical to expect such fall in retail price of petrol or diesel in other countries or other economies especially developing economies.” Since small quantities can add up to big numbers." that Cambridge Advanced Learner's Dictionary gives. as in the example. businesses try out "special promotions. retail is "the sale of goods to the public for use or consumption rather than for resale. An obsolete meaning is "to sell at second hand". 18 . "Retailing consists of the sale of goods/merchandise for personal or household consumption either from a fixed location such as a department store or kiosk. speaks of sharply falling crude oil prices dramatically cutting the retail price of gasoline. "This model of computer is retailing at £650. when www. Retail is `not wholesale.' says Encarta.
ideas or experiences to satisfy needs and desires. is about 20% and it is even higher in several European countries including the United Kingdom (Private Label Manufacturers Association’s website: www. It is also known that there are a lot of organizations and companies in the market today who offer a particular product to these consumers. Wellman 1997).”(Michael R. Factors affecting customers buying decisions: Model of Consumer Buyer Behaviour Philip Kotler (2003) gives a model of consumer buyer behaviour. “It is a study of the processes involved when individuals or groups select. which are owned and marketed by retailers themselves.plma. use or dispose of products. market grew at twice the rate of national brands to reach a 15% dollar sales share by the end of 2000 (Sethuraman. The consumers’ preferences and buying behaviour is very similar in these two markets.Over the past decade.S. services. It is the 19 . Due to growing demand and the increasing per capita income has also helped the boom in retail industry. and Europe have experienced significant growth of store brands (also commonly referred to as private label brands). It is known that consumer is someone who consumes the finished product produced or sold by an organization or a company.S. Between 1996 and 2000. the dollar sales of store brands in the U. The study of reason behind the decision of a consumer to buy a particular product or to use a particular service is known as studying Consumer Behaviour. The trends in US and UK retail markets are quite similar to each other. The field of consumer behaviour covers a lot of ground. retail markets in the U. purchase. The current unit volume share of store brands in the U.S. Reports and surveys show that store brands are consistently a top priority for grocery retailers (Alaimo 2003. Solomon.org). 2003). 2004).
the field was often referred to as buyer behaviour. Because people act differently at different times they sometimes alter their consumption decisions depending on the particular stage they are in at the time. it reflects the different factors that influences buying decisions of consumers. It is not only price or brand loyalty (store patronage in our research) that influences an individuals or groups buying decisions. The chart below shows the buyer behaviour model. Buyer Behaviour Model Marketing Stimuli Other Stimuli Buyer’s Characteristics Buyer’s Decision process Problem Recognition Information Search Evaluation of alternatives Purchase decision Post purchase behavior Buyer’s Decision Product Price Place Promotion Economic Technological Political Cultural Product choice Brand choice Dealer choice Purchase timing Purchase amount Cultural Social Personal Psychological Source: Adapted from Philip Kotler. The customers are too numerous and diverse in their buying requirements. purchase. use. The success of a company depends on many factors in which consumer behaviour plays a vital role. This use to reflect an emphasis on the interaction between consumers and producers at the time of purchase. A company cannot serve all customers in a broad market. Consumer plays a leading role in the market. A company needs to identify market segments it can serve effectively. The criteria they use to evaluate products and services in one of their moods or stages may be quite different from those used in another mood or stage. Marketers now recognize that it is an ongoing process. Marketing Management. “Analyzing Consumer Markets and Buyer Behaviour”. The entire consumption process is taken into consideration now which 20 . Pearson (11th edn. ideas. 2003.study of the processes involved when individual’s or groups select. or dispose of products. 184 During early stages of development. or experiences to satisfy needs and desires. services.).
they go on to form social classes. perceptions and behaviour that an individual acquires from his families and friends or basically the environment in which he has been brought up influences all his decisions to a great extent. These areas include automobiles. Cultural Factors: Culture is the fundamental determinant of an individual’s wants and behaviour. When individuals of a particular culture are combined together. home furnishings. (Solomon. Social Factors: Social factors which include a person’s reference groups and family etc also determine consumer buying behaviour. social. They include religions. occupation. during and after purchase. When these sub cultures reach a substantial level to influence the buying decisions. education etc. racial groups and nationalities. Culture is something which an individual imbibes and inculcates in him/her from his surroundings. “A person’s reference group consists of all the groups that have a direct or indirect influence on a person’s attitude or behaviour” 21 .includes the issues that influence the consumers before. companies often alter their marketing strategies to target these groups. In a nutshell it segregates different groups according to their standard and style of living. food items etc. A consumer’s buying behaviour is mainly influenced by cultural. Social classes show distinct product and brand preferences in many areas. geographic regions. area of residence. personal and psychological factors. 2004). The set of values. These social classes reflect income. clothing. Each culture consists of smaller subcultures that provide more specific identification and socialization for their members. preferences.
while in the mature years of their life people stick to a special and healthy diet. Different stages of life-cycle also influence the buying decision of a person. politics and economics along with sense of ambition. also determine the selection of a brand or store for any individual. and family members constitute the most influential primary reference groups. 22 . Groups which have a direct influence on a person are called Membership groups. Lifecycle groups are quite often chosen as target markets by different marketers. self-worth and love. Other than these groups “aspirational groups”. Reference groups expose an individual to new behaviours and lifestyle. From parents a person acquires an orientation towards religion. economic circumstances. 1983)But family is still the most important consumer-buying organization in society. all kind of foods when they are growing up. This includes family. group which a person wants to be a part of and “dissociative groups”. lifestyle and personality and self-concept. Membership group also includes religious. a group to which an individual does not want to be related. professional and trade union groups. (Rosann L. According to Kotler (2003) influence of these groups creates pressure for conformity that may affect actual product and brand choices. occupation. These groups are known as secondary groups. 2003). friend’s neighbours and co-workers. George Moschis (1985) says that the family orientation consist of parents and siblings.” Personal Factors: Buying decisions are dependent on personal characteristics as well. Spiro. They include buyer’s age and stage in the life cycle. People eat baby food when they are infants.(Philip Kotler. Reference groups introduce an individual to new behaviour and lifestyle.
Lawrence Lepisto’s (1985). Occupation also affects the consumption patterns. autonomy. Personality of a person influences his or her buying behaviour as well. research has identified different psychological life stages. These factors contribute a lot towards buying behaviour or preferences of an individual. Tesco. defensiveness and adaptability. savings. these factors also lead or contribute in the decision a person takes to select his/her store to shop at. business class travel or having lunch at a fancy up-market restaurant. It can be Asda. 1981) being self-confidence. disposable income. Sheffet. He is of the view that adults experience certain “passages” or transformations during their life span. Kassarjian and Mary J. Similarly people belonging to different income groups or with a different mindset would make their retail purchases from different stores. 23 . (Harold H. Marketers attempt to develop brand personalities that will attract consumers with same self-concept. Product gets greatly affected by economic circumstances. Psychological Factors: Philip Kotler (2003) is of the view that a person’s buying choices are mainly influenced due to four major psychological factors: Motivation which means a need that is sufficiently pressing or forcing a person to drive the person to act. while on the other hand a top-end executive would prefer spending his money in buying an expensive suit. An operational or middle level executive will buy work clothes. debts etc. deference. dominance. work shoes etc. Waitrose or a Marks & Spencer. Personality means a set of psychological traits that lead to relatively consistent and enduring responses to environment stimuli. sociability.
First. status) 5. He categorizes human needs in 5 different groups or segments. recognition. A person then wants clean air to breath. from the most pressing to the least pressing. sellers should do their best to avoid dissatisfiers for example. the second stage says that the focus shifts from basic needs to his security and health. The theory has two implications. He is of the view that human needs can be arranged in a hierarchy. water. Social needs (sense of belongingness.A. becomes health and hygiene conscious. because Marks & Spencer has that brand image of being an up market highstreet retail outlet while on the other hand stores like Tesco and Asda promote themselves as EDLP (Everyday Low Price) stores. This brings advantage to both the customers and the organization. For any individual the priority is that of satisfying basic needs in the first stage defined in the theory. Esteem Needs (self-esteem. The third and the fourth stage focus on how a person is perceived by others and his social status. Physiological Needs ( Food. Second. 24 . the manufacturers should identify the major satisfiers or motivators of purchase in the market and then supply them to the customers. H. a training manual will not help the product to sell but a bad manual might reduce its sales. Self-Actualization (self-development realization) This theory basically says that people have different kind of needs at different times or stages. love) 4. people are driven by particular needs at particular times. 1. Someone who earns more than £10000 per month would probably prefer to shop at Marks and Spencer rather than a Tesco or Asda. Frederic Herzberg (1984) also developed a two factor theory that distinguishes between satisfiers and dissatisfiers. Safety Needs (Security and protection) 3. Maslow (1970). shelter) 2.
Problem Definition: The buying decision process starts when the buyer recognizes a problem or need. Information Search: Based on the problem or need the consumer is inclined to search for more information and hence he may collect the information from any of the following sources namely public sources. Marketers must monitor post purchase satisfaction. evaluation of information. perception and attitudes. as well as by external or environmental influences such as the family. 4. Stages in Buying Decision Process: Buying decision process can be broadly classified in to five sections namely: 1. Every consumer goes through the same decisions process. Problem recognition. commercial sources. The individual a specific behavior in the market places is affected by internal factors such as needs. social groups. The need can be triggered by internal or external stimuli. post purchase actions and post purchase product uses. 25 .Buyer behavior may be viewed as an orderly process whereby the individual interacts with his or her environment for the purpose of making market place decisions on products and services. Purchase Decision: After evaluating the alternatives available the customer will be able to purchase the product with less deliberation. the consumer evaluates them on conscious and rational basis. 5. Evaluation of Alternatives: Based on the information collected through various sources. search for information. motives. which consists of their following stages. Post Purchase Behavior: After purchasing the product. 3. purchase decision and post purchase evaluation. economics and business influences. 2. personal sources and experimental sources. culture.
Buyer behaviour is what influences or makes an individual decide about his buying preferences and choices. But it’s very important for stores to understand the buying behaviour and pattern of customers in order to do accurate forecasting. Today price is considered as the most important factor which influences or makes a person change his mind about a particular product, brand or a store. Especially in the retail industry where there are a number to competitive products and stores which may be offering product at a cheaper price or with a few add-on’s. Price sensitivity: Pricing is being used as a strategic and marketing tool to gain competitive advantage. Lowering down the prices due to competition has resulted in low-profit margins, which in turn has made the industry less attractive for new entrants. The report also states that this decrease in profit margins has made these market players realize that they will have to look for other avenues to gain competitive edge over their rivals. Supermarkets have already started focusing on ‘Product’ and ‘Process’ innovation. They have realized the fact that to retain its loyal customer base, they will need to give them something extra. If the products are identical and the prices the same, why would a customer patronise a particular brand or store. Of all the tools available to marketers, price is supposed to be the most influential factor or tool. Pricing of a product influences both consumers buying behaviour and consequently firm’s sales and profit. So it does not come as a surprise when price promotions suck up majority of the marketing budget and an almost ubiquitous aspect of consumer choice. This has influenced the customer’s expectation so much that they expect deals when they enter any store. According to a study conducted by (S. Han, S. Gupta and Donald R. Lehman for Journal of Retailing, results indicate that by discounting by competing brands does not have a significant effect on the threshold
for gain, but it significantly decreases the threshold for loss. In other words, while consumers feel a significant loss or disappointment toward a target brand if competing brands offer substantial discounts, they do not perceive any gain toward a target brand if competing brands are not discounting. Price sensitivity however is not just about charging high prices to maximize revenue. It might also make sense to cut prices - sometimes dramatically - to encourage people who may otherwise not be part of the market to use the services or goods being provided. Identifying the extent to which individuals in the market are price sensitive is an important part of the marketing mix. Most of the times this price cut are based on the assumption that the number of customers would increase because of price-cuts and this increase in the overall turnover will compensate for the loss in margin. It is also assumed that existing customers would start consuming more because of the price-cuts. According to Byung-Do Kim, Robert C. Blattberg, Peter E. Rossi(1995) Marketing researchers have long recognized that differences among consumers play an important role in the development of pricing policy and the positioning of consumer products. Consumers have a pre-conceived notion about quality of different brands within a product category. Sanjay K. Dhar and Peter E. Rossi (2004) claim that retailers have relied on three types of retail promotional tools to sell their products: temporary price cuts, feature advertisements, and in-store displays. This study was conducted with all US markets and all major retailing chains taken as a sample to investigate the role of retail competition, retail strategies and demographics in determining consumer response to these three different types of promotion. The findings of the study revealed that retail strategies and consumers characteristics influence the response from customer. They
suggested that retail competition is still important but has less impact on the way consumers respond. According to Dhar “Retailers make long-term decisions when setting up their store, such as determining the size of the store, its price positioning, geographical location etc. These strategies are undertaken with the assumption that they will help the retailer sell more and differentiate themselves in the marketplace. Two major retail strategies affect consumer response: price format and store format. Retailers typically use the Everyday low Pricing (EDLP) or Hi-Lo pricing strategy. Since the EDLP stores reduce the prices regularly, they do not offer as many promotions. The discounts offered at these EDLP stores is also comparatively lesser to other stores, because their products are already heavily discounted. While Hi-Lo stores normally have high regular prices, and then reduce those processes by substantial amount, discounting mire frequently than EDLP stores. The study also indicates that EDLP customers are less sensitive to short-term price cuts than customers at Hi-Lo stores. The study says that the greater is the competition in retail market, the greater would be the price sensitivity, making the consumers more responsive to price cuts. Higher level of competition in the sector makes it easier to compare prices across national brands. Other things that affects the prices in the quality of the product and he general belief. Consumers often form assumptions about companies, products and stores. These market beliefs then become the short-cut
Locally owned stores give the best service. More than fifty percent of these customers did not remember the price of the product they had just bought and more than half of the shoppers who purchased a product which was offered at a discounted price were unaware that the price was reduced. A stores character is reflected in its window displays. Salespeople in specialty stores are more knowledgeable than other sales personnel. it’s cheaper to buy it at a discount outlet. Generic products are just name brands sold under a different label at a lower price. Stores that are constantly having sales don’t really save you money. When in doubt. The results showed that shoppers wanted to spend only a short time making their selection and many did not check the price of the item they selected. When you are not sure what you need in a product. Peter & Alan (1990) studied model of grocery shopper response to price and other point-of-purchase information was developed and hypotheses were tested by using interviews and observations. Product/Packaging Source: Adapted from Calvin P. New products are more expensive when they’re first introduced. “Consumer Market Beliefs: A Review of the Literature and Agenda for Future Research. It’s advisable to stay away from products when they are new to the market. When you buy heavily advertised products. In general. 729-35. Duncan. higher prices generally indicate higher quality. synthetic goods are lower in a quality than goods made of natural materials. Items tied to “giveaways” are not a good value. it’s a good idea to invest tin the extra features. Within a given store. Advertising & Sales Promotion “Hard-sell” advertising is associated with low-quality products. UT: Association for Consumer Research. Coupons represent real saving for customers because they are not offered by the store. These brands are the ones that are purchased the most. (1990). Provo. A store that offers a good value on one of its products probably offers good values on all of it items. Stores that have just opened usually charge attractive prices. 29 . a national brand is always a safe bet. Store Prices/Discounts/Sales Sales are typically run to get rid of slow-moving merchandise. Larger store offers better prices than small stores. it usually takes the manufacturer a little time to work the bugs out. Largest-sized containers are almost always cheaper per unit than smaller sizes. because you will probably wish you had them later. but once you figure out what you want. not for higher quality.” Advances in Consumer Research 17. Specialty stores are great places to familiarize yourself with the best brands. prices tend to settle down as time goes by. you are paying for the label.Common Market Beliefs Brand All brands are basically the same. Credit and return policies are most lenient at large department stores.
retailers to sun short-term pricing deals etc. These changes in observed prices could influence manufacturers to change their strategies. price is a complex factor and has more than one dimensions and not composed of only retail prices. Common Price Promotion Techniques According to an article published in the Harvard Business Review by Dickson and Sawyer (2003) there are three broad categories in which retailers attract the consumers on the basis of pricing: 30 . They found considerable evidence from both marketing and economics supporting the notion that. Observed retail prices either after or before adjusting for promotions can fluctuate to a great extent over a period of time. focusing on how marketing mix variables affect household demand for frequently purchased products.Russell S. the importance of reference pricing. from the consumer’s prespective. prices from consumer’s perspective are dynamic for many product categories. Apart from being complex. Since the ultimate aim of these strategies is to attract more and more number of customers towards themselves. Winer (1986) did considerable amount of research econometric and conjoint-based. Knowing that pricing is one of the most important strategies that retailers focus at. The studies highlighted on the fact that retail price or promotion-adjusted price explains more change or variance in consumer demand than any other marketing-mix variable does. there is also a need to understand different ways in which retailers implement these pricing strategies. The purpose of the research was to develop and test a simplified model of consumer behaviour emphasizing (1) the multidimensional nature of price when examining it from consumer’s perspective-in particular.
Retailers send signals to customers in different ways telling them whether a given price is relatively high or low. If used appropriately. Prices that end in 9. Customer learned to recognize that even stores which offer sale’s through out the year are actually compromising on the quality of product offered. The sofa was on sale for $2170 at one store. the same pricing cues may breach customers trust. To a great extent they rely on the retailers to tell them if they are getting a good price. But if these tools are not used properly.1. and 3. Consultant and a former Harvard Business School Professor Gwen Ortmeyer. 31 . The cases where sale signs are placed on non-discounted items are infrequent enough that the use of such signs is still valid. the regular price was $2320 and it cost $2600 – “35% off” the original price of $4000 at other stores. Interview with store managers and the researchers own observation of actual prices at department and specialty stores confirmed that when an item is discounted. reduce brand equity and give rise to law-suits. in which a reporter priced the same sofa at several bay area furniture stores. Sale 2. they can be effective tools for building trust with customers and convincing them to buy your products and services. in a review of promotional pricing policies refers to. consumers don’t have an accurate sense of what the price should be. it almost invariably has a sale sign posted nearby. Signpost items Sale’s For most of the items they buy. a 1990 San Francisco Chronicle article.
where consumer are particularly in the dark about relative quality. Many customers. including furniture and men’s and women’s clothing. putting signs on more than 30% of the items diminished the effectiveness o the pricing cue. typically on items bought frequently. In fact. But all the consumers are probably aware of some benchmark prices. the less effective were those signs were at increasing demands in certain section. know the 32 . for instance. But on the contrary researchers have found out that response to this pricing technique is remarkable.There was a study conducted by Dickson and Sawyer (2003) and the analysis of sales data revealed that the more sale sign used.99 only) are also a very common and widely used price based marketing strategy. so little information is added by the price ending. The cases often involve jewelry department. helping customers evaluate whether they are getting a good deal. but have also come to include a wide range of other retail categories. Signposts Items For most items. customers do not have accurate price points they can recall at a moment’s notice. its believed that customers would ignore it. Specifically. The end of the price acts the same way as the sale sign does. Misuse of sale signs can also result in prosecution indeed. several department stores have been targeted by attorneys. Prices that End in 9 According to the same article prices that end in 9 (for example – Buy two pair of ‘XYZ’ for £19. Buyers are often more sensitive to price endings than they are to actual price changes. The sale sign informs customers that the item is discounted. this pricing tactic is so common. Generally it is expected that demand for an item will go down as the prices would go up.
under which suppliers promise customers that they will not sell to any other customers at a lower price. customers were more confident that the store prices were lower than its competitors. Closely related to price-matching policies are the most-favoured-nation policies used in business-to-business relationships. hardware and groceries promise to match or beat the competitor’s price. for example.price of common products like coke or movie tickets so they can easily distinguish between expensive and inexpensive price levels for such “signposts” items without the help of pricing cues. Selecting popular items to serve as pricing signposts increases the likelihood that consumers’ price knowledge will be accurate – and may also allow a retailer to obtain volume discounts from suppliers and preserve some margin on sales. 33 . These policies are attractive to business customers as they can be rest assured as they know that they are getting the best prices. 2003) analyses whether customers find these price-matching policies re-assuring. It is also known as price matching. where customers were presented with description. It is a widely used tactic in the retail market where store that sell. That impression then guides their purchase of other items for which they have less price knowledge. So they can focus their attention on increasing the volume of sales. The signpost item strategy is intended to be used on products for which price knowledge is accurate. electronics. Another way of using pricing techniques is ‘pricing guarantees’. An article in Harvard Business Review (September. Research suggests that customers use the prices of signposts items to form an overall impression of a store’s prices. It sites a study conducted by University of Maryland marketing professors Sanjay Jain and Joydeep Srivastava.
and maintaining successful customer relationships. Customer Relationship is very important for creating loyal customers.To maximise the effectiveness of price cues. • Basic: The salesperson sells the product but does not contact the customer again. retailer should implement them systematically. Ongoing measurement should be an essential part of any retailers’ use of pricing cues. This information helps the company continuously improve its offering. The focus of relationship marketing is on developing longterm relationships and improving corporate performance through customer loyalty and customer retention. 34 . developing. • Reactive: The salesperson sells the product and encourages the customer to call if he or she has any questions or complaints. Customer Relationship Marketing is a practice that encompasses all marketing activities directed toward establishing. infact. given the extra cost and effort that it involves? To answer this. Store Patronage and Loyalty. The salesperson also solicits from the customer any product improvement suggestions and any specific disappointments. there is a need to distinguish five different levels of relating to customers. and measurement should begin even before a pricing cue strategy is implemented to help determine which items should receive the cues and how many should be used. How much should a company invest in relationship marketing. • Accountable: The salesperson phones the customer a short time after the sale to check whether the product is meeting the customer's expectations.
Therefore quality improvement programs (QIP) normally increase profitability. The greatest marketing department in the world cannot compensate for deficient products or service. (Hassan and Kaynak. It can be said that the seller has delivered quality 35 . Customers have a set of needs. There is an intimate connection between product and service quality. let alone be profitable. 1994) are of the view that “Promotional strategies should emphasize intrinsic cues. • Partnership: The Company works continuously with the customer to discover ways to effect customer savings or help the customer perform better. while at the same time supporting higher prices and often lower costs. such as quality.• Proactive: The company salesperson phones the customer from time to time with suggestions about improve product use of helpful new products. Price. Today’s top executives view the task of improving product and service quality to be their top priority.” A company’s marketing will not be effective if it is only entrusted to the marketing department. Most customers will no longer accept or tolerate average quality performance. prestige and value in consumer products. does not outweigh the importance of quality and styling in product selection. Many global successes of Japanese companies are due to their building exceptional quality into their product. requirement and expectations. Higher levels of quality result in higher level of satisfaction. customer's satisfaction and company profitability. an extrinsic cue. Importance of Quality Quality is an equally important element in order to ensure customer satisfaction. styling. Companies today have no choice but to adopt total quality management (TQM) if they want to stay in the race.
verbal or written statements of an individual or groups can be relied upon. In their study. Chow and Holden (1997) adopted a similar approach to studying trust in the buyerseller relationship.when ever the seller product & service meets or exceeds the customer's expectations. attitude toward the product. They defined trust as perceived credibility and goodwill. It says that researchers have emphasized on the fact that trust is fundamental in developing customer loyalty. The company that manages to satisfy most of its customers needs most of the time is a quality company. but also to buyer loyalty. They concluded that trust is a significant predecessor to not only attitude toward the product. Relationship between Marketing and Trust An article published in www. They have always believed that winning the consumers confidence and trust is the foundation stone to gain customer loyalty.. communication openness. Their model of trust in the buyer-seller relationship consisted of six variables: trust in the salesperson. and loyalty behaviour. Schurr and Ozanne conducted an experiment to examine the interaction of trust and bargaining 36 . they defined trust as the belief that a person’s or an organization’s word or promise is reliable and that a person or organisation will fulfil his/her obligations in an exchange relationship. loyalty intention. Doney and Cannon (1997) studied trust in the buyer-seller relationship. promises. They related trust in the firm to trust in the sales personnel.org talks about the relationship between marketing and trust. trust in the company. Schurr and Ozanne (1985) suggested that higher trust levels eventually lead to a more favourable attitude toward loyalty.ifama. They defined trust as the expectancy held by an individual that the words.
org cites that Swan. Bowers. but it also facilitates favourable attitude towards the seller. brand preference. intention-to-buy and liking) and a behavioural measure (including exclusive purchase and repeat purchase 37 . and purchase intentions. They found that shared communication. Morgan and Hunt (1994) used commitment-trust theory to develop a model of relationship marketing that includes precursors and outcomes of relationship commitment and trust. They found strong support for trust as an intermediary in marketing relationships. They also found that trust positively effects purchase behaviours. The same article published in www. It also says that Geyskens. including determinants associated with the salesperson and with the salesperson’s firm. They figured out several unsolved issues in the trust literature including the relationship between trust and suspicion. customer satisfaction. opportunistic behaviours. The results suggested that trust not only moderates buyer reactions to seller’s bargaining toughness.stance on cooperative behaviour in buyer-seller negotiations. They defined trust as existing when a party is confident of exchange partner’s reliability and integrity. They also identified a positive relationship between trust and commitment and identified commitment and trust as key intermediaries contributing to relationship marketing success. Two important categories or background of trust emerged from the meta-analysis. favourable customer attitudes. Similarly. and values effects trust directly. and Richardson (1999) analysed the background and consequences of trust in a sales context. Steenkamp. They manipulated the levels of trust and bargaining stance. and Kumar (1998) developed a casual model of past history and consequences of trust based on a review of the concept of trust within marketing channels.ifama. Laurent and Uncles (1997) conceptualise loyalty as an attitudinal measure (including commitment.
Researchers such as Macintosh and Lockshin (1997) emphasize the role of interpersonal relationships when examining store loyalty. They presented a model of store loyalty consisting of customer-to-salesperson and customer-to-store relationships. The findings indicated trust and commitment to salespersons have positive impacts on both attitudes toward the store and purchase intentions. Furthermore. They found that service quality perceptions and merchandise quality perceptions are strongly related to store loyalty intentions. 38 . and Wittink (1998) examined store loyalty intentions for current customers of a multi-store grocery retailer. They used three measures of store loyalty intentions: 1) customer’s intention to continue purchasing. these consumers tended to be more loyal to the store. 2) intention to increase future purchases. Dube & Maute (1998) conducted an experiment in which value-added strategies and value-recovery strategies were manipulated under various competitive environments to study the impact on customer satisfaction and loyalty. 1995) Jones and Sasser (1995) argue that the link between satisfaction and loyalty is not linear. Their findings revealed that both types of strategies had positive impacts on customer satisfaction and loyalty with differing sensitivities to the competitive environment. McLaughlin. The researchers adopted two types of loyalty measures: situational loyalty and enduring loyalty. Conceptualising loyalty as including both positive attitudes and repeat purchase behaviour was another determinant.probability). It is generally accepted that satisfaction may be related to loyalty but is not synonymous with loyalty (Jones & Sasser. They measured loyalty as the customer’s stated intent of repurchase and found that moving customers to a higher level of satisfaction helps to develop long-term loyalty. Sirohi. and 3) intention to recommend the store to others.
Use of database to provide additional incentives indicates that these schemes help the retailers develop Customer Relationship Management commonly know as CRM programmes and provide a stream to grow sales with known. are being developed. There are few reasons for supposing that retailers that have so far shunned loyalty card schemes will alter their view. Both nectar and boots have 11 million active collectors. the underlying use of store cards by retailers and finance companies is to make money out of credit balances and. there were signs that loyalty card schemes may be about to fall out of fashion. less affluent consumers. Boots Advantage Card and Nectar Card – each claim over 11 million regular users. mainly value conscious. they remain an expensive way of borrowing money. Tesco clubcard is held by 10 million households but has 13 million active collectors due to second-card holders in the same household. Safeway had dropped its scheme and Sainsbury’s decision to join a coalition scheme rather than run its own scheme implied that the days of standalone schemes may be over. not based on points.It is also important to understand why retail stores are focusing on increasing their ‘loyal customer’ base. The report also says that a new generation of loyalty club schemes. However. According to Mintel report. These schemes collect personal information and spend data about regular shoppers and offer incentives. regular shoppers. while loyalty points may make these schemes more attractive. The cost of operating loyalty card schemes is rising too fast for there to be much interest in spending on technological 39 . When the previous Mintel reports were researched in 2002. Retailers that have their focus firmly set on price and value will continue to emphasise these attributes because it is what motivates their targets shoppers. (2004) two years on the three biggest schemes – Tesco Clubcards. Many more store cards now offer loyalty point features than was the case in 2002. bonuses and prize draws in return.
g. Bergen and Scott Davis. you probably will be fairly soon. On the academic research front. Its direct mail costs are vast and so improving accuracy of reach and refining quality of offers made to each recipient group have considerable benefit. Karolefski 2003). 1995). Raju. If you're not in a battle currently. The discussion at the practitioner level in the business press has predominantly focused on sales or market share (Sethuraman 2003). "are a fact of life—whether we're talking about the fast-paced world of 'knowledge products. and specifying “optimal” store brand marketing strategies for retailers (Mills 1995. or the staid. Dick et al. resulting in most of its investment being out of sight of shoppers.' the marketing of Internet appliances.g.. the predominant focus of initial studies was on “profiling” the characteristics of store brand consumers (e. Sethuraman and Dhar 1995." write Akshay R. Not surprisingly.features of these schemes. Tesco is keeping things very simple and investing in improving its targeting through more accurate data mining. traditional business of aluminum sidings. The focus of recent studies in this area – consistent with that in the business press – has shifted to estimating the effect of marketing actions on national brand and store brand sales or market share. mostly discussing how well store brands are doing or what retailers can do to increase sales of their store brands (e. Alaimo 2003." It's not only necessary to understand why price wars have become a global phenomenon in the retail industry. "Price wars. Rao.. the impressive growth and penetration of store brands in retail markets have attracted attention and discussion. Mark E. company. 40 . Sethuraman 2003). It's important to carefully analyze your customers. An online subject search reveals scores of practitioner articles. but it's also critical to recognize where to look for resources in battle.
p. Retail industry is a highly competitive industry in United Kingdom or rather most of the developed economies around the world. “It has often been said that the only constant in retailing is change. If retailers fail to determine or forecast the change they might end up loosing store loyalty they enjoy. the idea is to figure out the reason for “pricing strategy” being the most important strategy and to understand what can be the other factors that can affect the change of retail strategies. 1987. the reasons which can make a consumer change his/her mind or buying preferences.competitors. Tesco etc. Because changing buying preferences may very well lead to discontinuation with a particular brand or store. Theories of Retail Change It’s important to understand the different Theories of retail change to understand what leads to change in customer buying behaviour. has been a constant feature of marketing thought” (Brown. and retail change. Johan Hagberg (2005) published on internet a research work on retail change theories. and other players within and outside the industry that may have an interest in how the price war plays out. if never a burning issue.5) 41 . These retail outlets have based their marketing basically on offering lowprices. Therefore. where the market share has been captured by Retailing giants like Wal-Mart.
1961. driving up prices.asb. 1976) and the polarisation principle (Dreesman. the retail accordion (Hall.dk/upload/ accessed on 27/7/2006) internet says the cyclical theories mean that change occurs in a cyclical manner. The retail life cycle is based on the same ideas as the Product Life Cycle and maintains that just like a product retail institutions also evolve through the stages of birth. which means that this institution increase significantly in terms of sales. operator based on high quality and services rather than low prices in the long term. When a retail outlet or institution gains competitive advantages over its competitors. it enjoys rapid sales increase. The cyclical theories consist of different contributions. The institution then moves on to become to a high cost. This change opens up for the next low cost innovator and the wheel revolves. growth. 1968). with repetition of earlier trends. profitability and market share. maturity and decline. which afterwards deals with the changes in offering. the wheel of retailing (McNair. This stage ends with 42 . Hollander. expenses and overall margins eventually. The success initiates the competitors to follow. Mc Nair (1957) the wheel of retailing theory says. the retail life cycle (Davidson. 1957). low cost and narrow margin actor. 1966). Bates & Bass. Knapp & Winsten.Brown (1987) made distinction of the theories to retail change into three broad categories: Cyclical theory Environmental theory Conflict theory Cyclical theories: Johan Hagberg (2005) in his research work published on the internet (www. retail institutions start as a low price.
The retail change theories included the study of above literature shows that wowing a customer and 43 . 1968. After studying the trends in retail industry and analysing consumers buying behaviour. Markin & Duncan. According to McGoldrick (2002) these theories has attracted heavy criticism. mature and decline as an effect of environmental circumstances. cultural. Institutions emerge. and one of the responses to this criticism is the suggestion to focus more upon the evolution of individual retailing institutions in order to increase understanding of internal and external causes of retail change.increasing costs and the institution reaches the maturity stage. Environmental theories The environmental view of institutional evolution holds that changes in the environment (economic. followed by the decline stage with loss of market share and reduced profitability. Responses could be of two major types. develop. Conflict Theories This theory states that innovations in the retailing system force the established players to respond or adapt to the innovation. price sensitivity. 1981). demographic. social. what is store loyalty and why do customers get loyal to a store the focus of analysis shifts to the different ways in which these pricing tactics are implemented by the stores and what are the better ways to do it. The institutions have the ability to adapt to the changes in the environment are the only ones likely to survive. by copying the characteristics or by differentiating the threatened institute from the threat. legal and technological) are reflected in the structure of the retail system (Dreesman.
The attempt is to find out that how many customers are actually loyal to a particular store and if yes are they ready to change there ready to give up there patronage if there is a change in price. There are so many factors that contribute to a customer getting loyal to a store. 44 .making him loyal to a particular brand or store is a tedious task to perform.
Lewis P.CHAPTER 3 Research Methodology To get the correct answer to the research question drafted after the literature review is to research on it scientifically. Wilson (1996) says that the success of any marketing project. identification of research questions to be addressed. Thornhill A. suggest that research philosophy relates to the development of knowledge and the nature of knowledge. These assumptions will underpin research strategy and methods to be chosen as a part of that strategy. whether it is conducted in an academic or practitioner environment. it has to be assumed that the product quality at all the stores is the same as it was before change in price. 45 . when there will be an appreciation or depreciation in price values. The philosophy adopted should be influenced by practical considerations. The main influence is always likely to have a particular view of the relationship between knowledge and process by which it is developed. Research philosophy precedes research methodology. Critical issues like overall purpose of research. Research has become a science and has its own share of do’s and don’t. The research philosophy adopted should contain important assumptions. To find out whether the consumer will shift or switch over to another store. R. and choice of quantitative or qualitative approach should be resolved as soon as possible. In order to get correct. use of theoretical framework. depends to a large extent on decisions made by the researcher at an early stage in the research process.. development of hypotheses. The basic assumption in the research question framed here is that the quality of the product will be unchanged. reliable and accurate results the need is to understand and follow the methods.. Saunders M. (2007)..
and journalism. The process of measurement is 46 . It may be the preliminary phase of a quantitative study or stand alone research. You are exploring the reasons why people do or believe something. with no clear demarcation points. And it is advised to select a qualitative method when most of these conditions apply: You have no existing research data on this topic. biology.Qualitative Research www. Quantitative Research Quantitative research is the systematic scientific investigation of quantitative properties and phenomenon and their relationships. draw assumptions. including physics. geology. The objective of quantitative research is to develop and employ mathematical models. sociology.com defines qualitative research as an exploratory study (to explore an unknown sector. typically in what's known as "focus groups. theories and hypotheses pertaining to natural phenomena. understand motivations) or operational study based on in-depth analysis of interviewee responses (in a group or individually). Quantitative research is widely used in both the natural and social sciences.ipsos. psychology. identify the main dimensions of a problem." It most often deals with a restricted sample of individuals that does not necessarily need to be representative. education. The most appropriate unit of measurement is not certain (Individuals? Households? Organizations?) The concept is assessed on a nominal scale.
Quantitative method of research has been chosen because of the presence of the following features in the research and the research question. 1985). Since a trend is being measured to find out the switch over cost and the reason for selection of a particular store (almost impossible with qualitative research). It is a formalized schedule for collecting information from respondents. 1981). Questionnaire: Mc Daniel C.central to quantitative research because it provides the fundamental connection between empirical observation and mathematical expression of quantitative relationships. and (numerical) data from earlier research is available. & Gates R. It provides 47 . (2001) define questionnaire as every form of survey research relies on the use of questionnaire. Comparison between Qualitative and Quantitative Research: With the growing acceptance of qualitative methods in education (Shulman. It is a frequently researched topic. At the extremes are two groups the purist and the pragmatists (Rossman & Wilson. It is a set of questions designed to generate the data necessary for accomplishing the objectives of the research project. The concept is being measured on an ordinal scale. The questionnaire is the common thread for almost all data collection methods. They believe that the two method types are incompatible because they are based on paradigms that make different assumptions about the world and what constitutes valid research. the debate has shifted to what their relationship to quantitative methods should be. The research is more of a confirmatory rather than exploratory research.
When to use a questionnaire? There is no all-encompassing rule for when to use a questionnaire. When corroborating other findings. A Questionnaire can be quite inexpensive to administer. potentially several thousand people could respond in a few days. c. Time is also an important resource that questionnaires can maximize. questionnaires can be a useful confirmation tools. Examples of such cases would include studies that need to ask embarrassing questions about private or personal behaviour. Questionnaires are easy to administer confidentially. Although preparation may be costly. The administration cost per person of a questionnaire can be as low as postage and a few photocopies. If a questionnaire is self-administering. A questionnaire should be considered in the following circumstances. When resources and money are limited. In studies that have resources to pursue other data collection strategies. The choice will be made based on a variety of factors including the type of information to be gathered and the available resources for the experiment. More costly schemes may turn up interesting trends. any data collection scheme will have similar preparation expenses. Often confidentiality is the necessary to ensure participants will respond honestly if at all. such as a e-mail questionnaire.standardization and uniformity in data gathering process. Questionnaire gives a customized opinion from the sample selected. b. a. It would be impossible to get a similar number of usability tests completed in the same short time. but occasionally 48 . When it is necessary to protect the privacy of the participants.
A follow-up large scale questionnaire may be necessary to corroborate these earlier results. 2002). These two purposes have different research design requirements (Gill and Johnson. In contrast explanatory or analytical research will enable to examine and explain relationship between variables. Questionnaires can be therefore be used for descriptive or exploratory research. There are other methods of secondary data collection as well like observation and interviews both structured and semi-structured. such as that undertaken using attitude and opinion questionnaires and questionnaires of organisational practices.there will not be resources to run these other tests on large enough participant groups to make the results statistically significant. Questionnaire was the chosen method of survey to find out the answer for the research question. Selfadministered questionnaires are usually completed by the respondents.administered questionnaires are recorded by the interviewer on the basis of each respondent’s answers. will enable to identify and describe the variability in different phenomena. Descriptive research. According to the hypotheses going to individual customers was the best option to figure out whether they will change their brand preference or give away the brand loyalty due to change in price. Questionnaires are usually not believed to be good for exploratory or other research that requires a large number of open-ended questions. The choice of questionnaires is dependent by a variety of factors related to research question and research objectives. The design of a questionnaire differs according to how it is administered. Responses to interviewer. But to a great extent it is also dependent on: 49 . in particular causeand-effect relationships.
People who are funny. Number of questions to be asked to get the desired data and answers. different income levels and different sex. Data can be classified in two ways. The importance of well- 50 . also known as the data sample. • • • Importance of reaching a particular person as respondent. Subjective vs. The sample needs to be as representative and accurate as possible where it will be used to generalise about the total population. theatres and cinema halls. Each respondent was approached and was requested to participate in the survey. Selection of interviewer. Importance of respondents answer not being contaminated or distorted Size of sample required for analysis. who visit at these museums. Non-respondents were not recorded due to constraint to time and resources. Interviewer Questionnaires are quite flexible in what they can measure. taking into account the likely response rate. These interviews were conducted in city of London at Piccadilly Circus where the desired sample was available. Each question was asked to them individually.• Characteristics of the respondents from whom data is to be collected. Due to financial implications assistance was not taken from any organisation or individual for getting the responses and gathering the primary data through these questionnaires. • • Types of question to be asked to get the desired information. Objective and Quantitative vs. however they are not equally suited to measuring all types of data. which was 100% in the research as interviews were conducted personally. Qualitative. This improved reliability of data.administered questionnaire ensured that respondent was whoever was wanted to be. 20 people were interviewed as a sample and included people from different age groups.
The questionnaire may lack a logical flow and thereby cause the participant to lose interest.defined objectives can not be over emphasized. 51 . how would it be possible to reach insightful conclusions if one didn't actually know what they had been looking for or planning to observe. It is difficult to imagine identifying a problem and its cause. A questionnaire that is written without a clear goal and purpose is inevitably going to overlook important issues and waste participants' time by asking useless questions. but continue on to the analysis stage. from responses to broad and generalizing questions. let alone its solution. Consequential. In other words. what useful data you may have collected could be further compromised. The problems of a poorly defined questionnaire do not end here.
Any question must be carefully crafted. the researchers control over the environment will be somewhat limited. By their very nature. Qualitative questions may also require more thought on the part of the participant and may cause them to become bored with the questionnaire sooner. 290 According to (www-static.cc. the word "easy" and "difficult" can mean radically different things to different people. when a questionnaire is administered.gatech. quantitative questions are more exact then qualitative. such as user satisfaction.Source: Mc Daniel C. (2001). if a group of participants are asked on a questionnaire how long it took them to learn a particular function on a piece of software. A more objective usability test of the same function with a similar group of participants may return a significantly higher learning time. In general. but the cost of such a questionnaire can be much higher and offset their economic advantage. More elaborate questionnaire design or administration may provide slightly better objective data. This loss of control means the validity of the result is more reliant on the honesty of the respondent. questionnaires are better suited to gathering reliable subjective measures. Questions may be designed to gather either qualitative or quantitative data. This is why questionnaires are inexpensive to administer. For example. “Questionnaire Design”. For example. of the system or interface in question. on average. it is more difficult to claim complete objectivity with questionnaire data then with results of a tightly controlled lab test. but in particular questions that assess a qualitative measure must be phrased to avoid ambiguity. & Gates R. In general. it can be said that 52 . it is likely that they will be biased towards themselves and answer. with a lower than actual time.edu). Consequently. Marketing Research Essentials.
administration. and interpretation. Since our focus is on people who may or may not change there loyalty to a particular store due to price fluctuations. Designing the questionnaire 5. The sample chosen in the survey was based on the fact that representative sample needs to be taken from different stores. money and other resources. Identifying the population and sample 3. 8 An important issue in choosing the sample relates to whether the members chosen are representative of the population. The target age-group were people who shop on regular basis. Analyse the data To design the questionnaire an important task was to define the population and sample to be interviewed or surveyed. since there buying decisions are based on their parents decision in most number of cases. Marks & Spencer. The basic process of survey research can be outlined as follows: 1 2 3 4 5 6 7 1. People going to a particular store can not be interviewed for the entire research.questionnaires can measure both qualitative and quantitative data well. Deciding how to collect replies 4. A sample is a sub-set of the population that is usually chosen because to access all members of the population is prohibitive in time. Tesco and other stores. but that qualitative questions require more care in design. so people less than the age of 16 years were ruled out of the survey. age group of less than 16 did not 53 . 2. The population is simply all the members of the group that you are interested in. Sample population for this research consisted of people or consumers of different stores like Asda. Carrying out the survey 6. Defining research aims. Sainsbury’s.
attribute These distinctions are important. People with different income levels have different mindset and needs. Opinion variables record how respondents feel about something or what they think or believe is true or false. Attribute variables contain data about the respondents characteristics. They are used to explore how opinions and behaviour differ between respondents. People belonging to different income groups have different choice and preferences. do now or will do. In contrast. This differs from respondent’s opinion. 54 .seem to hold that importance. marital status. opinion 2. Behavioural variables contain data on what people did in past. Another question that was put in the questionnaire to determine the sample was income group. that’s called recording their behaviour. Attributes are best thought of as things a respondent possesses. Selecting people from one income group would not have given the survey a realistic overview. education occupation and income. 9 Dillman (2000) distinguishes between three types of data variable that can be collected through questionnaires: 1. as they will influence the way your questions are worded. data on behaviours and attributes record what respondents do and are. Attributes include characteristics such as age. Satisfaction of one want leads to desire of something more superior and luxurious. behaviour 3. When recording what respondents do. As he income level increases the needs and wants of a human being change. gender. They have different preferences at different stages of their life. The questionnaire designed for this particular research has two questions to determine the attributes of the respondents their age groups and their income group.
The options given were carefully chosen to make sure that all the possible answers to a particular question were present. 2000). Clear wording of questions using validity of the questionnaire. 2003). When designing individual questions researchers do one of the three things (Bourque and Clark. 1994). Most types of questionnaire included a combination of open and close ended questions. 1994). the respondents feel at ease because they don’t have to think and write too much as they have options available. The questions asked were all close ended questions because of a few reasons. provide a number of alternative answers from which the respondent is instructed to choose.10 The design of each question was based on the data which was to be collected. Open questions (Dillman. Closed questions. 11 12 55 . allow the respondents to give answers in their own way (Fink. Close ended questions are faster or quicker to answer. This comfort level of respondents with the questionnaire increases the response rate as people do not refrain from answering the questionnaire which is not the similar case in case of open ended questions. If these responses cannot be easily interpreted then these benefits are marginal (Foddy.
Here are the findings of the research. it is very important to analyse that data other wise raw data is of no use if it can not be interpreted. 56 . There were a total of 100 questionnaires which were completed. Analyse of the data is done firstly as per their frequency. The data was then entered in SPSS software which is renowned software of marketing research.CHAPTER 4 Research and Findings After collecting the data through the means of questionnaire.
57 . The people chosen for survey were young people infact 89% of them were less than the age of 40 years.5 0 4 0 3 0 2 0 1 0 Count 0 >00 10 1 0 to 2 0 00 50 2 0 to 4 0 50 00 <00 40 Y u m n ly in o e is o r o th cm For the sample there were 86% of the people surveyed were the ones who belonged to income group of less than £2500 a month. what is interesting here is the fact that 27% of them don’t have any specific buying time or period they shop whenever they need. Consumers who will go on to become loyal to stores or they already are which might be mainly because of their family and friends. 73% of these people go for monthly shopping. out of which 53% were less than 25 years old.
This gives reliable information.People from different stores became a part of the survey. A cross tabulation between which income group prefers which store. majority of them shop at Tesco. No store seems to have a dominating majority as far as number of its regular customers is concerned. Waitrose etc. Morrison’s. as there are representative samples from different stores. Others stores included stores like Iceland. shows that people who earn less than 1000 pounds a month. 58 . On the other hand people above 4000 income level prefer Marks and Spencer or Waitrose. while the middle-income group prefers Sainsbury’s.
but the limitation here is that people have loyalty cards of more than one store sometimes.40 30 20 10 Count 0 Asda M arks & Spencer Sainsbury's Tesco Others W hich store do you shop at Let’s analyse the fact that how many participants had were loyal to a particular store. 59 . It can be seen that only 45% of the people surveyed had store loyalty cards.
probably these were the representative sample that cares for ‘snob value’. There were only 10% people who chose or selected their store because of its brand name. for majority of them important factor was the geographical location of the store. When analysing the reason for store preference. Majority of customers of Sainsbury’s and Marks & Spencer had loyalty cards followed by Tesco. 60 .Analysis was also done to know which stores have what rate of loyalty as far as loyalty cards are concerned. The companies should take advantage of this and they should think more towards retaining them. This was surprising as price or quality were supposed to be the most important determinants when selecting a store.
40 30 20 10 Count 0 Price Quality and service Geographical Locatio Brand Name Others Why do you prefer the store you shop at After finding out this information the next step was to get the answer for our research question. These questions asked the participants directly whether they will change there store preferences if there is a price hike in the store where they shop or if the competitor is offering products for cheaper rates. For that there were two direct questions put in the questionnaire. The assumption is that quality of the product is unaffected and there is only price change. 73% of people who participated were of the view that price is not the only thing that will make them change their shopping preferences at a particular store. For 36% 61 .
40 30 20 10 Count 0 yes No Can't Say 4 Wouls a change in price affect your store prefrence When asked how much price change or fluctuation would make them give away their store patronage.people price is still a very important factor when it comes to changing their store patronage. 37% of the people accepted that a change of 10 to 30 pounds per 40 30 20 10 Count 0 <10/person/month 30 to 50/person/mont dont know 10 to 30/person/mont How much as a sample value in Pounds would effect your store prefrence 62 .
To answer the main question of the research analysis was done to figure out the reasons due to which people selected their stores and compared it to whether they will change their stores if there was a price change. 63 . are most likely to change their store preference if there is a change in the prices. This validates the collected data as well. People who said that there preference of store was due to price factor and geographical location. will most probably make them change their preferences.per head per month. quality and service being the same. since people who selected there store because of price. they were the ones who were more willing to change there store because of a price change. But 30% of people were still unsure about changing there store preferences. Investigations were made further to find out what kind of price change would lead to a shift in customer store preference.
that they will not be changing there store preferences because of price also agreed that at a certain price level they will not patronise to the same store. On the other hand people who said. 64 . There were also a lot of people who were unsure about both changing their store preferences and the price levels at which they will be changing there selected store. majority of them were the ones who will change there shopping preferences if there is a change between £10 to 30 per person per month.People who said that they are ready to change the store if there is a price change.
Most of the retailers worldwide are trying to reduce their cost of production and the better part is that they are not shying away from passing on this benefit to the customers. The literature review already mentions the different factors which effects a consumer’s ultimate buying decision. 65 .CHAPTER . They want to make sure that the competitors customer switches over to them and there own customers remain loyal to them. By passing on these benefits to ultimate consumers the stores are trying to lure more and more customers towards them. as these loyalty cards are given from the first day you shop at a store. It is important to understand that it is not easy to make a customer loyal towards a product or a store.5 Conclusion Since marketing is more focused on ultimate consumers. There are a lot of reasons which contribute in making a consumer select a product or service or a store in this case. Loyalty cards are just a way probably to acknowledge the customer for shopping regularly at the same store. But it can also be considered as a marketing gimmick. it has become easier for these stores to contact suppliers from throughout the world and use the absolute cost advantage by outsourcing the product manufacturing and processing elsewhere. Price is the most discussed and researched topic today in retail industry. The revolutionary change and improvements in the supply chain management system through out the world has also helped the retailers in reducing costs. the dissertation topic was also chosen keeping the retail and consumer market in focus. Since the world has become a global village today. card holders are given coupons and are offered special discounts.
Because the way prices are being slashed. That’s what they have been targeting on even when they know that there are other factors as well which influence the buying decision of a consumer. Otherwise rather than making new customers they might loose out on the existing customers. the several alternatives of the customer constitute his product choice set. 66 . Customer rank the products from need – satisfying to the last need satisfying value is the consumers estimate of the products overall capacity to satisfy his or her needs. wants and desires. goodwill etc. Another important question is how to make customers loyal and more importantly how to make sure that they don’t switch over to a rival. year. revenues. in the remaining stages of your life. The crux of marketing strategies of these companies is low and affordable prices. The concept of value. profits. All the retailers will have to make sure that they are not suffering from marketing-myopia (short sightedness). This is very difficult but not impossible. the additional needs associated with the product is called the need set. the company should try and focus on areas that are also important for an individual to make his or her buying preferences. If you become loyal to a product or a store it basically implies that the product caters to all that you need pertaining to the same area. day people have different needs.It’s because at different stages of life. because the changing patterns if known or anticipated can reap rich dividends for the organisation in terms of customer loyalty. The company probably needs to forecast the retail change well and accurately in advance. cost & satisfaction are crucial in the final product choice. they will reach a stage when they can not be brought down any further. Rather than just focusing on winning the price war with the competitor.
even though a lot of customers have loyalty cards of different stores they do not necessarily patronise to a particular store. shows that there are lot of people who probably decide as per the situation which store is better for them. It also talks about store loyalty. 67 . however it seems that consumers who become loyal to a store because of snob value are more likely to stay back for a longer period of time. But the high rate of people. The research shows that price is an important factor for a customer to make his or her buying decision but there are other factors also which comes into play. But lack of time and financial resources could not make this research work very detailed. This research has brings out the point that price is not the most important factor which determines the reason for store preference. who were not certain about them changing the store due to price change and how much price change. They want good-quality sometimes. Given a change in a few factors customers would change there loyalty. A bigger sample at different retail stores themselves could have given a more accurate idea about store patronage of customers and there inclination towards changing the store due to change in price or any other factor for that matter. sometimes are looking for a brand name. sometimes for a cheap and affordable product.The objectives of this dissertation were achieved through means of the research conducted. there are other factors which mean more to a particular person sometimes.
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This questionnaire has been formulated to investigate the same. If you could please answer the following questions.http://www.PDF#search=%22theories%20store %20loyalty%22 (accessed on 29/8/2006) http://www. doing my MBA dissertation on Relationship between Store Patronage and price sensitivity. 1) Your age is: a) Between 16 to 25 years c) More than 40 years 2) Your monthly income is: a) Less than £1000 c) Between £2500 to £4000 3) How often do you shop? a) Weekly c) Monthly 4) Number of people you shop for? a) One b) 2 to 4 5) Which store do you shop at? a) Asda b) Between 25 to 40 years b) Between £1000 to £2500 d) More than £4000 b) Fortnightly d) as needed c) More than 4______ b) Marks & Spencer 72 .org/conferences/9/1999/1999%20Congress/Forum %20Papers_Proposals/Morganosky_Michelle.com I am student at University of Wales Cardiff.ifama.upi.
9) Why do you prefer the store you shop at? a) Price b) Geographical Location c) Quality and Service d) Brand Name e) Others_____ 10) Would a change “in price” affect your store preference? a) Yes b) No c) Can’t say 11) How much as a sample value in £ would affect your store preference? a) Less than £10/person/month b) £10-£30/person/month c) £30-£50/person/month d) Don’t know Thanks for your time.100 c) 100 – 150 d) 150 and above. 73 . 7) Do you have a loyalty card for the store you shop at? a) Yes b) No 8) Your monthly expenses for the shopping basket? a) Less than 50 b) 50 .c) Sainsbury’s d) Tesco e) Others (Please specify _______________) 6) For how long have you been shopping at the store specified above? a) Less than 1 year b) 1 to 3 years c) 3 to 5 years d) 5 years and above.
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