Module 2

Consumer Behavior in Retail Business

Introduction:
Customer are becomng more powerful. more knowledgeable and more
wonhstated. and rescarch into modernconsumer behavor is inereasingly important
for the reta1l1ng sector The buy ing decision process is the decision-making process
usd by oonsumers regard1ng market transactions before. during. and after the
purchase ofa good or ser ice Itcan be seen as a particular form of a cost-benefit
analbsisin the prescnceof multiple alternatives

Buying decision process and its implication on

retailing:NIEPF
Recognltlon of Need

Information Search

Evaluation of Alternatives

Purchase Declslon

" Stage I - Needs / Problem Recognition

It is the first stage of the buying process where the consumer recognizes a problem
or a requirement that needs to be fultilled. The requirements can be generated either
by internal stimuli or extermal stimuli In this stage, the narketer should study and
understand the consumers to find out what kinds of needs arise, what brought Lhem
about, and how they led the consumer lowards a particular product.
" Stage 2- Information Search
In this stage, the consumer sccks more
information, The consumer may have keen
attention or may go into active information search. The consumer can
obtain
nformation from any of the several sources. This include personal sources (lamily.
friends, ncighbors, and acquaintances). industrial sources (advertising, sales people.
dealers. packaging). public sources (mass media, consumer-rating and organization).
and esperiential sources (handling. examining, using the product). The relative
intluencc of these information sources varies with the product and the buyer.
Stage 3 - Evaluation of Alternatives
In this stage, the consumer Uses information to evaluate alternative brands from
diflerent alternatives. How consumers go about evaluating _purchase alternatives
depends on the individual consumer and the specific buying situation. In some cases.
consumers use logical thinking, whereas in other cases. consumers do little or no
evaluat1ng: instead they buy on aspiration and rely on intuition. Sometimes
consumers make buying decisions on their own: sometimes they depend on friends.
relatives. consumer guides, or sales persons.
" Stage4- Purchase Decision
In this stage, the consumer actually buys the product. Generally, a consumer will
buy the most favorite brand, but there can be two factors, i.e, purchase
intentions
and purchase decision. The first factor is the attitude of otherS and the second is
unforeseen situational factors. The consumer may form a purchase intention based
on factors such as usual income, usual price, and usual product benefits.

" Stage 5- Post-Purchase Behavior

In this stage, the consumers take further steps after purchase based on their
satisfaction and dissatisfaction. The satisfaction and dissatisfaction depend on the
relationship betwcen consumer's expcctations and the product's performance. If a
product is short ofexpectatiens, the consumer is disappointed. On the other hand, if
it meets their expectations, the consumer is satisfied. And it exceeds their
Cxpectations, the consumer is delighted. Cs PfCL3

Influence of group and indjvidual factors:

MPLA
ÅIOL
1. Functional Factor: The factor is totally about needs, backed by a logic that
what makes sense and also fits in the best interest of the customer. This one factor
also playsa very important role in the buying decision.
2. Marketing Mix Factors: there are 4components jn the marketing mix. 1e
product. pricing, promotjon and place of distribution and each of these compnets
have a direct or indirectimpacton the buying procESS of the cSuDeTs The
consumers consider various things like the characteTistics of the product prioe
charged. availability of the product at the tequited location and much more
3. Psychological Factors: Hurnan psschology is a majot daerminant of
consumer behavior. These factors are difficult to rneasure but are porwerful enough
to influence a buy ing decision.
Some of the important psychological factors are:
Motivation
When a person is motivated enough. it influences the buying behavior of the person
A person has many needs such as social needs, basic needs, security needs. esteem
needs. and self-actualization needs. Out of all these needs. the tasis nspds and
security peeds take a position above all other needs. Hence basic needs and security
needs have the power to motivate a consumer to buy products and serices
Perception
Consumer perception is a major factor that influencs consumer behavior.Customs
percepion is a process where a customer collects information about2product and
interprets theinformationto make a mcaningful image ofaparticular produz When
a customer sees advertisements, promotions. customer rexiews. social media
feedback, etc. relating to aproduct, they develop an impressian about the product
Learning
When a person buys a product, he'she gets to learn something more about the
product. Learning comes over a period of Lime through expernence. A consumer's
learning depends on skills and knowledge. While skill can be gained through
practice. knowledge can be acquired only through experience
Attitudes and Beliefs
Consumers have certain attiudes and beliefs which influence the buy ing ecisions
of a consumer. Based on this attitude, the consumer behaves in a particular way
towards aproduct. This atitude plays asignificant role in definingthe brandimage
of a product. Hence. marketers try hard Lo understand the attitude of a consumer to
design their marketing campaigns.
4. Cultural factors: A group of people is associated witha set of alues and
ideologies that belong to a particular community. When a person comes from a
particular community. hisher behavior is highl influenced by the culture relating
10 that parlicular community. Some of the cultural factors are:
 elterr
olharal Iactors nclade the basac values, needs. wants. preferences. perceptions, and
h that arc obscrved and learned by a consumer from their ncar lamily
member and othcr iportant poople around them
helture
hin a cullural group. there cuIsts many subcultures These subcultural groups
chare the same sct of beiefs and values Subcultures can consist of people from
ditierent religian, caste. gcographies and nationalt ies These subcultures by itsell
fom a ustomcr scgmenl
orial (lass
Lahand v co socIcty across the globe has the form of social class. The social class
nt just determincd by the income. but also other factors such as the
amils background. cducaton and residence location. Social class is occupaion.
prodit the consumer behas 10t important to

$. Personal Factors: Factors that are personal to the

buy tng bchas or These personal factors differ from consumers influence their
person to_ person. thereby
producing diflercntL perceptions and consumer behavior.
Some of the personal factors are:
Age
ARc Is a mAJor factor that influcnces buy ing
diffet from that of middle-aged people. Elderlybehavior.
people
The buying choices of youth
behavor Locnagers will be more interested in buyinghave atotally different buy ing
products Maddlc-agcd are focused on house, property andcolorful vehicle
clothes and beauty
for the family
Income
Income has the ability to inluence the buy ing behavior of a
gIves hugher purchasing power to consumers. When a person. Higher income
dsposablc income Itgives more opportunity for the consumerconsumer
has higher
ta spend on luxurious
products Whereas low-income or
their incomc on basIC nceds such as middle-income group consumers spend most of
groceries and clothes.
Occupation
cupaton of a consumer influences the buying bebavior. Aperson lends o buy
things that arc appuprale to thisher profession. For
cluthes according Lo ths prolession while a profes_orexample, a doctor would buy
will haxe d1tterent buying
Tifestyle
ole s an atlitudc, and a way in
buy ing bchaviot is h1ghly influcnccd bymhich an ind1vidual stay in the Society The
the lifestyle of a consumer. For
whcn a cunsumer lcads a healthy hfestyle, then the example
healthy alternativcs to junk food products he buys will relate to
6. Economic Factors: The consumer buying habits and decisions greatly depend
on the cconomic siluation ofa country or a market. When a nation is prosperous, the
cconony is strong. which lcads to the grcater moncy supply in the markct and higher
purchasing power lor consumers. When consumers experience a positive cconomic
env ironmen. they are more confident to spend on buying products. Whereas, awcak
conomy relecis astruggling market that is impacted by unemplayment and lower
purchasing power
Some of the important cconomic factors are:
Personal Income
When a person a_ a higher disposableincome, the purchasing power increases
simultaneously. Disposable income refers the moncy that is left after spending
tOwards the basic necds ofa person. When there is an increase in disposable income.
it leads to higher expenditure on various items. But when the disposable income
reduces, parallelly the spending on multiple items also reduced.
Family Income
Family income is the total income from all the members of afamily. When more
people are caming in the family, there is more income availablefor shopping basic
needs and luxuries. Higher family incomeinfluencesthe people in the family to buy
more. When there is asurplus income available for the family. the tendency isto buy
more luxury items which otherwise aperson might not have been able to buy.
Consumer Credit
When a consumer is offered casy credit to purchase goods, iLpromotes higher
spending. Sellers are making it casy for the consumers to avail credit in the formof
creditcards,easy installments, bank loans, hire purchase. and many such other credit
options. When there is higher credit available to consumers, the purchase of comfort
and luxury items incrcases.
Liquid Assets
Consumers who have liquid asscts tend to spend more on comfort and luxuries.
Liquid assets are those assets, which can be converted into cash very casily, Cash in
h¡nd. bank savings and securities are some examples of liquid assets. When a
consumer has higher liquid assets, it gives him more confidence to buy luxury goods.
Savings
Aconsumer is highly influenced by the amountofsavings he/she wishes to set aside
from his inceome. Ifa consumer decided tosavemore. then Jhis cxpenditure on buy ing
reduces. Whereas if a consumeris interestedin saving nore., then most of his income
will go towards buying products.
 7.Social Factors: Humans are socal bengs and the lne around many peopic
p tniuche Ihct buving behavor Humans tr o imtate other humans and alsc
o b Sociallh acccpted in the socact Hence the1r buy ing
Clhet popis around themThese factors are considered as
behaviot is Influenced
of the socal
factors are soaators Some
Famils
Tamis pi2ys a significant role in shap1ng the buy ing behavaor
diciops preferences from his childhood by watchng of a person A person
conlunues Lo buy the same products even when they family buy products and
Reference
A
Groups grow up
reference group is a
Generally . all the people ingroupthe reference
o1 people wjth whom 2pRTSon 2ssociates himself.
group have common buy ing behavor and
iaflucncecach othet.
Roles and status
Aperson is infl uenced by
the role he holds in the
Psttion. his buy ing behavior willthat socier.
be infuenced largel, by his Ifaperson is in a high
15 2 Chief status A person wh0
Executive
Satt or arn employ ee Officer
in a company hill bus
company will have acording
of the same Io his status_while
different buy ing nattern
Customer shopping behavior:
CustOmer shopping behavior of Consumer buying
consumer's attitudes. preferences. intentions. and behavioriis the sum total of a
behavior in the marketplace when decisions regardingthe consumer's
purchasing 2
consumer behavior draws upon scial scienceproduct or service. The study of
Psy chologEY. Sociolog, and
economics. disciplines of anthropology

Problem recognitíon
information search
Alternative evaluation
Purchase decision

Post-purchase behaviour
Types of customer shopping behaviour: ELHV
1. Extended Decision-Making:
Extended Decision-Making occurs when consumers are buying a rather expensive
product. What do you do when thinking about purchasing a designer handbag for a
four-figure price? Of course, you spcnd some time doing in-depth research about the
bandbag. before making your final purchase decision. Since it is ahigh-cnd handbag.
the cconomic risk of buy ing it is much higher than if you would buy an average bag.
Simply put, you would not necessarily purchase a designer lashion item on
daily basis. Therefore you spend more time evaluating the looks and the use of the
product, and how you will leel about it afier purchasing it. You might even ask your
family and friends for advice, or read product reviews online beforc committing to
investing.

2. Limited Decision-Making:
Speaking of Limited Decision-Making, consumers are faced with limited decision
making. This essentially means that there is.a limiting variety or availability of this
product on the market.
For example. you really fancy this pair of sunglasses with white frames and
yellow-tinted lenses. However, there are only two brands out there that offer this
style of sunglasses. Brand x" offers thecir sunglasses for 195,-. Yes, that is alot for
asingle pair of sunglasses. But the other sunglasses available, by the brand "Z,
costs 365,-. which is far more expensive than those sold by brand "X". Since you
do not have a lot of options, you decide to spend your moncy on brand "X" anyway.

3. Habitual Buying Behavior:

Habitual Buying Behaviour plays a big role in our daily routine. We do not put alot
of thought or research into buying aproduct that is incredibly cheap and available in
masses, at the same time.
For instance, you frequently buy a new pair of socks. Either because you
always misplace them or because you always end up having holes in them. What
you do is, you continue buying the one pair of socks that costs the least amount of
money, since you keep running out of socks. It has literally become a habit of yours.

4.Variety-Seeking Buying Behavior:

You display this type of purchase behaviour when there are visible differences
between a products within the existing brands. You, as a consumer, might want to
try out a similar product of various brands out of curiosity.
 Te ghe toua concrete evample, you may fcel the urgc to buy aplain, white t-shirt
In siighily dilcrent designs at nultuple stores Just because you
car the eact same white (-shirt every day - vou want to switchmight
n0t wat to
things up cvery
now and then The 1-shrt is very aflotdable at all places, so buy ing 3 or Sof
should not be a problenn at all. them

Customer service and customer satisfaction:

Customer service is the
provision of service to
after a purchase Each industry requires differentcustomers before, during. and
Customer service is the assistance and guidance a levels of customer service.
betore, during, and after they buy a product or company provides to people
service.
between satisfied customers, brand loyalty, and here's a direct correlation
revenuc growth. JCustomer
satisfaction has always been a fundamental part ofbusiness, but it's more
brands - and have etemal imporlant
than ever now. Consumers expect a lot_ from
choose from. Service necds to be part of cach step of brands to
interactions through post-purchase and beyond.) their journey, from initial

Customer satisfaction is defincd as a measurement that

cåstomers are with a determines how happy
company' s_products,
satisfaction information, including services, and capabilities. Customer
determine how to best improve surveys and ratings, can help a company
or_changes
organization's main focus be its_products and services. An
must to satisfy its customers. This applies to
firms. retail and wholesale businesses, govenment industrial
nonprofit organizations, and every subgroup within an bodies, seryice companies.
organization.
The factors to achieve & ensure
1.
customer service and
Product: The product is your core offering to the soetinn. PPPP
It is the fir_t and real value on which the customer in return for a price.
custamer judges you and the most
important factor on which customer satislaction
saloo where the ambience, service and seating are depends. Imagine going to a
restaurant you visited last Thursday. The guy offersbetter
you
than the fine dining
asks you to take a seat and then gives the most excellent coffee and
Would you cver be horrible haircut of your life.
satisfied withthe saloon?
2. Policies: policies are guidelines that direct the company. as whole to
ways to ensure customer satisfaction. They show he function in
intent of the business
towards achieving customer delight. If the policies do not
satisfaction, just your define customer
swcet talks are nol going to cut it,
 the cmployces of thc company are the cnablers of customer
3. People: People or ahout thc number of employces you have, it is
practcal Itis not
satislaction in
reflccts your brand in their day to day interactions.
about how cach onc of them the
factors beh1nd Zappos rucket spccd growth was define
Ohc of he drivngemplovees to customer service. You not only necd to
dedcaon of ther
also makc it inplementable through your
strategy but
Custoner salrsfacton as a requircd slack and authority
Kople by giving thcm the
the customer
implementable steps that makeimplemented
Processes are the to
4. Processes: Customer satisfaction, when
satisfaction strategy. a reality. handle. The last thing you would want
is
cumbersome to
scale. become highly
promises they make.
your support guys faling on
in your
Proactivity is the agility to take steps and adopt changes
5. Proactivity: sat1sfaction. It encompasses everything
structure to ensure customer
busincss customer's needs.
from product development according to the
Avtty
Puenu ewel
Levels of customer service: 3
treats custoner service as a
Customer service as_an activity: This tolevel customer's needs. Order
particular task that a firm must accomplish satisfy the claims handliog are all
returns and
processing. billing and invoicing, produc service.
typical examples of this level of customer
emphases customer
º Customer service as performance measures: (This level as the percentage of
such
service in terms of specific performance measures, processed within
orders delivered on time and complete and the number of orders
acceplable time limits.
service to a
Customer service as a philosophy: (This level elevates customer
superior
firm-wide commitment to providing customer satislaction through
quality goods and services.
 Bencfits of customer servicc and satisfaction:

(onsumer satisfaction:
t Customers arc harpn vour business partners and
and ths al lcads to higher profits You can
investors will he happy aS
wIn thc trust of investors and
ake the mot of ven wable bus1ness
opportunity with a strong customcr oasc
Boost brand reputation and
usomcT satisfaction impacts brandpopularity:
lccdhack and figurc out which arcas couldreputation
be
and popularity Sce customer
it accounts ot
customer scrvIcg? on't be afradimproved and improve satislacthon. 1s
Tccdback ill hclp manage cxDcctations and act to ask vour customers. üoncs
dcdicatcd lcams and nitalaves for accord1ngly. Famous brands havc
improving customer satisfaction,
them achicve high sales which heips
figures.
Customer retention:
Naturally. when the customer is happy with vour
vOur brand and will not shift to compctitors. This inservice, he will stick backith
company customer retention is far
as itsclf is a big plus point lor the
customct scrvIce also helps 1o crcate neW cheaper than customer acquisition. But
customers too.
>Customer recommendations:
When vou give good
They lend to do so evencustomer service, your customers talk about you to others.
more when they have been
over a pcriod of time These recciving good quality service
references and
business. The more the relerences, recommendationsmean money to your
the more
umc. cost and energy customers acquired without spending a
Boost sales and profits:
When your seryIceIs good, and the
acquirç new customers ata Iractionword of mouth and
relerences are good. vou will
of the cost you were
business spends a lot in advertising. supposcd to A nomal
walk in to ther do0rs But with good promotions and whatnot to gct customers to
customer service, all that is being done by vour
CNISting customers. This ensures fantastic
maximum returns on the investmcnt alrcadysalesdone
and protitability as you are
getting
>Competitive advantage:
manpower
can becgme
that you employ for service relationships
ustomer service and the are building
Ifyour employecs themselves
your competitiveadvantage.will not allowa competitor to enter or place tochold
beat
with customers. then they and d1ficult to
sustainable and competitive business
Hence. your business becomes benefits to any once it starts
there are tremendous
Thus, as you can sec.
giving go0d customer service.

> Innovation and uniqueness: level enjoying the brand image and high
profits,
the pcak
When the company_isat superior quality seryjces and products to customers. Also
their
they can aim at providing
concentrate on bringing
innovation and uniqueness in
organizations can
products through research and development.
>Customer loyalty: loyal.
customers are satisficd. they belicve in the brand and become of the
When your repeat business and form a major part
These loyal customers give brandshuge toll on your business-revenue and customer
revenug. Losing customers takes a loyal customers spent 67% more Jhan new ones
churn numbers. Adobe's reporLsaidto this the positive word of mouth to friends and
via repcat orders. upsells, etc, Add rcally starts to add up. Satisficd existing
family from your loyal customers, and jitbrand to their loved ones for the great
customers feel they can promote the
experiences they've had.