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Retailing

Retailing consists of those business activities involved in the sales of goods and services to consumers for their personal, family or household use. The field of retailing is both fascinating and complex. It has enormous impact on the economy, in distribution, and its relationship with companies that see goods and services to retailers for their resale or use. Retailing is the final stage in the distribution process, it does not necessary have to include a retailer, manufacturers, importers, non-profit firms, and wholesalers, and other organization are also considered as retailers when they sell goods and/or services to final consumers. Competition in the retailing scene has intensified manifold for the past few decades, generally as a consequence of new technologies, more sophisticated management practices and industry consolidation. These trends have been especially pronounced in the food industry. There has been a significant amount of studies that examine the issues of retail channel management and retail marketing strategies to tackle the fierce competition in existing retail channels in food industry. As in all other industries, the ultimate decider of the eventual success of an alternative retail channel is the CONSUMER. Consumers refer to individuals who buy products and services for themselves or on behalf on their households. They are invariably either users of these products or services or responsible for the welfare and well being of those who are. Since consumers are extremely crucial for retailers, an understanding of consumer behaviour is an essential prerequisite of successful retail marketing strategy and one of the most fundamental principles of in exerting influence on consumer patronage decision process. Without customer focus, marketing planning can easily be dominated by the actions of competitors or internal influences. The success of a retailer depends on how well he/she selects, identifies and understands his customers. The feasibility of new retail channels is also highly dependent on retailers. Ability to select the type of consumer segments to reach (mass markets, market segment, or multiple segments), to identify the characteristics and needs of the specific target market and understanding how consumers make decisions. According to Peter McGoldrick, the most successful examples of innovation and evolution in retail formats are retailers that respond accurately and profitably to previously unsatisfied needs.

TYPES OF RETAIL OUTLETS The emergence of new sectors has been accompanied by changes in existing formats as well as the beginning of new formats: Hyper marts, typically 8,000 sq.ft and more Large supermarkets, typically 3,500-5,000 sq. ft. Mini supermarkets, typically 1,000-2,000 sq. ft. Convenience stores, typically 750-1,000sq. ft. Discount/shopping list grocery

Industry Profile in India Retailing in India


Retailing in India is one of the pillars of its economy and accounts for about 15% of its GDP.[1] The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value.[2][3] Organised retailing, absent in most rural and small towns of India in 2010, refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the publicly-traded supermarkets, corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganised retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local mom and pop store, owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.[4] Supermarkets and similar organized retail accounted for just 4% of the market in 2008.[5] Until recently, regulations prevented most of the foreign investment in retailing. Some retails faced complying with over thirty regulations such as "signboard licences" and "anti-hoarding measures" before they could open doors. There are taxes for moving goods to states, from states, and even within states in some cases. However, the Indian government has been opening the retail market and simplifying regulations. In November 2011, Indian central government announced major reforms paving way for giants such as Walmart, Carrefour and Tesco, as well single brand majors such as IKEA, Nike, and Apple to enter one of the fastest growing retail market of 1.2 billion people.[5] This announcement immediately caused intense activism - both in opposition and in support - within India. On 7 December 2011, Indian government conceding to the opposition, announced it is suspending the retail reforms till it reaches a consensus.[6] Most Indian shopping takes place in open markets or millions of small, independent grocery and retail shops. Shoppers typically stand outside the retail shop, ask for what they want, and can not pick or examine a product from the shelf. Access to the shelf or product storage area is limited. Once the shopper requests the food staple or household product they are looking for, the shopkeeper goes to the container or shelf or to the back of the store, brings it out and offers it for sale to the shopper. Often the shopkeeper may substitute the product, claiming that it is similar or equivalent to the product the consumer is asking for. The product typically

has no price label in these small retail shops; although some products do have a manufactured suggested retail price (MSRP) pre-printed on the packaging. The shopkeeper prices the food staple and household products arbitrarily, and two consumers may pay different prices for the same product on the same day. Price is sometimes negotiated between the shopper and shopkeeper. The shoppers do not have time to examine the product label, and do not have a choice to make an informed decision between competitive products. India's retail and logistics industry, organized and unorganized in combination, employs about 40 million Indians (3.3% of Indian population).[7] The typical Indian retail shops are very small. Over 14 million outlets operate in the country and only 4% of them being larger than 500 sq ft (46 m2) in size. India has about 11 shop outlets for every 1000 people. Vast majority of the unorganized retail shops in India employ family members, do not have the scale to procure or transport products at high volume wholesale level, have limited to no quality control or fake-versus-authentic product screening technology and have no training on safe and hygienic storage, packaging or logistics. The unorganized retail shops source their products from a chain of middlemen who mark up the product as it moves from farmer or producer to the consumer. The unorganized retail shops typically offer no after-sales support or service. Finally, most transactions at unorganized retail shops are done with cash, with all sales being final. Between 2000 to 2010, consumers in select Indian cities have gradually begun to experience the quality, choice, convenience and benefits of organized retail industry.

Growth
Growth over 1997-2010

India in 1997 allowed foreign direct investment (FDI) in cash and carry wholesale. Then, it required government approval. The approval requirement was relaxed, and automatic permission was granted in 2006. Between 2000 to 2010, Indian retail attracted about $1.8 billion in foreign direct investment, representing a very small 1.5% of total investment flow into India.[8] Single brand retailing attracted 94 proposals between 2006 and 2010, of which 57 were approved and implemented. For a country of 1.2 billion people, this is a very small number. Some claim one of the primary restraint inhibiting better participation was that India required single brand retailers to limit their ownership in Indian outlets to 51%. China in contrast allows 100% ownership by foreign companies in both single brand and multi-brand retail presence. Indian retail has experienced limited growth, and its spoilage of food harvest is amongst the highest in the world, because of very limited integrated cold-chain and other infrastructure. India has only 5386 stand-alone cold storages, having a total capacity of 23.6 million metric tons. However, 80 percent of this storage is used only for potatoes. The remaining infrastructure capacity is less than 1% of the annual farm output of India, and grossly inadequate during peak harvest seasons. This leads to about 30% losses in certain perishable agricultural output in India, on average, every year.[8]

Indian laws already allow foreign direct investment in cold-chain infrastructure to the extent of 100 percent. There has been no interest in foreign direct investment in cold storage infrastructure build out. Experts claim that cold storage infrastructure will become economically viable only when there is strong and contractually-binding demand from organized retail. The risk of cold storing perishable food, without an assured way to move and sell it, puts the economic viability of expensive cold storage in doubt. In the absence of organized retail competition and with a ban on foreign direct investment in multi-brand retailers, foreign direct investments are unlikely to begin in cold storage and farm logistics infrastructure. Until 2010, intermediaries and middlemen in India have dominated the value chain. Due to a number of intermediaries involved in the traditional Indian retail chain, norms are flouted and pricing lacks transparency. Small Indian farmers realize only 1/3rd of the total price paid by the final Indian consumer, as against 2/3rd by farmers in nations with a higher share of organized retail.[8] The 60%+ margins for middlemen and traditional retail shops have limited growth and prevented innovation in Indian retail industry. India has had years of debate and discussions on the risks and prudence of allowing innovation and competition within its retail industry.[9] Numerous economists repeatedly recommended to the Government of India that legal restrictions on organized retail must be removed, and the retail industry in India must be opened to competition. For example, in an invited address to the Indian parliament in December 2010, Jagdish Bhagwati, Professor of Economics and Law at the Columbia University analysed the relationship between growth and poverty reduction, then urged the Indian parliament to extend economic reforms by freeing up of the retail sector, further liberalisation of trade in all sectors, and introducing labor market reforms. Such reforms Professor Bhagwati argued will accelerate economic growth and make a sustainable difference in the life of India's poorest.[10],[11] A 2007 report noted that an increasing number of people in India are turning to the services sector for employment due to the relative low compensation offered by the traditional agriculture and manufacturing sectors. The organized retail market is growing at 35 percent annually while growth of unorganized retail sector is pegged at 6 percent.[12] The Retail Business in India is currently at the point of inflection. As of 2008, rapid change with investments to the tune of US $ 25 billion were being planned by several Indian and multinational companies in the next 5 years. It is a huge industry in terms of size and according to India Brand Equity Foundation (IBEF), it is valued at about US$ 395.96 billion. Organised retail is expected to garner about 16-18 percent of the total retail market (US $ 6575 billion) in the next 5 years. India has topped the A.T. Kearneys annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. The Indian economy has registered a growth of 8% for 2007. The predictions for 2008 is 7.9%.[13] The enormous growth of the retail industry has created a huge demand for real estate. Property developers are creating retail real estate at an aggressive pace and by 2010, 300 malls are estimated to be operational in the country.[14]

[edit] Growth after 2011

Before 2011, India had prevented innovation and organized competition in its consumer retail industry. Several studies claim that the lack of infrastructure and competitive retail industry is a key cause of India's persistently high inflation. Furthermore, because of unorganized retail, in a nation where malnutrition remains a serious problem, food waste is rife. Well over 30% of food staples and perishable goods produced in India spoils because poor infrastructure and small retail outlets prevent hygienic storage and movement of the goods from the farmer to the consumer.[15],[16],[17] One report estimates the 2011 Indian retail market as generating sales of about $470 billion a year, of which a miniscule $27 billion comes from organized retail such as supermarkets, chain stores with centralized operations and shops in malls. The opening of retail industry to free market competition, some claim will enable rapid growth in retail sector of Indian economy. Others believe the growth of Indian retail industry will take time, with organized retail possibly needing a decade to grow to a 25% share.[17] A 25% market share, given the expected growth of Indian retail industry through 2021, is estimated to be over $250 billion a year: a revenue equal to the 2009 revenue share from Japan for the world's 250 largest retailers.[18],[19] The Economist forecasts that Indian retail will nearly double in economic value, expanding by about $400 billion by 2020.[20] The projected increase alone is equivalent to the current retail market size of France. In 2011, food accounted for 70% of indian retail, but was under-represented by organized retail. A.T. Kearney estimates India's organized retail had a 31% share in clothing and apparel, while the home supplies retail was growing between 20% to 30% per year.[21] These data correspond to retail prospects prior to November announcement of the retail reform.

The Indian Retail Market


Indian market has high complexities in terms of a wide geographic spread and distinct consumer preferences varying by each region necessitating a need for localization even within the geographic zones. India has highest number of outlets per person (7 per thousand) Indian retail space per capita at 2 sq ft (0.19 m2)/ person is lowest in the world Indian retail density of 6 percent is highest in the world.[22] 1.8 million households in India have an annual income of over 45 lakh (US$85,500).[23] Delving further into consumer buying habits, purchase decisions can be separated into two categories: status-oriented and indulgence-oriented. CTVs/LCDs, refrigerators, washing machines, dishwashers, microwave ovens and DVD players fall in the status category. Indulgence-oriented products include plasma TVs, state-of-the-art home theatre systems, iPods, high-end digital cameras, camcorders, and gaming consoles. Consumers in the status category buy because they need to maintain a position in their social group. Indulgenceoriented buying happens with those who want to enjoy life better with products that meet their requirements. When it comes to the festival shopping season, it is primarily the statusoriented segment that contributes largely to the retailers cash register.[24]

While India presents a large market opportunity given the number and increasing purchasing power of consumers, there are significant challenges as well given that over 90% of trade is conducted through independent local stores. Challenges include: Geographically dispersed population, small ticket sizes, complex distribution network, little use of IT systems, limitations of mass media and existence of counterfeit goods.[25]

Entry of MNCs
The world's largest retailer by sales, Wal-Mart Stores Inc and Sunil Mittal's Bharti Enterprises have entered into a joint venture agreement and they are planning to open 10 to 15 cash-and-carry facilities over seven years. The first of the stores, which will sell groceries, consumer appliances and fruits and vegetables to retailers and small businesses, is slated to open in north India by the end of 2008.[27] see also for more Detail Pick/Mller "[2]"</ref> Carrefour, the worlds second largest retailer by sales, is planning to setup two business entities in the country one for its cash-and-carry business and the other a master franchisee which will lend its banner, technical services and know how to an Indian company for directto-consumer retail.[28] The worlds fifth largest retailer by sales, Costco Wholesale Corp (Costco) known for its warehouse club model is also interested in coming to India and waiting for the right opportunity.[29] Opposition to the retailers' plans have argued that livelihoods of small scale and rural vendors would be threatened. However, studies have found that only a limited number of small vendors will be affected and that the benefits of market expansion far outweigh the impact of the new stores.[30] Tesco Plc., plans to set up shop in India with a wholesale cash-and-carry business and will help Indian conglomerate Tata group to grow its hypermarket business.(19)

Challenges
A McKinsey study claims retail productivity in India is very low compared to international peer measures. For example, the labor productivity in Indian retail was just 6% of the labor productivity in United States in 2010. India's labor productivity in food retailing is about 5% compared to Brazil's 14%; while India's labor productivity in non-food retailing is about 8% compared to Poland's 25%. [31] Total retail employment in India, both organized and unorganized, account for about 6% of Indian labor work force currently - most of which is unorganized. This about a third of levels in United States and Europe; and about half of levels in other emerging economies. A complete expansion of retail sector to levels and productivity similar to other emerging economies and developed economies such as the United States would create over 50 million jobs in India. Training and development of labor and management for higher retail productivity is expected to be a challenge. To become a truly flourishing industry, retailing in India needs to cross the following hurdles:[32]

Automatic approval is not allowed for foreign investment in retail. Regulations restricting real estate purchases, and cumbersome local laws. Taxation, which favours small retail businesses. Absence of developed supply chain and integrated IT management. Lack of trained work force. Low skill level for retailing management. Lack of Retailing Courses and study options Intrinsic complexity of retailing rapid price changes, constant threat of product obsolescence and low margins.

In November 2011, the Indian government announced relaxation of some rules and the opening of retail market to competition.

India retail reforms


Until 2011, Indian central government denied foreign direct investment (FDI) in multi-brand Indian retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or any retail outlets, to sell multiple products from different brands directly to Indian consumers. The government of Manmohan Singh, prime minister, announced on 24 November 2011 the following:[15][33]

India will allow foreign groups to own up to 51 per cent in "multi-brand retailers", as supermarkets are known in India, in the most radical pro-liberalisation reform passed by an Indian cabinet in years; single brand retailers, such as Apple and Ikea, can own 100 percent of their Indian stores, up from the previous cap of 51 percent; both multi-brand and single brand stores in India will have to source nearly a third of their goods from small and medium-sized Indian suppliers; all multi-brand and single brand stores in India must confine their operations to 53-odd cities with a population over one million, out of some 7935 towns and cities in India. It is expected that these stores will now have full access to over 200 million urban consumers in India; multi-brand retailers must have a minimum investment of US$100 million with at least half of the amount invested in back end infrastructure, including cold chains, refrigeration, transportation, packing, sorting and processing to considerably reduce the post harvest losses and bring remunerative prices to farmers; the opening of retail competition will be within India's federal structure of government. In other words, the policy is an enabling legal framework for India. The states of India have the prerogative to accept it and implement it, or they can decide to not implement it if they so choose. Actual implementation of policy will be within the parameters of state laws and regulations.

The opening of retail industry to global competition is expected to spur a retail rush to India. It has the potential to transform not only the retailing landscape but also the nation's ailing infrastructure.[15],[34] A Wall Street Journal article claims that fresh investments in Indian organized retail will generate 10 million new jobs between 2012-2014, and about five to six million of them in

logistics alone; even though the retail market is being opened to just 53 cities out of about 8000 towns and cities in India.[34] It is expected to help tame stubbornly high inflation but is likely to be vehemently opposed by millions of small retailers, who see large foreign chains as a threat. The need to control food price inflation -- averaging double-digit rises over several years -- prompted the government to open the sector, analysts claim. Hitherto India's food supplies have been controlled by tens of millions of middlemen (less than 5% of Indian population). Traders add huge mark-ups to farm prices, while offering little by way of technical support to help farmers boost their productivity, packaging technology, pushing up retail prices significantly. Analysts said allowing in big foreign retailers would provide an impetus for them to set up modern supply chains, with refrigerated vans, cold storage and more efficient logistics. "I think foreign chains can also bring in humongous logistical benefits and capital," Chandrajit Banerjee, director-general, Confederation of Indian Industry, told Reuters. "The biggest beneficiary would be the small farmers who will be able to improve their productivity by selling directly to large organised players," Mr Banerjee said.
[edit] Indian retail reforms on hold

According to Bloomberg, on 3 December 2011, the Chief Minister of the Indian state of West Bengal, Mamata Banerjee, who is against the policy and whose Trinamool Congress brings 19 votes to the ruling Congress party-led coalition, claimed that Indias government may put the FDI retail reforms on hold until it reaches consensus within the ruling coalition. Reuters reports that this risked a possible dilution of the policy rather than a change of heart.[35],[36],[37] India Today claimed that the resistance to Indian retail reforms is primarily because it has been badly sold, even though it can help fix the exploitation of Indian farmers by the decades-old "arhtiya" and "mandi" monopoly system. India Today claims the policy is good for the small Indian farmer and the Indian consumer.[38] Pratap Mehta, president of the Centre for Policy Research, claimed any U-turn or postponement of retail reforms will cause an immense loss of face to the Congress-led central government of Manmohan Singh. The mom-and-pop farmers of India support these reforms. The consumers of India want the reforms. The government has already annoyed those who oppose change and innovation in retail. By putting retail reforms on hold, the government will additionally alienate much larger segment of India's population supporting FDI. So they will now have the worst of both worlds, claims Mehta.[39] Deepak Parekh, Ashok Ganguly and other economic policy leaders of India, on 4 December 2011, called placing investment and innovation in retail on hold for the sake of vested interests as unfair and detrimental to vast majority in India. They urged farmers, consumers and the common people to raise their voice against this false drama of apprehension against investment and modernising trade in organised retailing. They called upon Indians to come out and strongly support progressive measures and reforms with the same spirit and gusto with which we take the liberties to criticize policies or issues we do not appreciate.[40] Several newspapers claimed on 6 December 2011 that India parliament is expected to shelve retail reforms while the ruling Congress party seeks consensus from the opposition and the Congress party's own coalition partners. Suspension of retail reforms on 7 December 2011

would be, the reports claimed, an embarrassing defeat for the Indian government, suggesting it is weak and ineffective in implementing its ideas.[41] Anand Sharma, India's Commerce and Industry Minister, after a meeting of all political parties on 7 December 2011 said, "The decision to allow foreign direct investment in retail is suspended till consensus is reached with all stakeholders."

RETAIL INDUSTRY IN INDIA


The retail sector in India is witnessing a huge revamping exercise as traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. Western-style malls have begun appearing in metros and second-rung cities alike introducing the Indian consumer to a shopping experience like never before. The sector is at an inflexion point where the growth of organised retailing and growth in the consumption by the Indian population is going to take a higher growth trajectory. The Indian population is witnessing a significant change in its demographics. Organised retail is on all time high in India. The growth is boosted by various factors such as availability of professional practices, media proliferation, various brands which are gaining value thereby enhancing industry growth, availability of various funding options, regulations like VAT implementation to make processes simple, sea change in demographics of country and international exposure. The Indian retail market, which is the fifth largest retail destination globally, was ranked second after Vietnam as the most attractive emerging market for investment in the retail sector by AT Kearney's seventh annual Global Retail Development Index (GRDI), in 2008. The share of retail trade in the country's gross domestic product (GDP) was between 810 per cent in 2007. It is currently around 12 per cent, and is likely to reach 22 per cent by 2010. In a joint study recently conducted by ASSOCHAM and KPMG, the following findings were revealed: The total retail market size in India in 2008 was estimated at US$ 353 billion. The annual growth of the retail market in India is expected to be around 8 percent. The total retail market size in India is likely to touch US$ 416 billion by 2010. The present share of organised retail sector is estimated at 7 per cent. The estimated annual growth of organised retail sector is 40 per cent. The size of organised retail sector by 2010 is estimated to reach US$ 51billion. The estimated share of organized retail in total retail by 2010 is 12 per cent.

The investment into modern retailing formats over the coming 4-5 years is expected to be around US$ 25-30 billion.

Advantage India
Against the backdrop of an accelerating modern retail revolution, India offers to be an attractive destination for global corporations and leading retailers seeking emerging markets overseas. India presents a significant market, with its young population just beginning to embrace significant lifestyle changes.

Rapid Economic Growth


The fast and furious pace of growth of the Indian economy is the driving force for Indian consumerism; with the Indian consumers confident about their earnings and are spending a large portion of their high disposable incomes. Projections by analysts suggest that India has the potential to be labelled the fastest-growing economy and outpace the developed economies by 2050. Analysts predict India to sustain an average GDP growth rate of 5 per cent till the mid of this century, with India projected to outpace the other developed economy markets by 2050. The average annual growth rate for 1994-2004 was pegged at 6.1 per cent, second only to China. The more recent growth rates of over 9 per cent posted for India, promise a continued robust growth story. Private consumption accounted for 62 per cent of Indias GDP in 2004-05, comparable to most of the leading economies around the world.

The Young India


Against the backdrop of an ageing world, India possesses the advantage of having a largely young population. 35 per cent of Indias population is under 14 years of age and more than 60 per cent of the population is estimated to constitute the working age group (15-60) till 2050. Two-thirds of Indian population is under 35, with the median age of 23 years, as opposed to the world median age of 33. India is home to 20 per cent of the global population under 25 years of age. This trend is projected to continue for the next decade, with the share set to reach its maximum in 2010. The large proportion of the working-age population translates to a lucrative consumer base vis--vis other economies of the world, placing India on the radar as one of the most promising retail destinations of the world.

Potential untapped market


India ranks first, ahead of Russia, in terms of emerging market potential and is deemed a Priority 1 market for international retail. Organised retail penetration is on the rise and offers an attractive proposition for entry of new players as well as scope for expansion for existing players. India is home to a

large base of consumers with annual incomes ranging from US$ 1,000 US$ 4,700, comprising of over 75 million households. A steadily rising percentage of rich and super rich population and impressive disposable incomes offers a spectrum of opportunities, spanning from rural retailing to luxury retailing. The impressive retail space availability and growing trend of consumerism in the emerging cities and small towns add to the market attractiveness. Abundant availability of skilled Labour India has a vast resource base of talent and skilled labour. Over 37,000,000 students were enrolled in about 150,000 pre-college institutes and over 11,700,000 in 14,000 higher education institutions in 200506. With English being the language for business in India, the language skills of the Indian workforce score higher than that of emerging economies. Retail Management is a sought after education stream amongst students, with over 15 premier institutes offering specialised courses in Retail Management. The great Indian consumer market is still going strong. The ETIG analysis carried out by the Economic Times revealed that most mass consumer goods and service in India were not much affected by the global economic slowdown. Despite the inflation experienced during the period, the second-quarter results of leading 70 consumer-related firms revealed that their aggregate revenues increased by 8.5 per cent during the September 2008 quarter over the same period in 2007. Even though this was a tad lower than the 9 per cent growth posted during the first quarter of 2008-09, it was a lot higher than the 7 per cent registered during the previous three quarters for these firms. Despite the global economic slowdown, Indian retailers are still optimistic about the India growth story. The Indian economy is more stable than other economies across the world and one must not confuse India with the rest of the world. With the 3040 per cent drop in retail rentals, Indian retailers are a happy lot. In fact, retailers are also foreseeing further drops in rentals in 2009 and they are optimistic about their expansion plans for this year. India has one of the largest number of retail outlets in the world. A report by Images Retail estimates the number of operational malls to grow more than two-fold, to cross 412, with 205 million square feet by 2010, and a further 715 malls to be added by 2015, with major retail developments even in tier-II and tier-III cities in India. Even as the organised retail market is starting to take off, there is an associated surge in branded discount outlets in India. Top realtors and local retail chains are developing malls in regional boroughs, specifically to sell premium branded goods.

Government Initiatives
The government has taken various measures to promote and encourage investment in the Indian retail industry. The Government allows 100 per cent FDI in cash and carry through the automatic route and 51 per cent in single brands. Besides, the franchise route is available for big operators. To further

attract global retailers, the economic survey 200708 has suggested a share for foreign equity in all retail trade and 100 per cent in respect of luxury brands and other specialised retail chains. However, many industry experts feel that the Indian tariff structure has to be streamlined as India levies one of the highest duties and taxes on imported luxury goods. This fuels the growth of the grey market and duty-free purchases, even as the stringent regulatory environment encumbers investment by foreign brands.

Organizational characteristics
Given the traditional and underdeveloped state of the Indian retail sector, the organizational characteristics of retail enterprises are rudimentary. Most of them belong to independent enterprises in the form of small family businesses. Cooperatives have been present in India for several decades, spurred by the encouragement given by the Indian Government, which viewed the cooperative movement as an integral component of its erstwhile socialist policies. However, since the 1990s, there has been a reduction in government support for cooperatives. In 2002, there were about 35,000 outlets run by cooperatives. Economic liberalization, competition and foreign investment since the 1990s led to a proliferation of brands with both foreign and Indian companies acquiring strong brand equity for their products. Hence, franchising emerged as a popular mode of retailing. Sales of franchises grew at a rapid pace of 14% per annum over the review period. India represents an economic opportunity on a massive scale, both as a global base and as a domestic market. Regulatory controls on foreign direct investment (FDI) have relaxed considerably in recent years. However, while retailing currently remains closed to FDI, this is an area of ongoing debate. This means that foreign retailers and consumer goods manufacturers can only participate in the retail market through indirect access strategies, such as wholesaling, franchising or licensing, or by having a manufacturing base in India, or in businesses upstream of retailing. However, the Indian government has indicated in 2005 that liberalization of direct investment in retailing is under active consideration. Price controls have been progressively liberalized since 1992, but a small number of items remain fully controlled. There are also extensive controls on packaging, labelling and certification. Estimates of the size of the retail sector vary, with recent calculations putting the annual value of Indian retailing anywhere between US$180 billion and US$292 billion in 2003. The retail sector is largely made up of what is known in India as the unorganized sector. This sector consists of small family-owned stores, located in residential areas, with a shop floor of less than 500 square feet. At present the organized sector (everything other than these small family-owned businesses) accounts for only 2 to 4 percent of the total market although this is expected to rise by 20 to 25 percent by 2010. Many of the companies surveyed believe that the potential size of this market is underestimated. They consider that there are considerable

opportunities for organized retailers in the kind of rural territories that many companies have failed to address. A critical issue is how fast and how far the consuming class will grow. This depends both on the growth of personal disposable income and the extent to which organized retailers succeed in reaching lower down the income scale to reach potential consumers towards the bottom of the consumer pyramid. Companies expect retail growth in the coming five years to be stronger than GDP growth, driven by changing lifestyles and by strong income growth, which in turn will be supported by favourable demographic patterns. The structure of retailing will also develop rapidly. Shopping malls are becoming increasingly common in large cities, and announced development plans project at least 150 new shopping malls by 2008. The number of department stores is growing much faster than overall retail, at an annual 24 percent. Supermarkets have been taking an increasing share of general food and grocery trade over the last two decades. Consumer credit will also grow, assisted by the likely fall in retail lending rates and more efficient and consumer-friendly lending practices. Distribution continues to improve, but it still remains a major inefficiency. Poor quality of infrastructure, coupled with poor quality of the distribution sector, results in logistics costs that are very high as a proportion of GDP, and inventories which have to be maintained at an unusually high level. Marketing and advertising are of increasing interest and concern to consumer companies. Indian consumers are becoming increasingly sophisticated and knowledgeable about products; media channels that allow companies to communicate with consumers are growing in diversity and reach. Foreign brands remain very powerful in India, especially in clothing and personal care products, but increasingly brands have to be associated with value. Advertising is becoming a bigger part of the marketing mix. Companies are concerned about identifying consumer insights and the profusion of media channels. Food and beverage offer the greatest organized retail growth opportunities, say companies. The main growth opportunity in the segment is in processed foods: rapid growth in the processed food segment is already apparent, changing lifestyles and food habits are resulting in the rapid expansion of branded food outlet and caf chains. Gemstones and jewellery represent the most significant specialist segment of Indian retailing. Organized jewellery retailers are increasingly offering brand solutions to the demand for quality and value, as consumers move away from traditional retail settings reliant on family retailers. All companies agree that Indian consumer markets are changing fast, with rapid growth in disposable incomes, the development of modern urban lifestyles, and the emergence of the kind of trend-conscious consumers that India has not seen in the past. Companies expect that the next cycle of change in Indian consumer markets will be the arrival of foreign players in consumer retailing. The very fact that politicians have left the issue open leads us to think the restrictions are going to be reviewed. And if retailing is liberalized, say companies, growth will be boosted, but so will competition. Indian companies

know Indian markets better, but foreign players will come in and challenge the locals by sheer cash power, the power to drive down prices.

Retail Formats in India


Malls The largest form of organized retailing today, Located mainly in metro cities, in proximity to urban outskirts Ranges from 60,000 sq ft to 7,00,000 sq ft and above. They lend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof. Examples include Shoppers Stop, Piramyd, a Pantaloon, Big Bazaar, Reliance, Specialty stores. Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on specific market segments and have established themselves strongly in their sectors. Discount Stores As the name suggests, discount stores or factory outlets, offer discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of perishable/ non-perishable goods. Department Stores Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. Further, classified into localized departments such as clothing, toys, home, groceries, etc. Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, which started in Mumbai and now has more than seven large stores (over 30,000 sq. ft) across India and even has its own in store brand for clothes called Stop. Hyper Marts/ Super Markets Large self-service outlets, catering to varied shopper needs are termed as Supermarkets. These are located in or near residential high streets. These stores today contribute to 30% of all food & grocery organized retail sales. Super Markets can further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales.

Convenience Stores

These are relatively small stores 400-2,000 sq. feet located near residential areas. They stock a limited range of high-turnover convenience products and are usually open for extended periods during the day, seven days a week. Prices are slightly higher due to the convenience premium.

MBOS
Multi Brand outlets, also known as Category Killers, offer several brands across a single product category. These usually do well in busy market places and Metros.

Defining Consumer Behavior


What is Consumer Behavior?
How many times throughout the day do people make product decisions? If you stop to think about it, many product decisions are made every day, some without much thought. What should I wear? What should I eat? What am I going to do today? Many product decisions are answered routinely every day and they help move the economy of cities, countries and ultimately the world. Product decisions also shape life for the consumer. How can simple decisions be so important? Why do marketers spend millions of dollars to uncover the reasons behind these decisions? To define consumer behavior: it is the study of consumers and the processes they use to choose, use (consume), and dispose of products and services. A more in depth definition will also include how that process impacts the world. Consumer behavior incorporates ideas from several sciences including psychology, biology, chemistry and economics. "All marketing decisions are based on assumptions and knowledge of consumer behavior," (Hawkins and Mothersbaugh, 2007). Researching consumer behavior is a complex process, but understanding consumer behavior is critical to marketers-they can use it to:

Provide value and customer satisfaction.

Effectively target customers. Enhance the value of the company. Improve products and services. Create a competitive advantage Understand how customers view their products versus their competitors' products. Expand the knowledge base in the field of marketing, Apply marketing strategies toward a positive affect on society (encourage people to support charities, promote healthy habits, reduce drug use etc.)

Consumer Behavior
Value and Relationship Quality

Consumers choose goods and services based on the assumption that they will be rewarded with value and satisfaction. Consumption is the process by which goods and services are used and assigned a level of value by the consumer. Quality + Price + Customer Service = Value and Satisfaction

That level could be positive, if the customer was satisfied, or it could be negative if they did not find any value in their purchase. Marketers have to provide the right combination of quality, price and customer service in order to give customers positive value and satisfaction. That will in turn create happy, loyal customers. The formula looks like this: If a product/service is provided that has low quality, and a high price, that does not create a happy, satisfied customer. At the same time, having a great product at the best possible price means nothing if the customer is treated badly, or not provided with the opportunity to return unwanted items.

So what is meant by 'Quality?'


Quality is a product or service's ability to meet the customers' need or want. Quality is difficult to define, and varies with each consumer, however we can take a look at some of the components of quality for products and services:
Products

Performance-The product does what it is supposed to do. Features-The product includes all the specifications that it says it has or that are required, this includes safety measures. Reliability-The product performs consistently. Durability-When the product is being used it has to last under the conditions of normal use. Serviceability-The product is easy to maintain or repair either by the consumer or by providing a warranty which says the company will provide repairs. Aesthetics-This is important to consumers, products have to look good, and this contributes to a brand equity and identity. Perception-Even if the product has good quality, if the customer does not think so, then it won't sell. The customer has to have positive feelings about the product, the company, the brand name and the employees.

Services

Responsiveness-Services are performed in a prompt manner. Reliability-The service is performed right, the first time, and all subsequent times. Assurance-Knowledgeable and friendly employees are essential as customers will equate employees behavior with the entire company. If a customer has a bad experience with an employee, they will be less likely to purchase from the entire company's offerings. Customers expect technical competence and professionalism from salespeople. Empathy-Providing individualized attention to customers will make them feel special and keep them coming back. Tangibles-Some services provide physical evidence that they occurred, for example a restaurant cooks (service) and provides the food (product).

Why People Buy


Marketers spend millions of dollars trying to understand why people buy products and services. Sometimes it seems that there is no reason for a purchase, but in reality there is always a reason. Many factors are involved in a customers' buying decision, any one of which can become the deciding factor, such as:

Conspicuous consumption: Lavish spending for the purpose of displaying wealth or social status; preference for buying increases with price. Snob effect: Desire to buy something nobody else has; preference for buying increases with rarity or scarcity. Bandwagon effect: Desire to buy something everybody else is buying; preference for buying increases with perceived popularity. Economic-To enhance their lifestyle or to fulfill two of Maslow's needs: physiological (food, shelter) and Safety and Security.

Psychological-This is the study of how people interact with their environment, products are consumed to enhance their well being, for example air fresheners, furniture and convection ovens.

Sociological-The study of the thoughts, feelings, and behaviors of group interaction, especially in a social setting. People want to feel accepted and loved by their peers and they need to consume products that will appeal to their chosen groups. For example a consumer wants to join a kayaking team would have to purchase the proper gear, clothing and maybe even music genre in order to fit in with the group.
Practical-Consumers purchase products because they need them to survive, such as shoes and medicine. Impractical-is the opposite of practical, purchasing products that are not necessary. Rational-Purchases are made with logical, thought out reasoning. Irrational-products are purchased for foolish or absurd reasons. Factual-Purchasing products based on researched reports. Emotional-purchasing products based on feelings

Buy to satisfy a need (for a reason). Buy to satisfy a want (desire).

Consumers Also Buy: To Increase


Sales. Profit. Satisfaction. Confidence. Convenience. Pleasure. Production.

To Protect

Investment Self Employees Property Money Family

To Make

Money Satisfied customers Good impressions

To Improve

Customer relations Employee relations Image Status Earnings Performance

To Reduce

Risk Investment Expenses Competition Worry Trouble

To Save

Time Money Energy Space

Segmentation, Demographics and Behavior


Segmentation is the process of breaking down the intended product market into manageable groups; it can be broken down by:

Relationship Customer Type Product Use Buying Situation Purchasing Method Behavior Geographic Location Demographics Psychographics

Relationship

Kind of relationship weak, strong, arms length dealing, close partnership.

Customer Type

Type of customer manufacturer, service, government, military, non profit, wholesaler, retailer, end user.

Product Use

How customers use product installation, components, accessories, raw material, eaten, professional service.

Buying Situation

Buying situation rebuy, modified rebuy, new purchase.

Purchasing Method

Purchasing methods Internet, long term contract, warranty, financing, cash on demand.

Behavior

Needseconomic, functional, psychological, social. Benefits--quality, service, economy, convenience, speed. Attitude toward product--Enthusiastic, positive, indifferent, negative, hostile. User status--Nonuser, ex user, potential user, first time user, regular user. Loyalty status--None, medium, strong, absolute. Brand Familiarity-Unaware, aware, informed, interested, desirous, intending to buy. Occasion--Regular occasion; special occasion, convenience, comparison shopping, unsought product. Type of problem solving needed-routine, limited, extensive. Information required-low, medium, high.

Geographic Location

Region of world, country North America, South America, Africa, Asia, Europe. Regions within that country (For Example USA) Pacific Northwest, South, Midwest, New England. Size of city population under 5,000 people to 4 million or more. Urban vs. rural country, city, large city = more resources, more independence; country=more dependence on neighbors and pooling resources. Climate cold, hot, rainy, desert, beaches, mountains.

Demographics

Income under $5,000 to $250,000+ a year. Gender male, female, neither, both. Age Infant, toddler, preschool, tween (age 8 to 12), teen, college age, 20, 30, 40, 50, 60, 70-90. Family size 1 person, 2, 3, 4, 5 or more.

Family life cycle young, single, engaged, DINKS (double income no kids), SINKS (single income no kids), married with kids (babies, toddler, elementary school age, teen, older), recently divorced, empty nester (children have moved out), same-sex couples, single parents, extended parents (grandparents raising their grandchildren), retired (either wealthy or Medicare dependent/poor). There are also Boomerang Kids (adult children have moved back home), Cougar/Silver Fox (Cougar is a 40-60 year old weathly, single, career driven woman seeking a younger man; Silver Fox is a 4060 year old wealthy, single, career driven man seeking a younger woman). Job unemployed, housewife, part-time, full-time, student, professional, craftsperson, farmer, retired. Education grade school or less, some high school, high school graduate, some college, college graduate, graduate degrees. Religion Christian, Jewish, agnostic, atheist, Muslim, Islam etc. Race White, Black, Asian, Hispanic, Native American, mixed race, etc. Culture/nationalityAmerican, French, English, African, Russian, Indian etc. Generation (For Example USA) GI Generation, Silent, Matures, Baby Boomer, Gen X, Gen Y, Boomlets.

Psychographics

Lifestyle interests, hobbies, activities, interests, opinions, values, media preferences. Everyone has two lifestyles, the one they are in now, and the one they desire to be in, which is usually better than the current one. Almost all decisions are influenced by the buyers current and desired lifestyle. Personality traits o Sincerity. o Excitement. o Competence. o Sophistication. o Ruggedness.

Social class Lower, middle-low, middle, middle-upper, upper, upper-upper, working class, blue collar.

Segmenting Public
Another way of segmenting publics is to do it based on values and lifestyles. Such segmentation regularly is used by marketers to focus product and service appeals on particular socioeconomic levels. According to the VALS Lifetime Scale, segmentation separates consumers into eight distinct categories based on income and social class. Remember that income is not the same as wealth, income is money that is earned, wealth is accumulated assets that people already have (cars, house, art). Some people can have a high income and have no money because they spent it all, or they can have lots of wealth and no job. a) Actualizers b) Fulfilleds c) Believers d) Achievers e) Strivers f) Experiencers g) Makers h) Strugglers See below for more detail and examples. a) Actualizers are those with the most wealth and power. i) Successful, sophisticated, active, high self esteem, abundant resources. ii) Image is important not as a status symbol but as an expression of their independence and character. iii) Leaders in business and government. iv) Concerned with social issues. v) Have a taste for the finest things in life. vi) 72% married, 59% men, 95% college educated. vii) Income is $5 million a year and up. b) Fulfilleds have high resources and are principle-oriented professionals or retirees. i) Mature, satisfied, comfortable people. ii) Value order, knowledge and responsibility. iii) Most are well educated and in or recently retired from professional jobs. iv) Leisure activities center around the home and family. v) Conservative, practical consumers that look for functionality, value and durability in the products they buy. vi) Income is $2-$5 million a year. c) Believers are Fulfilleds without the resources. i) Conservative, conventional with concrete beliefs based on traditional established codes: family, church, community and the nation. ii) Deeply rooted moral codes.

iii) As consumers they are predictable and conservative, favoring American products and established brands. iv) 70% married, 46% men, 6% college educated. v) Median age is 58. vi) Income is $500,000 to $2 million. Actualizers, Fulfilleds, and Believers are upper class. They are only .5% of the population in the USA but control 80% of the wealth. d) Achievers have high resources and are status oriented. i) Seek recognition and self definition through achievements at work and school. ii) Value predictability and stability. iii) Deeply committed to work and family. iv) Social lives are centered around family church and career. v) Image is important to them. vi) They favor established prestige products and products that demonstrate success to their peers. vii) 73% married, 39% men, 77% college educated. viii) Income around $200,000. e) Strivers lack the resources of Achievers but are equally status oriented. i) Seek approval from the world around them. ii) Striving to find a secure place in life. iii) Easily bored and impulsive. iv) Wish to obtain things that are out of their reach. v) Income around $100,000. Achievers and Strivers are the middle class. This group is shrinking due to high credit card debt, bad mortgages and an increasing level of unemployment in America. 90% of Americans make $100,000 or less a year in income. f) Experiencers have high resources, are action oriented, and are disposed toward taking risks. i) Young, vital, impulsive and rebellious. ii) Politically uncommitted and ambivalent about what they believe. iii) Avid consumers that spend much of their money on clothing, fast food, music and movies. iv) 34% married, 53% men, 41% college educated. v) Median age is 26. vi) Income is around $50,000 a year. g) Makers also are action oriented but have low resources. i) Practical with constructive skills. ii) Experience the world by working in it, building a house, raising children, fixing cars, canning vegetables. iii) Politically conservative. iv) Suspicious of new ideas. v) Respectful of government ideas and organized labor. vi) Unimpressed by material possessions other than those with a functional purpose.

vii) Sometimes called the working class. viii) Income is around $30,000 a year. h) Strugglers have the lowest resources. i) Have constricted lives. ii) Chronically poor. iii) Uneducated and limited skills. iv) Without strong social bonds. v) Chief concerns are about their health and safety. vi) Cautious consumers. vii) Loyal to favorite brands. viii) 47% married, 37% men, 3% college educated. ix) Median age is 61. x) Median income is $9,000 a year, which is equivalent to minimum wage. Experiencers, Makers, and Strugglers are lower class. These three classes total around 30 million Americans. About half are married in an effort to combine resources. How do you appeal to each of these groups?
Actualizers

Appeal to their sense of independence and emphasize how it will enhance character.
Fulfilleds

Appeal to family issues, durability and value.


Believers

Appeal as an established brand, family issues.


Achievers

Appeal to their need to feel prestigious, image is important to them, also family and work.
Strivers

Appeal to the sense of attaining products they will feel important having.
Experiencers

Action! Appeal to a sense of youth and fun.


Makers

Appeal to function

Strugglers

Appeal to loyalty and security

Internal Influences - Learning


Consumer behavior is largely learned behavior. Learning is a change of behavior following an interaction between a person and their environment. A person touches a hot stove and then gets hurt, because of that interaction they learn not to touch the hot stove again. Most attitudes, values, tastes, behaviors, preferences, symbolic meanings and feelings are acquired through learning. People buy things and then make decisions for future purchases based on if they liked the product, quality, service, and price. Social organizations help people learn "appropriate" beliefs about issues like drinking and driving, proper nutrition, etc. Companies that help their customers learn about their products and create positive feelings with their product, service, brand name, and employees-have a competitive advantage The Learning Process:

Exposure - the customer becomes aware of product, service or advertisement through at least one of their five senses (sight, smell, taste, touch, hearing). When a customer walks into a store, goes onto a website, drives by a billboard, reads a magazine or tries a free food sample, the learning process begins Attention - the customer processes the stimulus. Understanding - the customer interprets the information and acts on it either by purchasing the product or service, dismissing the information, seeking more information (asking family and friends, going on the Internet) or remembering it for future information.

Memory
Marketing messages can be effective only if the consumer correctly understands the messages, and remembers them when needed. Memory refers to a consumer's ability to understand the marketing messages and assign them value and meaning. Value and meaning always together. The value and meaning assigned is largely determined by internal factors, (thoughts, feelings, emotion, attitude, perception, motivation, personality, lifestyle) which are different for each consumer. For example, a consumer who drinks lots of milk, sees an advertisement that says "Got Milk?" and since they already have positive feelings for the product they will purchase more milk, whereas a consumer who does not enjoy drinking milk and sees the same ad, may dismiss the ad or may try drinking more milk for a short period of time and then decrease consumption again. Three things influence consumer's ability to understand messages:

Physical Characteristics of message

Imagery: When the brand name, words, and slogan work together to create an image in the mind of the consumer, it will invoke ideas, feelings and objects, and a direct recovery of past experiences. Disney is big on evoking nostalgia and past experiences, they want adult customers to remember being taken to the Disney parks as a child and then repeat the experiences with their own children. Much of their advertisement depicts families having wonderful experiences together, while the adults are remembering being there as children. Color: Colors have an enormous impact on marketing messages, and color affects consumers in a subjective manner, so that most of the time consumers dont even know they are being affected! For example, in the US, the color red makes people eat 25% more, therefore most restaurants use red as their main color. The meaning and value assigned to colors changes with the culture, so marketers need to be fully aware of how color is interpreted by different groups of people. For example, the Starbucks Coffee Company logo is green, but when they opened shops in Malaysia, they had to change the logo to brown because in that culture green is associated with sickness. Font: The presentation of words and how they are shaped will also enhance the marketing message and contribute to the value and meaning. For example, these two different fonts for a cigarette company will convey entirely different meanings, and may attract two different customers.

Characteristics of the message receiver (consumer)

Intelligence: unless you are specifically marketing a product to extremely intelligent individuals, it is best to word marketing messages on a level most people can understand, and dont ever talk to your customers in a way that would make them feel inferior. Involvement: A customer with higher levels of involvement with the product, service and marketing information will have more recall than a consumer with less involvement. Creating more interest in the product and making a website more interactive will help to increase sales. More involvement means more sales. Familiarity: Generally, the more familiar a customer is with a product, the more likely they are to purchase it; however, having too much familiarity can lead to adaptation, when customers become tired of their familiar purchases and seek out novelty items. For example, in the US in the 1990s, ketchup sales began slipping and to revamp sales, ketchup manufacturers created green and purple ketchup, these novelty items boosted sales, but only for a few months, when consumers became tired of them. Expectations: If the customer doesnt know what to expect from the product or service, then they are not going to purchase it. This explains why familiar brand names like Campbells Soup, Coca-Cola and Disney do not change their logos customers are familiar with them, have positive thoughts about them and know what to expect. Physical limits: Marketers need to remember that some consumers have limitations such as hearing impairment or color blindness and this needs to be taken into consideration when creating marketing messages.

Characteristics of the environment

Intensity of information: If a consumer is overloaded with stimuli in an environment, they are much more likely to avoid the ad, or not comprehend it at all. Let's face it, we live in a world cluttered with advertisements, it can be difficult to break through all of it and get to your target market customers. Marketers have to be more creative since customers can now skip commercials (thanks to recordable television); marketers use product placement in the actual movie or television show, the characters in the show use the brand name products and may even talk about how they like the brand name. This is all part of the advertising. Marketers are also making use of new social marketing movements such as Twitter and Facebook that can be programmed to reach customers that want to see your marketing messages. Framing: Messages can be framed to seem positive or negative and this will affect how customers assign value. "If you don't use sunscreen, you could get skin cancer" or "Use sunscreen to moisturize and protect your delicate skin". Timing: Many factors will influence how a message is interpreted and assigned value including: amount of time customer has to view a message, time of day, and type of medium used. A customer driving in the morning 70mph past a billboard for coffee may only have a few seconds to interpret the message, but since it is a time of day when that product is most consumed, they may be more likely to act on the message.

Emotion and Perception A. Emotion


Emotion is difficult to define, and even more difficult to predict. However, they are important to marketers because consumers tend to react to marketing messages and make purchases based on feelings and emotions. Emotion can be used to create product benefits. Such as with Tide detergent and Cheerios cereal; their commercials feature families having wonderful moments together, that couldn't have happened without those products. Emotion in advertising enhances attention, attraction, and is processed more thoroughly by the consumer and may be remembered better. These are the elements of the relationship between emotion and understanding:

Self control-the ability to control your emotions Emotional empathy-the ability to understand other people's emotions Positive/negative outlook-a person's outlook on life can be upbeat and optimistic or depressed and negative; most people fall somewhere in between Productivity-ability to use emotions to solve problems

B. Perception
Perception is the process by which people select, organize, and interpret information Perception has four major steps: 1. Exposure - When a stimulus (like a billboard) comes within range of your senses (vision)

2. Attention - Determined by the individual and the situation; Nerves pass the information onto the brain for processing 3. Interpretation - when marketing messages are assigned meaning 4. Memory

a. Short-termfor immediate decision making b. Long-termfor retention

For an ad to be successful it must have the following four elements:

1. Exposure Must physically reach the consumer 2. Attention The consumer must attend to it 3. Interpretation It must be properly interpreted 4. Memory Must be stored in memory that will allow retrieval

Motivation
Motivation is an internal state that drives us to satisfy needs. Motivation is the energizing force that activates behavior. Once we recognize that we have a need, a state of tension exists that drives the consumer to the goal of reducing this tension and eliminating the need. Consequently, only unmet needs motivate. According to Maslow's hierarchy of human needs, for each need there are positives gained and negatives that are avoided by meeting that particular set of needs. Products that are purchased because of a need will satisfy a goal and avoid unwanted consequences. For example, people need to feel secure so they purchase smoke detectors, therefore gaining protection and avoiding loss and fear of fire. According to McGuire, there are 12 psychological motives, 12 reasons why consumers are motivated to make purchases.

1. Need for consistency 2. Need for attribute causation 3. Need to categorize 4. Need for cues 5. Need for independence

6. Need for self-expression 7. Need for ego-defense 8. Need for reinforcement 9. Need for affiliation 10. Need for modeling 11. Need for novelty 12 Need for Assertion

1. Need for consistency

People have a basic desire to have all parts of themselves consistent and they purchase products that fulfill this need. People that listen to country music will purchase products like cowboy boots, heavy duty trucks and pets.

2. Need for attribute causation

People have the need to determine who or what causes things to happen to them. For example, some people choose to attribute it to themselves, fate or an outside force like God.

3. Need to categorize

Categories allow people to process a large amount of information. Vehicles are categorized into cars, SUV's, light trucks, heavy duty trucks, van, sporty, mid-size, hybrid, electric and so on. This helps consumers quickly narrow down their choices when purchasing a vehicle.

4. Need for cues

Most people will view others' behavior and infer what they feel and think. Clothing plays an important role in presenting image of a person. People quickly judge others by the clothing they are wearing and the vehicle they drive.

5. Need for independence


Americans strive for individuality and self-expression and many products are marketed as "limited edition" or being different and unique The Japanese culture discourages individuality and focuses on affiliation, and behavior that enhances family and culture.

6. Need for self-expression

Americans are known for letting others know who and what they are by their extravagant purchases, especially clothing and cars. Who really needs a $1,200 pen? What is that saying about that person?

7. Need for ego-defense

The need to defend your identity. An insecure customer will purchase well-known brand names for fear of being labeled socially incorrect.

8. Need for reinforcement

People are motivated to act because they are rewarded for doing it. For example, showing off a new diamond ring to your friends creates acceptance and approval.

9. Need for affiliation

Affiliation is the need to develop mutually helpful and satisfying relationships with others, which is a critical part of all people's lives.

10. Need for modeling

Conformity and the need to base behavior on that of others. This is the major motivation of children, tweens (8-12 year olds), and especially teenagers-and in their social world conformity mean acceptance.

11. Need for novelty

People have variety seeking-behavior and this may be a reason for brand switching and impulse buys, but that depends on the person. People experiencing rapid life changes will seek stability, while people in stable life situations will seek change. The travel industry uses this by changing up their ads and showing adventure vacations where people are actively having fun and some ads showing relaxing vacations where people are swinging in a hammock.

12. Need for Assertion

Customer's need to engage in activities that will increase self-esteem and self-esteem in the eyes of others. Most consumers respond positively to ads that appeal to this need. In an advertisement for a ladies razor, it will say "show off your beautiful legs to your man," this will appeal to women by showing that the product increases your self-esteem.

Personality
Some marketers believe we choose products that express our personalities. Personality is defined as the thoughts, emotions, intentions and behavior that people express as they move through their environment. Personality is unique to individuals, but may be applied to groups, is a combination of characteristics and traits and influences purchasing behaviors. Marketers will use interviews and focus groups to understand personality and how it relates to the purchase of certain products.

Frugalityconsumers restrain themselves and think heavily about purchases Impulsivenesspurchases are made without much thought beforehand Anxietya person with lots of anxiety may have more post-purchase dissonance and feel upset about purchases after they get them home Bargainingsome consumers prefer to bargain for purchases, it gives them a sense of control over their spending Vanitytaking excessive pride in ones appearance and accomplishments

Competencebeing responsible and dependable Excitementcraving daring and spirited purchases Ruggednesscraving products that are tough and strong Sincerityhonest and genuine Sophisticationdesiring products that are glamorous and prestigious

Lifestyle and Attitude A. Lifestyle


Lifestyle is a common word to explain complicated consumer behaviors. Lifestyle is a way to segment people into groups based on three things: opinions, attitudes and activities. Lifestyle means the ways groups of consumers spend time and money. Lifestyle can include things like bowling, cooking, car racing, kayaking, attending charity events, having pets, interest in politics, watching sporting events and so on Everyone has two lifestyles-the one they are currently in and the one they want to be in, which is always better than the current one. Marketers exploit this desire to move into a better lifestyle by showcasing people who are better off than the intended target market in their ads. For example most ads targeting children show children that are almost too old for the product, this appeals to younger children who desire to be like them.

B. Attitude
An attitude is an internal evaluation, expressed outwardly about a person, object or issue. There are three components of attitude - affect, behavior and cognition. This sis sometimes called the ABC's of attitude. These three components work together to form a hierarchy of effects: Purchase High involvement Hierarchy of effects Beliefaffectbehavior

Low involvement

Beliefbehavioraffect

Experiential

Affectbehaviorbelief

Behavioral Influence

Behaviorbeliefaffect

In a purchase that requires a high level of involvement, such as a car, consumers will consider various choices and develop beliefs about each choice; then they develop feelings about the

products (affect); and finally they act on the behavior and decide to purchase, or not. Whereas with a behavioral influence, the customer will act first (purchase), then develop beliefs about their purchase and that leads to developing feelings about the product or service.

External influences - Introduction


What are external influences in consumer behavior?

a. What a consumer eats, wears, and believes are all learned and influenced by the culture they live in, their family, childhood and social environment. All of these are external factors that affect purchases. Here is a list of the external influences that affect consumer behavior:

Age Race Gender Education level Cross-cultural influences Sub-cultures (Hispanic-American) Social status (upper, middle, lower) Customs, Beliefs, Expectations, Traditions, Habits Reference groups are groups that have shared beliefs, interests and behaviors and influence a consumers behavior:
Examples include: Religious, Political, Family, Friends, Co-workers, Clubs and Associations.

People are social and they want to belong to special groups. Group members share common interests, influence each other, and share rules and values. Primary groups are those with the most influence, such as family members; secondary groups have less interaction than the primary group, such as clubs and organizations. As children grow into teenagers, their parents become less of an influence and peer groups become more of an influence. All groups exert what is called social power; some groups have more power than others over consumers decisions. Values Community

c. External influences can also include situational influences, sometimes called atmosphericssensory items in an environment that may change buying patterns, such as music, color, smell, and lighting. If a store plays loud rock music, they may attract young adults, but drive away older consumers. Color is a huge influence on behavior, but is also dependent on culture, since different cultures perceive colors differently. In the US white is a color worn at weddings, and in China, red is the color of choice for weddings. Many bakeries will pump the smell of their treats outside the store, so that passersby will be more likely to want to come in.

d. Before making a purchase, consumers will go through an external information search. They will go through this search in order to evaluate the alternatives and narrow down their list of choices. It includes:

Personal experiencehave they purchased this product before? How do they feel about it? Websites/Internet searchresearching the quality of the product Knowledgesomeone with little or no knowledge of the product will need lots of information! Friends/reference groupsconsumers ask friends, family and coworkers about their experiences with the product. Advertising and promotions

e. A purchase may be ultimately made due to Heuristics. This is a personal set of values that everyone has and it causes consumers to buy what they are comfortable buying, such as purchasing from specific countries of origin, or products that they are brand loyal to.

Family Life Cycle (FLC)


Family life cycle is defined as what type of family the target market consumer is in. DINKS are double income no kids and SINKS are single income no kids. Marketers love to target the DINKS and SINKS because they have lots of discretionary income and no children to spend it on, so they spend their extra money on themselves, their house, their pets and vacations.

Stages of the Family Life Cycle (FLC)


Young and single Engaged couples DINKS (Double Income No Kids) SINKS (Single Income No Kids) Married with children: Babies, Toddlers, Elementary School Age (5-7), Tweens (812), Teens (13-17), Older Single parents Empty nester Boomerang Kids (adult children who have moved back in with their parents) Extended parents (grandparents raising their grandchildren) Blended Families (stepchildren) Cougar and Silver Fox Recently divorced Same-sex singles/couples Retired - Wealthy or Medicare dependent

The engaged couples and the recently divorced spend money on similar products, although for different reasons. Engaged couples are buying products to begin a life together and the recently divorced are buying products that they already had and now need to replace. Extended parents are grandparents taking care of their grandchildren. Same sex couples and singles are grouped together whether they have children or not, because of their lifestyle and

interests. An empty nester is someone whose children are now grown adults and have moved out of the house. Boomerang kids are adult children who are living with their parents.

Consumer Culture
a. Culture includes knowledge, belief, art, law, morals, customs, and any other capabilities and habits acquired by humans as members of society. b. How does culture affect consumer behavior? Whatever a person consumes will determine their level of acceptance in their society. If someone does not act consistently with cultural expectations, they risk not being accepted in society. c. What happens when a company ignores culture? McDonalds is one of the most popular restaurants in the world. At their American based restaurants they serve beef hamburgers, but when they decided to open restaurants in India, they used lamb meat for their hamburgers, because the Indian people do not eat cow meat; if McDonalds had ignored this cultural difference they would not have been successful in India! That was the problem when The Walt Disney Company opened EuroDisney outside Paris; it was almost a failure because Disney ignored the culture. The French people drink wine at very young ages and prefer sugar on their popcorn, not salt, like Americans. Disney did not accommodate their theme park until they realized that the French people were indeed their target market, so they changed the name of the park to Disneyland Paris and made modifications to their menus and also to the wait lines in the park. d. Factors that Define a Culture

i. Individual/Collective: The culture in the US is an individualistic society, where people generally look out for themselves; The Japanese culture focuses on the collective, and people work to better society as a whole. ii. Extended/Limited Family: In the US, families move away from each other and generally dont live together in the same house; In many Asian and European countries, parents, kids, grandparents and even aunts and uncles live together in the same house. iii. Adult/Child: Different cultures will define when someone is an adult. In the US it is 18 years old, but in some South American countries it is 14 or 15 years old. In the Hebrew culture a boy becomes a man at 13 during his Bar Mitzvah ceremony. In the Hispanic culture a girl becomes an adult at 15th birthday party. iv. Masculine/Feminine: Cultures define the roles of men and women differently, including their rank, and prestige in society. v. Youth/Age: The value placed on Elders depends on the culture vi. Cleanliness: In the US, cleanliness is very important, in fact most of the products advertised on American TV claim to improve cleaning; In other cultures showering on a daily basis is unnecessary. vii. Tradition/Change: Some societies prefer traditions over making changes. viii. Hard work/Leisure: In some cultures hard work is valued over leisure time. ix. Postponed gratification/Immediate gratification: American culture is centered on immediate gratification I want it now!

x. Sensual gratification/Abstinence: The Netherlands is a society that openly talks about and advertises sexual activity; in Muslim societies those topics are taboo, and women who get pregnant before marriage are often shunned.

Social Environment and Social Class


Social Environment

Reference groups have an influence on purchasing behavior, but the level of influence will depend on where the product will be consumedin public or in privateand whether the product is a want or a need.
Social Class

Populations can be subdivided into groups who members share similar hobbies, opinions, and activities. Americans have two lifestylesthe one they are in and the one they strive to be in, which is usually better than their current situation. It is important for a marketer to understand the subdivisions of society in order to better choose target markets for their products and services.

Family Influences (Birth Order)


Where a child places in the birth order can have an effect on how they see themselves, and therefore affects their consumer behavior. The middle child often seems to have the most negative impressions of his lot in life.
Younger children always want to be able to do the things older siblings are allowed to do. And older siblings may feel that the younger siblings get away with things they were not able to when they were the same age. Here are the levels of birth order:

Only Child Oldest Child Second Oldest Sibling Middle Child of Three Siblings Youngest Sibling

Only Child

Pampered and spoiled Is center of attention; often enjoys position. May feel special. Relies on service from others rather than own efforts. Feels unfairly treated when doesn't get own way. Likelier to hold a professional position. Concerned with meeting parents expectations. Confident. Pays Attention to Detail. Good in School. Overly Critical.

Oldest Child

Is only child for period of time; used to being center of attention. Believes must gain and hold superiority over other children. Being right, controlling often important. Strives to keep or regain parents' attention through conformity. If this failed, chooses to misbehave. May develop competent, responsible behavior or become very discouraged. Sometime strives to protect and help others. Confident. Determined. Born Leader. Organized. Eager to Please. Likes to Avoid Trouble.

Second Oldest Child


Never has parents' undivided attention. Always has sibling ahead who's more advanced. Acts as if in race, trying to catch up or overtake first child. If first child is "good," second may become "bad." Develops abilities first child doesn't exhibit. If first child successful, may feel uncertain of self and abilities. May be rebel. Often doesn't like position. Feels "squeezed" if third child is born. May push down other siblings.

Middle Child of Three Siblings


Has neither the rights of oldest nor privileges of youngest. May feel like they dont have place in family. Becomes discouraged and "problem child" or elevates self by pushing down other siblings. Is adaptable. Learns to deal with both oldest and youngest sibling.

Youngest Sibling

Feels every one bigger and more capable. Expects others to do things, make decisions, take responsibility. Becomes boss of family in getting service and own way. Develops feelings of inferiority or becomes "speeder" and overtakes older siblings. Remains "The Baby." Places others in service. If youngest of three, often allies with oldest child against middle child. Persistent Affectionate Crave the Spotlight

Situational influences on consumer behavior (outlet selection)


Shopping is an activity that everyone in the world participates in, but what exactly is it? Is a store necessary for shopping to take place? What motivates someone to shop? Marketers, retailers and manufacturers spend lots of money to get consumers to shop, but not every shopping trip results in a purchase. Shopping is an important factor in any economic system and changes the standard of living. Economic systems depend on consumers buying products and services. Companies depend on loyal customers and repeat purchases to bring in sales and profit and to pay their employees. Employees become consumers as they spend their earned paycheck on products and services. Consumers depend on purchases to give them value and satisfaction. The motivation to shop can depend on factors that cannot be controlled by the consumer or the marketer; if the consumer is in a hurry or relaxed, shopping alone or with friends or with their kids, if the store is crowded or emptysituational influences can affect purchasing decisions. Situational Influences are factors specific to a time and place that a customer reacts to. A. Atmospherics and Situational Influences B. Time C. The Science Behind Shopping D. Shopping Habits E. Online shopping Habits F. Eating Habits

Situational Influences and Atmospherics


The three major situational influences are Time, Place and Conditions.

TimeIf a customer is in a hurry or the store is crowded this can change the way information is processed. The customer may not have time to consider all the brand alternatives and this will affect what they purchase. Placethe dcor, furniture, colors and clothing of the employees will affect the motivation of the consumer. For example, a restaurant selling seafood seems to have more credibility in an ocean themed dcor environment. ConditionsWomen tend to purchase more when they shop with friends, taking your kids to the grocery store increases your likelihood of spending more money 150% because parents shopping with children are more likely to be influenced by the

product preferences of their children. Climate will affect purchases, if it is cold outside you would be more likely to purchase a hot drink. Marketers have researched customer behavior enough to know that certain environmental factors will affect their shopping habitssmell, lights, music, colors, crowds, safety and employees. The term for this research is called atmospherics. Atmospherics is the physical manipulation of the store environment (physical or online) to change the mood of the customer. Creating a positive store environment causes people to stay in the store longer and the longer a customer spends in a store the more money they are likely to spend. Creating positive feelings about a store also generates loyal customers and repeat shopping visits.

Physical Featuresdcor, lights, sounds, weather, employee clothing, store layout and visible configuration of shelves and merchandise. All of these things combine to create feelings in customers. A department store that wants to sell expensive clothing needs to have stylish fixtures, colors and furnishings, and the employees should fit into this stylish atmosphere. Sales personnel can often persuade a consumer to purchase or not purchase a particular brand based on their mood, attitude, clothing and knowledge of the products. Store layout can also affect brand purchase as well as the total in-store expenditure. Grocery stores are arranged to maximize exposure to items not routinely purchased while obtaining normal grocery purchases. Point-of-purchase displays can attract attention to a brand and produce a greater likelihood of purchasing that brand. For example, an end-of-aisle display featuring a particular brand of snack food will increase purchases of this brand over normal shelf sales. Colorcolors mean different things to different cultures, and the store (or website) needs to have full understanding of colors and their meanings. Colors are used to affect customers and in most cases they wont even know it! In the US red is an energy color and is often used to stimulate the appetite, where as blue is a calming color. Smellthe study of smell and how they affect shopping habits is just beginning, however we already know one thingif a store smells bad, customers wont shop long! Musicmusic influences a customers mood. Slow tempo music relaxes the customer and causes them to linger in the store longer, whereas fast tempo music may be better for stores and restaurants that need rapid turnover. Music isnt just about speed, the type of music must match the store. A Texas barbeque themed restaurant would attract more customers with country music rather than pop music. Crowdsare always going to lead to negative shopping experiences. The more crowded a store is the more likely customers are going to feel confined and unhappy and will find a way to spend less time in the store and may make uninformed shopping decisions. Promotional deals, such as cents-off sales or 2-for-the-price-of-1, offer an economic purchase incentive. This is done quite often in the promotion of frequently purchased products like toothpaste. Stock-out means that a store has run out of a product (or has not restocked the product) and this can lead to brand switching or store switching. There are several things a customer would do in this situation: CUSTOMER BEHAVIOR IN A STOCKOUT SITUATION

PURCHASE BEHAVIOR Buy a substitute product at the original store, this may replace the intended brand for future purchases Wait to purchase until the intended product is available Not make any purchase Purchase the intended brand at another store VERBAL BEHAVIOR Consumer makes negative comments about the original store Consumer makes positive comments about the substitute store Consumer makes positive comments about the substitute product ATTITUDE CHANGE Consumer has a negative attitude about the original store Consumer has a positive attitude about the substitute store Consumer has a positive attitude about the substitute product

Retail outlets are physical (or virtual online) stores that sell product/services. Manufacturing companies make the products that retail outlets sell. Retail outlets can be an independent retailer, a chain store or a franchise. An independent retailer usually only has one location and is a small business owned by a person or group of people. A chain store is a store with many locations throughout a region. A franchise is when a corporation sells partial ownership of their store locations to local businesspeople. The owner then runs the store for the corporation and in turn makes a percentage of the sales as profit. McDonalds is perhaps the best known franchise in the world. There are several different types of retail outlets, each with its own level of service and product assortment. The amount of gross margin a company makes often depends on their level of product turnover. The less product turnover a company has the more likely they are to need high prices in order to make a profit. Here is a chart with some examples of the different types of retail outlets:

Time
Time is something that customers give up in order to shop and this is a very valuable thing! It is necessary to give up time for consumption to occur, but time can affect consumption in three forms:

i. Time Pressure When customers dont have a lot of time they tend to process less information because time is important for thorough problem solving. Customers in a hurry may choose the well- known (and usually higher priced) brand because they dont have time to consider the alternatives. Or they may choose the least expensive product and risk buyers remorse (cognitive dissonance). ii. Time of YearConsumers are affected by the changing seasons, but not just according to the product needs such as coats in winter and sunscreen in summer, they are also affected by the amount of daylight. Due to daylight savings time and the increased amount of darkness in winter, consumers shop earlier in the day, and they tend to purchase more comfort products. Overall consumers tend to spend more money in the summer. Food items vary with the season and holidays.
iii. Time of DayEveryone has a circadian rhythm, which helps regulate our sleeping and awake times. Most people are naturally sleeping (or tired) during midnight to 6am and from 1pm to 3pm. People who shop during these hours may have less energy and may not make informed purchases. In order to counteract this many people turn to energy drinks and caffeine in the morning hours. Danes, Italians, French and Americans drink coffee, while those in the UK, and some Asian countries drink tea.

The Science Behind Shopping


a. Shopping activities. Until the proliferation of the Internet shopping depended on physical stores being located near potential shoppers. Now consumers are purchasing product from around the globe and having it shipped right to their door via the Internet. Consumers can also purchase in other non-traditional ways such as vending machines and the use of their Smartphones to make a purchase from anywhere. There are usually one of four reasons why consumers go to a store (or visit a shopping website): b. Four Types of Shopping Activities i. Acquisitional ShoppingCustomers go to the store intending to make purchases and acquire product or services. ii. Epistemic ShoppingCustomers shop to obtain information about the products they intend to purchase in the near future. iii. Experiential ShoppingRecreational activities to satisfy the customers need for fun and relaxation. Sometimes people shop just for the experience or due to boredom. iv. Impulsive ShoppingSpontaneous shopping that leads to a need for self-fulfillment. Consumers often purchase things without thinking and dont consider the consequences. c. Anthropology (behavioral science) has devoted a branch to the study of modern shoppers. It studies shoppers interacting with retail environments (and not only stores this includes banks and restaurants), so this means they study every rack, counter, display, entrance, exit, cashier line, parking lot every nook and cranny that you could imagine of a retail environment. Research in the study of shopping is not high-tech. The most important research tool is a person called a tracker. A tracker is a field researcher of the shoppers. Trackers make their way through stores following every little move a shopper makes. They

follow a shopper around inconspicuously and record virtually everything the shopper does such as how many ties they pick up or how many towels they may touch. The trackers notice things about the retail environment that a normal employee wouldnt notice. They apply extreme attention to a specific area and then analyze what could make that retail space better for the shopper and more profitable for the retailer. Here are some of the things a tracker will analyze. i. Which direction do customers turn when they enter the store? ii. Where are the sale items located? iii. How long do customers linger in a store/given area? iv. Which areas of the store are the most/least crowded? v. What impediments to shopping are there? vi. How long are lines? d. Theory of the Butt Brush i. During an early study of Bloomingdales in New York City, by Paco Underhill (author of The Science of Shopping) he put a camera in one of the main entrances of the store hoping to study how shoppers negotiated the doorway during its busiest time. Instead, they noticed that shoppers - especially women dont like being brushed from behind. They noticed this by looking at the tie rack that was located right near the doorway they were studying. People would go to the rack and browse through the ties that were on display. Then they would be bumped by people heading in and out of the store. After a few bumps the shopper would leave the rack. Paco told this to his client and his client noted that the sales of the ties were lower than usual. They moved the tie rack and sales went up quickly and substantially.

Shopping Habits a. Overview


Studies find that it's part of our psychological makeup to do the same things over and over again. Essentially humans are pretty predictable, and stores take advantage of that to get us to buy more. i. If a shopper touches or picks up the merchandise they are more likely to buy it. (thats why certain items are in easy reach). ii. The more time you spend in a store, the more you buy; 30-40 minutes = average $72.00, but 3 hours or more = average $200. iii. Stores are designed to keep you there for hours on end so youll buy more! If customers can see over the shelves, they will spend more time in the store because they can see the available merchandise. Also, notice how you have to walk through the store to get to the escalator, the sale items, and the bathrooms?

iv. You will overspend if you wait until the last minute and make one big trip to the store. v. Shop once a week = 66% chance of making an impulse buy; Shop 3 or more times a week = 57% chance of making an impulse buy. vi. You will be more likely to make an impulse buy when shopping with another person, the more people you shop with, the more likely you are to splurge.

b. Research Discoveries.
Here are some other shopping habits that Paco Underhill (author of The Science of Shopping) uncovered through his research: i. The higher the "interception rate" (contacts with employees), the higher the chance of purchase. ii. Placement of key merchandise in a "transition zone" near the door -- but not too near -- is advised. iii. The "boomerang rate" (the percentage of shoppers who failed to walk down the full aisle), determines the "capture rate" (the percentage of customers who actually "see" a given product on the shelf) iv. What Shoppers Like

1. Touching the product 2. Mirrors 3. Discovering Bargains 4. Talking to employees 5. Recognition by employees

v. What Shoppers Do Not Like


1. Too Many Mirrors 2. Long Lines 3. (Being Forced to ask) Dumb Questions 4. Merchandise out of stock 5. Obscure Price Tags 6. Intimidating Service 7. Crowded stores and aisles

c. The 5 Types of Shoppers.


The Way You Shop Can Influence How Much You Spend. If you've ever come home after shopping and wondered, why in the world did I buy that? the answer might have to do with your shopping personality type.

1. The Touchy-Feely Shoppera shopper that picks something up and then usually purchases it.

2. The Mall Lingerer these shoppers take their time going through a store. 3. Guerrilla Shopper--the opposite of the mall lingerer. This person waits until the last minute, especially around the holiday season, and then runs around frantically, trying to get all the shopping done in one shot. 4. The Sales Junkie--these people are subjected to a spillover effect. If they see one bargain, they think everything in the store is a bargain, making them apt to spend more money. For instance, some dollar-store items (like peroxide, tomato sauce and Gatorade) are sometimes cheaper at supermarkets/discount stores. Warehouse stores like Costco may be a bargain when it comes to batteries and cereals, but less so when it comes to items like digital cameras. 5. The Social Shopper-- this type enjoys shopping with friends and almost never shops alone, they tend to make a lot of impulsive purchases.

d. Six motivation-based shopping orientations of college students


i. Chameleons: shopping styles are situation-specific or constantly changing. Their shopping approach is based on product type, shopping impetus, and purchase task. ii. Collectors/Gathers: stockpile items and to purchase large quantities to either save money or alleviate the need for shopping. They attempt to get the best price and take advantage of retailer guarantees. iii. Foragers: motivated to purchase only the desired items. They are willing to search extensively and have little store loyalty. They like to shop alone. iv. Hibernants: are indifferent toward shopping. There shopping patterns are opportunistic rather than need driven and they will often postpone even required purchases. v. Predators: speed oriented in their shopping. They plan before shopping and like to shop alone. They dont enjoy shopping and tend to shop outlets where they are assured of getting the items they need quickly. vi. Scavengers: enjoy shopping both to make purchases and as an activity. They like to go to sales and consider shopping to be entertainment. They make numerous unplanned purchases.

e. Impulse Purchasing vs. Unplanned Shopping


i. All consumers are confronted with unplanned and impulsive shopping decisions, and there is a difference between making an impulsive product choice and an unplanned one. ii. A consumer may make an unplanned purchase because something in the store, such as a point of purchase display, triggers a reminder that they need something. Unplanned purchases are usually made because of a need. iii. An impulsive purchase is made spontaneously and usually without regard to costs or negative consequences. They are usually motivated by the need for immediate selfgratification.

iv. How do retailers encourage consumers to make impulse purchases?

1. Placing certain products together in the storesuch as putting the peanut butter next to the breadwill help consumers remember how well those product go together. 2. Add-on purchases. Employees can ask consumers to purchase an umbrella to go with their new raincoat, or socks to go with their new shoes. 3. Make the consumer feel good. Give the customer personal attention, a special deal or free products can create positive feelings. 4. Make it easy for the customer to buy. Give the customer less time to think about the purchase with things like automatic one-click buying on a website. 5. Promotional sales and discounts. Buy one get one free offers, or buy 2 for $5.00, causes the consumer to think the products are on sale, when they may not be, and lowers their ability to think about the consequences.