Chapter 19

Consumer Behavior,
Electronic
Commerce, and
Channel Strategy

McGraw-Hill/Irwin Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
Introduction

From an economic perspective, channels of

distribution are thought of as providing:
Form utility
Time utility
Place utility
Possession utility

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Store-Related Affect and Cognition

Store image
Is what consumers think about a particular store.
Includes perceptions and attitudes based on sensations
of store-related stimuli received through the five
senses.
Developing a consistent store image is a common
goal of retailers.

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Store-Related Affect and Cognition (cont.)

Store atmosphere
Primarily involves affect in the form of in-store
emotional states that consumers may not be fully
conscious of when shopping.
Environmental stimuli affect consumers’ emotional
states, which in turn affect approach or avoidance
behaviors.
The four types of approach or avoidance behaviors
are physical, exploratory, communication, and
performance and satisfaction approach.
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Exhibit 19.2 - A Model of Store Atmosphere
Effects

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Store Atmosphere (cont.)

Pleasure and arousal were found to influence

consumers’ stated:
Enjoyment of shopping in the store.
Time spent browsing and exploring the store’s
offerings.
Willingness to talk to sales personnel.
Tendency to spend more money than originally
planned.
Likelihood of returning to the store.
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Store-Related Behavior

Store contact
Involves the consumer locating, traveling to, and
entering a store.
A number of variables are concerned with obtaining
store contacts.
Store location decisions are strongly influenced by heavy
traffic and pedestrian patterns, which facilitate store
contact.
Visibility of the store and its distance from consumers are
used to select locations that can increase store contact.

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Store-Related Behavior (cont.)

Store loyalty
Repeat patronage intentions and behavior.
Strongly influenced by the arrangement of the
environment, particularly the reinforcing properties of
the retail store.
Is a major objective of retail channel strategy and has
an important financial impact.

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Store Environment

Three major decision areas in designing effective

store environments:
Store location
Store layout
In-store stimuli

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Store Location

Good locations allow ready access, can attract

large numbers of consumers, and can
significantly alter consumer shopping and
purchasing patterns.
Store location decisions represent long-term
financial commitments, and changing poor
locations can be difficult and costly.
Retail location models are quite sophisticated and
can deal with a variety of criteria.
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Store Location (cont.)

General approaches to store location

Checklist method - Attempts to systematically evaluate
the relative value of a site compared to other potential
sites in the area.
Analog approach - Identifies an existing store or stores
similar to the one to be located.

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Store Location (cont.)

Regression models - Commonly used to investigate the

factors that affect the profitability of retail outlets at
particular sites.
Location allocation models - Involve the simultaneous
selection of several locations and estimation of demand at
those locations to optimize some specified criteria.

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Store Layout

Grid layout
The grid layout is more likely to be used in
department and specialty stores to direct customer
traffic down the main aisles.
Free-form layout
This arrangement is particularly useful for
encouraging relaxed shopping and impulse purchases.

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Exhibit 19.3 - Examples of Grid and Free-
Form Store Layouts

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Exhibit 19.4 - Advantages and Disadvantages
of Grid and Free-Form Layouts

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In-Store Stimuli

Signs and price information

Benefit sign
Price-only sign
Color
Warm colors
Cool colors
Shelf space and displays
Normal display, expanded display, and special display

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In-Store Stimuli (cont.)

Music
The tempo of background music influences consumer
behavior
Scent
Scents vary in terms of how pleasant they are
perceived to be, how likely they are to evoke
physiological responses, and how strong they are.
Ambient scent can influence feelings about stores and
their products.
Neutral and pleasant scent categories can be diffused
in a store to influence consumers.

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Nonstore Consumer Behavior

Consumer purchase mode refers to the method

a consumer uses to shop and purchase from store
or nonstore alternatives.
Choices made among the various consumer
purchase modes are influenced by many factors.

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Catalog and Direct Mail Purchases

Have grown dramatically with the increase in

dual-income families and the general need for
consumers to save time.
Catalogs have some disadvantages for
consumers.
Catalog prices are higher and consumers have to pay
shipping charges.
Do not allow the consumer to experience the feel, fit,
or other sensory stimuli of a product directly.
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Catalog and Direct Mail Purchases (cont.)

Waiting time to receive merchandise.

Unsatisfactory product returned at consumer’s own
expense.

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Vending Machine Purchases

Provide merchandise in convenient locations and

are often available for purchases twenty-four
hours a day.
Product prices are typically higher.
Recovery of money may not be possible when
vending machines fail to deliver the merchandise.

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Television Home Shopping

Allows consumers to purchase conveniently from

their homes by telephone and can offer and
demonstrate products.
It also allows better visual display than catalogs.
Limitations:
Consumers must watch the channel when the
merchandise is offered.
Consumers must pay shipping charges
Less informative than experiencing products directly
in stores.
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Direct Sales Purchases

Salespeople can provide in-depth product usage

information.
Merchandise is often priced higher than similar
merchandise in stores.
Consumers’ must spend time watching the
demonstration and discussing products.
Pressure by overzealous salespeople to purchase
unneeded products.

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Electronic Exchanges

Involve consumers in collecting information,

shopping, and purchasing from Web sites.
Is the fastest growing purchase mode.

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Exhibit 19.5 - A Comparison of Six
Consumer Purchase Modes

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Electronic Commerce

The process by which buyers and sellers conduct

exchanges of information, money, and
merchandise by electronic means, primarily on
the Internet.
Electronic commerce often requires consumers to
seek out marketers by going to particular Web
sites.

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Consumer Strategies for Electronic and Store
Exchanges
Consumers can both shop and purchase
electronically, making a pure electronic exchange.
They can use the store-aided electronic exchange.
Consumers can collect information online and
then go to a brick-and-mortar store or dealer to
make a purchase.
They can shop and purchase in stores without
using the Internet at all.

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Exhibit 19.6 - Point-and-Click and Brick-and-
Mortar Consumer Strategies

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Consumer Electronic Exchanges and
Multichannel Marketing
The use of the Internet for collecting information
about products and brands and purchasing has
grown rapidly in recent years.
Many retailers now use a multichannel
distribution strategy which allows consumers to
purchase in stores, online, from catalogs and in
other ways.

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Channel Strategy

Different members of a distribution channel may

be primarily concerned with influencing different
consumer behaviors.
The starting point for designing effective
channels is an analysis of consumer-product
relationships.

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Exhibit 19.8 - Channel Design Criteria

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Commodity

The nature of the product or service offered to

the consumer.
Key consumer-related questions in considering
the nature of the product or service are:
What consequences or values the product or service
provides the target market?
How much time and effort target-market consumers
are willing to expend to shop for, locate, and purchase
the product?
How often target-market consumers purchase the
product?
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Conditions

The current state of and expected changes in the

economic, social, political, and legal
environments in which the firm operates.
This information is critical in channel design
because channels typically involve long-term
commitments by the firm that may be difficult to
change.

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Competition

The size, financial and marketing strengths, and

market share of a firm’s competitors are major
concerns in designing effective marketing
strategies.
For channel decisions, a key issue is how major
competitors distribute products and how their
distribution system influences consumers.

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Costs

Costs can be viewed as a constraint on the firm’s

ability to distribute products and services and to
serve and influence consumers.
Firms seek distribution systems that minimize
total distribution costs at a particular level of
customer service.

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Coverage

Seldom can every member of a selected target

market receive sufficient marketing coverage to
bring about an exchange.
Coverage refers to the number of outlets in a
particular geographic area in which the product
or service will be sold.

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Competence

Frequently overlooked criterion in designing

channels:
Firm’s competence to administer the channels.
Perform channel tasks at all levels to ensure effective
distribution to the consumer.

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Control

In general, there is greater control in direct

channels because no intermediaries are involved.
Franchised channels also involve greater control
than indirect channels because the franchiser
places strong contractual constraints on the
franchisee’s operations.

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Characteristics of Intermediaries

In addition to such factors as the size, financial

strength, and marketing skills of intermediaries,
consumer perceptions of intermediaries can be
crucial in channel strategy.
If no acceptable intermediaries are available, the
firm must market directly, encourage the
development of intermediaries, or forgo entering
a particular market.

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Summary

Channels of distribution have a very important

impact on consumer affect, cognition, and
behavior.
The two most critical store-related affect and
cognitions for channel strategy are store image
and store atmosphere.
The store-related behaviors, store contact and
store loyalty, are primary objectives of retail
channel strategy.

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Summary (cont.)

Store environment entails store location, store

layout, and in-store stimuli.
The six consumer purchase modes include stores,
catalogs/direct mail, vending machines, direct
sales, TV home shopping, and electronic
exchange.
It is the consumer and their relationships with
other criteria that determine appropriate channel
strategy.
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