Chapter 4

Customer Buying Behavior

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
The World of Retailing

Introduction to Retailing

Types of Retailers

Multi-Channel Retailing

Customer Buying Behavior

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Questions

■ How do customers decide which retailer to go to

and what merchandise to buy?
■ What social and personal factors affect customer
purchase decisions?
■ How can retailers get customers to visit their
stores more frequently, and buy more
merchandise during each visit?
■ Why and how do retailers group customers into
market segments?

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Illustration of Buying Process

Eva Carlyn, a student at the University

of Washing, is beginning to interview
for jobs. For the first interviews on
campus, Eva planned to wear the blue
suit her parents bought her three years
ago. But after looking at her suit, she
realizes that it’s not stylish, and it © Digital Vision

shows signs of wear. She wants to

make a strong first impression during
her interviews, so she decides to buy a
new suit.

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Illustration (Continued)

Eva surfs the Internet for tips on dressing for interviews (

www.collegegrad.com and www.jobsearch.about.com)
and looks through catalogs to see which styles are
offered. However, she decides to go to retail store to try
things on, and to have the suit in time for her first
interview next week. She usually shops at Abercrombie
& Fitch and American Eagle Outfitter, but neither sells
business suits. Before going to the mall, she goes to
BrandHabit.com, a site that enables her to examine and
compare the suits currently available at the mall. Armed
with a list of possibilities, she goes directly to the stores
that she reviewed on BrandHabit.com.

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Illustration (Continued)

She likes to shop with Britt,

but Britt is in Paris for the
semester. Since she values
Britt’s opinion, Eva shares
her shopping list with Britt on
Kaboodle.com.

© Ingram Publishing/AGE Fotostock

4-6
Illustration (Continued)

Evan wanders into Macy’s, as a

salesperson approaches her in the
career women’s department. After
asking her what type of suit she wants
and her size, the salesperson shows
her three suits. Eva photographs them
with her cell phone, and text
messages them to Britt in Paris. Britt
likes all three, so Eva tries them on
again. However, after messaging Britt © Bananastock/Punchstock

more photos, all three individuals

decide the 2nd suit is the most
appropriate for the interview.

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Illustration (Continued)

Eva is happy with the aesthetics of the

suit: its color, fit, fabric, and length.
Although, she is about the costs of dry
cleaning, and she realizes she’s spending
more money than she had planned. Then
Eva decides to buy it after another
customer in the store tells her she
appears very professional in the suit.
As the salesperson walks with Eva to the cash register,
they pass a display of scarves. The salesperson stops,
picks up a scarf, and demonstrates to her how well the
scarf complements the suit. As a result, Eva also decides
to buy the scarf.
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Stages in the Buying Process

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Types of Needs

■ Utilitarian Needs –satisfied

when purchases accomplish a
specific task. Shopping needs
to be easy, and effortless like
Sam’s or a grocery store.

■ Hedonic needs – satisfied

when purchases accomplish a
need for entertainment,
emotional, and recreational
experience as in department
stores or specialty stores.

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Hedonic Needs that Retailers can Satisfy

■ Stimulation
 Ex: Background music, visual displays, scents
■ Social experience
 Ex: Mixed-use developments, lifestyle centers
■ Learn new trends and fashions

Ex: The Body Shop – learn how can live an environmentally friendly lifestyle
■ Satisfy need for power and status
 Ex: Canyon Ranch – upscale health resorts
■ Self-rewards
 Ex: personalized makeovers
■ Adventure
 Treasure hunting for bargains

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Conflicting Needs

■ Ex: Eva’s hedonic needs (wearing a DKNY suit

to enhance self-image) conflict with her budget,
and her utilitarian need to get a job.
■ Customers make trade-offs between their
conflicting needs
■ Cross shopping

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Stimulating Need Recognition

Suggestions by Sales Associates

Advertising and Direct Mail
Visual Merchandise in store
Special Events in the Store
Signage
Displays
Free food sample
Stockbyte/Punchstock Images
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Information Search

■ Amount of Information Search Depends on the value

from searching versus the cost of searching
■ Factors Affecting Amount of Information Search
 Product Characteristics
• Complexity
• Cost
 Customer Characteristics
• Past experience
• Perceived risk
• Time pressure
 Market Characteristics
• Number of alternative brands

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Sources of Information

Internal
Past experiences
Memory

Digital Vision / Getty Images

External
Consumer reports
Advertising
Word of mouth

© Dynamic Graphics/Picture Quest

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How Can Retailers Limit the Information
Search?

■ Information from sales associates

■ Provide an assortment of services
■ Provide good assortments
■ Everyday low pricing
■ Credit

Royalty-Free/CORBIS

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Retailers encourage customers
to spend time

■ The more time customers spend shopping, the

more they will buy.
 Customers who spend 40 mins in a store are more
than twice as likely to buy than someone who spends
10 mins. Also, they typically buy 2x as many items.
■ Stores use food and personal service
 Talbots: attention of a sales associate, light snack
 City Furniture: Chocolate cookies
 Gymboree: television playing kids’ videos
■ Websites provide enjoyable experiences with
technologies

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Evaluation of Alternatives

■ Multiattribute attitude model:

 Customers see a retailer, product, or service as a
collection of attributes or characteristics
 Predict a customer’s evaluation of a retailer, product,
or service based on
• Its performance on relevant attributes
• the importance of those attributes to the customer

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Information about Retailers Selling
Groceries

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Information Used in Evaluating Retailers

4-20
Information Needed to Use Multi-Attribute
Model

■ Alternative Consumer Considering

■ Characteristic/Benefits Sought in Making Store
and Merchandise Choices
■ Ratings of Alternative Performance on Criteria
■ Importance of Criteria to Consumer

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Information Eva Used in Buying Suit

4-22
Information Needed to Use
Multi-Attribute Model

■ Alternative retailers consumers can consider

■ Characteristic/Benefits Sought in Making Store
and Merchandise Choices
■ Ratings of Alternative Performance on Criteria
■ Importance weights that consumers attach to
the merchandise

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 Getting into the Consideration Set

■ Consideration set: the set of

alternatives the customer
evaluates when making a
selection
■ Retailers develop programs
influencing top-of-mind
awareness
 Get exposure on search engines
like Google
 Try to be the top of the page
 More stores in the same area
(e.g., Starbucks)

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Methods for increasing the chance of store visit
after getting into the consideration set

■ Increase Performance Beliefs of Your Store

■ Decrease Performance Beliefs About
Competitor
■ Increase Importance Weight of Attributes on
which You Have an Advantage
■ Add a New Benefit on which You Excel

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Purchasing Merchandise or Services

Customers do not always purchase a brand with the

highest overall evaluation.

■ The high-rated item may not be

available in the store.

The McGraw-Hill Companies, Inc./Jill Braaten, photographer

■ How can a retailer increase the
chances that customers will
convert their merchandise
evaluations into purchases?

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Converting Merchandise or Services
Evaluations into Purchases
■ Measure: the number of abandoning
carts in stores and at websites

■ Methods to reduce it:

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

 Don’t stock out of popular merchandise
 Reduce waiting times at checkout
• Digital displays offering entertainment
(Disney)
• Apple stores – cell check-out
 Easy navigation and check-out at websites
(amazon.com)
 Offer liberal return policies, money back
guarantees, and refunds if same
merchandise is available at lower prices
from another retailer

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Postpurchase Evaluation

■ Satisfaction
 A post-consumption evaluation of how well a store or
product meets or exceeds customer expectations
■ Becomes part of the customer’s internal
information that affects future store and product
decisions
■ Builds store and brand loyalty

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Types of Purchase Decisions

■ Extended Problem Solving

-High financial or Social Risk

■ Limited Problem Solving

-Some Prior Buying Experience

■ Habitual Decision Making

-Store Brand, Loyalty

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Extended Problem Solving

Consumers devote time and effort analyzing alternatives

■ Financial risks –
purchasing expensive
products or services
■ Physical risks – purchases
that will affect consumer’s
health and safety
■ Social risks – consumers
will believe product will
affect how others view
them
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What Retailers Need to do for Customers Engaged in
Extended Problem Solving

Provide a Lot of Information

-Use Salespeople rather than advertising to
communicate
with customers

Reduce the Risks

-Offer Guarantees
-Return Privileges
© Royalty-Free/CORBIS

4-31
Limited Problem Solving

Purchase decisions process involving moderate

amount of effort and time

■ Customers engage in this when

they have had prior experience
with products or services
■ Customers rely more upon
personal knowledge
■ Majority of customer decisions (c) Brand X Pictures/PunchStock

involve limited problem solving

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What do Retailers Need to do for Customers
Engaged in Limited Problem Solving?

■ It depends…
■ If the Customer Is Coming to You, Provide a Positive
Experience and Create Loyalty
 Make Sure Customer is Satisfied

 Provide Good Service, Assortments, value

 Offer Rewards to Convert to Loyal Customer

■ If the Customer Goes to Your Competitor’s Store,

Change Behavior
 Offer More Convenient Locations, Better Service and

Assortments

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Encouraging Impulse Buying

■ Impulse buying: one common type of

limited problem solving
■ Influence by using prominent point-of-
purchase (POP) or point-of-sale (POS)
 Have Salespeople Suggest Add-ons
 Have Complementary Merchandise

PhotoLink/Getty Images
Displayed Near Product of Interest
 Use Signage in Aisle or Special Displays
 Put Merchandise Where Customers Are
Waiting

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Habitual Problem Solving

Purchase decision process involving little or no conscious effort

■ For purchases that aren’t important to

the consumer
■ For merchandise consumers have
purchased in the past
■ For consumers loyal to brands or a
store

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Customer Loyalty

■ Brand Loyalty
 Committed to a Specific
Brand
 Reluctant to Switch to a
Different Brand
 May Switch Retailers to Buy
Brand
■ Store Loyalty
 Committed to a Specific
Retailer
 Reluctant to Switch Retailers

4-36
What Retailers Need to do for Customers to
Engage in Habitual Decision Making

IT DEPENDS

■ If the customer habitually comes to you, reinforce behavior

 Make sure merchandise in stock

 Provide good service

 Offer rewards to loyal customer

■ If the customer goes to your competitor’s store, break the

habit
 Offer special promotions

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Social Factors
Influencing the Buying Decision Process

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Family Influences Buying Decisions

■ Purchases are for entire

family to use

■ Whole family participates in

decision making process

■ Retailers work to satisfy

needs of all family members

Kids in the U.S. spend over $200 billion on personal items. They directly
influence the purchase of another $300 billion worth of items such as food
and clothing.
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Reference Groups

A reference group is one or more people whom a person uses as a basis

of comparison for beliefs, feelings and behaviors.

Reference groups affect buying decisions by:

■ Offering information
■ Providing rewards for specific purchasing behaviors
■ Enhancing a consumer’s self-image

(c) image100/PunchStock

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Reference Groups

■ Eva…. looks to
 Soccer player Mia Hamm and tennis player Maria
Sharapova for the selection of athletic wear
 Jessica Simpson for casual fashion advice
■ Store advocates:
 Customers that like a store so much that they actively
share their positive experiences with friends and
family
 Victoria Secret
 Alpha Moms

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Culture

Culture is the meaning, beliefs, morals and values shared by most

members of a society
Western culture: individualism
Eastern culture: collectivism

Subcultures are
distinctive groups
of people within a
culture

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Criteria for Evaluating Market Segments

■ Actionable
■ Identifiable
■ Substantial
■ Reachable

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 Methods for Segmenting Retail Markets

Geo-demographic

Geographic Segmenting Markets Demographic

Lifestyle Benefits Buying situations

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Geo-demographic Segmentation
“Birds of a feather Flock Together”
PRIZM (Potential Rating Index by Zip Market – Claritas (www.Claritas.com)
ESRI Tapestry

Town and Gown Latino America

College Town Singles Hispanic Middle Class
Foreign Films (+) Boxing (+)
Dogs (-) Dance Music (+)
Sewing (-) Barbequing (-)
Coca Cola (+) Avocados (+)
Fast Food (+) Cosmopolitan (+)
Friends (+) Touched By an Angel (+)
Sports Illustrated (+)
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Distribution of Gray Collar Aging Couples Near
Suburbs

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VALS2 American Lifestyle Segments

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