Retail Shopper Behaviour

MBA
(DISTANCE MODE)
DBA DBA 1740 RETAIL BEHAVIOUR RETAIL SHOPPER BEHAVIOUR
IV SEMESTER COURSE MATERIAL
Centre for Distance Education

Anna University Chennai Chennai 600 025
Author Dr. K. Chitr a Dr. Chitra

Assistant Professor Department of Management Studies KCT, Business School, Kumarakuru College of Technology Coimbatore - 641 006
Reviewer Dr.H.Peeru .H.Peer Dr.H.P eer u Mohamed

Professor Department of Management Studies Anna University Chennai Chennai - 600 025
Editorial Board Dr.T.V.Geetha .T.V Dr.T.V.Geetha

Professor Department of Computer Science and Engineering Anna University Chennai Chennai - 600 025
Dr.H.Peeru .H.Peer Dr.H.P eer u Mohamed

Professor Department of Management Studies Anna University Chennai Chennai - 600 025
Dr.C Chellappan .C. Dr.C. Chella ppan

Dr.A.K .A.Kannan Dr.A.K annan

Copyrights Reserved (For Private Circulation only) ii
iii
ACKNOWLEDGEMENT
The author has drawn inputs from several sources for the preparation of this Course Material to meet the requirements of the syllabus. The author gracefully acknowledges the following sources: Retailing Management, Michael Levy & Barton A Weitz, Tata McGraw-Hill Publishing Company Limited, New Delhi. Consumer Behaviour, Leon G.Schiffman & Leslie Lazar Kanuk, Pearson Education, Delhi. Consumer Behaviour, David L Loudon & Albert J Della Bitta, Tata McGraw Hill Publishing Company Limited, New Delhi. Shopper, Buyer and Consumer Behaviour , Jay D Lindquist & M.Joseph Sirgy, Biztantra, New Delhi. Consumer Behaviour, Satish K Batra & S H H Kazmi, Excel Books, New Delhi. Consumer Behaviour, The Institute of Chartered Financial Analysts of India, Hyderabad. Customer Behavior: A Managerial Perspective, Jagdish N Sheth and Banwari Mittal, Thomson Asia Pte Lts, Sinagapore. Consumer Behaviour, J Paul Peter & Jerry C Olson, Mc Graw Hill, Singapore.
In addition to the above, the author wishes to acknowledge the contributions of the following Authors/ Websites / Journals / Magazines in the retail Management. Knowledge @ Wharton Tom Reeher Junxiang Lu Dale Zetocha Cheol park Roman Lenzen V.Kumar Sunil Gupta et.al Saharon Rosset et.al Nicolas Glady et.al Uta Werner
v
P.Ryan www.insight.kellogg.northwestern.edu www.hbswk.hbs.edu www.wikipedia.org/wiki/customer_life_time_value www.harvardbusinessonline.com www.indiafdiwatch.org www.kbm1.com Investment monitor January 2007 DLF- Trends and detail Ernst and young
In spite of at most care taken to prepare the list of references any omission in the list is only accidental and not purposeful. K.CHITRA Author
vi
DBA 1740 RETAIL SHOPPER BEHAVIOUR

UNIT I - INTRODUCTION Profile of Indian Retail and Retail shoppers Indian Retail shopping environment Changing trends in shopping behaviour Need and importance of the study of shopping behaviour. UNIT II- SHOPPING PROCESS Dimensions and approaches to retail shopping behaviour Pre shopping, shopping and post shopping behaviour Diffusion of innovations in retail context. UNIT III INTERNAL INFLUENCES ON SHOPPER BEHAVIOUR Personal attitude, perceptions, learning, personality, lifestyle and self-image. Inter personal Communications, persuasion, family, group, and stores employees. UNIT IV - EXTERNAL INFLUENCES ON SHOPPER BEHAVIOUR External store location, Shop atmospherics- social, cultural, cross cultural online retail shoppers behaviourTechnology influence on shopper behaviour. UNIT V - ADDITIONAL DIMENSIONS Customer Relationship Management - its impact on retail shoppers behaviour complaint management system lifetime value of retail shoppers Emerging issues. REFERENCES: 1. Leon G. Schiffman, Leslie Lazar Kanuk, Consumer Behaviour, Pearson Education, New Delhi, 2002. 2. David L.Loudon, Albert J Della Bitta, Consumer Behaviour, McGraw Hill, New Delhi 2002. 3. Jay D. Lindquist and M.Joseph sirgy, Shopper, buyer & consumer Behaviour, Theory and Marketing application, Biztantra Publication, New Delhi 2005. 4. Sheth Mittal, Consumer Behaviour A Managerial Perspective, Thomson Asia (P) Ltd., Singapore, 2003. 5. K.K.Srivastava, Consumer Behaviour in Indian Context, Goal Gotia Publishing Co, New Delhi 2002. 6. S.L. Gupta & Sumitra Pal, Consumer Behaviour an Indian Perspective, Sultan Chand, New Delhi 2001. 7. Ms.Raju, Dominique Xavedel, Consumer behaviour, Concepts Applications and Cases, Vikas publishing house (P) Ltd., New Delhi 2004. 8. Henry Assael, Consumer behaviour strategic approach Biztantra, New Delhi, 2005. 9. H.Peeru Mohamed, CRM A Step by Step Approach, Vikas publications, New Delhi, 2005.
vii
CONTENTS
UNIT I INTRODUCTION
1.1 1.2 1.3 1.4 1.5 1.6 1.7 INTRODUCTION LEARNING OBJECTIVES GLOBAL RETAIL TREND PROFILE OF INDIAN RETAIL SCENARIO CHANGING TRENDS IN THE INDIAN RETAIL SCENARIO PROFILE OF RETAIL SHOPPERS AND CHANGING TRENDS IN SHOPPING BEHAVIOUR NEED AND IMPORTANCE OF THE STUDY OF SHOPPING BEHAVIOUR 1.7.1 Importance to Retailers 1.7.2 Importance to Shoppers 1.7.3 Importance to Public Policy makers and regulators 1 1 1 4 9 14 20 23 25 25
UNIT II SHOPPING PROCESS

2.1 2.2 2.3 INTRODUCTION LEARNING OBJECTIVES DIMENSIONS AND APPROACHES TO RETAIL SHOPPING BEHAVIOUR 2.3.1 Traditional models 2.3.2 Contemporary models 2.3.3 Approaches to retail shopping behaviour PRESHOPPING, SHOPPING AND POST SHOPPING BEHAVIOUR 2.4.1 Stages in shopping decision process DIFFUSION OF INNOVATIONS IN RETAIL CONTEXT 2.5.1 Diffusion process 2.5.2 The Adoption process 2.5.3 Factors influencing adoption, resistance and diffusion 29 29 30 30 33 44 45 49 68 68 71 73
2.4
2.5
ix
UNIT III INTERNAL INFLUENCES ON SHOPPING BEHAVIOUR

3.1 3.2 3.3 INTRODUCTION LEARNING OBJECTIVES PERSONAL INFLUENCES 3.3.1 Attitude 3.3.2 Perceptions 3.3.3 Learning 3.3.4 Personality and self image 3.3.5 Lifestyle INTERPERSONAL 3.4.1 Communication and persuasion 3.4.2 Family 3.4.3 Group influences 3.4.4 Stores employees 77 77 78 78 89 94 97 105 108 108 114 118 121
3.4
UNIT IV EXTERNAL INFLUENCES ON SHOPPER BEHAVIOUR

4.1 4.2 4.3 INTRODUCTION LEARNING OBJECTIVES EXTERNAL INFLUENCES 4.3.1 Store location 4.3.2 Shop atmospherics 4.3.3 Social influences 4.3.4 Cultural and cross cultural influences ONLINE RETAIL SHOPPERS BEHAVIOUR TECHNOLOGY INFLUENCE ON SHOPPER BEHAVIOUR 125 126 126 126 129 136 141 150 163
4.4 4.5
UNIT V ADDITIONAL DIMENSIONS

5.1 5.2 5.3 5.4 5.5 INTRODUCTION LEARNING OBJECTIVES CUSTOMER RELATIONSHIP MANAGEMENT & RETAIL SHOPPERS BEHAVIOUR COMPLAINT MANAGEMENT SYSTEM LIFETIME VALUE OF RETAIL SHOPPERS EMERGING TRENDS 169 169 170 178 181
xi
RETAIL SHOPPER BEHAVIOUR
UNIT I
NOTES
INTRODUCTION
1.1 INTRODUCTION The Indian retail industry - a sun rise industry has registered a strong growth during the recent past, which is evidenced, in terms of volume, size of operations and style of functioning across the nation. A shift from traditional retailing to well organized retailing has been very much noticeable and that stands to testify the pattern of development in the retail industry in India. However in India, even now most of the retail business rely on unorganized retail business units each one is spread smaller in size catering to the needs of neighbourhood areas. The development of retail industry of India is in correspondence with the global trend of retailing. Against this background this unit provides a snapshot of global retail trend as a prelude for the understanding of Indian retail industry. The profile of Indian retail scenario and the changing trends is also explored along with the changing trends in the shopping behaviour. The need and importance of studying shopping behaviour is also highlighted. 1.2 LEARNING OBJECTIVES After reading this unit you will be able to understand The global retail trend Profile of the Indian retail sector and the changing trend Changing trend in the shopping behaviour Need and importance of understanding the shopping behaviour
1.3 GLOBAL RETAIL TREND A detailed discussion on the global trend in retailing was presented in the Course material Retail Management: Concepts and environment. As an additional input, a brief encapsulation of global trend in retailing is explained in this section as a prelude to further discussion. The retail organizations started moving across the boundaries that goes with the ideology expressed in the Dunnings electric theory. Dunnings electric theory is worth to be referred
1 ANNA UNIVERSITY CHENNAI
DBA 1740
NOTES
here. According to the theory the firm engage itself in the global retail operations mainly on account of three major factors ownership specific advantages, transactional advantage and locational advantages. Ownership advantages are related to firm specific advantages that emerges from proprietary know how, that can be utilized for competitive advantage in the global market. Such proprietary know how includes patents, trade marks, copy rights etc. that are legally protected. Transactional advantages include a firms ability to minimize cost of operations in the overall business system and thereby gain the competitive advantage. Locational advantages refer to such of those advantages that are derived from locating a retail unit in foreign market. This include, lesser labour cost, lesser market risk and wider market opportunity and so on. The global retail industry has registered almost 5% growth rate per annum. United states of America is the leading player in the retail industry accounting for about 35% of the global retailing business that is followed by countries such as Japan, Germany, China, United Kingdom, France, Italy, Spain, Canada, Mexico, India, Russia, South Korea, Brazil and Australia. The impact of retail can be witnessed in countries like USA, UK, Mexico, Thailand and more recently in China and India. Economics of countries like Singapore, Malaysia, Hong Kong, Sri Lanka, Dubai are heavily rely on retail. The following table presents largest retailers in the world.
Retail Organization Wal-mart Carrefour Home Depot Metro Royal Aholo Target Cost co whole sale Albert Tsons Aeon Walgreen
Revenue in million $ Appx. 287000 903800 730100 70160 64650 49300 48180 40050 38940 37508
The retail industry contributes to the global economy in terms of revenue as well as employment generation. The investments in global retail business has also witnessed remarkable growth. The retail organizations have spread their wings across boundaries and launched their outlets specially in developing nations. As a result global retail players are the providers of employment opportunities to people of developing nations. Such
global retail players includes Wal mart, Mc Donald, Carrefour, Target, Kroger, Home Depot, Sears Roebuck, Tesco, Metro, Subway and so on. The globalised retail operations has thrown brand new challenges to the local retailers. Until recently most active globalization of retailing was only with luxury and specialized items. Today the global retailing is centered around Food items, Fashion items, Jewellery, Leather goods, books, Furniture, Toys, electrical and electronic items, cloths, medical items and so on. As such, to be a winner in the global retail market a player is expected to be mass merchandiser coupled with the capability of category dominance and having the ability to launch own store brand. Players who operates in India have followed any one or combination of the following entry strategies viz. Exporting Licensing Franchasing Joint venture Self-start entry Acquisition
NOTES
Retailers with a fairly strong brand of their own might attempt to enter retail industry of other countries through export. This involves minimum risk at the same time the market share through export might also be minimum. Licensing on the other hand ensures the foreign retailers to use, another countrys retailers product, brand name, retail strategy and so on. Franchising yet another method of retail market entry in another country. This method involves permitting retailers of another country to carry on business as per specification of parent company. While the major control rest with the parent company the day to day operations shall be decided and dealt with home country retail operators. Fast Food retailers like Domino, Pizza Hutt have entered India through the Franchise route. Joint venture permits a retailer entering into joint agreement with a multinational retailer and both of them operators in one country as per the norms, terms and conditions so prescribed. Self start retail organizations are original build up in the way the foreign retail organization wants its existence in another country. May be started at a small level it will emerge as a big retail mall over a period of time. On the contrary thanks to the in flow of Foreign Direct Investments a very big size retail shops also possibly be established at the very beginning itself on the self start mode of operation.
ANNA UNIVERSITY CHENNAI
DBA 1740
NOTES
Acquisition is yet another form of entry in the retail industry. A retail organization having satisfied with the performance of another organization might attempt to acquire the same and run the retail business. This type of acquisition may be quiet common at the developing market. At times leading players may merge their operations with other retailers. Taking competitive advantage of both organizations a sizeable market share shall be enjoyed. Worlds Retail industry is controlled by a handful of powerful corporations mainly from US and western Europe. Retail Corporations, such as Wal-mart, TESCO, Carrefour and Metro are now entering into India. This has lead to Indian corporate giants such as Reliance, Tata and Birla to enter into the retail arena. 1.4 PROFILE OF INDIAN RETAIL SCENARIO The retail sector in India, is highly fragmented and organized retail is at its growth phase. There are about 15 million retail outlets spread across India. More than 80% of these are run by small family business. India possesses the largest density of small retail shops in the world, with 11 retail outlets for every 1000 people. This number is very high comparing with international average. Unorganized retail outlets account for approximately 97% and the rest 3% by organized retail outlets. However organized retail outlets have a plan to grasp 15 to 20% of total market share within 5 years with a gross investment ranging from $ 25 billion to $ 30 billion mainly in the food and grocery retail domain. In India organized retailing is projected to grow 20-30% per annum. In India the top six cities contribute 66% of the organized retailing. With Metros already been exploited the focus is now been shifted to tier-II cities. India in the yore has been famous for its traditional markets - bazaars and fairs. However the turn of this Millennium witnessed organized retail shopping malls in India. The number of malls are expected to grow to a very greater extent by 2010. Shopping streets (High streets) bazaars, Malls, Departmental store have become integral part of life. Prime shopping streets have been at the forefront of retailing Retailing becoming an indispensable part of consumers every day life. Large number of international brands have also lined up in India including Armani, Versace, Cartier, Marks and Spencer, Salvatore, Ferragamo, Canali, Mont Blanc, Ladro etc. Luxury retail market centred around Delhi, Kolkatta, Bangaluru, Mumbai, Chennai, Coimbatore, Ludhiana, Thiruvananthapuram, kochi, Pune, Ahamedabad, Surat and Hyderabad. The luxury market in India becoming bigger day by day. This avalanche of luxe brands easing their way into India. A luxuries buy is not just about purchasing a beautiful product also it is about understanding the power of its imagery and what it connotes
to the shopper. There is an easier acceptance of luxury and an increased willingness to experiment with main stream fashion. This results in an increased tendency towards disposiability and casting out from apparel to cars. Jimmy Choo and Gucci latest makers of luxury goods are targeting India. Luxury Hi-style brands like Hugoboss, Ferrari, Nina Ricci, Burberry, Davidoff, Nike, Adidas, Versace, Park avenue, Black berry (for apparels) Citizen, Casio, Tommy Hilfiger, Giordano (for watches). Evoluzione (For furniture) Rechance (Designer outfit) Soles (Shoe) Atmosphere (furnishing) Studio 100 (stylish bath room fitting) Wills life style (club wear) 02 (Health Studio) Sports locker (Sports accessories) etc. are focusing Indian retail markets.
NOTES
In India the corporate retailers have mega plan for expansion by 2009-10. A brief report runs as below: Reliance : Rs.30,000 cr ($ 6.67 bn) investment to set up multiple retail formats with expected sales of Rs.90,000 + cr ($20 bn) by 2009-10. The company plans thousands of stores across 784 cities and towns. Bharati Group : Plans Rs.31,500 cr (US$ 7 bn) investment in creating retail network in the country including 100 hypermalls and several hundred small stores. Pantaloon : Expansion into all possible formats of retail across categories and segments, 30 mn sq.ft by FY 2010, foray in insurance, real estate and consumer finance the turnover is expected to touch Rs.30,000 cr ($6.67 bn) in FY 2010-11. RPG : Planning IPO, 450 + Music World, 50 + Spencers Hyper covering 4 mn sq ft by 2010. Lifestyle : Rs.450 +cr($90 mn) investment in next 5 years to expand on Max Hypermarkets & value retail stores, Home & Lifestyle Centres. Rahejas: Shoppers Stop, Crossworld, Inorbit Mall, Home Stop and recently lunched hypermarket named Hypercity, 55 hypermarkets across India, by 2015. Subhiksha: 750 stores and Rs.650 + cr ($145 mn) sales by March 2007. Piramyd : 1.75 mn sq ft of retail space and 150 stores in next 5 years. Trent : Trent to open 27 more stores across its retail formats adding 1 mn sq ft of space in the next 12 DLF malls.
DBA 1740
NOTES
Trinethra : Recently acquired by the AV Birla group, Trinethra (currently with two formats Trinethra and Fabmall) plans 220 stores with a turnover of over Rs.300 cr ($667 mn) in the fiscal year 2007-08. Vishal Group : Plans include an IPO and investment close to Rs.1250 cr ($ 278 mn) by 2010, targeting 220 outlets, taking its cumulative retail space to 5 mn sq ft and sales turnover of Rs.5000 cr ($ 1 bn+). With 50 + new stores getting ready in the fiscal year 2007-8 the chain is investing Rs.300 cr (66.67 mn) with sales target of over Rs.700 cr ($ 155.6 mn). Vishal Retail is a retailer focused on the lower to-middle income group, with presence mainly in tier III locations.
The corporate retails are not without criticisms. India FDI Watch is attempting to build awareness and facilitate grassroot actions to prevent entry of corporations in the retail sector. It is claimed that thousands of small family run shops will go out of business in developing countries by virtue of corporate retails. According to A.T. Keareneys Global Retail Development Index India has been ranked as number one as regards retail market potential and attractiveness fueled by a GDP growth rate of an average of about 6% over the last two decades, second only to China, Indias market potential on retail front is so much promising. In terms of penetration by the organized retail sector, footwear is the highest category, followed by clothing. Footwear is driven by the dominance of home-grown players like Liberty as well as the 15% market share that MNC retailer Bata commands. Foreign presence, especially through the franchisee route, e.g. Adidas, Reebok, Nike etc. Franchisee activity in this category, especially in Tier II cities, is pegged to rise. The clothing segment is positioned for further organized retail penetration due to the high level of branding activities by apparel retailers and merchandising spread across formats such as department stores, hypermarkets, own retail outlets and franchises. The brands that dominates Indian retail fabrics levis, plant fashion, arrow, Lee, Reebok, John player, Peter England, Colour plus Zodiac, Louis Philippe, Wrangler, Excalibur Flying machine park avenue and the like Retail on Books & Music, which is still concentrated in the big 8 cities, is also slated for increase. The jewellery sector on the other hand will see increased competition, especially on price, as smaller retailers challenge the might of the larger ones. Growth in consumer durables has traditionally been driven by the post-liberalization era. Retail revenues in this segment will grow further in proportion with increase in urban incomes. The home furnishings segment has been relatively unorganized so far and growth will be driven by new formats introduced by innovative retailers. The medical care, health and beauty segments too require an innovative, aggressive approach on the part of Indian and international retailers to grow.
Indias retail giants, including Kishore Biyanis Future Group, Mukesh Ambanis Reliance Retail and Sunil Mittal-promoted Bharti group, have started negotiations with the railways for leasing land for retail development. The companies are also looking at an alliance by which they will use the railways network for their supply chain by carrying their products to different warehouses across the country. They had talks with Indian retail chains, which have shown interest in lending their land to set up retail outlets. Retail companies are also looking at tying up with the railways for setting up warehousing and a cold chain. The railways expect to earn about 4 per cent of their projected revenues next year from retail-related activities. With over 44,000 hectares of vacant land they want to commercially exploit, the railways set up the Rail Land Development Authority this year for this purpose. They have been looking at various options of using the land, including setting up retail outlets, hotels, a cold storage network and warehouses. After Reliance Industries, Tata, Bharti and the AV Birla group, the $ 3.2-billion Munjal family-promoted Hero group is all set to become the next big entrant in the Indian retail sector. Organized Retail trade is largely in the hands of private independent owners and distribution structure for fast moving consumer goods consisted of multiple layers such as carrying and forwarding agents, distributors, stockists, wholesalers and, retailers. The retailing system in India operated at three parallel levels: the formal sector, informal sector, and the fair price shops under the governments public distribution system. Indias retail sector is wearing new clothes and with a three-year compounded annual growth rate of 46.64 per cent, retail is the fastest growing sector in the Indian economy. Traditional markets are making 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 an unparalleled shopping experience. The study of the history of retailing business throws up the fact that in most economies organized retailing passes through four distinct phases in its evolution cycle. In the first phase, new entrants create awareness of modern formats and raise consumer expectations. During the second phase, consumers demand modern formats as the market develops, leading to strong growth. As the market matures, intense competition forces retailers to invest in back-end operating efficiency. In the final phase, retailers explore new markets as well as enormous opportunities as growth tapers off. Supply chain management (SCM) attains top priority in the third phase of evolution. Fierce competition forces retailers to respond quickly to changes in the market, bringing forth the importance of SCM in handling availability of stock, supplier relationships, valueadded services and cost cutting. Traditional retailers are expected to enhance their investments in supply chain, whilst new entrants are likely to look at supply chain first
7
NOTES
DBA 1740
NOTES
broadening their national reach. India is currently in the second phase of the retail evolution, with domestic customers becoming more demanding with their rising standard of living and changing lifestyles. Change in customers focus from just buying to broad shopping (buying, entrainment and experience) has led to a pick-up in momentum in organized formats of retailing. Unavailability of quality retail space has been one of the main constraints for development of organized formats in India. In the past, negative yield on leased property and lack of bank funding due to unorganized property market resulted in a dearth of quality retail space in the country. The spread between yield on property and its financing cost has turned positive with the fall in interest rates. Attractive yields on investments have resulted in a sharp increase in property development. With a cumulative estimated space of 40 million sq ft and over 600 malls by 2010, with as much as 100 million sq ft retail space. Pro-active steps taken by the government permitting use of land for commercial development in various cities, including Mumbai and Delhi, have also contributed to increased availability of retail space in the country. Availability of retail space is expected to increase further whenever property funds and investment trusts are permitted, which will help create a secondary market for real estate in the country. Consumerism and brand proliferation also enhanced organized retailing in the country. Most of the worlds leading brands, like LOreal Espirit Louis Vuitton Marks & Spencer Tommy Hilfiger Louis Phillipe Levis, Pepe Lee Arrow Dockers Red Tape Clairns Hugo Boss Tiffany Bulgari Ecco
Chambor Revlon Philips Corelle Magppie Nike Reebok Parker Ray Ban Lego and Mattel, are now present in India. Another factor that accelerated the growth of organized retailing is media proliferation. Increased advertisements and brand promotions have led to a growing consumer spending across a wide range of product categories. The remarkable extent of retail operations of MNCs in India are of recent origin. The dominant retail players have strongly set their foot in India. Entry by these retail organizations have given a shift for the retail operations in India. The very profile of the Indian retail and retail shoppers have changed to a greater extent which is captured in the following pages. 1.5 CHANGING TRENDS IN THE INDIAN RETAIL SCENARIO Indian retail organizations have made greater shift in terms of their formats, which is very much noticeable in the recent past. There has been remarkable changes in the retail format from traditional shops to ultramodern state-of-the art retail malls. In India while the traditional retail stores tends to survive the modern retail outlets tends to grow at a rapid speed as evidenced from the track records. The following are the major reasons for the growth of organized retailing Availability of lands at a comparatively cheaper rates Movement of people from rural to urban. The entry of MNC in the retail Industry Flow of Foreign Direct Investment Government of Indias liberalization policy Changing life style of people Shift in the consumer demand to foreign brands Influence of technology and media that had greater access to an domestic and foreign retail products
NOTES
DBA 1740
NOTES
Improved standard of living and similar factors are responsible for the organized retail outlet to grow in India.
The following retail formats are prominent in India as an date Traditional shops Discount shops Speciality shops Departmental stores Chain shops Shopping Malls Cooperative stores Speciality store Multi Brand outlets Hyper markets / super market Large super markets Convenient shops and so on.
Brief explanation to select formats of retail shops are presented below : Shopping 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, and Pantaloon. Specialty Stores : Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPGs Music World and the Times Groups music chain Planet M, are focusing on specific market segments and have established themselves strongly in their sectors. Discount Shops: As the name suggests, discount stores or factory outlets, offer discounts on the MRP through selling in bulk reaching economics 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. Hypermarts/Supermarkets: 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 into 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.ft 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 budy market places and Metros. The growth of shopping malls in the recent past in India specially in cities like Delhi, Mumbai, Kolkotta, Hyderabad, Kochi, Chennai, Thiruvananthapuram, Bangalore are very much remarkable. As India is rapidly moving into an exciting and competitive market place many more foreign players are in the pipeline with innovative products and retail marketing strategies. The volume of sales as well as value of by retail organizations have also increased to a greater extent. As the Indian retail industry is growing from the stage of infancy to the stage of consolidation, a significant share of volume as well as value of products sold is attainable by retailers. The organized retail outlets focus on variety of offerings including retail financial and other services. Retail banking in India is at great-boom Major Indian retail shops may be broadly classified, as below on the basis of products they offer. Food Health and Beauty Clothing Home furniture Durable goods Leisure and personal goods Financial services Life style products Cultural products Medical products Ethinic Products Jewellery Handicrafts Handlooms
11
NOTES
DBA 1740
NOTES
Footwear Skincare Perfumes Books Toys Games Leather goods Home appliances Accessories Electronics and the like
The retail organizations quite often suffer from the following threats viz. Threats of new entrants Bargaining power of suppliers Bargaining power of shoppers Threats of substitutes The intensity of rivalry
After the liberalization, privatization and globalization the retail industry is open up to private players and many MNCs started floating their operations in India. This trend pose severe threat to the local players. As such local retailers have to align all their activities, to win over the situation. Bargaining power of the suppliers have improved significantly. As such quality products are costing much more than what it was earlier. This is by virtue of the control of resources by the suppliers. This has lead for the introduction of private labels (store labels) and their by setting new trends, in almost all products available. The number of substitute available also has increased. A retail shop is expected to keep in stock all varieties of such products preferred by a prospective buyer leading to one shop buying for all requirements. The retail organizations are forced to face the intensity of rivalry leading to a compulsion of product differentiation, store image buildup and strategic group formation. There appears a strong need for differentiating the offerings by a retail organization and to build up the retail store image in a distinct way so as to create a positive mind set about the retail shop. To survive in the competitive environment and to withstand the rivalry pressure retail strategic groups are getting formed. These group consider similar target market with similar retail marketing approaches. The strategic group approach is an enabler to gain greater market share.
The retail organizations as an date focus on the following additional dimensions. The locational shift Location plays vital role as to attract and retain the shoppers. Most of the organized retail formats are located at the urban centres to gain the advantage of the urban atmosphere. Atmospherics Added to this the focus of the retail outlets are on the internal and external store atmospherics: It is found that internal atmospherics has a positive association with shopping behaviour of retail shoppers. The internal atmospherics include layout, lighting, music, directional sinage and so on. The external atmospherics include parking space store ambience and the like. The retail organizations have started focusing attention on store atmospherics to increase the foot fall of shoppers. Multiple services: The retail organizations have also started focusing attention on multiple services. This services are in addition to the core services offered by the retail outlets. For example a retail outlet for petrol offers many additional services to engage the retail customers. Such additional services include sale of stationery items, food items, auto repairings and the like. Customization: To a greater extent the retail shops are attempting to customize the services including service timing, service conditions charges for the services and so on according to the expectations of the target customers. Customer Pull: Retail organizations to a target extent are assuming the characteristics of customer pull organizations. This leads to customized service packages delivered through customized service channels together with customer desired supply chain management. In this process retail organizations are emerging as learning organizations, learning from customers, competitors, employees, and so on. Empowered employees: In addition the retail organizations have started empowering its employees to a greater extent. In this process the retail organizations share information at all levels setting its own vision and motivate employees to have relentless focus on retail shopper expectations. Such empowered retail employees shall energize the system and structure towards generating delighted customers.
NOTES
13
DBA 1740
NOTES
Shift in focus: The main thrust of retailers has drastically shifted from mere a service provider to provider of total shopping experience that is memorable and repeatable again and again. The challenges ahead of Indian retailing The following are the major challenges ahead of Indian retailing Barriers to Foreign Direct Investment, which leads to restrictions on the entry of global best players and thereby limited exposure to best practices. Government of India is yet to provide industry status to retailing that leads to restricted financial availability Lack of urbanization together with poor development in transportation and infrastructure. Increasing land cost that leads to difficulty in locational choice. Supply chain bottle necks resulting in constrains on distribution network Complex taxation system leading to differential taxation Multiple legistrations regarding licensing, and clearance practices Lack of availability of trained manpower on different aspects of retailing.
1.6 PROFILE OF RETAIL SHOPPERS AND CHANGING TRENDS IN SHOPPING BEHAVIOUR In India the retail market witness shoppers with changing profiles. A brief account of the profile of retail shoppers is presented in the following lines. Spread of sophisticated retail shoppers: Until recently shoppers at Tier : 1 cities such as Delhi, Mumbai, Bangaluru, Chennai clearly had an upper hand as regards product choice, sophisticated retail outlets, affluency income level and the like. Now such scenario have spread across the nation on a phased manner. This leads to wider spread of sophisticated shoppers. Demographics: The target shopper base for most retailer stands approximately 500 million and a snap shot of he demographic profile of the shoppers reveals the following facts. Twin income Most family have shoppers with twin income, that leads to increasing demand for items of their choice. By the way it has widened the retail market opportunity. More things to shop In tune with the above, while the husband and wife are earning partners, necessarily they have to balance with work life and domestic requirements. This leads to depend on retail outlets for foods, leisure time spendings, hospitality and the like.
Greater Disposable income There appears greater disposable income for the booming Indian middle class which is currently 22% of the total population which is expected to increase by 32% by 2010. Disposable incomes are expected to rise at an average of 8.5% per annum until 2015. Raise in Discretionary spending In India the discretionary spending has been a 16% rise for the urban upper and middle classes and the number of high income house hold has grown by 20% almost every year since 1995. Agewise distribution A sizeable number of population is less than 25 years and a strong growth in the number of shoppers expected in this age bracket Urban Shoppers The Indian urban population is projected to increase from the present 28% to 40% of the total population Credit friendliness Credit availability has enormously increased in the recent years that had made retail shoppers to shift from the traditional mind set of save and buy to buy and repay, credit friendliness, easy availability of finance have changed mindsets. Capital expenditure (jewellery, homes, cars) has shifted to becoming redefined as consumer revenue expenditure. No more sinking with sorrow, but floating with joy a finance provider address to retail shopper. Average Indian salary surged by 14%. The expense basket has shifted from necessity to life style products. Life style goods Preferences towards life style goods have increased. Graceful inflow of such life style products in the Indian retail market is the current attraction. Retail experience Shoppers have started enjoying organized retailing experience as much as attending a party, visiting a theme park and so on.Retail shopping especially after the emergence of Mall types of retailing formats attract shoppers not exclusively for shopping alone: for many shoppers, shopping has emerged as an entertainment. These shoppers consider shopping at big malls, shopping centres etc. as a days time out, at the same time getting exposed to brand new arrivals latest incentive schemes available, and so on. A minimum level of shopping is also likely to happen Retailers are making use of these category of foot fall, to window display their new arrivals and promote the sales by other means.
15
NOTES
DBA 1740
NOTES
Shift from price focus: There is an increasing shift from price consideration to design and quality, as there is a greater focus on looking and feeling good (apparel as well as fitness). At the same time, the new Indian shoppers are not beguiled by retailed products which are high on price but commensurately low on value or functionality. Self employed segments : The self-employed segment of the population has replaced the employed salaried segment as the mainstream market. 40% of primary wage earners in the top 2-3 social classes in towns with a population of 1 million or more are self employed, professionals and businessmen. This has driven growth in consumption of mobile phones and two and four-wheelers. Information rich: The shoppers are becoming information rich thanks to the exposure of media, such information richness enable greater awareness and induces variety seeking behaviour. Shoppers are well informed about all aspects connected with the retail marketing mix. Variety seeking behaviour: Todays retail shoppers exhibits variety seeking behaviour style. Becoming not satisfied with what they have purchased and in search of additional value for money they tend to search for varieties available in a product line, substitutes, brand new items, additional benefits offered and so on. This variety seeking behaviour appears to be one of the major challenges to the retailers of the present day to attract such variety seeking shoppers, a marketer has to struggle and has to convince the prospective shoppers that they provide every thing the shoppers looking for. As Reliance mobile claims for their Black Berry, that the product has hi-capacity battery, smart organizer, Blue tooth enables, SMS, Multimedia player, expandable memory, Data and voice across CDMA and GSM countries, Instant push e-mail, Hi-speed internet browsing, Track ball for easy navigation, digital voice clarity, voice activated dialing and so on. On the same line concord watches claims: What other watch has a 3.3 mm thick sapphire crystal? What other watch has 7 side screws for greater structural strength? What other watch has a distinct 3 level dial ? What other watch has a case made of 53 elements that, stands 16.7 mm tall? What other watch has a formula for the ultimate construction ? These examples show how the makers are struggling to retain variety seeking shoppers within their market fold.
Status consciousness Retail shoppers are becoming more and more status conscious. They are going in for products that suits to their own personal status, that too they choose such items from retail shops that corresponds to their personal status and style. Such status consciousness of the retail shoppers pose new challenges to the retail marketers. Asian tiles world claims, we make not just tile, its style goes in tune with the trend. Brand Consciousness In continuation of the above, shoppers are more and more brand conscious shoppers opting for select list of branded items. This is particularly so in the case of Textiles, Jewells, fashion items, food items, leather items, electronic items, home furnishing and so on. This attitude of retail shoppers have made the retail markets to be flooded with branded items irrespective of the product line. Liking for store brands To cater to the specific requirements of retail shoppers many retailers have started offering products of their own make that are generally terms as store brands or private labels. The tendency towards accepting store brands / private labels are on the increase, specially in grocery, food textile,and other fast moving consumer goods categories to cite few examples store brands available at shoppers stop, Globus, Pantaloon Food world, Nilgiris, Subhiksha, Reliance, and the like. Fond of atmospherics: Among other things, the retail shoppers are influenced by the store conditions that prevail within the shop. What so ever may be the decision of the shopper, before the walk in the retail shop the internal conditions that prevail within the shop has the potential to influence the shopping decision in terms of what brands are opted at what price. Ultimately it is leading to impulse buying also. The store condition includes the internal atmospherics such as a good painting, pleasant smell, comfortable layout, attractive window display, courtesy embedded services of the sales personnels, instant incentive schemes and so on. Gone are the days, the shoppers are simply satisfied with the brands as long as it meets the core functional needs associated with such brands. These days, shoppers expectation goes much beyond that, in search of total satisfaction that the shoppers aim to derive from every aspects connected with the purchase and usage of the brands. This includes the internal as well as external atmospherics of the retail outlets, service quality, pre, during and post purchase responsiveness of the retail outlets and other related aspects. All these become vital components of totality of satisfaction, which the retail shoppers seek in the present highly competitive retail environment.
NOTES
17
DBA 1740
NOTES
Fascinated by corporate retailing Retail shoppers are more and more fascinated towards corporate retailing. Retailing in style has attracted large number of shoppers who have hitherto satisfied with street corner shops. This is in view of manifold advantages a shopper might drive from out of corporate retail shops. Shoppers perceive that they get value for money, from out of latest brands together with services delivered in a state-of-the art surroundings. Investment orientation Investment orientation have also started dominating the mindset of shoppers. As such in anticipation of future benefits, shoppers started spending as jewels, financial products, insurance products etc. As such a new world of retailing has just opened its door. Avenue for socialization The culture of week end outing, party with friends and family members are on the increase. This trend look for retail outlets amenable to keep celebration mood stored with joyful entertainments, involving shopping and other related activities. Such shoppers wants access to retail outlets 24 hours a day 7 days per week. Customized products Shoppers today are more in favour of customized products and services. They express in clear terms what might suit to them the best. Retailers also fine tuning their products and services in alignment with that they listen from their customers, as Amway says we make better products in the whole new way: we use our ears Tech Savvy The tendency towards application of technology has been rapidly increased. Shoppers are becoming tech savvy and has emerged as on line shoppers. They navigate, collect information process the same and act online. This is specially in the case of shopping for gift items, books, electronics item, apparels, eatables, leather goods and so on. Fast track approach Shoppers are showing fast track approach when it comes to adoption of a new product. They adopt new products, new brands at a much faster rate than their counter parts have done a few years back. Brand and shop switchers In continuation of the above shoppers are fast as regards both brand switching as well as retail shop switching. Brand as well as retail shop switch over are also taking place at a much faster rate. This is in view of the availability of unlimitedly abundant choices both in respect of product as well as retail stores.
Organized shoppers Shoppers are becoming more and more organized shoppers. They are sure as to what to buy when, how, where and such decisions are taken in advance and implemented, the outcome is revisited and fine tuned for future purchase activities. Brand ambassadors Retail shoppers to day are the brand ambassadors, in the real sense. Both satisfied shoppers and dissatisfied shoppers convey their shopping experience and brand satisfaction in their own way to the prospective as well as existing shoppers. Better negotiators The retail shoppers have emerged as better negotiators as they are totally aware of the offerings in terms of quantity and quality offered by competing retailers. Also they are provided with multiple options at their door steps. Further the purchasing power has appreciated either with own money or with borrowed money. Retailers have to necessarily respond to the spirit increasing negotiation skill of retail shoppers. Time pressure The time pressure now the shoppers have are compelling them to do shopping for every thing under one roof shoppers are becoming one stop shoppers. This has resulted for the dawn of malls, hypermarkets and so on. Minimum level of tolerance The level of tolerance of retail shoppers is diminishing at a faster rate. Any defect associated in the overall service/product delivery system, however minimum it may be might leads to cause irritation at the maximum and result in ultimate shopper attrition. Getting them back to the shopper inventory is a tough and costly affair to the retail organization. Eco friendliness Yet another face, the retail shoppers project is eco friendliness. There is increasing awareness among the shoppers on green products. Shoppers started look for references of greenness of product. The trend to accept such green products is on the increase and many retailers are making this as their unique selling proposition to attract and sustain shoppers. Eg. Nokia green electronics, ITC papers and boards, Reva cars, Honda Hybrid cars, Dells recycling services. Dell takes back the product at the end of its life and recycle or dispose it using approved procedure. WeP peripherals started setting up ewaste bins across Bangaluru. That take care of collection and segregation of CDs floppy discs and dry cell batteries.
NOTES
19
DBA 1740
NOTES
Fascination towards foreign brands The fascination towards foreign brands, of late china products are on the increase among our retail shoppers. This may be because of our retail shoppers perception towards such foreign brands as superior brands. The image of global brands among local shoppers are a point of severe consideration while local brands competiting against global brands. Awareness of consumer rights Retail shoppers are becoming more and more knowledgeable as regards their rights granted within the legal framework. The rights are protected by consumer courts which are within easy access to retail shoppers. The changing profile of retail shoppers have been narrated in the above line. An understanding of this changing profile of retail shoppers would enable to arrive at meaningful retail marketing strategic decisions. 1.7 NEED AND IMPORTANCE OF THE STUDY OF SHOPPING BEHAVIOUR The study of shopping behaviour has manifold advantages to the retail strategists and all other stake holders connected with retailing. The following pages deal with the retail shopping model and the need and importance of an understanding of shopping behaviour. Retail shopping behaviour A basic conceptual model of retail shopping behaviour is presented below:
20
Internal and external influences
NOTES
Felt need
Information search and Analysis

In t e r n a l a n d e x t e r n a l i n f l u e n c e s What to buy (brand choice) Not to Buy Where to buy (store choice) When to buy In t e r n a l a n d e x t e r n a l i n f l u e n c e s At what price to buy To Buy With whom to buy How much to buy How to buy ( terms )
Decisions
Execution
Loyal to Store & Brand Loyal to Brand Only
Purchase made
Loyal to Store Only Non Loyal to Store & Brand
Purchase delayed Purchase denied
Search for Substitutes Abandonment Search for Substitutes
Internal and external influences
The model above reveals that once the need is felt of course that is the paramount important to ignite the shopping activity, the shopper proceed with search for information, processing and analyzing such information captured. The shopper might depend on media peer groups, family, integrated marketing communications, sales persons, on line access and so on for the purpose of gathering information. The gathered information shall be processed and analysed. This analysis would lead to take decision either not to buy the product under consideration or to buy the product. The decision of not to buy may leads to further information search and analysis. On the other hand, if the shopper has opted for a decision to buy, that in turn will leads to decide further on the associated issues of the purchase such as what brand to be purchased?
DBA 1740
NOTES
Which shop that is to be purchased ? When the purchase activity to carried out ? Preferably within what price range the brand should be purchased? With whom the shopper might make the purchase? In terms of volume, how much to purchase, is that purchase to be done on cash or credit basis? and similar associated decisions are to be arrived at. Once the decision is arrived the execution of the same take place. It is likely that there may be time gap between the decision and its execution, depending on the financial and other considerations involved in the purchase. The execution of the decision might take three possible routs viz actual purchase to be made delaying the purchase and denial of the execution of the idea of the purchase itself. The probable causes for delay as well as denial of execution of purchase decision might be that the shopper may be in search of additional values for the money or the felt need itself would have been filled in otherwise by other means or the need for fulfillment of the fact need has become ceased its very purpose. Delayed purchase will lead to search for substitute. Where as denial will lead to either abandonment or search for substitute. However, it is likely that as long as felt need present a shopper will attempt to go in for further information search and analysis. Once the shoppers have made the purchase the following outcome are possible. The shopper, in the event of satisfaction may turn to be a loyal shopper for both brand as well as to the store. Repeat purchase possibility is very much obvious in this case. As an alternative the shopper may prefer to have the brand alone and loyal to that but not to the shop as he may not be convinced either with the service delivery system or other aspects pertaining to the shop. Possibility is also there that, the shopper may like to continue shopping in the same shop but with different brands. It is quiet contrary to the previous conditions. Finally, one more likelihood is possible that the shopper say good bye to both the brand and the shop. This situation is likely when the shopper is in total disagreement with services offered in the shop as well as claims made by the brand concerned. All the above behivoural outcome are subject to the influence of both internal as well as external variables. Of course, a detailed discussion about those variables are presented in other sections. While the main thrust of this model is an the implementation aspects of retail shopping decisions and the related behaviour. Few other models, explaining the overall purchase decisions are dealt in other sections, which will enable to gain more insights on behavioural pattern. Need and Importance Shopping is an indispensable activity of any individual be it be out of necessity or for pleasure. Success of a retail store depends to a greater extent on its understanding the consumers. However this is the biggest challenge faced by consumer analyst and the retailers. The profitability of a retailer depends on his ability to attract shoppers, satisfy and retain them. Shoppers influence can be felt at both micro and micro level. At the micro level they determine the retail concerns profitability, share prices, acquisition and merger. At the
macro level they determine which nations are able to sell their goods to other nations for needed foreign currency and investment, jobs and prosperity of the nation as a whole. Knowledge regarding how people shop and consume the products enables the retailer to ascertain the type and volume of products to be stocked, the manner in which they have to be displayed so as to attract the shoppers to buy more products. Understanding shoppers will enable the retailer to design and develop strategies relating to products, prices, promotions and operations that will meet the needs of the shoppers. A retail concern can be successfully run by understanding the shoppers influence rather than attempting to influence the shoppers. This section deals with the discussion on the important of understanding the shopping behaviour from the perspective of retailers, consumers, public policy makers and regulators. 1.7.1 Importance to Retailers The study of shopping behaviour provides critical information to the retailers in developing marketing strategies and tactics. It provides information regarding the shoppers needs and wants and thereby enables the retailers to design appropriate strategies to attract and retain consumers. Ultimately the success of a retailer depends on knowing, serving and influencing the shoppers. Market segmentation Shoppers are not alike, their needs differ. Understanding and addressing the needs of different groups of shoppers would lead to increased consumer satisfaction. Retailer could segment the market based on the extent of price consciousness, importance attached to quality, variety seeking behaviour of shoppers, volume of purchases made etc. In & Out stores target on the segment of customers who are time conscious and look out for convenience goods. A retail store could operate different outlets based on the needs of different segment of customers. For eg Wal-Mart and Sams club. Studying the shopping behaviour would help the retailer to identify the underserved segments- those segments of shoppers whose needs are not met. Identifying the target market A retailer may not be able to serve all the needs of all the entire gamut of shoppers. This may be due to resource constraints or any other limitations. The retailer should review the market opportunities so as to identify the distinct group of shoppers whose wants and needs could be addressed profitably. Understanding the shopping behaviour would enable the retailers to determine the viable target market. Knowledge of shopping behaviour also helps the retailers to identify the individuals involved in preshopping, shopping and post shopping process which would enable to frame strategies to identify and attract the target market.
NOTES
23
DBA 1740
NOTES
Positioning Positioning enables a retail store to differentiate itself from that of the competitors. Effective positioning strategies should enable a consumer to attach the retail store with a certain image which reflects what the retail outlet is how it is different from that of the competitors. Positioning decisions play a critical role in ensuring the success of a retail organization. The retailer should understand whether the shopper will like the positioning strategy and how the same can be communicated clearly in a persuasive manner. Understanding the shoppers behaviour will enable an retail concern to arrive at attractive positioning/repositioning strategies acceptable by the consumers. Merchandising decision Understanding the shoppers behaviour would enable the retailer to make a number of decisions like the type of products, brands, depth and width of assortments , the SKUs and display, space management, POP displays etc. Retailers should also identify the fast moving and slow moving merchandise, the extent of satisfaction of the shoppers relating to the various aspects of merchandise dealt. Accordingly the retailer may modify the strategies to meet the shoppers expectations. Pricing decisions Among other things price of the merchandise offered is an important factor influencing the shoppers decision making. It is important for a retailer to understand how shoppers react to pricing decisions. The economic theory suggest that a decrease in the price could enhance the demand. However the reaction of the shoppers of price changes could be very complex. The shoppers could be price sensitive with respect to some category of merchandise whereas in other cases they may not be. Low prices could be perceived by shoppers as low quality at the same time they might be willing to pay more for a product symbolizing status. Understanding the shoppers behaviour is needed to get inputs for developing the pricing strategies. Decisions regarding retail format, location and layout The decision regarding retail stores format, location and layout can affect the footfall and conversion rate. Shoppers preference for location should be taken into consideration while setting up a retail store. knowledge on the shoppers behaviour would enable a retailer to arrive at a retail format that would suit the shoppers requirement. Dominos pizza addresses the needs of shoppers to stay at home by undertaking home delivery. The layout in a supermarket should be designed in manner that would enable the shoppers to easily find the products needed. Insight into shoppers behaviour also enables the retailer to develop the other aspects of retail environment. It is found through research that bright colours and loud, fast-paced music will make consumers move quickly through the store. Softer, more subdued colors and music will have the opposite effect.
Promotion decision Promotional decisions can often influence the shoppers decision to buy the product or service, the consumption and the disposition of the same. Knowledge on the shoppers behaviour would equip the retailers decisions regarding the promotional mix viz., advertising, personal selling, sales promotion and public relations. Retailers can influence the shoppers expectations using the promotional measures. If the expectations set are not meet, it will influence the shoppers level of satisfaction judgment. The promotions should be designed in such a way to influence the consumer attitudes in a positive manner. It is also used by retailer to influence the consumer memoires for retailer store name and the product attributes dealt by him. The use of color, language, body language etc., has different meaning in different culture. Their use in advertising, sales promotions and personal selling efforts may elicit different reactions and interpretations from different categories of shoppers which should be understood thoroughly before the designing and launching a promotional mix. Decisions regarding the customer service Retailers resort to customer service so as to differentiate themselves from that of the competitors. The decision regarding the customer service should take into account the needs of the shoppers, their expectations and the importance attached by them. The customer service model that is designed based on the shoppers inputs is more likely to satisfy them. Shoppers satisfaction resulting in Repeat visits Understanding the shopper beahaviour would enable to satisfy their expectations which will result in more shopping visits. Retaining an shopper will result in cost efficiency. This is because the cost of serving an existing customer is less than attracting a new customer. A new shopper would require more pre-sale and post-sale service than a continuing shopper. Also a retail concern cannot aim at satisfying all segments of shoppers. Identifying and selecting the right customers and retaining them will lead to more benefits. This requires a through understanding of the shopping behaviour which will enable the retailers to select right shoppers and build strategies to retain them. 1.7.2 Importance to Shoppers Understanding the shoppers behaviour can help to create a better environment for shoppers. It enables to create an ambience attractive to the shoppers. Knowing the preference, expectations and importance attached by shoppers would enable to create attractive product display, merchandise arrangements, layout, space planning of sign boards, advertisement, pull carts etc so as to enhance the shopping experience. 1.7.3 Importance to Public Policy makers and regulators The policy makers need to understand the consumer behaviour in order to make decisions regarding the laws to protect the shoppers from unfair, unsafe or inappropriate
25
NOTES
DBA 1740
NOTES
marketing practices. The shoppers should be protected from deceptive and misleading advertisement which requires an understanding of how, when and whether shoppers are deceived or misled by advertisements, sales promotional offer etc. To sum up, understanding shopper behaviour enables retailers to arrive at appropriate decisions on retail strategy formulation with specific reference to Retail format Attracting more shopper footfall Retaining shoppers Designing relationship strategy Logistics and supply chain adjustments Decisions on visual merchandising Designing integrated marketing communications Execution of shoppers response corporate social responsibility Venturing new offers Vertical as well as horizontal retail business expansion Employee empowerment on shoppers complaint handling etc.
A clear understanding of shopper behaviour will enable retail organization as a high performing organization most preferred by all its stake holders. In fact such an indepth understanding of shoppers behaviour will drive the retail organisation, a learning and pro active organization which will cater to all the requirements of the present as well as prospective shoppers on a fast tract mode. Customized retail marketing mix can be designed and executed based on the understanding of shoppers behaviour. Retailers can buildup their own competitive edge, drawing clue from the shoppers behavioural perspectives. Over a long run, a sustainable competitive advantage can be developed and maintained. The retail organization might turn around as a shopper driven organizations reengineering its scarce resources towards maximization of shoppers satisfaction. Satisfied shoppers are the real performing assets of the retail organizations. Shoppers extent of satisfaction will reflect on their behavioural pattern. Constant tracking and monitoring of shoppers satisfaction would lead to appropriate actions which in turn leads to profit maximization. Shoppers behaviour pattern analysis would provide insight into the specific behaviour of different segments of shoppers. Such insight would lead to design strategies appropriate to the specific shopper segment to improve upon their retail store patronage.
26
On the above lines and on similar lines an understanding of retail shoppers behaviour would provide, an inspiring, innovative and influential road map to retail organizations to march ahead of a sustainable and rewarding growth under the competitive environment. There arise the need and importance of the study of retail shopping behaviour. SUMMARY This unit has aimed at providing the basic framework to understand the retail shoppers behaviour. The chapter has started with an input into the global trend in retailing. This is followed by the discussion on the trend of retailing in Indian context. The changing trend in Indian retail scenario and the shoppers behaviour is presented in detail. A model of shoppers behaviour is also presented to provide the impetus needed for understanding the discussion presented in the following chapters. HAVE YOU UNDERSTOOD? Discuss the global trend in retailing. A MNC wants to start a retail concern dealing with apparels. As a marketing consultant you are asked to advice the company regarding the retailing trend in India. Explain the need and importance of understanding the shopper behaviour. What factors have contributed to the change in the Indian shoppers behaviour?
NOTES
27
DBA 1740
NOTES
28
UNIT II
NOTES
SHOPPING PROCESS
2.1 INTRODUCTION Understanding the shopper behaviour is the first step to frame effective retail strategies. In order to succeed in the business a retailer should attract and retain the existing shoppers. This requires an understanding regarding what makes a shopper to buy or not to buy a product? To visit or not to visit a retail store? Against this background this unit attempts to provide insight into the various dimensions and approaches to study the shopping behaviour. The shopping behaviour is considered to be synonymous with the consumer behaviour and the inputs are drawn from the insights provided by various authors regarding the consumer behaviour. A shopper undergoes a series of steps in evaluating the purchase of a product, and the retail outlet where the purchase is to be made. Understanding these stages would enable a retailer to frame strategies in order to place the products dealt by him and his retail outlet in the consideration set of a shopper. In this context the three stages involved in the shopping process viz., pre shopping , shopping and post shopping are explained. The term shopper in the ordinary parlance refers to anyone who is just looking around, he may end up only with collecting information and may or may not purchase any product or services. However in this book the term shopper refers to an individual who purchases for the purpose of individual or household consumption. In this context the shopping process involved by the individuals are explained. Innovations are needed for a retailer in order to differentiate himself from that of the competitor. In this context a detailed discussion the meaning of the term innovation as applicable to the retailer, product and shopper are explained in addition to the diffusion process. The categorization of shopper on the basis of adoption of innovation is explained along with an insight into the reasons for non adoption or resistance to innovation. 2.2 LEARNING OBJECTIVES After reading this unit you will be able to understand Various dimensions and approaches to the retail shopper behaviour
DBA 1740
NOTES
Stages in the shopping process Elements involved in the diffusion of innovation Adoption process of an innovation Reasons for adoption , resistance and diffusion
2.3 DIMENSIONS AND APPROACHES TO RETAIL SHOPPING BEHAVIOUR Shopping behavior refers to the decision process and physical activity individuals engage in when evaluating, acquiring, using or disposing of goods or services. A number of variable influences the shoppers choice of a retail store and the products/brands purchased. Many of these variables are internal and are not observable for eg the attitude. Some variables like the economic climate are external and can be observed. It is not possible to exactly measure the nature and relative strength of the influence of the variables. Against this setting the models provides necessary input to understand the shoppers behaviour. The models are derived from the consumer behaviour models. A model can be defined as a simplified representation of reality. For the purpose of simplification and avoiding complexity the models includes only certain aspects of relevance and interest and excludes aspects that are not relevant to the shoppers behaviour. Since shoppers behaviour involves decision process, the models that focus on the process are discussed. Some models depict only very specific aspect of the shopper behaviour for eg brand loyalty while other are comprehensive and include a great variety of shopper behaviour. 2.3.1 Traditional models The earliest models of shopping behaviour are devised by economist which focused on the allocation of scarce resources among the unlimited wants and needs. Two major disciplines viz., the micro and macro economics provide alternative views about the consumers. Microeconomic model Micro economic model focuses on the one aspects of the shoppers behaviour ie the act of purchase which is only a portion of the shoppers behaviour. Micro economists concentrated on explaining what consumers would purchase and in what quantities these purchase would be made. Knowledge on the tastes and preferences leading to purchase is assumed to have been acquired. Microeconomics does not provide input on why the shoppers develop various needs and preferences and how they rank the need and preferences. A number of assumptions are made on the following lines; The shoppers needs and wants are unlimited and thereby cannot be fully satisfied The shoppers have limited budget and they am to allocate the budget so as to maximize the satisfaction of wants and needs
30
The shoppers develop their own preferences without the influence of others and the preference is consistent over a period of time. The shoppers have an understanding of exactly how much satisfaction the product purchased can give them As the additional units of product or service are purchased the marginal ie., the additional satisfaction or utility provided by the next unit will be less than the marginal satisfaction or utility provided by the previously purchased units. Shoppers use price of the products as the sole measure of sacrifice involved in obtaining it and price plays no other role in the purchase decision. Shoppers are perfectly rational and they will always act in a deliberate manner to maximize their satisfaction.
NOTES
On the basis of above given assumptions economist argue that perfectly rational shoppers will always purchase the goods that provides the highest ration of additional benefit to the cost. The benefit/cost ration is expressed as a ratio of its marginal utility to price (MU/P). The shopper would seek to achieve a situation where the following expression holds for any number of goods; MU1 P1 MU2 P2 MU3 P3 MUn
= = = . =
Pn
If any one products ratio or choice of a retail store is greater than the others the shoppers can achieve greater satisfaction and will immediately purchase the same. Until the products MU/P ratio is equal to other ratios the consumer will purchase the product after which the additional purchase of the good will stop. The micro economic theory suffers from the following limitations; The assumptions are highly unrealistic and act as the major limitation. For example shoppers lack complete knowledge regarding the products and often influence each others preference. The choices made by them are influenced by many variables apart from price. Macroeconomic model also focuses on the specific act of purchase. Shoppers behaviour before and after the act is not taken into consideration. As such the model is not comprehensive. Macroeconomic view Macro economics focuses on the aggregate flows in the economy. It takes into account the monetary value of goods and resources, where they are directed and how they change over time. The shoppers behaviour is inferred from the economic flow as they are the ones who influence the flows. Though macro economic view does not offer a unified model it provides insights into the shoppers behaviour. For example The relativeincome and the permanent-income hypotheses.
DBA 1740
NOTES
The relative income hypothesis argues that peoples consumption standards are mainly influenced by their peers and social groups rather than their absolute income levels. The proportion of family income devoted to consumption is expected to change only when an income change places the family in a different social setting. Permanent income hypothesis explains why specific individuals do no change their consumption patterns even when their incomes suddenly change. The hypothesis proposes that consumers do not use actual income to determine the amount of their consumption expenditures but are influenced by their estimate of some average, long term amount that can be consumed without reducing their accumulated wealth. Sudden increase or decrease in income are viewed as temporary and therefore are expected to have little influence on consumption activity. Others variable suggested by macroeconomist as influencing the consumption patterns are previous income, experiences, accumulated liquid assets, variation in taxes etc. The stress is on economic variables however the influence of psychological factors are not considered. Katonas Behaviourial economics perspective The traditional economic theories focused on the economic behaviour of the shopper ie the supply, demand prices etc. Behaviourial economics focuses on the behaviour of the shoppers. George katona argued that the study of the influence of psychological variables would lead to a deeper understanding of the behaviour of economic agents. Katonas argument is now viewed as the behaviourial economics. His argument is presented below in a simplified manner;
Actual economic condition
Psychological process
Consumer sentiment
Economic behaviour
The illustration shows that as in traditional economic models the actual economic conditions are shown to influence the shoppers. This includes the interest rate, inflation, unemployment, level of the GNP, taxes, income and debt. These influences are however modulated by the psychological factors like the individuals level of motivation, knowledge, attitude, perception and the like. The consumer sentiment results from the psychological process which modifies the effect of actual economic condition. Consumer sentiment can be viewed as the consumers level of confidence about the current economic condition he faces and his expectations about the status of economic conditions in the future. This consumer sentiment play a major role in deciding the amount of discretionary spending at a given point of time. Katona argued that people in the economy share a similar view and
a result large number of consumers will hold back on the discretionary income if they foresee an economic slowdown leading to an economic downturn. This may happen even if the current economic conditions are quite acceptable. 2.3.2 Contemporary Models Contrary to the economic model the contemporary models focus on the decision process of the consumer. Ti place emphasize on the mental activity that occurs before, during and after purchases are made. The model is based on the material developed in the behavioral sciences. Most of the variables identified in the models are drawn from psychology and sociology. Most widely quoted models are presented below; Nicosia model Francesco Nicosia was one of the first consumer behaviour modeler to shift focus from the act of purchase itself to the more complex decision process that consumers engage in regarding the product and services. The model is a pioneering attempt to consolidate about consumers. The model is presented in a flowchart format. All the variables are viewed as interacting and no variable is viewed as inherently dependent or independent. The model describes a circular flow of influences where each component provides input to the next. The model contains four major components viz., 1. The firms attributes and outputs or communications and the consumers psychological attributes 2. The consumers search for and evaluation of the firms output and other available alternatives 3. The consumers motivated act of purchase and 4. The consumers storage or use of the product It is assumed that the consumer is seeking to fulfill specific goals and that the consumer does not have any prior experience with the firm so that no positive or negative predispositions towards the firm exist in the consumers mind.
NOTES
33
DBA 1740
NOTES
The diagram shows that the firm produces some type of communication that the consumer is exposed to. Attributes of the message and the consumer determine the nature of the consumers exposure to it and its influences on him. One positive consequence is that the message might influence the consumers attitudes towards the brand. This attitude is the input to field two. At this point the consumer might become motivated to gain information and search for the same. The search could be internal or external. Internal search refers to searching internal memory for relevant information whereas external search occurs when the consumer visits stores, reads journals/magazines etc. The search is likely to lead to evaluation. If the evaluation result is positive the consumer will be motivated towards a firms brand. If nothing intervenes the motivation will lead to shopping activity and purchase of the brand. After the purchase a number of outcomes may occur. The firm may receive a feed back and the consumers attitudes toward the brand may change because f the experience gained with the product usage. This experience is the feedback to the consumers predispositions.
As could be seen the model views the act of purchase as only one stage in the more important ongoing decision process of consumers. The model has contributed the funnel approach which views consumers as moving from general product knowledge toward specific brand knowledge and from a passive position to an active state which is motivated to a particular brand. The model however suffers from the following limitations; The computer like flow is sometimes restricting and numerous factors internal to consumers are not considered The assumption that the consumers begin without predisposition regarding the firm is also restricting. There is an overlap between the firm attributes and the consumer attributes in the model
NOTES
Howard-Sheth Model Howard-Sheth model is an integrating framework for a vary sophisticated comprehensive theory of consumer behaviour. The terms buyer is used in this model to refer to both the industrial and the ultimate consumers thus attempting to develop an unified theory useful for understanding a great variety of behaviours. The model depicts the rational brand choice behaviour of buyers under condition of incomplete information and limited abilities. The model depicts three levels of decision making; 1. Extensive problem solving: early stages of decision making in which the buyer has little information about brands has not developed well defined and structured criteria by which to choose among products 2. Limited problem solving: In this more advanced stage choice criteria are well defined but the buyer is still undecided about which set of brand will best serve him. The consumer experiences uncertainty about which brand is best 3. Routinized response beahviour: Buyers have well-defined choice criteria and also have strong predisposition towards one brand. Little confusion exits in the consumers mind and he is ready to purchase a brand with little evaluation of alternative
35
DBA 1740
NOTES
36
The model involves four major components which are explained below; 1. Input variables The input variables act as the stimuli which may be of two kinds. Significance stimuli are actual elements of brand that are confronted by the buyer viz., quality, price distinctiveness, availability and service. Symbolic stimuli also involve the above attributes. They are generated by producers representing their products in symbolic form such as in advertisements. Social stimuli are generated by the social environment including family and groups. 2. Output variables The output variables include the buyers observable responses to stimulus inputs. The following are the five output variables arranged in order from attention to actual purchase. Attention the magnitude of the buyers information intake Comprehension the buyers store of information about a brand Attitude the buyers evaluation of a particular brands potential to satisfy his motives Intention the buyers forecast of the brand to be purchased Purchase behaviour the actual purchase which reflects the buyers predisposition to buy as modified by any inhibitors. 3. Hypothetical constructs A number of intervening variables are proposed represented by hypothetical constructs. The constructs can be categorized into two major groups viz., perceptual constructs dealing with information processing and learning constructs dealing with the buyers formation of concepts. The three perceptual constructs are explained below; i. Sensitivity to information ie the degree to which the buyer regulates the stimulus information flow. ii. Perceptual bias distorting or altering information iii. Search for information active seeking of information about brands or their Characteristics The six learning constructs are defined as i. Motive general or specific goals impelling action ii. Brand potential of the evoked set the buyers perception of the ability of the brands in the evoked set to satisfy his goals iii. Decision mediators the buyers mental rules for matching and ranking purchase alternatives according to his motives. iv. Predisposition preference towards brands in the evoked set expressed as an attitude toward them. v. Inhibitors price, time pressure and other environmental forces which restrain purchases of a preferred brand. vi. Satisfaction the degree to which consequences of a purchase measure up to the buyers expectations for it.
37
NOTES
DBA 1740
NOTES
4. Exogenous variables Exogenous variables refer to a number of external variables that can significantly influence the buyers decisions. It includes the personality, social class, culture and other variables. These variables are not as well defined as other aspects of the model because they are external to the buyer. The process starts when the buyer confronts an input stimulus. The stimulus is subjected to perceptual bias as a result of the influence of the buyer predispositions as affected by motives, decision mediators and evoked set. The modified information will also influence the variables which in turn will influence the predisposition to purchase. The actual purchase is influenced by the buyers intentions and inhibitors. A purchase leads to the evaluation of level of satisfaction which in turn increases the buyers predisposition towards the brand. As the buyer acquires more information about brands, less external search for information is made leading to more routine purchase behaviour. The model makes a significant contribution to the understanding of the consumer behaviour. It identifies many of the variables influencing the consumers and explains how they interact with each other. Also the model depicts the different types of consumer problem seeking and information search behaviour. It has also highlighted that the outcome of consumers decision other than just purchases. The model however suffers from the following drawbacks; The model does not make a sharp distinction between exogenous and other variables. Some of the variables are not well defined and are difficult to measure. The model has limited generality for example ti is not useful in explaining joint decision making between family members or other members of an organization. The model is quite complex and difficult to understand for a novice.
Engel-Blackwell-Miniard Model The model is originally developed by Engel, Kollat and Blackwell in 1968. Subsequently it has undergone many revisions including the contribution of Miniard and it stands as the most popular representations of consumer behaviour. The decision process is viewed to consist five activities which occurs over a period of time. 1. 2. 3. 4. 5. Motivation and need recognition Search for information Alternative evaluation Purchase and Outcomes
The model groups variables into four general categories viz., stimulus inputs, information processing, decision process and variables influencing the decision process.
38
NOTES
39
DBA 1740
NOTES
Similar to the Howard-Sheth model consumers are recognized to undergo two distinct modes of operation viz., Extended problem solving(EPS) and Limited Problem solving situations(LPS). EPS is characterized by high levels of involvement and/or high levels of perceived risk. The product evaluation process is expected to be regress and consumer may shop at different outlet. Satisfaction with the brand is crucial for continued commitment with the same brand. In limited problem solving situations the consumer operates under low level of involvement and /or low levels of perceived risk. This results in low motivational search for brand information and non rigorous evaluation of alternatives. The consumer may not be motivated to shop at many outlets and satisfaction with the product will encourage repurchase because of disinterest and not due to real loyalty towards the product/brand. The basic model depicted in the diagram characterizes both EPS and LPS situations. However the degree to which various stages will be used by consumers will be different with the different situations. In the case of extended problem solving situation the model is activated with the recognition of need by the consumer. The need could be recognized from three possible influences viz., information stored in the memory, environmental influences and individual characteristics such as the level of involvement of the consumer. In the need recognition stage the consumer becomes aware of the disparity between the present state and his concept of the ideal state- the state at which he would like to be. In the information processing stage, the consumer involves himself in both in internal and external search. Internal memory is searched by consumer to determine the extent of information known about the alternatives and how to choose among them. If the knowledge level is not adequate the consumer will indulge in external search. The extent of search will also depend on various other aspects like the extent of risk which the consumer is willing to undertake. In the case of a low risk taker, the consumer will tend to seek more information. Apart from these aspects information search is also influenced by the environmental influences such as urgency of need. The information accumulated will be subjected to processing in a five step. The first step involves exposure to stimuli which may involuntary or through active mode. The stimuli must capture the consumer attention so as to significantly influence extensive problem solving. The attention stage is highly selective as the individual pays importance to only most important aspects he believes in. The comprehension stage involves deriving meaning from information and holding the same in short term memory so that it can be retained to allow further processing. The next two stages viz acceptance and retention relates to the third stage in decision process viz alternative evaluation. Alternative evaluation stage involves comparing information about alternative brands gained through search process to the information regarding the standards stored in the permanent memory. Acceptance occurs when information is compared to the evaluative criteria and as a result the existing belief in memory is either reinforced or changed. Reinforcement or change depends on the degree to which the consumer generates supportive
or negative thoughts about the information received. Acceptance leads to retention of information and lack of acceptance result in loss of information. The alternative evaluation process leads to an intention to make the purchase of the most favourably evaluated brand. Unless situations like lack of finance etc arises, intention will lead to actual purchase. Evaluation of the product continues in the usage stage also where the performance of the product is matched with the expectations. If the performance does not meet the expectations it results in dissatisfaction. In limited problem solving situation the consumer is not highly involved and he may not go through the all the stages. Need recognition may often arise when the consumer has ran out of the product. External search may be minimal. Alternatives are often evaluated by determining whether they meet some minimal level of acceptability and purchase is made with minimal deliberation. If the brand meets expectation repurchase may arise but brand loyalty is not likely due to lack of involvement. The Engel-Blackwell Miniard model include many variables influencing consumer with a specific focus on the levels of consumer involvement and emphasis on the decision making process regarding purchases. The model however suffers from the following limitations. The role of some variables is not clearly indicated. For example the influence of environmental variables is noted but their role in affecting behaviour is not well specified. The role of motives in influencing behavior is also not well defined The model is also criticized for being somewhat mechanistic in its treatment of decision process.
NOTES
Schiffman and Kanuk explain the models of consumers in terms of the following four view viz., economic view, passive view, cognitive view and emotional view. An Economic view In theoretical economics where perfect competition is assumed, the consumer is often characterized as making rational decisions. This model is popularly known as economic man theory. The model has been criticized for a number of reasons. To make rational decision a consumer has to be aware of all available product alternatives, should be capable of ranking each alternative in terms of its benefits and disadvantages and should be able to identify the best alternative. However in real time consumers rarely have all information or sufficiently accurate information to make the perfect decision. The economic model of all rational consumers is unrealistic due to the following reasons. People are limited by their existing skills, habits and reflexes People are limited by their existing values and goals and People are limited by the extent of their knowledge
DBA 1740
NOTES
In the realistic situation consumers are generally unwilling to engage in extensive decision making activities. They settle for a satisfactory; decision instead of maximizing their decisions in terms of economic considerations such as price-quantity relationship etc. Due to this reason the economic model is often rejected as too idealistic and simplistic. A Passive View Passive view depicts consumers as basically submissive to the interests and promotional efforts of the marketers. The consumers are perceived as impulsive and irrational purchasers. The passive model suffers from the limitations of failing to recognize the role of consumers. Consumers often play an equal role in many buying situations. They play their role either by seeking information about product alternatives or by selecting the product of their interest or by indulging in impulse buying to satisfy their mood or emotion. The consumers their own motivation, perception, attitude etc and as such they cannot be easily manipulated. A cognitive view The cognitive view describes consumers who fall between the extremes of the economic and passive views. The consumers do not have total knowledge about the product alternatives and therefore cannot make perfect decisions, but they actively seek information and attempt to make satisfactory decisions. In cognitive model consumers are viewed as information processors. Information processing enables formation of preferences which ultimately lead to purchase intention. The cognitive view recognizes the fact that the consumer is unlikely to attempt to obtain all information about the choices under consideration. They may stop the information collection when they perceive that they have sufficient information about the alternatives to make a satisfactory decision. This information processing viewpoint suggests that the consumers often develop shortcut decision rules called heuristics to facilitate the decision making process. They also use decision rules to cope with the exposure of too much of information ie information overload. An emotional view Emotion view takes into account the feelings or emotions such as joy, fear, love, hope, fantansy etc., which is associated with certain purchases. Purchases of consumers may at be made on impulse instead of careful search, deliberation and evaluation of alternatives. Such purchases are usually emotionally driven. In case of emotional purchase less importance is given to search of pre purchase information. More emphasize is given to the mood and feelings. Mood is defined as a feeling state or state of mind. Emotion is a response to a particular environment whereas mood is a pre existing state, already present at the time the consumer view an advertisement or enters a retail environment. Mood plays an important role in consumer decision making as it impacts on whether shopping will be done , when and where it will be done, whether the shopping will be done alone or with other etc. Mood also influences how the consumer responds to actual shopping environment
for example point of purchase display etc. The retailers attempt to create a mood for shoppers so as to encourage them to spend more time in the shop. Consumers in a positive mood will be able to recall more information about a product than those are in a negative mood Simple model of consumer behaviour Henry Assael suggests a simple model of consumer behaviour place emphasize on the interaction between the marketer and consumer. Consumer decision making is the central component of the model. The decision making process involves perceiving and evaluating brand information, brand alternatives and decision making. The model is depicted below;
Feedback to consumer
NOTES
The individual consumer Consumer decision making Consumer response
Environmental influences
Feedback to environment
The consumers choice is influenced by the environment and the consumer himself. The individual consumers needs, perceptions regarding the brand characteristics and attitudes towards alternatives influences the choice. In addition to this the consumers demographics, culture, lifestyle and personality characteristics also play a major role in decision making. The second influence on consumer behaviour viz environment is represented by culture, subculture, friends, family members and reference groups. Marketing organizations are also a part of the environment as they provide the product or services to satisfy the consumer needs. Once the purchase decision is made and executed, post purchase evaluation happens and it acts as the feed back to the individual consumer. The consumer will learn from experience and may change the process of acquiring information, evaluating brands and selection of a brand. The experience will directly influence the consumers future behaviour.
DBA 1740
NOTES
Feedback is also provided to the environment by way of communication regarding the purchase to friends and families. Input mat also be provided to Marketers who seek information from the consumers so as to arrive at better marketing strategies to satisfy consumers needs. 2.3.3 Approaches to Retail Shopping behaviour: Shopper behaviour can be approached from two perspectives viz., managerial and holistic view. Managerial approach view Shopper behaviour as an applied science. It is studied as adjunct to and as a basis for developing marketing strategies. Holistic approach views shoppers behaviour as a pure rather than applied social science. Shoppers behaviour is treated as legitimate focus of inquiry in itself with necessarily being applied to marketing. Managerial Approach: Managerial approach is more micro and cognitive in nature. It is micro in emphasizing the individual shopper, his or her attitudes, perceptions, lifestyle and demographic characteristics. Environmental influences viz., the reference groups, family, culture etc are studied in the context of how they influence the individual shopper. It is cognitive in the sense that emphasize is placed on the thought process of individual shopper and the factor influencing their decisions. The managerial approach provided inputs to the marketing strategies to fulfill the goal of satisfying the needs of the individual shoppers in a socially responsible manner. Information is collected on the consumer needs ie the desired product benefits, thought process ie attitudes and perceptions, and characteristics ie lifestyle and demographics. This information is aggregated to define segments of shoppers who can be targeted with the marketers offerings. The risk involved in taking a too rigid a managerial perspective is ; It might overemphasize the rationality of shoppers. The search for information and processing of the same may not be done in a systematic manner as perceived especially in the case of product purchased for their symbolic value on impulse and on addictive basis. Following a strict cognitive approach may not reveal the underlying nature of consumers decision. The dynamics of the environmental factors which are independent of the individual may be overlooked. The managerial approach tends to focus more on purchase rather than the consumption. The inputs regarding consumption patterns and consumption experience would lead to arrive at successful marketing strategies.
Holistic Approach A holistic approach is macro in its focus. The emphasis is place on the nature of consumption experience rather than on the purchasing process. Consumption is viewed as symbolic as well as functional, antisocial as well as social, and idiosyncratic as well as
normative. Purchase behaviour is viewed as of little inherent interest outside its impact of the consumption experience. It is studied in the context of shopping rather than decision making as shopping is more culturally derived. The managerial orientation is more focused in predicting what the shopper might do in the future, whereas the holistic approach is more interested in understanding the environmental context of the shoppers actions. The holistic approach has the following drawbacks Findings regarding the culturally derived meaning of consumer actions and consumption experiences may not be actionable from the marketers perspective. Sufficient emphasize is not given to the purchase decisions. It is imperative for marketers to understand how consumers reach decisions so as to influence them. Though many consumer decisions are not arrived through systematic processing, understanding the cognitive process is necessary so as to meet the consumer needs.
NOTES
2.4 PRESHOPPING, SHOPPING AND POST SHOPPING BEHAVIOUR Shoppers today are faced with myriad of decision options. The options if filtered, will lead to five main type of decision ie., what to buy, how much to buy, where to buy, when to buy and how to buy. Decision regard what to buy is the basic and fundamental task for the entire shopping process. The decision involves not only the generic category of product desired, but more specifically a narrow range of item and sometimes the shopper even makes the decision regarding the brand to be purchased. With this decision the shopper completes the overall shopping decision process. The second basis decision deals with how much of each item to be purchased. This will lead to the decision regarding the quantity to be purchased. The decision regarding where the selected product or services will be purchased will be the next step. The shoppers do not perceive all retail outlets as the same. The shopper must decide not only on the type of retail store but also the particular retail outlet from where the purchases are to be made. The product and outlet choice is usually made together. The decision sequence differs from one product to other product and also within products it varies form one individual to other. The decision regarding when to buy is influenced by factors as urgency of need , availability of the product to be purchased, retail stores operating time, availability of finance, period of sales and clearances etc. The decision of how to buy is also influenced by various factors. The consumer may shop extensively or buy from the first outlet. Traditionally shoppers decision making have been approached by researchers from a rational perspective. The process is expected to involve clearly recognized problem, leading to careful evaluation of attributes, and choice of product and brand that would deliver the maximum satisfaction at the lowest cost. Richard W Olshavsky and Donald H Granbois note that such a process is not accurate portrayal of many purchase decisions. If shoppers were to follow this deliberate process their entire lives would be spent in making such decisions, allowing them little or no time to enjoy the things they actually buy. Some
DBA 1740
NOTES
decisions are made by shoppers in the rational manner but many others are performed with little conscious effort and shoppers seem to make snap decisions based on very little information. The amount of efforts put on purchase decision also differs based on the importance attached. Shoppers decision is many a time focused on the feelings and emotions associated with acquiring or using the brand or with the environment in which it is purchased or used rather than its attributes. There are various types of shoppers decision process. It can be viewed as a continuum ranging from low involvement to high level involvement. Based on the amount of effort that goes into decision making, the decision making process can be grouped on one end as habitual purchase decision making or nominal decision making and at the other extreme is extended decision making. Many decisions fall in middle and are characterized as limited decision making. The types of decision process are not distinct but rather blend into each other. The decision process in each of this situations is depicted below; Nominal decision making.
Low involvement purchase Nominal decision making
Problem recognition (Selective )
High involvement purchase Limited decision making

Problem recognition (generic )
Extended decision making

Problem recognition (generic )
Information search (limited, internal)
Information search (internal, limited externa)l ernal Evaluation of alternatives
Information search (internal, external )
Evaluation of alternatives
Product choice and purchase
Post purchase action, No dissonance , very limited evaluation
Post purchase action, No dissonance, limited evaluation
Post purchase action, Dissonance, Complex evaluation
46
Purchase involvement refers to the level of concern for or interest in the purchase process. The involvement of a shopper can take many forms such that it can be cognitive or emotional. There are several broad types of involvement related to the product, the message, or the perceiver. Product involvement refers to a shoppers level of interest in a certain product. Marketers use many sales promotions to increase consumer involvement in the product Advertising involvement refers to the shoppers interest in processing the advertisement messages. Television is generally viewed as low involvement medium and shoppers process information in a passive manner. On the other hand, print media is a high involvement medium as the reader actively process information. Purchase situation involvement occurs while buying the same item in different contexts.
High
NOTES
Level of inolvement
Low Nominal Limited Extended
Types of decision making
Nominal decision making Nominal decision making is also referred as nominal problem solving, habitual decision making or routine problem solving. In this type of decision making recognition of need is likely to lead directly to an intention to buy. Information processing is very limited or non existent. It usually involves low involvement, low priced and frequently purchased products which are consumed on an ongoing basis. As soon as the problem is recognized, shoppers internal search from long-term memory leads to the preferred brand and no brand evaluation occurs unless the brand fails to perform as expected. Some decisions are so nominal that the shoppers do not think of even the alternative brand. Nominal decision making is generally the outcome of continued satisfaction with a brand which was initially chosen after an
DBA 1740
NOTES
extended decision making process or the shopper does not attach much importance to the purchase activity. The choices characterized by automatic behaviour are made with minimal effort and without conscious control. The development of such routinized, habitual or repetitive behaviour helps shoppers to minimize the time and effort devoted to mundane purchase activities. For example the purchase of salt, sugar etc for household consumption. Limited Decision making Limited decision making is usually more straightforward and simple. It involves internal and limited external search, consideration of just few alternatives, simple decision rules on a few attributes and little post purchase evaluation. It lies between routinized and extended decision making. Shoppers are not very much motivated to search for information or evaluate each attribute enthusiastically, but use cognitive shortcuts. When the level of involvement is lowest, limited decision making may not be much different than the routinised decision making. Sometimes emotional factors may influence limited decision making. Extended decision making Shoppers involved in extended decision making situation resemble to the traditional decision making perspective. Such decision involve extensive internal and external search for information followed by rigorous evaluation of several alternatives as the shopper does not possess much information about the product or service considered. The evaluation often involves careful consideration of attributes of one brand at a time so as to identify how much each brand measure up to a set of desirable attributes. A shopper may be involved in such complex decision process in case of purchase of computer, cars, washing machine, house et., Post purchase is more likely to be complex involving dissonance behaviour. The difference in the shoppers decision making process is highlighted below;
Nominal decision making Limited decision making Extended decision making
Low cost products Frequent purchases Low involvement Familiar product/brand Little search and time given to purchase
More expensive products
Infrequent purchases High involvement Unfamiliar product/brand
Extended search and time given to purchase
48
2.4.1 Stages in shopping decision process The shopping decision process is viewed by different authors in different manner. Though different terminology is used by various authors, distilling their view leads to the following stages in the shopping process for a extended problem solving situation; Need/problem recognition Search for information Pre purchase evaluation of alternatives Purchase Consumption Post consumption evaluation Post shopping Shopping Pre shopping
NOTES
The model depicted above provides a road map to understand the decision making process. The model shows the seven steps undergone by a shopper when making decisions; need recognition, information search, pre purchase evaluation, purchase, consumption, post-consumption evaluation, and divestment. Understanding the stages will provide input regarding why people buy or dont buy and what can be done to attract and retain shoppers. Detailed discussion on the steps depicted follows; I. Preshopping As depicted in the diagram pre shopping process has three steps viz., need/problem recognition, information search and pre purchase evaluation of alternatives. A detailed discussion on each of the process follows; Need/ Problem recognition The starting point for any purchase decision is need or problem recognition. Need recognition occur when an individual senses a difference between the desired state and the actual state of affairs. The actual state refers to the way in which a need is already being met and the desired state is the way a person would like for the need to be satisfied. Need recognition depends on how much discrepancy exist between the shopper current state and the desired state. When the difference exceeds a certain level of threshold, a need is recognized.
2.
49
DBA 1740
NOTES
Below Threshold
Desired state
Actual state
Degree of discrepency
At or above Threshold
No need Recognition
Need Recognition
Shopper must become aware of the problem or need through processing of information internally or externally. Then they become motivated. The process of problem recognition means the consumer become aroused and activated to engage in purposeful purchase decision activity. The motivation to resolve a particular problem or need depends on the magnitude of the discrepancy between the desired and actual states and the importance of the problem/need. At a point of time a shopper may have a number of problems/need but the due to monetary or time constraint the individual may attempt to solve only the most significant problems. The recognized problem should also be sufficiently defined so as to proceed to further stages. Sufficient problem definition occurs when the shopper clearly understand the same so as to act on it. For example a shopper faced with the problem of stock out for soap for his personal consumption has a clearly definition of problem. But if the same individual is having a problem of expression of self image, though the problem is recognized it may require clear definition of the same so as to enable him to identify the ways in which the self image could be projected in an appreciable manner. Various types of problem recognition process can be arrived at on the basis of immediacy of required solution and whether or not the problem was expected. The matrix results in various types of problems viz., routing, emergency, planning and evolving problem situations as shown below;
Immediacy of solution Expectancy of problem Immediate solution required Occurrence of problem Routine expected Occurrence of problem Emergency unexpected
Immediate solution not required Planning Evolving
50
Routine problems are those in which the difference between actual and desired states is expected to occur and an immediate solution is required. Convenience goods are typically associated with such type of problem situation. For example purchase of grocery made by shoppers. Emergency problem are those that are unexpected in which immediate solutions are necessary. Some retailers cater to shopper facing such problems for eg. In & Out stores in petrol stations. Planning problems occurs when the problem occurrence is expected but and immediate solution is not necessary. For example a consumer who wants to replace his television will begin to look out for television, engage in information search etc. Planning problems are of the type that can lead to purchase of pre-need goods or services which are bought in anticipation of being using in future, generally after a time lag. example of pre need services include insurance, pre-paid college fee etc. Evolving problem occurs when the problem is unexpected but no immediate solution is required. For eg fashion oriented purchase. Situations leading to problem recognition A number of situations may lead to problem recognition. Some significant reasons are explained below;
Influencers Culture/subcult ure Social status Reference group Family Financial situations Earlier decisions Individual growth Emotions Motives Situation
NOTES
Desired State
Evaluati on Less than? Equal to? More than?
Actual state
Influencers Past decisions Normal depletion Brand/produc t performance Individual growth Emotions Govt/consum er group Product availability Situation
Depleted or Inadequate stock situation is the most frequent reason giving raising to the problem recognition stage. In case of depleted or out of stock situation the shopper has exhausted the goods and has to repurchase in order in order to satisfy the needs. Sometime the existing stock of goods may be inadequate leading to purchase requirement. Discontentment with existing products may lead to problem recognition. The dissatisfaction may be faced by the individual himself or may also arise due to the result of others decisions in the family. The shopper may sometimes simply search for something new and different in order to break the routine. The problem is mainly due to the variety seeking behaviour of the shopper involved.
DBA 1740
NOTES
Changes encountered in the environment may lead to problem recognition. For example different life cycle stages may lead to need for different products. The influence of reference group also leads to problem recognition leading to change in the consumption pattern. The financial status of the consumer has a very important relationship to problem recognition. The affordability of the shopper depends on the actual or anticipated financial position which may trigger the problem recognition. The promotional activities of the marketers may lead a shopper to perceive a difference of sufficient magnitude between the desired state and the actual state. Once the shopper becomes aware of the problem two basic outcomes are possible. The shopper may decide not to pursue any further problem-solving behaviour. This might occur if the difference between the shoppers desired and actual state is not great enough to cause him to act on resolving the difference. Yet another situation which may not lead to further action is the presence or absence of environmental elements like the family, finance, social class values etc. The second type of response that may occur from the problem recognition process is for the consumer to proceed into further stages of decision making activity leading to information search and evaluation. The shopper may develop a conscious buying intention which is defined as a disposition amounting to some resolve, to buy some particular product or brand under certain specified conditions. The conditions may relate to time, place, and circumstance of the purchase. Buying intention simply refers to a shoppers state of mind and personal commitment to buy at some time and place given certain circumstances. A shoppers intention of buying a particular product may not be fulfilled because of change in mind set, forgetting of intention, or from being prevented from executing the intention. The process of shopping may lead shoppers to new beliefs about product availability and attributes of various brands all of which may cause buying intentions not to be fulfilled. Since intentions are not necessarily sufficient to ensure purchase, the marketers can help shoppers move along the process through advertisement, point of purchase sales promotion activities etc.
Activating need/problem recognition Understanding the need/problem recognition may reveal potential opportunities that a business may wish to exploit. It will lead to identifying market with unsatisfied desires which will provide marketers with new sales opportunities to be explored. The existence of unsatisfied needs and desire will lead to new businesses and product innovations. The shoppers need can be activated by changing their desired state. The shoppers can be made to desire for products. Product innovation also causes need recognition. Many innovations have succeeded due to their ability to satisfy previously unfulfilled needs. The shoppers perception about the adequacy of their actual state could be changed. Advertisements could play a major role in making the shoppers perceive that the existing state of affairs is inadequate. Sometimes reminding the consumers of a need may be sufficient to activate the need recognition. A consumer browsing a retailers aisles may encounter a
display that reminds him of a previously forgotten purchase need. Manufacturers have modified their products in order to stimulate need recognition. For example in the case of toothbrush although most tooth brushes wear out in three month, consumers replace them once in a year. Oral-B has introduced a blue dye in the center bristles which gradually fades during usage. The absence of blue dye indicated that the tooth brush is no longer effective and needs replacement. There are two approaches to problem recognition viz., Generic and selective problem recognition. Generic problem recognition General problem recognition focuses on helping shoppers to feel a discrepancy that a number of brands within a product category can reduce. It attempts to stimulate primary demand ie the demand for a product category. Companies seeking to grow the size of the total market for a product are attempting to elicit to generic need recognition. The shoppers usually perceive minimum difference between competitors products ie one brand tastes pretty much the same as other. A marketer will generally use this approach when the problem is either latent or of low importance and one of the following condition exists; Product is in the early stages of its life cycle The marketer has very high market share After problem recognition, consumers external search tends to be limited It is a situation of industry wide cooperative effort.
NOTES
An increase in generic problem recognition generally leads to expansion of total market for the category. In certain cases, when a firm has the dominant market share in a product category, it may focus on generic problem recognition hoping that sales will probably come to their brand. Selective problem recognition Selective need/problem recognition occurs withn the need for a specific brand within a product category (selective demand) is stimulated. Marketers try to persuade shoppers that their need will be satisfied by a particular brand. They resort to comparative advertising that describes the advantages of one brand over the competitors brand. Approaches to determine shoppers problems A variety of approaches are used by marketers to identify the shoppers problems. Survey or focus groups are conducted to determine the problems faced. Both the methods use one of the following approaches;
53
DBA 1740
NOTES
1. Activity analysis focuses on a particular activity like cleaning the house, travel etc. The survey or the focus group is conducted to determine the problems shopper face in the course of performing an activity 2. Product analysis focuses of examining the purchase and use of a particular product, service or brand. The shoppers are asked about problems encountered while using the product or consuming the service 3. Problem analysis starts with a list of problems and the respondents are asked to identify the activities, products or brands they associate with the problems listed. 4. Human factor research is helpful in identifying the consumers functional problems which they themselves are not aware. It is employed to determine the effect of lighting, temperature, sound and product design on human capabilities such as vision, fatigue, response time and flexibility etc. 5. Emotional research focuses on the effect of emotions. The consumers emotions associated with a particular product are identified using focus group research, personal interview or projective techniques. 2. Information search
Once the shopper identifies the need or recognizes the problem and if there are no constraints preventing further behaviour, they move on to the next stage in the decision making process viz., the information search. Information can be considered as the knowledge obtained about some fact or circumstance. The term search refers to the mental as well as the physical information seeking and processing activities engaged in order to facilitate the decision making. The search may be undertaken so as to identify information about product, price, retail store etc. Based on purpose of search it may be categorized as prepurchase or ongoing and based on the source it can be categorized as internal or external. Prepurchase search is a typical form of search associated with the purchasing context. If the consumer has recognized a problem, he would engage in a prepurchase search. Ongoing search does not occur to solve a recognized and immediate purchase problem. It is a search activity independent of specific needs or decisions. If an individual with an interest in a product but with no demand for the product , the search will be an ongoing search rather than the prepurchase. A summary of the similarities and differences between prepurchase and ongoing search is highlighted below;
Internal search Internal search is the first stage to occur after the shopper recognizes the problem. It is a mental process of recalling and reviewing information stored in memory that may relate to the purchase situation. The shopper relies on any attitudes, information or past experiences that have been stored in memory and can be recalled for solving the recognized problem. The recall may be immediate or may occur slowly as a conscious effort is made to bring
the information to mind. The reliance on internal search may be vary important part of shoppers strategies. Research findings have highlighted that most shoppers rely on experiential information source in retail shopping trips. They decide where to shop based on the previous experiences. Hence any negative experience may be difficult to overcome for a retailer as the shopper would remove the retail outlet form his acceptable alternatives set. The outcome of internal search may be that a shopper ; 1. Makes a decision and proceed to engage in purchase behaviour 2. Has made a decision but is constrained by some environmental variables 3. Determines that insufficient or inadequate information exists in his memory to make a decision and indulge may indulge in external search. External search External search refers to the process of obtaining information from other sources in addition to information obtained from the internal source. Information might be obtained from advertisements, friends, salespeople, store display etc. Three general categories of information are available from external environment; 1. Information about the existence and availability of various product and service offerings, 2. Information useful in forming evaluative criteria 3. Information on the properties and characteristics of alternatives The type of information sought depends on extent of information known already to the shopper. The shopper may derive information from direct experience of using the product themselves. In addition to this information can be gathered from three major areas Marketer-dominated sources refers to sales person, packaging and other sources under the control of the marketer. This source is extensively used in the early stages of product awareness and initial interest. Consumer sources include all the interpersonal communication not under the control of the marketer. Personal sources are extensively used in the latter stages of the decision process. It includes the opinions, beliefs, attitudes, behaviours and feelings of relatives, friends, neighbours and strangers contacted on the internet Neutral sources include a portion of the mass media, government reports and publications from independent product testing agencies. These groups are not under the direct control of the marketer. Profession information contained in handouts, pamphlets, articles, magazines, journals, books, internet and by professional contacts also form part of neutral sources. Majority of consumers actually engage in quite limited amount of external search. The amount of external search that shoppers engage in varies considerably across individuals and different purchase situations. The cost benefit associated with external search is undertaken to evaluate the viability of the same. External search will be undertaken and will continue as long as the shopper perceives the benefits of search to be greater than the costs involved. The potential benefits of search are
55
NOTES
DBA 1740
NOTES
1. More comfortable feeling about making an informed purchase 2. An increase in the actual chances of making a choice that leads to greater satisfaction. 3. The positive feelings derived from being generally knowledgeable about product and services 4. The pleasure derived from engaging in shopping activity and 5. The high potential monetary payoffs to search Potential costs of external search include the commitment to time, foregoing other pleasant activities, and the frustrations or tensions involved as well as any actual monetary expenditures such as fuel and parking fees. The costs and benefits are as perceived by the shoppers, they may not match perfectly with reality. Many factors can influence the amount of external search either by directly affecting the shoppers cost/benefit perceptions or by indirectly acting as constraint to the process. Some are explained below; Market conditions : The characteristics of the marketplace can significantly affect the external search behaviour. Availability of information, number of alternatives to consider and location of outlets are some factors. Various research studies lead to conclusion that the external search is greater if o prices are higher and price differences between brands are greater, o Style and appearances are perceived to be quite important o The shopper suspects that substantial differences may exist between product alternatives o Buying strategies : shopper often adopt various strategies so as reduce the amount of external search. For example brand loyalty and store loyalty are developed through purchase experience. o Individual factors: The shoppers own characteristics influence the degree of external search activity. For example if the shopper has a greater market experience with a product then the individual will indulge in a lower degree of external search. Likewise open-mindness and self confidence may also affect the search activity. o Situational factors: a number of situational factors may influence the external search. Search will be reduced when there is a urgency of a need or the amount of available is limited. Like wise when the store is crowded or when special offers are provided the search activity will be limited. o Perceived risk: risk or uncertainty regarding the purchase decision or the consequences of the decision significantly influences the amount of information gathered by the shopper. The perceived risk may be financial, functional, physical social or psychological risk. 3. Pre purchase evaluation process
The likelihood of a product being purchased depends on whether it is evaluated favorably by the shopper concerned. Evaluation involves those activities undertaken to appraise carefully on the basis of certain criteria, alternative solutions to the problem in hand. The search process determines what the alternatives are and in the evaluation process
they are compared so that the shopper can make a decision. In deciding the product or brand to buy and place of purchase etc. the consumers will rely heavily on their evaluations of alternatives available for choice. Disliked alternatives are rejected quickly or ignored completely and liked alternatives are considered and compared with the one receiving the most positive evaluation. Although search and evaluation are mentioned as separate stages they are undertaken together during decision making. Before making the purchase decision, the shopper has to decide on various issues like whether to consider all the brands in the market place or should consideration be restricted to a subset of brands? How should the alternatives be evaluated? These fundamental aspects of the evalution process are depicted below;
Framing consideration set Evaluating alternatives
NOTES
Rely on pre-existing evaluations
Construct evaluations
Categorical Process
Piecemeal Process
Determining choice alternatives A shopper will have number of alternatives from which purchase decision can be made. However not all alternatives available will be considered by the shopper. Instead a subset will only be taken into consideration. There are actually there subsets of brands within the awareness set of alternative viz consideration set, inept set and inert set. The alternatives considered during decision making are known as consideration set or evoked set. The inert set consists of those choices that the shopper has failed to perceive any advantage in buying ie they are neither evaluated positively nor negatively. The inept set is made up of choices that have been rejected fro purchase consideration by the shopper because of unpleasant experience or negative feedback from others. The consideration set contains only a subset of the total number of alternatives available to the shopper. Some individuals will have a larger consideration set while for some it will be smaller. In order to gain entry into the consideration set, the marketers make changes in the product, price, promotion and physical distribution. In some situations marketers find it beneficial to encourage shoppers to consider not only their brand but competitive brands
DBA 1740
NOTES
as well. This is known as attraction effect. The attractiveness of a given alternative and the chance of it being chosen are enhanced when an inferior alternative is added to the set of considered alternatives. Framing /constructing the consideration set Framing consideration set depends on the recall of choice alternatives from memory. However all the alternatives retrieved from memory will not receive consideration. The shopper may screen the alternatives based on their liking and will generally limit their consideration to the alternatives towards which they are favourably predisposed. The shoppers cannot construct a consideration set based on the internal search of memory without prior knowledge of atleast some alternatives. The shoppers may talk to others, search through the yellow pages, consider all brands available at the store and so on. The retail environment has a greater ability to affect the consideration set of shoppers. The manner in which the consideration set is framed ie whether based on internal memory or external search should be taken into account for designing the marketing strategy Evaluating alternatives Once the consideration set is framed the shopper must decide how the considered alternatives will be evaluated. Two options are available viz., relying on pre-existing product evaluations stored in memory or construct new evaluations based on information acquired through internal or external search. Pre existing evaluations is based on the prior purchase and consumption experiences with the product. It may also be based on secondhand experiences ie the impression of friends. The shoppers will be more confident in evaluations derived from actual product usage. In many situations shopper may be unable to rely on their pre-existing evaluations for making a choice or may elect not to use these evaluations. They may want to construct new evaluations. Two basic process may be followed in constructing new evaluations ie categorization process and piecemeal process. According to categorization process, evaluation of a choice alternative depends on the particular category to which it is assigned. In contrast, under piecemeal process an evaluation is derived from consideration of the alternatives advantages and disadvantages along important product dimensions. Categorization process takes into account the mental categories existing in the mind of shoppers. The categories can be general or specific and the categories are associated with some degree of liking or disliking. If the product is assigned membership to a particular category it will receive an evaluation similar to that attached to the category. How a product is categorized can strongly influence the shoppers demand. Marketers use brand extension to take advantage of categorization. Through brand extension well-known and respected brand name from one product category is extended into other product categories. Shoppers
evaluation of brand extension depend on their likings of the core brand. The effectiveness of the strategy will be reduced if the product categories of the extension and the core brand become more dissimilar. Piece meal process involves constructing an evaluation of a choice alternative using bits and pieces. First the shoppers must decide the particular criteria or product dimensions to be used in evaluating choice alternatives. For example in the purchase of television price, brand, country of origin may be considered. The next step is to evaluate the strength or weakness of each considered alternative on the basis of particular criteria deemed important in making the choice. The shopper may rely on internal or external source of information to make the choice. The shopper may also use cutoffs to make judgment about performance. A cutoff is simply a restriction or requirement for acceptable performance. A shopper may have the upper limit for price of the television to be purchased. If the price exceeds the limit it may not be acceptable. The shoppers may also use certain signals when judging the product performance. Signals are product attributes that are used to infer other product attributes. Attributes such as brand name, price and warranty may be interpreted as signals of product quality. The final step in piecemeal process involves using ones judgment about the performance of the considered alternatives to form an overall evaluation of each alternatives acceptability. The evaluation strategy may be mainly grouped as compensatory or non compensatory. Noncompensatory evaluation strategy is where a products weakness on one attribute cannot be offset by its strong performance on another attribute. For example the taste of a snack may be good but the calories intake may be more. In the case of a compensatory evaluation strategy, perceived weakness of one attribute may be offset or compensated for by the perceived strength of another attribute. For example high price of television would be compensated buy its performance. The amount of evaluation that occurs depends on the urgency of need, significance of the product to the buyer and the degree of complexity of the alternatives involved. The appraisal of information produced during search may result in several possible results, depending on the extent to which the buyer reconciles his desired and available alternatives. One outcome is that the shopper will stop the search for information as he has found an acceptable product that satisfies the recognized problem. A second possibility is that the shopper may discontinue the search because no product has been identified. A third possible outcome is for the shopper to continue searching even though no acceptable alternative has been found. The information evaluation process differs under low involvement conditions because it mainly occurs after the purchase and not before. The shopper has some expectations about the products performance and purchases the same based on brand name recognition. After the use of the same the shopper evaluates the brand and develops attitudes towards. If the attitude is favourable it which may lead to repurchase else brand switching occurs.
NOTES
59
DBA 1740
NOTES
II. Shopping The shopping process involves the actual purchase of the product from a retail outlet of the shoppers choice. The consumers shop for a variety of reasons. The most obvious reason is to purchase something, but this may not reflect the actual motivation in each circumstance. Research studies have found that both personal and social motives influence consumer shopping activities. The personal motives for indulging in shopping are; Role playing: shopping activities are learned behaviour and are expected or accepted as part of ones position or role such as that of a housewife. Diversion: shopping offers a diversion from the routing of daily life and is a form of recreation. Self gratification: shopping is performed not for the expected utility of consuming but by the utility of the buying process itself. Learning about new trend: shopping provides information trends and movements and product symbols reflecting attitudes and lifestyles. Physical activity : shopping can provide a considerable amount of exercise Sensory stimulation: shopping is performed for purpose of sensory benefits it provides such as looking at and handling merchandise, listening to sounds, and smelling the scents. The social motives which initiates shopping are It is viewed as a social experience outside the home. Shopping is done mainly for it provides opportunities for seeking new acquaintances, encounters with friends or just people watching Shopping is performed as it enables communication with others having a similar interest. It often provides opportunity to interact with customers or sales people having similar interests. Stores provide a meeting place where members of peer group can gather hence shopping is motivated by peer group attraction Shopping is motivated by the a feeling of status and power it provides as the shoppers are treated well and waited upon by the sales people Shopping may be done for the pure pleasure of bargaining. It is looked upon as an activity which provides the enjoyment of gaining a lower price through bargaining, companion shopping or visiting special sales.
In this purchase decision process the shoppers decide: Whether to buy When to buy What to buy(product type and brand) Where to buy How to pay
Whether to buy? The shoppers always has the option of aborting the process for many reasons, including changed motivations and circumstances, new information, lack of information etc. Even after arriving at the decision to buy a shopper may change his choice in the last minute. When to buy? The decision to buy can lead to a fully planned purchase, partially planned or an unplanned purchase. In the case of fully planned purchase both product and brand are chosen in advance. In partially planned purchase situation intent to buy exist but brand choice is deferred until shopping. In unplanned purchase both the product and brand are chosen at the point of sale. Fully planned purchase: this type of purchase is encouraged by marketers through promotion of brand and store loyalty with advertising and other programs. The planned purchase is likely to occur when involvement with the product is high but can also occur with low involvement purchases. The execution of planned purchase depends on various in store factors such as the store layout and design, display, ambience, time pressures etc. The purchase may also be interrupted or diverted by the marketing tactics followed like free samples, price reduction, coupons, point-of-purchase displays or other promotional activities. Partially planned purchase: The shoppers may plan the products they intend to purchase but delay the choice of brand or specific styles or sizes of the product until they visit the store. This type of purchase occurs in the case of low involvement purchase. The final brand decision may be influenced by price reductions or special display and packaging. Unplanned purchase: Research studies indicate that more than 50 percent of items purchased by shoppers fall in the category of impulse purchase. The impulse purchase by shoppers are often don in whimsical manner and can be prompted by point of purchase displays, price offs etc. Four types of impulse buying may happen; 1. Pure impulse a novelty or escape purchase which breaks a normal buying pattern 2. Suggestion impulse a shopper having no previous knowledge of a product sees the item for the first time and visualizes the need for it. 3. Reminder impulse - a shopper sees an item and is reminded that the stock at home needs to be replenished or recalls the previous decision to purchase 4. Planned impulse a shopper enter the store with the expectation and intention of making some purchase on the basis of price offers, coupons etc. Five critical elements distinguish impulsive from non impulsive shopper behaviour. They are;
NOTES
61
DBA 1740
NOTES
The shopper has a sudden and spontaneous desire to act, involving a marked divergence from previous behaviour. The sudden desire to buy puts the shopper in a state of psychological disequilibrium where he feels temporarily out of control. The shopper may experience psychological conflict in weighing immediate satisfaction against the long-term consequences of the purchase. Shoppers reduce the cognitive evaluation of product features. Shoppers buy without any regard for future consequences.
Several product, marketing and consumer characteristics influence the impulse purchase behavior. Product characteristics like low price, shorter product life cycle, size and style etc., Marketing factors like advertising, POP material, store location etc diverts a shopper influencing him to indulge in impulse purchase. Consumer characteristics like the personality, demographic and socio economic characteristics are also related to the rate of impulse buying. When a purchase occurs is also affected by the timing factor such as seasonality. Time also affects the price which in turn influences the likelihood of a purchase. What to buy (product and brand) The steps involved in arriving at the decision regarding the product or brand is explained in detail in the previous section during the discussion regarding the pre purchase evaluation phase. The extent to which a shopper develops the repeat purchase pattern is explained in this section. The marketers strives to have a steady group of unwavering shoppers for its product or service. research reveals that improvement in brand loyalty leads to increase in the market share. However developing loyal shoppers has become difficult due to several reasons; similarity of products in terms of form, content and communication, price competition from private and generic labels, sales promotion tactics, high inflation, growth of new products competing for the shelf space and mind space of the shoppers. A study on repeat purchase behaviour reveals four type of brand loyalty patterns; 1. Undivided loyalty is exhibited when a shopper purchases a brand in a continuous manner. 2. Divided loyalty is exhibited when shoppers shift between brands in a sequence like ABABAB 3. Unstable loyalty is where the brands are purchased in the following sequence AAA B BB 4. No loyalty is where the shopper buys different brands following the sequence A B C DEF
62
Research studies reveal that the majority of shoppers tend to purchase a favorite brand or set of brands. The studies conclude that thought the degree of loyalty varies with the product, the percentage of shoppers exhibiting some brand loyalty is high. Where to buy The choice of a retail outlet is made by the shopper at this phase. The detailed discussion regarding the various types of retail format available for a shopper to choose from was presented in the previous semester course material Retail Management: Concepts and Environment. The factors which influence the choice of a retail outlet are listed below; Location has an impact on the store patronage. The closer the consumers are to the store, the greater will be the likelihood of purchase from the store. A detailed discussion on the store location is presented in the Unit IV. Depth, breadth and quality of assortment are important determinants of store choice Store design and physical facility of the store Advertising and sales promotion measures undertaken by the retailer Employees of the retailer ie the behaviour and attitude of the store personnel The customer service offered by the retailer Type of shoppers who visit the store Pricing practice of the retail store Store image Store layout and atmospherics Consumer logistic ie the speed and ease with which shoppers mover through the retail and the shopping process
NOTES
The influence of the above listed factors differ depending on the variables such as type of products involved, the type of store and the type of shopper concerned. How much to pay In a purchase process shoppers spend money, time and attention when they buy the products. Therefore all the products can be viewed as the having economic, time and cognitive price to be paid by the shopper. Money and time budgets Economic theories state that if a person earns more, he spends more in the market place. However in present day situation every shopper is having a limit on the time availability and how they allocate the time between work and leisure depends on their timestyles. Leisure time is viewed as anything outside than work. Contemporary view of time has divided available time into three blocks consisting of paid time, obligated time and discretionary time. Discretionary time refers to the leisure time when individuals feel no
DBA 1740
NOTES
sense of economic, legal, social or physical compulsion or obligation. Nondiscretionary or obligated time includes the time spent for physical obligations, social obligation and moral obligations. The amount of time the shoppers are willing to spend on shopping activities often decreases with the increase in earning. The time available to involve in the complex decision process reduces which makes brands as important part of buying process. Shoppers mainly spend on either time saving goods or time using goods. Time using goods use the time of the shopper like the TV. Time saving foods can increase the leisure time of shopper by decreasing the nondiscretionary time expenditure for eg washing machines, microwave etc. In order to maximize the utilization of time the shopper may involve in polychromic time usage instead of monochromic time usage. Polychromic use involves combining activities simultaneously like letting the car for service and using the waiting time for completion of shopping etc. Cognitive resources Cognitive resources represent the mental capacity available for undertaking various information processing activities. Marketers compete not only for the time and money of shoppers but also for the cognitive resources or attention of shoppers. Attention consists of two dimensions viz., direction and intensity. Direction refers to the focus of attention. Intensity refers to the amount of capacity focused in a particular direction. Shoppers are continuously bombarded with advertisements in TV, radio, print, bill boards and internet apart from point of purchase display all focused to draw the attention of shoppers. In case of low involvement products shoppers may act as cognitive misers and may not devote the cognitive resources. Providing too much of information leads to exceeding the cognitive capacity of the shoppers which will lead to confusion. In addition to the payment to be made in terms of money, time and cognitive resources, the shopper also decides the mode of payment ie cash, credit card , having open account or payment through internet. III. Post shopping This phase involves the activities involved in consumption and post consumption evaluations. 1. Consumption
Consumption refers to shoppers usage of purchased product. Basically an individual could be groups as either user or non user of the product or service. understanding the behaviour of user as well as the nonuser is important for a marketer. Analyzing the non user behaviour will enable to frames strategies for converting them to user which pronounces the potential market opportunity. The dimensions of consumption behaviour are depicted below;
Entire population
NOTES
Non user
User
When is it consumed?
Where is it consumed?
How is it consumed?
How much is consumed?
Proximity to purchase Time of day
Situation A Situation B
Usage 1 Usage 2
Heavy users Medium users Light users
Many products are consumed as soon as the purchase is done. In some cases purchases are made without the knowledge of time of consumption. Understanding the time when consumption is made would enable to segment eh market based on the when the consumption happen. Likewise it is useful to understand the place where consumption is made. Some happen inside house some at the place of purchase itself. Knowledge on how the products are consumed would provide impetus for building the marketing mix strategies. Many shopper purchase the same product yet use the same in different manner. Shoppers may differ substantially in the amount of consumption. The differences in consumption also provide opportunity for segmenting the user market called as usage volume segmentation. It leads to three types of users viz., heavy, medium and light users. Understanding the usage pattern will provide input for enhancing the amount of consumption. Consumption experiences Consumption experiences refer to the particular feelings experienced during consumption. Feeling may be positive or negative. Sometimes they are overwhelming. Often consumption experiences are ordinary and experienced with little feeling. Some consumption activity may evoke strong feeling when things go wrong. Negative feelings such as disappointment, anger and regret may arise when the consumption experience does not measure up to the expectation. Marketers may position their products based on the feeling experienced during consumption . The consumption experience may be viewed as rewarding or punishing. It may provide positive reinforcement, negative reinforcement or punishment. A consumption experience provides positive reinforcement when the shopper receives some positive outcome from product usage. Negative reinforcement occurs when consumption enables shoppers to avoid some negative outcome. For medication are taken to avoid pain. Sometimes both positive and negative reinforcement may happen during consumption. Punishment occurs when consumption leads to negative outcomes. For example memebership in fitness center
DBA 1740
NOTES
may leave a person looking worse than before. A punishing consumption experience is unlikely to be tires again. Also shoppers are less likely to enjoy buying and using negative reinforcement products that positive reinforcement products. 2. Post consumption evaluation
Post consumption evaluation serves several functions. It broadens the shoppers set of experiences stored in the memory. It also enables to evaluate how the shopper has performed in selecting the product, retail stores etc. The feedback the shopper receives form this stage helps to make adjustments in future purchasing strategies. Satisfaction is an important element in the evaluation stage. It refers to the buyers state of being adequately rewarded for the sacrifice made. Adequacy of satisfaction is a result of matching actual past purchase and consumption experience with the expected reward in terms of its anticipated potential to satisfy the shoppers motives. Shoppers form certain expectations prior to the purchase. The expectations may be about The nature and performance of the product or service The cost and efforts to be expended The social benefits or costs accruing to shopper as a result of the purchase.
Advertisement has often an important role to play in forming the expectations. The shoppers may have a variety of product performance expectations which include the shoppers hope regarding the ideal level of performance, expectations regarding the fair and equitable performance for the amount spend and what the consumer expects to actually occur. The interaction between expectation and actual product performance produces either satisfaction or dissatisfaction. However there is no direct relationship between the level of expectations and the level of satisfaction. There exist a modifying variable known as disconfirmation of expectations which mediates the situation. When a shopper does not get what is expected, the situation leads to disconfirmation. Disconfirmation can be of two varieties: a positive disconfirmation occurs when what is received is better than expected and a negative disconfirmation occurs when things turn out worse than anticipated. If the shopper is satisfied with the usage of product or service it results in more favorable post purchase attitudes, higher purchase intentions and brand loyalty. However, even if satisfied a shopper may not repeat the purchase for want of novelty or variety. Of the shopper is dissatisfied they are likely to exhibit less favourable post purchase attitudes, lower or non existent purchase intentions, brand switching, complaining behaviour and negative word of mouth.
66
Dissonance Cognitive dissonance is a psychological state which results when a person perceives that two thoughts, both of which he believes to be true, do not fit together ie inconsistent. The dissonance occur as a result of discrepancy between a consumers decision and the consumers prior evaluation. A shopper who encounter some problems with the brand purchased will be in a state of post purchase dissonance. Dissonance occurs in the following situations When a shopper passes the minimum threshold of dissonance tolerance When the action is irrecoverable. For example after the purchase of a product, it cannot be returned and money cannot be refunded. Unselected alternative have desirable features. There are several desirable alternatives Available alternatives are dissimilar in their qualities The buyer is bound to his decision because of the psychological significance There is no pressure applied to the shopper to make a decision.
NOTES
Dissonance will be strongest for the purchase of durables, though it can exist for almost every purchase. Dissonance reduction A shopper tries to reduce dissonance through the following ways; 1. Changing product evaluations
The shoppers may try to reevaluate the product alternatives in order to reduce the dissonance. The shopper may enhance the attributes of the products selected while decreasing the importance of the unselected products attributes. The shopper may also reevaluate the products alternatives to view them as being more alike than was thought at the purchase stage. In addition the shopper may resort to selective retention so as to forget the positive features of the unselected alternatives and negative features of the chosen product while remembering the negative attributes of the unchosen item along with the positive features of the selected product. 2. Seeking new information
The shopper may try to reduce the dissonance by seeking additional information in order to confirm the correctness of the product choice. The dissonance theory suggests that the dissonant individuals would actively avoid information that would tend to increase their dissonance and seek information supporting their decision.
67
DBA 1740
NOTES
3.
Changing attitude
The shopper may try to reduce the dissonance by changing the attitude so to make them consonant with his behaviour. The shoppers resort to changing the attitude because it is easier than reversing the act of purchase. The shopper reevaluates the product and adopts positive attitude towards it so that consonance can be achieved. 2.5 DIFFUSION OF INNOVATIONS IN RETAIL CONTEXT Innovation is an essential element for a retailer not only to sustain but to succeed in the competitive retail scenario. Innovations may happen in the type of products dealt, pricing strategy followed, positioning methods, retail image built , distribution methods adopted, sales promotion offers to shoppers , display and layout of the retail store, sign boards used, etc. In the present scenario, where more retailers are competing to capture the mind space and pocket space of shoppers, the retailer has to be innovative in order to attract and retain the shoppers. 2.5.1 Diffusion process The diffusion process is concerned with how innovations are spread. Diffusion can be defined as the process by which the acceptance of innovation (new product, service, or new practice) is spread by communication to the members of a social system (target market) over a period of time. Communication refers to mass media, sales people or informal communication. The concept of diffusion is closely related to adoption process. In the broadest sense, diffusion is a macro process concerned with the spread of an innovation from its source to the consuming public. In contrast, adoption process is micro that focuses on the stages through which an individual consumer passes when deciding to accept or reject an innovation. A retailer intending to differentiate himself from the competitor should necessarily innovate. The success or failure of a new product(Product here includes the services or new ideas )depends on the process by which innovations spread. The retailer/ marketer usually would like to secure the largest amount of adoption within the shortest period of time. A retailer needs to understand the diffusion process so that he can properly manage the spread of new product. As per the diffusion mentioned above, diffusion process involves four basis elements (1) innovation (2) the channel of communication (3) the social system and (4) time. The elements are discussed below; 1. The Innovation
Various approaches have been taken to define new producer a new service; these can be classified as firm, product , market and consumer oriented definitions of innovations.
68
Firm oriented definitions A firm oriented approach treats the newness of a product from the perspective of the company producing or marketing it. When a product is new to the retailer it is considered new. The product may not actually be new in the marketplace either to the shopper or to the competitor. This concept would be useful to examine the impact of new product/ service/idea on the retailer. Product oriented definitions A product oriented approach focuses on the features inherent in the product itself and on the effects of these features on the shoppers established usage pattern. Three types of product innovations are listed based on the degree of innovativeness. A continuous innovation has the least disruptive influence on the established pattern. It involves the introduction of a modified product rather than a totally new product. A dynamically continuous innovation is more disruptive than a continuous innovation but still does not alter established beahviour patterns. It involves creation of a new product or modification of an existing product. A discontinuous innovation requires shoppers to adopt new behaviour patterns. It is a product that is so new that the shoppers have never known anything like it before. The ipod, cell phone, microwave ovens etc have all been into this category at the time of introduction in the market place.
NOTES
Market oriented definitions A market oriented approach judges the newness of a product in terms of how much exposure the shoppers have to the new product. Two definitions have been extensively used; 1. A product is considered new if it has been purchased by a relatively small percentage of potential market. 2. A product is considered new if it has been on the market for a relatively short period of time. Shopper oriented definitions A new product is any product that a potential shopper judges to be new. Newness is based on the shoppers perception of the product, rather than on physical features or market realities. This approach is mostly used by the advertisers and marketers to build their strategies. In addition to the above, innovations can also be characterized on other ways; Functional innovations offer functional performance benefits over existing alternatives. Often functional innovations involve new technology that lets them perform better than existing alternatives. For example printer with scanner and photocopying facilities
DBA 1740
NOTES
Aesthetic or hedonic innovations are new products, services or ideas that appeal to our aesthetic, pleasure seeking and /or sensory needs. For example, performed dresses, new food varieties etc Symbolic innovations are products, services, attributes or ideas that have new social meaning. In some cases symbolic innovations involve a new offerings that is used exclusively by a particular group of shoppers.
Many products represent blends of these innovation types. The innovations may also have breadth. Breadth of innovation refers to the new and different uses to which a new product is put. 2 The channels of communication The quickness with which an innovation spreads in the market depends to a great extent on communications between the marketer and the shopper as well as the communication among the shoppers through word of mouth. Both the impersonal sources like advertisements and the interpersonal sources like the sales people and opinion leader have an influence on the communication. A variety of new channels of communications have developed in the recent years to inform the shoppers regarding the innovative products and services. Interactive messages where the shopper can play an active role instead of being passive to the message given, Internet communications in the form of chat, new groups, blogs, consumer shows and exhibitions are also used for communicating information regarding the innovations. 3. The Social system The diffusion of innovations usually takes place in a social setting ie the market segment or the target market at whom the innovation is aimed at. The social system is the physical, social or cultural environment to which people belong and within which they function. The social system serves as the boundary within which the diffusion of new product happens. Every social system has its own norms or values which influences the acceptance or rejection of the new products. When a social system is modern in orientation the acceptance of innovation is likely to be high. If it is traditional, then the innovation may take time for adoption or it may be rejected. 4. Time Time is the crucial element in the diffusion process. The diffusion of innovation is basically dependent on the time for understanding three different concepts viz., the amount of purchase time, the adopter categories and the rate of adoption. The purchase time refers to the amount of time that elapses between the shoppers initial awareness of the product or service and the point at which they purchase or reject it. purchase time is important because the average time a shopper takes to adopt a new product enables to predict the overall length of time it will take for the new product to achieve widespread adoption. For example if the individual purchase time is short, the overall rate of diffusion will be faster.
The adopter categories is explained in the next section. Rate of adoption is concerned with the time it takes a new product or service to be adopted by members of a social system. It deals with how quickly it takes a new product to be accepted by those who will ultimately adopt it. In general it is felt that the diffusion of products worldwide is becoming a more rapid phenomenon. Retailers or marketers in general would like a rapid rate of product adoption so as to penetrate the market and quickly establish market leadership before the competitors capture the market. In some situations marketers might prefer to avoid rapid rate of adoption for a new product. In this situation they may follow a skimming price policy where the products are initially sold at a high price and then gradually the price may be reduced. In addition to time taken for adoption of a product, the extent of adoption should also be given equal importance. 2.5.2 The adoption process Adoption is a major process in the diffusion of innovation. The adoption process refers to the stages through which an individual shopper passes through while arriving at a decision to try or not to try or continue using or discontinue using a new product. The acceptance and continued use of product or brand by an individual is referred to as adoption. The adoption process is depicted below;
Adoption
NOTES
Trail
Legitimationn
Attitude
Comprehension
Awareness
1. Awareness : At this stage the potential adopter finds out about the existence of a product but has only little information and no formed attitude about the product. 2. Comprehension: The shopper at this stage gather information and understand the details regarding the product and its functionality. 3. Attitude: the shopper develops favourable or unfavourable behaviourial predispositions toward the product . If the shopper develops an unfavourable attitude towards the product it will lead to termination of the adoption process.
71
DBA 1740
NOTES
4. Legitimation : in this stage the individual concerned is convinced about the product and decides to adopt the same. The shopper may use information already gathered as well as additional information in order to reach the decision. 5. Trial : shopper may test or tries the product to determine its utility. Trial may take place cognitively, or use the same in a limited or total way depending on the innovations nature. Cognitive trail refers to the vicarious use of the product in an hypothetical situation. 6. Adoption. At this stage the shopper determines whether or not to use the product in a full scale manner. Continued purchase and use of the time fulfills the adoption process. Adoption is thus viewed as a sequence of events through which individual pass over a period of time. Some shoppers pass through the stages mentioned above as soon as the products are introduced in the market ie in the early stages of products life while some may do so much later. Shoppers may be grouped on the basis of time of adoption. This will enable the retailer to categorize individuals into groups which has the similar characteristics. The information may be used for segmenting the market based on the type of the adopter and frame suitable strategies. Five categories are identified view, innovator, early adopter, early majority, late majority and laggard. The characteristics of each of these groups as identified from the research studies are summarized below. 1. Innovators
This group form only 2.5% of a market. They are first to adopt new products. They are quite venturesome and are eager to try new ideas. They have more risk capital and can afford to take calculated risk. Innovators are well-educated, come from well- established families and are cosmopolitan, having friends outside the community. Their sources of information also are not depended only on their local community. 2 Early adopter (13.5% of the market)
They are the second group to adopt an innovation. This group si more socially integrated locally than the innovators and has the greatest degree of opinion leadership in most social system. They are respected as good sources of information and advice about innovation. Hence they play an important role in diffusion process. They keep track of innovators and adopt the innovation which appears successful. They are ahead of average individual in innovativeness and hence look upon by others as role model. They have less risk capital than the innovators. They are younger than later adopters, higher in social status and above average in education. They read more than the later adopters and rely on the information provided by sale people. When early adopters begin buying something new, retailers watching the product moving are likely to advertise it more heavily and display it prominently in stores.
72
3.
Early majority(34% of a market)
This is the next group to adopt an innovation and is the most deliberate of all adopter categories. The individuals in this segment may consider an innovation for some time before adopting. Their adoption period is longer than that of the two previous groups. They are above average in age and education and in social and economic status. They rely heavily of the informal sources of information that do the earlier adopters. They depend on the information from sales person , neighbours and friends of early adopters. Late majority (34 % of a market) This category of shoppers adopts an innovation just after the average consumer in the market place. They are skeptical about new ideas and may yield only because of economic necessity or increasing social pressures. Those in late majority are above average in age and below average in education, social status and income. They rely heavily on informal sources of information and influence. Laggards (16 % of a market) They are the last group to adopt an innovation. They are traditional bound and depend on the decision made in the past. They are suspicious of innovations and the length of the adoption process for this group takes a long time. when they start adopting the product new innovation is likely to be introduced in the market superseding the previous innovation. The above categorization may be used by the retailer to frame strategies regarding promotion, pricing etc. 2.5.3 Factors influencing adoption, resistance and diffusion The rate of diffusion may range from several weeks to several decades. The success of a new product depends on how many shoppers in the market adopt the same and how quickly it is adopted. Hence the retailers need to understand the factors that lead to adoption or resistance and diffusion. The adoption of a new product depends on the characteristics of the innovation and the social system in which it is diffused. These aspects are discussed below; Characteristics of innovation There are six product characteristics that seem to influence the rate and extent of adoption of an innovation ; 1. Relative advantage is the degree to which an innovation is perceived as superior to the existing products in the market. It may be in terms of longer life, easier maintenance, more funcationality etc. The products that have a strong relative advantage will be adopted more rapidly. 2. Compatibility is the degree to which an innovation is consistent with exiting values and past experiences of adopters. New product that is not compatible with the shoppers norm will face difficulty in acceptance. 3. Complexity refers to how difficult the innovation is to understand and use. Complex items will take a longer time to diffuse in the market.
73
NOTES
DBA 1740
NOTES
4. Trailability or divisibility is the extent to which an innovation may be tried on a limited basis. If a product cannot be used on trail in the form of samples on a less expensive scale, diffusion will be retarted 5. Observability or communicability refers to the conspicuousness on the innovation. If a new product is highly visible in social situations it will be communicated most readily to other shoppers. 6. Cost refers to the magnitude of the financial resources required to obtain and operate the innovation. Innovations high in cost would generally diffuse more slowly. Not all shoppers accept innovation. The disruption which they may have to undergo while accepting the innovation may cause them to resist the same. The shoppers may sometime resist an innovation to maintain a status quo. The characteristics of the shopper, the innovation and the market factors have a direct effect on the adoption process. 2. Characteristics of the social system The characteristic of social system in which the innovation is introduced also affects the resistance, adoption and diffusion. The kind of people who represent the target market for the innovation and the nature of relationships among the people in the social system affect the acceptance of innovation in the market. Modernity: Modern systems are those that have a positive attitude towards change. The extent of modernity of the target segment affects the resistance or adoption of an innovation. The more modern the target segment is the more receptive the shoppers would be towards innovations. Homophily: homophily refers to the overall similarity among members in the social sytem. The more similar the market is in terms of education , values, needs and income , the faster will be the diffusion process. This is because similar people tend to model each other. They also interact easily due to similar background which will enhance the process of diffusion. Physical distance: It refers to the physical distance between the members of a social system. When member of a social system are spread apart, diffusion tends to be slower. Opinion leadership: They are the key influencers in the diffusion process. They spread positive or negative information to a great number of shoppers. Characteristics that encourage rejection The innovation or product characteristics which were listed in the previous section could cause the shoppers to reject an innovation viz., lack of relative advantage, incompatibility with previous habits and experiences, complexity, lack of observability, high cost and inability to try the products. This factors can be groped as three major barriers to adopting an innovation; value barrier, usage barrier and risk barrier. Value barrier refers to products lacks of relative advantage compared with the substitute products. Retailers can overcome the value barriers by reducing the price and by conveying information to convince the shippers regarding the products value.
Usage barrier occurs when an item is not compatible wit the shoppers existing habits or practices. The opinion leaders can play a mjor role in influencing and convincing the shoppers to change their needs and habits then the commercials. Risk barrier represents shoppers physical, economic, performance or social risk of adopting an innovation. Technological improvement and consumer education can overcome the perceived risk. Offering trail is a most effective way of overcoming the risk barrier.
NOTES
Retailers should attempt to identify the non adopters of an innovation so that strategies can be framed to convert them to adopters. The non adopters can be divided into several groups viz., passive shoppers, active rejectors and potential adopters. . Passive shoppers are those who have tried the product but are unlikely to provide much information to others about the same. Active rejectors are those who have tried the product but are likely to provide unfavourable WOM to others. Potential adopters are those who have not yet tried the product but who may be influenced by active rejectors, active acceptors or the marketers. Potential adopters may not be adopting the product because of lack of awareness. Advertising may enhance the chance of adoption. Product improvements may be tried for active rejectors. Thus different strategies should be followed for different adopter groups. SUMMARY This unit has provided an insight into the dimensions and approaches to the shopping behaviour. The various stages viz., shopping process viz. preshopping, shopping, post shopping were explained in detail. Four element in the diffusion process viz., the innovation, communication, social system and time were discussed. The steps involved in adoption of an innovation were highlighted. The categorization of adopters viz., innovators, early adopter, early majority, late majority and laggards and their profile were dealt. The reason for non adoption or resistance were also highlighted. This unit provides an insight into the shopping process which acts as the platform to understand the internal influences on the shopping behaviour dealt in Unit 3. HAVE YOU UNDERSTOOD? Discuss the various approaches to the study of shopping behaviour. Explain the various stages involved in the shopping decision process. What are the stages involved in the adoption of an innovation. Highlight the elements involved in the diffusion of an innovation. Explain with example the extended problem solving, limited problem solving and habitual decision making situations. Explain the reason as to why a retailer should know the shopping decision process. A retailer finds that an innovative product introduced in his outlet is not purchased by the shoppers. What strategies would you recommend him to make the shoppers adopt the product?
75
DBA 1740
NOTES
76
UNIT III
NOTES
INTERNAL INFLUENCES ON SHOPPING BEHAVIOUR

3.1 INTRODUCTION The quality of retail strategy depends on how well a firm indentifies and understands the shoppers and forms its strategy mix to appeal to them. This requires a through knowledge on the decision making process of a shopper and the various factors influencing the shoppers. Unit II has provided the input regarding the preshopping, shopping and post shopping behaviour. With this background knowledge, the present unit aims to provide input regarding the internal influences on the shopper behaviour. The internal factors can be broadly categorized as personal and interpersonal influences. Personal influences deals with : attitude, perceptions, learning, personality and self image and lifestyle. Interpersonal variables include communications and persuasion, family , group and store employees. These personal and the interpersonal variables are explored in detail in this unit. 3.2 LEARNING OBJECTIVES After reading this unit you will be able to understand; The nuances of attitude formation, theories on attitudes and strategies to change attitude Role of perception in decision making process Learning theories Influence of personality and self image on the shopper behaviour Strategies for framing persuasive communication Stages in family life cycle and role of family in decision making Reference group influences on the shopper behaviour Functions of store employees and their influence on the shopper behaviour
77
DBA 1740
NOTES
3.3 PERSONAL INFLUENCES The influence of select personal variables on shopping behaviour is dealt under this section. The personal variables dealt are: attitude, perceptions, learning, personality and self image and the lifestyle of the shoppers. 3.3.1 Attitude Attitude plays a pertinent role in the shoppers behaviour. The consistency of purchases made by the individuals, recommendations to others regarding products, preferences for products or the retail store, their beliefs, the process of evaluations of alternatives and intentions are all related to attitudes. Attitude is a learned predisposition to behave in a consistently favourable or unfavourable way with respect to a given object. The word object refers to product, brand, service, possessions, advertisement, cause and issues, cause, retailer, price etc. Attitude is generally learned. This means that attitudes relavant to shopping behaviour are formed as a result of direct experience with the product or situation , word-of-mouth, internet , advertisement, direct marketing etc. Attitudes are relatively consistent with the behaviour they reflect. However attitudes are not necessarily permanent, they can be changed. Attitude occurs within and is affected by the situation. Situation refers to events or circumstances that influence the relationship between and attitude and behaviour at a particular point of time. Attitude can also be said as a relatively global and enduring evaluation of object, issue, person or action. Attitudes are overall evaluations that express how much an individual like or dislike an object or an action. Shoppers frame attitude towards products, brands, advertisements, retailer stores etc and a retailer should understand the same in order to create a favourable attitude or to change an unfavourable attitude. Attitudes are important because they serve several functions. These functions were dealt in the previous semester course material Retail Management : Concepts and Environment. Recalling the same reminds us four distinct function of attitude viz., The adjustment function directs people towards pleasurable or rewarding objects and away from unpleasant, undesirable ones. Attitude of an consumers depend to a large degree on their perception of what is need satisfying and what is punishing. Ego-defensive attitudes help to protect the ego or self-image from threats. For example a consumer who has made a poor decision may defend the decision as correct. Value expressive attitudes enable the expression of the persons centrally held values. Consumers adapt certain attitudes in an effort to translate their values into something more tangible and easily expressed. Marketers who understand the values which consumers want to express and design products and promotional campaigns to fulfill the same will be successful in their efforts.
78
Knowledge function - The need for understanding things around us develops the attitude towards acquiring knowledge. The need to know tends to be specific. Thus out of the need to know come attitudes about what we believe we need or do not need to understand. In simple words, attitude performs the following functions; Guide an individuals thoughts called as cognitive function Influence the feeling called affective function Affects our behaviour called as connative function
NOTES
Attitude influences the acquisition, consumption and disposition of an offering. Thus attitude play a major role in deciding what an individual does, what he consumes, how he consumes, where he shops etc. Characteristics of attitudes Attitude can be described in terms of the following characteristics; Favourability how much an individual likes or dislike an object Attitude accessibility an accessible attitude is one that can be easily and readily retrieved from memory Attitude confidence or strength refers to the extent to which a shopper holds the attitude in confidence. Sometimes attitudes are very strong and held with great deal of confidence. In other cases a shopper may not be very certain Persistence or endurance refers to time until when the attitude is held. Some might last for a extremely long time,while others may be short lived. Resistence to change refers to the ease with which the shoppers attitude towards product or brand can be changed. In general attitudes are difficult to change.
Forming and changing attitudes Marketers need to understand how the shoppers attitude is formed so as to create or affect consumer attitudes towards his offerings. This knowledge provides useful information about how attitudes about existing offerings or established shopping behaviour can be changed. The following diagram conceptualizes the attitude formation and change process;
79
DBA 1740
NOTES
Attitudes are based on Cognitions (thoughts) Cognitive (thoughts) The cognitive
Shoppers Elaboration of a message (based on their motivation, ability and opportunity (MAO)
Affect (feelings /emotions) Affect (feelings/emotions) Emotional processing Attitude toward the ad Classical conditioning The mere exposure effect Mood Affect transfer
High Central-route Processing
response model The expectancy value model Simple beliefs
Low Peripheral-route Processing
Simple inferences Attributions Heuristics
The kind of information used by shoppers to frame their attitudes forms the base for attitude formation and change. From the above diagram several basis of attitude formation can be identified. Some views hold that attitudes are based on cognitions or beliefs ie attitudes are based on the thoughts about the information received. The information may be received from external or internal source discussed in the previous unit. Attitudes can also be based on emotions. A shopper may have a favourable attitude about an offering (clothes,music, product etc.,) simply because it feels good or seems to be right. The next issue affecting the attitude formation and change is the amount of thinking or elaboration the shoppers put forth in forming and changing their attitudes. In some cases the shoppers motivation, ability and opportunity(MAO) is high, in which case a lot of effort is devoted, along with mental energy and involvement in the act of forming or changing attitudes and making decisions. The term central route processing is used to describe attitude formation which is based on a careful and effortful analysis of the true merits or central issues contained within the message.
80
When the motivation, ability and opportunity is low, the shoppers attitudes are based on a more tangential or superficial analysis of the message, not on an effortful analysis of its true merits. The term peripheral-route processing is used describe the attitude formation and change processes that involve limited effort on the part of the shopper. Further discussion regarding attitude formation and change are presented under two main headings : (1) high effort (2) Low effort I. Attitude formation and change : High effort
NOTES
The shoppers devote a lot of effort to process information and make choices. The marketers can influence their attitudes either Cognitively influencing their thought or the beliefs Affectively influencing the emotional experiences
The attitudes formed can be influenced by the marketers through the characteristics of source used in a persuasive communication or through the type of message used or thorugh a combination of both. The attitude thus formed may play a powerful role in influencing the shoppersintention and their actual behaviour. The following diagram provides the framework for further discussion;
Attitude formation and change : High Effort
Cognitive bases of attitudes Cognitive response model Expectancy-value model Affective bases of attitudes Emotional processing Attitude towards advertisement
Influencing cognitively based attitudes Source factors Credibility Reputation Message factors - Argument quality - One sided Vs two sided messages -Comparative messages
Influencing affectively based attitudes Source factors Similar sources
Message factors - Emotional appeals - Fear appeals
Attitudes and Intentions
81
DBA 1740
NOTES
Cognitive (Thinking ) basis of attitude A number of theories are proposed to explain the cognitive bases of attitudes when the shoppers are likely to put lot of effort to process information and make decisions. Two theories are highlighted below viz., (1) cognitive response model and (2) Expectancyvalue model 1. Cognitive response model The basic idea behind the cognitive response model is that the shoppers reactions to the message affects their attitudes. Cognitive responses refer to the thoughts that arise in the minds of a shopper when he is exposed to a communication. The thoughts can take the form of recognitions, elaborations, associations, images or ideas. The cognitive response model predicts that the spontaneously generated response will determine the attitude. Three categories of responses to communications have been identified through research studies; Counter arguments are thoughts that express disagreement with the communication Support arguments are thoughts that express agreement with the message Source derogations are thoughts that discount or attack the source of message.
According to the cognitive response model, the above responses will affect the shoppers attitudes. Counter arguments and source derogation will result in a less favourable initial attitude or resistance to change attitude. It can be seen that according to cognitive response model the shoppers exert a lot of effort in responding to the message by generating the above said responses. 2. The Expectancy- Value Model The expectancy model is widely used to explain the formation and change in attitude. According to this model attitudes are based on Beliefs or knowledge of the shopper about an object or action Their evaluation of these particular belief
A variety of expectancy value model that differ in terms of components of attitude have been proposed. The models vary as to whether they are examining the individuals evaluation of an attribute or its importance and how these components are measured. The theory of reasoned actin(TORA) is one of the most widely used model for understanding attitudes. The model provides an expanded picture of how,when and why attitudes predicts behaviour. The TORA model includes not only formation and change of attitude buy how people in the social environment influence the behaviour.
82
Influencing cognitive based attitudes in case of High effort The attitude can be formed or changed by influencing the source or the message or both. Influencing through the source When information processing is done with high effort the shoppers whose attitudes are based on cognitions are likely to be influenced by believable information. The messages should generate support arguments, restrict counter arguments and source derogations and increase the belief strength i.e. it must be credible. Spokes persons creditability and company reputation enhances the credibility of a message. Credible sources are thought to have the characteristics of trustworthiness, expertise and status. Marketers generally use celebrity, an actor, a company representative or a real shopper as spokes person to endorse the message. Credible sources have considerable impact on the shoppers acceptance of the message particularly when their previous attitudes are negative or when the message deviates from their prior beliefs and when the message is complex to understand. Many marketing communication do not feature an actual person. In these situations, shoppers judgments of credibility are formed from the reputation of the company that is delivering the message.
NOTES
Influencing through the message The credibility of a message is evaluated through three factors mentioned below; Argument quality: Strong arguments increase the quality of the message. Arguments are considered to be strong when they present the best features of an offering in a convincing manner. If the message is weak, the shoppers may not be convinced to buy the product/service. One versus two sided messages: Majority of marketing messages present only positive information which is called one-sided message. Two sided message are those containing both positive and negative information about an offering. Two sided message will enhance the credibility of the marketing concern and also be more appealing to intelligent shoppers who prefer more balanced and less biased messages. Comparative messages : comparative messages show how much a concerns offering is better than that of the competitors. Indirect comparative message refer to messages in which offering is compared with unnamed competitors. in case of direct comparative advertising, advertisers explicitly name a competitor set of competitors against whose product the offering is positioned.
83
DBA 1740
NOTES
Affective (Feelings) basis of attitude Most of the research on attitude is focused on the cognitive model of attitude formation. However the shoppers exert a lot of mental energy in processing the message on an emotional basis. Emotional reactions serve as a powerful way of creating attitudes that are favourable, enduring and resistant to change. This section discusses when and how attitudes that can be changed through shoppers feelings when the processing efforts and MAO is high. (1) Emotional processing If the affective (feeling) involvement towards an object or decision is high, the shoppers can experience strong emotional reactions to stimulus such as anger, fear, joy etc and these feeling in turn influence attitudes. High involvement in an advertisement can be created by appealing to emotions of shopper. Negative emotions can sometimes have a positive effect on attitudinal change. For example showing the sufferings of a polio affected person in a polio vaccination campaign. It is important to note that cognition can still influence whether experienced feelings will influence the shoppers attitudes. The shoppers must link the feelings to thoughts so that the feelings will have a direct impact on the attitudes. Even if an emotional advertisement is viewed it should be linked positively by thought to the offering, then only it will have an impact on the attitude. (2) Attitude towards ad model Attitude towards ad model tries to create an understanding regarding the impact of advertising or other promotional measures on consumer attitude toward product or brand. The model states that the consumers form various feelings and judgments as the result of exposure to an advertisement. These feelings and judgments in turn affect the consumers attitude toward the advertisement and beliefs about the brand acquired from exposure to the advertisement. Finally, the consumers attitude towards the ad and belief about the brand influence his attitude toward the brand. Influencing affectively based attitudes When the attitudes are affectively based the characteristics of source and the message can be used to change the shoppers attitudes by emotion. Influencing through source Perceived attractiveness is an important characteristic affecting the affectively based attitude. Source can be perceived as attractive if they are made similar to the target segment of shoppers, likable or familiar. Attractive sources evoke favourable attitude if they are appropriate for the product category. The attractive source enhances the attitudes, either by making the ad informative or by affecting the shoppers belief that the product must be good. When the source is attractive but not relevant it can distract the shopper away from the idea of the message. The relationship between attractiveness and attitude change applies to selling encounters also. The shoppers are more attracted to and buy from sales people they perceive similar to themselves and they are more likely to perceive physically attractive sale people as having more selling skills and they are more likely to yield to their request.
Influencing attitudes through message The characteristics of message that influence the formation and change in the attitude are Emotional appeals: marketers try to influence the shopper attitudes by using appeals that elicit emotions such as love, wanting, joy, hope, excitement, daring, fear, anger, shame or rejection. First five emotions can be used to attract shoppers to the offering whereas the last four would be used to create anxiety among the shoppers about what might happen if they do not use the offering. Fear appeals: Fear appeals attempt to elicit a specific kind of emotional response of fear or anxiety by stressing the negative consequences of either engaging or not engaging in a particular behaviour. By arousing fear marketers hope that the shoppers will be motivated to think about the message and behave in the desired manner.
NOTES
Predicting behaviour using attitudes The marketers need to know whether, when and why attitudes predict behaviour apart form knowing how attitudes are formed and how they can be changed. The findings of the research studies have thrown light on many factors that can affect the influence of attitudes on the behaviour. They are listed below; 1. Level of involvement/elaboration: Attitude are more likely to predict behaviour when cognitive involvement is high. The shoppers have more actively processed information, the attitude is more likely to be based on strongly held beliefs, thereby resulting in stronger conviction. 2. Knowledge and experience: Research findings show that attitudes are more strongly related to behaviour when the consumer is knowledgeable about or experienced with the object. 3. Accessibility of attitudes: If an attitude is accessible or in the top of the mind and is easily remembered it will be strongly related to behaviour. Product usage or direct experience generally increases attitude accessibility. 4. Attitude confidence: If the shopper is more certain about the evaluations the confidence will be stronger and it will be related to the behaviour. Confidence tends to be stronger when the attitude is based on either a greater amount of information or on more trustworthy information. 5. Specificity of attitude : Attitudes will be more related to behaviour when it is measured with respect to a specific beahaviour which is attempted to be predicted rather than being general. 6. Situational factors: Intervening situational factors can prevent a behaviour from being performed and can thus weaken the attitude-behaviour relationship 7. Personality variables: The personality of a shopper will have an impact on the attitude behaviour relationship.
85
DBA 1740
NOTES
II. Attitude formation and change : Low effort In contrast to the shoppers in high-effort situations, low-elaboration shoppers are either not willing or not able to exert a lot of effort and emotional resources to process the information received from various communication sources. The shoppers are not motivated to process the message because ti is not relevant to their needs, values and goals or it involves a decision about which the shoppers feel little risk. The shoppers may also exert low effort due to o Lack of sufficient knowledge to decipher the meaning o Message is in a incompatible format o They are not mature enough to process the message The shoppers frame attitude not on the basis of detailed consideration of meassage but on easily processed aspects of the message called peripheral cues and hence it is called as peripheral route to persuasion. As in the case of central route to persuasion when the effort is high, here also there are two peripheral routes to persuasion ie cognitive and an affective route. The concept is depicted below;
Attitude formation and change : Low Effort
Cognitive bases of attitudes Simple beliefs - Simple inferences - Attributions - Heuristics Affective bases of attitudes Mere exposure effect Classical conditioning Attitude towards ad Mood
Influencing cognitively based attitudes Source factors Credible sources Message factors - category and schema consistent information -large number of message arguments -simple messages -involving messages Context factors -message repetition
Influencing affectively based attitudes Source factors -Attractive sources -Likable sources -Celebrity sources Message factors - Pleasant pictures - Music, humor, - Emotionally involving messages Context factors Message repetition Program or editorial context
Attitudes and Intentions
86
Cognitive bases of attitude: Low effort Simple belief affects the shoppers attitude when the processing effort is low. Beliefs may not be strong because the shopper might not have processed the message deeply. ince the beliefs are not very strong, marketers may change the same successfully. Simple beliefs are formed by forming simple inferences which is based on easily processed peripheral cues in the advertisement. Alternatively shopper may form simple beliefs based on their attributions or explanations for an endorsement. If shoppers attribute an endorsement to the endorsers desire to earn a lot of money they will not perceive the message as believable. The shoppers may use their prior knowledge to form heuristics i.e. simple rules of thumb that are easy to invoke and involve little cognitive effort. A special type of heuristic is the frequency heuristic where the shopper simply form a belief based on the number of supporting arguments. Influencing cognitively based attitudes Marketers should consider several factors when trying to influence cognitively based attitudes. Three major characteristics of a communication that can be used to influence the attitudes are the source, message and the context (1) Source Credible sources can serve as peripheral cues when the effort is low. Message relevant arguments are not actually processed as in the case when the processing effort is high. The source experitise is used as simple cue in making judgment about the credibility of the message. Little cognitive effort is only involved in making judgment. (2) Messages Messages include the category and schema consistent information, large number of message arguments, simple messages and involving messages. Many elements of a communication may be used to affect the inferential beliefs that shoppers form from a message. In designing ad marketers should place considerable attention on the immediate association the shoppers may have to easily processed visual and verbal information in a message. This is referred as the category and schema consistent information. Instead of presenting lot of detailed information about the offerings, the marketers should provide simple message that communicates one or two key pints because shoppers may be easily overloaded with information. Marketers include certain elements in the advertisements that focus on enhancing the shoppers involvement in the message so that it will increase their likelihood of message processing. Self referencing will enhance the involvement. It can be induced by asking the
87
NOTES
DBA 1740
NOTES
shoppers to relate the message to their own experience or self image. Involving message may also use mystery ad in which the identity of the brand is not revealed until the end of the ad. (3) Context factors The context in which the message is delivered can influence the belief strength and salience. Message repetition can have an impact on the shoppers cognitive processing ability. The repeated message helps shoppers to acquire simple beliefs about important features or benefits and increase their salience or retrievability from the memory. The shoppers do not try to actively process the information rather the constant repetition helps in both learning and recalling the information from memory through a process called incidental learning. Repetition also increases the awareness and makes the brand familiar. Affective basis of attitude: low effort The study of low effort affective processes involves four major areas: the mere exposure effect, classical conditioning, attitude towards the ad and mood. According to the mere exposure effect the shopper tends to prefer familiar objects to unfamiliar ones. The shoppers attitudes toward an object or behaviour will change over the time as they become more and more familiar with it. Classical conditioning states that there are certain unconditioned stimuli that automatically elicit an unconditioned emotional response such as joy or warmth. By repeatedly pairing the unconditioned stimulus with a neutral stimulus (conditioned) such as brand name may evoke the same emotional response(conditioned response) to the brand name itself. For example the unconditional stimulus could be represented by happy scenes that would generally evoke positive feelings. By repeatedly pairing the brand (the conditioned stimulus) with the unconditional stimulus it is hoped that the positive feeling will be produced by just their association with the brand name alone. Attitude towards the ad refers to the situations where the attitudes towards one object can affect attitudes towards an object with which it is associated with. The shoppers may like an advertisement a great deal. This may be due to the positive response or any other reason. Because they like the advertisement so much, they eventually transfer their affect from the ad to the brand which is advertised. Attitudes are affected by shoppers moods. A stimulus can create a positive mood and this mood in turn affects the shoppers reactions to any other stimulus that they happen to evaluate. Thus the shopper may like something because he is in a good mood and may not like the same due to his bad mood. Influencing affectively based attitudes Marketers can influence the affectively based attitudes by focusing the attention to the source, message and the context in which the message is delivered.
88
(1) Source Two factors play a major role in determining whether or not the sources evoke favourable reactions; their physical attractiveness and their likability. When the shoppers motivation to process a message is low, attractive source will enhance the favourability of consumers attitudes, regardless of whether the message arguments are strong or weak. The shoppers rate the ads with physically attractive models as more appealing, attractive, eye catching, impressive and interesting than the ads with unattractive models. The likability of the source can also influence affectively based attitudes. Likable sources may act as an unconditioned stimuli and create a positive mood that affects the shoppers evaluations of the ad, brand and make them feel more positive about the endorsed products. Physical attractiveness and likability explains as to why celebrities are used mostly in advertisements. (2) Message Message characteristics include pleasant pictures, music, humor and emotional content. Pleasant pictures serve as conditioned stimulus and thus affect the shoppers mood and make the ad likable and interesting. Music has been shown to stimulate a variety of positive effect by many research studies. Marketers must use the right kind of music that produces the desired affective responses. Humor is another technique used to enhance positive affect. The shoppers often rate humorous ads as most popular. Humor tends to work best for certain type of audiences liket for example the younger people. Emotional message may take the form of transformational advertising. The goal of a transformational ad is to associate the experience of using the product with unique set of psychological characteristics. (3) Context Message repetition and program or editorial context is the key contextual factors. Message repetition focuses on creating brand familiarity. This is an important way of affecting shoppers attitudes when the effort is low. Shoppers may prefer the brand which is frequently repeated as they are familiar with the same. The program or editorial context in which a message appears affects how it is evaluated. 3.3.2 Perception The market place is thronged with multitude of competition who offers similar products and services. Yet some products, brands retail stores etc are perceived to be better than that of the similar products/services. The way the product or service is perceived is intricately tied to the shoppers it attracts and the share of market it gains. Thus the brand image,
89
NOTES
DBA 1740
NOTES
pricing and risk avoidance are all aspects of shoppers perception. Understanding perception and the factors determining how the shoppers view products and services provides input to the marketers to successful strategies. Perception is defined as the process by which individual selects, organizes and interprets stimuli into a meaningful and coherent picture of the world . Thus perception is the way in which an individual gathers, processes and interprets information from the environment. Perception in marketing context can be viewed as the opinion a shopper forms about a product by seeing its packaging, colors used, symbols of the brand and the logo associated with the brand. 3.3.2.1 Elements of perception The elements of perception are sensation, absolute threshold, differential threshold and subliminal perception. These elements are presented below; 1. Sensation Sensation is the reaction to a stimulus. It is the immediate response of our sensory receptors (eyes, ears, nose mouth, fingers) to basic stimuli such as light, color, sound, odors and textures. Perception is the process by which these sensations are selected, organized and interpreted. Hence the study of perception focuses on the sensations. When a person is exposed to any of the marketing stimuli, the first reflex that is initiated in him is known as sensation. Thus the shoppers reaction to the stimulus received by any or the five senses is called sensation. Perception influences the purchase decisions of the shoppers hence the marketers try to provide shoppers with cues to perceive the product in such a way that they will appeal to the shoppers senses. The marketers also try to make the shoppers perceive the product in a specific way. 2. Absolute threshold The lowest degree of sensory inputs at which the shopper becomes aware of a sensation is called the absolute threshold. For example a shopper may not hear an jingle in a noisy room. The jingle in the advertisement may escape his attention. The stimuli falls short of the threshold of the human sensory system. The marketers job, therefore to develop the communications in such manner that it can be sensed ie it should be above the absolute threshold. 3. Differential threshold Differential threshold is the smallest detectable difference between two values of the same stimulus. This is also referred as Just noticeable difference (JND). It is the minimum amount of change in a stimulus that can be consciously detected by a person. For example if the price of a popular brand of a popular is increased by Rs.1000 it might not lead to a prospective shopper changing his mind about buying the same, however if the price increase is above Rs.5000 it will definitely be noticeable and the shopper would probably change his choices.
JND is the minimum amount by which the stimulus intensity must be changed in order to produce a noticeable variation in the sensory experiences. Marketers use JND to determine the degree of change to be made to secure the attention of the shopper. The change here refer to using JND to determine how much variation in price of a product can actually make a difference or in determining how the packaging of a product has to be altered to secure the shoppers attention. Marketers thus make use of JND to cope with competition, to attract consumers with a reduction in price or to attract shoppers with attractive and catchy packaging designs. These are called the positive uses of JND. Sometimes marketers may try to incorporate a change that is just short of JND and hence cant be perceived by the shoppers. They reduce the size or quantity of the product in such a way that the shopper is unaware of it and pays the same price. 4. Subliminal perception Subliminal means subconscious. The subconscious mind of an individual stores everything he experiences. Normally this process takes place without the actual awareness of eh person because the threshold level for actual awareness is higher than that of actual perception. Messages that are not consciously registered in the memory is called as subliminal messages. When the marketers try to stimulate the subconscious of the shopper toward their products, it is known as subliminal perception. Marketers use the sensory inputs in a degree lower than the minimum level required for them to reach the shoppers sensory threshold. For example the concealed warning note to the shoppers, use of imperceptible audio messages, fleeting visual images, accelerated verbal communication and so on. 3.3.2.2 Process of perception Perception plays an important role in the information processing activity of the shopper. The perceptual process as explained by Michael R.Soloman is depicted in the diagram below
Sensory stimuli Sensory receptors
NOTES
Sights Sounds Smells Taste Textures
Eyes Ears Nose Mouth Skin
Exposure
Attention
Interpretation
The exposure, attention and interpretation stages are enumerated below;
91
DBA 1740
NOTES
1. Exposure Exposure occurs when the senses deduct any external cues from the various things contacted. Shoppers are exposed to various advertisements from variety of sources. The exposure is the starting point of information processing. When perception takes place at the point at which the shopper becomes aware of the various products available in the market. When the shopper views the advertisement the senses get stimulated. Most of the time, exposure to marketing messages happens unintentionally except when shopper actively searches for information regarding specific product or service Selective perception The shoppers are being constantly bombarded with advertisements through all the available media at all times. Hence it becomes difficult to catch the attention of the shoppers. It has to be understood that the shoppers face an information overload. In this situation they involuntarily adopt a selective perception process. Using this process the shoppers perceives only those advertisements that he feels are relevant to him and ignores the rest. The process of selective perception has the following four steps; i. Selective exposure : shoppers avoid ads or information that might contain unpleasant information or any other information that they consider undesirable. They normally look for ads that are positive and look desirable
ii. Selective attention: shoppers will avoid information that might contain unpleasant information or any other information that they consider undesirable. They look for ads that are positive and look desirable. iii. Perceptual defense: shoppers may screen out certain stimuli they want to avoid. The past experience and the emotion state of the shopper play an important role in this process. iv. Perceptual blocking: the shoppers may sometimes perceive that the product is of no use to them and so dont bother about it or dont make an effort to remember the same. In order to overcome filtering based on the selective perception , the marketers use innovative concept in their ads to catch the attention of the shoppers. They also resort to give their ads maximum media exposure so that the shopper comes across the same frequently. 2. Attention The shoppers normally recall only a part of all the information that has been received through various media. Exposure occurs when the information comes into contact with any of the five senses of a person. Marketers follow innovative methods to capture the attention of the shoppers. Getting the attention of the shoppers depend son the stimulus, individual factors and situational factors.
Stimulus Anything that initiates an individual to take action is said to a stimulus. Marketers try to stimulate shoppers to purchase their products through their advertisements. The stimulus will receive the attention of an individual based on the following factors; Size and intensity: The larger the stimulus the greater will be the chance of being noticed. The number of times a shopper is exposed to an information has also an impact on the intensity of this response. Colour and movement: Eye catching and contrasting colours help marketers in gaining the attention of the shoppers. Position: Position of the object in the visual fields affects the response generated. Hence marketers try to position their products near the center of the visual field in order to ensure that the shoppers notice the same easily. Isolation: Separating the object or isolating it also influences the intensity of the stimulus. For example placing a product on the big table which is otherwise empty will capture the attention. Format or design of Ad: Different fonts, calligraphic text. Layout of the advertisement also influences the stimulus. Contrast or Distinguish: The visual impact of messages in contrasting colours is higher and shoppers invariably pay more attention to them. Information extent: Shoppers cannot process to much of information. Hence overloading of information should be avoided. Providing precise information generally works and acts as stimulus rather than providing too much of information.
NOTES
Individual factors The attention of the shopper depends on the following factors; Interest and need: Shoppers will pay more attention to the information when he perceives a need for the product and when he is interested in the information presented in the advertisements. Ability: Shoppers differ in their ability to understand the information and retain it. Involvement: A shopper who is more involved in a product spends considerable time in collecting information about the same.
Situational factors The setting in which the shopper is exposed to the stimuli also determines the extent of attention paid to the advertisement or the information received. The ambience, surroundings, other shoppers, the noise, temperature etc may influence the extent of attention paid to point of purchase display and other promotional measure inside the retail store.
93
DBA 1740
NOTES
3. Interpretation Interpretation refers to the meaning the shopper derives from the ad presented to him. Shoppers understanding of the stimulus presented depend upon his personal views. Their learning, experience and expectations from a product influence their interpretation. Interpretations differ from significantly from one shopper to the other. The cultural differences, personality, extent of knowledge, experience, learning etc may cause the difference in perception. Semiotics is the process through which the shoppers correlate various symbols and signs with certain beliefs, perceptions etc. understanding semiotics helps marketers to understand how shoppers interpret the symbol and colors used in the product and advertisements. Shoppers buy products for a variety of reasons apart form the functional benefit it offer; for what it means to them rather what it actually is ,or to project a specific social image by conspicuous consumption of certain products or services. The packaging of the product, the way in which it is advertised, price , promotional activities, packaging, the music or visual in advertisements etc plays an important role in determining how the products are perceived or interpreted by the shoppers. 3.3.3 Learning Learning is an important component of shopper behaviour. Learning can occur intentionally or unintentionally. It occur intentionally when a problem is recognized and information is acquired about products that might solve the problem. Unintentional learning can also strongly influence the shopper behaviour. The learning mechanism enables the shoppers to adapt to the changing environment. Knowledge on the learning principle can useful in understanding how shoppers want and motives are acquired and how their tastes are developed. This will enable the marketers to decide how advertisements or other techniques can help in shoppers learning regarding products and promotions. Learning can be defined as a relatively permanent change in behaviour occurring as a result of experience. Three points arise from the above definition. First, behaviour refers to non observable cognitive activity as well as to overt actions. It is possible for learning to occur without any change in the observable behaviour. Second, learning results in relatively permanent change in behaviour. This excludes changes brought by fatigue and other shortlived influences. Third the definition of learning stresses experience. 3.3.3.1 Types of learned behaviour All the behaviour exhibited by individuals is learned. Some specific types of learning are explained below; Physical behaviour: Individuals learn many physical beahviour pattern ie to walk, talk and interact with other. As shoppers, individual learn methods of responding
to various situations. These may take the form of behaving like the role models in purchase and use of products, reaction to the price etc. Symbolic learning and problem solving : People learn symbolic meanings that enable highly efficient communication through the development of languages. The marketer use these symbol for eg brand names, logo, signs, etc to connote positive images to the shoppers. Problem solving learning occurs by employing the process of thinking and insight. Affective learning : Individuals learn to value certain elements in the environment and dislike others. This means the shoppers learn many of their wants, goals, motives as well as the products that satisfy these needs. Learning also influences the development of favourable or unfavourable attitude towards the marketers and their products which will in turn affect the tendency to purchase
NOTES
Learning by shoppers occurs by direct experience of product or service. These direct experience can be influenced by marketers. To understand the same, learning theories and the elements of learning should be understood. 3.3.3.2 Principle elements of learning Shoppers learn in several basic ways. Four elements are fundamental for learning to take place viz; motive, cue, response, and reinforcement. These components influence exact nature and strength of these components influence what will be learned, how well it be learned and the rate at which the learning will occur. 1. Motivation Motives arouse individuals and thereby increase the readiness to respond. It provides the energy need to engage in the learning activity. It is the driving force that impels individuals to action and is the result of unfulfilled needs. If an individual has strong motivation to learn something, there is increased likelihood that learning will take place. The degree of involvement in the goal object will influence an individuals degree of motivation to acquire information or knowledge about product or service. 2. Cues Cues are relatively weak stimuli, not strong enough to arouse shoppers but have the potential of providing direction to motivated activity. The shoppers are exposed to various cues almost everyday such as advertising, display, packaging and prices. These cues serve to help shoppers satisfy their needs by purchasing certain brands. 3. Response The way an individual reacts to a cue or stimulus is the response and could be physical or mental in nature, leading to learning. The shoppers are exposed to many cues providing direction at the same time and each cue competes for attention. The responses to particular cues or stimuli may be significantly affected by earlier learning as a result of responsereinforcement.
DBA 1740
NOTES
4. Reinforcement The probability that a given response will be repeated in the future can be termed as reinforcement. Reinforcement of a specific response increases the likelihood for the response to reoccur. Reinforcement can be anything that both increases the strength of response and tends to induce repetitions of the behaviour that preceded the reinforcement. Marketers always try to y reinforce the response of the shoppers. If a shopper is rewarded for a particular response, he is most likely to repeat the beahviour. On the other hand negative reinforcement makes the shopper avoid such a response. Therefore it is extremely important that the companies try to positively reinforce their product or services 3.3.3.3 Behavioral learning theories According to behavioral learning theories learning takes place as a response to external stimuli; when an individual reacts to a known situation in a predictablemanner. Behavioral scientist do not give importance to the internal thought process, instead stimulus inputs and the resultant behaviour are focused. Two important behavioral theories of learning are: classical conditioning and instrumental conditioning. 1. Classical conditioning Proponents of classical conditioning are of the view that human beings and animals can be taught to behave in a particular manner by conditioning. Conditioning can be defined as a learning process in which an organisms behaviour becomes dependent on the occurrence of a stimulus in its environment. Classical conditioning is said to occur when a response to a particular stimuli is combined with another stimulus that brings the same response. Marketers consistently highlight their products positive aspects through advertisement. For example in case of Tata Steels advertisement, it highlights the steels strength and quality. So the moment the shopper thinks of quality and strength(unconditioned response) of steel for construction of house , they think Tata steel(conditioned response) The three most important aspect of classical conditioning are repetition, stimulus generalization and stimulus discrimination. Repetition: In order to create favourable attitudes toward the products, marketers increase the number of times people are exposed to their advertisement. If the association between the conditional and unconditional stimulus is consistently repeated, it increases the stimulus response association and individuals will not easily forget such associations. This is one of reasons as to why the marketers are repeatedly advertising their products or services. Stimulus generalization : Learning is based on the individuals ability to generalize things. Stimulus generalization happens where individuals respond similarly to mildly different stimuli. Stimulus generalization is the reason why most imitation and fake products succeed in the market. People producing fake products that look almost like the original brands will
successfully sell their products in the market taking advantage of the stimulus generalization of the shoppers. Stimulus discrimination: This is opposite to stimulus generalization. This is a process where a specific stimulus is selected from a group of similar stimuli. Marketers try to convince their shoppers to differentiate their brands from imitations and urge them not to purchase such products. Marketers develop product and brand positioning strategies to help shoppers identify their brands distinctively. 2. Instrumental Conditioning Like classical conditioning, instrumental conditioning needs an association between stimulus and response. However the stimulus that provides the most rewarding response will be learned. Instrumental conditioning is also known as operant conditioning. Unlike the classical conditioning the response to stimuli is active, where individuals seem to actively respond to stimuli, provided it is positive. If a response to stimuli is positive and satisfying, only then the individual is more likely to repeat the behaviour in the future. On the other hand, if the response is less than satisfying or negative, the individual is likely to avoid repeating the behaviour. 3.3.3.4 Cognitive learning theories Cognitive learning theories highlight the importance of learning thorough mental processing. Individuals try to solve the complex issues they face using information available. They seek information from external environment and use it to resolve the problems faced from time to time. Such learning which occurs from using human mind is called cognitive learning. Behaviorist approach might be more relevant when shoppers cognitive activity is minimal as in the case of low involvement purchase situations. For example the shopper may be inclined to buying the same product purchased earlier as long as the results are satisfactory. Cognitive learning theory is relevant in understanding the shoppers decision process in situations of high-involvement purchases. In case of extensive problem solving, the consumer becomes aware of a need, indulges in information search and evaluates alternatives available to satisfy the need, buy a product or service that is believed to satisfy the need and make post purchase evaluation to ascertain the degree of satisfaction. 3.3.4 Personality and self image Personality and self image are two psychologival aspects that have been used for studying the shopper behaviour. The purpose of studying these variables is to determine their usefulness in understanding shoppers basic orientations and their brand and store preferences, media usage patterns, preference for promotional efforts and other facets of
97
NOTES
DBA 1740
NOTES
shopper behaviour. This knowledge would allow the marketers to understand the underlying pattern reflected in their product choices and other behaviour. 3.3.4.1 Personality There exist no precise definition for the concept of personality. It has viewed by different people in different contexts. However there are certian major aspects of similarity among the various definitions which is brought to focus by David Loundon and Della Betta Personality is viewed as unique characteristics that account for differences between individuals rather than on how people are alike. Personality refers to the consistency of the individuals dispositions rather than the changes in his or her actual behaviour across different situations.
Hence Personality can be understood as an individuals response tendencies across situations and over time. understanding the relationship between personality of the shopper and his purchase behaviour will enable marketers to target and promote their products effectively. Psychologist use two common approaches in the study of personality: the sate approach and the trait approach. State approach to personality The state approach to personality aims at understanding the individual in the context of whole. It is the study of personality that enables to predict what a person will do in a given situation. This approach to the study of personality is a holistic process where the focus is on understanding the individual as a whole. Psychologists use a variety of measurement techniques to uncover an individuals response tendencies. This approach takes into account external influences such as family, groups, culture and so on. The limitation of this state approach for marketers is that it examines individuals, not groups or market segments. The focus is on one person at a point of time. Trait approach to personality Understanding the personality traits in terms of consistent tendencies to respond to a given situation in a certain ways is more useful to marketers. The fundamental assumption of the trait approach to personality is that individuals share the same traits but they are expressed at different levels, resulting in different personalities. Market segmentation can be done on the basis of extent of influence of specific personality traits or combination of traits on the behaviour of shoppers. When targeting segments that display a particular personality trait, marketers can develop promotional campaigns that effectively communicate the benefits of their products and help to overcome the resistance of shoppers who share this trait.
98
Influence of General Personality Traits on Shopper behaviour A general personality trait is one that invariably affects an individual across a range of situations, both those that are consumption relation and those that are not. Self confidence, shyness, and aggressiveness are all general personality traits. The influence of the general personality traits on the shopper behaviour is presented below; Compliance, aggressiveness and Detachment Individuals deal with anxiety through one of the three responses tendencies: compliance, aggressiveness and detachment. Compliance refers to the personality traits describing a tendency to deal with anxiety by moving towards people and complying with their wishes. Marketers of products and services related to helping people create and or maintain social relationships should target and appeal to shoppers with complaint personalities. Aggressiveness describes a tendency to deal with anxiety by moving against people and offending them. Marketers of achievement, status and power related products and services should target and appeal to shoppers with aggressive personalities. Detachment describes the tendency to deal with anxiety by moving away from people and asserting ones independence. Marketers of product related tot helping people achieve independence should target and appeal to shoppers with detached personalities for eg financial investment instruments Generalized self confidence A shopper with generalized self confidence is one who is comfortable in making decisions. Generally shoppers low in self confidence is more inclined to choose brands from popular and highly visible manufacturers than from less known companies. Similarly shoppers with self confidence will be more willing to be adopt new products introduced in the market. Marketers of new stores and outlets should target and appeal to shoppers with high self-confidence. Conversely marketers of stores with well established reputations should attempt to retail their store patrons by targeting and appealing to those who have low self-confidence. Self-consciousness Self confidence is a tendency of being keenly aware of oneself in many situations. Those characterized as being self-conscious are very sensitive to the image they communicate to others. This heightened awareness of self makes them use products to project their self image. If marketers are targeting this segment of shoppers they should consider offering accessories or benefits that are likely to reduce social anxiety. Self-monitoring Self monitoring refers to the ease with which people adapt to different situations and manage the impressions they make on others. High self-monitors are adept at managing such impressions, are attuned to the demands of different situations, and adapt their
99
NOTES
DBA 1740
NOTES
behaviour accordingly. In contrast, people characterized as low self monitors tend to express their opinion and beliefs about things irrespective of others. If marketers know the extent to which their target shoppers tend to score high or low on self-monitoring, they can develop more effective marketing programs. For example marketers should not provide much technical information about their product or service to high self monitors as they are more sensitive to information that affects their image. Self-Esteem Self esteem describes the extent to which the actual self is congruent with the ideal self. Individuals whose actual self fall very short of their ideal self are characterized as low in self esteem. Conversely individuals whose actual self is close to their ideal self are characterized as high in self-esteem. People with high self-esteem feel generally positive about themselves, while those with low self esteem dont. Low self-esteem shoppers tend to use different products and services to deal with stress and anxiety. Dogmatism Dogmatism is a personality trait describing a tendency to be close-minded, seeing life in terms of black and white. A nod dogmatic is more open-minded, appreciating complexity in life and seeing many shades of gray. The dogmatic person has one view of reality and fits experiences and situation to that reality. Researchers have found that highly dogmatic people are generally less receptive to new or unfamiliar stimuli, such as new design, new product etc. Rigidity Rigidity describes the tendency to be inflexible in tastes and preferences. Rigidity generally correlates negatively with risk-taking behaviour or innovativeness. The marketers dealing with technological innovation, should target their products are services to shoppers who are less rigid. Less rigid shoppers are likely to express less resistance to the use of products and services that involve high risk activities. Tolerance to ambiguity Tolerance to ambiguity refers to the personality trait that describes the tendency not to feel bothered by situation in which the person lacks information to guide action. Tolerant people tend to engage more in exploratory behaviours, they gather information by shopping around. Shoppers who are tolerant of ambiguity are more likely to search for information as the choice task becomes more complex and as the products become more novel. Marketers who are targeting on the shoppers with high degree of ambiguity should disseminate as much information as possible about their product and services. Optimum stimulation level(OSL) OSL refers to the desire to explore the environment and seek stimulation. Some people have a greater desire to explore the environment and seek stimulation than others.
Research studies have shown that a shoppers optimum level is related to variety seeking and risk taking. The shoppers whose OSL is high were found to generate more cognitive responses to advertising, sought more information , make riskier decision and gambled more than the shoppers with low OSL. State Vs Action Orientation Some individuals are action-oriented ie they can more easily transform their intentions into actual behaviour that other state-oriented people. An action oriented shopper is likely to be more decisive than a state-oriented shopper, is likely to take less time shopping around and is quick to take action. When the marketers are targeting on the action-oriented shoppers they should develop campaigns to meet product trail objectives. Separateness-Connectedness Some people perceive themselves as individuals separated from others, while some tend to see themselves as highly connected with others. The former is said to have a strong sense of separateness while the latter is viewed to have a strong sense of connectedness. This personality trait is important in studying shopper behaviour because people react differently to advertisements having separated versus connected themes. Impulsiveness Impulsiveness describes the tendency to act on the spur of the moment without considering the consequences of ones action. Shoppers scoring high on impulsiveness are most likely to indicate willingness to buy things they did not need but like that those scoring low on impulsiveness. They will also willing to pay more. Point of purchase display would be attractive to these shoppers. Extraversion and Neuroticism Extrovert is likely to be quite sociable and active. In contrast introverts are loners and they like to be left alone. Research studies show that extroverts tend to experience more positive feelings than negative feelings in response to advertising. Neuroticism is the tendency to experience negative affect. Neurotic consumers tend to experience more negative feelings than positive one. Need for cognition Some shoppers tend to think through the purchase decision more thoroughly than others. The tendency is referred to as the need for cognition. The shoppers who have high need for cognition tend to be persuaded by advertising with quality arguments, whereas shoppers with low need for cognitions will be influenced by endorser attractiveness. Influence of Consumption -Specific Personality Traits on Shopper behaviour A consumption specific personality trait affects the shopper only in situations related to consumption and does not extend its influence into non consumption situations. The
101
NOTES
DBA 1740
NOTES
influence of certain consumption specific personality traits on shoppers bevhaviour is presented below; The Market Maven type The market maven shopper is a kind of shopper who has information about many kinds of products, places to shop and other aspects of market place. The shopper initiates discussion with and respond to others who request product and store information. Research findings shows that these type of shoppers influential in the way they make purchase decisions and are found to be usually aware of new products. They tend to participate in various market activities like the use of coupons in purchases. They enjoy shopping and use browsing to collect information about the products Innovativeness Shoppers innovativeness refers to the tendency on the part of the shopper to be among the first to purchase new products within specific categories. This personality trait is very important for marketers of technological innovations. Marketers of new products can gain more market share by targeting on the shoppers who are considered to be high on innovative trait Opinion leadership Opinion leadership is a product-specific personality trait related to product expertise. Opinion leader is a person who is well versed in a product category. This expert is characterized as being motivated to spread the word about the product in ways that reflect his or her opinion (positive or negative). He is different form the market maven in the sense that the opinion leaders expertise is restricted to a particular product class only whereas market maven collects information about many products Product specific self-confidence Product specific self confidence refers to the extent to which certain shoppers feel confident about making decisions with regard to a product category. Marketers of specialty products sold in specialty stores should target self-confident shoppers, self-confident in relation to the product in question. Product specific self-efficacy Shoppers self-efficacy represents the shoppers belief in his or her own performance capability or competence in relation to a product category. Marketers of technological innovations should target shoppers considered high on self efficacy directly related to the product in question. Coupon Proneness, Value Consciousness and Deal Proneness Coupon proneness is the tendency to redeem coupons by purchasing the advertised product or service. Value consciousness is defined as the amount of concern the shoppers
has for need-satisfying properties of the product or service in relation to the price of that product or service. Deal proneness refers to the use of various sales promotion incentives such as trading stamps, sales etc. Marketers should design strategies based on the type of sales promotion devices that is attractive to the shoppers Product specific involvement Shopper may feel a great deal of product specific involvement- emotional involvement in a particular product class or category. Shoppers who are emotionally involved with a particular product class or category are likely to have a belief structure about the product that is more complex and integrated than those who are not involved with the product. Measuring product involvement will enable marketers to segment the market into those who are more and less emotionally involved with the product and accordingly frame pricing, advertising and related strategies. 3.3.4.2 Self-image The shoppers self image (self concept) plays a significant role in predicting and explaining behaviour. Studying shopping behaviour using self image enables to get a description of shoppers by themselves, instead of personality tests that fit the individuals responses into pre determined categories or traits. This distinction is significant because the way a shopper perceives himself or herself might differ substantially from the way in which the researcher sees or categorizes the same shopper. Shoppers have multiple selves, reflecting the many roles they play in their daily lives. These roles are refereed to as identities. For e.g. a women may play different role at her house and the place of work. Each identity is different and gives raise to a different set of purchase needs and motivations. Role identities thus can have an enormous impact on the shopping behaviour. Self image is more complex than role identity. It encompasses not juts the roles in which the shopper see themselves but extends to how shoppers feels they are viewed by others in each of these roles. Shoppers figure out how they will be viewed in the eyes of others and create a social self- an image of how they believe others see them. Forms of self image Self image is a configuration of beliefs related to self. Self image can be defined in terms of the relationship between the shoppers and products. There are four major types of self image that play a part in the shopper behaviour; actual self, ideal self, social self, ideal social self. Actual self image is a part of what psychologists refer to as the private self. The private self involves those images that one has of oneself about which one feels protective. Actual self image is how the shopper sees himself. People are motivated to protect their personal identities. They feel uncomfortable if they engage themselves in doing things that do not reflect their true selves. This is called as the self-consistency motive. It drives people to act in ways that are in line with their actual self-images.
103
NOTES
DBA 1740
NOTES
Private self image
Shoppers self image
Public self image
Actual self image
Ideal self image
Social self image
Ideal social self image Social Approval motive
Self consistency motive
Self Esteem motive
Social consistency motive
Ideal self image as shown in the above diagram is also a part of the private self. Ideal self image is how shoppers would like to be. A person may see himself as lacking in self confidence (actual self image), yet he may want to be self assured (ideal self image). There is often a discrepancy between actual and ideal self. The ideal self motivates behavior through the self esteem motive. In order to realize the ideal self , the shopper may acquire goods or services so as to boost their self esteem. Social self image is linked to the public self ie how we believe people think of us and how we like people to think of us. Social self image reflects how individuals believe others see them. A person may believe that other see him as introvert. This social self image may be consistent or inconsistent with the actual and ideal self. Social self-image influences behaviour through the social consistency motive. People are motivated to maintain an image others have of them Ideal social self reflects how shoppers would like others to see them. The ideal social self image affects shoppers behaviour through the social approval motive. The shoppers are motivated to do things that cause other to think highly of them. Self image congruence Self image congruence occurs when the shoppers self image matches with the brand user image. This match or mismatch may occur with any one of the four types of self image : actual, ideal, social and ideal social. A match of the brand user image with the shoppers actual self image is referred to as actual self congruity, with ideal self image as ideal self congruity , with social self image as social self congruity and with ideal social self image as ideal social self congruity.
104
Actual self congruity means the brand user image is matching with the shoppers actual self image. For example if a particular brand of cell phone is advertised and projected the image of being tech savvy and if the shopper views himself as tech savvy person , there is a self congruity. Marketers can persuade the shoppers to adopt a product or service through promotional messages designed to induce actual self-congrutiy. Ideal self congruity results when the brand user image is matches with the shoppers ideal self image. Marketers create fantasy advertising designed to encourage shoppers to buy products. Fantasy advertising motivates shoppers to adopt the product because the user image of product meets their ideal self images. Social self-congruity is the degree of match between the shoppers social self image and the brand user image. The shoppers are motivated by the need for social self consistency and hence buy products and services than reinforce their social images. Ideal social self congruity is the degree of match between the shoppers ideal social self image and the brand user image. The need for social approval motivates shoppers to do things that have user image consistent with the ideal social self.
NOTES
Self image is a powerful concept which has implications and applications in the field of shopper behaviour. The concept has been used in market segmentation, advertising, packaging, personal selling, product development and retailing. The self image concept could serve as a blueprint for marketers to design marketing programs. Research studies have suggested that self image can be an important predictor of shoppers brand preferences. However there are other constraining factors such as price and other individual or environmental influences that can modify the brand preferences. 3.3.5 Lifestyle The concept of lifestyles is highly related to shoppers value and personality. Values and personality represent internal states or characteristics. Lifestyles are manifestations or actual patterns of behaviour. Life style can be viewed as a unique pattern of living which influences and is reflected by ones consumption behaviour. It is determines by our past experiences, innate characteristics and current situations. The products that individuals consume are related lifestyle. The purpose of exploring lifestyles is to obtain more precise pictures of how shoppers think an act. Life style marketing establishes a relationship between the product offered in the market and the targeted lifestyle groups. Lifestyles segmentation is based on the activities, interest and opinions of groups. These are psychographic segmentation and lifestyles are derived form psychographics. Activities can be described as how one spends time on work, hobbies, social events, vacation, entertainment etc. interest are a persons priorities and preferences regarding family, job, food, media, achievements etc. Opinions refer to how one feels about a wide variety of events including politics, business, society, products,etc.
105
DBA 1740
NOTES
3.3.5.1 Characteristics of lifestyle Lifestyle can be described using the following characteristics; Lifestyle is a group phenomenon: An individuals lifestyle is influenced by a variety of factors including participation in social groups and relationships with others. Lifestyle influences many aspects of behaviour. A persons lifestyle commits that individual to a certain consistency in behaviour. Lifestyle implies a central life interest. A distinct lifestyle may be identifies when some activity or interest influences other. Lifestyles vary according to sociologically relevant variables: The rate of social change, age, gender, ethnicity etc are determinants of lifestyle 3.3.5.2 Market segmentation Psychographics studies are used to develop an in-depth understanding of market segments and sometimes to define segments. In order to identify the significant lifestyle trends, researchers measure AIO (Activities, Interest and Opinions) statements using a Likert Scale. Psychographic analysis enables marketers to understand the shoppers lifestyles better and develop packaging and communication programs that position products to their various lifestyle attributes. A widely uses approach to lifestyle marketing is the Values and Lifestyle System (VALS). VALS2 can be used to measure the shoppers attitudes and values by measuring the degree of agreeability to statements depicting lifestyles. Three type of self-orientations can be arrived at; Principle oriented: the shoppers make purchase decisions based on their beliefs and principles rather than what others think. Status oriented : the shoppers are heavily influenced by the beliefs, opinions and views of others. Action oriented: these individuals buy products to affect their environment and seek activity, variety and risk taking.
In addition to the self-orientations, the other dimension of the VALS2 typology is resources which refer to the physical, psychological, material and demographic resources the shoppers have to pursue their self orientations. VALS2 defines eight categories of lifestyles which can be used by marketers to help in advertising and positioning of products. The eight categories are discussed below; Actualisers They have abundant resources and are sophisticated in their tastes and habits. They are active and have high self esteem. They develop, explore and express themselves in a variety of ways. They are the leaders in business and in government. They have wide interst and are concerned with social issues and are open to change.
Fulfilled As the name suggests they are satisfied and mature people who are well educated.They are practical shoppers and conservative. They look for products which are durable , have value and function properly. They are well informed about the world and are ready to increase their knowledge. They prefer leisure at home. Achievers They are placed high in Maslows hierarchy of needs and are career and work oriented. They make their dreams come true. They like to work. Work provides them with a sense of duty, material rewards and prestige. They live conventional lives, authority and image is important to them. They also favour established products and show their success around. Experiencers They are action oriented, young, vital, enthusiastic and rebellious. They have enough resources and experiment in new ventures. They indulge in exercise, sports, outdoor recreation and social activities. They are avid shoppers and spend much on entertainment, clothing, food, music, videos, movies etc. their behaviour pattern is subject to change as they are enthusiastic to new ideas. Believers Believers are conservative, conventional people with their needs, strong faiths and beliefs. They have modest resources sufficient to meet their needs. They are conservative and predictable. They use established brands. Strivers They are status oriented, but have a low income as they are striving to find a secure place in life. They are low in economic, social and psychological resources. They are concerned about the opinion of others. They see success with money. They like to be stylish. They wish to be upwardly mobile and strive for more. Makers Makers have construction skills and value self efficiency. They experience the work by working on it. They are people who work with their hands. They are politically conservative, suspicious of new ideas, they buy products that will help them in achieving their purpose. Strugglers These are poor people, struggling for existence. Their educational qualification is low, they are also low skilled and are without strong social bonds. They are despairing and have low status in the society. Their chief concern is to fulfill the primary needs of physiological security and safety. They are loyal to their favorite brands.
NOTES
107
DBA 1740
NOTES
Life style marketing is being used extensively nowadays for developing and positioning new products. Life style research finding will enable marketers to frame suitable strategies to improve retail performance. 3.4 INTERPERSONAL In addition to the personal influences on the shopper beahviour, a number of interpersonal factors also exist. The following section provides an account of select inter personal influences viz., communication and persuasion, family, group and store employees. 3.4.1 Communication and persuasion Communication is a unique tool that marketers use to persuade shoppers to act in a desired way. Communication may take many form; verbal, visual or a combination of both. It can also be symbolic where the marketers use price, logo, packaging etc to convey the meaning. Communication can encourage shoppers to purchase the products by providing them the needed information and by putting them in a receptive state of mind. Communication is the bridge between marketers and shoppers and between shoppers and their socio cultural environments. 3.4.1.1 Components of communication Communication involves transmission of message from sender to the receiver through a medium of transmission. In addition to the sender, receiver, medium and message, feedback plays a vital role in communication. It enables to understand whether the receiver has understood the message in the same sense in which it is communicated. The basic communication model is explained below;
Basic communication model Sender (Source) Message Channel (Medium) Receiver (Shopper)
Feedback
The Sender The sender is the initiator of the communication. The communication can be from formal or informal source. A formal communication source is likely to represent eithea for profit or a not-for-profit organization. Informal source can take the form of parent or friend who provides the product information or advice. Shoppers rely on the informal communication source for making purchase decision. This is because shoppers perceive that the informal sources have nothing to gain from the receivers subsequent actions and hence more importance is given to word of mouth communication.
The receiver The receiver of the communication is likely to the members of the target market. Intermediary and unintended audiences are also likely to receive marketers communication. Intermediary audiences include wholesalers, retailers. Unintended receivers of marketing communication include pubic that are important to the marketer such as the shareholders, creditors, suppliers, employees, bankers etc. while framing communication strategy the marketers should understand that the audience is composed of individual receivers each of whom interprets the message according to their own personal perceptions and experiences. The medium The medium or otherwise communication channel can be impersonal or interpersonal. Impersonal communication refers to the mass medium, interpersonal communication includes a formal conversation between a salesperson and a customer or informal communication between two or more people that takes place face to face or by telephone, mail etc. Mass media are generally classified as print (newspapers, magazines, billboards), broadcast ( radio, television), or electronic(internet, mobile). Innovations like interactive advertisement enable the audience to provide an immediate feedback. Marketers also practice direct marketing which is made possible by capturing the shoppers information in the database. The message The message may be verbal or non verbal or a combination of both. A verbal message usually provides more product specific information than the nonverbal communication. However combining verbal message with the nonverbal message enables effective and attractive delivery of information rather than using it individually. Feed back Feedback is an essential component of both interpersonal and impersonal communications. Prompt feedback permits the sender to reinforce, to change or to modify the message to ensure that it has reached the audience. Feedback can be understood from the body language of the receiver ie from the facial expression, body movement ect. However it is easier to obtain feedback from interpersonal communications than impersonal communications. 3.4.1.2 The communication process Communication process should be designed to make the shopper aware of the product, create a positive attitude towards the product, induce purchase or commitment and show how the product can meet the shoppers need. The communication process involving, the initiator, the receiver and the feedback are explained below;
NOTES
109
DBA 1740
NOTES
The initiator The message is usually send by the organization which needs to communicate to the target audience about the product or service. The communication is done in order to inform, persuade and influence the choice of the shopper. The message initiator should take utmost care to see that the message is encoded in a manner which is understandable by the target audience. The message may be communicated verbally or visually or by a combination of both. The marketer may choose the print, television or radio or electronic media or all the media as a channel to communicate the information. The credibility of the source affects the decoding of the message. The perceived honesty and objectivity of the source which initiates the communication has an enormous influence on how the communication is accepted by the receiver. Creditability of the source is based on number of factors including the intention of the source. Some salient points are The credibility of the informal sources is generally higher than that of the formal sources. Friends, neighbors, relatives have a strong influence on the receivers beahviour as they are perceived to gain nothing form the product transaction they recommend. The receivers treates the information from the person who owns the product as totally objective and as it is received from actual experience. However the credibility is questionable in situations where the individuals who experience post purchase dissonance often try to reduce their uncertainty by convincing others to make a similar purchase. In case of formal sources, the credibility of the not for profit sources are assumed to be generally higher than the credibility of the commercial sources. The shoppers sometime view the spokesperson who gives the product message as the initiator of the message. This is the reason for use of celebrities in advertisements. However in order to enhance the credibility, the celebrities should give testimonials or endorse products with specific wordings that lies within his recognized competence of the spokesperson. In interpersonal communication, the shoppers are more likely to be persuaded by salesperson who gives the impression of honesty and integrity. The reputation of retailer who sells the product has a major influence on the message credibility. The reputation of the medium that carries the advertisement also enhances the credibility of the advertiser. The shoppers previous experience with the product or retailer has a major impact on the credibility of the message. Satisfying product experience increases the credibility of the further messages of the advertiser. If the shopper is not satisfied with the product the credibility of the future message tend to reduce. Even if high credibility sources are used in communication, the persuasive effects of the same reduce over time. This phenomenon is termed as the sleeper effect. Hence the marketers must repeat the same series of communications or ads in order to maintain the high level of persuasiveness of the spokesperson.
110
The target audience The message received will be decoded by the receiver on the basis of their personal experience and personal characteristics. The meaning derived from the message depends on the following aspects The personal characteristics of the individuals influence the accuracy with which an individual decodes a message. A persons demographics - age, gender, marital status, educational qualification, social cultural membership, lifestyle and the other aspects discussed in the preliminary part of this unit viz., attitude, perception ,learning, self image and personality influences the message interpretation. A persons level of involvement also plays a key role in determining the attention paid by him in decoding the message. The shoppers mood affect the way in which an advertisement is perceived, recalled and acted upon. Research findings indicates that the shoppers mood is often influenced by the context in which the advertising message appears and the content of the ad itself. Positive feeling induced by advertisements that depicts positive outcomes may enhance the likelihood of purchase of the advertised products.
NOTES
Various barriers to communication may affect the accuracy with which shoppers interpret the messages. These include selective perception and psychological noise. Selective perception refers to the shoppers tendency to selectively view advertisements and ignore the ads which has not special relevance or interest to them. Psychological noise refers to inability to receive the message due to various factors i.e., competing advertising message or distracting thoughts. In order to avoid noise the message is repeated many times. Feedback The ultimate success of marketing communication lies in the ability to persuade the target audience to act in the desired manner. Obtaining feedback ensures the initiator that the message has been received in the same sense in which it was proposed. In case of interpersonal communication the feedback can be obtained immediately through verbal or nonverbal cues. Because of the high cost of advertising space and time in mass media it is important to obtain a proper feed back in case of impersonal communication also. However in case of the impersonal communication the feedback cannot be obtained directly, instead it can only be inferred from the resulting action. 3.4.1.3 Designing persuasive communications An effective and persuasive communication strategy involves four activities; setting up an communication objective, selecting the appropriate target audience, encoding the message and selecting the appropriate media through which the message is to be transmitted. 1.Communication objectives The communication objective of a marketer could be to transmit message regarding brand positioning, product launch, additional features, promotional schemes , increase goodwill, create positive brand image etc.
DBA 1740
NOTES
2. The target audience Identifying the target audience is an important factor in developing an effective communication strategy. The target audience consist of the shoppers segment that the marketer want to target. The segment should be properly selected as one message cannot be targeted at all different segment of shoppers. The target audience should be homogeneous in the sense it can consist of Shopper who have a positive view about the brand Shopper who view the product negatively Non users of the product who view the brand positively Non users of the product who view the brand negatively Brand switcher Bargain hunters Shoppers who view shopping as an enjoyable activity Shoppers who view shopping an activity to be completed etc
3. The message Message is the thought, idea, attitude, image or other information that the sender wishes to convey to the intended audience. In order to design an effective message; The objective should be understood ie what the communication is expected to accomplish. The target audience personal characteristics in terms of education, interests, needs etc should be considered A right mix of verbal and nonverbal stimuli should be used to attract the target audience. Research studies have found that the use of simple sentence structure in advertisements enables greater level of recall than the advertisements using more complex sentence structure. It is also found through research that rhetorical speech is most effective with unmotivated shoppers. The shoppers liking for the advertisement, brand attitudes and recall can be improved by manipulating the resonance in the ad. Resonance is defined as wordplay used in combination with relevant picture. Advertising for high involvement product should project strong, well-documented, issue relevant arguments that encourage the cognitive processing. When the involvement is low, visual and symbolic material such as the background scenery, music or celebrity spokes person can be used. While designing the message the marketers should make decisions regarding the following aspects;
112
Message framing: The marketer should take decision regarding the positive or negative message framing. Positive message framing happens when the advertisement stresses the benefits to be gained by using the specific product. Negatives message framing stresses on the benefits to be lost by not using the product. The message framing strategy depends on the target audience involvement with the product category One-sided vs two-sided messages: One sided message stresses only the favourable information. It is used in situations where the audience is friendly. If is the audience is critical or unfriendly, likely to hear opposing claims, educated then two sided message can be used. Two sided advertising messages acknowledge that the advertised brand has shortcomings. Such messaged will be more effective in personal selling situations. Comparative advertising: In case of comparative advertising, the marketers claim product superiority for its brand over one or more of the competitors products. Comparative advertising is used for product positioning, target market selection and for brand positioning strategies. Research studies highlight that the comparative ads elicited higher levels of cognitive processing and had better recall and were perceived to be more relevant than non comparative ads. Order effects: Order deals with the decision regarding whether to present the ads first or in the last and whether the positive effect should be highlighted or negative effect in the beginning. Research findings suggest that the order of presentation is more likely to affect the recall of audio messages than visual messages. In case of presenting the benefits of the product, the most important point should be made first , if the audience interest is low. Reputation: Repetition ie the frequency of ad affects the persuasion, ad recall, brand name recall and brand references. It also increases the chance of the brand inclusion in the consideration set. 4. The media Media planning is an essential component of communication design and is directly dependent on the type of product, the target audience, and the message. Generally marketers adopt multiple media to communicate to the target audience. The main campaign was communicated through one primary medium, while the other media are used to support the primary media. Marketers are using precision targeting techniques like the selective binding and direct marketing to target a very specific potential shopper segment. Selective binding is generally facilitated by print media like magazines and newspapers. In this technique, a very specific set of subscribers to the media get their print copies with some extra pages bound with their copy. News paper inserts by local marketers in a particular geographical areas is based on this strategy. In case of direct marketing various media like mail order catalogs, phone, email etc are used to reach very specific set of potential shoppers.
113
NOTES
DBA 1740
NOTES
3.4.2 Family Family is defined as two or more persons related by blood, marriage or adoption who reside together. The individuals who constitute a family might be described as members of the basic group who live together and interact to satisfy their personal and mutual needs. With changing time, the family structures have also changed to a great extent. There are three different types of family structures married couple, nuclear family and extended family. A married couple is the smallest family unit, which represents newly weds/ and or old couples living alone. Nuclear family generally comprises a married couple with one or more unmarried children living together. A family comprising a married couple with children and one or both grandparents is called an extended family. In Indian context, there is another family structure known as joint family. A joint family structure consists of two or more siblings with their families living together. 3.4.2.1 Role of family The family performs certain essential functions imparts consumer socialization ,looks after the economic well being, offers emotional support and maintains a family lifestyle Consumer socialization The socialization of family members, ranging from young children to adults is a central family function. in the case of young children, the process includes imparting to children the basic values and modes of behaviour consistent with the culture. It include moral and religious belief, interpersonal skills, grooming ets. The aspect of childhoold socialization that is particularly relevant to the study of consumer behaviour is consumer socialization. Consumer socialization is defined as the process by which children acquire the skills, knowledge and attitudes necessary to function as consumers. Research studies show that many preadolescent children acquire their consumer behaviour norms through observation of their parents and older siblings who function as their role models. Shopping with parents ie the shared shopping experience also give children the opportunity to acquire in-store shopping skills. The socialization process is not only confined to childhood rather it is an ongoing process. The socialization begins in early childhood and extends throughout a persons entire life. It is also quite common for selected product loyalty or brand preferences to be transferred from one generation to another called as intergeneration brand transfer. Some brands may be transferred for even three or four generations within the same family. Economic well being Providing financial means to its dependents is a basic family function. However the way in which the family divides the responsibilities fro providing economic well-being has changed considerably during the last two decades. It is no longer true to say that men are
the only bread winners of the family. Women also share the responsibility of earning for the economic well being of the family. Likewise the household responsibilities are shared by men too. Emotional support The provision of emotional nourishment i.e. the love, affection and intimacy to its members is an important core function of the family. In fulfilling this function the family provides support and encouragement and assists its member in decision making concerned with social and personal problems. Family lifestyles The importance place of education or career, reading, television viewing, on learning computer skills, frequency of eating out, selection entertainment and recreational activities etc depends on the lifestyle of the family in which an individual is brought up. Family life style commitments influence the consumption pattern to a greater extent. 3.4.2.2 Family life cycle (FLC) Family life cycle is a useful marketing tool to predict the shopper behaviour. It enables to segment the target market in terms of a series of stages spanning the life time of a family unit. A family life cycle describes the various stages of a family. FLC provides an estimate of time and money available to a family at each stage. The stages in the FLC is arrived taking into account the marital status, size of the family, age of family members and employment status of the head of the household. The family requirements changes with times, as does the disposable income of a household. Hence understanding the FLC will enable to frame strategies suitable to the various stages in FLC. The traditional FLC model and the non traditional model are presented below; I. Traditional FLC
NOTES
The traditional FLC is a progression of stages through which families pass. it is viewed to have five basic stages; bachelorhood, honeymooners, parenthood, post parenthood and dissolution. The stages are explored in detail. Stage 1: Bachelorhood This is the first stage of the traditional family life cycle. It consists of people who have established separate households apart from parents. Such a stage cannot be witnessed much in India, however it is coming up with children moving outside their family for job related reasons. In India a large majority of the children live with the parents even while working. the majority of this stage consists of young , single, employed adults, but it may also consist of college students who live on their own. The salary earned is treated like pocket money and it is mostly spend on food, clothing, entertainment and recreational activities.
115
DBA 1740
NOTES
Stage II: Honeymooners This stage starts immediately after marriage and continues until the arrival of couples first child. This stage serves as a period of adjustment to married life. The husband and wife may be employed and the combined income enables them to enjoy a lifestyle that provides with the opportunity to purchase more. It also allows them to save or invest the extra income. They spent mostly in setting up house. They spent most of the income on furniture, necessary home appliances, automobiles etc. the expenses may be met by themselves or in most cases in India is paid by the parents. They spend a lot in dining out, entertaining and other leisure activities. Stage III: Parenthood Families enter the parenthood stage with the arrival of first child. This stage is quite long and lasts till the children become economically independent. This stage can be further divided into pre school phase, elementary school phase, high school phase and college phase. In the preschool phase a considerable amount is spent on product like baby food, toys etc. in the later stages the money is spent on education and related products. Stage IV: Post parenthood At this stage of the traditional FLC, children establish their own household and the original couple are called empty nesters. Empty nesters are generally believed to have increased expense on travel and medical needs. Members of a financially stable household at this stage find an increase in their disposable income and use this time and money to indulge in hobbies and other interests. They also spend money on homes, automobiles, furniture and vacations and thus form a good market for marketers of luxury products. It India empty nesters stage was not very common in India where the grand parents, parents and children live together. However old couples in India are living alone or are being looked after by old age homes, catering specifically to the needs of well-to-do empty nesters. Stage V: Dissolution Dissolution of basic family unit occurs with the death of one spouse. When the surviving spouse is in good health, is working and have adequate savings, and has supportive family and friends, the adjustment would be easier. The surviving spouse often follows an economic lifestyle. II .Non traditional FLC With changing demographics and family structures, the non traditional FLC is evolved. These nontraditional stages not only include family households but also nonfamily households. The non family households consist of a single individual and those consisting of two or more unrelated individuals. In order to accommodate the non traditional households the following stages are proposed by Schiffman and Kanuk in the non traditional FLC;
Family households
Childless couples Married couples may elect not to have children due to delayed marriages or the women being more career-oriented. Couples who marry More career oriented men and women and greater later in life (in late occurrence of couples living together. Likely to have 30s or later) fewer or even no children. Couples who have Likely to have fewer children first child later in life (in their late 30s or later) Single parents I High divorce rates contribute to a portion of singleparent households. Single parents II Young man or woman who has one or more children out of wedlock Single parents III A single person who adopts one or more children Extended family Young single-adult children who return home to avoid the expenses of living alone while establishing careers. Divorced daughter or son and grandchildren return home to parents Elderly parents who move in with children Newlyweds living with in-laws
NOTES
Non Family households
3.4.2.2 Family decision making Inputs regarding Family lifecycle would enable markers to further explore the family decision making process. Schiffman and Kanuk propose eight distinct roles in the family decision making process. These roles provide insight into the way in which families interact in the various consumption-related roles.
117
DBA 1740
NOTES
The identities of the family members who fill these roles vary from family to family and from product to product. A single family member may also assume a number of roles or in some cases these roles may not be required. 3.4.3 Group influences A group may be defined as two or more individuals who interact in order to accomplish either individual or group goals. Group can be classified on the basis of the member ship status also. Membership group in one to which an individual belongs to or would qualify to become member. Symbolic groups are those in which an individual is not likely to receive membership, despite acting like a member by adopting the groups values, attitudes and behaviour. In the context of shopper behaviour, reference group is an extremely important and powerful idea. A reference group is any person or group that serves a point of comparison for an individual in forming either general or specific values, attitudes or specific guide for behaviour. From the marketing perspective reference groups are groups that serve as frames of reference for individuals in their purchase or consumption decisions. Reference groups that influence the general or broadly defined values or behaviour are called normative reference groups. Normative reference group influences the development of a basic code of beahviour. Groups that serve as benchmarks for specific or narrowly defined attitudes or behaviour are called comparative reference groups. A comparative reference group may constitute neighbouring families whose lifestyle is admired. Comparative reference groups influence the expression of the specific attitude and behavior of the shopper. Originally reference group was used to include only those groups with which an individual interacted on a direct basis which include family and close friends. The concept has broadened to include both direct and indirect individual and group influences. Indirect
reference groups consist of those individuals or groups with whom a person does not have a face to face contact such as TV personalities, sports stars, cinema stars etc. The major societal groupings that influence shopper behaviour are in order: family, friends, social class, selected subcultures, ones own culture and other cultures. 3.4.3.1 Factors affecting the reference group influence The degree of influence that a reference group exerts on the shoppers behaviour depends on the nature of the individual, the product and the specific social factors. Apart from these factors, some additional factors are highlighted below; Information and experience An individual who has experience with the product or can have access to information will be less dependent or influenced by the reference group. On the other hand if a shopper does not have access to objective information or if the firsthand experience with the product is not available then the influence of reference group will be more. Credibility, attractiveness and power of the reference group A reference group that is perceived as credible, attractive or powerful can induce the shoppers attitude and influence their behaviour. Shoppers will be influenced by the information they obtain from people whom they consider to be trustworthy and knowledgeable. Power groups are not expected to change the attitude as in case of reference group which is considered as attractive or credible. Individuals may conform to the behaviour of powerful person or group but are not likely to express a change in their own attitudes. Conspicuousness of the product The extent to which a product is visible may affect the degree of influence of the reference group. The visually conspicuous product is one that will be noticed by others and hence the influence of reference group will be more. In case of privately consumed products that are less conspicuous are less likely to be purchased with a reference group in mind. 3.4.3.2 Types of reference groups The shoppers are potentially influenced by a number of people they come in contact with or observe. Some of them are highlighted below; Friendship groups Friendship groups are most likely to influence the shoppers behaviour next to the family members. Friendship groups are highly informal as they are usually unstructured and lack specific authority levels. Friendship group provides companionship, and ability to discuss problems that cannot be discussed with the family members. Hence the opinions and preferences of friends influence the products or brands a shopper ultimately selects especially in the category of food, beverages, clothing etc.
119
NOTES
DBA 1740
NOTES
Shopping groups Two or more people who shop together for food, clothing or simply to pass time are called as shopping group. Such groups are consists of normally family or friends and so they are called purchase pals. The motivation for shopping with purchase pals is to have a good social time and to reduce the risk when making an important purchase decision. Work groups People spend most of their time at work and hence the group formed at work place plays a major role on the Shopping behaviour of the members. Both formal work group and the informal friendship work group can influence the shopping behaviour. The formal work group consist of members who work together as a team. The informal group consists of members who work for the same institution but may not be working together as a team. Virtual group or communities Internet has enables new type of group viz virtual group or communities. Community was originally thought as people who live in the same place. This has undergone a change with the internet community, which is defined as set of social relations among people. The internet communities provide access to a wide range of information and the anonymity of the net gives its users the freedom to express whatever they wish. Consumer action groups Consumer action groups have been formed as response to consumerist movement. They are very large in number and are dedicated to providing shoppers with assistance in making the right purchase decisions, consume the products and services in a healthy and responsible manner. 3.4.3.3 Celebrities and other reference group appeals Celebrities include movie stars, TV personalities, popular entertainers, sports icon etc. celebrities can be powerful force in creating interest or actions with regard to purchasing or using select goods and services. Advertisers spend enormous sums of money to have celebrities promote their products. Celebrities may be used to give testimonial, to give endorsement, as an actor in a commercial, or as a company spokesperson. Testimonial refers to a celebrity attesting the quality of the product or service based on the personal usage. In case of endorsement a celebrity lends his name and appears on behalf of the product or service with which he may be an expert. In case of an actor, the celebrity presents a product as a part of a character endorsement. As a spokes person the celebrity represents the brand or company over an extended period of time. The celebrity contributes to the fame, talent, credibility, charisma etc to the advertising program. The other appeals are presented below;
120
The expert: An expert is a person who because of his or her occupation, special training, experience is in a unique position to help the prospective shopper evaluate the product or service that the advertisement deals with. This appeal may be used by marketers to convince the shoppers. The Common man: The common man appeal uses the testimonial of a satisfied shopper. It demonstrates to the prospective shopper that someone like him have used the product and is satisfied. The executive and employee spokesperson: Increasing number of firms uses their top executives as spokes person. The executives who are admired by general population due to their achievements and status have an influence on the potential shoppers.
NOTES
3.4.4 Stores employees Employees play an important role in retaining the shopper and making them a regular customer. Advertising and other promotional offers may attract a shopper to visit a retail outlet, but the store employee is the one who comes in direct contact with the shopper when he enters a retail outlet. The employee by his attitude, action and behaviour can make a casual visitor into a regular shopper. The employees in a retail store help the shoppers by performing a variety of function. Some of which are highlighted below; The employee provides information to the shopper regarding the new products, the usage of the same, instruction to be followed in using the same etc. A retail stores has a number of product categories and a great variety of assortment. Inspite of the sign boards and other information, a shopper may have difficulty in identifying the products he needs. The employees can help the shoppers to identify the product and thereby reduce their search time. Employees may provide expert advice to shoppers who are facing difficulty in choosing among alternatives. They promote the product or brands by providing insight into the salient features and function in comparison to the competing products in the market The employees handle the objection and queries raised by the shopper in the convincing manner. They persuading the shopper to purchase by stressing on the salient features or benefits of the product dealt, the reduced price, quality etc They help shoppers to close the sale by negotiating the price, getting price reduction and ultimately they collect the bill and the purchased products In case of high involvement products, the post purchase dissonance is also handled by the employees.
121
DBA 1740
NOTES
In case of complaining shoppers, they handle the grievance to the satisfaction of the shopper as well the employer. They satisfy the ego of the shopper by waiting upon them and thereby create the mood to do shopping. Employees can provide feedback on the various aspect of a retail store and the product dealt. They can provide information on the shoppers grievance and can also suggest alternative solutions for the same. As employees come into direct contact with the shoppers they are better informed about the shoppers needs and expectations. The store employees can influence the shoppers behaviour positively or negatively through the performance or non performance of the above listed functions. In order to perform the above listed functions in a satisfactory manner a store employee should have some qualities. They should have through knowledge about the categories of products dealt in the retail store Communication skills is a must as they come into direct contact with shoppers Patience is required virtue to deal with any time of shopper, particularly a complaining shopper or one who lacks confidence in decision making The employee should have empathy and be willing to listen to the shopper and his unspoken needs They should be social and put the shoppers at ease Employee should have the presence of mind to be proactive and reactive to the shoppers needs and queries They should be flexible to deal with different types of shoppers with an array of ever changing needs They should have the ability to perform consistently under pressure. Stress tolerance is an important quality of a retail employee It may not be possible for a retailer to get the employees with all the necessary skills. They may have to recruit people and train them in the required skill set. Many training methods are available; lecture, demonstrations, films, programmed instructions, conference, sensitivity training, case studies, role playing, behaviour modeling and competency based instructions. Conducive environment should be created so as to ensure the success of the training progamme. The training programme should also be regularly evaluated. Many research studies state that a satisfied employee can lead to satisfied customers which will in turn lead to profits for an organization. In order to satisfy the retail employees, they have to be compensated fairly apart from providing a satisfactory and motivating work environment. The compensation could be paid in the form of straight salary or on salary plus commission basis.
SUMMARY Understanding the variable influencing shopper behaviour provides the retailer with pertinent inputs to frame strategies. This unit dealt in detail the various personal and interpersonal variables influencing the shopper behaviour. The personal variables viz attitude, perception, learning, personality and self image were discussed. The inter personal variables; communication and persuasion, family, group and store employees were presented in detail. Equipped with the understanding of the internal influences on the shopper behaviour, the next unit provides a detailed discussion on the external influences on the shopper behaviour. HAVE YOU UNDERSTOOD How are attitudes towards products or retail outlets formed? Can you change the attitudes of the shopper? Elucidate. How does perception influence the retail shopper behaviour? How does learning happen? How can the knowledge of learning help the retailers? A retail outlet wants to position itself as a store which caters to the lifestyle need of the shopper. Suggest strategies for the same. Explain how persuasive messages can be created and communicated to shoppers. Elucidate the various stages in the FLC. Explain how segmentation based on FLC can be practiced by a retailer. Discuss the different types of reference groups and appeals that can be used by retailer to influence the shoppers decision making. Highlight the role of store employee in attracting and retain shoppers.
NOTES
123
DBA 1740
NOTES
124
UNIT IV
NOTES
EXTERNAL INFLUENCES ON SHOPPER BEHAVIOUR

4.1 INTRODUCTION A Retailer invests huge sum in selecting ideal location for the retail store, designing the exterior and interior of a store so as to attract and retain the shopper. However the retail store location should reachable by the shopper. It should be viewed in a positive perspective by the shopper. A shopper takes into account a number of factors in the selection of a retail outlet. These aspects are highlighted in the chapter. Likewise the social class to which a shopper belongs to or perceives to belong to shapes the choice of the retail store and the products consumed by him. In addition the culture has a greater influence on the spending and consumption pattern of a shopper. Thanks to the development in communication and technology, culture is evolving in different dimensions leading to a change in the lifestyle of the shoppers and the behaviourial pattern. Understanding the same is imperative for a retailer to design successful strategies. In tune with this, an overview on the various aspects of cultural influences is presented. The consumers today are more tech savvy, time rich and money poor. They are more willing to depend on technology so as save time and enjoy increased convenience. In this respect online retailing is gaining momentum. Though the penetration level is low, e-tail is evolving and shoppers depend on the same to a greater extent for obtaining information. An attempt has been made in this unit, so as to highlight the salient aspects of online retailing. Segmentation of online shoppers is also attempted so as to gain insight into shopping behaviour. Technological invasion has upgraded the retail sector by enriching the customers experience and making shopping as a more enjoyable task. The technological influence on the shoppers behaviour needs to be understood so as to assess the impact of introducing of the same in a retail store. Hence a discussion on the type of technology that is introduced in retail stores is presented.
125
DBA 1740
NOTES
4.2 LEARNING OBJECTIVES After reading this unit you will be able to understand; Various factors taken into consideration by a shopper in selecting a retail location Elements of shop atmospherics Influence of social class on the shopper behaviour Cultural and inter cultural influences on the shopper behaviour Issues in On-line retailing The influence of technology on the shoppers behaviour
4.3 EXTERNAL INFLUENCES Shoppers behaviour is influenced by external factors apart from the internal variables dealt in the previous unit. The external factors viz., store location, shop atmospherics, social influences, cultural and cross cultural influences are dealt in this section. 4.3.1 Store Location Among other things, location plays a major role in a shoppers selection of retail store. Even though a store has an attractive exterior, interior, ambience, offers quality product at less price, provides good customer care etc a shopper may not purchase, if the location is not reachable or preferred. A shopper may many times compromise on issues like price, variety, and quality due to the nearness of a store outlet. Thus store location plays a crucial role in selection of a store and in developing loyalty towards a particular store. A Shopper can choose the a retail store from any of the three broad locations viz., isolated store, unplanned business district and planned shopping center. An isolate store is a free standing retail outlet located either on a highway or a street. There are no adjacent retailers with whom the stores share the shoppers traffic. In an isolated store the shoppers enjoys flexibility in terms of space, parking lots, less crowd etc. However the variety seeking shoppers may not find it rewarding, economical or convenient to travel to shop in one store only. An unplanned business district is a type of retail location where two or more stores are situated together in such a way that the total arrangement or mix of stores is not due to prior long range planning. Stores are located in close proximity due to the advantages they can reap. There are four types of unplanned business districts viz central business district, secondary business district, neighbourhood business district and string. A detailed discussion of these locations was presented in Retail management: concepts and environment. A brief recapsulation is provided here;
126
i. Central Business District - A Central Business District (CBD) is the hub of retailing in a city.CBD draws large number of shoppers due to the following attractions; access to public transportation, excellent goods and services assortments, wider range of prices, a variety of store types and customer services, a high level of pedestrian traffic and proximity to commercial and social facilities. However it suffers from the drawbacks like inadequate parking, traffic, congestion, high rents and taxes, more travel time etc. ii. Secondary Business District- A secondary business (SBD) district is an unplanned shopping area that is located on service roads at the intersection of two major streets in a city. The SBD sell a higher proportion of convenience oriented items. The SBD enjoys the benefits like good product assortment, access to throughfares and public transportation and more personal service. The major weakness of secondary business districts are discontinuity of offerings, parking difficulties and fewer outlets than in CBDs. iii. Neighbourhood business district - A neighbourhood business district (NBD) is an unplanned shopping area that appeals to the convenience shopping and service needs of a single residential area. An NBD contains several small stores, such as the dry cleaners, stationary shop, personal care centers, restaurants and the like. The major advantages offered by NBDs are convenient location, longer hours, good parking and a relaxed atmosphere. The drawback is that they offer a limited selection of goods and services and prices are generally higher because the competition is lesser than in the case of CBD or SBD. iv. String- A String is an unplanned shopping area comprising a group of retail stores often with similar or compatible product lines, located along a street or highway. The retailers situated in the string include the restaurants, gift shops and music stores and the like. The string location enjoys the advantages of an isolated store such more flexibility, better road accessibility, parking facilities and lower operating costs. However it suffers from less control over prices, lower store loyalty and limited product variety. A planned shopping center consists of a group of architecturally unified commercial establishments on a site that is centrally owned or managed, designed and operated as a unit.A planned shopping centre enjoys a number of benefits like cooperative planning and sharing of costs which enables to sell at a lesser price, assortments of goods and services, unified shopping center images, maximum pedestrian traffic and access to highways and parking lots.
NOTES
The various locational factors that may influence the shoppers decision are briefed below; 1. Traffic Traffic refers to both pedestrian and vehicular traffic. The pedestrian traffic refers to the number and type of people passing by. The shoppers choice of a store depends on how crowded the areas appears. The time is also taken into account by the shopper to identify the peak and slag hours. Likewise in taking the vehicular traffic counts, the shopper taken into account the extent and timing of congestion.
DBA 1740
NOTES
2. Transportation Nearness to the transportation facility is important for people who do not have their own vehicle. The availability of buses, taxis, subways, trains and other kinds of public transport is into account in selecting the retail . The nearness to the major roads, driving time, transportation network etc should be rated before selecting the location. A related factor is the road condition which includes the age, number of lands, number of stoplights, congestion, state of the repair and maintenance work etc. For eg a site in old, narrow, congested road which needs to be repaired is not a good selection. 3. Parking facilities Availability of parking facility is assuming an important role in the shoppers choice of a store. Increase in the vehicle population, has made it difficult to get a parking slot. The safety consideration and cost of parking is also questionable. The ingress/egress- the ease of entering and exiting the sites parking also limits the accessibility. The number and quality of parking spots, their distance from store should all be evaluated. The extent of parking facilities required depends on the stores trading area, type of the store, the proportion of shoppers using a car, the existence of other parking lot and time spend in a shopping trip (it determines the turnover of spaces), the flow of shoppers and parking made by the non shoppers. 4. Visibility Visibility refers to shoppers ability to see the store and enter the parking lot safely. Good visibility is important for stores in order to attract and retain loyal shoppers. A store which is not visible may not communicate its existence to shopper and has a high chance of not being chosen by the shopper. 5. Amenities available The availability of other services like restaurants, banks, ATMs, petrol bunks is considered by a shopper in the selection process. 6. Store composition A market with a large number of stores usually has more shoppers visiting the area than locations where one or two stores exist. The type of stores that exist in the area is also equally important. If the store in a given location complements, blends and cooperate with one another, and benefits from others presence, affinity exists. When the affinity is strong, the sale of each store will increase due to higher customer traffic. The compatibility can be measured with the degree with which the stores exchange customers.
128
7. Type of Product The kind of product to be purchased by the shopper affects the choice of location. A food and grocery retailer may be located near or in a residential area. Locating the supermarket in a purely business district may not be an easy task. Similarly a boutique dealing with highly priced, designer collection is situated in the area where the residents could afford the same ie upmarket area which suits the image of the boutique. 8. Competition and Neighbors Other businesses in the prospective location are also taken into consideration by a shopper while selecting a retail store. The image of other stores, types of shoppers visiting the same, extent of crowd, type of product sold by the neighbours can actually induce or affect the choice of the retail shop. 9. Other factors Shoppers may also chose the retail store by taking into account the placement in the location, size and shape of the building, condition and age of the lot and building. Placement refers to the sites relative position in the district or center. Corner influence can be enjoyed if the retail store is situated in a corner where two streets intersect. It attracts greater foot fall as it is visited by pedestrians from both the streets. The site is normally expensive in view of the inherent benefits. 4.3.2 Shop Atmospherics Among other things the choice of a retail store to a greater extend depends on the shop atmospherics. Atmospherics refers to the psychological feeling a shopper gets when visiting the retail shop. It is personality of the retail shop. In case of a store based retailing atmospherics refers to the stores physical characteristics that projects an image and draws the shoppers. The sights in the retail store, sounds, smells and other physical attributes all contribute to the shoppers perception. Apart from influencing the selection of the retail shop, atmospherics also influences the time spent by the shopper insider the store, amount of money spend ie the tendency to spend more than the originally planned amount and the likelihood of visiting the retail shop again. A retailer should engage in visual merchandising by taking proactive, integrated atmospherics approach to create a certain look by properly displaying products, stimulating shopping behaviour and enhancing the physical environment. In order to attract the shopper the retailer has to concentrate on the following aspects of the retail environment.
NOTES
129
DBA 1740
NOTES
4.3.2.1 Exterior The storefront and entrance of a retail shop will create a first impression and is subjected to critical evaluation by the shopper. The exterior gives an impression regarding what a shop has to offer. The aim of the exterior is to attract the shopper and communicate that the store fits into the image the shopper envisages. If the store exterior is not managed properly or if it creates a poor image, even if the merchandise dealt are of good quality, it may turn the shoppers away from the retail store. On the other hand if the exterior is good and the merchandise dealt is not upto the expectations of the shopper, then also it may drive the shoppers away from the store. Lack of cohesion between the exterior and interior is likely to create dissonance. Facades The exterior is communicates messages through many elements: the windows window display, the nature of entrance, view to the interior, sights and the materials with which the entrance is constructed. Each of the elements needs to be consistent and harmonious with others. Various alternatives are available in planning a storefront; A modular structure is a one piece rectangle or square that may attach several store, Prefabricated structure a frame built in a factory and assembled at the site, A prototype store used by franchisors and chains to foster a consistent atmosphere. A recessed storefront attracts people by being recessed from the level of other stores. A shopper has to walk in a few feet to examine the storefront. A recessed store front offers protection from environment and acts as funnel drawing shoppers to the store. A projecting storefront intrudes into the street or complex, thus announcing the presence of the shop to the shoppers.
The choice depends on necessity to differentiate a store front from the surroundings. In addition to the store front the trees, fountains and benches in front of the store may attract and create a positive impression about the store by creating a relaxed environment. Entrance The faade is a prelude to the entrance itself. The entrance provides a sense of transition from the world outside to the world of the retailer inside. Number of entrances in the retail shop may be an indication of managing the crowd in an elegant manner. More number of entrances and exit attracts the vehicles and pedestrians. The type of entrance is also important. The kind of door that is used affects the shoppers perception about the store. The function of the store is much more that of providing security to the store. The doorway can be revolving, electric, self opening, regular, push-pull, sliding etc. while designing the door, the type and positioning of the door handle or door push should be thoughtfully considered, keeping in mind the armful of shopping bags. Walkways should also be given due importance as it affects the shoppers perception. A wide, lavish walkway creates a different atmosphere and mood rather than a narrow one. The shoppers would be happy if sufficient space exists for comfortable entry into the store. Display windows Display windows are an ideal way to attract new and existing shoppers. They enable the shoppers to identify the stores offerings and induces people to enter. It creates the mood for the shopper by showing the representative merchandise offering. They are used for selling promotions, image building, seasonal changes, new arrivals and to showcase high demand items. a retailer should properly plan in order to develop a good window display. The number, size, shape, colour and themes of display and frequency of changes should be planned. Window display needs to be changed often so that they do not become stale. The frequency of changing window displays depends on seasons, type of merchandise, promotional intensity and festivals and occasions. Material for storefronts The choice of material for the storefront communicates and convinces the shoppers to enter the shop. It provides a clear indication about the cutlrue,values and interiors of the store. For example the storefront created with marbles, stone, granite suggest a solid and enduring quality of the store. Stainless steel offers the image of contemporary merchandise. More expensive metals such as bronze, brass etc conveys an image of good quality. Building height The building height can be disguised or nondisguised. In case of the disguised building height part of the store is beneath the ground level. Such building will be attractive to shoppers who dont like a large intimidating structure. Non disguised building is where the entire building or store can be seen.
131
NOTES
DBA 1740
NOTES
Visibility In order to make its presence known a retail store should be visible. The pedestrian and / or vehicular traffic must be clearly able to see the store fronts or marquees. Bill boards are used to make the shoppers feel the presence of the retail shop. Exterior signage The shopper can get an impression about the store form the exterior signage. It works like an advertisement for the store by communicating the name and the character of the store. a good signage should be distinctive and yet merge with the surroundings. They typography should be decided keeping in mind the clarity and store personality. Highly reflective surfaces that distort the visibility of the sign should be avoided. The external signs are normally illuminated from within using external lanterns, tubes or spotlights. The retailer should keep in mind the surrounding stores and the surrounding area while planning the exterior. 4.3.2.2 General interior Once the shopper is inside the store, numerous elements affect their perception. Some of these elements are discussed below; Floors Floor finishes can create different atmospheres, zones, walkways and departments. Larger stores use a wide range of floors to differentiate various sections and departments. The flooring is chosen in such a way that it suits the overall design of the store and the type of the merchandise dealt. Carpets, wood and tiles, cement etc can be used for flooring. Carpet and wood can create exclusive environments. However materials such as marble, terrazzo, mosaic, granite and ceramic tiles are used as they are durable and easy to clean. Interior walls A number of finishes and material are available for walls. Paint is the least expensive and most flexible finish, however it can be easily soiled. Repainting walls in regular frequency is a must for maintaining the image of the store. Plaster finish or a combination of painting and plaster can be used. A combination of plaster with fiberglass, glass, concrete, wood, plastic, laminate, mirror, fabric, paper and other materials can be used to create an attractive environment. Ceilings The ceiling is one of the most complex parts of a store, usually carrying and concealing many vital services such as lighting electrical wiring, air conditioning, security equipment etc. they can be dominating visual, distracting the shoppers from the merchandise. The ceilings can be suspended or false. It can be of made of same material as that of the walls.
132
Music Music can be used in the store to create a positive environment that influences shopping behaviour. Sales have been found to be affected by the kind of music being played in the store. A research study conducted in music store revealed that the sales increased by 38% when a supermarket play a slower music compared to when it played fast music. Shoppers have been found to spend more time in stores that play soft music as compared to stores that play loud music. Music makes shoppers spend more time in the store and changes their pace, which can be utilize to build sales or repeated visit by influencing the mood of the shoppers. Stores should ensure that appropriate and continuous music is always played so as to enhance the shopping experience. Lighting Research studies have shown that proper lighting can increase the sales by 20%. Lighting performs the essential function of illuminating the store and the merchandise. It also influences the stores atmosphere. Lighting can enhance the effect of even a mediocre interior design. Theatrically lit or ambient-lit atmosphere can be created depending on the needs of the retailer. An ambient lit store is used in supermarkets, drug stores, etc where an overall illumination is made. Theatrically lit light is used in fashion stores or jewelers to highlight particular merchandise or an array of merchandise. Lighting decisions should also be made in combination with the floor plan and the type of merchandise dealt. Lighting can influence of effect of color hence the decision on type of lighting should be made cautiously. Light can also create a sense of space within a store. The stores should ensure that the cheaper bulbs are not used as they create a shabby image. A bright storefront is more attractive, hence the storefront should be properly lighted so as to make the store more appealing. Interior signage Interior signage is used to perform specific roles like selling merchandise, giving information and providing direction inside the store. Different signage can be used to perform different task. The signs which provide direction should be simple and quickly comprehensible. Signs that help to enhance the sales process are more complex. In general a sign should be kept simple and should not convey too many things which might confuse the shopper. It should be kept in a visible height and a legible font should be used. The size of the signage should also be proportionately increased to the area it needs to point out. Colours Colours can create or change the mood of the shopper. Effect of colour should be considered in combination with the lighting used in the shop. Bright, vibrant colours contribute to a different atmosphere than light pastels or white colours. Research studies show that in
133
NOTES
DBA 1740
NOTES
case of fashion oriented stores, blue interiors are associated with more favourable evaluations, marginally greater excitement, higher store patronage intentions and higher purchase intentions than orange interiors. Fixtures Retailers may use custom designed fixtures and off the rack or stock fixtures. Custom designed fixtures lend uniqueness to the store and are better suited for merchandise. Special fixtures may add to the image of the store, however it may be costly. Care should be taken to see that the fixture design are kept as simple as possible. The other factors to be considered in order to create a proper atmosphere inside the store are highlighted below; Scent and sounds influence the shoppers needs. For example in case of restaurants food aroma can be used to increase the appetite. A cosmetic store may use perfumes to enhance its appeal to the shoppers. The stores temperature affects the time spend by shoppers in the store. a retail store which in not air conditioned may not be preferred by a shopper in hot summer. Wide uncrowded aisle creates a positive image rather than a crowed or narrow one. Shoppers may find it more comfortable, easy and less irritated if they are not pushed, pulled or touched while they walk on the aisle. Presence of escalators, elevators and or stairs might influence the shoppers choice of store and the departments visited in a store. Escalators provide a quiet view of the entire store. Stairs are important for discount and smaller stores. Dead areas in a store can also be used to appeal to the senses of the shopper. The dead area refers to the awkward spaces where normal displays cannot be set up. Light fixtures, doors, rest rooms, dressing rooms and vertical transportation can cause dead areas. A retail store depends on the salesmen for communicating, message, creating customer. etc. In this context a retailer should educate and train the employees to create positive atmosphere so as to enhance the attractiveness. Positive, well groomed, un informed employee can create a negative effect on the shopper A store which has a state of art technology impresses people with its operational efficiency and speed. If the technology is outdated or slow it might lead to impatient shoppers. The presence of trail room may be an important factor influencing the choice of a textile retail store. A fashion store can have a carpeted dressing room or an average quality room depends on the type of shopper it caters to. The cleanliness of the store matters a lot in projecting a positive image among the shoppers. It can add value to the efforts taken by the retailer in creating a positive and attractive exterior and interior
134
4.3.2.3 Store layout A detailed discussion about store layout was dealt in the previous semester course material -Retail Management: Concepts and Environment. With the indepth understanding, some salient features are refreshed here. In order to design a layout which is attractive to the shopper, equal importance should be given to selling space, merchandise space, and the shoppers space. Selling space is used for display of merchandise, interaction between sales people and customers, demonstrations and so on. Merchandise space is used to stock non displayed items. shoppers space influences the shopping mood. It includes the lounge, benches, chairs, dressing rooms, rest rooms, restaurant, parking, wide aisles etc. Depending on the expectation and needs of the shopper the merchandise can be arranged following functional product groupings, purchase motivation product groupings, market segment product groupings and storability product groupings. Functional product grouping is based on the end use of the merchandise. Purchase motivation grouping appeals to the shoppers urge to buy product s and the amount of time they are willing to spend on shopping. Market segment offerings focuses on displaying items that appeal to a given target. Storability product groupings can be used for products requiring special care in handling. The shoppers should be enticed to move inside the store by following race track layout. The department locations should be properly planned and the shelves displaying products should also be given due consideration. The shelf should be easily reachable by the shopper. The space between the shelves should also be properly planned so as to avoid the butt-brush effect. The personal space needed by a person to mover around freely should be kept in mind else it may be create an image of being crowded and unpleasant. The individual products display on the rack should also be made in an inducing and convenient manner for the shopper. 4.3.2.4 Interior displays Interior display plays a major role in influencing the shoppers towards impulse buying. The shoppers may be attracted by the point of purchase display which might induce them to get more information about the product. The display can also persuade the shopper to buy the products. Research studies quote that majority of the purchase decisions are made by the shoppers inside the retail shop. Against this back POP display acts as a silent salesperson. Signs and instore media educate and draw attention to the product available and its attributes. The interior display should be changed so as to attract the attention of shopper and to break the monotony. In should also be kept in mind that some shoppers may be confused if the display is change and be frustrated in identifying his product requirements. A fine balance should be achieved to demonstrate variety and still keep the shoppers at ease.
135
NOTES
DBA 1740
NOTES
In the case of retail store which follows an assortment display, shoppers may be encouraged to feel, look around and try the products. Shoppers will find it convenient to buy food products, apparels, greeting cards etc in the open assortment display. A theme setting display which depicts the product offering in a thematic manner can set a specific mood for the shoppers. Each special theme seeks to attract attention and make shopping more fun. An ensemble display which focuses on presenting the complete product bundle rather than displaying merchandise in separate category may make it easy for a shopper to choose the merchandise. Shoppers will be encouraged by the ease of purchase and will be attracted by envisioning the entire product bundle. In case of apparel stores a shopper may prefer a rack display where the dresses are neatly hung. However a cluttered display will tend to confuse the shoppers. The shopper may choose the products in case display, cut case display and dump bin only if they need it. The display by itself will not attract the shoppers to purchase. Case display exhibits heavier, bulkier items than rack holds. In cut case display, the merchandise is left in original carton. In a dump bin a case holds pile of sale clothing or other products. These displays may stimulate shoppers to purchase by creating an image of reduced price by ensuring that no frills are attached Electronic display can also be used to make the POP more interactive, exciting and tailored to the requirement of shoppers. It demonstrates the products and answers shoppers queries. It can also be made more attractive using multi media capabilities. 4.3.3 Social Influences Social class is defined as the division of members of a society into a hierarchy of distinct status classes, so that members of each class have relatively the same status and members of all other classes have either more or less status. Social class is a group consisting of a number of people who have approximately equal positions in the society. Societies have been divided into various strata based on the multitude of factors like economic and political power, cultural values and beliefs, family background, education and income. Social class is thus primarily based on income, wealth and occupation. 4.3.3.1 Nature of social class Six basis characteristics of social class is discussed below; Social classes exhibit status: Social status is different from social class in the sense that it has more to do with lifestyle and prestige. However social class and status have an important relationship. Social classes are multidimensional: Social classes are based on a number of components. They are not equivalent to or determined solely by occupation or income or any one criterion. According to some theories housing is also considered as key social class ingredient. Housing refers to the place where a person lives
Social classes are hierarchical: Social classes have a vertical order to them ranging from high status to low status. Individuals may be placed within a class on this hierarchy, based on status criteria. Social classes are homogeneous: People within the social classes are similar in attitudes, activities, interests and other behaviour patterns. This homogeneity allows the marketers to effectively segment the market by social class and to develop appropriate marketing mixes. Social classes restrict behaviour: Interaction between social classes is limited because most individuals are comfortable in dealing with people belonging to their class as they have similar attitudes, values, behavioral pattern etc. This factor limits the interaction between different classes about advertising, products and other marketing element. Social classes are dynamic: Social mobility depends on the type of system ie open or closed systems. In open systems people have social mobility ie they have opportunity for upward or downward movement in the social strata. People in closed systems have inherited or ascribed status. They are born in one social level and cannot leave it.
NOTES
4.3.3.2 Social class measurement Three broad approaches are available to measure social class subjective approach, reputational approach and objective approach. Subjective approach In subjective approach individuals are asked to estimate their own social class positions. Individuals are asked to rank themselves in the social class hierarchy. However since most people may be reluctant to categorize themselves as either lower class or upper class will end up in ranking themselves as middle class. Reputational method According to this approach members of the community are asked to rank each other in the status system. This approach requires individual to know each other in order to rank, and hence it is limited to small communities and therefore cannot be widely used by marketers. The objective method Objective measures involve measures of demographic or socio-economic factors of individual using questionnaires. The questionnaires may focus on collection of information regarding the individuals, their families, place of residence etc. The variables like income, occupation, education may also be considered. The data regarding the geo demographic maybe considered. The data includes the zip code and the residence - neighbourhood information details.
DBA 1740
NOTES
Objective measures of social class may fall into two basic categories viz., singlevariable index and composite variable indexes. Single variable index uses one socioeconomic variable to evaluate the social-class membership which may be income, education or occupation. The other variables which might be considered are quality of neighborhood and the monetary value of the residence. These data can be used to support and verify the social class membership assigned on the basis of occupational status or income. Possessions ie the furniture, telephone, general atmosphere in room etc are also used as index of social class. This scale which is bases on possessions is called Chapins Social Status Scale. The composite variable index, as the name suggests combine a number of socioeconomic factors to index the social class. Such index is considered to reflect the complexity of the social class better than a single variable index. Index of status characteristics (ISC) and Socioeconomic Status score are the two important composite indexes used to measure social class. ISC is a weighted measure of socioeconomic variables; occupation, source of income, house type and quality of neighborhood ie dwelling area. The socio economic status score combines three socio economic variables viz occupation, income and educational attainment. 4.3.3.3 Social stratification The social classes differ in their values, attitudes and behaviour. Social class stratification provides a clear understanding of the shoppers on the basis of which segmentation could be practiced to serve the needs in a better manner. The Coleman-Rainwater classification of American societys social class is highlighted below; Upper-upper class: This group is composed of old, locally prominent families. It is the smallest group having international residence and friends. They are oriented towards living graciously, upholding family reputation and displaying a sense of community responsibility. Lower-upper class: The class constitutes of people who have recently accumulated wealth and are not quite accepted by the upper-uppers. They are founders of large businesses, wealthy doctors and lawyers. They have the highest income of all the classes and their goal is to live graciously as well as to succeed in their ventures. Upper-Middle class: The class constitute of moderately successful professional men and women, such as doctors, lawyers, professors, owners of medium sized business and men at managerial level. It also includes younger men and women who are expected to reach the occupational status level within few years. This group is motivated towards achieving success in their careers, reaching a higher income level, and achieving social advancement for themselves and children. Middle class: This class is the top of the common man level in the society. The members constitute the non managerial workers, small business owners and highly paid blue collars. The key motivation for this segment is respectability and striving.
138
Working class: These are poor but honest and family folks constitute the largest of all the classes. It is composed of skilled and semiskilled workers and small business trade people. These class members earn good income but dont use it to become respectable as in the case of middle class group. They are oriented towards living well and enjoying life from day to day rather than saving for future or being concerned by others opinion. Upper-lower class: This class is the working poor who have belong to the labour makert. Although above poverty level, they dont have steady employment as they have only less education and are unskilled Lower-lower class: This class of people lives below poverty line. Their income is generated from illegal activities. They have bad reputation among high classed who view them as lazy, shiftless, against work and immoral.
NOTES
India had only two distinct classes at the time of independence ie the upper class and the lower lass. However in the last few decades the middle class has emerged. The middle class segment can be further stratified as upper middle, middle middle, and lower middle class. The factors which have contributed to the increase in middle class are raising rate of literacy among women and their increasing participation in the workforce. A survey by AC Nielson on attitudes among youth, categorized Indian youth into the following types; Balancing lot - consist of upper an upper-middle class males and females, who believe in self-expression and freedom, but value family. Money matters- social class consists of middle and lower-middle class males, who believe that money is the only way to success. Desi youth consist of mostly middle and lower-middle class males and females, who have strong value systems at home, and thus are apprehensive of western culture and values. Cool guys males and females belonging to affluent class, who have completely adopted western culture and brands Repressed souls mostly middle and lower middle class females who have tense relationship with parents and are frustrated with life due to parental restrictions.
4.3.3.4 Social class and shopper behaviour The influence of social class on the shopping behaviour in terms of products they buy, the places they shop and the responses to promotions and prices are explored in this section; Products and services consumed Products and services consumed differ among the social classes. Apart form betweenclass purchasing differences, within the class also variations occur. Sometimes it might be
DBA 1740
NOTES
difficult to distinguish class differences in purchase patterns of products which are bought by a wide variety of shoppers for example the generic products. However research findings shows that social class differences could be witnessed in case of purchase of certain brands of products, store choice and restaurants. The consumption pattern of upper-uppers are quite different from other social classes in the sense they do not purchase to impress others. Lower uppers are oriented strongly towards conspicuous consumption and their purchase decisions are geared towards demonstrating wealth and status through expensive cars, jewelry etc. The upper-middles purchase greater number of products than any other class. Since they are successful in their respective field, their purchase decision reflect strong social implications. Social acceptability is an important guideline in the consumption activity of middle class. They are more interested in products which will enable them to gain social acceptance than the functionality of the same. Working class are more concerned with purchase providing them immediate gratification. However they avoid spending money in ways that are considered out of the place. Their expense on services is much less than the spending on durables. The lower-lower class are likely to spend more of immediate gratification and they have a tendency to do impulse buying. Shopping behaviour Shopping behaviour varies with the social class. Research findings show that the store choice and social class membership are very closely related. All shoppers do not buy at glamorous, high status stores. Instead people select a retail store which matches their values and expectations. Same products and brands may be purchased in different outlet by members of different social classes. Research on social class and information searching under different levels of perceived risk show that in case of high risk purchases no social-class pattern existed for information search using friends, relative, newspaper, magazine, TV/radio and sales people. In middle level purchases friends and relatives are more likely to be used as information sources as social class decreases. Research findings on shopping behaviour of women show that in case of upper and upper middles; women organize shopping more purposefully and efficiently. They have more information on where, when and to shop and the information is collected prior to purchase by reading brochures, newspapers etc. Store environment is important for them. The stores should be clean, orderly ,reflect good taste and staffed with employees who are well aware of the product and the shoppers status. Women belonging to middle class work more at their shopping. Shopping for non food items is though as a demanding and tedious process filled with uncertainty. They are value conscious and seek to get maximum value for the money paid.
140
The working class women prefer to shop at known places suggested by friends etc where they feel comfortable. They buy with less prepurchase deliberations than the middle and upper classes. They are more likely to use in-store information sources such as display and sales people and purchase mostly from discount houses. Lower class group mostly buys on impulse. They often purchase from local shops who cater tailor made products on credit terms. Promotion Social classes differ in the media choice and usage patterns. They also differ in their perceptions and response to advertising and other promotional messages including the words used. The media patterns reveals that the upper classed tend to buy and read more newspapers, magazines and watch less television than other classes. The media choice of upper middles reveals FM radio an newspapers as the preference. They spend significant time in watching programmes of their taste. The middle class group ted to read morning newpapers and magazines and have a pragmatic approach to advertising. Though they are attracted by discounts they are cautious in their purchases and ensure that the incentive is worth the effort. The working class listen to radio and spend more time in watching television. They are more receptive towards sales promotional offers and are attracted towards the same. Lower class media habits are the same as working class except that they have even lower readership of magazines and newspapers. Price related behaviour Research studies reveal that lower classes are poorly informed about price and product alternatives. They are more likely to buy products on discount offers/ on sale. Price perceptions of middle and working classes show that working class believes more on the price/quality relationship. They believe that high priced product are of high quality. Saving, spending and credit Saving, spending and credit usage are all related to social class stratification. It is found that upper class shoppers are more future oriented and confident of their financial acumen. The lower class are found to be more inclined towards gratification of their immediate needs. They are more concerned with the safety and security of their savings. The lower class purchasers use credit card to pay for things they may not be able to afford whereas the upper class use it as a substitute for cash. 4.3.4 Cultural And Cross Cultural Influences Culture reflects the personality of a society. It influences all activities of individual including the purchase of goods or services. Shoppers perceive that the goods or services purchased and consumed by them transmit cultural meaning. Advertising and other promotional strategies should carry the values, norms or beliefs that model the culture of the target segment. Understanding the culture of the shoppers will enable the marketers to interpret their reaction to the marketing strategies.
141
NOTES
DBA 1740
NOTES
Culture is defined as that complex whole that includes knowledge, belief, art, morals, law, custom and other capabilities and habits acquired by man as a member of society. It is also defined as patterns of values, beliefs and learned behaviour that are held in common and transmitted by member of any given society. In order to understand the influence of culture on shopper behaviour, culture can be defined as the sum total of learned beliefs, values and customs that serve to direct the shopping behaviour of members of a particular society. Belief refers to the accumulated feelings and priorities that individuals have about things and possessions. It consists of large number of verbal and non verbal statements that reflects a shoppers knowledge and assessment of another person, a retail store or a brand etc. Values are also beliefs, however they differ from belief in the sense that they are few in number, difficult to change, not tied to specific situation or objects and are widely accepted by members of society. Values serve as a guide for culturally appropriate behaviour. Customs are explicit modes of behaviour that constitute culturally approved or acceptable ways of behaving in specific situations. Beliefs and values are guides for behaviour whereas customs are usual and acceptable ways of behaving. 4.3.4.1 Components of culture Different culture differs in what each expects from its members, however all culture exists to meet the common needs of the people. The culture has components which is evolved to protect the people. They are; Norms: The rules of behaviour are called norms which provide guidelines on acceptable and unacceptable behaviour. Norms can be classified as enacted and crescive norms. Enacted norms are explicit rules easily recognized by people inside and outside of the social unit. Crescive norms are learned and practiced by members of a social unit but may not be easily recognized by nonmembers. Customs: Customs are behaviours that have lasted over time and are often passed down in the family setting. Mores: It is a set of standards for values and behaviours that are considered morally right. The members of a culture set the standards for what is morally right and expect compliance. Conventions: Those practices tied to the conduct of everyday life in various settings in a culture is called conventions for eg the appropriate clothes to be worn, food to be served in a certain settings etc. Sanctions: Sanctions are negative actions on the part of the members of the culture. When members of a culture do not confirm to the norms, customs, mores or conventions of the society, they may be sanctioned. It may take the form of avoidance, shunning or banning where individuals are not allowed to participate in various activities.
142
Values: The enduring beliefs that specific modes of conduct or end-states of existence are preferred to other specific modes of conduct or end states. Modes of conduct in order to obtain certain end-states are called instrumental values and the end-states towards which a person is moving are called terminal values. Beliefs in culture: Cultural beliefs are based on religion and myth. Cultures are shaped by the underlying religious philosophies of the people. A myth is a story or fable that reflects important values shared by members of a culture and this used to teach one or more of these values. Rituals : It is a pattern of behaviour tied to an event that is considered important to our lives. Rituals involve the use of goods and services. Those objects needed in order for rituals to be carried out successfully are called ritual artifacts. Marketers need to understand the rituals in order to position the product or services.
NOTES
4.3.4.2 Characteristics of culture The concept of culture is difficult to understand .The characteristics of culture explained below may clarify the meaning. Culture is invented: People invent culture and this invention consists of three independent systems or elements;(1) an ideological system consisting of ideas, beliefs, values and way of defining acceptable and unacceptable actions (2) a technological system that consists of skills, crafts and arts that enable humans to produce material goods derived form the natural environment (3) an organizational system such as family that makes it possible to coordinate their behaviour effectively with the actions of others. Culture is learned: Culture in not instinctive, but learned beginning early in life and is charged with a good deal of emotion. It is handed over from generation to generation Culture is socially shared: Culture is a group phenomenon, shared by human beings living in organized societies and kept relatively uniform by social pressure. The group involved could be the society at large or the family. Cultures are similar but different: Different cultures may exhibit similarity in certain aspects yet they may be different in many respects which makes the shopper behave in a different manner. Culture is gratifying and persistent: Culture satisfies basic biological needs as well as learned needs. It consists of habits that will be manipulated and reinforced as long as those who practice them are gratified. This gratification makes the culture to be handed over from one generation to another. Culture is adaptive: Culture is gradually and continuously changing. Some societies are quite static , with a very low rate of change while others are more dynamic with very rapid changes takes place
143
DBA 1740
NOTES
Culture is organized and integrated: Culture has various parts that is fit together. Each culture has some inconsistent elements however it tends to form a consistent and integrated whole. Culture is prescriptive: Members of culture have a common understanding of right and proper way of doing things. The culture has ideal standards which make people in the society to act in a consistent and acceptable manner. Norms also enables to adhere to the guidelines.
4.3.4.3 Measurement of culture Number of measurement techniques can be used to study culture. Some of the techniques are explained; Projective techniques Projective techniques are used to reveal the underlying motives of individuals despite their efforts to conceal the same or due to unconscious rationalizations. A variety of disguised tests such as incomplete sentences, untitled pictures or cartoons, ink blots, word association test etc can be used. It is often used during indepth interviews. The theory behind projective test is that the respondents inner feeling influence how they perceive the stimuli. Their responses are expected to reveal their underlying needs, wants, fears and motive whether or not the respondents are fully aware of them. Content analysis The content of messages revels the cultural aspects of a society. Cultural analysis focuses on the content of verbal, written and pictorial communications. It can be used as an objective means of determining the social and cultural changes that have occurred in a society. Fieldwork In fieldwork a small sample of people are selected and their beahviour are carefully observed. The observation leads to conclusion regarding the values, beliefs and customs of the society under investigation. The field observation focuses on the observation of the shopper behaviour, it takes place in a natural environment and it can be performed with or without the shoppers awareness regarding the test. It focuses mostly on the in-store shopping behaviour and less frequently on consumption. In some cases the researcher who is conducting the field study may also become active member of the environment in which the study is conducted. Value measurement survey instruments Values can be measured by means of questionnaire or value instruments to ascertain the responses of shoppers towards personal and social concepts as freedom, comfort,
natural security and peace. The value instruments like the Rokeach Value Survey, the List of Values and the Values and Lifestyles VALS can be used. 4.3.4.4 Languages of Culture Languages beyond words must be considered while taking into account different cultures. The meaning of the words and the translation of product descriptions, brands, taglines and the like should carefully considered. Marketers is planning to sell the product or services in other culture, should give importance to the languages in positioning and communicating the products, services or messages. Some languages are explored below; Words: Words mean different things in different language which should be taken into account while giving brand name. For example, the coca-cola sounded like kou-ke-kou-lain Chinese which was interpreted to mean a thirsty mouth and a mouth of candle wax. The changes the phonetic translation to ke-kou-ke-la which means a joyful taste and happiness. Colours : Colours means different things in different culture. Red is positive color in Argentina and Denmark and in China it means good luck. However it is a negative colour in Nigeria and Germany. Red is considered as a feminine colour in china and masculine colour in France and Britain. Time: Members of different culture view and interact with time in different ways. Self time is spend on memories, perceptions and future expectations of their everyday life. Interaction time occurs in informal settings such as in the household or other social setting. Institutional time happens in highly structured settings such as organizations, schools and the workplace. Space, distance and gestures: The typical distance between individuals in various settings is not the same in all cultures. In Germany, Austria, Sweeden or the Netherlands the acceptable distances between individuals in a business or personal conversation are greater than in the United States or Australia. Gestures, postures or body positions also vary in meaning. Symbols: Symbols carry connotative meanings that are subject to interpretation. Symbols can persuade the shopper that the product can bestow some special, culturally desirable advantage. Friendship and Agreements: The meaning of friendship varies across cultures. The shoppers may be attracted to certain outlets and to select particular service suppliers based on friendship. Agreements are the result of accepted practices and customs in business and other arena among the members of the society. Understanding the broad variety of languages within a culture helps marketers to ; Design, produce and deliver and position products and services that will be acceptable to culture members. Produce more effective and culturally acceptable messages, presentations and campaigns.
NOTES
145
DBA 1740
NOTES
Analyze and find ways to work within the time perceptions, procedures and constraints of the society. Understand the importance of friendships and the mechanics of putting together agreements with trading partners in different cultures.
4.3.4.5 Cross cultural influences Marketers today operate in the globalized economy. Global thinking and sensitivity are key aspects which will contribute to the success of marketing strategies. Marketers have to understand and base their strategies on the cultural inputs of people which differ in different country. It is imperative for marketers to acknowledge the cultural differences in order to attract and retail shoppers. Cultural differences in terms of norms, customs, mores, conventions, sanctions, values, belief etc should be understood to exist in the global market. Culture: The shoppers perspective Individuals have a natural tendency to belief that their own culture is better than or even superior to others. This is called as ethnocentrism. Ethnocentric people see their culture as the center of everything and judge others culture with their standards. Consumer/ shopper ethnocentricity is and economic form of ethnocentrism. It arises out of shoppers love and concern for his own country and the harmful economic impact of importing goods from other nations. The shoppers who are strong ethno centrists view buying foreign goods as not only ethnocentric issue but as a moral issue also. Such shoppers will prefer to buy inferior goods made in their own country rather than buying foreign goods. The shopper may also have cultural animosity. This refers to a situation where the people in one nation have a very strong aversion to people of another country. This may be due to negative historical experiences. Cultural relativism is where a person views or judges any behaviour, value or norms within its own social and cultural settings. Marketers have to frame their strategies relating to advertising, promotion, etc based on the cultural standards of the shoppers rather that what the marketers think as the best. Cultural comparison Hofestede approach to cross cultural value measurement is used extensively. The approach is based on the following dimensions of cultural values; Individualism Versus Collectivism cultures Individualistic culture refers to the society where the members of a culture put their own advancement and welfare ahead of the same factors for the groups, institutions and their culture as a whole. In such culture people are focused more on themselves and give priority to their interests and goals more than that of the group. Equality, freedom, the uniqueness of the individual and the personal enjoyment are considered to be more important and competition to become the best is and being ahead of others is encouraged. Australia,
England, Denmark, France and United States are examples of countries where the individualistic culture prevails. In individualistic culture, the shoppers are less likely to be influenced by others. The product will be chosen on the basis of their self image and personal pleasure and the choice is made to express themselves freely. Products which will improve the shoppers skill and knowledge and profession advancement will be demanded. Promotion should also be focused on the individual benefit. In collective culture people put the good of others, the group which they belong to and the society as a whole above their own. The development of collective self is fostered. In this culture, self discipline is important and competition on a group basis is accepted but not encourages. People in collective culture have less need for equality and freedom. Countries such as Thailand, Hongkong, Indonesia, Greece, Egypt are higher on Collectivism. In a collective society belongingness matters most. The influence of reference group is higher. The focus of the offerings should be on the basis of the pleasure, skill development and knowledge acquisition in a group setting. Promotion should be based in the context of shopper being part of various groups. Masculinity versus Femininity Cultures Culture may also be compared on how the role of men and women are differentiated and how publicly or privately segregated the two genders are from each other. Role differentiation within the home as well as within the culture at large can be assessed. If male role are considered superior to those of female, the societies are called masculine and if female roles are considered superior it is called feminine. In a masculine culture, high value is place on things such as monetary gain, material possessions, completion, being successful, assertive and aggressive. The feminine culture are set on nurturing the family, quality of life, social responsibility, environmental quality and the like. The shoppers role also varies according to gender in differ culture. The role of men and women in certain culture has become blurred and as such men are also involved in shopping for groceries, cooking, taking care of children. Like wise women are also working, take part in decisions etc. Women are becoming more educated and are beginning to move in the business world. However some countries culture view women as inferior to men. This role difference will have an impact on the male and female goods and services demands and also on how the shoppers function in the marketplace. High versus Low power Distance cultures Power distance refers to the level of social inequality that exists in a society. It also refers to how willing the members are to accept authority at all level. High power distance refers to high social inequality refers. Authority acceptance at the family level, in social settings, at work, form government agencies are all taken into account. In case of culture
147
NOTES
DBA 1740
NOTES
with very high power distance , the difference in power between the most and least powerful individuals or groups is great. Great gulfs exist in wealth, land education, income, access to health care, job opportunities, political relationships etc. in this system the subordinates are expected to maintain appropriate distance from superiors in conversation and manners. People are after power or involved in activities leading to increasing their power so as to gain satisfaction. In low power distance culture equality exists among all people and authority is shared. Countries with high power distance include Egypt, India, Malaysia, Philippines etc. Lower power distance exist in countries Australia, New Zealand, England, Germany, United States etc. The segmentation of market will be more diverse in case of low power culture. Demand for high-quality goods will be widespread. In high power distance society large markets for necessities and basic housing and foodstuffs will be found among the lower segment of people. Status or social brand images will sell well to shoppers in the higher social ladder as they are highly motivated by affiliation and status norms. High versus Low uncertainty Avoidance Culture Level of ambiguity which a culture is willing to accept indicates its uncertainty avoidance. It refers to the willingness of the members of a society to accept ambiguity and uncertainty. High uncertainty avoidance otherwise a certainty culture is found in societies that have routinized behaviour patterns, many rules and regulations, low tolerance for new ideas and new ways of doing things. Shoppers in such society tend to go their families and others important to them to get advice, security, guidance and comfort. They are more prone to stress, emotions and anxiety. They may be aggressive and hard working. Low uncertainty avoidance exists in culture where people are willing to take risk. They dont have a strong desire to control their destiny. They are relieved, confident, rational and retired. As shoppers their behaviour is more flexible and they are reactive. New ideas are easily accepted. Selling goods and services to shoppers in certainty cultures requires highly reliable offerings with guarantees. Brands having the image tied to risk aversion, problem solving and prevention will be attractive to the shoppers. Abstract Versus Associative Thinking Cultures Abstract thinking culture is where the members are logical thinkers who are interested in the principle of cause and effect. Products and services which deliver benefits are valued high. Face to face communication is prefered and members of such societies are willing and eager to make changes and to try new products and services. In associative thinking cultures, the cultures connections or associations with people, celebrities and events impact on the importance of things. The products ties to such value are preferred. Communication through the mass media is acceptable rather than face to face communication. Conclusions about people, product, services etc are not arrived in a
logical thinking manner. Hence promotions based on logic may not be persuasive. The context in which the product is offered or the message is delivered is given importance. People in this culture resist change and do not easily adopt product or service innovation. Cultural and International marketing decisions Marketing decision should be based on culture of the societies where the marketer wishes to place his product or services. Some decisions are discussed below; Market segments As in the case of domestic market, in the international market also the marketer should identify the market segments and develop product or services to suit the needs of the shoppers. Marketers may identify the segments globally as well as within individual countries or regions. A study conducted in 14 countries identified five distinct global segments that share attitudes, values and actual purchasing patterns which are uniform across national boundaries and different cultures; Strivers consist of people whose median age is 31 and who lead active lives. They prefer products and services that leads to instant gratification. They are under stress most of the time. Achievers are of the same age as strivers, but have already succeeded in life. They are affluent, assertive and are style leaders. They value status and quality in the brands they buy and are largely responsible for setting trends Pressureds are women in every age group who find it difficult to manage all the problems in their lives. They have little time for enjoyment. Adapters are older people who live comfortably. They are content with themselves and their lives and they recognize and respect new ideas without losing sight of their own values. They are willing to try new products which adds value to their life. Traditionals embody the oldest values of their countries and cultures. They are resistant to change and they are content with the familiar products. Apart from the above segmentation, countrywise segementation based on the individual culture may be practiced by marketers.
NOTES
Product considerations The type of product consumed varies in each culture as each country has a different mix of consumption. A product considered for marketing in a foreign country should be evaluated regarding the suitability with the countrys value system. Products can be categorized and ranked on a most to least culturally bound continuum as highlighted below; The consumer products are culture bound to the maximum extent whereas industrial products are the least.
149
DBA 1740
NOTES
Established product categories are most culture bound and new product categories are the least bound. Simplex technology is highly culture bound compared to the complex technology. Kitchen based item are most culture bound followed by items like bath and bedroom, living room, garden, garage and items for use away from home.
The product which succeed in one country may miserable fail in another country if it fails to adopt to the culture of the society. Simple elements as package, design, colour which is not suitable to a culture may be detrimental to the marketer. B Promotional consideration Promotional strategies should be based on a countrys culture. Promotional failure have occurred abroad because of lack of understanding of foreign culture. Marketers have failed miserably in many cases by following the same brand name and advertising strategies across different countries. An example of coca colo was mentioned in the previous pages. The promotional strategies may fail if cultural barriers are not given due consideration. Distribution channel considerations The culture of a foreign nation should be understood in making the channel decisions. for example the cultural influence on retailing. Supermarkets in Britain are small compared to the same in U.S. this is because the British housewives lack cars and shop on foot in their neighbourhood. Also they value social relationship with the shoppers and they have schedules for their purchases so that they buy different food products on different day. Understanding this is imperative for arriving at decisions regarding the channel management. Pricing considerations Pricing decisions are affected by the foreign culture as the shoppers perception of price varies from country to country. For example in developing countries American product may be perceived as superior and should be prices at a sufficiently high level, because the shoppers may perceive quality based on the price. If the product is priced less the shoppers may perceive it to be of low quality. In developed countries the product may be perceived as equivalent to domestic products and hence it should be similarly priced else the marketers may loose the market share. 4.4 ONLINE RETAIL SHOPPERS BEHAVIOUR Thanks to the increase number of telephone - broadband connection and increase in the number of tech savvy shoppers, online retailing is gaining momentum in India. According to a statistical report (www.internetworldstats.com) the internet penetration in India has a penetration rate of 3.7%. The e-tailing, e-retailing or online retailing is now considered as a viable model, which coexists and competes for the share of the shoppers mind space and pocket space. Online retailing is the sale of consumer goods and services via an
interactive electronic communications network. Electronic communication network alternative includes personal computers, interactive television and web enabled mobile telephones. Internet has revolutionized the relationship between manufacturers and retailers and retailers and shoppers. Amazon.com is one of the earliest virtual retailer which sells the products via the internet and do not have physical stores. However the number of virtual retailers is steadily increasing owing to the benefits enjoyed by them over the store based retailers. Unlike the store based retailers, virtual retailers do not carry physical inventory. The internet acts as on order placing and transacting mechanism and once the transaction is complete the product is delivered directly to the shoppers which reduce the cost of the products. The cost of delivery is generally passed on to the shopper increasing the retailers profit. The cost of running a website is much lesser than the cost of running a brick and mortar store or catalogue retailing. The assortments of products that can be dealt is more as there is no physical space limit as in the case of store based retailing. It can function any time any day throughout the year and there are no physical boundaries.
NOTES
Business models There are two general approaches to marketing on the web viz., virtual business and the supplement approach. Virtual Business.
Virtual Business exist only on the net, rather than having physical business with tangible store-fronts, inventories and product. Successful virtual business opportunities can be realised by creating a web site with following features: Creating a retail presence larger than any physical store. Providing extra information in a form competitor cant imitate. Selling a speciality product or collectable worldwide. Providing extra benefits and convenience to customer, like extremely low cost of transaction. Providing a sense of community that competitors cannot match like chat rooms and bulletin boards. Amazons founder Jeffrey Bezoz describes community as the secret weapon of electronic merchant.
151
DBA 1740
NOTES
The Supplement Approach.
In Supplement Approach web marketing is used as another promotional tool in addition to the traditional advertising, personal selling and sales promotion. This approach has number of advantages as promotional tool, as it enables large quantities of information to consumers quickly and at a negligible variable cost. It enables to reach consumers anytime, anywhere and there is little wasted coverage-people exposed to the advertisement who are not in target market. The promotional track can be used as follows: The web can be used to build brand awareness and image. Web is a cost-effective way to augment the core product with related information and services. Cost saving from automating routine customer service function like enquiries. Building customer database. Many web sites in India are supplementary in nature. Not all companies will be satisfied with using web as advertising tool to build awareness or providing information. Many companies operate for a set target return on investment. The following are some money-making models that marketers can use to make revenues on the web: The Retail Model.
An electronic storefront is set up on the web and it makes money by selling product directly to shoppers. The store offers a wide range of products bought from the manufacturer at wholesale and sells them at 30 to 60 percent gross profit margin. A number of retail formats exist in case of store based retailing which was dealt in detail in the previous semester course material Retail Management: concepts and environment. Likewise the virtual retailers may engage in online retailing in a number of formats. They can sell the products only through electronic network or they can do business both in the store based retail format and the e-tailing format. The latter is mostly practiced by the retailers. In a broader sense the internet can be used by the retailers for disseminating information or as transaction sites. Information only site where the shoppers can get information regarding the various products or services offered. This type of site functions essentially as a source of information about the marketer and the products dealt. It is a public relations tool designed to create awareness and to support retail brand. Transaction sites are two way communication systems which allow shoppers to place orders and retailers to communicate with shoppers. Transaction websites involves more cost in terms of building and maintaining the site, delivery systems and secure online credit payment system.
152
The Mall Model.
NOTES
A web location is developed and web retailer are charged fee for using the same. A web retailer can have his own server or rent space from someones else server, which is like renting a space in a mall. The shoppers enjoy the benefit of visiting one site for all their shopping needs. The Broker Model.
It enables the meeting of buyer and seller on the web, for a charge. Electronic brokers introduce suppliers who deal with the items that the shoppers are looking for. Eg. online trading. The Broadcast Model.
It provides attractive free content to shopper and charge advertisers to appear with the content. Like television network and print media, the revenue is accumulated by selling advertisement on their site. The Subscriber Model.
The shoppers are charged to view the content. The model provide free information for a trial period and after that begin charging fee for accessing their site. The drawback is that once content provider begin charging subscription fees, visitors drop off .Most generally business already accustomed to subscribing to research service may be a better target than consumer for this model. Strategies to capture and retain online shoppers Capturing and retaining shoppers in virtual market requires a different approach than the store based retailing strateties. Conversion of marketing activities to online front requires structural changes in the approach towards 4 Ps in marketing mix. The 4 Ps should be converted to 5 Cs viz, benefit to shopper (product), cost to the shopper (price), convenience to the shopper (place), communication (promotion) and customization. After sale service, customer relationship management and atmopsherics in the cyberspace also play a major role in enhancing the customerbase. Product
Products offered through web should be suitable for e-shopping. Online marketing not only offers physical goods, but also digital goods. It is also possible to customize products to suit the requirement of shoppers. Greater emphasis should be placed on viability, quality, reliability, dependability and integrity. Products which have high virtual appeal and lower physical appeal are more suitable for online marketing. The products which are already used by shoppers and have brand reputation can be easily offered for
DBA 1740
NOTES
sale on web. The product should also be highly digitisable. There are certain products which the shoppers will prefer to touch, smell etc before buying. In case of these products, the marketer should provide real time experience to cross the habitual boundaries of the shoppers. A shopper has the choice of buying almost all products in the internet. However certain products are more amenable for e-tailing are; CDs, books, videos, gifts, computer hardware and software, travel tickets, hotel reservation, movie tickets etc. shoppers prefer to buy products which are; standard, catering to convenience need, low involvement, repeat, single gift purchases. Hence the books, music, videos and gift items fall into this category. Differentiated high involvement, new task, jointly purchased, self consumption items are not shopped much thorough the cyberspace. High convenience, perishable, immediate consumption products are also less likely to be purchased through the internet because of inherent delay in delivery. Offering unique merchandise enables a virtual retailer to differentiate himself from that of the competitors, build loyalty and enables price differentiation. This can be done by offering private label products , but it is very difficult for new entrants in online retailing as the shoppers will have be knowledgeable about the retailers. Virtural retailers could offer unique bundling of merchandise which could be purchased individually from other e-tailers. The bundling should offer more convenience for potential shoppers or offer better value. Price In case of traditional marketing, price is mostly fixed, whereas online marketing offers dynamic, customized and group pricing. Price is used as a means to encourage shoppers to purchase through web. Various strategies like frequent purchase plan to reinforce customer loyalty and to encourage repeat purchase are followed. Web-only specials are also used to lure shopper to purchase through web. Online auction allows purchaser to bid the price. Pricing in online marketing can also take the form of asking the shopper to offer a price that they would be willing to pay for a product or service. Online retailing also enables shopper to pay for the goods or services through the net. However the question of security makes the customer still wary in using the credit card. The encryption technology, use of digital cash and digital signature will help shopper and marketer overcome these hurdles. Place Traditional market place has many physical constraints like geographical boundaries to reach the shoppers and deliver the products. E-marketing provides unlimited market space, prompt and timely delivery of goods to shoppers is also made possible. For digital products internet itself is a delivery channel where software packages and application can be ordered online and downloaded directly to customer PC. This new distribution channel is cheap, fast and effective.
Promotion and brand building In comparison to the store based retailers, virtual retailers encounter more intense competition as shoppers has access to a number of retailers on the internet. Hence a strong brand image is very important as it assures the trustworthiness of a retailer, quality of the products, reliability of delivery, after sale service. In order to provide information about the products or services to the target market and to build brand awareness and equity the following online marketing strategies can be exploited in place of traditional promotional tools practiced: 1. Permission marketing strategies: E-mail messages to potential shoppers is an effective way of announcing new product or services or sales of existing product. It is much cheaper than any other media used for promotion. However unsolicited mail is often considered as spam. The practice of sending email message to people who have requested information is called opt-in e-mail and is a part of marketing strategy called permission-marketing. To induce potential shoppers to accept or opt in to advertising information through e-mail messages, the seller must provide some incentives. 2. Brand-leveraging Strategies The leveraging approach works well for a firm that already has web sites that dominate a particular market. Well-established web site can extend their dominant position to other product and services. 3. Affliate-marketing Strategies In this strategy the product promotion is done through the affiliate firms web site which provide description, review, rating and other information about a product, the affiliate firms web site is linked to the retailers sites, the affiliate site receives commission. 4. Viral-marketing Strategies. Viral-marketing relies on existing shoppers to inform other prospective shoppers about the product they are using. It uses individual shoppers to spread word about the retailer. The number of shoppers increases much as virus multiply and hence the name. Personalization. The fifth P in online marketing is personalization. Using artificial intelligence, the shoppers are provided with personalized information. After the first visit, the home page greets the shopper in person, automatically provides all the information which he is interested in. Personalization crosses promotion and product and enhances both in the process. Apart from concentrating on the above said factors, strategies should also be built by retailers to ensure good service to the shoppers. A number of things can go wrong in making a online purchase. Most of the orders not delivered in and also there is high rate of
155
NOTES
DBA 1740
NOTES
return due to inconsistency with the order. Hence, good after sale service is essential. Customer relationship management should also be practiced through emails. The e-tail atmospherics The e-tail atmospherics includes the same components like the brick and mortar retailing viz., the storefront, general interior, store layout, displays and checkout counters. These aspects are dealt; Storefront The homepage resembles the storefront in e-tailing. The home page should have the following features; It should be attractive and encourage shoppers to explore further The retail stores brand should be displayed prominently indicating its positioning strategy The navigation should be made easier Graphics should be chosen carefully keeping in mind the downloading time. most of the e-shoppers pay for time on the web, hence downloading should take less time. The site should have a distinct look and feel from that of the competitors The entire array of product line carried should be listed The retailers e-mail address, phone number and mailing address should be displayed Help menu should included to make the e-shopping easier It should be connected with many search engines so that the site will be more accessible to the potential shopper The colour choice, font style , the design should made attractive as well as visible and legible to the shoppers.
General interior The general interior set the shopping mood by using colour, audio visual effects etc. some guidelines are mentioned below; The web sit should be simple and uncluttered. Too much of pictures and text might distract, overwhelm and create a shabby picture. It should carry details about the retail concern The product icon should be suitably designed Attractive and relevant news could be published Shopping carts to be designed properly for placing orders The search engine should be displayed Details regarding the location of physical store should be displayed Separate login for shoppers for loyalty programs should be designed
Store layout In e-tail environment store layout means the layout of webpage and the links from one page to another. An inefficient e-store layout which consumes lot of time would frustrate the shoppers. A store directory with the product categories will enable the shopper to carry out the e-shopping in an easier manner. Some guidelines are mentioned below; Interactive search engines should be included as it enables empowered search for products and services. The e-shopper will be taken to the concerned websites from the search engine in a jiffy which will enhance the shopping experience. Popular brands and products could be displayed in distinctive places which are attractive to the shoppers. More space can also be allocated to the fast moving products. If a webpage has scroll bars, then the best selling items are displayed in the top of the page. The submit button finalizing the completion of a transaction should be placed place in a prominent position near the last column of entry. The graphics and the text should not be separated. If the graphics takes a long time to get downloaded, the text should be downloaded first which will engage the shoppers instead of keeping them idle.
NOTES
Display The e-tailer can display full product information or display the group of assortments in a selective manner. The display decision affects the appearance of the site, as well as the level of choice and clarity level of a shopper with respect to the information presented. Ensembles can be displayed so that the shoppers can create their own choice in an interactive manner. 3Ds, animations and video graphs could be used to enrich the display quality. The compatibility for various versions/browsers should be kept in mind while designing the pages. Checkout Counter The checkout counter is all the more important for the e-shopper than an online shopper due to the following reasons; security and privacy issues, different steps and procedure to be followed for completing online transactions, the presence of shipping and handling costs are not revealed until the last stage. The e-shopper should take utmost care in filling up the details regarding the model number, quantity, delivery address, phone number etc. The ease of transaction completion is an important factor which ensures shoppers patronage. Problems and prospects for an e-shopper E-tailing enables a shopper to enjoy the following benefits ; Customization of websites to the individual requirement of the shoppers is possible in online shopping.
DBA 1740
NOTES
The website can be updated more frequently without incurring high cost. The shopper can get current information quickly Unlimited space to present product assortments, display and information enables a shopper to have a good shopping experience Enables to complete shopping within few minutes The shopper however has to encounter the following drawbacks; The ambience cannot be felt by a shopper as in the case of a brick and mortar store. Shopping is many times viewed by individuals as social activity or enjoyment. The emotional shopping experience which is enjoyed in store front cannot be experienced in the e-tail format. A shopper cannot hold, smell, feel or try the products as in real time. Though virtual experiences can be provided it may not be matching the real time. e-shoppers are not ensured with the safety of transaction using credit cards and as such they are not willing to part with their credit card details on the net, fearing the misuse of the same. Shoppers in India are used to personalized services and are pampered by sale person which is lacking in e-tail. One of the biggest barriers in e-marketing is personal computer penetration. In India computer is still a luxury to many people. Even though computers are available at low price, the internet connection is slow and unreliable. The users have to pay the telephone charges as well as the ISP charges for internet access. Likewise the products are delivered through postal service which has questionable reliability.
Segmenting e-shoppers While segmenting the e-market the retailer should take into consideration the following aspects; The marketer should attempt the best segmentation method which maximizes the opportunity for present as well as future profits. Potential buyers within a segment should be similar in terms of benefits sought, or in terms of reaction to price or promotion methods. There should be diversity among the different segments. If the needs of different segments are not different then the segments should be combined suitably. It should be feasible to reach the target segment through the marketing action. The cost involved in identifying the characteristics of target market and assigning them to different segment should not be excessive. Basis of segmentation: Segmenting online customers needs a different approach than that is followed in offline market. The abysmal performance of targeted banner ads on internet portal sites, where click through rates are very much lesser underscores the failures of the conventional mode. Hence e-tailers, advertisement agencies, research firms etc are constantly searching for
new segmentation schemes as applicable to the e-world which utilizes the webs unique strength. Some basis for segmenting the online consumers is presented; Extent of adoption - Technology is not embraced by all customers in an equal manner. On the basis of the extent of adoption of e-market the customers can be categorized as; Avoiders - consist of consumers who consciously avoid the e-market and keep on justifying their action. Aspirants - consists of consumers who desire to adopt the e-marketing. The benefits of e-market are known to them and they aspire to use the same. Addicts - consists of consumers who have a very strong positive attitude towards cyber marketing. Given the choice they prefer online market to offline market. Adjusters - experience FUD (Fear, Uncertainty, Doubt). They will go for online buying provided they have enough reasons to convince themselves. Application skills - Segmentation of e-consumers on the basis of the ability to browse the web leads to the following;
NOTES
Nave users lack basic knowledge and skills to use online service effectively. They require training to get acquainted with the webmosphere. Providing additional information, phone calls and other supporting information may be followed. Learners have the desire to use the e-market and the willingness to invest time and effort to learn the system. They are much likely to try the cyber market provided they are educated about the same. The web site should be designed in a user friendly manner and it should direct the customers in a step by step manner. Experience users are familiar with the technology and aware of where the information is stored and organized. They are versatile with the technology and know the ways and means to optimize the use of technology to their advantage. Strategies for these tech bees should focus on providing technology updates and sophisticated web sites to hold their attention. Extent of Stickiness The extent of loyalty exhibited towards a particular website leads to the following groupings; Happy stayers are satisfied with the content of the page and the information provided. They are much likely to send information and suggestion to the online site and tolerate occasional bugs and annoyances. Wanderers are always on the look out for something more. They will often react quickly and negatively to any delay or problem faced by them in using the web page. Rather than take the time to make suggestion, they will click and be gone. It takes more effort to keep them with the company.
DBA 1740
NOTES
Hostages are the consumers who are staying with the company inspite of the dissatisfaction in the use of technology. They remain loyal to the concern inspite of their sufferings. However it is not a good symptom and so the company should find the reasons for the dissatisfaction and initiate steps to remove the same. Place of Usage Based on the place where the consumer browse they are segmented as below; Users at Office - The consumers may not be spending must time in looking around for information at the work place. He may spend a few minutes in making the purchase or in search of information accordingly the page may be designed to present facts in a nut shell without much pictures and video. Users at Home - The surfer may be at leisure, have time at his disposal and look around for information. More information may be provided and audio, visual aids may be used to attract attention. Users at Net cafe - The consumer here pay for the utilizing the net services. The consumer may be willing to spend time on a page provided he thinks that he will get value for the same. Additional information and added services may provide the needed attraction. Type of Buyer The online buyer may be an individual or the industrial buyer. Individual buyer - The consumer here is more influenced by his own needs, psychological make up, attitude etc. The web site should cater to his needs and decision making process which may not always be rational. The website may be informal and personalized. The individual may again be categorized as Technical enthusiast - who is more concerned about the newness of the technology and more the sophistication more the attraction. Hobbyist - who is browsing merely for passing time and may be willing to spend more time if things capture his interest Non technical user - who is not well versed in technology but involves himself in the task of visiting webpage for some purpose Domestic user who uses it for making household purchases or for the family.
Industrial buyer- The purchase here is more rationalized and decision is also made not by an individual but usually a group of people. The web page should be more professional and provide information on a rationale basis. Security freakiness The online consumers are much bothered about the security of their payment and the data provided by them. Following categories emerge out of the importance given to security
160
Believers - the online consumers believe that the company would have taken care of the payment security and need only little convincing regarding the same. They would have already involved themselves in such situation and have not come across any negative experiences. Wary consumers - They are on guard always and are very cautious in making decision. They can be convinced with some effort. The targeted group should be informed in detail about the various security measures and should be guaranteed that the data and payment made will be safe from hackers. They can be provided with the option of making payment as suitable to them. Skeptics - They are very much doubtful about the security issues. Given the chance they will quit making online purchase. They have to be educated about the systems safety and should be communicated about the encryption and fire wall protection enabled by the concern. They need much convincing and online as well as offline channels should be explored to attract them. Type of use The following segmentation is proposed on the basis of type of use the customer wants to make of the net Global villagers - use net primarily for communication purpose. They use email, newsgroups, chat rooms and forums for exchange of information. Primary focus is on networking and information sharing. Pop up ads, banner ads and emails may be used to disseminate information. Global beach combers - use net to search. They are looking for something for nothing. If their search ends with something for value, they may stick to it. They will buy online only when they are sure that they are getting a best deal. They need to be convinced. Global workers - use net as a part of performing their work. They are affluent but have only less time at their disposal. They are attracted by site which provides information to enhance their knowledge base and provide the leading edge. Extent of involvement The e- involvement score can be calculated and the customers can be segmented as follows; Less involved - light users of internet and are not much attracted by online purchase or e-tailers. They are infrequent visitors of the site and dont indulge much in online activities. They have rarely purchased anything in cyber market. Strategies should be aimed at converting them to more involved customers.
NOTES
161
DBA 1740
NOTES
More involved - medium users of internet and are attracted to e-world. They repeatedly visit the site and find it convenient to buy online. Web site should be designed in a dynamic manner to keep them involved. Super involved - heavy user of internet and regular visitors of the web site. They should be rewarded for repeated visit and encouraged to stay with the company with value added offers. Motivation propelling online shopping The need behind the online shopping is the basis for arriving at the following segments, Newbie - consist of consumers who are new to the concept of online purchase. They use net to get information about various options available and ultimately make a small purchase which does not require much amount. The website should be simple and enable the customer to quit anytime they want. 3D of the pictures and provision of email ids of other satisfied shoppers may yield results. Reluctant shoppers - are much bothered about security and privacy issues. They need lot of convincing and online customer support and discussions to pacify them. Bargain shoppers - they take pride in making purchase for lowest price. They are constantly involved in comparison. Price off products are always attractive to them. Surgical shoppers - they are very confident about the products to be purchased and where to look out for information. They have their own criteria and will buy form the etailer whose offer matches with the criteria set by them. Power shoppers - the purchase is for need fulfillment. They are sure about what they want and dont want. They do not waste time in looking around. Experts opinion and customer services may be attractive to them. They should be provided with instant access to relevant information. Enthusiast shoppers - shopping is a enjoyable experience. The website should cater to their easy go nature and provide more fun. Occasionalization Booz-Allen & Hamilton and Nielsen//NetRatings Inc., have grouped the online customers into seven segments based on the user session characteristics. The user session characteristics takes into account the length of the time the user stayed online, time spend in each webpage, familiarity with the web page and the category to which the website visited belongs to. The seven segments are briefed below: Quickies - they spent very short time (1 minute) and visit only few sites. They spend very less seconds on each page. They will not notice any information and log off the session as soon as their business is over.
162
Just the facts - they look out for specific information and spent 9 minutes but views the page rapidly. They have low propensity to buy. Single mission - they want to complete a task for which they gather information and leave the internet. They may spent 10 minutes and search in unfamiliar sites but look into sites which fall in the same category. They can be attracted only be information related to the purpose of session. Do it again - the user had visited the site already and he may spent 14 min for a session. Users may be willing to click through banner advertisement which are of interest to them and may react to the same. Loitering - they spent 33 minutes in a session. They leisurely visit to the familiar sites and are more likely to react to marketing message. Information please - the sessions last for 37 minutes. The purpose is to gain knowledge on a particular aspect. They visit familiar sites, but are willing to visit cross categories and spend more time on a page that attracts their interest. Surfing -70 minutes on an average is spent. They do wider but not deeper explorations. They spent time on pages with lots of content. The marketers make use this to build brand awareness as the users are exposed for a longer duration of time. The segmentation methods discussed above could be clubbed with the other usual segmentation basis applicable to offline market viz., demographic basis, Psychograpics, Personality traits etc., and thereby differing matrix of segmentation can be arrived at to capture a share in the e-tail. Developing e-segmentation strategies is a must to ride the next wave of value through the net. 4.5 TECHNOLOGY INFLUENCE ON SHOPPER BEHAVIOUR Information technology is deployed by retailers to enhance the shopping experience. In order to serve the shoppers in a better way IT is used by retailers for item identification, improvement of internal and external communication, and information processing and analysis. Select IT enabled services which enriches the shopping experiences are highlighted below; Electronic kiosks A kiosk is a small physical structure which including a computer and a display screen. It displays information for people walking by. Interactive kiosks are self-contained computing terminals that provide access to on-demand information and transactions. Interactive kiosks are computers with touch-screen displays. It provides information access via electronic methods. In a retail setting the interactive kiosks displays various products available for sale by a single touch on the screen. The shoppers can use a retail kiosk as a
163
NOTES
DBA 1740
NOTES
pre-sales assistant by scanning an items Universal Product Code (UPC) to learn about details, specifications, guidance, rebates and coupons. Through video kiosks the shoppers can identify the location of the product without moving around the store. This reduces the shopping time and frustration. With the kiosks to help the shoppers are less dependent on the sales assistants. It reduces the movement around the shop which will be beneficial for both the retailers and the shoppers. An modification of interactive kiosks is the frequent shopper kiosks. These are located near the entrance of the retail stores. The regular shoppers are provided with the frequent shopper card. On using the card the kiosks displays the customized set of products which are frequently purchased and the appropriate promotional strategy designed on the basis of the shoppers past purchases. Shoppers can order their merchandise through the kiosks and can collect it after some time. Information regarding product advertisements, store specials and promotions can be obtained by the shoppers through the kiosk by using it as a scrolling billboard or video player. In the case of music store chains, the kiosk can be used to help a shopper sample the CD by hearing the song before purchasing the same. The kiosks can be linked to the retailers online store so that the shoppers can order the merchandise and have it delivered at home. It also provides information regarding the products that the branch does not stock but can be ordered for the shopper. Kiosks enable a shopper to enjoy self service and freedom to the maximum extent. It eliminate the waiting time to be spent for a salesmen assistance and enhances the flexibility enjoyed by a retailer. Virtual Display Case The virtual display case is a large-screen with rear-projection, video display and computer graphics system which shows realistic, three-dimensional images of shelves stocked with products. It is usually located near a stores entrance and so as to enable the shopper to view and purchase a wider selection of items than could be carried in the store without moving around. The shoppers can see the three dimensional view of the product using a pair of 3-D glasses, available in a bin on the side of the display, to view the stereo images. The device has a hand-held controller and joystick that allows consumers to select between different product categories, zoom in on shelf displays and pick up products and examine them from any angle. When products are selected from the virtual shelf, they appear to float in space. To select a product for purchase, the consumers have to simply drop it into a simulated shopping basket. Body Scanning This technology is mostly used in apparel industry. The three dimensional technology helps shoppers in textiles to identify the dress which will fit them, try them on virtually and
alter the same to suit their requirements or customize the outfit from the chosen dress material. This system uses video cameras that are attached to computer. The body measurements are taken from several angles and a three dimensional model of the shopper is created. Through virtual try on the shopper can select the dress which he wishes to purchases and the computer shows the image of the shopper wearing the selected outfit. The measurements of the shopper can be used again by way of embedding the same in smart card. Thus body scanning technology enables to enrich the shoppers experience in real in time stores or e-tail stores. Handi scan Handiscan or Self scanners are provided in certain retail stores which add to the shoppers experience. A handheld device can be used by shoppers which enables them to scan the items selected by them. After the shopping is done, they can pay the bill without unloading the products from the shopping cart. This will reduce the time wasted in unloading the cart and preparing the bill again. Self checkout system In conventional supermarkets, product selection is performed by the shoppers, and product checkout is performed by cashiers. Typically, a shopper will walk up and down the aisles selecting products to buy and placing the selected products in the shopping basket. Once the shopper has finished selecting products, the basket is taken over to a checkout counter. The shopper then unloads the selected products from the basket and places them on the checkout counter. Each item is then checked out by a cashier, typically using a barcode scanning system. Finally, each item is bagged, either by the customer, the cashier, or by another supermarket employee. In this conventional shopping approach, the product selection process and the checkout process are performed one after the other. As a result, the total time required to complete a shopping trip is the sum of the product selection time and the checkout time. Even under optimum conditions, when there are no queues at the checkout counters and the cashier operates quickly and efficiently, the checkout process can contribute a few minutes to the total shopping time. And when conditions are sub-optimum, (e.g., when there are long checkout queues, when a cashier is slow, and/or when a preceding customer has a problem) the checkout process can significantly extend the total shopping time. A self checkout system includes a portable terminal with a data reader, such as a barcode scanner, and a self-checkout station with an automated payment-accepting subsystem. Both can be self operated by the shoppers. A self-checkout station reduces the checkout queue times without requiring additional manpower. It enables customers to identify and log selected products by themselves using a portable reading terminal, scan their selected products, and then pay for their purchase by themselves using either an
165
NOTES
DBA 1740
NOTES
automatic cash-receiving system or a magnetic credit/debit card reader. Self checkout system motivates the shopper to purchase products or enjoy services in the less possible time. Electronic shelf edge label Electronic shelf edge label uses a liquid crystal display (LCD) to display information regarding the price and other details regarding the product in the shelf. The electronic shelf display is directly connected to the EPOS system ensuring that the price charged at the checkout is the same as that displayed on the shelf. Any changes made by the retailer in the prices of the product is immediately displayed thus ensuring that the information reaching the customer in less time. This system is provides dynamic and updated informative to the particularly in the case of perishable products where the product prices may be high in the morning and less in the evenings. Electronic Point of Sale Systems (EPOS) An EPOS system consists of a laser scanner capable of reading a universal product code attached to the computer that can recognize the products, records the sale and display the price for the shopper to check and produces the itemized receipt for the shopper at the end of transaction. The EPOS enables the shopper to enjoy reduced checkout time. Shoppers need not waste time in queue. They can also check out the receipts printed in detail. Stockout situations are avoided which reduces the number of shopping trips to be repeated due to non availability of stocks. Electronic Fund Transfer at Point of Sale (EFTPOS) An EFTPOS system connects the computer to the banks and credit card companies apart from connecting to the retailers central computer. It facilitates cashless payment by shoppers. The system enables the shoppers to pay using credit and debit cards swiped through a scanner on the till. The details of the transaction are transmitted immediately to the shoppers bank or credit card company which checks to the availability of the cash or credit limit and authorizes the retailer to proceed with the transaction and debits the shoppers account. The retailers account is credited simultaneously. Relationship management packages Relationship management is ahead of the transactional exchange and facilitates the marketer to understand the shoppers sentiments and buying habits so that the they can be provided with products and services before it is demanded. This is possible through the integration of four important components i.e. people, process, technology and data. It costs five times more to acquire a new customer than to retain one. In traditional retail environment, it was easy to retain customers as the retailers knew all their customers personally. They knew their preferences and what was happening in their lives. Armed with this knowledge, retailers were able to react quickly and market to each customer
individually. They were able to build friendships interacting with their customers. Along the way of growing chains and building malls and promoting self-service, many retailers lost touch with their customers. Recognizing the value in customer loyalty, retailers are now seeking to reclaim personal relationships with their customers. Information technology aids retailers to keep track of customers. Data warehousing and data mining Data related to shoppers is collected using the computers. The demographic profile of the consumers, their purchases in terms of volume and value, purchase frequency, preferences etc., can be assimilated. Data mining provides insights and knowledge about the valuable shoppers who provide maximum sales. The information obtained would enable the retailers to identify the most profitable shoppers and design customized marketing strategies to retain them. Special offers, sales letters informing the choices available in their preferred product/category and other retail loyalty programs can be planned based on the available data. In case of credit card purchases relevant data as required by the credit card organization could be passed on to them. The life time value of shopper can be obtained based on which customized promotion can be offered. The Data warehousing and data mining tools enables to profiling shoppers and it provides the information needed to best understand patterns in the shopper behavior in multiple dimensions. It enables focused delivery and support based on shoppers segment. Information technology aids in budgeting and forecasting revenues/volume of sales for segmented customers and design strategic solutions for enhancing effectiveness of promotional programs. Designing, delivering and accounting of E-coupon can be done in less time. By analyzing coupon usage and spending trends customized mails can also be generated for each shopper. All this will lead to enhanced shopping experience. Electronic loyalty schemes Electronic loyalty schemes can be practiced by developing smart cards that could register customer transaction either by swiping them or bar code scanning them or keying the card number. The loyalty scheme is administered by collecting the personal information about the shoppers viz., name, address, occupation, marital status, income, product preferences etc. The shoppers are provided with personalized electronically readable magnetic card. Every transaction made by the shopper is recorded by scanning the card. Based on the purchases made, a shopper can accumulate the loyalty points which is added to the account and printed on the receipt. The points collected can be redeemed in the next shopping bill or in the form of gifts and offers. The technologies discussed above enables the retail shopper to do shopping in reduced time and with less effort apart from having an enriching shopping experience. The shopper will be able to compare the products, features, prices and other benefits by having all the
167
NOTES
DBA 1740
NOTES
information. Technology enhances the convenience provided to the shopper and caters to the needs by providing customized services. SUMMARY This chapter dealt in detail the external factors influencing the shoppers behaviour. Various type of location a shopper may choose and the factors taken into consideration for the selection of a location were highlighted. Shop atmospherics depicts the personality of a store and thereby plays a major role in influencing the shopping behaviour. The elements of shop atmospherics viz., the exterior, general interior, interior display and store layout are discussed. The influence of social class, culture and intercultural role are highlighted. The various e-tail models, issues on online retailing and strategies for capturing the e-shoppers were presented. Discussion on the shop atmospherics in a virtual store is also included. A brief outline on the different type of technology used in retail store to enrich the shopping experience is provided. The next unit provides inputs to design the CRM strategies and practice the same on the basis of customers life time value. HAVE YOU UNDERSTOOD? What factors influence a shopper in the selection of a retail location? Discuss the role of shop atmospherics in attracting, retaining and enhancing the shoppers loyalty. How does the social class influence the shoppers behaviour? What cultural aspects should be considered by a retailer in deciding a marketing mix? Design the salient feature on e-tailing. Highlight the essential features of an online retail store. Explain the influence of technology in enhancing the shopping experience.
168
UNIT V
NOTES
ADDITIONAL DIMENSIONS
5.1 INTRODUCTION Equipped with the understanding of retail shopper behaviour and the various internal and external factors influencing them, the present unit provides the impetus needed for the retailers to arrive at sustainable competitive advantage. Customer relationship management focuses on the need for maintaining a sustaining relationship with the existing shoppers. Many research studies have pointed out that the cost of adding a new customer is higher than the cost of retaining an existing customer. In this context this unit highlights the various steps involved in developing an effective CRM programme. Maintaining the relationship with customers also requires a good complaint management system, as complaints provide the way for a retailer to improve the services rendered to the shoppers. It has to seen by a retailer as an opportunity to serve customer in a better manner than treating it as something to be ignored. This chapter provides a detailed account of the need and importance of evolving a complaint management system in a retail setting. The discussions on Shoppers life time value would enable to arrive at the value of shoppers which would provide the basic framework on deriving the Customer relationship strategies. 5.2 LEARNING OBJECTIVES After reading this unit you will be able to understand The process involved in building CRM programme The need and importance of evolving a complaint management system in the retail setting The basic framework for arriving at the shoppers life time value
169
DBA 1740
NOTES
5.3 CUSTOMER RELATIONSHIP MANAGEMENT & RETAIL SHOPPERS BEHAVIOUR In the competitive scenario, it is difficult to differentiate a retailer from that of the other. The offering of retailers in terms of product or services is replicable, hence a retailer has to evolve at strategies to increase the market share and also take steps to retain the same. Research studies reveal that the cost of attracting new customer is much more than the cost of retaining an existing customer. Studies also reveal that studies have shown that a small proportion of the customer base (20% or less) accounts for more than 70-80% of firms revenues and profits. In order to enhance the profit of a retail store and to ensure an enhanced market share it is essential retain the existing shoppers in addition to attracting new customers. In order to retain existing customers it is essential for a retail organization to follow Customer relationship management practices. This approach of retail business aims at building, and maintaining one-to-one life-long relationship with their large number of customers. CRM can be viewed as a comprehensive strategy and process of acquiring, retaining, and partnering with selective customers to create superior value for the company and the customer. It is a process or methodology used to learn more about customers needs and behaviors in order to develop stronger relationships with them. Levy and Weitz define CRM as, A business philosophy and set of strategies, programs, and systems that focuses on identifying and building loyalty with a retailers profitable customers. It is based on the business philosophy that all customers are not profitable in the same way and retailers can increase their profitability by building relationships with their better customers. The goal is to develop a base of loyal customers who patronize the retailer frequently. CRM is quite a new phenomenon in retailing industry. Only big retailers have installed CRM systems to identify and track customer purchases and take appropriate management decisions, especially on managing customer relationships. Organized retailers like Big Bazaar, Westside, Shoppers Stop, etc., are concentrating on providing more value to their valuable customers using targeted promotions and services to increase their share of wallet, i.e., the percentage of the customers purchases made from these retailers with these customers. Almost all of them have started Loyalty Programs, i.e., frequent shoppers program in order to reward the existing customers. These programs help the retailers in increasing the number of footfalls as well as enhancing their sales revenues and profits. For example, Shoppers Stop, one of the leading apparel retailer in India, had net sales of Rs. 1.6 Billion, increasing net profits by 96% with the companys loyalty program, First Citizen Club (a CRM program) accounting for 63% of the sales. The organized retailing in India is progressing towards a tough competitive environment where only those retailers would survive who can understand their customers and develop a strong bond with them by developing and implementing appropriate CRM strategies and programs effectively.CRM is can enable a retailer to enhance the overall performance.
CRM would enable a retailer to know; Which type of customers creates maximum profits? How to attract and maintain this kind of customers? How to make other customers fall into this category?
NOTES
CRM Process CRM is an iterative process that turns customer data into customer loyalty through four sequential activities shown in the CRM Model
First step in CRM involves attracting customers to apply for membership willingly. This can be performed using enquiries, application and relevant service at the shop counters, call centre and company website). This will enable collection of relevant customer information, including family, work and personal information. The shoppers should be encouraged to use their membership cards when they are purchasing through POS. The POS sales data can be uploaded to CRMs business intelligence for data modeling and relevant analysis. After different categories of customer groups are created, their behaviour patterns can be mapped and corresponding product strategies, as well as different sales and marketing activities according to the characteristics of different customer groups. After the implementation of sales and marketing activities, the results should be assessed from customers reaction through CRMs business intelligence. The CRM process is discussed in detail below; I. Collecting Customer data
A retailer should develop one or more methods for gathering data about customers, their buying patterns, demographic profiles, their likes and dislikes about the products or services. This information can be used to offer the products or services that meet the consumers needs. Meeting a need is the first step towards creating customer loyalty. For some small businesses, gathering data can be challenging. Customers may interact with the retailer in various ways, such as visiting the website, visiting the retail store, through catalogues, telemarketing etc. Data about customers should be gathered in a consistent
DBA 1740
NOTES
fashion, at every point of interaction. In addition, the data gathered should be integrated into one central location which will provide the broadest possible perspective on the customers ie a Customer data warehouse can be maintained by a retailer which provides the basic foundation for subsequent CRM activities. The amount of data to be stored about a customer in a data warehouse should be given a careful consideration. Normally the practice is to consider more is better. However it may not be feasible as the retailers may not have an IT budget that can support the kind of systems required to store and process multiple years of detailed information. The database may contain the following information; Customers demographic details including, name, age, sex, education, income etc and the psychographic data collected would enable the retailer to segment the customers. Customer preference details such as the frequently purchased product, brands, assortments; favorite colour, fabrics and sizes in case of apparel retailer would provide valuable information which can be used to initiate future sales. Transactional details highlighting the date of purchases, price paid, the products purchased and whether the promotional offers have induced purchase, mode of payment etc., Customer contact details including the direct interaction with the customers, interactions through websites, kiosks, and telephone calls can be tracked. It can also include details about the contacts initiated by retailer such as catalogs, direct mail etc. The customer responsiveness to marketing activities of the retailer can be recorded so as to identify the effective promotional measures
Constructing the database based on the above data is easy for catalog and internet shoppers using retailers credit card for purchasing the merchandise. The shoppers who buy in a non store environment need to provide the relevant details to ensure the delivery of the products. Hence the information can be easily collected and linked to the transaction. Majority of the shoppers in India purchase in the store setting rather than the virtual environment. However collection of data from such shoppers is a difficult task as the customer pay cash or uses credit cards issued by banks. Against this setting the retailer can collect data by the following methods; Requesting for information: retailers may request for information from the customer and thereby built the database. However the customer may be reluctant to give information due to the fear of violation of privacy issues. Membership cards may be provided by the retailer, during the process data can be collected from them. The customers are offered incentives either in the form of reduced price or free gifts on using the loyalty or membership card. Points may be provided for each purchase made by the customers. The points can be later
redeemed for selected products in the catalogue. Whenever the card is used, the relevant data is recorded in the database, thereby data can be accumulated. Sometimes retailer may discreetly collect information about the customer by linking the transaction through the credit cards used. Enough information can be obtained by retailer from the credit card and check account numbers used by a customer to link the transaction to the individual customer. Some options available to collect the data are highlighted below; Hosted CRM systemsHosted CRM systems enable salespeople, customer service reps and other employees to input information about a customer gathered during an interaction. The information is then automatically available to others in the company for use in subsequent interactions with that customer, or for analysis and marketing purposes. With a hosted CRM system, the provider maintains all the hardware and software necessary to deliver the CRM tools. Because these systems are often accessed through the web browser, all that a retailer needs in an internet-connected computer. Some hosted CRM solutions, particularly those aimed at retailers, also provide tools for creating customer loyalty programs. CRM softwareAnother option is to license CRM software for one or multiple users. CRM software provides many of the tools that hosted web solutions offer. But CRM software can be accessed without an internet connection. In some cases, CRM software data can be synchronized and carried on handheld devices, such as a PDA or smart phone, which could be convenient when visiting customers on site. Customer surveysOne of the best ways to gather relevant data about customers is to ask questions in a brief survey. The overall goal is to find out how satisfied the customers are and whether they would recommend the retailer to others. This information can be obtained by various means, such as a paper form, a website survey or an e-mail. The survey questions should be minimized so as to get the best possible participation. Incentive can also be provided for customers for answering a survey. A plan should be developed to aggregate the data collected so it can be sliced and diced in various ways and integrated into the customer database. Spreadsheets the computer spreadsheet programs enables to enter data and offers data analysis tools, too. This might provide the most valuable data to the retailer.
NOTES
It should be remembered by the retailer that the data collected will only be a proportion of the total foot traffic of the store including regular customers who are not willing to get involved in any data collecting devices. While collecting data, the focus should be not to just collect customer details but to gather profile data on; What products and services they are interested in? What products they have purchased in the past? When the purchase is made?
173
DBA 1740
NOTES
There is a need to extract transactional data for customers using credit/loyalty cards & input this on to a marketing database (as an overnight routine) so that customer purchases can be categorized for analysis & future selection. Frequency & value of purchase also need to be analyzed to establish the most loyal and most valuable customers II. Analyzing data and identifying target customers After the collection of data, the retailer has to focus on analyzing the data so as to obtain information for developing loyalty programs. Data mining is one application used for this purpose. Data mining is a technique used to identify patterns in data that is not revealed prior to searching through the data. The customer interactions with the company are becoming very complex and the volume of data that is being generated is also increasing day by day. Data mining techniques enables to gain valuable insight into the consumers data. It enables to perform profitability analysis to identify the profitable customers, customer churn analysis to identify the customers who are likely to leave, customer segmentation and customer propensity analysis which indicates the chances of the customer buying a given product offered by the company. Data mining will be helpful in all the stages of customer life cycle ie acquiring new customers, increasing the value of the customers and retaining the customers by using information about the customers. Market basket analysis is a specific type of data analysis that focuses on the composition of the basket or bundle of products purchased by a household during a single shopping occasion. It is a modeling technique based upon the theory that if a customer buys a certain group of items, then it is more (or less) likely that for the customer to buy another group of items. The set of items a customer buys is referred to as an itemset, and market basket analysis seeks to find relationships between purchases. In retailing, most purchases are bought on impulse. Market basket analysis gives clues as to what a customer might have bought if the idea had occurred to them. As a first step, market basket analysis can be used in deciding the location and promotion of goods inside a store. If, as has been observed, purchasers of Barbie dolls have are more likely to buy candy, then high-margin candy can be placed near to the Barbie doll display. Customers who would have bought candy with their Barbie dolls had they thought of it will now be suitably tempted. Market basket analysis enables to arrive at advanced analytics such as: Item affinity: Defines the likelihood of two (or more) items being purchased together. Identification of driver items: Enables the identification of the items that drive people to the store that always need to be in stock. Trip classification: Analyzes the content of the basket and classifies the shopping trip into a category: weekly grocery trip, special occasion, etc. Store-to-store comparison: It enables to create a convenient and easy way to compare stores with different characteristics (units sold per customer, revenue per transaction, number of items per basket, etc.).
Identify market segments Market segments enables to identify group of customers who have similar needs, purchase similar merchandise and respond in a similar manner to marketing activities. After compiling and analyzing relevant customer data, segmenting can be done so as to understand their future behavior. This will help to develop targeted loyalty programs for one or more groups. A mix of the following four types of customers can be identified; Truly loyalThese customers buy products or services frequently and highly recommend the same to others. This customer base needs to be maintained and expanded, as they will be the backbone of the retailers future business. Retailers should try to understand what makes them happy and provide them the most value through the loyalty programs. AccessibleThese customers like the retailers products or services, but factors such as a better competitive offer may cause them to stray. Goal should be to determine what prevents these customers from being completely satisfied and fix the situation before they leave. TrappedThese people remain as retailers customers because the cost of switching is too high. These customers arent happy about doing business with the retailer, and theyre likely to jump ship at some point. They can be converted to loyal customers if effort is made to find out what they need or what you could improve. These customers could easily turn into truly loyal customers with the right attention. High-riskThis group of customers often purchases on the basis of price alone. If the customers find a better price, theyll leave. These customers arent worth spending the limited marketing budget as the price-conscious customers rarely turn into loyal customers. In creating loyalty programs, its important to reward only the customers who need to be retained. However, some of the customers may be truly dissatisfied for good reasons. In that case, the retailer has to identify and resolve the issues before its too late. Identifying best customers Best customers can be identified using analysis such as life time value, RFM ( recency, frequency and monetary) analysis etc. Life time value analysis is dealt in detail in the next section. A brief note on RFM follows; Recency frequency monetary value tools is a technique designed to help businesses determine who their best customers are. This is based on customers recency (how recent their last order was), frequency (how often they buy from you), and monetary value (how much they spend). RFM analysis is basically a method of estimating the life time value of a customer using recency, frequency and monetary value of past purchases. Customers who have made infrequent, small purchases recently are considered to be the first time customers. CRM strategies may be designed to convert them into early repeat customers
175
NOTES
DBA 1740
NOTES
and eventually high-value customers. In the case of the customers belonging to the high frequency, recency and monetary value, the CRM strategies should aim at maintaining the loyalty of customers and gaining a greater share of wallet by selling more merchandise to them. The retailer may pay less attention to customers who have not purchased recently or whose life time value is less or those who are committed to other retailers as it may be difficult to recapture them. II. Developing CRM programs Once the customers are identified based on their future potential, the next step is to develop CRM programs for the different customer segments. Three types of programs can be identified; for retaining their best customers, converting good customers into highLTV customers and getting rid of unprofitable customers. I. Customer retention In the present competitive scenario, the focus of the organization is on customer retention than merely on customer acquisition. Customer retention is the process of keeping the current customers in the customer inventory for an unending period of time by meeting their needs and exceeding their expectations. As already mentioned in the beginning of this section, customer retention would cost less than acquiring a new customer. Research studies also reveal that there is a close interaction between customer retention and customer loyalty. Customer retention would also enable a retailer to sell more to the existing customers by giving special promotions thereby increasing the sales. A retained customer will also spread a positive image of the organization by word of mouth. This will enable to attract new customers. Retained customers may also be less price sensitive than a new customer. Hence on account of all the benefits discussed above a retailer has to design strategies to retain the existing customers. Four approaches can be practiced; frequent shopper programs, special customer service, personalization and community. 1. Frequent shopper programme Frequent shopper programs are used to build a customer database by identifying customers with transactions and to encourage repeat purchase behaviour. Retailers provide incentives for encouraging customers to enroll in the program and use the card. The incentives may be in the form of discount on purchases made or accumulation of points on the purchases made. The frequent shopping program has the following drawbacks; The programs are expensive from the point of view of both launching cost and maintenance cost It is difficult to make changes in the program when the problems arise. The changes should be informed to customers as it forms part of the shopping experience. The more successful the program is , the customer will react negatively to the changes made in the program which will reduce the loyalty and trust.
There is no assurance that the frequent shopper program will increase the consumer spending behaviour and loyalty towards the retailer. The programs are easily replicated by the competitors and hence it does not enable the retailer to gain competitive advantage.
NOTES
In order to avoid the duplication of the offers, the retailers are resorting to offer a more personalized service to the best customer base on their requirements which will be invisible to the competitors. 2. Special customer services Customer services can be designed based on the profitability of the customers. In the case of highly profitable customers, a retailer can provide a high quality customer service to build and maintain the loyalty. 3. Personalization Equipped with customer data and analysis tools, retailers can economically offer unique benefits and target messages to individual customers. The retailers can identify the profitable customers and develop programs for the individual customers which are referred to as one to one retailing. Internet offers the greatest potential to practice one to one marketing in an effective manner. Most of the messages can be automated and personalized. The personalized rewards or benefits the customers receive are based on unique information possessed by the retailer and the sales people. 4. Community Community programs aims at retaining the customers by developing a sense of belongingness among the members. The internet channel offers an opportunity for exchanging information and develops more personal relationship with each other and the retailer. Customers are made to feel like a family and thereby they may feel reluctant to leave the community. The retailer may post information which are of interest to the community and which may be beneficial to them. II. Converting good customers into Best customers Good customers can be identified by a retailer and by offering them more products and services the share of wallet from these customers can be increased. Customers database maintained by the retailer can be used for identifying the prospects for cross selling and add on selling. Cross selling focuses on selling a complementary product or service in a specific transaction. For example an apparel store may sell accessories like cosmetics, bags along with an outfit. Add on selling is selling additional new products and services to existing customers.
177
DBA 1740
NOTES
III. Dealing with unprofitable customers Retailers may have a group of customers on whom he incurs more cost than the returns received out of the sales made to them. The unprofitable customers drain on the resources that could be better applied to the profitable customers. In order to deal with these customers a retailer may offer less costly services for satisfying the needs or can charge the customers for the services rendered. A retailer instead of eliminating an unprofitable customer may try to reduce the number of offers made to them. Sometime customers may be unprofitable due to the retailers fault. An upscale retailer lost sales because its changing rooms were dirty and in bad repair. Women who had taken up a considerable amount of salespersons time were declining to change in those rooms, and declining to buy thereby adding up to unprofitable customers. Hence while identifying the unprofitable customers the retailer should exercise caution in identifying the reason for the same. 5.4 COMPLAINT MANAGEMENT SYSTEM It is essential to have an efficient complaint management system designed and executed so that a retailer can retain the shoppers beyond the time limit. Complaints are expression of dissatisfaction associated with the product / service purchased or any other aspects associated with the delivery system, in total. Why complaint handling is important ? Complaints are effective form of communication, that provide an opportunity to gain feed back about the services/product offered. Internal efficiency can be improved by effective resource utilization. Complaints enable to initiate corrective actions and improve upon the total delivery system that is in alliance to the shoppers requirements. Retailers can learn from angry / frustrated shoppers and recognize the significant points of service mismatch with shoppers expectations. Complaints at time will contain constructive ideas towards improving retail business productivity. Recognizing and fairly responding to shoppers complaints might result into generation of loyal shoppers in large numbers. Loyal shoppers in turn will become hard core loyalists. Listening and reacting to shoppers complaints will help retailers to reach their primary goal of shoppers satisfaction which in turn will leads to augment the retention rate of shoppers. Effective complaint handling might prevent retail shop switchover. A critical analysis of complaints received might lead to corrective actions among internal customers which in turn will transform an organization as a high performing organization.
Complaints give opportunities for long-range product innovation, service quality improvements, pro active measures for prevention of problems. If a complaint is properly resolved the shopper in turn will emerge as a satisfied shopper and will become the store ambassador.
NOTES
Only a fraction of dissatisfied shoppers complaints to retailers. Rest of them leave the organization and negatively contribute towards the image of the retail shop. The fact that a complaint is received is an indicator that, behind every complaints registered there are large number of shoppers who are skeptical about the willingness or ability of retailers to resolve complaints. Hence, they dont prefer to complaint. But they will simply withdraw their patronage. To over come this situation each complaint is to be dealt with utmost care. Evolving a customer complaint management system Evolving an effective complaint management system has the following steps to be followed. Zingerman has proposed five steps to handle customer complaints. They are : 1. Acknowledge the complaint 2. Sincerely apologize 3. Make it right 4. Thank the customer for letting us know about the problem 5. Document the complaints It is essential to acknowledge the complaint as and when it is received. Shoppers will be generally pleased with a prompt response. The acknowledgement might also contain a word of apology clearly it seems we did not deliver the experience you were expecting and what we expect ourselves to deliver. Further, the retailer make all attempts to set right things at the earliest possible. If such action will take a little longer time means, send an interim reply with an explanation, of what you have done, are doing or will do to make things right. While making such attempts make it customize to each shopper. Also provide opportunity to the shopper to express himself with his point of view on the matter. Having settled the issue, it is the duty of the retailer to thank the shopper for giving the opportunity. If possible provide him a surprise gift, also. It is very essential to document the whole process of complaint, as a guideline for future course of actions. Extension of the above complaint management steps provides more insight and that extended steps are dealt below. 1. Acknowledge the complaints As far as possible personalize such acknowledgements. Talk to the shopper if possible. 2. Investigate and analyse the complaints Retailers are expected to be fair, and try to look at it from both sides view point
DBA 1740
NOTES
3. Resolve the problem in a manner consistent with company policy and procedure 4. Follow up the matter in such a way the shopper is really satisfied with the resolution. Otherwise refer to a third party and cooperate with the third party to arrive at an amicable solution. 5. Designate an employee or group of employees to receive, acknowledge track and monitor complaints and to have continuous interaction with the shoppers who have complained, so as to maintain a long lasting relationship with them. 6. Designing a perfect system of record keeping to enable recording details pertaining to complaints its nature, solution provided, cost involved, shoppers reaction to complaint resolution and so on. Retailers policy perspectives on complaint management system The retailers are expected to commit themselves for complaint solving. Such commitment should be there in the entire ladder of retail organization. Written policies and procedure for speedy and mutually satisfiable complaint solving should be framed, communicated and implemented. The retailers have to periodically conduct review meetings and understand the types and nature of complaints received, the extent of the solution provided and the like. Total employee involvement is a must towards complaint solving. Employees are to be motivated and proper incentive schemes may be introduced, encouraging employees to actively associate themselves with solving complaints. This certainly require employee empowerment and appropriate training to handle complaints. Retailers may even think of having a dedicated team of employees allocated for receiving and solving complaints. The vital qualities needed for complaint handling employees are patience, empathy, articulate, simulate shoppers problem and able to balance fairly between the interest of the retail shop and the shoppers concerned. Also such employees must be capable of coming out with alternate solutions to keep the shoppers delighted on the one hand and on the other hand keep the cost minimum to the retailers. The major focuses of offering complaint solution are two. They are viz. the cost involved to retailers should be minimum, and at the same time the return on such complaint solution should be the maximum, mainly from the view point of shoppers retentions. There may be occasions where a complaint be solved with the intervention of third party, which involves, conciliation, mediation, and arbitration. Such third party includes, consumer courts, government regulatory agencies and so on. Some time it may be advantages to retailers as it leads to a fair complaint resolution, which is expeditious and economical.
180
The practice of complaint management must be visible and accessible to all concerned. There must be a system to communicate the complaints resolved on periodical basis. Posters, in-house journals, newsletters, employee meeting etc. are commonly available forums to communicate the complaint resolution. 5.5 LIFETIME VALUE OF RETAIL SHOPPERS EMERGING TRENDS Shoppers life time value is a powerful and straight forward measure that synthesizes shopper profitability and attrition risk at individual shopper level. The concept of life time value of a shopper is well established in the practice of data base marketing. The life time value of shopper is a measure of the value of the shopper to the retail business. It is the potential contribution of the shopper to the business. It is vital to understand the return on retail investment from the prospective of shopper life time value. Shopper life time value represents a metric of a shopper value to retail organization over the entire span of their relationship. This approach helps the retailers to understand. How much is the worth of the shoppers? How much of the present active shopper will continue to be active in future? How much is the worth of a shopper segment? Is it worth while to retain such segment?
NOTES
It is always preferable to develop an ongoing relationship with existing shoppers, rather than depending costly promotions to attract fresh shoppers. The life time value of a shopper is further defined as the expected present value of net cash flows from the firms relationship with the shopper over his life time. The shopper life time value is often used as an upper limit on spending to acquire the shopper. From a retailer perspective, shopper life time value can help to develop strategies to attract, retain and develop, the right shoppers. Of late, the loyalty levels of shoppers are measured taking into account of the life time value, through their contribution. Where the contribution is more they are the hard core loyalist and where there is no contribution or the contribution is minimum the shopper is treated as defector or prone to churn. Maximization of shopper life time value would lead to maximization of shopper equity. Shopper equity has traditionally been seen as the discounted sum of the life time earnings from all current and future shoppers. There are specially designed softwares available to calculate shopper life time value. For example Marketing Engineering for Excel is a Microsoft Excel add-in software which runs from within Microsoft excel and only with data contained in an Excel spread sheet.
181
DBA 1740
NOTES
Models and Methods There are different methods and models available to calculate shopper life time value. For example, Markov Chain Model, CART Model (Classification Regression Tree), RFM Model (Recency Frequency and Monetary), Probability Models, Econometric Models, Persistence Models, GAM (Generalized Additive) Models, MARS (Multivariate Adaptive Regression Splines) Models, diffusion/growth Models and so on. Irrespective of the models and methods to calculate shopper life time value, the two key components are associated with such calculations. (a) Shopper monthly margin and (b) Shopper survival probability. The survival probability is the probability of survival of a shopper beyond a specified time period. It varies from industry to industry. For survival probability understanding, prospective observation plan is normally used. A sample model to measure shopper life time value in a telecommunication retail industry as given by Junxiang Lu is reproduced below: LTV = MM *
T i=1
(pi / (1 + r/12) i-1)
Where MM is the monthly margin for the last three months for existing shoppers, or the last months monthly margin for newly acquired shopper. MM is either calculated from accounting models or estimated through a set of regression models. T is the number of months in consideration to calculate shoppers life time value; it could be 24, 36 or some other number that makes the most business sense. r is the discount rate. P i is the series of shopper survival probabilities (Shopper survival curve) from month 1through month T,
Where P 1 = 1. P i is estimated through shopper survival model. Data sources: The data sources for calculating shopper life time value are generally four viz (a) Macro marketing data (b) Financial information (c) Shopper demographics (d) Shopper contact data
182
Shopper life time value calculation Model as presented by Gupta et.al (2004) is shown below.
NOTES
T (p t Ct )rt LTV = AC (1 + i) t t=0

Where LTV = Life time value pT = price paid by a consumer at time t, ct = direct cost of servicing the shopper at time t, i = discount rate or cost of capital for the firm, rt= probability of shopper repeat buying or being alive at time t, AC = acquisition cost, and T= time horizon for estimating Shopper Life time value In spite of this simple formulation, researchers have used different variations in modeling and estimating Shopper Life time value. Some researchers have used an arbitrary time horizon or expected shopper life time (Reinartz and Kumar 2000; Thomas 2001), whereas others have used an infinite time horizon (eg Fader, Hardie, and Lee 2005; Gupta, Lehman, and Stuart 2004). Gupta and Lehman (2005) showed that using an expected shopper life time generally overestimates the life time value, some times quite substantially. Most models to calculate shopper life time value apply to the contractual or shopper retention situation. These models make several simplifying assumptions. Life time value is the present value of future cash flows, directly attributable to the firms relationship with shoppers. The shopper life time value approach is appropriate for managing non replaceable shoppers. Useful Terminologies Understanding of following terms is vital to understand shoppers life time value Churn Rate: The percentage of shoppers who end their relationship with a company in a given period. One minus the churn rate is the retention rate. Most models can be written using either churn rate or retention rate. If the model uses only one churn rate, the assumption is that the churn rate is constant across the life of the shoppers relationship. Discount Rate: The cost of capital used to discount future revenue from a shopper. Discounting is an advance topic that is frequently ignored in shopper lifetime value calculations. The current interest rate is sometimes used as a simple (but incorrect) proxy for discount rate.
DBA 1740
NOTES
Retention Cost: The amount of money a company has to spend in a given period to retain an existing shopper. Retention costs include shopper support, billing, promotional incentives etc. Period: The unit of time into which a shopper relationship is divided for analysis. A year is the most commonly used period. Shopper lifetime value is a multi-period calculation, usually stretching 3-7 years into the future. In practice, analysis beyond this point is viewed as too speculative to be reliable. The number of periods used in the calculation is sometimes referred to as the model horizon. Periodic Revenue: The amount of revenue collected from a shopper in the period. Profit Margin: Profit as a percentage of revenue. Depending on circumstances this may be reflected as a percentage of gross or net profit. For incremental marketing that does not incur any incremental overhead that would be allocated against profit, gross profit margins are acceptable.
Illustration of Shopper lifetime value calculation: For easy understanding of shopper lifetime value calculations a worked out sample as dealt by Arthur Middleton Hughes, (Vice President, Knowledge Base Marketing, and www.kbm1.com) is presented below. To understand Life Time Value (LTV), lets begin with a typical Life Time Value table:
A c q u isition Y ea r S h o p p ers R eten tio n R a te O rd ers p er Y ea r A vg O rd er Size T o tal R even u e 1 0 0,00 0 6 0% 1.8 $ 90 $ 16 ,20 0,000 S eco n d Y ea r 6 0,000 7 0% 2 .5 $ 95 $ 14 ,2 5 0,000 T h ird Y ea r 4 2,000 80 % 3 $ 10 0 $ 12 ,60 0,00 0
C o sts C o sts of S a les A cq u isitio n / M kt. C o st M ar ketin g C osts T o tal C o sts
7 0% $ 11 ,34 0,000 $ 55 $ 5,500 ,0 00 $ 16 ,84 0,000
6 5% $ 9,26 2,5 00 $20 $ 1,20 0,0 00 $ 10 ,4 6 2,500
65 % $ 8,190 ,00 0 $ 20 $ 840 ,0 00 $ 9,030 ,00 0
G ro ss P rofit D isco u n t R a te N et P resen t V a lu e C u m u la tive N P V P rofit S h o p p er LT V
($ 64 0,00 0 ) 1 ($ 64 0,00 0 ) ($ 64 0,00 0 ) ($ 6 )
$ 3,78 7,5 00 1 .1 6 $ 3,26 5,0 86 $ 2,62 5,0 86 $26
$ 3,570 ,00 0 1 .3 5 $ 2,644 ,44 4 $ 5,269 ,53 1 $ 53
184
In this table, 100,000 shoppers are acquired originally. We are following their purchase history for the next three years. The first thing you will notice is that 40% of them disappear after the first year. The retention rate is only 60%. In future years the retention rate grows. The royalty of retained shoppers is higher than that of newly acquired shoppers. As shoppers stay with you, their number of orders per year and their average order size tends to increase. We are assuming a 70% cost of sales. The actual number may be different according to the situation taken for the calculation. The cost typically goes down after the first year. The cost of shopper service to existing shoppers is usually lower than that to new shoppers. It costs you $55 to acquire a new shopper. This is computed by taking all your advertising and sales costs and dividing this by the 100,000 shoppers acquired. It is assumed that $20 per shopper is spend per year on subsequent marketing, including the cost of the database that provides the information needed for this table, and is used to provide the personal communications needed to improve the retention rate. The Gross Profit is simply the revenue minus costs. This has to be divided by a discount rate to get the Net Present Value of the expected profits. The discount rate (based on interest rates) is needed because future profits are not worth as much in todays money as present profits. The formula for the discount rate is: D = (1+ (i rf)) n Where D = Discount rate, i = interest rate, rf = the risk factor, and n = number of years that you have to wait. With a risk factor of 2 and an interest rate of 8 %, the discount rate in the third year (two years from now) is D = (1 + (.08 2)) 2 or D = (1.16) 2 =1.35 The lifetime value is calculated by dividing the cumulative Life Time Value by originally acquired 100,000 shoppers. The Life Time Value in the third year is $53. That means that the Life Time Value of the average newly acquired shopper is $53 in the third year. In this one number we have encapsulated the retention rate, the spending rate, the acquisition, marketing and goods cost and the discount rate. From this table, we can learn quite a lot. We can see, acquiring new shoppers is not a profitable activity. Shoppers, in this case, become profitable only in the second and third years. This is typical. It is why money spent on increased retention has a higher payoff than money spent on acquisition. In the above example the average Life Time Value for a group of 100,000 shoppers is calculated. In a similar manner the Life Time Value of each individual shopper can be arrive at. This is done by creating shopper segments. Developing shopper segments is an art. It depends on our shopper base and marketing program. Segments might be by age (Senior Citizen, College Students, etc.) or by spending habits (Gold, Silver, and Bronze)
185
NOTES
DBA 1740
NOTES
or by product type (Deluxe, Regular, and Economy), etc. The Life Time Value table can be calculated to create a Life Time Value for each segment. Janet, one of the shoppers, may be a Deluxe shopper, who spends about $300 per year. The Life Time Value of the Deluxe shoppers for example, may be $100 in the third year. They may spend an average of $200 per year. So Janets third year Life Time Value is $150 ((300/200)*100)). We can set up a program to compute this number for every shopper and put that number into our shopper database. Life Time Value can thus be a valuable tool in the marketing arsenal. The shoppers with high Life Time Value (High Expected Future Profits) can be treated differently from those with low Life Time Value. More amount can be spend to retain them. Some shoppers may even have negative Life Time Value. Why spend a lot of money trying to retain these losers? The Life Time Value table can be used to evaluate the expected results of new marketing programs before we have spent millions of them. When we come up with a new initiative, estimate what it will do to the retention rate and the spending rate (orders and average order size). Some marketing programs will fail this test. Their benefits will be lower than their costs. They may cause Life Time Value to drop rather than to rise. In such situation the funding can be stopped. Life Time Value is thus a wonderful marketing tool which costs very little to calculate, and can return rich rewards in terms of improved marketing strategy. Determining the value of retail shoppers: Discounted shoppers profitability method Discounted shopper profitability requires lot of assumptions, estimates and judgments. By careful consideration of the components of shopper profitability, the retailer can develop a more intricate understanding of where the shopper profit opportunity resides.
186
NOTES
Annual sales (The total sales for the financial year)
Gross Income
(Annual Net sales after discounts (Cost of product + over heads))
Cost of Sales
(Cost of selling, distribution, stock holding customization etc.)
Net Shopper Profit (NCP)
(Gross income- cost of sales)
Expected length shoppers relationship profit (NCP)
(How long the shopper be loyal?)
Discounted shopper profitability
(NCP * expected length relationship)
187
DBA 1740
NOTES
The annual sales of a retail organization are drawn from its books of accounts. Gross income is arrived by deducting the cost of product and overhead charges from the Annual net sales. Further, the cost of sales which include selling and distribution cost, storage cost customization cost etc are to be reduced from the Gross income that would lead to arrive at net shoppers profit. The net shopper profit so arrived is to be multiplied with expected length of shopper relationship, which will give discounted shopper profitability. The future profitability should be discounted by the retail organizations internal cost of capital (i.e. profit in three years time is not worth) as much profit today). More over shoppers profit is expected to change significantly over the course of the relationship. Also the discounted shopper profitability is likely to change from shopper segment to segment. Enhancing shopper life time value: Retail organization perspectives Retail organizations should attempt to maximize the shoppers life time value by boosting the number, scope and duration of value creating shopper relationships and minimizing the value destroying ones. Viewing a retail organization as a portfolio of current and future shopper relationships can provide many insightful perspectives, to enhance shopper life time value. On this account the shopper base may be segmented into categories of different business models like; (a) Low cost to serve model: Under this category it will take only minimum cost to serve the shoppers but the revenue generated out of such service will be maximum. (b) Medium cost to serve model: Under this category the average cost of serving to shoppers will be more or less equal to the revenue generated out of such service. (c) High cost to serve model: Under this category it will take the maximum cast to serve the shoppers but the revenue generated out of such services will be minimum or at times it will negative also. Retailers have to play attention in all the three segments at a time and strategically convert the High cost to serve shoppers into Low cost to serve shoppers. The above strategic approach need appropriate changes in the retail organizations structure, style of operations, system, staff, supply chain process and so on. Focus should be made on shopper information management with greater visibility and control on inflow and outflow of information within each strategic decision points of the retail organization.
188
Strategic Actions The following strategic actions are advocated to retailers to look in profitable shoppers and induce them to claim further in the profitability ladder Achieve and surpass shoppers expectations Always elevate positive relationship Actively prepare to meet future needs of shoppers. Associate with shoppers who are in decline phase of loyalty Arrange for reward for loyalty Ascertain the fact that loyal shoppers are not always profitable shoppers Act towards satisfied shoppers
NOTES
Once satisfied does not mean satisfied forever, so the retailer has to be beware of satisfied shoppers as equal to that of dissatisfied shoppers. Shopper Profitability As far as a retailer is concerned, the possibility of enhancing shopper profitability throughout their life time can be looked from different routes.
1. Existing product to existing shoppers Increase of Sales 2. New product to Existing shoppers 3. New product to New shoppers 1. Storage
Increase of Shopper Profitability
Reduce Cost of Sales
2. Advertising 3. Distribution 1. Reconstructive Pricing Terms 2. Improved Negotiation
Improve Margin
189
DBA 1740
NOTES
Increase of shopper profitability could be done either by increase of sales or by improving of sales margin. Increase of sales is possible by offering existing product/service to existing shoppers or new product/ services to existing shoppers or new products/services to new shoppers. A reduction of costs of sales also would help to earn more profit from shoppers. Such reduction will take place in three forms generally viz. Reduction of storage costs, reduction of advertising expenses, Reduction of distribution costs. Shopper profitability can also improve by means of restructuring pricing terms or by improved negotiation. The above strategic routes applied in isolation or combined together would contribute towards enhancement of shopper profitability across their life time. Emerging issues in Shopper Lifetime Value: As claimed by Sunil Gupta et.al, the shopper lifetime value will have to take into account the following emerging issues: Key drivers of shopper lifetime value will include cost other than the production and transaction cost. The lifetime cost analysis might include a portfolio of shoppers and not single shoppers. Reconciling from Top-Down approach versus Bottom-Up approach, as there is mismatch between the macro models of demand estimation and shopper behavior vis-a- vis the micro models. Different system of accounting is needed to track and monitor cost allocation, cost to be allocated not per function basis but per shopper basis. There is a definite need to understand and appreciate the limits of theoretical shopper lifetime value models. The models have to incorporate rare events and recognize the threats.
SUMMARY This unit has aimed at providing the retailers with requisite inputs to frame strategies to retain and enhance the shoppers base. The unit has started with a detailed account of the need for Customer relationship management and the process involved in building a CRM programme. The steps involved viz., collecting the data, analyzing the same and developing CRM programme is dealt in detail. The need and importance of developing an effective complaint management system is explained. The basic framework for calculating the shoppers life time value is also explained.
190
HAVE YOU UNDERSTOOD? Discuss the need and importance of developing a CRM programme. A retailer running an apparel store for the past ten years is faced with the problem of shoppers attrition. Suggest him a suitable CRM programme to retain the shoppers. Discuss the need for compliant management system and evolve a mechanism for the same. What is the need for calculating Shopper Life time value. Discuss the process of calculating the same. Explain how the calculation of shoppers lifetime value would contribute to building an effective CRM programme.
NOTES
191
DBA 1740
NOTES
NOTES
192

Retail Shopper Behaviour

Caricato da

Informazioni sul documento

Descrizione originale:

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Retail Shopper Behaviour

Caricato da

Copyright:

Formati disponibili

MBA

DBA DBA 1740 RETAIL BEHAVIOUR RETAIL SHOPPER BEHAVIOUR

IV SEMESTER COURSE MATERIAL

Centre for Distance Education

Author Dr. K. Chitr a Dr. Chitra

Reviewer Dr.H.Peeru .H.Peer Dr.H.P eer u Mohamed

Editorial Board Dr.T.V.Geetha .T.V Dr.T.V.Geetha

Dr.H.Peeru .H.Peer Dr.H.P eer u Mohamed

Dr.C Chellappan .C. Dr.C. Chella ppan

Dr.A.K .A.Kannan Dr.A.K annan

Copyrights Reserved (For Private Circulation only) ii

DBA 1740 RETAIL SHOPPER BEHAVIOUR

UNIT II SHOPPING PROCESS

UNIT III INTERNAL INFLUENCES ON SHOPPING BEHAVIOUR

UNIT IV EXTERNAL INFLUENCES ON SHOPPER BEHAVIOUR

UNIT V ADDITIONAL DIMENSIONS

RETAIL SHOPPER BEHAVIOUR

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

Internal and external influences

Information search and Analysis

Purchase delayed Purchase denied

Search for Substitutes Abandonment Search for Substitutes

Internal and external influences

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

Actual economic condition

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR

ANNA UNIVERSITY CHENNAI

ANNA UNIVERSITY CHENNAI

RETAIL SHOPPER BEHAVIOUR