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Chapter Six:
Outlet Selection and
 Product Purchase


                       6-1
Outlet selection and product purchase
A further step in the consumer decision making process




                         ...
Chapter 6: Outlet selection and
             product purchase
1. How the traditional retailing environment is
     changin...
Consumer outlet selection
          and product purchase
• Where will consumers shop?
• How do they choose a retail outlet...
Outlet Selection and Choice

Selecting a retail outlet involves the same process as
selecting a brand. That is, the consum...
Outlet choice vs product choice
      (which one comes first?)
1. Brand (or item) first, retail outlet
   second

2. Retai...
Marketing strategy based on the
 consumer decision sequence




                                  6-7
Retailers use quality brands to promote
               the store




                                     6-8
Use of advertising to create brand demand
     and direct consumers to outlets




                                      6...
The Retail Scene

Retail outlet refers to any source of products or services for
consumers.
In-home shopping represents a ...
The Retail Scene

  Internet Retailing
  •   Barriers to Internet Shopping
  •   Characteristics of Online Shoppers

  Sto...
Online shopping
• Increasing number of consumers preferring to
  shop online - 5% in 1999 to 31% in 2004-5
• Females now u...
The Retail Scene



Online Sales by
Categories in Billions




                         6-13
The Retail Scene
Consumers shop online for reasons similar to those for shopping
from catalogs:




                      ...
The Retail Scene
                        Internet Retailing

Many industry experts
predicted the demise of
catalogs.

But ...
The Retail Scene
                 Barriers to Internet Shopping
Many barriers still exist to online purchasing, not the le...
The Retail Scene
                  Barriers to Internet Shopping
Online privacy concerns relate to consumer fears regardin...
The Retail Scene
                Barriers to Internet Shopping
As a consequence, companies must build and sustain
highly t...
The Retail Scene
                  Barriers to Internet Shopping
Lack of touch or ability to physically try products prior...
Reasons for not purchasing on the
             internet




                                    6-20
Online shopping by age groups




                                6-21
The Retail Scene
             Characteristics of Online Shoppers

Internet shoppers tend to have higher income and
educati...
The Retail Scene
           Characteristics of Online Shoppers
Research is moving beyond simple demographics.

     Trying...
The Retail Scene
             Characteristics of Online Shoppers


                           Shopping Lovers
The followin...
Store-based Retailing
The Retail Scene
                   Store-based Retailing

 Most sales take place in physical stores, and this will
 remai...
The Retail Scene
                  Store-based Retailing
 The following are the results of a Roper survey asking
 consumer...
The Retail Scene
                    Store-based Retailing
In-store shopping perceived as neither fun nor efficient by
man...
Applications in Consumer Behavior
                   Store-based Retailing


This Wal-Mart ad shows
one of the many ways
s...
The Retail Scene
     The Internet as Part of a Multi-Channel Strategy

Many think of Internet
retailers as distinct from
...
The Retail Scene
      The Internet as Part of a Multi-Channel Strategy

A multi-channel retail strategy approach is becom...
The Retail Scene
       The Internet as Part of a Multi-Channel Strategy

Consumers are utilizing multiple channel in comp...
The Retail Scene
   The Internet as Part of a Multi-Channel Strategy




                                                 ...
Attributes Affecting Retail Outlet Selection

Retail outlet selection involves a comparison of the
alternative outlets on ...
Attributes affecting retail
           outlet selection

• Outlet image
 –A  consumer’s or a target
   market’s perception...
Attributes Affecting Retail Outlet Selection

                          Outlet Image
Store image - perception of all the a...
Attributes Affecting Retail Outlet Selection

                    Outlet Image




                                       ...
Attributes Affecting Retail Outlet Selection
                          Outlet Image
 As these studies suggest, overall ret...
Attributes Affecting Retail Outlet Selection

                        Retailer Brands
Store brands are closely related to ...
Attributes Affecting Retail Outlet Selection

                     Retail Advertising
 Retailers use advertising to commun...
Attributes Affecting Retail Outlet Selection

                                            Retail Advertising
 Expenditure ...
Attributes Affecting Retail Outlet Selection

                     Retail Advertising

Retailers evaluating the benefits o...
Attributes Affecting Retail Outlet Selection

                    Retail Advertising
               Price Advertising Deci...
Expenditure of individuals drawn
 to a store by an advertised item




                                6-44
Attributes Affecting Retail Outlet Selection

                      Retail Advertising
                  Price Advertising...
Attributes Affecting Retail Outlet Selection

                  Outlet Location and Size

Location and size play an import...
Outlet location and size:
     retail attraction model

                   Si / Tiλ
MSi =
              n
              Σ ...
Consumer characteristics and outlet
            choice

• Shopping orientation
• Perceived risk
  – Financial risk
  – Soc...
Consumer Characteristics and Outlet
Choice
                   Shopping Orientation

A Shopping orientation is a shopping s...
Consumer Characteristics and Outlet
 Choice
                 Shopping Orientation: Part I

Chameleons              •   Sho...
Consumer Characteristics and Outlet
Choice
             Shopping Orientation: Part II
                         little stor...
Consumer Characteristics and Outlet
Choice
                            Perceived Risk
 The purchase of products involves t...
Financial and social risks for
  various types of products




                                 6-53
Reducing health risk via endorsement




                                   6-54
Consumer Characteristics and Outlet
Choice
                     Perceived Risk

The perception of these risks differs amon...
In-Store and Online Influences on Brand
Choices
Often we enter a retail outlet with the intention of
purchasing a particul...
In-store influences that alter brand
                choices

• The nature of unplanned purchases


  – Reminder   purchas...
In-store influences that alter brand
            choices (cont.)
• The nature of unplanned purchases


  –   The specifica...
In-store buying habits




                         6-59
In-Store and Online Influences on Brand
Choices
   Supermarket Decisions: Two-Thirds Are Made In-Store




               ...
Encouraging unplanned purchases -
‘gift-time’ and suggesting products




                                      6-61
In-Store and Online Influences on Brand
Choices
            In-Store Purchase Behavior




                               ...
In-Store and Online Influences on Brand
Choices
Strategies used by manufacturers and retailers to influence
in-store and o...
In-store influences that impact on
evaluation of alternatives and purchase




                                          6...
Point-of-purchase (POP) displays

• A device used by marketers and retailers at
  the point of sale to inform consumers or...
Point-of-purchase (POP) displays




                               6-66
In-Store and Online Influences on Brand
Choices
             Point-Of-Purchase Materials
         Shelf-Based Point-of-Pur...
In-Store and Online Influences on Brand
Choices
         Price Reductions and Promotional Deals

Price reductions and prom...
In-Store and Online Influences on Brand
Choices
          Price Reductions and Promotional Deals
Sales increases in respon...
In-Store and Online Influences on Brand
Choices
                     Outlet Atmosphere

  Store atmosphere is influenced b...
In-Store and Online Influences on Brand
Choices
                      Outlet Atmosphere
Atmospherics is the process manage...
In-Store and Online Influences on Brand
Choices
               Outlet Atmosphere




                                     ...
Shopper behaviour in response
       to frequent stockouts
Stockouts occur when the store is temporarily out of a particul...
Impact of stockout situation




                               6-74
In-Store and Online Influences on Brand
Choices
        Web Site Functioning and Requirements

 Consumers often research o...
In-Store and Online Influences on Brand
Choices
                      Sales Personnel

The effectiveness of sales efforts ...
Store atmosphere and shopper behaviour




                                    6-77
Purchase

  Once the consumer has selected the brand and retail
  outlet, he/she must complete the transaction, referred
 ...
Purchase

  Increasingly the percentage of potential purchasers
  who actually purchase is a major challenge for most
  on...
Summary of topics in this chapter:
We have discussed:
• How the traditional retailing environment is
  changing
• The tren...
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BB Chapter Six: Outlet Selection and Purchase

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BB Chapter Six: Outlet Selection and Purchase

  1. 1. Chapter Six: Outlet Selection and Product Purchase 6-1
  2. 2. Outlet selection and product purchase A further step in the consumer decision making process 6-2
  3. 3. Chapter 6: Outlet selection and product purchase 1. How the traditional retailing environment is changing 2. Trend towards internet retailing 3. Factors that affect retail outlet selection 4. Why consumer characteristics can also affect outlet selection 5. In-store influences that can affect brand choice 6. How marketers can capitalize on these influences 6-3
  4. 4. Consumer outlet selection and product purchase • Where will consumers shop? • How do they choose a retail outlet? – Consumer characteristics – Store characteristics • In-store decision alterations • The purchase process • Alternative to store selection • Implications for strategy 6-4
  5. 5. Outlet Selection and Choice Selecting a retail outlet involves the same process as selecting a brand. That is, the consumer recognizes a problem that requires outlet selection engages in internal and possibly external search evaluates the relevant alternatives, and applies a decision rule to make a selection 6-5
  6. 6. Outlet choice vs product choice (which one comes first?) 1. Brand (or item) first, retail outlet second 2. Retail outlet first, brand second 3. Brand and retail outlet simultaneously 6-6
  7. 7. Marketing strategy based on the consumer decision sequence 6-7
  8. 8. Retailers use quality brands to promote the store 6-8
  9. 9. Use of advertising to create brand demand and direct consumers to outlets 6-9
  10. 10. The Retail Scene Retail outlet refers to any source of products or services for consumers. In-home shopping represents a relatively small but rapidly growing percentage of total retail sales. Increasingly consumers see or hear descriptions of products in catalogs, direct-mail, print television or radio on the Internet and then acquire them via mail telephone, or computer orders 6-10
  11. 11. The Retail Scene Internet Retailing • Barriers to Internet Shopping • Characteristics of Online Shoppers Store-based Retailing The Internet as Part of a Multi-Channel Strategy 6-11
  12. 12. Online shopping • Increasing number of consumers preferring to shop online - 5% in 1999 to 31% in 2004-5 • Females now using the internet – Males 64%, females 62% • Image of the outlet influenced by: – Webpage design – Convenience – Security – Pricing 6-12
  13. 13. The Retail Scene Online Sales by Categories in Billions 6-13
  14. 14. The Retail Scene Consumers shop online for reasons similar to those for shopping from catalogs: 6-14
  15. 15. The Retail Scene Internet Retailing Many industry experts predicted the demise of catalogs. But catalogs and the Internet appear to be complementary. Consumers often purchase online after receiving a catalog! 6-15
  16. 16. The Retail Scene Barriers to Internet Shopping Many barriers still exist to online purchasing, not the least of which is the lack of Internet access. However, many who are online still have never made a purchase. A Forrester Research study found the following reasons among those who are online who have never made a purchase: 6-16
  17. 17. The Retail Scene Barriers to Internet Shopping Online privacy concerns relate to consumer fears regarding how personal information about them that is gathered online might be used, including: targeting children being inundated with marketing messages, and Identity theft Online privacy concerns represent a major challenge to Internet commerce, with estimated lost sales at some $24.5 billion! 6-17
  18. 18. The Retail Scene Barriers to Internet Shopping As a consequence, companies must build and sustain highly trusted online images and relationships. This involves such factors as having adequate privacy policies in place utilizing security verification systems (e.g., VeriSign), and handling consumer information responsibly Just as brand name can be a surrogate quality indicator, so too can it be a surrogate for information safety and security online. 6-18
  19. 19. The Retail Scene Barriers to Internet Shopping Lack of touch or ability to physically try products prior to purchase is also a concern. It affects product categories such as apparel where it can be difficult to simulate experience attributes such as fit. Internet marketers are creating virtual product experiences using such techniques as 3D simulations and rich media. MVM (My Virtual Model) is an example of this technology. 6-19
  20. 20. Reasons for not purchasing on the internet 6-20
  21. 21. Online shopping by age groups 6-21
  22. 22. The Retail Scene Characteristics of Online Shoppers Internet shoppers tend to have higher income and education levels than the general population, although these differences are diminishing. Online shoppers tend to be younger and more affluent than the average Internet users. While men and women are roughly equally split in terms of internet use, women are emerging as the stronger Internet buyer. 6-22
  23. 23. The Retail Scene Characteristics of Online Shoppers Research is moving beyond simple demographics. Trying to understand online shopping in terms of online experience and attitudes and behaviors regarding online shopping. Example: Those who purchase online tend to have more experience online. Those online 10 + years spend 75% more than those online 2 years or less! 6-23
  24. 24. The Retail Scene Characteristics of Online Shoppers Shopping Lovers The following are Adventurous Explorers results of a study which Suspicious Learners identifies the following eight online shopper Business Users segments: Fearful Browsers Shopping Avoiders Technology Muddlers Fun Seekers 6-24
  25. 25. Store-based Retailing
  26. 26. The Retail Scene Store-based Retailing Most sales take place in physical stores, and this will remain true for the foreseeable future. However traditional store-based retailing is certainly vulnerable in ways that plays into the hands of in-home retailers. 6-26
  27. 27. The Retail Scene Store-based Retailing The following are the results of a Roper survey asking consumers why they don’t like shopping in stores: 6-27
  28. 28. The Retail Scene Store-based Retailing In-store shopping perceived as neither fun nor efficient by many. Retailers fighting back with store-based activates and technologies to improve the experience: Brand stores add value by providing a fun shopping environment 6-28
  29. 29. Applications in Consumer Behavior Store-based Retailing This Wal-Mart ad shows one of the many ways store-based retailers add value for their customers – namely providing a fun shopping environment. Courtesy Wal-Mart Stores, Inc. 6-29
  30. 30. The Retail Scene The Internet as Part of a Multi-Channel Strategy Many think of Internet retailers as distinct from store-based retailers and catalogs. However, pure play Internet retailers such as eBay and Amazon are Priceline.com is an example of only part of the pictures. an exclusive Internet retailer 6-30
  31. 31. The Retail Scene The Internet as Part of a Multi-Channel Strategy A multi-channel retail strategy approach is becoming increasingly essential. This approach can take on many forms and relates to the shifts in consumer shopping patterns. Over 70% of the top 100 online retailers in the U.S. are multi-channel retailers. Multi-channel shoppers are consumers who browse and/or purchase in more than one channel. 6-31
  32. 32. The Retail Scene The Internet as Part of a Multi-Channel Strategy Consumers are utilizing multiple channel in complementary ways since no retailing format is optimal on all dimensions. So, the Internet can be used to • overcome a lack of informed salespeople or the inconvenience of researching products in-store, while • in-store can provide “touch” and immediacy of purchasing. 6-32
  33. 33. The Retail Scene The Internet as Part of a Multi-Channel Strategy 6-33
  34. 34. Attributes Affecting Retail Outlet Selection Retail outlet selection involves a comparison of the alternative outlets on consumer’s evaluative criteria: Outlet Image Retailer Brands Retail Advertising Outlet Location and Size 6-34
  35. 35. Attributes affecting retail outlet selection • Outlet image –A consumer’s or a target market’s perception of all the attributes associated with a retail outlet 6-35
  36. 36. Attributes Affecting Retail Outlet Selection Outlet Image Store image - perception of all the attributes associated with a retail outlet. 6-36
  37. 37. Attributes Affecting Retail Outlet Selection Outlet Image 6-37
  38. 38. Attributes Affecting Retail Outlet Selection Outlet Image As these studies suggest, overall retailer image (both Internet and store-based) relates to both functional and affective dimensions. 6-38
  39. 39. Attributes Affecting Retail Outlet Selection Retailer Brands Store brands are closely related to store image, and at the extreme, the store or outlet is the brand. Traditionally, retailers carried only manufacturers' brands, and only a few, such as Sears and Wards, developed their own brands. Increasingly retailers such as Wal-Mart and Target are developing and promoting high-quality brands with either the store’s name or an independent name. The key to success of store brands--high quality at a reasonable price. price 6-39
  40. 40. Attributes Affecting Retail Outlet Selection Retail Advertising Retailers use advertising to communicate their attributes, particularly sale prices, to consumers. Tracking the purchases of an advertised item understates the total impact of the ad. Spillover sales are the sales of additional items to customers who came to purchase an advertised item. 6-40
  41. 41. Attributes Affecting Retail Outlet Selection Retail Advertising Expenditure of Individuals Drawn to a Store by an Advertised Item Source: The Double Dividend. (New York: Newspaper Advertising Bureau Inc., February 1977. 6-41
  42. 42. Attributes Affecting Retail Outlet Selection Retail Advertising Retailers evaluating the benefits of price or of the promotions must consider the impact on overall store sales and profit. Studies show that price is frequently not the primary reason for selecting a particular outlet. Many retailers could benefit from emphasizing service, selection, or affective benefits. benefits Online retailers advertise in mass media to build image and attract consumers. 6-42
  43. 43. Attributes Affecting Retail Outlet Selection Retail Advertising Price Advertising Decisions Retailers face three decisions when they consider using price advertising: 1. How large a price discount should be used? 2. Should comparison or reference prices be used? 3. What verbal statement should accompany the price information? 6-43
  44. 44. Expenditure of individuals drawn to a store by an advertised item 6-44
  45. 45. Attributes Affecting Retail Outlet Selection Retail Advertising Price Advertising Decisions A reference price is a price with which other prices are compared. An external reference price is a price presented by a marketer for the consumer to use to compare with the current price. An internal reference price is a price or price range that a consumer retrieves from memory to compare with a price in the market. 6-45
  46. 46. Attributes Affecting Retail Outlet Selection Outlet Location and Size Location and size play an important role in store choice. All else equal, consumers generally select the closest store. Outlet size is also important. Generally, customers prefer larger outlets over smaller outlets. The retail attraction model, or the retail gravitation model model, is used to calculate the level of store attraction model based on store size and distance from the consumer. 6-46
  47. 47. Outlet location and size: retail attraction model Si / Tiλ MSi = n Σ Si / Tiλ = i= 1 MSi = market share of store i Si = size of store i (or mall) Ti = travel time to i λ = attraction factor for a particular product category 6-47
  48. 48. Consumer characteristics and outlet choice • Shopping orientation • Perceived risk – Financial risk – Social risk 6-48
  49. 49. Consumer Characteristics and Outlet Choice Shopping Orientation A Shopping orientation is a shopping style that puts particular emphasis on certain activities or shopping motivations. A recent study used projective techniques (in this case, thinking about an animal) to ascertain the ways college students approach shopping. 6-49
  50. 50. Consumer Characteristics and Outlet Choice Shopping Orientation: Part I Chameleons • Shopping style situation specific or constantly changing • Shopping approach is based on product type, shopping impetus, and purchase task Collectors/Gatherers • Propensity to stockpile items and to purchase large quantities to either save money or alleviate the need for shopping • Attempt to get the best price and take advantage of retailer guarantees Foragers • Particular and motivated to purchase only the desired items • Willing to search extensively and have little store loyalty; Prefer to shop alone 6-50
  51. 51. Consumer Characteristics and Outlet Choice Shopping Orientation: Part II little store loyalty; Prefer to shop alone Hibernants • Indifferent toward shopping, with opportunistic shopping patterns rather than need driven • Will often postpone even required purchases Predators • Purposeful and speed oriented in shopping; plan before shopping and like to shop alone • Do not enjoy shopping and tend to shop outlets where assured of getting needed items quickly Scavengers • Enjoy shopping both to make purchases and as an activity • Like to go to sales and consider shopping to be entertainment • Make numerous unplanned purchases 6-51
  52. 52. Consumer Characteristics and Outlet Choice Perceived Risk The purchase of products involves the risk that they may not perform as expected; such failure may result in a high Social cost • e.g., a hairstyle that is not appreciated by one’s peers Financial cost • e.g., an expensive pair of shoes that become too uncomfortable to wear Time cost • e.g., a television repair that required the set to be taken to the shop, left, and then picked up later Effort cost • e.g., a computer jump drive that is loaded with several hours of work before it fails Physical cost • e.g., a new medicine that produced a harmful side effect 6-52
  53. 53. Financial and social risks for various types of products 6-53
  54. 54. Reducing health risk via endorsement 6-54
  55. 55. Consumer Characteristics and Outlet Choice Perceived Risk The perception of these risks differs among consumers, depending in part on their past experiences and lifestyles. For this reason perceived risk is considered a consumer characteristic as well as a product characteristic. 6-55
  56. 56. In-Store and Online Influences on Brand Choices Often we enter a retail outlet with the intention of purchasing a particular brand but leave with a different brand or additional items. Influences operating within the retail outlet influence our shopping patterns. Unplanned purchases are purchases made in a retail outlet that are different from those the consumer planned to make prior to entering that retail outlet. 6-56
  57. 57. In-store influences that alter brand choices • The nature of unplanned purchases – Reminder purchases – Impulse purchases 6-57
  58. 58. In-store influences that alter brand choices (cont.) • The nature of unplanned purchases – The specifically planned decision – The generally planned decision – The substitute decision – The unplanned decision – The in-store decisions 6-58
  59. 59. In-store buying habits 6-59
  60. 60. In-Store and Online Influences on Brand Choices Supermarket Decisions: Two-Thirds Are Made In-Store 6-60
  61. 61. Encouraging unplanned purchases - ‘gift-time’ and suggesting products 6-61
  62. 62. In-Store and Online Influences on Brand Choices In-Store Purchase Behavior 6-62
  63. 63. In-Store and Online Influences on Brand Choices Strategies used by manufacturers and retailers to influence in-store and online decisions: 1. Point-Of-Purchase Materials 2. Price Reductions and Promotional Deals 3. Outlet Atmosphere 4. Stockouts 5. Web Site Functioning and Requirements 6. Sales Personnel 6-63
  64. 64. In-store influences that impact on evaluation of alternatives and purchase 6-64
  65. 65. Point-of-purchase (POP) displays • A device used by marketers and retailers at the point of sale to inform consumers or encourage them to buy; may comprise posters, cards, shelf wobblers, etc. 6-65
  66. 66. Point-of-purchase (POP) displays 6-66
  67. 67. In-Store and Online Influences on Brand Choices Point-Of-Purchase Materials Shelf-Based Point-of-Purchase Materials 6-67
  68. 68. In-Store and Online Influences on Brand Choices Price Reductions and Promotional Deals Price reductions and promotional deals • coupons • multiple-item discounts, and • gifts are generally accompanied by the use of some point-of- purchase materials. 6-68
  69. 69. In-Store and Online Influences on Brand Choices Price Reductions and Promotional Deals Sales increases in response to price reductions come from four sources 1. Current brand users may buy ahead of their anticipated needs (stockpiling). 2. Users of competing brand may switch to the reduced price brand. 3. Nonproduct category buyers may buy the brand because it is now a superior value to the substitute product. 4. Consumers who do not normally shop at the store may come to the store to buy the brand. 6-69
  70. 70. In-Store and Online Influences on Brand Choices Outlet Atmosphere Store atmosphere is influenced by such attributes as • lighting • layout • presentation of merchandise • fixtures • floor coverings • colors • sounds • odors • dress and behavior of sales and service personnel 6-70
  71. 71. In-Store and Online Influences on Brand Choices Outlet Atmosphere Atmospherics is the process managers use to manipulate the physical retail or service environment to create specific mood responses in shoppers. Internet retailers also have online atmospheres that are determined by • graphics • colors • layout • content • entertainment features • inactivity • tone 6-71
  72. 72. In-Store and Online Influences on Brand Choices Outlet Atmosphere 6-72
  73. 73. Shopper behaviour in response to frequent stockouts Stockouts occur when the store is temporarily out of a particular brand. Results in… 6-73
  74. 74. Impact of stockout situation 6-74
  75. 75. In-Store and Online Influences on Brand Choices Web Site Functioning and Requirements Consumers often research online then buy in traditional stores. However, losses also occur during the online shopping process. A DoubleClick study found the following reasons for shopping cart abandonment: 6-75
  76. 76. In-Store and Online Influences on Brand Choices Sales Personnel The effectiveness of sales efforts is influenced by the interaction of • the salesperson’s knowledge, skill, and authority • the nature of the customer’s buying task • the customer-salesperson relationship In the online context, marketers are testing so-called “pop- up” sales clerks that interact with customers as they shop on their web site. 6-76
  77. 77. Store atmosphere and shopper behaviour 6-77
  78. 78. Purchase Once the consumer has selected the brand and retail outlet, he/she must complete the transaction, referred to as purchasing or renting the product. In traditional retail environments, this was straightforward with little delay, with the exception of a major and complex purchase. Many consumers starting to make an online purchase quit without making one for a variety of reasons. 6-78
  79. 79. Purchase Increasingly the percentage of potential purchasers who actually purchase is a major challenge for most online retailers. Credit plays a major role in consumer purchases. Businesses need to simplify the actual purchase process as much as possible. 6-79
  80. 80. Summary of topics in this chapter: We have discussed: • How the traditional retailing environment is changing • The trend towards internet retailing • Factors that affect retail outlet selection • Why consumer characteristics can also affect outlet selection • In-store influences that can affect brand choice • How marketers can capitalize on these influences 6-80

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