Understanding Customers' Decision Making Process

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The retail industry developed in the United States in the 18th century and was initially restricted to only general stores. Gradually specialty stores came into existence in areas that had a population of over 5000 people and when suburbs began to grow after World War II, Supermarkets started to flourish in the US and Canada (Watch).

In the last two decades the modern retail industry has boomed across the globe. The competition in the retail industry has never been greater. As a result of this competition some retailers have lost sight of what customers actually need and want. The demographic and lifestyle changes of customers have affected how, where and what they shop. As the range of choices in products has increased drastically in the last decade, the biggest challenge for the marketing teams is to understand the buyers’ behaviours. It is very important to have a strong understanding of buyers’ behaviours because it will give insights on what customers feel is important and the factors that influence their decision making when buying a product(Zambito). These insights can then be used to create marketing campaigns which will be of interest to customers. If marketing teams can understand how customers make decisions, it could improve their marketing strategy. Since every customer is different it is necessary to generalize customers buying process to an extent.

Customers usually obtain information about products from personal sources (family and friends) or commercial sources (advertising, sales men, dealers) or public sources (magazines, newspapers, televisions). The influence of these sources of information will vary depending on the product and customer. The primary goal of this research is to identify which information sources play an influential role in choosing a product. We are also going to find out how the personal, social and cultural characteristics of customers influence their decision making process in selecting their choice of product, brand, dealer, etc.
If retailers can get to know what customers go through in each of the five stages of the decision making process, the sources of information and customers’ characteristics, they can influence customers to buy their products.

The objectives of this study are:
 To understand buyer behaviour
 To identify information sources that customers rely on
 To assess the factors that influence customers
 To identify the stimuli that influence the decision making process
 To propose how customers decision making can be influenced

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  • In the last two decades the modern retail industry has boomed across the globe. The competition in the retail industry has never been greater. As a result of this competition some retailers have lost sight of what customers actually need and want.
  • The biggest challenge for retailers is to understand the buyers’ behaviours. Understanding of buyers’ behaviours will give insights on the factors that influence their decision making when buying a productIf marketing teams can understand how customers make decisions, it could improve their marketing strategy.
  • http://www.cosmeticsbusiness.com/news/article_page/Asian_consumers_more_brandconscious_than_westerners/61951Source: http://www.afaqs.com/news/story.html?sid=30946http://articles.economictimes.indiatimes.com/20110709/news/29755761_1_brand-financial-consultant-indians
  • Indian Social Media – 27%
  • The second most important attribute for the world’s shopperswas a retail outlet that offered a Better Selection of High QualityBrands and Products. These results chart the evolution of thegrocery shopper as well. Today’s shopper appears to be whatretailing pundits aptly refer to as “The schizophrenic shopper”- shoppers that expect the best of both worlds from retailerstoday. On the one hand, shoppers are inclined to be bargainhunters and demand good value for their grocery dollar, and onthe other, they also expect retailers to stock a wide selection ofhigh quality brands. This ‘dual demand’ indicates that the sameconsumers want the ‘cheapest of the cheap’ in some categoriesand the ‘best of the best’ in others.
  • As large numbers of consumers in fast-growing, emergingmarkets, see their disposable incomes rise and attain newlyacquired, discerning tastes, they seek premium internationalgrocery products in their shopping baskets and head tosupermarkets with a better offering of high quality, brandedproducts. Typically, this forms the underlying basis for thehigh degree of correlation between an increase in per capitaGross Domestic Product and an increase in the share of marketthat goes through the Modern Trade, i.e. Supermarkets andHypermarkets.
  • In 20-25 age group, 74% of respondents trust Family/Friends and 69% trust Reviews/Ratings. 70% of 26-40 age group says they trust Family/Friends and Reviews/Ratings equally.In the above 40 category, 82% trust Family/Friends and 55% trust Reviews/Ratings
  • What do customers expect from supermarkets? Who are the customers?Gaining/Retaining Customer LoyaltyWhen and Where do they shop?Which channels and information sources do they rely on?
  • Technology is the final trend whichis likely to fundamentally alter how and where shoppers spendtheir money and interact with retailers. Whether it is throughTV shopping, on-line retailers, mobile phone applications orsocial networking sites, the application of technology is likelyto be the area where we see some of the biggest changes bythe year 2020.Retaining shoppers: Shopper loyalty and creatingdifferentiated retail brands will be key themes in many ofthe more developed markets, where retailers have a stronglyestablishedfootprint and as competition between the leadingchains becomes keener. We have started to see the launch ofmany types of loyalty cards but the jury is out as to whetherthese cards will truly provide differentiation for retailers orwhether these cards will just be a different means for shoppersto obtain promotional offers. Regardless, these cards will saya lot about shoppers. As the usage of such cards increase inpopularity, the wealth of customer data and insights gainedwill increasingly be central to the shopper engagementstrategies for many leading chains.Private Labels: The private label concept is still undevelopedin all Asian markets, with only Hong Kong having a share above5%. This opportunity will be developed over the next 10 yearsbut how quickly it will grow will be dependent on how muchretailers invest, not just in product development and quality butalso in actively marketing and selling the concept to shoppers.
  • Understanding Customers' Decision Making Process

    1. 1. INFLUENCING CUSTOMERS’ DECISIONMAKING PROCESS BY UNDERSTANDINGHOW CUSTOMERS CHOOSE PRODUCTS Decision Making Influencing Customer
    2. 2. AGENDAPersonal Cultural Social PART I - Background Of The Research PART II - Methodology, Analysis and Findings PART III - Academic and Commercial Benefits, Limitations of the Research, Suggestions for Future Research
    3. 3. PART IBackground Of The Research
    4. 4. Customers Decision Making Process The primary objective of any firm that wants to remain successful is to understand “How”, “Why” and “When” customers choose a particular product or service.
    5. 5. Customers Decision Making Process Literature on Buyer Behaviour suggests that customers go through a Five-stage Decision Making Process in any purchase. This model is important for anyone making Business decisions, be it Product Manufacturers or Retailers. It forces them to consider the whole buying process rather than just the purchase decision. Source: http://tutor2u.net/business/marketing/buying_decision_process.asp
    6. 6. Stimulus – Response Model of Buyer Behaviour MARKETING OTHER STIMULI STIMULI  Product  Economic  Price  Technological  Place  Political  Promotion  Cultural BUYER’S BUYER’S BUYER’SCHARACTERISTI DECISION DECISION CS MAKING PROCESS  Product Choice  Brand Choice Cultural  Problem Personal Recognition  Dealer Choice Social  Information search  Purchase timing Psychological  Evaluation of  Purchase Amount Alternatives  Purchase Decision  Post-Purchase Source: K6221 – Business Behaviour Notes Intelligence
    7. 7. Stimulus – Response Model of Buyer Behaviour MARKETING OTHER STIMULI STIMULI  Product  Economic  Price  Technological  Place  Political  Promotion  Cultural Scope of Research BUYER’S BUYER’S BUYER’SCHARACTERISTI DECISION DECISION CS MAKING PROCESS  Product Choice  Brand Choice Cultural  Problem Personal Recognition  Dealer Choice Social  Information search  Purchase timing Psychological  Evaluation of  Purchase Amount Alternatives  Purchase Decision  Post-Purchase Source: K6221 – Business Behaviour Notes Intelligence
    8. 8. Stimulus – Response Model of Buyer Behaviour MARKETING OTHER STIMULI STIMULI  Product  Economic  Price  Technological  Place  Political Focus of this research is to  Promotion  Cultural understand what exactly goes through buyer‟s mind at this point… CustomerIntelligence BUYER’S DECISION  Product Choice  Brand Choice  Dealer Choice  Purchase timing  Purchase Amount
    9. 9. Scope Of Research Buying Behaviour in SupermarketsNote: By supermarkets we mean the stores consisting mainly of groceries andlimited products on non food items such as toiletries, cosmetics, etc.
    10. 10. What Is The Need For This Research? Small grocery shop of the Past Retail Outlets of the Present  In the last two decades the modern retail industry has boomed across the globe. Singapore IndiaSupermarket Outlets Market Supermarket Outlets Share Food Bazaar/ Big Bazaar 700+NTUC FairPrice 240 Over 50% Reliance Fresh 680+ Cold Storage 43 Over 30% Spencer‟s 420+ Sheng Siong 25 Around 15% Business Monitor International (BMI) forecast  Business Monitor International (BMI) forecast that sales through Mass Grocery Retail outlets that sales through Mass Grocery Retail outlets to reach US$3.6 billion in 2012 and grow to reach to USD 27.67 billion by 2015 almost 28 percent to US$4.6 billion by 2016
    11. 11. What Is The Need For This Research? SCENARIO CHALLENGE What do customers expect from Changing Lifestyles and Tastes supermarkets? Demographic Changes Who are the customers? Increase in the number of Gaining/Retaining Customer supermarkets Loyalty Access to multiple media Which channels and information channels sources do they rely on?Demographic Changes If retailers can get to know what customers go through in each of the five stages of the decision making process, the sources of information and customers’ characteristics, they can influence customers to buy their products
    12. 12. Objectives of the Research To understand buyer behaviour To identify information sources that customers rely on To assess the factors that influence customers To propose how customers decision making can be influenced
    13. 13. PART IIMethodology, Analysis and Findings
    14. 14. METHODOLOG Y An online survey was conducted to understand the various thoughts that go into the customers‟ decision making process. The questions of the survey were framed such that we will get to know the customer‟s characteristics, customer‟s decision making process and marketing stimuli that influence the customer‟s decision of buying their choice of product/brand. The survey responses are analysed and suggestions are provided on how to influence customers‟ decision making In addition to the online survey, we observed the way people buy products in supermarkets
    15. 15. HYPOTHES ISAge is a significant factor in influencing Purchasing Decision.Gender is a significant factor in influencing Purchasing Decision.Nationality is a significant factor in influencing Purchasing Decision.
    16. 16. SAMPLE A total of 254 people took the survey and the respondents consisted of individuals from India, Singapore, China and a few other countries. Nationality Others, 13 PRC, 31 Singaporean, 53 Singaporean Indian PRC Others Indian, 157
    17. 17. Findings Based On Nationality
    18. 18. Which Nationals are more Brand Conscious? N - 254 Nationality - Brand Consciousness 69% 31% Nationality 77% 23 Yes 79% 21% No 75% 25% 0% 20% 40% 60% 80% 100% Response Percent 75% of the respondents from Singapore say that they are Brand Conscious 79% of the respondents from India say that they are Brand Conscious 77% of the respondents from China say that they are Brand ConsciousA recent poll has found consumers in Asia to be more brand-conscious than their counterparts inEurope and the USSource: http://www.cosmeticsbusiness.com/news/article_page/Asian_consumers_more_brandconscious_than_westerners/61951
    19. 19. Which is the Go-To Channel for new product information? N - 254 Nationality vs Channels 7 4 1 4 10 General Media (TV, Radio, Magazines) Promotional Events (Example: 16 9 12 11 14 Road Shows) Nationality Social Media (Example: Facebook, Twitter ) 123 24 42 34 91 Discussion Forums/ Reviews and Ratings 26 15 20 19 26 Word of mouth 0% 20% 40% 60% 80% 100% Response Percent Respondents from Singapore say that they are equally influenced by General Media and Word of Mouth Respondents from India say that they are mostly influenced by General Media, followed by Word of Mouth 39% of the respondents from China say that they are influenced by Social Media The number of Singaporeans (38%) who use Social Media to know about Products/Brands is increasing of lateAnd to the joy of advertisers and marketers, social media is twice as likely to influence Chinese buyingdecisions Source: http://www.fastcompany.com/magazine/152/the-socialist-networks.html
    20. 20. Which Information Source is the most trusted for evaluating alternatives? N - 254 Nationality vs Information Sources 10 12 1 3 Reviews/ Ratings 21 18 5 18Nationality Family and Friends 104 120 18 72 Sales Personnel 38 36 7 25 Advertisements 0% 20% 40% 60% 80% 100% Response Percent  71% of the respondents from Singapore say that they trust Reviews/Ratings  76% of the respondents from India say that they trust Family/Friends  58% of the respondents from China say that they trust AdvertisementsWith use of social media and interaction with fellow online consumers increasing, Singaporeans’trust in consumer opinions posted online is high. Online product reviews and discussion forumsare one of the most trusted sources of recommendations in purchase decision making Source: Nielsen Report - http://www.sg.nielsen.com/site/NewsReleaseJuly112011.shtml
    21. 21. What do customers expect when buying products from supermarkets? Value for Money
    22. 22. What do customers expect when buying products from supermarkets?Source: Nielsen_StoreChoice_ValueReport_Dec07- http://hu.nielsen.com/site/documents/Nielsen_StoreChoice_ValueReport_Dec07.pdfl
    23. 23. What do customers expect when buying products from supermarkets? Value for Money Price Global consumers vote “good value  According to Nielsen‟s latest annual for money” #1 influencer of Shopper Trends report, 62% of grocery store choice Singaporean shoppers claim they know the prices of most grocery Nielsen found that items and notice when price price, promotions and perceptions changes, making them the second are most influential in helping most price-sensitive shoppers in consumers define value. Southeast Asia after Malaysia Source: Nielsen_StoreChoice_ValueReport_Dec07- http://hu.nielsen.com/site/documents/Nielsen_StoreChoice_ValueReport_Dec07.pdfl
    24. 24. What do customers expect when buying products from supermarkets? Brand Reputation Quality  Today‟s shopper appears to be what retailing pundits aptly refer to as “The schizophrenic shopper”  On one hand, shoppers demand good value for their grocery dollar  On the other, they also expect retailers to stock a wide selection of high quality brands  This „dual demand‟ indicates that the same consumers want the „cheapest of the cheap‟ in some categories and the „best of the best‟ in othersSource: Nielsen_StoreChoice_ValueReport_Dec07- http://hu.nielsen.com/site/documents/Nielsen_StoreChoice_ValueReport_Dec07.pdfl
    25. 25. Buyer Involvement and Purchase DecisionHigh Involvement• Purchases that require extensive evaluationLow Involvement• Purchases that have a simple evaluation process Factors that Impact High/Low Involvement Purchase Decisions  Perception of Product Quality  Positive Belief about the brand  Lower Price  Sales Promotions  Product Features  Brand Reputation
    26. 26. Few Differences Between Brands High Involvement Low Nationality – Sales Involvement Nationality – Sales Promotions Promotions China 74% China 78% India 49% India 56% Agree AgreeSingapore 68% Singapore 77% 0% 50% 100% 0% 50% 100%  Customers prefer shopping in stores that run a lot of promotions irrespective of whether it is a High Involvement Purchase or Low Involvement PurchaseOver eighty-five percent of Malaysian and Singaporean shoppers said they shopped in stores whichoffered promotions and price discounts Source: Nielsen_StoreChoice_ValueReport_Dec07- http://hu.nielsen.com/site/documents/Nielsen_StoreChoice_ValueReport_Dec07.pdfl
    27. 27. Significant Differences Between Brands High Involvement Low Nationality – Brand Involvement Nationality – Brand Reputation Reputation China 35% China 29% India 38% India 40% Agree Agree Singapore 41% Singapore 45% 0% 20% 40% 60% 0% 20% 40% 60%  Customers prefer to buy products based on the reputation of the brand irrespective of whether it is a High Involvement Purchase or Low Involvement PurchaseNielsen’s Shopper Trends survey revealed that consumers are only inclined to buy promotional itemswhen they already like and trust a brand – price promotions and discounts are simply not enough toattract shoppers to a specific retailer in a highly competitive and concentrated retailer environment Source: Nielsen_StoreChoice_ValueReport_Dec07- http://hu.nielsen.com/site/documents/Nielsen_StoreChoice_ValueReport_Dec07.pdfl
    28. 28. NATIONALITY- SUMMARY We found that irrespective of the nationality, respondents are predominantly Brand Conscious Respondents from all the three countries still trust Traditional Media the most Among the three nationals, Chinese are more influenced by Social Media Reviews/Ratings and Family/Friends are the most trusted Information sources among all nationals. In general, respondents from all three countries are most likely to listen to word-of-mouth and friends who tell them where to get the best value Value for Money, Brand Reputation and Price influence customers in selection of the store So Supermarkets can employ the triple play strategy of Price, Promotions and Perceptions to attract consumers over other retailers.A recent study by Nielsen in Singapore says-“Social media enables consumers to obtain opinions and information from sources that were previously notpossible. As a result, consumers are flocking to popular social networks to help them make purchase decisionsand the platform has become one of the most influential forms of information available.”So the impact of social media in purchase decisions might increase among Singaporeans in the near future.
    29. 29. Findings Based On Age
    30. 30. Which age group is more Brand Conscious? N - 254 Age - Brand Consciousness ≥ 41 63.6% 36.4% Yes 79.6% 20.4%Ag 26-40 Noe ≤ 25 78.2% 21.8% 0% 20% 40% 60% 80% 100% Response Percent  Respondents in the age group 20-40 are more brand conscious The 26-40 age group are the most likely of the set to carry dependents and would therefore benefit from “back to school” type advertising. They are also very brand conscious and are more likely to have a preferred set of brands that they are loyal to. Source: http://www.bigonit.co.uk/services/wordpress/?cat=13
    31. 31. Which is the Go-To Channel for new product information? N - 254 Age - Channels ≥ 41 19 6 2 4 13 General Media (TV, Radio, Magazines) Promotional Events (Example: Road Shows)Ag Social Media (Example: Facebook, Twitter 26-40 68 28 33 33 64e ) Discussion Forums/ Reviews and Ratings Word of mouth ≤ 25 85 18 40 31 64 0% 20% 40% 60% 80% 100% Response Percent  General Media Advertising and Word of Mouth are the most influential of the channels among all age groups. Though social media has made a great impact in our day-to-day lives it is still far from influencing our purchasing decision 86% of people stated that TV advertising still has the most impact on their buying decisions. Word of mouth is the primary factor behind 20 to 50 percent of all purchasing decisions. Source: http://www.twistimage.com/blog/archives/what-type-of-advertising-has-the-most-influence/
    32. 32. Findings Based On Gender
    33. 33. Which is the Go-To Channel for new product information? N - 254 Gender - Channels Femal General Media 79 16 33 30 58 e (TV, Radio, Magazines) Promotional Events (Example: Road Shows) Gender Social Media (Example: Facebook, Twitter ) Discussion Forums/ Reviews Male 93 36 42 38 83 and Ratings Word of mouth 0% 20% 40% 60% 80% 100% Response Percent  73% of Women respondents are influenced by General Media  Women (31%) are early adopters of technology than men (28%) and are active in social media but their purchases have not been strongly influenced by social media Majority of the female respondents (75.7%) were of the opinion that they were influenced by TV commercials to purchase different types of products like food, clothing, cosmetics, stationeries and so on. Source: Impact of Television Advertisements on buying pattern of Women ( European Journal of Business and Management ) Vol 3, No.3
    34. 34. Which Information Source is the most trusted for evaluating alternatives? Gender - Information Sources N - 254 Female 74 81 10 51 Reviews/ Ratings Family and Friends Gender Sales Personnel Advertisements Male 99 105 21 67 0% 20% 40% 60% 80% 100% Response Percent  Reviews/Ratings and Family/Friends are the most trusted Information sources among men and women. 56% of women seek product trends, product reviews and recommendations online as part of their shopping process Source: A report from Total Beauty Media Group http://www.totalbeautymedia.com/tbm/insights/whitepapers/shopping-cart
    35. 35. AGE AND GENDER- SUMMARY Around 80% of the respondents in the age group 26-40 are Brand Conscious. Word of Mouth Advertising and General Media are the most influential channels among both genders and all age groups. Social media is still not the “Go-To” channel when it comes to Decision Making even among the 20-25 age group which is believed to dominate the social media sphere Reviews/Ratings and Family/Friends are the most trusted Information sources among both genders and all age groups The findings show that age, gender and nationality are all significant factors in influencing the purchase decision
    36. 36. Suggestions
    37. 37. SCENARIO CHALLENGE SOLUTION  Good Value for Money is now the most important factor in determining where customers buy their groceriesChanging Lifestyles and What do customers expect Tastes from supermarkets?  Customers choose a supermarket that offers a better selection of High Quality Brand and Products
    38. 38. SCENARIO CHALLENGE SOLUTION  Traditional media still remains the most influential channel.  Reviews/Ratings and Family/Friends are the most trusted information sources Which channels andAccess to multiple media  A store‟s/Brand‟s information sources do channels reputation is an they rely on? influential factor in what constitutes Good Value in consumers‟ minds. The power of perception is increasingly becoming very Important
    39. 39. SCENARI CHALLENGE SOLUTION O  Loyalty Cards:  We have started to see the launch of many types of loyalty cards  Can‟t say whether these cards will truly provide differentiation for retailers or whether these cards will just be a differentIncrease in the Gaining/Retaining means for shoppers to obtain promotional number of Customer Loyalty offers. supermarkets  Regardless, these cards will say a lot about shoppers. As the usage of such cards increase in popularity, the wealth of customer data and insights gained will increasingly be central to the shopper engagement strategies
    40. 40. Create Positive Perceptions Price Promotion Perception Supermarkets should understand that what customers expect is „Value for Money‟ „Good value‟ is matter of the mind The power of perception is very important – especially among shoppers Supermarkets can develop a strategy for taking the specific steps necessary to create positive perceptions about their Store Reputation and Brands Reputation
    41. 41. PART IIIAcademic and Commercial Benefits Limitations of the Research Suggestions for Future Research
    42. 42. Academic BenefitsPersonal Cultural This study provides students in Social psychology, marketing, and communications with information to:  Develop theoretical model of decisions made by customers  Study how customers respond to product/service related information and experiences  Study how different channels can be used to influence different age groups and improve their attitude towards a brand/product  Understand how people from different cultural backgrounds make purchase decisions
    43. 43. Commercial BenefitsPersonal Cultural This study will help retailers understand: Social  Buyer Behaviour  Buyers‟ Information Sources  Buyers‟ Characteristics  Buyers‟ Decision Making Process The insights gained from this study can be used for:  Collecting Customer Intelligence  Identifying who makes purchasing decisions  Identifying what customers expect when buying products from supermarkets  Retaining Customer Loyalty  Identifying the channels that could be used for marketing and providing information to customers  Finding new customers
    44. 44. Personal Cultural  The findings cannot be generalized because: Social  The majority of respondents are in the age group 20-40 This limitation can be overcome by conducting similar studies in other countries by inviting participants from more diverse age groups and also having questions that focus on other retail businesses  Methodology used for this research – Online Survey This limitation can be overcome by using other methodologies like face-to-face interviews, observational methods and diary studies
    45. 45. Suggestions For FuturePersonal Cultural Research  The current research focused on identifying the Social buyer behaviour based on nationality. Future researches on buyer behaviour can be carried out to identify if there are differences in buying behaviour between people of same ethnicity living in home country and a foreign country  Future research work could focus on:  Understanding the impact of Social and Psychological characters of consumers in the Decision Making process  The ways Technology is likely to fundamentally alter how and where shoppers spend their money and interact with retailers  Finding ways to retain customer loyalty  Understanding how important it is for stores to carry a lot of Private Label products that are cheaper
    46. 46. Recommendations For FuturePersonal Cultural Research Statistics show that about 40% of consumer spending is on impulse buying. Social A study can be conducted to understand the factors that influence Impulse Buying.

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