ret2214week-4levy6ce_ppt_ch03_1710781413258.pptx

CHAPTER 3
CUSTOMER BUYING BEHAVIOUR
Microsoft® PowerPoint® created by Shawn J.
Richards, Humber College ITAL

© 2020 McGraw-Hill Education Limited 3-2
Chapter 3
Customer Buying
Behaviour
LEARNING OBJECTIVES
LO1. Explore how customers make
decisions about whether to patronize
a retailer and buy merchandise.
LO2. Determine what social and
personal factors affect customer
purchase decisions.
LO3. Investigate how retailers can
get customers to visit their stores
more frequently and buy more
merchandise during each visit.
LO4. Discuss why and how retailers
group customers into market
segments.
Montgomery Martin/Alamy Stock Photo

• Retailers are beginning to realize the importance of
understanding the subgroups in the marketplace in order to
connect with the customer. You cannot be all things to all
customers.
• This chapter focuses on the needs and buying behaviour of
customers and market segments. It describes the stages
customers go through to purchase merchandise and the factors
that influence the buying process.
• We then use the information about the buying process to discuss
how consumers can be grouped into market segments.
3-3
Chapter 3
Customer Buying Behaviour
© 2020 McGraw-Hill Education Limited
LO1.

New Consumer Mindset
What are twenty-first-century consumers looking for in their retail
shopping experience?
• Pre-tail Access
• Next-Generation Environments
• Retail/Hospitality Mashups
• Social Shopping
• Net-Tech Customer Service
3-4
DID YOU KNOW?
33 percent. The percentage of customers who would
prefer to contact a company through social media
rather than by telephone.
© 2020 McGraw-Hill Education Limited
LO1.

• The buying process, the steps consumers go
through when buying a product or service, begins
when customers recognize an unsatisfied need.
3-5
The Buying Process
LO1.

©2020 McGraw-Hill Education Ltd. 3-6
Need Recognition
The buying process is triggered when consumers recognize they
have an unsatisfied need.
Types of Needs
• Utilitarian – When consumers go shopping to accomplish a
specific task, such as buying a suit for job interviews
• Hedonic – When consumers go shopping for pleasure
LO1.

Hedonic Needs Satisfied
by Retailers…
•Stimulation
•Social experience
1. Learning new trends
2. Status and power
3. Self-reward
4. Adventure DID YOU KNOW?
Customers who spend 40 minutes in a store are more
than twice as likely to buy than someone who spends
10 minutes, and they typically buy twice as many
items.
LO1.

Stimulation
• Retailers and mall managers use background music, visual
displays, scents, and demonstrations in stores and malls to create
a carnival-like, stimulating experience for their customers.
• Retailers also attempt to stimulate customers with exciting
graphics and photography in their catalogues and on their
websites.
Hedonic Needs Satisfied by
Retailers… (Continued 1)
LO1.

Social Experience
• Regional shopping malls have replaced open markets
• Mixed-Use development to satisfy consumers
• Lifestyle centres are allocating significant space to restaurants,
movie theatres, outdoor entertainment, and even condominium
living.
• Online retailers provide similar social experiences by enabling
customers to email products to their friends, create personal
blogs with their shopping lists to be shared with other people, or
participate in a particular interest-driven forum.
Hedonic Needs Satisfied by
Retailers… (Continued 2)
LO1.

• Customers must recognize unsatisfied needs before they are
motivated to visit a store or go online to buy merchandise.
• Sometimes these needs are stimulated by an event in a person’s
life.
• For example, a consumer’s department store visit to buy a suit
was stimulated by an impending interview, an examination of
her current wardrobe.
Stimulating Need
Recognition
LO1.

Information Search
• Once customers identify a need, they may seek information about
retailers or products to help them satisfy that need.
• More extended buying processes may involve collecting a lot of
information, visiting several retailers, spending more time on the
Internet, or deliberating a long time before making a purchase.
• Amount of Information Searched - The amount of information
search depends on the value customers feel they can gain from
searching versus the cost of searching
LO1.

Information
Search … (Continued)
• Sources of Information
• Internal sources of information
• Customer’s memory
• Such as names
• Images and past experiences with different stores
• External sources of information
• Information provided by the media and other people. When customers feel that their
internal information is inadequate, they turn to external information sources.
LO1.

Reducing Information
Search
• The retailer’s objective at the information search stage of the
buying process is to limit the customer’s search to its store or
website.
• One measure of a retailer’s performance on this objective is the
conversion rate, that is, the percentage of customers who enter a
store or access a website and then buy a product at the store or
website.
• Each element of the retailing mix can be used to achieve this
objective.
LO1.

Evaluation of Alternatives:
the multiattribute attitude model
• The multiattribute attitude model provides a useful way to
summarize how customers use the information they have and
collect about alternative products, evaluate the alternatives, and
select the one that best satisfies their needs.
• Based on the notion that customers see a retailer, a product, or a
service as a collection of attributes or characteristics.
• The model is designed to predict a customer’s evaluation of a
product, service, or retailer based on:
• Its performance on relevant attributes
• The importance of those attributes to the customer
LO1.

Characteristics of Food
Retailers - A
LO1.
A. Information about Stores Selling Groceries
Store Characteristics Supercentre Supermarket Internet Grocer
Grocery prices 20% below average average 10% above average
Delivery cost ($) 0 0 10
Total travel time (minutes) 30 15 0
Typical checkout time
(minutes)
10 5 2
Number of products,
brands, and sizes
40 000 30 000 40 000
Fresh produce Yes Yes Yes
Fresh fish Yes Yes No
Ease of finding products Difficult Easy Easy
Ease of collecting nutritional
information about products
Difficult Difficult Easy

Characteristics of Food
Retailers - B
LO1.
B. Beliefs about Stores’ Performance Benefits*
Performance Benefits Supercentre Supermarket Internet Grocer
Economy 10 8 6
Convenience 3 5 10
Assortment 9 7 5
Availability of product
information
4 4 8
* 10 = excellent, 1 = poor.

Evaluation of Retailers
LO1.

Selecting merchandise
The retailer must do market research to collect the following
information::
• Alternative retailers the customers consider
• Characteristics or benefits that customers consider when evaluating and choosing
a retailer
• Customers’ ratings of each retailer’s performance on the characteristics
• Importance weights that customers attach to the characteristic
Armed with this information, the retailer can use several approaches to
influence customers to patronize its store or Internet site.
LO1.

T h e r e t a i l e r n e e d s t o
m a k e s u r e t h a t i t i s
i n c l u d e d i n t h e
c u s t o m e r ’ s
c o n s i d e r a t i o n s e t ,
( a l s o k n o w n a s e v o k e d
s e t ) .
Getting into the
Consideration Set
LO1.

Results in?
After ensuring that it is in consumers’ consideration set, a retailer
can use four methods to increase the chances that customers will
select its store for a visit:
1. An increased belief about the store’s performance.
2. Decrease the performance beliefs for competing stores in the
consideration set.
3. Increase customers’ importance weights.
4. Adding a new benefit.
LO1.

Purchasing the
Merchandise or Service
• All about converting positive evaluations to real
purchases.
• Making it easier to purchase.
DID YOU KNOW?
According to research, eight in ten people aged 18–34
usually read the content of indoor advertising. Of
these people, a whopping 91 percent find MiniBoard
advertising to be eye-catching and effective in
influencing their shopping behaviour.
LO1.

Purchasing the Merchandise
or Service…(Continued 1)
IN WHAT WAY…?
Reduce wait times by:
• Having more checkouts.
• Installing digital displays to entertain customers waiting in line.
• Ease of navigation is critical for decreasing the number of abandoned
virtual carts.
LO1.

Purchasing the Merchandise
or Service …(Continued 2)
IN WHAT WAY…?
Reduce wait times by:
• Offer liberal return policies, money-back guarantees, price-
matching policies, and refunds if customers find the same
merchandise available at lower prices from another retailer.
• Self service checkouts, drive thrus
Online order pick-up parking.
© Calvin L. Leake | Dreamstime.com
LO1.

Post-purchase
Evaluation
All about SATISFACTION
• How well a store, product or service meet or exceeds customer
expectations.
• This then becomes part of the customer’s internal information that affects
future purchase decisions.
• Unsatisfactory or Satisfactory experiences can result in?
This post-purchase evaluation then becomes part of the customer’s
internal information and affects future store and product decisions.
LO1.

Types of Buying Decisions
• Extended Problem Solving
• customers devote considerable time and effort to analyzing their
alternatives.
• Limited Problem Solving
• a purchase-decision process involving a moderate amount of effort and
time.
• Habitual decision Making
• a purchase-decision process involving little or no conscious effort.
• Brand Loyalty
• customers like and consistently buy a specific brand in a product category.
LO1.

Social Factors Influencing
Buying Decisions
LO2 & 3

Social Factors Influencing
Buying Decisions…(Continued)
The factors which influence the customer’s social environment:
• Family - Many purchase decisions are made for products that the entire
family will consume or use.
• Reference Groups - composed of two or more people whom a person
uses as a basis of comparison for his or her beliefs, feelings, and
behaviours.
• Canada’s multicultural market - Visible minorities in Canada have
grown threefold over the last two decades and now make up 22.3 percent of
the population. Canada has evolving societal issues; no one comes here and
discards their culture
LO2 & 3

Market Segments
Criteria for evaluating market segments
A retail market segment is a group of customers whose needs are
satisfied by the same retail mix because they have similar needs.
Actionability - The fundamental criteria for evaluating a retail market
segment are as follows:
• Customers in the segment must have similar needs, seek similar
benefits, and be satisfied by a similar retail offering.
• Those customers’ needs must be different from the needs of customers
in other segments.
Actionability means that the definition of a segment must clearly
indicate what the retailer should do to satisfy its needs.
LO4

Criteria for evaluating
market segments …(Continued 1)
Identifiability - Retailers must be able to identify the customers
in a target segment.
Identifiability is important because it permits the retailer to
determine the following:
• the segment’s size
• with whom the retailer should communicate when promoting its
retail offering
Accessibility - The ability of the retailer to deliver the
appropriate retail mix to the customers in a targeted segment.
LO4

Criteria for evaluating
market segments…(Continued 2)
Size - A target segment must be large enough to support a unique
retailing mix.
For example, in the past, health food and vitamins were found
primarily in small, owner-operated stores that catered to a relatively
small market.
LO4

Demographic Segmentation
Geographic Segmentation
• Groups customers by where they live.
• A retail market can be segmented by country (e.g., Japan, Mexico) and
by areas within a country, such as provinces, cities, and
neighbourhoods.
© McGraw-Hill Education/Andrew Resek
LO4

• Demographics are numbers about people, and this information is
collected through a census of the population in Canada by Statistics
Canada and in the United States by the U.S. Census Bureau.
• Groups consumers on the basis of easily measured, objective
characteristics such as:
• Age
• Gender
• Income
• Education.
LO4
Demographic
Segmentation…(Continued 1)

• Who Is the Male Shopper?
• It does appear that men are from Mars and women are from Venus when
the sexes go shopping.
• As more and more men are participating in grocery shopping, we see
males starting to acquire a skill set in this area.
• The Power of Women
• Women comprise 52 percent of the North American population and have
significant buying power.
• Women make 85 percent of all retail and service purchases ($3.7 trillion)
and buy 51 percent of consumer electronics and 51 percent of all cars
(and influence 85 percent of all auto purchases), 50 percent of
computers, and 51 percent of all travel.
Demographic
LO4

• Knowledge of Demographics Is Critical Demographics are
critical to understanding product demand and defining a
retailer’s strategy. Demographics can explain the growth of
specialty beers and skin care creams, the demand for healthy
food, the trends in real estate, and golf memberships.
Fancy/SuperStock
Demographic
LO4

Generation Z
• Smart, savvy, and the first generation to grow up surrounded by
digital media:
• The Internet
• Smartphones
• Tablets
• Computer games
• Online streaming
• Mobile technology
• Social media
• Everything is interconnected, anything goes, everything is available,
and nothing is private.
• Retailers and suppliers will need to respond by providing this
generation with the tools they need to create, co-create, or re-create
to suit themselves
LO4

Geodemographic
Segmentation
• Geodemographic segmentation uses both geographic and
demographic characteristics to classify consumers.
• This segmentation scheme is based on the principle that “Birds of a
Feather Flock Together”.
• Consumers in the same neighbourhoods tend to buy the same types of
cars, appliances, and apparel and shop at the same types of retailers.
• Environics Analytics specializes in data mining. They break the country
down into recognizable clusters of consumer habits, by region, city, and
even neighbourhood.
LO4

Lifestyle Segmentation
• Lifestyle segmentation is a method of segmenting a retail
market based on consumers’ lifestyle.
• This method of segmentation is achieved through the study of
consumer psychographics
• Psychographics which refers to how consumers:
• live
• how they spend their time and money
• what activities they pursue
• attitudes and opinions about the world they live
LO4

Canada Post’ Snapshot
Segmentation System
LO4

Buying Situation
Segmentation
• The buying behaviour of customers with the same demographics
or lifestyle can differ depending on their buying situation.
• Thus, retailers may use buying situation segmentation, such
as fill-in versus weekly shopping to segment a market.
• For example, a parent with four children prefers the supercentre to
the Internet grocer or supermarket for weekly grocery purchases.
LO4

Benefit Segmentation
• Another approach to defining a target segment is to group
customers seeking similar benefits; this is called benefit
segmentation.
• In the multiattribute attitude model, customers in the same benefit
segment would attach a similar set of importance weights to the
attributes of a store or a product.
• For example, customers who place high importance on fashion and
style and low importance on price would form a fashion segment,
whereas customers who place more importance on price would
form a price segment.
LO4

Composite Segmentation
• Composite segmentation plans use multiple variables to
identify customers in the target segment.
• They define target customers by:
• Benefits sought
• Lifestyles
• Demographics
LO4

Summary
• The very nature of our multitasking lifestyles will influence
how and where we choose to shop in the future.
• Awareness of the consumer’s needs will help the retailer
develop a strategic plan that includes the right product, at the
right price, and available at a desired retailer.
• To satisfy customer needs, retailers must thoroughly
understand how customers make store choice and purchase
decisions and the factors they consider when deciding.
• The six stages in the buying process are need recognition,
information search, evaluation of alternatives, choice of
alternatives, purchase, and post-purchase evaluation, and
retailers can influence their customers at each stage.

Summary…(Continued)
• When buying decisions are less important to customers, they
spend little time in the buying process and their buying
behaviour may become habitual.
• The buying process of consumers is influenced by their personal
beliefs, attitudes, and values and by their social environment.
• The primary social influences are provided by the consumers’
families, reference groups, and culture.
• Some approaches for segmenting markets are based on
geography, demographics, geodemographics, lifestyles, usage
situations, and benefits sought.

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