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Week 3-Consumer Behaviour and Market Segmentation

Retail Consumer Behaviour

Consumer behaviour is “the study of the processes involved when individuals


or groups select, purchase, use or dispose of products, services, ideas or
experiences to satisfy needs and desires. (Soloman et al 2006)

Buying Roles (Blackwell et al 2000) THINK IAMDDB +S4U>>> take out the IAM & S4

1. Initiator- the person who begins the process of considering a purchase


(gather info to help decision).
2. Influencer- the person who attempts to persuade others in group
concerning the outcome of decision.
3. Decider- the individual with the power and/or financial authority to
make the ultimate choice regarding which product to buy.
4. Buyer- the person who conducts the transaction- e.g. visits store, calls
supplier, makes payment
5. User- the actual consumer/user for the product

The Buying Process (Berman 2013)

Firstly, buying process is the steps consumers go through when buying a


product or service.

1. Recognition of needs via stimulus (e.g. needing suit for interview)


hedonic vs utilitarian consumption
2. Information search (seek information about retailers which can satisfy
this need- word of mouth, window shopping, online, past experience
(internal)
3. Evaluation of alternatives- attributes of product>>online vs. shop
floor>> high-involvement vs low-involvement, quick response codes
4. Purchase (selling environment and service big factors, influence timing
with promotions)
5. Post purchase evaluation (views on product, will brand loyalty
develop?)
Factors Influencing the buying decision process

Berman (2013) believes these are:


 Demographics (e.g. age, gender, income level, marital status)
 Lifestyle (fitness or nah)
 Needs and desires
 Shopping attitudes and behaviour e.g. taste/preference, when they
shop
 Retailer actions (good service, promotions)
 Environmental factors (deciding to shop at stores that are sustainable,
design +layout)

Characteristics that influence consumer behaviour

Gender

For Women- Brown (1995) argues that romantic fiction can be found as
something that influences the consumer behaviour of women (the confessions
of a shopaholic, Devil Wears Prada)

For Men- Hardie (2012) argues that men love to have bought something.
However, they don’t like the process. Subtle difference but an important one.

Overall- 31% of men often bought from the first shop they visited, in
comparison to 23% of women, suggesting that women shop around more
before making purchases (Shoppercentric, 2013).
Millennial Consumers

1980-2000

Early Millennials vs. Late Millennials

 Born Before 1986 (EARLY)>>Born After (LATE)>>2008 Financial Crash-


Early millennials were in 20s job searching, set life up and got fucked and
all that late millennials still kids growing & Rise of Internet and
Smartphones>> internet hadn’t been invented while early millennials
were growing up by time it was fully introduced around world they
already gone through working life without it>>same for smartphones (
we were probably going through our second phone while growing up,
they didn’t get first one till their twenties).

Potential Question: What are the early Millennials and the late Millennials
and is this distinction relevant to retail?

Characteristics of millennials

 Largest generation; even bigger than baby boom (IMPACT ON ECONOMY


WILL BE HUGE)
 Always grown up in digital world (internet & Smartphones)
 Online world- rise of social media as a platform for us to express
ourselves
 Lower employment levels and smaller incomes- left younger millennials
with less money than previous generations
 Restricted by Debt- student loans have fucked us, take up bare income
 Different Priorities- less to spend>>> so put off real commitments>>
buying a house, marriage.

 Access not ownership- reluctance to buy (prefer Spotify,


Uber,Rent)
 Eventually will lead ‘’shared economy’’

Hierarchy of Needs – must haves for millennials are different, not as important
as previous generations (rent over owning)
Brands and Retail (Millennials)
They’re also the first generation of digital natives, and their affinity for
technology helps shape how they shop. They are used to instant access to
price comparisons, product information and peer reviews.
Beyond the Brand, Power of Social, Click to Buy, Searching For Value

Wellness (Millennials)

Finally, they are dedicated to wellness, devoting time and money to exercising
and eating right. Their active lifestyle influences trends in everything from food
and drink to fashion.

Defining Healthy, Smoking and Drinking, Fitness Focused

These are just some of the trends that will shape the new Millennial economy.

Customer Profiles- describing a consumer categorically so that they can be


grouped for marketing and advertising purposes. By target advertising to a
specific market segment, companies and marketers can find more success in
selling a particular product and increase profits.

Retail Market Segmentation- defined as the process of identifying groups of


people who behave in similar ways to each other, but somewhat differently
than other groups with the purpose of improving customers’ satisfaction and
retailer’s profitability (Blackwell et al, 2006). THINK GDPB

Criteria:
 Actionable (what actions to take to satisfy needs)
 Identifiable (determine which customers are in the market segment)-
size and whom to target
 Substantial
 Reachable

Approaches:
 GEOGRAPHIC (country)
 DEMOGRAPHIC (gender, age, marital status)- H&M divided, Zara TRF
 PSYCHOGRAPHIC (personality traits, interests)-harley davidson-
freedom to conquer open road
 BEHAVIOURAL (toothpaste white/sensitive- needs >> first time user or
nah)
VALS Framework - tool for lifestyle/psychographic segmentation (mainly)
and demographic REMEMBER I(TBASEM)S

 Survey
 Classified into eight segments
 This is based upon level of resources (horizontal) and motivation
(Vertical)
 High resources=high innovation & Low resources=Low innovation
 Firms find lifestyle segmentation is more effective than
demographic segmentation

Innovators- take charge, sophisticated,


curious, enjoy finer things, receptive to
new products
Thinkers- reflective, informed, content
(not interested in image or prestige)
Achievers- goal oriented, brand
conscious, conventional, attracted to
premium products
Experiencers- trend selling, impulsive,
variety seeking
Believers- Literal, loyal, moralistic
Strivers- contemporary, initiative, style
conscious
Makers- responsible, practical, self-
sufficient
Survivors
Survivors- Nostalgic, constrained,
conscious, very brand loyal

Consumer motivation and needs

Utilitarian consumption- functional and work-based needs


Hedonic consumption- personal enjoyment

Retail marketing tends to find a BALANCE between the two types of needs
Hierarchy of Needs

Motive- need that is sufficiently pressing to direct the person to seek


satisfaction
Motivation research- qualitative, designed to probe consumers’ hidden
subconscious motivations

 Self-actualization needs (self-development and realization)


 Esteem needs (self-esteem, recognition, status)
 Social needs (sense of belonging, love)
 Safety needs (security, protection)
 Psychological needs (Hunger, thirst)

Behavioral segmentation

According to Arnold and Reynolds (2003), 6 key motivations

 Seeking adventure
 Socializing
 Seeking satisfaction
 Searching for ideas
 Buying for others
 Searching for value

 Minimalists (mainly male over 25, lack hedonic motivation)


 Gatherers (mainly male under 25, searching for ideas and buying for
others)
 Providers (mainly female over 25 looking for value and buying for
others)
 Enthusiasts (mainly women under 25, high level of hedonic motivation)
 Traditionalists (slightly more females than males, fairly spread between
age group, moderate hedonic motivation)
Mass Concentrated Differentiated
Marketing Marketing Marketing
Strategy Strategy Strategy

 Determine target market approach


 Select specific target market
 Study characteristics, needs and attitudes of target market
 Examine how consumers make decisions- by product category
 Develop and enact appropriate retail strategy mix for target market
chosen
Week 7 : Pricing

Price – defined by Gilbert as monetary value assigned by seller to something


on transaction with buyer >>recognises not only role of retailer but also of
customer to accept or not

ELEMENTS – COMPETITION, ASSORTMENT, ECONOMICS, LOCATION, TIME


REMEMBER CALET

Competition Assortment
Price positioning Leader lines
Penetration pricing Price lining
Skimming pricing Odd-even ends
Price matching Price bundling

Economics
Cost and Demand
Price Elasticity
Retail Margins

Locations Time
Internet prices Special offers
Local price flexibility Seasonal sales
Prices for store formats Everyday low prices
International prices Price auctions

Retail Market Continuum

Mass market, Middle market, Luxury market

Mass market- relatively low prices owing to economies of scale involved in


selling large quantities of merchandise e.g. H&M

Middle Market- covers a large range of prices in between these extremes e.g.
DKNY

Luxury Market- Expensive goods that can be referred to designer goods e.g.
Loubs
Price Architecture

Once a retailer has established which price level to adopt, the specific range of
prices within the level should be decided upon

Price architecture is defined as the retailer’s offer of more than once price
level in order to appeal to different types of customer or occasion.

 KVC: Key-Value Categories


 KVI: Key-Value Items

1. Transaction and basket data – retailers can analyse and rank order
category and item-level performance, including sales and number and
size of baskets, including item, elasticity and market share
2. Shopper price-perception data- through primary research, retailers can
identify the categories and items that most drive value perception
3. Merchant Judgement- experienced merchants can then review and add
strategic items with high degree of competitive intensity (that is, where
competitors’ space allocation or marketing spending is high).

How the new digital retail era has changed the game

 Big data (real time data updates around globe)


 Personalization (consumers are increasingly expecting personalized
deals, some retailers can do this based off past shopping history
 Dynamic pricing- Online pure plays are increasingly sophisticated in
managing price, reacting to competitor prices in as little as one hour.
 Price Transparency- Price-comparison shopping engines instantly display
competitors’ pricing in a single view.
 Customer preference of online- 60% of customers are making purchases
online. Customers are often starting online even for in store purchases.
Retail Pricing- Objectives and Strategies

Soloman et al (2006) believes objectives should be first step when planning


prices

1. Develop pricing objectives


2. Estimate demand
3. Determine costs
4. Evaluate pricing environment
5. Choose pricing strategy
6. Develop pricing tactics

Categories of pricing

Cost-oriented pricing, competition-oriented pricing, demand-oriented pricing

Cost-oriented pricing

Based on the cost of buying the products from suppliers marked up by a


standard percentage by the retailer, then rounded up or down to the nearest
set price point.

 AKA Cost-plus pricing (direct labour + material + overhead + mark-up)


 Traditional perspective on pricing
 Manufacturers’ pricing: Fixed + variable + profit margin=cost price

Competition-oriented pricing

 Benchmark prices from close competitors


 Promotional pricing – undercutting prices intentionally e.g. 2 for £20,
H&M
 Everyday-Low pricing (EDLP)- remain low throughout the season e.g.
Poundland
 Price comparison websites
Demand-oriented pricing

 Depends on the volume of demand of customers for products and


services
 Sets prices based on consumer desires
 Determines the range of prices acceptable to the target market
 Top of this range is the demand ceiling, the most that people will pay for
a good or service
 Price-quality consideration and prestige pricing
 Impacted by PESTEL

Strategies

 Psychological - £0.99>>customer perceives costs as cheaper


 Market Penetration- Initially priced cheap to gain market share (trial)
 Market skimming- initially priced high, suits product that is innovative
and short supply>>idea is to increase demand by making it seem more
desirable and exclusive (related to social)>>can be altered after
 Price lining- involves adopting a selection of price points that meet their
customer expectations e.g. Tesco Finest
 Predatory pricing- set lower than competitors or suppliers to drive out
competition
 Backward pricing
 Reverse auction
 Multiple unit
 Segmented
 Second-hand goods and auction
 Geographical Pricing- currency, country, exchange rates
 Everyday-Low

Price elasticity- the degree to which changes in price affect the quantities
of products purchased by customers

Value- customers deemed benefit as opposed to costs of product to


determine worth
Markdowns: seasonal sales, reductions and offers

 Black Friday
 Blue cross sale

Week 9- Retail Design & Layout

Varley 2006 states that if the product range and the outlet work in harmony,
the retailers’ positioning strategy is reinforced but if they work in conflict, the
positioning will be unclear to customers, who will become confused and
disappointed.

 Design is the physical evidence


 Helps communicate brand image to consumers
 Provides an environment that customers wish to visit
 Needs to appeal to the target market
 Be compatible with the target market lifestyle
 Drive customers away from competitors

Trade-off in store design- ease of locating merchandise (planned purchase) vs.


Exploration of store (impulse purchase)

Zara’s store design concept is centered on four key principles that Zara maintain
definitively represent its core values; beauty, clarity, functionality and sustainability.

its implementation of industrial lightings, exposed ceilings and brushed concrete walls
(Saunter, 2015); (Dennis, 2015). Space between clothing rails reveals the building’s glass
exterior, designed to create a personal connection between the store and the outside
street (Saunter, 2015). Spotlighting and a neutral backdrop help the product to take center
stage, which is exhibited in the retailer’s signature outfit merchandising concepts (Saunter,
2015). In addition, the design of the store is fully sustainable, with energy consumption
being slashed by 30% than that of a convenience store, epitomizing Zara’s unwavering
commitment to sustainability, which customers expect from them (Saunter, 2015); (Dennis,
2015). This is presented in the form of speed-controlled mechanical escalators
Visual Merchandising- a proactive, integrated retail atmospherics approach
aimed to create a certain look, properly display products, stimulate shopping
behaviour, and enhance physical behaviour (Bernan and Evans, 2010)

 Silent salesperson of retail


 Involves a flair for composition and layout
 Reflects the taste of the consumers
 Derived from an awareness of the brand image of the company (Zara
principles)
 Provides USP, which differentiates it from competitors
 Centralised operation

Includes-

 Choice of fixtures and fittings to be used


 Method of product presentation
 Construction of ‘of self’ displays
 Use of point-of-sale material to stimulate impulse purchases e.g. signs
 Construction of window displays

Exterior design:

 Fascia or Marquee- communicate with consumer, stand-out, colour


(Chimichanga block capitals, red and green letters)
 Window display/Window dressing- invites customer, allows
presentation of merchandise and provides some
information>>expensive at retail level e.g. Selfridges
 Store entrance- sliding door, revolving with side door, folding door

Interior Design

 Semi-permanent fixtures; walls, lighting, flooring and décor and are


updated periodically

Store Layout

 Grid layout- long gondolas in repetitive pattern >>drug stores, grocery


stores e.g. boots
 Easy to locate merchandise
 Doesn’t encourage customers to explore store >limited site lines to
merchandise
 Allows more merchandise to be displayed
 Cost efficient

Racetrack/Boutique Layout

 Loop with a major isle that has access to departments and stores
multiple entrances
 Draws customer around store
 Provides different site lines and encourages exploration (impulse
buying)
 Used in department stores e.g. Selfridges, Debenhams, John Lewis

Freeform Layout

 Fixtures and aisles arranged asymmetrically


 Pleasant and relaxing ambiance doesn’t come cheap-small store
experience
 Inefficient use of space
 More susceptible to shoplifting-sales people cannot view adjacent
spaces
 Used in speciality stores and up-scale department stores e.g. perfume
shop, Nespresso Boutique

Hotspot Technique- promotional aisle, freestanding fixtures, point-of sale


areas, walls, end caps
In-store display

 Space planning (EFFECTIVE USE OF SPACE)


 Allocating floor/shelf space locating merchandise in store
 Where will the merchandise be displayed?
 How much space should be allocated to each category/item
 Profitability of merchandise
 Customer buying considerations>impulse near front
 Physical characteristics of product
 Complementary products adjacent
 Sales rate
 Highly trafficked areas (store entrances, near checkout)
 Highly visible areas (end aisle, displays)
 AVOID BRUSH EFFECT
 MAKE MERCHANDISE ACCESSIBLE
 ALLOW A TRANSITION ZONE

Retail Atmosphere

The psychological feeling a customer gets when visiting a retailer

4 Elements

 VISUAL – e.g. colour>>stimulate senses, change emotional state,


lighting, make merchandise look more attractive>> yellow-optimistic,
red-energy, blue-trust and security, green-wealth, orange-aggressive,
pink-romantic/feminine, black-powerful/dominant, purple-calm
 AURAL- relating to hearing>> fast-tempo vs. slow, lengthens time
 OLFACTORY- use of scent, positive impact on consumers
 Tactile- trying on the product effect, fittings fixtures and products,
DEBENHAMS

Store environment, targeted consumers, experiences, emotions, images,


immediate outcomes, long-term outcomes
Week 7: Marketing Communications

Strategy:
1. Determine promotional objectives
2. Establish overall promotional budget
3. Select promotional mix
4. Implement promotional mix
5. Review and revise the promotional plan

Communication strategy differs depending on type of retailer

Short term- increase sales, increase trafficking

Long term- build brand image, increase customer loyalty

PUSH VS. PULL

PUSH- A push promotional strategy involves taking the product directly to the
customer via whatever means, ensuring the customer is aware of your brand
at the point of purchase. E.G. point-of-sale displays, personal selling,
packaging design

PULL- A pull strategy involves motivating customers to seek out your brand in
an active process.

“Getting the customer to come to you” e.g. advertisement, mass-media


promotion, sales promotions and discounts, Customer Relationship
Management

Retail Advertising: paid communications given to consumers through non-


personal means e.g. newspapers, television, radio
AIDA- Attention, Interest, Desire, Action

Full service agencies vs. DIY

 Print media- (magazines, newspapers)-uniquely positioned to target


specific interest groups
 Outdoor Media- billboards, public transport signs, interactive bus stops

 Purpose is to inform and remind the target customer the retailers are in
the area>>guerrilla marketing e.g. Pespsi Way, Colgate

Implementing Advertising Campaigns

Select the main focus for the visual elements of press advertising through any of
these ways

 Package containing the product


 Product in use
 How to use the product?
 Product features
 Comparison of products (Persil )
 User benefit
 Humour (M&Ms)
 Testimonial
 What will happen if the product is not used

Forms of Communication

 Packaging – aesthetic, initially attracts a potential consumer,


contribution to brand identity, sustainable, innovative
 PR- communication that fosters a favourable image of
retailer>>generate interest and goodwill>>new product development,
rebranding, celebrating success
 Sponsorship (Rihanna Puma, Stormzy Addidas, Nike Tiger
Woods/Federer)-gain exposure, validate brand name, long-term
improve brand image>> have to be responsible (tiger woods)
 Sales Promotion- POP promotion
 Direct Marketing- communicating directly e.g. sign-up offers, emails,
loyalty schemes
 Digital & Social Media Marketing- Paid (advertisement options on
Instagram , Facebook, twitter), Earned (word of mouth, reviews,
recommendations, bloggers, SEO/SERP) and Owned (Social
Media)>>build presence online, introduces the retailer to a new
audience, increase in sales
 Personal selling- influence customers during to proceed to purchase
stage of buying process
 Relationship marketing- build greater loyalty and retention, more
long-term loyal relationships, ultimately increase sales and profits
(e.g. H&M Club) GRONROOS- A2 fulfil the promise
 Transactional vs. relational marketing experience
 Relationship ladder assumes that relationships develop as part of
growing customer loyalty (prospect, customer, client, supporter,
advocate, partner)
 Existence of a relationship between two parties creates additional
value for the customer and also for the supplier of product or service
(GRONROOS)
 Integrated marketing communications (IMC)
 Interaction
 Value
 A2- fulfil the promise

Week 4: Retail Product and Brand Management

Retailers must constantly review and if essential adapt their product range in
line with their customers’ changing requirements. Therefore, there is a need to
have a sufficient level of understanding of who their customers are, what their
product preferences are, and how their consumption needs and desires change
over time.

Organizational Retail Buying Process

Decision Making Unit (DMU)

 Buyers
 Coordinators
 Users
 Initiators
 Influencers
 Decision-makers
Category management has been defined as ‘the strategic management of
product groups through trade partnerships, which aims to maximize sales
and profits by satisfying consumer needs’ (IGD, 1999).

 Strategically managed product group

Products are put into groups that are carefully defined according to consumer
shopping behaviour. All products within a category can be managed using a
strategy that is specifically formulated for that group of products.

 Trade partnerships

Suppliers play a very active role in the management of the product group.

 Aims to maximize sales and profits.

The performance of the product group (sales and profits), but by linking this
performance to consumer satisfaction. Long-term performance objectives can
only be reached if consumer needs, both for products and in the shopping
process, are met.

 Satisfies consumer needs

Is a consumer-led process, and that only by having a deep understanding of


consumer needs and providing a product assortment that fully satisfies each
shopper as they interact with a product category can performance be
maximized in the long term.

Product category Roles

• Routine
• Seasonal/Occasional
• Convenience
• Destination
• Narrow/deep vs. Broad/shallow Product line
• H&M vs. Zara (broad is more expensive and relies on sale of more
merchandise) while narrow is cheaper, more concentrated, leads to higher
profits
• HARRODS (DEEP AND WIDE)
• Scrambled product assortment
PLC

A concept suggesting that a product goes through various stages in the course
of it’s life: introduction, growth, maturity and decline.
CRITICISM

 Attempts to match empirical sales data to life-cycles curves have proven


difficult and the results are largely meaningless
 The life cycle of a product and the shape of the curve is determined by
how it is managed over time
 The PLC is not equally valid for product class, product form, and brands
as often as it is suggested
 The stages of the life cycle are difficult to define and identifying where
on the life cycle a product is at any particular time is difficult to
determine

Retail Branding: use to build customer loyalty

 Can create an emotional tie with customers that build their trust and
loyalty
 Facilitates store loyalty because it stands for a predictable level of
quality

4 levels of brand awareness:


1. Being unaware of the brand
2. Brand recognition
3. Brand recall
4. Top of the mind
RETROBRANDING

Retail Image- incorporates everything

 Price led
 All about atmosphere
 Ideas led
 Price plus
The entirety of this product development cycle begins with market research. This includes
visits to university campuses, feedback from stores and sales reports and observations in
locations such as clubs, discos and similar settings where many fashionable individuals are
likely to be in attendance. Consequently, this means that Zara has needed to invest heavily in
information to technology in order to be able to keep-up-to-date with the latest information
on trends and consumer decisions. Next, this information is received and effectively analysed
at Zara headquarters. Once this occurs, commercial teams work simultaneously with design
teams, utilizing this information to create new lines and revamp old ones- determining the
fabrics, cut, and price points of a new garment. Once these decisions are finalised, the
necessary resources and materials are obtained based upon availability and the garments are
then produced, as opposed to waiting for certain materials to come before producing, and
thus improving efficiency of production. Finally, with state-of-the art technology (optical
devices, trackers) the products are distributed to the specific stores.