Chapter 7 Identifying and Understanding

Consumers
Consumer Demographics and Lifestyles
1. Meaning of Consumer Demographics
Consumer demographics refer to objective, measurable, and identifiable population data.
They help retailers understand who their customers are.

Common Demographic Variables

 Gender
 Age
 Income level
 Education
 Occupation
 Household size
 Marital and family status
 Place of residence
 Mobility
 Ethnic and racial background

Importance for Retailers

Demographic factors directly influence:

 Shopping behavior
 Product choice
 Price sensitivity
 Retail store location and format

Retailers must understand:

 Overall population trends

 Demographics of their target market

2. Demographics and Retail Strategy

Most retailers operate at a local or regional level, so demographics vary by:

 Country
 Region
 City
 Neighborhood
Therefore, retailers must collect data about people living in their trading area (the area from which
customers are drawn).

3. Key Demographic Factors Used in Target-Market Planning

Retailers analyze the following to plan their strategy:

 Market size: Number of potential customers

 Gender mix: Male vs. female proportion
 Age: Primary age groups to target
 Household size: Average family size
 Marital status: Single, married, families with children
 Income: Low, middle, or high income; discretionary income
 Mobility: Frequency of people moving in and out
 Employment status: Working men and women
 Occupation: Professionals, office workers, laborers
 Education: Level of education
 Ethnic/racial background: Presence of specific ethnic groups

These factors help retailers decide what to sell, where to sell, and how to sell.

4. Meaning of Consumer Lifestyles

Consumer lifestyle refers to how people live, including:

 How they spend their time

 How they spend their money
 What activities they value

Lifestyles are influenced by:

 Demographics
 Social factors
 Psychological factors

Retailers must first understand general lifestyle concepts, then identify the lifestyle of their own
target market.

5. Social Factors Affecting Consumer Lifestyles

a) Culture

Culture includes shared:

 Beliefs
 Values
 Customs
Example:
U.S. culture emphasizes individuality, success, and material comfort. Subcultures also exist (e.g.,
African-American, Hispanic, Asian-American).

b) Social Class

Social class is an informal ranking based on:

 Income
 Occupation
 Education

People in the same social class often have similar values and shopping patterns.

c) Reference Groups

Reference groups influence consumer behavior:

 Aspirational groups: Groups people want to join

 Membership groups: Groups people belong to
 Dissociative groups: Groups people want to avoid

Opinion leaders in these groups strongly affect purchase decisions.

d) Family / Household Life Cycle

The family life cycle shows how needs and purchases change from:

 Single life
 Marriage
 Having children
 Retirement

Retailers must also consider:

 Single adults
 Divorced individuals
 Single-parent families
 Childless couples

e) Time Utilization

Consumers divide time among:

 Work
 Transportation
 Leisure
 Family
 Shopping
Due to dual-income households and busy schedules, consumers have less time for shopping, which
affects retail strategies.

6. Psychological Factors Affecting Lifestyles

a) Personality

Personality includes traits such as:

 Self-confidence
 Innovativeness
 Independence
 Sociability

Different personalities prefer different retail formats and products.

b) Class Consciousness

Class consciousness is the desire for social status.

Status-conscious consumers value:

 Prestige brands
 High-status retailers

c) Attitudes

Attitudes are consumers’:

 Positive
 Neutral
 Negative feelings

These feelings apply to:

 Products
 Prices
 Retailers
 Store image

d) Perceived Risk

Perceived risk is the consumer’s belief about potential loss in a purchase.

Types of Perceived Risk

1. Functional – Will it work properly?

2. Physical – Can it harm me?
3. Financial – Can I afford it?
4. Social – What will others think?
 5. Psychological – Am I making the right choice?
6. Time – How much time will it take?

Higher perceived risk leads consumers to:

 Seek more information

 Delay purchase
 Avoid purchase

Retailers can reduce risk by providing information, warranties, and strong brand image.

7. Retailing Implications of Demographics and Lifestyles

a) Changing Gender Roles

 More women work long hours

 They prefer convenience and efficiency
 Men now shop more and share household duties

Retailers must adjust store design, products, and promotions accordingly.

b) Consumer Sophistication

Modern consumers are:

 More knowledgeable
 More confident
 More experimental

Examples:

 IKEA offers low prices with self-assembly

 Zara updates fashion quickly to encourage frequent visits

c) Poverty of Time

Many consumers feel time-pressured. Retailers respond by offering:

 Online shopping
 Home delivery
 Click-and-collect
 Extended store hours

d) Component Lifestyles and Hybrid Consumers

Consumers may:

 Buy luxury products in one category

  Buy budget products in another

This makes consumer behavior less predictable.

Retailers respond by offering:

 Budget brands
 Standard brands
 Premium brands

8. Consumer Profiles
Retailers use lifestyle segmentation tools such as:

 VALS
 PRIZM

These tools group consumers based on lifestyle, values, and behavior to improve targeting.

Consumer Needs and Desires

Meaning
When developing a target market profile, retailers must identify what consumers need and what
they desire. Understanding both helps retailers design effective retail strategies.

Consumer Needs
Consumer needs are basic and essential shopping requirements that arise from a person’s:

 Demographics
 Lifestyle

Needs focus on utility, convenience, and affordability.

Example:
A consumer needs a car for daily commuting and prefers:

 A nearby dealer
 Convenient service hours (evenings or weekends)

Needs must be satisfied for the consumer to consider a retailer.

Consumer Desires
Consumer desires are optional and discretionary wants that go beyond basic needs.
They strongly influence:
  Consumer attitudes
 Brand preferences
 Buying behavior

Example:
A consumer may desire:

 A luxury car
 Extra services such as a free loaner vehicle

However, if the budget is limited, the consumer may settle for a basic model that satisfies needs.

Difference Between Needs and Desires

 Needs are necessities and must be fulfilled
 Desires are wants that add pleasure or status
Retailers must balance both when designing their offerings.

Needs, Desires, and Consumer Motives

By satisfying needs and desires, retailers appeal to consumer motives, which are the reasons behind
purchasing behavior.

Retailers must consider:

 How far consumers are willing to travel

 Importance of convenience
 Preferred store hours
 Desired level of customer service
 Preferred product assortment and quality
 Price sensitivity
 Actions needed to reduce perceived risk
 Special needs of different market segments

Market Segments Based on Needs and Desires

Different consumer groups have different expectations. Retailers often focus on the following
segments:

1. In-Home Shoppers

In-home shoppers prefer shopping from home rather than visiting physical stores.

Key Points:

 Value convenience and time saving

 Often affluent and well educated
 May shop in stores but dislike local shopping
  Face limitations such as inability to touch products and concerns about returns

Retailers must offer easy ordering, clear information, and strong customer service.

2. Online / Mobile Shoppers

Online and mobile shoppers use digital platforms to:

 Search products
 Compare prices
 Place orders
 Choose home delivery or in-store pickup

They are usually tech-savvy, educated, and higher-income consumers.

Retailers must provide user-friendly websites and reliable fulfillment.

3. Outshoppers

Outshoppers prefer shopping outside their hometown.

Key Points:

 Often young or new to the community

 Seek variety, better prices, and big brand stores
 Enjoy entertainment and modern shopping environments

Local retailers try to reduce outshopping, while out-of-town retailers try to attract these consumers.

Retail Importance
Understanding consumer needs and desires allows retailers to:

 Design better products and services

 Improve customer satisfaction
 Reduce perceived risk
 Build long-term customer relationships

Shopping Attitudes and Behavior

Meaning
Shopping attitudes and behavior show:

 How people feel about shopping

 Where they shop
  How they make purchase decisions

Retailers study this to attract customers, improve stores, and increase sales.

Attitudes Toward Shopping

a) Shopping Enjoyment

 Some people enjoy shopping; others don’t.

 Enjoyment depends on:
o Store environment (music, lighting, layout, window displays)
o Customer service
o Ease of access and convenience
 Men often prefer fast, efficient shopping
 Women often prefer relaxing, enjoyable shopping
 Online shopping enjoyment comes from:
o 3D product views
o Zoom-in pictures
o Mix-and-match options

b) Shopping Time

 Time pressure affects shopping enjoyment.

 Dual-income households and busy schedules increase time pressure.
 Shoppers under pressure prefer:
o Quick shopping
o Efficient store layout
o Clear signs, easy parking
 Retailers must balance store aesthetics and shopping efficiency.

c) Cautious Spending & Wealth Disparity

 High-income consumers spend more on luxury items when they have extra money.
 Low-income consumers are careful, save more, and buy cheaper brands or discounts.
 Middle-range retailers often suffer because sales go to either high-end or discount stores.

d) Why People Buy or Not Buy in a shopping trip

 Consumers may leave without buying if:

o Prices are too high
o Products are unavailable
o Service is poor
 Online shoppers may abandon shopping carts if unsure or delayed.
 Shopping goals differ by:
o Product complexity
o Time available
o Occasion (need vs. browsing vs. fun)
e) Attitudes by Market Segment

Shoppers can be divided by behavior:

1. Involved Shoppers – Plan purchases, want discounts, check assortments.

2. Spontaneous Shoppers – Buy on impulse, less planning.
3. Apathetic Shoppers – Less time-conscious, low knowledge, price-sensitive.

f) Attitudes Toward Private Brands

 Many consumers trust private/retailer brands as much as national brands.

 Example: In U.S. & Canada, ~70% see private brands as good value & quality.

Where People Shop (Cross-Shopping)

 Consumers often shop at multiple store types for one product category.
 Example:
o Buy clothes from department stores & discount stores
o Buy groceries from supermarkets & convenience stores
 Cross-shopping depends on:
o Discounts
o Convenience
o Product assortment

Consumer Decision Process

Consumers follow 6 steps when buying:

1. Stimulus – Trigger (ad, friend, social media, need)

2. Problem Awareness – Realizing a need or unfulfilled desire
3. Information Search – Looking for options (memory, friends, internet, salespeople)
4. Evaluation of Alternatives – Comparing options by price, quality, features
5. Purchase Act – Buying the product (store, online, payment, availability matter)
6. Post-Purchase Behavior – Satisfaction, loyalty, or regret (cognitive dissonance)

Retailers help at each step to make buying easier, reduce risk, and encourage loyalty.

Types of Consumer Decision Making

1. Extended Decision Making
o Big, expensive, complex purchases (house, car)
o High perceived risk → full process followed
2. Limited Decision Making
o Medium-risk items (vacation, second car, clothing)
o Some steps used, but faster than extended
3. Routine Decision Making
o Habitual purchases (groceries, newspaper)
o Quick, minimal decision-making
Impulse Purchases
Impulse buying happens without planning:

1. Completely unplanned – No intention before entering store

2. Partially unplanned – Planned to buy, but brand/model undecided
3. Unplanned substitution – Planned brand changed in store

 Retailers influence impulse buying through:

o Product placement
o Discounts
o Attractive displays
o Online strategies (easy checkout, targeted offers)

Customer Loyalty
 Loyal customers shop regularly at preferred retailers
 Loyalty types:
1. False loyalty – Only buy during discounts
2. Inertia loyalty – Buy out of convenience
3. Latent loyalty – Light shoppers, occasionally loyal
4. Premium loyalty – Heavy shoppers, advocate the store
5. Reciprocal loyalty – Strong relationship + frequent purchases
 Best loyalty programs: Tailored rewards, not just price reductions

Summary:
 Shopper behavior depends on attitudes, goals, time, income, and personal traits.
 Retailers must create enjoyable experiences, convenience, and trust to influence purchases.
 Decision making varies by product risk and consumer experience.
 Impulse purchases and loyalty are important for increasing sales.

Retailer Actions
Retailers choose marketing strategies based on the type of customers they want to reach. There are 3
main approaches:

1. Mass Marketing
 Targets all consumers (broad audience).
 Same strategy for everyone.
 Examples:
o Walgreens: Pharmacy + general products, convenient locations, online access, serves
almost everyone.
 o Kohl’s: Moderate-priced private-label & national brands, same product mix for men,
women, and kids.

Key idea: One strategy for a large, broad audience.

2. Concentrated Marketing
 Focuses on one specific group of customers.
 Tailored strategy for that group.
 Examples:
o Dollar Tree: Lower-middle-income customers, all items $1.
o Family Dollar: Urban/rural lower-income families, multiple price options,
neighborhood store.
o Claire’s Stores: Teens, kids, and young women; sells jewelry & accessories.

Key idea: Small niche, very specific targeting.

3. Differentiated Marketing
 Targets multiple consumer groups.
 Each group has its own strategy.
 Examples:
o Foot Locker: Main store + Lady Foot Locker (women) + Kids Foot Locker (kids).
o Gap Inc.:
 Gap → classic clothing
 Banana Republic → luxury fashion
 Old Navy → affordable fashion
 Athleta → women’s activewear
 Intermix → designer clothing
o L Brands: Victoria’s Secret, Pink, Bath & Body Works, La Senza, Henri Bendel –
each brand for a different audience.

Key idea: Different strategies for different customer groups.

Steps to Decide Target Market

1. Choose a target market approach (Mass, Concentrated, or Differentiated).
2. Select specific target market(s).
3. Study characteristics, needs, and attitudes of target customers.
4. Examine how customers make purchase decisions.
5. Develop and implement the retail strategy for that target market.
Environmental Factors Affecting Consumers
Consumers’ buying behavior is influenced by external factors around them. Retailers need to
understand these to plan their strategies.

Key Environmental Factors

1. State of the economy
o Strong economy → more spending
o Weak economy → people spend less
2. Consumer confidence
o If people feel secure about their future finances, they spend more.
o Fear of recession → less spending
3. Country of residence
o Industrialized countries → high spending, modern shopping habits
o Developing countries → less spending, more price-conscious
4. Cost of living
o Expensive cities → consumers focus on essentials
o Cheaper regions → more discretionary spending
5. Inflation rate
o Fast rising prices → people buy less or look for cheaper options
6. Shopping infrastructure
o Traffic, crime rate, parking availability affect whether people visit stores
7. Price wars among retailers
o Discounts and competition can attract more consumers
8. New retail formats
o Online shopping, malls, pop-up stores influence shopping behavior
9. New technologies
o Apps, self-checkout, digital payment make shopping easier
10. Work-from-home trend
o More people at home → changes in demand for products
11. Government & community regulations
o Rules on store hours, consumer protection, new construction affect shopping
12. Societal values and norms
o Changing lifestyles, fashion trends, sustainability concerns influence choices
13. Digital presence & convenience
o Retail websites and apps make shopping faster and easier

Standard of Living
Retailers also consider how well people live, including:

 Family size
 Money left after spending on essentials (discretionary income)
 Consumer confidence in future income
Factors affecting standard of living:

 Decrease: unemployment, low wages, crowded housing, disasters

 Increase: higher wages, social benefits

International comparison:

 Standard of living differs country to country

 Measured using per capita income or other indicators

Simple Idea:

 Environmental factors = everything outside the consumer that affects shopping

 Retailers use this info to plan products, prices, and shopping experience