C H A P T E R 4

CUSTOME
R BUYING
B E H AV I O
R
MEMBERS

Dionco, Edarlene
Donquillo, Althea
Escandor, Dexter

BSBA - III
LEARNING OBJECTIVES
LO 4-1 LO 4-3

Describe the process that Summarize how the economy and

consumers go through when social factors affect customer
making retail patronage and buying purchase decisions.
decisions

LO 4-2 LO 4-2
Determine why and how retailers
Identify the different types of
group
buying processes
T HE BU YI NG P ROCESS
Need Recognition

Information Search about Channels, Store, Merchandise and

Services

Evaluation of Alternatives for Channels, Store, Merchandise

and Services

Purchase the Merchandise or Service

Post Purchase
NEED
RECOGNITION
• The buying process is triggered
when consumers recognize they
have an unsatisfied need.
• An unsatisfied need arises when
customers' desired level of
satisfaction differs from their present
level of satisfaction.
TYPE OF NEEDS
Utilitarian Hedonic
Needs • Satisfied when
Needs
• Satisfied when purchases
purchases specific accomplish a need
task. for entertainment,
• Shopping is easy and emotional and
effortless. recreational
experience.
Some other examples of how retailers satisfy hedonic needs are listed next:
• 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.
• Status and power
- Some people choose retailers based on the attention and respect they
receive.
• Adventure
- Often, consumers go shopping because they enjoy finding bargains,
looking for sales, and finding discounts or low prices.
Conflicting Needs
Most customers have multiple needs. Moreover, these needs often
conflict.
• The needs and decision-making processes may differ
depending on the specific situation.
Stimulating Need Recognition
• Customers must first recognize needs before they are
motivated to visit a store or go online to buy merchandise
 I N F O R M AT I O N S E A R C H

Source of Information

Amount of Information Search

Reducing Information Search

Internet/ social media/ mobile: information Search and Price

Competition
 SOURCE OF
I N F O R M AT I O N
Internal Source External Source

• Internal sources are information in a • External sources consist of information

customer's memory, such as names, provided by a host of sources.
images, and past experiences with • People search for products and
different stores. information using search engines such
• The major source of internal information as Google, visit the websites maintained
is the customer's past shopping by manufacturers and retailers, acquire
experience. information from traditional media (e.g.,
• Even if they remember only a small advertising), read blogs, watch product
fraction of the information to which they demonstrations on YouTube, and ask
are exposed, customers have an friends, in person and through social
extensive internal information bank to media.
draw on when deciding where to shop
and what to buy.
A M O U N T O F I N F O R M AT I O N
SEARCH
• The amount of information search undertaken depends on the value
customers believe they can gain from searching versus the cost of
searching.
• The amount of information search also is affected by;
1. Characteristics of the individual customer
2. Aspects of the market and buying situation in which the chase is made
• Two marketplace and situational factors affecting information search are
1. The number of competing brands and retail outlet
2. The time pressure under which the purchase must be made.
R E D U C I N G I N F O R M AT I O N
SEARCH
• The retailer's objective for customers in the information search stage is to
limit the customer's search to its store or website.
• Everyday low pricing (EDLP) This strategy reduces information search,
because it helps assure customers that they won't find a lower price for
these products at a different store the next time they go shopping.
INTERNET/ SOCIAL MEDIA/
M O B I L E : I N F O R M AT I O N S E A R C H
AND PRICE COMPETITION

• The internet in general, social media, and the increasing applications for
mobile devices have had a profound impact on consumers' ability to
gather external information.
• The Internet, social media, and mobile apps mean that consumers' ability
to compare prices no longer is limited by physical distance.
E V A L U A T I O N O F A LT E R N A T I V E S

• The multi attribute model

• Is based on the notion that customers see retailer, a product, or a

channel as a collection of attributes or characteristics.
• The model is designed to predict a customer’s evaluation of a
product, retailer, or channel on the basis of its performance on
relevant attributes and the importance of those attributes to the
customer.
 BELIEF ABOUT PERFORMANCE
A. Information About Stores Selling Groceries
Store Characteristics Supercenter Supermarket Internet Grocer
Grocery prices 20% below average Average 10% above average
Delivery cost ($) 10
Total travel time (minutes) 30 15 0

Typical check out time 10 5 3

(minutes)
Number of product, brand and 40,000 30,000 40,000
sizes
Fresh produce Yes Yes Yes
Fresh fish Yes Yes No
Ease of finding products Difficult Easy Easy
Ease of collecting nutritional Difficult Difficult Easy
information about products
 B. BELIEFS ABOUT STORE’S PERFORMANCE BENEFITS

Performance benefits Supercenter Supermarket Internet grocer

Economy 10 8 6

Convenience 3 5 10

Assortment 9 7 5

Availability of product
4 4 8
information
*10=excellent, 1=poor
I M P O RTA N C E W E I G H T
IMPORTANCE WEIGHTS PERFORMANCE BELIEFS
Characteristics Young single Parent with four Supercenter Supermarket Internet Grocer
women children
Economy 4 10 10 8 6
Convenience 10 4 3 5 10
Assortment 5 8 9 7 5
Availability of 9 2 4 4 8
product
information
OVERALL
EVALUATION
Young single 151 153 221
women
Parent with four 192 164 126
children

*10=very important, 1= very

unimportant
E V A L U AT I N G
R E TA I L E R S

• Research has shown that a customer’s 4 x10 = 40

overall evaluation of an alternative (in this 10x 3 = 30
situation, three retailers) is related to the 5 x 9 = 45
sum of the performance beliefs multiplied 9 x 4 = 36
by the importance weights.
151
 I M P L I C AT I O N F O R R E TA I L E R S
• In this section, it describe how a retailer can use the multi-attribute attitude model to improve
customers' experience and encourage them to shop at the retailer more frequently. First, the
model indicates what information customers use to decide which retailer to patronize or which
channel to use. Second, it suggests tactics that retailers can undertake to influence customers'
store, channel, and merchandise choices.
• To develop a program for attracting customers, retailers need to do market research to collect
the following information:
1. Alternative retailers that customers consider.
2. Characteristics or benefits that customers consider when evaluating and choosing a retailer.
3. Customers' ratings of each retailer's performance on the characteristics.
4. The importance of weights that customers attach to the characteristics.
G E T T I N G I N T O T H E C O N S I D E R AT E S E T
• Retailers need to be included in the customer's consideration set, or the set
of alternatives the customer evaluates when making a choice of a retailer to
patronize.
• To be included in the consideration set, retailers develop programs to
increase the likelihood that customers will remember them when they're
about to go shopping.
• After ensuring that it is in consumer's consideration set, a retailer can use
three methods to increase the chances that customers will select it for a visit:
1. Increase beliefs about the store's performance
2. Change customers' importance weights.
3. Add a new benefit.
CHANGING
PERFORMANCE
BELIEFS
• The first approach involves altering
customers beliefs about the retailer's
performance by increasing the retailer's
performance rating on a characteristic.
CHANGING
I M P O R TA N C E
WEIGHT
• Altering customer's importance weights is
another approach to influencing store
choice. A retailer wants to increase the
importance of customers place on
benefits for which its performance is
superior and decrease the importance of
benefits for which it has inferior
performance.
ADDING A NEW
BENEFIT
• Retailers might try to add new benefits to the
set of benefits customers when selecting a
retailer.
• It offers merchandise that is fair trade made
by workers who are paid a fair wages, not just
a minimum wage. A fair wage means that
workers are able to live relatively comfortably
within the context of their local area.
PURCHASING THE
MERCHANDISE OR
SERVICE

• Customers don't always patronize a store or purchase a brand or item of

merchandise with the highest overall evaluation. The product or service
offering the greatest benefits (having the highest evaluation) may not be
available from the retailer, or the customer may feel that its risks outweigh
the potential benefits. Other consumers mark purchase choices based on
a single attribute, regardless of how well the offering performs on other
characteristics.
• Retailers use various tactics to increase the chances that customer will
convert their positive evaluation into purchase.
 P O S T P U R C H A S E E VA L U AT I O N
• The buying process doesn't end when a customer purchases a product. After
making a purchase, the customer uses the product and then evaluates the
experience to determine whether it was satisfactory or unsatisfactory.
• Satisfaction- is a post consumption evaluation of how well a store or product
meets or exceeds customer expectations.
• This post purchase - evaluation then becomes part of the customer's internal
information and affects store and product evaluations and purchase decisions.
Unsatisfactory experiences can motivate customers to complain to the retailer,
patronize other stores, and select different brands in the future. Consistently
high levels of satisfaction build store and brand loyalty, which are important
sources of competitive advantage for retailers
TYPES OF BUYING DECISIONS

EXTENDED LIMITED HABITUAL

PROBLEM PROBLEM DECISION
SOLVING SOLVING MAKING
E X T E N D E D P R O B L E M S O LV I N G
• Is a purchase decision process in which customers devote considerable
time and effort to analyze their alternatives.
• Financial risks - arise when customers purchase an expensive product
or service.
• Physical risks - are important when customers feel that a product or
service may affect their health or safety.
• Social risks- arise when customers believe a product will affect how
others view them.
L I M I T E D P R O B L E M S O LV I N G
• A purchase decision process involving a moderate amount of effort and
time. Customers engage in this type of buying process when they have
had some prior experience with the product or service and their risk is
moderate.
• One common type of limited problem solving is;
• impulse buying or unplanned purchasing -which is a buying decision
made by customers on the spot after seeing the merchandise.
HABITUAL DECISION
MAKING
• A purchase decision process involving little or no conscious effort.
• When customers are loyal to a brand or a store, they engage in
habitual decision making.
• Brand loyalty - means that customers like and consistently buy a
specific brand in a product category. For example, loyal Coca-
Cola drinkers won't boy Pepsi, no matter what.
• Retailer loyalty - means that customers like and habitually visit
the same retailer to purchase a type of merchandise.
 The
SOCIAL econom Family
FA C T O R S y
INFLUENCI
NG THE
BUYING Referen
PROCESS ce Culture
group
THE
ECONOMY
• When the global or national economies struggle or undergo recessions,
consumers respond to the wider sense of uncertainty and risk by reducing
their purchases or seeking more affordable options.

FA M I LY
• Many purchase decisions involve products that the entire family will
consume or use. The previous discussion of the buying process focused
on how one person makes a decision. When families make purchase
decisions, they often consider the needs of all family members.
REFERENCE GROUP
• A reference group includes one or more people whom a person uses as a basis
of comparison for beliefs, feelings, and behaviors. A consumer might have a
number of different reference groups, such as family, friends, celebrities, and
opinion leaders.
• These reference groups affect buying decisions by
(l) offering information
(2) providing rewards for specific purchasing behavior
(3) enhancing a consumer's self-image.
• Reference groups provide information to consumers directly through
conversation, either face-to-face or electronically, or indirectly through
observation.
C U LT U R E
• Culture is the meaning, beliefs, morals, and values shared by most
members of a society. As the basis of the social factors that influence
people's buying decisions, the culture or cultures in which each consumer
participates often align with his or her reference groups.
M A R K E T S E G M E N TAT I O N
• Focused on how individual customers evaluate and select stores,
channels, and merchandise and the factors affecting their decision making
To be cost-effective, retailers identify groups of these customers (market
segments) and target their offerings to meet the needs of typical
customers in a segment rather than the needs of a specific customer
• Retail market segmentation
• A group of customers who are attracted to the same retail mix because
they have similar needs.
 Actionable

CRITERIA
Identifiable
FOR
E VA LU AT I N
G MARKET Substantial
SEGMENTS

Reachable
ACTIONABLE
• The fundamental criteria for evaluating a retail market segment
are that customers in the segment must have similar needs, seek
similar benefits, and be satisfied by a similar retail offering; and
those customers' needs must differ from the needs of customers
in other segments.
• Means that the retailer should know what to do to satisfy needs for
the consumers in the segment.
IDENTIFIABLE
• Identifiable means that the retailer is able to determine which
customers are in the market segment. When customers are
identifiable, the retailer can determine the segment’s size and
the consumers to whom the retailer needs to target its
communications and promotions.
S U B S TA N T I A L
• If a market is too small or its buying power insignificant. It cannot generate
sufficient profits to support the retailing mix activities.

REACHABLE
• Reachable means that the retailer can target promotions and other
elements of the retail mix to consumers in the segment.
APPROACHES FOR
SEGMENTING
MARKETS

• Geographic segmentation
• Demographics segmentation
• Geographic segmentation
• Psychographic segmentation
• Buying situation segmentation
• Benefit segmentation
GEOGRAPHIC
S E G M E N TAT I O N
• Geographic segmentation groups customers
according to where they live. A retail market can
be segmented by countries (Japan, Mexico) or by
areas within a country, such as states, cities, and
neighborhoods. Because customers typically shop
at stores convenient to where they live and work,
individual retail outlets usually focus on the
customer segment reasonably close to the outlet.
• Segments based on geography can be
identifiable, substantial, and reachable.
DEMOGRAPHICS
S E G M E N TAT I O N
• Groups consumers on the basis of easily measured,
objective characteristics such as age, gender, income,
and education.
• Demographic variables
• The most common means of defining segments,
because consumers in these segments can be
easily identified, their size can be determined, and
the degree to which they can be reached by and
are responsive to media can be easily assessed.
GEODEMOGRAPHIC
S E G M E N TAT I O N
• 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 neighborhoods tend to buy the same types of
cars, appliances, and apparel and shop at the same types of retailers.
P S Y C H O G R A P H I C S E G M E N TAT I O N
Psychographic Segmentation is a method of segmenting customers based on
how they spend their time and money, what activities they pursue, and their
attitudes and opinions about the world in which they live.
• Determining psychographics involves knowing and understanding three
components: self-values, self-concept, and lifestyles.
1. Self-values are goals for life, not just the goals one wants to
accomplish in a day. They are the overriding desires that drive how a
person lives his or her life.
2. Self-concept, is the image people ideally have of themselves.
Lifestyles
• The third component of people's psychographic way one see the way we live. If values provide
an end goal and self-concept is the way one sees oneself in the context of that goal, lifestyles
are how we live our lives to achieve goals.
• One of the most widely used consumer segmentation tools is VALS (values of lifestyle survey),
from Strategic Business Insights. VALS examines the intersection of psychographics,
demographics, and lifestyles.
• There are limitations to using most lifestyle segmentations.
Lifestyles are not as objective as demographics, and it is harder to identify potential
customers.
• With demographics, a firm like Nike can easily identify its customers as men or women and
direct its marketing strategies to each group differently. For these reasons, lifestyle
segmentation is often used in conjunction with other segmentation methods. Psychographics
are more expensive as a means to identify potential customers but often have higher
marketing utility than
 BENEFITS
S E G M E N TAT I O N

• A target segment is to group customers

BUYING seeking similar benefits.
S I T U AT I O N
• Segment clearly indicate how retailers
S E G M E N TAT I O N
should design their offerings to appeal
The buying behavior of to those customers. But customers in
customers with the same benefit segments aren't easily identified
demographics or lifestyle can
or accessed, it's hard to look at a
differ depending on their
buying situation. person and determine what benefits he
or she is seeking.
C O M P O S I T E S E G M E N TAT I O N
APPROACH
Composite segmentation
- uses multiple variables to identify customers in the target
segment according to their benefits, sought, life styles, and
demographics.
THANK YOU