Retail Management

Module 2: Consumer Behavior in Retail Business

• Consumer behavior – meaning, definition (2M)

• Consumer Buying decision process and its implications on
retailing – (5M) Factors influencing consumer behavior in
retailing -group and individual behavior(15M)
• Customer Shopping Behavior with respect to online and
offline retailing – (5m)
• Customer Service – meaning – Principles / key elements
of customer service in retailing ( 2M /5M)
• Customer Satisfaction – meaning – Strategies/Factors
influencing customer satisfaction(2M/5M)
• Retail planning process – steps involved (5M)
• Factors considered in preparing a business plan,
implementation of business plan, risk analysis(threats) in
retailing- (15M)

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 Consumer Behavior

Introduction

Study of consumer behavior is both a science and an art. Learning

about consumers is difficult and complex as it involves the study of
human beings. Human beings differ from one another, each individual
behaves differently, and it is not easy to predict human behavior.
Human behavior decides what to buy, when to buy it, etc. Human
beings differ in their needs, wants, tastes, and preferences.
Consumer behavior is a vast and complex subject. Understanding
consumer behavior and knowing consumers are not that simple.
Consumer behavior explains the reasons and logic that underlie
purchasing decisions and consumption patterns. The study of
consumer behavior is crucial for marketers, before producing or
launching a product.

Meaning and Definitions of Consumer Behavior

Consumer behavior refers to “the sum total of a consumer’s attitudes,
preferences, intentions, and decisions regarding their behavior in the
marketplace when purchasing a product or service.”
Consumer behavior means “the activities and decisions that
individuals or households make when selecting, purchasing, using,
and disposing of a product or service. Many psychological,
sociological, and cultural factors influence how consumers interact
with the market.”
Consumer buying behavior, it is “the study of consumers’ actions
when selecting whether to purchase a good that meets their needs. It

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is investigation into how customers behave and what motivates them
to purchase and use particular goods.”
Philip Kotler defines “Consumer behavior is the study of how people
buy what they buy, when they buy and why they buy.”
According to Solomon, Consumer behavior 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.”

Buying Decision Process

Meaning and Definition of Buying Decision Process
The consumer-buying process starts with need recognition, in which
consumers identify an unfilled need, and finishes with satisfaction
(agreement) or discontent (disagreement). It consists of multiple
steps and is influenced by a number of elements, including the
consumer’s personality, perception, attitude, and the promotional
activities of retailers.
The Buying Decision Process is also known as the consumer decision-
making process or purchase decision process.

Implications of Buying Decision Process on Retailing

1. Recognition of Need: Retailers can influence this stage by
creating awareness of products or services through advertising,
in-store displays, and online marketing. Understanding customer
needs and preferences is crucial for stocking the right products.
2. Information Search: Retailers must provide easily accessible and
accurate information about their products. This includes detailed

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 product descriptions, customer reviews, and comparison tools
on websites, social media, and in-store displays.
3. Evaluation of Alternatives: Retailers should offer a variety of
product options and price points to cater to different customer
preferences. Effective merchandising and clear product
differentiation can help customers make informed choices.
4. Purchase Decision: Retailers should ensure a seamless and
convenient purchase process. This includes having user-friendly
websites, efficient checkout processes, and multiple payment
options.
5. Purchase: Retailers should ensure that the product is readily
available for purchase, either online or in-store. Inventory
management is crucial to prevent stakeouts or overstock
situations that can frustrate customers.
6. Post-Purchase Evaluation: Retailers can engage customers after
the purchase to gather feedback and address any concerns. This
can be done through surveys, follow-up emails, or loyalty
programs.
7. Post-Purchase Behavior: Retailers need to maintain a strong
customer service infrastructure to handle returns, exchanges,
and complaints effectively. A smooth post-purchase process can
enhance customer satisfaction and loyalty.

Factors influencing in Group and Individual buying behaviour

Consumer buying behavior is influenced by a complex interplay of
various factors, including both group and individual factors. These
factors contribute to shaping the decisions consumers make when
purchasing products or services. Let’s examine into the influence of
these factors:

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 1. Group Factors: The group factors which influence the consumer
buying behavior are culture, social group, reference groups
family, and social network are discussed as below:
a) Culture: Culture refers to the shared beliefs, values,
customs, and behaviors of a particular group. It
significantly impacts consumer behavior by shaping
preferences, norms, and attitudes towards products.
Different cultures may have varying preferences for
colours, symbols, and even the types of products they
value.
b) Social Class: Social class influences buying behavior as it
determines a person’s access to resources and their desired
lifestyle. Individuals from different social classes might
have distinct preferences in terms of brands, products, and
shopping venues.
c) Reference Groups: Reference groups are the people or
groups that an individual looks up to or uses as a basis for
comparison. They can be family, friends, co-workers, or
even celebrities. Consumer choices areoften influenced by
their desire to conform to or differentiate themselves from
their reference groups.
d) Family: Family plays a crucial role in shaping consumer
behavior, particularly in terms of purchasing decisions
related to household items, vacations, and other family-
oriented products. Family members can influence each
other through direct advice, observation, or shared values
e) Social Networks: With the rise of social media, online
communities, and digital platforms, individuals are
increasingly influenced by their social networks.
Recommendations, reviews, and endorsements from peers

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 on these platforms can strongly impact purchasing
decisions.
2.Individual Factors: The individual factors which influences the
consumer buying behavior are perception, motivation and needs,
attitudes and beliefs, personality and styles, perceived risk, self-
concept and identity are discussed as below .
a) Perception: How individuals perceive a product or brand can
affect their buying behavior. Perception is influenced by factors
like sensory experience, marketing messages, packaging, and
personal biases
b) Motivation and Needs: Consumer behaviour is driven by
underlying needs and motivations, such as physiological needs,
safety, social belonging, esteem, and self-actualization.
c) Attitudes and Beliefs: Attitudes are a combination of beliefs and
evaluations of a particular object or situation. Positive attitudes
towards a product are more likely to result in purchasing
behaviour.
d) Personality and Lifestyle: Personality traits and lifestyles can
influence consumer choices. For instance, an adventurous
person might be more open to trying new products, while
someone focused on health might choose organic or natural
options.
e) Perceived Risk: Consumers assess the potential risks associated
with a purchase, including financial risk, performance risk, and
social risk. High-perceived risk can lead to cautious or delayed
decision-making.
f) Self-Concept and Identity: Consumers often buy products that
align with their self-concept and identity. This can include
clothing. Accessories, and other items that help them express
who they are or aspire to be.

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Consumer Buying Behaviour
Meaning of Consumer Buying Behaviour
Consumer Buying Behavior (is also known as Consumer shopping
behaviour) refers to “the actions, decisions, and patterns that
individuals exhibit when searching for, evaluating, selecting, and
purchasing products or services.
In other words, Consumer buying behaviour refers to “actions carried
out by customers prior to, during, and after purchasing products and
services for personal and family consumption. In simple terms, it refers
to the purchasing habits of individual and family consumers who
purchase products and services for personal consumption.”

Consumer Buying Behaviour of Online and Off-line Customers

Consumer buying behaviour of online and off-line customers is
discussed in the following paragraphs as below:
1. Online Consumer Behaviour: The study of the processes involved
when individuals or groups select, purchase, and use different
products, services, ideas, or experiences to satisfy wants and
desires through online channels is known as online consumer
buying behaviour. In other words, online consumer behaviour
refers to how people behave when shopping on the internet,
typically through websites, mobile apps, or other digital
platforms. It includes activities such as browsing online stores,
searching for products, reading reviews, adding items to
shopping carts, and making online purchases.
2. Offline Consumer Behaviour: The buying behaviour of the
ultimate consumer, who likes to visit traditional stores, contact
salespeople, or use magazines, newspapers, or telephone media

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 to purchase any product or service, is referred to as offline
consumer buying behaviour. In other words, offline consumer
behaviour pertains to how individuals behave when shopping in
physical, brick-and-mortar retail stores. It encompasses actions
such as visiting stores, interacting with sales associates,
physically examining products, and making purchases in person.

Factors influencing on Consumer Buying Behaviour

Consumer behaviour is the study of the reasons a person prefers to
buy one product over another and the underlying elements that
influence this decision. They are:
1. Cultural Factors,
2. Social Factors,
3. Personal Factors, and
4. Psychological Factors.

1. Cultural Factors: The values and ideologies of a certain community

or group of people comprise cultural factors. The culture of a person
determines how that person behaves. In simple terms, culture is
nothing more than an individual’s beliefs. What a person learns from
his or her parents and relatives while they are young, shapes his or
her culture. Some major cultural factors include:
a) Culture: A group of people’s beliefs, habits, rituals, and practices
are referred to as their culture. As a youngster develops, his family
and other important institutions teach him how to make decisions
and how to buy things.
b) Subculture: The culture can be further divided into separate
subcultures in which individuals are categorized more precisely based

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on their shared traditions and beliefs, such as their respective
religions, nations, and geographical locations.
c) Social Class: An individual’s social class has an effect on their buying
habits. People who belong to the same class are typically said to share
similar interests, values, and behaviours. The upper class, middle
class, and lower class are the three social classes that together make
up our society, These groups of consumers all exhibit various
purchasing habits.

2.Social Factors: Humans exist in a complex social context where they

are surrounded by different people who have various purchasing
habits. Being a social animal, man seeks to emulate socially
acceptable actions in order to be accepted by others. The following
categories apply to social factors influencing consumer purchasing
decisions:
a) Family: Family members play an important role in shaping one’s
choices and conduct. It provides an environment in which an
individual can evolve, develop personality, and acquire values. A child
learns his purchasing habits and preferences from his parents and
tends to buy the same products or services as an adult.
b) Reference Group: A reference group is a group with which an
individual prefers to be linked, i.e., to be referred to as a member of
that group. It is discovered that all members of the reference group
share common purchasing habits and have a considerable influence
on one another.
c) Roles and Status: A person’s position and role in society influence
his purchasing behaviours. A person in a high position in a company,
for example, is required to buy products that promote his status.

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3.Personal Factors: Personal elements are the individual elements
that Influence consumers’ purchasing patterns. Some major personal
factors include:
a) Age: The consumer’s purchasing behaviour is heavily influenced by
his age, i.e., the life cycle stage he/she is in. People purchase various
things at various phases of their lives.
b) By Income: A person’s income determines his purchasing
behaviour. Individual purchasing power is determined by income,
therefore, the higher the personal income, the greater the
expenditure on other products, and vice versa.
c) Occupation: An individual’s occupation affects his purchasing
behaviour. People are more likely to purchase products and services
that promote their profession and role in society.
d) Lifestyle: Consumer purchasing behaviour is influenced by their
lifestyle. The term “lifestyle” refers to an individual’s interests,
attitudes, opinions, and activities that represent how he lives in
society.

2.Psychological Factors: Psychological factors are those that talk

about an individual’s mind and drive his activities to seek satisfaction.
a) Motivation: Consumer purchasing behaviour is influenced by their
level of motivation. Maslow explains it quite well through his need
hierarchy theory, which includes basic needs, security requirements,
social needs, esteem needs, and self-actualization needs.
b) Learning: Learning is determined by an individual’s skills,
knowledge, and intention. Skills are developed through practice,
while knowledge and intention are gained through experience.

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c) Attitude and Beliefs: Individuals have particular thoughts and
attitudes regarding products that influence their purchasing decisions
These attitudes and beliefs are the proclivity to respond to a given
product in a specific way, and they comprise the brand image that
impacts customer purchasing behaviour.
d) Perception: A consumer’s perception of a particular product and
brand determines his purchasing decision. Perception is the process
by which an individual chooses, organizes, and interprets information
in order to reach a meaningful conclusion. Marketers place a premium
on controlling perceptual processes such as Selective Attention,
Selective Distortion, and Selective Retention.

Customer Service and Customer Satisfaction

Customer Service
Customer service is all about meeting the requirements and desires of
each customer. Customer service is an essential part of retailing. It is a
crucial strategic factor that can distinguish stores from one another.
Customer service has an impact on the overall retail experience. The
primary goal of customer service is to provide the satisfaction that the
customer expects from the store as a result of frequenting it.

Elements of Customer Service

1. Communication: To a retail customer, a clear and effective
communication is essential. Retail staff should be able to listen
to customers, understand their queries or concerns, and respond
appropriately.
2. Product Knowledge: Employees should have a deep
understanding of the products which they are selling. This

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 enables them to provide accurate information, make
recommendations, and address customer inquiries effectively.
3. Problem Resolution: Inevitably, issues may arise at any time of
business hours. Having a well-defined process for resolving
problems and handling customer complaints is crucial. A quick
and satisfactory resolution can turn a dissatisfied customer into
a loyal one.
4. Personalization: Tailoring interactions based on individual
customer preferences can enhance the customer experience.
This might involve remembering previous purchases or
suggesting complementary products.
5. Training and Development: Retail staff should undergo training
to improve their customer service skills. This includes dealing
with difficult customers, maintaining a positive attitude, and
using the right language and tone.

Customer Satisfaction
Customer satisfaction is the overall assessment of a customer’s
experience with a retail business. It reflects how well the business has
met or exceeded customer expectations. Satisfied customers are
more likely to make repeat purchases, refer friends and family, and
leave positive reviews.

Factors influencing in Customer Satisfaction

1. Quality of Products and Services: The primary factor influencing
satisfaction is the quality of products and services offered.
Meeting or exceeding the promised quality creates positive
perceptions.

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 2. Convenience: Convenience is a major driver of customer
satisfaction. This includes factors like store location, ease of
online shopping, checkout process, and availability of various
payment options.
3. Consistency: Consistency in service delivery across different
interactions and channels is vital. Customers expect a seamless
experience whether they’re interacting in-store, online, or over
the phone.
4. Timeliness: Prompt service, quick response times to inquiries
and timely delivery contribute to customer satisfaction. No one
likes to wait excessively.
5. Personal Experience: Customers appreciate feeling valued and
important. Friendly and respectful interactions, personalized
recommendations, and genuine engagement can enhance
satisfaction.
6. Post-Purchase Support: Providing support after the purchase,
such as assisting with setup, troubleshooting, or returns, can
leave a positive impression.
7. Feedback and Improvement: Actively seeking and acting upon
customer feedback demonstrates a commitment to
improvement, which can lead to increased satisfaction over
time.

Retail Planning Process

Retail planning is the process of developing a strategy for retailers to
meet customer demand while maximizing the return on investment
(ROI) using data and other resources. In the retail planning process, a
retailer decides about the planning strategies of the retail business,

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learn about the competition in the market, and create and implement
strategies accordingly. For example, if a store sells summer apparel,
they want to consider where to store the most amount of inventory
based on seasonality.
The following is an overview of the typical steps involved in the Retail
Planning Process:
1. Identify the objectives: At the micro-level, the goals are set for
each department, and at the macro level, the goals are set for
the entire business. For example, when the government invites
bids, the goal of the company is to get the contract, whereas the
goal of the individual departments of the company is to improve
their performance for sales, production, and more, respectively.
2. Make a market analysis and situational analysis: Analysis of the
market and situation helps the retailer to get answers to his
questions on how to sell and when to sell. For this purpose, a
detailed analysis of the internal and external factors affecting
the business is to be studied.
3. Research on the consumer buying behavior: Good research work
related to the target audience provides the much-needed
flexibility in planning. Therefore, the retailer needs to research
all the ways which can help him in attaining the business goals.
There is always more than one way of achieving the goals, and
only a good level of research can help a retailer identify these
ways.
4. Plan the retail strategies: Once retailers have set their objectives
and identified their market position and retail mix, it’s time to
plan relative retail strategy. Ideally, retail strategic plan is the
one that is the most profitable.

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 5. Emphasize short-term strategic plans: Now that the plan of retail
strategies has taken shape, it’s time to subdivide this plan into
shorter strategic plans. Having short-term strategic plans
provides more precision towards plan execution in the shortest
time frame.
6. Implementation of the strategies: It’s time to implement all the
gray work. It’s time for the practical implementation of the
planned strategies. At this step, the retailer can judge the
effectiveness of his strategic decisions.
7. Performance analysis: Multiple retail metrics can help the
retailer analyze the effectiveness of his overall retail process.
These retail key performance indicators provide the direction for
improvement in the planning and execution stage. The statistical
analysis, as derived from the use of performance analysis tools,
provides a clear picture regarding the increase in retail profit
margins.

Retail Business Plan

Meaning of Retail Business Plan
A business plan in the context of a retail business is a comprehensive
document that outlines the goals, strategies, and operational details
of the retail venture. It serves as a roadmap for the business, guiding
its growth, development, and decision-making processes. A well-
structured retail business plan helps stakeholders (such as investors,
lenders, and internal teams) understand the business’s mission,
vision, and how it intends to achieve its objectives.
Factors to be considered for Preparing a Business Plan

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Preparing a business plan is a crucial step in launching or growing a
business. It serves as a roadmap that outlines the business’s goals,
strategies, and operations. Here are some important factors to
consider when preparing a business plan.
1. Executive Summary: A concise overview of the entire business
plan, highlighting key points such as the business concept,
market opportunity. Competitive advantage, and financial
projections. Its goal is to convey the fundamentals of company
in a way that both informs and interests the reader.
2. Business Description: A detailed explanation of the retail
business, including its mission, vision, values, legal structure,
location, and history.
a) Explanation about what business does and the problem it
solves.
b) Define the target market and the potential demand for
product or service.
3. Market Analysis: A thorough analysis of the target market,
including demographics, consumer behaviour, trends, and
market size. This section should demonstrate a deep
understanding of the customer base and how the business
intends to meet their needs.
4. Competitive Analysis: An assessment of the competition in the
retail industry, identifying direct and indirect competitors, their
strengths and weaknesses, and strategies for differentiating the
business.
a) Identify the main competitors and their strengths and
weaknesses.
b) Highlight the unique selling points (USPs) and how it
differentiates from competitors.

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 5. Products and Services: A description of the products or services
the retail business will offer, including details about the product
range, features, benefits, pricing, and any unique selling points.
a) Provide in-depth information about the product or service.
b) Describe any unique features, intellectual property, or
patents.
6. Marketing and Sales Strategy: An outline of the strategies and
tactics the business will use to attract customers and drive sales.
This includes details about branding, advertising, promotions,
social media, and any other marketing initiatives.
a) Outline the plan to promote and market the business to
target audience.
b) Describe sales channels, pricing strategy, and distribution
methods.
7. Operations and Management: Information about the day-to-day
operations of the business, including staffing requirements, roles
and responsibilities of key personnel, inventory management,
suppliers, and distribution channels.
a) Detail how the business will operate on a day-to-day basis.
b) Include information about location, facilities, equipment, and
technology.
8. Financial Projections: Detailed financial forecasts, including
revenue projections, expense estimates, profit margins, cash
flow projections, and break-even analysis. This section helps
demonstrate the financial viability of the business and its
potential for profitability.
a) Create realistic financial forecasts, including sales,
expenses, profits, and cash flow.

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 9. Funding Request: If seeking external funding, this section
outlines the amount of capital needed, how the funds will be
used, and the terms of the investment or loan.
a) State how much funding a business need to start or expand
their business.
10.Appendices: Additional information that supports the main
content of the business plan, such as market research data, product
images, legal documents, resumes of key team members, and other
relevant materials.

Implementation of Business Plan

Implementing a business plan in a retail business involves executing
the strategies, tactics, and initiatives outlined in the plan to achieve
the business’s objectives and goals. Effective implementation is
essential for turning the business plan into tangible results and
ensuring the business’s success. Here is a step-by-step guide to help to
implement their business plan in a retail business:
1) Understand the Business Plan: Ensure that retailer
thoroughly understand the components of his business
plan, including the mission statement, vision, goals, target
market, competitive analysis, marketing strategies,
operational plans, financial projections, and timeline.
2) Break-down the Plan: Divide retailer’s business plan into
actionable tasks and projects. Create a detailed
implementation plan that outlines the specific steps,
responsibilities, timelines, and resources needed for each
task.
3) Allocate Resources: Determine the resources required for
implementation, including financial resources, human

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 resources, technology, facilities, and equipment. Allocate
these resources according to the priorities and needs
outlined in the plan.
4) Set Clear Responsibilities: Assign roles and responsibilities
to individuals or teams within the organization for each
task. Clearly communicate the expectations and
accountability for each team member.
5) Create a Timeline: Develop a timeline that outlines when
each task or project will be executed. Consider
dependencies between tasks and ensure that the timeline
is realistic and achievable.
6) Communication: Communicate the implementation plan to
all relevant stakeholders, including employees, managers,
investors, and suppliers Ensure that everyone understands
the plan and their roles in executing it.
7) Training and Development: If new processes, technologies,
or skills are required for implementation, provide training
and development opportunities for retailer’s employees.
Ensure that they have the necessary knowledge and skills
to carry-out their tasks effectively.
8) Monitor Progress: Regularly track and monitor the progress
of each task against the established timeline. Use project
management tools or software to facilitate tracking and
communication among team members.
9) Problem-Solving: Address any challenges or roadblocks
that arise during implementation promptly. Encourage
open communication among team members and provide
support to overcome obstacles.
10) Feedback and Adaptation: Gather feedback from
employees and stakeholders involved in the

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 implementation process. Use this feedback to make
adjustments, refine strategies, and improve the execution
of the plan.
11) Quality Control: Maintain quality standards
throughout the implementation process. Regularly assess
whether the executed activities align with the intended
outcomes and quality expectations.
12) Celebrate Achievements: Celebrate milestones and
achievements reached during the implementation process.
Recognize and reward employees for their contributions,
which can boost morale and motivation.
13) Evaluation and Review: After the implementation
phase, conduct a comprehensive evaluation to assess
whether the outcomes match the intended goals.
14) Continuous Improvement: Use the lessons learned
from the implementation process to refine the strategies
and enhance the business plan for on-going success.

Analysis in Retailing
Meaning of Risk Analysis
A Risk Analysis includes examining the probability of disasters induced
by either natural process, such as strong storms, earthquakes, or
floods, or by purposeful or unintentional human activity. Identifying
the potential for harm from these events, as well as the likelihood of
their occurrence, is an important aspect of risk analysis.

Process of Risk Analysis

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 1. Identify Risks: A firm has to identify potential risks that could
affect the retail business. These risks can be categorized into
various types as discussed in the following paragraphs:
a) Market Risks: Changes in consumer preferences, economic
downturns, and shifts in market trends assess the market risk
of retailing.
b) Operational Risks: Supply chain disruptions, inventory
management issues, equipment breakdowns, and employee
turnover is the operational risks of retailing.
c) Financial Risks: Fluctuations in costs, pricing pressures, credit
risks, and cash flow problems is the financial risk of retailing.
d) Regulatory and Compliance Risks: Changes in regulations,
legal disputes, and failure to meet industry standards is the
regulatory and compliance risks of retailing.
e) Competitive Risks: Increased competition, loss of key
customers, and pricing wars is the competitive risks of
retailing.
f) External Risks: Natural disasters, geopolitical events, and
health crises (as seen with the COVID-19 pandemic) are the
external risks of retailing.
2. Assess Probability and Impact: For each identified risk, assess
the probability of its occurring and the potential impact on the
retail business and again a rating to both probability and impact,
such as low, medium, or high. This will help to prioritize risks
that need immediate attention.
3. Develop Mitigation Strategies: For high-priority risks, outline
specific mitigation strategies. These strategies should outline
how a retail firm plan to reduce the likelihood of the risk
occurring and how to minimize its impact to happen on retail
business.

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 4. Contingency Planning: Develop contingency plans for the risks
that are difficult to mitigate. These plans outline the step that
takes if a particular risk materializes.
5. Monitoring and Review: Risk analysis is an ongoing process.
Regularly Review and update the risk assessment as business
evolves and market conditions change.
6. Communication: Incorporate the findings of risk analysis into the
business plan. Clearly communicate the identified risks,
potential impact, and the mitigation strategies to potential
investors, lenders, and stakeholders.

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