Chapter-05

Identifying and
Understanding
Consumers
 Chapter Objectives
 To discuss why it is important for a retailer to properly
identify, understand, and appeal to its customers.

 To enumerate and describe a number of consumer

demographics, lifestyle factors, and needs and desires –
and to explain how these concepts can be applied to
retailing.

 To examine consumer attitudes toward shopping and

consumer shopping behavior, including the consumer
decision process and its stages.

 To look at retailer actions based on target market

planning.

 To note some of the environmental factors that affect

 What Makes Retail Shoppers Tick?

• The quality of retail strategy depends on how well a firm

identifies and understands its customers and forms its
strategy mix to appeal to them.

• This entails identifying consumer characteristics, needs,

and attitudes, recognizing how people make decisions;
and then devising the proper target market plan. It also
means studying the environmental factors that affect
purchase decisions.
What Makes Retail Shoppers Tick?

Retail
Management
 Consumer Demographics and
Lifestyles
Demographics
• Consumer data Lifestyles
that is objective,
• Ways in which
quantifiable, easily
consumers and
identifiable,
families live and
measurable.
spend time and
spend money
 Consumer Demographics and
Lifestyles
 Consumer Demographics : Demographics are objective,
quantifiable, easily identifiable, and measurable population
data.

 Both groups of consumers and individual consumers can

be identified by such demographics as gender, age,
population growth rate, life expectancy, literacy, language
spoken, household size, marital and family status, income,
retail sales, mobility, place of residence, occupation,
education, and ethnic/racial background.

 These factors affect people’s retail shopping and retailer

actions.

 A retailer should have some knowledge of overall trends,

 Consumer Demographics and
Lifestyles

 Consumer Lifestyles : Lifestyles are the ways in which

individual consumers and families (households) live and
spend time and money.

 Consumer lifestyles are based on social and

psychological factors, and influenced by demographics.

 As with demographics, a retailer should first have some

knowledge of consumer lifestyle concepts and then
determine the lifestyle attributes of its own target market.
 Consumer Demographics and
Lifestyles
Social Factors
Reference
Culture
Groups

Social Lifestyle Time

Class Utilization

Household Family
Life Life
Cycle Cycle
 Consumer Demographics and
Lifestyles
Social Factors
The social factors that are useful in identifying and
understanding consumer lifestyles include the followings.

a. Culture : It is a distinctive heritage shared by a group of

people that passes on a series of beliefs, norms, and
customs.

b. Social Class : It involves an informal ranking of

people based on income, occupation, education, and
other factors.

c. Reference Groups : They influence people’s thoughts

and behavior, like Aspirational Groups (a person does
not belong but wishes to join), Membership Groups (a
person does belong), and Dissociative Groups (a person
 Consumer Demographics and
Lifestyles
Social Factors

d. The Family Life Cycle : It describes how a traditional

family moves from bachelorhood to children to solitary
retirement. At each stage, attitudes, needs, purchases,
and income change.

e. Time Utilization : It refers to the activities in which a

person is involved and the amount of time allocated to
them. The broad categories are work, transportation,
eating, shopping etc.
 Consumer Demographics and
Lifestyles
Psychological Factors

Personality Attitudes

Perceived Lifestyle Class

Risk Consciousness

Purchase
Importance
 Consumer Demographics and
Lifestyles
Psychological Factors
The psychological factors that are useful in identifying and
understanding consumer lifestyles include the followings.

a. Personality: It is the sum total of an individual’s

traits, which make that individual unique. They include
a person’s level of self confidence, innovativeness,
sociability, autonomy, emotional stability, and
assertiveness.

b. Class Consciousness: It is the extent to which a

person desires and pursues social status. A class-
conscious person values the status of goods, services,
and retailers.

c. Attitudes: These are positive, neutral, or negative

feelings a person has about different topics on
consistent basis. They are also feelings consumers
 Consumer Demographics and
Lifestyles
Psychological Factors
d. Perceived Risk: It is the level of risk a consumer
believes exists regarding the purchase of a specific
good or service from a given retailer, whether or not the
belief is correct.

e. The importance of a purchase : It affects the amount

of time consumer will spend to make a decision and the
range of alternatives considered. If a purchase is
important, perceived risk tends to be higher, and the
retailer must adapt to this.

Note : A retailer can develop a lifestyle profile of its target

market by answering those questions and then using the
 Retailing Implications of
Consumer Demographics and
Lifestyles
Demographic and lifestyle factors need to be considered
from several perspectives, like the followings.

a. Gender Roles: The huge number of working women is

altering lifestyles significantly. Due to trend toward
working women, the lifestyles of males are also
changing.

b. Consumer Sophistication and Confidence: Many

shoppers are now more knowledgeable, and
cosmopolitan; more aware of trends in taste, styles,
and goods and services; and more sophisticated.
 Retailing Implications of
Consumer Demographics and
Lifestyles
c. Poverty of Time: The increase in working women,
the desire for personal fulfillment, the daily job
commute, and the tendency of some people to have
second jobs contribute to many consumers feeling
time-pressured.

d. Component Lifestyles: In the past, shoppers were

typecast, based on demographics and lifestyles. Now,
it is recognized that shopping is less predictable and
more individualistic. It is more situation-based.
 Consumer Needs and Desires
 When developing a target market profile, a retailer
should identify key consumer needs and desires.

 From a retailing perspective, ‘needs’ are a person’s

basic shopping requirements consistent with his or her
present demographics and lifestyle.

 ‘Desires’ are discretionary shopping goals that have an

impact on attitudes and behavior.

Example : A person may need a car to get to and from

work. The person may desire a Porsche but be satisfied
with a Hyundai that can be serviced on the weekend and
fits within the budget.
 Consumer Needs and Desires

To address the question, like “Do different market

segments have special needs?”,
we will look at three particular market segments that
attract retailer attention.

a. IN-HOME SHOPPING
b. ONLINE SHOPPING
c. OUTSHOPPING
In-Home Shoppers

• Shopping is discretionary,
not necessary

• Convenience is important

• Active, affluent, well-

educated

• Self-confident, younger,
adventuresome
Online Shoppers

• Use of Web for decision-

making process as well
as buying process

• Convenience is important

• Above average incomes,

well-educated

• Time scarcity is a
motivator
 Outshoppers
• Out-of-hometown shopping

• Important for both local and

surrounding retailers. The
former want to minimize this
behavior, whereas the latter
want to maximize.

• Young, members of a large

family, and new to the
community

• Income and education vary

• They like to travel, enjoy fine

food, are active, and read out-of-
town newspapers
 Shopping Attitudes and Behavior
a) Attitudes Toward Shopping
Considerable research has been done on people’s attitudes
toward shopping. Such attitudes have a big impact on the ways
in which people act in a retail setting.

 Shopping Enjoyment : In general, people do not enjoy

shopping as much as in the past. So this is a challenge for
retailers. Many shoppers enjoy bargain hunting, window
shopping, being pampered by salespeople, and the opportunity
to get out of the house or office.

 Attitudes Toward Shopping Time : Retail shopping is often

viewed as a chore. Time-pressed by family and work
responsibilities, they spend fewer hours cruising the mall in
search of the perfect item, and look to get what they need as
quickly as possible. This trend has been dubbed as “precision
shopping”. The upside of precision shopping is that consumers
spend more money each time they visit a store.
 Shopping Attitudes and Behavior
a) Attitudes Toward Shopping

 Shifting Feelings About Retailing : There has been a

major change in attitudes toward spending, value, and
shopping with established retailers. The same shopper
who buys commodity goods at a wholesale club, may also
buy expensive apparel at Nordstrom.

 Why People Buy or Do Not Buy on a Shopping Trip :

It is critical for retailers to determine why shoppers leave
without making a purchase. According to Kurt Salmon
Associates, here are the top 10 reasons why shoppers
leave an apparel store without buying.
 Shopping Attitudes and Behavior
a) Attitudes Toward Shopping
Top Reasons for Leaving an Apparel Store Without
Buying
 Cannot find an appealing style
 Item is out of stock
 Nothing fits
 No sales help is available
 Cannot get in and out of the store
easily
 Prices are too high
 In-store experience is stressful
 Cannot find a good value
 Store is not merchandised
conveniently
 Seasonality is off
 Shopping Attitudes and Behavior
b) Where People Shop
Type of Retailer % Shopping
Where America Shops
• Supermarkets 72

• Discount department stores/supercenters 66

• Drugstores 61
• Convenience stores 59

• Apparel stores 36

• Home improvement centers 31

• Membership clubs 29

• Book/music stores 22
• Consumer electronics stores 21
 Shopping Attitudes and
Behavior
b) Where People Shop
Cross-Shopping
 Many consumers do ‘Cross Shopping’, whereby they
i. They shop for a product category at more than one retail
format during the year.
ii. Visiting multiple retailers on one shopping trip.

 The first scenario occurs because these customers feel

comfortable shopping at different formats during the
year, their goals vary by occasion, they shop wherever
sales are offered, and they have a favorite format for
themselves and another one for other household
members.

 Second scenario occurs because consumers want to

 Shopping Attitudes and Behavior
c) The Consumer Decision Process

Demographic Lifestyle
s
 Shopping Attitudes and Behavior
c) The Consumer Decision Process

The best retailers assist consumers at each stage in the

process, like the followings.

a. Stimulus (Newspaper Ads)

b. Problem Awareness (New Models)
c. Information Search (Point-of-Sale displays and good
salespeople)
d. Evaluation of Alternatives (clearly noticeable
differences among products)
e. Purchase (acceptance of credit cards)
f. Post-Purchase Behavior (extended warranties and
money-back returns)
 Behavior
c) The Consumer Decision
Process
Types of Consumer Decision
Making
There are three types of decision
processes.

i. Extended Decision Making

ii. Limited Decision Making
iii. Routine decision Making
 Shopping Attitudes and Behavior
c) The Consumer Decision Process
Types of Consumer Decision Making

Extended High

Limited RISK & TIME

Routine Low
 Types of Consumer Decision Making

Extended Decision Making : It occurs when a consumer

full use of the decision process.

 A lot of time is spent gathering information and

evaluating alternatives before a purchase.

 In this category are expensive, complex items with

which the person has had little or no experience.

 The perceived risk of all kinds is high.

 In this case, retailers like real estate real-estate

brokers and auto dealers emphasize personal selling,
printed materials, and other communication to provide
as much information as possible.
 Types of Consumer Decision Making

Limited Decision Making : In this case, the consumer

uses each step in the purchase process but does not spend
a great deal of time on each of them.

 It requires less time than extended decision making

since the person typically has some experience about the
purchase.

 The risk is moderate, and the consumer spends some

time shopping.

 Items requiring limited decision making include

clothing, a vacation, and gifts.

 This form of decision making is relevant to such retailers

 Types of Consumer Decision Making

Routine Decision Making : It takes place when

consumer buys out of habit and skips steps in the
purchase process.

• The consumer wants to spend little or no time shopping,

and the brands are usually repurchased (often from the
same retailers).

• This category includes items that are purchased

regularly, like groceries, newspapers, and haircuts, and
there is little risk because of consumer experience.

• This type of decision making is relevant to such retailers

as supermarkers, fastfood outlets etc.
 Impulse Purchases and
Customer Loyalty
Impulse Purchases : Impulse purchases arise when
consumers buy products they had not planned on buying
before entering a store, reading a catalog, seeing a TV
shopping show, turning to the Web, and so forth.
• At least part of the decision making is influenced by the
retailer.

 There are three kinds of impulse shopping.

i. Completely Unplanned
ii. Partially Unplanned
iii. Unplanned Substitution
 Impulse Purchases and
Customer Loyalty
i. Completely Unplanned : A consumer has no
intention of making a purchase in a goods or service
category before he/she comes into contact with a
retailer.

ii. Partially Unplanned : A consumer intends to make a

purchase in a goods or service category but has not
chosen a brand or model before he or she comes into
contact with a retailer.

iii. Unplanned Substitution : A consumer intends to

buy a specific brand of a good or service but changes
his or her mind about the brand after coming into
contact with a retailer.
 Impulse Purchases and
Customer Loyalty

 Impulse purchases are more influenced by retail

displays than are preplanned purchases, therefore
Point-of-Purchase (POP) displays play an important
role in this regard.

 With about 70% of all purchase decisions in mass

merchandisers made in the store, an increasing
number of brand marketers and retailers invest in
displays.
Impulse Purchases and
Customer Loyalty

Stimulating Impulse Purchases

Could you pass by this

vending machine without
making a purchase?
 Retailer Actions

a. Mass Marketing : Selling goods and services to a

broad spectrum of consumers. Like ‘Kohl’s Department
Stores’ which is one of the fastest-growing General
Merchandise retailers in the United States and is
capitalizing on a mass marketing approach.

b. Concentrated Marketing : Focusing on one specific

group. Like ‘Wet Steal’ which is a 425-store apparel
chain that caters to young women.

c. Differentiated Marketing : Aiming at two or more

distinct consumer groups, with different retailing
approaches for each group. Like ‘Gap Inc.’ has applied
differentiated marketing by launching ‘Banana
Republic’ (for upscale consumers), ‘Gap’ (for middle
market), and ‘Old Navy’ (for low end consumers).
 Environmental Factors and
Consumers
 Several environmental factors influence shopping attitudes
and behavior, including the followings:

 State of the Economy

 Rate of Inflation
 Infrastructure for Shopping
 Price Wars
 Emergence of New Retail Formats
 People Working at Home
 Regulations on Shopping
 Changing Social Values and Norms

 Although all of these elements may not necessarily have an

impact on any particular shopper, they do influence the
retailer’s overall target market.