Retail Management

BBA-6th Semester
BBA- 605 (M-3)

UNIT- 2
Dr. Deepak Sharma
Syllabus:
•Understanding the Retail Consumer: Retail
consumer behaviour,
•Factors influencing the Retail consumer,
•Customer decision making process,
•Types of decision making,
•Market research for understanding retail
consumer.
Understanding the Retail Consumer: Retail consumer behaviour

Understanding retail consumer deals with understanding their buying

behavior in retail stores. Understanding the consumer is important to know
who buys what, when, and how. It is also important to know how to
evaluate consumer’s response to sales promotion. It is very vital to
understand the consumer in the retail sector for the survival and prosperity
of the business.
Consumer versus Customer
A consumer is a user of a product or a service whereas a customer is a buyer
of the product or service. The customer decides what to buy and executes the
deal of purchasing by paying and availing the product or service.
The consumer uses the product or service for oneself.
Identifying a Customer
It is sometimes difficult to understand who is actually a decision maker while
purchasing when a customer enters the shop accompanying someone else. Thus
everyone who enters the shop is considered as a customer. Still, it is necessary to
identify composition and origin of the customers.
Composition of Customers − It includes customers of various gender, age,
economic and educational status, religion, nationality, and occupation.
Origin of Customer − From where the customer comes to shop, how much the
customer travels to reach the shop, and which type of area the customer lives in.
Objective of Customer − Shopping or Buying? Shopping is visiting the shops
with the intention of looking for new products and may or may not necessarily
include buying. Buying means actually purchasing a product. What does the
customer’s body language depict?
Customer’s Buying Behavior Patterns
The needs, tastes, and preferences of the consumer for whom the products are
purchased drives the buying behavior of the customer. The pattern of
customer’s buying behavior can be categorized as −
•Place of Purchase
Customers divide their place of purchase. Even if all the products they want are
available at a shop, they prefer to visit various shops and compare them in
terms of prices. When the customers have a choice of which shop to buy from,
their loyalty does not remain permanent to a single shop.
Study of customer’s place of purchase is important for selection of location,
keeping appropriate merchandise, and selecting a distributor in close proximity.
•Product Purchased
It pertains to what items and how many units of items the customer purchases.
The customer purchases a product depending upon the following −
Availability/Shortage of product
Requirement/Choice of product
Perishability of product
Storage requirements
Purchasing power of oneself
•Time and Frequency of Purchase
Retailers need to keep their working time tuned with customer’s availability.
The time of purchase is influenced by −
Weather
Season
Location of customer

The frequency of purchase mainly depends on the following factors −

Type of commodity
Degree of necessity involved
Lifestyle of customers
Festivals and customs
Influence of the person accompanying the customer.
•Method of Purchase
It is the way a customer purchases. It involves factors such as −
Is the customer purchasing alone or is accompanied by someone?
How does the customer pay: by cash or by credit?
What is the mode of travel for the customer?

•Response to Sales Promotion Methods

The more the customer visits a retail shop, the more (s)he is exposed to the sales
promotion methods. The use of sales promotional devices increases the number
of shop visitors-turned-impulsive buyers.
The promotional methods include −

Displays − Consumer products are packaged and displayed with aesthetics

while on display. Shape, size, color, and decoration create appeal.
Demonstrations − Consumers are influenced by giving away sample product
or by showing how to use the product and its benefits.
Special pricing − Unit’s special price under some scheme or during festive
season, coupons, contests, prizes, etc.
Sales talks − It is verbal or printed advertisement conducted by the salesperson
in the shop.
 Factors influencing the Retail consumer

In a general scenario, we’ve got five main factors that determine retail consumer
behavior, i.e these factors regulate if a target customer purchases a product or not.
These factors are namely Psychological, Social, Cultural, Personal, and Economic
factors.

1. Psychological Factors
Interestingly, human psychology is actually an integral factor that influences consumer
behavior although these factors aren’t exactly easy to measure. A few integral
psychological factors driving the behavior of consumers are :
Motivation
Perception
Learning
Attitudes and Beliefs
2. Social Factors
Humans are social beings, and the society or the people they live around influence
their buying behaviour. Human beings try to imitate other humans and nurture a
desire to be socially accepted. Hence, their buying behaviour is influenced by other
people around them. These factors are considered as social factors.
Family
Reference Groups
Roles and status

3. Cultural factors
A group of people is associated with a set of values and ideologies that belong to
a particular community. People coming from particular communities have
behaviours highly influenced by their culture. Cultural factors also include the
concepts of subculture and social class.
Culture
Subculture
Social Class
4. Personal Factors
Factors that are personal to the consumers influence their buying behaviour.
These personal factors vary from person to person, thereby producing
different perceptions and consumer behaviour.
Some of the personal factors include −
Age
Income
Occupation
Lifestyle
5. Economic Factors
Consumer buying habits greatly depend on the economic situation of a country
or a market. When a nation’s economy is strong, it leads to a greater money
supply in the market and higher purchasing power for consumers. Whereas a
weak economy reflects a struggling market that is impacted by unemployment
and lower purchasing power.
Some of the important economic factors are as follows −
Personal Income
Family Income
Consumer Credit
Liquid Assets
Savings
 Customer decision making process
Consumer Decision Making Process
Definition: The Consumer Decision Making Process is the sequential interrelated
steps explaining the approach of the consumers in making buying decisions. Also,
it involves an in-depth analysis of the consumers’ purchase behaviour. We can
also refer to it as the Buyer Decision-Making Process.

Steps in Consumer Decision-Making Process

Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Post Purchase Behaviour
1. Need Recognition
Need recognition occurs when a consumer exactly determines their needs.
Consumers may feel like they are missing out something and needs to address
this issue so as to fill in the gap. When businesses are able to determine when
their target market starts developing these needs or wants, they can avail the
ideal opportunity to advertise their brands.

There is a variance between consumers’ current and desired conditions.

When he faces any difficulty in a specific situation.
When he identifies his unsatisfied need and so on.
2. Information Search
The information search stage in the buyer decision process tends to change continually as
consumers require obtaining more and more information about products which can satisfy
their needs. Information can also be obtained through recommendations from people
having previous experiences with products.
At this level, consumers tend to consider risk management and prepare a list of the features
of a particular brand. This is done so because most people do not want to regret their
buying decision. Information for products and services can be obtained through several
sources like:
Commercial sources: advertisements, promotional campaigns, sales people or
packaging of a particular product.
Personal sources: The needs are discussed with family and friends who provided
product recommendations.
Public sources: Radio, newspaper and magazines.
Experiential sources: The own experience of a customer of using a particular brand.
3. Evaluation of Alternatives
This step involves evaluating different alternatives that are available in the market
along with the product lifecycle. Once it has been determined by the customer what
can satisfy their need, they will start seeking out the best option available. This
evaluation can be based upon different factors like quality, price or any other factor
which are important for customers. They may compare prices or read reviews and
then select a product which satisfies their parameters the most
4. Purchase Decision
When all the above stages have been passed, the customer has now finally decided
to make a purchasing decision. At this stage, the consumer has evaluated all facts
and has arrived at a logical conclusion which is either based upon the influence
from marketing campaigns or upon emotional connections or personal experiences
or a combination of both.

5. Post Purchase Behavior

The purchase of the product is followed by post-purchase evaluation which refers
to analyzing as to whether the product was useful for the consumer or not. If the
product has matched the expectations of the customer, they will serve as a brand
ambassador who can influence other potential consumers which will increase the
customer base of that particular brand. The same is true for negative experiences;
however, it can halt the journey of potential customers towards the product.
 Types of decision making
There are three types of decision in business:
•strategic
•tactical
•operational
strategic tactical operational

long term medium term day-to-day

complex less complex simple and routine

made by senior managers made by middle managers made by junior managers

eg launching new
eg aiming to be market eg regular ordering of
product/opening new
leader supplies/creating staff rota
branches
The following are the different types of decisions that are usually taken by managers
in the organization:

1. Programmed and Non-Programmed Decisions:

Programmed decisions are repetitive in nature. Such decisions deal with simple,
common, frequently occurring problems that have established procedures. These
decisions are taken based on the existing policy, rule or procedure of the organization.
For example: making purchase orders, sanctioning of different types of leave, increments
in salary, etc. Managers in dealing with such issues of routine nature, follow the
established procedures.
Non-programmed decisions are not routine in nature. They are related to exceptional
situations for which there are no established procedure. For example- Issues relating to
declining market share, increasing competition, etc. fall in this category. These problems
have to be handled in a different way. Many of the decisions that managers at top levels
make are non-programmed decisions.
2. Operational and Strategic Decisions:
Operational or tactical decisions relate to the present issues or problems. The main
purpose is to achieve high degree of efficiency. Better working conditions,
effective supervision, prudent use of existing resources, better maintenance of the
equipment, etc. fall in this category.
Usually, routine decisions are taken by managers at the lower levels, while
strategic decisions are taken by top level managers. The focus in the operational
decisions is on the short-run or immediate present, while it is on the long- rum in
the case of strategic decisions.
3. Organizational and Personal Decisions:
If the decision is taken collectively keeping in mind the organizational goal, it is
known as the organization goal, and if the manager takes any decision in the
personal capacity (affecting his/her life). It is known as personal decisions. These
decisions may sometimes affect the functioning of the organization as well. For
example, if the employee has decided to leave the organization, it may affect the
organization. The authority of taking personal decisions cannot be delegated and is
dependent on the individual itself.

4. Major and Minor Decisions:

These are classified as the type of decision-making in management where
decision-related to purchase of new premises is a major decision. These are taken
by top management whereas the purchase of stationery is a minor decision. Minor
decisions can be taken by the superintendent.
Market research for understanding retail consumer.
Common retail market research options include:
1. Intercept surveys
2. Mystery shopping
3. Customer surveys
4. Customer segmentation
5. Shop-alongs
6. Competitive research
7. Social listening and monitoring
1. Intercept Surveys
Intercept surveys, or intercept interviews, are a very popular retail market research option.
During a traditional retail intercept survey, an interviewer approaches customers leaving a
store and generally asks them about their experience.
Intercept interviews can be conducted using a tablet, laptop, or paper survey to record data.
Intercept surveys can be used by market researchers in a retail environment to better
understand and collect data on a variety of topics including:
Taste-testing
Merchandise-testing
Customer satisfaction
Brand awareness
Opinions on packaging
2. Mystery Shopping
Whether it be a sales associate’s knowledge or friendliness, store cleanliness, customer
service experience, store management, product options or availability, or something else,
there are a number of variables that impact a customer’s experience in a retail store.
Making phone calls or sending emails to specific departments (i.e., customer service)
Wearing a video camera while shopping to record the experience
Purchasing or returning merchandise from a specific department or through a specific
method (i.e., brick and mortar or e Commerce)

3. Customer Surveys
It’s impossible to read a customer’s mind, and in a market that is crowded and competitive,
retail stores need to be surveying their customers to stand out among their competitors.
Net Promoter Score (NPS): How likely are you to recommend [store name] to a friend?
Customer Satisfaction Score (CSAT): How would you rate your overall satisfaction with
the service you received at [store name]?
Customer Effort Score (CES): How easy was it to find the product(s) you were looking for
at [store name]?
4. Customer Segmentation
In addition to collecting feedback, customer surveys can also provide brands
with segmentation data.
By grouping your customers into market segments, you can deliver personalized
marketing messages that are more likely to convert.

5. Shop-alongs
Through a shop-along market research study, retailers are able to understand a
customer’s journey from the entrance to the exit of their store.
This type of retail market option involves a trained interviewer observing a
customer’s behavior while they shop in terms of navigation, decision-making,
product selection, and overall experience.
6. Competitive Research
It’s no secret that retail is an extremely competitive market. With hundreds of
options for customers to choose from, retailers are constantly competing with one
another.
Pricing
Product offerings
Sales or promotions
Marketing strategies
Social media tactics
Customer satisfaction scores
Design or layout
Reviews or ratings
7. Social Listening and Monitoring
As a retailer, especially in a competitive space, it’s essential to stay in the know about
the conversations that are happening online about your industry.
There’s nothing worse than an unhappy customer rambling on about their negative
experience with your company on social media for the world to see.
Just one negative customer experience in a retail store can fuel a social media wildfire.
Setting up alerts for these situations is important to putting out the fire before it’s too
late.
Trend tracking and analysis
Reputation and crisis management
Social impact of marketing
Competitive intelligence