Lecture #4: Consumer Behavior

These lecture notes are provided as a study aid in preparation for examinations. Students should review their class notes, and compare to the outline presented below. To assist in reviewing for exams, students are advised to rewrite their notes in accordance with the outline.

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It is important for retailers to have an understanding of how consumers make their purchases. This is the study of consumer behavior. For example, retailers need to know the following:

  1. When consumers buy--is there a seasonal component, a weekly component, etc.?
  2. How consumers shop--do they start by looking for information, do they go from store to store checking out prices and product offerings, etc.?
  3. How do consumers pay for their purchases? Credit card? Check? Cash?
  4. Where do customers shop? The nearest store? The biggest store? The mall?
  5. What do they buy? What percentage is impulse or decided in the store?
  6. Who makes the decisions? Who influences the decisions?
  7. Why do consumers buy? Out of necessity? For fun? To meet psychological "needs?"

A detailed understanding of these factors will give the retailer the ability to better sell their wares (and sell more of their wares). Wal-Mart has, probably better than no other, capitalized on this. They understood years ago that consumers wanted a value price on what they bought, so they did away with sales, and replaced it with "everyday low prices." The rest is Marketing history.

Another example is that of Barnes and Noble, which changed the nature of US bookstores from one of "get in and get out" to "come on in and stay awhile." Their stores feature Starbucks coffee shops and comfortable arm chairs, perfect for sampling books and magazines before purchasing them. Rather than decreasing their sales, this store atmosphere (which is more like a library than a retail store) actually encourages people to buy more. In fact, the longer people stay, the more they spend. So much for the WaldenBooks approach to book retailing.

This lecture will examine in close detail the various aspects of consumer behavior (CB) that are important for retailers to understand. Much is essentially a recap of what is studied in a CB course, but with an emphasis on how this knowledge can be applied to retailing.

A. What Consumers Buy

Following are various ways of breaking down the various "things" that people buy. Please note that these are not mutually exclusive.

  1. Products--tangible goods
  2. Services--intangible "goods," as well as experiences, and also hybrid service/product combinations
  3. Ideas--such as church, political ideologies, etc.
  4. Durables vs. Non-Durables--yet another way of dichotomizing, discerning between those products that are short-term and long-term
  5. Categories of products: convenience, impulse, shopping, and specialty

B. How Consumers Buy

  1. What is a market? A market is the set of actual and potential customers that could buy your product or service. This number is often rather large, and is not necessarily an indication of the conversion rate (the number of people who will actually buy the product/service).
  2. Needs vs. Wants
  3. Requirements of a Market Segment: actionability, identifiability, size, and accessibility

C. Who Buys and Who Decides

  1. Deciders
  2. Influencers
  3. Users
  4. Buyers

D. Why Consumers Buy

  1. Psychological Factors
    • Motivation
    • Maslow's Hierarchy of Needs (one more time!)
    • Perception: selective exposure, selective retention, and selective distortion
    • Learning--drives, cues, responses, reinforcement, repetition, participation
    • Attitudes--three components: cognitive, affective, behavioral
  2. Personal Factors
    • Personality
    • Self-concept
    • Life styles (AIO)
    • Life Cycles (also related to family below))
  3. Social Factors
    • Family (see also the buying roles listed above)--stage in family life cycle
    • Reference Groups
    • Social Class
    • Culture

E. Level of Involvement

F. A Simple Model of Buyer Behavior

  1. Problem Recognition
  2. Info Search
  3. Alternative Evaluation
  4. Purchase Decision
  5. Post-purchase evaluation

G. Where Consumers Buy

  1. At home
  2. In a store
  3. At work
  4. Parasite locations, which "feed" off of someone else's location

H. Methods of Market Segmentation

  1. Geography
  2. Demography
  3. GeoDemography
  4. Lifestyles
  5. Buying situation
  6. Benefit sought

Course Syllabus

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