bb chapter six: outlet selection and purchase

Chapter Six:Outlet Selection and Product Purchase

6-1

6-2

Outlet selection and product purchaseA further step in the consumer decision making proces s

6-3

Chapter 6 : Outlet selection and product purchase

1. How the traditional retailing environment is changing

2. Trend towards internet retailing3. Factors that affect retail outlet selection

4. Why consumer characteristics can also affect outlet selection

5. In-store influences that can affect brand choice

6. How marketers can capitalize on these influences

6-4

Consumer outlet selection and product purchase

• Where will consumers shop?• How do they choose a retail outlet?

– Consumer characteristics– Store characteristics

• In-store decision alterations• The purchase process

• Alternative to store selection• Implications for strategy

Outlet Selection and ChoiceOutlet Selection and Choice

Selecting a retail outlet involves the same process as selecting a brand. That is, the consumer

� recognizes a problem that recognizes a problem that requires outlet selectionrequires outlet selection

�� engages in internal and possibly external searchengages in internal and possibly external search

�� evaluates the relevant alternatives, and evaluates the relevant alternatives, and

�� applies a decision rule to make a selectionapplies a decision rule to make a selection

6-5

6-6

Outlet choice vs product choice (which one comes first?)

1. Brand (or item) first, retail outlet second

2. Retail outlet first, brand second

3. Brand and retail outlet simultaneously

6-7

Marketing strategy based on the consumer decision sequence

6-8

Retailers use quality brands to promote the store

6-9

Use of advertising to create brand demand and direct consumers to outlets

The Retail SceneThe Retail Scene

Retail outletRetail outlet refers to any source of products or services for consumers.

InIn--home shoppinghome shopping represents a relatively small but rapidly growing percentage of total retail sales.

Increasingly consumers see or hear descriptions of products in

�catalogs, direct-mail, print�television or radio �on the Internet

and then acquire them via �mail�telephone, or �computer orders

6-10


�� Internet RetailingInternet Retailing

•• Barriers to Internet ShoppingBarriers to Internet Shopping

•• Characteristics of Online ShoppersCharacteristics of Online Shoppers

�� StoreStore--based Retailingbased Retailing

�� The Internet as Part of a MultiThe Internet as Part of a Multi--Channel StrategyChannel Strategy

6-11

6-12

Online shopping

• Increasing number of consumers preferring to shop online - 5% in 1999 to 31% in 2004-5

• Females now using the internet – Males 64%, females 62%

• Image of the outlet influenced by:– Webpage design– Convenience– Security– Pricing


Online Sales by Online Sales by Categories in BillionsCategories in Billions

6-13


Consumers shop online for Consumers shop online for reasons similarreasons similar to those for shopping to those for shopping from catalogs:from catalogs:

6-14


Many industry experts predicted the demise of catalogs.

But catalogs and the Internet appear to be complementary.

Consumers often purchase online after receiving a catalog!

Internet RetailingInternet Retailing

6-15


Many barriers still exist to online purchasing, not the least ofwhich is the lack of Internet access. However, many who are online still have never made a purchase.

A Forrester Research study found the following reasons among those who are online who have never made a purchase:

BarriersBarriers to Internet Shoppingto Internet Shopping

6-16


Online privacyOnline privacy concernsconcerns relate to consumer fears regarding how personal information about them that is gathered online might be used, including:

�� targeting childrentargeting children

�� being inundated with marketing messages, andbeing inundated with marketing messages, and

�� Identity theftIdentity theft

Online privacy concernsOnline privacy concerns represent a major challenge to Internet commerce, with estimated lost sales at some $24.5 billion!

Barriers to Internet ShoppingBarriers to Internet Shopping

6-17


As a consequence, companies must build and sustain highly trusted online images and relationships .

This involves such factors as

� having adequate privacy policies in place� utilizing security verification systems (e.g., VeriSign), and � handling consumer information responsibly

Just as brand name can be a surrogate quality indicator, so too can it be a surrogate for information safety and security online.


6-18


Lack of touch or ability to physically try products prior to purchase is also a concern.

�It affects product categories such as apparel where it can be difficult to simulate experience attributes such as fit.

�Internet marketers are creating virtual product experiences using such techniques as 3D simulations and rich media.

�MVM (My Virtual Model) is an example of this technology.


6-19

6-20

Reasons for not purchasing on the internet

6-21

Online shopping by age groups


Internet shoppers tend to have higher income and education levels than the general population, although these differences are diminishing.

Online shoppers tend to be younger and more affluent than the average Internet users.

While men and women are roughly equally split in terms of internet use, women are emerging as the stronger Internet buyer.

Characteristics of Online ShoppersCharacteristics of Online Shoppers

6-22


Research is moving beyond simple demographics.

�Trying to understand online shopping in terms of online experience and attitudes and behaviorsregarding online shopping.

�Example: Those who purchase online tend to have more experience online. Those online 10 + years spend 75% more than those online 2 years or less!


6-23


The following are results of a study which identifies the following eight online shopper segments:


Shopping Lovers

Adventurous Explorers

Suspicious Learners

Business Users

Fearful Browsers

Shopping Avoiders

Technology Muddlers

Fun Seekers

6-24

Store-based Retailing


Most sales take place in physical stores, and this will remain true for the foreseeable future.

However traditional store-based retailing is certainly vulnerable in ways that plays into the hands of in-home retailers.

StoreStore --based Retailingbased Retailing

6-26


The following are the results of a Roper survey asking consumers why they don’t like shopping in stores:

StoreStore--based Retailingbased Retailing

6-27


In-store shopping perceived as neither fun nor efficient by many. Retailers fighting back with store-based activates and technologies to improve the experience:


Brand stores add value by providing a fun Brand stores add value by providing a fun shopping environmentshopping environment 6-28

Applications in Consumer BehaviorApplications in Consumer Behavior

This Wal-Mart ad shows one of the many ways store-based retailers add value for their customers – namely providing a fun shopping environment.


Courtesy Wal-Mart Stores, Inc.

6-29


Many think of Internet retailers as distinct from store-based retailers and catalogs.

However, pure playpure playInternet retailers such as eBay and Amazon are only part of the pictures.

The Internet as Part of a The Internet as Part of a MultiMulti --Channel StrategyChannel Strategy

Priceline.com is an example of Priceline.com is an example of an exclusive Internet retaileran exclusive Internet retailer

6-30


A multi-channel retail strategy approach is becoming increasingly essential.

�This approach can take on many forms and relates to the shifts in consumer shopping patterns.

�Over 70% of the top 100 online retailers in the U.S. are multi-channel retailers.

�Multi-channel shoppers are consumers who browse and/or purchase in more than one channel.

The Internet as The Internet as PartPart of a Multiof a Multi--Channel StrategyChannel Strategy

6-31


Consumers are utilizing multiple channel in complementary ways since no retailing format is optimal on all dimensions.

So, the Internet can be used to

• overcome a lack of informed salespeople or the inconvenience of researching products in-store, while

• in-store can provide “touch” and immediacy of purchasing.

The Internet as Part of a MultiThe Internet as Part of a Multi--Channel StrategyChannel Strategy

6-32

The Retail SceneThe Retail SceneThe Internet as Part of a MultiThe Internet as Part of a Multi--Channel StrategyChannel Strategy

6-33

AttributesAttributes Affecting Retail Outlet SelectionAffecting Retail Outlet Selection

�� Outlet ImageOutlet Image

�� Retailer BrandsRetailer Brands

�� Retail AdvertisingRetail Advertising

�� Outlet Location and SizeOutlet Location and Size

Retail outlet selection involves a comparison of the Retail outlet selection involves a comparison of the alternative outlets on consumeralternative outlets on consumer’’s evaluative criteria:s evaluative criteria:

6-34

6-35

Attributes affecting retail outlet selection

• Outlet image–A consumer’s or a target

market’s perception of all the attributes associated with a retail outlet

Attributes Affecting Retail Outlet SelectionAttributes Affecting Retail Outlet Selection

Store imageStore image - perception of all the attributes associated with a retail outlet.

Outlet ImageOutlet Image

6-36



6-37


As these studies suggest, overall retailer image (both Internet and store-based) relates to both functional and affective dimensions.


6-38


Store brands are closely related to store image, and at the extreme, the store or outlet is the brand.

�Traditionally, retailers carried only manufacturers' brands, and only a few, such as Sears and Wards, developed their own brands.

�Increasingly retailers such as Wal-Mart and Target are developing and promoting high-quality brands with either the store’s name or an independent name.

�The key to success of store brands--high quality at a high quality at a reasonable pricereasonable price.

Retailer BrandsRetailer Brands

6-39


Retailers use advertising to communicate their attributes, particularly sale prices, to consumers.

�Tracking the purchases of an advertised item understates the total impact of the ad.

��Spillover salesSpillover sales are the sales of additional items to customers who came to purchase an advertised item.

Retail AdvertisingRetail Advertising

6-40


Expenditure of Individuals Drawn to a Store by an Advertised IteExpenditure of Individuals Drawn to a Store by an Advertised Itemm


Source: The Double Dividend. The Double Dividend. (New York: Newspaper Advertising Bureau Inc., February 1977.

6-41


Retailers evaluating the benefits of price or of the promotions must consider the impact on overall store sales and profit.

�Studies show that price is frequently not the primary reason for selecting a particular outlet.

�Many retailers could benefit from emphasizing service, selection, service, selection, or affective benefitsaffective benefits.

�Online retailers advertise in mass media to build image and attract consumers.


6-42


Retailers face three decisions when they consider using price advertising:


Price Advertising DecisionsPrice Advertising Decisions

1.1. How large a price discount should be used?How large a price discount should be used?

2.2. Should comparison or reference prices be used?Should comparison or reference prices be used?

3.3. What verbal statement should accompany the price What verbal statement should accompany the price information?information?

6-43

6-44

Expenditure of individuals drawnto a store by an advertised item


A reference pricereference price is a price with which other prices are compared.

�An external reference priceexternal reference price is a price presented by a marketer for the consumer to use to compare with the current price.

�An internal reference priceinternal reference price is a price or price range that a consumer retrieves from memory to compare with a price in the market.


Price Advertising DecisionsPrice Advertising Decisions

6-45


Location and size play an important role in store choice.

�All else equal, consumers generally select the closest store.

�Outlet size is also important. Generally, customers prefer larger outlets over smaller outlets.

�The retail attraction modelretail attraction model, or the retail gravitation retail gravitation modelmodel, is used to calculate the level of store attraction based on store size and distance from the consumer.

Outlet Location and SizeOutlet Location and Size

6-46

6-47

Outlet location and size: retail attraction model

MSi = market share of store iSi = size of store i (or mall)Ti = travel time to iλ = attraction factor for a particular product

category

=MSiSi / Tiλλλλ

nΣΣΣΣ

i= 1 = 1 = 1 = 1 Si / Tiλλλλ

6-48

Consumer characteristics and outlet choice

• Shopping orientation• Perceived risk

– Financial risk– Social risk

Consumer Characteristics and Outlet Consumer Characteristics and Outlet ChoiceChoice

A Shopping orientationShopping orientation is a shopping style that puts particular emphasis on certain activities or shopping motivations.

A recent study used projective techniques (in this case, thinking about an animal) to ascertain the ways college students approach shopping.

Shopping OrientationShopping Orientation

6-49


Shopping Orientation: Part IShopping Orientation: Part I

Chameleons • Shopping style situation specific or constantly changing

• Shopping approach is based on product type, shopping impetus, and purchase task

Collectors/Gatherers • Propensity to stockpile items and to purchase large quantities to either save money or alleviate the need for shopping

• Attempt to get the best price and take advantage of retailer guarantees

Foragers • Particular and motivated to purchase only the desired items

• Willing to search extensively and have little store loyalty; Prefer to shop alone

6-50


Shopping Orientation: Part IIShopping Orientation: Part IIlittle store loyalty; Prefer to shop alone

Hibernants • Indifferent toward shopping, with opportunistic shopping patterns rather than need driven

• Will often postpone even required purchases

Predators • Purposeful and speed oriented in shopping; plan before shopping and like to shop alone

• Do not enjoy shopping and tend to shop outlets where assured of getting needed items quickly

Scavengers • Enjoy shopping both to make purchases and as an activity

• Like to go to sales and consider shopping to be entertainment

• Make numerous unplanned purchases

6-51


The purchase of products involves the risk that they may not perform as expected; such failure may result in a high

Perceived RiskPerceived Risk

Social cost • e.g., a hairstyle that is not appreciated by one’s peers

Financial cost • e.g., an expensive pair of shoes that become toouncomfortable to wear

Time cost • e.g., a television repair that required the set to be taken to the shop, left, and then picked up later

Effort cost • e.g., a computer jump drive that is loaded with several hours of work before it fails

Physical cost • e.g., a new medicine that produced a harmful side effect

6-52

6-53

Financial and social risks forvarious types of products

6-54

Reducing health risk via endorsement


Perceived RiskPerceived Risk

The perception of these risks differs among consumers, depending in part on their past experiences and lifestyles.

For this reason perceived riskperceived risk is considered a consumer characteristic as well as a product characteristic.

6-55

InIn--Store and Online Influences on Brand Store and Online Influences on Brand ChoicesChoicesOften we enter a retail outlet with the intention of purchasing a particular brand but leave with a different brand or additional items.

Influences operating within the retail outlet influence our shopping patterns.

Unplanned purchases Unplanned purchases are purchases made in a retail outlet that are different from those the consumer planned to make prior to entering that retail outlet.

6-56

6-57

In-store influences that alter brand choices

• The nature of unplanned purchases

– Reminder purchases

– Impulse purchases

6-58

In-store influences that alter brand choices (cont.)

• The nature of unplanned purchases

– The specifically planned decision– The generally planned decision– The substitute decision– The unplanned decision– The in-store decisions

6-59

In-store buying habits

InIn--Store and Online Influences on Brand Store and Online Influences on Brand ChoicesChoices

Supermarket Decisions: TwoSupermarket Decisions: Two--Thirds Are Made InThirds Are Made In--StoreStore

6-60

6-61

Encouraging unplanned purchases -‘gift-time’ and suggesting products


InIn--Store Purchase BehaviorStore Purchase Behavior

6-62


1.1. PointPoint--OfOf--Purchase MaterialsPurchase Materials

2.2. Price Reductions and Promotional DealsPrice Reductions and Promotional Deals

3.3. Outlet AtmosphereOutlet Atmosphere

4.4. StockoutsStockouts

5.5. Web Site Functioning and RequirementsWeb Site Functioning and Requirements

6.6. Sales PersonnelSales Personnel

Strategies used by manufacturers and retailers to influence Strategies used by manufacturers and retailers to influence inin--store and online decisions:store and online decisions:

6-63

6-64

In-store influences that impact on evaluation of alternatives and purchase

6-65

Point-of-purchase (POP) displays

• A device used by marketers and retailers at the point of sale to inform consumers or encourage them to buy; may comprise posters, cards, shelf wobblers, etc.

6-66

Point-of-purchase (POP) displays


ShelfShelf--Based PointBased Point--ofof--Purchase Materials Purchase Materials

PointPoint--OfOf--Purchase MaterialsPurchase Materials

6-67


Price reductions and promotional deals

• coupons

• multiple-item discounts, and

• gifts

are generally accompanied by the use of some point-of-purchase materials.

Price Reductions Price Reductions and Promotional Dealsand Promotional Deals

6-68


Sales increases in response to price reductions come from four sources

Price Reductions and Promotional DealsPrice Reductions and Promotional Deals

1. Current brand users may buy ahead of their anticipated needs (stockpiling).

2. Users of competing brand may switch to the reduced price brand.

3. Nonproduct category buyers may buy the brand because it is now a superior value to the substitute product.

4. Consumers who do not normally shop at the store may come to the store to buy the brand.

6-69


Store atmosphereStore atmosphere is influenced by such attributes as

• lightinglighting

•• layoutlayout

•• presentation of merchandisepresentation of merchandise

•• fixturesfixtures

•• floor coverings floor coverings

•• colorscolors

•• soundssounds

•• odorsodors

•• dress and behavior of sales and service personneldress and behavior of sales and service personnel

Outlet AtmosphereOutlet Atmosphere

6-70


AtmosphericsAtmospherics is the process managers use to manipulate the physical retail or service environment to create specific mood responses in shoppers.

Internet retailers also have online atmospheres that are determined by

• graphicsgraphics

•• colorscolors

•• layoutlayout

•• contentcontent

•• entertainment featuresentertainment features

•• inactivityinactivity

•• tonetone


6-71



6-72

6-73

Shopper behaviour in response to frequent stockouts

StockoutsStockouts occur when the store is temporarily out of a particular brand. Results in…

6-74

Impact of stockout situation


Consumers often research online then buy in traditional stores. However, losses also occur during the online shopping process.

A DoubleClick study found the following reasons for shopping cart abandonment:

Web Site Functioning and RequirementsWeb Site Functioning and Requirements

6-75


The effectiveness of sales efforts is influenced by the interaction of

• the salesperson’s knowledge, skill, and authority• the nature of the customer’s buying task• the customer-salesperson relationship

In the online context, marketers are testing so-called “pop-up” sales clerks that interact with customers as they shop on their web site.

Sales PersonnelSales Personnel

6-76

6-77

Store atmosphere and shopper behaviour

PurchasePurchase

� Once the consumer has selected the brand and retail outlet, he/she must complete the transaction, referred to as purchasingpurchasing or rentingrenting the product.

� In traditional retail environments, this was straightforward with little delay, with the exception of a major and complex purchase.

� Many consumers starting to make an online purchase quit without making one for a variety of reasons.

6-78

PurchasePurchase

� Increasingly the percentage of potential purchasers who actually purchase is a major challenge for most online retailers.

� Credit plays a major role in consumer purchases.

� Businesses need to simplify the actual purchase process as much as possible.

6-79

6-80

Summary of topics in this chapter:We have discussed:• How the traditional retailing environment is

changing

• The trend towards internet retailing• Factors that affect retail outlet selection

• Why consumer characteristics can also affect outlet selection

• In-store influences that can affect brand choice

• How marketers can capitalize on these influences