Retailing - Identifying and Understanding Consumers PDF
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Adamson University
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This document provides an overview of identifying and understanding consumers in retail contexts. It explores demographics, lifestyles, and factors influencing consumer decisions. It details concepts like perceived risk and retailer strategies to reduce it.
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Module 3 Helpful Facts for Understanding U.S. Topic 1: Identifying and Understanding Demographics (cont.) Consumers There are 5 million more females than males...
Module 3 Helpful Facts for Understanding U.S. Topic 1: Identifying and Understanding Demographics (cont.) Consumers There are 5 million more females than males Three-fifths of adult females are in the labor Chapter Objectives force To discuss why it is important for a retailer to Most U.S. employment is in services properly identify, understand, and appeal to 30 % of all U.S. adults have at least a four- its customers year college degree To enumerate and describe a number of consumer demographics, lifestyle factors, Current Economic Issues needs and desires – and to explain how Real 17 percent unemployment rate (10 these concepts can be applied to retailing percent unemployment and 7 percent To examine consumer attitudes toward underemployed, stopped linking, accepted shopping and consumer shopping behavior, early retirement offer) including the consumer decision process and Low levels of consumer confidence its stages High foreclosure rate (particularly Nevada, To look at retailer actions based on target Texas, California, Florida) plus high market planning underwater loans (nationwide) To note some of the environmental factors Many fixes are temporary—” cash for that affect consumer shopping clunkers” auto rebates, first time homebuyer incentives, mortgage renegotiations Figure 7-1: What Makes Retail Shoppers Tick Understanding Consumer Lifestyles: Social Factors Demographics and Lifestyles Demographics - consumer data that is objective, Understanding Consumer Lifestyles: quantifiable, easily identifiable, and Psychological Factors measurable Lifestyles - ways in which consumers and families live and spend time/money Helpful Facts for Understanding U.S. Demographics Typical household has an annual income of $50,000 Top 1/5 of households earn $100,000 or more Lowest 1/5 of households earn $20,000 or less High incomes lead to high discretionary income Figure 7-2: Perceived Risk and Consumers Attitudes by market segment Assessment kung bibili ba o hindi, Attitudes toward private brands dahiln sa pag-aanlinlangan Top Reasons for Leaving an Apparel Store Without Buying Cannot find an appealing style Cannot find the right size 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 Retailer Strategies to Reduce Perceived Risk by Shoppers 1. Functional– product usage testing by retailer; especially private labels. Double check returned “B” goods. Simulate wear for new goods. 2. Physical- safety testing, reduce salt and fat in food products 3. Financial- money back guarantee and exchange privileges 4. Social— co-branding of private label products with major high-quality national brands (Kirkland by Starbucks) 5. Psychological– showing empathy for consumer 6. Time- double money back guarantee; Saturn Cross-Shopping dealers picking and returning recalled cars Shopping for a product category at more than one retail format during the year Illustrations of Lifestyles Visiting multiple retailers on one shopping Gender Roles trip Consumer Sophistication and Confidence Poverty of Time Component Lifestyles Three Special Market Segments 1. In-Home Shoppers 2. Online Shoppers 3. Out shoppers 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 Attitudes Towards Shopping Level of shopping enjoyment Shopping time Shifting feelings about retailing Why people buy or not on a shopping trip Topic 2: Information Gathering and Processing in Retailing Figure 8-1: How Information Flows in a Retail Distribution Channel Suppliers Need To Know Retailers Need To Know Types of Impulse Shopping Completely unplanned Partially unplanned Unplanned substitution Consumers Need To Know Possible Retailer Approaches Mass Marketing - Kohl’s Department Stores Concentrated Marketing - Foot Locker Differentiated Marketing - Family Dollar Retail Information System (RIS) Module 4: Trading-Area Analysis Location, Location, Location Figure 8-2: A Retail Information System Choosing a Store Location Data-Base Management Trading-Area Analysis A trading-area is a geographic area containing the customers of a particular firm or group of firms for specific goods or services. Benefits of Trading-Area Analysis Figure 9-2: The Trading-Areas of Current and Destination Versus Parasite Stores Proposed Outlets Trading Areas and Store Types GIS Software The Trading-Area of a New Store Figure 9-3(A): GIS Software in Action Computerized Trading-Area Analysis Models The Size and Shape of Trading-Areas Reilly’s Law Table 9-1c: Chief Factors to Consider in Evaluating Retail Trading-Areas Reilly’s law of retail gravitation—a traditional means of trading-area delineation—establishes a point of indifference between two cities or communities so that the trading-area of each can be determined. Limitations of Reilly’s Law Distance is only measured by major thoroughfares; some people will travel shorter distances along cross streets. Travel time does not reflect distance Table 9-1d: Chief Factors to Consider in traveled. Many people are more concerned Evaluating Retail Trading-Areas with time traveled than with distance. Actual distance may not correspond with perceptions of distance. Huff’s Law Huff’s law of shopper attraction delineates trading-areas on the basis of product assortment at various shopping locations, travel times from the shopper’s home to alternative locations, and the Table 9-1e: Chief Factors to Consider in sensitivity of the kind of shopping to travel time. Evaluating Retail Trading-Areas Table 9-1a: Chief Factors to Consider in Evaluating Retail Trading-Areas Table 9-1f: Chief Factors to Consider in Evaluating Retail Trading-Areas Table 9-1b: Chief Factors to Consider in Evaluating Retail Trading-Areas Table 9-1g: Chief Factors to Consider in Evaluating Retail Trading-Areas Elements in Trading-Area Selection Figure 11-1c: Planning and Assessing a Retail Organization – Management Needs The Value Profit Chain and Human Resource Module 5: Retail Organization and Human Management Resource Management Satisfaction Mirror– Employee satisfaction Figure 11-1a: Planning and Assessing a Retail and loyalty (due to fairness of management, Organization the quality of one’s peers in the workplace, employee empowerment and monetary compensation) translates into high levels of customer service and customer loyalty. Recognizes that employees interact with customers not management Trader Joe’s Employee Statement “We will have well-trained, knowledgeable employees that create a fun store that is clean, WOW merchandised, informative, and one that continually kaizens (constantly improves) the customer experience.” Figure 11-1b: Planning and Assessing a Retail Wegman’s Employee Satisfaction Organization In a recent survey of Wegman’s employees, 33,000 of 37,000 employees responded (close to 90 percent). When asked, “Does management know what it’s doing?”, 96 percent responded with a “Yes” answer. The most common response to another question to describe Wegman’s management, was the word “family.” Figure 11-2: The Process of Organizing a Retail Table 11-1: Principles for Organizing a Retail Firm Firm Figure 11-3: Division of Tasks in a Distribution Channel Figure 11-6: Organization Structures Used by Small Independents Figure 11-4: A Job Description for a Store Manager Mazur Plan Merchandising—buying/selling, stock planning, Publicity—displays, event planning, advertising research Store management—customer service, merchandise protection, receiving Accounting and control—credit, expense budgeting, inventory management Figure 11-7: The Basic Mazur Organization Plan Figure 11-9: The Organizational Structure of for Department Stores Kroger Chain Retailer Organizations Centralized functional divisions– real estate, distribution, human resources (top management) Elaborate information system and management controls Human Resource Management in Retailing Centralization of much of buying with room to adapt to local markets Recruiting Department Store Organization Formats Selecting Training 1. Main store control– flagship executives Compensating oversee store units. Extreme centralization Supervising 2. Separate store organization— each store buys for itself and maintains sales Employee Turnover Costs responsibility The Coca-Cola Retailing Research Council 3. Equal store organization– buying is found that the supermarket industry’s annual centralized; branch stores are sales units turnover costs can exceed its entire profits by Figure 11-8: Equal-Store Organizational Format over 40 percent Used by Chain Stores Annual employee turnover for Publix, Stew Leonard’s and Wegman’s is 5-6 percent versus 19 percent overall (Fortune and Coca-Cola data) Direct and Indirect Costs of Employee Turnover Direct Costs: include separation costs, exit interviews, replacement costs (advertising, screening, new employee orientation) and training costs Indirect costs: include customer dissatisfaction, reduced suggestion selling, pricing errors, reduced morale among co- workers Table 11-2: True Cost of Employee Turnover o Meaningful training programs o Advancement opportunities o Zero tolerance for insensitive workplace behavior Diversity Two premises: 1. That employees be hired and promoted in a fair and open way, without regard to gender, ethnic background, and other related factors 2. That in a diverse society, the workplace should be representative of such diversity Women in Retailing Labor Law Considerations Issues to address with regard to female Retailers must not workers o Hire underage workers o Meaningful training programs o Pay workers “off the books” o Advancement opportunities o Require workers to engage in illegal o Flex time: the ability of employees to acts adapt their hours o Discriminate in hiring or promoting o Job sharing among two or more workers employees who each work less than o Violate worker safety regulations full time o Disobey the Americans with o Child care Disabilities Act Retailing empires o Deal with suppliers that disobey labor o Mary Kay laws o Avon Figure 11-10: A GoalOriented Job Description for Wal-Mart Sex Discrimination Case a Management Trainee Class action case involving 500,000 to 1.6 million women Filed ten years ago when female average salary was $13,000 about $1,100 less than average male salary Largest single litigation ever faced by WalMart Wal-Mart seeking to throw case out –argues that its policies prohibit discrimination, many different positions are involved, and personnel decisions are made at store level– not centralized Minorities in Retailing Issues to address with regard to minority workers o Clear policy statements from top management as to the value of employee diversity o Active recruitment programs to stimulate minority applications Figure 11-10: A GoalOriented Job Description for Employee Motivation I a Management Trainee (cont.) Employee centered approach—Whole Foods team-based hiring decision after 4- week trial period. Needs 2/3’s vote Hire salaries– Publix store manager=$113,000; Nordstrom has salespeople making $100,000 Continuous assessment-Trader Joe’s every three months (punctuality, is always friendly, knows product features, promotes high store morale. For part-time as well as full-time employees Employee Motivation II Profit sharing—Publix current and former employees own 85 percent of company. If price earnings multiple is 20; every $1 of Figure 11-11: A Checklist of Selected Training extra profit equals $20 in additional wealth. Decisions Encourages harder work for self and fellow workers Au Bon Pain– store managers have compensation linked to profit goals at specific locations Style of Supervising Retail Employees 1. Management assumes employees must be closely supervised and controlled; only economic inducements motivate 2. Management assumes employees can be assigned authority and be self-managers; Components of Compensation motivation is intrinsic 3. Management applies self-management Total compensation approach Salary plus commission Profit-sharing Employee Behavior and Motivation Several attitudes may affect employee behavior o Sense of accomplishment o Enjoyment of work o Attitude toward physical work conditions o Attitude toward supervisors o Confidence in company o Knowledge of business strategy o Recognition of employee role in achieving corporate objectives