Consumer Shopping Behavior RetailingMKTG 3346Professor Edward FoxCox School of Business/SMU

All Those DecisionsTripBuying or browsing?Specific need, or inventory replenishmentRetailerWhere to shop (order matters)?Mall/retail center vs. nearby storeIn-StoreWhat product categories?Within each category, which products to consider?What about impulse, or unplanned items?Buy or defer?

Consumer Shopping Decisions

TripPurpose(s) of the TripBefore determining where to shop, the consumer must determine the purpose(s) of the tripTransactionInformationEntertainment TransactionReplenishmentWhich retailer do I prefer?RoutineSpecific itemWhere are desired items available?For transaction-focused shopping, convenience, price, and assortment are key criteria for store choice

TripPurpose(s) of the TripInformationProduct searchAssortment is the primary criterionPrice searchExpected prices are the key criterionEntertainmentRetailer advertisingRetailer reputationMall operators often stage entertainment to create excitement and draw customer traffic

For information- and entertainment-focused shopping, proximity of a store to other stores (e.g., mall, restaurant row) is often a key criterion

TripPurpose(s) of the TripPurpose Shopper ClassificationTransactionInformationEntertainmentBuyer (Goal Directed)BrowserConsumers browse in apparel and department stores; not grocery and drug stores

Trip and RetailerWhere to Shop and What to BuyNeeded items, or shopping lists, often affect the choice of storeStore choiceWhere to shopCategory SelectionWhat to buy

Trip and RetailerWhere to Shop and What to BuyIf the purpose is replenishment

Neighborhood StoreLow-Price StoreShoppers buy less than half as much on a trip to the neighborhood store, compared to a low-price stores

Trip and RetailerWhere to Shop and What to BuyIf the purpose is replenishment

Shoppers engage in two types of trips:

Stock upSpend moreMainly on the weekendFill inDriven by specific item(s)Random occurrences

RetailerStore ChoiceConsumers report that their choice of store is driven by: ConvenienceProximity to the shoppers homeOne-stop shopping convenienceProximity to other stores (e.g., on the mall)PriceVariety and assortmentService

RetailerShoppers Evaluation of Retailer PricesThe general evaluation of a retailer prices is known as price imageConsumers cant evaluate all the prices in a store, so price image depends on:Prices of items that the consumer has considered buyingAre prices usually lower than competitors?Consumers cant easily evaluate how much lowerBetter known brands are thought to have a greater effect on the retailers price imagePrices of sale itemsMost salient to shoppersOften displayed, too

RetailerShoppers Evaluation of Retailer AssortmentRetailer assortment can be difficult for consumers to evaluateIt depends on the differences between products offered, as well as the number of products offeredThe shoppers general evaluation of a retailer product assortment is based on:The number of SKUs offeredWhether preferred or favorite brands are availableShelf or floor space devoted to the category

RetailerMulti-Store ShoppingSelecting a store may mean selecting more than one Price or value search order of store visits mattersConsumers meet different needs at non-competing retailers on the same tripCherry pickingThe store(s) visited previously may change the probability of visiting that store tomorrowCategory-specific store preferencesConsumers may tradeoff price and convenience differently from trip to trip

Multi-Store shopping is an important reason for retailers to locate their stores near other stores

RetailerMulti-Store ShoppingOver time, consumers may shop at many stores that sell similar items

Correlations of Logarithm of Household Packaged Goods ExpendituresData Source: IRI panel of 189 panelists from Oct 1995 - Oct 1997

Sheet1

HiLo GroceryEDLP GroceryMass MerchandiserDrug StoreWarehouse Club

HiLo Grocery1

EDLP Grocery0.1141

Mass Merchandiser0.8520.2151

Drug Store0.7910.1540.7131

Warehouse Club0.0750.1420.2210.0001

Sheet2

Sheet3

In-StoreWhat to Buy Shopping ListBefore shopping, customers often prepare a shopping list of items soughtOn paperUS (1995) 55% of grocery shoppers prepare shopping listsEurope (1997/8) 70% of grocery shoppers prepare shopping listsMentalIn apparel and other non-CPG shopping, fewer items are sought so shopping lists are primarily mental

In-Store What to Buy Shopping ListShopping lists may be more or less specificProduct category Brand Though most customers use shopping lists, only 25% of brands purchased are pre-selectedSize

Shopping lists, particularly mental lists, usually include only the product category (not the brand)

In-StoreWhat to Buy Factors Influencing Purchase DecisionsMost purchase decisions are made in-storeUSPOPAI 65% in the 1980s; 81% in the 1990sEuropeRetail Marketing Services 75% in 1997/88% category selected for purchase, but not brand4% pre-selected brand was substituted64% unplanned purchases

P-O-P is significant as the last three feet of a brands marketing campaign, and serves as the closer for in-store purchasing decisions as well as an influencer for impulse purchases POPAI, 1995

In-Store What to Buy Factors Influencing Purchase DecisionsSource: POPAI, 1995

% ReportingPromotional Influence86%In-Store Ads / Displays53%Billboards / Posters45%Radio32%Television Advertising30%Newspaper Advertising28%Direct Marketing / Couponing5%Magazine Advertising

In-StoreWhat to Buy Unplanned PurchasesItems for which purchase was not anticipated are considered unplanned purchasesImpulseNon-impulseReminderSuggestion Impulse purchases can be stimulatedMerchandising around cash-wraps, entrances and other high-traffic areasStore atmospherics (e.g., colors and smells)Displays

In-Store What to Buy Unplanned PurchasesPurchases which suggested/reminded by retailer are influenced by:DisplaySignage e.g., shelf tagsCross-merchandisingFrom the retailers perspective, these are add-on salesThe number of unplanned purchases increases with both variety and assortment offered by the retailerThe bigger the store, the more unplanned purchases

In-Store What to Buy Unplanned PurchasesUnplanned purchases may be limited by the shoppers budget constraints and time constraints

Browsers make more unplanned purchases

In-Store Brand/Product Choice Consideration SetsTo avoid spending all day in the store, shoppers limit their consideration to relatively few itemsWhat Consideration set is the subset of available products that is evaluated when making a choiceWhy limited cognitive resourcesHow screen items unlikely to be of interest before evaluating them

In-Store Brand/Product Choice Consideration SetsHow/when is the consideration set formedNeed RecognitionInformation SearchEvaluation of AlternativesIntention to PurchasePurchase DecisionConsideration Set

In-Store Brand/Product Choice Evaluation FactorsPrice/valueCompared with what is on the shelf (in-store)Compared with competitors (out of the store)Compared with recalled pricesQualityPerformance (e.g., fabric weave and weight, cut)Conformance (e.g., durability, workmanship)ImageFamiliarity / information Reduces uncertainty of evaluationBrand can be a proxy for quality, if quality is unknown and can be a primary factor in determining the image associated with a product

In-Store Brand/Product Choice Consumer EvaluationRetailers can affect consumers product evaluations byPricingVs. competitorsBetween items on the shelfAssortmentNumber of itemsQuality of itemsBrand(s) of merchandiseRetailers may try to up-sell, or influence shoppers to purchase a higher-margin product, but they are more likely to pursue customer loyalty or add-on sales

In-Store Brand/Product Choice Consumer EvaluationBrands are often a key component of the retailers positioningBarneys New YorkJCPenneyDonna KaranDolce & GabannaGiorgio ArmaniJil Sanderhttp://www.barneys.comArizonaLeeL.E.I.Vanity Fairhttp://www.jcpenney.com

In-Store Brand/Product Choice Private LabelRetailers may offer their own brands, known as private labelsOffer consumers more choice alternativesOffer consumers lower-priced alternatives to the national brandMay appeal to more price-sensitive shoppersOffer products that have higher margins than national brandsOffer products that are exclusive to the retailer

In-Store Brand/Product Choice Private LabelIn general, shoppers prefer national brands to store brands, though:Some retailers offer exclusively private labelsThe GapLands EndPrivate label penetration varies by category64% of egg sales58% of milk sales30% of sour cream salesPrivate label has higher penetration in certain countriesBritain

In-Store Brand/Product Choice Private LabelPrivate label examples

In-Store Purchase Quantity Purchase quantity is driven primarily by promotional discountsThe limited time availability leads customers to stockpileSpecific promotions encourage larger quantity purchases:Of individual itemsBuy one; get one free3 for the price of twoTrial size with purchaseOf goods in the storeVolume discountsFrequent flyer-type programs