Basics of Retailing

Market

markets Traditionally, a “market” was a physical place where buyers

and sellers gathered to buy goods. Economists describe a market as a
collection of buyers and sellers who transact over a particular product
class (such as the housing market or the grain market).
MAJOR FACTORS INFLUENCING BUYING
BEHAVIOUR

The buying behavior of consumers is affected or is influenced by a

number of factors. These factors are very broad, and, in general, affect
even normal behavior. The factors can be classified as -

• Cultural
• Social
• Personal
• Psychological
MAJOR FACTORS INFLUENCING BUYING
BEHAVIOUR
CULTURAL FACTORS - culture normally refers to the person's values,
preferences, wants and desires, which determine, to a great extent,
the person's behavior

For example, if the person is from a family of office goers, then risk
taking may not be strong. But, if the background is small business,
then risk taking will appear in his behavior
Need want and Desires
• Needs are the basic human requirements such as for air, food, water,
clothing, and shelter. Humans also have strong needs for recreation,
education, and entertainment.
• These needs become wants when directed to specific objects that
might satisfy the need. Our wants are shaped by our society.
• Demands are wants for specific products backed by an ability to pay.
Many people want a Mercedes; only a few can buy one
MAJOR FACTORS INFLUENCING BUYING
BEHAVIOUR
SOCIAL FACTORS - This includes Reference Groups, Family Influences,
Social Roles and Status

PERSONAL FACTORS - The stage in a life cycle of a human being or age

is a determinant of buying behavior.

The science of measuring and categorizing life styles is called

"psychographics".
MAJOR FACTORS INFLUENCING BUYING
BEHAVIOUR
• Psychographic examples include grouping customers based on social
status, interests, and opinions.

For instance, an auto manufacturer might use psychographic

segmentation to learn what its customers care about to create
products and marketing campaigns geared toward those individuals.
 Group Behavioural Tendencies
Successful, active, people with initiative, natural leaders,
Actualizers liking for sophisticated and well-known brands.

Very mature, satisfied and comfortable, prefer durable,

Fulfiller functional products of value

Career oriented, successful in career progression, will prefer

Achievers prestige products that indicate success to peers and colleagues

Young and enthusiastic, critical of low risk colleagues; will prefer and
Experiencers expend regularly on new designs in clothes, fast food, and entertainment gadgets

Group with Greater Resource

 Group Behavioural Tendencies
Believers Traditional and conservative, will prefer
traditional and tried products, will look upon
new goods with suspicion
Strivers Uncertain about future, insecure, seek approval
from superiors, Will favour and model the
mannerisms and styles of superiors.
Makers Practical, self-reliant family oriented, relatively
traditional, will like products, which are
functional and useful.
Strugglers The more resigned, passive, resource
constrained, very cautious customers

Group with Fewer Resources

MAJOR FACTORS INFLUENCING BUYING
BEHAVIOUR
PSYCHOLOGICAL FACTORS –

Motivation - The motive to buy something also arises from needs. Two
well-known early theories emerged from Maslow, and Herzberg.
Maslow's theory of hierarchy of needs
Hertzberg's Two Factors Theory
 Hertzberg's Two Factors Theory
The implications of Herzberg's theory in marketing can be simplified as

• Avoid dissatisfiers- Identify major dissatisfiers in your firm. Classify

them. Train yourself to avoid such dissatisfiers like a poor quality
product, poor communication skills, cluttered store, poor management
of services, and /or very negligent after sales service.

• Breed Satisfiers- Identify satisfiers in your firm. Project and market

products, optimistic behavior, congenial environment, customer
preferences and corporate reputation that satisfy the consumers and
meet needs like status, and recognition.
 THE BUYING DECISIONS
There are five roles easily discernable in a buying decision -

• Initiator- A person who first suggests the idea of buying a product

• Influencer- A person who can influence the decision by his views
• Decider- A person who actually decides what, how, and when to buy
• Buyer - The person making the actual purchase.
• User - The actual consume

During Diwali shopping, firecrackers are bought by the father, though the
children may influence and decide. But in a large-scale sale, the wife may
perform all the roles
 CUSTOMERS' BUYING BEHAVIOUR
Four forms of purchasing or buying behavior are normally observable
among consumers.

• Complex
• Dissonance reducing
• Habitual
• Variety seeking
 CUSTOMERS' BUYING BEHAVIOUR
Complex - This behavior occurs when customers get very much
involved in the purchase, and acquaint themselves with brands and
quality differences. This behavior normally occurs in three steps;

• Firstly, the buyer develops beliefs about the product.

• Secondly, attitudes or willingness to accept get developed in the
buyer.
• Thirdly a well thought out choice is made
CUSTOMERS' BUYING BEHAVIOUR
DISSONANCE REDUCING - Sometimes, in spite of high involvement, the
buyer may find it difficult to differentiate between brands. High
involvement occurs when the product to be purchased is
• costly
• needed infrequently
• the purchase is viewed as a high risk

HABITUAL - For many products, we never think and apply our minds
while making purchases. The best example is groceries
CUSTOMERS' BUYING BEHAVIOUR
VARIETY SEEKING - There are some products in which involvement
during buying is very low, but the becomes significant later, during or
after initial consumption.
THE BUYING DECISION PROCESS - A MODEL
Most firms research the buying decision made by customers on their
products. The research includes their brand beliefs, how involved they
are, how they came to know about the products or brand, and their
satisfaction on or after purchase. This enables the firm to prepare itself
for different customers and different products.
THE BUYING DECISION PROCESS - A MODEL
 Retail Strategy
A retailer who focuses on specific targets can provide a superior
offering to a specific group of customers, while the unfocused retailer
may be a second or third choice for everyone.

The strategic planning helps in -

• anticipating the consequences of decisions

• predicting events that may affect a business and
• directing the efforts and resources of a firm towards common
objectives.
 Retail Strategy
The four elements of strategic planning for retail are to understand –

• Objectives and mission statements of the organization

• Type of the organization
• Store image and target customers
• Sustainable competitive advantage.
Retail Strategy
Mission - well worked out mission statement provides employees with

• shared sense of purpose

• direction, and opportunity
• geared to long-term profit maximization
Retail Strategy
The retailers may define their objectives from the mission statement
that a firm will be able to –

• increase its efficiency of operation

• keep expenses in line
• seek the maximum opportunities for sales
• maintain and improve its customer relations
• flow back money in the business for modernization and
improvement of facilities
WHAT BUSINESS I AM IN
 Retail Strategy
The choice and decision on strategy depends upon your -
business area
customers and competitors

Successful retailers satisfy the needs of customers in their target market

better than their competitors do. By selecting a target market, retailers
indicate their preference, which consumers they will attempt to satisfy

By choosing a retail format, retailers determine the general nature of the

retail mix they will use to satisfy needs of customers in the target market
STORE IMAGE AND TARGET CUSTOMERS
A retailer's image is a result of -

• the way business is carried on

• the location from where the business is being operated
• the physical appearance of the store
The major elements in a consumer's view of a store are:

• The location of the store

• Its size, newness, type of fixtures and displays, width of aisles
• Type (age, reputation, social status, grooming, and so on) of sales people and other
store employees, o and their friendliness, courtesy, and merchandise knowledge
• Frequency of advertising and the style of ad layout (whether messed up, heavy with
headlines and sales pitches, or subdued, with much white space
• Number and genuineness of sales
• Quality and type of merchandise; how it is packed, displayed, and priced, the brands
carried
• General atmosphere of store, whether dark or well lighted, whether noisy, or subdued,
whether cheerful or sober, clean or cluttered, friendly or impersonal
• After sales experience with the store and its merchandise
• Emotional attachment and relationship with previous purchases
• Honesty and dependability; handling of adjustments and complaints
 SUSTAINABLE COMPETITIVE ADVANTAGE
Five important opportunities for retailers to develop sustainable
competitive advantages are -

(a) customer loyalty

(b) location
(c) vendor relations
(d) Management information and distribution systems
(e) low cost operations.
SUSTAINABLE COMPETITIVE ADVANTAGE
1) CUSTOMER LOYALITY - Customer loyalty is the commitment of the
customers to shop at store. S/He is emotionally attached to the firm for
some obvious reasons.

There are three approaches for developing customer loyalty

• Positioning
• Providing good customer service
• Offering unique merchandise
SUSTAINABLE COMPETITIVE ADVANTAGE
Positioning - It is by developing a clear and distinct image of their retail
offering. The image is consistently reinforced through their merchandise and
service in the customer's mind, as compared to its competitors.

Service – It takes considerable time and continuous training to build a

tradition and reputation for customer service, but it is a valuable strategic
asset because it can sustain this advantage for a long time

Merchandise – It is difficult for retailers to develop customer loyalty through

merchandise because competitors typically can purchase and sell the same
items. But it can be done by certain brands by offering Private labels
 SUSTAINABLE COMPETITIVE ADVANTAGE
2) LOCATION - "What are the three most important things in retailing? Is
"Location Laotian, and location".

3) VENDOR RELATIONS - By developing strong relations with vendors,

retailers may gain exclusive rights -

(1) to sell merchandise in a region,

(2) to buy merchandise at lower prices or with better terms than
competitors or
(3) to receive merchandise in short supply.
(4) to develop network in other regions where the vendor is operating
SUSTAINABLE COMPETITIVE ADVANTAGE
4) MANAGEMENT INFORMATIO AND DISTRIBUTION SYSTEM - How
best a retailer gathers the information related to target market,
merchandise, buying, assortment breadth and depth, market trend,
etc. and use them in the business for continuous growth

5) LOW COST OPERATIONS - Cost of operations is directly proportion to

size of the retail business. Larger the size of outlet, more is the cost of
operation.
All retailers are highly concerned about the costs of providing their
retail offering
GROWTH STRATEGIES
The retailers usually pursue four types of growth opportunities. These
are -
• market penetration
• market expansion
• retail format development
• diversification
GROWTH STRATEGIES
MARKET PENETRATION – A market penetration opportunity involves
directing investments toward existing customers, using the present
retailing format.

• One approach would be to open more stores in the target market in

location convenient to more of the firm's customers
• Another approach would be training salespersons to cross sell
GROWTH STRATEGIES
MARKET EXPANSION - A market expansion opportunity employs the
existing retail format in new market segments

RETAIL FORMAT DEVELOPMENT - It involves offering present

customers a new retail format. For example, "X," a catalogue retailer,
exploited a format development opportunity when it opened specialty
store

DIVERSIFICATION - It is an opportunity where an entirely new retail

format directed toward a market segment that is not presently served
ESTABLISHING RETAIL MIX
The way in which these goods and services are combined by a particular
retail store is the retailing mix. A good retailing mix provides a high
degree of satisfaction for target customers and results in customer
loyalty
TRADE AREA ANALYSIS
Store-location decisions involve two major considerations:

• Deciding on the general area to locate, that is, the city or trading area

• Selecting the specific site within that trading area

TRADE AREA ANALYSIS
DETERMINING THE TYPE OF LOCATION - A careful retailer seeking a
location considers several aspects of a prospective area such as:

• Population Factor
• Literacy Factor
• Trading Performance Factor
• Accessibility Factor
• Facility Factors
Types of Trading Areas