MKTG 2133 Retailing Management

Christhel Kaye G. Mametes

Formative Assessment 3

SUMMARY

The chapter focuses on how customers process information and make decisions about what
stores to patronize, what channels to use, and what products and services to buy. 1 It describes the
stages customers go through when making purchase decisions and the factors that influence their
buying process. Because typically it is not cost-efficient for retailers to develop unique offerings for
individual customers, retailers target their offerings to groups of customers (market segments) with
similar needs and buying processes.

The chapter discuss the consumer buying process by illustrating it through a scenario, the
buying process—the steps consumers go through when buying a product or service—begins when
customers recognize an unsatisfied need. Then they seek information about how to satisfy the need—
what retailers, channels, and products or services might satisfy the need. It was emphasized that there
are stages in the buying process which includes Need Recognition, Information Search, Evaluation,
Choice, Visit and Loyalty. Retailers attempt to influence consumers as they go through the buying
process to encourage consumers to buy merchandise and services from them. Each stage in the buying
process is examined in the following sections. The need recognition is the very crucial part in the buying
process this is where customers recognized their needs that motivates them to go shopping. It can be
classified into two types namely utilitarian needs- products that usually add ease to our lifestyle, goods
that are purchase for practical use and are based on consumers daily need. On the other hand, hedonic
needs goods that are consumed for luxury purposes, which are desirable objects that allow the
consumer to feel pleasure, fun, and enjoyment from buying the product. Once customers identify a
need, they typically seek information about retailers, channels, or products to help them satisfy that
need, we call this stage as the information search which can also be breakdown into two sources
Internal and external Sources. Internal Sources are information in a customer’s memory, such as names,
images, and past experiences with different stores. The major source of internal information is the
customer’s past shopping experience. Even if they remember only a small fraction of the information to
which they are exposed, customers have an extensive internal information bank to draw on when
deciding where to shop and what to buy. On the other hand, External sources consist of information
provided by a host of sources. People search for products and information using search engines such as
Google, visit the websites maintained by manufacturers and retailers, acquire information from
traditional media (e.g., advertising), read blogs, watch product demonstrations on YouTube, and ask
friends, in person and through social media.

Customers use those information to evaluate and select retailers, channels and products. The chapter
introduce multiattribute model is based on the notion that customers see a retailer, a product, or a
channel as a collection of attributes or characteristics. The model is designed to predict a customer’s
evaluation of a product, retailer, or channel on the basis of (1) its performance on relevant attributes
and (2) the importance of those attributes to the customer. After they’ve made the evaluation it’s time
to make a choice. Customers don’t always patronize a store or purchase a brand or item of merchandise
with the highest overall evaluation. The product or service offering the greatest benefits (having the
highest evaluation) may not be available from the retailer, or the customer may feel that its risks
outweigh the potential benefits. Other consumers make purchase choices based on a single attribute,
regardless of how well the offering performs on other characteristics. And the last part in the process
Post purchase evaluation, the buying process doesn’t end when a customer purchases a product. After
making a purchase, the customer uses the product and then evaluates the experience to determine
whether it was satisfactory or unsatisfactory. Satisfaction is a post consumption evaluation of how well a
store or product meets or exceeds customer expectations. This postpurchase evaluation then becomes
part of the customer’s internal information and affects store and product evaluations and purchase
decisions. Unsatisfactory experiences can motivate customers to complain to the retailer, patronize
other stores, and select different brands in the future.

The chapter also tackles the Types of Buying Decision, which can be classified into three types
namely processes: extended problem solving, limited problem solving, and habitual decision making.
Extended problem solving is a purchase decision process in which customers devote considerable time
and effort to analyze their alternatives. Customers typically engage in extended problem solving when
the purchase decision involves a lot of risk and uncertainty. Consumers engage in extended problem
solving when they are making a buying decision to satisfy an important need or when they have little
knowledge about the product or service. On the other hand Limited problem solving is a purchase
decision process involving a moderate amount of effort and time. Customers engage in this type of
buying process when they have had some prior experience with the product or service and their risk is
moderate. In such situations, customers tend to rely more on personal knowledge than on external
information. Furthermore, Habitual decision making is a purchase decision process involving little or no
conscious effort. Today’s customers have many demands on their time. One way they cope with these
time pressures is by simplifying their decision-making process.

The whole chapter emphasize the need to understand customers decision making and
purchasing behavior which is essential in market segmentation. Consumers go through several stages
when making a purchase decision: need recognition, information search, evaluation of alternatives,
choice of alternatives, purchase, and post purchase evaluation. It is important for retailers to
understand how they can nudge their customers closer to a buying decision at each step of their buying
process.

The importance of the stages depends on the nature of the customer’s decision. When decisions
are important and risky, the buying process is longer because customers spend more time and effort on
the information search and evaluation of alternatives. When buying decisions are less important to
customers, they spend little time in the buying process, and their buying behavior may become habitual.

The buying process of consumers is influenced by their personal beliefs, attitudes, and values, as
well as by their social environment. The primary social influences are provided by the economy,
consumers’ families, their reference groups, and culture. The chapter ends up with developing a
recommendation for retailers to properly segment the market to the customer and that is develop cost-
effective retail programs, retailers group customers into segments. Some approaches for segmenting
markets are based on geography, demographics, geodemographic, lifestyle, usage situations, and
benefits sought. Because each approach has its advantages and disadvantages, retailers typically define
their target segment by several characteristics.