UNDERSTANDING THE

RETAIL CUSTOMER

Peter Drucker, ‘business

exists to satisfy customers’

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Intro
 It is the consumer who determines the growth, prosperity, and even
existence of a Retailer.

 The ability to understand the customers is the key to developing a

successful retail strategy.

 The behavior of retail shoppers varies across markets.

 An integral part of understanding customers is identifying the

customers----- target segment
----demographics of this segment
----their needs and buying behavior

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 In short span of little 10 years, the change that
occurred in the Indian consumer is phenomenal.
Liberalization and a steady economic growth have
been the main factors that have driven this stage.

 Retail strategy is largely information based. The

gathering and analysis of data relevant to the retailer
is done by market research.

 In a world of increasing competition, research can aid

the retailer in satisfying the customer and thereby,
building loyalty.

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Need For Understanding
Consumer Behavior

 Accurate understanding of the consumer

needs helps the retailer to create the
products that are likely to be successful
in the market.

 Understanding of the consumer behavior is

the starting point of strategy creation.

 Helps the firm to assess how well it has

achieved its product positioning goals.
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 Understanding how the need for a
product/service was determined
 Understanding how information was
sought by the customer
 The process of evaluation of various
products and stores
 The payment process
 The post purchase
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Paco Underhill in his famous book” why
we buy, The science of shopping” bring
out some key facts about how
consumers buy and the various
influences on them. The book brings out
the key fact that most purchasing
decisions are influenced and made on
the shop floor itself.

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Factors Influencing The Retail
Shopper
 Range of Merchandise:

 If merchandise is similar to that of

another store or what is commonly
available, the customer may not see any
reason why he should not switch stores.

 The range of merchandise offered plays

an important role in the case of
categories like durables, book, music and
other lifestyle products.
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 Convenience of shopping at a
particular outlet:

 Example: while buying medicines, most

parties would prefer to buy from the
chemist near the doctor’s clinic or near
the hospital.

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 Time 2 Travel

 The time taken to reach a particular

retail location in fast is becoming critical.

 Take the case of metros like Mumbai,

where the travel time is high.

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 Socio Economic Background & Culture

 The Socio Economic Background & Culture of the

consumer largely determines his life style.
 This influences the kind of store that he may be
comfortable shopping in.
 Consumer buying behavior varies from market
to market and is largely influenced by the
culture of the region.
 Example: Asian culture is very different from
Western culture.
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 The need hierarchy is different for each
market

 It would be important to the retailer to

consider socio economic changes in a
geographic region over a period of time
as it would be an indicator of the
facilities available at various levels and
the quality of life of the population,
which would indirectly be related to the
spread of organized retail.
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 SOCIO ECONOMIC INDICATORS OF CHANGES IN INDIA
1991 - 92, 1996 - 97, 2006 – 07
INDICATORS 1991- 92 1996 - 97 2006 - 07
LIFE EXPECTANCY (IN TERMS OF YEARS) Male 57.7 60.1 66.1
 Female 58.7 61.1 67.1
 Infant mortality rate (per thousand births) 78 (a) 68 (b) 48
 Death rate (per thousand) 10 8.7 7.4
 Birth rate (per thousand) 28.9 28.72 21.7
 Fertility (per thousand) 130.3 113 91.4
 Literacy rate (%) 15 – 35 years 56 90 100
 7 years & above 52 75 90
 Per capita consumption of food grains (Kg) 182 193.6 225
 (a) Village without drinking water (thousands) 3.0(D) 0 0
 (b) Village partially covered 150 NEG 0
 Electricity as a source of lighting Rural 27 ( c) 50 80
 Urban 75 ( c) 80 95
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 The Stage of Family Life Cycle

 The stage of FLC that the customer

belongs to, largely influences his needs.

 Example: The needs of a young bachelor

will be different from the needs of family
with children and it is again different
from an elderly one.
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Customer Decision Making
Process
 The need for a product or service starts at
the time when the need for that particular
product or service is recognized. A need
may be psychological or functional.
 Psychological needs are associated with
personal gratification that the customer
may get from purchasing or owning the
product.
 A functional need is directly related to the
function of the product.
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Steps Involved In Consumer
Decision Making Process:

Search Evaluation
Need for Store Purcha
Visits of Option se
Recognitio Inform
n ation Decisio
n

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Steps Involved In Consumer
Decision Making Process:

 Identification of a need for the product

or service

 Search for information

 Evaluating alternatives

 The purchase decision

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Identification of a need for the
product or service:

 Typically, a consumer may realize

that he needs a product when the
current product he is using does not
meet his expectations or when he
sees a product or an advertisement
for the same and feels the need to
purchase it.

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Search for information:
 This step involves how the gathering
of information on how to solve the
problem. This search may be

 Internal – from memory

 External – friends, family, published

sources, sales person, internet etc.

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Evaluating alternatives:

 This evaluative criteria are used by

consumers to consider different options.

 These could vary from person to person

and may be influenced by situation.

 It also depends on product, occasion for

purchase and the buying environment.
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The purchase decision:

 Here the decision is made about first,

whether to buy or not.

 Numerous displays in a store may cause

a person to change his/her mind while in
the store perhaps , a sales clerk may
convince him to change brands or even
the amount he planned to spend.

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Key factors influencing consumer
behavior:
 Psychological Factors
 Consumer Needs and Motivation
 Perception
 Learning
 Believes and Attitudes

 Cultural Factors
 Culture
 Subculture (
 Social class (occupation ,education, income)

 Social Factors
 Reference Group
 Family
 Family life cycle
 Role and Status
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 Personal Factors
 Age and life cycle
 Personality
 Self Image
 Occupation
 Life – style (way in which people live and spends money)

 Economic Factors
 Personal income
 Family income
 Income expectations
 Savings
 Liquidity position
 Consumer credit

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 Previous Beliefs and
Shopping attitude
experience

Recognize
Evaluate options Store
Desire to decision outcome
shop And select store visits

How customers develop loyalty towards a store

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Market research
 Retail strategy is highly information based.
 Timely and relevant information is essential
to provide an adequate basis for day to day
decision making.
 A market activity deals with following
logical steps
 Collection of Data
 Analysis of the data collected &
 Deriving conclusions on the basis of data
collected.

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 The data collected may be

 Primary data
 Retailer collects this for a specific purpose

 Secondary data
 This may be Internal Sources like sales figure,
company reports, consumer complaints etc., &
External Sources like government statistics,
research done by commercial research agencies
and financial agencies.

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 From the retailers’ perspective
market research is done:

 Prior to setting up a Retail Store

&

 After setting up a Retail Store

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Prior to setting up a Retail
Store:
 Whether he should go ahead with the
store in the region/state/country.

 The primary information that he

would need to look at would be:

 Demographic Data

 Customer Data

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Demographic Data
 A study of the overall population, the age,
the literacy rate, social and economic
trends are termed as Demographic
Trends.

 They help the retailer understand the

diversity of retailing in a particular
region/nation.

 Many times this serves as the starting point

for understanding consumer profile.

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Issues that a retailer would look
into:
 The population: second in the world after china and
worlds largest democracy

 GDP and purchasing power parity: india is considered

to be fourth largest economy in terms of PPP.

 Age profile of population: cause of needs varies.

 Information on customers: National council of Applied

Economic Research ( NCEAR), Market information
survey of Indian households (MISH)-primary data,
National Readership survey- trends in both urban and
rural-conducted by 3 agencies ( IMRB, TNS Model ,
AC Nielson)

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After setting up a Retail Store
 Now Retailer would be concerned primarily
with the level of satisfaction of the target
customer.
 Here the research can help the retailer in
the areas:
 Evaluating Customer Satisfaction with the range
of Products and Services.
 Generating Ideas for and Developing Products.
 Evaluating the Acceptability Of The Products and
Pricing of New Products.
 Understanding Customer Profile.

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 As the retailer expands to multiple
locations, research becomes
essential. The methods commonly
used by retailers are:
 Focus group discussions
 Accompanied observation
 Profiling customers as they enter/ leave
the store to understand what they have
purchased etc.
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