Week 7 Retail Consumer Behavior

Rational Behavior

Individuals use rational calculations to make rational choices and achieve outcomes that are aligned with their goals and maximizing self interest

Williams-Sonoma

Introduced bread machines and sales were slow

Added deluxe version that was 50% more expensive and original got more sales

Decoy Pricing/Effect

The addition of a third, less attractive option (the decoy) can influence our perception of original two choices

Asymmetrically dominated, completely inferior to one option but partially to the other 

Netflix

Basic, Standard, and Premium options 

Cost of zero cost

When free shipping was introduced, Amazon saw sales increases everywhere except for France.

French division offered 1 franc ($0.20) pricing instead of free pricing. When this was changed to free, France saw the same sales increases as elsewhere.

1994 study

Fettucine alfredo was the worse than eating a stick of butter.
The study gained popularity after calling this dish a “heart attack on a plate.”
Sales increased by 40% nationally

Retail Shopping Behaviors

Demographics, lifestyles, needs + desires, shopping behaviors, retailer actions

Demographics

consumer data that is objective, quantifiable, easily identifiable, and measurable

Age, ethnicity, income, education, geographical location, home ownership

Median household income

$68,000

Median individual income

$43,206

Top 1% earn

$361,000

Top 10% earn

$125,100

How much do you need to earn to be in the top 1% globally?

$38,000

Demographic data

There are 5 million more females than males
Three-fifths of adult females are in the labor force
30% of all U.S. adults have at least a four-year college degree

Lifestyles

Ways in which consumers and families live and spend time/money
Social status, daily activities, food habits, and buying preferences
Lifestyle brands attempt to embody a customer segment’s lifestyle

Brands

Lululemon, North Face, Nike

How lifestyles are developed

Based on social factors and psychological factors

Aspirational group

A person does not belong but wishes to join

Lifestyles: Psychological Factors

Perceived Risks
• Functional
• Physical
• Financial
• Psychological
• Social
• Time

Reduce functional risk

Product usage testing by retailer; Simulate
wear for new goods.

Reduce Physical risk

safety testing, reduce salt and fat in food
products

Reduce Financial risk

money back guarantee and exchange privileges

Reduce Social risk

Co-branding of private label products with major high-quality national brands (Kirkland by Starbucks)

Reduce Psychological risk

showing empathy for consumer

Reduce Time risk

Double money back guarantee (refund double cost); car dealers picking and returning recalled cars

Gender Roles

Membership group

A person who does belong

Dissociative group

A person does not want to belong

Face-to-Face group

Intimate family or peer groups, most effective

Consumer Sophistication and Confidence

Poverty of Time

Component Lifestyles

Choosing products and services that meet diverse needs and interests rather than conforming to traditional stereotypes.