Consumer Buying Behavior, Search, and Factors Affecting

External Search Effort

Overview

• Consumer decision process with a focus on consumer search.

• Reaction from retailers—do retailers like to be “shopped” or “searched?”

• Market structure that results from search.

• Search costs, demographics, and segmentation.

Problem Recognition

Search

Alternative Evaluation

PurchasePurchase

EvaluationPurchase Act

Interpersonal Determinants

•Cultural Influences•Social Influences•Family Influences

Personal Determinants•Needs and Motives•Perception•Attitudes•Learning•Self-Concept

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An Integrated Model of the Consumer Decision Process

Customer Buying Behavior

• Extended problem solving: used to buy products which represent risk (financial, physical, social). Consumers spend time and effort in making the purchase.

• Limited problem solving: consumers are experienced with the product and risk is perceived to be limited.

Comparison of Extended and Limited Problem Solving

• Extended• Seek information

through literature, sales people.

• Seek opinions of family, friends.

• Want warrantees, guarantees.

• Limited • Minimal effort.• Use personal

knowledge instead of seeking external information.

• Subject to impulse buying.

Customer Buying Behavior

• Habitual decision making: low-risk routine purchasing decisions.

• Determined by:

--Brand loyalty.

--Store loyalty.

Retail Market Segmentation

• A group of customers whose needs are satisfied by the same retail mix because they have similar needs and go through similar buying processes.

External Search Effort

• “The degree of attention, perception, and effort directed toward obtaining environmental data or information related to the specific purchase under consideration.”

Search continues up to the point where the anticipated gains from search are exceeded by the costs:

Stores visited and Alternatives products sought

George Stigler, 1961

Gains of Search: Shopping can be worthwhile!

A consumer gains come from:– Finding new merchandise

• New brands,• Sizes• Flavors

– Learning about new products– Learning the distribution of prices.

Shopping is not free.

• Costs of search are:• Travel costs• Time• Energy, physical and psychological

• Search for the lowest price—then go back any buy.

Market Environment:Factors increasing search

• Increasing number of alternatives• Number of brands in the market• Number of retail firms in competition

• Wide distribution of prices• Geographic concentration of stores

• Regional malls• Downtown shopping districts

Marketers can increase search by increasing the amount of information in the market

• Advertising• Point-of-purchase• Sales personnel• Packaging• Experienced consumers• Independent information sources

Product: Factors increasing search

Relatively high prices– Automobiles– negotiated prices– allowance for trade-in

Highly differentiated products– Furniture, brands unimportant

"Positive" products– Products which are enjoyable to shop for,

rewards, boats, for example.

Potential Payoff/Product Importance

• Price

• Perceived Risk

• Social Visibility

• Status of Decision Making Activity

• Style and Appearance Importance

• Length of Commitment Necessary

Demographic Segmentation

• Age.

• Sex.

• Ethnicity.

• Income.

• Family size.

• Education.

Consumer Characteristics

Learning and experience (decreases search), process can become routinized.

Shopping orientation– Purposeful– Recreational

Age, gender, household life cycle -- What are the costs of time at different demographic stages?

Individual differences

• Ability to judge (+)

• Tolerance for ambiguity (+)

• Enjoyment and perceived search benefits (+)

• Education (+)

Situational Factors

Time availability, more time -- shopping can occupy that available time.

Purchase for self (versus gift) decreases the search.

Pleasant surrounding increases time spent shopping.

What about convenience goods?

• With respect to price, weekly expenditures on grocery items, health and beauty aids, and prescription drugs are significant components of the household budget.

• How does external search effort or process evolve within a changing household?

“Buying a new car”

• What is the purpose of a salesman?

• Do car dealerships appreciate customers who leave the negotiation phase to visit another dealer?

• Why is Saturn a different car buying experience?

Distribution intensity

Shopping goodHigh search Convenience good

Limited search

Number of stores carrying

Sales

Comparison of price and quality Very little Considerable Very little

Importance of convenient location Critical Important Unimportant

Purchase frequency Frequent Less frequent Infrequent

Planning time involved in purchase Very little Considerable Extensive

CONSUMER FACTORS

FactorConvenience

ProductsShopping Products

Specialty Products

Marketing Impact of the Consumer Products Classification System

Importance of store image

Number of retail outlets

Distribution channel length

Promotion

Price

Unimportant Very important Important

Many FewVery few; often one per market

area

Long Relatively short Very short

Advertising and promotion by

producer

Low

Personal selling and advertising

by both producer and retailer

Relatively high

Personal selling and advertising by producer and

retailer

High

MARKETING MIX FACTORS

FactorConvenience

ProductsShopping Products

Specialty Products

Marketing Impact of the Consumer Products Classification System

Retailer Reaction to “Search”• Retailers prefer to “reward” consumer

search for variety—finding different products.

• Retailers prefer to “defeat” consumer search on price—matching competitors on identical items.

• Opportunities for suppliers who can maintain differentiated assortments for retailers.

Changing Nature of Search

• What would happen if search on price had almost no cost? Can you think of a current scenario?

• What happens to consumer search when retail competition becomes increasing concentrated?– Price distribution?– Product variety?