Term Paper Final Sumit Gupta EPGP 05 155

7/27/2019 Term Paper Final Sumit Gupta EPGP 05 155

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hanging Consumer

ehaviour in Multi-channel

etail mpact of Online Channel Sumit Gupta

EPGP-05-155

Course Project on Consumer Behaviour



This term paper shows how the consumer behaviour is changing in retail Industry

globally and in Indian Context. With the emergence of more channels of

shopping like online shopping and the devices used to make purchase like

smartphones, tablets and PCs, marketers need to change the way they market

products to both on- and offline consumers. To attract customers, retailers are

sending personalised messages via SMS or emails. The Indian retail landscape is

evolving from the brick-and-mortar model to adopt technology for connecting

with consumers. The aim is to achieve a complete seamless customer experience.

This paper helps you to understand how consumer relationships with technology are changing

through space and time, and what this means for brands and advertisers. Gen Y, the next big cohort,

is technologically savvy, has higher expectations of retailers and more disposable income to spend.Research studies have shown that purchase decisions made today are made before consumer enters

stores. Improved data connection and several smartphone apps to compare product features, price and

offers has empowered consumers to make informed decisions. The retails stores have now started

developing smartphone free apps to help customer to search for a particular product and the find the

aisle number where it is kept in the store to save time and money.

The paper also specifies the go-dos for the marketers and store owners to provide more value to the

customers and enhance their shopping experience. The Indian retail experience has gone beyond the

traditional brick – and-mortar store and includes numerous touch points such as online stores, social

networks, call centres, etc. Changing economic dynamics, diverse choices in products and services,

numerous shopping formats and unparalleled access to information has empowered customers to

expect more from their retail experience. In today‟s rapidly changing and digitally connected world,

customers are more value-conscious while making purchase decisions.

Abstract



From Purchase funnel to… Consumer decision journey The retail revolution is well underway and consumers are leading the charge. They‟re researching

their purchases online via their computers, tablets, & mobile phones and they‟re doing it both athome and in-store. Consumers want their shopping experience to be easy, seamless, and tech-enabled but they‟re not getting it from current retail environments.In the past, the retail industry thought of the purchasing as a sequential funnel, a traditionalmarketer-centric purchase funnel, which separates brand from direct response activities

Now, a trend is emerging in urban India retail industry which is shifting from a marketer centric purchase funnel to a consumer centric decision journey, defined by needs and motivation ofconsumers. Consumers go through a dynamic 5-stage decision making journey to buy goods andservices but it‟s not always sequential. Some may move smoothly through the 5 stages if marketersdo a good job of meeting their needs but many will go back & forth between stages and some getstuck if their needs aren‟t met.

Figure 2 Consumer decision journey

Awareness

Consideration

Preference

Action

Loyalty

Figure 1 Traditional Purchase Funnel



Digital channels have potential to guide customers smoothly through the decision journey bymeeting their needs from the very beginning of their journey through to the purchase point & beyond.

Two major themes emerged from the Consumer Decision Journey Blurring of the digital and physical – While many retailers still separate brick and mortar

from online retail channels, consumers see the two as connected, and they expect to feel thatconnection throughout their decision journey. Accessing circulars online and then bringingdeals and coupons into the store, reading consumer reviews while at the shelf, andconnecting back with a retailer through online channels if consumers have questions athome are all commonplace activities. But they‟re hardly seamless; consumers wantconnected experiences and more sophisticated means of moving from online channels intothe store and back again.

A deeper need for personalization - Few years ago, consumers were able to go to theirlocal grocer, drug and department stores and were known: sales associates would call them

by name, inquire about their children, provide personalized assistance and even follow upwith thank-you notes after their customers had left the store. Today, only the most high-endapparel shopping services offer anything close to a personalized experience, and even then,any pre-shopping that occurs online isn‟t carried through to the retail environment.

As an industry, we need to move beyond basic targeting, tracking and demographicsegmentation to drive deeper, permissioned engagement with consumers, where we delivervaluable and personal experiences in and out of the store.

Open to possibility

A sub-conscious stage

well before awareness

Decision to change/buy

Something prompts a

Conscious need or want

Evaluating

Elimination & compare stage,

even within seemin l sim le cate ories

Shopping

Consumers take action… o into a store or online to sho

Experiencing

Drive loyalty & advocacy…

or send consumers backwards



The blending of the digital & physical creates a need for brands & retailers to take consumers onhighly personalized & customized journey

According to ABC model of attitudes every attitude has three components: A for affective, B

for behavioral, and C for cognitive. Attitudes help determine what we do - what we eat, howwe vote, what we do with our free time, and so on. The retail managers decision should target at

least one of the above three components. E.g. visually appealing positioning of the products onshelves could

Importance to business and marketing

Understanding what the consumer needs and motivations are at each stage of the journeyarms marketers with the knowledge they need to help move consumers smoothly through to purchase.

What‟s more, it helps marketers invest their marketing dollars where they‟ll have the mostimpact, by identifying the main media influencers at each stage of the journey.

Refer section – Indian Retail Market - below in the paper which talks about the potential marketsize which indicates how understanding customer behavior can help businesses penetrate the

untapped market with the help of an example.

Two most prevalent purchase journeys identified in the new retail journey are –

Habitual Journey and

Considered Journey

The two differ in “Open to Possibility” stage of the 5-stage decision making journey.Habitual journeys are typically triggered by the need to replenish a specific product or set of

products. The „Open to Possibility‟ moment comes later in the journey, and can „slide in‟ prompted by a coupon, an ad, word of mouth or inspiration at the shelf.Considered is different from habitual because “Open to possibility” stage comes much earlier.„Open to Possibility‟ is a consumer‟s current state; it contains his or her awareness of products and brands that are available, as well as all the past experiences and associations he or she may haveaccumulated over time.

Considered (e.g. Auto, Electronics)

Open to possibility Decision to change Evaluating Shopping Experiencing

Habitual (e.g. CPG, Personal Care)

Open to possibility Experiencing

Shopping Evaluating

Experiencing Decision to change



Replenishing product is typically trigger to buy. The main reason for purchase is running out – 78%

However, nearly 20% are „Open to Possibility‟. This is where desir e needs to be buil t before entering the

store to spark the decision to buy or change.

Vs.Retai lers need to f ind a way to make the store more of a consideration

58%

17%27%

22% 19%9% 8%

Running Out Need Another Want Newer Saw an Ad Impulse Buy Recommendation Old/Underperform

Trigger to Buy or Change

Figure 3 Habitual Vs. Considered Journey

Getting

The Right

ProductThe majority of consumersare focused on getting the

right product at the right price

OverallShopping

ExperienceMinority of consumers are

focused on the overall shopping

experience

Needs50%

Of consumers makingHousehold purchasesare driven by needs

Wants36%

Of consumers makingHousehold purchases

are driven by wants



Vs.

L ists help consumers feel in control - most use paper, mobile is growing. Opportuni ty to help

customers by linking l ist to avail s, deals, seasonal produce

Online and Offline touch-points

36%42%

15%

31%

Take

Inventory

List on

Paper

List on

Mobile

List in

Head

3%

4%

6%

8%

8%

11%

13%

13%

16%

17%20%

Mobils apps

Online video

Portal/ Home pages

Forums/ blogs

Online Advertising &…

Retailer sites

Search

Price comparison sites

Brand product websites

Deal/ coupon sitesConsumer opinion sites

5%

9%

13%

17%

19%

22%

32%

Newspaper

VOD

TV shows

Magazines

Circulars/ flyers

TV advertising

Product samples



Important store characteristics

When consumers are evaluating price is important but the range plus a relaxed & convenient shoppingexperience is also important.

26%

26%

27%

28%

28%

29%

30%

31%

40%

43%

45%

56%

Familiar with Layout

Friendly/Helpful Staff

Trusted/Well-Known

Checkout Pleasant

Good Loyalty Program

Reputation for Quality

Clean/Tidy Store

Close to home

Everything in one place

Broad Range Products

Good Deals/Offers

Competitive Prices



Once in-store, consumers are prone to browse & purchase items outside their original list.

Opportunity to use Elaboration Likelihood model to persuade customers

Browse

whole

store

39%

Visit a

few other

areas

36%

Only visit

areas

needed

25%

Browsing

No list

44%

Other

items32%

Only

items on

list

24%

List Making

In the store

75% browse

Although 81%make some formof list nearly halfdon’t bring it

75% buy thingsregardless of

original list



The above observations and data indicates that consumer is more considerate about quality andavailability of product rather than the store. However, with the opening of multiple channels toacquire products, the customer desires a seamless and consistent experience across channels.Although the customer has options to buy products online but touch and feel of product is importantin buying decision for Indian customer. This indicates that customer will visit the store beforemaking the final decision to purchase the product. Before visiting store it is highly likely that thecustomer had done the prior research on internet about the product and compared it with other products. This gives an opportunity not only to retail store owners but also the smartphone/tabletsapp developers and product manufacturers to influence the behavior of the customers before makinga purchase decision. To increase the footfall in a retail store and persuade the consumer to buy products form their store the store owner should come up with innovative and personalized offers

which can influence their purchase decisions.Few models that a store owner can use to understand the customer behavior is discussed below -

The ABC Model of Attitudes: Affect, Behavior & CognitionAttitudes are generally positive or negative. They can also be uncertain at times. Every attitude has

three components that are represented in what is called the ABC model of attitudes: A for

affective, B for behavioral, and C for cognitive. Attitudes help determine what we do - what we eat,

how we vote, what we do with our free time, and so on.

Affect – this refers to emotional component towards attitude object. For retail stores – consider

store as attitude object. How the consumer feels about the store can be derived from their moral

belief and value system. E.g. consumer likes cleanliness inside the store esp. where food items are

kept. Keeping the area clean will help create a positive attitude towards your store in customer’s

mind.Behavior – this refers to the way consumer behaves when exposed to attitude object (store). Think

of it as what the first thought comes to the mind of your consumer whenever the name of your

retail store is mentioned. Is it positive or negative? Imagine a customer is does an online research

on a product to buy and finds online that it is available in store but then he actually goes to store

to buy it and finds that it’s out of stock. If repeated multiple times he may develop negative

attitude towards the availability of products in your store.

Cognitive - it refers to the thoughts and beliefs one has about an attitude object (store).An attitude

AffectBehavior

Cognitive



that is constructed primarily through facts instead of emotions or observations of our behavior is a

cognitively-based attitude. E.g. attitude of a customer towards your sore is based on facts & figures

like customer friendliness, time per transaction, waiting time in queue, loyalty points awarded

availability of products, access to similar things at one location etc.

Elaboration Likelihood ModelThe store owner can also persuade customer to purchase other products which he may want but

not need. As shown above in the survey results that only 36% of the purchase decisions are driven

by wants as compared to 50% of the decisions which are driven by need. Thus there is a scope to

persuade customer to buy a certain product. The store can use the below to methods to persuade

its customers

Central Route to Persuasion – e.g. if a person has purchased a Microwave oven last time he visited

a store. You may offer him (personalized offer) microwave safe utensils at discounted price. If the

customer is satisfied with the Microwave oven, it is highly likely that he will avail the offer

otherwise it may even lead to boomerang effect (opposite effect)

Peripheral route to Persuasion – e.g. if you have personal details of a customer like birthday

details or anniversary details, you may persuade customer to buy gifts from your store by offeringhim discounts on most popular gift items like rings, necklaces, watches, perfumes etc.

Involvement Theory



Indian Retail MarketIndia‟s retail market is expected to cross 1.3 trillion USD by 2020 from the current market

size of 500 billion USD. Modern retail with a penetration of only 5% is expected to grow about sixtimes from the current 27 billion USD to 220 billion USD, across all categories and segments. It‟sa new world for both retailers and the customers where the latter is the king. Indians spend 25.2%of their time on social networking websites. As we move from the world of skeptics to earlyadopters to ultimately the tacticians, online retailing and mobile retailing are the new modes ofgrowth.

India‟s large and aspiring middle class of 75 million households or 300 million individualswant products that are value-driven. The country‟s 500 million people under the age of 25 haveaccess to more money that has additionally resulted in independence, aspirations and a demand for products.

The Indian retail sector accounts for over 20% of the country‟s gross domestic product(GDP) and contributes 8% to total employment. The cumulative foreign direct investment (FDI)inflows in single-brand retail trading, during April 2000 to June 2011, stood at 69.26 million USD.The country‟s rural population of 700 million presents an opportunity for retail and consumercompanies that cannot be ignored.

Factors driving the organized retail sector include the following:

Higher incomes driving the purchase of essential and non- essential products

Evolving consumption patterns of Indian customers

New technology and lifestyle trends creating replacement demand

Increase in rural income as well as urbanization

Increase in easy access to credit and consumer awareness

Growth of modern trade format across urban, Tier I, Tier II and Tier III cities andtowns

Rapid urbanization and growing trend towards nuclear families

e-CommerceWe can always argue that the Indian e-Commerce industry is evolving. But on taking a

closer look at the industry, we realize that it will be worth US$ 70 billion by 2015 (according toASSOCHAM) with a steady growth of 35% CAGR. Both the retailers and the consumers have usedelectronic media cautiously. Issues relating to the use of credit cards, debit cards and online bankinghave kept some consumers at bay. The legacy of using the touch and feel of the product is a

critical attribute to the decision of buying. Internet or the electronic media is largely being used

by consumers for search, research, price comparison and finally the „store locater‟ to buy the product.A 2011 global online survey by Nielsen suggests that about 875 million consumers across theworld prefer to shop online. This represents a 40% rise from the 627 million online shoppersrecorded for 2009. The report confirms that 85% internet users in this period shopped online.The majority of e-shoppers were from South Korea, where a staggering 99% internet users were alsoe-shoppers. Japanese, German and UK consumers rank second while Indian shoppers rank third.

According to Google, India has more than 100 million internet users, half of whom make online purchases, and the number is growing every year. With such a large market size, retailers as well asconsumer goods manufacturers are entering the web space to attract potential customers

PwC‟s thought leadership report Strong and Steady – 2011 Outlook for the Retail andConsumer Products Sector in Asia indicates that the Indian apparel market is relatively untappedacross all categories. Clothing sales have been rising steadily in recent years, supported by a largemarket of young consumers and an increasing interest in Western fashion.For many Indians, low prices are a key purchase driver. The following factors drive the growth of



value fashion retail:• Increasing incomes are enabling Indian consumers to spend more and experiment across

products, brands and categories.• Apparel is no longer a functional category but one that conveys appearance, prestige and

image. Consumers want to buy apparel that is both affordable and fashionable.• The growth of modern trade has helped increase the demand for both branded and value

apparel. This, coupled with the emergence of new sectors and professional jobopportunities, has also helped drive demand for office wear.

• Over 50% of India‟s population is under 25. Young Indians are aspirational, demanding and focused on apparel that is both

• Current penetration of apparel in the organized retail category is 10%. This is expected toincrease to 30 to 35% by 2015.

Customers today care more about the retailing experience than they did in the past. Theirexpectations from retailers go beyond just shopping of goods and services. Today, consumers arelooking for a personalized, seamless and distinctive experience from the retailers.

Localized Experience - Given the amount of information retailers have about the customer behaviour, buying habits, etc. the consumer expects the retailer to ensure that the goods andservices are available in the stores when the customer walks in to shop.Seamless Experience - Consumers want to traverse multiple channels easily and enjoy a seamlessexperience. This means the physical store, web, catalogue, call center and kiosks have to beintegrated to ensure a consistent customer experience across these channels.Distinctive Experience - Apart from the competitive price, the customers seek a distinctive

shopping experience driven by best customer service. Retailers have developed customer friendlyreturn or exchange policies, loyalty programs, customer appreciation days, etc.

Figure 4 Evolution of Customer Experience

PwC Report - The Indian Kaleidoscope: Emerging trends in retail

Microsoft Internal Analysis Report on emerging trends in retail.

Class Notes

ABC Model

ELM

FCB

Persuasion

http://www.pwc.in/en_IN/in/assets/pdfs/industries/retail-and-consumer/retail-report-300812.pdf


http://education-portal.com/academy/lesson/the-abc-model-of-attitudes-affect-behavior-cognition.html#lesson

http://en.wikipedia.org/wiki/Elaboration_likelihood_model



http://books.google.co.in/books?id=prtctg_gW6kC&pg=PA55&lpg=PA55&dq=FCB+Grid+%2B+involvement+theory&source=bl&ots=tZAJ6d4Cl1&sig=yZHh3LWvjTC8ScTmRjYDYkTEsK8&hl=en&sa=X&ei=co2UU_7tFYi2uATkj4I4&ved=0CEAQ6AEwBg#v=onepage&q=FCB%20Grid%20%2B%20involvement%20theory&f=false

http://www.psychologyandsociety.com/routestopersuasion.html

















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Term Paper Final Sumit Gupta EPGP 05 155