Know your consumer, it pays

To be successful in retail, a retailer needs to know his consumer and his purchasing behaviour. Dr Ravipreet S. Sohi lists the different types of consumers and makes suggestions on how to attract and retain them The success of a retailer depends on his understanding of his customers. In order to do this, it is important that he recognises how people make their purchase decisions. Whenever consumers buy goods or hire services, they use some form of a decision-making process. There are four types of decision-making processes: extended decision-making limited decision-making routine decision-making impulse purchase Which decision-making process the customer follows depends on the situation. Sometimes, the decision-making is done at the subconscious level and consumer may not be aware of it. Each of the four processes has different implications for retailing. Extended decision-making This occurs when a consumer spends a lot of time gathering information and evaluating the alternatives before making the purchase. Normally, this occurs for expensive, more complex items with which the customer has no prior experience. Examples of such products can be an automobile such as a car, a major appliance such as a refrigerator or a washing machine, or a high-value electronic item such as a computer, television or music system. Suggestions to retailers: For such items it is important for retailers to have trained salespeople, printed materials, and other forms of communication to provide as much information as possible to a potential buyer. The retailer should try and use a low-key selling approach so that the shopper feels comfortable and not pressurised in any way into making the purchase. Internet as a medium: With more people becoming Internet savvy, companies can also use the Internet as a medium for providing information about their products. For example, in the US, Honda has created an excellent website for its products (www.honda.com). Customers can view the new car models online and check their features and prices. When they decide to make a purchase, they are linked to the dealers' websites, where they can see online the various vehicles available in each dealer's inventory. They can request quotes by e-mail from different Honda dealers in their area. With this information they can negotiate a price, again by e-mail, with a dealer and make the deal. All that is left to do is for the customer to visit the dealership, inspect the vehicle and sign the papers. Limited decision-making In limited decision-making, the consumer does not spend as much time gathering information and evaluating the alternatives as in extended decision-making. Typically, the limited decision-making process occurs for medium-price products that the consumer has bought before, but on an infrequent basis. This form of decision-making is relevant for retailers such as clothing stores and department stores. Consumers spend some time shopping around and analysing the alternatives according to their desires and standards before making a choice. Suggestions to retailers: The shopping environment and product assortment are very important in this situation. Sales personnel should also be available to answer questions and differentiate among the products and brands. Routine decision-making The routine decision-making process takes place for lower priced, frequently bought products. This category includes items such as branded food products and daily need items. For such products, customers spend little or no time shopping around. They usually buy the same brands, and often from the same retailers. Suggestions to retailers: For such products, it is important for the retailer to have a good location, convenient hours, clear merchandise displays, and most important, availability of the products. Impulse purchasing Impulse purchasing takes place when customers walk into a store and buy something they had not planned to earlier. Typically, this occurs for items such as magazines, chewing gum, confectionery items and cigarettes. For these items, consumers do not spend time evaluating the alternatives and making a decision. They buy the item because it catches their eye. Suggestions to retailers: Retailers should display such items near the payment counters. The idea is for these products to draw attention at the last-minute, when the shopper is preoccupied with making the payment and has no time to think about that purchase. Post-purchase behaviour Retailers should also realise that customers do not stop their decision-making once the purchase is made. Most people tend to reevaluate their purchase decision, especially for high-value items, because of doubts about their choice. This is called post-purchase behaviour. Is the product performing as promised? Did the retailer act as expected? Could they have purchased the product at a better price elsewhere? Suggestions to retailers: It is important for the retailer to reinforce the customer's decision and erase these doubts. After sales follow-up by a phone call or a service visit, especially for high-value items can be very beneficial. This shows the customers that the retailer cares about them. It can dispel the customers' doubts about the purchase and increase their level of satisfaction. Satisfied customers tend to make repeat purchases from the same store and give favourable recommendations to their family and friends. Dissatisfied customers, on the other hand, can ruin sales opportunities through bad word-of-mouth publicity. Negative sales drivers In addition to understanding the consumer decision processes and post-purchase behaviour, retailers should also try and understand what drives people to buy or not buy during a visit to their store. Here are some of the reasons why shoppers, who are interested in making a purchase, may leave the store without buying: Products in the store do not appeal to them They cannot find the product they are looking for, or it is out of stock No sales help is available They cannot get in and out of the store easily Prices are too high The shopping experience in the store is not very pleasant They cannot find good value for money The merchandise is not displayed properly in the store. Thus, it is evident that a retailer must understand the kind of customer that is visiting his outlet. That done, the retailer should develop strategies to ensure that he makes a conversion and also makes the customer a regular visitor to his shop. Having a finger on the customers' pulse will ensure that both, the retailer's customers and business, grow.