"To compete and build customer loyalty, retailers must know what's in the mind of the customer," said Robert Verdisco, IMRA president. "They need to know how consumers live their lives, how they use the products they buy, and how consumption patterns cause consumers to buy from one type of retail outlet or another."
The results of the Consumption Behavior Study, "Understanding Your Customer," were presented at IMRA's 1997 Annual Convention by Roger Blackwell, president of Blackwell Associates, Inc., a retail consulting firm commissioned by IMRA to design the study and interpret the strategic meaning of its findings. Analyzing the nearly 4,000 responses to the survey, Blackwell stressed that consumption analysis reaches beyond what people buy in stores to examine why people may not buy a particular product, brand or buy from a specific store.
"Firms that only understand buyer behavior may do a good job of selling existing products within existing channels of distribution. But firms that understand consumption behavior are able to create value with new or improved products and distribution channels," stated Blackwell.
"For example, if an apparel retailer wants to find out what types of clothing its typical customers really want to buy, it might want to get into consumers' closets, literally. Enlightened retailers might ask women to show them how they put together their wardrobes -- how they use the fashions they own, which may span several years. From such an exercise, retailers can learn how consumers mix and match items, which items they choose to keep in their closets for many years, and why."
Frequent Shopper Reward
Another piece of the puzzle involves keeping the customer, as discussed by Brian Woolf, president of Retail Strategy Center, Inc., who pointed out that strategies to increase the retention rate of customers should take priority over strategies for attracting new customers.
"Retailers need to distinguish their real customers from the deal customers -- identify the top 20 percent or 30 percent of loyal customers who shop their store regularly and account for most of their sales, versus the bottom tier who come in once in a while to take advantage of a discount or promotion," Woolf said. "Then they need to reward their best shoppers with savings and incentives as opposed to continually losing money on below-costs customers."
Historically, mass retailing has treated all customers equally with a "one price for all" strategy, Woolf noted. Yet the value of a frequent shopper reward program is unquestioned not only by the small handful of retailers that have implemented such programs, but in other industries, such as insurance, where low-risk customers get lower rates, and magazine publishing, which offers subscriptions at prices lower that those at the newsstand.
Indeed, the Consumption Behavior Study revealed that if a store in which they regularly shop began offering a frequent shopper card, more than half of consumers (54 percent) would most appreciate a benefit of lower prices on specific products. More than two out of five (42 percent) said they would most like price reductions on any purchase after making a specific number of purchases.
Price May Not Matter
Yet price is not the overriding factor in consumers' shopping decisions. Consumers were asked to score their degree of agreement with a list of statements in order to learn what was most important to them about retail shopping and products. The results show consumers gave the most weight to "I shop more often at stores that make shopping convenient," followed by "Having a complete assortment of choices is important to me."
Seeing special tags or information about products on the shelves and speed at the check-out lane came next in order of importance among consumers. The first appearance of price being important to consumers wasn't found until the fifth slot with the statement, "To save money, I shop at discount stores whenever I can."
"In today's hypercompetitive retail environment, just having the products and brands people want to buy is not enough," Blackwell stated. "All retailers must deliver on the details that consumers think are most important in order to make their shopping experiences as painless as possible including the speed and ease with which they move through the retail/shopping process."
In conclusion, Blackwell added, the starting place in developing marketing strategies is to understand the minds of customers, especially their perceived problems and unmet needs.
"Products and services, as well as their distribution channels, should be developed based upon the problems or needs of the potential customers, rather than the problems of the firms that currently sell to them," he said. "When implemented well, the result may be that the market leaders not only delight the minds of those customers, but expand them to the point that they will never again be satisfied with the offerings of competitors."
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