The customer may always be right according to the old adage, but the customer may not always be profitable. This is reason that many retail companies are today rethinking their customer strategies. While the existence of the customer is integral to the existence of the retailer, the ability to understand consumers is the key to developing a successful retail strategy. To be able to satisfy the customer, it is necessary to understand them, their needs and how they respond to various marketing efforts done by retail organization. As competition increases and the customer becomes knowledgeable and demanding the retailer needs this knowledge to stay ahead of his competitors and build a competitive advantage.
An integral part of understanding customers is identifying the customer for the product or service i.e. the target segment and the demographics o this segment their needs and buying behavior. We started by understanding the need for studying the consumer; this is followed by a discussion on the factors that affect the retail shopper. The decision making process that a customer undergoes while buying is then examined. We also study the changes in the Indian consumer and understand what it means for the retailer. Lastly we look at how the retailer can use research as a tool for understanding markets and consumers.
The need for studying consumer behavior:
A key faced by the retailer is creating products and services which would be successful in the market. An accurate understanding of consumer need helps the retailer create product that is likely to be successful in the market. Consumer understanding or an understanding of the consumer buying behavior is the starting point of strategy creation. It is not only important o understand what consumers know about a product, but also what they do not know. This helps in determining the cannels of communication and the products that need to be created to cater the needs of the customer. Understanding consumer knowledge can also help a firm assess how well it has achieved its product positioning goals. The firm needs to study consumers to see how it is deemed success.
Retailers need to know the various influences that lead up to a purchase, not just the store where the purchase as made. This includes looking at a host of external and internal influences. The process starts with:
1) Understanding how the need for a product / service was determined
2) Understanding how information was sought by the customer
3) The process of evaluation of various products and stores
4) The payment process
5) The post purchase behavior
While understanding consumer behavior completely may not really be possible, it is in the best interest of the retailer to know his customers. The earliest attempts to study Consumer behavior were motivation research, which relied heavily on Freudian techniques. Consumers can be studied in a variety of ways, including through observation, electronic surveillance interview and surveys, experimentation and sales analysis or consumption research. Firms must examine the demographics (even geo demographics) of customers, as well as the role of group influence and personal factors like attitudes beliefs motivations etc. Population is not static in the long term; they move around with population ebbing and flowing like the sea. Growth areas emerge over time, quickly some slowly. Corporations analyze these population trends and start planning to enter or leave markets accordingly. This is the process of analyzing constantly the changing consumer trends competition, external sources of influences and company strengths and weaknesses. This may all sound very sound very easy but in practice it is often very difficult.
It is also important to know how, when and where the customers use the product or service that the retailer sells. An objective analysis of internal strengths and weaknesses must also be made. This is often difficult, for strengths are often overstated, while weaknesses understand. An analysis of the competition is also in order. Some firms welcome competition even trying to locate near competitors so that a critical mass can be created. Finally, the external market factors must be considered notably the economy but also technological and legal / political issues as well.