Tag Archives: buying behavior

The Value Proposition for Bricks and Clicks Retailers

I’m not aware of one retailer that does his/her business without customers. Indeed, retailers that have plenty of loyal customers enjoy a competitive advantage and are doing well. So, how do they do it?  Retailers with a clear and effective value proposition at least know who their customers are, what they want and need and why are they coming back. Above all, retail customers can also be found online…

With the advent of the internet and subsequent social media networks, the way that retail customers interact with retailers, products, and patrons has changed. In fact, in today’s tech savvy society, shoppers have access to brands 24/7, from websites to mobile apps to storefronts. Therefore Bricks and Clicks retailers (retailers that use both the physical and online retail channels) need to develop a value proposition for their store and online customers.

What is a value proposition?

A value proposition is an entire set of experiences, including value for money that an organization brings to customers 1. Importantly, customers may perceive this set or combination of experiences to be “superior, equal or inferior to alternatives”.

The customer value proposition can also be explained by this equation: value = benefits less (-) costs. The equation suggests that customer value comprises positive consequences (benefits) and negative consequences (costs). When customers perceive greater benefits than sacrifices, customer value is created 2. Perceived benefits and costs for retail customers are shown in the Table below.

Customer perceived benefits Customer perceived costs
Transactional – lower prices, lower interest rates; Monetary – maintenance costs, running costs, disposal costs;
Relational – product quality, service support, delivery, personal interaction Learning costs – time and money needed to learn how to use a product;
Functional – finding the right products, convenient shopping hours. Logistics costs – delivery costs, time to deliver.

How do customers perceive value?

Customers perceive value on the benefits of the product or service they receive. Consequently, as the environment changes, and the customer experience and their needs change, the value they seek also changes. Before the advent of the internet, retailers that had the most knowledgeable sales persons were valued by customers, especially when they shopped for specialty products. However, nowadays, in the digital era, customers can not only get comprehensive product information online, but they also can read product reviews and compare prices.

Retailers need therefore to communicate their value proposition also in the online channel, through their websites and in social media networks.

The value proposition for online customers

Retail customers are rapidly engaging in the online channel. Indeed, there are, according to Dr Dave Chaffey, Smart Insights, 27 Apr, 2017, 2.8 billion active social media users. With these billions of social media users, retailers are no longer in control of customer relationships. Instead, customers and their highly influential virtual networks are now driving the conversation, which can trump a retailer’s marketing, sales and service efforts with their unprecedented immediacy and reach 3.

Kumar and Reinartz 4, 2016 said the following about how customers perceive value online:

For many online services (e.g., Google Maps, Facebook), customers are not expected to pay in monetary terms. The core benefit is free of monetary charge from the end user’s perspective. The monetization comes mainly from advertising revenues, with ads targeted at narrow segments or personal individual profiles. However, in the context of digitization, a new cost related aspect has been emerging.

“Customers now have to understand the value of the personal information that they will give up in this exchange. Thus, customers pay in terms of less privacy instead of monetary outlays. In fact, some customers value privacy of personal information privacy so much that they would be willing to pay to preserve privacy – this then creates a market for privacy” concluded Kumar and Reinartz 4.

What if you don’t have a value proposition yet?

The purpose of retailers is to create value for their customers. Therefore a value proposition equates to a positioning statement because it defines “who is the target customer?” as well as “why should the customer buy it?” and “what are we selling?” 2. According to Rintamäki, Kuusela and Mitronen, 2007, a value proposition should:

  • Increase the benefits and/or decrease the sacrifices that the customer perceives as relevant;
  • Build on competencies and resources that the company is able to utilize more effectively than its competitors;
  • Be recognizably different (unique) from competition; and
  • Result in competitive advantage.

GetToGrow mentioned the following advantages of a value proposition

  1. Gives direction. A value proposition gives you direction by defining your ideal target audience right up-front, and then identifying and understanding a core need that you look to satisfy with your planned solution.
  2. Creates focus. A robust value proposition gives you and your team focus by identifying the fundamental initiatives, activities and aspects of your business that will have the greatest impact on meeting your defined target audience’s needs.
  3. Breeds confidence. Confidence comes from knowing that you’re making a difference to the people that you’re serving, that you’re doing so in a way that’s meaningful to them, and that your actions are aligned to delivering an overall remarkable experience.
  4. Improves customer understanding and engagement. By grounding your solution in an understanding of your audience and their specific need, you can engage with them in a much more compelling and effective manner.
  5. Provides clarity of messaging. The value proposition frames not only how you’re creating value for your audience by addressing a core need, but critically why your solution is better than what they are currently doing or using, or versus whatever else is potentially out there that could do so.
  6. Increases effectiveness of marketing. By truly understanding your desired customers and their core need that you’re solving for, you’re able to focus on the channels and vehicles that are most relevant, and will effectively communicate the benefits and advantages of your solution.

Concluding

Retailers that know and understand their customer’s needs, want and wishes the best can communicate a superior value proposition to them. By using ‘big data’ or your internal sources of customer data, your firm’s value proposition can be customized and personalized. However, care should be taken not to infringe on the individual’s privacy.

Further reading:

Implementing Social Customer Relationship Management in Retail

Video: Value Propositions and Positioning

 

Notes:

1 Hassan, A. 2012. The value proposition concept in marketing: How customers perceive the value delivered by firms–A study of customer perspectives on supermarkets in Southampton in the United Kingdom, International journal of marketing studies, 4(3):68.

2 Rintamäki, T., Kuusela, H. and Mitronen, L. 2007. Identifying competitive customer value propositions in retailing, Managing Service Quality: An International Journal, 17(6):621-634.

3 Heller Baird, C. and Parasnis, G. 2011. From social media to social customer relationship management, Strategy & Leadership, 39(5):30-37.

4 Kumar, V. and Reinartz, W. 2016. Creating enduring customer value, Journal of Marketing, 80(6):36-68.

Image:

Flickr.com

Webrooming and Showrooming – Buying Behaviors of Retail Customers in Virtual and Physical Environments

Webrooming and showrooming are popular jargons that describe how retail customers use different combinations of online and physical channels to search for information about products, corroborate this information and make the purchase 4. These customers are tech savvy and they use their mobile phones to great effect to help them to decide what to buy where and at what price.

Both Bricks and Mortar retailers and Clicks Only retailers were slow to react to the changes in the buying behavior of their customers. However, Bricks and Mortar retailers are now adding the online channel to their business and Clicks Only retailers are opening physical stores. The adoption of the omnichannel by retailers couldn’t happened sooner. Hence Bricks and Clicks retailers…

Brain Eisenberg, quoted by ClickZ said that “Retail does not exist without an online component and online retail isn’t as cost-effective if you don’t have a brick-and-mortar component.” “We’re connected all the time through the phones in our pockets, but we live in a physical world”, said Eisenberg.

Webrooming and showrooming

Showrooming

Most of us has done showrooming at least once before. Showrooming is when you visit a store, saw a product you like, but then purchase it online instead of from the store 1. According to Douw G Steyn, author at Bricks2Clicks, the advent the internet has led to the adoption of innovative digital technology and the rolling out of broadband mobile connectivity.

At the same time, consumers quickly learned how to use mobile devices to compare products and prices when shopping 2.  These tech-savvy consumers are changing the fundamental consumer-retailer relationship and showrooming is fast becoming a problem plaguing the retail industry.  In the past few years, as online shopping exploded and smartphones became the norm, the showrooming phenomenon — consumers using their phones to comparison shop in stores — seemed poised to gut the revenue of offline retailers.

The real hurdle, though, is pricing writes Ann Zimmerman in the Wall Street Journal 5. “Lower prices are one of the main reasons people pick Amazon and other internet-only emporiums over traditional retailers” said Ann.

Machavolu and Raju, 2014 6 advice retailers to do the following to counter showrooming:
  1. Adopt a Collaborate-and-Coordinate business model. In today’s business set-up, manufacturers and retailers, both are working in different silos and eventually end up contending against each other. But it will be fine if both operates together to offer customized solutions that exactly suits their shoppers’ needs.
  2. Treat customization as the mantra for success. Customization programs can only be successful when retailers believe they are a key areas of focus for all their staff. Treating the programs as only a ‘side task’ may result in mediocrity and leave the retailers worst off than before.
  3. Lay emphasis on customer experience. The new age customers want themselves to be part of the process while the product is being planned, developed or delivered, hence companies must focus on getting their customers involved in doing so.

Luo, et al (2014) 2 have identified two measures that retailers can take to influence shoppers’ intention to showroom, namely 1) to reduce the online-offline price difference and 2) to improve the level of employee knowledge competency. Webrooming is nowadays recognized as an opportunity that retailers can use to counter the showrooming phenomenon.

Webrooming, which is similar (but opposite) to showrooming is a manner which customers use to help them in making their buying decisions.

Webrooming

Webrooming is the opposite of showrooming.  Showrooming is when you’re standing in a store, and you pull out your smartphone to see if you can get a better price online. However, webrooming is when you’re searching online, check what item you like and go to the store to pick it up 3.

“Webrooming is actually nothing new. Since the early days of online shopping, more people have researched their shopping online than have actually bought there”, says Emily Adler in Business Insider. Emily highlighted results from a recent report from BI Intelligence:

  • Webrooming is more common than showrooming. In the U.S., 69% of people practice webrooming, while 46% do showrooming.
  • The data shows that millennials prefer webrooming. For electronics, shoes, sports equipment, and cosmetics, more millennials say they prefer to webroom, rather than research in store and then buy online.
  • Amazon remains the No. 1 place where showroomers end up making their purchases. But it’s an even more popular destination for webroomers who ultimately buy elsewhere.
  • Only recently have Bricks and Mortar retailers begun to capitalize on webrooming. They’re using tactics like knowledgeable sales staff, in-store pick-up of online orders, in-store Wi-Fi, and smartphone discounts that nudge showroomers to buy in-store.
  • New initiatives for the connected in-store experience keep popping up: tablets and mobile phones used as register systems. Also robotic arms that deliver clothing into dressing rooms, and beacon hardware, which powers in-store maps and automatic hands-free payments.

Concluding

It seems that retailers are starting to catch up with the buying behavior of their tech savvy customers. Whether their customers are webrooming and showrooming , the retailer’s main goal should be to get the sales through their businesses.

Notes:

1 Quint, M., Rogers, D. and Ferguson, R. 2013. Showrooming and the rise of the mobile-assisted shopper, Columbia Business School, Center on Global Brand Leadership.

2 Luo, Q., Oh, L.B., Zhang, L. and Chen, J. 2014. Examining the Showrooming Intention of Mobile-Assisted Shoppers in a multichannel Retailing Environment, In PACIS (p. 141).

3 Nesar, S. and Sabir, L.B. 2016. Evaluation of Customer Preferences on Showrooming and Webrooming: An Empirical Study, Al-Barkaat Journal of Finance & Management, 8(1):50-67.

4 Flavián, C., Gurrea, R. and Orús, C. 2016. Choice confidence in the webrooming purchase process: The impact of online positive reviews and the motivation to touch, Journal of Consumer Behaviour, 15(5):459-476.

5 Zimmerman, A., 2012. Can retailers halt ‘showrooming’, The Wall Street Journal, 259:B1-B8.

6 Machavolu, M.S.K. and Raju, K.V.V. 2014. Showrooming: The Next Threat to Indian Retail, MITS International Journal of Business Research, 1(1):1701.

Image:

Flickr.com

Shopping Behavior of The Baby Boomers

If you were born 50 to 70 years ago, you’re a ‘Baby Boomer’. Yes, most of you are still alive and do most of things you did as a youngster, but doing it differently. Retailers should realize that you are different from other generations and therefore behave differently when shopping. If they make your shopping trip a pleasant one, they may find that you (Baby Boomers) can be a profitable customer niche. Similarly can retailers with an online presence achieve more sales and positive word of mouth once they recognize Baby Boomers is a valuable consumer segment.

The Baby Boomers is part of a cohort – that is people who are born within a certain time frame and who are consequently subject to similar environmental influences. Other groups in this generational cohort are “Generation X or Millennials”; “Generation Y” and “Generation Z”. The Baby Boomers and how they shop will be discussed in this piece.

Who and what are the Baby Boomers?

Baby Boomers were born between 1946 and 1964, the period after World War 2. The number of Baby Boomers peaked in 1999, but has decreased since then and their number will continue to decline. Boomers make rational consumption decisions and their decisions are influenced by experts and close friends. They are more ethnically diverse, more highly educated, more likely to be employed in professional and managerial positions and spend more of their adult years working than previous generations 1.

They also differ in their personal and social lives from other generations as they are less likely to be married and to have an available spouse or adult children. Many Baby-boomers face triple dilemma of burdening care-giving of parents, financial support for offspring, and their own future older life 2. Such an overburden can lead to insufficient preparation for old age and may lead to depression. Boomers however, are not unfamiliar with the internet.

The Baby Boomers is the first generation that enters retirement with an extensive knowledge of the internet 1. Lee Rainie and Andrew Perrin of the Pew Research Center reported the following about the adoption of technology by US Baby Boomers:

  • 76 – 83 % are internet users;
  • 60 – 66 % have broadband at home;
  • 87 – 91% own a cellphone;
  • 45 – 54% participate in social media;
  • 46 – 52 % use Facebook.

Apart from being users of the internet, Baby Boomers also spend a lot of time on the internet. Ian Barker of BetaNews reports that Boomers spend the longest time on the internet compared to the other generational cohorts.

Now that we know a little more about Boomers and their use of technology, it is time to see how they behave when gone shopping.

The shopping behavior of Baby Boomers

Retailers can use cohort analysis in market segmentation because each cohort shares values, attitudes, consumption patterns, or an ability to use technology 3. Shopper age affects the shopping behavior of consumers. It is not different with Baby Boomers – Baby Boomers are direct when shopping; they know what they intend to purchase and plan their shopping trip 3.  They are more deal prone than other generational cohorts. Atkins and Hyun 4 suggest retailers do the following improve the shopping experience of Baby Boomers:

  • Marketers must understand the importance of saving time/effort and money for these consumers;
  • In-store directional signage, information kiosks or in-store product pickup will increase the convenience of the shopping experience;
  • Offer frequently purchased products such as pharmacy and staple food items closer to the entrance;
  • Provide promotional savings such as senior discounts and coupons that will entice and satisfy the older consumers;
  • When targeting older customers, who value getting the right purchase, it is important to offer product assortments that meet their needs

Baby Boomers also shop online.

The online shopping behavior of Baby Boomers

Baby Boomers use the internet a minimum of 10 hours per week. Importantly, they use those hours to connect with friends and family (66%), to read the news online (about 37%), and to shop (35%) 3. eMarketer interviewed Lori Bitter, consultant at The Business of Aging and author of “The Grandparent Economy” about “How Baby Boomers Make Purchase Choices Online and on Mobile”. Some of the comments Lori made are the following:

  • About Boomers browsing the mobile web and using apps – “The ones who have smartphones do use the mobile web. Boomers like peer reviews of restaurants and store experiences, and are beginning to use tools like Yelp or OpenTable. But they still mostly choose to search [the web]. In focus groups, boomers seem to be confused about when they’re actually in an app vs. when they’re online on their phones. Apps are not part of their adoption curve yet.”
  • Getting Boomers engaged on mobile devices – “For younger generations, their smartphone is their life, but boomers have to be led there. For example, some consumers can’t keep track of their rewards programs, but marketers can remind them to use those points at checkout. Baby boomers think about points and coupons differently than younger populations, but that doesn’t mean they don’t like a deal. Building in reminders through mobile is a [good idea]. “
  • What Baby Boomers think about the value that new technology offer them – “The baby boom generation has probably seen more change than arguably any generation in history. I don’t think they’re afraid of it, but they do have a “been there, done that” mentality. They might not have bought the iPhone 4, and skipped right to the iPhone 6. They’re willing to wait. In general, creating urgency is very difficult with this population.”

Baby Boomers that get older, and get less mobile, may shop more online. The products can be delivered on their doorsteps.

Concluding

Baby Boomers were a decade or so back the cohort that was targeted most by retailers. They were plentiful with lots of cash to spend. Age, however, has started caught up with them. They are still a profitable consumer niche if retailers recognize their needs and make the shopping experience a happy one. Retailer’s main target nowadays is the Generation X or Millennials cohort. Read this piece “Demographic Segmentation – Dividing the Market by Generations “for more on generational cohorts.

Notes:

1 Genoe, M.R., Liechty, T.,Marston, H.R. and Sutherland, V., 2016. Blogging into Retirement: Using Qualitative Online Research Methods to Understand Leisure among Baby Boomers. Journal of Leisure Research, 48(1):15

2 Park, Y.J. and Kim, Y.J. 2016. The Relationship among Financial Support for offspring, Care-giving to Parents, Preparation for Their Own Old Age, and Depression of Baby-boomers, Advanced Science and Technology Letters, Vol.131

3 Sullivan, P. and Hyun, S.Y.J. 2016. Clothing Retail Channel Use and Digital Behavior: Generation and Gender Differences, Journal of Business Theory and Practice, 4(1):125

4 Atkins, K.G. and Hyun, S.Y.J., 2016. Smart Shoppers’ Purchasing Experiences: Functions of Product Type, Gender, and Generation, International Journal of Marketing Studies, 8(2):1

Images:

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