RETAIL MANAGEMENT service has reached a level of equilibrium,

which occurs when a product has been on the

Chapter 1: PERSPECTIVE IN RETAILING
market for a long time and there are many
Retailing - consist of the final activities and substitutes for the product.
steps needed to place merchandise made
Demographic Shifts
elsewhere into the hands of the consumer and
to provide services to the consumer. Other significant changes in retailing over
the past decade have resulted from
The Nature of Change in Retailing
changing demographic factors such as
The retail industry continues its never-ending
● The fluctuating birth rate
transformation. In a world dominated by
● The growing importance of the 70
e-commerce, brick-and-mortar retailers are
million Generation Y consumers (born
re-aligning to meet the needs of the
between 1978 and 1994)
Omni-channel consumer that wants to buy
● The move of Generation X into middle
“anywhere, at any time and through any
age (born between 1965 and 1977)
channel.” At the same time, these
● The beginning movement of the baby
mobile-savvy consumers are empowered with
boomer generation into retirement (born
competitive pricing and products all within the
between 1946 and 1964)
reach of their pocket or purse.
● The increasing number of women
Bricks and Mortar Retailers - Retailers that relative to men attending and graduating
operate out of a physical and geographic from college and concurrent rise in
based building or store. unemployment among men relative to
women.
E-Tailing - Electronic retailing (E-tailing) is the
sale of goods and services through the Same-Store Sales
Internet.
Compares an individual store’s sales to its
M-Tailing - Wherein the power of the mobile sales for the same month in the previous year.
phone technology is harnessed in retailing.
Store Size
With the exponential increase in
communication technology and penetration When planning your retail store, the amount of
of mobile phones, M-Tailing will be the selling space will be one of the most important
future-retailing model. factors in selecting a location. It can also be
one of the most difficult to determine. As with
Price Competition
any new business, most of your assumptions
Competitive pricing is the process of selecting will be based on industry research and
strategic price points to best take advantage of comparing similar stores operating in similar
a product or service-based market relative to locations.
competition. This pricing method is used more
Scrambled Merchandising - Exists when a
often by businesses selling similar products
retailer handles many different and unrelated
since services can vary from business to
items.
business, while the attributes of a product
remain similar. This type of strategy is
generally used once a price for a product or
 Experience and Niche Retailing 2. Number of Outlets- number of outlets
each firm operates.
Your customers are in control, and that could
3. Margins versus Turnover
be very good for your ecommerce business.
● Gross-margin percentage – A
The term “experience” has come to describe
measure of profitability derived by
the effect of the accumulation over time of
dividing gross margin by net sales.
interactions between a business and its
● Gross margin – Is the difference
customers.
between net sales and cost of goods
Everything about your company, including your sold.
brand’s story, your content, and even website ● Operating expense – Are those
performance, contributes to customer expenses that a retailer incurs in
experience and has the potential to influence running the business other than the cost
sales. Customer experience ultimately seeks to of the merchandise.
please consumers, to develop a reciprocal ● Inventory turnover – Refers to the
relationship between store and shopper. number of times per year, on average,
that a retailer sells its inventory.
Responding to Change
● High-performance retailers – Are
Success in retailing depends on a retail those retailers that produce financial
manager’s ability to properly interpret what results substantially superior to the
societal changes are occurring and what these industry average.
changes mean to the store’s customers and
Concepts of Margin and Turnover
then build a strategy to respond to these
changes. Therein lies the excitement and
1. Low-margin/low-turnover retailer – Is
challenge of retailing as a career.
one that operates on a low gross
margin percentage and a low rate of
inventory rate.
2. High-margin/low-turnover retailer – Is
one that operates on a high gross
margin percentage and a low rate of
inventory rate.
3. Low-margin/high-turnover retailer –
Is one that operates on a low gross
margin percentage and a high rate of
inventory rate.
CATEGORIZING RETAILERS 4. High-margin/high-turnover retailer –
Is one that operates on a high gross
1. NAICS Codes- The U.S Bureau of the margin percentage and a high rate of
Census, for purposes of conducting the inventory rate.
Census of Retail Trade, classifies all
retailers using three-digit North 4. Location
American Industry Classification Before:
System (NAICS) codes. ● Metropolitan area
● Central business district
 ● Regional shopping center down on shoplifting and employee theft of
● Neighborhood shopping center merchandise?
● Freestanding unit 10. How to leverage the Internet and social
After: media to support your mission?
● Nontraditional retail areas

This is an area of retailing that may

undergo significant changes in the next
decade. The Internet suggests that future
locations may be as close as a consumer’s
tablet computer, smartphone, or the electronic
device of their automobile. Also, consider that
many retail offerings may be digital in nature.
For instance, of the tens of thousands of apps
you can access via your smartphone or digital
device, many of them target retail customers. Store management
The retailing career path involves responsibility
5. Size for selecting, training, and evaluating
- is classified by sales volume and number personnel, as well as in-store promotions,
of employees. The reason for classifying by displays, customer service, building
size is that the operating performance of maintenance, and security.
retailers may vary according to size; that is,
larger firms generally have lower operating Buying
costs per sales than smaller firms.
The retailing career path whereby one uses
A RETAILING CAREER
quantitative tools to develop appropriate buying
Issues you have to deal with in Retailing plans for the store’s merchandise.
career:
Salary
1. What product(s) or service(s) to offer?
Entry-level retail managers or buyers who do
2. What group of customers to serve?
exceptionally well can double or triple incomes
3. Where to locate the store?
in three to five years. For you to become a
4. How to hire, train, and motivate your
retail entrepreneur either out of college or
employees?
afterwards. As a retail entrepreneur, you will
5. How to use your advertising to promote
want to build the profitability of your enterprise
merchandise and also build the store image?
which will, if you do well, ultimately create a
6. What price level to use and when to lower
very high level of economic wealth.
the price?
7. What levels of customer service (store Career Progression
hours, credit, staffing parking, etc.) to offer your
A person capable of handling increasing
customers?
amounts of responsibility can move up
8. How to lay out and design the store?
quickly. It only depends on both the retail
9. How to control store-operating expenses
organization and the individual.
and police employees and customers to cut
 Geographic Mobility Creativity
In order to progress rapidly, a person must The ability to generate and recognize novel
often be willing and able to make several ideas and solutions. The competitive
moves, even if the changes may not be environment is constantly changing, there is no
attractive in terms of an individual’s lifestyle. standard recipe for retailing. Retail executives
Rapidly growing chain stores usually find it need to be ideal people as well as analysis. It
necessary to transfer individuals, especially should be sensitive, perceptive decisions that
those in the store-management career path, in require imaginative and innovative techniques.
order to open stores in new geographic areas.
Decisiveness
Societal Perspective
The ability to make rapid decisions and to
Professional merchants are considered render judgment, take action, and commit
respected and desirable members of their oneself to a course of action until completion. A
community, state, and nation. Leading retail retail manager must be an action person.
executives are well-rounded individuals with a
Flexibility
high social consciousness. Retailers serve
society not only outside their retailing career The ability to adjust to the ever-changing
but also within it as well. needs of the situation. The retail manager must
have the willingness and enthusiasm to do
PREREQUISITES FOR SUCCESS
whatever is necessary to get the job
Hard Work completed. Because plans must be altered
quickly to accommodate changes in trends,
One can have a balanced and happy life
styles, and attitudes, successful retailer
coupled with a retailing career by using good
managers must be successful.
time-management and planning skills. It may
also be with developing family-friendly human Initiative
resource practices.
Retail managers are doers. They must have
Analytical Skills the ability to originate action rather than wait to
be told what to do. Managers must monitor the
The retail manager must be able to solve
numbers of business (sales volumes, profits,
problems through numerical analysis of facts
inventory, levels, etc.) and seize opportunities
and data in order to plan, manage, and control.
for action.
The retail manager is a problem solver on a
day-to-day basis. An understanding of the Leadership
past and current performance of the store,
The ability to inspire the team members to trust
merchandise lines, and department is
and respect your judgement and the ability to
necessary. It is the analysis of these
delegate, guide, and persuade the team.
performance data that forms the basis of future
actions in the retailing environment. Today’s Organization
retailer must be able to analyze all the financial
The ability to establish priorities and plans and
data that are available before going to market.
follow through to achieve great results. To
achieve goals, the successful retailer must be
a good time manager and set priorities when Creative Method
organizing personnel and resources.
The creative retail manager is an idea
Risk Taking person. This retail manager tends to be a
conceptualizer and has a very imaginative
Retail managers should be willing to take
and fertile mind capable of creating a
calculated risks based on thorough analysis
highly successful retail chain.
and sound judgement; they should also be
willing to accept responsibility for the results. A Two-Prolonged Approach
Stress Tolerance The synthesis of creativity and analysis is
necessary in all fields of retailing. To decide
Retailing is a fast-paced and demanding career
who or what to duplicate requires not only
in an ever-changing environment. One must be
creativity but also an analysis of the strategies
able to perform consistently under pressure
that retailers are pursuing. This is an exercise
and to thrive on constant chance and
in weighing potential returns against risks.
challenge.
A Proposed Orientation
Perseverance
Four major orientations:
Retailers may become frustrated due to the
many things they can’t control. It is important 1. Environmental – to anticipate and
to have perseverance. adapt continuously to external forces
in the environment. This is with social,
Enthusiasm
legal, technological, economic, and
Retailers must have a strong feeling of warmth other external forces.
for their jobs, otherwise they will convey the 2. Management Planning – adapt
wrong image to their customers and systematically to a changing
department associates. environment. A retailer who wants to
have the competitive edge must plan
THE STUDY AND PRACTICE OF
today for the future.
RETAILING
3. Profit – all retail decisions will have an
Analytical Method effect on the firm’s financial
The analytical retail manager is a finder performance. It will focus on
and investigator of facts. These facts are fundamental management of assets,
summarized and synthesized so a manager sales revenues, and expenses.
can make decisions systematically. In doing so, 4. Decision Making – to focus on the
the manager uses models and theories of retail need to collect and analyze data for
phenomena that enable him or her to structure making intelligent retail decisions.
all dimensions of retailing. An analytical
perspective can result in a standardized set
of procedures, success formulas, and
guidelines.
 few suppliers. The method of supplier selection
Chapter 2: THE ELEMENTS OF and the terms and conditions that apply to
MERCHANDISE PLANNING them are similarly determined. An article on the
US retailing giant Wal-Mart’s Merchandising in
A Merchandising Strategy Action, further explains the essence of a
To start with the very definition, focus merchandising strategy.
separately on the word’s merchandising
Buying Cycle
strategy. Fundamentally, a strategy defines a
company’s position; merchandising on the Before moving on to the concept of the
other hand refers to the basic product-mix that merchandising process, we take into
the retailer offers to the end consumer. Thus, a consideration the concept of the Buying Cycle.
merchandising strategy is defined as a The buying cycle starts with determining the
company’s position with respect to a given requirements of the product that needs to be
product mix----aimed at ensuring optimization stocked in the retail stores, this is followed by
of resources, achieving target-sales and the process of selecting suppliers and vendor
margins, and reducing stockouts and/or negotiations. Having determined the quantity
markdowns. The merchandising strategy that needs to be purchased and the supplier to
(Figure) in turn, dictates the position that a source it from the merchandiser then needs to
particular buyer/merchandise adopts with move forward to actually placing the order and
respect to the following criteria: once the goods are actually received then it
needs to be allocated to the various stores, the
1. The products to be sourced entire process.
2. The terms and conditions agreed with the
The Concept of Lifestyle Merchandising
vendors and suppliers
Lifestyle retailing can be defined as the policy
3. The pricing strategy to be adopted;and
of tailoring a retail offering to suit the
4. The method of packaging and presentation
lifestyles of specific target market segments.
to the end consumer
Further the basic lifestyle in a region is a
The corporate strategy of a retail organization
reflection of the standard of living or occupation
influences the buying strategy. While the
of the majority of the particular region. One
corporate strategy serves as a guiding
segment that has witnessed the successful
framework for each and every department
application of the concept of lifestyle
within the organization, the buying strategy is
retailing is that of restaurants; one such
more specific. For the organization, it serves as
successful retailer being McDonald’s.
a guide for the function of buying, as well as to
decide the time-frame for specific actions to be When a retailer provides merchandise or
accomplished. Thus, while the buying strategy knowingly adopts a merchandise strategy,
is a reflection of the corporate strategy, it is which will serve the needs of s specific target
specific only to the company’s buying audience in keeping with the lifestyle they lead,
department. The buying policy not only as it is called lifestyle merchandising. Other
certain a buyer’s duties and responsibilities, products, which have been successful in terms
but also enables the suppliers and vendors to of lifestyle merchandising include: furniture,
clearly understand whether the company cookware, accessories like watches, bags,
allows many suppliers to be a part of its exclusive cosmetics, skincare,
sourcing base, or restricts its buying to/from a body-care/hair-care-products, etc. lifestyle
merchandising is also common in the food and Merchandise Strategy
beverage business, where certain restaurants
As the next stage, merchandise strategy is
may cater to the requirements of people from a
evolved. After the volume of turnover— or, the
certain class of the society. It is interesting to
amount of sales---that needs to be achieved is
note that, when it comes to cookware, lifestyle
clear, the amount that is required to be
merchandising has emerged in the form of
invested in the merchandise is arrived at. This
chef-themed product lines. Retailers have also
amount is termed as the merchandise budget,
been known to successfully combine
and forms a basic financial tool used for
shows/programs on cooking, aired on a
planning and controlling the retailer’s
particular television channel, with a collection
merchandise inventory investments. This is
of cookware. It is more advantageous for the
followed by range planning and outlet/ space
retailer to first analyze the lifestyle of a
planning. The former involves decision-making
particular chosen set of customers and then
pertaining to categories and/or departments
create products, services and environments
and, at the same time, space planning in terms
which cater to the same. An element of lifestyle
of the space available for the display of various
merchandising is solutions merchandising,
products. Space in terms of existing as well as
where products are developed to satisfy the
new outlets is budgeted for, in terms of space
priorities of a target group. Such advantages
and the range plan.
take on a new dimension in a world that is
fiercely competitive, where it is difficult to gain Assortment Strategy
any competitive edge. Lifestyle merchandising
What follows is the development of a detailed
allows the retailer to carve an exclusive niche
merchandise-mix, called assortment strategy.
for themselves, in the eyes of the
Merchandise assortment refers to the number
end-consumer, and thereby not having to
of different product items that the retailer
directly compete with other retailers.
stocks within the particular product lines. The
Forecast assortment strategy can vary from retailer to
retailer and from shallow to deep to narrow to a
The entire process of planning starts with the
combination of all three. The entire process of
forecast. This involves determining the target
merchandise management is a combination of
sales and turnover, and the margins to be
merchandise variety and merchandise
achieved. The overall company-wide planning
assortment, and the required merchandise
and forecasting is derived from the company’s
support numbers. It is necessary that the
overall business strategy. Typically, forecasts
numbers in merchandise support are
are influenced by past sales’ data and the
determined at an earlier stage, as this
company’s plans and
determines the quantities eventually bought by
The sales which need to be achieved, but, from the retailer.
a retail standpoint, also serves as a guide to
This is the basic level at which the process of
determine where from sales should be
merchandise management takes place. Before
achieved i.e. existing stores, new stores, new
progressing further, let us first understand
merchandise lines, etc.
some key terms in the context of
merchandising. projections for the future. The
sales forecast serves as a tool not only in
understanding.
 Key Concepts in Merchandising rapidly changing consumer behavior and
create products or product-mixes that would
Merchandise Mix – first in the context of
satisfy such demand.
merchandising, it refers to the complete range
of products that the retailer chooses to offer to Seasonal Merchandise – this includes
its customers. In other words, merchandise mix products that sell well over non-consecutive
covers the breadth of products sold by the time periods. Examples of such products
retailer. Often, it is also referred to as the include monsoon-wear (umbrellas, raincoats,
product assortment. Over a period of time, the etc.). and winter-wear (thermal clothing,
merchandise mix may change in keeping with mittens, etc.) The concept of basic, fashion and
the market conditions, and may vary even fad products is better illustrated through the
during the course of the same year. For product life.
example, the merchandise mix offered during
Refers to a unique shape or form of any
Diwali is different from that offered in summer
product. It may also refer to specialized types
time.
of expression----such as taste in music and
Merchandise Line – it comprises a group of food, preferences in clothing and accessories,
closely related products intended for the same and so on.
end use, and sold to the same customer group.
Width of Assortment
A given merchandise line also falls within the
same price range. Thus we can say that a This is the number of distinct goods
combination of merchandise lines makes up and/or service categories (product lines)
the merchandise mix. a retailer carries. Width or breadth of
merchandise is also referred to as the number
Fashion Merchandise – these products, on
of merchandise brands in the given
the other hand, have higher demand but fir a
merchandise line. Like for example, a retailer
relatively shorter period of time. Therefore,
stocking various brands of men’s shirts, or a
buying the right quantities at the right time is of
food store offering different brands of pickles,
great importance for this category of products.
etc. (Underwear)
As the demand for the product is for a limited
time, excess buying may result in heavy Depth of Assortment
markdowns at the end of the season or when
This is the variety in any one category of goods
the product goes out of style. Examples of
and/or services (product line) with which a
such products include jeans (boot cut, stone
retailer is involved. It refers to the average
washed, etc.) and skirts (knee-length,
number of SKUs (stock-keeping units) within
ankle-length, etc.) which may be in style for a
each brand of the merchandise line. For
reason.
example, Indian-wear,western blouses,
IRA (Internal Revenue Allowance) accessories, t-shirts, formal trousers and
casual bottom wear.
Fads – in contrast to fashion, fads enjoy
popularity for a limited period of time and Consistency
usually generate a high level of sales for a
This is an important element of the assortment
short time. Sourcing of a product, which is
dimension of a retailer. The two dimensions of
termed as fad, is difficult as it requires a
breadth and depth describe the size of the
merchandiser to understand even the preempt
assortment. Consistency, in turn, can be
defined as the degree to which different types Implication for Retailers - The most
of products that comprise the merchandise significant implication of an aging population
assortment are related. for retailers, particularly those targeting
boomers, is that their customer’s big spending
Merchandise Hierarchy
years are generally behind them
This is an indicator of the manner in which
3. Ethnic Trends
product classification is done at the level of the
retailer. It is logical classification (Figure 2.6), Implication for Retailers - Common mistakes
based on the way in which customers are likely that retailers make when targeting the
to buy the products. (Rice,ulam, customer is assuming that the population is
almost the same
Chapter 3: Retail Customers 4. Geographic Trends
Retail Customers The location of consumers in relation to the
retailer will often affect how they will buy.
Customer Satisfaction is determined by
Retailers should be concerned, not only with
whether or not the total shopping experience
the number of people, their ages and their
has met or exceeded the customer’s
ethnicity but also with where they reside.
expectation. It is important because it costs the
All consumers want convenience and will
average retailer five times as much money to
therefore tend to patronize local retail outlets.
get a new customer into a store.
Implication for Retailers - As consumers shift
3 Important Type of Trends
to geographic location, retailers are
Population Trends experiencing store growth and national
retailers are adding stores and distribution
Retailers often find it useful to group
centers (warehouse) A common mistake of
consumers according to population variables,
retailers to assume that all consumers in a
such as population growth trends, age
certain geographic area have the same
distribution, ethnic makeup and geographic
purchasing habits.
trends.
5. Micro Marketing
1. Population Growth
Tailoring merchandise in each store to
Retailers have long viewed an expanding match the preferences of its neighborhood.
population base as synonymous with growth in Urban Centers , Metropolitan Statistical Areas
retail markets. (MSA), Are freestanding urban areas with
Implication for Retailers - Any increase in populations in excess of 50,000.
domestic population growth will mean an Implication for Retailers - Every shift in
increased demand for goods and services. consumer population patterns has a major
Another growth opportunity for retailers is implication for retailers, especially when it
international expansion. comes to expenditures made for household
products. Resulted in a slowdown for
2. Age Distribution
downtown retail activity, sales increase in free
The most significant change today is the bulge standing sub-urban locations have more than
of early baby boomers moving into their sixties. offset any decline.
 6. Mobility likely divorce even if unhappy with their
marriage
In many countries people are born, raised,
married, widowed and die in the same city or Implication for retailers - Retailers must
immediate geographic vicinity.2 Major Factors make specific adjustments for divorced,
for this heightened is the country divorce rate working women with children by adjusting store
and state or regional economic slowdown and hours, providing consumer information and
hence loss of jobs that varies across the changing the product assortment.
country.
4. Make up American Households
Implication for retailers - Retailers in areas
undergoing rapid population growth will want to Two interesting facts about the changing
be prepared to serve these new consumers American household Boomerang effect- the
quickly as many retail-oriented decisions must parents think the children have left the
be made on the spot. household for good, but they keep coming
back. Sandwich generation family /
Social Trends
trigeneration family – these parents are not
1. Education healthy enough to live full time by themselves
but their health is not so bad that they need full
The education level is average increasingly.
time assistance in a nursing home. All three
Implication to Retailers - The college generations are under the same roof.
educated consumer differs in their buying
Implication for retailers - This market is not
behavior from other workers of the same age
concerned about back to school sales and
and income levels. They are more alert to
other family oriented retail activities. Instead
price, quality and advertisement claims.
they are more interested in HDTV’s, high
2. State of Marriage social image, and gourmet foods.

Not only are many people postponing marriage 5. Changing the Nature of work
but also some are choosing not to marry at
Many of these individuals were starting a small
all.
business while holding onto their main job,
Implication for Retailers -This trend toward others were earning money to purchase
single-person households presents many something special, saving for future
opportunities for the retailer because of the consumption or saving for retirement.
increased need for a large number of smaller
Implication for retailers - Retailers need to
houses complete with home furnishings. As a
find ways to enrich the job experiences and
result the retailers need to adjust the store
lower turnover. Today, there are opportunities
hour’s operation to accommodate the needs of
for retailers to employ part timers in a variety of
customers.
positions.
3. Divorce
Economic Trends
An interesting side effect of the soft
1. Income growth
economy over the last five years is that
unemployed spouses become more dependent Consequently, it is quite possible that those
on the one that had a job and they were less that are rich today will be poorer in the future
and vice versa.
Implication for Retailers - The imbalance in Implication for retailers - The rise in the
income growth across households has created number of working women has many retailer
an increased demand for the value oriented implications, first, as the number of dual wage
retailers. Economists tend to view it from earner families’ increase, many of these
different perspectives; Disposable income is families have less time for shopping and are
simply all personal income minus personal more prone to looking for convenience and
taxes (take home pay). Discretionary income additional services from retailers. Time pressed
is disposable income minus the money shoppers also find that the price is sometimes
needed for necessities to sustain life such as less important than convenience, availability
minimal housing, transportation, food and and service
clothing. The retailer knows that, while
4. Widespread Use of Credit
consumers won’t spend all their increased
disposable on the retailer merchandise, they Retailers, especially department stores and
will nevertheless increase spending. Retailers those selling big ticket items, have long offered
who sell luxury goods want to see discretionary their own credit card to customers. Credit card
income increase. firms are seeking for the trend to continue.
They offer promotional incentives such as free
2. Personal Savings
airline miles, rebates on new auto purchases
It should be also pointed out that the and rebates on future purchases.
government number regarding the savings rate
Implication for Retailers - Retailers benefit
fails to address the treatment of capital gain or
from the credit card. Research shows that
losses. When the government measures
customers spend more when they use a credit
disposable income, it counts wages, interest,
card than when they must pay in cash.
earned, and dividends; however, it overlooks
However, since the growth in credit has been
realized or unrealized capital gain or losses.
outstripping the growth in personal income.
Consequently, changes in wealth that result
It is evident that households will face the
from variations in home and equity values are
liquidity crisis as income growth slows or
omitted.
becomes negative.
Implication for Retailers -Retailers have
Stimulus - A stimulus involves a cue (external
benefited from the spending rather than
to the individual) or drive (internal to the
saving mindset of the consumers. As the
individual). A cue is any object or phenomenon
marketplace becomes saturated with
in the environment that is capable of eliciting a
available workers, overall wages fall, which
response.
could negatively impact future retail sales.
3. Women in the labor force
This growing trend of women in the labor force
is true of all age groups, even women aged
25-34 are currently in the labor force. And
might be raising their families and this working
mom isn't just those lucky enough to work for
an employer that provides flexible work
schedules.
Drive - is a motivating force that directs preference for the brand to buy and the retailer
behavior. Drives can be physiologically based from which to purchase it. Some consumers
(hunger and the need to stay warm in the cold) are not only habitual users of the product but
or learned (the desire to spend spring break in also heavy users.
Cancun).
Limited Problem Solving
Passive Information Gathering
Limited problem solving occurs when the
which is the task of receiving and processing consumer has a strong preference for either
information regarding the existence and quality the brand or the store but not both. The
of merchandise, services, stores, consumer may not have a store choice in mind
shopping convenience, but may have a strong preference for the brand
parking,advertising,and any other factor that a to purchase.
consumer might consider in deciding of where
Extended Problem Solving
to shop and what to purchase.
Extended problem solving occurs when the
Problem Recognition - Stimuli can often lead
consumer recognizes that a problem exists yet
to problem recognition. Problem recognition
does not have a strong preference for either
occurs when the consumer’s desired state of
the brand or the store.
affairs departs sufficiently from the consumer’s
actual state of affairs. Problem-Solving Stages
consumers recognize that a problem exists
believe a potential product solution exists
within the marketplace, they will engage in
problem solving.
Active information gathering which is when
consumers proactively gather information.
Many consumers begin their active information
gathering with a search engine such as Google
to find out about the desired product or service,
Problem Solving
its price, and where it is available. Consumers
The next two stages in the consumer shopping are then confronted with the second stage in
and purchasing model-active information problem solving-the evaluation of alternatives.
gathering (or search) and evaluation of The evaluation of alternatives typically involves
alternatives will determine the degree of three stages.
problem solving that occurs. Individuals solve
1. In the first stage, consumers develop a
problems by searching for information and then
set of attributes on which the purchase
evaluating their options or alternatives.
decision will be based. The set of
Habitual Problem Solving attributes refers to the characteristics of
the store and its products and services.
With habitual problem solving the consumer
2. In the second stage, consumers narrow
relies on past experience and learning to
their consideration and set a more
convert the problem into a situation requiring
manageable number of attributes.
less thought. Here the consumer has a strong
 3. In the final stage, consumers directly
compare the key attributes of the
alternatives remaining in their “short
list”.
Purchase
Based on information gathered and evaluated
in the problem-solving stage, the consumer
decides whether to purchase and which
product and retailer to choose.
Post-Purchase Evaluation
The consumer shopping and purchase process
does not end with the purchase. Ultimately,
consumers are buying solutions to their
perceived needs, and successful retailers
take an active interest in ensuring that their
customers feel satisfied over the long term
and that their needs have been resolved.
Post-purchase resentment
where the consumer’s dissatisfaction results in
resentment toward the retailer