Situation A. Dixons, the product is mp3 player. To understand better the selling situation it is useful to undertake the analysis of consumer behavior because it is a manner in which consumers act and react in different situations involving the purchase of a good or service. Every purchase consists of several stages, first a need is recognized, then depending from the type of need a level of involvement is set – how many efforts and money to invest, next the customer is researching the product and evaluates the alternatives to select the needed product.
In case of buying mp3 player and similar products in general it refers to the situation when the consumer is likely to devote some time and efforts in deciding what he needs exactly, how he or she will use the product and if it will be easy for him/her to use it although sometimes such products referred to fast moving consumer goods due to their high obsolescence – the speed of modification and new product development that is especially evident with mobile phones. Probably such product can be classified somewhere between the speciality and fashion products (Gilbert, 1999).
So this process is called extended problem solving as opposed to impulse buying – more risk involved and more external information researched because the buyer has low confidence in this relatively new product. Therefore it is especially important to make such information available to the consumer. However if the customer had a previous experience of using the mp3 player this can be called a limited problem solving. In this case fewer efforts are needed from retailer/salesperson to inform, persuade and motivate the customer to make a purchase.
Why a consumer may want mp3 player? To store/organize in a digital way his music collection, to listen to downloadable music, to swap the music files with others, to use it both on home and work computer. In general apart from those satisfied needs and extended opportunities of using the device the potential buyer may just want to remain up-to-date along with his friends, or he could be just a fan of new gadgets as well. That is what constitutes tangible and intangible characteristics of the product, the value perceived by a customer.
A customer has particular expectations about the player in terms of its functionality and emotional satisfaction he can get. Another feature of such purchase is the relative long term of using a player and perceived reliability – a customer regards it to be a worthy investment, even if the technology will continue evolving and offer new trendy players. With the mp3 player it is most likely that a customer is a buyer, making the decision because such device is going to be used by himself.
He might have a friend with him – an influencer who is able to help him to decide or this friend might help him before the actual visit to the shop – at the stage of researching or identifying alternatives. The consumer may react to the impulse of the advertising of the particular brand and then depending on the awareness, prior knowledge and habit they may visit the shop which sells such products. He can research the Internet prior to the decision-making or use the store sales force and displayed items to make research and buy online eventually.
It can be a threat or an opportunity for a retailer – depending on where the consumer decides eventually to close the sale. The Internet is especially useful for comparing alternatives – ranking on different parameters. Another major consideration is price – with mp3 players it may be still difficult to compare different models as the market has not saturated enough that’s why there is some air of exclusivity when customers can be charged a premium price provided they believe in reliability and performance secured by the brand.
The retailer’s brand is quite important for the consumer to make a purchase. Apart from emotional appeal such factors as its location, reputation and general expectations about its merchandise also play a great role in making a decision. Comparing to say, Gadgetshop, Dixons gives a reasonable, less playful, free from excessive hype approach that is especially important when you are undertaking a purchase of mp3 player and you are unsure about its potential advantages yourself – what can be called a technological barrier.
The way the store is organized is also welcoming customers to drop in, browse and have a chat with the professional sales staff – its helpdesk is situated in the center of the shop floor. Even the colours – cold blue create a professional image without hassle which usually is a typical feature for the other shops which create a mood for the impulsive purchase. The store atmosphere is a part and extension of the whole mix – it can be regarded as promotion, advertising and product. Thus such dimensions as visual and aural characteristics also apply.
For some people this part of the shopping experience can be reassuring, whereas for other the actual interaction with the knowledgeable salesperson or persuasive advertisement. Although a lot depends on the product itself a salesperson can do identify the motives of the customer and satisfy them. Such technique as empathy selling can help. Some people should be persuaded more than the other to accept the risk of the purchase. A salesperson should identify the interest in mp3 player, that present its benefits and special offers and to add some technological details, supported by comparative leaflets, brochures etc.
If the customer is reluctant to make a purchase straightaway he should encourage the consequent visits to the store. With such product as mp3 player it is quite important to be in the know of the technological issues, the compliance with other consumer electronics, etc. The mp3 player still remains a pure consumer product, so it should be promoted in the same way as other consumer products but stressing on the benefits it can give to a consumer and after-purchase service in case a customer experiences any problems – further advice, consultation, or even return.
Finally the act of purchasing may be motivated by the ease of payment – for example using credit facilities offered by the store. So in general the consumer behaviour is to some extent rational and irrational depending on the product and involvement. Comparing to the retailer buying behaviour a customer can be more manipulated by advertising and branding in general, he is not so restricted in terms of requirements and budget, strategy – no one is controlling his expenditures and shopping can be a leisure activity. Situation B. Selling to Debehnams the products of Artpoint.
Artpoint is a small company based in Moscow with shops in Vienna and Berlin. It produces T-shirts and accessories with prints, which are developed as a whole collection each season with changing topics and ideas. It has very urban and art-related approach towards design to cater to the younger customers. To approach a Central Buyer of Debenhams a small manufacturing company such as Artpoint should make an audit of its strenghs and weaknesses, what can be offered and gained, particular benefits etc. And it is useful to understand how the decision-making works in such big organizations.
As retailers generally stay nearer to the consumer markets than producers, they are more responsible for the consumer choice and future revenues. In general the buying function can be described as the retailer’s strategic positioning which results into the assortment and the specific products. Many pricing, merchandising and communications decisions are made through the buyer for the whole organization, all the stores so it is quite an extended role. He works in a close collaboration with merchandiser meaning that he should be aware of sales data and market trends in general to predict the demand for particular products.
Basically he should take into consideration a lot of operational issues along with general creative flair – what is that to make good sales. He has a great authority but also undertakes a great risk. So in multiples it is quite a complex task and any move should be justified enough because of the growing importance of assortment and increased competition (McGoldrick, 2002). Debenhams has its own policy towards representation of brands in its shop. A great percentage of its sales come through the “Designers at Debenhams” own brand range.
So for a small company like Artpoint it is an opportunity to launch its presence at the British market. For a multiple company like Debenhams it is useful to get closer to the designers’ intelligence and introduce something for its younger customers while projecting same values of the brand – quality and affordability comparing with other designer brands (Mintel, 2000). The differences between consumer and retailer buying behaviour start from a need definition – within the organization it is more a result of thorough internal audit than just a wish on its own as it can happen with consumers.
The personality of a Central Buyer may affect the decision-making, but as it is a specialized function with certain procedures and techniques it is not as influential as with consumer buying behaviour. Generally Debenhams might consider Artpoint as a new supplier-manufacturer when a need is perceived to introduce new product lines – T-shirts and accessories in this case – in order to widen the choice of brands available or when a lack of satisfaction is noted with existing products/brands, customers are not very keen to buy the existing range of T-shirts and accessories.
The decision-making can be triggered by the fact of offering of Artpoint’s products to the buyer. Some internal information is gathered before getting external information and drafting a preliminary list of suppliers. Regarding the external sources of information there are different ways to estimate the new supplier/product – through the personal meeting, written information and product testing. A meeting can happen on a fashion show and information can be gathered through trade publications. So personal selling and public relations become more important in this case, the advertising is less attractive which contrasts with consumer selling.
Still it is argued that comparing the data analysis involved when estimating the sales performance of the existing products the procedures for the new products are often more ambigouos. A new product is a great risk for a retailer in terms of introduction, possible slow movement of stock and needed mark-downs. Same applies to the replacement the existing products – the costs may be too high. The task of decision-making can be made by a whole buying committee when buyers present their findings to the managers and merchandisers.
Such issues as the implications for making a decision, its costs and the frequence of a purchase are being discussed. That can take away a bit of risk from a central buyer which is borne by a customer himself in consumer buying. The drawback for Artpoint is that it can take some time to make a decision for Debenhams. While both tangible (service, product attributes, price) and intangible attributes (trust, value, and loyalty) are used in a retailer buying decision-making similarly to the consumer buying they are more subject to rigorous calculation.
The buying function is specialized and a lot of time and efforts are supposed to be involved in decision-making, regarded as a routine process for the key merchandise. The alternatives are checked against a number of criteria. The major criteria are profitability and sales, the turnover linked to the potential opportunities in this product class. The next important criterion relates to the assortment – the portfolio of brands and the impact of a new product on the sales of other brands, many customers can be upset by dropping some brands, which affects their long-term retention.
This is especially valid for a department store like Debenhams which consists of certain ranges of merchandise organized in branded collections. So the issue of customer value should be also explored in relation to the benefits presented by the product – this relates to the emotional and physical characteristics, price etc. For a clothes retailer such characteristics as design, colour, adequate sizes, price are especially important. A multiple retailer should consider the introductory and continual marketing campaign for a new product which can be done by supplier.
A supplier is judged against a number of characteristics including reputation, reliability in terms of delivery etc. Pricing and financial terms constitute another important part of criteria – a supplier should have a competitive pricing strategy to ensure the appropriate market share for a retailer. There are some certain tactical considerations in the choice of suppliers. Finally the distribution channel requirements should be addressed (Hansen and Skytte, 1998). These are general criteria used for selection, an adequate weighing should be assigned to make a decision after devising a score for each supplier.
For example Debenhams as a relatively conservative brand might consider a move to a new supplier such as Artpoint as more important in terms of perceived customer value then the risk borne – in this case a lexicographic choice strategy is employed. Similarly a conjunctive choice strategy may be applied to ensure that Artpoint satisfies the minimum required for the attributes. It is most likely that Debenhams has its own screening procedures to identify the suppliers, so Artpoint should fit in this process. The next task for the Central Buyer is to negotiate terms of trade – supply price, discounts, delivery conditions, advertising allowance.
A retailer has certain set terms and some of them can be negotiated such as credit facilities, special delivery, labeling/price-marking services etc mostly to the benefit of the retailer which has a major bargaining power. For a small company such as Artpoint in the most extreme cases it can lead the going out of business at all therefore it is important to estimate a certain threshold in financial terms to cope with such a big multiple retailer. While the retailers are increasingly involved in own products development, they become more knowledgeable in product’s specifications and manufacturing.
They have obtained a great expert power in these areas. It can be useful for Artpoint to shift manufacturing to the retailer and be only in charge of design and styling as it can be difficult to stick to the quality requirements and order size or replenishment schedules, so launching the line under “Designers at Debenhams” can be a good option. The production of own brands made by Debenhams has its economy of scale which a small company cannot provide. In a long-term perspective though it can lead to some diluting of the Artpoint brand, loss of its exclusivity.
So some clear objectives should be stated – what is expected from such a collaboration, risks and rewards, future considerations. There is common goal for a retailer to establish a long-term relationship with both its suppliers and customers, but it will be different in each case, with a supplier it is a more structured commitment. However in both situations it is the buyer who exerts the most power, in consumer buying the customer can be easily switched to another retailer/brand while a retailer tends to negotiate the best terms from a supplier, very often squeezing his margins.