Month: July 2020

Evaluation of Retail Trade Area

To begin the evaluation of retail opportunities, the market analysis study should be done to understand demand and supply of major catego­ries to determine market potential. Demand refers to the amount of retail space (in square feet) that could be supported by consumers residing in the trade area, based on estimates of their spending potential.

Supply refers to the actual square feet of retail space, sometimes called Gross Leasable Area (GLA), that currently exists in the trade area. A comparison of demand and supply by store type can help identify gaps (demand exceeds supply).

After considering other more qualitative market factors including how and where local residents/people shop, conclusions can be drawn regarding potential business categories worthy of business expan­sion or recruitment efforts.

A flowchart describing this method is presented below:

Estimating Retail Demand:

Estimating Retail Supply

To analyze supply, a database of existing businesses needs to be con­structed for each of the store categories under investigation. The database for each store category should include all of the retail businesses within the trade area used to calculate demand. The database should include a list of the names and addresses of all the current retailers in the primary trade area.

For each retail store, include a reasonable estimate of store size in square feet. For general merchandise stores, include the approxi­mate number of square feet devoted to that product line. While calcula­tions of retail space in a market area are often based on observation and rough estimates, they do provide a reasonable and important “ballpark” figure for this analysis.

Square feet of store space is often called gross leasable area (GLA). It can be estimated by actual measurement of a building’s street-front width and estimate of its depth.

Other Market Considerations

Examining quantitative aspects of demand and supply is only part of the analysis. There are also a number of qualitative considerations that require local knowledge and insight about the market. The previously calculated differences in retail space demand and supply need to be analyzed in context of other market factors.

The following provide additional consid­erations that add to the analysis of each category.

1. Survey and Focus Group Findings

What have we learned from local research about consumer behaviour and perceptions of the downtown? We must use findings from “Study of Con­sumer Attitudes”.

2. Trade Area Demographic and Lifestyle Findings

Does lifestyle segmentation data indicate that local residents are more likely to purchase goods within this store category? Use findings from “Study Customer Demographics and Lifestyles”.

3. Analysis of Non-Local Market Segments

Is there significant market potential from non-resident customer segments such as tourists and commuters?

4. Retail Mix Analysis

How many businesses in the category are located in the downtown areas of comparison communities?

5. Competitiveness of Existing Stores in Trade Area

Are existing stores/markets/malls in this category providing the merchan­dise and service local shoppers demand?

6. Competitiveness of Existing Stores Outside of the Trade Area

Do surrounding communities with regional shopping centers and big box stores siphon business in this category out of the trade area?

7. Consumer Behaviour and Trends in Store Category

Are purchases driven by convenience or comparison-shopping? Do stores of this type locate in downtown districts anymore?

8. Drawing Conclusions

The quantitative comparison or retail space demand and supply by store type provide an initial measure of market opportunities (i.e. demand greater than supply). However, demand and supply must be analyzed in combi­nation with many other market considerations.

If there appears to be a significant amount of unmet demand, there may be opportunity for an existing business to expand or a new business to be recruited. Business development opportunities may also exist in areas where supply is greater than demand, especially in those communities that are successful in draw­ing customers from outside their trade area because of a special product niche they have created.

Analyzing Trade Area

A trade area is simply the geographic area that generates the majority of the customers for a community, business district or downtown. Knowing the boundaries of the trade area defines the number of potential custom­ers that may patronage your downtown.

Furthermore, knowing the trade area allows for demographic and lifestyle information to be gathered from a variety of public and private sources. This information provides insight into the people in the trade area and eventually will allow consumer demand for products and services to be calculated.

Therefore, defining the trade area is an important step in market analysis. A trade area often extends beyond the municipal boundaries of a community. Defining this extent is important, but it is also necessary to recognize how a trade area can vary.

In other words, a downtown may have a number of different trade areas depending on a variety of factors. Often, the variability can be attributed to either different types of products and businesses, or different market segments of customers.

How Trade Areas Differ?

Different business types will have different trade areas, that is, people will travel from greater distances to purchase certain goods and services than others. While each individual store may have its own unique trade area, these areas can often be generalized into two different types: convenience shopping trade areas and comparison shopping trade areas.

Local convenience trade areas are based on the ease of access to these types of products. That is, people will obtain these products (apparel, groceries, etc.) based on travel distances or travel time.

Conversely, comparison shopping trade areas are based on price, selec­tion, quality and style. People are more likely to compare these types of goods (appliances, furniture, etc.) as well as travel longer distances for their purchase. Subsequently, the trade area will shrink or grow depending on the products sold. In addition to different types of shopping goods, there are also different types, or market segments, of customers frequent­ing a downtown.

Three common market segments are local residents, day­time employees and tourists. Local residents live within the trade area. As they reside year-round, they provide the majority of spending potential for most downtowns. Daytime employees may live in the trade area, but may also commute from other outside areas.

However, while these employees are in the downtown, they provide the potential to stay and make pur­chases. Furthermore, depending on the community, tourists can provide a large amount of spending potential. While they are not permanent cus­tomers, tourists make purchases while they visit the area.

Simple Methods of Trade Area Definition:

Even though trade areas vary by store type and market segment, one or possibly two general trade areas are needed to proceed with the market analysis. To define these trade areas, there are several techniques avail­able. These techniques have different uses as well as their own advantages and disadvantages.

Each of these methods is described in detail below.

1. Reilly’s Law of Gravitation:

Reilly’s Law of Retail Gravitation is a theoretical means of trade area definition. It is based on the premise that that people are attracted to larger places to do their shopping, but the time and distance they must travel influence their willingness to shop in a given city.

In other words, people are more likely to travel shorter distances when possible. Addition­ally, customers are more likely to shop in larger communities, as they provide a greater opportunity for goods and services.

Reilly’s Law provides a mathematical formula that can be used to calculate hard numbers relating the distance people will travel. However, a simple map and commonsense can be combined to use the concepts behind Reilly’s Law and generate general trade area boundaries.

2. Pin code Tabulation:

Another simple method for trade area definition is to tabulate the number of customers by their pin codes. As later explained, pin code data can be collected using a variety of methods and sources.

However, regardless of how the data is obtained, there are a number of advantages to the pin code tabulation method:

1. Collecting information from customers allows the trade area to be based on real business data, instead of created from a theoretical basis.
2. Comparing the trade area maps of different businesses can identify opportunities to increase market size and penetration. For instance, the trade areas for businesses that primarily sell convenience items can be compared with each other to identify differences. These differences could indicate potential market expansion opportunities for some of the businesses. The same can be done for comparising shopping businesses.

iii. Trade areas for different market segments can be compared. Businesses serving residents can be compared to the origins of employees at a major employer. Furthermore, pin codes are ideal for tracking the origins of non-local tourists.

While tabulating customer zip codes has the ability to capture trade area variability, an appropriate sample of participating businesses must be incorporated. For instance, stores that serve both convenience and com­parison shopping segments are necessary to understand the local market. Businesses that serve tourists are needed to examine the tourist market

Implementation is the process that turns strategies and plans into actions in order to accomplish strategic objectives and goals. Implementing your strategic plan is as important, or even more important, than your strategy. The video The Secret to Strategic Implementation is a great way to learn how to take your implementation to the next level.

Critical actions move a strategic plan from a document that sits on the shelf to actions that drive business growth. Sadly, the majority of companies who have strategic plans fail to implement them. According to Fortune Magazine, nine out of ten organizations fail to implement their strategic plan for many reasons:

• 60% of organizations don’t link strategy to budgeting
• 75% of organizations don’t link employee incentives to strategy
• 86% of business owners and managers spend less than one hour per month discussing strategy
• 95% of the typical workforce doesn’t understand their organization’s strategy.

A strategic plan provides a business with the roadmap it needs to pursue a specific strategic direction and set of performance goals, deliver customer value, and be successful. However, this is just a plan; it doesn’t guarantee that the desired performance is reached any more than having a roadmap guarantees the traveler arrives at the desired destination.

Getting Your Strategy Ready for Implementation

For those businesses that have a plan in place, wasting time and energy on the planning process and then not implementing the plan is very discouraging.  Although the topic of implementation may not be the most exciting thing to talk about, it’s a fundamental business practice that’s critical for any strategy to take hold.

The strategic plan addresses the what and why of activities, but implementation addresses the who, where, when, and how. The fact is that both pieces are critical to success. In fact, companies can gain competitive advantage through implementation if done effectively.  In the following sections, you’ll discover how to get support for your complete implementation plan and how to avoid some common mistakes.

Avoiding the Implementation Pitfalls

Because you want your plan to succeed, heed the advice here and stay away from the pitfalls of implementing your strategic plan.

Here are the most common reasons strategic plans fail:

• Lack of ownership: The most common reason a plan fails is lack of ownership. If people don’t have a stake and responsibility in the plan, it’ll be business as usual for all but a frustrated few.
• Lack of communication: The plan doesn’t get communicated to employees, and they don’t understand how they contribute.
• Getting mired in the day-to-day: Owners and managers, consumed by daily operating problems, lose sight of long-term goals.
• Out of the ordinary: The plan is treated as something separate and removed from the management process.
• An overwhelming plan: The goals and actions generated in the strategic planning session are too numerous because the team failed to make tough choices to eliminate non-critical actions. Employees don’t know where to begin.
• A meaningless plan: The vision, mission, and value statements are viewed as fluff and not supported by actions or don’t have employee buy-in.
• Annual strategy: Strategy is only discussed at yearly weekend retreats.
• Not considering implementation: Implementation isn’t discussed in the strategic planning process. The planning document is seen as an end in itself.
• No progress report: There’s no method to track progress, and the plan only measures what’s easy, not what’s important. No one feels any forward momentum.
• No accountability: Accountability and high visibility help drive change. This means that each measure, objective, data source, and initiative must have an owner.
• Lack of empowerment: Although accountability may provide strong motivation for improving performance, employees must also have the authority, responsibility, and tools necessary to impact relevant measures. Otherwise, they may resist involvement and ownership.

It’s easier to avoid pitfalls when they’re clearly identified. Now that you know what they are, you’re more likely to jump right over them!

Covering All Your Bases

As a business owner, executive, or department manager, your job entails making sure you’re set up for a successful implementation. Before you start this process, evaluate your strategic plan and how you may implement it by answering a few questions to keep yourself in check.

Take a moment to honestly answer the following questions:

• How committed are you to implementing the plan to move your company forward?
• How do you plan to communicate the plan throughout the company?
• Are there sufficient people who have a buy-in to drive the plan forward?
• How are you going to motivate your people?
• Have you identified internal processes that are key to driving the plan forward?
• Are you going to commit money, resources, and time to support the plan?
• What are the roadblocks to implementing and supporting the plan?
• How will you take available resources and achieve maximum results with them?

Whether you have just started your business or developing it day-by-day, a business plan is what you would need throughout your journey. The crucial factors that you would write down on a piece of paper will help you going towards your desired success. So, the question that arises here is How to write an effective business plan that will take your company to the expected height?

Basically, your business plan should be nothing but your answers to a comprehensive question list. To begin with, ask yourself:

Where do you want your business to go?

Find out how would you like to see your business in the next five, ten, or fifteen years down the lines?

What is your expected revenue and profit in future?

How many employees will you hire?

How would you like to expand your business?

And the list goes on.

Similar to the plan of long-term, create a short-term plan that would be applied to a shorter period of time, particularly a year. For example: What are your goals for the current year? What are the targets that you must accomplish to reach that ultimate goal?

Seven important factors to consider before starting a business

1. A great idea

“No business can develop in the absence of a great idea. A great and a practical idea is the only thing on which the development of your business will depend. Moreover, as a lot of companies are involved in the market, you need to have a unique idea that stands out.”

Not sure what your great idea is? Explore our business ideas hub and get inspired.

2. Funding and budget

“The next important factor that should be considered involves the funding of your business. You need to properly identify the sources through which you will be able to get the funding for your business. Moreover, it is better to have a plan so that the budget of a company can be properly maintained.”

What are the options for funding your business? Discover the different ways of raising finance.

3. Analysis of competitors

“You need to know what your competitors are doing and what are their strategies? With this knowledge, you will be able to take appropriate decisions about your company. It will also help you in developing a much more effective strategy for your business.”

4. An effective business plan

“No business can develop fully in the absence of a business plan. Writing a business plan can help you determine if your idea is feasible and provide direction. With a business plan, you will be able to know every next step that should be taken.”

5. Legal documentation

“The next factor that needs to be considered is the completion of legal documents. For the sale of some specific products and services, there are some requirements for the preparation of legal documents. Make sure you have already done all the legal documentations for your business.”

Our legal issues section can help you to understand some of the common concerns.

6. Positive attitude

“It is one of the most important things that will help you in passing all the challenges and difficulties. There will be a lot of risks and hurdles you will face in this process and the only thing that can save you will be your positive attitude. You will have to work hard to develop a company of your own.”

7. Know when you need help

“The development of a business is not a matter of seconds, it will involve a lot of time that is spent with hard work. However, in this process, you will be needing the help of some experts. Make sure you already have an adviser who can provide you with the best advice at the hour of need.

“These are the seven most important factors you need to consider while starting a business of your own.”

In the retail planning process, a retailer decides about the planning strategies of the retail business, learn about the competition in the market, and create and implement strategies accordingly.

Retail planning is crucial for every retail business. Otherwise, you will always find yourself to dilemma while making decisions for your store.

Seven Steps involved in Retail Planning Process

1. Set objectives

Setting Objectives is important for the success of the business. It is not necessary that the goal of a business is to maximize sales. An organization can pursue multiple goals at the same for example, expansion of business in a year, revenue generation, and more product lines, etc. it is apparent that all goals mentioned above are focused on multiplying sales.

Broadly the objective of an organization can be divided into two categories:

(i) External Objectives

The external objectives of an organization include the performance of the organization in an external environment focused on customers.

Such as providing customer satisfaction and increasing their loyalty for the products, selling quality products at lower prices, providing better customer service, etc.

(ii) Internal Objectives

On the other hand, internal objectives consist of sales goals, revenue generation, maximizing the sales using existing resources, etc.

Both objectives are important for an organization. But only clear objectives can be easy to achieve, and planning can be done accordingly to attain these objectives. Therefore, it is important for a retailer to set annual objectives to ensure success and to measure it.

2. Analysis of the market

After the objective for the organization is defined. The next step is to analyze the situation of the market you are planning to enter.

The analysis can help you to make an effective decision. you can learn about the competitors’ strategies and plan your strategies accordingly, what are the expectations of your customers and how you can fulfill them, how you can stay ahead in competition in the market, etc.

The analysis can help you to learn about the threats and opportunities in the market and what actions you should take. In addition to this, analysis can help you to learn about the strengths and weaknesses of your own business.

In this way, you can work on to strengthen your strengths and work on your weaknesses to turn them into your strengths. You can make decisions about how you can use your resources such as financial resources, human resources, intangible and physical resources, etc.

3. Analysis of Customers

Analysis of customers is the most important activity of the retail planning process. You can’t simply like a product, design it and throw in the market and expect customers to buy it and like it.

By analyzing the customers, you need that what are the expectations and requirements of customers and you select a segment of potential customers who are most likely to buy your products. You can plan your business strategies better if you know your customers.

You can optimize your marketing mix to satisfy your customers. Customers analysis helps the organization to innovate and create services to satisfy its customers and retain them for a long period.

Hence, you avoid the chances of getting out of fashion as you keep updating your strategies with the changing demands and requirements of customers.

4. Frame Retail Strategies

After you have decided key objectives and learned about the market situation and customers’ requirement, next, you should prepare your retail strategy for marketing positioning and retail mix.

The market strategies should be prepared based on kind of products sold in your store or the segmentation of the market you are dealing with.

The meaning of retail mix is to have the balanced amalgamation of retail activities, and the meaning of retail positioning is the strategy of the retailer to enter the target market and establish his business to compete with the competitors.

It is important to pay attention to these processes to grab the attention of your potential customers and make establish a positive image of your retail business.

You need to prepare effective retail strategies to stay ahead in the game of retailing. Work on various elements such as the location of the store, pricing policy, merchandise assortment, advertisement, customer service, etc. for example, you can attract customers by offering good quality of products at lower prices than your competitors or central location of the store can be a key element to attract more customers.

5. Strategic Short-term Planning

In the next step, the retailer must think and plan about the short-term plans to grow your business. For example, you can attract more customers in your store during the festive season by using tactic advertising and marketing strategies.

You can run a short-term TV advertisement or can circulate advertising pamphlets in the local market. Strategic short-term plans are important for boosting sales instantly. Therefore, you should start planning short-term plans before the beginning of the festive season.

Your planning should be as per the requirement of the event. For example, an advertisement plan for valentine’s day can’t be the same as the advertisement plan for Christmas.

6. Implementation of the Strategies

Once you have decided strategies, the final step is to implement those strategies and control them. In this step, you will also check whether your strategies are working or not and how much they have helped in boosting the sales.

Implementing strategies is not easy, it requires thorough planning, and you need to make changes in the store, and you may also need to change the role of your employees.

You might face some reluctance from your employees but if you plan smartly. You can divide the work among your employees in such a way so that they don’t feel burdened. In addition to this, you can also give them a bonus if their work pays off.

7. Analyzing the performance of the strategies

Your job does not end with the implementation of strategies. You should analyze its performance and see where did you face most difficulties and what kind of issues did you face. Learn about them and take your lessons and implement them in your future strategy planning.

Customer satisfaction (CSAT) is a metric used to quantify the degree to which a customer is happy with a product, service, or experience. This metric is usually calculated by deploying a customer satisfaction survey that asks on a five or seven-point scale how a customer feels about a support interaction, purchase, or overall customer experience, with answers between “highly unsatisfied” and “highly satisfied” to choose from.

Customer service is the direct one-on-one interaction between a consumer making a purchase and a representative of the company that is selling it. Most retailers see this direct interaction as a critical factor in ensuring buyer satisfaction and encouraging repeat business.

Even today, when much of customer care is handled by automated self-service systems, the option to speak to a human being is seen as necessary to most businesses. It is a key aspect of servant-leadership.

Basics of Good Customer Service

Successful small business owners understand the need for good customer service instinctively. Larger businesses study the subject in-depth, and they have some basic conclusions about the key components:

• Timely attention to issues raised by customers is critical. Requiring a customer to wait in line or sit on hold sours an interaction before it begins.
• Customer service should be a single-step process for the consumer. If a customer calls a helpline, the representative should whenever possible follow the problem through to its resolution.
• If a customer must be transferred to another department, the original representative should follow up with the customer to ensure that the problem was solved.

Customer Services Job Requirements

Much is expected of customer service representatives. Yet the pay for the job is low. The average salary in 2018 was about $33,750, according to the Bureau of Labor Statistics.

Some of the job expectations:

• Customer service representatives must be accessible, knowledgeable, and courteous. They require excellent listening skills and a willingness to talk through a resolution. Training in conflict resolution can be beneficial.
• Strong speaking skills are important. For phone staff, this means speaking clearly and slowly while maintaining a calm demeanor even if the customer doesn’t.

Employer Responsibilities

Poor management can doom any customer service operation. A couple of important tips for managers:

• Make sure your customer service representatives are fully informed and have the latest information and the company’s products and policies.
• Periodically assess the customer service experience you are providing to ensure that it’s an asset to the company.
• Consider conducting regular surveys to give customers the chance to provide feedback about the service they receive and suggest areas for improvement.

Using Mobile Services Effectively

In recent years, studies of customer service have centered on creating the perfect online experience.

The first and most difficult factor is the multiplicity of channels. Today’s customers expect to get service through whatever app or device they happen to be using at the moment. That may be a mobile device or a laptop, a social media site, text app, or live chat.

Once again, the focus has been on packaging how-to content and related resources that are designed for self-service. Increasingly sophisticated data analytics also are being used to identify dissatisfied or low-engagement customers.

But, as always, the most effective customer service apps need to incorporate human contact, if only as a last resort.

• Customer service is the interaction between the buyer of a product and the company that sells it.
• Good customer service is critical to business success, ensuring brand loyalty one customer at a time.
• Recent innovations have focused on automating customer service systems but the human element is, in some cases, indispensable.

Consumer Buying Behavior refers to the actions taken (both on and offline) by consumers before buying a product or service. This process may include consulting search engines, engaging with social media posts, or a variety of other actions. It is valuable for businesses to understand this process because it helps businesses better tailor their marketing initiatives to the marketing efforts that have successfully influenced consumers to buy in the past.

A variety of factors go into the consumer buyer behavior process, but here we offer just a few. Taken separately, they may not result in a purchase. When put together in any number of combinations, the likelihood increases that someone will connect with a brand and make a purchase. Four factors influencing consumer buying behavior are:

• Cultural Factors: Culture is not always defined by a person’s nationality. It can also be defined by their associations, their religious beliefs or even their location.
• Social Factors: Elements in a person’s environment that impact the way they see products.
• Personal Factors: These may include someone’s age, marital status, budget, personal beliefs, values, and morals.
• Psychological Factors: A person’s state of mind when they are approached with a product will often determine how they feel not only about the item itself but the brand as a whole.

Studying consumer behavior is important because this way marketers can understand what influences consumers’ buying decisions. By understanding how consumers decide on a product they can fill in the gap in the market and identify the products that are needed and the products that are obsolete. Studying consumer behaviour also helps marketers decide how to present their products in a way that generates maximum impact on consumers. Understanding consumer buying behaviour is the key secret to reaching and engaging your clients, and convert them to purchase from you.

A consumer behavior analysis should reveal:

• What consumers think and how they feel about various alternatives (brands, products, etc.);
• What influences consumers to choose between various options;
• Consumers’ behavior while researching and shopping;
• How consumers’ environment (friends, family, media, etc.) influences their behavior.

Consumer behavior is often influenced by different factors. Marketers should study consumer purchase patterns and figure out buyer trends. In most cases, brands influence consumer behavior only with the things they can control; like how IKEA seems to compel you to spend more than what you intended to every time you walk into the store.

Factors affects consumer behavior

Many things can affect consumer behavior, but the most frequent factors influencing consumer behavior are:

1. Marketing campaigns

Marketing campaigns influence purchasing decisions a lot. If done right and regularly, with the right marketing message, they can even persuade consumers to change brands or opt for more expensive alternatives. Marketing campaigns can even be used as reminders for products/services that need to be bought regularly but are not necessarily on customers’ top of mind (like insurance for example). A good marketing message can influence impulse purchases.

2. Economic conditions

For expensive products especially (like houses or cars) economic conditions play a big part. A positive economic environment is known to make consumers more confident and willing to indulge in purchases irrespective of their personal financial liabilities. Consumers make decisions in a longer time period for expensive purchases and the buying process can be influenced by more personal factors at the same time.

3. Personal preferences

Consumer behavior can also be influenced by personal factors, likes, dislikes, priorities, morals, and values. In industries like fashion or food personal opinions are especially powerful. Advertisement can, of course, help but at the end of the day consumers’ choices are greatly influenced by their preferences. If you’re vegan, it doesn’t matter how many burger joint ads you see, you’re probably not gonna start eating meat because of that.

4. Group influence

Peer pressure also influences consumer behavior. What our family members, classmates, immediate relatives, neighbors, and acquaintances think or do can play a significant role in our decisions. Social psychology impacts consumer behaviour. Choosing fast food over home-cooked meals, for example, is just one of such situations. Education levels and social factors can have an impact.

Four types of Buyers

1. The Analytical Buyer

Motivated by logic and information, this buyer will look at all the data on competing brands and products before making an informed decision.

2. The Amiable Buyer

Warm and friendly, this buyer just wants everyone to be happy. That is why they are often paralyzed by big decisions when there is the perception of a win/lose outcome.

3. The Driver Buyer

Drivers are most concerned with how others view them and whether they follow. The trendsetters, Drivers are most concerned with their appearance rather than the relationships that are formed during a transaction.

4. The Expressive Buyer

Relationships are key to the Expressive Buyer. They cannot stand feeling isolated or ignored during a transaction. Instead, they want to feel like your most important asset.

It’s hard to distill something as complex as consumer buying behavior into four neat and tidy categories. Most people will find they are a combination of these types of consumer buying behavior.

Consumers are a tribal bunch, and the groups they choose to belong to are significant to how those consumers view themselves and live their lives. Much the way they pick like-minded friends, consumers also purchase brands they believe represent standards they relate to. This is a key component of reference group marketing. Convincingly associating your product or service with a group your target market admires is how you can use group influence to boost your brand’s sales.

Consumers Trust Reference Groups

Consumers are influenced by different types of reference groups they believe they are a part of or aspire to be. Group influence goes both ways; sometimes, consumers avoid brands they believe would put them into a group they don’t want to be included in. People buy things to help form and express their self-concept and their connections with like-minded people. Many things a person buys, especially showy items such as clothing, accessories, vehicles, restaurants or club memberships, are symbolic of what he thinks is acceptable to a certain reference group such as his family, social circle, workplace, community or culture.

An individual buyer might make purchases that appeal to a few different types of reference groups. For example, a consumer who wants to appear eco-friendly may purchase a Toyota Prius. That same consumer might also feel connected to Nintendo’s gaming community and opt to buy Nintendo consoles over Sony or Microsoft products. Group influence comes from many directions and in most cases, different types of reference groups do not clash in the buyer’s mind because the products that signify them are in completely separate categories.

Branded Upbringings Make Lifetime Buyers

Kids influence their parents’ purchases, and reference group marketing can be quite effective with children and teenagers. Marketers aim their messages at children via television, apps and internet to establish early brand familiarity and inspire direct sales. While parents may refer to other parents and groups for the final decision on household purchases, teens and children are typically driving forces behind their parents’ purchasing decisions.

Consumers Buy Peer Status

Wealthy consumers influence non-wealthy consumers. Certain brands keep luxury consumers believing they’re part of an elite club. The trick for marketers of high-end luxury goods and services is to appeal to the wealthier consumers who want to feel distinguished from the non-wealthy while at the same time appealing to the larger audience of consumers who want to emulate the wealthy, according to research on consumer behavior. For example, a high-end watchmaker may release a limited edition luxury watch for its targeted consumers followed by a more affordable version of the product, under the same brand name, for a wider market.

Cause Affiliations and Purchasing

Movements in society can influence consumer behavior. Media reports associated with a brand can fuel consumer activism for or against it, making social media an important asset for any brand engaging in reference group marketing. For example, an injustice involving a manufacturer that is publicized in the media may trigger a consumer to join a boycott of the manufacturer’s brand. Conversely, a company’s association with a charitable cause or heroic deed may compel the consumer to purchase the company’s brand just to show support. People favor brands that resonate with what they believe in and what they think like-minded believers accept.