Consumer Behavior - The Sale Effect

The Sale Effect

Final Project Consumer Behavior Fall Quarter 2011 Candice Alvarado, Ericka Smith, Kaitlin Andreas, Kristine Mileson & Mariel Alvarez

Table of Contents

Observation……………………………………………………………………………….3 Hypothesis……………………………………………………………………………......7 Experimental Design……………………………………………………………………10 Field Data………………………………………………………………………………..12 Analysis………………………………………………………………………………..…17 Infographic………………………………………………………………………………19 Appendix…………………………………………………………………………………21 Rough Field Data…………………………………………………………………22 Experiment Photos………………………..………………………………………26 Works Cited………………………………………………………………………29

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Observation The verb ‘Sell’ defined by The Merriam-Webster dictionary as: A. To cause or promote the sale of. B. To make or attempt to make sales to. C. To influence or induce to make a purchase. This definition tells us everything we need to know about retail sales, especially sales promotion through advertising. Retailers operate with a single goal in mind: To Sell. This concept of selling merchandise has been using promotion and persuasion to influence consumers to make a purchase for hundreds of years. From buy one get one, two for the price of one, to percentages off, retailers are constantly striving to give the consumer incentive. And it works, consumers are constantly searching for the lowest price and retailers are working hard to offer those low prices that people expect. Nearly every retailer uses sales to motivate consumers to make a purchase and we have come to love them for that. From weekly sales, to holiday sales, to the infamous Black Friday madness we as consumers strive to buy at the lowest price possible. Do consumers use this knowledge to their advantage? Do sales really have an influence on consumer purchases?

We plan to observe three similar stores, in a mall setting at Bellevue Square in order to understand the effect sales have on the consumer and if these advertised sales influence consumers to buy or not to buy.

By identifying the consumers of Bellevue, we can make an educated decision to conduct our experiment at Bellevue Square where these affluent consumers shop and live.

Knowing the type of customer and who they are will benefit us in a way in which it helps us prove that they will be influenced to make a purchase based on sales on signage, and are guided by similar interests. These consumers are a very affluent type, they value quality in products and in services. When observing these consumers most are very aware of their buying power and therefore will make purchases based on their knowledge that they have the extra money to spend. Thus, providing that Bellevue was the right location to conduct our experiment at.

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Movers & Shakers Wealthy, Middle Age w/o Kids Movers & Shakers is home to America's up-and-coming business class: a wealthy suburban world of dual-income couples who are highly educated, typically between the ages of 35 and 54. Given its high percentage of executives and white-collar professionals, there's a decided business bent to this segment: members of Movers & Shakers rank near the top for owning a small business and having a home office.

Social Group: Elite Suburbs Lifestage Group: Midlife Success 2009 Statistics: US Households: 1,853,105 (1.61%) Median HH Income: $107,108 Lifestyle Traits • Order from J. Crew • Go downhill skiing • Read Inc. • Watch Saturday Night Live • Land Rover Range Rover

Demographics Traits: Urbanicity:

Suburban

Income:

Wealthy

Income Producing Assets:

High

Age Ranges:

35-54

Presence of Kids:

HH w/o Kids

Homeownership:

Mostly Owners

Ethnic Diversity:

White, Asian, Mix

The Movers & Shakers is the home of the up and coming business class. They are educated and have the income to afford their lavish lifestyle. This class is an ethnically diverse group with no children. This bracket is a good addition to our type of consumers since they are educated and have well-paying jobs. This proves why are types of consumer shop at the savvy stores like Banana Republic, J. Crew, and Ann Taylor.1

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Executive Suites Upper-Mid, Middle Age w/o Kids Executive Suites consists of upper-middle-class singles and couples typically living just beyond the nation's beltways. Filled with significant numbers of AsianAmericans and college graduates--both groups are represented at more than twice the national average--this segment is a haven for white-collar professionals drawn to comfortable homes and apartments within a manageable commute to downtown jobs, restaurants, and entertainment Social Group: The Affluentials Lifestage Group: Midlife Success 2009 Statistics: US Households: 1,047,515 (0.91%) Median HH Income: $76,334 Lifestyle Traits • Shop at IKEA • Play racquetball • Read Wired • Watch The Office • Acura TSX

Demographics Traits: Urbanicity: Suburban Income: Income Producing Assets: Age Ranges: Presence of Kids: Homeownership: Employment Levels: Education Levels:

Upper-Mid Above Avg.

Ethnic Diversity:

White, Asian, Mix

<55 HH w/o Kids Mostly Owners Management College Grad

The Executive Suites category consists of upper middle class educated individuals with no children. They are drawn to the comfortable lifestyle with their jobs being close to where they live. They enjoy many activities that help keep them active. This category is full of ethnically diverse consumers that values customer service. For this reason we are able to stand behind our conclusion that many of these types of consumers shop at the same store for example Banana Republic, J. Crew, and Ann Taylor 2

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Ann Taylor Ann Taylor is a chic women’s clothing store that offers everything from pretty feminine pieces to bold, modern sportswear for sophisticated adult women from the ages of 18 to 50 an up. Although the store only offers women’s merchandise they have expanded their brand to a lower price point through The Loft and have recently released a modern, sophisticated and professional maternity line. According to quantcast.com, the Ann Taylor customer is predominately female, Asian or Caucasian, and do not have children as most are well-educated and professional working women. These working women have an overall more affluent income, making more than sixty-thousand dollars a year up to more than onehundred thousand dollars a year. The demographic of the Ann Taylor consumer is broken down further in the charts below.

www.Quantcast.com

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Banana Republic Banana Republic, part of Gap Inc. offers modern, refined clothing for men and women plus shoes and accessories. According to Quantcast.com Banana Republic’s target consumers are within the age range of 18 to 49 years old with a stable disposable income.

These consumers are very affluent in addition to being savvy educated individuals. While our group observed Banana Republic we notice that our assumption with the demographics range was true when a consumer walked in the store they were at times carrying an Ann Taylor or J. Crew shopping bag.

www.Quantcast.com

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J. Crew J. Crew is a specialty retail store that offers clothing with class and sophistication.

Providing women’s, men’s and children’s clothing and accessories, J. Crew’s range is extensive. Although the store offers a wide selection of their products all over the gamut, women are the most dominant consumer. According to quantcast.com, the J. Crew premiere customer falls in the 18-34-age range, although the older age bracket from 35-49 follows close behind. The majority of the consumers are Caucasian and the ethnic base is of Asian decent. Other characteristics of the J. Crew consumer base are that they tend to not have children, have the means to shop precariously and have a graduate or post graduate education level. The demographic characteristics below show the breakdown of each category more extensively.

www.Quantcast.com

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Hypothesis Question How many consumers will make a purchase if there is an advertised sale that is communicated through signage in the store window?

We applied the above question throughout the processes of the scientific method in order to determine our hypothesis for this experiment. Our independent variable will be the whether or not the store is promoting a sale, while our dependent variable will be the amount of “purchases” made, observed by counting the number of customers exiting the store with a bag in hand as well as those who exit without one.

Hypothesis If a store is promoting a sale through advertisements and signage (windows), then a consumer is more likely to make a purchase.

The above hypothesis clearly states the independent and dependent variables as well as our predicted result that will be observed through this experiment.

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Experimental Design We conducted an experiment that tested consumer behavior through observing the effectiveness of advertised ‘sales’ and signage on mall shoppers. We visited Bellevue Square and observed the behaviors of consumers & their purchasing decisions while they were shopping at the mall. We observed three specific stores that target the same demographic and offer their merchandise at a similar price point; J. Crew, Ann Taylor and Banana Republic. We made our observations by viewing the store’s entrance and counting the number of customers who walked out of the store with a shopping bag in hand (from that store) as well as those who did not. By using this observation technique, we are able to draw a conclusion on the effect that sales and signage have on consumer purchases. We expected that the consumers will be more likely to make a purchase in the event of an advertised sale through signage.

Independent Variables •

The store

•

The day & time

•

The sales being offered by the store

Dependent Variables •

Purchase or no purchase (bag or no bag)

Controlled Variables •

Location of stores (Bellevue Square)

•

Days & times of observations

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50 customers visit (100 customers total)

Uncontrolled Variables

•

Service received in the store

•

Assortment of merchandise

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Sale prices

•

Percentage of discount (sale) 10

Method Participants - Due to the nature of the experiment, we were unable to select participants as mall shoppers as to keep it unknown that we were conducting a social experiment on their behavior as a consumer. We obtained our field data through random convenience sampling, using a total of five observers.

Procedure – We conducted this experiment over a two-week period, at Bellevue Square Mall, on Thursday November 10th & Thursday November 17th. We collected the field data by observing the entrance to each store (Ann Taylor, Banana Republic and J. Crew) and counting the number of customers that exit with a shopping bag (from that store) in hand as well as the number of customers that exit without one. We observed a total of 100 customers for each store to ensure that our experiment collects adequate and measureable data for each location.

Our measure for this experiment will be whether or not signage and advertisement of a sale influences a customer to not only enter the store but make a purchase. We know that there could be systematic differences given that we have no control over the consumer’s behavior, shopping preferences, income, and agenda. Another systematic difference that could occur is the difference between merchandise offerings and the nature of the sale, including the percentage discount & prices of the merchandise that is included in the sale.

We also take into account that consumers purchase decisions are influenced by their experience in store including customer service, organization and merchandise presentation.

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Field Data The field data that was collected throughout this experiment can be found in the tables below, beginning with day one, to the final day of the experiment. The data found on the tables is further explained through observations that we made throughout the duration of the experiment.

Day 1: Thursday, November 10th at 1:00pm Day 2: Thursday, November 17th at 1:00pm Number of Purchases per 100 Customers Ann Taylor Day 1 Day 2 Totals

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14 21 35

Banana Republic 9 4 13

J. Crew 10 15 25

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Ann Taylor Ann Taylor Number of Purchases (Bags) per 100 Customers Day 1 Day 2 Total

Bag 18 21 35

No Bag 32 29 65

Total 50 50 100

Ann Taylor Day One On the first day we observed Ann Taylor, the store had a sale sign “new reductions up to 70% off original prices”. We observed shoppers doing numerous things that showed they were drawn to the sign. After observing the stores windows and the reduction sign, shoppers often did a double take when they saw the sign and quite a few decided to enter the store. The consumers’ behavior in these instances seemed to show that they were affected by the sale and that it prompted people to enter the store. On this day there was a 36% purchase rate.

Ann Taylor Day Two The second day that we observed Ann Taylor, the store had a sale for “30% Off of Your Entire Purchase”. This sale seemed to get even more attention than the first. We were surprised to see that the sign that was 30% off received more interest than the 70% off sign.

Although the 30% off was a better offer storewide, we expected that people would focus more on the percentage off than reading the wording of the sign. We saw shoppers stop and glance at the Ann Taylor window and could clearly see that they were reading the sale signage. Another influencing factor is that on this day there were new holiday window displays that could have attracted more customers that had noticed the change. On the second day of the experiment there was a 42% purchase rate.

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Banana Republic Banana Republic Number of Purchases per 100 Customers Day 1 Day 2 Total

Bag 9 4 13

No Bag 41 46 87

Total 50 50 100

Banana Republic Day One The atmosphere surrounding Banana Republic the first day we did our experiment was rather calm and quiet. There wasn’t much happening at the store sales wise other than a ‘new arrivals’ sign that was displayed outside the store. The windows were decorated for the holidays, which we can assume the new merchandise was their holiday & winter collections. Most shoppers either just passed the store without a second glance or quietly went inside to look around.

We did notice a couple shoppers leave and return to the store later and couple who would come out one side and enter through the other. There was an 18% purchase rate on this day.

Banana Republic Day Two The second day of observing Banana Republic was much like the first, slow and a low number of purchases. The window displays were the same as the previous week, along with the ‘new arrivals’ sign. There was little incentive to draw mall shoppers into the store, however people did enter the store but did not necessarily find anything worth purchasing.

We noticed many shoppers with bags from other store in hand which tells us they have the disposable income to be shopping at a prestigious mall such as Bellevue Square, however were not persuaded by Banana Republic’s offerings on this day. Over the long period of time we observed the store, there were only four purchases made out of fifty shoppers that entered and exited the store. There was an 8% purchase rate on the second day at Banana Republic.

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J. Crew J. Crew Number of Purchases per 100 Customers Day 1 Day 2 Total

Bag 10 15 25

No Bag 40 35 75

Total 50 50 100

J. Crew Day One The first day of our observation, J. Crew had its window’s displayed with bright coats, winter sweaters, classic trousers and complimentary shoes to match each styled look.

The theme was called “Button Up” and it definitely created a holiday mood by constructing snowflakes made out of different buttons. While watching consumers that went into J. Crew, a few observations were made. First, the demographic was spot on to the Quantcast.com research. Shoppers were female dominant and all of the other characteristics previously stated visually fit the individuals. Secondly, the consumers that went into J. Crew had a 25 percent purchase rate (which came from the raw field data. Although there were no sales broadcasted in the windows, consumers still gravitated towards J. Crew and it was noticed that the consumers who meandered into J. Crew also had bags from the other stores that were observed, Banana Republic and Ann Taylor.

J. Crew Day Two The second day was relatively the same as day one. The consumers were mostly female, dressed classy with a certain level of sophistication in their strut. The windows were in a transformation, or ‘work in progress’ phase. J. Crew was in the middle of changing the visual presentation so the front of the store looked a bit disheveled. Although the windows were in the midst of a facelift, the purchase percent rate increased to an average 43 percent. This was a rather substantial growth from the week earlier 25-percentage rate. The observation that was noticed that changed from the previous week was that J. Crew introduced the holiday seasonal emerald bag.

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By adding in the introduction of the Christmas bag could have altered the purchase decision.

This concluded that while shopping at J. Crew, the window display had little to do with consumer purchasing.

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Analysis Results After gathering all of our raw data and analyzing the outcomes from each visit at each store we have proven our hypothesis to be true that advertised sales have an influence on consumer purchasing. We chose to observe Ann Taylor, J. Crew, and Banana Republic at Bellevue Square because they all have similar target audiences & equal foot traffic, so our experiment would have set variables and our findings would be more accurate. Of the three stores, Ann Taylor was the only one with sales during both visits. Banana Republic had new arrivals during both visits and J. Crew didn’t have any advertised sales going on during either of our visits.

During the first visit Ann Taylor was having a sale for 70% off already reduced prices. This day we counted 18 shoppers exit the store with purchases out of 50 total shoppers. The second visit Ann Taylor was having a sale for 30% off all merchandise. On this day 21 of 50 shoppers left with purchases.

J. Crew did not have any signs or sales happening at the store. During our first visit 10 of 50 shoppers made purchases and 15 of 50 made purchased during the second observation day.

Banana Republic had “New Arrivals” signage placed outside the entrance of the store on both days we did our experiment; however, there didn’t seem to be an influence on the shopping statistics as both days had considerably lower purchases than the other two businesses. During the first visit only 9 of 50 consumers made purchases and the second day purchases dropped to 4 out of 50 shoppers.

We can conclude from these statistical findings that sales do influence consumers to make a purchase. Banana Republic had a 13% purchase rate out of 100 customers while J. Crew had a 25% purchase rate, both stores did not have sales advertised in their windows.

Ann Taylor was the only store with advertised sales in their windows during our visits and had the highest number of total purchases between the three stores with a 35% purchase rate per 100 customers. This confirms our hypothesis that if a store is promoting a sale through advertisements and signage (windows), then a consumer is more likely to make a purchase. Our hypothesis is not only confirmed by the data we conducted and illustrated above, but it can also backed up by the estimated number of visits to each store’s online site

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found on Quantcast.com. We took the opportunity to compare the three stores internet presence and found that while J. Crew had the highest number of visits, they sell to both men and women while Ann Taylor had the second highest number of visits and they are specifically a women’s only brand. Banana Republic’s Internet presence was significantly lower during the past year, which correlates directly to the low numbers of purchases we observed during our experiment.

www.Quantcast.com

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Infographic

The above illustration shows the process that was taken by our group in order to observe and execute our study. First, our group, Candice, Kaitlin, Mariel, Ericka and Kristi jumped in a car. As the group jammed to music and gossiped about boys, they took a journey to the Eastside. After arriving at Bellevue Square, the group headed to Starbucks for a jolt of energy and then they separated into pairs to go to each desired store. Once outside of Banana Republic, J. Crew and Ann Taylor, each individual found a spot to settle in and the consumer observation began. First, the group inspected the window displays. Banana Republic had “New Arrivals” signage in the window, while J. Crew had no sale signage and Ann Taylor had sale signage both days. After tallying up a total of fifty consumers for each day, the group headed back to Seattle to start analyzing what they discovered. Each store’s numbers were laid out, by the amount of bags a consumer had after they left the store, over fifty. Then, the total numbers of both days with consumers with bags were divided into one

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hundred. It turned out that the store that had the most sale signage in the window ultimately had the most purchases. Ann Taylor came in first with a 35 purchase percentage ratio, followed by J. Crew with a 25 purchase percentage ratio and Banana Republic came in last with only a 14 purchase percentage ratio.

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The Sale Effect Appendix

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Rough Field Data Ann Taylor Day One Observation

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Ann Taylor Day Two Observation

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Banana Republic Day One Observation

Banana Republic Day Two Observation

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J. Crew Day One Observation

J. Crew Day Two Observation

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The Sale Effect Experiment Photos Ann Taylor

Week 1 Right & Left Window Displays (Sale: 70% off New Reductions)

Week 2 Holiday Windows Right & Left Window Displays (Sale: 30% off Entire Store)

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Banana Republic

Left Entrance Window Display (Featuring a ‘New Arrivals’ sign)

Right Entrance Window Display

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J. Crew

J. Crew Left Side Window Display

Right Side Window Display (work in progress)

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Works Cited "Anntaylor.com Traffic and Demographic Statistics by Quantcast." Home | Quantcast. Web. 28 Nov. 2011. <http://www.quantcast.com/anntaylor.com/demographics>.

"Bananarepublic.com Traffic and Demographic Statistics by Quantcast." Home | Quantcast.

Web. 28 Nov. 2011. <http://www.quantcast.com/bananarepublic.com/demographics>.

"Jcrew.com Traffic and Demographic Statistics by Quantcast." Home | Quantcast. Web. 28 Nov. 2011. <http://www.quantcast.com/jcrew.com/demographics>.

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