Quy An | Gia Huy | Thanh Ngan | Ngoc Thanh | Khanh Trang

Consumer
decision-making
GOME Electrical Appliances Holding
Limited: The “Tuangou” Challenge

CB2 - Group 8
 TABLE OF CONTENTS

01 INTRODUCTION
Introducing of the case
02 ISSUES
Illustrating the main issues
context raised in the case

QUESTIONS DISCUSSION
03 Answering the case
04 LESSONS LEARNED
Summarising the lessons
questions learned from the case
 INTRODUCTION
The industry The brand
The electrical supply industry ● GOME’s corporate mission and culture:
○ Be a pioneer & contribute to society

The company: GOME ○ Keep promises & be credible

○ Uphold integrity & develop people
● 01/01/1987: a new electrical
○ Hire for capability & hire locally
appliances shop (Beijing).
○ Establish a strong brand &
● 1992: expanded to 08 stores (each
emphasise image
under different names) → United
● GOME’s Strategy: low price & low cost.
and called “GOME Home
○ Competitive pricing from high
Appliance”.
volume, customer service comes first.
● 2003: marked a watershed in
GOME’s development.
 MAIN ISSUES
● Too many benefits &
Unfair discounts for shoppers ->
regular customers would
treatment not accept.
→ Lose a number of regular
or normal customers.

Increased in the Tuangou Day

Increase of labour &
●
Project.
administrative cost → Affect the cannibalization
of normal GOME stores sales.
Question 1
1. What type of consumer decision-making process does a tuangou purchase belong to? Explain why.
There are three types of problem-solving process in purchase decisions:

Extended decision making

Limited decision making
● High level of purchase involvement
● Low to moderate level of purchase
● Spend many hours on searching for information
involvement
about the products, reading reviews online or
● Involve less search for information, few
asking for recommendations from friends and
choices alternatives are evaluated
family members
● Choices are carried out quite quickly
● Complex evaluation of multiple alternatives

Nominal decision making

● Low level of purchase involvement
● Put very little efforts in researching the product
and evaluating choice alternatives
● Frequent purchases, products are often low-cost
and low risk
Question 1
1. What type of consumer decision-making process does a tuangou purchase belong to? Explain why.

Explanation:
● Tuangou shoppers look for a variety of products, “ranging from home appliances to automobiles and
from wedding packages to building/renovation materials for new home”. These goods are quite
complicated and infrequent purchase or even bought once in life.
● Due to the expensiveness and unfamiliar of such sorts of goods and services, customers have to put a
lot of time and efforts into decision making searching internal and external product information,
followed by a complex evaluation of multiple choice alternatives.
● Besides, customers have to jon in Tuangou session, visit store and bargain with retailers.

=> The difficulty of this procedure has demonstrated that the tuangou, or
team purchasers, utilize careful decision-making while making purchases.
 Describe the decision-making process of a
Question 2 typical Tuangou shopper and compare with
that of a typical walk-in customer

STAGES TUANGOU SHOPPERS TYPICAL WALK-IN CUSTOMER

Shoppers would not buy the product: - Tend to demand products to satisfy
- If they can not organize a group of immediate needs.
people who leveraged the collective - Just have some ideas about what to
bargaining power with retailers to get buy or what will solve the issues,
Problem
discounts. which is different from deeply
Recognition
- If team buyers fail to negotiate a researching the price of Tuangou
lower price, special discounts or deals shoppers.
on products. - Do not make sure about the best
option for price, brand, product line, …
Question 2
STAGES TUANGOU SHOPPERS TYPICAL WALK-IN CUSTOMER

- Find information about a product/

brand of interest to them: - Same sources of information on the
+ Through channel/websites website/internet.
Search for
+ By directly visiting stores - Do not put much effort and time,
Alternative
+ Approaching store managers compared to Tuangou, to buy a product.
Solutions
+ Asking friends/family - Be more easily influenced and attracted
- Know exactly about the product they by in-store environments/ programs.
wanted.

- Mainly concerned with price.

- Some make a decision before visiting the
- Combining with their bargaining
store to buy desired products.
power => negotiate to obtain special
Evaluation of - Most walk-in customers are more likely
deals and better prices.
Alternatives to make a decision during the store
- Options/ alternatives have been
visits/ rely on the recommendation from
evaluated precisely in online group
the salesperson.
discussion via Tuangou website.
Question 2
STAGES TUANGOU SHOPPERS TYPICAL WALK-IN CUSTOMER

After having done tons of research and - Tend to make a decision or purchase
alternative comparisons online, the while browsing in store rather than
Purchase group will gather at an agreed time and before visiting.
location, and show up unannounced at a - Need more time to decide compared to
retail store. Tuangou buyers.

- Less likely to experience

post-purchase dissonance since they - Typical walk-in customers may have
Post-purchase
get the thing they want (lower price). post purchase dissonance since the
Use and
- The alternative solutions and research and evaluation process of
Reevaluation
evaluation have been considered products took place quite quickly.
carefully among all team buyers.
Question 3 GOME’s tactics towards Tuangou shoppers

● April 2006, launched “GOME Tuangou Day Project”

○ Online shoppers: shopping online and have discounts 5%-40%
by signing up, providing personal information and details of
desired products.
○ Privileges of Tuangou shoppers: Minimum of 2% discount,
Tuangou VIP card, complimentary gift and lucky draw.
● November 2006, launched “Tuangou Banquet” - the biggest tuangou
event of the year
○ GOME Stores corporate with local Tuangou website
○ Advertise and organize Tuangou trips
● Arrange special VIP “close store” shopping events, providing
shoppers with bargains and great shopping experience to build a
strong brand image
 Question 3 Pros and Cons

Pros Cons
● Increase sales, bargain power, ability to ● Conflicts due to unfair treatment
negotiate lower price between Tuangou Shoppers and regular
● Better control the number of Tuangou shoppers -> may lose a number of regular
Shoppers and understand consumer customer
behaviors ● Disadvantage positions where there are
● Avoid price conflicts between Tuangou big team purchase and large bargain
Shoppers and regular shoppers power.
● Increase labour and administration cost
Question 4
● Construct a separate store for Tuangou customers in a location where the cost of rent and
employee salaries are reasonable.
○ Pros:
■ Prevent the erosion of profit margin.
■ Remove the bias given to tuangou shoppers in comparison to regular customers.
○ Cons:
■ Tangou has become a popular fad in China.
■ Excluding all tuangou consumers might significantly reduce the customer base.
Question 4
● Build many separate Tuangou stores.
○ Pros:
■ Due to trends changing and new models being introduced
daily, electronic products have relatively short product lives.
=> Outdated electrical gadgets in stock can be cleared
away at a discount.
○ Cons:
■ Such exclusive stores will be costly to open.
■ These special stores must be properly distinguished from the
regular GOME stores.
=> Otherwise, there can be a deficit in the sales of the
normal GOME stores.
 LESSONS LEARNED
Balance between
regular and
Tuangou shoppers Minimize labour &
administrative cost
● Focus more on
developing benefits and
Try to build a separate store
discounts for regular
for Tuangou shoppers while
customers
minimizing the cost of rent
● Balance between two
and staff salary in the
types of shoppers
different areas.
→ Increase the brand’s loyalty.
References
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