GOME's Tuangou Challenge: Consumer Decision-Making Process Analysis

This case study examines GOME Electrical Appliances Holding Limited and its "Tuangou" challenge, a group-buying phenomenon. The analysis delves into the consumer decision-making process of Tuangou shoppers, contrasting it with that of typical walk-in customers. The assignment explores the types of consumer decision-making involved, from extended to nominal, and how GOME adapted its tactics, such as the "GOME Tuangou Day Project" and "Tuangou Banquet," to cater to this market. It assesses the pros and cons of these strategies, including increased sales versus potential conflicts and higher labor costs. The study proposes solutions like separate stores and evaluates their implications, ultimately emphasizing the need to balance the interests of both Tuangou and regular customers to maintain brand loyalty and minimize costs. The case study references several academic sources, including consumer behavior textbooks and articles on group buying.

Consumer
decision-making
GOME Electrical Appliances Holding
Limited: The “Tuangou” Challenge
CB2 - Group 8
Quy An | Gia Huy | Thanh Ngan | Ngoc Thanh | Khanh Trang

INTRODUCTION
Introducing of the case
context
01 ISSUES
02 Illustrating the main issues
raised in the case
QUESTIONS DISCUSSION
Answering the case
questions
LESSONS LEARNED
Summarising the lessons
learned from the case
TABLE OF CONTENTS
03 04

INTRODUCTION
The company: GOME
The brand
● 01/01/1987: a new electrical
appliances shop (Beijing).
● 1992: expanded to 08 stores (each
under different names)→ United
and called “GOME Home
Appliance”.
● 2003: marked a watershedin
GOME’s development.
● GOME’s corporate mission and culture:
○ Be a pioneer & contribute to society
○ Keep promises & be credible
○ Uphold integrity & develop people
○ Hire for capability & hire locally
○ Establish a strong brand &
emphasise image
● GOME’s Strategy: low price & low cost.
○ Competitive pricing from high
volume, customer service comes first.
The industry
The electrical supply industry

MAIN ISSUES
Unfair
treatment
● Too many benefits &
discountsfor shoppers ->
regular customers would
not accept.
→ Lose a number of regular
or normal customers.
Increase of labour &
administrative cost
● Increased in the Tuangou Day
Project.
→ Affect the cannibalization
of normal GOME stores sales.

Question 1
1. What type of consumer decision-making process does a tuangou purchase belong to
There are three types of problem-solving process in purchase decisions:
Limited decision making
● Low to moderate level of purchase
involvement
● Involve less search for information,few
choices alternatives are evaluated
● Choices are carried out quite quickly
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
Extended decision making
● High level of purchase involvement
● Spend many hours on searching for information
about the products, reading reviews online or
asking for recommendations from friends and
family members
● Complex evaluation of multiple alternatives

Question 1
1. What type of consumer decision-making process does a tuangou purchase belong to
Explanation:
● Tuangou shoppers look for a variety of products, “ranging from home appliances to automobile
from wedding packages to building/renovation materials for new home”. These goods ar
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 t
lot of time and efforts into decision making searching internal and external product info
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.

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

Question 2
STAGES TUANGOU SHOPPERS TYPICAL WALK-IN CUSTOMER
Search for
Alternative
Solutions
- Findinformation about a product/
brand of interest to them:
+ Through channel/websites
+ By directly visiting stores
+ Approaching store managers
+ Asking friends/family
- Know exactly about the product they
wanted.
- Same sources of informationon the
website/internet.
- Do not put much effort and time,
compared to Tuangou, to buy a produc
- Be more easily influenced and a
by in-store environments/ programs.
Evaluation of
Alternatives
- Mainly concerned with price.
- Combining with their bargaining
power => negotiate to obtain special
deals and better prices.
- Options/ alternatives have been
evaluated precisely in online group
discussion via Tuangou website.
- Some make a decision before visiting
store to buy desired products.
- Most walk-in customers are more li
to make a decision duringthe store
visits/ rely on the recommendation from
the salesperson.

Question 2
STAGES TUANGOU SHOPPERS TYPICAL WALK-IN CUSTOMER
Purchase
After having done tons of research and
alternativecomparisonsonline, the
group will gather at an agreed time and
location, and show up unannounced at a
retail store.
- Tend to make a decision or purcha
whilebrowsingin storerather than
before visiting.
- Need more time to decide compared
Tuangou buyers.
Post-purchase
Use and
Reevaluation
- Less likely to experience
post-purchase dissonance since they
get the thing they want (lower price).
- The alternativesolutions and
evaluation have been considered
carefully among all team buyers.
- Typical walk-in customersmay have
post purchasedissonancesince the
research and evaluation process of
products took place quite quickly.

Question 3
● 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 “closestore”shopping events,providing
shoppers with bargains and great shopping experience to build a
strong brand image
GOME’s tactics towards Tuangou shoppers

Pros Cons
Question 3Pros and Cons
● Increase sales, bargain power, ability to
negotiate lower price
● Better control the number of Tuangou
Shoppers and understandconsumer
behaviors
● Avoid price conflicts between Tuangou
Shoppers and regular shoppers
● Conflicts due to unfair treatment
between Tuangou Shoppers and regular
shoppers -> may lose a number of regular
customer
● Disadvantage positions where there are
big team purchaseand large bargain
power.
● Increase labour and administration cost

Question 4
● Construct a separate store for Tuangou customers in a location where the cost
employee salaries are reasonable.
○ Pros:
■ Prevent the erosion of profit margin.
■ Remove the bias given to tuangou shoppers in comparison to regular custome
○ 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
● Focus more on
developing benefits and
discounts for regular
customers
● Balance between two
types of shoppers
→ Increase the brand’s loyalty.
Minimize labour &
administrative cost
Try to build a separate store
for Tuangou shoppers while
minimizing the cost of ren
and staff salary in the
different areas.

References
1. Peter JP, Olson JC. Consumer behavior. McGraw-Hill Higher Education; 2010.
2. Mothersbaugh DL, Hawkins DI, Kleiser SB. Consumer behavior: Building marketing strategy. New
McGraw-Hill Education; 2020.
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Available from: https://www.acrc.hku.hk/Case/Detail/687
4. Gome Retail Holdings Limited. [cited 2022Jun28]. Available from: http://www.gome.com.hk/html/i
5. Group buying for business: Advantages and disadvantages [Internet]. Evonomie. 2012 [cited 202
Available from:
https://evonomie.net/group-buying-for-business/group-buying-for-business-advantages-and-disad
s/
6. Dohoanglan. Preorder, Group Buy, order LÀ Gì,ưu nhược điểm [Internet]. Vietgear.vn. 2022 [cited 2022Jun28
Available from: https://vietgear.vn/preorder-group-buy-order-la-gi/
7. Staff M. Tuangou: An FAQ [Internet]. Marketplace. 2010 [cited 2022Jun28]. Available from:
https://www.marketplace.org/2010/01/22/tuangou-faq/