CHAPTER 1

1.1 INTRODUCTION TO CONSUMERS

Definition:

An individual who buys products or services for personal use and not for
manufacture or resale. A consumer is someone who can make the decision whether
or not to purchase an item at the store, and someone who can be influenced by
marketing and advertisements. Any time someone goes to a store and purchases a
toy, shirt, beverage, or anything else, they are making that decision as a consumer.

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1.2 Who is a Consumer?

A person who has indicated his or her willingness to obtain goods and/or
services from a supplier with the intention of paying for them.
Someone who has purchased goods and/or services for personal
consumption.

What Do Customers Want, Anyway?

To be taken seriously 10. Knowledgeable help

2. Competent, efficient service 11. Friendliness

3. Anticipation of my needs 12. To be kept informed

4. Explanations in my terms 13. Follow-through

5. Basic courtesies 14. Honesty

6. To be informed of the options 15. Feedback

7. Not to be passed around 16. Professional service

8. To be listened to (and heard) 17. Empathy

9. Dedicated attention 18. Respect

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1.3 The Six Basic Needs of Customers:

1. Friendliness:
Friendliness is the most basic of all customers needs, usually associated with
being greeted graciously and with warmth. We all want to be acknowledged
and welcomed by someone who sincerely is glad to see us. A customer
shouldnt feel they are an intrusion on the service providers work day!

2. Understanding and empathy:

Customers need to feel that the service person understands and appreciates
their circumstances and feelings without criticism or judgment. Customers
have simple expectations that we who serve them can put ourselves in their
shoes, understanding what it is they came to us for in the first place.

3. Fairness:
We all need to feel we are being treated fairly. Customers get very annoyed
and defensive when they feel they are subject to any class distinctions. No
one wants to be treated as if they fall into a certain category, left wondering
if the grass is greener on the other side and if they only received second
best.

4. Control:
Control represents the customers need to feel they have an impact on the
way things turn out. Our ability to meet this need for them comes from our
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 own willingness to say yes much more than we say no. Customers dont
care about policies and rules; they want to deal with us in all our
reasonableness.

5. Options and alternatives:

Customers need to feel that other avenues are available to getting what they
want accomplished. They realize that they may be charting virgin territory,
and they depend on us to be in the know and provide them with the inside
scoop. They get pretty upset when they feel they have spun their wheels
getting something done, and we knew all along a better way, but never made
the suggestion.

6. Information:

Tell me, show me everything! Customers need to be educated and informed

about our products and services, and they dont want us leaving anything out!
They dont want to waste precious time doing homework on their own they
look to us to be their walking, talking, information central.

Understanding customer needs and wants is not always simple. Some customers
have needs of which they are not fully conscious, or they cannot articulate these
needs, or they use words that require some interpretation. Consider the customer
who says he wants an "inexpensive car. The marketer must probe further.

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1.4 The 5 Types of Customers:

In the retail industry, it seems as though we are constantly faced with the issue of
trying to find new customers. Most of us are obsessed with making sure our
advertising, displays, and pricing all scream out to attract new customers. This
focus on pursuing new customers is certainly prudent and necessary, but, at the
same time, it can wind up hurting us. Therefore, our focus really should be on the
20 percent of our clients who currently are our best customers.

In retail, this idea of focusing on the best current customers should be seen as an
on-going opportunity. To better understand the rationale behind this theory and to
face the challenge of building customer loyalty, we need to break down shoppers
into five main types:

Loyal Customers: They represent no more than 20 percent of our customer base,
but make up more than 50 percent of our sales.
Discount Customers: They shop our stores frequently, but make their decisions
based on the size of our markdowns.
Impulse Customers: They do not have buying a particular item at the top of their
To Do list, but come into the store on a whim. They will purchase what seems
good at the time.
Need-Based Customers: They have a specific intention to buy a particular type
of item.
Wandering Customers: They have no specific need or desire in mind when they
come into the store. Rather, they want a sense of experience and/or community.

If we are serious about growing our business, we need to focus our effort on the
loyal customers, and merchandise our store to leverage the impulse shoppers. The
other three types of customers do represent a segment of our business, but they can
also cause us to misdirect our resources if we put too much emphasis on them.
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Let me further explain the five types of customers and elaborate on what we should
be doing with them.

Loyal Customers:

Naturally, we need to be communicating with these customers on a regular basis by

telephone, mail, email, etc. These people are the ones who can and should influence
our buying and merchandising decisions. Nothing will make a Loyal Customer feel
better than soliciting their input and showing them how much you value it. In my
mind, you can never do enough for them. Many times, the more you do for them,
the more they will recommend you to others.

Discount Customers:

This category helps ensure your inventory is turning over and, as a result, it is a key
contributor to cash flow. This same group, however, can often wind up costing you
money because they are more inclined to return product.

Impulse Customers:

Clearly, this is the segment of our clientele that we all like to serve. There is nothing
more exciting than assisting an Impulse shopper and having them respond
favourably to our recommendations. We want to target our displays towards this
group because they will provide us with a significant amount of customer insight
and knowledge.

Need-Based Customers:

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People in this category are driven by a specific need. When they enter the store,
they will look to see if they can have that need filled quickly. If not, they will leave
right away. They buy for a variety of reasons such as a specific occasion, a specific
need, or an absolute price point. As difficult as it can be to satisfy these people, they
can also become Loyal Customers if they are well taken care of. Salespeople may
not find them to be a lot of fun to serve, but, in the end, they can often represent
your greatest source of long-term growth.

It is important to remember that Need-Based Customers can easily be lost to

Internet sales or a different retailer. To overcome this threat, positive personal
interaction is required, usually from one of your top salespeople. If they are treated
to a level of service not available from the Web or another retail location, there is a
very strong chance of making them Loyal Customers. For this reason, Need-Based
Customers offer the greatest long-term potential, surpassing even the Impulse
segment.

Wandering Customers:

For many stores, this is the largest segment in terms of traffic, while, at the same
time, they make up the smallest percentage of sales. There is not a whole lot you
can do about this group because the number of Wanderers you have is driven more
by your store location than anything else.

Keep in mind, however, that although they may not represent a large percentage of
your immediate sales, they are a real voice for you in the community. Many
Wanderers shop merely for the interaction and experience it provides them.
Shopping is no different to them than it is for another person to go to the gym on a
regular basis. Since they are merely looking for interaction, they are also very likely
to communicate to others the experience they had in the store. Therefore, although

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Wandering Customers cannot be ignored, the time spent with them needs to be
minimized.

Using this understanding to help turn Discount, Impulse, Need-Based, and even
Wandering Customers into Loyal ones will help grow our business. At the same
time, ensuring that our Loyal Customers have a positive experience each time they
enter our store will only serve to increase our bottom-line profits.

Customer personality types:

The Know it Alls

These folks tend to be experts in just about everything. Sometimes, they can come
off as arrogant and often opinionated. When they are wrong about a subject, they
usually put the blame someplace else.

The Passives

Passives usually try to avoid conflict at all costs. When presented with conflict, they
usually tend to be non-committal and agreeable. These folks usually do not offer
opinions or let you know how they feel about a given subject.

The Dictators

These folks often have strong personalities and can come across as bullies. In
addition, they can sometimes unintentionally be insulting. Brutally critical, they can
be very difficult to work with.

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The Yes People

Yes people tend to agree with any commitment and will promise to meet
unreachable deadlines. You can tell you are dealing with a Yes person because they
often apologize for a problem many times ones that they did not create.

The No People

No people are negative and downright pessimistic. They tend to look at what is not
working instead of what is. Resistant to change, these folks can throw a wet blanket
over an entire process.

The Complainers

Just like the name implies, the complainers find something to complain about with
almost every situation. While they are often correct in their complaint, they find it
difficult to offer praise or see the good in a situation.

Knowing what kind of personality you are dealing with can go a long way with
developing ways to handle the situation.

Conclusion

The failure or success in any business is dependable upon the behaviour of the end-
user or consumer who finally uses the product or any services. This is again vital
not only to the producer of the final goods but also the intermediaries who play a
major role in carrying the product from initial level to the final level i.e. from the
manufacturer to the consumer. Of course the final player in the channel is important
to a consumer but the business of all the intermediaries gets affected. The

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understanding of consumer behaviour helps in identifying the weak points and also
reflects the positive aspect of any business.

It is the behaviour of the consumer which impacts their decision to purchase or not
purchase the product. Depending on their decision and their usage, an organization
decides which products to manufacture and to continue. The positioning of the
product is dependent on the consumption of the product and this behaviour of
consumers may be related to any kind of products or services. The consumer
behaviour also reflects the trends in the national growth and economy.

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 CHAPTER 2
2.1 UNDERSTANDING CONSUMER BEHAVIOUR

Consumer behaviour involves the psychological processes that consumers go

through in recognizing needs, finding ways to solve these needs, making purchase
decisions (e.g., whether or not to purchase a product and, if so, which brand and
where), interpret information, make plans, and implement these plans (e.g., by
engaging in comparison shopping or actually purchasing a product).

Often, we take cultural influences for granted, but they are significant. An
American will usually not bargain with a store owner. This, however, is a common
practice in much of the World.

Physical factors also influence our behaviour. We are more likely to buy a soft
drink when we are thirsty, for example, and food manufacturers have found that it
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is more effective to advertise their products on the radio in the late afternoon when
people are getting hungry.

A persons self-image will also tend to influence what he or she will buyan
upwardly mobile manager may buy a flashy car to project an image of success.

Social factors also influence what the consumers buyoften, consumers seek to
imitate others whom they admire, and may buy the same brands. The social
environment can include both the mainstream culture (e.g., Americans are more
likely to have corn flakes or ham and eggs for breakfast than to have rice, which is
preferred in many Asian countries) and a subculture (e.g., rap music often appeals
to a segment within the population that seeks to distinguish itself from the
mainstream population). Thus, sneaker manufacturers are eager to have their
products worn by admired athletes. Finally, consumer behaviour is influenced by
learningyou try a hamburger and learn that it satisfies your hunger and tastes
good, and the next time you are hungry, you may consider another hamburger.

Consumer Choice and Decision Making: Problem Recognition:

One model of consumer decision making involves several steps. The first one is
problem recognitionyou realize that something is not as it should be. Perhaps,
for example, your car is getting more difficult to start and is not accelerating
well. The second step is information searchwhat are some alternative ways of
solving the problem? You might buy a new car, buy a used car, take your car in for
repair, ride the bus, ride a taxi, or ride a skateboard to work. The third step involves
evaluation of alternatives. A skateboard is inexpensive, but may be ill-suited for
long distances and for rainy days. Finally, we have the purchase stage, and
sometimes a post-purchase stage (e.g., you return a product to the store because you
did not find it satisfactory). In reality, people may go back and forth between the

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stages. For example, a person may resume alternative identification during while
evaluating already known alternatives.

Consumer involvement will tend to vary dramatically depending on the type of

product. In general, consumer involvement will be higher for products that are very
expensive (e.g., a home, a car) or are highly significant in the consumers life in
some other way (e.g., a word processing program or acne medication).

It is important to consider the consumers motivation for buying products. To

achieve this goal, we can use the Means-End chain, wherein we consider a logical
progression of consequences of product use that eventually lead to desired end
benefit. Thus, for example, a consumer may see that a car has a large engine,
leading to fast acceleration, leading to a feeling of performance, leading to a feeling
of power, which ultimately improves the consumers self-esteem. A handgun may
aim bullets with precision, which enables the user to kill an intruder, which means
that the intruder will not be able to harm the consumers family, which achieves the
desired end-state of security. In advertising, it is important to portray the desired
end-states. Focusing on the large motor will do less good than portraying a
successful person driving the car.

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Information search and decision making:

Consumers engage in both internal and external information search. Internal

search involves the consumer identifying alternatives from his or her memory. For
certain low involvement products, it is very important that marketing programs
achieve top of mind awareness. For example, few people will search the Yellow
Pages for fast food restaurants; thus, the consumer must be able to retrieve ones
restaurant from memory before it will be considered. For high involvement
products, consumers are more likely to use an external search. Before buying a car,
for example, the consumer may ask friends opinions, read reviews in Consumer
Reports, consult several web sites, and visit several dealerships. Thus, firms that
make products that are selected predominantly through external search must invest
in having information available to the consumer in neede.g., through brochures,
web sites, or news coverage.

A compensatory decision involves the consumer trading off good and bad
attributes of a product. For example, a car may have a low price and good gas
mileage but slow acceleration. If the price is sufficiently inexpensive and gas
efficient, the consumer may then select it over a car with better acceleration that
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costs more and uses more gas. Occasionally, a decision will involve a non-
compensatory strategy. For example, a parent may reject all soft drinks that contain
artificial sweeteners. Here, other good features such as taste and low calories
cannot overcome this one non-negotiable attribute.

The amount of effort a consumer puts into searching depends on a number of factors
such as the market (how many competitors are there, and how great are differences
between brands expected to be?), product characteristics (how important is this
product? How complex is the product? How obvious are indications of quality?),
consumer characteristics (how interested is a consumer, generally, in analysing
product characteristics and making the best possible deal?), and situational
characteristics.

Family Decision Making:

Individual members of families often serve different roles in decisions that

ultimately draw on shared family resources. Some individuals are information
gatherers/holders, who seek out information about products of relevance. These
individuals often have a great deal of power because they may selectively pass on
information that favours their chosen alternatives. Influencers do not ultimately
have the power decide between alternatives, but they may make their wishes known
by asking for specific products or causing embarrassing situations if their demands
are not met. The decision maker(s) have the power to determine issues such as:

Whether to buy;
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 Which product to buy (pick-up or passenger car?);
Which brand to buy;
Where to buy it; and
When to buy.

Note, however, that the role of the decision maker is separate from that of the
purchaser. From the point of view of the marketer, this introduces some problems
since the purchaser can be targeted by point-of-purchase (POP) marketing efforts
that cannot be aimed at the decision maker. Also note that the distinction between
the purchaser and decision maker may be somewhat blurred:

The decision maker may specify what kind of product to buy, but not which
brand;
The purchaser may have to make a substitution if the desired brand is not in
stock;
The purchaser may disregard instructions (by error or deliberately).

It should be noted that family decisions are often subject to a great deal of conflict.
The reality is that few families are wealthy enough to avoid a strong tension
between demands on the familys resources. Conflicting pressures are especially
likely in families with children and/or when only one spouse works outside the
home. Note that many decisions inherently come down to values, and that there is
frequently no "objective" way to arbitrate differences.

One spouse may believe that it is important to save for the childrens future; the
other may value spending now (on private schools and computer equipment) to help
prepare the children for the future. Who is right? There is no clear answer here. The
situation becomes even more complex when more partiessuch as children or
other relativesare involved. Some family members may resort to various
strategies to get their way. One is bargainingone member will give up something

16
in return for someone else. For example, the wife says that her husband can take an
expensive course in gourmet cooking if she can buy a new pickup truck.
Alternatively, a child may promise to walk it every day if he or she can have a
hippopotamus.

Another strategy is reasoningtrying to get the other person(s) to accept ones

view through logical argumentation. Note that even when this is done with a sincere
intent, its potential is limited by legitimate differences in values illustrated above.
Also note that individuals may simply try to "wear down" the other party by endless
talking in the guise of reasoning.

Various manipulative strategies may also be used. One is impression management,

where one tries to make ones side look good (e.g., argue that a new TV will help
the children see educational TV when it is really mostly wanted to see sports
programming, or argue that all "decent families make a contribution to the church").
Authority involves asserting ones "right" to make a decision (as the "man of the
house," the mother of the children, or the one who makes the most money).
Emotion involves making an emotional display to get ones way (e.g., a man cries
if his wife will not let him buy a new rap album).

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2.2 The important motives, influencing the ultimate buying
behaviour:

1. Fear : To overcome theft, you may purchase a burglar alarm (out

of Fear)

2. Desire for money : Purchasing when the price falls down.

3. Vanity : Getting costly items to be admired by others

4. Pride : Possessing luxurious items for high position in the society

5. Love and affection : When you purchase toys, dresses for your sister, it is out
of Affection

6. Sex and romance : Spending much on dresses, ornaments etc.

7. Fashion : Imitation motives: Old people dress like young ones.

8. Possession : This refers to collection of stamps, coins etc.

9. Health and Physical : Purchasing health foods, vitamins etc. Well being

10. Comfort and : Purchasing equipments like refrigerator, pressure

cookers, mix convenient etc.

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2.3 Economic factors affect buyers behaviour:

1. Disposal personal income:

The economists made attempts to establish a relationship between income and

spending. Disposal personal income represents potential purchasing power that a
buyer has. The change in income has a direct relation on buying habits.

2. Size of family income:

The size of family and size of family income affect the spending and saving
patterns. Generally large family spend more and short family spend less, in
comparison.

3. Income expectations:

The expected income to receive in future has a direct relation with the buying
behaviour. The expectation of higher or lower income has a direct effect on
spending plans.

4. Propensity to consume and to save:

This goes to the habit of spending or saving with the disposal income of buyers. If
the buyers give importance to present needs, then they dispose of their income. And
buyers spend less if they give importance to future needs.

5. Liquidity of Fund:

The present buying plans are influenced greatly by liquidity of assets i.e., cash and
assets readily convertible into cash, ex bonds, bank balances etc.

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6. Consumer Credit:

Buy now and pay later plays its role effectively in the rapid growth of markets for
car, scooter, radio, furniture and the like.

Economic model suggests behavioural hypothesis:

Lower the price of the product, higher the sales.

Lower the price of substitute products, lower the sales of this product
Higher the real income, higher the sales of the product.
Higher the promotional expenses, higher the sales.

Internal influences of buyers:

psychographics (lifestyle),
personality, motivation, knowledge,
attitudes,
beliefs, and
Feelings.
demographics,

External influences of the buyer:

culture,
sub-culture,
Locality,
royalty,
ethnicity,

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 family,
social class,
reference groups,
lifestyle, and
Market mix factors.

Understanding Consumer Behaviour in Markets:

Now, let us understand how the behaviour of consumer affects a marketer or what
the benefits of understanding consumer behaviour are.

It helps the marketer to take vital decisions with respect to designing of future
marketing strategies. What kind of promotional offers or marketing campaigns
need to be undertaken?

Whether the marketer should stick to the same product, extend the product
portfolio, or probably launch a new product. If consumers prefer a particular brand
and make the purchase and the consumption of the same their regular habit, it is
time that the marketer should think of improving upon a brand or come out with a
different product. Many times, the need calls for a niche marketing.

It also helps an organization to reinstate the corporate policies or take action to

reframe the corporate mission statement.

The consumer behaviour also has effects on the entire social network which again
helps an organization to target a specific audience or set of customers.

The behaviour of consumers gives the nation a different face, either good or bad.

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 Also helps in scheduling of events, for example, any product launch or any
advertising campaign.

The consumer behaviour also is related to cultural attributes. If a product suits a

particular cross-section of culture, the marketer can think of extending his products
to international arena and across different cultures.

Above all, the study of consumer behaviour helps a marketer to identify or define
the basic Ps of marketing and the marketing mix.

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 CHAPTER 3
3.1 PROFILE OF INDIAN CONSUMERS

The recent years have witnessed rapid transformation and vigorous profits in
Indian retail stores across various categories. This can be contemplated as a result
of the changing attitude of Indian consumers and their overwhelming acceptance to
modern retail formats. Asian markets witness a shift in trend from traditional
retailing to organized retailing driven by the liberalizations on Foreign Direct
Investments. For example, in China there was a drastic structural development after
FDI was permitted in retailing. India has entered a stage of positive economic
development which requires liberalization of the retail market to gain a significant
enhancement.

The Indian consumption patterns are slowly converging with global norms. The
Indian consumer is now spending more on consumer durables, apparel,
entertainment, vacations and lifestyle related activities. Entertainment, clothing and
restaurant dining are categories that have been witnessing a maximum rise in
consumer spending since 2002.

India is on the radar screen in the retail world and global retailers and at their wings
seeking entry into the Indian retail market. The market is growing at a steady rate
of 11-12 percent and accounts for around 10 percent of the country's GDP. The
inherent attractiveness of this segment lures retail giants and investments are likely
to sky rocket with an estimate of 20-25 billion in the next 2-3 years, and over
200 billion by end of 2014. Indian retail market is considered to be the second
largest in the world in terms of growth potential.

Consumer Profile: One of the key reasons for the increased consumption is the
impressive growth of the middle class. Around 70 per cent of the total households
in India reside in the rural areas. The total number of rural household is expected
23
to rise from 135 million in 2001-02 to 153 million in 2009-10. This presents the
largest potential market in the world. According to the study conducted by NCEAR,
the number of `lower middle income' group in rural areas is almost double as
compared to the urban areas, having a large consuming class with 41% of the Indian
middle class and 58% of the total disposable income.

The Indian rural market has been growing at 3-4% per annum, adding more than
1 million new consumers every year and now accounts for close to 50% of the
volume consumption of fast-moving consumer goods (FMCG) in India. The market
size of the fast moving consumer goods sector is projected to be more than double
to US$ 23.25 billion by 2010 from the present US$ 11.16 billion. As a result, it is
becoming an important market place for fast moving consumer goods as well as
consumer durables.

There were nearly 70 mm households (33% of the total) with an income of more
than US$3,000 in 2006. These "well-off" households already own relatively
expensive consumer durables, such as air conditioners and refrigerators.

600 mm+ effective buyers by 2010

550 mm+ under the age of 20 by 2015
70 mm+ earn 8,00,000+ ($18,000) a year number to rise to 140 mm by
2011

Consumer Behaviour: Availability of lifestyle spending options is increasing for

Indian consumers and that inducing higher spends on "status acquisition".
Traditionally, Indian consumer is cautious about debts. In recent past, this attitude
has changed radically and in recent year's credit is no more a feared entity.

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Indian consumer buying behaviour to a large extent has a western influence.
Foreign brands have gained wide consumer acceptance in India and they are much
more open for experimentation. Beauty parlours in cities, eateries, designer wear,
watches, hi-tech products are a few instances which reflect these changes.

Purchasing priorities in India also influence the level of sales of individual products.
Penetration data bear this out: televisions in use in 2006 were estimated at 95 per
1,000 populations, far higher than the level for white goods. This reflects the
growing demand for entertainment in India.

Consumer Spending: The rate of growth of spending on discretionary items

(unlike basic necessities like food) has been growing at an average of 9 per cent per
year over the past five years. A nation of savers, India, has now altered into a nation
of spenders.

KSA Technopak's Consumer Outlook report estimates that an average Indian

spends 40% of his monthly salary on food and grocery and 8% on personal care
products.

Indian consumer spending basket:

Consumer durables 53%

Books & Music 32%
Movies & Theatre 38%
Vacation 32%
Home Textiles 29%
Mobile phones 96%
Payment Household help 48%
Computer / peripherals 10%

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Urban-Rural divide in spending (%):

Category Rural Urban

Entertainment 33 67

Consumer Services 44 56

Durables 50 50

Misc. Consumer goods 57 43

Clothing and Footwear 61 39

Food 64 36

Consumption Trends

Food Essentials 45.68%

Essential Services (water, power, rent,

10.1%
and fuels)

Clothing 4.9%

Footwear 0.63%

Medicare 4.25%

Transport & Communication 14.51%

Recreation, Education, and Culture Less than 4%

Home Goods 3.25%

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A Note on Consumer Spending Patterns in India:

Consumer spending can be categorized

into regular spends and lifestyle spends.
Regular spending includes the basic
necessities of life, while lifestyle
spending includes spending on a
computer, internet, car, cell phone, etc.
Analysis of consumer spending in the
past 10 years reveals that the average
consumer has been spending on an
increasing number of different goods

There are a number of factors affecting

the consumer spending pattern in India;
these include growing income levels
resulting in more disposable income
with individuals, changing attitudes
towards consumption, changes in
prices, introduction of new products,
availability of credit such as loans,
mortgages and credit cards, rising
aspiration levels, increased literacy,
growing brand consciousness and rapid
urbanization.

Spending habits are different for people belonging to different sections of society.
For instance, people belonging to the middle class consider basic necessities and
27
education and spending toward the future of their children as their top priorities,
followed by lifestyle goods. The rich class spends more on luxury goods and
international brands. The super-rich class spends on ultra-luxury goods. It is
observed that as disposable income increases, people prefer more of branded goods,
shift to processed foods, and the expenditure on food, beverages, tobacco, and
transport and communication also increases. A comparison of consumer spending
habits in 2002 with those in 2007 revealed that expenditure on food, clothing and
personal care has remained more or less constant, but expenditure on entertainment
has increased.

Shopping habits of Indians are changing due to their growing disposable income,
relative increase in the younger population, and the change in attitudes towards
shopping. The emphasis has changed from price consideration to design, quality
and trendiness. The desire to look and feel good is also guiding factor for customers
while making their purchase decisions. Growing disposable income is also
propelling demand for consumer durables and eating in restaurants among Indians.
Age is also a major factor that affects the spending decisions of an individual. For
instance, people in 20-24 years age group spend more on electronic / home
appliances and movies, while people in the 45-48 years age group spend more on
vacations.

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3.2 Consumer behavior in India:

This study on Indian consumer behaviour is aimed at helping businessmen to get a

better understanding of the Indian market place thus enabling them to embark on
selected strategies to effectively reach the Indian consumers.

India is a big country with 28 states, over one billion people and 120
dialects/languages.

From the market perspective, people of India comprise different segments of

consumers, based on class, status, and income.

An important and recent development in Indias consumerism is the emergence of

the rural market for several basic consumer goods. Three-fourths of Indias
population lives in rural areas, and contribute one-third of the national income. This
rural population is spread all over India, in close to 0.6 million villages.

India is a lucrative market even though the per capita income in India is low and it
remains a huge market, even for costly products.

Among the total 164.8 million households in India, 80.7 million households comes
under low income group ( <US$ 581 ), followed by 50.4 million lower middle
income households ( US$ 581 to US$ 1162), 19.7 million middle income group
(US$ 1162 to US$ 1190 ), 8.2 million upper middle income group (US$ 1790 to
US$ 2465 ) and 5.8 million high income group (>US$ 2465).

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Characteristics of the Indian Consumer Behavior

The Indian consumers are noted for the high degree of value orientation. Such
orientation to value has labelled Indians as one of the most discerning consumers
in the world. Even, luxury brands have to design a unique pricing strategy in order
to get a foothold in the Indian market.

Indian consumers have a high degree of family orientation. This orientation in fact,
extends to the extended family and friends as well. Brands with identities that
support family values tend to be popular and accepted easily in the Indian market.

Indian consumers are also associated with values of nurturing, care and affection.
These values are far more dominant that values of ambition and achievement.
Product which communicate feelings and emotions gel with the Indian consumers.

Apart from psychology and economics, the role of history and tradition in shaping
the Indian consumer behaviour is quite unique. Perhaps, only in India, one sees
traditional products alongside modern products. For example, hair oils and tooth
powder existing with shampoos and toothpaste.

30
3.3 Different Segments of Indian Consumers

1. The Socialites

Socialites belong to the upper class. They prefer to shop in specialty stores, go to
clubs on weekends, and spend a good amount on luxury goods. They are always
looking for something different. They are the darlings of exclusive establishments.
They go for high value, exclusive products. Socialites are also very brand conscious
and would go only for the best known in the market.

2. The Conservatives

The Conservatives belong to the middle class. The conservative segment is the
reflection of the true Indian culture. They are traditional in their outlook, cautious
in their approach towards purchases, spend more time with family than in partying
and focus more on savings than spending. Slow in decision making, they seek a lot
of information before making any purchase. They look for durability and
functionality but at the same time are also image conscious.

They prefer high value consumer products, but often have to settle for the more
affordable one. These habits in turn affect their purchasing habits where they are
trying to go for the middle and upper middle level priced products.

3. The Working Women

The working woman segment is the one, which has seen a tremendous growth in
the late nineties. This segment has opened the floodgates for the Indian retailers.
31
The working woman today has grown out of her long-standing image of being the
homemaker. Today, she is rubbing shoulders with men, proving herself to be
equally good, if not better. Working women have their own mind in decision to
purchase the products that appeal to them.

Indias Rich

Indias rich can be categorized into five major categories as follows:

The Rich

The rich have income greater than US$11,000/- per annum. Total household
having such incomes are 1,058,961. These people are upwardly mobile. Some of
them in this category are Double Income No Kids (DINK) households. They spend
more on leisure and entertainment-activities than on future looking investments.
Across the category, backgrounds are distinctly middle class. They aspire,
therefore, to attain the super-rich status.

The Super Rich

The Super Rich have income greater than US$22,000/- per annum. Total number
of households is 320,900. There are less DINK families here than in the rich
category. The Super Rich are mainly professionals and devoted to consumerism.
They buy many durables and are status conscious.

32
3. The Ultra-Rich

The Ultra-Rich have income greater than US$44,000/- per annum. The number of
households in this category is 98,289. There is no typical profile of the ultra-rich.
There are some DINK households of middle-level executives. Some single earning
households are of first generation entrepreneurs. Some rich farmers, who have been
rich for a long time, belong to this category.

4. The Sheer Rich

The Sheer Rich is made up by households having income exceeding US$110,000/-

per annum. Such households are 20,863. They do not have a homogenous profile.
There are joint families as well as nuclear families in this category. They consume
services greatly. They own multiple cars and houses. They aspire to social status
and power.

5. The Obscenely Rich

The Obscenely Rich is made up of households having income exceeding

US$222,000/- per annum. There are hardly 6,515 such households in India. They
are first-generation entrepreneurs who have some of them are techies. A variety of
people belong to this category. They are just equivalent to the rich in the developed
countries. They crave for exclusivity in what they buy. Most premium brands are
relevant to them.

33
Rural Consumer

About three quarters of the Indian population are in the rural areas and with the
growing middle class, especially in the Indian cities, the spill over effect of the
growing urban middle class is also felt in the rural areas.

The Indian rural market has been growing at 3-4% per annum, adding more than 1
million new consumers every year and now accounts for close to 50% of the volume
consumption of fast-moving consumer goods (FMCG) in India. The market size of
the fast moving consumer goods sector is projected to more than double to US$
23.25 billion by 2010 from the present US$ 11.16 billion. As a result, it is becoming
an important market place for fast moving consumer goods as well as consumer
durables.

Increasing Awareness of Indian Consumers

Over the years, as a result of the increasing literacy in the country, exposure to the
west, satellite television, foreign magazines and newspapers, there is a significant
increase of consumer awareness among the Indians.

Today more and more consumers are selective on the quality of the
products/services.

This awareness has made the Indian consumers seek more and more reliable
sources for purchases such as organized retail chains that have a corporate
background and where the accountability is more pronounced. The consumer also
seeks to purchase from a place where his/her feedback is more valued.

Indian consumers are now more aware and discerning, and are knowledgeable
about technology, products and the market and are beginning to demand benefits
34
beyond just availability of a range of products that came from trusted
manufacturers.

The Indian consumers are price sensitive and prefer to buy value for money
products.

3.4 Changing Trends in Indian Consumer Behavior

1. Bulk Purchasing

Urbanisation is taking place in India at a dramatic pace and is influencing the life
style and buying behaviour of the consumers.

The working urbanites are depending more on fast and ready-to-serve food, they
take less pain in traditional method of cooking and cleaning.

Bulk purchases from hyper stores seems to be the trend these days with purchasing
becoming more of a once-a-week affair, rather than frequent visits to the
neighbourhood market/store/vendor.

The popular growing shopping trend among urbanities is purchasing from super
markets to hyper stores.

2. Trendy Lifestyles

The current urban middle and upper class Indian consumer buying behaviour to a
large extent has western influence. There is an increase in positive attitude towards
western trends. The Indian consumer has become much more open-minded and
35
experimental in his/her perspective. There is now an exponential growth of western
trend reaching the Indian consumer by way of the media and Indians working
abroad.

Foreign brands have gained wide consumer acceptance in India, they

include items such as;

Beverages
Packed food
Ready to eat food
Pre-cooked food
Canned food
Personal care products
Audio/video products
Garment and apparel
Footwear
Sportswear
Toys
Gift items

Foreign brands vie increasingly with domestic brands for the growing market in
India. Foreign made furniture is well accepted by the Indian consumers.
Malaysian, Chinese, Italian furniture are growing in popularity in India.

Indian consumers have also developed lifestyles which have emerged from
changing attitudes and mind sets; exposure to western influences and a need for

36
self-gratification. Beauty parlours in cities, eateries, designer wear, watches, and
hi-tech products are a few instances which reflect these changes.

3. Buyers Market in the Making

The sellers market is slowly moving towards becoming the buyers market.

Since, Indias economic liberalization policies were initiated in 1991, many new
product offerings have entered the Indian market and product variety has also
increased manifold.

Import licensing restrictions are being eliminated and tariffs significantly reduced
and this has led to large range of consumer goods made available in India.

Indian consumers have always preferred foreign goods and with the liberalization,
they now have a choice of foreign products vis--vis the local products.

Consumer Spending Behavior

The Indian consumer spending has increased from US$ 133.60 in 1992-93 to US$
350.74 in 2002-03, a compound annual growth of 10.13 per cent at current prices.

The way Indian consumers are spending their money on various items has changed
in recent years. The share being spent on the basis (food and beverages) has fallen
from 54.07 per cent in 1992-93 to 44.8 per cent in 2002-03. Other items have
increased in importance, for example, medical and healthcare spending has
increased from 3.5 per cent to 8.5 per cent of total expenditure over the same period,
a compound growth rate of 19.71 per cent. Similarly spending on transport and
communication has grown at 13.2 per cent.

37
While the Compound Annual Growth Rate (CAGR) in total consumer spending has
been around 12 per cent a year over the past decade, there have been sharp ups and
downs. Consumer expenditure has been in tandem with the annual GDP growth.

For rural India, per capita 30 days' consumer expenditure of US$ 12.34 was split
up into US$ 6.78, on an average, for food, and US$ 5.56 for non-food. Food
expenditure included US$ 2.25 for cereals and cereal substitutes, and US$ 2.37 for
milk, milk products, vegetables, edible oil and US$ 2.16 on others. Non-food
expenditure included US$ 1.11 for fuel and light, and another US$1.00 for clothing,
footwear and US$3.45 on other non-food expenditure.

For the urban sector, average Monthly Per Capita Consumer Expenditure (MPCE)
of US$ 23.53 was split up into US$ 10.00 for food and US$ 13.53 for non-food. Of
food expenditure, US$ 2.37 went towards cereals and cereal substitutes while US$
3.67 was spent on milk, milk products, vegetables and edible oil and US$3.96 on
other food items. US$ 2.11 was spent per person per month on fuel and light, and
US$ 1.65 on clothing and footwear and US$9.77 on other non-food items.

Urban expenditure levels per capita exceeded rural levels for all the product groups,
except on cereals and cereal substitutes. The average monthly per capita
expenditures on cereals and cereal substitutes for rural and urban areas are very
close to each other.

The gap between rural and urban averages of MPCE was of the order of US$ 11.16.
The item-groups viz. milk and milk products, beverages etc., fuel and light,
education, miscellaneous consumer goods & services, conveyance and rent
contributed to the gap significantly.

Non-food expenditure per person in the urban sector was more than double of that
for the rural sector, where it was about US$ 5.55.

38
In India, the higher income group (>US$2,465) spends more amount of their
income on luxury goods and trendy products than fact moving consumer products.

The middle income group (US$1,162 US$1,190) spends more on consumer

expendables than the rich.

Conclusion

Top class, middle class and lower class are income related classifications of the
population and each of this class has its own consumption pattern.

For the Indian market, exporters/manufacturers should see the substantial middle
class and base the market demand/projections on this roughly estimated at 250
million people with substantial disposable income.

Urban and rural life of India:

Up until recently, large part of the marketing that was done in this country was done,
targeting the urban population of the country. Now the marketing potential of the
rural part of the country is rapidly growing. Let us get an understanding of the urban
and rural break- up of the country.

26% of the population lives in the cities or in urban India. The remaining 74% lives
in the villages or in rural India. The population of the country is spread over the
villages but is very concentrated in the cities. India has six of the largest cities in
the world. These are - Kolkata, Mumbai, Delhi, Madras, Bangalore and Hyderabad.
Besides these cities, there are six other cities that are growing at a very rapid rate
and have a huge concentration of the population. These are - Ahmedabad, Kanpur,

39
Pune, Nagpur, Lucknow and Jaipur. In addition to these cities, there are around
4000 towns that have concentrations of the population.

In the cities, there are a lot of jobs available now-a-days due to call centres and
BPO's. This has given many more people purchasing power. Items that were luxury
items a few years ago are seen in every house in the cities.

Indian middle class male consumer

The middle class of India is for whom most of the advertising is targeted. Even in
the lower middle class, consumer products like biscuits, talcum powder, hair oil,
hair cream, toilet soaps, leather foot ware, casual foot ware, wrist watches, quartz
watches etc. are purchased.

To get a much better understanding of the middle class male head of the family,
consider the following characteristics:

Security Seeking:

The middle class generally consists of security seeking people. Even though they
are receptive to new ideas, they do not very readily dash into new ventures. The
middle class man does not only want economic security, but he also wants
emotional security.

He will not do something that is likely to upset his emotional ties. He wants social
security. He wants to be part of society. He does not want to be a rebel or an outcast.
Being part of society he enjoys a degree of protection. He is likely to welcome new
innovations is they satisfy his sense of security. If he feels that a particular idea will
help him improve his economic position or social relationships he will accept it.
Anything that is likely to upset this balance is going to be discarded by him.
40
Credit purchases:

The middle class Indian normally lives in a fixed income. He has to manage his
finance in a rigid budget. He wife selects reasonably good furnishings and uses
modern cooking gadgets. He usually has a two-wheeler of this own. He aspires for
the well-to-do lifestyle he sees on TV. So his purchases are generally materialistic
in nature. Because of this he likes to make large purchases and pay for though the
different credit facilities that are made available to him by the banks and other
financial institutions.

Now days practically everything is made available to him on instalment payments.

The availability of credit facility acts as a temptation to buy. His desire for bringing
home more and more material comforts is realized by the availability of credit
facilities.

The State Bank of India campaign of a few years ago, "Be a big shoppers! Make a
big buy! Take home a car, a VCR or a sewing machine today! You can do it now
with the big buy scheme..." appealed to many Indians.

The system of "credit cards" is also growing in the country at a very fast rate. It is
expected that in the near future, Indians will be the biggest users of credit cards
second only to America.

Prestige Conscious:

The middle class Indians have many of their possessions, largely because they are
"status conscious" or "prestige conscious". The middle class mans finances may be
tight and he may even struggle to meet ends. Still, he looks for more than average
comforts, and plans for more material possessions. These possessions act as status
symbols. By appealing to this prestige a marketer may motivate the middle class
man.

41
Strong Family Ties....Home loving:

The middle class man is a home loving man. He assigns a lot of importance to the
wellbeing of his family. He spends a good portion of his income on the education
of his children. His children get priority in his budget. He without much resistance
will adjust to the changing fashions of his college going children even though these
changes may be costly for him. The concept of "small family more comforts" has
gone well with him. The "family tie" binds him so strongly that anything that
appeals to this "human bond" will find his ready acceptance.

His son's education or his daughters marriage are life- long dreams for him.
Anything that appeals to these dreams will catch his immediate attention.

However, the middle class man is greatly influenced by his wife especially on his
buying decisions. Tooth-paste, hair oil, magazines or tape recorders, the purchasing
decision is consented by her. There are certain buying decisions that are made by
his wife solely so the middle class housewife is another important person to study
from the marketing point of view.

The Indian middle class house wife as a consumer:

The percentage of working women in India is growing at a steady pace. This is

mainly because of the development in communication systems and growth of
educational opportunities given to women. Because of this growth of working
women, the women now-a-days also have an increased purchasing power. Due to
this, industries that are directly related to women like cosmetics etc. have seen a
major boost. Also, toiletries, food and beverages etc. have seen a growth.

42
The middle class house wife is generally educated and is the purchasing agent for
some of the products the family buys. She is also the "gatekeeper" for many
products like new cooking medium, fast food etc. that cannot enter the house
without her clearance. She also decides purchases meant for children.

To get a much better understanding of the Indian house wife, consider the following
characteristics of her buying decisions:

Cautious, but not averse to change:

The middle class house wife is generally educated, earns her own money or has to
use money given to her on a fixed budget. This makes the middle class house wife
a discriminating and cautious buyer. However, she is not averse to new ideas and
things. She is willing to try new things but she will not adopt any product instantly.
She will make a sample purchase, check with people who use the product, listen for
guidance and then finally she may go in for purchasing the product.

Quality as well as cost cautious:

The middle class house wife is a quality as well as cost cautious buyer. She will try
to purchase products that will last her for a long time. She will try to get "millage"
out of every rupee she spends. She is less likely to purchase use and throw type
of products. Besides being quality conscious, she also is cost conscious. Before
buying a particular product she will first check the price with other sellers and will
then go in for the lowest price.

Because of being quality and cost conscious, extra features like re-usable containers
will influence her buying decision. Bonus prizes, coupons, rebates etc. will
definitely attract her attention.

43
Instead of advertising she relies on word-of-mouth communication. She is
interested in knowing what her neighbour or colleges are using. Even after she
purchases a product she seeks reassurance about making the right purchase decision.

Leisure seeking:

As time passes the house wife is getting used to more and more leisure though the
use of modern gadgets like washing machines and other such house hold items. She
will be interested in new innovations that reduce her work time even more. She may
not be able to afford all the modern gadgets that are available in the market but they
still hold her interest because they are a potential for saving time and avoiding
drudgery.

Sense of grooming:

Sense of beauty is a strong motive force behind several of her purchases. Soap or
shampoo, vanishing cream or cleansing milk, perfumes or hair oil - selecting her
brand is greatly influenced by her sense of grooming. She is generally fashion
loving however she is not fashion crazy. A strong sense of traditionalism runs
thought her personality. Products or ideas that uproot her basic personality or values
will not find acceptance with her.

44
Understanding the middle class urban teenager as consumer:

They are more adventurous than their elders and they care less for tradition and
religion. The often are after a "New Look" and they seek novelties. They are quick
to adopt new fashions that emerge.

They are generally more receptive to change. They believe more in spending money
in the pursuit of pleasure than saving for the future. It is not easy to dupe them but
it is quite easy to motivate them. Teenagers are becoming quite a distinct market
segment.

They not only have products and services that been designed to cater their needs but
also they are an influence on the decisions taken by adults. Some estimates show
that around Rs.500 core a year is the amount of money given to children as pocket
money.

45
 CHAPTER 4

4.1 CONSUMERS SPENDING HABITS

Changing Spending Habits of Indians:

Spending habits have undergone dramatic changes in recent years in India. A new
report finds that people are spending a great deal on clothes and communications.

India is showing a preference for ready-made apparel with a massive 75% hike in
such purchases while the neighbourhood daze may soon be an extinct species as
tailoring expenses have gone down by 26% in the rural sector and 33% in the urban
sector. Another major change in consumer behaviour was found in the way India
connects. Telephone expenditure, per person per month, increased by a whopping
515% since 1999-2000 in rural areas and by 230% in urban areas. The deep inroads
made by the mobile revolution was visible in the proportion of households incurring
expenditure on telephone going up from 5% to 32% in rural areas and from 25% to
63% in urban areas. Expenditure on education has gone up from 45% to 57% in
urban India and from 29% to 44% in rural India while expenses on healthcare have
also gone up substantially.

All of these are a clear indicator of change culture and values in modern India.
Embrace of modernity and globalization of India does not come without its perils.
Consumerist ideology and rampant materialism does not satisfy deepest human
aspirations. More stuff and toys only adds to new and complicated problems in the
society. It merely replaces one set of problems with new ones.

46
A Look at the Spending Habits of College Students:

While some students struggle to make ends meet, the stereotypical college
experience of eating Ramen Noodles, wearing clothes from Goodwill, and drinking
cheap beer is quickly disappearing. Much of this can be explained by the changing
demographics of todays students. Less than half (43%) of college students are 18-
21. The typical college student is in their mid-twenties, either lives at home or on
campus, and has a job. Students no longer expect to complete college in 4
consecutive years, and many fluctuate between full-time and part-time study over
a period of 5 to 7 years. The older the student, the more money he or she generally
has.

The typical college student gets an average of $757 a month from jobs, parents or
other sources. Most money comes from work. 75% of students maintain jobs while
attending school, earning $645 per month on average. 20% have secured an on-
campus job and 42% are spending school breaks working. Parents contribute too,
contributing an average of $154 to a students monthly income. A student spends
more than $13,000 per year on average, 19% of which is discretionary. That adds
up to a substantial $211 per month of discretionary spending.

Credit cards are monetary sources for some students. Most students 70% of males
and 75% of females have between 1-3 credit cards. While establishing credit in

47
college can be to your advantage, using credit cards for basic living expenses can
create financial problems. Use credit cards sparingly.

Overall, data reveals college students to be savvy, capable and influential

consumers, balancing the rising cost of tuition with a hardy work ethic, spending a
fair portion of their considerable discretionary income on high-end technology, and
holding considerable sway over the purchasing decisions of their peers. College
students spend most of their discretionary income on food. Students spend more
than $11 billion a year on snacks and beverages. Even students who live in the
dorms and have meal plans spend a lot of money eating out. You can spend
hundreds of dollars on coffee each semester. Utilizing your meal plan and cooking
your own meals can save a great deal of money.

A large expense for many college students is electronics, gadgets, and technology.
Students rely on technology to access information, communicate with friends, and
keep themselves entertained. These expenses are seen as necessities. The majority
of college students (90%) own a computer, and two-thirds (65%) of those students
have a broadband connection. 62% of college students own a stereo, a cell phone
(77%), a printer (77%), and a television (84%). A large portion of income goes to
cell phone service, which 85 percent of students have. The majority of students with
cell phone service pay for extras such as text messaging (62%) and internet access
through their mobile phone (41%).

Entertainment is another large expense for college students. They spend nearly $3
billion annually on movies, DVDs, music, and video games. They spend $474
million on music sales, $658 million on theatre tickets, and $341 million on games
each year. At home and in the dorms, theyre watching movies, spending $600
million to buy and $326 million to rent DVDs. If you think a big entertainment
expense for college students is going out to bars and partying with friends, youre
right. It is estimated that the average student spends at least $50 per month on beer
48
alone. Each year, American college students spend $5.5 billion on alcohol. While
smoking is not a form of entertainment to most, it is a costly habit. A pack-a-day
habit can cost you several hundred dollars a semester.

Personal care is another big expense for college students, with $4 billion spent each
year for personal care products alone. Students also spend a lot of money clothing
themselves. Nationally, students spend more than $5 billion a year on clothes and
shoes.

By the time they reach college, full-time students represent over sixty billion dollars
in buying power. This amount usually increases once the student graduates and
becomes employed. Marketers who can successfully reach these young adults with
a quality product, positive message, and clear value, may enjoy decades of loyal
purchasing and millions of dollars worth of free, word-of-mouth marketing.
Hooking someone while still in college is one way to do this.

49
 CHAPTER 5

5.1 CONSUMER BEHAVIOUR IN RECESSION.

10 key pointers of consumer behaviour in a recession revealed:

Many believe recession will be short lived and economic prosperity will return

Some consumers groups may as a consequence of falling interest rates be better

off during the recession and will benefit from businesses slashing retail prices.
These are two key findings of Media in a Recession, a report by Arena BLM,
the Haves-owned media planning and buying group.

Despite the credit crunch, consumers with reasonable security of employment who
dont need to move house will have more disposable income than they had several
months ago, thanks to recent interest rate falls, even if high street lenders are slow
to pass on the savings.

The report finds that while consumers are completely aware of the economic
situation and are less prone to making rash decisions or impulse purchases, they
believe the recession will be short lived and economic prosperity will return.

Already it is clear that certain brands are benefitting from the change in consumer
habits.

Like for like sales for Dominos Pizza increased by 17.8%, DVD sales are up 6.5%
year on year for the third quarter of 2008.

Outside these sectors the high street virtual and real is filling up with bargains
and consumers will take the opportunity to spend on cheaper high ticket items. The

50
new Westfield Shopping Centre in West London attracted half a million shoppers
in its opening weekend.

Consumers believe that media is increasingly important in a recession; delivering

cheap entertainment, reassurance and escapism. Brands that offer escape and
indulgence in conjunction with value will be winners in a recession. Early winners
are also feel-good movies such as Mamma Mia, High School Musical 3, and
Quantum of Solace selling out at the box office.

The report found that consumers are avoiding high ticket or debt funded purchases
that they consider non-essential.

Car and property sales have collapsed.

Consumers are searching harder for value and are utilising internet tools such as
price comparison websites and search engines. Broadband connections are still
growing despite the downturn and two thirds of homes now have high-speed web
access.

Consumers are more likely in a recession to switch brands, ditching lifetime

favourites in pursuit of value, trust and reliability.

Consumers will interrogate brands and their communication harder. Facile or

unbelievable claims will be rejected. Consumers will support the brands they think
are helping them.

Consumers still want low-cost indulgence and are prepared to make sacrifices to be
able to afford high-ticket non-essential products and services.

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5.2 10 Key Pointers.....

1. Consumers will still make high-value purchases, but will require greater
reassurance. They are less likely to debt fund significant purchases.

2. The current expectation is that both interest rates and inflation will stay low,
perversely putting consumers who remain in employment in a better economic
position. The main issues will be confidence and reassurance.

3. Consumers will be massively price sensitive. They will price compare and use
digital channels to facilitate this. Given every retailer is offering some form of
promotion, consumers know they can access value.

4. But they also want entertainment and escapism. Brands that help them achieve
great value and enjoyment are most likely to succeed.

5. There is significant evidence that advertising through a recession drives sales,

preference and both long- and short-term success.

6. Media rates will fall more steeply than the downturn in the economy. The real
reduction is rates will be greater than headline inflation figures. Advertisers who
approach media owners with strong, long-term business cases that demonstrate
support will generate substantial improvements.

7. Digital will drive huge benefits and drive purchasing behaviour and will be low
risk way of communicating with consumers. Digital response will improve if
campaigns run in conjunction with targeted offline media exposure.

8. Creative production costs should drop and media owners will invest in
production to help access new budgets.

52
9. Flexibility will massively improve value creation, both in terms of negotiation
and clients who are prepared to test and learn.

10. Brief agencies in a different way. Briefs are frequently executional, with the
channel already defined. We suggest sharing the business problem and getting the
agency to challenge conventions; if you believe you need to be on TV and your
budget is drastically reduced, challenge your agency to find to come up with an
approach that will allow it, in the current market it may well be possible.

Recessions can bring upon radical and disruptive changes in consumer behaviour.
The OTO Research report confirms that during this recession 80% of consumers
are going to change their spending habits. 89% of consumers are going to
systematically check online what and where the best products are, and what their
value for money is. Consumers are getting savvy in the way they optimize their
spending. During a recession, the role of your brand is to build trust and justify the
value for money.

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CASE STUDY

1. The Beer industry in India in context

of Consumer Buying Behaviour
The Indian beer market was estimated to be 6.7 million hectolitres (hl) in 2002-03.
Beer consumption has been growing rapidly at a CAGR (Compound Annual
Growth Rate) of 7 per cent over the last 9 years, while growth in 2002-03 was 11
per cent.

Indian growth rates compare favourably with the global beer industry, which grew
by about 2.6 per cent in 2001-02 Apart from providing strong growth, India also
provides attractive profit margins due to the consolidated nature of the industry a
comparison between China and India, for example, reveals that the Chinese beer
market is marked by intense competition, with several players being marginalized.
In China there are about 400 brewers, of which the top 10 account for only 45 per
cent of the market. This has resulted in low profit margins for the Chinese beer
players. In contrast, the top two beer players in India account for about 75 per cent
of beer sales in India and the industry stands a chance to see more consolidation in
the near future. The effect of this consolidation can be seen in the fact that beer
prices in India rarely go down with the competitive pressures of new product or
brand launches. In the past, whenever beer prices have gone down, it has been due
to either the lowering of duties by the government or the deregulation of distribution
(leading to lower margins for the distribution channel partners). In neither scenario
have the margins or revenues of beer manufacturers been affected.

54
Per capita consumption in India is hovering around a measly 0.5 litres per annum.
These figures pale into insignificance if one compares them with those of Czech
Republic that has the highest per capita consumption of 156.9 litres per annum.

Per capita consumption is directly related to the taxation, according to an industry

observer. For instance, in Maharashtra there is a direct 100% excise duty on Beer.
An equivalent 650 ml bottle is available for approximately Rs 8 in China. Which is
why the per capita consumption in China is a high 16 litres per annum.

The Indian beer market has been growing rapidly over the last 10 years, due to the
positive impact of demographic trends and expected changes, like:

Rising income levels: India is home to nearly one-sixth of the global population
and is one of the most attractive consumer markets in the world today. Various
research studies have shown that a rise in the income levels has a direct positive
effect on beer consumption. The National Council for Applied Economic Research
(NCAER) projects India's 'very rich', 'consuming' and 'climbers' classes to grow at
a CAGR of 15 per cent, 10 per cent and 2 per cent respectively. With this growth
in income levels, Indian beer consumption is expected to continue growing, at the
very minimum, at the growth rates witnessed in the last decade.

Changing age profile: As a consequence of the high birth rates prevalent until the
1990s, a large proportion of the Indian population is in the age group of 20-34 years.
This age group is the most appropriate target for beer marketers. This population
trend will give a further boost to the growth of beer consumption in India.

Many global players are planning to enter the Indian beer sector and they realise
that a partnership with a local player is important to establish a successful presence
in India in a short time frame.

55
Changing lifestyles: A deep-seated traditional social aversion to alcohol
consumption has been a traditional feature of the Indian society. However, as urban
consumers become more exposed to western lifestyles, through overseas travel and
the media, their attitude towards alcohol is relaxing. Social habits are undergoing a
transformation as mixed drinks are becoming more popular. The greatest evidence
of this trend is the increase in beer consumption among women. More and more
women are consuming beer the penetration in metropolitan areas is almost twice
as high as the penetration in other large cities implying that the greater tolerance
towards alcohol consumption in metropolitan areas facilitates the consumption of
beer. With increasing urbanisation, this acceptance is only going to rise.

Reduction in beer prices: The Indian consumer typically values an alcoholic

beverage on the basis of its 'kick' factor versus its price. The following two factors
therefore, affect the market for beer. Firstly, as most states do not have a differential
tax structure based on the alcohol content, strong beer...

As far as the Light beer segment goes, there is no existing competition in the
market. However, a number of well-established brands, especially lagers, have a
significant market presence. Chiefly Kingfisher - India's celebrated malty draught
lager since 1857; voted 'The World's Best Lager' in Stockholm and Chicago.

In India the future of beer industry is very much optimistic because:

1. India has predominantly a warm/hot climate

2. The beer-drinkers in the country are much younger than the average beer-drinker
elsewhere in the world. This makes them more likely to carry the brand with them
for a lifetime.

56
3. Increasing exposure to beer and wine drinking, mainly due to media and
consumer mobility.

All these factors combined make the scenario very promising for beer industry and
are 'in sync' with their strategy for India.

UB (United Breweries Ltd.) is the market leader in the Indian beer market with a
40% market share. Its flagship Kingfisher brand alone commands 25% market
share. The company has however been focussing on strong beer, which has driven
growth. The company introduced its strong beer, Kingfisher Strong during the year
2000 in the selected market of Maharashtra and Karnataka. The move came as a
reactive move following increasing shift of consumers towards strong beer, a trend
started by Shaw Wallace. While the overall market grew marginally by 2%, the
strong beer market grew at 8-10% during the year at the expense of lager beer. The
market is now skewed towards strong beer with more than 60% of the market being
strong beer market. Beer mix today is approximately 60 percent lager beer and 40
percent strong beer. This ratio was very different 4 years ago.

Over the last four years strong beer has been the fastest growing segment. This was
completely usurped by Shaw Wallace. As of today while Shaw Wallace has
approximately 28 to 30 percent of the strong beer market, UB already has achieved
14 to 15 percent of that strong beer market and is growing very fast. It launched
Kingfisher Strong only in May of 2001. And once it is able to take Kingfisher
Strong national, it will try to match Shaw Wallace's market share over the next few
years.
Apart from Kingfisher, and Foster's Beer, the other brands in the Indian market
are Carling Black Label, Carlsberg, Dasburg, Golden Eagle, Guru, Maharaja
Premium Lager, Hake Beck, Haywards 2000 Beer, Haywards 5000, Haywards
skol, Flying Horse Royal Lager, Taj Mahal, Heinekin, Hi-Five, Ice, Kingfisher
Diet, Kingfisher Strong, Kirin, KnockOut, Legend, London Diet, London Draft,
57
London Pilsner, Royal Challenge, San Miguel Lager, Sand Piper, Strohs and
Zingaro.

The major brands which belong to large groups in the industry (apart from UB) are
Shaw Wallace - Royal Challenge Premium Lager, Haywards 2000 Premium
Lager, Haywards 5000 Super Strong, Hi-Five and Lal Toofan.

South African Breweries India Ltd. - Knock-Out, Continental and Three Lions, a
new brand that was launched in the autumn of 2001 by SAB in Uttar Pradesh,
Chandigarh and Himachal Pradesh.

Other possible competition Radico Khaitan and beer international Interbred have
formed a joint venture to distribute Interbrew's Beck's brand of beer in India. The
premium lager beer segment in India will be targeted. Radica has also announced
the launch of its international division.

The beer-drinkers in the country are much younger than the average beer-drinker
elsewhere in the world. This makes them more likely to carry the brand with them
for a lifetime. Also, as the target audience becomes younger, a light beer is expected
to attract first-time drinkers, since it is much milder than any of the other beers in
the country.

A lot of new variants promise to gain prominence, but mainly in niche urban
segments. The sophisticated consumer who drinks beer for the experience and not
to get drunk will lap up ice beer or light beer. In urban centres, apart from first time
users companies are also targeting women, who as 'the times they are a changing,'
are entering the market for beer. Essentially, women shy away from beer
consumption because it is associated with calories, and has traditionally been a
buddy drink, associated with pot-bellied men sitting at bars and shooting darts.

58
Litters Per Person Beer in comparison with other Liquids

Categories 2000 2001 2002 2003 2004 2005

Beer 0.5 0.5 0.6 0.6 0.7 0.7
Bottled 0.1 0.1 0.1 0.2 0.3 0.5
Water
CSDs 1.0 1.2 1.2 1.5 1.6 1.8
Coffee 2.0 1.2 1.3 1.3 1.3 1.2
Distilled 0.3 0.3 0.4 0.5 0.6 0.6
Spirits
Fruit 0.1 0.1 0.1 0.2 0.2 0.2
Beverages
Milk 41.2 41.7 40.2 40.7 40.1 40.5

59
 Tea 49.7 50.9 49.2 52.5 48.2 44.2
Wine 0.0 0.0 0.0 0.0 0.0 0.0
Subtotal 94.8 96.1 93.1 97.4 93.0 89.7
All Others* 631.9 630.6 633.6 629.3 633.7 637.0
TOTAL 726.7 726.7 726.7 726.7 726.7 726.7

Who decides?

Self Spouse Joint Family Elders Children

Buying a house 25% 5.8% 20.8% 30.1% 14% 0.4%

Child's marriage 7.7% 5.9% 21.8% 18.7% 11.5% 4%

Own marriage 20.4% 2.5% 6.2% 22.4% 29.7% 0.9%

Child's education 15.1% 6.6% 34% 12.5% 5.6% 4.6%

Taking a loan 31.4% 5% 24.3% 18.1% 9.2% 0.6%

Fixing monthly budget 24.2% 10.3% 33.3% 18.5% 11.2% 0.6%

Buying entertainment durables, like TVs [ Get

21.4% 8.2% 33.4% 26.7% 7.4% 1.6%
Quote ]

Buying durables like washing machines 19.3% 10.7% 33.3% 26.2% 8.2% 1%

Deciding on holiday destinations 20.6% 6.1% 28.4% 31.8% 4.5% 5.6%

The study showed the emergence of certain definite trends in the area of just who
decides what. For example, the person in question seemed to play a major role in
60
deciding the monthly budget or whether to take a loan, but when it came to deciding
whom he should marry, it was still the older people in the family who played a key
role.

Both, the husband and the wife jointly decided on issues like the marriage of
progeny. In a majority of cases, the whole family got together to decide what kind
of house to buy where to go for a holiday.

Alcohol consumption habits indicated that 25 per cent drank alcohol, of which 72
per cent were beer drinkers. Most executives drank at bars and pubs, while self-
employed professionals drank at friends' homes. Businessmen preferred parties to
have a drink or two at.

61
 Data Analysis

Demographic factors:

1. Gender: The role of gender towards purchasing luxury products is

considered important, because the influencing factors for men and women

might be different. From the marketers perspective it would be useful for

them know the different factors, so that they could customize their marketing

strategy accordingly.

Gender No. of Percent

respond
ents

Male 468 67.3

Female 227 32.7

Total 695 100.0

Above table indicate that out of total 695 respondents, 468 are male and

227 are female. This information is presented using pie diagram as follows.

62
2. Age Group: This study aims to examine the factors influencing the youth

towards luxury fashion products. Youth have been described as all

individuals between the age group of

18 to 36 years. In order to get in depth evaluation, this segment has been

further categorized into three groups 18 to 23 years, 24 to 29 years and 30

to 36 year

Age group No. of Perce

responde nt
18 to 23 years nts118 17.0
24 to 29 years 316 45.5
30 to 36 years 261 37.6
Total 695 100.0

63
Above table indicate that out of total 695 respondents, 118 respondents belong to

the age groups between 18 to 23 years (young age) 316 respondents belong to the

age groups between 24 to 29 (middle age)years and 261 respondents belong to the

age groups of 30 to 36 years(senior age)

This information is presented using pie diagram as follows.

64
3. Qualification: The youth have been grouped based on their educational
qualification.

Those doing their graduation, post-graduation and those employed. The aim,

was to check if the influencing factors differed based with their qualification

Qualification No. of Percent

responders
Employed 409 58.8
Studying Graduation 40 5.8
Studying Post- 246 35.4
Graduation
Total 695 100.0

Above table indicate that out of total 695 respondents, 409 are employed. 40

respondents are doing graduation whereas 246 are doing post-graduation.

This information is presented using pie diagram as follows.

65
4. Nativity: The nativity of an individual has a huge influence on his buying

behaviour. Thus for this study the nativity of the youth was captured

Nativity No. of Percen

respondents t

Central 41 5.9
East 78 11.2
West 170 24.5
North 197 28.3
South 209 30.1
Total 695 100.0

66
5. Lived in during the formative years between 13 to 18 years: Past studies have

proven that the place where an individual spent his formative years of growing

up has a huge influence on the buying behaviour. Hence this information was

captured for this study.

Lived in No. of Percent

respondent
Central s 49 7.1
East 84 12.1
West 214 30.8
North 185 26.6
South 163 23.5
Total 695 100.0

67
6. Living in presently: The place where the individual is living in, has a

huge influence of that region on his buying behaviour. Hence this

information was captured for this study.

Living in No. of Percent

respondents
Central 44 6.3
East 45 6.5
West 348 50.1
North 91 13.1
South 167 24.0
Total 695 100.0

68
7. Living for: The length of time spent in a region would influence the

buying behaviour of the individual. Therefore this information was captured

for this study

Living for No. of Percent

respondents

Below Two yrs. 155 22.3

Two to Five yrs. 98 14.1

Five to Ten yrs. 56 8.1

More than 10 yrs. 386 55.5

Total 695 100.0

69
8. Social role: Studies have shown that the mind-set of an individual changes

as per the occupational background Hence for the purpose of this study, the

information on the social role was captured. They were categorized under

three broad heads: Business class, Service class and student class

Social Role No. of Perce

responde nt
Business nts105 15.1
Service 392 56.4
Student 198 28.5
Total 695 100.0

70
9. Family Monthly income: There is always a strong relationship between

income and consumption. Hence this information was captured to

understand the influence of the factors on different income levels

Family Income No. of Perce

(p.m.) responde nt
Below 1 lac nts291 41.9
Two to Five lacs 229 32.9
More than 5 lacs 175 25.2
Total 695 100.0

71
FINDINGS
Survey by Shoppers Stop:

A survey conducted by the marketing team of Shoppers Stop Ltd. Reveals the
psychograph of the modern shopper.

Accordingly the survey classifies customers in to the four segments namely

Convenience Shoppers
Value Shoppers
Image Shoppers
Experience Shoppers

Convenience shoppers for instance, are people who consume relatively less
amount of time while shopping. Also they look out for the width and depth of the
range they purchase and conduct their annual shopping at one shot.

Value Shoppers always hunt for value for money; Prefer quality reassurance and
benchmark offerings among other related attributes.

Image Shoppers are fashion- conscious and look out for the latest trends and
labels.

On the other hand , Experience Shoppers are attentive and prefer personalized
services look out for the right ambience, prefer giving personal advice on
clothing at the time of purchase , and prefer not to buy at one sold.

According to Ernst & Young report, 'The Great Indian Retail Story', the
emergence of a larger middle and upper middle classes and the substantial

72
increase in their disposable income has changed the nature of shopping in India
from need based to lifestyle dictated. The self-employed segment has replaced
the employed salaried segment as the mainstream market, thus resulting in an
increasing consumption of productivity goods, especially mobile phones and 2 -
4 wheeler vehicles. There is also an easier acceptance of luxury and an increased
willingness to experiment with the mainstream fashion, resulting in an increased
willingness towards disposability and casting out from apparels to cars to mobile
phones to consumer durables.

73
SUGGESTIONS

Marketing Strategies

Online Marketing

A study by the Confederation of Indian Industry (CII) and the International Trade
Centre predicts that e-commerce activity in India will rise from US$ 0.10 million
in 2002-03 to US$ 5.8 billion in 2007-08, of which the business to business
segment will account for US$ 5.41 billion.

Currently, the products Indian consumers are buying through online are greeting
cards, clothes, CDs/VCDs/DVDs, cassettes, books, magazines, medicine and
educational material.

The popular online shops in India include:

www.ebay.in
www.shopping.rediff.com
www.reliablegreetings.com
www.shopping.expomarkets.com

Celebrity Influence

This is an important tool which is able to influence Indian consumer buying

behaviour. In India, celebrities are being increasingly used in marketing
communication by marketers to lend personality to their products. With the visual
media becoming more popular the use of celebrities in the TV media has

74
increased. Celebrities create headlines. Their activities and movements are being
closely watched and imitated. What they endorse sell like hot cakes. It is not
surprising therefore that using celebrities in advertisements has become common
practice.

In India especially, it is not difficult to look for the reasons as to why companies
are increasingly using celebrities. Indians always love their heroes and heroines.

Consumers like advertisements more if they are admirers of the celebrities in the
advertisements. When a consumer likes the celebrity in the advertisement, he or
she is more likely to accept what the celebrity says about the advertised product
and therefore will develop more positive feelings toward the advertisement and
the brand itself. Famous celebrities are able to attract attention and retain attention
by their mere presence in the advertisements.

In the midst of the advertisement clutter, the advertisements that celebrities

endorse also achieve high recall rates. When people see their favoured reference
group members or celebrities in the advertisements, they pay more attention to
them.

Celebrities may also help reposition products. Products with sagging sales needs
some boosting and in this Indian celebrities can help by way of them endorsing
the product concerned.

Quality Oriented Outlets

Indian consumers looking for quality choose expensive brands as they feel that
price is an indicator of quality.

75
However, in the absence of well-known brands in selected product range,
consumers are likely to take cues from well-established retail outlets hoping that
these outlets carry quality products.

Businessmen who prefer not to go for high-visibility, costly campaigns may

embark on the strategy to engage well known retail outlets to capture the segment
of Indian consumers looking for quality products.

Freebies

Indian consumer buying behaviour is influenced by freebies. Freebies are

consumer products given free of charge as gifts to purchases of selected products
above a certain value. TVs, washing machines, refrigerators, and ready- made
clothes are some of the product categories in which freebies are given to Indian
consumers. Freebies generally comprise tooth paste, soaps, detergent, cooking oil
etc.

Companies wanting to penetrate the Indian market, perhaps should consider

giving freebies for the purchases made by the Indian consumers. Companies can
work with the local business partners to attract the consumers by way of such
promotion campaigns.

Eco-Friendly Products
The environmental awareness in India has started affecting marketing of products
based upon their eco-friendliness. In general, Indian consumers are likely to buy
environmentally responsible products and packs. The future key for marketing
could be to select more ethical and ecological responsible products and
packaging, which is also convenient for consumers, thus, balancing
environmental concerns with commercial considerations.

76
 CONCLUSION

In the highly specialised study of BUSINESS MANAGEMENT, BUSINESS

ADMINISTRATION or just MANAGEMENT today, MARKETING
MANAGEMENT function plays a very critical role. This is because this
functional area of management (1) EARNS the revenue, & (2) WORKS in
the close proximity with the public or persons outside the organisation.
Controlling these two attributes to have the desired benefits are the most difficult
part of the management, because none of these two are within the direct control
of the marketers. This doesnt mean that the other functional areas are not useful,
but they are not DIRECTLY involved in the activities mentioned
above. Similarly, within the study of Marketing Management, the Consumers
or the Customers play a very critical role as these are the people who finally
BUY the goods & services of the organisation, and the firm is always on the move
to make them buy so as to earn revenue. Its crucial from both the points of view
as given below:

From the customers point of view: Customers today are in a tough spot.
Today, in the highly developed & technologically advanced society, the
customers have a great deal of choices & options (and often very close &
competing) to decide on.

1. They have the products of an extreme range of attributes (the 1 st P -

Product),
2. they have a wide range of cost and payment choices (the 2nd P -
Price),
3. they can order them to be supplied to their door step or anywhere
else (the 3rd P - Place),
4. And finally they are bombarded with more communications from
more channels than ever before (the 4th P - Promotion).

77
 How can they possibly decide where to spend their time and money, and
where they should give their loyalty?

From the marketers point of view: The purpose of marketing is to sell

more stuff to more people more often for more money in order to make more
profit. This is the basic principle of requirement for the marketers in earlier days
where aggressive selling was the aim. Now it cant be achieved by force,
aggression or plain alluring. For the customers are today more informed, more
knowledgeable, more demanding, and more discerning. And above all there is no
dearth of marketers to buy from. The marketers have to earn them or win them
over.

The global marketplace is a study in diversity, diversity among consumers,

producers, marketers, retailers, advertising media, cultures, and customs and of
course the individual or psychological behaviour. However, despite prevailing
diversity, there also are many similarities. The object of the study of consumer
behaviour is to provide conceptual and technical tools to enable the marketer to
apply them to marketing practice, both profit & non-profit.

The study of Consumer Behaviour is one of the most important in business

education, because the purpose of a business is to create and keep customers.
Customers are created and maintained through marketing strategies. And the
quality of marketing strategies depends on knowing, serving, and influencing
consumers. In other words, the success of a business is to achieve organisational
objectives this suggests that the knowledge & information about consumers is
critical for developing successful marketing strategies because it challenges the
marketers to think about and analyse the relationship between the consumers &
marketers, and the consumer behaviour & the marketing strategy.

78
The main objective of the study of consumer behaviour is to provide marketers
with the knowledge and skills that are necessary to carry out detailed consumer
analyses which could be used for understanding markets and developing
marketing strategies. Thus, consumer behaviour researchers with their skills for
the naturalistic settings of the market are trying to make a major contribution to
our understanding of human thinking in general.

The study of consumer behaviour helps management understand consumers

needs so as to recognise the potential for the trend of development of change in
consumer requirements and new technology. And also to articulate the new thing
in terms of the consumers needs so that it will be accepted in the market well.

79
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