200 Mark Project TY BMS 6th Semester Kunal Khanna

Factors Affecting The Indian Consumer Buying Pattern

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CHAPTER 1.

INTRODUCTION TO CONSUMERS

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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.

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?2

http://www.businessdictionary.com/definition/individual.html

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http://www.businessdictionary.com/definition/decision.html

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http://www.businessdictionary.com/definition/manufacture.html

http://www.investorwords.com/6664/service.html

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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

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 shouldn’t feel they are an

intrusion on the service provider’s 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

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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 own willingness to

say “yes” much more than we say “no.” Customers don’t 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 don’t want us leaving anything out! They don’t

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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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 favorably 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:

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

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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 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.

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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.

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.

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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 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 dependant 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.

UNDERSTANDING CONSUMER

BEHAVIOUR

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.,

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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 is more effective to

advertise their products on the radio in the late afternoon when people are getting hungry.

A person’s self-image will also tend to influence what he or she will buy—an upwardly

mobile manager may buy a flashy car to project an image of success.

Social factors also influence what the consumers buy—often, 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

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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

learning—you 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

recognition—you 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 search—what 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 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 consumer’s life in some other way (e.g., a word

processing program or acne medication).

It is important to consider the consumer’s 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

consumer’s 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 consumer’s

family, which achieves the desired end-state of security. In advertising, it is important to

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portray the desired end-states. Focusing on the large motor will do less good than portraying

a successful person driving the car.

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 one’s 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 need—e.g., through brochures, web sites,

or news coverage.

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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 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 analyzing product characteristics and making the best

possible deal?), and situational characteristics.

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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;

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 family’s 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.

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One spouse may believe that it is important to save for the children’s 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 parties—such as children or other relatives—are involved.

Some family members may resort to various strategies to get their way. One is bargaining—

one member will give up something 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 reasoning—trying to get the other person(s) to accept one’s 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 one’s 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 one’s

"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 one’s

way (e.g., a man cries if his wife will not let him buy a new rap album).

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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, mixy

convenience etc.

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Economic factors affect buyer’s 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.,

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.

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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,

family,

social class,

reference groups,

lifestyle, and

market mix factors.

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Understanding Consumer Behaviour in Markets:

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

benefits of understanding consumer behaviour.

• 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.

• 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

P’s of marketing and the marketing mix.

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CHAPTER 3.

PROFILE OF INDIAN CONSUMERS

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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 Rs 20-

25 billion in the next 2-3 years, and over Rs 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 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

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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 mn 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 mn+ effective buyers by 2010

550 mn+ under the age of 20 by 2015

70 mn+ earn Rs. 8,00,000+ ($18,000) a year – number to rise to 140 mn 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.

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. 23


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%

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%

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Essential Services (water, power, rent,

and fuels) 10.1%

Clothing 4.9%

Footwear 0.63%

Medicare 4.25%

Transport & Communication 14.51%

Recreation, Education, and Culture Less than 4%

Home Goods 3.25%

A Note on Consumer Spending Patterns in India:

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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 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.

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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.

Consumer behavior in India:

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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 India’s consumerism is the emergence of the rural

market for several basic consumer goods. Three-fourths of India’s 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).

Characteristics Of The Indian Consumer Behaviour

28


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 along side modern products. For example, hair oils and tooth

powder existing with shampoos and toothpaste.

- 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

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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. 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.

- India’s Rich

30


India’s rich can be categorized into five major categories as follows:

1 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.

2 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.

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

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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.

- 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

32


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 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.

Changing Trends In Indian Consumer Behaviour

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.

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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 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.

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Indian consumers have also developed lifestyles which have emerged from

changing attitudes and mind sets; exposure to western influences and a need

for self-gratification. Beauty parlours in cities, eateries, designer wear,

watches, 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, India’s 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-à-vis the local

products.

Consumer Spending Behaviour

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

35


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.

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.

36


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, 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.

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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.\

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 installment 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.

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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 man’s 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.

Strong Family Ties....Home loving:

The middle class man is a home loving man. He assigns a lot of importance to the well being

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 daughter’s 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.

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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.

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.

40


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.

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.

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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

crore a year is the amount of money given to children as pocket money.

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CHAPTER 4.

CONSUMERS SPENDING HABITS

43


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 darzi 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. Consumeristic

ideology and ramphant 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.

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http://timesofindia.indiatimes.com/Business/India_Business/Indians_spend_more_on_clothes_mobiles/articleshow/1982174.cms


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 today’s

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 student’s 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 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

45


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, they’re 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, you’re right. It is estimated that the average student spends at least $50

per month on beer 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.

46


CHAPTER 5.

CONSUMER BEHAVIOUR IN

RECESSION

47


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 Havas-owned media

planning and buying group.

Despite the credit crunch, consumers with reasonable security of employment who don’t 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 Domino’s 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 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.48


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.

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.

49


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.

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.

50


CHAPTER 6.

CASE STUDY

51


1. The Beer industry in India in context

of Consumer Buying Behaviour

The Indian beer market was estimated to be 6.7 million hectoliters (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.

52


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.

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

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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.

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

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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, Dansberg, Golden Eagle, Guru, Maharaja Premium Lager, Haake

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, 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 Interbrew 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. Radico 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.

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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.

Liters 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

Water

0.1 0.1 0.1 0.2 0.3 0.5

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

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Distilled

Spirits

0.3 0.3 0.4 0.5 0.6 0.6

Fruit

Beverages

0.1 0.1 0.1 0.2 0.2 0.2

Milk 41.2 41.7 40.2 40.7 40.1 40.5

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

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

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http://money.rediff.com/stocks

http://money.rediff.com/stocks


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 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.

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CHAPTER 7

FINDINGS

Survey by Shoppers Stop:

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

psychography 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.

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According to Ernst & Young report, 'The Great Indian Retail Story', the emergence of a

larger middle and upper middle classes and the substantial 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.

CHAPTER 8 Suggestions - Marketing Strategies

1 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

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http://www.reliablegreetings.com/


www.shopping.expomarkets.com

2 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 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 they

endorsing the product concerned.

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http://www.shopping.expomarkets.com/


3 Quality Oriented Outlets

Indian consumers looking for quality choose expensive brands as they feel that

price is an indicator of quality.

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.

4 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.

5 Eco-Friendly Products

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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.

Consumers in India are taking lead in prompting manufacturers to adopt

technologies to produce eco-friendly products.

CHAPTER 9

Methodology

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CHAPTER 10.

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 doesn’t mean that the other functional areas are not useful, but they are

not “DIRECTLY” involved in the activities mentioned above.

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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. It’s

crucial from both the points of view as given below:

1. 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 1st 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 3 rd

P - Place),

4. and finally they are bombarded with more communications from more

channels than ever before (the 4th P - Promotion).

How can they possibly decide where to spend their time and money, and where they

should give their loyalty?

2. 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 can’t be achieved by force, aggression or plain alluring.

For the customers are today more informed, more knowledgeable, more demanding,

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. 65


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.

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.

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200 Mark Project TY BMS 6th Semester Kunal Khanna

Documents

middle class

moving consumer

typical college

indian retail

food expenditure

indian consumer

strong beer

indian beer