1 A Study of factor affecting impulse buying behavior by rural consumers at the point of purchase A dissertation submitted in partial fulfillment of the requirements for the award of PGDM by Tushar Part-time Post Graduate Programme in Management Management Development Institute Gurgaon 122 007 August, 2013
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Factors affecting buying behavior at the point of sale
Dissertation report - Buying behavior of consumers in Rural India at the point of purchase. Evaluation of critical factors.
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A Study of factor affecting impulse buying behavior by rural
consumers at the point of purchase
A dissertation submitted in partial fulfillment of the requirements
for the award of
PGDM
by
Tushar
Part-time Post Graduate Programme in Management
Management Development Institute
Gurgaon 122 007
August, 2013
2
A Study of factor affecting impulse buying behavior by rural
consumers at the point of purchase
A dissertation submitted in partial fulfillment of the requirements
for the award of
PGDM
by
Tushar
under the guidance of
Shri Dr. Chinmaya Kulshrestha
Assistant Professor
MDI, Gurgaon
Part-time Post Graduate Programme in Management
Management Development Institute
Gurgaon 122 007
August, 2013
3
Certificate of Approval
The following dissertation titled A Study of factor affecting impulse buying behavior by rural
consumers at the point of purchase is hereby approved as a substantive work/study in management
carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the
award of PGDM for which it has been submitted. It is understood that by this approval the undersigned
do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn
therein but approve the dissertation only for the purpose it is submitted.
Dissertation Examination Committee for evaluation of dissertation
Name Signature
1. External Examiner
_______________________ ___________________
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Certificate from Dissertation Advisory Committee
This is to certify that Mr. Joshi Tushar Kumar, a participant of the Part-time Post Graduate
Programme in Management has worked under our guidance and supervision. He is submitting this
dissertation titled A Study of factor affecting impulse buying behavior by rural consumers at the
point of purchase in partial fulfillment of the requirements for the award of the PGDM.
This dissertation has the requisite standard and to the best of our knowledge no part of it has been
reproduced from any other dissertation, monograph, report or book.
Dr. Chinmaya Kulshrestha Mr.
Assistant Professor
Management Development Institute
Gurgaon Gurgaon
16th August 2013 16th August 2013
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Abstract
A Study of factor affecting impulse buying behavior by rural
consumers at the point of purchase
by
Joshi Tushar Kumar Govindlal
For companies to attain commercial success, it is important that managers understand consumer behavior. The relationship between consumer behavior and marketing strategy is emphasized because the success of companies’ marketing strategies depends upon managers’ understandings of consumer behavior (understanding of consumer behavior is especially important during a recession -Kotler and Caslione (2009). When consumer buys some products indicates how well the company’s marketing strategy has been executed.
The study of customer behavior is based on consumer buying behavior, with the customer playing three distinct roles: Shopper/payer, buyer & consumer. Research has shown that consumer behavior is difficult to predict, even for experts in the field (Armstrong & Scott, 1991). Consumer behavior involves the psychological processes that consumers go through in recognizing their needs, finding ways to solve these needs, making purchase decisions (e.g., whether 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).
This study is focused around impulse buying of low involvement products, meaning purchase made by consumer without planning in advance. This work is an attempt to find out the factors that drive consumer’s buying behavior – Target spend, occasion, price, promotion, display etc. The study is based on the primary data collected from consumers at NCR as well as Gujarat with the help of structured questionnaire. Data analysis has been done using SPSS & XLSTAT software. The statistical analysis method employed in this study is Factor Analysis & PCA.
Impulse buying is a sudden and immediate purchase with no pre-shopping intentions either to buy the specific product or to fulfill a specific buying task. The finding of the study indicates that pricing strategies, store characteristics, situational factors and promotional activities mostly influence the impulse buying behavior of consumers. In case of pricing factor, it is noticed that products with reduced price is bought as impulse purchase. Also income level of consumers affects impulse purchase positively.
In case of store factor, it is important how the stores induce consumers to be impulsive. POS offers, display of product in shelf and behavior of sales person are influencing consumers to be impulse buyers. Marketers for rural India should put more efforts creating attractive and eye catching POS offers & product display providing information regarding new products. Relation with store keeper, his/her friendliness and attention are necessary to attract customers.
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Findings also indicate that situational factors such as popularity (brand) of product, comments of reference group and requirements of products in festival seasons influence impulse buying. Branded products organized in the shelf of local store at hand reach; help to recall its need. If family members or friends go with the consumer, they motivate him/her to be impulsive by suggesting prominent & existing brands.
Last factor of this study is advertisement activity. It can be specific brand offer, advertisement of product in print and visual media or any sort of promotion of products in village are during mela / haat that initiate impulse buying behavior of consumers.
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Acknowledgement
I owe a deep gratitude and heartfelt thanks to Dr Chinmaya Kulshrestha, who has encouraged and guided me
throughout my research work. I also express my heartfelt gratitude to my revered guide for his unmitigated support,
meticulous reviews, in depth inquiries and advice on the work. It has added immense value to thesis. I want to thank
Mr. Anoop Manohar, my industry guide for provide inputs from real business side as well as Misha from Knowledge &
Insights group of Coca-Cola India, Rahul from Ipsos research agency for their suggestions & support during this work.
Thanks are due to Dr. Neelu Bhullar, Chair Person, PTPGP program, Management Development Institute, Gurgaon
for her hard inspiration and providing valuable support. I also want to share my gratitude towards staff members –
Shrinivas, Ravinder and Tokas for being instrumental and excellent communication between student and institute to
ensure timeliness. Without them it would have been not possible to complete the research work.
Again, I sincerely express my profound gratitude to all faculty members of MDI providing immense learning during my
study tenure that is what has enabled me to complete this work and made difference to my life.
It need special appreciation and thanks to my colleagues at Coca-Cola - Diana, Lopa, Prashant and Mili for helping
and encouraging me throughout the study & research tenure and accommodating at various challenging occasions like
business travels & meetings.
During these two and half years of long hours of work and ups & downs, my family and friends stood by me. My wife
Mamta & son Jaytirth needs special mention for putting up with my crazy working hours and preoccupations.
I want to thank my friends Harsh, Khushhal, Muneesh, and Neeraj as well as all classmates – for standing beside me
during all ups & downs during whole tenure of MDI.
My mother, father and brother are always there to support through tough times and encouraged me constantly, always.
I express my deep sense of gratitude to all the respondents who participated in the survey of the study and spared their
valuable time to provide the requested responses
All are not mentioned but none is forgotten.
Tushar Joshi
Gurgaon
16th
August 2013
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Table of Contents
Page
Abstract V
Acknowledgement VII
Table of Contents VIII
List of Figures X
List of Tables XI
List of Appendices XII
List of Abbreviations XIII
I SECTION – 1
1.1 Introduction 1
1.2 Business Problem 4
1.3 Research Problem 5
1.4 Research Questions – Objectives 6
1.5 Hypothesis 6
II SECTION – 2
2.1 Secondary Research 7
2.1.1 Review of Literature 7
2.2 Primary Research 23
2.2.1 Study Methodology 23
2.2.2 Factors selected of Study 24
2.2.3 Sample 24
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2.2.3.1 Profile of final Sample 25
2.2.3.2 Research Procedure 25
2.2.3.3 Questioners 26
III SECTION – 3
3.1 Result & Discussion 27
3.2 Conclusion & Recommendations 34
3.3 Limitations & Future Research 35
IV SECTION – 4
4.1 Bibliography 36
4.2 Appendices 42
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List of Figures
Figure No. Description Page
1 Competition Strategy 10
2 Black Box Model of Consumer behavior 11
3 Consumer buying decision making process 18
4 Graphical representation of communalities 32
5 PCA mapping of factors 33
6 Screen Plot of Eigen values 47
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List of Tables
Table No. Description Page
1 Factors Affecting Consumer Buying Behavior 19
2 Profile of respondents 25
3 Table 3: KMO and Bartlett's Test 28
4 Percentage Variation Explained 29
5 Rotated Component Matrix 30
6 Factors Nomenclature 30
7 Communalities of different components 31
8 Communalities against different components for graphical format 31
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List of Appendices
Appendix
No.
Description Page
1 Preliminary questionnaire 42
2 Final Survey questionnaire 44
________________________________
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Abbreviations
VOC: Voice of Customer / Consumer
FMCG: Fast Moving Consumer Goods
NCAER: National Council for Applied Economic Research
Rs. : Rupees
INR: Indian Rupees
CSR: Corporate Social Responsibility
NDTV: New Delhi Tele Vision
MNC: Multi-National Corporations
NGO: Non-Government Organizations
NCR: National Capital Region
KMO: Kaiser-Meyer-Olkin
PCA: Principal Component Analysis
Qi: Question i
Sig.: Significance
Ho: Null Hypothesis
H1: Alternate Hypothesis
SPSS: Statistical Package for Social Sciences
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SECTION: 1
1.1 Introduction
Retailer’s shop is certainly an important medium for direct conversation with consumer. To ensure
effective communication, there is need of congruence between all four Ps of marketing: product-
package-price-promoter (retailer in most of the cases). When consumer walks up to retail counter – Its
retailer / package / brand should spell out a crisp and winning Shop Speech for product. This
phenomenon is more critical for all low involvement categories. Point of sale is always critical place for
gaining authentic consumer & business insights / VoC.
Currently majority of trade in rural India (where 70% of Indian population lives) is happening at
conventional retail outlets. Again rural India has untapped potential that do not have ready access to
modern form of outlets as of now. In future, I expect traditional stores will go through a transformation
or consolidation to survive against environmental changes.
In last few years now, the lure of rural India has been the subject of animated discussion in corporates.
And there are many reasons too. With urban markets getting saturated for several categories of FMCG
and with rising rural incomes, marketing executives are fanning out and discovering the strengths of the
large rural markets as they try to expand their markets. Today, the idea has grown out of its infancy and
dominates discussions in any corporate boardroom strategy session.
A survey by the NCAER, India's premier economic research entity, shared report that rise in rural
incomes is keeping pace with urban incomes. From 55 to 58 per cent of the average urban income in
1994-95, the average rural income has gone up to 63 to 64 per cent by 2001-02 and touched almost 66
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per cent in 2004-05. The rural middle class is growing at 12 per cent against the 13 per cent growth of
its urban counterpart. Even better, the upper income class those with household incomes of over Rs
one million [$22,700] per annum is projected to go up to 21 million by 2009-10 from four million in 2001-
02. It will have a 22 to 23 per cent rural component. Higher rural incomes have meant larger markets.
Already, the rural tilt is beginning to show. A study by the Chennai-based Francis Kanoi Marketing
Planning Services says that the rural market for FMCG is worth $14.4 billion, far ahead of the market
for tractors and agro-inputs which is estimated at $10 billion. Rural India also accounts for sales of $1.7
billion for cars, scooters and bikes and over one billion dollars of durables. In total, that represents a
market worth a whopping $27 billion.
It is no wonder that Indian firms as well as MNCs have cottoned on to the idea of a resurgent rural India
waiting to happen. Now Coke's rural growth far outstrips its urban growth. Coke has recently started a
CSR campaign of support my school for empowering rural schools with Toilets, Drinking water and
other facilities. This initiative is supported by NDTV as well as other 60 corporates. Coke is not the only
MNC to have cottoned on to the rural lure. Hindustan Lever Ltd, the $2.3 billion Indian subsidiary of
Unilever, the country's largest FMCG Company, has also got on the track. Its Project Shakti uses self-
help groups across the country to push Lever products deeper into the pyramid. Its program creates
income-generating capabilities for underprivileged rural women; improves rural quality of life by
spreading awareness of best practices in health and hygiene; empowers the rural community by
creating access to relevant information through community portals and it also works with NGOs to
spread literacy.
Vertical integration of the food market from farm to fork becomes the best way to achieve literacy and
serve the interest of every stakeholder in the chain the farmer, the processor, the retailer and the
consumer. As Ashok Gulati of the US-based International Food Policy Research Institute put it, the
future of Indian agriculture in general and the farmer in particular depends on the how soon they can
become globally competitive. Indian economic policy realizes this. Between the 8th (1992-97) and the
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10th (2002-07) Five Year Plans, successive governments have tripled the spending on rural
development from $6.82 billion to $20.2 billion. All this potential has got India's big business houses
rushing to enter and expand rural businesses.
Tata Chemicals ran a chain called Tata Kisan Kendra, which offer farmers all the products and services
ranging from agriculture inputs to fiancé options. Today, the Tata has 421 franchisee-run centers and
reaches out to over 3.6 million farmers. Like the Tatas the Mahindra group has successfully established
a synergy between its current businesses and the planned rural forays.
Such lucrative business environment of rural India force marketer to understand variances exist with
theses consumer buying behaviors especially for the target industry of low involvement products. This
study is taken up to critically analyze this topic and bring out business relevant information.
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1.2 Business Problem
It’s been strongly perceived that retail transformation will not only increase complexities in product
handling but strategically offer differentiator to trade partner and encourage consumer preference at
point of purchase. A relevant differentiator can only be delivered by consumer focused value addition
by innovation. In my current as well as past role of innovation offered me opportunities to close
collaboration with consumer and retailer during innovation process.
Majority of products in food and beverage are indulgence products and consumer does impulse
purchase. The current political environment has changed to imbibe modern trade at very fast pace, It is
also very critical to understand the change in buying behavior of rural consumer in changing definition
of trade.
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1.3 Research Problem
Consumer buying behavior and especially rural consumer in emerging economy like India is always
evolving. The typical decision making process of buying would get distorted while purchase of
indulgence products and impulse buying transaction. In case of rural consumer, the coinage pricing
make beverages to compete against all set of products from confectionary to biscuit – It is very critical
to find out the value calculation frame work of these consumer. This in turn helps to identify right value
proposition and relevant differentiator for these consumers.
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1.4 Research Questions
1. What are the factors affecting the impulse buying behavior?
2. What significant macro factors driving impulse purchase at the point of sale?
1.5 Hypothesis
Ho: There is significant indifference of all the factors affecting impulse buying decision
H1: There is significant difference of all the factors affecting impulse buying decision
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SECTION - 2
2.1 Secondary Research
2.1.1 Review of Literature
John Mano Raj and Selvaraj highlighted that in the end it is certain that FMCG companies will have to
really gain inroads in the rural markets in order to achieve double digit growth targets in future. There is
huge potential and definitely there is lot of money in rural India but the smart thing would be to weigh in
the roadblocks as carefully as possible. The companies entering rural market must do so for strategic
reasons and not for tactical gains as rural consumer is still a closed book and it is only through
unwavering commitment that the companies can make a dent in the market. Ultimately the winner
would be the one with the required resources like time and money and also with the much needed
innovative ideas to tap the rural markets. Define unique value proposition for rural customers
In Accenture Report on Rural Consumer (2013), pointed that many companies make the mistake of
treating rural consumers as a single homogeneous market. They fail to understand the diversity within
these regions—which are fragmented in terms of size, buyer needs, values and spending power.
Companies also tend to offer the same value proposition to rural consumers that they offer to urban
consumers. The value proposition usually centers on the product’s functional benefits and pays little
attention to how the product meets rural consumers’ unique needs and wants. As competition
intensifies in rural markets, companies will find it increasingly difficult to win customers using such
“push” strategies. To gain market share, businesses will need to tailor their value propositions and
position their brands to target specific consumer segments and create deeper connections with them.
Our research found that companies realize the importance of local market intelligence. They are
making serious investments in the development of capabilities such as customer analytics to gain
insights into rural consumers and their latent needs. These capabilities include segmenting rural
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consumers, tracking price elasticity and identifying new higher margin markets, including geographies
and product and service categories
Steve Gaskin (2013) specifically mentioned to asked very critical questions and answer that before
selecting conjoint analysis for identifying product attributes driving sales
1. Is a utility-based market share the right model?
2. Who is the decision maker?
3. Can the product be adequately described and realistically valued using a set of discrete
features? Or is a holistic view more appropriate?
4. To what degree are product choices determined by more subjective considerations, such as
aesthetics?
5. Are all of the important attributes included, and are the various levels realistic? If so, are there
too many of them for people to evaluate?
6. Can people intelligently evaluate the attributes? Can the attributes be expressed in terms that
are understandable and relevant to customers?
7. Are there enough customers out there to complete our survey? And if so, can we afford to
recruit them?
Pundit (2003) stated in workbook about Indian rural market, where its vast size and demand base offers
great opportunities to Companies. Two-thirds of Indian consumers live in rural areas and almost half of
the national income is generated here. It is only natural that rural markets form an important part of the
total market of India.
The report published by National Council of Applied Economic Research (2010) mention that with about
74 per cent of its population living in its villages, India has perhaps the largest potential rural market in
the world. It has as many as 47,000 haats (congregation markets), compared to 35,000 supermarkets
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in the US. Plus, of the total FMCGs demand in India, nearly 53 per cent comes from the rural market.
For consumer durables, the figure is 59 per cent. In the area of communication, companies have
perhaps failed to recognize that a rural consumer may be buying a particular brand or even the product
category itself (particularly durables) for the first time. With hardly any key influencer within the village
and few sources of information (since print and electronic media have limited reach), the rural
consumer feels inhibited and ill equipped to buy confidently. To communicate effectively with rural
audiences, it is important to understand the aspirations, fears and hopes of rural customers, in relation
to each product category, before developing a communication package to deliver the product message.
Hence, there is a strong need to build reassurance and trust about product quality, service support and
company credentials in the minds of rural consumers. This is best done through the face-to-face 'below
the line' touch, feel and talk mode at haats, melas and mandis.
Sarita and Paresh (2012) states that marketing strategies is the most difficult because it concerns the
timing of individual marketing decision. It can also be highly technical because a market strategy calls
for a comprehensive review of all factors that are likely to affect prices in the future. Marketing strategy
involves careful scanning of the internal and external environments. Internal environmental factors
include the, plus performance analysis and strategic constraints. External environmental factors include
customer analysis, analysis, as well as evaluation of any elements of the technological, economic,
cultural or political/legal environment likely to impact success. As information related to marketing
strategy is highly technical extension staff must join the hands together with Agricultural economist,
Agribusiness specialist and Agricultural marketing specialist.
Matthey, Johnson and Hari (2011) highlighted following key factors for capturing consumer liking in
rural area in their report in Harvard Business Review.
Affordability: In our experience, though, a far more robust approach to creating an affordable emerging
market offering is to trade off expensive feature and functions that people don’t need for less expensive
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one they do need. To get that right requires a clear understanding of the context in which the offering
will be sold – which calls for further field work, preferably of a collaborative rather than a merely
observational kind. This is good product –development advice in any market. In fact, it applies to
indigenous players operating close to home, like Godrej as well as to Western companies confronting
the unfamiliar.
Integrate the Elements: Business models can be conceived in variety of ways. Our approach focuses
on the basics and also on factors that make it difficult to move from an existing model to a new one –
margin requirements, overhead, and “resource velocity” (the capacity to generate a given volume of
business within a specific time frame). It has four parts: the customer value proposition, a profit formula,
key processes, and key resources the company must use to deliver the CVP repeatedly and at scale.
Creating competitive advantage lies in integrating these elements to produce value for both the
customer and the company. That’s easy to say but devilishly hard to do. Mapping the traditional
functions of your company to these broad categories will show you how much you’d have to change to
integrate those functions into a new business model.
Superstores in Bangladesh, ASA University Review, Vol. 5 No.1, January - June
the power of brand, Journal of Consumer Marketing, 19 (4): 351- 358.
Venkat, R. Prahalad, C.K. (2005), The Power of Branding, Business line's Journal on
Management The future of competition
Wood, L. (2000), ‗Brands and brand equity: definition and management‘ Management
Decision, 38 (9): 662-669
Yoo, B., Donthu, N. & Lee, S. (2000), ‗An examination of selected marketing mix elements
and brand equity‘, Academy of Marketing Science Journal, 28 (2): 195-211
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4.2 Appendices
Appendix – 5.1: Pilot Research questionnaire
Please, Answer The Following Questions As Thorough as Possible. For purchase of beverage / confectionary / other __________________
1. Did you think of item before coming to store ? Yes No
2. Did you think of brand before coming to store ? Yes No
3. Did you think of which store to go for? Yes No
4. Did you think of any parameters before coming to store? Temperature Taste (Sweet / Sour) Color Fruit / Non Fruit Liquid / Solid Packaged / Unpackaged Price Point Any other ..
5. How do you select store ? Closest to me Offer low prices / discount Where I am treated with respect Looks Clean and authentic Other …………………
6. How did you get the product? Asked for the pack by pin pointing Picked up the arm length available product Asked to store keeper for options
- Within Category - Within Price Point - Within any other criteria ……………….
7. Did you end up with
New Brand – Known Category Known Brand – Known Category
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New Brand – Unknown Category Known Brand – New Category
8. Did price point is important for product you bought? Yes No
9. Does deviation from coinage pricing (Rs. 1,2,5,10,15, 25) make you skip this product and buy anything else ?
Yes No
10. Did you hear your friends / family / other people talking about product you bought ? Yes No
11. Did you consider color / package shape for selecting this product? Yes No
12. Does easy pronunciation of product name important for you to ask for product? Yes No
13. Did you think of quality / hygiene while purchase of this product ? Yes No
14. Will you recommend this product to your other friends / family ? Yes No
15. Can you tell story about – How did you selected this one product out of whole options available at shop.
Gender: Age: Region: Village: Name: Monthly household income: Number of Family members: Job:
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Appendix – 5.2 Final Survey Questioners
1. Do you consider lower price of product for unplanned behavior?
a. Strongly Agree (Always)
b. Agree (Some time)
c. Neither agree nor Disagree (Neutral)
d. Disagree (rarely)
e. Strongly Disagree (Never)
2. Do you select price off products above regular priced items?
a. Strongly Agree (Always)
b. Agree (Some time)
c. Neither agree nor Disagree (Neutral)
d. Disagree (rarely)
e. Strongly Disagree (Never)
3. Does earlier experience of products, samples motivate buying?
a. Strongly Agree (Always)
b. Agree (Some time)
c. Neither agree nor Disagree (Neutral)
d. Disagree (rarely)
e. Strongly Disagree (Never)
4. Do schemes run by store keeper motivate you buying?
a. Strongly Agree (Always)
b. Agree (Some time)
c. Neither agree nor Disagree (Neutral)
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d. Disagree (rarely)
e. Strongly Disagree (Never)
5. Does display of item near hand reach, visible range motivate buying ?
a. Strongly Agree (Always)
b. Agree (Some time)
c. Neither agree nor Disagree (Neutral)
d. Disagree (rarely)
e. Strongly Disagree (Never)
6. Does your relation with store / store keeper important for selecting product?
a. Strongly Agree (Always)
b. Agree (Some time)
c. Neither agree nor Disagree (Neutral)
d. Disagree (rarely)
e. Strongly Disagree (Never)
7. Does familiarity with brand / product important while doing unplanned purchase ?
a. Strongly Agree (Always)
b. Agree (Some time)
c. Neither agree nor Disagree (Neutral)
d. Disagree (rarely)
e. Strongly Disagree (Never)
8. Does earlier talk / friend’s / family’s recommendation important for unplanned pick up ?
a. Strongly Agree (Always)
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b. Agree (Some time)
c. Neither agree nor Disagree (Neutral)
d. Disagree (rarely)
e. Strongly Disagree (Never)
9. Do you carry some budget for impulse purchase products ?
a. Strongly Agree (Always)
b. Agree (Some time)
c. Neither agree nor Disagree (Neutral)
d. Disagree (rarely)
e. Strongly Disagree (Never)
10. Does unplanned purchase for guest / group consumption purpose make select specific brand /
category?
a. Strongly Agree (Always)
b. Agree (Some time)
c. Neither agree nor Disagree (Neutral)
d. Disagree (rarely)
e. Strongly Disagree (Never)
Name:
Gender: M / F
Age: < 17 Y / 18 – 25 Y / 26 – 45 Y / >46 Y
Region: City / Village
Monthly Household income:
Less than 5000 INR / 5001 – 10000 INR / more than 10001 / Not willing disclose