Factors Affecting The Indian Consumer Buying Pattern

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CHAPTER 1.

INTRODUCTION TO CONSUMERS

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Factors Affecting The Indian Consumer Buying Pattern

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.

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Factors Affecting The Indian Consumer Buying Pattern

What Do Customers Want, Anyway?
To be taken seriously 2. Competent, efficient service 3. Anticipation of my needs 4. Explanations in my terms 5. Basic courtesies 6. To be informed of the options 7. Not to be passed around 8. To be listened to (and heard) 9. Dedicated attention 10. Knowledgeable help 11. Friendliness 12. To be kept informed 13. Follow-through 14. Honesty 15. Feedback 16. Professional service 17. Empathy 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 defensive when they feel they are subject to any class distinctions. No one wants to be

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but never made the suggestion. show me – everything!” Customers need to be educated and informed about our products and services. 5.Factors Affecting The Indian Consumer Buying Pattern treated as if they fall into a certain category. and they depend on us to be “in the know” and provide them with the “inside scoop.” Customers don’t care about policies and rules. Understanding customer needs and wants is not always simple. 4 . 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. information central. and we knew all along a better way. or they cannot articulate these needs. Consider the customer who says he wants an "inexpensive car.” They get pretty upset when they feel they have spun their wheels getting something done. Information “Tell me. or they use words that require some interpretation. 6. Options and alternatives: Customers need to feel that other avenues are available to getting what they want accomplished. left wondering if “the grass is greener on the other side” and if they only received second best. Some customers have needs of which they are not fully conscious. They realize that they may be charting virgin territory. 4. talking. The marketer must probe further. 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. they want to deal with us in all our reasonableness.

but Discount Customers: They shop our stores frequently. Most of us are obsessed with making sure our advertising. at the same time. we need to break down shoppers into five main types: • Loyal Customers: They represent no more than 20 percent of our customer base.Factors Affecting The Indian Consumer Buying Pattern The 5 Types of Customers: In the retail industry. In retail. it seems as though we are constantly faced with the issue of trying to find new customers. we need to focus our effort on the loyal customers. This focus on pursuing new customers is certainly prudent and necessary. but make their decisions based Impulse Customers: They do not have buying a particular item at the top of their “To make up more than 50 percent of our sales. • into the store. Rather. • Do” list. 5 . • on the size of our markdowns. this idea of focusing on the best current customers should be seen as an on-going opportunity. They will purchase what seems good at the time. • Need-Based Customers: They have a specific intention to buy a particular type of Wandering Customers: They have no specific need or desire in mind when they come item. Therefore. it can wind up hurting us. and pricing all “scream out” to attract new customers. The other three types of customers do represent a segment of our business. but. If we are serious about growing our business. they want a sense of experience and/or community. but they can also cause us to misdirect our resources if we put too much emphasis on them. displays. and merchandise our store to leverage the impulse shoppers. our focus really should be on the 20 percent of our clients who currently are our best customers. but come into the store on a whim. Let me further explain the five types of customers and elaborate on what we should be doing with them. To better understand the rationale behind this theory and to face the challenge of building customer loyalty.

Need-Based Customers: People in this category are driven by a specific need. you can never do enough for them. they will look to see if they can have that need filled quickly. Impulse Customers: Clearly. They buy for a variety of reasons such as a specific occasion.Factors Affecting The Indian Consumer Buying Pattern Loyal Customers: Naturally. These people are the ones who can and should influence our buying and merchandising decisions. There is nothing more exciting than assisting an Impulse shopper and having them respond favorably to our recommendations. mail. can often wind up costing you money because they are more inclined to return product. as a result. we need to be communicating with these customers on a regular basis by telephone. the more you do for them. This same group. however. As difficult as it can be to satisfy these people. email. or an absolute price point. they can also become Loyal Customers 6 . If not. etc. In my mind. the more they will recommend you to others. Discount Customers: This category helps ensure your inventory is turning over and. they will leave right away. it is a key contributor to cash flow. We want to target our displays towards this group because they will provide us with a significant amount of customer insight and knowledge. this is the segment of our clientele that we all like to serve. Nothing will make a Loyal Customer feel better than soliciting their input and showing them how much you value it. When they enter the store. Many times. a specific need.

at the same time. Need-Based Customers offer the greatest long-term potential. Salespeople may not find them to be a lot of fun to serve. they are also very likely to communicate to others the experience they had in the store. but. the time spent with them needs to be minimized. this is the largest segment in terms of traffic. however. they make up the smallest percentage of sales. that although they may not represent a large percentage of your immediate sales. Therefore. Customer personality types: The Know it Alls 7 . Keep in mind. If they are treated to a level of service not available from the Web or another retail location. while. in the end. Many Wanderers shop merely for the interaction and experience it provides them. although Wandering Customers cannot be ignored. ensuring that our Loyal Customers have a positive experience each time they enter our store will only serve to increase our bottom-line profits. Since they are merely looking for interaction. and even Wandering Customers into Loyal ones will help grow our business. Using this understanding to help turn Discount. surpassing even the Impulse segment. Wandering Customers: For many stores. Need-Based. At the same time. To overcome this threat. there is a very strong chance of making them Loyal Customers. It is important to remember that Need-Based Customers can easily be lost to Internet sales or a different retailer. Shopping is no different to them than it is for another person to go to the gym on a regular basis. they are a real voice for you in the community. usually from one of your top salespeople. For this reason. they can often represent your greatest source of long-term growth. Impulse. 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. positive personal interaction is required.Factors Affecting The Indian Consumer Buying Pattern if they are well taken care of.

The Dictators These folks often have strong personalities and can come across as bullies. The Complainers Just like the name implies. 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.Factors Affecting The Indian Consumer Buying Pattern These folks tend to be experts in just about everything. When presented with conflict. The Yes People Yes people tend to agree with any commitment and will promise to meet unreachable deadlines. these folks can throw a wet blanket over an entire process. Sometimes. they usually put the blame someplace else. Knowing what kind of personality you are dealing with can go a long way with developing ways to handle the situation. The No People No people are negative and downright pessimistic. The Passives Passives usually try to avoid conflict at all costs. Brutally critical. When they are wrong about a subject. they can be very difficult to work with. the complainers find something to complain about with almost every situation. They tend to look at what is not working instead of what is. In addition. they usually tend to be non-committal and agreeable. 8 . they find it difficult to offer praise or see the good in a situation. they can come off as arrogant and often opinionated. While they are often correct in their complaint. they can sometimes unintentionally be insulting. Resistant to change. These folks usually do not offer opinions or let you know how they feel about a given subject.

The understanding of consumer behaviour helps in identifying the weak points and also reflects the positive aspect of any business. Of course the final player in the channel is important to a consumer but the business of all the intermediaries gets affected. Depending on their decision and their usage. from the manufacturer to the consumer. The consumer behaviour also reflects the trends in the national growth and economy. 9 .Factors Affecting The Indian Consumer Buying Pattern 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. 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.e. 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. an organization decides which products to manufacture and to continue. It is the behaviour of the consumer which impacts their decision to purchase or not purchase the product.

UNDERSTANDING CONSUMER BEHAVIOUR Understanding consumer behaviour Consumer behaviour involves the psychological processes that consumers go through in recognizing needs.g.Factors Affecting The Indian Consumer Buying Pattern CHAPTER 2.. making purchase decisions (e. 10 . finding ways to solve these needs.

This. however. Americans are more likely to have corn flakes or 11 . by engaging in comparison shopping or actually purchasing a product). 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. we take cultural influences for granted.Factors Affecting The Indian Consumer Buying Pattern whether or not to purchase a product and. The social environment can include both the mainstream culture (e. for example.. which brand and where). and may buy the same brands. interpret information. consumers seek to imitate others whom they admire. We are more likely to buy a soft drink when we are thirsty. Physical factors also influence our behaviour. Social factors also influence what the consumers buy—often.g. is a common practice in much of the World.g. and implement these plans (e. An American will usually not bargain with a store owner. 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. make plans. if so. but they are significant.. Often.

The first one is problem recognition—you realize that something is not as it should be. ride a taxi.Factors Affecting The Indian Consumer Buying Pattern ham and eggs for breakfast than to have rice. we have the purchase stage.g. a home. and the next time you are hungry. for example. for example.g. people may go back and forth between the stages. leading to a feeling of power. The third step involves evaluation of alternatives. A skateboard is inexpensive. you may consider another hamburger. a person may resume alternative identification during while evaluating already known alternatives. leading to a feeling of performance. To achieve this goal. we can use the Means-End chain.. but may be ill-suited for long distances and for rainy days. you return a product to the store because you did not find it satisfactory). a consumer may see that a car has a large engine. Consumer Choice and Decision Making: Problem Recognition: One model of consumer decision making involves several steps. sneaker manufacturers are eager to have their products worn by admired athletes.. a car) or are highly significant in the consumer’s life in some other way (e. Finally. which ultimately improves the consumer’s self-esteem. Perhaps. and sometimes a post-purchase stage (e. which means that the intruder will not be able to harm the consumer’s family. A handgun may aim bullets with precision. Consumer involvement will tend to vary dramatically depending on the type of product.. Thus. It is important to consider the consumer’s motivation for buying products. leading to fast acceleration. which enables the user to kill an intruder. wherein we consider a logical progression of consequences of product use that eventually lead to desired end benefit. your car is getting more difficult to start and is not accelerating well. consumer behaviour is influenced by learning—you try a hamburger and learn that it satisfies your hunger and tastes good. In general.g. take your car in for repair. consumer involvement will be higher for products that are very expensive (e. a word processing program or acne medication). or ride a skateboard to work. In advertising. Thus. buy a used car. ride the bus. The second step is information search—what are some alternative ways of solving the problem? You might buy a new car. which is preferred in many Asian countries) and a subculture (e. it is important to 12 . In reality. For example.. rap music often appeals to a segment within the population that seeks to distinguish itself from the mainstream population). which achieves the desired end-state of security. Finally.g.

firms that make products that are selected predominantly through external search must invest in having information available to the consumer in need—e. read reviews in Consumer Reports.g. For high involvement products. 13 . consumers are more likely to use an external search. consult several web sites. the consumer may ask friends’ opinions. For certain low involvement products. Before buying a car. Thus. or news coverage. and visit several dealerships. Internal search involves the consumer identifying alternatives from his or her memory. For example.Factors Affecting The Indian Consumer Buying Pattern portray the desired end-states. thus. few people will search the Yellow Pages for fast food restaurants. through brochures. Information search and decision making: Consumers engage in both internal and external information search.. for example. the consumer must be able to retrieve one’s restaurant from memory before it will be considered. Focusing on the large motor will do less good than portraying a successful person driving the car. it is very important that marketing programs achieve “top of mind” awareness. web sites.

the consumer may then select it over a car with better acceleration that costs more and uses more gas. consumer characteristics (how interested is a consumer. If the price is sufficiently inexpensive and gas efficient.Factors Affecting The Indian Consumer Buying Pattern A compensatory decision involves the consumer “trading off” good and bad attributes of a product. and situational characteristics. The amount of effort a consumer puts into searching depends on a number of factors such as the market (how many competitors are there. in analyzing product characteristics and making the best possible deal?). other good features such as taste and low calories cannot overcome this one “non-negotiable” attribute. generally. a decision will involve a non-compensatory strategy. and how great are differences between brands expected to be?). a parent may reject all soft drinks that contain artificial sweeteners. 14 . a car may have a low price and good gas mileage but slow acceleration. Occasionally. For example. For example. product characteristics (how important is this product? How complex is the product? How obvious are indications of quality?). Here.

15 . and When to buy.Factors Affecting The Indian Consumer Buying Pattern Family Decision Making: Individual members of families often serve different roles in decisions that ultimately draw on shared family resources. It should be noted that family decisions are often subject to a great deal of conflict. The purchaser may have to make a substitution if the desired brand is not in stock. Which product to buy (pick-up or passenger car?). 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. The decision maker(s) have the power to determine issues such as: • • • • • Whether to buy. Influencers do not ultimately have the power decide between alternatives. The reality is that few families are wealthy enough to avoid a strong tension between demands on the family’s resources. Note. The purchaser may disregard instructions (by error or deliberately). Some individuals are information gatherers/holders. These individuals often have a great deal of power because they may selectively pass on information that favours their chosen alternatives. Conflicting pressures are especially likely in families with children and/or when only one spouse works outside the home. who seek out information about products of relevance. and that there is frequently no "objective" way to arbitrate differences. 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. From the point of view of the marketer. however. Note that many decisions inherently come down to values. Which brand to buy. but they may make their wishes known by asking for specific products or causing embarrassing situations if their demands are not met. that the role of the decision maker is separate from that of the purchaser. Where to buy it. but not which brand.

where one tries to make one’s side look good (e. Note that even when this is done with a sincere intent. Also note that individuals may simply try to "wear down" the other party by endless talking in the guise of reasoning. a child may promise to walk it every day if he or she can have a hippopotamus." the mother of the children.g.Factors Affecting The Indian Consumer Buying Pattern One spouse may believe that it is important to save for the children’s future.g. its potential is limited by legitimate differences in values illustrated above. The situation becomes even more complex when more parties—such as children or other relatives—are involved. Who is right? There is no clear answer here.. Alternatively. or argue that all "decent families make a contribution to the church"). For example. One is impression management. One is bargaining— one member will give up something in return for someone else. Emotion involves making an emotional display to get one’s way (e. 16 . argue that a new TV will help the children see educational TV when it is really mostly wanted to see sports programming. the wife says that her husband can take an expensive course in gourmet cooking if she can buy a new pickup truck. Authority involves asserting one’s "right" to make a decision (as the "man of the house. Another strategy is reasoning—trying to get the other person(s) to accept one’s view through logical argumentation. the other may value spending now (on private schools and computer equipment) to help prepare the children for the future. or the one who makes the most money). Some family members may resort to various strategies to get their way. a man cries if his wife will not let him buy a new rap album). Various manipulative strategies may also be used..

Well being 10. Desire for money 3. dresses for your sister.Factors Affecting The Indian Consumer Buying Pattern The important motives. Possession : Spending much on dresses. Pride : Purchasing when the price falls down. : Imitation motives: Old people dress like young ones. you may purchase a burglar alarm(out of fear) 2. 9. pressure cookers. Sex and romance 7. coins etc. influencing the ultimate buying behaviour: 1. Fear : To overcome theft. Love and affection : When you purchase toys. : Getting costly items to be admired by others : Possessing luxurious items for high position in the society 5. mixy etc. vitamins etc. Fashion 8. ornaments etc. it is out of affection 6. Comfort and convenience : Purchasing equipments like refrigerator. : This refers to collection of stamps. 17 . Health and Physical : Purchasing health foods. Vanity 4.

Size of family income : The size of family and size of family income affect the spending and saving patterns.. 18 . ex bonds. cash and assets readily convertible into cash. Consumer Credit : Buy now and pay later” plays its role effectively in the rapid growth of markets for car. Generally large family spend more and short family spend less. Liquidity of Fund : The present buying plans are influenced greatly by liquidity of assets i. then they dispose of their income. 6. If the buyers give importance to present needs. 2. scooter. Income expectations : The expected income to receive in future has a direct relation with the buying behaviour. Disposal personal income : The economists made attempts to establish a relationship between income and spending. bank balances etc. in comparison.e. 4. And buyers spend less if they give importance to future needs. Disposal personal income represents potential purchasing power that a buyer has. The expectation of higher or lower income has a direct effect on spending plans. radio.Factors Affecting The Indian Consumer Buying Pattern Economic factors affect buyer’s behaviour: 1. furniture and the like. The change in income has a direct relation on buying habits.. 5. 3. Propensity to consume and to save : This goes to the habit of spending or saving with the disposal income of buyers.

higher the sales. and feelings. higher the sales of the product. 19 . sub-culture. and market mix factors. reference groups. ethnicity.Factors Affecting The Indian Consumer Buying Pattern Economic model suggests behavioural hypothesis : • • • • Lower the price of the product. beliefs. knowledge. royalty. Higher the promotional expenses. Locality. External influences of the buyer: • • • • • • • • • • culture. Lower the price of substitute products. demographics. motivation. attitudes. family. Internal influences of buyers: • • • • • • psychographics (lifestyle). higher the sales. lower the sales of this product Higher the real income. social class. personality. lifestyle.

the need calls for a niche marketing. • Whether the marketer should stick to the same product. let us understand how the behaviour of consumer affects a marketer or what are the benefits of understanding consumer behaviour. 20 . If consumers prefer a particular brand and make the purchase and the consumption of the same their regular habit. any product launch or any advertising campaign. for example. • The consumer behaviour also is related to cultural attributes. If a product suits a particular cross-section of culture. the study of consumer behaviour helps a marketer to identify or define the basic P’s of marketing and the marketing mix. or probably launch a new product. What kind of promotional offers or marketing campaigns need to be undertaken. it is time that the marketer should think of improving upon a brand or come out with a different product. Above all. extend the product portfolio. • 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 marketer can think of extending his products to international arena and across different cultures. • It also helps an organization to reinstate the corporate policies or take action to reframe the corporate mission statement. • It helps the marketer to take vital decisions with respect to designing of future marketing strategies. either good or bad. • Also helps in scheduling of events.Factors Affecting The Indian Consumer Buying Pattern Understanding Consumer Behaviour in Markets: Now. • The behaviour of consumers gives the nation a different face. Many times.

Factors Affecting The Indian Consumer Buying Pattern CHAPTER 3. PROFILE OF INDIAN CONSUMERS 21 .

India has entered a stage of positive economic development which requires liberalization of the retail market to gain a significant enhancement. The market is growing at a steady rate of 11-12 percent and accounts for around 10 percent of the country's GDP. This can be contemplated as a result of the changing attitude of Indian consumers and their overwhelming acceptance to modern retail formats. Around 70 per cent of the total households in India reside in the rural areas. For example. The inherent attractiveness of this segment lures retail giants and investments are likely to sky rocket with an estimate of Rs 2025 billion in the next 2-3 years. The total number of rural household is expected to rise from 135 million in 200102 to 153 million in 2009-10. in China there was a drastic structural development after FDI was permitted in retailing. Entertainment. the number of `lower middle income' group in rural areas is almost double as compared to the urban areas. India is on the radar screen in the retail world and global retailers and at their wings seeking entry into the Indian retail market. vacations and lifestyle related activities. This presents the largest potential market in the world. entertainment. The Indian consumer is now spending more on consumer durables. The Indian rural market has been growing at 3-4% per annum.Factors Affecting The Indian Consumer Buying Pattern Profile of Indian consumers The recent years have witnessed rapid transformation and vigorous profits in Indian retail stores across various categories. 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. Asian markets witness a shift in trend from traditional retailing to organized retailing driven by the liberalizations on Foreign Direct Investments. According to the study conducted by NCEAR. clothing and restaurant dining are categories that have been witnessing a maximum rise in consumer spending since 2002. adding more than 1 million new consumers every year and now accounts for close to 50% of the volume consumption of 22 . having a large consuming class with 41% of the Indian middle class and 58% of the total disposable income. The Indian consumption patterns are slowly converging with global norms. and over Rs 200 billion by end of 2014. apparel.

As a result. 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. • • • 600 mn+ effective buyers by 2010 550 mn+ under the age of 20 by 2015 70 mn+ earn Rs. far higher than the level for white goods. Indian consumer buying behaviour to a large extent has a western influence. A nation of savers. has now altered into a nation of spenders.Factors Affecting The Indian Consumer Buying Pattern fast-moving consumer goods (FMCG) in India. Indian consumer is cautious about debts. This reflects the growing demand for entertainment in India.00. Foreign brands have gained wide consumer acceptance in India and they are much more open for experimentation. Penetration data bear this out: televisions in use in 2006 were estimated at 95 per 1.000 populations. Traditionally. it is becoming an important market place for fast moving consumer goods as well as consumer durables. 23 . Purchasing priorities in India also influence the level of sales of individual products. eateries. designer wear.000+ ($18. There were nearly 70 mn households (33% of the total) with an income of more than US$3. hi-tech products are a few instances which reflect these changes. India. Beauty parlours in cities. this attitude has changed radically and in recent year's credit is no more a feared entity.000) a year – number to rise to 140 mn by 2011 Consumer Behaviour: Availability of lifestyle spending options is increasing for Indian consumers and that inducing higher spends on "status acquisition". such as air conditioners and refrigerators. watches.25 billion by 2010 from the present US$ 11.000 in 2006. These "well-off" households already own relatively expensive consumer durables.16 billion. In recent past. The market size of the fast moving consumer goods sector is projected to be more than double to US$ 23. 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. 8.

Factors Affecting The Indian Consumer Buying Pattern 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 Entertainment Consumer Services Durables Misc. Consumer goods Clothing and Footwear Food Rural 33 44 50 57 61 64 Urban 67 56 50 43 39 36

Consumption Trends Food Essentials Essential Services (water, power, rent, and fuels) Clothing Footwear Medicare Transport & Communication Recreation, Education, and Culture Home Goods 45.68% 10.1% 4.9% 0.63% 4.25% 14.51% Less than 4% 3.25%
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Factors Affecting The Indian Consumer Buying Pattern

A Note on Consumer Spending Patterns in India:

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Factors Affecting The Indian Consumer Buying Pattern

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 urbanization. levels, increased literacy, growing brand consciousness and rapid

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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The desire to look and feel good is also guiding factor for customers while making their purchase decisions. people in 20-24 years age group spend more on electronic / home appliances and movies. quality and trendiness. Age is also a major factor that affects the spending decisions of an individual. For instance. Growing disposable income is also propelling demand for consumer durables and eating in restaurants among Indians. Consumer behavior in India: 27 . and the change in attitudes towards shopping. relative increase in the younger population.Factors Affecting The Indian Consumer Buying Pattern Shopping habits of Indians are changing due to their growing disposable income. The emphasis has changed from price consideration to design. while people in the 45-48 years age group spend more on vacations.

19.8 million high income group (>US$ 2465).6 million villages. and income. 80.2 million upper middle income group (US$ 1790 to US$ 2465 ) and 5. even for costly products. Characteristics Of The Indian Consumer Behaviour 28 . status.7 million households comes under low income group ( <US$ 581 ). over one billion people and 120 dialects/languages. This rural population is spread all over India. Among the total 164. India is a lucrative market even though the per capita income in India is low and it remains a huge market. 8. India is a big country with 28 states.4 million lower middle income households ( US$ 581 to US$ 1162).7 million middle income group (US$ 1162 to US$ 1190 ). Three-fourths of India’s population lives in rural areas. An important and recent development in India’s consumerism is the emergence of the rural market for several basic consumer goods. in close to 0. based on class. From the market perspective.8 million households in India. and contribute one-third of the national income. followed by 50. people of India comprise different segments of consumers.Factors Affecting The Indian Consumer Buying Pattern 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.

For example. Apart from psychology and economics. They are the darlings of exclusive establishments. Indian consumers are also associated with values of nurturing. and spend a good amount on luxury goods. the role of history and tradition in shaping the Indian consumer behaviour is quite unique. only in India. one sees traditional products along side modern products. powder existing with shampoos and toothpaste. Indian consumers have a high degree of family orientation. extends to the extended family and friends as well. hair oils and tooth - Different Segments Of Indian Consumers 1 The Socialites Socialites belong to the upper class. care and affection. exclusive products. luxury brands have to design a unique pricing strategy in order to get a foothold in the Indian market.Factors Affecting The Indian Consumer Buying Pattern The Indian consumers are noted for the high degree of value orientation. They prefer to shop in specialty stores. 2 The Conservatives 29 . They are always looking for something different. Brands with identities that support family values tend to be popular and accepted easily in the Indian market. They go for high value. go to clubs on weekends. Product which communicate feelings and emotions gel with the Indian consumers. Such orientation to value has labelled Indians as one of the most discerning consumers in the world. Even. Socialites are also very brand conscious and would go only for the best known in the market. These values are far more dominant that values of ambition and achievement. Perhaps. This orientation in fact.

They are traditional in their outlook. The working woman today has grown out of her long-standing image of being the homemaker. Working women have their own mind in decision to purchase the products that appeal to them. but often have to settle for the more affordable one. This segment has opened the floodgates for the Indian retailers. spend more time with family than in partying and focus more on savings than spending. - India’s Rich 30 . they seek a lot of information before making any purchase. Slow in decision making. which has seen a tremendous growth in the late nineties. cautious in their approach towards purchases. if not better. 3 The Working Women The working woman segment is the one. she is rubbing shoulders with men. They prefer high value consumer products. Today. proving herself to be equally good.Factors Affecting The Indian Consumer Buying Pattern The Conservatives belong to the middle class. The conservative segment is the reflection of the true Indian culture. They look for durability and functionality but at the same time are also image conscious. These habits in turn affect their purchasing habits where they are trying to go for the middle and upper middle level priced products.

They spend more on leisure and entertainment-activities than on future looking investments. There are less DINK families here than in the rich category. backgrounds are distinctly middle class. The number of households in this category is 98. Total number of households is 320. Some single earning households are of first generation entrepreneurs. 4 The Sheer Rich 31 .per annum. These people are upwardly mobile.961. Total household having such incomes are 1.058. They buy many durables and are status conscious. therefore. Some of them in this category are Double Income No Kids (DINK) households. Across the category. They aspire.per annum.000/. 3 The Ultra Rich The Ultra Rich have income greater than US$44. belong to this category.000/. Some rich farmers.per annum. There are some DINK households of middle-level executives.289.900. who have been rich for a long time. 2 The Super Rich The Super Rich have income greater than US$22. The Super Rich are mainly professionals and devoted to consumerism. There is no typical profile of the ultra-rich. to attain the super-rich status.000/.Factors Affecting The Indian Consumer Buying Pattern India’s rich can be categorized into five major categories as follows: 1 The Rich The rich have income greater than US$11.

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. They are just equivalent to the rich in the developed countries.16 billion.25 billion by 2010 from the present US$ 11. Such households are 20. As a result.000/. They are first-generation entrepreneurs who have some of them are techies. They crave for exclusivity in what they buy.515 such households in India. A variety of people belong to this category. The Indian rural market has been growing at 3-4% per annum. especially in the Indian cities. Most premium brands are relevant to them.000/. There are joint families as well as nuclear families in this category. it is becoming an important market place for fast moving consumer goods as well as consumer durables. - Increasing Awareness Of Indian Consumers 32 . There are hardly 6. They do not have a homogenous profile. 5 The Obscenely Rich The Obscenely Rich is made up of households having income exceeding US$222.per annum.863. They aspire to social status and power. They own multiple cars and houses. They consume services greatly. The market size of the fast moving consumer goods sector is projected to more than double to US$ 23. the spill over effect of the growing urban middle class is also felt in the rural areas.Factors Affecting The Indian Consumer Buying Pattern The Sheer Rich is made up by households having income exceeding US$110. - Rural Consumer About three quarters of the Indian population are in the rural areas and with the growing middle class.

exposure to the west. products and the market and are beginning to demand benefits beyond just availability of a range of products that came from ‘trusted’ manufacturers. Today more and more consumers are selective on the quality of the products/services. The working urbanites are depending more on fast and ready-to-serve food. The consumer also seeks to purchase from a place where his/her feedback is more valued. satellite television.Factors Affecting The Indian Consumer Buying Pattern Over the years. and are knowledgeable about technology. as a result of the increasing literacy in the country. rather than frequent visits to the neighbourhood market/store/vendor. 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. 33 . there is a significant increase of consumer awareness among the Indians. The Indian consumers are price sensitive and prefer to buy value for money products. Bulk purchases from hyper stores seems to be the trend these days with purchasing becoming more of a once-a-week affair. they take less pain in traditional method of cooking and cleaning. Indian consumers are now more aware and discerning. 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. foreign magazines and newspapers.

• • • • • • • • • • • • 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 34 . Foreign brands have gained wide consumer acceptance in India. There is now an exponential growth of western trend reaching the Indian consumer by way of the media and Indians working abroad. 2 Trendy Lifestyles The current urban middle and upper class Indian consumer buying behaviour to a large extent has western influence.Factors Affecting The Indian Consumer Buying Pattern The popular growing shopping trend among urbanities is purchasing from super markets to hyper stores. they include items such as. There is an increase in positive attitude towards western trends. The Indian consumer has become much more openminded and experimental in his/her perspective.

74 in 2002-03. 35 . Consumer Spending Behaviour The Indian consumer spending has increased from US$ 133. Indian consumers have also developed lifestyles which have emerged from changing attitudes and mind sets.Factors Affecting The Indian Consumer Buying Pattern Foreign brands vie increasingly with domestic brands for the growing market in India. eateries. they now have a choice of foreign products vis-à-vis the local products. hi-tech products are a few instances which reflect these changes. Chinese.60 in 1992-93 to US$ 350. India’s economic liberalization policies were initiated in 1991. Malaysian. Since.13 per cent at current prices. 3 Buyers’ Market In The Making The sellers’ market is slowly moving towards becoming the buyers’ market. Foreign made furniture is well accepted by the Indian consumers. exposure to western influences and a need for self-gratification. Indian consumers have always preferred foreign goods and with the liberalization. a compound annual growth of 10. designer wear. 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. watches. Italian furniture are growing in popularity in India. Beauty parlours in cities.

conveyance and rent contributed to the gap significantly.65 on clothing and footwear and US$9. vegetables and edible oil and US$3.71 per cent. milk and milk products.96 on other food items. vegetables. US$ 2. beverages etc.11 was spent per person per month on fuel and light. Of food expenditure. footwear and US$3. The item-groups viz. Similarly spending on transport and communication has grown at 13.8 per cent in 2002-03.37 went towards cereals and cereal substitutes while US$ 3.34 was split up into US$ 6. edible oil and US$ 2.67 was spent on milk.00 for clothing. medical and healthcare spending has increased from 3. 36 .16 on others. Food expenditure included US$ 2. For the urban sector.53 was split up into US$ 10. The share being spent on the basis (food and beverages) has fallen from 54. milk products. a compound growth rate of 19.25 for cereals and cereal substitutes. and US$ 5. and US$ 1. education. on an average.37 for milk. and US$ 2. For rural India. there have been sharp ups and downs.11 for fuel and light. for food. US$ 2. While the Compound Annual Growth Rate (CAGR) in total consumer spending has been around 12 per cent a year over the past decade. milk products. Consumer expenditure has been in tandem with the annual GDP growth. Other items have increased in importance. The gap between rural and urban averages of MPCE was of the order of US$ 11. except on cereals and cereal substitutes.78.16.07 per cent in 1992-93 to 44.77 on other non-food items. for example.2 per cent. Non-food expenditure included US$ 1. miscellaneous consumer goods & services. average Monthly Per Capita Consumer Expenditure (MPCE) of US$ 23.5 per cent of total expenditure over the same period.45 on other non-food expenditure.56 for non-food. Urban expenditure levels per capita exceeded rural levels for all the product groups.Factors Affecting The Indian Consumer Buying Pattern The way Indian consumers are spending their money on various items has changed in recent years. fuel and light.00 for food and US$ 13. The average monthly per capita expenditures on cereals and cereal substitutes for rural and urban areas are very close to each other. and another US$1. per capita 30 days' consumer expenditure of US$ 12.53 for non-food.5 per cent to 8.

26% of the population lives in the cities or in urban India. where it was about US$ 5.up of the country. middle class and lower class are income related classifications of the population and each of this class has its own consumption pattern. - Conclusion Top class. These are . India has six of the largest cities in the world. In addition to these cities. For the Indian market.465) spends more amount of their income on luxury goods and trendy products than fact moving consumer products.55. The remaining 74% lives in the villages or in rural India.Ahmedabad. large part of the marketing that was done in this country was done. targeting the urban population of the country. Lucknow and Jaipur. there are around 4000 towns that have concentrations of the population. Urban and rural life of India: Up until recently. Delhi. The population of the country is spread over the villages but is very concentrated in the cities. there are six other cities that are growing at a very rapid rate and have a huge concentration of the population. The middle income group (US$1. In India. Nagpur.Factors Affecting The Indian Consumer Buying Pattern Non-food expenditure per person in the urban sector was more than double of that for the rural sector. Now the marketing potential of the rural part of the country is rapidly growing.Besides these cities. Bangalore and Hyderabad.190) spends more on consumer expendables than the rich. the higher income group (>US$2.162 – US$1. These are . 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. Pune. Let us get an understanding of the urban and rural break. Kanpur.Kolkata. Mumbai. 37 . Madras.

consumer products like biscuits. quartz watches etc. hair cream. He has to manage his finance in a rigid budget. He will not do something that is likely to upset his emotional ties. consider the following characteristics: Security Seeking: The middle class generally consists of security seeking people.\ Credit purchases: The middle class Indian normally lives in a fixed income. wrist watches. but he also wants emotional security. Even in the lower middle class. He wants social security. The middle class man does not only want economic security. Indian middle class “male” consumer The middle class of India is for whom most of the advertising is targeted. He wife selects reasonably good furnishings and uses modern cooking gadgets. are purchased. 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. Items that were luxury items a few years ago are seen in every house in the cities. To get a much better understanding of the middle class “male” head of the family. Being part of society he enjoys a degree of protection. This has given many more people purchasing power. talcum powder. casual foot ware.Factors Affecting The Indian Consumer Buying Pattern In the cities. Even though they are receptive to new ideas. leather foot ware. Anything that is likely to upset this balance is going to be discarded by him. there are a lot of jobs available now-a-days due to call centres and BPO's. He aspires for the well-to-do lifestyle he sees on TV. He usually has a two-wheeler of this own. He wants to be part of society. they do not very readily dash into new ventures. If he feels that a particular idea will help him improve his economic position or social relationships he will accept it. He is likely to welcome new innovations is they satisfy his sense of security. 38 . hair oil. He does not want to be a rebel or an outcast. So his purchases are generally materialistic in nature. toilet soaps.

. His desire for bringing home more and more material comforts is realized by the availability of credit facilities.long dreams for him. he looks for more than average comforts. largely because they are "status conscious" or "prestige conscious". These possessions act as status symbols. the purchasing decision is consented by her.Factors Affecting The Indian Consumer Buying Pattern Now days practically everything is made available to him on installment payments.. His son's education or his daughter’s marriage are life. Still. The concept of "small family more comforts" has gone well with him. However. Indians will be the biggest users of credit cards second only to America. The State Bank Of India campaign of a few years ago. The availability of credit facility acts as a temptation to buy. "Be a big shoppers! Make a big buy! Take home a car. Tooth-paste. The system of "credit cards" is also growing in the country at a very fast rate. 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. He assigns a lot of importance to the well being of his family. He without much resistance will adjust to the changing fashions of his college going children even though these changes may be costly for him." appealed to many Indians. 39 ... magazines or tape recorders. The middle class man’s finances may be tight and he may even struggle to meet ends. Prestige Conscious: The middle class Indians have many of their possessions. He spends a good portion of his income on the education of his children.Home loving: The middle class man is a home loving man. His children get priority in his budget. the middle class man is greatly influenced by his wife especially on his buying decisions.. The "family tie" binds him so strongly that anything that appeals to this "human bond" will find his ready acceptance. It is expected that in the near future. By appealing to this prestige a marketer may motivate the middle class man. hair oil. Strong Family Ties. Anything that appeals to these dreams will catch his immediate attention. and plans for more material possessions. a VCR or a sewing machine today! You can do it now with the big buy scheme.

she is not averse to new ideas and things. She is also the "gatekeeper" for many products like new cooking medium. However. This makes the middle class house wife a discriminating and cautious buyer. She also decides purchases meant for children. She will try to purchase products that will last her for a long time. 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. She is willing to try new things but she will not adopt any product instantly. the women now-adays also have an increased purchasing power. To get a much better understanding of the Indian house wife. have seen a major boost. Besides being quality conscious. 40 . Before buying a particular product she will first check the price with other sellers and will then go in for the lowest price.Factors Affecting The Indian Consumer Buying Pattern The Indian middle class “house wife” as a consumer: The percentage of working women in India is growing at a steady pace. consider the following characteristics of her buying decisions: Cautious. Also. Because of this growth of working women. have seen a growth. listen for guidance and then finally she may go in for purchasing the product. industries that are directly related to women like cosmetics etc. This is mainly because of the development in communication systems and growth of educational opportunities given to women. toiletries. she also is cost conscious. food and beverages etc. The middle class house wife is generally educated and is the purchasing agent for some of the products the family buys. that cannot enter the house without her clearance. Quality as well as cost cautious: The middle class house wife is a quality as well as cost cautious buyer. fast food etc. She is less likely to purchase “use and throw” type of products. She will try to get "millage" out of every rupee she spends. Due to this. check with people who use the product. She will make a sample purchase.

41 .Factors Affecting The Indian Consumer Buying Pattern Because of being quality and cost conscious. She is generally fashion loving however she is not fashion crazy.selecting her brand is greatly influenced by her sense of grooming. Even after she purchases a product she seeks reassurance about making the right purchase decision. A strong sense of traditionalism runs thought her personality. extra features like re-usable containers will influence her buying decision. Products or ideas that uproot her basic personality or values will not find acceptance with her. vanishing cream or cleansing milk. Instead of advertising she relies on word-of-mouth communication. 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 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. She will be interested in new innovations that reduce her work time even more. rebates etc. will definitely attract her attention. Bonus prizes. perfumes or hair oil . She is interested in knowing what her neighbour or colleges are using. Soap or shampoo. coupons. Sense of grooming: Sense of beauty is a strong motive force behind several of her purchases.

500 crore a year is the amount of money given to children as pocket money. It is not easy to dupe them but it is quite easy to motivate them. 42 . They are generally more receptive to change. 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. The often are after a "New Look" and they seek novelties.Factors Affecting The Indian Consumer Buying Pattern Understanding the “middle class” urban teenager as consumer: They are more adventurous than their elders and they care less for tradition and religion. They believe more in spending money in the pursuit of pleasure than saving for the future. They are quick to adopt new fashions that emerge. Some estimates show that around Rs. Teenagers are becoming quite a distinct market segment.

CONSUMERS SPENDING HABITS 43 .Factors Affecting The Indian Consumer Buying Pattern CHAPTER 4.

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. 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. Embrace of modernity and globalization of India does not come without its perils. It merely replaces one set of problems with new ones. All of these are a clear indicator of change culture and values in modern India. More stuff and toys only adds to new and complicated problems in the society. 44 . Consumeristic ideology and ramphant materialism does not satisfy deepest human aspirations. Another major change in consumer behaviour was found in the way India connects. increased by a whopping 515% since 19992000 in rural areas and by 230% in urban areas. Telephone expenditure. A new report finds that people are spending a great deal on clothes and communications. 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. per person per month.Factors Affecting The Indian Consumer Buying Pattern Consumers spending habits Changing Spending Habits of Indians: Spending habits have undergone dramatic changes in recent years in India.

and keep themselves 45 . 75% of students maintain jobs while attending school. the stereotypical college experience of eating Ramen Noodles. using credit cards for basic living expenses can create financial problems. Use credit cards sparingly. Much of this can be explained by the changing demographics of today’s students. capable and influential consumers. gadgets. Credit cards are monetary sources for some students. 20% have secured an on-campus job and 42% are spending school breaks working. The typical college student is in their mid-twenties. Most students – 70% of males and 75% of females – have between 1-3 credit cards. and technology. and many fluctuate between full-time and part-time study over a period of 5 to 7 years. Less than half (43%) of college students are 18-21. A large expense for many college students is electronics. Most money comes from work. earning $645 per month on average.Factors Affecting The Indian Consumer Buying Pattern A Look at the Spending Habits of College Students: While some students struggle to make ends meet. Utilizing your meal plan and cooking your own meals can save a great deal of money. Overall. Students spend more than $11 billion a year on snacks and beverages.000 per year on average. You can spend hundreds of dollars on coffee each semester. College students spend most of their discretionary income on food. Even students who live in the dorms and have meal plans spend a lot of money eating out. either lives at home or on campus. Students no longer expect to complete college in 4 consecutive years. A student spends more than $13. The typical college student gets an average of $757 a month from jobs. That adds up to a substantial $211 per month of discretionary spending. and holding considerable sway over the purchasing decisions of their peers. contributing an average of $154 to a student’s monthly income. 19% of which is discretionary. Students rely on technology to access information. While establishing credit in college can be to your advantage. and drinking cheap beer is quickly disappearing. and has a job. wearing clothes from Goodwill. communicate with friends. data reveals college students to be savvy. Parents contribute too. balancing the rising cost of tuition with a hardy work ethic. the more money he or she generally has. spending a fair portion of their considerable discretionary income on high-end technology. parents or other sources. The older the student.

Entertainment is another large expense for college students. It is estimated that the average student spends at least $50 per month on beer alone. students spend more than $5 billion a year on clothes and shoes. 62% of college students own a stereo. Personal care is another big expense for college students. a cell phone (77%). word-of-mouth marketing. Hooking someone while still in college is one way to do this. American college students spend $5. and $341 million on games each year. They spend $474 million on music sales. 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. Marketers who can successfully reach these young adults with a quality product. it is a costly habit. At home and in the dorms. you’re right. a printer (77%). and a television (84%). By the time they reach college.5 billion on alcohol. positive message. which 85 percent of students have. full-time students represent over sixty billion dollars in buying power. A large portion of income goes to cell phone service.Factors Affecting The Indian Consumer Buying Pattern entertained. Each year. While smoking is not a form of entertainment to most. $658 million on theatre tickets. They spend nearly $3 billion annually on movies. This amount usually increases once the student graduates and becomes employed. and two-thirds (65%) of those students have a broadband connection. These expenses are seen as necessities. The majority of students with cell phone service pay for extras such as text messaging (62%) and internet access through their mobile phone (41%). Students also spend a lot of money clothing themselves. 46 . and video games. DVDs. they’re watching movies. may enjoy decades of loyal purchasing and millions of dollars worth of free. Nationally. with $4 billion spent each year for personal care products alone. and clear value. music. A pack-a-day habit can cost you several hundred dollars a semester. The majority of college students (90%) own a computer.

CONSUMER BEHAVIOUR IN RECESSION 47 .Factors Affecting The Indian Consumer Buying Pattern CHAPTER 5.

DVD sales are up 6. Early winners are also feel-good 48 .5% year on year for the third quarter of 2008. The report finds that while consumers are completely aware of the economic situation and are less prone to making rash decisions or impulse purchases.” a report by Arena BLM. thanks to recent interest rate falls. the Havas-owned media planning and buying group. The new Westfield Shopping Centre in West London attracted half a million shoppers in its opening weekend.Factors Affecting The Indian Consumer Buying Pattern Consumer behaviour in recession.8%. Like for like sales for Domino’s Pizza increased by 17. Already it is clear that certain brands are benefitting from the change in consumer habits. reassurance and escapism. Consumers believe that media is increasingly important in a recession. they believe the recession will be short lived and economic prosperity will return. Despite the credit crunch. even if high street lenders are slow to pass on the savings. 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. consumers with reasonable security of employment who don’t need to move house will have more disposable income than they had several months ago. delivering cheap entertainment. 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. Brands that offer escape and indulgence in conjunction with value will be winners in a recession.

trust and reliability. and Quantum of Solace selling out at the box office.. 2.. Consumers will support the brands they think are helping them.. Car and property sales have collapsed. 49 . 10 Key Pointers. They are less likely to debt fund significant purchases. Consumers will be massively price sensitive. Consumers still want low-cost indulgence and are prepared to make sacrifices to be able to afford high-ticket non-essential products and services. The main issues will be confidence and reassurance. 3. Brands that help them achieve great value and enjoyment are most likely to succeed.. Broadband connections are still growing despite the downturn and two thirds of homes now have high-speed web access. They will price compare and use digital channels to facilitate this. High School Musical 3. Consumers are searching harder for value and are utilising internet tools such as price comparison websites and search engines. Consumers are more likely in a recession to switch brands.Factors Affecting The Indian Consumer Buying Pattern movies such as Mamma Mia. The report found that consumers are avoiding high ticket or debt funded purchases that they consider non-essential. 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. ditching lifetime favourites in pursuit of value. but will require greater reassurance. Consumers will interrogate brands and their communication harder. Given every retailer is offering some form of promotion. 1. consumers know they can access value. Facile or unbelievable claims will be rejected. But they also want entertainment and escapism. 4. Consumers will still make high-value purchases.

Consumers are getting savvy in the way they optimize their spending. 8. During a recession. Media rates will fall more steeply than the downturn in the economy. 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. the role of your brand is to build trust and justify the value for money. There is significant evidence that advertising through a recession drives sales. Flexibility will massively improve value creation. 50 . challenge your agency to find to come up with an approach that will allow it. and what their value for money is. Recessions can bring upon radical and disruptive changes in consumer behaviour. if you believe you need to be on TV and your budget is drastically reduced. Brief agencies in a different way.Factors Affecting The Indian Consumer Buying Pattern 5. both in terms of negotiation and clients who are prepared to test and learn. The real reduction is rates will be greater than headline inflation figures. with the channel already defined. 7. preference and both long. The OTO Research report confirms that during this recession 80% of consumers are going to change their spending habits. in the current market it may well be possible. 89% of consumers are going to systematically check online what and where the best products are. We suggest sharing the business problem and getting the agency to challenge conventions. Creative production costs should drop and media owners will invest in production to help access new budgets. Briefs are frequently executional. long-term business cases that demonstrate support will generate substantial improvements. Advertisers who approach media owners with strong. 6.and short-term success. 9. 10.

CASE STUDY 51 .Factors Affecting The Indian Consumer Buying Pattern CHAPTER 6.

India also provides attractive profit margins due to the consolidated nature of the industry – a comparison between China and India. 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. while growth in 2002-03 was 11 per cent. whenever beer prices have gone down. 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. which grew by about 2. reveals that the Chinese beer market is marked by intense competition. for example. Indian growth rates compare favourably with the global beer industry.7 million hectoliters (hl) in 2002-03. In the past. In China there are about 400 brewers. The Beer industry in India in context of Consumer Buying Behaviour The Indian beer market was estimated to be 6. with several players being marginalized. it has been due to either the lowering of duties by the government or the deregulation of distribution (leading to lower 52 . of which the top 10 account for only 45 per cent of the market.6 per cent in 2001-02 Apart from providing strong growth. This has resulted in low profit margins for the Chinese beer players.Factors Affecting The Indian Consumer Buying Pattern 1. In contrast. Beer consumption has been growing rapidly at a CAGR (Compound Annual Growth Rate) of 7 per cent over the last 9 years.

Social habits are undergoing a transformation as mixed drinks are 53 . An equivalent 650 ml bottle is available for approximately Rs 8 in China. Changing age profile: As a consequence of the high birth rates prevalent until the 1990s.Factors Affecting The Indian Consumer Buying Pattern margins for the distribution channel partners). according to an industry observer. 'consuming' and 'climbers' classes to grow at a CAGR of 15 per cent. Which is why the per capita consumption in China is a high 16 litres per annum. However. as urban consumers become more exposed to western lifestyles. Changing lifestyles: A deep-seated traditional social aversion to alcohol consumption has been a traditional feature of the Indian society. through overseas travel and the media. 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. in Maharashtra there is a direct 100% excise duty on Beer. 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. This age group is the most appropriate target for beer marketers. their attitude towards alcohol is relaxing. These figures pale into insignificance if one compares them with those of Czech Republic that has the highest per capita consumption of 156. Per capita consumption in India is hovering around a measly 0. In neither scenario have the margins or revenues of beer manufacturers been affected. With this growth in income levels. at the growth rates witnessed in the last decade.5 litres per annum. a large proportion of the Indian population is in the age group of 20-34 years. due to the positive impact of demographic trends and expected changes. For instance. This population trend will give a further boost to the growth of beer consumption in India. The Indian beer market has been growing rapidly over the last 10 years. Various research studies have shown that a rise in the income levels has a direct positive effect on beer consumption. 10 per cent and 2 per cent respectively. The National Council for Applied Economic Research (NCAER) projects India's 'very rich'. Per capita consumption is directly related to the taxation.9 litres per annum. Indian beer consumption is expected to continue growing. at the very minimum.

The company introduced its strong beer. especially lagers. strong beer. as most states do not have a differential tax structure based on the alcohol content.. mainly due to media and consumer mobility.. have a significant market presence. UB (United Breweries Ltd. All these factors combined make the scenario very promising for beer industry and are 'in sync' with their strategy for India.Factors Affecting The Indian Consumer Buying Pattern becoming more popular. The beer-drinkers in the country are much younger than the average beer-drinker elsewhere in the world.) is the market leader in the Indian beer market with a 40% market share.India's celebrated malty draught lager since 1857. Chiefly – Kingfisher . The move came as a reactive move following increasing shift of consumers towards strong beer. However. there is no existing competition in the market. India has predominantly a warm/hot climate 2. The greatest evidence of this trend is the increase in beer consumption among women. More and more women are consuming beer – the penetration in metropolitan areas is almost twice as high as the penetration in other large cities – implying that the greater tolerance towards alcohol consumption in metropolitan areas facilitates the consumption of beer. a number of well-established brands. Firstly. Its flagship Kingfisher brand alone commands 25% market share. voted 'The World's Best Lager' in Stockholm and Chicago. Increasing exposure to beer and wine drinking. The company has however been focussing on strong beer. which has driven growth. this acceptance is only going to rise. Kingfisher Strong during the year 2000 in the selected market of Maharashtra and Karnataka. 3. This makes them more likely to carry the brand with them for a lifetime. a trend started by Shaw Wallace. affect the market for beer. As far as the Light beer segment goes. Reduction in beer prices: The Indian consumer typically values an alcoholic beverage on the basis of its 'kick' factor versus its price. While the overall market 54 . In India the future of beer industry is very much optimistic because: 1. With increasing urbanisation. The following two factors therefore.

Heinekin. Hi-Five. And once it is able to take Kingfisher Strong national. Maharaja Premium Lager.Knock-Out. Haake Beck. Ice. London Pilsner. San Miguel Lager. Haywards 5000. Chandigarh and Himachal Pradesh. Haywards 5000 Super Strong. the other brands in the Indian market are Carling Black Label. The premium lager beer segment in India will be targeted. Legend.Royal Challenge Premium Lager. Taj Mahal. Royal Challenge. 55 . 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. This ratio was very different 4 years ago. The major brands which belong to large groups in the industry (apart from UB) are – Shaw Wallace . Carlsberg. Haywards 2000 Beer. London Draft. UB already has achieved 14 to 15 percent of that strong beer market and is growing very fast. Hi-Five and Lal Toofan. Also. Over the last four years strong beer has been the fastest growing segment. Kirin. and Foster's Beer. Continental and Three Lions. Beer mix today is approximately 60 percent lager beer and 40 percent strong beer. Dansberg. KnockOut. South African Breweries India Ltd. This was completely usurped by Shaw Wallace. London Diet. Radico has also announced the launch of its international division.Factors Affecting The Indian Consumer Buying Pattern grew marginally by 2%. This makes them more likely to carry the brand with them for a lifetime. As of today while Shaw Wallace has approximately 28 to 30 percent of the strong beer market. Apart from Kingfisher. The beer-drinkers in the country are much younger than the average beer-drinker elsewhere in the world. Haywards 2000 Premium Lager. Kingfisher Strong. it will try to match Shaw Wallace's market share over the next few years. The market is now skewed towards strong beer with more than 60% of the market being strong beer market. Kingfisher Diet. It launched Kingfisher Strong only in May of 2001. a new brand that was launched in the autumn of 2001 by SAB in Uttar Pradesh. . Guru. Sand Piper. Flying Horse Royal Lager. Haywards skol. Strohs and Zingaro. the strong beer market grew at 8-10% during the year at the expense of lager beer. Golden Eagle.

6 0. Essentially. since it is much milder than any of the other beers in the country.1 0.Factors Affecting The Indian Consumer Buying Pattern as the target audience becomes younger.' are entering the market for beer.3 1.7 0. A lot of new variants promise to gain prominence. In urban centres. a light beer is expected to attract first-time drinkers.2 1.5 1.3 1.5 0. but mainly in niche urban segments.0 2. women shy away from beer consumption because it is associated with calories. apart from first time users companies are also targeting women.2 0.6 0.3 1.2 1. who as 'the times they are a changing.0 1.8 1.2 56 . associated with pot-bellied men sitting at bars and shooting darts.3 0.1 0.6 1.1 0. The sophisticated consumer who drinks beer for the experience and not to get drunk will lap up ice beer or light beer.7 Bottled 0.5 Water CSDs Coffee 1. and has traditionally been a buddy drink. Liters Per Person – Beer in comparison with other Liquids Categories 2000 2001 2002 2003 2004 2005 Beer 0.2 1.5 0.

7% 0.0 89.3% 10.3% 18.9 TOTAL 726.2% 22.1% 14% 7.9% 34% 12.2 0.4% 31.0 633.6% 24.4% 8.2 0.0 726.0 93.2 40.4% 20.6% 57 .9 0.2% 0.5 44.2 40.7 Wine 0.7 0.6% 19.Factors Affecting The Indian Consumer Buying Pattern Distilled Spirits Fruit 0.8% Family Elders Children 0.6% 21.6% 24.6 726.1 40.2 Tea 49.1 48.0 96.7% 33.4% 2.1% 6.7 0.3% 26.4% 26.3% 33.7 0.8% 30.2 0.6% 31.2% 8.1% 9.7 726.7 Who decides: Self Buying a house Child's marriage Own marriage Child's education Taking a loan Fixing monthly budget Buying entertainment durables.1 630.3% 18.6% 4.5% 5.3 0.7% 5.1 0.4% 29.4% 5% 21.6 0.7% 11.5 0.0 Subtotal 94.4 0.5% 11.2% 10.9% 20.1 633.7 637.2 49.4% 1.6 0.6 726.0 93.5% 5.8% 4.6% 6.7% 7.3 726.8% 18.7 0.1% 28.2% 0.5 0.7 52.2% 1% 20.7 50.7 Beverages Milk 41.8 All Others* 631.0 97.5% 15.3 0. like TVs [ Get Quote ] Buying durables like washing machines Deciding on holiday destinations 25% Spouse Joint 5.4 629.1 41.5% 4% 6.2 40.2% 33.

of which 72 per cent were beer drinkers. Businessmen preferred parties to have a drink or two at. the person in question seemed to play a major role in deciding the monthly budget or whether to take a loan. CHAPTER 7 FINDINGS 58 . Most executives drank at bars and pubs. the whole family got together to decide what kind of house to buy where to go for a holiday. it was still the older people in the family who played a key role. For example. the husband and the wife jointly decided on issues like the marriage of progeny. but when it came to deciding whom he should marry. Alcohol consumption habits indicated that 25 per cent drank alcohol. In a majority of cases.Factors Affecting The Indian Consumer Buying Pattern The study showed the emergence of certain definite trends in the area of just who decides what. while self-employed professionals drank at friends' homes. Both.

are people who consume relatively less amount of time while shopping. Prefer quality reassurance and benchmark offerings among other related attributes. 59 . On the other hand .conscious and look out for the latest trends and labels. Also they look out for the width and depth of the range they purchase and conduct their annual shopping at one shot. resulting in an increased willingness towards disposability and casting out from apparels to cars to mobile phones to consumer durables.Factors Affecting The Indian Consumer Buying Pattern Survey by Shoppers Stop: A survey conducted by the marketing team of Shoppers Stop Ltd. thus resulting in an increasing consumption of productivity goods. There is also an easier acceptance of luxury and an increased willingness to experiment with the mainstream fashion. Image Shoppers are fashion. The self-employed segment has replaced the employed salaried segment as the mainstream market. 'The Great Indian Retail Story'. especially mobile phones and 2 . prefer giving personal advice on clothing at the time of purchase . 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. Experience Shoppers are attentive and prefer personalized services look out for the right ambience. and prefer not to buy at one sold. According to Ernst & Young report. 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.4 wheeler vehicles. Value Shoppers always hunt for value for money.

41 billion. books. the products Indian consumers are buying through online are greeting cards. cassettes.rediff.reliablegreetings.10 million in 2002-03 to US$ 5.in www. clothes.com www. medicine and educational material. of which the business to business segment will account for US$ 5. With the visual media becoming more popular the use of celebrities in the TV media 60 .com www.shopping.expomarkets. In India.8 billion in 2007-08. CDs/VCDs/DVDs. Currently.shopping.ebay.com 2 Celebrity Influence This is an important tool which is able to influence Indian consumer buying behaviour. The popular online shops in India include: • • • • www.Factors Affecting The Indian Consumer Buying Pattern 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. celebrities are being increasingly used in marketing communication by marketers to lend personality to their products. magazines.

Indians always love their heroes and heroines. When a consumer likes the celebrity in the advertisement.Factors Affecting The Indian Consumer Buying Pattern has increased. When people see their favoured reference group members or celebrities in the advertisements. 61 . Famous celebrities are able to attract attention and retain attention by their mere presence in the advertisements. Celebrities may also help reposition products. 3 Quality Oriented Outlets Indian consumers looking for quality choose expensive brands as they feel that price is an indicator of quality. Their activities and movements are being closely watched and imitated. Celebrities create headlines. It is not surprising therefore that using celebrities in advertisements has become common practice. Consumers like advertisements more if they are admirers of the celebrities in the advertisements. it is not difficult to look for the reasons as to why companies are increasingly using celebrities. the advertisements that celebrities endorse also achieve high recall rates. In India especially. In the midst of the advertisement clutter. Products with sagging sales needs some boosting and in this Indian celebrities can help by way of they endorsing the product concerned. 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. What they endorse sell like hot cakes. they pay more attention to them.

and ready. refrigerators. 62 . Indian consumers are likely to buy environmentally responsible products and packs. thus. balancing environmental concerns with commercial considerations. soaps. 5 Eco-Friendly Products The environmental awareness in India has started affecting marketing of products based upon their eco-friendliness. in the absence of well known brands in selected product range. Businessmen who prefer not to go for high-visibility. 4 Freebies Indian consumer buying behaviour is influenced by freebies. washing machines. consumers are likely to take cues from well established retail outlets hoping that these outlets carry quality products. In general. Freebies generally comprise tooth paste. TVs. The future key for marketing could be to select more ethical and ecological responsible products and packaging. costly campaigns may embark on the strategy to engage well known retail outlets to capture the segment of Indian consumers looking for quality products. Consumers in India are taking lead in prompting manufacturers to adopt technologies to produce eco-friendly products. perhaps should consider giving freebies for the purchases made by the Indian consumers. Companies wanting to penetrate the Indian market. Companies can work with the local business partners to attract the consumers by way of such promotion campaigns.made clothes are some of the product categories in which freebies are given to Indian consumers. which is also convenient for consumers. detergent. Freebies are consumer products given free of charge as gifts to purchases of selected products above a certain value. cooking oil etc.Factors Affecting The Indian Consumer Buying Pattern However.

Factors Affecting The Indian Consumer Buying Pattern CHAPTER 9 Methodology 63 .

They have the products of an extreme range of attributes (the 1st P . because none of these two are within the direct control of the marketers.Price). 1. & (2) “WORKS” in the close proximity with the public or persons outside the organisation. and the firm is always on the move to make them buy so as to earn revenue. but they are not “DIRECTLY” involved in the activities mentioned above. “MARKETING MANAGEMENT” function plays a very critical role.Product). within the study of Marketing Management.Place).Factors Affecting The Indian Consumer Buying Pattern CHAPTER 10. they have a wide range of cost and payment choices (the 2nd P . From the customers’ point of view: Customers today are in a tough spot. Similarly. Controlling these two attributes to have the desired benefits are the most difficult part of the management. 2. in the highly developed & technologically advanced society. the customers have a great deal of choices & options (and often very close & competing) to decide on. CONCLUSION In the highly specialised study of “BUSINESS MANAGEMENT”. 3. This is because this functional area of management (1) “EARNS” the revenue. This doesn’t mean that the other functional areas are not useful. “BUSINESS ADMINISTRATION” or just “MANAGEMENT” today. Today. It’s crucial from both the points of view as given below: 1. they can order them to be supplied to their door step or anywhere else (the 3rd P . 64 . the “Consumers” or the “Customers” play a very critical role as these are the people who finally BUY the goods & services of the organisation.

despite prevailing diversity. In other words. And the quality of marketing strategies depends on knowing. both profit & nonprofit. and where they should give their loyalty? 2. and customs and of course the individual or psychological behaviour. there also are many similarities. cultures. and the consumer behaviour & the marketing strategy. serving. consumer 65 . advertising media. and finally they are bombarded with more communications from more channels than ever before (the 4th P . However. marketers. producers. The main objective of the study of consumer behaviour is to provide marketers with the knowledge and skills. more demanding. more discerning. Thus. that are necessary to carry out detailed consumer analyses which could be used for understanding markets and developing marketing strategies. How can they possibly decide where to spend their time and money. This is the basic principle of requirement for the marketers in earlier days where aggressive selling was the aim. diversity among consumers. 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. retailers. The marketers have to earn them or win them over. because the purpose of a business is to create and keep customers. aggression or plain alluring. 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”. The study of Consumer Behaviour is one of the most important in business education. For the customers are today more informed. more knowledgeable. Customers are created and maintained through marketing strategies.Factors Affecting The Indian Consumer Buying Pattern 4. and influencing consumers. Now it can’t be achieved by force. The global marketplace is a study in diversity. And above all there is no dearth of marketers to buy from.Promotion). 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.

Factors Affecting The Indian Consumer Buying Pattern 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. 66 .

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