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Chapter - 1

Introduction

“Sales Promotion is an action-focused marketing event whose purpose is to have a direct


impact on the behaviour of the firm’s consumers”.

The fast moving consumer goods (FMCGs) form a large part of consumers’ budget in
many countries. The retail trade in these products, that is, their supply to households, has
managed to generate a lot of interest from consumers and policy-makers. This is because
a well-functioning retail sector is necesary for daily provision of theseimportant products
at high quality and low cost. Fast Moving consumer Goods are products that have a quick
shelfturnover, at a comparatively low cost and don't require a lot of thought, time and
financial investment to purchase. Themargin of profit on a separate FMCG product is less.
But the large number of goods sold is whatmakes the difference. Fast Moving Consumer
Goods is a categorization that belongs to broad range of frequentlypurchased consumer
products like: toiletries, soaps, cosmetics, teeth cleaning products, shaving products,
detergents, and other non-durables like glassware, bulbs, batteries, paper products and
plastic goods, such asbuckets. The consumer purchase decision is focussed upon and it
tells us to what extent the brand influences that decision where the maximum populations
are expatriates. FMCG industry, also called as CPG (Consumer packaged goods) industry
primarily deals with the production, distribution and marketing of consumer
packagedgoods. The Fast Moving Consumer Goods (FMCG) is those consumables which
are normally consumed by the consumers at a regular interval. Some of the prime activities
of FMCG industry are selling, marketing, financing, purchasing, etc. The industry also
engaged in operations, supply chain, production and general management.

FMCG Industry Economy:

FMCG industry provides a wide range of consumables and accordingly the amount of
money circulated against FMCG products is also very high. The competition among

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FMCG manufacturers is also growing and as a result of this, investment in FMCG industry
is also increasing, specifically in India, where FMCG industry is regarded as the fourth
largest sector with total market size of US$20.1 billion. FMCG Sector in India is estimated
to grow 60% by 2011. FMCG industry is regarded as the largest sector in New Zealand
which accounts for 5% of Gross Domestic Product (GDP).

Common FMCG products:


Some common FMCG product categories include food and dairy products, glassware,
paper products, pharmaceuticals, consumer electronics, packaged food products, plastic
goods, printing and stationery, household products, photography, drinks etc. and some of
the examples of FMCG products are coffee, tea, dry cells, greeting cards, gifts, detergents,
tobacco and cigarettes, watches, soaps etc.

Market potentiality of FMCG industry:


Some of the merits of FMCG industry, which made this industry as a potential one, are
low operational cost, strong distribution networks, presence of renowned FMCG
companies. Population growth is another factor which is responsible behind the success
of this industry.

Leading FMCG companies & Industry Potential:

Some of the well known FMCG companies are Sara Lee, Nestlé, Reckitt Benckiser,
Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi, Mars,
Coca cola, Nirma, Dabur, Himani etc.

The Indian FMCG sector is the fourth largest sector in the economy with a total market
size in excess of US$ 20.1 billion. It has a strong MNC presence and is characterized by a
well-established distribution network, intense competition between the organized and
unorganized segments and low operational cost. Availability of key raw materials, cheaper
labour costs and presence across the entire value chain gives India a competitive
advantage.

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The FMCG market was set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in
2015. Penetration level as well as per capita consumption in most product categories like
jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped market
potential. Burgeoning Indian population, particularly the middle class and the rural
segments, presents an opportunity to makers of branded products to convert consumers to
branded products.

Growth is also likely to come from consumer 'upgrading' in the matured product
categories. With 200 million people expected to shift to processed and packaged food by
2012, India needs around US$ 28 billion of investment in the food-processing industry.

Automatic investment approval (including foreign technology agreements within


specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas
Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector.

That will translate into an annual growth of 10% over a 5-year period. It has been estimated
that FMCG sector will rise from around Rs 56,500 crores in 2005 to Rs 96,100 crores in
2011. Hair care, household care, male grooming, female hygiene, and the chocolates and
confectionery categories are estimated to be the fastest growing segments, says an HSBC
report.

With the presence of 12.2% of the world population in the villages of India, the Indian
rural FMCG market is something no one can overlook. Increased focus on farm sector will
boost rural incomes, hence providing better growth prospects to the FMCG companies.
Better infrastructure facilities will improve their supply chain. FMCG sector is also likely
to benefit from growing demand in the market. Because of the low per capita consumption
for almost all the products in the country, FMCG companies have immense possibilities
for growth. And if the companies are able to change the mindset of the consumers, i.e. if
they are able to take the consumers to branded products and offer new generation products,
they would be able to generate higher growth in the near future. It is observed that the rural
income has grown, boosting purchasing power in the countryside. However, the demand
in urban areas would be the key growth driver over the long term.

Also, increase in the urban population, along with increase in income levels and the
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availability of new categories, would help the urban areas maintain their position in terms
of consumption. At present, urban India accounts for 66% of total FMCG consumption,
with rural India accounting for the remaining 34%. However, rural India accounts for more
than 40% consumption in major FMCG categories such as personal care, fabric care, and
hot beverages.

In urban areas, home and personal care category, including skin care, household care and
feminine hygiene, will keep growing at relatively attractive rates. Within the foods
segment, it is estimated that processed foods, bakery, and dairy are long-term growth
categories in both rural and urban areas.

The FMCG Industry & Trends:


Indian Competitiveness and Comparison with the World Markets:

The following factors make India a competitive player in FMCG sector:

1. Availability of raw materials:


Because of the diverse agro-climatic conditions in India, there is a large raw material
base suitable for food processing industries. India is the largest producer of livestock,
milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice,
wheat and fruits &vegetables. India also produces caustic soda and soda ash, which are
required for the production of soaps and detergents. The availability of these raw
materials gives India the location advantage.

2. Labour cost comparison:

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Low cost labour gives India a competitive advantage. India's labour cost is amongst the
lowest in the world, after China & Indonesia. Low labour costs give the advantage of low
cost of production. Many MNC's have established their plants in India to outsource for
domestic and export markets.

3. Presence across value chain:


Indian companies have their presence across the value chain of FMCG sector, right from
the supply of raw materials to packaged goods in the food-processing sector. This brings
India a more cost competitive advantage. For example, Amul supplies milk as well as
dairy products like cheese, butter, etc.

The future of FMCG:


Fast moving consumer goods will become Rs 400,000-crore industry by 2020. A Booz &
Company study finds out the trends that will shape its future. Considering this, the anti-
ageing skincare category grew five times between 2007 and 2008. It‘s today the fastest-
growing segment in the skincare market. Olay, Procter & Gamble‘s premium anti-ageing
skincare brand, captured 20 per cent of the market within a year of its launch in 2007 and
today dominates it with 37 per cent share. Who could have thought of ready acceptance
for anti-ageing creams and lotions some ten years ago? For that matter, who could have
thought Indian consumers would take oral hygiene so seriously? Mouth-rinsing seems to
be picking up as a habit — mouthwash penetration is growing at 35 per cent a year. More
so, who could have thought rural consumers would fall for shampoos? Rural penetration
of shampoos increased to 46 per cent last year.

Consumption patterns have evolved rapidly in the last five to ten years. The consumer is
trading up to experience the new or what he hasn‘t. He‘s looking for products with better
functionality, quality, value, and so on. What he ‗needs‘ is fast getting replaced with what
he ‗wants‘. A new report by Booz & Company for the Confederation of Indian Industry
(CII), called FMCG Roadmap to 2020: The Game Changers, spells out the key growth
drivers for the Indian fast moving consumer goods (FMCG) industry in the past ten years
and identifies the big trends and factors that will impact its future.

It has been estimated that FMCG sector witnessed robust year-on-year growth of
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approximately 11 per cent in the last decade, almost tripling in size from Rs 47,000 crore
in 2000-01 to Rs 130,000 crore now (it accounts for 2.2 per cent of the country‘s GDP).
Growth was even faster in the past five years — almost 17 per cent annually since 2005.
It identifies robust GDP growth, opening up of rural markets, increased income in rural
areas, growing urbanization along with evolving consumer lifestyles and buying
behaviours as the key drivers of this growth.

It has been estimated that the FMCG industry will grow at least 12 per cent annually to
become Rs 400,000 crore in size by 2020. Additionally, if some of the factors play out
favourably, say, GDP grows a little faster, the government removes bottlenecks such as
the goods and services tax (GST), infrastructure investments pick up, there is more
efficient spending on government subsidy and so on, growth can be significantly higher.
It could be as high as 17 per cent, leading to an overall industry size of Rs 620,000 crore
by 2020.

Abhishek Malhotra (2010) told that the Indian GDP per capita is low but many Indian
consumer segments which constitute rather large absolute numbers are either close to or
have already reached the tipping point of rapid growth. The sector is poised for rapid
growth over the next 10 years, and by 2020, the industry is expected to be larger, more
responsible and more tuned to its customers.

Based on research on industry evolutions in other markets and discussions with industry
experts and practitioners, Booz & Company has identified some important trends that will
change the face of the industry over the next ten years. Some key ones related to evolution
of consumer segments are as follows:

1. Accelerating remiumisation:
The rising income of Indian consumers has accelerated the trend towards
premiumisation‘ or up-trading. The trend can be observed prominently in the top two
income groups — the rich with annual income exceeding Rs 10 lakhs, and the upper
middle class with annual income ranging between Rs 5 lakhs and Rs 10 lakhs. The rich
are willing to spend on premium products for their ‗emotional value‘ and ‗exclusive feel‘,
and their behavior is close to consumers in developed economies. They are well-informed
about various product options, and want to buy products which suit their style. The upper
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middle class wants to emulate the rich and up-trade towards higher-priced products which
offer greater functional benefits and experience compared to products for mass
consumption.

While these two income groups account for only 3 per cent of the population, it is
estimated that by 2020 their numbers will double to 7 per cent of the total population. The
rich will grow to approximately 30 million in 2020, which is more than the total population
of Sweden, Norway and Finland put together. Similarly, the upper middle segment will be
a population of about 70 million in 2020, which is more than the population of the UK.

Over the next ten years, these groups will constitute large enough numbers to merit a
dedicated strategy by FMCG companies. Abhisek Malhotra (2010) added that they have
seen companies focused on selling primarily to the mid segments. Often, there is no clear
segmentation being offered. Players would do well to clearly separate their offerings for
the upper and mid segments,‖ and the two should be treated as separate businesses with a
dedicated team and strategy for each.

2. Evolving categories:
Categories are evolving at a brisk pace in the market for the middle and lower-income
segments. With their rising economic status, these consumers are shifting from need- to
want-based products. For instance, consumers have moved from toothpowders to
toothpastes and are now also demanding mouthwash within the same category

Also, consumers have started demanding customised products, specifically tailored to their
individual tastes and needs. The complexities within the categories are increasing
significantly. Earlier a shampoo used to have two variants — normal and anti-dandruff.
Now, you have anti-dandruff shampoos for short hair, oily hair, curly hair, and so on.
Every thing is getting customised.

The trend towards mass-customization of products will intensify with FMCG players
profiling the buyer by age, region, personal attributes, ethnic background and professional
choices. Micro-segmentation will amplify the need for highly customized market research
so as to capture the specific needs of the consumer segment targeted, before the actual
product design phase gets underway.
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The beauty products market will grow by 20 per cent per annum as result of the changing
socio-economic status of consumers, especially women. Middle-class women are now
more conscious of their appearance and are willing to spend more on enhancing it.
Products such as colour cosmetics (growing by 46 per cent) and sun care products
(growing at 13 per cent) have latched on to this trend rapidly

3. Value at the bottom:


It has been defined the bottom-of-the-pyramid or BoP consumers as those who earn less
than Rs 2 lakhs per annum per household. The group constitutes about 900 to 950 million
people. While the middle class segment is largely urban, already well-served and
competitive, the BoP markets are largely rural, poorly-served and uncompetitive. A lot of
the basic needs of BoP consumers are yet unmet: Financial services, mobile phones &
communication, housing, water, electricity and basic healthcare. And so there is untapped
opportunity.

Abhisek Malhotra (2010) added that the aspiration was always there, and increasingly
money is coming in. The segment is being targeted primarily with lower-priced products,
say, Rs 2 Parle-G. But increasingly it will need products that deliver more value — say,
Rs 5 product that serves as dinner and also delivers nutrition (vitamins, proteins etc).
Companies like PepsiCo and Tata are working on such products.

It is added that the rural BoP population is estimated to be about 78 per cent of the total
BoP population. The segment is becoming an important source of consumption by moving
beyond the ‗survival‘ mode. As a result of rising incomes, the growth of FMCG market
in rural areas at 18 per cent a year has exceeded that of the urban markets at 12 per cent.
While the rural market comprises only 34 per cent of the total FMCG market, given the
current growth rates, its contribution is expected to increase to 45-50 per cent by 2020. It
will require tailored products at highly affordable prices with the potential of large volume
supplies.

Products such as fruit juices and sanitary pads which had no demand in the rural markets
earlier have suddenly started establishing their presence. While most FMCG players have
succeeded in establishing sufficient access to their products in rural areas, the next wave
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of growth is expected to come from increasing category penetration, development of
customized products and up-trading rural consumers towards higher-priced and better
products.

4. Increasing Globalisation:

While many leading MNCs have operated in the country for years given the liberal
policy environment, the next 10 years will see increased competition from Tier 2 and 3
global players. In addition, larger Indian companies will continue to seek opportunities
internationally and also have an access to more global brands, products and operating
practices.

5. Decentralization:
Despite the complexity of the Indian market (languages, cultures, distances) the market
has mainly operated in a homogenous set-up. Increased scale and spending power will
result in more fragmented and tailored business models (products, branding, operating
structures).

6. Growing Modern Trade:


Modern trade share will continue to increase and is estimated to account for nearly 30%
by year 2020. This channel will complete existing traditional trade (~8 million stores
which will continue to grow) and offer both a distribution channel through its cash & carry
model as well as more avenues to interact with the consumer.

7. Focus on Sustainability:
Global climatic changes, increasing scarcity of many natural resources (e.g. water, oil) and
consumer awareness (e.g. waste) are leading to increased concerns for the environment.
The pressure on companies to be environmentally responsible is gradually increasing due
to involvement of various stakeholders – from government (through policy) to consumers
(through brand choice) and NGOs (through awareness).

8. Technology as a Game Changer:


Increased and relevant functionality coupled with lower costs will enable technology
deployment to drive significant benefits and allow companies to address the complex
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business environment. This will be seen both in terms of efficiencies in the back-end
processes (e.g. supply chain, sales) as well as the front-end (e.g. consumer marketing).

9. Favourable Government Policy:


Many government actions – in discussions as well as planned – will help in creating a
more suitable operating environment. This will be done both on the demand side by
increased income and education as well as on the supply side by removing bottlenecks and
encouraging investments in infrastructure.

The confluence of many of these change drivers – consumers, technology, government


policy, and channel partners – will have a multiplication impact and magnify both the
amount as well as the pace of change. Winning in this new world will require enhancing
current capabilities and building new ones to bridge gaps. In this new world FMCG
companies will have 6 imperatives from a business strategy perspective:

1. Disaggregating the operating model


2. Winning the talent wars
3. Bringing sustainability into the strategic agenda
4. Re-inventing marketing for ‗i-consumers‘
5. Re-engineering supply chains
6. Partnering with modern trade

Another big trend that has been is the emerging idea of many Indians. It is added that
despite the complexities of language, culture and distances, the Indian market has largely
been seen as a homogenous market. There‘s one product for the entire country the same
Maggi noodles for Karnataka and West Bengal, or the same Diet Coke for Punjab and
Assam. Besides, these products have the same advertisements that run across the country.

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Chapter – 2
OVERVIEW OF FMCG SECTOR
The Fast moving consumer goods (FMCG) industry is among top four industries in India.
Broad range of consumables are covered in FMCG industry and according to that the amount
of money circulated against FMCG products is also very high. FMCG manufacturers have
high competition and as because of this the investment in FMCG industry is also increasing,
specifically in India, where FMCG industry is considered as the fourth largest sector with total
market size of approximately US$20 Billions. FMCG sector in India is estimated to grow
rapidly in coming years. Just for example, in New Zealand the FMCG industry is considered
as the largest sector which accounts for 5% of Gross Domestic Product (GDP) of the country.
Some common FMCG product categories include food and dairy products, glassware,paper
products, pharmaceuticals, consumer electronics, packaged food products,plastic goods,
printing and stationery, household products, photography, drinks etc.and some of the examples
of FMCG products are coffee, tea, dry cells, greeting cards,gifts, detergents, tobacco and
cigarettes, watches, soaps etc.

Leading FMCG companies & Industry Potential:


Some examples of well known FMCG companies are Sara Lee, Nestlé, Reckitt Benckiser,
Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi, Mars,
Coca cola, Nirma, Dabur, Himani etc.The Indian FMCG sector is the fourth largest sector in
the economy with a totalmarket size in excess of US$ 20.1 billion. The FMCG has a good
MNC presence and isdefined by a well-established distribution network, a tough competition
amongst the organized and unorganized segments and low operational cost. Availability of
key raw materials, cheaper labour costs and presence across the entire value chain gives India
a competitive advantage.

The FMCG market was set to treble from US$ 11.6 billion in 2003 to US$ 33.4billion in 2015.
Penetration level as well as per capita consumption in most productcategories like jams,
toothpaste, skin care, hair wash etc in India is less that indicates theuntapped market potential.
Burgeoning Indian population, particularly the middleclass and the rural segments, represents
a chance to makers of branded products toconvert consumers to branded products.Growth is
also likely to come from consumer 'upgrading' in the matured productcategories. India needs

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around US $ 28 billion of investment in the food processing industry with 200 million people
expected to shift to packaged and processed food by 2012. The demand in urban areas would
serve asthe key growth driver over the long term. The growth in the urban population, along
with growth in income levels and the availability of new categories, would help the urban areas
in maintaining their level interms of consumption. At present, urban India accounts for 66%
of total FMCG consumption, with rural India accounting for the remaining 34%. But the rural
India accounts for more than 40% consumption in major FMCG categories such aspersonal
care, fabric care, and hot beverages.

In urban areas, the categories like home and personal care category, skin care, household care
and feminine hygiene, would keep growing at comparatively comfortable rates. Within
thefoods segment, it is estimated that processed foods, bakery, and dairy are long-termgrowth
categories in both rural and urban areas. Indian companies have their presence across the value
chain of FMCG sector, right from the supply of raw materials to packaged goods in the food-
processingsector. This brings India a more cost competitive advantage. Like the Amulsupplies
milk as well as dairy products like cheese, butter, etc. The growing income of Indian
consumers has accelerated the trend towards premiumisation‘ or up-trading. The trend can be
observed mostly in the toptwo income groups — the rich with annual income exceeding Rs 10
lakhs, and theupper middle class with annual income ranging between Rs 5 lakhs and Rs 10
lakhs. The rich are willing to spend on premium products for their emotional value‘ and
exclusive feel‘, and their behavior is close to consumers in developedeconomies. They are
well-informed about various product options, and want to buyproducts which suit their style.
The upper middle class wants to emulate the richand up-trade towards higher-priced products
which offer greater functional benefitsand experience compared to products for mass
consumption.While these two income groups account for only 3 per cent of the population, it
isestimated that by 2020 their numbers will double to 7 per cent of the totalpopulation. The
rich will grow to approximately 30 million in 2020, which is morethan the total population of
Sweden, Norway and Finland put together. Similarly,the upper middle segment will be a
population of about 70 million in 2020, whichis more than the population of the UK.

Table: 2.1 Top 10 companies in FMCG sector in India

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S.No. Companies
1 Hindustan Unilever Ltd.
2 ITC (Indian Tobacco Company)
3 Nestle India
4 GCMMF (AMUL)
5 Dabur India
6 Asian Paints (India)
7 Cadbury India
8 Britannia Industries
9 Procter & Gamble Hygiene and
Health Care
10 Marico Industries

Source: Naukrihub.com
Thepersonal care category has the largest number of brands, i.e., 21, inclusive of Lux,
Lifebuoy, Fair and Lovely, Vicks, and Ponds. There are 11 HUL brands in the 21, aggregating
Rs. 3,799 crore or 54% of the personal care category. Cigarettes account for 17% of the top
100 FMCG sales, and just below the personal care category. ITCalone accounts for 60%
volume market share and 70% by value of all filter cigarettesin India. The foods category in
FMCG is gaining popularity with a swing of launches by HUL, ITC, Godrej, and others. This
category has 18 major brands, aggregating Rs. 4,637crore. Nestle and Amul slug it out in the
powders segment. The food category has alsoseen innovations like softies in ice creams,
chapattis by HUL, ready to eat rice byHUL and pizzas by both GCMMF and Godrej Pillsbury.
This category seems to havefaster development than the stagnating personal care category.
Amul, India's largestfoods company has a good presence in the food category with its ice-
creams, curd, milk, butter, cheese, and so on. Britannia also ranks in the top 100 FMCG brands,
dominates the biscuits category and has launched a series of products at variousprices.

In the household care category (like mosquito repellents), Godrej and Reckitt are twoplayers.
Good knight from Godrej, is worth above Rs 217 crore, followed by Reckitt's Mortein at Rs
149 crore. In the shampoo category, HUL's Clinic and Sunsilk make itto the top 100, although
P&G's Head and Shoulders and Pantene are also trying hardto be positioned on top. Clinic is
nearly double the size of SunsilkDabur is among the top five FMCG companies in India and

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is the herbal specialist.With a turnover of Rs. 19 billion (approx. US$ 420 million) in 2005-
2006, Dabur hasbrands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real.
AsianPaints is enjoying a formidable presence in the Indian sub-continent, Southeast Asia, Far
East, Middle East, South Pacific, Caribbean, Africa and Europe. Asian Paints isIndia's largest
paint company, with a turnover of Rs.22.6 billion (around USD 513million). Forbes Global
magazine, USA, ranked Asian Paints among the 200 BestSmall Companies in the
WorldCadbury India is the market leader in the chocolate confectionery market with a 70%
market share and is ranked number two in the total food drinks market. Its popularbrands
include Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems. The Rs.15.6 billion (USD 380
Million) Marico is a leading Indian group in consumer products andservices in the Global
Beauty and Wellness space.

The Rs.85, 000 crore FMCG market in India is growing at a fast pace despite of theeconomic
downtrend. The increasing disposable income and improved standard of over the next ten
years, these groups will constitute large enough numbers to merita dedicated strategy by
FMCG companies. Abhisek Malhotra (2010) added thatthey have seen companies focused on
selling primarily to the mid segments. Often, there is no clear segmentation being offered.
Players would do well to clearlyseparate their offerings for the upper and mid segments, and
the two should betreated as separate businesses with a dedicated team and strategy for each.

The future of FMCG:


Fast moving consumer goods will become Rs 400,000-crore industry by 2020. A Booz &
Company study finds out the trends that will shape its future. Considering this, the anti ageing
skincare category grew five times between 2007 and 2008. It‘s today the fastest-growing
segment in the skincare market. Olay, Procter & Gamble‘spremium anti-ageing skincare
brand, captured 20 per cent of the market within a yearof its launch in 2007 and today
dominates it with 37 per cent share. Who could havethought of ready acceptance for anti-
ageing creams and lotions some ten years ago?For that matter, who could have thought Indian
consumers would take oral hygiene soIncreasingly, FMCG players are realizing that India is
not a homogenous market andconsumer preferences vary significantly. By 2020,
Maharashtra‘s GDP will exceedthat of Greece, Belgium, and Switzerland, and Uttar Pradesh‘s
economic size willexceed that of Singapore and Denmark. So, having a dedicated firm for
Maharashtraor Gujarat can prove to be a realistic and profitable proposition. We will
seecompanies coming up with regional products. Hindustan Unilever has teas which are
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different in one state versus the other. Pepsi has a different product in AndhraPradesh which
is not sold anywhere else. Differentiation used to happen at the countrylevel; now you will see
at the state level. FMCG players need to grow regional‘ in their thinking and move towards
anincreasingly decentralized operating model in India. As consumer preferences differacross
regions and states, companies may follow a regional strategy in terms ofproduct ingredients,
positioning, marketing campaign, and channels. Overall, decentralization or regionalization
will become an increasingly important theme for FMCG players.

FMCG in India has a strong and competitive MNC presence across the entire value chain. It
has been predicted that the FMCG market will reach to US$ 33.4 billion in2015 from US $
billion 11.6 in 2003. The middle class and the rural segments of theIndian population are the
most promising market for FMCG, and give brand makersthe opportunity to convert them to
branded products. Most of the product categorieslike jams, toothpaste, skin care, shampoos,
etc, in India, have low per capitaconsumption as well as low penetration level, but the potential
for growth is hugeseriously? Mouth-rinsing seems to be picking up as a habit mouth wash
penetrationis growing at 35 per cent a year. More so, who could have thought rural
consumerswould fall for shampoos? Rural penetration of shampoos increased to 46 per cent
lastyear.

Consumption patterns have evolved rapidly in the last five to ten years. The consumer is
trading up to experience the new or what he hasn‘t. He‘s looking for products withbetter
functionality, quality, value, and so on. What he needs‘ is fast getting replaced with what he
wants‘. A new report by Booz & Company for the Confederation ofIndian Industry (CII),
called FMCG Roadmap to 2020: The Game Changers, spellsout the key growth drivers for the
Indian fast moving consumer goods (FMCG) industry in the past ten years and identifies the
big trends and factors that will impactits future.

It has been estimated that FMCG sector witnessed robust year-on-year growth
ofapproximately 11 per cent in the last decade, almost tripling in size from Rs 47,000 crore in
2000-01 to Rs 130,000 crore now (it accounts for 2.2 per cent of the country‘sGDP). Growth
was even faster in the past five years almost 17 per cent annuallysince 2005. It identifies robust
GDP growth, opening up of rural markets, increasedincome in rural areas, and growing
urbanization along with evolving consumer lifestylesand buying behaviours as the key drivers
of this growth.
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It has been estimated that the FMCG industry will grow at least 12 per cent annuallyto become
Rs 400,000 crore in size by 2020. Additionally, if some of the factors playout favourably, say,
GDP grows a little faster, the government removes bottleneckssuch as the goods and services
tax (GST), infrastructure investments pick up, there ismore efficient spending on government
subsidy and so on, growth can be significantlyhigher. It could be as high as 17 per cent, leading
to an overall industry size of Rs. 620,000 crore by 2020. The big firms are growing bigger and
small-time companies are catching up as well.

According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by
MNCs, and the balance by Indian companies. Fifteen companies own these 62brands, and 27
of these are owned by Hindustan Lever. Pepsi is at number threefollowed by Thums Up.
Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8) and Parle
(9). These are figures the soft drink and cigarettecompanies have always shied away from
revealing. Personal care, cigarettes, and softdrinks are the three biggest categories in FMCG.
Between them, they account for 35 of the top 100 brands.

Sales Promotion Introductory Ideas:


Sales promotion:
A typical sales promotion budget covers almost 70% of the total consumer salespromotional
budget. It is also considered as a brand differentiator by many big playerslike Coca-Cola,
Pepsi, Heinz and many more. For many business experts andacademics, sales promotion is
regarded as typical marketing techniques that add valueto a product in order to achieve specific
marketing goals. The primary purpose ofsales promotion is to induce the consumers to make
a quick buying-decision in orderto create increases sales. Typical example of sales promotion
is to offer customers totake chance of winning a prize or offering some extra products with the
same price.

Sales promotion and marketing are inter-related but not have the similar purpose. It is
advertising which makes a platform for sales promotion where customers can see thedirect
added value of buying your product. On the other hand, advertising is an intangible promotion
of your products to send the marketing message to the customerbase.
Sales Promotion: Advantages & Disadvantages:

16
The main advantages associated with promotional sales are-an easy way to learncustomer
response and it work fast. It is also an inexpensive marketing technique.Sales promotion does
not always bring positive impact to business, sometime thistype of promotion cause negative
brand impact to customers mind in the long-term.So, a promotional campaign needs to be
designed taking into account theconsequences of losing brand value. A PIMS study of 1991
suggests that overuse ofsales promotion brings low ROI, almost 15% less, in comparison to
balanced andcalculated promotional offers. It is advisable not to use sales promotion as a tool
ofbrand imaging; advertising is always the best way as far as branding is concerned. So,
marketers need to be careful and must understand the difference between the salespromotion
and advertising.

Objective of sales promotion:


Before designing a promotional campaign, you must identify the target groups. This is done
by breaking up of your product markets and identification of small groups ofconsumers whose
wants and needs are not the same as the mass market as a wholethisis one of the key to success
in sales promotion. For finding the target group youneed to take a qualitative research on the
market to determine your groups ofcustomers, if the target group exists then find out their
needs & wants, and whatdrives them to buy your product. After learning about the target
groups, you must setthe objectives of sales promotion which is all about why you want to
achieve in salespromotion campaign and how your customers will be benefits. Other aspects
of salesobjectives are: budget of the promotion and duration of the promotional offer.

Examples of Sales objectives


1. Many marketers use the promotional sales as a tool to learn the response of thefirst time
users, by offering reduced price, sales coupons, or money-backguarantees.
2. To increase the repeat purchase from the existing users.
3. It can work as an introductory platform for a new product. But a hosing planand get a domain
name free.
4. Sales promotion is a vehicle to defend your business against your competitors.By giving
your users free coupons upon buying every products so as they canget considerable discount
on the next purchase with a specified time willcertainly bind your customers with your
products and it will unlikely that theywill switch on a new brand, even if it being highly
competitive.

17
5. Try to target and find a new segment in the market by focusing geographic andpsychology
of users such as users with high and low purchasing needs.Normally, arranging a competition
or contents are very helpful for targeting aspecific interest group.

Types of Sales Promotion


Basically there are three main categories of sales promotion targeted at differentelements of
markets such as consumers, traders, industries.
1. Consumer sales promotions
2. Trade sales promotion
3. B2B and industrial sales promotion
1. Consumer Sales Promotion:

Sampling
If your objective is to trial the product then sampling is an effective sales promotionmethod.
Usually sampling is involved with low value products and products havinghighly visible
features of benefits. For delivery sample products marketers use eitherdoor-to-door or mailing
approach

Couponing
It is one of the oldest sales promotion strategies and sometimes couponing makes theproduct
problematic by cheapening your brand name. Coupon is mainly used forattracting new
customers as well as to increase instant sales with price reduction of aproduct.

Contests and Sweepstakes


These are very popular low-cost methods of sales promotion used and viable inalmost any
demographic location on earth. These techniques help people to learn yourproduct more and
help them pay more attention to your product. For instance if you arrange a completion about
providing the accurate information of your product, then certainly interested customers will
learn about your product and this is why it is aneffective way of educating customers.

Money refunds
Instant cash-back, refunds and rebates are very attractive ways to promote sales in cellphone
service providers and web-hosting companies. For any product salespromotion, money back
offers give a sense of security to all customers.
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Premiums and bonus packs
A premium offer means an extra item at a low price or totally. Premiums are one ofthe effective
sales promotions in targeting the brand switching users and also toincrease sales rate among
the existing users.

Loyalty schemes
This is great way to hold the loyalty of customers. It is basically a point based system, where
each customer gets some points on each purchase and later he can use thesepoints on buying
the same products or other products at a reduced price. To many marketers, loyalty schemes
are also known as-frequent purchasing scheme.

Exhibitions
This is not like trade show. The purpose of an exhibition is to interact with thecustomers,
answer their queries and not to merchandise any products. Generallyexhibitions are held to
develop consumer interests on products. It is a very powerfuland efficient vehicle to reach the
customers and to educate them about your products.Example of exhibition is -Motor Show.

Packaging
Many marketers do no pay much attention to the quality of packaging, because they simply do
not understand the psychological and brand image aspects of packaging.An attractive and
innovative packaging can work like a salient sales man-packagingdoes the hooking function
to buyers. A well-packaged product carries not only thebrand values but also create an
emotional link to your prospects. Not that it is onlyimportant for packaging to be eye-catching,
aesthetic, but it needs to protect theproduct inside with proper manner.

Trade Sales Promotions:


Improve the distribution line is the key purpose of trade sales, by organizing tradeshows. Some
effective techniques used in a trade promotion are: discounts, point-ofsalesmaterials, shelf
facings, and displays.

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Incentives
This is a popular trade promotion idea with the manufacturers, retailers normally doesnot use
this technique to boost their sales. Incentives are given as a form of cashbonus or prizes per
sale.

Buying allowances
It‘s a kind of price reduction for your product for a specific period of time.

Trade shows
It is a way of getting to learn new customers, introduce those new products, gettingcustomer
reactions. But unlike exhibitions, trade show involves in selling products. Asuccessful trade
show can be measured by keeping records of the number of visitors,useful leads and
identifying the products with most interests to customers.

Advertising allowances promotion


This is very common practice among manufacturers where a certain amount of moneyis given
to the retailers by the manufacturing company. This is allowances is based onthe number of
products and orders retailers can bring to the manufacturers.

Free training
It is a well-unformatted sales man work like an ambassador for your brand. Customersneed
proper information from a proper channelled-no one than sales man does this jobbetter. As a
part of the promotional offer and relationship building, manufacturersoffer training to the retail
staff so as they become more effective and skilled whiledealing with customers. This free
training is very important promotion factor youmarket any complicated and expensive
products. Along with it each trainingmanufacture needs to provide well-documented brochures
and technical manuals tothe retailers.

Sales Promotions: B2B & Industrial:


This is the last but not certainly the least important portion of the sales promotionplan.
Industrial sales promotion is all about applying the trade & consumerpromotional ideas into
industrial marketing environment. Depending on the situation, you need to decide on which
consumer and trade promotion ideas is best suited inB2B environment. For example, consumer

20
promotional offer like ―buy one get one free can be offer in B2B environment as ―buy one
and get one-year service free.

Depending of the type of products you choose to promote decides which promotionalideas will
bring you the best ROI. While devising a promotional plan, keep in mindthat sales promotion
has disadvantages too. So, make sure sales promotion campaigndoes not harm your brand
image at any cost. And finally, always try to avoid pricecompetition wars as much as possible,
rather put you all the attention in improving thequality of products by adding more values to
it.

Sales promotion consists of all promotional activities other than advertising, personalselling
and publicity that help to increase sales through non repetitive and one timecommunication.
In other words, it includes marketing activities other than personalselling, advertising, and
publicity that stimulate consumer purchasing and dealer effectiveness, such as point of
purchase displays, shows and exhibitions, demonstrations and various non-recurring selling
efforts not in the ordinary routine.

Purpose:
The ultimate aim or purpose of sales promotion is that of increasing the volume of sales and
profits but it differs from advertising and personal selling both in approachand techniques.
Personal selling involves face to face contact with specificindividuals, while advertising is
directed at a large number of potential customers.

Sales promotion serves as a link between two by focusing selling efforts on selectedsmall
groups of people. Sales promotion usually involves non-recurring and noroutinemethods, in
contrast with the routine and recurring nature of advertising andpersonal selling. Under
advertising, the media is not owned and controlled by theadvertiser except in direct mail
advertisings. But sales promotion methods are controlled by the advertiser. Sales promotion
covers various stimulants directed to theconsumers and dealers that is why it is of two types-
consumers sales promotion and dealers sales promotion. The former stimulates consumer‘s
buying at the point ofsale, and latter improves dealer‘s effectiveness at the retails outlets.

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How Sales Promotion Objectives are set:
Sales promotion has dual objective: (A) Basic objectives and (B) Other objectives.

(A) Basic objectives of sales promotion are:


(i) Increasing the buying response of ultimate consumers.
(ii) Increasing the selling efforts and intensity by dealers as well as by sales personnel.
(iii) Supplementing and co-coordinating the efforts of advertising and personal selling

(B) The other objectives are:


(i) Calling attention to new products and product improvements.
(ii) Informing buyers of new brand and new packaging.
(iii) Improving market share.
(iv) Obtaining dealer outlets.
(v) Meeting competition.

These objectives are set on the basis of following criteria.


(i) Cost of reaching an audience member.
(ii) Acceptability of the tools to be used.
These criteria are developed taking into consideration the following variables/factors:

(i) Kinds of product:


The product is one of the factors determining the form of promotion. Toys, toiletsoaps and
cosmetics are effectively shown on television. Mass selling consumergoods can be easily
promoted through radio and television. Industrial and specialtygoods should be promoted
through technical journals and through sales engineers.

(ii) The buyer:


If the marketers are to provide realistic solutions to the problem of buyers, they must know
their customers, their needs and desires, their attitude, values, aspirations and expectations.
Hence marketers must have up-to-date information about customerdemand and customer
behaviour. If the buyers are educated then demonstrations orinstructions can be used as sales
promotion technique. Similarly, contests and quizzescan be used if buyers are of young age
and educated.

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(iii) Nature and size of market:
The number, geographical location and purchasing power of potential customers exercise a
significant impact on the sales promotion. Sampling, coupon, money refund orders, premium
offer, price-off and trading stamps etc., are suitable for salespromotion in local markets. On
the other hand, fairs, exhibitions and fashion showsare more appropriate for sales promotion
on the national level particularly forgarments, books and electronic items.

(iv) Stages in product life cycle:


This is an important managerial tool in sales promotion. A product life cycle consists of four
stages. (a) Introduction of the product require lot of energy to createawareness, acceptance and
demand for the product. Introducing a new product formost companies is a costly and difficult
exercise that is why they mostly depend onmiddlemen, (b) Growth. It includes a fast growth
both in sales volume and profit. (c)Maturity (Saturation).This stage is longer. But the speed in
achieving sales volume reduces during this stage. Profit also starts declining much faster than
the sales. (d) Declining. This is the last stage in product life cycle. After a period of stability,
thebuyers loose interest on the product, and sales start falling more quickly. At this stagehigh
cost sales promotion technique may be used or existing product may beimproved.

(v) Management policy:


In the management policy, first of all, sales promotion objectives are set, thencommunication
tools required to achieve these objectives are designed, and the thirdstep is to determine the
cost required to execute promotional activities andprogrammes. In short sales promotion
expenditure is directly related to the objectivesto be achieved.
(iv) Budget allocation available:
The decision on how much to spend on promotion is externally difficult on account ofmultitude
of promotion tools, on the one hand, and varieties of products and marketson the other. For
example, the greater the geographical dispersion of a target market,the greater the
communication expenditure required. Similarly, if an offering is in itsearly life cycle, there is
a greater need of expenditure. But promotion budget shouldalways justify the tasks to be
undertaken. A basic principle would be the cost andreturns of sales promotion tools to be
adopted.Hindustan Lever has its well drawn up sales promotion budget. If any business
housedoes not have its promotion budget fixed, then promotion programmes will have to
bedesigned to support the marketing plan.
(v) Government regulations:
23
Government has passed various laws and made rules to protect the consumer interest, such as
the prevention of Food Adulteration Act, the Drugs and Magic Remedies (Objectionable
Advertisements) Act, and Drugs and Cosmetics Act etc. Salespromotion policy must take into
consideration the government regulations relating tothe particular product, e.g. the commodity
rates must be specified on the package andin case of medicines drug contents and date of
manufacturing, date of expire, andprice must be specified.

The purpose of this chapter is to provide information about the marketing communication mix
used to promote the product. There is no space for introducing all of them (see Figure 3.1)
therefore, the three most widely used will be considered – advertising, sales promotion and
public relations (PR). On the other hand, there is another mean of communication ‘word of
mouth’. This method is very difficult to command as it expresses the customer’s perception of
the brand and the producer can hardly manage to control the people’s experience or opinion
about the particular product (Wilmshurst and Mackay, 2002).

Figure 2.1: Common communication/promotion tools


Advertising Sales Promotion Public Personal Direct
Relations Selling marketing
Print and Contests, games, Press kits Sales Catalogs
broadcast ads sweepstakes, presentations
lotteries
Packaging-outer Premiums and gifts Speeches Sales meetings Mailings
Packaging inserts Sampling Seminars Incentive Telemarketing
programs
Motion pictures Fairs and trade Annual reports Samples Electronic
shows shopping
Brochures and Exhibits Charitable Fairs and trade TV shopping
booklets donations shows
Posters and Demonstrations Sponsorships
leaflets
Directories Couponing Publications
Reprints of ads Rebates Community
relations

24
Billboards Low-interest Lobbying
financing
Display signs Entertainment Identity media
Point-of-purchase Trade-in Company
displays allowances magazine
Audiovisual Trading stamps Events
material
Symbols and Tie-ins
logos

Source: Kotler (1994, p. 597)

Having the product in the certain place, setting the appropriate price and deciding which
distribution channels to utilize is simply not enough to start the selling process; the consumer
must notice the product and all the product mix included (Wilmshurst, and Mackay, 2002).
The method how to gain and retain the consumer’s attention is called marketing strategy. This
means introducing the strategic marketing planning into particular “day-to-day marketing
tactics and operations” (Fifield, 1998). Figure 3.2 illustrates the development of marketing
strategy in a common way.

25
Figure 2.2: Developing marketing strategies

Organisational goals
Market needs

Mission statement
Customer behaviour

Market
segmentation
Business objective
Market
attractiveness

Gap analysis

Marketing Marketplace
The
objective implementat
marketing
mix(es) ion

Opportunities
Organisational capability

Resource/performance
audit Competitive opportunities

Strengths and Environment audit


weaknesses

Source: Fifield (1998, p. 184)

We could see that to set up a marketing strategy we need to clarify appropriate marketing
objective. Before, we must specify organisational goals, which determine the strategic
marketing position. Exploring market needs and opportunities will help us to establish market
niche for which we can start the production. The last item remains the organisational
capability, which reveals the internal resources for efficient operation of the association. Once
we have created the particular strategy marketing mixes their implementation can take place.

26
Now we understand how to plan a marketing strategy and what tools to use. The following
lines will discuss the marketing communication methods, their functions, benefits and
shortcomings in more depth. First, advertising, second, sales promotion and third, public
relations (PR) will be outlined. At the very end of this chapter, the summary will recapitulate
the secondary research.

Advertising
(Rowley, 1998) defines advertising as
“Any paid form of non-personal presentation and promotion of ideas, goods or services by
any identified sponsor. The pages of professional newsletters and magazines are common
avenues for advertising information products”.
This chapter is going to describe various aspects of advertising. First, functions of advertising
will be introduced. Second, different types of advertising and finally, styles and appeals of
advertising will be explained.

Functions of advertising
According to recent research, three functions of advertising can be perceived. In this part, they
will be demonstrated in more depth. Advertising is a process used by a merchandiser to inform
customers (Yeshin, 1998). Moreover, Smith (1995a) postulates that advertising comes across
when launching new product or when the customer needs to be informed about the already
existing one. One could also say that the main function of advertising is to provide particular
information. Furthermore, Batra, Myers and Aaker (1996) append that advertising plays
significant role in changing consumers’ mind, gaining their attention and persuading them
about qualities of the product.

The most desirable aim of advertising seems to remain the support of the sale of concrete
merchandise, as mentioned above frequently accomplished by providing sufficient
information to underpin customers’ awareness of the certain product (Arens, 2002).For the
same reason, Low and Mohr (2000) show that some goods could be purchased at a seasonal
basis only, advertising functions as a reminder to the public meanwhile. On the contrary, some
professional services like medical or legal were not connected with advertising techniques in
public opinion for many years (Garretson and Clow, 1999).

27
Types of advertising
Yeshin (1998) divides advertising in three parts:
 Pioneer advertising: this type of advertising is useful when merchandisers provide
information related to newly launched product that potential customers could notice it
moreover, it serves to boost the potential consumers’ awareness rather than to alert on
the merchandise’s aspects of quality.
 Competitive advertising: this tries to attract potential consumers with providing
particular information about the product’s benefits that seem to be unique and unlikely
to found in other competing items.
 Comparative advertising: this means straight comparison between two or more
competing products in the marketplace. Additionally, the author points out that are
necessary to put stress on the special conditions within the English market where the new
Trade Marks Act from 1994 allows companies directly to compare its products with its
competitors to foster competitive advantage.

Advertising in practise
Two variant approaches in advertising practice could be noticed. Rational and emotional
appears and their embranchment will be discussed.
Rational appeal v emotional appeal
As the name reveals the difference between rational and emotional appeal of the advertisement
is obvious. The rational appeals’ aim is to inform customers, either existing or potential, about
the product; the whole ad is about providing some specification about the merchandise’s
features and is frequently used in the computer market and in business–to–business advertising
whereas the emotional appeal is based on processing a particular emotion in the observer’s
mind (Yeshin, 1998). Different types of rational and emotional appeal will be discussed later
on. How the rational and emotional appeals connected with the level of customer’s level of
interest work see Figure 3.2.

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Figure 2.3: The balance of emotions and information provision

High involvement Rational product attribute appeals


Information provision
Benefit claims

Emotional image-based appeals


Social, ego, hedonic orientation

Low involvement

Source: Fill (1999, p. 282)

Advertising appeals
There are two various types of advertising appeals which will now be taken in account. Future
appeal means, according to Batra, Myers and Aaker (1996) a type of advertisement
highlighting the main qualities or elements of the merchandise or service offered. In
accordance with Driver and Foxall (1984), the producer uses this type of advertising when an
intended comparison with other competing product is desired. Another type of advertising
appeal is price or value appeal which tries to convince the buyers that they obtain other value
with the purchase of that particular product or that they save money as Smith (1995a) notes.
The writer mentions also that this technique is more efficient when accompanied with another
value for the customers such as high quality and low price. Likewise, the main attribute of the
ad could bequality(Fill, 1999). Advertising which emphasises quality is called quality appeal.
There is another appeal named news approach, which in a congruence with Batra, Myers and
Aaker (1996) is useful when the product has been innovated or other changes could be
discovered. A different view is popularity appeal which concentrates on showing the position
of the brand in the marketplace for instance the brand XY is the No.1 in Great Britain (Yeshin,
1998). In contrast, fear or anger is frequently used to develop the feeling of fear or anger in
the customer in order to persuade him or her to identify with the product (Smith,
1995a).Another example is a social acceptance appeal which, according to Arens (2002), tries
to lead the buyers to feel like their favourite film star.In agreement with Fill (1999), the
manufacturers often focus on gaining the public’s awareness of the brand targeting on the
people’s mind or originate a special unique image. This technique is called sensory appeals.

29
Styles of advertising
Style of advertising divides into two broad areas. These are appeals based on the provision of
information and appeals based on emotions and feelings. These areas are now discussed in
turn. First of all, we will consider appeals based on providing information. Manufacturers
implement factual advertising when they want the consumer to purchase the merchandise that
is why the ad as a whole is concerned to give particular information (Yeshin, 1998; Fill, 1999).
Furthermore, this approach is used to underpin the consumers’ final resolution (Harker, 2000).
The buyer can recognize real - life situations when he or she has been exposed to that type of
advertisement, to illustrate, two women involved in recommendation of the washing powder
(Fill, 1999). Receivers will identify themselves with the performers and seeing that the
promoted product has successfully solved the performer’s problem, buyers are tempted to
purchase that one for solving their own problems (Branthwaite, 2002). Similarly, the style of
advertising called demonstration could be perceived as an advertisement, where, as Erdogan
and Tagg (2003) declare, the particular merchandise is described as the only way how to tackle
some problem; the product seems to be the ideal solution, take the case of advertisement of
medical products often use to overcome the suffering and so on. Considering another type of
advertising, testimonial, we could observe that the aim of this is to convince the customers of
qualities of a concrete product by using a spokesperson appraising the merchandise’s attributes
and benefits moreover; the person should be someone familiar to the public Erdogan and Tagg
(2003). The trustworthiness is the major aspect of the ad as the authors state.

The second type of advertising is based on emotional feelings. This contains various styles.
For instance, using fearfollows two targets: first, the customer is warned of consequences of
inappropriate handling with the product or unsuitable manners and its possible hazard (drink
driving); second, the patron would be exposed to public indignation if not used the particular
merchandise, to demonstrate advertisements promoting anti-dandruff shampoo (Hackley,
2003). Besides, he declares that fear could be considered as a great tool to convince the
onlookers to take proper moves (for example stop smoking). On the other hand, exaggerating
the problems could cause the customers’ alienation (Fill, 1999). A different case is humour.
The employment of humour can usually guarantee that the consumer will be in a good
disposition, which could ensure his or her positive perception of the brand (Hackley (2003).As
the person is largely persuaded of the quality of the product, there is high probability that he

30
or she will buy it as the paper comments. In contrast, Fill (1999) notes that some issues towards
not using humour have been raised, the mission of the ad can disappear while concentrating
on the humour component, and cross-border advertising could tackle problems with translation
as conveying the message could cause obstacles. In correspondence with Okazaki and Rivas
(2002), there is evidence that advertising in recent years using animation has been aiming
especially on children as the uninteresting product could pull the observers’ notice. As there
are no problems with translation the advertising seems to be able easily to reach cross-borders
extend as the authors assume. Advertising styles can use sex as well. Utilising sexcan be
regarded as exceptionable and it really works in some cases only Nielson and Curry (1997).
Brands concerning with underwear often provide ads with sex appeal trying to gain the
people’s awareness, for example some perfume producers use that as well as the writers claim.
Including musicwithin the advertisement could be appertained as on of the tools how to raise
the consumers’ attention and to create positive aspect to the brand promoted (Fill, 1999). The
consumer might easily remember the melody and connect it with the particular product next
time when displayed to the ad. Moreover, music can interpret the lifestyle as many car
producers show (Fill, 1999). It can serve to foster the product differentiation as well as the
author proposes. What is more, using fantasy and surrealism can induce different perceptions.
Seeing an advertisement showing the product in unusual situations evokes various notions
however, the producer should be aware of the possible misunderstanding. Often symbols and
special signs are used (Okazaki and Rivas, 2002).Slice of lifeis the name of the following style.
People from the ‘real life’ try to persuade the final users through the performance in front of
the camera (Nielson and Curry, 1997). These ‘normal’ people are in some cases much more
likely to convince the public of qualities and attributes of the promoted merchandise rather
than celebrities or other influential individuals, that is why many producers prosper from the
nature of this type of advertising (Yeshin, 1998). Not every advertisement includes spoken
word. Non-verbal advertisements are frequently exploited when the producer intends to launch
the particular product in foreign markets as well as there are no restraints with the foreign
language interpretation (Branthwaite, 2002). Chocolate producers, beer industry also
insurance agencies often use the method called brand heritage or history(Yeshin, 1998). Not
only the styles mentioned above exist, there are many more. Yeshin (1998) puts forward other
types of advertising as mini – drama, continuing character, pastiche, spectacular, musical,
stage show, infomercials and many others.

31
When ads work
Information included in the ad invokes a special emotional feeling in the customer’s heart that
is why the producers should bear in mind that even the advertisement focused on providing
information leaves a certain trace in the person’s emotional perception of the brand (Driver
and Foxall, 1984). Compilation of the emotional and rational unit of the ad creates a peerless
mark in the public’s mind and that is why the merchandiser should be aware of and handle
with this intangible asset carefully (Jones, 1995). Additionally, Ogilvy (2004) highlights the
importance of the content of the ad. He demonstrates that the advertisement should comprise
of benefits of the product itself and its advantage towards its competitors to have better impact
on the customers’ perception of the brand. Moreover, Hart (1995) posits that ads using people
seem to be more effective than those which advertise the particular product without them. The
latter form of promoting the product induces less participate impression as the author states.
Hackley (2003) emphasises the importance of proper marketing research and the role of
account planners in the whole advertising process. According to his study, the research should
be provided as cooperation with consumers rather than collecting aggregated information. He
underscores utilisation of copywriting as well. Now we see the differences among various
styles of advertising however, to achieve objectives set at the beginning of the campaign, we
need to understand how the promotion process looks like. To illustrate the promotion process,
see Figure 3.3.

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Figure 2.4: The promotion process

1. Set promotional objectives

2. Identify the target evidence

3. Select the message

4. Select the media

5. Agree budgets

6. Monitor, test and controlresults

Source: Fifield (1998, p. 247)


The process begins with setting promotional objectives. From identification of the target
evidence, we are able to select the appropriate message. An important issue is apparently
selection of the right medium to convey our message. The final budget for advertising could
be approved afterwards. The last step is supervising and controlling the results in accordance
with the objectives.

Variant techniques are used to increase sales by providing free samples. Despite of sales
promotion plays significant role in the marketing mix this method seems to be less regarded
than other parts (direct marketing, advertising) as Srinivassan, and Anderson (1998) postulate.
There is evidence that more than in other areas of marketing managerial positions in sales male
executives dominate (Harmon, 1997). In this chapter, several topics are described. First, its
function, benefits and limitations are discussed. Next, objectives and finally, techniques of
sales promotion are represented.

Functions of sales promotion


The sales promotion techniques influence customers, resellers and producers as well (Fill,
1999). Dawes (2004) points out that the growing trend of utilisation of this marketing tool
could be observed in recent years. According to his survey, sales promotion makes the
33
purchasing procedure significantly easier. Also due to rising range of products offered, the
sales promotion helps the producers to gain more space on the retail shelves and the resellers
could lure customers to their stores as the author says. However, sales promotion does not
provide economies of scale compared to advertising, so it is more likely to be utilized by
companies with lesser market share (Low and Mohr, 2000).

Benefits of sales promotion


Sales promotions have a doubtless impact on the process of production as it enables to settle
the fluctuation of consumer demand; moreover, its changeability to the amount produced
fosters the small businesses’ financial situation towards greater competitors in the marketplace
as larger enterprises have usually less limited financial sources (Yeshin, 1998). Sales
promotion can be considered as a great tool for growing the sales in short period of time
(Alvarez and Cassielles, 2005). Launching new products connected with effort to convince the
customers to try avoids outdating; mounting the merchandise offered extends the customers’
selection can be stated as other benefits of sales promotion (Dawes, 2004).

Limitations of sales promotion


However, not only advantages can be seen when explaining the role of sales promotion. It
indubitably underpins brand switching which causes bad perception of the brand (Yeshin,
1998). Even some of the loyal consumers start buying the promoted product on the certain
occasion only (when the sales promotion is running) or they may start thinking that the
promoted brand encounters sales problems as Peattie and Peattie (1995) demonstrate. Alvarez
and Cassielles (2005) proclaim that exaggerated use of sales promotion jeopardises the brand
profitability at all. Finally, d'Astous and Landreville (2003) state that despite of extensive
exploitation of sales promotion in the marketing mix there is a scarce of academic research in
this particular field.

When sales promotion works


To evaluate the efficiency of the sales promotion campaign several criteria have to be met.
Yeshin (1998) introduces the idea as follows:
 Setting the objectives must be done in a proper way in terms of obviousness and
conciseness
 Measurement of the targets is commonplace

34
 Placing unrealistic aims has no sense
 Financial covering of the campaign must be sufficient
Alvarez and Cassielles (2005) highlight that sales promotion cannot be realised as an
extemporisation, conversely, detailed devices should be worked out.

Sales promotion objectives


There are two types of sales promotion objectives. These are consumer objectives and trade
objectives and both of them will now be considered in turn.
Consumer objectives
Consumer objectives focus on the final user. There are a number of aspects that fall into this
category. Firstly, there is the increasing use of customer registers, both current and prospective,
by firms (Yeshin, 1998). Then, there is the persuasion of consumers to try new or current
merchandisewhich Rowley, (1998) identifies a main objective of sales promotion. The success
of such a campaign is also dependent on the nature of the promoted product and the consumers’
involvement in the purchase (Fill, 1999). For more facts, see Figure 3.4.

Figure 2.5: A sales promotion objectives grid


Involvement

High Low

New Without sales Use sales promotion


product or promotion to stimulate trial
market

Established Non-loyals – use for Non-loyals – use


product or switching sales promotion to
market attract for trial
Loyals – use carefully
Loyals – use sales
promotion to reward
for increased usage

Source: Fill (1999, p. 363)

35
From the figure above several issues can be observed. For current merchandise or services, the
strategy is apparently either to boost the usage or to persuade new customers to purchase a
product. Thereafter, the levels of usage and trial for the particular market segment have to be
approved (Fill, 1999).

A further consumer objective is product re-purchase/loyalty. The aim of this objective is to


create repeated shopping in the short-term strategy and for the long term to originate the
consumer loyalty (Alvarez and Cassielles, 2005). Increase rate/frequency of purchase has
suchlike objectives as the former one; the achievement may be reached by showing new
utilisation of the current product (Yeshin, 1998). Trading up is another consumer objective.
Fill (1999) describes trading up as a technique where the producer prepares the promoted
product in small quantities and gives it in the consumers’ disposal in order to persuade them
to buy larger amounts later. Parsons (2003) summarises that because of its quick operation
sales promotion is useful when launching a new product or when the producer’s intention is to
overcome the difficulties connected with some periods of the product life cycle.

Trade objectives
There are a number of trade objectives which the manufacturers may seek to meet. Resellers
frequently use traffic buildingto lure the customers to visit the store where the particular
promoted merchandise can be purchased (Dawes, 2004). This means profit for both partners
of the distribution channel – the producer and the retailer as well. The other trade objective is
inventory building. Because of the producer wants the customer to buy greater amounts of the
goods he or she also wants to convince of extensive inventory is available (Närhinen, Nissinen
and Puska, 2000). On the other hand, as Yeshin (1998) suggests, the producer may develop
new product so he wants the reseller to diminish his or her inventory. Parsons (2003) assumes
that sales promotion is due to its ability to react quickly could be used to decrease the effect of
competitive doings, which is another type of trade objectives. There is another option how to
support the trade. In congruence with Yeshin (1998), many aims of support to trade could be
observed: in-store sampling, seasonal production (swimming suits, ski, and many others),
impetus to try new products and so on. Lucas (1996) presumes that in-store promotion appears
to be not very profitable. Närhinen, Nissinen and Puska (2000) add that the company might
seek to rejuvenate decreased sales with proper sales promotion.

36
2.10 Sales promotion techniques
Basically, there are three members of the distribution chain, all of them having distinct
objectives. In this part, all the aims will be shown in more depth. First, techniques that
manufacturers use to cooperate with resellers, second, the methods of maintaining the relations
between resellers and consumers will be mentioned and third, the main attention will focus on
techniques used by manufacturers to attract consumers. To illustrate the possible channels of
distribution, see Figure 3.5. The company investigated in this research is presented as
manufacturer dealing with final consumers. Therefore, we will focus on objectives connected
with manufacturers and resellers in more depth.

Figure 2.6: Consumer marketing channels

Manufacture Consumer
r

Retailer

Wholesaler Retailer

Source: Adapted from Kotler (1994, p. 529)

Fill (1999) emphasises that manufacturers who try to persuade retailers to stock their
merchandise frequently use these kinds of concessions:
 buying allowances – the retailer is enabled to keep particular amount of goods in
recurred for certain orders
 merchandise allowance – the reseller is entitled to keep arranged amount of goods
without paying for it
 competition for the retailers – aimed to underpin the retailers’ accomplishment
 further training for the resellers without charging

37
On the other hand, there are objectives which are important for resellers to attract final users.
Joint promotion and joint advertising are aimed to entice the public to visit the place of
purchase (Yeshin, 1998; Fill, 1999). There are a number of techniques which manufacturers
seek to follow to gain consumers’ attention. These will be now discussed in turn.

First, we will consider sampling. Fill (1999) presumes that sampling has the most impact on
consumers. It could be provided as presentation in front of customers, small amounts designed
to trial or usage of the product promoted free of charge as he notes as well. He continues that
the cosmetic industry often applies perfumed space on pages of magazines for women, which
seems to be pioneering method of how to make the trial less difficult. However, he points out
that this technique belongs to the more expensive ones. On the contrary, Williams (1994)
believes that sampling in spite of its high costs has been observed as an integral part of
department stores more and more. Another type of the techniques utilised by producers is
couponing. Williams (1994) indicates that coupons have greatest impact on empowering sales
of merchandise in the sluggish phase of product life cycle. He ascribes them the virtue to
vitalise dropping market share or fire up staid merchandise in the progressive marketplace.
Coupons, as Peattie and Peattie (1995) assume, can take significant role when trepanning the
consumers to enter new department store, which could cohere with meeting trade objectives
introduced above. Consumers obtain coupons either through retailers or immediately from
manufacturers as they could be called as one of the most effective brand-switching tool (Fill,
1999). Still, the customer in enabled to obtain certain goods for lower price with this voucher,
when buying the merchandise the customer shows the appropriate voucher as stated in the
study. Yeshin (1998) and Fill (1999) concur that the voucher could be added to another product
which leads the public to buy one product whilst exert the price reduction for the second one
or the benefit could be related to two products from different range. Indeed, the consumer bears
in mind these two products (Srinivassan and Anderson, 1998). However, Srinivassan and
Anderson (1998) argue that coupon implementation requires more money and time. As
described above coupons can be provided immediately to customers, which enables the
producer to aim on specific group of consumers and as Fill (1999) highlights this is more
expensive or through media, which carries the advantage of wide intensity of impression.
Moreover, Williams (1994) adds that using coupons has main drawbacks of shipping expenses,
profusion and other disadvantages should be born in mind. Additionally, Garretson and Clow
(1999) remind that another marketing tool should accompany the couponing technique. To
lead the sales promotion campaign to successful end the producer might provide some price-
38
offs. Price-offs mean that the manufacturer marks the merchandise that the customer could
accurately see that the price is lowered (Fill, 1999). Alvarez and Cassielles (2005) maintain
that price-off or money-off are very common promotion techniques as they are effective when
attractive customers. In addition, Yeshin (1998) explains that the new price is frequently
highlighted on the package itself, entirely or as a percentage to the previous price.
Nevertheless, the author speculates there are drawbacks linked to this method – all the
consumers will be exposed to that price reduction, not the faithful ones only. As Rapp and
Collins (1987) agree price offs could be implemented within several days without previous
examining the expected outcome. Peattie and Peattie (1995) warn about the possibility of price
wars when exaggerating price-off techniques among competitors. Bonus packs belong to other
sales promotion techniques. Using them expresses selling bigger value (two packs instead of
one) for unvarying price (Fill, 1999). Yeshin (1998) develops this idea by splitting up the term
“bonus pack”:
 Bonus pack itself - the package is augmented without paying more, the increased
amount labelled absolutely or as a percentage of the regular volume
 Banded pack - two or more products are fixed together
Thereafter, Yeshin (1998) notes that the producers’ option relies on his or her potential;
the first technique involves capacities for enlargement of the package, which is naturally
not inherent to all companies, the second one needs extensive workforce and more time
for fixing the packages. Another type of sales promotion technique used by
manufacturers to gain consumer’s attention is a free gift. Yeshin (1998) concentrates
on these types of a free gift:
 On-pack free gift - the additional product is supplemented to the regular one (for
example a CD appended to a magazine)nevertheless, larcenies could be regarded as an
important shortcoming
 In-pack free gift - the added product is hidden inside ordinary merchandise
 With-pack free gift - useful in cosmetic industry
 The pack itself - the package could be used again after utilisation of the goods
The survey of Yeshin sustains that all these practises when used properly enrich the brand with
significant worth in the consumers’ mind, this technique operates as a tool to set of from its
rivals. Moreover, Yeshin (1998) refers that the producer may want to boost the loyalty with
creating more ensuing free gifts so that the customer is tempted to buy a certain product in
particular period of time gaining this free gift within. In addition, there is another allurement

39
for the public: sweepstakes and contests. Fill (1999) describes contest as the promotional tool
where consumers emulate in faculties or workmanship to obtain some award, whereas
sweepstakes are competitions where the person awarded has to be chosen accidentally. Easier
selection of winners belongs doubtlessly to advantages of the latter technique, which maybe
leads to its greater popularity as the research concludes. Yeshin (1998) cites that on the one
hand contests and sweepstakes could be observed as good chance how to create aura to the
brand as a whole, balanced against the time difficulties connected with setting up the
campaign. Williams (1994) punctuates the relevancy of public, which should be impressed by
the promotion. Pursuant to his survey, children belong to the most influenceable ones. On the
other hand, smart cards can be perceived as the tool of future. Williams (1994) accentuates
smart cards as further developed cards imposed mostly in the USA. He emphasises that these
cards contain many information about the holder useful when the individual wants to pay for
the purchase. It is able to keep information about the date of emption and when it comes to
payment at the checkout reader, personal greeting could appear on the screen afterwards as the
author says. Furthermore, Rapp and Collins (1987) point for previous shopping come forward
and finally, the price for all goods is automatically subtracted when price reduction promotions
are being in progress. Instead of showing the present at the store itself, the customer may
receive the gift by mail (Yeshin, 1998). He suggests that obtaining the present can be
conditioned by increased amount of buy; the extra value can be sumptuous which, of course,
proves more value for the receiver. In accordance with his study, this technique can serve to
set apart to the company’s rivals. However, there are other costs linked with this practice such
as postage, wrapping for example, which causes many expenditures to start the campaign as
the author warns. Self liquidating offers may be a different sales promotion method. Using
self-liquidating offers does not require many costing items because part of the costs is inherent
to the individual and the second part (selling, exposure) belongs to the firm as Fill (1999)
notes. Self-liquidating offers can be seen in the car industry, exceptional form could be noticed
when considering some media emulation (Yeshin, 1998). To demonstrate, he describes the
process on the example of a phone call that the applicant has to complete to win the apprised
award, for instance to answer particular question, however the respondent is not aware that the
he or she call will pay for the call with increased sum of money compares to usual charge. The
disadvantage to its low costs could be that this is not able to boost the sales like other
promotional tools, furthermore, no special merit to the public is provided as the author reasons.
In conclusion, Lazar (2005) refers to unlawful types of sales promotion such as lottery

40
gambling. The company may use a specialised agency to prepare the whole promotion
programme (Kramer, 2005).

Public Relations (PR)


Every company has PR, even if it objects it (Murray, 2001). Public relation is a mean of
communication with external and internal stakeholders of the firm. In this chapter various
aspects of PR will be discussed. First of all, the benefits of PR will be explained. Second,
various functions of this marketing tool and finally, different types of PR techniques are
described.

Benefits of PR
Yeshin (1998) sees the major objective of PR as being able to create goodwill and to provide
enough information for the consumers that they will sympathise with the company’s
performance and comprehend its philosophy. Moreover, Haywood (1998) presents PR as an
excellent mean of sharing information with the company and its stakeholders. Equally
important, Murray (2001) remarks that PR seems to be multilateral and originative compared
to other marketing tools.
Compared to advertising, PR offers the advantage of being somewhat more trustworthy
because the public perceives the information about the firm in a different way (Koprowski,
1995; Yeshin, 1998). Additionally, traces of particular media methods could be encoded in the
PR theme, which delivers the certain mission with more reliability (Koprowski, 1995).
Koprowski states that PR seems to be less costly in contrast with advertising, as there are no
extra costs for the media vehicle. Moreover, as the study shows, PR possesses the ability to
transmit the target information immediately to concrete public, which could be more
problematic when using advertising. PR, like no other form of marketing communication, has
the faculty to generate exceptional outcomes helping to foster the company’s image
(Koprowski, 1995; Yeshin, 1998). Conversely, as the investigations confirm, the scarcity of
PR is doubtlessly its inability to regulate the communication because the exposure to the
audience and the final appearance of the message belongs to the media.

41
Functions of PR
PR plays a momentous role in the whole marketing mix. There is evidence that using PR can
meet a variety of objectives.

The company is operating within a constantly varying environment thus it cannot consider its
position in the marketplace as static; its task is to pursue the widespread awareness of the
institution’s performance in the overall view and regulate it to the company’s benefit (Yeshin,
1998; Murray, 2001). Moreover, executive bodies have to be continually informed about the
company’s conduct to make sure that the association’s actions do not trespass the generally
honoured political and social norms (Yeshin, 1998). The management of organisations
concerning high-tech production, as Seitel (2001) highlights, rely on good PR, as it is the only
way of setting up in an environment full of rivals. One could also say, public affairs entails
maintaining relationships with different stakeholders such as press, public enterprises, trade
unions and government (Varey, 1997). Every company, according to Yeshin (1998), should
both create and look after good connections with the public organisations because the local or
global administrators express opinions towards many activities carried out by businesses. PR
is an excellent tool for maintaining contacts both within the company and outside (Yeshin,
1998). Announcing the organisational involvement in “charity donation” programmes could
be, as Wilson (2000) postulates, an admirable example of creating positive publicity. All the
stakeholders should be aware of the company’s situation within the marketplace and PR uses
a variety of techniques to inform them (for example periodicals for internal or external use).
The main objective of profit-making organisations is to create enough financial revenue. As
noted above, the company operates within structuralised surroundings of stakeholders, whose
perception of the organisation’s accomplishment seriously influences the amount of income
achieved. The company’s action should be presented truly to the public because negative
meaning from outwards could shape future failures (Yeshin, 1998). Additionally, in-house
activities develop the previous point, highlighting the importance of establishing and keeping
good communications with the internal employees, as they create the core of the company and
negative information routes within the top-down management could cause earnest problems
in production and, therefore, influence negatively the public perception of the enterprise
(Yeshin, 1998). Furthermore, Wilson (2000) emphasizes the advantages of employee
volunteer programmes as a marvellous integrative communication policy. PR promotes not
only the organisation’s name but it is responsible for providing appropriate information about

42
its merchandise and services as well (Yeshin, 1998). Also, boosting consciousness about new
product is nowadays more likely to take the form of PR rather than advertising (Seitel, 2001).
Financial press and financial experts could be regarded as two major financial stakeholders
(Murray, 2001). One of the most important issues connected with the organisational
performance is unquestionably dealing with the financial analysts, who assess the corporate
output by, for example, setting value to the company’s shares (Yeshin, 1998). Preparing and
rendering sufficient and quality information can be regarded as one of the PR’s task (Saffir,
2000). Besides, media relations’ objective is to drive attention and constant awareness (Varey,
1997). Maintaining good connections with media come under the key concern of PR as many
of the organisational missions are developed with the help of them (Yeshin, 1998). Media
consist of people with their own estimation of what the organisation is doing, thus creating
positive relationships with the media employees could almost guarantee that the messages
conveyed through the intermediary will correspond to the company’s concept (Yeshin, 1998).

PR is not only about hard work, Yeshin (1998) suggests that one of the very important issues
of PR is to take proper actions in local or global occasions. He proposes that the enterprise
should organise some amusing project to reinforce good connections with the influential
stakeholders such as employees or resellers. One could also say that providing these ‘leisure’
activities enables the company to discover hidden needs and problems of stakeholders
(Murray, 2001). Overall, business sponsorship means, according to Yeshin (1998), that the
organisation’s name could be linked to a particular event, which could build a strong brand
value to customers. Moreover, Varey (1997) says that the audience is much more likely to bear
in mind the promoted brand after such event. The firm must plan the PR process to meet the
corporate objectives set for the particular campaign; the functions of PR are simply not enough
to achieve agreed goals. To understand how the PR process is planned, look at Figure 1.8.

43
The identification of PR
problems/opportunities

The planning of PR activities

Implementation of plan

Evaluation of plan

Figure 2.7: The PR planning process


Source: Yeshin (1998, p. 262)
The process is introduced by identifying PR problems and opportunities. This represents a
fundamental for planning necessary PR activities. The following step is implementation of the
plan and the final step involves evaluation of the plan in congruence with the initial problems
and the activities approved.

44
Chapter-3
Sales Promotion Schemes in India

We all have seen TV commercials.A few seconds TV commercial costs lakhs of


rupees.Most of the advertisements/commercials belong to FMCG sector. This sector has
the highest advertising expenses, because the proportion of sales has kept the expenses
nearly proportionate to growth in income. The Indian FMCG sector is that the fourth largest
sector with in the economy.There is a powerful MNC presence and is characterised by a
well established distribution network, intense competition between the organized and
unorganized segments and low operational price. Easy availability of raw materials,
cheaper labor prices and presence across the whole price chain offers India a competitive
advantage.

The FMCG market has become triple between 2003 and 2015. Penetration levels have also
increased as per capita consumption in most product classes like jams, toothpaste, skin
care, hair wash etc in India is low indicating the untapped market potential. World’s second
largest Indian population, notably the center category and therefore the rural segments
present a chance to manufacturers of branded merchandise to convert shoppers to branded
merchandise. Growth is additionally doubtless to return from shopper 'upgrading' within
the matured product classes. With more than two hundred million individuals expected to
shift to processed and prepacked food by 2016, India desires around more than US$ 31
billion of investment within the food-processing trade.

India - an outsized commodity spender


An average Indian spends around forty per cent of his financial gain on grocery and eight
per cent on tending merchandise. The massive share of fast-paced commodity (FMCG) in
total individual payment beside the massive population base is another issue that produces
India one amongst the most important FMCG markets. Even on a world scale, total shopper
expenditure on food in India at US$ a hundred and twenty billion is amongst the most
important within the rising markets, next solely to China.

45
Brand Defined:
There are several definitions of what disapproval is and therefore the common thread in
most of those definitions is that a brand should be clearly differentiated. the sooner
definition of a complete was projected by the yank promoting Association ―a brand could
be a name, term, sign, symbol, or design, or a mixture of them, supposed to spot the
products or services of 1 merchant or cluster of sellers and to differentiate them from those
of competitors (O‘Malley, 1991:107). though this definition was criticized for being too
product-oriented and with a stress on visual options as a differentiating issue, Dibb, Simkin,
Pride, & Ferrell (1997) changed this original definition to a reputation, term, design,
image or alternative|the other} feature that identifies one seller's smart or service as distinct
from those of other sellers.

The key change in the definition byDibbs et al (1997) is ―any other feature as this allows
for intangibles such as brandimage as a point of differentiation and not only the tangible
visual features.

Ambler (2003) takes on similar viewpoint to that of Dibb et al (1997) by expandingthe


definition further as a name, symbol or design that identifies one or more productand it is
something that is bought by the consumers. Ambler (2003) further emphasizethe difference
between a product and a brand by highlighting that unlike a product,which can be produced
in a factory and it can be copied by a competitor, a brand isunique. Earlier definitions by
Ambler (1995) was based on a consumer orientedapproach by defining a brand as a promise
of the bundles of attributes that someonebuys and provide satisfaction.
The attributes that make up a brand may be real or illusory, rational or emotional,tangible
or invisible. Wood (2000) supports this view and highlights that a brand canbe defined
from different perspective such as consumers' perspective and/or from thebrand owner's
perspective. In addition, brands are sometimes defined in terms of theirpurpose, and
sometimes described by their characteristics.

According to Leiser (2004), the understanding of brands today is far beyond thesimplistic
view of a logo, tagline or advertising image but a set of expectations andassociations
evoked from experience with a company or product. Furthermore, it is allabout how
customers think and feel about what the business or product can deliveracross the board.

46
Batey (2008) elicit differences between a product and a brand asfollows: You buy a product
for what it does; you choose a brand for what it means.
• A product sits on retailer‘s shelves; a brand exists in consumers‘ minds.
• A product can quickly be outdated; a brand is timeless.
• A product can be copied by a competitor; a brand is unique.

Davis (2002) reiterates that consumers do not have a relationship with a product orservice
but he/she may have a relationship with a brand because a brand is a set ofpromises and
therefore the strongest brands own a place in the consumer‘s mind.Furthermore, strong
brands can increase the value of a company as investors arewilling to pay more for
intangible asset such as a strong brand (Motameni andShahrokhi, 1998; Davis 2002;
Ambler, 2003; Rooney, 1995). In the context of thisresearch paper, the question could be
asked ―What is a strong brand?

According to Aaker (1996), a strong brand has a strong brand equity which is a set ofassets
such as: brand name awareness, brand loyalty, perceived quality and brandassociations.
However building strong brands is a challenge in today‘s environment asthere are
substantial pressures and barriers both internal and external. Aaker (1996),further
highlights that one needs to understand these pressures and barriers in order todevelop
strong brand strategies. Some of the barriers highlighted by Aaker (1996) are:price,
proliferation of competitors, fragmented media and so forth.
Barron (2003) takes on a view that strong brands are built on a solid internalfoundation
based on four fundamentals:
• Create brand intent
• Align the organization
• Deliver customer experience
• Measure and refine
Creating brand intent maximizes the area of intersection between what a companydoes well
and distinctively and what its targeted customers want or need. When brandintent is clear,
it is important the whole organization is aligned to ensure that theentire organization is able
to deliver the brand intent as this will help deliver customerexperience through
organizational capability and processes. Finally, a good evaluationprogramme will ensure
that brands stay onintent (Barron, 2003).

47
Nandan (2005) suggests that strong brands have two very key distinct features namelybrand
image and brand identity however no matter how good a company is such ashaving a
unique vision, strong management or superior product if the core benefits ofthe brand are
not clearly communicated to the right target audience, the brand willultimately fail. This is
evidenced by well known strong brands such as Coke, Pepsi, Mac Donald‘s, Nike, Apple
etc. that are always communicated with clear benefits, brand image and identity. Also,
managers of strong brands understand the changingneeds of consumers and the micro and
macro environments. According to Davis (2000), an understanding of competitors is vital
in building a strong brand and thefailure to understand one's competitors is ultimately the
failure to know one's customers: who they are, how they think, and how the brand can be
adapted to meettheir needs.

Strong brands are developed over time and the branding literature increasinglysuggests that
the strength of a brand is not due to the strength of creating a differencein customer
perceptions but rather brand strength is due to the meaning that the brandcreates (Kay,
2005). Brands however need to be relevant and appeal to the newgeneration of consumers
and that is why branding has evolved over the years andstrong brands are always being
revitalized to maintain relevancy and to attract new consumers.

The evolution of branding:


The definition of branding has evolved over the years and the Oxford English dictionary
(Oxford, 2009) traces the development of the word ―brand from theGerman word
―brandrwhich referred to the mark made by burning with a hot ironand its usage was first
noted in 1552. According to Jevons (2005), branding wasdiscovered long before the earliest
definition of marketing in 1561 which thereforestrongly suggests that branding was defined
before the marketing subject wasdiscovered. Over the years the definition of branding has
evolved from referring to a brand as a name, symbol or logo (O‘Malley, 1991:107) to
people‘s perception abouta product or a company (Barron, 2003) and over time definitions
within the businessliterature have included value enhancement or adding value (Jevons,
2005).

According to Rooney (1995), the use of branding by big business is nothing new
andbranding itself is more than one hundred years old with the majority of countrieshaving
started trademark acts to establish the legality of a protected asset as far backas 1890. The
48
years 1800 through to 1925 were known as the richest period of namegiving (Hambleton,
1987). The 90‘s saw a change in branding with a focus oncreating mutually beneficial
situations for the consumer and the brand. According toBerry (1993), many companies
realized that they needed adequate price controlmeasures and effective and efficient brand
building activities to strengthen the brandequity. Companies started applying brands to
more diverse settings where the role ofbranding has become more important.

The harsher environments in the 90‘s forced organizations to work harder to gainprofits
and thus there was a shift in the way brand management was organized as itbecame a team
effort within organizations with a focus on enhancing the customerexperience (de
Chernatony, 1996). The concept of branding also became moreglobalised with global
brands gaining more recognition and value. According toMotameni and Shahrokhi (1998),
brands that are available in many different countrieshave more value than brands that are
available in a fewer markets.

Over the years, companies have used branding as part of marketing strategy to grow and
diversify their businesses and during the 1980‘s, brands were used as valuableassets for
takeovers on the open market and this saw a rise in acquisition of brandedcompanies
(Rooney, 1995). The increase in acquisitions in the 80‘s resulted in manybrands suffering
because of the change in management that is always associated withacquisitions and this
resulted in many brands losing a clear image in the consumersmind (Rooney, 1995).
According to Beverland (2005), brands have always been commercial agents andbrand
managers take pride in their ability to meet the needs of their target market.However, these
two desires are in conflict with the recent trend towards positioning brands as
authentic,emphasizing the timeless values desired by consumers whiledownplaying
apparent commercial motives. The dual problem for the firm is increating images of
authenticity while dealing with the challenge that authenticitypresents for brand
management. As such brands that seem to be too focused on thebottom line and not on
societal issues are sometimes viewed as not authentic. According to Henkel, Tomczak,
Heitmann & Herrmann (2007), market saturation andconsumer confusion have changed
the role of branding dramatically during the lastdecades. Consumers therefore try to handle
the flood of apparently exchangeableproducts and services by demanding those goods that
provide a holistic and coherentconsumption experience. As a result, brands are no longer
simple product labels, butthey are communication platforms towards customers and other
49
stake holders thatconvey specific attributes of products or services as well as company
values andmission statements. Kunde (2002), highlights that today, however the western
world

is over supplied and there is an over abundance of everything and we live in an era ofexcess.
Offering more of the same is no longer a viable option and differentiation anduniqueness
are important. Kunde (2002) further highlights that there is only one place that marketers
must be serious about and that is the human mind.

However no matter how much marketing support goes behind abrand, it is important that
the right message about what the brand stand for iscommunicated. Today, brand
management is still as complex as it was before asbrands are not static but evolve all the
time and the role of brand custodians is toensure that the brand remains relevant in
consumers‘ mind and repertoire.

Sales promotion By E-Commerce- In the recent years,E-Commerce has


become very famous.Large ventures over the globe have encountered critical changes in
their business data framework. Enormous speculations were made in big business asset
arranging frame work usage yet they strive to get convenient data that is required to settle
on successful business choice and to guarantee ceaseless development of undertakings.
Setting "e" before any procedure or capacity appeared to be the enchantment medicine for
endless story of achievement and quick returns for endeavors. E-business, e-obtainment, e-
deals, e-installment, e-keeping money, e-CRM, e-CAD, e-conveyance are simply a couple.
Web, for instance is turning into a standout amongst the most well known medium in
transmitting different information. Clients can discover any sort of data inside a shorter
time contrasted and traditional system that devours more of a chance.

The rise of the Internet through out the world has been helping such a mixture medium in
working together and additionally lifestyle of individuals. Indeed, Internet is crucial and
essential for the presence of E- business. Electronic business or e-trade has been
characterized as the capacity to perform transactions including the trade of merchandise or
administrations between two or more gatherings utilizing electronic devices and strategy.
The blast of E-business has made new phenomena in our lifestyle particularly in shopping

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exercises. Buyers can without much of a stretch purchase items or administrations like
magazines and carriers tickets by means of Internet. Internet is the component which has
recently turns out to be the main ingredient of fast and advance lifestyle. The purpose of
Internet may be many like communication, exploration, social systeming and official work.
In the last few years internet has turned out to be a necessity for all. The growth of Internet
has led to a couple of new expansions like buying produces resulting in cutting cost of
produce, online transaction of money, sharing information globewidely and much more.
According to a report by C.K Prahalad,Professor,Big business school, University of
Michigan online buying reduce margin for corporations as customers turn more and more
to the internet and there they can easily compare prices of the produce and can go with the
best deal. He said that internet has truly an effectual ingredient in changing the traditional
ways of doing big business. The incessant inflow of competition will automatically
decrease the prices and in that case in long term all corporations could only earn normal
profit.

Essentially, there are three methodologies used by firms further bolstering for making good
fortune: general expense authority, separation, and centering. A general expense
administration method endeavors to offer the least cost item or administration to clients in
respect to a company's adversaries. This is based on the effective administration of the
whole esteem chain, where taken a toll must be thoroughly controlled from crude material
buys to dissemination channel conveyance. A separation methodology positions an
organization to contend on the uniqueness and estimation of its items and administrations.
Well-known brand picture, a solid notoriety and quality items and administrations are the
attributes of a separation methodology. A center technique is utilized by organizations to
position themselves in a business corner. In their specific corner they make advantage over
adversaries through either cost authority or separation strategies (Lumpin,scott and
Gregory,2002). For differentiators expense control is additionally critical, they need to
keep a level of expense equality or vicinity with respect to contenders. Differentiators do
this by decreasing expenses in all zones that don't influence separation. Differentiators may
pick up different focal points through Internet methodologies by giving very custom-made
client administration frameworks to improve deals deliberations, give quick input to clients
and suppliers, and give constant answers for administration issues. The playing point of
separation is that organizations utilizing differentiators can make proficiencies so specific
for a given client, that the change of clients turning to other result suppliers, whether
51
impersonations or substitutes, is enormously diminished (Lumpin, Scott and Gregory,
2002).

In the event that we would like to create an effective plan of action in any coliseum, not
simply e-trade, we must verify that the model successfully addresses the eight components
recorded in . These components are: quality suggestion, income model, market open door,
aggressive nature, preference, market system, hierarchical improvement, and
administration group (Ghosh, 1998). Numerous essayists concentrate on an association's
quality recommendation and income model. While these may be the most essential and
most effortlessly identifiable parts of an organization's plan of action, alternate components
are similarly critical when assessing plans of action and arrangements, or when
endeavoring to comprehend why a specific organization has succeeded or fizzled (Kim and
Mauborgne, 2000). In the accompanying area, we depict each of the key plan of action
components all the more completely.

Execution of e-governance is quite obviously not going to be very smooth or easy. There
is still an enormous confusion among implementing agencies in the understanding of what
exactly e-commerce and e-governance are and how to go about it. Few of these
corporations have insufficient internal computer personnel who have their own confines in
understanding and implementing e-governance schemes. This does not allow them to act
as a bridge flanked by the corporation and professional external corporations. In order to
evolve a single point service, there is also a need for integration and convergence of
services offered by different departments. All-embracing coverage of rural areas is also
going to take more time.

The initiatives here are vital despite these set of rules. The situation for e-commerce
expansion itself would be furthered and strengthened by using the Internet as a tool for
‘electronic governance’. The principle here is that in promoting big business on-line,
administrations will aid the delivery of goods, services and information. This will enable
more traffic across data systems, which in turn, will serve to generate the revenues and
speculation rationale needed to support further communications expansion.

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The impact of E-commerce changes will be dramatic in our country.Serious plans are
compulsory in India to augment the output of skilled professionals in order to meet the
growing demand within the country itself; otherwise the shortage would affect our own
growth in e-commerce. The issue of 'brain-drain' has been talked about for years. Many
though see it today as a 'brain-gain' on account of the tremendous benefits in the IT sector
that these professional have and are bringing to the country. Though, a more serious issue
that needs to be addressed at the international level is what could be referred to as the
surreptitious creation of ‘high-tech indentured labor’. The developed globe, to meet its own
shortages and needments, decides on both the timing and conditions of importing such
professionals from growing nations. In times of recession, they shed such jobs and
repatriate the professionals. There is a srong point of view negotiated by administrations
on mutually beneficial terms and conditions? In India, we need to have a national debate
on this issue and also raise it at the multilateral level at corporations such as the WTO on
the one hand, while putting in place an agenda to gain from the financial prospect, on the
other.

Across the country, the needment of software engineers is being addressed by plans to
increase the capacity in the State-run university system on a two to three year programme.
Quite unplanned but rather accomplishment fully, this has been matched by the booming
private sector educational services in IT and e-commerce that have proliferated across the
country. Even though education has traditionally been a State responsibility, thousands of
private software and e-commerce training institutes have mushroomed all across the
country—and not just in the big metros. In fact training and education is itself emerging as
a new e-commerce export activity with few of of the bigger players in the field of computer
education now setting up branches abroad and portals on the Internet. These teverying
shops make available training from software programmes to e-commerce practices and
web-services like medical transcription. The growing demand for such proficiency is today
creating several employment opportunities. Though, the issue of standards, certification,
and gratitude of these training programs is still to be addressed. Few of amount of
regulation will be necessary here, lest young students and their poor parents get cheated by
few of these highly priced teverying shops. Administration policies and plans of e-
education also need to be aligned with what is happening in the market.

53
An organization's worth suggestion is at the precise heart of its plan of action. A worth
suggestion characterizes how an organization's item or administration satisfies the needs of
clients (Kambil, Ginsberg, and Bloch, 1998). To create and/or investigate an association's
worth recommendation, you have to comprehend why clients will decide to dobusiness
with the firm rather than an alternate organization and what the firm gives that different
firms don't and can't. From the purchaser perspective, fruitful e-business quality
suggestions include: personalization and customization of item offerings, diminishment of
item hunt costs, decrease of value finding expenses, and assistance of transactions by
overseeing item conveyance (Kambil, 1997; Bakos, 1998).

Freshdirect, case in point, basically is putting forth clients the freshest perishable
nourishment in New York, immediate from the cultivators and makers, at the most minimal
costs, conveyed to their homes around evening time. Albeit neighborhood stores can offer
new sustenance likewise, clients need to use a hour or two shopping at those stores
consistently. Accommodation and spared time are exceptionally critical components in
Freshdirect's quality recommendation to clients. Before Amazon existed, most clients by
and by flew out to book retailers to submit a request. In a few cases, the fancied book may
not be accessible and the client would need to hold up a few days or weeks, and afterward
come back to the book shop to lift it up. Amazon makes it feasible for book sweethearts to
shop for basically any book in print from the solace of their home or office, 24 hours a day,
and to know promptly whether a book is in stock. Amazon's essential worth
recommendations are unparalleled choice and convenience.in numerous cases,
organizations create their quality recommendation focused around present economic
situations or patterns. Shoppers' expanding accentuation on new perishable sustenances
instead of solidified or canned merchandise is a patternFreshdirect's authors observed, in
the same way that Starbucks' originators saw the developing enthusiasm toward and interest
for espresso bars across the nation. Both organizations viewed the business and after that
created their worth recommendation to meet what they saw to be customers' interest for
specific items and administrations.

Income Model
An association’s income model depicts how the firm will gain income, create prof- its, and
produce a predominant profit for contributed capital. We utilize the terms income model
and money related model reciprocally. The capacity of business associations is both to
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create benefits and to deliver returns on contributed capital that surpass elective ventures.
Benefits alone are not sufficient to make an organization "fruitful" (Porter, 1985). So as to
be viewed as effective, a firm must produce returns more noteworthy than option ventures.
Firms that come up short this test go out of presence. Retailers, for instance, offer an item,
for example, a PC, to a client who pays for the machine utilizing money or a charge card.
This produces income. The trader regularly charges more for the machine than it pays out
in working costs, delivering a benefit. At the same time keeping in mind the end goal to
start a new business, the workstation dealer needed to contribute capital—either by
obtaining or by dunking into individual reserve funds. The benefits from the business
constitute the profit for contribute capital, and these returns must be more prominent than
the shipper could get somewhere else, say, by putting resources into land or simply putting
the cash into a reserve funds account. In spite of the fact that there are numerous distinctive
e-trade income displays that have been created, most organizations depend on one, or some
blend, of the accompanying significant income shows: the promoting model, the
membership display, the transaction charge demonstrate, the deals model, and the partner
model. In the publicizing income model, a Web webpage that offers its clients substance,
benefits, and/or items additionally gives a gathering to promotions and accepts expenses
from sponsors. Those Web destinations that are fit to draw in the best viewership or that
have an exceedingly specific, separated viewership and can hold client
consideration("stickiness") can charge higher promoting rates.yahoo, for example, infers a
lot of income from web crawler what's more different types of web publicizing. In the
membership income model, a Web webpage that offers its clients substance or
administrations charges a membership expense for access to some or every last bit of its
offerings. For example, the online variant of Consumer Reports gives access to premium
con- tent, for example, point by point appraisals, audits and suggestions, just to supporters,
who have a decision of paying a $5.95 month to month membership charge or a $26.00
yearly expense. Experience with the membership income model shows that to effectively
beat the unwillingness of clients to pay for substance on the Web, the substance offered
must be seen as a high-esteem included, premium offering that is not promptly accessible
somewhere else nor effortlessly recreated. Organizations effectively offering con-tent or
administrations online on a membership premise incorporate Match.com and
eharmony(dating administrations), Ancestry.com (see and Genealogy.com (lineage
research), Microsoft's Xboxlive.com (feature diversions), Rhapsody Online (music),among
others.
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In the transaction expense income model an organization gets a charge for empowering or
executing a transaction. Case in point, ebay gives an online closeout commercial center and
accepts a little transaction expense from a vender if the merchant is fruitful in offering the
thing. E*trade, an online stockbroker, gets transaction expenses each one time it executes
a stock transaction for a client.

In the deals income model organizations determine income by offering products, data, or
administrations to clients. Organizations, for example, Amazon (which offers books,
music, and different items), Llbean.com, and Gap.com, every have deal income models. In
the off shoot income model locales that control business to a "partner" accept a referral
charge or rate of the income from any coming about deals. For instance, My points profits
by joining organizations with potential clients by offering unique arrangements to its parts.
When they exploit an offer and make a buy, parts win "focuses" they can recover for
freebies, and Mypoints gets a charge. Group sentiment locales, for example, Epinions
accept much of their income from guiding potential clients to Web destinations where they
make a buy.

Diagram 3.1 Business Model of Market place


Source: Emarketservices.com

According to the manufacturer and dealer’s perspective, Ecommerce entails the design,
manufacturing, marketing, positioning, distribution and delivery of product/services.

56
Network communication, Internet infrastructure and the use of information technology
make easier this process. Thus organizations are moving traditional buying and selling
activities to the web because it is a more rapid, convenient and cost and time efficient
medium. Using the Internet to take telephone orders, send faxes, make sales calls, ship
products and bill client’s benefits all involved parties.

Electronic Commerce is an electronic system that connects information resources of


information systems with the reach of network connection to directly link. The component
of information exchange of Electronic Commerce system encompasses banner,
advertisements and website containing details of products or services and electronic
catalogues providing detailed information regarding pricing, quality, delivery and payment
terms and conditions. In some systems that also provides customized offerings. This E-
Commerce has broader approach over the network. The agreement and order placement
stage is followed by the value exchange including physical or electronic commerce can be
done through traditional methods using electronic payment system like credit card, debit
card, electronic cash, electronic visa card, etc.

In the case of digital goods such as software packages, digitized music clips, digitized video
clips and other multimedia information in digital format the consignment or delivery is
done instantaneously over the network. In the case of physical goods once the confirmation
of payment validation is done online the shipment or delivery department is alerted to
prepare the delivery package and ship it according to the buyer’s advice. The business may
tie up with information systems of delivery.

E-Commerce Models
Modeling traditional paper based practices into practices appropriate for E-commerce often
proves to be a difficult task from the business perspective. For example; consider the
uncertain kinship between traditional signatures and computer based authentication
methods.

A business model is the methods of doing business by which a company can sustain itself,
that is, generate revenue. The business model spells out how a company makes money by
specifying where it is positional in the value chain. Some models are quite simple. A

57
company produces goods or services and sells it to customers. If all goes well, the
revenuesfrom sales exceed the cost of operation and the company realizes profit.

Diagram 3.2.The E-Business Model


Source: http://www.computerworld.com/article/2588708/e-commerce/e-commerce-the-
difference-between-e-business-and-e-commerce.html

Other models can be more intricately woven. Radio and television broadcasting is a good
example. With all the talk about “free” business models on the web, it is easy to forget that
in radio, and later in television. Programming has been aired free to anyone with a receiver
for much of the past century. The broadcaster is part of a complex network of distributors,
content creators, advertisers, and listeners or viewers, who makes money and how much is
not always clear at the outset.

The literature about Internet E-Commerce has offered various definitions, some of which
are listed as follows:
1. Architecture for the product, service and information flows, including a description of
the various business participants and their roles.
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2. A description of the potential benefits for the various business participants.
3. A description of the sources of revenues.
However, a business model does not discuss how it will realize the business mission of
company. For our understanding, Ecommerce can be defined as any form of business
transaction in which the parties interact electronically. Transaction in an E-Market
represents a number of interactions between parties. For instance, it could involve several
trading steps, such as marketing, ordering, payment and support for delivery. An electronic
market allows participating sellers and buyers to exchange goods and services with the
support of information technology. E-Markets have three main functions such as:
1. Matching buyers and sellers.
2. Facilitating commercial transactions.
3. Providing legal infrastructure.
Information Technology performs all the three functions and also helps to increase market
efficiency and reduce transaction costs. The Internet and the WWW allow companies to
efficiently implement these key-trading processes. For instance, many search services and
brokers are available to help buyers for finding information, products and merchants in E-
Markets. A company’s business model is the way in which it conducts business in order to
generate revenue. In the new economy, companies are creating new business models and
reinventing old models. We find business models categorized in different ways. As such
there is no single, comprehensive and cogent taxonomy of web business models one can
point to. Although there are many different ways to categorize E-Business models, they
can be broadly categorized as:
• E-Business model based on the relationship of transaction parties.
• E-Business model based on the relationship of transaction types.

E-Business Model Based On Relationship of Transaction Parties:


E-commerce is not just Business to Person or Person to Person; it is also used Business-to-
Business and Business-to- Government. “Business to consumer sites focused on taking
customer orders online before building in automated support or marketing. However,
Business to business sites is finding that they need to include value-added services to
facilitate E-procurement” Electronic markets are establishing in various fields. Each
industry has their market with different characteristics. For example Information B-to-C
market is different from the automotive B-to-B market. In the past companies that sell
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digital information goods: such as news, articles, music, books or digital video. In the B-
to-C market for information, the task of e-infrastructure is not limited to help match
customers and sellers; it also acts as delivery of large files, distribution channel, streaming
media and other types of digital goods in an efficient way. We can define this B-to-C
Internet market as an open system, where number of participants is unknown. In the
automotive B-to-B market, such parts and components of cars are sold with having high
degree of specification. The market is mainly based on EDI over expensive VAN services.
EDI involves the exchange of standardized, structured information between organizations,
permitting direct communication between computer systems. Now a day in many activities
of automotive B-to-B markets the Internet is used. At the heart of the B-to-B application is
the strong integration of different activities. Servers, networks and software should provide
the infrastructure to integrate web-based applications with mainframe and legacy systems.
In the B-to-B market the number of participants involved in trading is limited. It is also
known as closed market. It is difficult to understand the nature of the market’s
Requirement.

Apart from the ones mentioned above, there are various other e-commerce transactions
which have not yet been tested in the court of law yet, and the characterization of such
transactions still remains uncertain. Examples being payments made for the maintenance
of software, website hosting, data warehousing, data retrieval, delivery of high value data.

In addition to software payments, e-commerce income arises from online shopping portals
offering digital and tangible products, website like snapdeal.com offering and deals online
and charging a commission for them, CRS websites, e-banking. In case of online platforms
of tangible products, it is relatively simpler to characterize the income thereof as income
from business profits. However in case of composite services like e-banking, access to paid
databases, sale of digitized book issues, web hosting, etc., issues arise with respect to
characterization.

Permanent Establishment in E-Commerce

Generally, a creation of PE requires the enterprise to carry out an income generating


business in the other contracting state. In the context of e-commerce, due to the intangible

60
nature of transactions, it is difficult to determine the existence of a PE based on the existing
tests laid down for determination of a PE.

Internationally, merely advertising on a website about the products and services by itself
would not constitute a PE. However, if the business is being carried out through a website
and the website owner owns / has rented the server on which the website is hosted or
otherwise has the server at its disposal, the server in such an instance may constitute a PE
(as the server constitutes a “fixed place of business” of the enterprise). But, a third party
website hosted on a computer server of an internet service provider should not result in the
server being at the disposal of the enterprise owing the website and therefore, such hosting
should not create a server PE. This principle has been upheld by Indian courts in relation
to advertisement revenue earned by Google and Yahoo from India.

However, Indian tax authorities have been contending a website could constitute a PE in
certain circumstances and have expressed reservations to the OECD commentary in this
regard. Some other important reservations pertain to PE exposure from (i) websites hosted
on a third-party server which is not leased or otherwise available at an enterprise’s disposal;
and (ii) leased automated equipment which is not operated and maintained by the lessor
enterprise post set-up. On-line reservations and bookings for airlines, trains and other travel
agencies is often routed through CRS which allow real-time access airline fares, seating
availability, schedules and enabling the bookings, reservations and generation of tickets.
The issue of taxation of income based on the location of the CRS has been dealt with in a
few judgments. The Delhi Tribunal in the cases of Galileo International and Amadeus
Global Travel v. Deputy Commissioner Income Tax, concluded that non-resident
companies providing computerized reservation system are liable to be taxed in India to the
extent of booking fees received from Indian residents. The Tribunal came to such
conclusion on the ground that these companies have a “virtual” presence in India which
constitutes a “virtual” PE.

Making an e-trade result primarily includes making and sending an e-business site. The
initial phase in the advancement of an e-trade site is to distinguish the e-business model.

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Contingent upon the gatherings included in the transaction, e-business could be
characterized into 4 models.
These are:
• Business – to – Business (B2b) model
• Business – to – Consumer (B2c) model
• Consumer – to- Consumer (C2c) model
•consumer – to – Business (C2b) model

Business-to-Business (B2b) Model


B2B commerce is a booming big business in the e-commerce arena. With the increasing
use of the internet, more and more big business are realizing the commercial advantage of
giving clients an well organized and effectual manner to order produces or services online.
It facilitates access to the ordering process to only those with whom a concern has a
commercial relationship.

Big business to Big business e-commerce make available small and medium enter
augments[SMES] with an excellent prospect to access new market segments reduce costs
and make available better client service. Any problem faced will be viewed more as speed
breakers rather than barriers. The internet is emerging as an effectual medium of
information storage and dissemination. Its penetration rate has far outpaced the growth of
other media such as television, news study, radio etc.

B2B communication is though relatively high value in nature and corporations are slow to
change their traditional systems for the supply chain management. The reasons for the
growth in B2B e-commerce are many. In an increasing spirited scenario, e-commerce
offers highly attractive cost saving options. The shift to this process is often driven by the
needs of buyers.

Innovative methods of enhancing B2B and B2C levels of e-commerce include:

• CD-ROM catalogues that are linked to the user's online catalogue, enabling him to browse
offline and order online.
• Kiosks placed at physical store locations or in shopping malls to introduce users to the
easy online ordering options.
• Extranets to link big industries together that accomplish regular big business to big
business communication.
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• Affiliate programmes to drive big business to your commerce site from other content
related sites.

B2B e-commerce is expected to be the largest mode of transacting e-big business and is a
globe wide phenomenon. It involves taking internet enabled initiatives to form commercial
links with other enter augments, dealers or manufacturers. In this form of e-commerce, a
big business firm places orders for supplies with a newbig business firms directly over the
Internet. Study work and time compulsory for processing the order and delivery of the
goods are thus reduced to a great extent.

The B2b model includes electronic transactions for requesting, obtaining, and also other
regulatory assignments between houses. It incorporates exchanging products, for example,
business memberships, expert administrations, assembling, and wholesale dealings. Here
and there in the B2b model, business may exist between virtual organizations, not, one or
the other of which may have any physical presence. In such cases, business is directed. You
can see a striking resemblance in the case of www.amazon.com. As you know,
www.amazon.com is an online book shop that offers books structure different distributers
including Wrox, O'reilly, Premier Press, et cetera. For this situation, the distributers have
the choice of either creating their own particular site or showing their books on the Amazon
site (\www.amazon.com), or both. The distributers for the most part decide to show their
books on www.amazon.comat it provides for them a bigger gathering of people.

Presently, to do this, the distributers need to transact with Amazon, including business
houses on both the finishes, is the B2b model. Consider a theoretical illustration. ABC
organization offers vehicles parts and XYZ organization collects this part and after that
offers the auto to clients. XYZ organization goes over the Web webpage of ABC and thinks
that it suitable. XYZ along these lines, demands for more data about ABC lastly, chooses
to buy vehicles parts car from ABC. To do this, XYZ submits a request on the Web website
of ABC. After ABC accepts the request subtle elements, it approves the data. When the
request is affirmed, the installment methodologies are settled. At last, ABC sends an
acknowledgement of installment to XYZ and conveys the products according to the
shipment points of interest settled on the two associations. The focal points of the B2b
model are:

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• it can productively keep up the development of the inventory network and the assembling
and getting methods.
• it can computerize corporate methodologies to convey the right items and administrations
rapidly and cost-viably.
The B2b model is anticipated to turn into the biggest quality segment of the business inside
a couple of years. This is said to be the quickest developing part of e-trade
Favorable circumstances:
• help to computerize interchanges between organizations making them simpler and
speedier
• allow cutting costs radically
• help in diminishing oversights

Burdens:
• often need legacy incorporation.

Significant BUSINESS-TO-BUSINESS (B2b) BUSINESS MODELS


Big business to Customer E-commerce [B2C]
This is for the clients to buy stores from the websites. The problem arises to be recognized
in this is to secure payment, using encryption, transaction integrity, quick response, time
and reliability.

B2C e-commerce involves selling of goods and services to customers or end users. It allows
them to browse the produce catalogue, select produces or services and complete the order
online.

In a B2C transaction, the interaction is flanked by a customer and the preferred big
business. For example, the most well known site is amazon.com, which is the first online
bookseller who has proved a potential competitor to the traditional bricks and mortar
booksellers such as Barrens and Noble.

In this group of e-commerce, big industries use the internet to offer to customers sales and
services around the globe 24 hours a day, seven days a week and 365 days a year, the sites
Amazon, Rediff and Uphar are among those belonging to this group. These websites are
meant for selling goods directly to customers throughout the internet. The two-way
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accessibility of the internet enables operating corporations to directly ascertain client
preference and buying trends. Big industries are using these customer insights to formulate
marketing strategies and offer to the clients what they want and when they want. E-big
business in this mode significantly reduces the costs associated with intermediaries, service
centers and mass marketing campaigns. As e-commerce makes just in time delivery
potential, the supplier does not have to store the goods. He can procure them from the
suppliers as and when he gets the order from the buyer throughout the internet.

B2C is the most well known form of e-commerce, wherein the individuals are directly
concerned in B2C e-commerce, and big industries use the internet for offering their
products or services 24 hours a day throughoutglobewide access. The sites Amazon.com
and Rediff are among these. These websites spell goods directly to customers over the
Internet. The two way accessibility feature of the internet enables operating corporations
to ascertain customer preferences and buying trends directly.

Portal:
Portals like Yahoo, MSN/Windows Live, and AOL offer users both web search tools as
well as content and services such as news, e-mail, instant messaging, calendars, shopping,
music downloads, video streaming and more, all in one place. At first, portals wanted to be
viewed as “gateways” to the Internet. They are marketing themselves as places where
people will start their Web searching and hopefully spend a long time to read news, find
activity, and meet other people. As portals do not sell anything directly or so it seems and
in that sense they can present themselves as unbiased. The market prospect is very large:
In 2008, about 173 million people in the United States had access to the Internet at work
or home [e-Marketer, Inc., 2008a]. Portals generate revenue primarily by charging
advertisers for ad placement, collecting referral fees for routing clients to other sites, and
charging for premium services. AOL, MSN [in conjunction with Verizon], and Yahoo [in
conjunction with AT&T]—which in addition to being portals are also Internet Service
Make available[ISPs] that make available access to the Internet and the Web—add an
supplementary revenue stream: monthly subscription fees for access. Although there are a
number of portal/search engine sites, the top five sites[Google, Yahoo, MSN/Windows
Live, AOL, and Ask.com] gather more than 95% of the search engine traffic because of
their superior brand gratitude[Nielsen Online,08]. Many of the top sites were among the
first to materialize on the Web and therefore had first-mover advantages. Being first confers
65
advantage because clients trust a reliable make available and also experience switching
costs if they change to late arrivals in the market. By garnering a large slice of the
marketplace, first-movers—just like a single telephone system—can offer clients access to
commonly shared ideas, standards, and experiences [few of thing called system
externalities that we illustrate in later chapters].

Yahoo, AOL, MSN/Windows Live and others like them are considered horizontal portals
as they define their market space to include all users of the Internet. Vertical portals [few
of times called portals] attempt to make available similar services as horizontal portals, but
are focused around a particular subject matter or market segment. For instance, Sailnet
specializes in the customer sailboat market that contains about 8 million Americans who
own or rent sailboats. Although the total number of vertical portal users may be much lower
than the number of portal users, if the market segment is attractive enough, advertisers are
ready to pay a premium in order to revery a targeted audience. Also, visitors to specialized
niche portals end up spending more money than the average Yahoo visitor. Google and
Ask.com can also be considered portals of a sort, focus primarily on offering search
services. They generate revenues primarily from search engine advertising sales and also
from affiliate referral fees. For more information, see Insight on Proficiency: Search, Ads,
and Apps: the Future for Google [and Microsoft].

E-tailer :
Online retail stores, also known as e-tailers, come in all sizes. From giant Amazon to tiny
local stores that have Web sites. E-tailers are similar to the typical bricks-and-mortar
storefront, other than the fact that clients only have to connect to the Internet to place an
order and to check their inventory. Few of e-tailers, which are referred to as “bricks-and-
clicks,” are subsidiaries or divisions of existing physical stores and carry the same
produces. JC Penney, Barnes & Noble, Wal-Mart, and Staples are four examples of
corporations with complementary online stores. Others, though, operate only in the virtual
globe, without any ties to physical locations. Amazon, BlueNile.com, and Drugstore.com
are examples of this type of e-tailer. Several other variations of e-tailers—such as online
versions of direct mail catalogs, online malls, and manufacturer-direct online sales—also
exist [Gulati and Garino, 2000]. Given that the overall retail market in the United States in
2008 is predictable to be around $4 trillion, the market prospect for e-tailers is very large
[U.S. Census Bureau, Financial and Statistics Administration, 2008]. Every Internet user
66
is a potentialclient. Clients who feel time-starved are even better prospects, as they want
shopping solutions that will eliminate the need to drive to the mall or store [Bellman, Lohse,
and Johnson, 1999]. The e-tail revenue model is produce-based, with clients paying for the
purchase of a particular item. This sector is extremely spirited, though. As barriers to entry
[the total cost of entering a new marketplace] into the Web e-tail market are low, tens of
thousands of small e-tail shops have sprung up on the Web. Becoming profitable and
surviving is very hard, though, for e-tailers with no prior brand name or experience. The e-
tailers’s challenge is making its big business unique and differentiating its big business
from existing stores and Web sites. Corporations that attempt to revery every online
customer are likely to reduce their possessions quickly. Those that clearly identify their
target market and its needs are best prepared to make a profit. Keeping expenses low,
selection broad, and inventory controlled are keys to accomplishment in e-tailing.

E-Distributor
Organizations that supply items and administrations specifically to individual
organizations are e-merchants . W.w. Grainger, for instance, is the biggest wholesaler of
support, repair, and operations (MRO) supplies. MRO supplies are considered aberrant
inputs to the generation process—instead of immediate inputs. Previously, Grainger
depended on index deals and physical conveyance focuses in metropolitan territories. Its
list of gear went online in 1995 at Grainger.com, giving organizations access to more than
300,000 things. Organization acquiring executors can seek by sort of item, for example,
engines, HVAC, or liquids, or by particular brand name. E-merchants are claimed by one
organization trying to serve numerous clients. On the other hand, as with trades (portrayed
on the following page), basic mass is an element. With e-merchants, the more items and
administrations an organization makes accessible on its site, the more appealing that site is
to potential clients. One-quit shopping is constantly desirable over needing to visit various
locales to spot a specific part or item.

E-Procurement
In the same way that e-wholesalers give items to different organizations, e-acquirement
firms make and offer access to advanced electronic markets. Firms, for example, Ariba,
case in point, have made programming that helps expansive firms compose their
acquisition transform by making smaller than usual computerized markets for a solitary
firm. Ariba makes uniquely coordinated online lists (where supplier firms can rundown
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their offerings) for buying firms. On the offer side, Ariba helps merchants offer to
expansive buyers by giving programming to handle index creation, sending, protection,
and money. Both the purchase and offer side programming is alluded to nonexclusively as
"worth chain administration" programming. B2b administration suppliers profit through
transaction charges, expenses focused around the amount of workstations utilizing the
administration, or yearly authorizing charges. They offer purchas- ing firms a complex set
of sourcing and production network administration instruments that allow firms to diminish
store network costs. In the product world, firms, for example, Ariba are off and on again
likewise called provision administration suppliers (Asps) ; they can of irms much lower
expenses of programming by attaining scale economies. Scale economiesare efficiencies
that come about because of expanding the measure of a business, for example, when huge,
altered expense generation frameworks, (for example, industrial facilities or programming
frame) could be worked at full limit with no unmoving time. On account of programming,
the peripheral expense of an advanced duplicate of a product project is about zero, and
discovering extra purchasers for an unreasonable programming system is uncommonly
productive. This is substantially more effective than having each firm form its inventory
network administration framework, and it allows firms, for example, Ariba to practice and
offer their product to firms at an expense far short of what the expense of creating it
Exchanges have collected the majority of the B2b consideration and early subsidizing due
to their potential business size despite the fact that today they are a little some piece of the
general B2b picture. An trade is an autonomous advanced electronic commercial center
where several suppliers meet a littler number of substantial business buyers (Kaplan and
Sawh-ney, 2000). Trades are claimed by autonomous, generally entrepreneurial startup
firms whose business is making a business sector, and they produce income by charging a
commission or charge focused around the span of the transactions directed among
exchanging gatherings. They generally serve a solitary vertical industry, for example, steel,
polymers or aluminum, and concentrate on the trade of immediate inputs to generation and
transient contracts or spot obtaining. For purchasers, B2b trades make it conceivable to
assemble data, look at suppliers, gather costs, and stay up with the latest on the most recent
happenings all in one spot. Merchants, then again, profit from stretched access to
purchasers. The more prominent the amount of venders and purchase ers, the bring down
the deals cost and the higher the shots of making a deal. The simplicity, velocity, and
volume of transactions are summarily alluded to as business liquidity.in hypothesis; trades
make it essentially less exorbitant and prolonged to recognize potential uppliers, clients
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and accomplices, and to work with one another. Accordingly, they can lower ransaction
costs—the expense of making a deal or buy. Trades can additionally lower item expenses
and stock convey costs—the expense of keeping an item available in a warehouse. In
actuality,, B2b trades have had a troublesome time persuading many suppliers to move into
solitary computerized markets where they confront effective value rivalry, and a similarly
troublesome time persuading organizations to change their acquiring conduct far from
trusted long haul exchanging accomplices. Therefore, the amount of trades has tumbled to
short of what 200, down from in excess of 1,500 in 2002, despite the fact that the surviving
firms have encountered a few achievement (Ulfelder, 2004; Day, Fein, Ruppersberger,
2003).

Industry Consortia
Industry consortia are industry-claimed vertical commercial centers that serve particular
businesses, for example, the vehicles, aviation, concoction, flower, or logging commercial
ventures. Interestingly, level commercial centers offer particular items and administrations
to an extensive variety of organizations. Vertical commercial centers supply a more
diminutive number of organizations with items and administrations of particular
enthusiasm to their industry, while even commercial centers supply organizations in
diverse businesses with a specific sort of item and administration, for example, advertising
related, monetary, or figuring administrations for instance, Exostar is a web exchanging
trade for the aviation and resistance industry,founded by BAE Systems, Boeing, Lockheed
Martin, Raytheon, and Rolls-Royce in 2000. Exostarassociate with in excess of 300
acquisition frameworks in 20 separate nations and has enlisted more than 40,000
exchanging accomplices around the world. Industry consortia have had a tendency to be
more effective than autonomous trades partially on the grounds that they are supported by
influential, profound pocketed industry players, and additionally in light of the fact that
they reinforce conventional buying conduct instead of look to convert it.

Business-to-Consumer (B2c) Model


The B2c model includes transactions between business associations and customers. It
applies to any business association that offers its items or administrations to shoppers over
the Internet. These locales show item data in an online index and store it in a database. The
B2c demonstrate additionally incorporates administrations internet saving money, travel
administrations, and wellbeing data. Consider a theoretical sample in which a transaction
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is directed between a business association and a buyer. A business house, LMN Department
Store, shows and offers a reach of items on their Web webpage, www.lmn.com. The subtle
elements data of all their items is held in the immense indexes kept up by LMN Department
Stores. Presently, a shopper, William Ward, needs to purchase a blessing for his wife. He
in this manner ,logs on to the site of LMN Department Stores and chooses a blessing from
the inventory. He additionally gets the itemized data about the blessing, for example, the
value, accessibility, rebates, along these lines on from their inventory. At last, when he
chooses to purchase the blessing, he puts in a request for the blessing on their Web
webpage. To submit a request, he needs to detail his individual and charge card data on
www.lmn.com. This data is then approved by LMN Department Store and put away in their
database. On check of the data the request is prepared. Thusly, as should be obvious, the
B2c model includes transactions between a buyer a done or more business associations. E-
Commerce Models.The illustration of the www.amazon.com site additionally includes the
B2c show in which the customer hunt down a book on their site and puts in a request, if
needed. This suggests that a complete business result may be a mix result of more than one
plan of action. Case in point, www.amazon.com incorporates the B2b demonstrate in which
the distributers transact with Amazon and the B2c display in which an individual purchaser
transact with the business association.

Diagram 3.3 Business-to-Consumer (B2c) Model


Source: smallbusiness.chron.com

The B2c model of e-trade is more inclined to the security dangers in light of the fact that
individual purchasers give their charge card and particular data n the site of a business

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association. Also, the purchaser may question that his data is secured and utilized
successfully by the business association. This is the primary motivation behind why the
B2c model is not generally acknowledged. Thusly, it gets exceptionally vital for the
business associations to give hearty security instruments that can ensure a shopper for
securing his data Favorable circumstances:
• allow organization to stretch out existing administrations to clients
• allow organization to expand its clients
• offer a more extensive decision and permit less expensive costs
• may provide for the organization a overallperceivability
• online shops are open 24h a day Detriments:
• low request change rates
• high hazard

Significant Business-to-Consumer (B2c) Business Models


75 plan of action concentrates on deals to the individual customer, while on account of the
e-wholesaler, the plan of action concentrates on deals to an alternate business.the sort of e-
business engineering included can additionally influence the grouping of a plan of action.
M-business, for occurrence, alludes to e-business led over remote systems. The e-tail plan
of action, case in point, can likewise be utilized within m-business, keeping in mind the
essential plan of action may remain in a broad sense the same as that utilized as a part of
the B2c segment, it will regardless must be adjusted to the exceptional difficulties postured
by the m-nature. At long last, you will additionally note that a few organizations use various
plans of action. Case in point, ebay could be considered as a B2c market creator. In the
meantime, ebay can likewise be considered as having a C2c plan of action. On the off
chance that ebay receives remote versatile processing; permitting clients to offer on barters
from their wireless or remote Web gadgets, then ebay might likewise be depicted as having
a B2c m-business plan of action. We can expect numerous organizations will have nearly
related B2c, B2b, and m-trade varieties on their fundamental plan of action. The reason
will be to influence ventures and holdings created with one plan of action into another
business model.business-to-shopper (B2c) e-trade, in which online organizations look to
achieve singular customers, is the most well-known and commonplace kind of e-business.

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E-Tailer
Online retail stores, regularly called e-tailers, come in all sizes, from titan Amazon to minor
neighborhood stores that have Web locales. E-tailers are like the average blocks and-mortar
storefront, with the exception of that clients just need to interface with the Internet to check
their stock and submit a request. Some e-tailers, which are alluded to as "blocks and-
clicks," are subsidiaries or divisions of existing physical stores and convey the same items.
Jcpenney, Barnes & Noble, Wal-Mart, and Staples are four samples of organizations with
corresponding online stores. Others, notwithstanding work just in the virtual world, without
any binds to physical areas. Amazon, Bluenile.com, and Drugstore.com are cases of this
kind of e-tailer. A few different varieties of e-tailers, for example, online renditions of post
office based mail inventories, online shopping centers, and maker immediate online deals
likewise exist (Gulati and Garino, 2000). Given that the general retail advertise in the
United States in 2008 is evaluated to be around $4 trillion, the business sector open door
for e-tailers is extensive (U.s. Enumeration Bureau, Economic and Statistics
Administration, 2008). Each Internet client is a potential client. Clients who feel time-
starved are stunningly better prospects, since they need shopping results that will wipe out
the need to drive to the shopping center or store (Bellman, Lohse, and Johnson, 1999). The
e-tail income model is item based, with clients paying for the buy of a specific thing. This
segment is greatly aggressive, nonetheless. Since hindrances to entry(the aggregate
expense of entering another commercial center) into the Web e-tail business sector are low,
countless little e-tail shops have sprung up on the Web. Getting beneficial and surviving is
exceptionally troublesome, on the other hand, for e-tailers with no earlier brand name or
experi-ence. The e-tailer's test is separating its business from existing stores and Web
locales. Organizations that attempt to achieve each online purchaser are liable to drain their
assets rapidly. Those that create a specialty procedure, plainly recognizing their target
market and its needs, are best ready to make a benefit. Keeping costs low, determination
expansive, and stock controlled are keys to accomplishment in e-tailing, with stock being
the most hard to gauge.

Content Provider
In spite of the fact that there are numerous distinctive ways the Internet might be valuable,
"data content," which could be characterized comprehensively to incorporate all
manifestations of protected innovation, is one of the biggest sorts of Internet use. Protected
innovation alludes to all types of human outflow that might be put into an unmistakable
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medium, for example, content, Cds, or theweb (Fisher, 1999). Content suppliers disperse
data substance, for example, computerized feature, music, photographs, content, and fine
art, over the Web. As per the Online Publishers Association, in 2005, U.s. customers used
$2 billion for online substance (Online Publishers Association, 2006). From that point
forward, computerized music, motion pictures, and televi- sion have turned into an
undeniably critical a piece of the business sector, and are relied upon to create over $3.6
billion in incomes alone throughout 2008 (emarketer, Inc. 2007b;2007c; creator gauges).
suppliers profit by charging a membership expense. For example, on account of Real.com's
Rhapsody Unlimited administration, a month to month membership expense gives clients
access to many tune tracks. Other substance suppliers, for example, Wsj.com ( The Wall
Street Journal's online daily paper), Harvard Business Review, and numerous others,
charge clients for substance downloads notwithstanding or set up of a membership expense.
Micropayment frameworks innovation gives content suppliers a savvy strategy for
transforming high volumes of little money related transac-tions (anywhere in the range of
$.25 to $5.00 for every transaction). Micropayment frameworks have enormously
improved the income model prospects of substance suppliers who wish to charge by the
download. Obviously, not all online substance suppliers charge for their data: simply take
a gander at Sportsline.com, Cio.com, Cnn.com, and the online forms of numerous daily
papers and magazines. Clients can get to news and data at these destinations without paying
a penny. These prevalent destinations profit in different routes, for example, through
publicizing and accomplice advancements on the site. Progressively, notwithstanding,
"free substance" is constrained to features and content, though premium substance in-
profundity articles or feature conveyance is sold for a charge. For the most part, the way to
turning into an effective substance supplier owns the substance. Customary managers of
copyrighted substance distributers of books and daily papers, telecasters of radio and TV
content, music distributers, and motion picture studios—have capable favorable
circumstances over newcomers to the Web who basically offer circulation stations and
must pay for substance, frequently at oligopolistic costs. Some substance suppliers, in any
case, don't possess content, yet syndicate (total) and after that circulate substance delivered
by others. Syndication is a significant variety of the tandard content supplier model. An
alternate variety here is Web aggregators, who gather data from a huge range of products
and after that increase the value of that data through post total administrations. Case in
point, Shopping.com gathers data on the costs of many merchandise on the web, dissects
the data, and presents clients with tables indicating the reach of costs and Web areas.
73
Shopping.com increases the value of substance it totals, and re-offers this quality to
advertis- ers who publicize on its site (Madnick and Siegel, 2001).any e-trade startup that
expects to profit by giving substance is prone to face challenges unless it has an interesting
data source that others can't get to. Generally, this business class is ruled by conventional
substance providers.online substance is talked about in further dept.

Transaction Broker
Destinations that process transactions for buyers ordinarily took care of in individual, by
telephone, via mail are transaction agents. The biggest commercial enterprises utilizing this
model are fiscal administrations, travel administrations, and occupation position
administrations. The online transaction merchant's essential worth suggestions are funds of
cash and time. Likewise, most transaction merchants give auspicious data and assumptions.
Locales, for example, Monster.com offer work searchers a national commercial center for
their abilities and superintendents a national asset for that ability. Both businesses and
occupation seekers are pulled in by the comfort and cash of data. Online stock
intermediaries charge commissions that are extensively short of what conventional
specialists, with numerous offering significant arrangements, for example, money and a
specific number of free exchanges, to bait new clients (Bakos,lucas, et al., 2000).given
climbing purchaser enthusiasm toward monetary arranging and stocks, the market open
door for online transaction representatives seems, by all accounts, to be huge. On the other
hand, while a large number of clients have moved to online specialists, numerous have
been watchful about changing from their customary representative who gives particular
exhortation and a brand name. Reasons for alarm of security intrusion and the misfortune
of control over particular money related data likewise help market safety. Thus, the
challenge for online dealers is to overcome purchaser fears by underscoring the security
and protection measures set up, and, in the same way as physical banks and business firms,
giving an expansive reach of monetary administrations and not simply stock exchanging.
Transaction merchants profit each one time a transaction happens. Each one stock
exchange, for instance, nets the organization a charge, built either in light of a level rate or
a sliding scale identified with the span of the transaction. Drawing in new clients and urging
them to exchange habitually are the keys to producing more income for these organizations.
Occupation locales produce posting charges from executives in advance, as opposed to
charging a charge when a position is filled. Rivalry among specialists has gotten more
furious in the recent years, because of new contestants offering continually engaging offers
74
to purchasers to sign on. The individuals who flourished at first were the first movers, for
example, E*trade, Ameritrade, Datek, and Schwab. Throughout the beginning of e-
business, a hefty portion of these organizations occupied with xpensive promoting fights
and were eager to pay up to $400 to procure a solitary client. In any case, online businesses
are currently in immediate rivalry with customary firm firms who have joined the online
marketspace. Huge solidification is happening in this industry. The amount of occupation
destinations has likewise reproduced, yet the biggest locales (those with the biggest number
of employment postings) are pulling in front of more diminutive specialty organizations.
In both commercial enterprises, just a couple of, substantial firms are liable to get by in the
long haul.

Market Creator
Market inventors construct an advanced environment in which purchasers and dealers can
meet, show items, scan for items, and create costs. Before the Internet and the Web, market
makers depended on physical spots to build a business. Starting with the medieval
commercial center and stretching out to today's New York Stock Exchange, a business
sector has implied a physical space for transacting. There were few private digitalnetwork
commercial centers preceding the Web. The Web changed this by making it conceivable
to partitioned markets from physical space. A prime illustration is Priceline, which permits
shoppers to set the value they are eager to pay for different travel housing and different
items (now and then alluded to as a converse closeout) and ebay, the online closeout
website used by both organizations and buyers. Case in point, ebay's closeout plan of action
is to make a computerized electronic environment for purchasers and merchants to meet,
concur on a value, and transact. This is unique in relation to transaction intermediaries who
really do the transaction for their clients, going about as operators in bigger markets. At
ebay, the purchasers and merchants are their own particular executors. Every deal on ebay
nets the organization a commission focused around the rate of the thing's deals cost,
notwithstanding a posting charge. ebay is one of the few Web destinations that has been
productive for all intents and purpose from the earliest starting point. Why? One response
is that ebay has no stock or creation costs. It is essentially a go between the business open
door for business makers is possibly immeasurable, yet just if the firm has the monetary
assets and showcasing plan to draw in sufficient venders and purchasers to the commercial
center. At the end of June 2008, ebay had about 84.5 million dynamic clients, and this
makes for a proficient business sector (ebay, 2008). There are numerous personality
75
purchasers for each one kind of item, now and again for the same item, forexample,
portable computer phone. New firms longing to make a business sector require a forceful
marking and mindfulness project to draw in a sufficient discriminating mass of clients.
Some substantial Web-based firms, for example, Amazon have leveraged their extensive
client base and began barters. Numerous other advanced barters have sprung up in more
modest, more particular vertical business sections, for example, gems and automo- biles.
Notwithstanding advertising and marking, an organization's administration group and
association can have any kind of effect in making new markets, particularly if a few
supervisors have had encounter in comparative organizations. Pace is frequently the key in
such circumstances. The capability to get operational rapidly can have the effect in the
middle of achievement and disappointment.

Service Provider
While e-tailers offer items on the web, administration suppliers offer administrations on
the web. There's been a blast in online administrations that is frequently unrecognized. Web
2.0 provisions, for example, photograph imparting, feature offering, and client created
substance (in web journals and interpersonal interaction locales) are all administrations
gave to clients. Google has headed the route in creating online provisions, for example,
Google Maps, Google Docs and Spreadsheets, and Gmail. Thinkfree and Buzzword are
online choices to Microsoft Word gave as administrations (as opposed to boxed
programming an item). More particular administrations, for example, online hospital
expense administration, monetary and annuity arranging, and travel recommender
destinations are demonstrating solid development. Administration suppliers utilize a
mixture of income models. Some charge an expense, or month to month memberships,
while others produce income from different sources, for example, through publicizing and
by gathering particular data that is valuable in immediate showcasing. A few
administrations are free yet are not finish. Case in point, Google Apps' fundamental version
is free, however a "Head" model with virtual gathering rooms and progressed devices costs
$50 for every representative a year. Much like retailers who exchange items for money,
administration suppliers exchange learning, ability, and competencies, for income. Clearly,
a few administrations can't be given on the web. For instance, dentistry, medicinal
administrations, pipes, and auto repair can't be finished by means of the Internet. On the
other hand, online plans could be made for these administrations. Online administration
suppliers may offer workstation administrations, for example, data stockpiling, give
76
legitimate administrations, for example, at LinklatersBlueflag, or offer counsel and
administrations to high-total assets people, for example, at Mycfo.com. Basic supply
shopping destinations, for example, Freshdirect and Peapod are likewise giving services.to
entangle matters a bit, most money related transaction intermediaries (portrayed long ago)
give administrations, for example, school educational cost and annuity arranging. Travel
dealers likewise give excursion arranging administrations, notjust transactions with aerial
shuttles and inns. In fact, blending administrations with your items is an effective business
procedure sought after by a lot of people hard-merchandise organizations (for instance,
guarantees are administrations). The fundamental quality recommendation of
administration suppliers is that they offer consumersmvaluable, advantageous, efficient,
and minimal effort options to customary administration suppliers or—on account of web
crawlers and most Web 2.0 requisitions they give benefits that are genuinely special to the
Web. Where else would you be able to pursuit 50 billionweb pages, or offer photographs
with as numerous other individuals in a split second? Research has found, for example, that
a main consideration in anticipating internet purchasing conduct is time starvation Time-
starved individuals have a tendency to be occupied experts who work extended periods and
essentially don't have sufficient energy to get bundles, purchase perishables, send
photographs, or visit with budgetary organizers (Bellman, Lohse, and Johnson, 1999). The
business sector open door for administration suppliers is as substantial as the mixture of
administrations that could be given and possibly is much bigger than the business sector
open door for physical merchandise. We live in an administration based economy and
public opinion; witness the development of quick sustenance restaurants,package
conveyance administrations, and remote phone administrations. Shoppers' Freshdirect and
other e-trade organizations can likewise be delegated online retailers insofar as they
warehouse normally obtained things and make a benefit focused around the spread
betweentheir purchase and offer prices.increasing interest for comfort items and
administrations looks good for present and future online administration
providers.marketing of administration suppliers must alleviate shopper fears about
enlisting a merchant on the web, and in addition manufacture certainty and recognition
among present and potential clients. Building certainty and trust is discriminating for
administration suppliers almost as it is for retail item Group PROVIDER Despite the fact
that group suppliers are not another substance, the Internet has made such locales for
similarly invested people to meet and chat much less demanding, without the constraints
of topography and time to ruin investment. Group providersare locales that make a
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computerized online environment where individuals with comparative investment can
transact (purchase and offer products); offer premiums, photographs, features; correspond
with similar individuals; get premium related data; and even play out dreams by receiving
online identities called avatars. The informal communication destinations Myspace,
Facebook, Friendster, and several other more modest, specialty locales, for example,
Doostang, Twitter, and Sportsvite, all offer clients group building instruments and
administrations. The fundamental quality recommendation of group suppliers is to make a
quick, conven-ient, one-stop site where clients can concentrate on their most paramount
concerns and premiums, offer the experience with companions, and take in more about
their interests.community suppliers normally depend on a half and half income demonstrate
that incorporates membership expenses, deals incomes, transaction charges, partner
expenses, and publicizing charges from different firms that are pulled in by a firmly
centered audience.community locales, for example, ivillage profit through associate
associations with retailers and from promoting. Case in point, a guardian may visit
Babystyle for tips on diapering an infant and be displayed with a connection to
Huggies.com; if the guardian clicks the connection and after that makes a buy from
Huggies.com, Babystyle gets a commission. Moreover, standard ads additionally produce
income. At About.com, guests can offer tips and purchase prescribed books from Amazon,
giving About.com a commission on every buy. A percentage of the most established groups
on the Web are Well.com, which gives a gathering to innovation and Internet-related
dialogs, and The Motley Fool (Fool.com), which gives monetary counsel, news, and
sentiments. The Well offers different enrollment arrangements extending from $10 to $15
a month. Diverse Fool helps itself through ads and offering items that begin "free" yet
transform into yearly memberships. Buyers' enthusiasm toward groups is mushrooming.
Group is, apparently, the quickest developing online action. While numerous group
destinations have had a troublesome time getting productive, about whether numerous have
succeeded. More current group destinations, for example, Facebook and Myspace may not
be productive at this point, yet they are rapidly creating promoting incomes as their
fundamental parkway of income. Both the precise substantial informal communication
locales (Myspace and Facebook each one have in excess of 100 million profiles) as ell as
specialty destinations with littler committed gatherings of people are perfect advertising
and publicizing regions. Customary online groups, for example, the Well, ivillage, and
Webmd (which gives therapeutic data to parts) find that thickness and profundity of knowl-
edge at a webpage is a vital variable. Group parts oftentimes ask for knowl-edge, direction,
78
and guidance. Absence of accomplished faculty can seriously hamper the development of
a group, which needs facilitators and chiefs to keep examinations on course and important.
For the more current group person to person communication destinations, the most impor-
tant elements of achievement give off an impression of being straightforwardness and
adaptability of utilization, and a solid client quality recommendation. For example,
Facebook has quickly picked up on its adversary Myspace by swaying clients to
manufacture their income delivering provisions that run on their profiles, and even take in
promoting and member incomes. Online groups profit essentially from logged off informal,
viral promoting. Online groups have a tendency to reflect logged off connections. At the
point when your companions say they have a profile on Facebook, and request that you
visit, you are urged to assemble your online profile

Customer to-Consumer (C2c) Model


The C2c model includes transaction between customers. Here, a purchaser offers
straightforwardly to an alternate customer. ebay and www.bazee.com are regular samples
of online closeout Web locales that give a buyer to publicize and offer their items online to
an alternate shopper. In any case, it is fundamental that both the vender and the purchaser
must register with the bartering site. While the dealer needs to pay an altered

3.4 Customer to-Consumer (C2c) Model


Source: smallbusiness.chron.com

charge to the online sales management firm to offer their items, the purchaser can offer
without paying any expense. The site unites the buyerand dealer to direct arrangements
Give us a chance to now take a gander at the past figure as for ebay. At the point when a
client arrangements to offer his items to different clients on the Web webpage of ebay, he

79
first needs to cooperate with an ebay website, which for this situation demonstrations as a
facilitator of the general transaction. At that point, the merchant can have his item on
www.ebay.com, which thus charges him for this. Any purchaser can now scan the site of
ebay to hunt down the item he intrigued by. Ifthe purchaser runs over such an item, he
submits a request for the same on the Web website of ebay. ebay now buy the item from
the dealer and afterward, offers it to the purchaser. Thusly, however the transaction is
between two clients, an association demonstrations as an interface between the two
associations

Preferences
• allow purchasers to connect specifically among all
• give to the buyers another method for buying and offering administrations and products

Weaknesses
• little acquiring limit

Shopper to-Business (C2b) Model


The C2b model includes a transaction that is directed between a purchaser and a business
association. It is like the B2c model, notwithstanding, the contrast is that for this situation
the buyer is the dealer and the business association is the purchaser. In this sort of a
transaction, the purchasers choose the cost of a specific item as opposed to the supplier.
This classification incorporates people who offer items and administrations to associations.
Case in point, www.monster.com is a Web webpage on which a purchaser can post his bio-
information for the administrations he can offer. Any business association that is intrigued
by conveying the administrations of the customer can get in

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3.5 C2b Model
Source: www.businessnewsdaily.com

3.6 (C2b) Model


Touch with him and afterward utilize him, if suitable. Give us a chance to take a gander at
an alternate case of the C2b model. William Ward needs to purchase a carrier ticket for his
adventure structure New York to New Jersey. William needs to travel promptly.
Subsequently, he hunt a Web website down a ticket. The Web website offers offering office
to individuals who need to purchase tickets promptly. On the Web webpage, William cites
the most astounding value and gets the ticket. Notwithstanding the models
examined as such, five new mode ls are continuously taken a shot at that includes
transactions between the administration and different elements, for example, purchaser,
business associations, and different governments. All these transactions that include
government as one element are called e-influence. The different models in the e-
administration situation are:

•Government-To-Government (G2g) Model:


This model includes transactions between 2 legislatures. Case in point, if the American
government needs to by oil from the Arabian government, the transaction included are
classified in the G2g model.

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•Government-To-Consumer (G2c) Model:
In this model, the administration transacts with an individual buyer. For instance, a
legislature can authorize laws relating to duty installments on individual buyers over the
Internet by utilizing the G2c model.

•Consumer-To-Government (C2g) Model:


In this model, an individual shopper communicates with the administration. Case in point,
a customer can pay his wage duty or house charge on the web. The transactions included
for this situation are C2g transactions.

Arranging E-COMMERCE BUSINESS MODELS: SOME DIFFICULTIES


There are numerous e-business plans of action, and progressively are continuously
concocted consistently. The amount of such models is restricted just by the human creative
ability, and our arrangement of diverse plans of action is positively not exhaustive.
Nonetheless, regardless of the richness of potential models, it is conceivable to recognize
the significant bland sorts (and unpretentious varieties) of plans of action that have been
produced for the e-trade enclosure and portray their key gimmicks. It is paramount to
acknowledge, then again, that there is nobody redress approach to order these plans of
action. Our methodology is to classify plans of action as indicated by the distinctive e-
business parts B2c, B2b, C2c, and so forth.—in which they are used. You will note, in any
case, that generally comparative plans of action may show up in more than one segment.
Case in point, the plans of action of online retailers (frequently called e-tailers) and e-
merchants are very comparative. Be that as it may, they are recognized by the business
center of the part in which they are utilized. On account of e-tailers in the B2c division, the
plan of action concentrates on deals to the individual purchaser, while on account of the e-
merchant, the plan of action concentrates on deals to an alternate business. The sort of e-
trade innovation included can likewise influence the grouping of a plan of action. M-trade,
for example, alludes to e-business led over remote systems. The e-tail plan of action, for
example, can additionally be utilized as a part of m-trade, keeping in mind the essential
plan of action may remain on a very basic level the same as

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3.6 Business model diagram
Source: www.businessnewsdaily.com

that utilized within the B2c segment, it will in any case must be adjusted to the unique
difficulties postured by the m-nature's turf. At last, you will likewise note that a few
organizations use numerous plans of action. Case in point, ebay might be considered as a
B2c market creator. In the meantime, ebay can additionally be considered as having a C2c
plan of action. On the off chance that ebay embraces remote versatile processing;
permitting clients to offer on barters from their PDA or remote Web gadgets, then ebay
might likewise be depicted as having a B2c m-trade plan of action. We can expect
numerous organizations will have nearly related B2c, B2b, and m-trade varieties on their
fundamental plan of action. The reason will be to power speculations and stakes created
with one plan of action into another plan.

According to a review given by Forrester Study, social systems also playing an


significance role in driving customers online and getting them to involve with brands. This
report could gain additional implication in light of the facts such as India being ranked as
Face book’s third largest user after US and Brazil. Though, this fact should also be in mind
that there still exists a form of ‘digital divide’ in India where the benefits of internet have
not been fully utilized in non urban areas due to lack of exposure and missing of interest in

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non urban society towards internet. In this situation, mobile connections could play a very
significance role. India has 926.55 million wireless subscribers.

Electronic Business in super set of business cases and E-commerce is subset of E-business.
The internet offer huge possibilities to integrate the categories and automate the interaction
between the processes.

1. E-auctioning: Auctioning on the internet has new dimension.


The internet makes auction more democratic allowing anyone with an internet connection
to participate in the auction.
2. E-Banking: Electronic banking is one of the most successful online business which
save the individual and companies rime and money.
3. E-learning: In this age of technological growth, Electronic learning or Internet based
training offer new dimension. Learn any subject online and also conduct test online.
So internet offers many-opportunity and support electronic commerce like-E-marketing,
E-trading, E-supply, and E-Resource Management E-gambling.
Internet is the component which has recently turns out to be the main ingredient of fast and
advance lifestyle. The purpose of Internet may be many like communication, exploration,
social systeming and official work. In the last few years internet has turn out to be a
necessity for all. The growth of Internet has led to a couple of new expansions like buying
produces resulting in cutting cost of produce, online transaction of money, sharing
information globewidely and much more. According to a report by C.K
Prahalad,Professor,Big business school, University of Michigan online buying reduce
margin for corporations as customers turn more and more to the internet and there they can
easily compare prices of the produce and can go with the best deal. He said that internet
has truly an effectual ingredient in changing the traditional ways of doing big business. The
incessant inflow of competition will automatically decrease the prices and in that case in
long term all corporations could only earn normal profit.

These days e-commerce has turn out to be a necessity part of everyday’s life. Working to
e-commerce platforms is not a luxury but rather an integral part for most people,
particularly in the urban areas. Alternative e-commerce platforms are obtainable in place
of the traditional commercial platforms for almost every need of our lives, These E-
Commerce platforms are obtainable for buying of everyday household items to online
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trading. As 1980 United States is using mail order or catalogue shopping. India started
using online commerce in 2000 and it can be clearly said that it was the accomplishmentor
of mail order and catalogue shopping that started in United States in 2000.

As per current study 2 billion internet users are recorded all throughout the globe and out
of this, in India there are 13.30 internet users. Confidence of internet users is increasing in
online commerce which has led to nearly 40% of such type of users which means 7.4
million users. Therefore it implies that India is in a good position for the upliftment of the
e-commerce business. Particularly, e-commerce presents one of the greatest opportunities
in the retail market and resulting in decreasing the cost of the produce. That’s why are
buyers are switching to e-commerce platform.

According to a review given by Forrester Study, social systems also playing an


significance role in driving customers online and getting them to involve with brands. This
report could gain additional implication in light of the facts such as India being ranked as
Face book’s third largest user after US and Brazil. Though, this fact should also be in mind
that there still exists a form of ‘digital divide’ in India where the benefits of internet have
not been fully utilized in non urban areas due to lack of exposure and missing of interest in
non urban society towards internet. In this situation, mobile connections could play a very
significance role. India has 926.55 million wireless subscribers.
The Indian Administration is also working on different projects for providing broadband
connectivity to the village level administration bodies [i.e. the Gram Panchayats]. The
Administration’s plan is to make available broadband connectivity at the rural levels and
sub urban levels, to make availabledifferent services like e-education, e-health, e-activity,
e-commerce and e- governance to the society.7 this is also a very good and appreciable
step to boost e-commerce in India.

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Diagram 3.7: Internet and Mobile Association of India - Digital Commerce
Source: www.iamai.in

E-commerce has drastically changed the travel business so much that travel plans are just
a click away as it is proved from the regular increasing number of users of IRCTC i.e. a
platform for booking tickets of Indian Railways online. In starting online booking of tickets
was only there but now it has been extended for booking of hotels and cars resulting in
making the platform friendlier.

It would be interesting to know few of the accomplishment stories in e-commerce. Few of


online engines have been specifically designed to compare price of produces like my price
shop. In 2012 this corporation carried out a study of certain e-commerce stores in India and
listed out few of interesting facts as follows:
• Brands are moving online with their own stores: Examples: Nokia Shop, Puma, Reebok,
Samsung etc.
• Fashion is No 1: Top 3 Categories all belong to Fashion, with more than 130 stores [big
and small] selling few of or the other fashion produces
• Augment of Online Exclusive labels Example: Zovi.
• Online stores of main offline players: Example: Future bazaar, Croma retail, The Mobile
Store.
• Media Publishing Houses foray in e-commerce: Example: Homeshop18, BagitToday,
India times.
• Well known[deal] sites pivoting to e-tailing: Example: Snap deal,Seventy MM,
KyaZoonga.
• Social Heart in deals exclusively with handicrafts made by NGOs
• YellowLeg.com deals exclusively with travel book.

1. Flipkart
Flipkart was launched to start as an online produce price comparison portal and soon the
idea changed into establishing an e-commerce portal. The website had a humble beginning
with just about INR 4 lakhs worth of speculation and now private equity players such as
Accel Partners and Tiger Globe wide have collectively invested $150 million in the entity
so far. Flipkart also worked in collaboration of other websites with their wide range of
produces and a very competently managed supply chain. Apart from the remarkable
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accomplishment that Flipkart has gained, Flipkart has managed to redefine online client
experience.

2. IRCTC
IRCTC which make availablefacility of online ticketing operations of the Indian railways
has revolutionized railway ticketing in India to the extent and now it is the largest e-
commerce portal in the Asia-Pacific region. Several factors also have contributed in the
growth of this website and one of them being the convenience and ease of use that this
website has managed to make available. IRCTC has managed to change the trend of online
booking and has gained confidence of its users. Few of the methods that IRCTC used are:
» Cheap and convenient: Not only people living in just tier 2 and 3 towns but also in metros
like Delhi and Mumbai were relieved to obtain the convenience of tickets being delivered
at the doorstep.
» Easy to navigate web interface: The website make available all potential options,
allowing user to customize his or her train options according to start and end stations,
desired dates, routes and obtainable fare classes. The platform also allows user to keep a
record of all bookings, cancellations and upcoming trips.
The buying habit of Indians has also changed along with the buying power with the growth
of E-Commerce corporations. It’s not only confined to travel, books, garments or mobile
accessories. Now there are few of E-commerce corporations that sell jewellery, watches
and other accessories.
The competition has turn out to be more dynamic. Initially, it was started with a few travel
E-Commerce sites like Make My Trip, Yatra, and many more, after that other corporations
like flipkart.com,snap deal.com, etc. also came in market. These corporations started
selling of customer goods, garments and all types of accessories. No doubt, these
corporations have brought a revolution in E-Commerce landscape in India. User started
enjoying the comfort of online shopping of books, cameras, Smartphone etc. equipped with
effectual marketing and evolved client service. This implies that e-commerce has fully
changed the mind set if Indian buyer.

Amazons and eBays of the globe face tough competitions from the Flipkarts and Myntras.
All credit goes to the strong branding that the E-Commerce sector has managed to build.

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It is just the completion of first phase in the growth of e-commerce. The brand building,
buying habit changing of the user, the revolution created by Flip karts, Snap deals and
Myntras have a challenge now. Amazon, the big fish in e-commerce has started its
operation in India also.

Now it is the time to gear up, and proficiency is the only way by which we can achieve our
target. Being updated and getting the right insights at the right time are the two core
strategies that these E-Commerce corporations must follow now.

Is Big Data hype in the tech globe? Think again. Definitely not in E-Commerce, as the
neediest for Big Data and Analytics to gain deeper insights into the clients behavior and
business trends are growing rapidly. As IT managers grapple with the challenge of handling
the data explosion, it won’t be long before data will move from Tera to Peta, and then will
move to Exa. Thus, now it is the right time for the CIOs and Senior IT Managers in E-
Commerce to invest largely on Big Data.

ITDMs in E-Commerce business with absence of big data are like without head chickens.
Big Data was always in existence. Now, the e-commerce business has just finded out that
a term can be coined around it. It’s more about the fact that data is being created in more
areas. Earlier, everything used to happen throughout different applications, now data
proliferation has happened throughout channels of social media. It’s also occurring in
device data as today’s mobile phones are generating more and more data.

The challenge, which Senior ITDMs face in E-Commerce big industries, is to store, collect
and organize data from multiple channels – waiting to be examined. Though, it’s surely not
an easy task to make sense of it.

Mrinal Chatterjee is the CIO of Shopclues.com, is an e-commerce that is having the largest
catalogue in India. The first corporation in this trend is eBay. According to the information
make available Shopclues.com has about 22000 inventories at any given time, which is
about million produces.

Chatterjee says, It is very tough job for our big business to promote the right produces
according to clients, neediest. It’s not potential anyhow to show million produces at the
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home page. We have to understand clearly what our clients want to see and buy. This is a
place where we have to leverage Big Data to gain knowledge where our clients are coming
from, what their buying psychology are, the time when they mostly shop and so on. Google
Analytics is very helpful in this.

An e-commerce big business has a number of data sources to know about the decisions on
how to set a price and compete in this advertisement situation. The data sources are of
different type, and until recently, they were very tough to integrate. Relevant data includes
produce costs and prices competitor offers,sales,advertising campaigns and prices stock
levels and stocking costs, sales, clients’ sentiment and sales data.

MakeMyTrip, the leading in India for travel services considers Big Data to be central for
its growth strategy, and Information Proficiency make available the technical help for
leveraging Big Data, as well as a Data Science approach to retrieve intelligence from it.

Sanjay Kharb, Vice President, at MakeMyTrip says, we have a group of dedicated team
members for handling our Big Data that works very closely with produce management and
marketing. Basically, the resource allocation and privatization is done by two strategies:
Corporation-wide and horizontal use cases and Line of Big business specific use cases.
Though with the increasing number of users and growing traffic, there are several concerns
that affect largely such as the large rates of failed communication on the website that may
not be equipped to deal with the increasing volume of users.

Electronic commerce has changed the way we do big business Today’s knowledge mainly
depends on intellectual capital. We have enthused from an business based economy where
machines used to dominate productivity, to an information based economy where
intellectual contents, without any geographic boundaries, is the main cause of value added.
If growingnations have to get from this new financial and technical explosion that the
growth of e-commerce signifies, they must have most significance ingredient human
resource in place.

In India E-Commerce is one of the fast growing sectors of country’s Digital Economy.
Flipkart that is also known as leader in retail e-commerce recently announced that it has

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crossed $ 1 Billion in sales early this year , this unbelievable expansion has sent many small
e-commerce industries scrambling to gather a piece of the online e-tailing action.

One of the gems of the Indian Information ProficiencyBusiness ,Mr Narayan Murthy
announced recently that he would work in co-operation with Amazon India to launch a
joint venture to develop a new e-commerce portal for the Indian Market. CARE ratings
recently presented a detailed pdf report on its assessment of the rapidly growing e-
commerce business in India which can be studied below.

E-Commerce is growing globe widely with Asian economies like China, India and
Indonesia .In India E-commerce is growing at a fast rate with a predictable size of
Rs.43,930 crores in FY13 and a CAGR of 43.8% [FY08-13].

According to the internetglobestats.com –As on June 30, 2012 the top 20 nations in the
internet by number of users as, India ranks 3rd after U.S and China. This e-commerce
business is mainly dominated by the travel sector which accounts approximately 70% of
the communication of e-commerce business and e-retail’s share in e-commerce accounts
approximately 12.5%.

In spite of the rapid growth, the e-commerce sector is still in a young stage with significant
e- commerce ventures being started by young entrepreneurs. In India the e-commerce
business lags far behind differentgrowing and developed nations[U.S share of E-commerce
to total retail is approximately 1.5% vis-à-vis 5.8% ] due to internet penetration because of
poor communications.

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Diagram 3.8: E-Commerce in India: Evolving Models
Source: indiamicrofinance.com

E-commerce business in India comp augments two key big business types: B2B [market
share-90%] and the second one is B2C [market share-10%]. US follows inventory-
based/independent model while India and China follows “Market place Model”. ‘Market
Place’ model make available platform to enormous number of manufacturers/traders
[particularly MSMEs] to promote their produces [which converts to benefit the MSMEs in
the form of high turnover] as well as manages all functions and in turn the entity earns
profit from sellers for services and goods. The B2C players own the goods while in the
other model-B2B, players don’t carry inventory. Currently FDI is restricted in B2C model
in India.

E-retailing market in India has been predictable at Rs.5, 513 crores in FY13 with a robust
CAGR of 30.5% [FY08-FY13].Though; In India e-retailing constitutes a miniscule 0.2%
of the total retail market and 2.3% of organized retail market in India. In India e-retailing
business is divided with large players which are very few at the top and race for high
valuation has led to fierce competition and robust. Below-average penetration of e-retailing
has give birth to explosive growth of only one of its kind visitors during July 2011 to July
2012 having limits i.e. Indian retail online market.

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Diagram 3.9: Indian E-commerce: Growing under set of rules
Source: www.iamwire.com

The missing of connection with customer is the significance and biggest challenge in e-
retailing. Moreover, apart from low internet penetration, like low credit card/debit card
usage which is being offset by C.O.D, logistics, and multiple languages issues which is
being managed by building in-house logistics by players and much more are also few off
the bigger challenges faced by players. Thoughproficiency works as backbone of e-
retailing, a try has been made to fill this gap. Other challenges are also there such as client
relationship management solution, well organized supply chain management, and
increased security systems which form the base of e-retailing. Overseas capital inflow is
the next phase to build the compulsorycommunications.

In India FDI in E-commerce has seen around 1.3 billion US$ of overseasspeculation in the
E-commerce sector from 2010 to June 2013 and an enormous number of deals compared
with few of other peers because of enormouspotential seen in India.

Currently, 100% FDI has been allowed in big business-to-big business[B2B] e-commerce,
but there is restriction on FDI in B2C Independent/ Inventory model which has restricted
the growth of this segment due to lack of monetary backing compulsory for their expansion
strategies. Equity funding is very helpful for growth of e-retailing providing the large
reedmen’s on account of deep discounts served to client as an acquisition plan, for creating
differentiation and establishing logistics and in terms of client service.

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In B2C model FDI have a very positive impact on overall financialexpansion as it will
make available the compulsorymonetary backing to the young players of this sector.
MSMEs, if monetary banking is making available to it, will be able to extend their coverage
throughout e-commerce portals. Long-term dedicated speculation will also bring in
knowhow and it will also improve efficiencies in the supply chain that are mandatory for
the e-commerce sector and it will also lead to spirited pricing. It will also boost the ancillary
industries like warehousing, logistics etc. In backend if minimum speculation is
compulsory, it may also lead to communicationsexpansion.

On the other hand, launching of FDI in B2C model, Single ownerships of overseas retailers
may have a negative impact on the domestic business.B2C players and Brick and Mortar
players may also lead to merger in the business. It may decrease the MSME sector and
Indian Entrepreneurship. Though, external player’s entry with certain straphanger like must
minimum local sourcing with the MSMEs will definitely lead to expanded manufacturing
activities.

Currently the supremacy of the ICT revolution has made a drastic change in employment
patterns, skill-sets needed and financial growth across the globe and an array of employees.
A unique counter of prospect has been opened up for few ofgrowingnations. The basic to
accomplishment here lies in consummating that the market for several kinds of human
possessions is becoming globe wide. The ICT proficiency is rapidly decreasing the area of
human activities that need physical rearrangement of persons and that why prospect is
moving to such nations that can be helpful in providing the kind of human possessions as
compulsory by the globe wide economy. At present India has this resource in ampleness,
and opportunities of the new economy could be helpful in giving outstanding results. To
ensure plentiful human capital, though, speculation and pro-active policies in technical
education are needed to realize the true potential. To turn out to be e-literate Citizens it is
must first need to be literate.

As e-commerce enhances and the more mature stages of commercial exchange [i.e.
payment reconciliation, auditing, contracting etc.] are carried out electronically, more
specialized skills are going to be compulsory. Even for using the Internet for a product or
service, basic knowledge of the computer and knowledge of the Internet is needed. From
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designing of websites to electronic credit management and hardware and software
maintenance, all call for specialized skills that may not be easily referable. Sufficient
building in the knowledge of the existence of a globe wide market of such skills, area of
information proficiency, for such skills, is therefore critical. The expansion of electronic
commerce, therefore, puts a premium on the expansion of training policies and education,
to confirm that training institutions' syllabus is according to the reedmen’s of business. One
key concern to be kept in mind in the area of services is e-commerce. In order to organize
a policy debate on the concerned subject, it would be useful to mention few off the main
questions and up-and-coming problems in this sector. The WTO concerned matter for
electronic commerce needs to be examined and suggest out from the perspective of several
growing nations in general and India in particular. In the case of India, policy and strategy
point of view, it is also mandatory to target on few off the key policy structure enthusiasm
that need to be concentrated upon for e-commerce to be beneficial and accomplishmentful.

The plausible of e-commerce is no more a matter of discussion. From the globe of hype
and fantasy it has been shifted to the area of digital reality. From starting e-commerce
affects the financial relations flanked bynations and within corporations and it is assumed
to continue to do so much more, it has to be considered as a matter of key policy maker.
As e-commerce expansion turn out to bees more and more tolerable, it is mandatory such
as India that such nations must not only appreciate and address its prospects for the
expansion of business and trade but also as a means of regular existence in the new globe
of e-commerce-based trade and big business. The talent to do so will depend on different
features, the most significance of which will be legal architecture, physical [the
telecommunication system] and the monetary, which includes a trade and big
businesssituation that are favorable to e-commerce. It will also depend on the price of
hardware [routers, switches, computers etc.] and comfort of access and software, as well
as the education standards and human resource and country policies.

Nations, like India, also need putting in sequence themselves for the future multilateral big
business agenda; in particular the so-called new problems on which the Second Ministerial
Conference of the Globe Trade Corporation [WTO] asked the WTO General Council to
execute advices. Out of the several issues one such issue is e-commerce which is currently
under study in the WTO. E-commerce is not only a new proficiency and a new interface
for globe wide trade and big business, it is also still growing. Nations such as India so
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called growingnations, therefore, must understand, and assess carefully from their aspect,
the advantages and disadvantages of the several proposals and issues in this matter that
have discussed at the WTO. They need to appreciate the potential impact of this new
method on their economies and must work out appropriate methods and responses to it.
Though, unlike most other big business concerned agenda produces before the WTO, this
is a space that is not just new but also one where several number implications are as yet
ambiguous. E-commerce make available the space so called platform which make
available facilities of buying and selling produces and information on the internet and other
online services.

Usually the term commerce means the transaction done flanked bybig business partners.
That’s why the term e-commerce seems to kind of narrow to people, because of that few
of time we use the term e-big business. It is an extensive definition of e-commerce. Few of
sort of confusion is there flanked by the advisor and the academicians over the use of this
term. According to few of people views e-commerce enclose all globes of electronically
based corporation task that backing a firm’s market exchanges that include a corporation’s
overall information system’s communications. On the other side, few of says that e-big
business encloses the entire globe of external and internal electronically based tasks that
includes e-commerce also.

“Although e-commerce’s potential to make enormous savings and big business


efficiencies, the practical approach remains hard to pin down. The query is still same that
“how will e-commerce change the purchasing of transport, logistics in the supply chain and
globe wide planning? Co-ordination has been mentioned as the key enabler for e-trading
but how can transport corporations and individual logistics assure itself that they are
making profit from the e-commerce revolution?”

Electronic Commerce [e-commerce] is electronic trading. It work with the help computers,
shared software and internet to receive and send produce drawings and specifications;
purchase orders ,invoices and bids; and any other type of data according to the neediest of
suppliers clients, public or the employees.

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Diagram 3.10 Flow chart of working of E-Commerce.
Source: www.merchantuniversity.org

E-commerce is the advance and very profitable method to operate big business which
transforms normal movement of information into electronic communication from point-of-
sale reedmen’s, production and determination scheduling, right throughout to payment,
receipt and invoicing. E-commerce uses technologies and standards that include Technical
data Interchange [TDI], Hypertext mark-up language [HTML], Extensible Markup
Language [XML] Electronic Data Interchange [EDI], and the Standard for Exchange of
Produce model data [STEP]. E-commerce is made potentialthroughout the use of different
technologies of the Internet; value added Systems and the Globe Wide Web. The Internet
is a collection of computer systems, which co-operate with every other to share data using
common standards of software. Throughout satellite links and telephone wires, Internet
users can exchange information in a variety of forms. The design, size and scope of the
Internet permits users to connect easily throughout phone numbers and ordinary personal
computers, exchange E-mail with colleagues friends and friends with accounts on the
Internet, post information for others to access, and update it frequently, access multimedia
information that includes sound, photographic images and even video, and access diverse
perspectives from around the globe. Electronic Commerce means better big business
communication and data interchange information is essential for every and any big

96
business. The eminence and quantity of information which a big business delivers to clients
or use this information to make decisions can determine just how spirited the big business
is.

A corporation already may be using a number of electronic based tools to help acquire and
extend information and communication needs. These may include personal computers,
word processors, courier, facsimile machines, telex services, cellular phones, pagers and
more. Unfortunately, many of today's communication tools are not really up to the speed
of today's big business needs, and can actually create barriers to achieving the goals set on
the basis of strategies formulated by a corporation. For instance, postal facilities can keep
big business waiting for information for days or even weeks. Overnight couriers may save
time but can be an expensive proportion. Traditional telex and fax is quick but costly and
communicating by telephone can turn out to be an endless game of tag.

Now a big business can avoid these problems by using e-commerce which is fast, cost well
organized, time saying and easy to use -i.e., financial tangibility and good big business
generation.

Electronic big business can result in better communication, wide market coverage by
offering the benefits of speed, convenience, being cost effectual, timeliness, high profit.
The globewidebig business situation is moving faster than ever before. Increased
competition at home and abroad means eminence as well as productivity must be preserved
by corporate houses. This pressure has led to a reappraisal of the accepted existing big
business practice in the search for greater well organized.

The tried and tested way of facing spirited threat in the past has been cost reduction
throughoutproduceion rationalization, labor shedding and big business restructuring.
Electronic Commerce [e-commerce] is electronic big business. It’s using the power of
computers, the Internet and shared software to send and receive produce specifications and
drawings; bids, purchase orders and invoices; and any other type of data that needs to be
communicated to clients, suppliers, employees or the public. Be it B2B or B2C, the benefits
are for all parties concerned – clients as well as suppliers. Proficiency has enabled us to
reduce the acquisition time and costs. It has helped lower the prices of goods and services
increase the number and eminence of suppliers and also helped increase the buyer
97
productivity. More detailed MIS and enhanced inventory control is potential now. This in
turn has reduced the time to market and also improved produceeminence at lower cost. A
further improvement in payment processing is potential. All this will enable in expanding
the clients base.B2B e-commerce was the produce of an attempted solution to an
administrative problem. It developed a new thought, EDI [Electronic Data Interchange].
Thereafter XMLcame, which is a lighter and simpler data exchange standard that is being
used by B2B sites. E-commerce sites made their first appearance in 1992. Initially these
sites were more like virtual catalogues which simply listed the produces for sale. Orders
were placed offline, throughout fax, phone or email. But within a span of 4-5 years the
proficiency advanced exponentially and created virtual stores with shopping carts and
client accounts. SSL [Secure Socket Layer] made it potential for customers to order and
pay online throughout credit cards. E-commerce quickly gained well knownity amongst
customers and suppliers. It gave customers the luxury of comparing produces, prices and
services before making a decision to purchase. The suppliers now had access to an
unlimited client base without any boundaries, that too 24*7*365. Today e-commerce is
enormously well known and is the fastest growing and most profitable market According
to IDC, this year; it is expected to account for two thirds of globe wide e-commerce. Aided
by high speed broadband, B2C is also expected to grow. Future advances incorporate
digital money and e-wallets, and 'personal agents' that help users find what they are looking
for. To support the newest trend of human interaction in e-commerce client service, sites
can partner with fulfillment centers to make availableclients with excellent services and
suppliers with information. The Internet is creating unique and infinite opportunities for
clients as well as big industries.

The big business structuring of e-commerce in India is not an easy task. The stakeholders
have to comply with techno legal needments in order to accomplishmentfully run e-
commerce big industries in India. Further, there are many techno legal e-commerce
compliances in India that are presently not complied with a mainity of e-commerce players
of India.

Even the overseas investors are not taking these irregularities and non compliances
seriously and they are investing in the hope that in the later years they would regulaaugment
these irregularities. Though, not all irregularities are capable of being rectified as many of

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them are civilly and criminally punishable under Indian laws. As on date e-commerce due
diligence in India is neglected by investors and monetary institutions.

As per the Consolidated FDI Policy of India 2013 by Department of Industrial Policy and
Promotion [DIPP] [PDF], the overseas direct speculation [FDI] in e-commerce activities
in India is allowed up to 100% throughout automatic route. E-commerce activities refer to
the activity of buying and selling by a corporationthroughout the e-commerce platform.
Such corporations would engage only in Big business to Big business [B2B] e-commerce
and not in retail trading, inter-alia implying that existing restrictions on FDI in domestic
trading would be applicable to e-commerce as well.

As per the present FDI policy, FDI in Single Brand produce retail trading is allowed up to
100% throughout administration approval route and is allowed up to 51% in multi brand
retail trading throughoutadministration approval. This is subject to compliance with
additional reedmen’s as prescribed by the policy.

After the Election Commission announced the schedule for the Look Sabha election, model
code of accomplish has come into place, which bars the caretaker administration to refrain
from taking any policy decision which may disturb the level-playing field. The Election
Commission has also issued guidelines for media coverage under Section 126 of RP Act,
1951.

Tesco has already entered into Indian market in this field. UK-based Tesco is the only
corporation to have entered the sector with a speculation of $110 million, more than one
year after the administration allowed 51 per cent FDI in the sector in September 2012. Two
overseas retailers, Carrefour and Aeon, have also expressed interest in setting shops in the
country with Indian partners. French-multinational retailer Carrefour is understood to be in
talks with Bharti enterpaugments, which broke up with US-based Walmart last year, to
enter the Indian multi-brand retail space. Carrefour has been present in India as 2010 in
wholesale cash and carry segment and has five stores across the country.

E-commerce appears to be free from the kind of set of rules faced by corporations in the
past. An e-commerce situation handled in an appropriate manner, with the right
customization of produces and services can lead to win-win situation for both clients and
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corporations. The clients can get the right produce, for the right price, timely whereas the
corporations can set new benchmarks in competence and productivity.
Accomplish commercial communication electronically over the Internet is known as
Electronic commerce. This process is carried out primarily in five levels, and the main
aspect of e-commerce is a merchant selling produces or service to the customers. There are
five main segments under the broader group of e-big business. Though, the following are
few of well known e-commerce models used by corporations engaged in e-commerce.

Levels of E-Commerce
Big business to Big business E-commerce [B2B]
The process of accomplishing big business on the Internet is known as e-big business. It is
not just about buying and selling, but also services, fulfilling the client’s needs and
collaboration with big business partners. Big business to big business e-commerce is smart
big business. The prospect for big business to big business e-commerce is immense.

The way the cycle works is, wholesaler sells produces to the retailer. Advanced e-
commerce software support multi-tier pricing. This helps in setting up online stores that
offer preferred pricing to few of merchant and shared price to others.
This includes internet-enabled initiatives of an enterpaugment to form commercial linkages
with a newenterpaugment, manufacturer, dealer and/or warehouse. The time to market and
study work gets vastly reduced in this form of e-commerce. All throughout the globe, this
e-commerce mode is prevalent. B2B transaction means the interaction is flanked bybig
industries. For example, a website that is catering the steel business might have facility for
both buyers and sellers to list their needments and post their produces. This helps them in
swiftly closing the communication and the buyer can get eminence material and can choose
from different suppliers.
B2B commerce is a booming big business in the e-commerce arena. With the increasing
use of the internet, more and more big business are realizing the commercial advantage of
giving clients an well organized and effectual manner to order produces or services online.
It facilitates access to the ordering process to only those with whom a concern has a
commercial relationship.
Big business to Big business e-commerce make available small and medium
enterpaugments [SMES] with an excellent prospect to access new market segments reduce
costs and make available better client service. Any bottlenecks faced should be viewed
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more as speed breakers rather than barriers. The internet is emerging as an effectual
medium of information storage and dissemination. Its penetration rate has far outpaced the
growth of other media such as television, news study, radio etc.

3.11 Operation of e commerce


Source: merchantstand.com
DEFINITION
The statement trade is the fundamental idea for electronic business, relating to purchasing
and offering of merchandise while "business" indicates business practice and exercises
proposed to make benefits. Electronic trade, in the same way as any possible business,
manages the trade of cash for delicate or hard merchandise and administrations.

Kalakota and Whintons in 1997 characterized the term E-trade from alternate points of
view. These points of view are:

• Communication
• Business Process

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• Service
• Online

Communication Perspective: According to this point of view, E-business is the


conveyance of data, item/administrations or installments over tele-correspondence stations,
machine systems or whatever viable electronic mode of correspondence.

Business Process Perspective: This says that E-business is the requisition of innovation
towards the robotization of business transactions and work stream.

Service Perspective: E-business is characterizes as an instrument that addresses the


yearning of firms, shoppers and administration to cut administration expense while
enhancing the nature of products/ administrations and expanding the velocity of
administration conveyance.

Online Perspective: E-business gives the proficiency of purchasing and offering items and
data on the web and other online administrations.

The term trade is dealt with as transaction between business accomplices. Hence, the term
e-business appears to reasonably slender to individuals. In this manner eventually we
utilize the term e-business. It is a more extensive meaning of e-business. There is perplexity
among the advisors and the academicians over the utilization of this term. Some imagine
that e-trade incorporates all universe of electronically based authoritative exercises that
help a company's business trades – including an association's whole data framework's
foundation. Then again, some contend that envelops the whole universe of inside and outer
electronically based exercises including e-trade.

"E-business can possibly unleash colossal investment funds and business efficiencies, yet
the items of common sense stay tricky. In what capacity will e-trade change the worldwide
arranging and acquiring of transport and logistics in the inventory network? Logistics has
been portrayed as the key empowering influence for e-business – however by what means
can singular logistics and transport organizations guarantee that they profit from, as
opposed to die in, the e-trade transformation?"

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Electronic Commerce (e-business) is electronic business. It's utilizing the force of
machines, the Internet and imparted programming to send and get item determinations and
drawings; offers, buy requests and receipts; and whatever possible sort of information that
needs to be conveyed to clients, suppliers, workers or general society.

E-business is the new, productive approach to direct business which goes past the basic
development of data and extends electronic transactions from purpose of-offer necessities,
determination and generation planning, directly through to invoicing, installment and
receipt. E-business utilization key principles and advances including Electronic Data
Interchange (EDI), Technical Data Interchange (TDI), Hypertext Mark-up Language
(HTML), Extensible Mark-up Language (XML), and the Standard for Exchange of Product
model information (STEP). E-trade is made conceivable through the stretched innovations
of the Internet, the World Wide Web, and Value-Added Networks. The Internet is an
overall accumulation of machine systems, co-working with one another to trade
information utilizing a typical programming standard. Through phone wires and satellite
connections, Internet clients can impart data in an assortment of structures. The size,
extension and configuration of the Internet permits clients to associate effectively through
standard Pcs and nearby telephone numbers, trade electronic mail (E-mail) with
companions and associates with records on the Internet, post data for others to get to, and
upgrade it oftentimes, get to interactive media data that incorporates sound, photographic
pictures and even feature, and access assorted points of view from as far and wide as
possible. An extra characteristic of the Internet is that it fails to offer a focal power as such,
there is no "Web, Inc." that controls the Internet. Past the different representing sheets that
work to create arrangements and principles, few leads and replies to no single association
tie the Internet.

Distinctive individuals use diverse phrasing, for example, 'electronic exchanging'


'electronic acquirement' 'electronic obtaining' or 'electronic showcasing'. From the above
definition, we can infer that electronic business is regularly utilized within a much more
extensive sense, to mean basically the same as 'electronic business'. As such e-business
incorporates buys of products, administrations and other budgetary transactions in which
the intuitive procedure is intervened by data or advanced engineering at both locationally
separate, finishes of the exchange. Here "transactions" incorporate both determination of
merchandise and administration obliged and duty to purchase. E-business transaction
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model could be regarding business to business (B2b), business to client (B2c) or client to
client (C2c).

Electronic Commerce means better business correspondence and information exchange


data is crucial for each and any business. The quality and amount of data which a business
conveys to clients or utilize this data to settle on choices can focus exactly how aggressive
the business is. An organization as of now may be utilizing various electronic based
apparatuses to help procure and amplify data and correspondence needs. These may
incorporate Pcs, word processors, dispatch, copy machines, telex administrations, cells,
pagers and that's only the tip of the iceberg. Shocking l a hefty portion of today's
specialized apparatuses are not so much upto the pace of today's business needs, and can
really make boundaries to attaining the objectives set on the premise of techniques figured
by an organization.

For example, postal offices can keep business holding up for data for quite some time or
even weeks. Overnight dispatchs may spare time however might be an exorbitant extent.
Customary telex and fax is brisk yet exorbitant and conveying by phone can turn into an
interminable round of tag.Presently a business can stay away from these issues by utilizing
e-trade which is quick, fetched proficient, time colloquialism and simple to utilize -i.e.,
budgetary substance and great business era.

Electronic business can bring about better transactions, wide market scope by offering the
profits of rate, comfort, being financially savvy, auspiciousness, high net revenues, moment
client relations, no misfortune of clients, effect and control- all are a small amount of the
past conventional business strategies. A worry can do all that it can to run its business
productively and gainfully.
Provision of electronic operations to business exercises means better business results. It
extraordinarily encourages a firm to settle on better choices, deal estimates, costs and other
important data might be sent and accepted quickly. A business will dependably have the
data it needs quicker, simpler and all the more totally in the new arrangement of
correspondence than at any other time in recent memory in the recent past.

This empowers firms to have an edge over contenders by illuminating, catching up and
asking for data quicker and less demanding to clients.
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An alternate gimmick is that it serves to keep up more noteworthy control, at work, home
or while voyaging, correspond with any business accomplice or firm, anyplace in a split
second.

How does e-business help business? It encourages by enhancing responsiveness to


economic situations and client inclination. Each business must know how paramount
timing is to showcasing and offering items. Timing is imperative to pander to the requests
of clients. In the event that wholesalers, merchants and deals energy don't get the right data
at the perfect time, there will be a money related emergency and in addition losing
significant clients. E-trade system empowers an organization to actualize advertising
projects with more prominent accuracy, for example:
• Pre-empt aggressiveness with a change in showcasing strategies before they can respond.
• Improve responsiveness by reconsidering value change and showcasing projects as and
when needed.

Expedites and Streamlines Reporting


It has been an experience in traditional business polishes with variables like postponements
and inadequacy in reporting frameworks disabling adequacy. Responsive, opportune data
streams from sound administration frameworks. Electronic trade enhances conveyance and
circulation both inside and outside associations. The profits are:
• Stored arrangements of key beneficiaries encourage conveyance.
• Electronic conveyance time.

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Coordinates Sales Efforts
Some showcasing studies uncover that most business people use almost 75 for every penny
of their time on the streets, depending vigorously on phone calls for contact with their head
officers and consumers Phone label makes an interminable baffling amusement out of
finding leads and catching up to validate deals calls. Also, lost or undelivered data brings
about low deals records. Different profits of electronic business are:
• Eliminating phone tag.
• Sending and getting message at comfort.
• Linking deals group numbers to assemble, including global delegates, and
• Closing deals without postponements.

Effectiveness and Efficiency


Electronic trade can expand the effectiveness and adequacy of open connection projects,
show press discharges, monetary upgrades and other corporate interchanges. Duplicate
surveys and approbations are assisted by circling texts to key inner and outer contacts.

Close Contact with Clients


In any business where keeping up close contact with clients is a necessity attention,
electronic business can build responsiveness of the organization' and guarantee client
fulfillment. Arrangement affirmations, demands for data, catch up reports and electronic
information exchange could be effected with more prominent proficiency utilizing texts.

Planning and Execution of Meetings


The system of electronic operations all hands on deck encourages arranging and execution
of gatherings. Official administration gatherings, workshops, workshops, symposia and
assemblies take a lot of time and exertion to oversee. Courses of action must be facilitated
among a mixture of various gatherings in diverse areas e.g., lodgings, speakers, exhibitors,
actively present people, the media and so on. Reports and overviews need to be
appropriated before as well as after, the occasion. Furthermore there are dependably the
migraines generally breaking occasions and a minute ago affirmation. In an electronic
nature's domain, feature gatherings, report gathering, machine based meeting, which offer
organizations the adaptability of both electronic and paper circulation, can make these
employments simpler and more compelling.

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Need for E-Commerce
The worldwide business environment is moving speedier than any other time in the recent
past. Expanded rivalry at home and abroad means quality and additionally gainfulness must
be safeguarded by corporate houses. This weight has prompted a reappraisal of the
acknowledged existing business hone in the quest for more prominent productively.
Customarily, the reaction notwithstanding focused danger has been to lessen costs by L
vindicating creation, shedding work and rebuilding business, coupled with ventures in
.innovation to enhance benefit and create benefit.

Whether business to business (B2b) or business to client (B2C) there are profits to all
gatherings, clients or suppliers. A decrease in securing times and expenses, lower costs for
products and administrations, an extended number and nature of suppliers, a build in
purchaser benefit. Better administration data and better stock control is conceivable. A
Reduction time to market is likewise achievable giving enhanced working efficiencies and
enhanced item quality at decreased expense. The installment methodology can additionally
be enhanced lastly and above all an enormously extended clients base. B2b e-business was
resulting from an endeavor to tackle an authoritative issue. It created another workstation
standard to handle these needs, which got known as EDI, Electronic Data Interchange.
Today its relative, XML, a lighter, less complex information trade standard is utilized by
B2b destinations. Straight forward e-trade locales initially seen in 1992. The early e-
business locales were virtual lists, basically posting items available to be purchased.
Requesting was disconnected from the net, through email, telephone or fax. By 1996 the
engineering had propelled extraordinarily to create virtual stores with shopping trucks,
customer accounts and, with the improvement of conventions, for example, Secure Socket
Layer (SSL), empowered clients to request and pay for their buy on-line specifically with
charge card. E-business rapidly got famous with buyers and suppliers. For clients, it was
quick, simple and effective, permitting them to think about items, value and administration
before buy. For suppliers, it permitted them to achieve a boundless worldwide group of
onlookers, 24 hours a day, 7 days a week at decreased expenses. Today e-business is
generally utilized and developing quick. B2b is the biggest, quickest developing and most
productive business sector. As per IDC, in the not so distant future, it is required to record
for two thirds of overall e-business. B2c is likewise anticipated that will develop, supported
by Broadband (rapid) Internet access to all the more on-line family units. Future
developments incorporate advanced cash and e-wallets, and 'particular operators' that help
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clients find what they are searching for. Destinations can work with satisfaction focuses
giving clients phenomenal administration and suppliers with data, and can help the most
current pattern for human connection in E-business client administration. The Internet is
making exceptional and appearing interminable open doors for both clients and
organizations. Yet it one of its significant issues is that it is changing so quick that both
gatherings are overpowered by the pace of progress and the sheer number of decisions
accessible to them. Moreover web organizations win by emulating administers very not the
same as those which customary organizations may take after.
E-trade has all the earmarks of being excluded from the sorts of requirements that have
restricted organizations truly. An e-business environment took care of in a legitimate way,
with the right customisation of items and administrations, in inventive ways, can prompt
win-win circumstances. The clients can get the right item at the ideal time and at the right
cost, organizations can set new gauges in effectiveness and benefit.

Interdisciplinary nature of e-commerce


Electronic business, being another field, is simply creating its hypothetical or logical
establishments. It is focused around a few orders. The real trains of E-Commerce with a
few examples of issues with which they are concerned take after:

3.12 Interdisciplinary nature of e-commerce


Source: merchantstand.com

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Marketing
Numerous issues of showcasing logged off are significant to online E-Commerce - for
instance, expense profits of advel1isements and notice methodologies. Different issues are
novel to E-Commerce, running from internet advertising system to intelligent stands.

Computer sciences
A significant number of the issues in the foundation of E-trade, for example, dialects,
media, and systems, fall into the order of workstation sciences. Savvy executors assume a
real part in E-Commerce too.

Consumer conduct and Psychology


Customer conduct is the way to the accomplishment of B2c exchange, yet so is the conduct
of the merchants. The relationship in the middle of societies and customer mentality in
electronic business sector is a case of an exploration issue in the field.

Finance
The money related markets and banks are one of the significant members in E-Commerce.
Additionally, financing courses of action are some piece of numerous online transactions.
Issues, for example, utilizing the Internet as a substitute for a stock trade and duplicity in
online stock transactions are a specimen of the numerous subjects of the recorded.

Economics
Electronic business is impacted by budgetary strengths and has a significant effect on world
and nation economies. Additionally, speculations of micro and macro-matters of trade and
profit need to be considered in E-Commerce arranging, and in addition the budgetary
effects of E-Commerce on firms.

Management Information Systems (MIS)


The data frameworks division is generally in charge of the sending of E-Commerce. This
control spreads issues running from frameworks investigation to framework reconciliation,
also arranging, execution, security, and installment frameworks, among others.

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Accounting and Auditing
The back-office operations of electronic transactions are like different transactions in a few
regards, however diverse in others. For instance, examining electronic transactions displays
a test for the bookkeeping calling; so does the improvement of approachs for .expense profit
legitimization.

Management
Electronic trade deliberations need to be overseen appropriately, and due to the
interdisciplinary nature of E-Commerce, its administration may require new methodologies
and speculations.

Business Law and Ethics


Lawful and moral issues are amazingly critical in E-Commerce, particularly in a worldwide
business. Countless bills are pending, and numerous moral issues are interrelated with
lawful ones, for example, protection and protected innovation.

Others
A few different controls are included in different parts of E-Commerce to a lesser degree
for instance, etymology (interpretation in worldwide exchanges), mechanical autonomy
and tangible frameworks, operations research/ administration science, facts, and open
arrangement and organization. Likewise, E-Commerce is of Interest to designing, health
awareness, correspondence, and stimulation distributed

In a B2b transaction, the cooperation is between organizations. For instance, a site that is
getting for the steel business may have office for purchasers and dealers to rundown their
necessities and post their items. It helps them in rapidly shutting the transactions and the
purchaser can get quality, material and can browse diverse suppliers. B2b trade is a
developing business in the e-trade coliseum with the expanding utilization of the web,
more business are understanding the business preference of giving business customers a
streamlined and simple way to request items or administration on the web. It encourages
access to the requesting procedure to just those with whom a worry has a business
relationship.

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Business to Business e-trade gives little and medium endeavors (SMES) with a fabulous
chance to get to new markets, enhance client administration and diminish costs. Keeping
in mind obstructions exist, they ought to be seen a greater number of as pace breakers as
opposed to street boundaries. As a medium of data stockpiling and spread, the web has and
is developing a reasonable victor. Its rate of infiltration has far outpaced the development
of other well known media, for example, daily paper, radio and TV.

B2b transactions are however moderately high esteem in nature and associations are
moderate to change their conventional frameworks for the inventory network
administration. The explanations behind the development in B2b e-trade are a lot of people.
In an expanding focused situation, e-trade offers exceedingly alluring expense sparing
choices. The movement to this procedure is regularly determined by the needs of
purchasers. Inventive systems for upgrading B2b and B2c levels of e-business include:
• CD-ROM inventories that are interfaced to the client's online index, empowering him to
peruse logged off and request on the web.
• Kiosks put at physical store areas or in shopping centers to acquaint clients with the simple
web requesting choices.
• Extranets to connection organizations together that lead customary business to .business
transactions and
• Affiliate projects to drive business to your trade site from other substance related locales.
B2b e-trade is required to be the biggest mode of transacting e-business and is a worldwide
sensation. It includes taking web empowered activities to structure business joins with
different ventures, merchants or producers. In this manifestation of e-trade, a business firm
places requests for supplies with an alternate business firms specifically over the Internet.
Paperwork and time needed for preparing the request and conveyance of the merchandise
are subsequently diminished all things considered.

It is for the clients to purchase stores from the web. The issue to be perceived in this is to
secure installment, utilizing encryption, transaction respectability, fast reaction, time and
unwavering quality. B2c e-business includes offering of merchandise and administrations
to shoppers or end clients. It permits them to search the item list, select items or benefits
and complete the request on In a B2c transaction, the collaboration is between a customer
and the favored business. Case in point, the most well known webpage is amazon.com,

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which is the first online bookseller which has demonstrated a potential contender to the
conventional blocks and mortar booksellers, for example, Barrens and Noble.

In this class of e-business, organizations utilize the web to offer to buyers deals and
administrations as far and wide as possible 24 hours a day, seven days a week and 365 days
a year, The locales Amazon, Rediff and Uphar are among those fitting in with this
classification. These sites are implied for offering products specifically to customers
through the web. The two-path openness of the web empowers working organizations to
straightforwardly learn client inclination and purchasing patterns. Organizations are
utilizing these shopper experiences to plan promoting techniques and offer to the clients
what they need and when they need. E-business in this mode essentially diminishes the
expenses connected with delegates, administration focuses and mass promoting fights.
Since e-trade sets aside a few minutes conveyance conceivable, the supplier does not need
to store the merchandise. He can get them from the suppliers as and when he gets the
request from the purchaser through the web.

B2c is the most mainstream manifestation of e-business, wherein the people are
straightforwardly included in B2c e-trade, and organizations utilize the web for offering
their items or administrations 24 hours a day through worldwide access. The destinations
Amazon.com and Rediff are among these. These sites spell products straightforwardly to
customers over the Internet. The two way openness peculiarity of the web empowers
working organizations to learn buyer inclination and purchasing patterns straightforwardly.
It is for the clients to buy stores from the web. The problem to be recognized in this is to
secure payment, using encryption, transaction integrity, quick response, time and
reliability.

B2C e-commerce involves selling of goods and services to customers or end users. It allows
them to browse the produce catalogue, select produces or services and complete the order
online.

In a B2C transaction, the interaction is flanked by a customer and the preferred big
business. For example, the most well known site is amazon.com, which is the first online
bookseller who has proved a potential competitor to the traditional bricks and mortar
booksellers such as Barrens and Noble.
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In this group of e-commerce, big industries use the internet to offer to customers sales and
services around the globe 24 hours a day, seven days a week and 365 days a year, the sites
Amazon, Rediff and Uphar are among those belonging to this group. These websites are
meant for selling goods directly to customers throughout the internet. The two-way
accessibility of the internet enables operating corporations to directly ascertain client
preference and buying trends. Big industries are using these customer insights to formulate
marketing strategies and offer to the clients what they want and when they want. E-big
business in this mode significantly reduces the costs associated with intermediaries, service
centers and mass marketing campaigns. As e-commerce makes just in time delivery
potential, the supplier does not have to store the goods. He can procure them from the
suppliers as and when he gets the order from the buyer throughout the internet.

B2C is the most well known form of e-commerce, wherein the individuals are directly
concerned in B2C e-commerce, and big industries use the internet for offering their
products or services 24 hours a day throughoutglobewide access. The sites Amazon.com
and Rediff are among these. These websites spell goods directly to customers over the
Internet. The two way accessibility feature of the internet enables operating corporations
to ascertain customer preferences and buying trends directly.

Portal:
Portals like Yahoo, MSN/Windows Live, and AOL offer users both web search tools as
well as content and services such as news, e-mail, instant messaging, calendars, shopping,
music downloads, video streaming and more, all in one place. At first, portals wanted to be
viewed as “gateways” to the Internet. They are marketing themselves as places where
people will start their Web searching and hopefully spend a long time to read news, find
activity, and meet other people. As portals do not sell anything directly or so it seems and
in that sense they can present themselves as unbiased. The market prospect is very large:
In 2008, about 173 million people in the United States had access to the Internet at work
or home [eMarketer, Inc., 2008a]. Portals generate revenue primarily by charging
advertisers for ad placement, collecting referral fees for routing clients to other sites, and
charging for premium services. AOL, MSN [in conjunction with Verizon], and Yahoo [in
conjunction with AT&T]—which in addition to being portals are also Internet Service
Make available[ISPs] that make available access to the Internet and the Web—add an
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supplementary revenue stream: monthly subscription fees for access. Although there are a
number of portal/search engine sites, the top five sites[Google, Yahoo, MSN/Windows
Live, AOL, and Ask.com] gather more than 95% of the search engine traffic because of
their superior brand gratitude[Nielsen Online,08]. Many of the top sites were among the
first to materialize on the Web and therefore had first-mover advantages. Being first confers
advantage because clients trust a reliable make available and also experience switching
costs if they change to late arrivals in the market. By garnering a large slice of the
marketplace, first-movers—just like a single telephone system—can offer clients access to
commonly shared ideas, standards, and experiences [few of thing called system
externalities that we illustrate in later chapters].

Yahoo, AOL, MSN/Windows Live and others like them are considered horizontal portals
as they define their market space to include all users of the Internet. Vertical portals [few
of times called portals] attempt to make available similar services as horizontal portals, but
are focused around a particular subject matter or market segment. For instance, Sailnet
specializes in the customer sailboat market that contains about 8 million Americans who
own or rent sailboats. Although the total number of vertical portal users may be much lower
than the number of portal users, if the market segment is attractive enough, advertisers are
ready to pay a premium in order to revery a targeted audience. Also, visitors to specialized
niche portals end up spending more money than the average Yahoo visitor. Google and
Ask.com can also be considered portals of a sort, focus primarily on offering search
services. They generate revenues primarily from search engine advertising sales and also
from affiliate referral fees. For more information, see Insight on Proficiency: Search, Ads,
and Apps: the Future for Google [and Microsoft].

E-tailer :
Online retail stores, also known as e-tailers, come in all sizes. From giant Amazon to tiny
local stores that have Web sites. E-tailers are similar to the typical bricks-and-mortar
storefront, other than the fact that clients only have to connect to the Internet to place an
order and to check their inventory. Few of e-tailers, which are referred to as “bricks-and-
clicks,” are subsidiaries or divisions of existing physical stores and carry the same
produces. JC Penney, Barnes & Noble, Wal-Mart, and Staples are four examples of
corporations with complementary online stores. Others, though, operate only in the virtual
globe, without any ties to physical locations. Amazon, BlueNile.com, and Drugstore.com
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are examples of this type of e-tailer. Several other variations of e-tailers—such as online
versions of direct mail catalogs, online malls, and manufacturer-direct online sales—also
exist [Gulati and Garino, 2000]. Given that the overall retail market in the United States in
2008 is predictable to be around $4 trillion, the market prospect for e-tailers is very large
[U.S. Census Bureau, Financial and Statistics Administration, 2008]. Every Internet user
is a potentialclient. Clients who feel time-starved are even better prospects, as they want
shopping solutions that will eliminate the need to drive to the mall or store [Bellman, Lohse,
and Johnson, 1999]. The e-tail revenue model is produce-based, with clients paying for the
purchase of a particular item. This sector is extremely spirited, though. As barriers to entry
[the total cost of entering a new marketplace] into the Web e-tail market are low, tens of
thousands of small e-tail shops have sprung up on the Web. Becoming profitable and
surviving is very hard, though, for e-tailers with no prior brand name or experience. The e-
tailers’s challenge is making its big business unique and differentiating its big business
from existing stores and Web sites. Corporations that attempt to revery every online
customer are likely to reduce their possessions quickly. Those that clearly identify their
target market and its needs are best prepared to make a profit. Keeping expenses low,
selection broad, and inventory controlled are keys to accomplishment in e-tailing.

Content make available:


Although there are numerous ways the Internet can be useful, “information content,” which
can be defined Usually to include all forms of intellectual property, is one of the largest
types of Internet usage. Intellectual property refers to all forms of human expression that
can be put into a tangible medium such as text, CDs, or the Web [Fisher, 1999]. Content
make available distribute information content, such as digital video, music, photos, text,
and artwork, over the Web. According to the Online Publishers Association, in 2005, U.S.
customers spent $2 billion for online content [Online Publishers Association, 2006]. As
then, digital music, movies, and television have turn out to be an increasingly significance
part of the market, and are expected to generate over $3.6 billion in revenues alone during
2008 [e-Marketer, Inc. 2007b; 2007c; author estimates] make available make money by
charging a subscription fee. For instance, in the case of Real.com’s Rhapsody Unlimited
service, a monthly subscription fee makes available users with access to thousands of song
tracks, other content make available, such as WSJ.com. Micropayment systems have
greatly improved the revenue model prospects of content make available who wish to
charge by the download. Though, not all online content make available charge for their
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information; just look at Sportsline.com, CIO.com, CNN.com and the online versions of
many newsstudys and magazines. Users can access news and information at these sites
without paying a cent. These well known sites make money in alternate ways, such as
through out advertising and partner promotions on the site. Though, “free content” is
limited to headlines and text, whereas premium content—in-depth articles or video
delivery— is chargeable. Usually, the key to becoming aaccomplishmentful content make
available is to own the content. Traditional owners of copyrighted content like publishers
of books and newsstudys, broadcasters of radio and television content, music publishers
and movie studios—have powerful advantages over newcomers to the Web who simply
offer distribution channels and have to pay for content, often at exorbitant prices. There are
other content make availablesthough who do not own content, but syndicate [aggregate]
and then dispense content produced by others. Syndication is a main variation of the
standard content make available model. A new variation here is those who collect
information from a wide variety of sources and then add value to that information
throughout post aggregation services and are known as Web aggregators. For instance,
Shopping.com collects information on the prices of thousands of goods online, examine
the information, and presents users with tables showing the range of prices and Web
locations. Shopping.com adds value to content it aggregates, and re-sells this value to
advertisers who advertise on its site [Madnick and Siegel, 2001].Any e-commerce startup
that intends to make money by providing content is likely to face hardies unless it has a
unique information source that others cannot access. For the most part, this big
businessgroup is dominated by traditional content make available. Online content is
discussed in further dept.

Transaction Broker:
Sites that process communication for customers normally handled in person, by phone, by
mail are transaction brokers. The largest industries using this model are monetary services,
travel services, and job placement services. The online transaction broker’s primary value
propositions are savings of money and time. In addition, most transaction brokers make
available timely information and opinions. Both employers and job seekers are attracted by
the convenience and currency of information. Online stock brokers charge commissions
that are considerably less than traditional brokers, with many offering substantial deals,
such as cash and a certain number of free trades, to lure new clients [Bakos,Lucas, et al.,
2000]. With rising customer awareness in monetary planning and the stock market, the
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market prospect for online transaction brokers appears to be enormous. Though, while
innumerable clients have shifted to online brokers, many have been cautious about
switching from their conventional brokers who make available personal touch and a brand
name. There is also a fear of loss of privacy and loss of control over personal monetary
information and this also contributes to market resistance. As a result, the challenge for
online brokers is to augment above customer fears by stressing upon the security and
privacy measures in place, and, like physical banks and brokerage firms, providing a wide
range of monetary services and not just limiting to stock trading. Brokers make money
every time a transaction occurs. Every stock trade nets the corporation a fee, based either
on a flat rate or a sliding scale as per the size of the transaction. The key to generate more
revenue is to attract new clients and encourage them to trade frequently. Job sites charge
listing fees from employers up front, rather than charging a fee when a position is filled.
Competition among brokers has turn out to be fiercer in the past few years, due to new
entrants offering ever more tempting offers to customers to sign on. Those who flourished
at the outset were the first movers such as Ameritrade, Schwab, E-Trade and Date. During
the initial days of e-commerce, most of these firms engaged in costly marketing campaigns
and were willing to pay up to $400 to add a single client. Though, online brokers are now
in direct competition with traditional brokerage firms who have entered the online market
space. Note worthy consolidation is occurring in this business. The number of job sites has
also multiplied, but the largest sites [those with the largest number of job listings] are
pulling ahead of smaller niche corporations. In both industries, only a few, large firms are
likely to continue to exist in the long run.

Market creator:
A digital situation in which buyers and sellers can meet, display produces, search for
produces, and establish prices is built by Market creators... Before the Internet and the Web,
market creators depended on physical places to set a market. From the medieval market
place to today’s New York Stock Exchange, a market needed a physical space for
transacting. There were almost no private digital system marketplaces prior to the Web.
The Web altered this by making it potential to detach markets from physical space. A
leading example is Priceline; which allows customers to set the price they are willing to
pay for different travel arrangements and other produces also referred to as a reverse
auction; and eBay, the online auction site used by both customers and big industries. For
example, eBay’s auction big business model creates a digital electronic situation for buyers
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and sellers to meet, agree on a mutually satisfactory price, and transact. This is poles apart
from transaction brokers who actually carry out the transaction for their clients, acting as
agents in larger markets. At eBay, the buyers and sellers both are their own agents. Every
sale on eBay nets the corporation a commission depending on the percentage of the item’s
sales price along with a listing fee. EBay is one of the few Web sites that have been
profitable literally from the beginning. The reason is that eBay simply acts as a middleman
and has no inventory or production costs. This means both sellers as well as buyers pay e-
bay to avail its services.

The market potential for market creators is unlimited, but only if the firm has the capital
and marketing plan to catch the attention of sufficient sellers and buyers to the marketplace.
At the end of June 2008, eBay had about 84.5 million active users, and this makes for a
well organized market [eBay, 2008]. There are many buyers for every type of produce, few
of times for the same produce, for example, laptop models. New enterpaugments striving
to create a market needan hard line branding and awareness program to magnetize a
sufficient critical mass of clients. Few of very large Web-based firms such as Amazon have
banked upon their large client base and started auctions. Many other digital auctions have
sprung up in smaller, more specialized vertical market segments such as automobiles and
jewelry. In addition to branding and marketing, a corporation’s management and
corporation team can make a difference in creating new markets, particularly if few of
managers have had previous experience in similar big industries. The key in such situations
is more often than not is -speed. The aptitude to turn out to be operational swiftly can make
the difference flanked byaccomplishment and failure.

E-service make available:


In comparison to e-tailers who sell produces online, service make available offer their
services online. There’s been a growth in online services that is often unrecognized. Web
2.0 applications such as video sharing, photo sharing and user-generated content [in blogs
and social systeming sites] are all services make available to clients. Google is the leader
in growing online applications such as Google Maps, Google Docs and Spreadsheets, and
Gmail. Think Free and Buzzword are online alternatives to Microsoft Word make available
as services. Personal services such as monetary and pension planning, online medical bill
management and travel recommender sites are performing strongly. A variety of revenue
models are used by service makes available. Few of charge a fee or monthly subscriptions,
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while others generate revenue from other sources, such as throughout advertising and by
collecting personal information that is useful in direct marketing. Few of services are free
but partially. For example, Google Apps’ basic edition is free, but a “Premier” model with
virtual conference rooms and advanced tools costs $50 per employee a year. Service make
available trade proficiency, knowledge and capabilities for revenue just like retailers who
trade produces for cash. Obviously, there are few of services that cannot be making
available online. For example, medical services, dentistry, plumbing, hardware support and
car repair cannot be completed via the Internet. Though, arrangements can be made online
for these services. Online service make available may offer services like information
storage, legal services, [example being LinklatersBlueFlag], or offer services and advice to
high-net worth individuals, such as at MyCFO.com. Grocery shopping sites such as Fresh
Direct and Peapod are also service make available. To complicate matters a bit, most
monetary transaction brokers [illustrated previously] make available services such as
college tuition and pension planning. Travel brokers also offer vacation-planning services,
not just big business with airlines and hotels. Indeed, combining services with your
produces is a powerful big business strategy pursued by many hard-goods corporations [for
example, warranties are services]. The basic value proposition of service make available is
that they offer customers valuable, convenient, time-saving and low-cost compared to
traditional service make available or in the case of search engines and most Web 2.0
applications—they make available services that are unique to the Web. Where else can you
search 50 billion web pages, or share data with as many other people at once? Study has
found that a significance factor in predicting online buying behavior is time starvation. The
market prospect for service make available is as large as the variety of services that can be
making available and potentially is much larger than the market prospect for physical
goods. We live in a service-based economy and society; witness the growth of fast food
restaurants, package delivery services, and wireless cellular phone services. Customers’
Fresh Direct and other e-commerce big industries can also be classified as online retailers
insofar as they warehouse commonly purchased items and make a profit based on the
spread flanked by their buy and sell prices. Increase in demand for convenience products
and services bode well for current and future online service make available. Marketing of
service make available must dispel customer fears about hiring an online vendor, as well
as develop confidence and familiarity among current and potentialclients. Building
confidence and trust is imperative for service make available just as it is for retail produce
merchants. Kodak, for instance, has a powerful brand name which is over a century old,
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and has translated that brand into a trusted online make available of photo services. In the
process, Kodak is transforming itself from a produces-only corporation [cameras and
study] into a more advance digital services corporation.

Society make available:


Society make available are not a new entity. Though the Internet has created sites for like-
minded individuals to meet and converse, without the confines of time and geography to
deter participation. Society make available are sites that create a digital online situation
where people with similar interests can communicate with like-minded people. They can
also transact [buy and sell goods]; share interests, photos, videos;; receive interest-related
information; and even play out fantasies by adopting online personalities called avatars.
Social systeming sites like Facebook, MySpace, Fraudster and hundreds of other niche sites
such as Twitter, Doostang and Sportsvite offer users society building tools and services.
The basic value intention of society make available is to create a fast, convenient, one-stop
site where users can focus on their most vital concerns and interests, share their experience
with friends, and learn more about their own interests. For this society make available
depend on a fusion revenue model. This model includes subscription fees, sales revenues,
transaction fees, affiliate fees and advertising fees from other firms that are attracted by a
niche audience. Society sites such as village generate revenue throughout affiliate
relationships with retailers and from advertising. For example, a parent might visit Baby
style for instructions on diapering a baby and be presented with a link to Huggies.com. If
the parent clicks the link and makes a purchase from Huggies.com, Baby style gets a
commission from Huggies.com. Similarly banner ads also generate revenue. About.com
allows visitors to share tips and buy recommended books from Amazon, giving About.com
a commission on every purchase. Few off the oldest communities on the Web are
Well.com, which make available a forum for proficiency and Internet-related discussions,
and The Motley Fool [Fool.com], which make available monetary news, advice and
opinions. The Well offers a range of membership plans ranging from $10 to $15 a month.
Motley Fool generates revenue throughout ads and selling produces that start out “free” but
turn into annual subscriptions. Customers’ interest in communities is growing. Society is,
debatably, the fastest growing online activity. While many society sites have had a tough
time becoming profitable, over time many have succeeded. Both the very large social
systeming sites [MySpace and Facebook every have over 100 million profiles] as well as
niche sites with smaller dedicated audiences are model marketing and advertising
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territories. Traditional online communities such as the Well, I Village, and WebMD find
that depth of knowledge at a site is a significance feature. Society members often request
advice, knowledge and guidance. Lack of trained and experienced personnel can severely
impede the growth of a society, which needs facilitators and managers to keep deliberations
on course and relevant. For the newer society social systeming sites, the most significance
ingredients of accomplishment appear to be easing and flexibility of use, and a strong client
value proposition. For instance, Facebook has rapidly gained on its rival MySpace by
encouraging users to put together their own revenue-producing applications that run on
their profiles, and even take in advertising and affiliate revenues. Online communities
profit appreciably from offline word-of-mouth and viral marketing. Online communities
tend to mirror offline relationships. When your friends say they have a profile on Facebook,
and ask you to visit, you are encouraged to create your own online profile.

Here association is between customer to shopper. Case in point, in destinations like e-Buy
Bid or Buy.com, Baazi.com which are closeout locales, one can for all intents and purpose
offer and purchase any products (either utilized or new ones).This manifestation of e-
business is only the digital adaptation of the great old closeout houses. In the event that
anybody needs to offer anything, every one of the one need to do is post a message on the
site, giving subtle elements of the item and the normal value and hold up for an intrigued
client to turn up and purchase it. The purchaser contacts the merchant through the Internet
and the arrangement is crossed once the sum is finished. Online message sheets and wheels
and deals are likewise samples of C2c e-business.
E-trade, by engaging the client, has been deliberately reclassifying business. A sample of
C2b model of e-trade is the site Price line.com, which permits prospective air transport
explorers, travelers in need of lodging reservations and so forth to visit its sites and show
their favored cost for go between any two urban areas. On the off chance that a carrier is
eager to issue a ticket on the clients offered value, the purchaser can then set out to the said
terminus at his terms.

This is concerned more with promoting a partnership's inner techniques all the more
effectively. Client mind and help exercises likewise hold ground. The necessity is that are
all organization toward oneself with requisitions on the web that the workers can utilize E-
Commerce is one of the few innovations in human history which include so many potential
benefits. The comprehensive nature of the proficiency, low cost, interactive nature, ability
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to revery hundreds of millions of people, endless possibilities, resourcefulness and advance
of the supporting communications [particularly the web] result in many potential benefits
to individuals, corporations and society. These benefits are just starting to turn out to be
visible, but they will increase appreciably as E-Commerce expands. It is therefore not
surprising that many maintain that the E-Commerce revolution is just as profound as
industrial revolution when it comes to change.

Benefits to Corporations
The benefits to corporations are as follows:
• Electronic commerce allows a corporation to easily identify and locate more clients, the
best suppliers, and the most appropriate big business partner’s globe wide. It expands the
market place to national and international market with minimal capital outlay.
• Electronic commerce helps bring down the following: cost of creating, processing,
distributing, storing and retrieving study-based information. By introducing an electronic
procurement system, corporations can bring down the purchasing administrative costs by
almost 85 percent.
• Ability to create highly dedicated big industries. For example, dog toys, which were
earlier sold only in pet shops or department and discounts stores, are sold now on a
specialized site-www.dogtoys.com.
• Electronic commerce facilitates “pull” type supply chain management which allows
reduced inventories and overhead. In a pull-type system the process begins from client
orders and uses just-in-time manufacturing.
• The pull-type processing enables expansive customization of products and services which
make available spirited benefit to the implementers.
• Electronic commerce reduces the time flanked by the expenditure of capital and the
receipt of products and services.
• Electronic commerce initiates big business processes reengineering projects. The
productivity of sales people, knowledge workers, and administrators can increase by 100
percent or more by changing processes.
• Electronic commerce brings down the telecommunication cost the as the internet is
cheaper than value added systems.
• Other benefits are: improved client service and image, new big business partners,
compressed cycle and delivery, simplified processes, increased productivity, expediting
access to information, increased flexibility and reduced transportation costs.
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Benefits to Customers
The benefits of E-Commerce to customers are as follows:
• Electronic commerce allows clients 24*7 accesses all throughout the year, from almost
any location.
• Electronic commerce make available client with multiple choices.
• Electronic commerce often make available clients the prospect to buy less expensive
produces and services by providing them and prospect to compare before making a
purchase.
• In case of digitized produces, E-Commerce allows quick delivery.
• Clients can receive relevant and detailed information immediately.
• Electronic commerce allows customers to participate in virtual auctions.
• Electronic commerce allows clients to interact with other clients in electronic
communities and exchange ideas as well as compare experiences.
• E-commerce facilitates competition, which results in significant discounts.

Benefits to Society
The benefits of E-Commerce to society are as follows:
• Electronic commerce enables more individuals and prospect to work from home and to
do less traveling for shopping, reducing traffic on the roads and therefore lower air
pollution.
• Electronic commerce allows few of merchandise to be sold at lowest prices, so less well
off people can buy and increase their standard of living.
• Electronic commerce enables people in third globe nations and rural areas to enjoy
produces and services that otherwise are not accessible to them.
• Electronic commerce facilitates delivery of public services like health care, education,
and distribution of administration social services at a reduced cost and/or improved
eminence.

1.6 Confines of E-Commerce


The confines of E-Commerce can be grouped into two categories which are:
• Technical confines and
• Non-technical confines
The technical confines of E-Commerce are as follows:
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• Lack of system security, reliability, standards and communication protocols.
• Inadequate telecommunication bandwidth.
• The software expansion tools are still evolving and changes are rapid.
•Hard to incorporate the Internet and E-Commerce software with few of existing
applications and databases.
• Vendors may need special Web servers and other communications in addition to the
obtainable system servers.
• Few of E-Commerce software might not in tune with few of hardware or may be
mismatched with few of operating systems or other mechanism.
• With time, appropriate planning can minimize the impact of these confines.
Execution of e-governance is quite obviously not going be very smooth or easy. There is
still an enormous confusion among implementing agencies in the understanding of what
exactly e-commerce and e-governance are and how to go about it. Few of these
corporations have insufficient internal computer personnel who have their own confines in
understanding and implementing e-governance schemes. This does not allow them to act
as a bridge flanked by the corporation and professional external corporations. In order to
evolve a single point service, there is also a need for integration and convergence of
services offered by different departments. All-embracing coverage of rural areas is also
going to take more time.
The initiatives here are vital despite these set of rules. The situation for e-commerce
expansion itself would be furthered and strengthened by using the Internet as a tool for
‘electronic governance’. The principle here is that in promoting big business on-line,
administrations will aid the delivery of goods, services and information. This will enable
more traffic across data systems, which in turn, will serve to generate the revenues and
speculation rationale needed to support further communications expansion.
The impact of E-commerce changes will be dramatic in our country. India must effectually
prepare for and make sure its e-readiness for them. Serious plans are compulsory in India
to augment the output of skilled professionals in order to meet the growing demand within
the country itself; otherwise the shortage would affect our own growth in e-commerce. The
issue of 'brain-drain' has been talked about for years. Many though see it today as a 'brain-
gain' on account of the tremendous benefits in the IT sector that these professional have
and are bringing to the country. Though, a more serious issue that needs to be addressed at
the international level is what could be referred to as the surreptitious creation of ‘high-
tech indentured labor’. The developed globe, to meet its own shortages and needments,
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decides on both the timing and conditions of importing such professionals from growing
nations. In times of recession, they shed such jobs and repatriate the professionals. Should
not this be negotiated flanked by administrations on mutually beneficial terms and
conditions? In India, we need to have a national debate on this issue and also raise it at the
multilateral level at corporations such as the WTO on the one hand, while putting in place
an agenda to gain from the financial prospect, on the other.

Across the country, the needment of software engineers is being addressed by plans to
double the capacity in the State-run university system on a two to three year programme.
Quite unplanned but rather accomplishment fully, this has been matched by the booming
private sector educational services in IT and e-commerce that have proliferated across the
country. Even though education has traditionally been a State responsibility, hundreds of
private software and e-commerce training institutes have mushroomed all across the
country—and not just in the big metros. In fact training and education is itself emerging as
a new e-commerce export activity with few of of the bigger players in the field of computer
education now setting up branches abroad and portals on the Internet. These teverying
shops make available training from software programmes to e-commerce practices and
web-services like medical transcription. The growing demand for such proficiency is today
creating several employment opportunities. Though, the issue of standards, certification,
and gratitude of these training programs is still to be addressed. Few of amount of
regulation will be necessary here, lest young students and their poor parents get cheated by
few of these highly priced teverying shops. Administration policies and plans of e-
education also need to be aligned with what is happening in the market.

3.4 The Future of E-Commerce


In 1996, Forrester Research Institute (www.forrester.com) anticipated that B2c would be a
$6.6 billion business in 2000, up from $518 million in 1996. At that point they changed the
figure to $20 billion, and the expectation continues developing. In 1997, about $10 billion
value of B2b transactions were led over the Internet. Expectations on the aggregate size of
E-Commerce differ. For 2010, aggregate web shopping and B2btransactions are assessed
to be in the extent of $700 billion to $4 trillion. Some E-Commerce requisitions, for
example, barters and online stock exchanging, are developing at a rate of 15 percent to 25
percent for every month, and the amount of Internet clients worldwide is anticipated to
achieve 750 million by 2008. Upwards of 50 percent of Internet clients are anticipated to
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be online customers. One evidence of the possibility of E-Commerce is the cost of E-
Commerce-related stocks on the Internet.
Most E-Commerce organizations, for example, Arnazon.com, are not making a benefit.
They are extending operations and producing deals development. It is accepted that by
2010 a large portion of the significant E-Commerce organizations will begin to produce
sizable benefits. Is E-Commerce only one more trendy expression or would it say it is true?
We accept that it is genuine in view of its potential profits.

The Benefits Of E-Commerce


Few advancements in mankind's history include the same number of potential profits as E-
Commerce does. The worldwide nature of the engineering, ease, chance to achieve a huge
number of individuals, intuitive nature, mixed bag of conceivable outcomes, and
resourcefulness and development of the supporting base (particularly the web) bring about
numerous potential profits to associations, people, and public opinion. These profits are
simply beginning to appear, however they will build fundamentally as E-Commerce
stretches. It is not shocking that some keep up that the E-Commerce insurgency is simply
'as ace found as the change that accompanied the modern upset.

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Profits to Organizations
The profits to associations are as takes after:
• The product e advancement devices are as of now advancing and evolving quickly.
• It is hard to incorporate the Internet and E-Commerce programming with some current
provisions and databases.
• Vendors may require unique Web servers and different bases notwithstanding the system
servers.
• Some E-Commerce programming may not fit with some equipment or may be
contradictory with some working frameworks or different parts.
• over the long haul, these confinements will decrease or be succeed; suitable arranging can
minimize their effect.

Non-specialized Limitations
Of the a lot of people non-specialized limits that moderate the spread of E-Commerce, the
accompanying are the significant ones:

Absence of Awareness
The greatest test before fruitful e-business over the Net is that of changing the brains and
state of mind of the vendors tuned in to the rising data engineering. Further, good faith and
vital business projections are needed. In the event that e-business must be a substitute
method for working together in India, another mindfulness is required, something that
would slice through the buildup and U.s. resemble the other indistinguishable.

The majority of the specialists don't comprehend the hugeness and ramifications of the
electronic business medium or are unsure of the quality and conveyance plan, physical
conveyance of products and mode of installment. Absence of familiarity with the
engineering and its potential profits are additionally similarly in charge of the poor
development of e-trade. Absence of investment and ability to make a standard
transformation has turned into an essential issue. Numerous organizations are not eager to
acknowledge that their organizations require a progressive change to subsist in the
conceivably advanced world. In short, data engineering ought not be looked upon as an end
however as an intends to accomplish general improvement. The IT segment is individuals
concentrated, guaranteeing unfathomable job good fortunes.

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The absolute most imperative test today relates to expanding attention to the banquet of
e-trade to potential clients, instruct the business sector and the clients will themselves
choose these administrations. Along these lines, the e-trade crew ought to acknowledge
the way that the clients are to a great degree requesting and that they ought to be
equipped towards this end and surpass the desires of clients. .
Absence of Infrastructure

E-business base improvement is grinding away early stages organize in India. This
inadmissible advancement is yet an alternate significant bottleneck for fruitful net
business in India. The absence of foundation, if made accessible as needed, will
guarantee that the speculation in e- business begins streaming in light of the fact that
the business is occurring and framework will develop. To enhance the nation's wide
framework, significant players must approach to help their pie of engineering. All the
base system required for virtual e-trade has not been there from the earliest starting
point when it was begun, there was a weep for the genuine state of the virtual framework
for launching fruitful e-business. This high cost of foundation advancement for e-
business is additionally including the expense of rented lines.

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Chapter 4
Literature Review

3.1 Relationship of Promotion & Consumption:

The relationship between consumption and promotion has long been discussed. Many studies
have focused on the effects of sales promotion on brand switching, purchase quantity, and
stock piling.It has been found that promotion makes consumers switch brands and purchase
earlier or more. The consumers‘ consumption decision was long ignored and it remained
unclear that how promotion affected consumption.It was documented two decades
ago(Blattberg et al. 1995). Conventional choice models could not be used to address this issue
because many of these models assumed constant consumption rates over time (usually defined
as the total purchases over the entire sample periods divided by the number of time periods).
While this assumption can be appropriate for some product categories such as detergent and
diapers, it might not hold for many other product categories, such as packaged food, candy,
fruit juice, or yogurt. For these categories, promotion can actually stimulate consumption in
addition to causing brand switching and stockpiling. Thus, for product categories with a
varying consumption rate, it is critical to recognize the responsiveness of consumption to sales
promotion in order to measure the effectiveness of sales promotion on sales more precisely

More literature in behavioral and economic theory provided supporting evidence that
consumption for some product categories responds to promotion. Using an experimental
approach, Wansink (1996) establishes that significant holding costs pressurize consumers to
consume more of the product. Wansink and Deshpande (1994) show that when the product is
perceived as widely substitutable, consumers will consume more of it in place of its close
substitutes. They also show that higher perish ability increases consumption rates. Adopting
scarcity theory, Folkes et al. (1993) show that consumers curb consumption of products when
supply is limited because they perceive smaller quantities as more valuable. Chandon and
Wansink (2002) show that stockpiling increases consumption of high convenience products

more than that of low-convenience products. In an analytical study, Assuncao and Meyer

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(1993) show that consumption is an endogenous decision variable driven by promotion and
promotion-induced stockpiling resulting from forward-looking behaviour.

There are some empirical papers addressing the promotion effect on consumer stockpiling
behaviour under price or promotion uncertainty. Erdem and Keane (1996) and Gonul and
Srinivasan (1996) establish that consumers are forward looking.

Erdem et al. (2003) explicitly model consumers‘ expectations about future prices with an
exogenous consumption rate. In their model, consumers form future price expectations and
decide when, what, and how much to buy. Sun et al. (2003) demonstrate that ignoring forward
looking behaviour leads to an over estimation of promotion elasticity.

3.2 Sales Promotion and Consumer Response/ Preference:

So far, not much work has been done to identify the purchasing strategies that consumers adopt
in response to particular promotions, or to study how pervasive these strategies are in a
population of interest. Blattberg, Peacock and Sen (1976) define a purchase strategy as a
general buying pattern which "incorporates several dimensions of buying behaviour such as
brand loyalty, private brand proneness and deal proneness." A greater understanding of the
different types of consumer responses to sales promotions can help managers to develop
effective promotional programs as well as provide new insights for consumer behaviour
theorists who seek to understand the influence of different types of environmental cues on
consumer behaviour.

Blattberg, Eppen, and Liebermann (1981), Gupta (1988), Neslin, Henderson, and Quelch
(1985), Shoemaker (1979), Ward and Davis (1978), and Wilson, Newman,

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and Hastak (1979) find evidence that promotions are associated with purchase acceleration in
terms of an increase in quantity purchased and, to a lesser extent, decreased inter purchase
timing. Researchers studying the brand choice decision-for example, Guadagni and Little
(1983) and Gupta (1988)-have found promotions to be associated with brand switching.
Montgomery (1971), Schneider and Currim (1990), and Webster (1965) found that promotion-
prone households were associated with lower levels of loyalty towards any consumer/product.

Blattberg, Peacock, and Sen (1976, 1978) describe 16 purchasing strategy segments based on
three purchase dimensions: brand loyalty (single brand, single brand shifting, many brands),
type of brand preferred (national, both national and private label), and price sensitivity
(purchase at regular price, purchase at deal price). There are other variables that may be used
to describe purchase strategies.

Throughout the world, consumer sales promotions are an integral part of the marketing mix for
many consumer products. Marketing managers use price-oriented promotions such as free gifts,
rebates, and price discounts to increase sales and market share, entice trial, and encourage brand
switching. Non-price promotions such as sweepstakes, frequent user clubs, and premiums add
excitement and value to brands and may increase sale (e.g., Aaker 1991; Shea, 1996). Sales
promotion schemes provide utilitarian benefits such as monetary savings, added value,
increased quality, and convenience, as well as hedonic benefits such as entertainment,
exploration, and self expression (Chandon, Laurent, and Wansink, 1997).

A large body of literature has examined consumer response to sales promotions, most notably
coupons (e.g.. Sawyer and Dickson, 1984; Bawa and Shoemaker, 1987 and 1989; Gupta, 1988;
Blattberg and Neslin, 1990; Kirshnan and Rao, 1995; Leone and

Srinivasan, 1996). Despite this, important gaps remain to be studied. It is generally agreed that
common & standard sales promotion schemes are difficult to standardize because of legal,
economic, and cultural differences (e.g., Foxman, Tansuhaj, and Wong, 1988; Kashani and
Quelch, 1990; Huff and Alden, 1998). FMCG consumers should therefore understand how
consumer response to sales promotion schemes differs between countries or states or province.

3.4 Preferences and Sales Promotion Types:


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There is a difference between "expected price" and "price promotion." Following Thaler (1985),
it is viewed that the price consumers‘ use as a reference in making purchase decisions as the
price they expect to pay prior to a purchase occasion. Further, the expected price may also be
called the "internal reference price" (Klein and Oglethorpe 1987) as opposed to an external
reference price such as the manufacturers' suggested list price. A brand is on price promotion
when it is offered with a temporary price cut that is featured in newspaper advertising and/ or
brought to consumers' attention with a store display sign.

Hypothesis on price expectations has been used to provide an alternative explanation for the
observed adverse long-term effect of price promotions on brand choice (Kalwani et al. 1990).
Previous research has shown that repeat purchase probabilities of a brand after a promotional
purchase are lower than the corresponding values after a non promotional purchase (Dodson,
Tybout, and Sternthal 1978; Guadagni and Little 1983; Shoemaker and Shoaf 1977). Dodson,
Tybout, and Sternthal evoke self-perception theory to predict that if a purchase is induced by
an external cause (such as a price promotion) as opposed to an internal cause (e.g., the brand
will be reduced when the external cause is removed. Alternatively, Kalwani et al. argue that
consumers form expectations of a brand's price on the basis of, among other things, its past
prices and the frequency with which it is price promoted. Consumers' reactions to a retail price
then may depend on how the retail price compares with the price they expect to pay for the
brand.

Specifically, during a price promotion, they are apt to perceive a price "gain" and react
positively; correspondingly, when the deal is retracted, they are apt to perceive a price "loss"
and are unlikely to purchase the brand. Neslin and Shoemaker (1989) offer yet another
alternative explanation for the phenomenon of lower repeat purchase rates after promotional
purchases. They argue that the lower repeat purchase rates may be the result of statistical
aggregation rather than actual decline in the purchase probabilities of individual consumers
after a promotional purchase. Specifically, "if the promotion attracts many consumers who
under non promotion circumstances would have very low probabilities of buying the brand,
then on the next purchase occasion the low probabilities of these consumers bring down the
average repurchase rate among promotional purchases".
The behaviour of households that have low probabilities of buying a brand upon the retraction
of a deal can be explained readily in a price expectation framework. It has been suggested that
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the price they expect to pay for the brand may be close to the deal price and they may forego
purchasing the local brand when it is not promoted because its retail price far exceeds what
they expect to pay for it.

Investigation has been made on the impact of price promotions on consumers' price
expectations and brand choice in an interactive computer-controlled experiment. Manohar U.
Kalwani and Chi Kin Yim discussed that expected prices were elicited directly from
respondents in the experiment and used in the empirical investigations of the impact of price
promotions on consumers' price expectations. Further, rather than studying the impact of just a
single price pro- motion and its retraction, they assessed the significance of the dynamic or
long-term effects of a sequence of price promotions. They have concluded that both the price
promotion frequency and the size of price discounts have a significant adverse impact on a
brand's expected price.

There are other findings of Raman and Bass (1988) and Gurumurthy and Little (1989), they
also found evidence in support of a region of relative price insensitivity around the expected
price such that changes in price within that region produce no pronounced change in consumers'
perceptions. Price changes outside that region, however, are found to have a significant effect
on consumer response. Further, they discussed that promotion expectations are just as important
as price expectations in understanding consumer purchase behaviour. In particular, consumers
who have been exposed to frequent price promotions in support of a given brand may come to
form promotion expectations and typically will purchase the brand only when it is price
promoted. Added to it, in the case of price expectations, consumer response to promotion
expectations was asymmetric in that losses loom larger than gains.

Applying Helson's (1964) adaptation-level theory to price perceptions, Sawyer and Dickson
(1984) suggest that price promotions may work in the short run because consumers may use the
brand's regular price as a reference and then are induced by the lower deal price to purchase the
brand. However, frequent temporary price promotions may also lower the brand's expected
price and lead consumers to defer purchases of the brand when it is offered at the regular price.

Tversky and Kahneman (1974) have shown that people rely on a limited number of heuristic
principles that reduce complex tasks of assessing probabilities and predicting values to simpler
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judgmental operations. In some cases, people may anchor and adjust their forecasts by starting
with a preconceived point and weigh that point heavily in arriving at a judgment. When the
frequency of past price promotions is "very low," consumers identify a price promotion offer
as an exceptional event and may not modify the brand's expected price. The brand's expected
price then will be anchored around the regular price because of insufficient adjustment. In other
cases, people may arrive at a judgment on the basis of how similar or representative the event
is to a class of events. Therefore, when a brand is price promoted "too often," consumers come
to expect a deal with each purchase and hence expect to pay only the discounted price on the
basis of its representativeness.

It is obvious that given a certain level of price discount, the brand's expected price will be
bounded by the regular price and the implied sale price. That line of reasoning suggests that the
relationship between the price promotion frequency and the expected price can be approximated
by a sigmoid function.

Consumers’ perception of the price discount makes a big impact on any brand’s image. Uhl and
Brown (1971) postulate that the perception of a retail price change depends on the magnitude
of the price change. They report results from an experiment indicating that 5% deviations were
identified correctly 64% of the time whereas 15% deviations were identified correctly 84% of
the time. Della Bitta and Monroe (1980) find that consumer' perceptions of savings from a
promotional offer do not differ significantly between 30%, 40%, and 50% discount levels.
However, they find significant differences between the 10% and 30 to 50% levels. They also
discuss some managers' beliefs that at least a 15% discount is needed to attract consumers to a
sale. Apparently, small price changes may not be noticed and even a large price reduction (say,
60 or 70%) may not be assimilated to affect the brand's expected price if it is considered
exceptional. Hence, the impact of the depth of price discounts on lowering the brand's expected
price is likely to occur when the price discount offered by the brand is relatively large but not
so large that it is seen as an exceptional event.

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Price discounts ranging from 10 to 40%, a range commonly used in past research on price
discounts in the consumer packaged goods categories (Berkowitz and Walton 1980; Curhan
and Kopp 1986). Within that range, the findings of Uhl and Brown (1971) and Della Bitta and
Monroe (1980) suggest that it is reasonable to expect the relationship between the brand's
expected price and the depth of price discounts to be concave.

However, Manohar U. Kalwani and Chi Kin Yim (1992) found that the brands expected price
is a linear function of the price promotion frequency and the depth of price discounts at
conventional significance levels. Nevertheless, the results provide some directional support for
nonlinear relationships between the expected price and the two elements of a price promotion
schedule. Given the important implications of such potential nonlinear effects of price
promotions on brands' expected prices,further research testing those nonlinear effects of price
promotions should prove fruitful for the design of optimal price promotion policies.

They also contributed that promotion expectations suggest that unfulfilled promotion
expectation events among consumers who have come to expect promotions on a brand because
of frequent exposure to them will have an adverse impact on the brand. Analogously,
unexpected promotion events will enhance the probability of purchasing a brand among
consumers who have not been exposed to many price promotions and therefore do not as a rule
expect the brand to be available on a promotional deal. they suggest that those results are
consistent with the rational expectations view that "any policy rule that is systematically related
to economic conditions, for example, one observed with stabilization in mind, will be perfectly
anticipated, and therefore have no effect on output or employment" (Maddock and Carter 1982).
Policy actions that come as a surprise to people, in contrast, will generally have some real effect.
Clearly, the design of optimal price promotion schedules requires consideration of the fact that
an increase in the use of price promotions could erode long-term consumer demand by lowering
the prices that consumers anticipate paying for the brand.

Price promotional deals may come to be "perfectly anticipated" and have much less impact on
consumer response than they do when they come as a surprise to consumers. Apart of it they
suggested that Evaluation of the trade off between the short-term sales gain from a price
promotion and the adverse effect on future sales because of consumers forming price and
promotion expectations requires knowledge of how price promotions affect the formation of
consumers' expectations under different market conditions.
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Promotions have increased in popularity during the past few decades. The positive short-term
impact of price promotions on brand sales is well documented. A price promotion typically
reduces the price for a given quantity or increases the quantity available at the same price,
thereby enhancing value and creating an economic incentive to purchase. However, if
consumers associate promotions with inferior brand quality, then, to the extent that quality is
important, a price promotion might not achieve the extent of sales increase the economic
incentive otherwise might have produced.

Price promotions often are used to encourage trial among nonusers of products and services.
Thus, it is important to understand the effects of promotions on evaluations made by consumers
who do not have prior experience with the promoted brand. Such promotions include those for
new brand introductions, as well as those targeted al nonusers of an established brand. If
promotions damage brand evaluations, they will undercut the positive economic and
psychological Incentives promotions supply and reduce the likelihood of trial. Furthermore,
those who purchase for the first time in response to the promotion may be less likely to purchase
again when the promotion ends.

But do price promotions lead to unfavourable brand evaluations? And if, so, when? The
literature on the effect of promotions on brand evaluations is equivocal. In their review of the
sales promotion literature, Blattberg and Neslin (1990) observe that though "for years
advertising executives have been warning marketing executives that promotions will destroy
their brands image", "it is not clear that promotions do detract from a brand's consumer
franchise". It was also concluded that price promotions unfavourably affect brand evaluations
(Ogilvy 1963) with academic research, which has found mixed evidence of this effect.
Specifically, though it is well documented that the likelihood of purchasing a brand after a deal
retraction is lower if the prior purchase was a promotional one (Guadagni and Little 1983;
Shoemaker and Shoaf 1977), it is debatable whether this decrease is due to lowered brand
evaluations. One of the explanations offered for this finding is that there is an attitude change
at the individual level (Dodson, Tybout, and Stemthal 1978; Doob et al. 1969; Scott 1976).

Dodson. Tybout, and Stemthal (1978) argue that, if a person buys a brand on deal, he or she is
likely to attribute his or her behavior to the deal rather than to having a favorable attitude toward
the brand, as compared with customers who bought the brand at full price. Although their results
are consistent with an individual-level attitude change due to attributional thinking after a
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purchase on deal, Dodson, Tybout, and Stemthal's study does not measure brand evaluations
directly and so cannot rule out alternative explanations for the pattern of results (Neslin and
Shoemaker 1989).

Scott and colleagues have examined the effect of promotions on evaluations at the individual
level after subjects tried a promoted brand. They find that promotions could affect brand
evaluations negatively (e.g., subjects preferred the taste of (brand name) when they tasted
without a coupon), but that this effect depended on whether subjects thought about the reasons
for their choice before choosing (Scott and Yalch 1980), when they thought about their
behaviour (Scott and Tyboul 1979), and whether they had prior brand knowledge (Tybout and
Scott 1983).

Davis, Inman, and McAlister (1992) also examine the difference between pre and post
promotion brand evaluations at the individual level but find no evidence that price promotions
affect evaluations for frequently purchased branded packaged goods. Across three promoting
brands in each of four different product categories, evaluators of promoted brands in the post
promotional period are not found to be lower than in the pre promotional period, The studies
by Scott and colleagues indicate that promotions have a damaging effect on post trial
evaluations, whereas Davis, Inman, and McAlister's study suggests that the impact of
promotions on brand evaluations in these packaged goods categories is, on average,
nonexistent.

There are several possible explanations for this seeming inconsistency. These relate to
(1) the timing of the promotional exposure and brand evaluation relative to trial, (2) whether
the consumer has seen promotions for the product in the past, and (3) differences among
product categories. The vast majority of research that has assessed the effect of price
promotions on brand evaluation has studied the effect after product trial, rather than pre trial
(Scott and Tybout 1979; Scott and Yalch 1980; Tyboul and Scott 1983). This is an important
distinction because the effect of promotions has been found to be lower in the presence of well
defied internal knowledge structures (Tybout and Scott 1983). This suggests that the effect of
promotions on brand evaluations is likely to be moderated by the extent of consumer expertise
in a product category, particularly pre trial, when direct experience with the brand is unavailable
as a source of information.

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Because promotions are temporary prices, their institution and retraction contain information
that consumers may use to make judgments related to the product. A price promotion (or its
absence) may serve a simple informative function (for similar conceptualizations, see Inman,
Peter, and Raghubir 1997; Raghubir 1998).

3.4 Promotion’s Valence:


Available literature on price-quality has found that a relatively lower price generally is
interpreted as an indicator of inferior quality and that this effect is magnified when only price
information is available to make a judgment (e.g., Etgar and Malhotra 1981; Monroe and
Petroshius 1981; Olson 1977; Rao and Monroe 1988). Although the economic aspect of price
leads to reduced demand at higher prices, the quality inference leads to enhanced demand at
higher prices or requires a trade-off between price and inferred quality (Hagerty 1978; Levin
and Johnson 1984). The extent to which consumers use price as an indicator of quality depends
on the availability of alternative diagnostic information (Szybillo and Jacoby 1974).

Rao and Monroe (19B8) find evidence that, with increased product familiarity, people
increasingly used intrinsic (versus extrinsic) product quality cues to make quality judgments.
The greater the amount of other information available, the smaller will be the effect of price on
perceived quality (Rao and Monroe 1988). Because price promotions reduce price and because
lower prices are associated with lower quality, we predict that when other information
diagnostic of quality is not available, offering price promotions will lead to inferences of lower
quality.

Predictions of a negative effect also are implied by attribution theory. Attribution theory
suggests that consumers assign causes for managerial actions (for a review of attribution theory
applications to marketing, see Folkes 1988). When consumers are exposed to a promotion, they
attribute a reason for it. These attributions may be to the brand or to some external force. A
study that examines attribution valence finds that brand-specific attributions for a promotion
were valenced negatively, whereas non brand reasons were positive or neutral (Lichtenslein,
Burton, and O‘Hara 1989).

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When subjects were asked why a brand might promote, the brand-specific reasons they gave
were associated with perceptions of poorer quality, whereas the non brand reasons were neutral
or complimentary to the brand.

Similarly, Lichtenstein and Bearden (1986) examine product, circumstance, and person
attributions for a promotion. They find that product attributions were valenced negatively, for
example, "because the car is inferior" and "because the car has poor styling." Therefore, if
consumers undertake attributional thinking when exposed to a price promotion and if these
attributions are to the brand, the attributions are more likely to lead to unfavourable brand
evaluations.

3.5 Informative Promotion


The important question is to find that whether a promotion shall be attributed to brand related
factors than external/situational factors. Attribution theorists, starting with Heider (1958), have
found that observers attribute another person's behaviour to intrinsic or dispositional qualities
rather than to situational factors, even when the behaviour easily could be explainable by the
latter. This phenomenon, called the "fundamental attribution error" (or "correspondent
inference theory"; Jones and Davis 1965), predicts that consumers attribute promotional
behaviour to the disposition of the brand rather than industry characteristics. Thus, because
consumers are more likely to attribute promotions to brand-related (versus industry-related)
factors and because these factors are typically negative, offering a promotion should affect
brand & its market share unfavourably.

The survey of the Literature suggests that when price promotions serve an informational
function, they are likely to have a negative effect on pre trial brand evaluation. The issue of
whether price promotions affect brand evaluations therefore might be restated to ask when they
serve an informational function. The promotion's information value is context-specific. One
context in which a promotion may be perceived as containing information relevant to brand
quality is when the act of promoting is a deviation from past behaviour. This indicates there has
been a change, and a re evaluation of the brand may be in order.

To illustrate, if a brand that has been promoted frequently in the past is promoted currently, the
current promotion conveys little that is new about the brand to consumers, and they are not
likely to give the current behaviour much thought. Conversely, if a brand that has never been
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promoted in the past is promoted, this is informative and more likely to lead to a re evaluation
of the brand. This construct, formally termed "consistency" in the attribution literature, has been
shown to affect the extent to which people make personality inferences about another person
given his or her actions (Einhorn and Hogarth 1986; Hastie 1984; Hilton and Slugoski 1986;
Jones and Davis 1965; Kelly 1967, 1972).

Consistent with this logic, in the context of reference prices, Lichtenstein and Bearden (1989)
find that consumers' price perceptions were dependent on the consistency of merchants' price
claim policies. Consumers should find promotional behaviour more informative of a brand's
quality when it is inconsistent with past behaviour than when it is consistent.

The valence (the intrinsic positive or negative characteristic) of a behaviour has been well
researched in social psychology and shown to affect the salience (Fiske 1980) and the
processing of information (Fiske 1980; Skowronski and Carlston 1989), Taylor (1991)
summarizes the differential effects of positive and negative information, arguing that they have
asymmetric effects. These effects include, for example, that negative experiences are elaborated
upon more than positive experiences, that people search more for negative (versus positive)
information when making judgments, and that they weight this information more heavily
because they find it more diagnostic than positive information (e.g., Fiske 1980; Hamilton and
Zanna 1972. 1974; Herr, Kardes, and Kim 1991; Kanouse and Hanson 1972).

In one of the few studies that assess the effects of valence on attributional thinking, Gidron,
Koehler. and Tversky (1993) demonstrate that the number of times a behaviour had to be
performed by a person for the trait associated with that behaviour to be ascribed to the person
was significantly greater for positive behaviours than for negative behaviours. In short, it is
more difficult to change people's negative attitudes in a positive direction than it is to influence
their positive attitudes negatively.

Priya Raghubir and Kim Corfman (1991) found that price promotions affect pre trial brand
evaluations and do so unfavourably, but only in some specific conditions. The moderators
identified were past promotional history, individual expertise in the category, and perceptions
of how common promotions are in an industry, both manipulated within an industry and
examined across industries. Specifically, (1) offering a promotion is more likely to lower a
brand's evaluation when the brand has not been promoted previously, compared with when it
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has been frequently promoted;

(2) promotions are used as a source of information about the brand to a greater extent when the
evaluator is not an expert but has some basic industry knowledge; and (3) promotions are more
likely to result in negative evaluations when they are uncommon in the industry.

Given these results, Davis, Inman, and McAlister's (1992) finding that promotions do not affect
brand evaluations can be understood better. They study categories with which consumers had
considerable prior experience and in which promotions were common. Furthermore, the brands
they examine had been promoted in the past (prior to the experiment).

FMCG frequently use price promotions to attract customers. It is not uncommon to find stores
advertising 50, 60, or even 70 percent discounts on several products. But do consumers believe
these advertised discounts? Previous studies suggest that they do not. It has been shown that
consumers' perceptions of discounts are typically less than the advertised discounts (see, e.g.,
Blair and Landon 1981; Mobley, Bearden, and Teel 1988). In other words, consumers discount
the price discounts. Concept has been extended by suggesting that the discounting of discounts
depends on the discount level, store image, and whether the advertised product is a name brand
or a store brand. Since the discounting of discounts is likely to affect consumers' intentions to
buy the product, effects of the discount level, store image, and product advertised on consumers'
purchase intentions.

A better understanding of consumer responses to price discounts for different stores and brands
also helps investigate the existence of promotion thresholds. A threshold is the minimum value
of price promotion required to change consumers' purchase intentions. While many managers
believe that price reductions of about 15 percent are needed to attract consumers to a sale (Della
Bitta and Monroe 1980), very few studies have attempted to validate this managerial intuition.
Sunil Gupta and Lee G. Cooper (1999) used the experimental data and a simple econometric
methodology to find promotion thresholds. They have also investigated whether the thresholds
are different for different stores and brands. These results provide a better understanding of
consumers' response to price promotions.

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Brand name and store image are important contextual variables affecting consumers' responses
to price and promotion. While price and other focal cues are the stimuli to which consumers
respond directly, the effects of price-cue information are moderated by other informational cues
available to consumers (Olson 1977). These background or contextual cues are all other stimuli
in the behavioural situation that provide the context within which the focal cues are operative
(Monroe 1977). These include such cues as brand name, store image, and brand familiarity.
While many studies have looked at the effect of focal cues and the influence of comparative
prices (e.g., Lichtenstein and Bearden 1989), very few have examined the contextual influences
of brand name and store image. In a study of comparison prices and coupon and brand effects,
Bearden, Lichtenstein, and Teel (1984) suggested the need for research to understand better the
brand and store effects at varying discount levels.

3.6 Perceived Discount:


Consumers evaluate and encode information provided to them, and it is their perception of the
information and not the information itself that affects their behaviour. Olson and Jacoby (1977)
note, "External stimuli do not exert direct effects upon behaviour but only indirect effects.
Stimuli must first be perceived and interpreted before they can affect decision processes and
overt behaviour" (p. 73). Therefore, valuation or encoding of observed prices or price discounts
(which are the external stimuli) is expected to be carried out. Theories such as information
integration define valuation as the psychological processes that extract information from
physical stimuli (Anderson 1981).

In pricing literature, encoding refers to the subjective interpretation and assignment of meaning
to objective prices and price discounts (Monroe 1984; Olson and Jacoby 1977; Zeithaml 1984).
Further, the notion of reference price, which is consistent with adaptation-level theory (Helson
1964) and assimilation-contrast theory (Sherif 1963), suggests that consumers have internal
reference prices against which current prices are compared (Kalwani et al. 1990; Lattin and
Bucklin 1989; Urbany and Dickson 1991; Winer 1986). The perceived discount (PD) is
therefore the expected savings from this internal reference price (Mobley et al. 1988; Monroe
1977; Winer 1986).

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As the discount advertised (AD, defined in this study as the percentage off regular price) by
retailers‘ increases, consumers' perceptions of the discounts or savings are also likely to
increase. This is clearly the underlying premise for most promotional offerings, and it has been
supported by several studies (Berkowitz and Walton 1980; Della Bitta, Monroe, and McGinnis
1981; Mobley et al. 1988). Is the PD less than the AD? This question was addressed by several
studies in relation to the issue raised by Federal Trade Commission cases dealing with the
fairness of reference price advertising by retailers. Critics of advertised reference price argue
that retailers commonly inflate these prices and distort consumer perceptions of the savings
offered (Liefeld and Heslop 1985; Urbany, Bearden, and Weilbaker 1988).

Defenders of reference price advertising claim that consumers learn to discount reference price
claims, thus protecting themselves from deception (Blair and Landon 1981). Consumers'
scepticism about advertised price offers has been demonstrated by many previous studies (Fry
and McDougall 1974; Liefeld and Heslop 1985; Sewall and Goldstein 1979). For example,
Liefeld and Heslop (1985) state, "Perhaps the sale context is so overused that the intent of these
practices is readily transparent to consumers leading them to distrust and greatly discount the
claims implied by such advertising practices". Blair and Landon (1981) found that reference
price claims were consistently discounted by about 25 percent. Even when reference prices are
not explicitly mentioned, consumers seem to discount the perceived savings level.

Mobley et al. (1988) found that 25 percent and 50 percent discount claims elicited 21 percent
and 45 percent perceived price reductions, respectively. Following Urbany et al. (1988), It has
been suggested that discounting occurs when consumers doubt the credibility of the advertised
savings, but instead of completely rejecting it they reduce it to a level deemed more reasonable.

Does the discounting of discounts increase with the increase in the advertised level? The answer
seems to be yes. Della Bitta et al. (1981) suggest that, if the price reduction is too large,
consumers may perceive that the offer is not bona fide. Fry and McDougall (1974) found that
higher claimed savings resulted in fewer respondents' believing the reference price.
Urbany et al. (1988) proposed that discounting may be a natural response of consumers,
particularly to advertisements making seemingly exaggerated savings claims. Della Bitta and
Monroe's (1980) findings suggest that consumers' perceptions of savings do not significantly
differ between 30 percent and 50 percent discount levels, hence indirectly suggesting a larger
discounting of claimed savings at 50 percent than at 30 percent.
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3.10 Thresholds of Promotion:
A promotion threshold is the minimum value of price discount required to change consumers'
intentions to buy. The concept of a threshold can be related to the psychological process of
discrimination in which a consumer would not react to stimuli unless the perceived changes
were above a just noticeable difference (Luce and Edwards 1958). The concept of a threshold
is widely recognized and acknowledged by both researchers and practitioners. In the context
of advertising effectiveness, Eastlack and Rao (1986) showed that a minimum level of
advertising is needed before advertising has any significant impact on sales.

The use of the well-known S-shaped response function also testifies to the acceptability of the
threshold concept. On the basis of assimilation-contrast theory, Gurumurthy and Little (1989)
argue for the existence of a price threshold. They suggest that consumers have latitude of
acceptance around their reference price. Therefore, small price differences within this range
or latitude are less likely to be noticed than prices above or below this range.

Kalwani and Yim (1992) found evidence in support of a region of relative price insensitivity
around the reference price, such that only price changes outside this region had a significant
impact on consumer brand choice. Many managers also believe that price reductions of about
15 percent are needed to attract consumers to a sale (Della Bitta and Monroe 1980). Therefore,
Sunil Gupta and Lee G. Cooper (1992) proposed that promotion thresholds exist such that
consumers do not change their intention to buy the product unless the price reduction is greater
than some threshold value.

Further, since the CI due to promotion is likely to be greater for a name brand than that for a
store brand, retailers promoting a name brand should be able to change

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consumers' purchase intentions by advertising a lower discount than the discount needed for a
store brand. Similarly, high-image stores should be able to attract consumers by offering a
lower discount than that needed by low-image stores. Sunil Gupta and Lee G. Cooper (1992)
expected that the promotion threshold for name brands and high-image stores is lower than
that for the store brands and low-image stores.

Sunil Gupta and Lee G. Cooper (1992) provide some interesting results about the effect of
ADs on consumers' perceptions of these discounts and consequently on changes in their
intentions to buy the product. They find that consumers discount the price discounts; that is,
consumers' perceptions of discounts are typically less than the AD. The discounting of
discounts increases with the increase in AD. These results are consistent with the results of
many previous studies. For example, Fry and McDougall (1974), Liefeld and Heslop (1985),
Sewall and Goldstein (1979), and Urbany et al. (1988) also found that consumers are skeptical
about the advertised claims of retailers and therefore discount such claims.

Sunil Gupta and Lee G. Cooper (1992) also indicate that the discounting of discounts is higher
for store brands than for name brands. Corresponding effects on CIs are also found. For
example, in general, offering a discount on a name brand has more impact on consumers'
intentions to buy than a similar discount on a store brand. They expected to find similar
differences between high- image and low-image stores. However, store effects were not found
to be significant.

It is interesting to note that, in a slightly different context, Rao and Monroe (1989) conducted
a meta-analysis of studies dealing with the effect of price, brand name, and store name on
buyers' perceptions of product quality. They found that, while price and brand effects were
strong and significant, the effect of store name on perceived quality of product was generally
small and not statistically significant. They also presented an approach to find promotion
threshold and saturation points. The existence of a threshold confirms managerial intuition that
price reductions of about 15 percent are needed to attract consumers to a sale (Della Bitta and
Monroe 1980). The study refines this intuition by suggesting that the threshold levels vary by
brand name. As expected, the threshold for the store brand was found to be significantly higher
than that for the name brand.

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In other words, to attract consumers a store needs a lower level of discount on a name brand
than on a store brand. They have added that promotions reach a saturation level so that their
effect on consumers' purchase intentions is minimal beyond this discount level. For the stores
and products used, the saturation levels were estimated at 20-30 percent discount level. Thus,
it may not be useful to offer discounts below the threshold or above the saturation level.

Each year, companies spend billions of dollars on trade promotion to induce retailers to offer
stronger merchandising support (e.g., price reduction, feature, special display) for their brands.
Though recent research has documented the success of pricing and promotion in stimulating
immediate sales response (e.g., Guadagni and Little 1983; Gupta 1988; Neslin, Henderson,
and Quelch 1985), there is concern about the long run implications of such activity. Some
industry experts contend that frequent price discounting blurs the distinction between the deal
price and the baseline price of a product (Marketing News 1985).

If consumers come to expect deals as the rule rather than the exception, discount prices lose
their ability to boost sales. To use price discounting effectively, managers must understand the
link between pricing activity and consumer expectations.

One stream of research investigating this link is based on the notion that the consumer
establishes a reference price for a brand or product (Monroe 1979; Winer 1986). The reference
price reflects the expectations of the consumer, which are shaped by the past pricing activity
of the brand. The consumer then evaluates the future price of the brand in relation to this
reference point and his or her response is related to the disparity between the two.

Hence, consumer response to an unexpected price decrease (a "pleasant surprise") is greater


than the response to an expected price decrease. The reference price frame-work is consistent
with several psychological theories of consumer behaviour and price perception, including
adaptation-level theory (Helson 1964) and assimilation-contrast theory (Sherif 1963).
Empirical work by Winer (1986) and Raman and Bass (1986) support the presence of general
reference price effects in consumer brand choice behaviour.

Product pricing, however, is not the only activity influencing the expectations of consumers.
In recent years, retail promotion by which non price merchandising activity such as special
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displays and store features has had an increasingly important effect on consumer choice
behaviour. For example, Fader and McAlister (1988) suggest that the proliferation of
promotional activity in many product categories may be training consumers to buy on
promotion. If so, consumer expectations about future promotional activity are just as important
to understanding consumer choice behaviour as consumer expectations of price.

James M. Lattin and Randolph E. Bucklin (1989) investigated that the reference effects of
price and promotion on consumer choice behaviour. The model is based on the premise that
consumers form expectations about the future marketing activity of a brand from their past
exposure to such activity. The model reflects not only reference price, but also the consumer's
promotional reference point for a brand. They further assumed that consumers use these points
of reference in evaluating a brand at each purchase opportunity and that consumer response
was influenced by the disparity between their reference points and the actual price and
promotional status of the brand. These assumptions enabled them to calibrate a brand choice
model and test for the presence of reference effects.

Further, James M. Lattin and Randolph E. Bucklin (1989) proposed and tested a model of
consumer response incorporating the reference effects of price and promotion. Their results
supported the notion that consumers form expectations based on their exposure to promotional
activity and that those expectations influence the patterns of brand choice. By including both
price and promotional variables in the model of consumer response, they were able to
characterize explicitly the differences between promotional and non promotional price
elasticity and to separate these effects from the reference effects of price and promotion. They
have provided a different rationale to explain the carryover effects of promotions on consumer
response.

Other researchers have focused on the differences between prior purchase and prior
promotional purchase on subsequent brand choice; their rationales require that the promotional
brand actually be purchased by the consumer. They have suggested that if they control for
prior promotional purchase, there is still a significant association between consumer response
and exposure to the brand on promotion.

3.11 Consumer price formation: reference prices


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The price‘s knowledge and memory has been one of most frequent research issues on the
consumer behaviour for more than 40 years. Strong efforts have been made to define the
concept of reference price, from those who consider it from an external perspective as the price
that is announced, to those who regard it as an average of the prices the consumer has
previously paid, from an internal perspective. As a result, it seems important to know the
‗‗definition‘‘ of reference price that is referred to when it comes to debating questions related
to it. In his work, Lowengart proposes an intense review of the definitions of the reference
price concept that have appeared throughout time in the main research works focused on such
a concept (Lowengart, 2002).

Consumers establish their reference prices in relation to their personal buying experience, their
observations, and their exposition to the existing information on prices or their subjective
interpretation. A total of 26 different definitions of the concept ‗‗reference price‘‘ have been
found (Lowengart, 2002). They can be classified according to:

The type of information used: external or internal.


The behavioural character or the judgment of the internal process of formation of reference
prices.

The conclusion that can be drawn from the compilation of the different options of
conceptualization of the reference price is that such proliferation seems to be a demonstration
of the complexity and multidimensional nature of the consumer‘s price assessment

Likewise several alternatives of estimation of reference prices have been proposed. While
some research works defend that the consumer will carry out price estimations from previous
information and experiences (Winer, 1986; Lattin and Bucklin, 1989; Kalwani et al., 1990;
Mayhew and Winer, 1992; Krishnamurthi et al., 1992; Hardie et al., 1993; Kalyanaram and
Little, 1994; Rajendran and Tellis, 1994; Mazumdar and Papatla, 1995, 2000; Kopalle et al.,
1996; Kopalle and Winer, 1996; Bell and Bucklin, 1999; Erdem et al., 2001), others maintain
that the consumer will use the stimuli present at the buying moment to form his reference price
(Hardie et al., 1993; Rajendran and Tellis, 1994; Mazumdar and Papatla, 1995).

Complementarily to the different approaches to the estimation of the reference price can be
considered the existence of the internal and external reference price. The internal reference
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price is an estimate of the price the consumer has in his mind. In its formation, a series of
factors or variables that can be classified into two basic types, contextual and temporal factors
are involved. The contextual factors are related to the different brands‘ prices within the
category of product at the buying moment. The temporal factors are more linked to the prices
on previous occasions or buying experiences of the consumer. The importance of the temporal
and contextual component could vary according to the consumers‘ characteristics.

Thus, for instance, it is possible that for the consumers with an intense preference for the brand
the temporal component may be more developed while for the consumers that alternate the
acquisition of several brands the contextual component may carry more weight. Likewise, the
buying frequency can also have some effect. Thus, the consumers who acquire the category of
product more frequently will tend to remember more clearly the prices they paid in the past
and as a result the temporal component will be more important (Rajendran and Tellis, 1994).

The external reference price can be considered any notification of the price the consumer
receives through some external information channel and which he uses to make comparisons.
There is a clear identification of the external reference price with the contextual component
that affects the internal reference price; therefore such concepts are closely related. The
external reference price could be the price of the brand leader, or the price of the brand that is
usually acquired or the selling price recommended by the manufacturer on the product‘s pack.
In any case, it is necessary for these to be credible so that the consumer can incorporate them
as an orientation in his assessment (Yadav and Seiders, 1998; Chandrashekaran (2004). The
main objective of the external reference price is to increase the internal reference price so that
the prevailing market selling price becomes more attractive and this makes the consumer make
up his mind and buy the product (Compeau et al., 2004).

According to the buyer‘s and the acquired products‘ characteristics, the weight of the
internal/external reference price will vary. Thus, in Winer‘s (1986) or Lattin and Bucklin‘s
(1989) research works, in which the incidence of the reference prices on the brand choice is
studied, there is no explicit distinction between internal and external reference prices.
However, other researchers like Bell and Bucklin (1999) and Mazumdar and Papatla (2000)
focus their works on the distinction between both reference prices and their importance in the
buying process

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Mazumdar et al. (2005) constitutes a reference since they offer a synthesis of the main
conclusions drawn in the study of the reference prices:

(1) Consumer‘s prior purchase experiences have shown to influence internal


reference price (IRP): The strongest determinant of a consumer‘s IRP is the prior
prices he or she observes;
prices encountered on recent occasions have a greater effect on IRP than distant ones;
and the greater the share of prior promotional purchases, the lower is the consumer‘s
IRP.

(2) The negative effect of deal frequency on consumers‘ IRP is moderated:


 The dealing pattern (regular vs. random) of the purchased brands;
 The dealing pattern of competing brands; and
 The framing of the deal (percentage vs. cents off).

(3) IRPs for durable products are influenced by such aggregate factors as anticipated
economic conditions and household demographics: competitive prices and differences in
attribute configurations and features across alternatives are more salient than historical prices
(for durable products); historical prices of durables products are used only to discern a price
trend, if it exist; and consumers‘ price expectations are influenced by the technology used in
a specific brand compared with other brands in the same durable product category.

(4) How previously encountered prices are integrated to form a reference price?
 Assimilation contrast theory and adaptive expectation model seem to depict the
process of integration of prior prices and contextual information accurately;
 consumers update their reference prices:
– weighting their existing reference price and observed prices; and
– factoring in a price trend observed from prior prices.

(5) Integration of the information at the store environment:


 Retailer-provided advertised reference point (ARP) that exceeds the selling
price raises the consumer‘s IRP, even when the ARP is deemed to be
exaggerated;

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 The use of semantics aimed at competitive comparison is more effective in
raising IRP than is the use of temporal comparisons; and

 When faced with a large amount of externally available information, consumers


are selective in deciding which pieces of contextually provided information are
salient.

(6) Use of memory for prior prices vs. externally available information:
 Consumers use both memory and external information, but they assign weights
to each that depend on consumer and product characteristics;
 The weight on memory in related:

– Negatively to the size of consumer‘s consideration set;


– Negatively to the frequency of purchases during promotions such features
and displays;
– Positively to the price level of the product category;
– Negatively to the increase of inter purchase time of the category; and
– Negatively to the frequency of promotions in the category.

As it can be observed, the synthesis of the studies they have analyses is organized
around six big blocks of questions among which there are aspects related to the
formation of reference prices giving especial emphasis to internal reference prices and
how different environmental elements influence this process.

Nevertheless, apart from the works previously mentioned, Begona Alvarez Alvarez and
Rodolfo Vazquez Casielles (2008) pointed out the relevance in the field of study of reference
prices of recent works such as those by Fibich et al. (2005), Klapper et al. (2005), and Moon
et al. (2006), which show the importance of and interest in the study of reference prices.

3.13 Immediate price reductions- Sales Promotions


Price and promotion strategies are closely related. It is very difficult to distinguish price
variances which are caused by decisions derived from the pricing policy from those produced
as a result of the promotion policy. Thus, proposal has been developed by Cummins (1998),
according to which sales promotion has to stop being a part of the communication mix to

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become an autonomous variable.

After the promotion ends, sales are reduced even below the usual levels (without promotion).
In the long term, the sales level tends to go back to a position near the initial position. Even
Mela et al. (1998) confirm that long-term price promotions make the consumer more sensitive
to price and therefore their effectiveness is reduced with the subsequent negative effect on
benefits. These results are coherent with those obtained by Mela et al. (1997). Nevertheless,
we must clarify that the effects provoked by promotions vary according to multiple factors:
the type of incentive, the amount of discount provided or the type of product to which the
promotion is applied, among others.

Some time ago both effects were more intense than nowadays because the use of sales
promotion was not as widespread as it is now. Nowadays the consumer observes that the
category of products is systematically affected by some promotional actions, and as a
consequence he will not modify the planning of his purchase (Fader and Lodish, 1990; Lal,
1990). Retail establishments should modify their promotional plans in order not to lose the
essential objective: modify favorably the consumer buying behaviour surprising him with a
promotion action. This element of surprise is now in danger.

Besides, the presence of promotion actions attractive to consumers may make this change
establishment (Tellis, 1997). This effect is related to the change of brand, that is, consumers
who do not usually acquire the brand feel attracted and buy it. The greater increase in sales
occurs as a consequence of this reality (Blattberg and Neslin, 1990; Gupta, 1993).

It is necessary to be continuously in touch with the market because on certain occasions the
use of promotions could cause unwanted effects. This happens when the consumer perceives
that he is paying for unnecessary product highlighting and positioning activities, which will
make his behaviour, deviate from the desired one, and thus, he will stop buying the promoted
brand (Simonson et al., 1994). On some occasions the consumer may also stop buying a brand
or avoid its purchase when it is promoted so as not to have to justify his behaviour before the
group (Simonson, 1989). Or the consumer simply decides not to buy the promoted product
because he feels that he is being manipulated and he will act punishing the retailers.

The results of works such as those by Suri et al. (2000), detect the need to introduce promotions
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as explicit elements of the consumer buying behaviour. Begona Alvarez Alvarez and Rodolfo
Vazquez Casielles (2008) concluded that the brand choice and buying behaviour developed by
consumers is a complex phenomenon. The variables that influence it are numerous and it is
necessary to know them to act and develop useful strategies that achieve the objectives aimed
at in each case. The influence of prices on this process is very important.

In previous researchers questions related to reference prices have been approached in depth. It
seems widely accepted that when consumers buy a product they compare its price with a
subjective level. The problem focuses on finding the most adequate way of estimating that
level. While some theoretical trends consider that the consumer forms his reference price from
the observation of the prices at the establishment, others defend that the consumer remembers
the prices paid on previous occasions and he will form his reference price from them. The
analysis made allows them to propose the estimations from stimuli or observation as
explanatory of the brand choice and decision process developed by the consumer.

Just as it was expected, Begona Alvarez Alvarez and Rodolfo Vazquez Casielles (2008) have
confirmed the importance of prices in the purchasing process. The effects derived from their
fluctuations depend on the characteristics of the brand. Specifically, they have found
differences in the intensity of response to price variances between manufacturer brands and
store brands. The latter appeared to be more vulnerable.

Since one of the most widely used techniques of sales promotion are immediate discounts,
they have considered it necessary to clarify the effects this may produce. Interesting results
have been obtained regarding this issue. Discounts are perceived as attractive and serve to
modify consumer preferences, but depending on the category of product.

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Thus, for those in which consumers show a strong tendency or preference for the brand, the
expected results are not obtained, because they are not relevant in the brand decision process.
The application of another promotional tool would be more advisable instead. However, for
other categories of product with lower loyalty rates, the application of discounts is the most
adequate action, since the use of other promotion actions does not produce any effect.

Sellers use various advertising and promotion tactics to attract customers and increase sales.
Previous research has shown that framing of promotion messages and presentation of price
information influence consumers‘ perceptions of prices and their willingness to buy (Das,
1992; Sinha et al., 1999; Sinha and Smith, 2000).

However, Lan Xia and Kent B. Monroe (2008) have distinguished between consumers who
have prior goals to buy the product relative to those who do not have such purchase goals.
Further, they have added whether consumers‘ responses to different promotion message
framing and price presentations differ when they do or do not have pre-purchase goals. Since
the same promotion information may lead to different perceptions as consumers‘ goals vary
(Shavitt et al., 1994), understanding how consumers with different purchase goals react to
various promotion messages can help sellers design effective promotion programs.

3.14 Goals of consumers:


Purchasing decisions of many consumers are goal oriented (Bagozzi, 1997; Bagozzi and
Dholakia, 1999). Such goals are important as they direct other stages of the consumers‘
decision process. Broadly, there are different levels of consumer goal specificity (Lawson,
1997). People with abstract goals tend to search across product categories and consider a wider
range of information as relevant. For example, if the goal is to get away from work and have
fun (an abstract goal), consumers may consider multiple activities including going to a movie,
visiting friends, or taking a vacation. Many options are relevant and attentions are spread
across multiple product categories. On the other hand, if the goal is to buy a microwave oven
(a concrete goal), only microwave oven information is relevant and tends to get people‘s
attention.

In the market place, consumer goals vary along a continuum ranging from no goal, abstract
goal to concrete goal. Goals guide consumers‘ information gathering and decision processes.
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Goals are associated with different levels of consumer involvement (Howard and Kerin, 2006)
which guide the allocation of attention as well as other cognitive resources for information
processing (Peterman, 1997).When consumers have an abstract goal or no goal at all, the
involvement with any particular purchase is low and they may spread out their attention and
no single piece of information may be regarded as particularly relevant.

However, when they have a specific purchase goal, their involvement is high and they are
more focused in their information search and processing and perceive some types of
information to be more relevant than others. As Bargh (2002) has indicated, the particular goal
in place changes everything – the focus of attention and the evaluation of objects and events,
as well as memory for events

Although the importance of consumer goals has been recognized in previous research, it has
not been explicitly incorporated in research on consumers‘ perceptions of price promotions
(Mazumdar et al., 2005). Yet, when shopping, consumers may encounter various price
promotion messages for products or services for which they do or do not have specific purchase
goals. Mazumdar et al. (2005) in a summary of reference price research called for more
research examining shopping occasions (i.e. planned vs unplanned purchases) as an important
moderating factor of the effects of various types of reference price information. Lan Xia and
Kent B. Monroe (2008) examined how consumers‘ prior purchase goals interact with
promotion characteristics to influence their perceptions of price promotions and their
willingness to buy.

3.15 Pre-purchase goals and price promotions:


Goals play a fundamental role in influencing how information in a promotion message will be
processed (Shavitt et al., 1994). When individuals have multiple information processing
strategies available, they select among them on the basis of goals, motives, and the
environmental context (Taylor, 1998). Thus, by definition information regarding a specific
product attracts more attention when consumers have a pre-purchase goal for that product
category compared to when consumers do not have a pre-purchase goal.

Price promotions usually provide consumers with monetary savings on specific products. If
consumers are in a store intentionally searching for these specific products, then it is expected
that they would find promotions on such products more attractive compared to those
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consumers who are in the store but do not have a prior purchase goal for a promoted product.
Therefore, the purchase likelihood is higher. In addition to this main effect, consumers may
react to different promotion characteristics in different ways given the existence or absence of
a pre-purchase goal. For example, Howard and Kerin (2006) found that consumers with
different levels of involvement, operationalized by whether they are in the market for a
particular product, have different information processing styles and hence respond to different
price promotion cues.

Price promotion characteristics can be grouped into four categories: price presentation, deal
characteristics, situation factors, and study effect (Krishna et al., 2002). Price presentation
research examines whether consumers‘ perceptions of a promotion are influenced by how the
promotion is communicated, e.g. framing. Research on deal characteristics studies the
influence of factors such as deal percentage, free gift value, and size of the bundle. Situation
factors refer to the overall situation of the price promotion including types of stores, brands
and whether the promotion information is received at home or in the store.

Finally, study effect addresses measurement issues including factors such as number of
variables manipulated and number of participants. Different promotion characteristics
influence current as well as future purchase intentions (DelVecchio et al., 2006). Lan Xia and
Kent B. Monroe (2008) examined several important issues related to price presentations and
deal characteristics of price promotions focusing on promotion framing, format, and promotion
depth.

3.16 Discount vs. Free Gift- Big question


When we talk about promotions, price promotions come in different formats such as discount,
coupon, rebate, and purchase with free gift, etc. While most promotion forms involve monetary
savings, some promotions are non-monetary. One type of non-monetary promotion often used
is offering consumers a free product or gift instead of a price discount.

Compared to price discounts, non-price promotions such as free gifts are likely to be perceived
as small gains (Diamond and Johnson, 1990) and maintain product quality perceptions
comparing to discounts (Darke and Chung, 2005). Discounts reduce the price that consumers
have to pay for the product (i.e. reduced sacrifice). However, in a free gift promotion, while
the value of the promotion may be equivalent to a discount, nevertheless, it does not reduce
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the sacrifice with the focal product purchase and therefore it could be perceived as a gain. If
consumers with and without pre-purchase goals respond differently to gains and losses in price
promotion perceptions, they may react differently to monetary and non-monetary price
promotions

Diamond and Abhijit (1990) discussed about retail value of the free product. As discussed may
be, if consumers who are planning to buy a product are more focused on the monetary sacrifice,
they would prefer a price discount (reduced loss) over a free gift promotion (small gain).
However, consumers who are not planning to buy may be more attracted by a small gain
associated with the free gift.

Lan Xia and Kent B. Monroe (2008) concluded how consumers with or without a specific pre-
purchase goal respond differently to a price promotion. Not surprisingly, Lan Xia and Kent B.
Monroe (2008) showed a consistent main effect of goal on participants‘ willingness to buy.
This main effect was not mediated by perceived value. This result is consistent with the
intuition that consumers are responsive to information that matches their needs. Product or
brand level price promotion information is less relevant when consumers do not have a pre-
purchase goal. They observed a main effect of promotion format. Participants preferred
discount over free gift and higher discount level over lower discount level regardless of the
presence of a pre-purchase goal. These main effects were mediated by perceived transaction
value. It is also added that the main effect of promotion format probably due to fact that the
two promotion framing represented equivalent price savings.

In addition to the main effects, they show how consumers‘ goals interact with some important
characteristics of price promotions to influence their willingness to buy.

The effect of the promotion message framing or format is conditional on consumers‘ prior
purchase goals. Consumers planning to purchase a product are more responsive to promotion
messages framed as reduction of losses (e.g. ―pay less‖ and a discount) while consumers
without a goal are more responsive to messages framed as additional gains (e.g. ―save more‖
and free gift).

Henceforth, consumers with different purchase goals respond differently to the depth of a
discount. When consumers do not have a purchase goal, they are less responsive when the
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discount level is either too small or too large. In contrast, such thresholds are less observable
when consumers have a prior purchase goal. Further more, it has been concluded that perceived
quality is the underlying mechanism for the effect of promotion framing across purchase goals.
Overall, introducing consumer goals as a moderating factor provides some boundary
conditions to previous research effects and adds to knowledge of consumers‘ perceptions of
and responses to various price promotions.

The notion that targeted deals are more efficient than across-the-board sales promotions that
provide unnecessary discounts to price-insensitive consumers has prompted a dramatic growth
in customized pricing and sales promotions (Acquisti and Varian 2005). However, questions
have been raised regarding the efficacy of targeted offers in general (Homburg, Droll, and
Totzek 2008) and customized price promotions in particular (Acquisti and Varian 2005;
Feinberg, Krishna, and Zhang 2002).

Thus, whether companies should rely on customized promotions remains an open question,
highlighting the need for additional research into how consumers respond to targeted discounts
as well as contingencies that affect their response to these offerings (Franke, Keinz, and Steger
2009; Simonson 2005).

In this regard, a variable that has received little attention in the literature is the relative
exclusivity of targeted price promotions. Because such promotions are offered selectively to
some consumers (i.e., deal recipients) but not to others (i.e., deal non recipients), targeted price
promotions involve a level of exclusivity that surpasses that associated with more inclusive
(i.e., undifferentiated) offers. At their most exclusive, price discounts can be customized to
maximize promotional fit with individual consumers (Simonson 2005). At more modest levels
of exclusivity, targeted promotions can be selectively offered to entire groups of consumers,
as with affinity marketing programs (e.g., Borders‘ educator savings promotions, which limit
discounts to current and retired teachers).

Research by Feinberg, Krishna, and Zhang (2002) provides evidence of a betrayal effect, in
which loyal consumers of a brand provide less favourable preferences for that brand when they
are excluded from a targeted deal offered only to competitors‘ customers.

Equity frameworks (Adams 1965; Bolton and Ockenfels 2000; Greenberg 1986) presume that
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people will engage in interpersonal comparisons that factor not only the outcomes received
(non social utility) but also how such outcomes compare with those that others accrue (social
utility). When consumers react to marketing offers with the goal of maximizing personal
welfare (i.e., they are self-regarding), the receipt of an exclusive deal leads to advantageous
inequity that enhances evaluations of the targeted discount among deal recipients (Greenberg
1987; Loewenstein, Thompson, and Bazerman 1989). In contrast, non recipients (whose
exclusion from the offer results in disadvantageous inequity) should evaluate this type of
promotion less favourably. Thus, as a result of their respective outcomes, recipients and non
recipients should differ in their evaluations of a targeted deal.

Equity theory further suggests that evaluations of a targeted offer will depend not only on the
relative outcomes associated with the offer (i.e., whether the consumer is a recipient or non
recipient) but also on the inputs or costs associated with receipt of the promotion. In the context
of targeted deals, these inputs may be represented by the amount of effort customers have
invested in their relationship with a marketer (e.g., through their past patronage of the brand)
(Feinberg, Krishna, and Zhang 2002; Homburg, Droll, and Totzek 2008); in turn, these
investments should influence how consumers respond to a targeted offer (Verhoef 2003). In
this regard, the negative reactions of deal non recipients in Feinberg, Krishna, and Zhang
(2002) likely arose because of disparities in both exchange components.

In comparison with deal recipients, these consumers experienced disadvantageous inequity in


terms of both the relative outcomes associated with the offer (non receipt of the targeted
promotion) and the relative inputs (brand-loyal non recipients had more invested in their
relationship with the marketer than deal recipients, who were users of a competitive offering).
Being placed in a situation of disadvantageous inequity presumably prompted negative
emotions (Tabibnia, Satpute, and Lieberman 2008) that undermined the preferences of non
recipients for the brand to which they had previously been loyal.

However, Michael J. Barone & Tirthankar Roy (2010), explored was whether, when, and how
recipients‘ evaluations of a targeted price promotion may be affected by the offer‘s exclusivity
(i.e., the extent to which an offer is available to consumers in the marketplace). If exclusion
from a targeted offer can trigger disadvantageous inequity for non recipients (as Feinberg,
Krishna, and Zhang (2002) demonstrate), it stands to reason that receipt of an exclusive
discount should engender advantageous equity for deal recipients.
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Furthermore, an emerging literature on inequity aversion (Fehr and Gintis 2007; Fehr and
Schmidt 1999) suggests that certain people desire outcomes that balance self-regarding (i.e.,
selfish) interests with other-regarding interests. Thus, some consumers may be reluctant to
engage in exchanges that provide them with advantageous inequity, and this disinclination is
likely to grow with the level of inequity characterizing the exchange (Scheer, Kumar, and
Steenkamp 2003).

Inequity-averse deal recipients should evaluate a deal less favourably as it becomes more
exclusive. As a result of their motivation to avoid experiencing the negative affect (e.g., guilt)
that may accompany advantageous inequity (Scheer, Kumar, and Steenkamp 2003), inequity-
averse recipients should evaluate exclusive deals less favourably than more inclusive offers.
While variations in inequity aversion have been examined at more macro levels (e.g., across
cultures; see Scheer, Kumar, and Steenkamp 2003), little work has explored individual
difference factors that characterize inequity-averse people.

However, such an examination affords a means of identifying theoretically relevant variables


that moderate consumers‘ tendencies toward inequity aversion, information that is useful in
developing strategies aimed at more effectively and efficiently delivering targeted deals to the
marketplace.

3.17 Deal Exclusivity & Consumer Response:


Self-construal reflects the potential for people to hold varying self-views (Agrawal and
Maheswaran 2005; Markus and Kitayama 1991) and involves the degree to which people
define themselves in isolation of others (i.e., independent construal) or in relation to a group
(i.e., interdependent construal). Although self-construal can be represented as a chronic,
relatively stable dimension of a person‘s personality or as a frame of mind that is situationally
primed by contextual factors (Oyserman, Coon, and Kemmelmeier 2002), in either case, it
holds implications for the values people strive to achieve in managing their self-concepts. As
a result, self-construal can influence judgments (Markus and Oyserman 1989), including those
made in response to sales promotions tactics (e.g., loyalty programs; see Kivetz and Simonson
2003).

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To this end, people adopting independent, ego-focused construal tend to manage their self-
concepts with respect to considerations that centre on their relative uniqueness (Markus and
Kitayama 1991; Oyserman, Coon, and Kemmelmeier 2002). This orientation guides
information processing in ways that allow people to ―maintain, affirm, and bolster the
construal of the self as an autonomous entity‖ (Markus and Kitayama 1991). Because the
selectivity of customized promotions is compatible with these values, recipients with
independent self-construal should favourably evaluate exclusive deals. Conversely, because
consumers with interdependent self-views define themselves in terms of their connectedness
with a group (Markus and Kitayama 1991), their decisions should reflect a desire to maintain
harmony with others (Markus and Oyserman 1989). As a result of this relational sensitivity,
these people may value collectivism to the point of sacrificing personal gains to avoid discord
with others (Oyserman, Coon, and Kemmelmeier 2002).

Such people should therefore strive to achieve marketplace exchanges that lead to outcomes
that are more equitable (versus inequitable) in nature. In turn, this distaste for inequity should
negatively affect the evaluations of a targeted deal provided by recipients with interdependent
self-construal.

3.18 Deal Exclusivity-Gender effects:


Research on self-construal suggests that recipient gender can influence how deal exclusivity
affects the evaluations of customized offers. Specifically, Western men are often characterized
as possessing independent self-views, while Western women more typically adopt
interdependent self-construal (Markus and Kitayama 1991). Men‘s independent self views
should prompt them to value unique (i.e., exclusive) offers that provide them with the basis
for self-enhancement to a greater extent than women, whose interdependent self views should
result in less favourable evaluations of targeted deals.

Such an outcome is compatible with research on sex roles in judgment (e.g., Meyers-Levy
1988), demonstrating that men tend to employ agentic, self-focused processing goals (that
should lead to a stronger preference for exclusive promotional offers), while women have
communal processing goals that emphasize interpersonal considerations (and should result in
a weaker preference for targeted deals). This expectation is also consistent with research on
distributive justice showing that men prefer resource allocations that provide gains to
themselves, while women favour equity-based allocations that result in similar gains to all
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(e.g., Fehr, Naef, and Schmidt 2006; Major and Adams 1983; O‘Malley and Greenberg 1983).

As Michael J. Barone & Tirthankar Roy (2010) noted previously, a basic tenet of equity theory
involves not only the outcomes that accrue (in this case, receipt of the targeted deal) but also
the inputs necessary to obtain these benefits (i.e., relationship equity). In this regard, recipients
should react more strongly to the distribution of targeted deals when they perceive that they
have higher (rather than lower) relationship equity with a firm. This rationale is borne out by
Feinberg, Krishna, and Zhang‘s (2002) results, which indicate that customers who are loyal to
a brand (and thus had achieved high levels of relationship equity) react in a particularly
negative manner when they are excluded from a targeted promotion offered by the brand to
less meritorious consumers (brand switchers).

In a positive vein, Kivetz, Urminsky, and Zheng (2006) demonstrate that consumers respond
more favorably to an offer (e.g., by accelerating purchases) when they have more invested in
a marketer‘s rewards program and therefore have developed greater relationship equity with
the firm.

Accordingly, the level of effort a consumer invests in building a relationship with a firm should
be positively related to the degree to which recipients are sensitive to deal characteristics
(including promotional exclusivity) and, as a result, to the extremity of their response to a
targeted offer. Therefore, consumers who have invested heavily in a relationship with a firm
through their transactional history should prove sensitive to receiving a targeted offer; in
contrast, those with lower levels of relationship equity may be less responsive to a deal‘s
exclusivity, given that they have little vested in the relationship (Adams 1965; Greenberg
1986).

Therefore, the influence of exclusivity on deal evaluations should be most prominent when
consumers have built up (through past patronage) relatively high levels of relationship equity.
If this is indeed the case, the effects we set forth regarding gender and promotional exclusivity
should be limited to conditions of high relationship equity. Thus, we predict that men (women)
should prefer exclusive (inclusive) offers, but only when relationship equity is high; when such
equity is low, deal exclusivity should factor less into their evaluations.

Targeted promotions and customized pricing are becoming increasingly common in the
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market. Extant research on these practices (e.g., Feinberg, Krishna, and Zhang 2002) has
focused on how non recipients respond to deals provided selectively to other consumers. A
complementary but unexplored issue was whether the response of deal recipients depends on
perceptions of the offer‘s exclusivity (i.e., its availability to other consumers). Across three
studies, Michael J. Barone & Tirthankar Roy (2010) demonstrated that some consumers (e.g.,
male participants and those with independent self-view) favour exclusive deals over inclusive
ones. The findings further showed that under certain conditions (e.g., when the level of
relationship equity consumers have built with a marketer through their past patronage is low),
both types of offers were evaluated equally favourably. Perhaps most intriguing were the
results indicating that certain consumers (e.g., female participants and those with
interdependent construal) react negatively to receiving a targeted offer that was exclusive,
instead preferring discounts that were more widely available.

In addition to identifying these boundary conditions to the positive effects of deal exclusivity,
Michael J. Barone & Tirthankar Roy (2010) provided evidence of the process mediating such
effects. These results indicate that consumers who prefer more exclusive deals do so because
receiving selective offers provides them with a basis for self-enhancement (e.g., by helping
them attain values related to autonomy).

In contrast, the negative reactions of participants exhibiting an aversion to exclusive


promotions were driven by the superiority of inclusive offers to allow them to self-enhance
(e.g., by confirming their desires to maintain harmony with others). Thus, while receipt of an
exclusive targeted deal can engender positive feelings for certain segments of consumers, these
same offers can trigger less favourable emotions for other consumers that undermine their
evaluations of the deal.

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Aside from providing an initial demonstration of when and how deal exclusivity influences
consumer response to targeted promotions, the current investigation contributes to several
other literature streams. In conceptualizing the observed response variability to deal
exclusivity, Michael J. Barone & Tirthankar Roy (2010) employed inequity aversion, a
concept from economics that has received minimal empirical consideration in the marketing
literature. This inattention was somewhat surprising given that inequity aversion focuses on
exchanges and outcomes, two concepts fundamental to the study of marketing (Bagozzi 1975).
Research on inequity aversion provides a basis for anticipating that some people will exhibit
self regarding preferences for options that afford them advantageous inequity, and others will
prefer more equitable outcomes that effect a consideration of other-regarding interests.

However, little empirical attention has been given to identifying factors useful in predicting
who will be inequity averse and who will not. Michael J. Barone & Tirthankar Roy (2010)
provided such evidence by documenting that inequity-averse behaviour is more likely for
certain people (e.g., female participants and consumers with interdependent self-construals)
and under certain conditions (e.g., when relationship equity is high). Research along these lines
is important theoretically given that it delineates moderating variables associated with
conditional boundaries to inequity aversion; pragmatically, these findings have value by
pinpointing characteristics that marketers can incorporate into the strategies they use to deliver
targeted deals to the marketplace.

Focus of prior research has been on examining the parameters typically associated with
managers‘ development of promotional calendars, including depth, frequency, and duration
(Silva-Risso, Bucklin, and Morrison 1999). By demonstrating that exclusive deals may be
evaluated more, equally, or less favourably than inclusive deals, Michael J. Barone &
Tirthankar Roy (2010) showed that consumer response to discounts were also sensitive to a
―non traditional‖ deal characteristic, namely, the perceived exclusivity of a price promotion.
These results extended the literature on deal restrictions as well. Although extant research has
focused on promotional limitations, such as quantity, time, and minimum purchase
requirements (Inman, Peter, and Raghubir 1997). Their studies provided insight into an
understudied form of deal restriction (exclusivity) that is becoming increasingly important
with the growth of targeted offers.

Findings of Michael J. Barone & Tirthankar Roy (2010) similarly hold implications for
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research on transaction utility theory, indicating that deal recipients can experience self-
enhancement through affective consequences associated with being a ―smart shopper‖
(Schindler 1998). The results expand on prior work in this area by demonstrating that receipt
of a ―good deal‖ in the form of an exclusive promotion that provides consumers with a
financial advantage in the marketplace (relative to consumers who do not receive the discount)
does not necessarily engender positive feelings.

Rather, the evidence provided indicates that the relationship between receiving a deal and
experiencing positive affect may be more complex than previously believed and contingent on
characteristics associated with both the consumer (e.g., self-construal, gender) and the offer
(e.g., its exclusivity).

A large body of research on consumer responses to sales promotions (e.g. Bawa and
Shoemaker, 1987 and 1989; Blattberg and Neslin, 1990; Leone and Srinivasan, 1996; Huff
and Alden, 1998) has accumulated over the past few decades due to the growing importance
of this marketing lever.

However, there has been much emphasis on coupons at the expense of other equally important
promotional tools, which has created the need for more work to be done in this area. Nelson
Oly Ndubisi and Chew Tung Moi (2006) investigated (together with coupon) the effects of
other sales promotional tools such as free sample, bonus pack, price discount, and in-store
display on product trial among Malaysian consumers, as well as the role of awareness or
knowledge of promotional tools.

According to Shimp (2003), sales promotion refers to any incentive used by a manufacturer to
induce the trade (wholesalers, retailers, or other channel members) and/or consumers to buy a
brand and to encourage the sales force to aggressively sell it. Retailers also use promotional
incentives to encourage desired behaviours from consumers. Sales promotion is more short-
term oriented and capable of influencing behaviour. Totten and Block (1994) stated that the
term sales promotion refers to many kinds of selling incentives and techniques intended to
produce immediate or short-term sales effects. Typical sales promotion includes coupons,
samples, in-pack premiums, and price-offs, displays, and so on. Coupons have been used to
produce trial (Robinson and Carmack, 1997). According to Cook (2003), coupons are easily
understood by the consumer and can be highly useful for trial purchase. Gilbert and Jackaria
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(2002) concurring to the popularity of coupon reported that coupon is ranked last as the
promotional least widely used by consumers and least influence on product trial. Other studies
(e.g. Peter and Olson, 1996; Gardener and Trivedi, 1998; Darks, 2000; Fill, 2002) have
reported the importance of coupons as a sales tool.

Price promotion does influence new product trial (Brandweek, 1994). According to Ehrenberg
et al. (1994) short-term peaks in sales were due primarily to purchases made by occasional
users of a brand rather than by new customers. Furthermore, the study concluded that these
occasional users, after taking advantage of the price reduction, would most likely return to
their favourite brands in their portfolio rather than buy the promoted brand at full price.
However, Shimp (2003) and Fill (2002) among other extant studies have documented a link
between price promotion and product trial.

With regard to free sample, another important promotional tool often used by firms, marketing
managers recognize the importance of product trial and direct behavioural experience with a
product; hence they often mail free samples of products to consumers so that consumers can
try the products for themselves, rather than just hear about the products (Kardes, 1999).
However, Gilbert and Jackaria (2002) found that a free sample as a promotional offer had no
significance on consumers‘ reported buying behaviour, whereas Pramataris et al. (2001), Fill
(2002), and Shimp (2003), have shown otherwise.

Factory bonus pack according to Lee (1963) is used to increase consumer trial of the brand.
Larger package size and accompanying advertising of the offer tended to make the promotion
noticeable (Gardener and Trivedi, 1998). Since more of the product is included at no extra
cost, consumers can be persuaded to buy the product if they feel it represents a deal that
produces the greatest value for their money. According to Gilbert and Jackaria (2002), packs
with ‗‗buy-one-get-one-free‘‘ may not increase brand awareness before trial purchase because
the customer will only come across the product once in the store (unlike samples or coupons),
however, if the promotion is noticeable it will facilitate brand recognition and brand recall for
future purchases. Since an additional amount is given for free, consumers may be persuaded
to buy the product if they feel it represents a fair deal that provides value for money. Ong et
al. (1997) found that consumers appeared to be slightly sceptical of the bonus pack offer, but
somewhat more trusting of the price and quantity claimed. In other words, believability of the
bonus pack offer was weak; however, they would likely buy one bottle and not buy more than
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one bottle they concluded. The report speculated that this happens because consumers suspect
that manufacturers do raise prices slightly in conjunction with bonus pack offerings.

Product trial involves actually trying or using a product (Kardes, 1999). According to Peter
and Olson (1996), trial ability refers to the degree to which a product can be tried on a limited
basis or divided into small quantities for an inexpensive trial. Banks (2003) wrote that with
sales promotion, brands have a chance to quickly affect consumer choice and behaviour by
adding value through an on-pack offer, by achieving incremental display or by encouraging
trial via sampling and/ or couponing.

According to Schindler (1998), a price promotion that is designed to evoke attributions of


responsibility could be expected to appeal to consumers more than one that does not evoke
such attributions, and thus have a greater ability to create product trial among consumers.
Wayne (2002) found a link between sales promotion and product trial. Chandon et al. (2000)
indicated that sales promotion may be attractive to highly promotion prone consumers for
reasons beyond price savings. These highly promotion prone consumers may switch brands to
receive special deals that reflect and reinforce their smart shopper self-perception. They
concluded that highly promotion prone consumers might try a new product that has promotion.
Thomas (1993) argued that the magnitude of planned distribution and promotion expenditures
(advertising, sales promotions, sales force, and so on) could affect initial trial of the brand.

Nelson Oly Ndubisi and Chew Tung Moi (2006) concluded that Malaysian consumers respond
more to free sample, price discount, in-store display, and bonus pack than coupon. A plausible
explanation for the weak influence of coupon was poor knowledge of the tool. This research
showed the linkages among various promotional tools and product trial, and thereby helped to
better understand how Malaysian consumers respond to various promotional tools offered by
marketers. Promotions that emphasize in-store display, free sample, price discount, and bonus
pack are likely to be more effective than coupon.

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Furthermore, Nelson Oly Ndubisi and Chew Tung Moi ( 2006) added that in-store display
proneness has the strongest effect on product trial compared to other sales promotional tools.
Attractive in-store display practices are necessary to gain the greatest sales from product trial.
Bonus pack, free sample, and price discount significantly affect product trial, albeit the
determinant power of bonus pack is the lowest among other promotional tools. Thus, one of
the ways to improve the determinant power of bonus pack is to keep a regular pack along side
with a bonus pack on the shelves, in order to enable consumers to make comparison. Such
opportunity for a comparative observation will help to enhance the credibility of the tool and
consumers‘ confidence in it. With regard to free sample and price discount, sellers should
continue to apply them because of their robust influences on product trial.

Coupon has no significant effect on product trial. This is largely due to consumers‘ poor
knowledge of the tool. Another probable reason for the poor influence of coupon may be
because coupons provide less shopping convenience benefits, require more skill and effort
than buying a product on sale added by Nelson Oly Ndubisi and Chew Tung Moi ( 2006).

3.24. Short- and long term effects of Sales Promotion


The evidence of short-term effects seems to be well documented in the literature. It is
suggested that sales promotion can build brand awareness and motivate trial, provide more
specific evaluation methods, as they are more immediate and operate in a specific time frame,
(Pham, M.T., Cohen, J.B., Pracejus, J.W. & Hughes, G.D., 2001), influence sales, (Roberts,
John H., 1995) expand the target market (Robertson, T.S., 1993) and achieve competitive
advantage.( Rothschild, M.L. & Gaidis, W.C.,1981). According to their purpose, sales
promotions are often successful in inducing action, as they encourage consumers to act on a
promotion while it is still available. Also, the strength of sales promotion lies in its flexibility
to quickly respond to competitor attacks contributed by Sandra Luxton (2001).

Despite these benefits, the question remains whether these effects are made at the expense of
the long term impact that sales promotion may have on companies. Sawyer, A. and P. Dickson
(1984) and Simonson, I., and Z. Carmon (1994) proved that there is evidence pointing towards
sales promotion having a negative effect on brands, especially in relation to advertising. It is
argued that sales promotion does not have any brand-building impact and could lead to
diminishing effects for the brand, particularly well-established ones.

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In fact, the Ehrenberg et al. study showed that price-related promotions do not have any effect
on brand performance, either in terms of sales or repeat purchase. According to the authors,
this is due to the fact that promotions influence existing customers in the first place, with some
rare exceptions shared by Simonson, I., and Z. Carmon (1994). This is a concern for
companies, whose main objective it is to target new customers or gain more long-term profit,
as new customers might only take advantage of the promotion and then go back to their
preferred brand. Also, even when the existing customers are targeted and the response is
satisfying, these consumers‘ price sensitivity may be enhanced, causing difficulties in the long
run.

A premium brand needs to justify its high price and its image, and often does so through
advertising, but are these media expenditures a waste of money if the image is damaged
through other communication channels? Perhaps the easiest advice wouldbe to simply avoid
sales promotion due to this potential risk, but as we have seen in he FMCG markets, sales
promotion cannot easily be avoided and market characteristics force companies to address this
issue. In addition, it is arguably the FMCG markets that face the largest issue of competition
and lack of differentiation among products; and these are all the problems that successful
branding might ease.

Also, as previously implied, retailers and the characteristics of the retail environment play an
important role in customers‘ perception of a brand. Not surprisingly, it has been found that the
context in which a brand is seen influences the sales output. For instance, display features in a
store may trigger different responses in consumers. If a company has invested marketing
communications efforts in establishing a high-quality brand image and the product is then
placed in an undesirable context (for instance, in proximity to the brands associated with lesser
quality), consumers may perceive less brand value incorporated by Wakefield, K. L. and
Jeffrey J. Inman (1993). Thus, it may be the retailers who have ultimate control over brand
image and effective sales.

The sales promotion activities of companies could have an additional impact on the whole
market category as well. It is found that a successful price promotion did expand the category
while the promotion lasted, while having a negative long-term effect of decreased sales in the
period after the promotion. A reason for this might lie in the fact that people tend to buy greater
quantities during the promotion, and this leads to weaker demand once the promotion has
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finished. Another, equally distressing theory about the promotional impact on the category is
that since sales promotion tends to encourage brand-switching, the category does not benefit
as a whole as people switch to even lower prices.

3.25 Price sensitivity


One of the most discussed negative effects concerns consumer price sensitivity. Findings show
that sales promotion tends to increase consumer price sensitivity, due to the formation of
reference prices. When consumers buy a product, they start to comparethe price to the
reference price, as opposed to the actual one. If a consumer is used to buying two coffees for
the price of one, when the sales promotion is removed, the actual price of the coffee suddenly
seems more expensive. However, this implies that, in order for consumers to become too price
sensitive, promotions would have to happen frequently, since consumers do not tend to always
remember prices.

Naturally, different consumers react differently to prices and sales promotion, depending on
their own predispositions and preferences. For instance, customers loyal to a specific brand
will perhaps not switch even when presented with the most tempting offer while others actively
search for the best offer available. Promotions can, however, lead to a greater number of people
becoming offer-seekers as, Mela et al., (1997) found that, looking long-term, price promotions
do make both loyal and non-loyal customers more sensitive to price.

Conclusion:
Inherently, sales promotion techniques are intended to have a direct impact on buying
behaviour, which implies their short-term focus. However, every aspect of communication by
a company has some sort of effect on the company‘s brand image, and therefore any company
which has recognized the importance of thinking strategically knows that it must look beyond
short-term effects. In terms of brand building, sales promotion has traditionally been associated
with a negative long term impact due to its predominantly price-orientated nature. But, as we
have seen, this view has neglected the full scope of sales promotion methods.

A strategic marketing communications plan will clearly state the elements, such as the
objectives, target audience and positioning, which will all help the company decide upon the
sales promotion method that is most suitable for the company and the particular campaign. A

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wish to incorporate the value-increasing methods, while a premium brand might wish to look
toward more brand-building techniques. The enhanced planning in the sales promotion
process, along with a closer analysis of all the sales promotion methods, will lead a company
with a premium brand positioning to the more creative forms, which do not rely on product
discounts.

When integrating sales promotion into the marketing communications plan, messages will
reinforce each other, regardless of the medium or tool used. Tools can be interrelated, for
instance, by using advertising to promote promotions or, as we have seen, by using
competition to enhance public relations. By understanding the impact each individual
promotional tool has, managers will achieve synergy between the methods more easily.
Therefore, the challenge for managers should not be whether to allocate funds to advertising
or sales promotion, but rather to find a way to connect these methods.

What we have also seen emerge from the literature is a doubt whether or not either advertising
or sales promotion can influence consumers’ buying behaviour– a question that surely needs
more empirical answers. But, at least for now, we do know that companies can rarely exclude
sales promotion from their campaigns due to the factors such as increased competition and
pressure from retailers. They can, however, choose to use the sales promotion elements which
have proven to be more effective in enhancing the company‘s image, and should certainly do
so if they have a premium brand positioning. Incorporating sales promotion strategically,
given all its characteristics, may turn out to be quite challenging for a company, but:

―Today‘s and tomorrow‘s marketing managers really do not have the choice whether or not
to use sales promotion but only whether to use these valuable tools poorly or skilfully‖.

Conclusion
It is widely perceived that sales promotion schemes are intended to have a direct impact on
buying behavior of consumer which implies their short term focus. But any company
recognizing the importance of thinking strategically, knows that it must look beyond short
term effects. Sales promotion has traditionally been associated with a negative long-term
impact due to its predominantly price-oriented nature. But, this perception has neglected the
full scope of sales promotion methods. Companies can hardly exclude sales promotion
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schemes from their marketing strategy due to various factors and challenges. These factors
include increased competition, pressure from retailers, and challenge of not only maintaining,
but also increasing sales. We need to understand the impact of each individual sales
promotional tool. This research is an effort to fill the gap to choose sales promotion tools
which are more effective in enhancing companies’ sales. It will help in using these tools
skillfully. This research on the impact of sales promotion schemes on consumer behaviour
with special reference to Fast Moving Consumer Goods (FMCG) is unique in the sense that
it may provide useful information in the direction of designing the clutter breaking sales
promotion schemes managers. That is why this topic is chosen.

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Chapter - 5
Research Methodology
Introduction:
It is well documented that building and maintaining positive brand equity and higher
percentage of market share in FMCG industry, with one‘s consumer base is considered to
be critical for long-term survival (Farquhar 1990; Keller 1993; Blackstone 2000; Ambler
2001).

Fill C. (2005) noted that in the changing and competitive marketing communication
industry it is of vital importance for companies finally to recognize that consumers
perceive a brand through all the communication touch-points. This, in turn, implies the
importance of a strategic focus in any marketing communications plan, as brand building
is a long-term exercise. A brand entails a construct ―of, first, an identity that managers
wish to portray and secondly, images construed by audiences of the identities they
perceive‖.

Given the potential link between promotion and brand equity, of major concern is to know
FMCG consumer‘s perception towards consumer based brand equity sources.

Despite a wealth of literature on the separate issues of Brand Equity and sales promotion,
to date there has only been a relatively small amount that specifically addresses the
relationship between the two; further support for Schultz‘s suggestion that they don‘t
really know a lot yet. There has however been some debate about whether sustained
promotional activity is likely to reduce a brand‘s franchise and the literature has mixed
findings (Blattberg et al. 1995; Roberts 1995).

Specifically, building brand equity appears to be worthy of investigation in the context of


sales promotions. Indeed, the most recent practices in the industry diverge from the general
academic view that sales promotions destroy brand equity (Mela et al. 1997; Yoo et al.
2000).

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The most recent literature on sales promotions (Chandon & Laurent 1999) stresses the
need to distinguish between two types, monetary and non-monetary, because there are
important differences between them. On the one hand, monetary promotions (e.g. free
product, coupons) are primarily related to utilitarian benefits, which have an instrumental,
functional and cognitive nature. They help consumers to increase the acquisition utility of
their purchase and enhance the efficiency of their shopping experience. On the other hand,
non-monetary promotions (e.g. contests, sweepstakes, free gifts, loyalty programmes) are
related to hedonic benefits with a non-instrumental, experiential and affective nature,
because they are intrinsically rewarding and related to experiential emotions, pleasure and
self-esteem.

So, studying the consumer preference between cash discount (Price Promotion) and free
gift (Non Price promotion) has been identified as one of the objectives of this study.

These factors have been highlighted especially in the FMCG markets, characterized
usually by low involvement products; a lack of clear differentiation between brands and
extreme competiveness. Premium brands and market leaders have not been exempted from
these issues, as it has been found that followers and market leaders experience the same
level of competition although their brand characteristics may vary greatly.

Statement of the Problem:


Professional management is essence for improving overall efficiency and effectiveness in
every business, which makes business organization sustainable in changing political and
economic environment. Since couple of years more and number of corporate sector
companies have experienced the grave problems of deciding promotional strategy and
specifically sales promotion schemes to win the customers. Also, on the other hand, sales
promotion initiatives taken without keeping the long term objectives of the business may
reduce the market share of FMCG company. It is felt that management practices of
designing and implementing promotional decisions should be well researched and rational
to justify the investment on promotions. It has been felt that large gap remains between
what has been accomplished and what is remaining. Therefore the statement of the
problem under the study that has been selected is

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“A Study Of The Impact Of Sales Promotion Schemes On Consumer Behaviour
With Special Reference To Fast Moving Consumer Goods (FMCG)”

Research Objectives:
To study the consumer attitude towards the cash discount as a sales promotion scheme.
1. To compare the consumer preference between cash discount and free gift
2. To study the deal proneness of consumer considering demographic variables.

Research Hypothesis:
Ho1: There is no significant difference between Consumer attitude towards the cash
discount as a sales promotion scheme and demographic variables.

Ho2: There is no significant difference between consumer preference of cash discount


and free gift as sales promotion schemes.

Ho3: There is no significant difference between Consumer deal proneness and


demographic variables.

Motivation for the study:


With the growth of population and spending power of the consumer has created the
opportunities and challenges for the FMCG companies in the world market.
Simultaneously, competition to win consumers has been increased drastically. World is
becoming the small village and Many MNC‘s have entered in India and other countries.
Marketing paradigm is shifting from consumer satisfaction to consumer delight. Enticing
consumers with the various sales promotion schemes is the order of the day. If this tool is
not used strategically, company has to follow the trend of promotions to maintain the
market share. Considering almost universal applications of designing the sales promotion
schemes and understanding its impact on business has motivated to take the steps in the
direction to study this crucial aspect of promotion management.

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Research Design:
A research design is a framework or blue print for conducting the research project. It
details the procedures necessary for obtaining the information needed to structure and/or
solve research problems. The research design lays the foundation for conducting the
project. The descriptive research design is being used to study the formulated problem.
Primary and secondary data has been collected according to the need of the study. For
collecting primary data, structured questionnaire has been prepared considering
objectives of the study. More over important factors have been considered to measure the
interested variable of the study.

Sampling Element:
Each and every individual who purchases the FMCG products in the region of Western
Uttar Pradesh has been identified as a sampling element.

Sampling Design & Data Collection:

The universe of the study consists of all FMCG consumers in the state of Western Uttar
Pradesh.

Sample Size: 500

Sampling Method: Convenient Sampling Method

Data Type: Primary Data & Secondary Data

Data Collection Tool: Structured Questionnaire

Scope of Research : Western Uttar Pradesh

Conjoint Techniques:
Conjoint Analysis is an ever-growing family of techniques that can be broken into three
main branches:
 Ratings-based conjoint
 Choice-based conjoint
 Hybrid techniques

The first step in doing Conjoint right is to pick the most appropriate method for your
particular objectives and circumstances. In principle, the right technique will be the one

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that most closely mimics your marketplace dynamics. In practice, that will most often be
Choice-based Conjoint. Choice-based Conjoint offers respondents a series of choice sets,
generally two to five alternative products. Respondents can pick any of the available
alternatives or even elect not to buy, if none of the alternatives in that choice set are
sufficiently attractive. This format closely mimics buying environments in markets with
competition.

Ratings-based Conjoint involves nomadically rating individual product alternatives or pair


wise rating two product alternatives simultaneously. No-buy options are not easily
accommodated in Ratings-based Conjoint. Ratings-based Conjoint may be more
appropriate for non-competitive markets, such as oligopolies, monopolies or emerging
categories.

Hybrid techniques, approaches which combine self-explicated scaling with either Ratings-
based Conjoint or Choice-based Conjoint, are generally most appropriate when a large
number of attributes must be included.

So, understanding the problem of the research and market mimics, it has been
decided to select choice based conjoint analysis.

Both Ratings-based Conjoint and Choice-based Conjoint can be conducted as full-profile


or partial-profile studies. Full-profile tasks involve one level from every attribute in the
study. If there are six attributes in your full-profile study, then each product alternative
will have six attribute levels which define it.

Partial-profile tasks involve a subset of the total set of attributes. If there are six attributes
in your partial-profile study, then each product alternative may have two or three attribute
levels which define it.

Full-profile studies should ideally contain no more than six attributes. The critical issue is
to define products that are simple enough to be understood by respondents. If your
attributes are extremely complex and unfamiliar, perhaps six is too many. If your attributes
are extremely simple and familiar, perhaps you may be able to include more than six.

177
Partial-profile designs can include up to 50 or more attributes. Partial-profile designs, a
relatively recent development in Conjoint Analysis, typically compete with hybrid designs
when a large number of attributes needs to be included.

Full-profile designs are generally preferred over partial profile designs if the number of
attributes is sufficiently small because full-profile designs can accommodate interaction
terms more easily, require fewer samples and are more familiar to most market
researchers. Full-profile designs are generally preferred over hybrid designs if the number
of attributes is sufficiently small because hybrid designs usually cannot accommodate
interaction terms and are considered to employ a less natural question format. So full
profile approach to conjoint has been implemented.

A potential concern for any approach that accommodates a large number of attributes is
Attribute additivity (AA). Seldom mentioned in the literature, AA is the phenomenon
where a large number of less important attributes may overwhelm one or two extremely
important ones, due to sheer numbers. For example, a feature rich product may have more
total utility than a low-priced one simply because all of the small utility weights of the
various product features, when summed, exceed the utility weight of the price attribute.
There is currently no consensual ―right‖ way to address this problem. One possible
approach is to, on an individual level, limit the number of attributes included in model
simulations to the six most important. This is consistent with the rationale for limiting the
number of attributes in a conjoint task to six.

Attributes and Levels:


Once market research objectives are clearly defined, attributes and levels must be specified
in such a way that the subsequent analysis can address the objectives. If one objective is
to understand the impact of the introduction of a new brand into your category, for
example, it is essential that brand be an attribute in your study and the new brand be a level
within the brand attribute.

178
There are two attribute-related issues that you must be aware of which continue to be
problematic:

 Number of levels effect (NOL)

 Attribute range (AR)

NOL is the phenomenon that attributes importance is affected by the number of levels
specified in the design. For example, if Price has two levels, Rs 6 and Rs 12, in one study
and Price has four levels, Rs 6, Rs 8, Rs 10, and Rs 12, in another study that is exactly the
same as the first (except for the Price levels), Price in the second study will be more
important than it was in the first. There is Other than attempting to keep the number of
levels of all attributes as close to one another as is practical, there is no known solution to
this problem. ACA, however, does suffer substantially less from NOL than other
techniques.

Similarly, attribute range also affects attribute importance. If, in the second study above,
Price only had two levels, but those levels were Rs 6 and Rs 24, Price would again show
more importance in the second study. The best we can do here is to define the minimum
range of attribute levels necessary to realistically address the research objectives for each
attribute in the study.

179
LIMITATIONS OF THE STUDY

1. The samples size is not too much to generalize the result of the study.

2. This study is limited to Western Uttar Pradesh only and result may differ if conducted in
other regions. Also it measures the consumer preference in FMCG product categories. If
the same study is repeated for other industry consumer preference of sales promotion
schemes may vary

3. The study is limited to sales promotion schemes of FMCG product categories only and
result may vary if study is conducted for non FMCG product categories.

4. There are other variables besides sales promotion schemes which affect brand equity
perception and consumer preferences.

5. Evaluation is based on the primary data generated through questionnaire and accuracy of
the findings entirely depends on the accuracy of such data and unbiased responses of the
customers.

180
Chapter – 6
Analysis & Interpretation

Questionnaire is one of the tools of the primary data collection. In this researchconsumer
responses have collected through questionnaire. It is imperative to test the reliability of the
tool used for the data collection. So, reliability analysis of the scale is done as mentioned
below. Moreover Item wise statistics and inter item correlations presented.

6.1 Reliability Analysis of Scale:

6.1.1 Case Processing Summary of Scale Reliability Analysis:

Case Processing Summary

N %

Cases Valid 460 100.0

Excludeda 0 .0

Total 460 100.0

a. List wise deletion based on all variables in the procedure.

6.1.2 Reliability statistics:

Reliability Statistics

Cronbach's Alpha Based on


Cronbach's Alpha Standardized Items N of Items

.874 .870 22

181
6.1.3 Scale Items Statistics:
Item Statistics

Mean Std. Deviation N


Brand loyalty 1 3.55 1.961 460
Brand loyalty 2 3.21 1.839 460
Brand loyalty 3 3.13 1.700 460
Brand loyalty 4 4.38 1.734 460
Brand Awareness 1 3.12 1.658 460
Brand Awareness 2 3.92 1.853 460
Brand Awareness 3 2.69 1.684 460
Brand Awareness 4 3.72 1.999 460
Brand Awareness 5 3.85 1.987 460
Brand Awareness 6 2.59 1.395 460
Perceived Quality 1 4.38 1.615 460
Perceived Quality 2 4.17 1.742 460
Perceived Quality 3 3.81 1.654 460
Perceived Quality 4 3.62 1.741 460
Perceived Quality 5 3.62 1.700 460
Perceived Quality 6 3.49 1.981 460
Perceived Quality 7 3.16 1.710 460
Perceived Quality 8 4.08 1.686 460
Brand Association 1 3.25 1.641 460
Brand Association 2 4.18 1.829 460
Brand Association 3 4.45 1.675 460
Brand Association 4 3.48 1.709 460

Cronbach‘s Alpha based on standardised items is 0.870 which proves the reliability of the scale.

182
6.1.4 Sample Statistics:
Frequency statistics is one of the important aspects of interested variables therefore
frequency statistics of the demographic variables is mentioned below.

Sample Statistics
Gender Employment Educational Family No. of Marital Family district
status qualfiicatoin Income family status type
members

N Valid 460 460 460 460 460 460 460 460

Missing 0 0 0 0 0 0 0 0

Gender
300
261
250

200 179
Frequency

150

100

50

0
Male Female
Gender

183
Diagram :Classification of Gender

Employment Status
300 262
250
200
Frequency

150
106
100
45 47
50
0
Self Employed Government Non-Government Not employed
Employee Employee
Employment Status

Diagram: Employment Status

Educational Qualification
250 199
200
Frequency

150 122
100 76
42
50 15 6
0

Educational Qualification

184
Diagram :Educational Qualification

Family Income
160
140
120
Frequency

100
80
60
40
20
0
Below 1 1 to 2 lakh 2 to 3 lakh 3 to 4 lakh 4 to 5 lakh Above 5
lakh lakh
Family Income

Diagram: Family Income

Marital Status
250 231 229

200
Frequency

150

100

50

0
Married Unmarried
Marital status

185
Diagram:Marital Status

Family Type
350 331

300
250
Frequency

200
150 129

100
50
0
Joint Family Individual Family
Family Type

186
DIAGRAM:FAMILY TYPE

Testing Hypothesis:

Testing hypothesis provides the scientific base for the interpretation. Herewith, stated
hypothesis are tested with the help of various parametric and non parametric tests as
mentioned below.

Ho1: There is no significant difference between Consumer attitude towards the cash
discount as a sales promotion scheme and demographic variables.

Ho11: There is no significant difference between Consumer attitude towards the


cash discount as a sales promotion scheme and Gender.

Group Statistics

6.2.1 Attitude towards Cash discount According to Gender:

Std. Error

Gender N Mean Std. Deviation Mean

Attitude towards Cash Male 281 3.0859 .98839 .05896

Discount
Female 179 3.1014 .98887 .07391

187
6.2.2 One-Sample Kolmogorov-Smirnov Test (Test of Normality):

Attitude towards
Cash Discount

N 460

Normal Parametersa Mean 3.0919


Std. Deviation .98753

Most Extreme
Differences Absolute .092

Positive .092

Negative -.043

Kolmogorov-Smirnov Z 1.968

Asymp. Sig. (2-tailed) .001

Attitude towards
Cash Discount

N 460

Normal Parametersa Mean 3.0919


Std. Deviation .98753

Most Extreme Differences Absolute .092

Positive .092

Negative -.043

Kolmogorov-Smirnov Z 1.968

Asymp. Sig. (2-tailed) .001

a. Test distribution is Normal.

188
Running the normality test it is found that the sample distribution is not the normal
0.001 < 0.005) distribution. Hence Normality of the sample does not validate the Z test
for testing the hypothesis.

Here, it is to test whether two samples are coming from the same population. More
clearly, there is any significance difference between the mean of two samples. It is a
comparing of two means with large sample size. If the distribution of the attitude
towards the cash discount is normal probability distribution, Z test as a test of
comparing two means should be used. But the interested variable is not normally
distributed.

In this context, it is advisable and required to apply non parametric test to test the
significance difference between two samples.

So, Non parametric tests have been used to test the hypothesis as mentioned below.

6.2.3 Mann-Whitney Test:


Ranks
Sum of
Gender N Mean Rank Ranks
Attitude towards Male 281 229.78 64568.50
Cash Discount
Female 179 231.63 41461.50
Total 460

6.2.4 Test Statisticsa

Attitude towards
Cash Discount

Mann-Whitney U 24947.500
Wilcoxon W 64568.500

Z -.145
Asymp. Sig. (2-tailed) .884

189
6.2.4 Test Statisticsa

Attitude towards Cash


Discount

Mann-Whitney U 24947.500
Wilcoxon W 64568.500
Z -.145

Asymp. Sig. (2-tailed) .884

a. Grouping Variable:
Gender

6.2.5 Two-Sample Kolmogorov-Smirnov Test:

Test Statisticsa

Attitude towards
Cash Discount

Most Extreme Differences Absolute .048

Positive .048

Negative -.041
Kolmogorov-Smirnov Z .502
Asymp. Sig. (2-tailed) .963

a. Grouping Variable: Gender

190
Here, at 5 % level of significance the value of the Mann Whitney and Kolmogorov-
Smirnov tests are greater than 0.05 ( 0.884 > 0.05 & 0.963>0.005, respectively) it is
concluded that there is no significant difference between Consumer attitude towards
the cash discount as a sales promotion scheme and gender as one of the demographic
variables.

Ho12: There is no significant difference between Consumer attitude towards the


cash discount as a sales promotion scheme and employment status.

To check the assumption that all the employment status have equal variance Levene
test is performed.

6.3.1 Test of Homogeneity of Variances

Attitude towards Cash Discount

Levene Statistic df1 df2 Sig.

1.667 4 455 .157

Significance value is 0.157 > 0.10, So Levene test accept the assumption of equal
variance among the various employment status. So, ANOVA is used to test the
hypothesis.

191
6.3.2 Descriptives
Attitude towards Cash Discount

95% Confidence

Interval for

Mean

Std. Std. Lower Upper

N Mean Deviation Error Bound Bound Minimum Maximum

Self employed 106 2.9838 .92168 .08952 2.8063 3.1613 1.29 5.71

Government
45 3.0635 1.13207 .16876 2.7234 3.4036 1.43 5.71
Employee

Non

Government 47 2.9179 .88201 .12865 2.6590 3.1769 1.71 6.29

Employee

Not employed 262 3.1718 1.00169 .06188 3.0499 3.2936 1.29 6.57

Total 460 3.0919 .98753 .04604 3.0014 3.1824 1.29 6.57

192
6.3.3 ANOVA
Attitude towards cash discount

Sum of Squares df Mean Square FSig.

Between Groups
4.368 3 1.456 1.498 .214

Within Groups 443.256 456 .972

Total 447.623 459

It is observed that the significance value is 0.214 > 0.05, Null Hypotheses is not rejected
and concluded that there is no significant difference between Consumer attitude towards
the cash discount as a sales promotion scheme and employment status.

Ho13: There is no significant difference between Consumer attitude towards the


cash discount as a sales promotion scheme and Education Qualification

M To check the assumption that all the Educational Qualification categories have equal
variance Levene test is performed.

6.4.1 Test of Homogeneity of Variances


Attitude towards Cash Discount

Levene Statistic df1 df2 Sig.

.421 5 454 .834

Significance value is 0.834 > 0.10, So Levene test accept the assumption of equal
variance among the various employment status.

193
6.4.2 Descriptive

Attitude towards Cash Discount

95% Confidence
Interval for Mean

Std. Std. Lower Upper


N Mean Deviation Error Bound Bound Minimum Maximum

Below
primary 15 3.0762 1.02855 .26557 2.5066 3.6458 1.57 5.57

Primary
42 2.9150 1.08937 .16809 2.5755 3.2544 1.57 6.29

Higher

secondary 76 3.1165 .91747 .10524 2.9069 3.3262 1.57 5.43

Graduate
199 3.1558 .96765 .06859 3.0205 3.2910 1.29 6.29

Post
graduate 122 3.0703 1.02954 .09321 2.8857 3.2548 1.29 6.57

Above
postgraduate
6 2.3810 .64944 .26513 1.6994 3.0625 1.57 3.14

Total
460 3.0919 .98753 .04604 3.0014 3.1824 1.29 6.57

194
6.4.3 ANOVA
Attitude towards Cash Discount
Sum of Mean
Squares Df Square F Sig.
Between
5.267 5 1.053 1.081 .370
Groups
Within
442.357 454 .974
Groups
Total 447.623 459

It is interpreted that the significance value is 0.370 > 0.05, Null Hypotheses is not rejected
and concluded that there is no significant difference between Consumer attitude towards
the cash discount as a sales promotion scheme and Educational Qualification.

Ho14: There is no significant difference between Consumer attitude towards the cash
discount as a sales promotion scheme and Family Income.

To check the assumption that all the Family Income categories have equal variance Levene
test is performed.

6.5.1 Test of Homogeneity of Variances


Attitude towards Cash Discount

Levene Statistic df1 df2 Sig.

.496 5 454 .779

Significance value is 0.779 > 0.10, So Levene test accept the assumption of equal variance
among the various Family Income Group. So it provides the evidence to run ANOVA as a
parametric test.

195
6.5.2 Descriptives
Attitude towards Cash Discount

95%
Confidence
Interval for
Mean

Std. Std. Lower Upper

N Mean Deviation Error Bound Bound Minimum Maximum

Below 1
82 3.2805 .95461 .10542 3.0707 3.4902 1.57 6.29
lakh

l to 2 lakhs 148 3.0463 .94485 .07767 2.8928 3.1998 1.29 5.86

2 to 3 lakhs 102 3.1232 1.01495 .10049 2.9239 3.3226 1.43 6.57

3 to 4 lakhs 58 3.3695 1.03537 .13595 3.0972 3.6417 1.86 6.00

4 to 5 lakhs 32 2.5536 .76265 .13482 2.2786 2.8285 1.29 4.00

Above 5
38 2.8083 1.03031 .16714 2.4696 3.1469 1.29 5.43
lakhs

Total 460 3.0919 .98753 .04604 3.0014 3.1824 1.29 6.57

6.5.3 ANOVA
Attitude towards Cash Discount

Sum of Squares Df Mean Square F Sig.

Between Groups 20.123 5 4.025 4.274 .001

Within Groups 427.500 454 .942


Total 447.623 459

It is interpreted that the significance value is 0.01 < 0.05, Null Hypotheses is rejected and
concluded that there is significant difference between Consumer attitude towards the cash
discount as a sales promotion scheme and Family Income.

196
6.5.4 Robust Tests of Equality of Means

Attitude towards Cash Discount

Statistica df1 df2 Sig.


Welch 5.172 5 144.940 .000

neBrown-Forsythe 4.367 5 320.461 .001

a. Asymptotically F distributed.

Robust Tests of Equality between means like Welch and Brown- Forsythe (0.000 < 0.05 & 0.01
< 0.05) also confirmed that there is a significant deference between attitude towards cash discount
as a sales promotion schemes and Family Income.

As the Family income Increases the attitude towards the cash discount becomes more favorable
compare to free gift. It is probably because high family income respondents need immediate
benefit and cash discount is a more visible immediate benefit than other types of sales promotion
schemes.

Ho15: There is no significant difference between Consumer attitude towards the cash
discount as a sales promotion scheme and Family Type.

6.6.1 Group Statistics

Std. Std. Error


Family Type N Mean Deviation Mean

Attitude towards Joint Family 129 3.0377 .88380 .07781


Cash Discount
Individual
331 3.1131 1.02560 .05637
Family

Here, it is to test whether two samples are coming from the same population. More clearly, there
is any significance difference between the mean of two samples. It is a comparing of two means
with large sample size. If the distribution of the attitude towards the cash discount is normal
probability distribution, Z test as a test of comparing two means should be used. But the interested

197
variable is not normally distributed.

In this context, it is advisable and required to apply non parametric test to test the significance
difference between two samples.
So, testing hypothesis non parametric test is used.

6.6.2 Mann Whitney Test:

Ranks
Family Type N Mean Rank Sum of Ranks

Attitude towards Cash Joint Family 129 227.66 29367.50


Discount
Individual Family 331 231.61 76662.50

Total 460

6.6.3 Test Statisticsa

Attitude towards Cash Discount

Mann-Whitney U 20982.500

Wilcoxon W 29367.500
Z -.287

Asymp. Sig. (2-tailed) .774

a. Grouping Variable: Family Type

198
6.6.4 Two samples Kolmogorov Smirnov test:
Test Statisticsa

Attitude towards
Cash Discount

Most Extreme Differences Absolute .064

Positive .043
Negative -.064
Kolmogorov-Smirnov Z .612

Asymp. Sig. (2-tailed) .848

a. Grouping Variable: Family Type

Here, at 5 % level of significance the value of the Mann Whitney and Kolmogorov Smirnov test
are greater than 0.05 ( 0.774 > 0.05 & 0.848 > 0.05, respectively) it is concluded that there is no
significant difference between Consumer attitude towards the cash discount as a sales promotion
scheme and Family type as one of the demographic variables.

Ho16: There is no significant difference between Consumer attitude towards the cash
discount as a sales promotion scheme and marital status.

6.7.1 Group Statistics


Marital Std. Std. Error
Status N Mean Deviation Mean

Attitude towards Cash Married 231 3.0779 1.00148 .06589


Discount
Unmarried 229 3.1061 .97525 .06445

Here, it is to test whether two samples are coming from the same population. More clearly, there
is any significance difference between the mean of two samples. It is a comparing of two means
with large sample size. If the distribution of the attitude towards the cash discount is normal
probability distribution, Z test as a test of comparing two means should be used. But the interested
variable is not normally distributed. In this context, it is advisable and required to apply non
parametric test to test the significance difference between two samples.
199
6.7.2 Mann Whitney Test:
Ranks
Marital
Status N Mean Rank Sum of Ranks

Attitude towards Cash Married 231 227.48 52547.50


Discount Unmarried 229 233.55 53482.50
Total 460

6.7.3 Test Statisticsa

Attitude towards Cash Discount

Mann-Whitney U 25751.500
Wilcoxon W 52547.500
Z -.490

Asymp. Sig. (2-tailed) .624

a. Grouping Variable: Marital Status

6.7.4 Two Sample Kolmogorov –Smirnov Test:

Test Statisticsa

Attitude towards
Cash Discount

Most Extreme Differences Absolute .050


Positive .050

Negative -.033

Kolmogorov-Smirnov Z .538
Asymp. Sig. (2-tailed) .934

a. Grouping Variable: Marital Status

200
Here, at 5 % level of significance the value of the Mann Whitney and Kolmogorov – Smirnov
tests are greater than 0.05 (0.624 > 0.05 &0.934 > 0.05, respectively) it is concluded that there is
no significant difference between Consumer attitude towards the cash discount as a sales
promotion scheme and marital status as one of the demographic variables.

Ho2: There is no significant difference between consumer preference of cash discount and
free gift as sales promotion schemes.

6.8.1 One-Sample Statistics

N Mean Std. Deviation Std. Error Mean

Cash Discount 460 2.46 1.130 .053

Free Gift 460 3.93 1.295 .060

6.8.2 One-Sample T Test

95% Confidence Interval

of the Difference
Sig. (2- Mean
T df tailed) Difference Lower Upper

Cash
46.714 459 .000 2.462 2.36 2.57
Discount

Free Gift 65.096 459 .000 3.932 3.81 4.05

Here the significance value (2- tailed) is 0.000 so, null hypotheses can be rejected and so
concluded that there is significant difference between consumer preference of cash discount and
free gift as sales promotion schemes.

It is also very clear that consumers prefer cash discount as a sales promotion schemes compare
to free gift as a sales promotion scheme.

201
Ho3: There is no significant difference between Consumer Deal proneness and demographic
variables.

Ho31: There is no significant difference between Consumer deal proneness and Gender.

6.9.1 Group Statistics

Gender N Mean Std. Deviation Std. Error Mean

Deal Proneness Male 281 3.6370 1.69509 .10112

Female 179 3.7877 1.74630 .13052

6.9.2 Test of Homogeneity of Variances

Deal Proneness

Levene Statistic df1 df2 Sig.

.959 1 458 .328

From the above table it can be observed that Levene‘s Test for equality of variance the
significance value is 0.328 > 0.10. So we conclude that both male and female categories have
equal variance.

6.9.3 Test of Normality:


One-Sample Kolmogorov-Smirnov Test

Deal Proneness

N 460
Normal Parametersa Mean 3.6957
Std. Deviation 1.71488
Most Extreme Differences Absolute .114
Positive .114
Negative -.114

202
Kolmogorov-Smirnov Z 2.446

Asymp. Sig. (2-tailed) .000

a. Test distribution is Normal.

From One sample Kolmogorov – Smirnov test of normality concluded that given variable
distribution is not normal though having the equal variance of deal proneness across gender
categories. Henceforth for testing hypothesis non parametric test should be used.

6.9.4 Mann Whitney U Test:

Ranks
Gender N Mean Rank Sum of Ranks

Deal Proneness Male 281 226.78 63726.50

Female 179 236.33 42303.50

Total 460

6.9.5 Test Statisticsa

Deal Proneness

Mann-Whitney U 24105.500

Wilcoxon W 63726.500
Z -.753
Asymp. Sig. (2-tailed) .452

a. Grouping Variable: Gender

203
6.9.6 Two Samples Kolmogorov – Smirnov Test:

Test Statisticsa

Deal Proneness

Most Extreme Differences Absolute .066

Positive .066

Negative -.039

Kolmogorov-Smirnov Z .688
Asymp. Sig. (2-tailed) .731

a. Grouping Variable: Gender

Here, at 5 % level of significance the value of the Mann Whitney and Kolmogorov-Smirnov tests
are greater than 0.05 ( 0.452 > 0.05 & 0.731 > 0.05, respectively) it is concluded that there is no
significant difference between Consumer deal proneness and gender as one of the demographic
variables.

Ho32: There is no significant difference between Consumer deal proneness and


Employment Status.

To check the assumption that all the employment status has equal variance of Deal Proneness
Levene test is performed.

6.10.1 Test of Homogeneity of Variances


Deal Proneness:

Levene Statistic df1 df2 Sig.

.618 3 456 .604

Significance value is 0.604 > 0.10, So Levene test accept the assumption of equal
variance of Deal Proneness among the various employment status.

204
So ANOVA as a parametric test should be used to identify the significant differences
between the consumer Deal proneness and Employment Status.

6.10.2 Descriptives

95% Confidence
Interval for
Deal
Proneness Mean
Std. Std. Lower Upper
N Mean Deviation Error Bound Bound Minimum Maximum

Self employed 106 3.9340 1.75567 .17053 3.5958 4.2721 1.00 7.00
Government
45 3.9704 1.71126 .25510 3.4563 4.4845 1.00 7.00
Employee
Non
Government 47 3.6525 1.75416 .25587 3.1374 4.1675 1.00 7.00
Employee
Not employed 262 3.5598 1.68547 .10413 3.3548 3.7648 1.00 7.00
Total 460 3.6957 1.71488 .07996 3.5385 3.8528 1.00 7.00

6.10.3 ANOVA

Deal Proneness: Sum of Squares Df Mean Square F Sig.

Between Groups 14.339 3 4.780 1.632 .181


Within Groups 1335.496 456 2.929
Total 1349.836 459

It is interpreted that the significance value is 0.181 > 0.05, Null Hypotheses is not rejected and
concluded that there is no significant difference between Consumer deal proneness and
employment status.

205
Ho33: There is no significant difference between Consumer deal proneness and Educational
qualification.

To check the assumption that all the educational qualifications have equal variance of Deal
Proneness, Levene test is performed.

6.11.1 Test of Homogeneity of Variances

Deal Proneness

Levene Statistic df1 df2 Sig.

1.165 5 454 .326

Significance value is 0.326 > 0.10, So Levene test accept the assumption of equal variance of
Deal Proneness among the various employment status.

So ANOVA as a parametric test should be used to identify the significant differences between the
consumer Deal proneness and Educational qualifications.

206
6.11.1 Descriptives

95%
Confidence

Deal Interval for

Proneness: Mean
Std. Std. Lower Upper
N Mean Deviation Error Bound Bound Minimum Maximum

Below
15 3.5778 1.87493 .48410 2.5395 4.6161 1.33 7.00
primary
Primary 42 4.0000 1.90136 .29339 3.4075 4.5925 1.00 6.67
Higher
76 3.4430 1.63335 .18736 3.0697 3.8162 1.00 7.00
secondary

Graduate 199 3.6851 1.65491 .11731 3.4537 3.9164 1.00 7.00


Post
122 3.7240 1.77250 .16047 3.4063 4.0417 1.00 7.00
graduate
Above
6 4.8333 1.61589 .65969 3.1376 6.5291 3.33 7.00
postgraduate

Total 460 3.6957 1.71488 .07996 3.5385 3.8528 1.00 7.00

6.11.2 ANOVA

Deal Proneness: Sum of Squares df Mean Square F Sig.

Between Groups 16.837 5 3.367 1.147 .335


Within Groups 1332.999 454 2.936
Total 1349.836 459

It is interpreted that the significance value is 0.335 > 0.05, Null Hypotheses is not rejected and
concluded that there is no significant difference between Consumer deal proneness and
educational qualifications.

207
Ho34: There is no significant difference between Consumer deal proneness and family
income.
To check the assumption that all the family income categories have equal variance of

Deal Proneness, Levene test is performed.

6.12.1 Test of Homogeneity of Variances


Deal Proneness:
Levene Statistic df1 df2 Sig.

.913 5 454 .472

Significance value is 0.472 > 0.10, So Levene test accept the assumption of equal variance of
Deal Proneness among the various employment status.

So ANOVA as a parametric test should be used to identify the significant differences between
the consumer Deal proneness and Educational qualifications.

6.12.2 Descriptives

Deal 95% Confidence


Proneness Interval for Mean

Std. Std. Lower Upper


N Mean Deviation Error Bound Bound Minimum Maximum

Below 1
82 3.5854 1.66177 .18351 3.2202 3.9505 1.00 7.00
lakh
1 l to 2
148 3.4324 1.63921 .13474 3.1662 3.6987 1.00 7.00
lakhs

2 to 3 lakhs 102 3.5784 1.73866 .17215 3.2369 3.9199 1.00 7.00

3 to 4 lakhs 58 4.0517 1.74249 .22880 3.5936 4.5099 1.33 7.00

4 to 5 lakhs 32 4.1979 1.81759 .32131 3.5426 4.8532 1.67 7.00


Above 5
38 4.3070 1.70915 .27726 3.7452 4.8688 1.33 7.00
lakhs

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Total 460 3.6957 1.71488 .07996 3.5385 3.8528 1.00 7.00

Deal Proneness: Sum of Squares df Mean Square F Sig.

Between Groups 42.283 5 8.457 2.936 .013


Within Groups 1307.553 454 2.880
Total 1349.836 459

It is interpreted that the significance value is 0.13 > 0.05, Null Hypotheses is not rejected and
concluded that there is no significant difference between Consumer deal proneness and family
income.

Ho35: There is no significant difference between Consumer deal proneness and family type.

6.13.1 Group Statistics


Std. Error
Family Type N Mean Std. Deviation Mean
Deal Proneness Joint Family 129 3.5685 1.69579 .14931
Individual
331 3.7452 1.72227 .09466
Family

6.13.2 Test of Homogeneity of Variances


Deal Proneness:
Levene Statistic df1 df2 Sig.

.383 1 458 .536

From the above table it can be observed that Levene‘s Test for equality of variance the
significance value is 0.536 > 0.10. So we conclude that both categories have equal variance.

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6.13.3 Test of Normality:
One-Sample Kolmogorov-Smirnov Test

Deal Proneness

N 460
Normal Parametersa Mean 3.6957
Std. Deviation 1.71488
Most Extreme Differences Absolute .114

Positive .114
Negative -.114
Kolmogorov-Smirnov Z 2.446
Asymp. Sig. (2-tailed) .000

Running the normality test it is found that the sample distribution is not the normal distribution.
Hence Normality of the sample does not approve the application of the t test for testing the
hypothesis.

Therefore, to test the hypothesis Non Parametric test is used.

6.13.4 Mann Whitney Test:

Ranks
Family Type N Mean Rank Sum of Ranks

Deal Proneness Joint Family 129 220.95 28503.00

Individual Family 331 234.22 77527.00


Total 460

6.13.5 Test Statisticsa

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Deal Proneness
Mann-Whitney U 20118.000

Wilcoxon W 28503.000

Z -.964

Asymp. Sig. (2-tailed) .335

a. Grouping Variable: Family Type

6.13.6 Two Sample Kolmogorov – Smirnov Test:

Test Statisticsa

Deal Proneness

Most Extreme Differences Absolute .063

Positive .005

Negative -.063
Kolmogorov-Smirnov Z .607
Asymp. Sig. (2-tailed) .855

a. Grouping Variable: Family Type

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Here, at 5 % level of significance the value of the Mann Whitney and Kolmogorov-Smirnov tests
are greater than 0.05 ( 0.335 > 0.05 & 0.855 > 0.05, respectively) it is concluded that there is no
significant difference between Consumer deal proneness and family type as one of the
demographic variables.

Ho36: There is no significant difference between Consumer deal proneness and marital
status.
6.14.1 Group Statistics

Marital Std. Error


Status N Mean Std. Deviation Mean

Deal Proneness Married 231 3.9481 1.76717 .11627

Unmarried 229 3.4410 1.62493 .10738

6.14.2 Test of Homogeneity of Variances


Deal Proneness

Levene Statistic df1 df2 Sig.

5.731 1 458 .017

From the above table it can be observed that Levene‘s Test for equality of variance the
significance value is 0.017 > 0.10. So we conclude that both categories have equal variance.

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6.14.3 Test of Normality:
One-Sample Kolmogorov-Smirnov Test

Marital Status

N 460
Normal Parametersa Mean 1.50
Std. Deviation .501
Most Extreme Differences Absolute .342
Positive .342
Negative -.340

Kolmogorov-Smirnov Z 7.339

Asymp. Sig. (2-tailed) .000

a. Test distribution is Normal.

Running the normality test it is found that the sample distribution is not the normal distribution.
Hence Normality of the sample does not approve the application of the t test for testing the
hypothesis.

Therefore, to test the hypothesis Non Parametric test is used.


6.14.4 Mann Whitney Test:
Ranks

Marital Status N Mean Rank Sum of Ranks

Deal Proneness Married 231 249.57 57650.50

Unmarried 229 211.26 48379.50


Total 460

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6.14.5 Test Statisticsa

Deal Proneness

Mann-Whitney U 22044.500
Wilcoxon W 48379.500
Z -3.097

Asymp. Sig. (2-tailed) .002

6.14.6 Test Statisticsa

Deal Proneness

Mann-Whitney U 22044.500
Wilcoxon W 48379.500
Z -3.097

Asymp. Sig. (2-tailed) .002

a. Grouping Variable: Marital Status

6.14.7 Two Sample Kolmogorov – Smirnov Test:

a
Test Statistics

Deal Proneness

Most Extreme Differences Absolute .138


Positive .000
Negative -.138

Kolmogorov-Smirnov Z 1.475

Asymp. Sig. (2-tailed) .026

a. Grouping Variable: Marital Status

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Here, at 5 % level of significance the value of the Mann Whitney and Kolmogorov-Smirnov tests
are less than 0.05 ( 0.002 > 0.05 & 0.026 < 0.05, respectively) it is concluded that there is
significant difference between Consumer deal proneness and marital status as one of the
demographic variables.
It is also very clear from Mann Whitney mean rank statistics; mean rank for married is higher
than unmarried category (249.57 > 211.26). So it is concluded than married are more deal prone
compare to unmarried.

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CONCLUSIONS

Summary of Findings and Conclusions:


Cash discount is one of the widely used Sales promotions Scheme on various FMCG
Products. Testing the hypothesis, it is found that male and female attitude towards the cash
discount as one of the sales promotion schemes do not differ significantly. In other words,
both gender categories have same attitude towards cash discount. Also, it does not differ
according to various Employment statuses, family type (joint or individual family) and
marital status (Married or Unmarried) of the respondents.

Educational Qualifications as one of the Categorical Independent variable does not have
any significant difference in terms of attitude towards the cash discount. While, it is found
that there is a significant difference among various family income categories towards cash
discount offered on various FMCG products. So, Family income is one of the variables
which should be considered while designing sales promotion schemes more specifically
cash discount.

There is significant difference between consumer preference of cash discount and free gifts
as sales promotion schemes. It is also very clear that consumers prefer cash discount as a
sales promotion schemes compared to free gift as a sales promotion scheme.

It is also concluded from the hypothesis testing there is no significant difference between
consumer deal proneness and Gender, Employment status, Educational Qualification,
Family income and Family type. But it is found that deal proneness differs according to
marital status. Furthermore, it is also proved that married people are more deal prone
compare to Unmarried. It may be because of unmarried may enjoy the freedom of spending
without additional responsibilities of the family while married are deal prone may be
because so many alternative of spending and additional responsibilities of family. They
await for sales promotion schemes and to take advantages of future/expected sales
promotion schemes, they are ready to postpone the purchase.

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From the calculated median values and test statistics, it is summarized that newspaper and
point of purchase material preference to know sales promotion schemes differs according
to Gender. Also, it can be referred that male prefers the newspaper and point of purchase
material as a source to know sales promotion schemes over female.

From the calculated median values and test statistics, it can be summarized that television
preference differs according to employment status to know the sales promotion schemes
information. Also it is concluded that from the median ranking the customers who are not
employed prefer television to be aware about the sales promotion schemes.

It is found out that males prefer sales promotion scheme on National Brand, Awareness
through Word of mouth, value added and immediate benefits type schemes over female.
While female prefers International brand, Awareness through word of mouth, Price off
and Immediate benefits type of Scheme over male. Also there is a significance difference
of the International brand, Awareness through Mass media price off and delayed benefits
type of schemes considering gender. Female prefers this type of scheme over male.

Sales promotion on international brand is preferred. Word of mouth publicity as a source


of sales promotion schemes information is preferred over other media types. Value added
scheme is preferred over price off . Immediate benefits is more preferable compared to
delayed benefits.

Overall, sales promotion schemes on international brands, awareness spread out by word
of mouth and value added type schemes with immediate benefit are preferred by the
customers. So,while designing sales promotion schemes and its benefits from the
perspectives of the customers above mentioned attributes of the sales promotion schemes
should be considered to achieve the objectives of the sales promotion schemes.

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Managerial Implication:
It can be referred from the findings that deal proneness is not the same across demographic
variables. This offers the immense scope of segmenting the market based on the consumer
deal proneness and designing the marketing strategies according to the target market, more
specifically sales promotion strategy.

There are various attributes as well attribute levels which should be considered while
designing the sales promotion scheme. From the research study, managers can refer the
important attributes and their levels which are important and preferred according to the
consumer while responding to the sales promotion scheme to achieve the efficiency and
effectiveness of the sales promotion schemes.

Comparing cash discount and free gift widely popular types of consumer sales promotions,
cash discount is preferred over free gift, but at the same time among various consumer
sales promotion schemes, value added type of sales promotion is preferred over price off,
which implies that other than free gift as a sales promotion scheme, value added scheme
is preferred by the consumers. Considering this findings, manager can design and innovate
value added scheme other than free gift.

In today's market scenario, consumers are bombarded with similar monotonous


promotional messages, so managers need to design schemes, which will break through the
chaos & create the necessary impact. When consumer sales promotion schemes are given,
they should be carefully chosen to ensure that they are relevant to the consumers. This
study may provide the useful information in the direction of designing the clutter breaking
sales promotion schemes to managers.

Further Scope of Research:


The present research has considered FMCG products to measure the consumer preference
towards sales promotion schemes. For, other than FMCG products this type of research
can be performed.

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This research has taken limited number of demographic variables as independent variables
therefore considering more demographic variables; aspiring researches can conduct the
research and may come out with interesting relationship.

Further research can be conducted at the national level as this research has been conducted
at the Western Uttar Pradesh state level. Further more present study has considered the
various popular categories of FMCG products. But there is a scope of conducting the
research study taking the specific FMCG product category only.

There is a scope of conducting the research study considering other sales promotion
schemes apart from widely used and popular sales promotion scheme namely cash
discount and free gift for comparing the preference of the consumers.

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RECOMMENDATIONS
The importance of consumer sales promotion in the marketing mix of the fast moving
consumergoods (FMCG) category throughout the world has increased. Companies spend
considerable time in planning such activities. However, in order to enhance the
effectiveness of theseactivities, manufacturers should understand consumer and retailer
interpretations of theirpromotional activities. A study of these perceptions will reveal their
preferences, theirknowledge, and motivations. The study here pertains to consumers
perceptions as well asretailer perceptions regarding sales promotion. When consumer sales
promotion schemes are given, they should be carefully chosen to ensure that they are
relevant tothe consumers. This study may provide the useful information in the direction
of designing the clutter breaking sales promotion schemes to managers. Analyzing the
information of sales promotion schemes on various FMCG products, itcan be inferred that
cash discount and Free gift as one type of value added sales promotion schemes widely
used by marketers. It can be suggested from this research that cash discount should be used
compared to free gift as a sales promotion scheme.
Sales promotion schemes on international brand are preferred therefore managing the
perception towards brand is also very important in FMCG sector. So, it is suggested to
manage the perception towards the brands. Word of mouth as a medium of spreading sales
promotion schemes awareness is preferred over others. Considering this fact found in this
research, promotion mix of the company should be decided to take thebenefits of the sales
promotion schemes.
While deciding sales promotion schemes of FMCG products, immediate benefits should
be provided to consumers as this research highlights the preference ofimmediate benefits
compare to delayed benefits.
From present research it can be suggested that consumers are deal prone which signals the
importance of timing of launching sales promotion schemes.
This research has taken limited number of demographic variables as independent variables
therefore considering more demographic variables; aspiring researches can conduct the
research and may come out with interesting relationship. Further research can be
conducted at the national level as this research has been conducted at the U.P. state level.
Further more present study has considered the various popular categories of FMCG
products. But there is a scope of conducting the research study taking the specific FMCG
productcategory only. In India fast moving consumer goods (FMCG) category has
220
witnessed an outburst of sales promotion activities in the post-liberalization era. Very little
literature has focussed on sales promotion perceptions. This study is an attempt to address
the gap in literature by providing empirical support through exploration.
There is a scope of conducting the research study considering other sales promotions
chemes apart from widely used and popular sales promotion scheme namely cashdiscount
and free gift for comparing the preference of the consumers.Analyzing information of sales
promotion schemes on various FMCG products, it can be inferred that cash discount and
Free gift as one type of value added sales promotion schemes widely used by marketers.
It can be suggested from this research that cash discount should be used compare to free
gift as a sales promotion scheme.
Sales promotion schemes on international brand are preferred therefore managing the
perception towards brand is also very important in FMCG sector. So, it is suggested to
manage the perception towards the brands. Word of mouth as a medium of spreading sales
promotion schemes awareness is preferred over others. Considering this fact found in this
research, promotion mix of the company should be decided to take the benefits of the sales
promotion schemes.
While deciding sales promotion schemes of FMCG products, immediate benefits should
be provided to consumers as this research highlights the preference of immediate benefits
compare to delayed benefits.

From Present research it can be suggested that consumers are deal prone which signals the
importance of timing of launching sales promotion schemes.

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