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SYNOPSIS

The Fast Moving Consumer Goods (FMCG) sector is a corner stone of the Indian
economy. This sector touches every aspect of human life. The FMCG producers now
realize that there is a lot of opportunity for them to enter into the rural market. The sector
is excited about the rural population whose incomes are rising and the lifestyles are
changing. There are as many middle income households in the rural areas as there are in
the urban. Thus the rural marketing has been growing steadily over the years and is now
bigger than the urban market for FMCGs. Globally , the FMCG sector has been
successful in selling products to the lower and middle income groups and the same is true
in India. Over 70% of sales is made to middle class households today and over 50% of
the middle class is in rural India. The sector is excited about a burgeoning rural
population whose incomes are rising and which is willing to spend on goods designed to
improve lifestyle. Also with a near saturation and cut throat competition in urban India,
many producers of FMCGs are driven to chalk out bold new strategies for targeting the
rural consumers in a big way. But the rural penetration rates are low. This presents a
tremendous opportunity for makers of branded products who can convert consumers to
buy branded products. Many companies including MNCs and regional players started
developing marketing strategies to lure the untapped market. While developing the
strategies, the marketers need to treat the rural consumer differently from their
counterparts in urban because they are economically, socially and psycho-graphically
different to each other. This paper covers the attractions for the FMCG marketers to go to
rural, the challenges, the difference between the rural and the urban market and the
suitable marketing strategy with the suitable example of companies and their experience
in going rural.

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ABOUT THE PROJECT

This project report provides a bunch of knowledge about demand of


different FMCG products in rural areas as well it also provides a detail knowledge about
the consumer preference towards different FMCG products.

The report also provides the details about the history of FMCG sector in rural
India. There is a plenty of data analysis and conclusions are given in the research paper.

On the basis of feedback through questionnaire and observation method, I find


out that the rural consumer has changed their strategy towards the products and starts to
purchase them on the basis of their quality. As the result, there is close competition
between the companies. As each of them are increasing their products, qualities, looks
and providing better services everyday.

Our analysis is based on sample results. It was a difficult task to gather the
information from respondents by meeting them personally in order to get questionnaire
filled. There was a lot of time pressure and sometimes unwillingness of respondents to
respond.

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CONTENTS

1. INTRODUCTION

2. LITERATRE REVIEW

3. RESEARCH METHODOLOGY

4. DATA ANALYSIS

5. SWOT ANALYSIS

6. CONCLUSION

7.REFERENCES

8. APPENDIX

INTRODUCTION

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There was a time when the FMCG companies ignores rural market,
they took no any interest to produced or sell products in rural market in India. It was the
initial stage of FMCG companies in India. As per as the time had passed, the strategy and
marketing style of FMCG companies had been changed.
 The Fast Moving Consumer Goods Sector is the fourth largest sector of Indian
economy with total market size of more than 60000 crore.
 The FMCG sector in India is expected to grow at a compounded annual growth
rate (CAGR) of 9% to a size of Rs 1,43,000 crore by 2010 from Rs 93,000 crore
at present.
 With a growth of 52.5%, the BSE FMCG Index has, during the last one year,
outperformed the Sensex, which could manage a growth of 41% only.
 A well-established distribution network, intense competition between the
organized and unorganized segments, low operating cost, strong branding
characterizes the sector.

Background of the study:-

In 1970, Nirma was the first FMCG Company to initiate and


produced goods according to rural consumers. In the early 1970s, when Nirma
washing powder was introduced in the low-income market, Hindustan Lever Limited
reacted in a way typical of many multinational companies. However, Nirma’s entry
changed the whole Indian FMCG scene .It became a great success story and laid the
roadmap for others to follow. MNC’s like HLL, which were sitting pretty till then, woke
up to new market realities and noticed the latent rural potential of India. 1983, C K
Ranganathan started selling shampoos in a sachet with an investment of Rs 15,000 and
dared to take on the multinationals, Lever and P&G, the unquestioned leaders in that
segment. . He targeted rural and small-town consumers who used soaps to wash their
hair. He introduced the sachet at 90 paise and then reduced it to 50-paise. And that’s
when the multinationals sat up and noticed him.Sales zoomed from 35,000 sachets to 12
lakhs. Initally they took any sachet, but after three months they restricted to Chik sachets.

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Now at the present time, rural market is one of the best opportunity and focusing
sector for the major FMCG companies in India. Each and every company is set to invest
a huge capital for competition in rural market. According to the Federation of Indian
Chambers of Commerce and Industry, the number of rural households using FMCG
products has grown from 136 million in 2004 to 143 million in 2007, a clear indication
that rural consumers are shifting from commodities to branded products. Urban
consumers, on other hand, could go slow on FMCG expenses, thanks for inflation spiral,
rise in fuel cost and costlier credit. Evidence suggests that for the first time, the rural
market has grown faster than the urban market in key product categories in April-May
2008, the latest months for which such information is available, according to market
research firm AC Nielsen.

Need for the Study:-

In those days, the rural market is the one of the best opportunity for
the FMCG sector in the India. It is more wide and less competitive market for the FMCG.
As the income level of the rural consumers increasing, the demand of FMCG is
increasing continuously. The various need of the study is given as follows:-
 To determine the raising demand of FMCG products in rural
area.
 Know about the different choices of rural consumers.

Definition of the Problem:-

The study of opportunity for FMCG products in the rural market is a


sum total of different analytical survey of different FMCG products in the rural area. In
one sense, we can say that it is determination of how much market captured by different
FMCG companies.

Scope of study:-

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With a population of 1 bn people, India is a big market for FMCG
companies. Around 70% of the total households in India reside in the rural areas. The
total number of rural households is expected to rise from 135 m in 2002 to 153 m in
2010, which represents the largest potential market in the world.

Rural and urban potential

Urban Rural
Population 2001-02 (m household) 53 135
Population 2009-10 (m household) 69 153
% Distribution (2001-02) 28 72
Market (Towns/Villages) 3,768 627,000
Source: Statistical Outline of India (2001-02), NCAER

An average Indian spends around 40% of his income on groceries and


8% on personal care products. A larger part of the total spending pie along with a large
base (in terms of population) makes India one of the largest FMCG markets.

Changing lifestyles:
Rising per capita income, increased literacy and rapid urbanisation have
caused rapid growth and change in demand patterns. The rising aspiration levels, increase
in spending power has led to a change in the consumption pattern.

Low penetration and low per capita consumption:

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Due to the large size of the market, penetration level in most product
categories like jams, toothpaste, skin care, hair wash etc. in India is low. This is more
visible when comparison is done between the rural and the urban areas. The average
consumption by rural households is much lower than their urban counterparts. Existence
of unsaturated markets provides an excellent opportunity for the industry players in the
form of a vastly untapped market as the income rises.

Penetration %
Category All India % Urban % Rural %
Deodorants 2.1 5.5 0.6
Toothpaste 48.6 74.9 37.6
As per given in Skin Cream 22 31.5 17.8
Shampoo 38 52.1 31.9
the above chart,
Utensil Cleaner 28 59.9 14.6
rural market
Instant Coffee 6.6 15.5 2.8
shows a good Washing Powder 86.1 90.7 84.1
improvement. Detergent Bar 88.6 91.4 87.4
In the presence Toilet Soap 91.5 97.4 88.9
of some product Source: HLL investor meet 2006
categories like, toilet soap, detergent bar, washing powder etc, it is same as in the urban
level. Rural market is also improving in the other products category.

Objectives:-
There are following objectives of the project:-
 To determine about the rural consumers preference towards
FMCG products.

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 To know about the recent demand of FMCG products in rural
area.

Hypothesis:-

I am also a citizen of rural area. I uses my experiences and perceptions as


hypothesis towards to made this project.

Limitations:-

While surveying I encounter with some problems like some people were
not willing to respond and few of them who responded were in hurry hence the active
participation was lacking. Due to which we faced difficulties in collecting information
regarding our questionnaire. Another problem which we face was that people were
hesitating to give information about their income. Except it, the sample size we have
taken for survey was small and it’s a difficult task to draw accurate conclusion or reach to
an exact result on the basis of limited sample size. Moreover, our investment was limited
and time was also less to go in depth.
Threats to us are that- as people were hesitating to give their income
details so there is chance of error regarding income.

Literature review:-

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Operational Research

Rural market is one of the best opportunity for the FMCG sector. In
some sense we can say that rural market is future of FMCG. As per research of Purba
Basu, (faculty of ICFAI business school), the lifestyle of rural consumers is changing.
Rural Indian market and the marketing strategy have become the latest marketing
buzzword for most of the FMCG majors. She added the strategies of different FMCG
companies for capturing rural market like Titan’s Sonata watches, Coco Cola’s 200ml
bottle,different strategies of HUL and Marico etc. She takes into consideration the study
of National Council for Applied Economic Research (NCAER). According to the
NCAER projections, the number of middle and high-income households in rural area.
India is expected to grow from 80 million to 111 million by 2007. In urban India, the
same is expected to grow from 46 million to 59 million. Thus, the absolute size of rural
India is expected to be double that of urban India.

According to Pradeep Tognatta, (former vice president of LG)


The economic growth inIndia's agricultural sector in last year was over 7%, compared
with 3% in the industrial sector.This implies a huge market potentiality for the marketer
to meet up increasing demand. Factors such as village psyche, strong distribution network
and market awareness are few prerequisites for making a dent in the rural markets. The
model is of the stolid Anglo-Dutch conglomerate UnileverGroup, which has enjoyed a
century-long presence in India through its subsidiary HindustanLever Ltd. It was
Hindustan Lever that several years ago popularized the idea of selling itsproducts in tiny
packages. Its sachets of detergent and shampoo are in great demand in Indian villages.
Britannia with its low priced Tiger brand biscuits has become some of the success storyin
rural marketing.
Rajesh K Aithal of IIM(L) had done his research on rural telecome in
India .He explain that Rural markets are an important and growing market for most
products and services including telecom. The characteristics of the market in terms of low
and spread out population and limited purchasing power make it a difficult market to
capture. The Bottom of the pyramid marketing strategies and the 4 A's model of

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Availability, Affordability, Acceptability and Awareness provide us with a means of
developing appropriate strategies to tackle the marketing issues for marketing telecom
services in rural areas. Successful cases like the Grameen Phone in Bangladesh and Smart
Communications Inc in Philippines also provide us with some guidelines to tackling the
issue.

As per concern of my research, it is a detail study of different FMCG


products used by rural consumers. It will provide a detail information about consumers
preferences towards a good number of FMCG products which is too unique and different
from those above researches.

Operations as a Transformation Process

Inputs ⇒ Transformation ⇒ Output

Operations management is about the way organizations produce goods and services.
Everything you wear, eat, sit on, use, read or knock about on the sports field comes to
you courtesy of the operations managers who organized its production. Every book you
borrow from the library, every treatment you receive at the hospital, every service you
expect in the shops and every lecture you attend at university all have been produced.

This definition reflects the essential nature of Operations Management; it is a central


activity in organizing things. Another way of looking at an operation is to consider it as a
transformation process.

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Operations are a transformation process; they convert a set of resources (INPUTS) into
services and goods (OUTPUTS). These resources may be raw materials, information, or
the customer itself. These resources are transformed into the final goods or services by
way of other 'transforming' resources - the facilities and staff of the operation.

Objectives

The present study is planned with the following objectives


• To study consumer preferences with respect to sales promotion in FMCG
category
• To examine tradeoffs, relative importance of different attributes while responding
to a sales promotion offer with conjoint design.
• To study variations in the preferences across different demographic variables.
• To understand the media habits of the consumers.

Operations Management is all about providing customers with products and


services.

You survive by giving customers with what they want

 Every Product or Service is really a bundle of different attributes.


 Product, place, price, performance, quality, timing, service, etc.
 Customers are looking for a bundle of characteristics
 Total bundle provides the level of value customers deem appropriate

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 Buying products with the attributes they want at the lowest price possible

• Attributes
• Price
• Quality
• Image
• Performance
• Safety
• Place – distribution
• Time – delivery, availability

 How do you decide which product to produce?


 How do you find out what attributes your product should have?
 How do you get those attributes into your product?

• What process?
• What resources do you need?
• Where do you get those resources?

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Marketing Research

Managers need information in order to introduce products and services


that create value in the mind of the customer. But the perception of value is a subjective
one, and what customers value this year may be quite different from what they value next
year. As such, the attributes that create value cannot simply be deduced from common
knowledge. Rather, data must be collected and analyzed. The goal of marketing research
is to provide the facts and direction that managers need to make their more important
marketing decisions.

To maximize the benefit of marketing research, those who use it need to


understand the research process and its limitations.

Marketing Research vs. Market Research

Market research deals specifically with the gathering of information about


a market's size and trends. Marketing research covers a wider range of activities. While it
may involve market research, marketing research is a more general systematic process
that can be applied to a variety of marketing problems.

The Value of Information

 Information can be useful, but what determines its real value to the organization?
In general, the value of information is determined by:
 The ability and willingness to act on the information.
 The accuracy of the information.
 The level of indecisiveness that would exist without the information.
 The amount of variation in the possible results.
 The level of risk aversion.
 The reaction of competitors to any decision improved by the information.

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 The cost of the information in terms of time and money.

The Marketing Research Process

Once the need for marketing research has been established, most marketing research
projects involve these steps:

 Define the problem

 Determine research design

 Identify data types and sources

 Design data collection forms and questionnaires

 Determine sample plan and size

 Collect the data

 Analyze and interpret the data

 Prepare the research report

 Problem Definition

The decision problem faced by management must be translated into a


market research problem in the form of questions that define the information that is
required to make the decision and how this information can be obtained. Thus, the
decision problem is translated into a research problem. For example, a decision problem
may be whether to launch a new product. The corresponding research problem might be
to assess whether the market would accept the new product.

The objective of the research should be defined clearly. To ensure that the
true decision problem is addressed, it is useful for the researcher to outline possible
scenarios of the research results and then for the decision maker to formulate plans of
action under each scenario. The use of such scenarios can ensure that the purpose of the
research is agreed upon before it commences.

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Research Design

Marketing research can classified in one of three categories:

 Exploratory research
 Descriptive research
 Causal research

These classifications are made according to the objective of the research.


In some cases the research will fall into one of these categories, but in other cases
different phases of the same research project will fall into different categories.

Exploratory research has the goal of formulating problems more


precisely, clarifying concepts, gathering explanations, gaining insight, eliminating
impractical ideas, and forming hypotheses. Exploratory research can be performed using
a literature search, surveying certain people about their experiences, focus groups, and
case studies. When surveying people, exploratory research studies would not try to
acquire a representative sample, but rather, seek to interview those who are
knowledgeable and who might be able to provide insight concerning the relationship
among variables. Case studies can include contrasting situations or benchmarking against
an organization known for its excellence. Exploratory research may develop hypotheses,
but it does not seek to test them. Exploratory research is characterized by its flexibility.

Descriptive research is more rigid than exploratory research and seeks to


describe users of a product, determine the proportion of the population that uses a
product, or predict future demand for a product. As opposed to exploratory research,
descriptive research should define questions, people surveyed, and the method of analysis
prior to beginning data collection. In other words, the who, what, where, when, why, and
how aspects of the research should be defined. Such preparation allows one the
opportunity to make any required changes before the costly process of data collection has
begun.

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There are two basic types of descriptive research: longitudinal studies and
cross-sectional studies. Longitudinal studies are time series analyses that make repeated
measurements of the same individuals, thus allowing one to monitor behavior such as
brand-switching. However, longitudinal studies are not necessarily representative since
many people may refuse to participate because of the commitment required. Cross-
sectional studies sample the population to make measurements at a specific point in time.
A special type of cross-sectional analysis is a cohort analysis, which tracks an aggregate
of individuals who experience the same event within the same time interval over time.
Cohort analyses are useful for long-term forecasting of product demand.

Causal research seeks to find cause and effect relationships between


variables. It accomplishes this goal through laboratory and field experiments.

Data Types and Sources

Secondary Data

Before going through the time and expense of collecting primary data, one
should check for secondary data that previously may have been collected for other
purposes but that can be used in the immediate study. Secondary data may be internal to
the firm, such as sales invoices and warranty cards, or may be external to the firm such as
published data or commercially available data. The government census is a valuable
source of secondary data.

Secondary data has the advantage of saving time and reducing data
gathering costs. The disadvantages are that the data may not fit the problem perfectly and
that the accuracy may be more difficult to verify for secondary data than for primary data.

Some secondary data is republished by organizations other than the


original source. Because errors can occur and important explanations may be missing in

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republished data, one should obtain secondary data directly from its source. One also
should consider who the source is and whether the results may be biased.

There are several criteria that one should use to evaluate secondary data.

 Whether the data is useful in the research study.

 How current the data is and whether it applies to time period of interest.

 Errors and accuracy - whether the data is dependable and can be verified.

 Presence of bias in the data.

 Specifications and methodologies used, including data collection method,


response rate, quality and analysis of the data, sample size and sampling
technique, and questionnaire design.

 Objective of the original data collection.

 Nature of the data, including definition of variables, units of measure, categories


used, and relationships examined.

Primary Data

Often, secondary data must be supplemented by primary data originated


specifically for the study at hand. Some common types of primary data are:

 Demographic and socioeconomic characteristics

 Psychological and lifestyle characteristics

 Attitudes and opinions

 Awareness and knowledge - for example, brand awareness

 Intentions - for example, purchase intentions. While useful, intentions are not a
reliable indication of actual future behavior.

 Motivation - a person's motives are more stable than his/her behavior, so motive
is a better predictor of future behavior than is past behavior.

 Behavior

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Primary data can be obtained by communication or by observation.
Communication involves questioning respondents either verbally or in writing. This
method is versatile, since one needs only to ask for the information; however, the
response may not be accurate. Communication usually is quicker and cheaper than
observation. Observation involves the recording of actions and is performed by either a
person or some mechanical or electronic device. Observation is less versatile than
communication since some attributes of a person may not be readily observable, such as
attitudes, awareness, knowledge, intentions, and motivation. Observation also might take
longer since observers may have to wait for appropriate events to occur, though
observation using scanner data might be quicker and more cost effective. Observation
typically is more accurate than communication.

Personal interviews have an interviewer bias that mail-in questionnaires


do not have. For example, in a personal interview the respondent's perception of the
interviewer may affect the responses.

Industrial Segment

 Personal Care
 Household Care
 Branded and Packaged Food and Beverages
 Spirits and Tobacco
 Branding
 Distribution Network
 Contract manufacturing
 Large Unorganized Sector

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Market Players

Domestic Players:-
ITC Limited
Marico
Nirma Limited
Foreign Players:-
Cadbury India Limited
Cargill
Coca Cola
Colgate Palmolive India
Hindustan Unilever Limited
Nestle India Limited
PepsiCo

Trends in Sectors

 The FMCG sector has been registering double-digit growth in sales since the last
couple of years. Currently, with annual revenues of US$ 14. 74 billion, it is the
one of the most promising sectors.
 The FMCG sector is witnessing rapid growth in rural areas and is estimated to
grow by 40 per cent compared to the growth of 25 per cent in urban areas.
 PepsiCo has announced a US$ 500 million investment in India over the next three
years.
 FMCG companies have acquired about 15 companies and have spread their
presence in more than a dozen countries.

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Market size

(Source: IBEF FMCG Analysis)

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Product Review

Cellular/Mobile phone

The Cellular telephone (commonly "mobile phone" or "cell phone" or

"handphone") is a long-range, portable electronic device used for mobile communication.

In addition to the standard voice function of a telephone, current mobile phones can

support many additional services such as SMS for text messaging, email, packet

switching for access to the Internet, and MMS for sending and receiving photos and

video. Most current mobile phones connect to a cellular network of base stations (cell

sites), which is in turn interconnected to the public switched telephone network (PSTN)

(the exception is satellite phones.Cellular telephone is also define as a type of short-wave

analog or digital telecommunication in which a subscriber has a wireless connection from

a mobile telephone to a relatively nearby transmitter. The transmitter's span of coverage

is called a cell. Generally, cellular telephone service is available in urban areas and along

major highways. As the cellular telephone user moves from one cell or area of coverage

to another, the telephone is effectively passed on to the local cell transmitter. A cellular

telephone is not to be confused with a cordless telephone (which is simply a phone with a

very short wireless connection to a local phone outlet). A newer service similar to cellular

is personal communications services (PCS).

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Brand preferences and advertisement

Students leant about cellular phone from many sources, mainly from

friends and families, through advertisement and from their own experience. Whether a

promotion and advertising hurt or help a brand is under-researched (Mela, Gupta &

Lehman, 1997). In the long-run, advertisement help brands by making consumer less

price sensitive and more loyal. Exposure of an ad is crucial to be effective in changing

consumer knowledge, attitude and behaviour (Evans,Moutinho & Van Raaj, 1996). And

for the ad to be seen, it must grab the attention of its target audience. ‘Ads originality’ as

defined from Pietes, Warlop and Wedel, (2002) were easier for customer to remember

than ordinary ads by increasing attention to it. This thus increased attention to the brand

being advertised.However, regardless of the content, ads for brand leaders are more

successful due to the influence of the brand (Simon, 1970). Ads for less popular brands

may be less successful even though the content may be good.

Liking towards the brand itself can influence liking for the brand (Hawkins, Best &

Coney, 1992). However according to study by Biehal, Stephens and Curlo (1992)

whether consumers like or dislike an ad does not necessarily lead to brand acceptance or

rejection. So, even though consumers may like the ad that they see, it does not necessarily

mean that they will go out and buy the brand advertised.Usually the consumer uses their

attitude towards the ad (Aad) in brand choice equaled that of attitude towards the brands

(AB).

Advertisers must remember that advertising messages are interpretend

differently between different genders (Maldonando, Tansuhaj & Muehling, 2003; Hogg

& Garrow, 2003; Putrevu, 2001).Prevoius study have proven that females were more

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likely to engagae in elaboration than men (Maldonado & Muehling, 2003). Hogg and

Garrow (2003) found that women paid more intention about the details of the characters

of an ad when asked to analyze advertising messages. They said that this may be

explained by the fact that females have a greater tendency than men to consider external

information and information related to others. Women are ‘comprehensive processors’

who try to gather all available information about the product.

In building brand preferences, Alreck and Settle (1999) proposed six strategies:

1) Need association- the product/brand linked to need through repeated messages.

2) Mood associations- brands should be associated with good feelings through

slogans,songs.

3) Subconscious motivation-use of symbol to excite consumers’ subconscious

motives.

4) Behaviour modification-consumers are conditioned to buy the brand by

controlling cues and rewards.

5) Cognitif processing-penetrating perceptual and cognitive barriers to create

favourable attitudes towards the brand/product.

6) Model emulation- portraying idealized lifestyles for consumers to imitate.

However, this study focused only on the symbolic or tangible elements in

influencing brand preference. It did not discuss tangible aspects (i.e product

characteristics) of influencing brand preference. Advertisement can change consumer’s

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perception of a product in terms of attributes content and proportion and also influence

consumer’s taste for attributes ( Gwin & Gwin, 2003)

Brand preference and product attribute

Attributes are the characteristic or features that an object may or may not

have and includes both intrinsic and extrinsic (Mowen & Minor, 1998) .Benefits is the

positive outcomes that come from the attributes.People seek products that have attributes

that will solve their problems and fulfills their needs (Mowen & Minor, 1998).

Understanding why a consumer choose a product based upon its attributes helps

marketers to understand why some consumers have preferences for certain brands (Gwin

& Gwin, 2003). In the study by Gwin and Gwin (2003), the Lancaster model of consumer

demand (1966, 1979), also referred to as the product attributes model, was used to

evaluate brand positioning.This model assumes that consumer choice is based on the

characteristics (or attributes) of a brand.Each product is abundle of attributes and that

choice is based on maximizing utility/satisfaction from the attritubes subject to budget

constraints. However there were two limitataions of the model: (1) the model is static and

deterministic and (2) the model does not explain how the preferences for attributes were

formed.This article also also didi not mention if experience with the product played a part

in influencing attributes preferences.

Both tangible nad intangible attributes of a product are equally important

in choosing a product or brand (Myers, 2003). There is no evidence that certain attributes

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are more related to customer loyalty than others (Romariuk & Sharp, 2003). It was, found

though, that the more attributes (non-negative) associated with a brand, the more loyal

the customer (Romariuk & Sharp,2003).Romariuk and Sharp (2003) suggested that

marketers should focus more on how many attributes the brand should be associated with

and not what attributes. However, this study did not specify what sort of attributes

marketers should associate the brand with; i.e. whether they should be relevant or

irrelevant attributes, tangible or intangible etc.This is because it is important that

consumer accurately lean about product attribute performances since it would influence

their interpretations of product performance by causing memory encode and retrieval

bias.Unfounded product attribute relationship beliefs can mislead them into expecting

something that is not there.(Mason & Bequette, 1998). Hence if products fall short of

customer expectataions,then dissactisfaction would result.Nevertheless, it was found that

through irrelevant, some attributes may still be important in influencing consumer

choice.Persistent preferences for product attribute soccurs when there is low ambiguity in

the initial potential choice for salient attributes coupled with experience,although those

attributes maybe irrelevant (i.e. an attributes usually not associated with favourable brand

outcomes (Muthukrishnan & Kardes, 2001). Consequently, Mason and Bequette (1998)

also said that perceptions on product performance based on salient attributes are more

important in influencing the consumer purchase behaviour than actual product attribute

performances. Similarly, Myers (2003) concluded that brand equity may be more

influenced by attribute knowledge more than consumer preference.

For low-involvement products, consumers have more objective view of

the nature of the attrinutes (eg. food, cosmetics) because they are constantly being

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advertised and promoted.Similarly Rioo, Vasquez and Iglesias (2001) sugggeated that

consumer evaluation of a product can be broken down into evaluation related to product

(tangible or physical attributes) and brand name (intangible attributes, or images added to

the product due to its brand names). In his study on the relationship between human

values and consumer purchases, Allen (2001) found there was a significant association

between human values (eg. hedonistic, achievement, self-direction, conformity, security

etc.), product preference and tangible attribute importance with how consumers perceive

the product (i.e tangible attributes) and how they evaluate the product (i.e symbolic

meaning,tangible/intangible attribute importance). Human values influence the

importance of the product’s tangible attribute importances that are already important to

consumers.

However perception of product performance on the salient attributes are

more important than actual performance (Mason & Bequette, 1998).Mowen and Minor

(1998) suggested that marketing managers should know the attributes that consumers

expect in a product and how positively or negatively they rate these attributes to help

develop and promote a successful product.Retailers need to be knowledgeable of the

product attributes perceived as the most important by each individual consumer group in

order to build and maintain market share (Warrington & Shim, 2000). It is the consumer

who determines which attributes matter to them. Different consumer groups place

different importance on different attributes (Warrington & Shim,2000).It was found that

consumers categoriez as LP/SB (low product involvement/strong brand commitment)

placed greater importance on product attributes and product orientataions than LP/WB

(weak brand commitment) consumers, which placed the most importance on price.

26
Markerters should consider using advertisement, which may play a role in

making attributee important to consumers that might not have been considered before

(Gwin & Gwin, 2003),Romariuk & Sharp (2003) suggested two objectives of short-term

and long-term brand building. In the short term, managers need to identify a specific

attributes to be communicated to the market,based on which message gave the best

execution.The key aim is to develop likeable advertisement.In the long-run,managers

need to build up a ‘bank’ of consumer perception about the brand to make it the one most

often thought of and make it difficult for competitors to have access to the minds of

consumers (Romariuk & Sharp, 2003).

The brand name of the product itself is an important attribute. Brands have

both functional (product-related) and symbolic dimensions (del Rio,Vasquez & Iglesiaz,

2001), On the product related benefit side, consumer evaluate product performance based

on its capabilities, usage effectiveness, value for money and reliability. The purchase and

consumption of products is increasing regarded by consumers as an indirect way of

communication to improve their self image and deliver certain impressions to other

people in their environment (del Rio,Vasquez & Iglesiaz, 2001), Therefore the brand

name benefits perceived by consumers is highly interrelated to the product-based

benefits. Big brand means a better image and a better product (del Rio,Vasquez &

Iglesiaz, 2001), Howevwer, as mention earlier, Mason and Bequette (1998) suggested

that perceived product performance is more important than actual attribute performance.

Similarly Myers (2003) concluded that brand equity might be influenced by attribute

knowledge more than consumer preference. This may be due to consumer biasness and

prejudice, Consumers’ product evaluations are influenced by memory. The biasness can

27
be reduced by having current information, experience and knowledge (Mason and

Bequette ,1998). Therefore, it’s not surprising that brands that consumers believe offer

superior value are most preferred brands chosen often (Myers, 2003). Brands with higher

equity resulted in greater preferences and high market shares.

Price is another form of attribute used by consumers to evaluate a

product.Price can sometimes be an indicator of quality; with a higher price indicating

higher quality (Mowen & Minor, 1998; Siu & Wong, 2002). Consumers perceive that a

higher price can be attributed to the higher cost of quality control (Siu & Wong, 2002).

Some consumers are highly price sensitive (elastic demand),whereby a high prices may

shift consumers to competitive brands (Mowen & Minor, 1998). Therefore price can have

a positive or negative influence on customers.

Dabur India

Dabur India Ltd. is the fourth largest FMCG Company in


India. Dabur deals in Health care and Personal care products. Today,
Dabur has a turnover of Rs.1899.57 crores. The market penetration of
Dabur is of about 1.5 million retail outlets all over India with 47 C& F
agents and more than 5000 distributors. Dabur India is divided into 2
major strategic business units:
 Consumer Care Division
 Consumer Health Division

Dabur has 3 subsidiary group companies:


1. Dabur Foods
2. Dabur Nepal
3. Dabur International- Further divided into Asian Consumer Care in
Bangladesh, African Consumer Care in Nigeria and Dabur Egypt.

28
Dabur has 13 ultra-modern manufacturing units in:
 Jammu & Kashmir
 Uttar Pradesh
 Himachal Pradesh
 Madhya Pradesh
 Rajasthan
 Uttaranchal
 West Bengal
 Silvassa
 Nepal

Dabur's Brands
 Vatika
 Anmol
 Hajmola
 Dabur Amla
 Dabur Chyawanprash
 Dabur Lal Dant Manjan

FMCG (Rs. In Cr.)


Financial for Past 4 Years 02-03 03-04 04-05 05-06

1048.5 1268.7
1148 1369.70
Sales 0 0
4.9 11.1 11.5 5.4
Other Income
109.6 136.1 187.9 243.3
Earnings before Tax
80.0 113.4 165.0 214.4
Profit before Tax
72 101.2 148 189.1
Profit after Tax
2.5 3.5 5.2 3.3***
EPS (Rs)

Exports to

29
 United Kingdom
 Egypt
 Bangladesh
 Dubai
 Nigeria
 Nepal

Dabur has its offices and representatives in America, Europe, and


Africa. It exports Active Pharmaceutical Ingredients to Latin America,
Europe, Africa, and other Asian countries. Dabur also exports herbal
products to Middle East, Far East, and several European countries.
Today Dabur is marketing its products in more than 50 countries.

30
RESEARCH METHODOLOGY

SAMPLE DESIGN

SAMPLE UNIT: - All working people are included both the genders i.e. males and
females irrespective of their education level.

SAMPLE SIZE: - 100

SAMPLE REGION: - Sahibabad Region, Gorakhpur

SAMPLING PROCEDURE: - Random Sampling

Research design:
The primary research was exploratory in nature. Exploratory research is
appropriate since it helps in identifying the opportunities present in the decision situation
and it also serves as a step towards further research activity. The study aimed at
identifying the functional gap between selection and utilization of FMCG products in
Institutional Markets with specific reference to Hotel Industry and Flight Catering
establishments and hence primary research was most appropriate for meeting the needs of
the objective in view is Exploratory research.

Sampling:

31
Probability sampling method has been used in this study and all catering
establishments had equal chances of being included in the sample size. Under probability
sampling, Simple random sampling technique was undertaken since there was a definite
sampling frame and prior information on the objects or sampling units were available
before the sampling process. Simple random sample was undertaken because the
population from which the sample is to be chosen is homogenous. The data was collected
through questionnaire and the research was designed to employ appropriate statistical
tools.

Product Research

In this year when almost all the stocks have been tumbled heavily on the
Dalal Street, the one sector which completely outperformed the market is FMCG. During
last 52 weeks the SENSEX has lost by around 53%, while BSE FMCG has just lost by
below 10%. Sensex witnessed strong bull market journey with almost 7 fold gains from
3000 in 2003 to 21000 in 2008, the FMCG did not match the Index equivalently but
managed to follow the trend by almost 3.5 times gain for the same period. Now in a bear
market scenario, the FMCG is bucking the trend which is a big sign of relief for
investors. Hence we believe FMCG is strong and defensive sector and one should
consider this sector for his portfolio and allocate some portion for it.

As the economy is facing the slowdown in demand, the FMCG sector is


not witnessing any visible sign of demand destruction, but is growing with healthy pace.
During the July-September quarter the aggregate revenues increased by 22%
despite cost inflation and aggregate net profit grew by almost 20% on yearly basis.
The bunch of factors like increased spending power in rural markets, appropriate pricing
polices by companies, better product mix and organic and inorganic expansion has shown
consistent growth for the industry and is expected to continue the drive the growth
further.

32
SENSEX v/s BSE FMCG INDEX

Buoyant rural spending

Growth in rural India, where 50% of FMCG sales come from, has been
quite strong. A lot of money is being spent in rural India through employment
generation schemes, while the loan waiver changes sentiment substantially. The
country has been blessed with good monsoons and good agricultural production.
The food inflation has also helped farmers with rise in income. Hence the purchase
power in rural areas has increased and spending behaviour is also changing. These help
FMCG companies with more revenues, while higher and middle class urban consumers
demand is inelastic for the goods and services that FMCG companies offer, so slowdown
in demand is not expected for FMCG.

33
Favourable Pricing Strategies

With the cost of almost every input ranging from palm oil and milk to
packaging material zooming upwards, FMCG companies had increased the price
smoothly to mange cost escalation. Colgate, for instance, had increased prices by 3-4%
earlier this year while Dabur had upped prices of hair oil, chyawanprash and toothpaste
by 4% and shampoos by 7%. Marico had increased prices of Parachute hair oil by 5-6%
while Hindustan Lever too had upped prices of a few brands by about 1 to 28%.
Companies with large product portfolios and a presence across price points - Hindustan
Unilever and Dabur - managed to offset margin pressures through shifts in the product
mix. With inflation showing signs of easing, the companies, which have taken price
increases on their products, are likely to benefit in the forthcoming quarters.

Decrease in Raw Material Prices

During the second quarter the crude price has fell to almost $60 from
record high of $ 147. For raw materials such as palm oil and packaging material, where
prices bear clear linkages to crude oil, it has been big relief for FMCG companies.
Though to match rising cost the companies had increased product pricing, the operating
margin has shrunk by 150-200 bps. However the companies made forward purchases or
built up additional inventories in the latter part of 2007 and in the first quarter of 2008, to
guard against a further rise. Dabur India, for which packaging is a key input, had covered
most of its requirements for the June quarter through forward purchases in the March
quarter itself. Now, after this challenging phase, FMCG makers may have less to worry
about on the raw material front over the next few months, as a range of inputs -
palm oil, packaging plastics and petroleum derivatives have seen a 20-30% price
correction, tracking the meltdown in crude oil prices which will recover the operating
margins.
The government had also supported with decrease in peak import duty for
raw materials and also excise cut in packaging material. The tax holiday at Himachal
Pradesh, Jammu and Kashmir, Uttarakhand will be significant benefit for FMCG
companies, which will also continue to improve bottom lines.

34
Better Product mix

The companies are improving its product mix with changing dynamics of
consumer behaviour. As consumers are becoming health conscious, the manufacturers are
ready to woo them by offering more Ayurvedic and Herbal products. Change in life-style
affluent Indians have also spurred the growth for FMCG products with increasing
‘premiumisation’ of portfolios and categories like anti-aging solutions, hair colors etc.
Besides, the Indian rural regions too are witnessing change in lifestyle, further pushing
up the FMCG sales.

Expansion to continue

Though the news of plant shut down and expansion project getting
delayed of the major Indian companies are getting more space in Indian media, the
FMCG majors are going ahead with expansion plans organically and inorganically.

• Dabur India acquired 72.15% of women’s skin-care company Fem Care Pharma
(FCPL) for Rs 203.7 crores in an all-cash deal. It is also set to start production of
personal care products from its new plant in UAE by December 2008, to meet the
increasing demand for its products.
• After earlier brand acquisitions in Egypt and South Africa the Marico group is
looking at more African acquisition to service new markets across Africa and
other countries in nearby region.
• Emami is planning to set up a manufacturing facility in Africa with an investment
of Rs. 90 crore, expected to be operationalised by 2010, as it looks to strengthen
its hold in the continent.
• Nestle India is also considering more acquisition in the country.
• ITC is to increase its Food Products to tap more market.

35
Market
CMP Net Sales Net Profit P/E 52 week price Debt-
Cap
company Equity
Rs. Cr Rs Cr % Rs. Cr %
Ratio High Low Ratio
Growth Growth
5235 384.95 430.17 18.22 63.50 16.00 20.82 524.90 342.30 0.02
Colgate
4110.9 11.63 265.50
Hind. 52142 236.00 21.08 456.00 26.97 169.00 0.04
1
Unilever
1351.6 1110.3 1880.0 1200.0
13218 22.15 131.76 13.18 26.09 0.02
Nestle 0 7 0 0
3862.6
64914 172.15 18.00 802.72 4.13 20.82 239.40 132.05 0.02
ITC 7
75.10 107.82
Dabur 6497 699.30 14.02 18.12 18.87 133.50 60.15 0.04
India
P/E
Ratio High Low
Debt-
Future Outlook

Indian FMCG sector is fourth largest sector in the economy. Over a period
of time with growth in GDP, change in lifestyle and with established distribution system
across the country this sector is also growing with new market horizons and also seize
sustained growth in coming years. Indian FMCG market experienced 16% growth in FY
07-08 and expected to grow by roughly 20% in FY 08-09.
In the Industry all the major players are growing consistently. The
companies are having almost negligible debt proportion in their balance-sheet. It makes
very safe and strong case for anyone to invest. Among heavyweights HUL has strong
presence in the Indian FMCG market so one can hold the stock or buy at decline. ITC is
still having major part of revenues from cigarette business. Its FMCG business is still in
the investment phase.
Colgate is the market leader in the oral care segment with consistently
holding significant market share in the segment. Dabur is diversifying in to many
segments with increasingly adding presence in global market as well. Marico is also the
leader in hair care market and aggressively increasing its presence in overseas market
organically and inorganically. P&G is increasing penetration in Indian markets especially
in health care and feminine hygiene. We believe these stocks can outperform in bearish
market scenario. Hence, one should add these stocks in his portfolio, which can give
good returns inlong term.

36
India has always been a country with a big chunk of world population, be
it the 1950’s or the twenty first century. In that sense, the FMCG market potential has
always been very big. However, from the 1950’s to the 80’s investments in the FMCG
industry were very limited due to low purchasing power and the government’s favouring
of the small-scale sector. Hindustan Lever Limited (HLL) was probably the only MNC
company that stuck around and had its manufacturing base in India.

At the time, the focus of the organised players like HLL was largely urbane. There too,
the consumers had limited choices. However, Nirma’s entry changed the whole Indian
FMCG scene. The company focused on the ‘value for money’ plank and made FMCG
products like detergents very affordable even to the lower strata of the society. Nirma
became a great success story and laid the roadmap for others to follow.

Private Consumption Expenditure Trends

CACR Food, Beverages, Tobacco Personal Care


FY81 11.0% 13.4%
FY91 11.7% 11.9%
FY01 11.9% 14.8%

MNC’s like HLL, which were sitting pretty till then, woke up to new market realities and
noticed the latent rural potential of India. The government’s relaxation of norms also
encouraged these companies to go out for economies of scale in order to make FMCG
products more affordable. Consequently, today soaps and detergents have almost 90%
penetration in India.

Post liberalisation not only saw higher number of domestic choices, but also imported
products. The lowering of the trade barriers encouraged MNC’s to come and invest in
India to cater to 1bn Indians’ needs. Rising standards of living urban areas coupled with
the purchasing power of rural India saw companies introduce everything from a low-end
detergent to a high-end sanitary napkin. Their strategy has become two-pronged in the

37
last decade. One, invest in expanding the distribution reach far and wide across India to
enable market expansion of FMCG products. Secondly, upgrade existing consumers to
value added premium products and increase usage of existing product ranges.

So you could see all companies be it HLL, Godrej Consumer, Marico, Henkel, Reckitt
Benckiser and Colgate, trying to outdo each other in getting to the rural consumer first.
Each of them has seen a significant expansion in the retail reach in mid-sized towns and
villages. Some who could not do it on their own, have piggy backed on other FMCG
major’s distribution network (P&G-Marico). Consequently, companies that have taken to
rural India like chalk to cheese have seen their sales and profits expanding. For example,
currently 50% of all HLL sales come from rural India, and consequently, it is one the
biggest beneficiaries of this (see table).

CAGR growth in last 10 years…

Sales Net Profit


Cadbury 16.6% 53.0%
Colgate 9.9% 4.2%
HLL 19.1% 33.5%
Marico 12.3% 25.7%
Nestle 16.4% 25.3%
P&G Hygiene 9.0% 19.9%
Reckit & Benckiser 13.3% 2.7%

There are others, like Nestle, which have till date catered mostly to urban India but have
still seen good growth in the last decade. The company’s focus in the last decade has
largely been on value added products for the upper strata of society. However, in the last
couple of years, even these companies have looked to reach consumers at the slightly
lower end.

One of the biggest changes to hit the FMCG industry was the ‘sachet’ bug.
In the last 3 years, detergent companies, shampoo companies, hair oil companies, biscuit
companies, chocolate companies and a host of others, have introduced products in

38
smaller package sizes, at lower price points. This is the single big innovation to reach
new users and expand market share for value added products in urban India, and for
general FMCG products like detergents, soaps and oral care in rural India.

Another interesting phenomenon to have hit the FMCG industry is the


mushrooming of regional companies, which are posing a threat to bigger FMCG
companies like HLL. For example, the rise of Jyothi Laboratories, which has given
sleepless nights to Reckitt Benckiser, the ‘Ghari’ detergent, that has slowly but surely
built itself to take on Nirma and HLL in detergents, and finally, the rise of ‘Anchor’ in
oral care, which has become synonymous with ‘cat’, which walks away with spoils when
two monkeys fight (HLL and Colgate). There are numerous other examples of this.

What does all this mean for the future of FMCG industry in India?
Undoubtedly, all this is good for the consumers, who can now choose a variety of
products, from a number of companies, at different price points. But for the players who
cater to the Indian consumer, the future brings a lot more competition. In this
environment, only the innovators will survive. Focus will be the key to profitability (ala
HLL). From an investor’s point of view, Indian FMCG companies do offer long-term
growth opportunities given the low penetration and usage in most product categories. To
choose the best investment opportunities look at the shapers (i.e. innovators) that have
been constantly proactive to market needs and have built strong, efficient and intelligent
distribution channels. Management vision to growth is the key, as consumers going
forward are likely to become even more sophisticated in their demand.

39
DATA ANALYSIS

Before analysis can be performed, raw data must be transformed into the
right format. First, it must be edited so that errors can be corrected or omitted. The data
must then be coded; this procedure converts the edited raw data into numbers or symbols.
A codebook is created to document how the data was coded. Finally, the data is tabulated
to count the number of samples falling into various categories. Simple tabulations count
the occurrences of each variable independently of the other variables. Cross tabulations,
also known as contingency tables or cross tabs, treats two or more variables
simultaneously. However, since the variables are in a two-dimensional table, cross
tabbing more than two variables is difficult to visualize since more than two dimensions
would be required. Cross tabulation can be performed for nominal and ordinal variables.

Cross tabulation is the most commonly utilized data analysis method in


marketing research. Many studies take the analysis no further than cross tabulation. This
technique divides the sample into sub-groups to show how the dependent variable varies

40
from one subgroup to another. A third variable can be introduced to uncover a
relationship that initially was not evident.

Conjoint Analysis

The conjoint analysis is a powerful technique for determining consumer preferences for
product attributes.

Hypothesis Testing

A basic fact about testing hypotheses is that a hypothesis may be rejected


but that the hypothesis never can be unconditionally accepted until all possible evidence
is evaluated. In the case of sampled data, the information set cannot be complete. So if a
test using such data does not reject a hypothesis, the conclusion is not necessarily that the
hypothesis should be accepted.

The null hypothesis in an experiment is the hypothesis that the


independent variable has no effect on the dependent variable. The null hypothesis is
expressed as H0. This hypothesis is assumed to be true unless proven otherwise. The
alternative to the null hypothesis is the hypothesis that the independent variable does
have an effect on the dependent variable. This hypothesis is known as the alternative,
research, or experimental hypothesis and is expressed as H1. This alternative hypothesis
states that the relationship observed between the variables cannot be explained by chance
alone.

There are two types of errors in evaluating a hypotheses:


Type I error: occurs when one rejects the null hypothesis and accepts the alternative,
when in fact the null hypothesis is true.

Type II error: occurs when one accepts the null hypothesis when in fact the null
hypothesis is false.

41
Because their names are not very descriptive, these types of errors
sometimes are confused. Some people jokingly define a Type III error to occur when one
confuses Type I and Type II. To illustrate the difference, it is useful to consider a trial by
jury in which the null hypothesis is that the defendant is innocent. If the jury convicts a
truly innocent defendant, a Type I error has occurred. If, on the other hand, the jury
declares a truly guilty defendant to be innocent, a Type II error has occurred.

Hypothesis testing involves the following steps:

 Formulate the null and alternative hypotheses.


 Choose the appropriate test.
 Choose a level of significance (alpha) - determine the rejection region.
 Gather the data and calculate the test statistic.
 Determine the probability of the observed value of the test statistic under the null
hypothesis given the sampling distribution that applies to the chosen test.
 Compare the value of the test statistic to the rejection threshold.
 Based on the comparison, reject or do not reject the null hypothesis.
 Make the marketing research conclusion.

In order to analyze whether research results are statistically significant or


simply by chance, a test of statistical significance can be run.

Tests of Statistical Significance

The chi-square ( c2 ) goodness-of-fit test is used to determine whether a


set of proportions have specified numerical values. It often is used to analyze bivariate
cross-tabulated data. Some examples of situations that are well-suited for this test are:
A manufacturer of packaged products test markets a new product and wants to know if
sales of the new product will be in the same relative proportion of package sizes as sales
of existing products.

42
A company's sales revenue comes from Product A (50%), Product B
(30%), and Product C (20%). The firm wants to know whether recent fluctuations in
these proportions are random or whether they represent a real shift in sales.

The chi-square test is performed by defining k categories and observing


the number of cases falling into each category. Knowing the expected number of cases
falling in each category, one can define chi-squared as:

c2 = å ( Oi - Ei )2 / Ei

where

Oi = the number of observed cases in category i,


Ei = the number of expected cases in category i,
k = the number of categories,
the summation runs from i = 1 to i = k.

Before calculating the chi-square value, one needs to determine the


expected frequency for each cell. This is done by dividing the number of samples by the
number of cells in the table.

To use the output of the chi-square function, one uses a chi-square table.
To do so, one needs to know the number of degrees of freedom (df). For chi-square
applied to cross-tabulated data, the number of degrees of freedom is equal to

( number of columns - 1 ) ( number of rows - 1 )

This is equal to the number of categories minus one. The conventional


critical level of 0.05 normally is used. If the calculated output value from the function is
greater than the chi-square look-up table value, the null hypothesis is rejected.

ANOVA

43
Another test of significance is the Analysis of Variance (ANOVA) test.
The primary purpose of ANOVA is to test for differences between multiple means.
Whereas the t-test can be used to compare two means, ANOVA is needed to compare
three or more means. If multiple t-tests were applied, the probability of a TYPE I error
(rejecting a true null hypothesis) increases as the number of comparisons increases.

One-way ANOVA examines whether multiple means differ. The test is


called an F-test. ANOVA calculates the ratio of the variation between groups to the
variation within groups (the F ratio). While ANOVA was designed for comparing several
means, it also can be used to compare two means. Two-way ANOVA allows for a second
independent variable and addresses interaction.

To run a one-way ANOVA, use the following steps:

 Identify the independent and dependent variables.

 Describe the variation by breaking it into three parts - the total variation, the
portion that is within groups, and the portion that is between groups (or among
groups for more than two groups). The total variation (SStotal) is the sum of the
squares of the differences between each value and the grand mean of all the
values in all the groups. The in-group variation (SSwithin) is the sum of the
squares of the differences in each element's value and the group mean. The
variation between group means (SSbetween) is the total variation minus the in-
group variation (SStotal - SSwithin).

 Measure the difference between each group's mean and the grand mean.

 Perform a significance test on the differences.

 Interpret the results.

This F-test assumes that the group variances are approximately equal and
that the observations are independent. It also assumes normally distributed data; however,
since this is a test on means the Central Limit Theorem holds as long as the sample size is
not too small.

44
ANOVA is efficient for analyzing data using relatively few observations
and can be used with categorical variables. Note that regression can perform a similar
analysis to that of ANOVA.

Discriminate Analysis

Analysis of the difference in means between groups provides information


about individual variables, it is not useful for determine their individual impacts when the
variables are used in combination. Since some variables will not be independent from one
another, one needs a test that can consider them simultaneously in order to take into
account their interrelationship. One such test is to construct a linear combination,
essentially a weighted sum of the variables. To determine which variables discriminate
between two or more naturally occurring groups, discriminant analysis is used.
Discriminant analysis can determine which variables are the best predictors of group
membership. It determines which groups differ with respect to the mean of a variable,
and then uses that variable to predict new cases of group membership. Essentially, the
discriminant function problem is a one-way ANOVA problem in that one can determine
whether multiple groups are significantly different from one another with respect to the
mean of a particular variable.

A discriminant analysis consists of the following steps:

 Formulate the problem.

 Determine the discriminant function coefficients that result in the highest ratio of
between-group variation to within-group variation.

 Test the significance of the discriminant function.

 Interpret the results.

 Determine the validity of the analysis.

45
 Discriminant analysis analyzes the dependency relationship, whereas factor
analysis and cluster analysis address the interdependency among variables.

Factor Analysis

Factor analysis is a very popular technique to analyze interdependence.


Factor analysis studies the entire set of interrelationships without defining variables to be
dependent or independent. Factor analysis combines variables to create a smaller set of
factors. Mathematically, a factor is a linear combination of variables. A factor is not
directly observable; it is inferred from the variables. The technique identifies underlying
structure among the variables, reducing the number of variables to a more manageable
set. Factor analysis groups variables according to their correlation.

The factor loading can be defined as the correlations between the factors
and their underlying variables. A factor loading matrix is a key output of the factor
analysis. An example matrix is shown below.

Factor 1 Factor 2 Factor 3


Variable 1
Variable 2
Variable 3

Column's Sum of Squares:

Each cell in the matrix represents correlation between the variable and the
factor associated with that cell. The square of this correlation represents the proportion of
the variation in the variable explained by the factor. The sum of the squares of the factor
loadings in each column is called an eigenvalue. An eigenvalue represents the amount of
variance in the original variables that is associated with that factor. The communality is
the amount of the variable variance explained by common factors.

A rule of thumb for deciding on the number of factors is that each


included factor must explain at least as much variance as does an average variable. In
other words, only factors for which the eigenvalue is greater than one are used. Other

46
criteria for determining the number of factors include the Scree plot criteria and the
percentage of variance criteria.

To facilitate interpretation, the axis can be rotated. Rotation of the axis is


equivalent to forming linear combinations of the factors. A commonly used rotation
strategy is the varimax rotation. Varimax attempts to force the column entries to be either
close to zero or one.

Cluster Analysis

Market segmentation usually is based not on one factor but on multiple factors. Initially,
each variable represents its own cluster. The challenge is to find a way to combine
variables so that relatively homogenous clusters can be formed. Such clusters should be
internally homogenous and externally heterogeneous. Cluster analysis is one way to
accomplish this goal. Rather than being a statistical test, it is more of a collection of
algorithms for grouping objects, or in the case of marketing research, grouping people.
Cluster analysis is useful in the exploratory phase of research when there are no a-priori
hypotheses.

Cluster analysis steps:

 Formulate the problem, collecting data and choosing the variables to analyze.

 Choose a distance measure. The most common is the Euclidean distance. Other
possibilities include the squared Euclidean distance, city-block (Manhattan)
distance, Chebychev distance, power distance, and percent disagreement.

 Choose a clustering procedure (linkage, nodal, or factor procedures).

 Determine the number of clusters. They should be well separated and ideally they
should be distinct enough to give them descriptive names such as professionals,
buffs, etc.

47
 Profile the clusters.

 Assess the validity of the clustering.

DATA COLLECTION METHOD

PRIMARY DATA:

Primary data was collected through a self administrated questionnaire. This questionnaire
aims to gather information related to various Branded Electronic Home Appliances.

SECONDARY DATA:

Secondary data was collected through magazines, research papers, internet etc.

RESEARCH INTRUMENTS

QUESTIONNAIRE DESIGN:

As the questionnaire is self administrated one, the survey is kept simple


and user friendly. Words used in questionnaire are readily understandable to all
respondent. Also technical jargons are avoided to ensure that there is no confusion for
respondents.
After a good deal of consumer survey and marketing research, I has collect a
good collection of data. The analyses of those data’s are given as follows:-

48
DATA ANALYSES FOR PREFERENCE FOR TOOTHPASTE IN RURAL
MARKET:-

In the initial years, the rural consumers preferred tooth powers, datoons etc.
but from the last decade, the preference of rural consumers towards toothpaste has been
changed. A huge number of toothpastes of different companies are sell in rural market.
Colgate, Pepsodent are the most popular toothpaste brands in rural market. The rural
consumers preference towards the different toothpaste brands are given in following pie
chart.

Consumers preference towards different toothpastes

DEMANDS OF DIFFERENT TOOTHPASTE BRANDS

10%

10%
35% PEPSODENT
COLGATE
CLOSE UP
15%
BABOOL
OTHERS

30%

As per analyses of above pie chart, we has found that Hindustan


Uniliver’s Pepsodent leads the market with 35% rural market share. 30% of rural
consumers prefers colgate as their favorite toothpaste brand, once again Hindustan
Uniliver’s close up occupies third position with 15% market share.10% of the rural
consumers prefers Dabur’s babool toothpaste and 10% consumers uses other toothpaste
brands.

49
DATA ANALYSIS FOR THE PREFERENCE FOR SOAP IN RURAL MARKET:-

In the survey of preference of my target consumers towards soap, I had


found the different preference and different choice of the consumers.

On the basis of their choice, I has get the following data given in following
table:-

DEMAND OF SOAP BRANDS

60
50
50
PECENTAGE

40 LUX
30 LIFEBOY
30
REXONA
20 OTHERS
12
8
10

0
LUX LIFEBOY REXONA OTHERS
BRANDS

As per given in the above table, the 90% of the soap market is
coverd by the products of Hindustan Uniliver.50% of rural consumers prefers HUL’s
Lux, where as 30% goes towards HUL’s Lifeboy third position is also acquired by a HUL
product where 15% of the market captured by Rexona. 8% of rural consumers prefers
some other soap brands.

CONCLUSION:-
In this analysis , I fonnd that a vast majority of rural consumers prefers
Lux as their more faithful brand.

50
DATA ANALYSIS FOR PREFERENCE FOR SHAMPOO IN RURAL MARKET:-

As per concern of shampoo , total 31.9% shampoo uses in rural market. It


shoes a good number of consumers preference towards shampoo in rural area. From the
last few years , the demand of shampoo sashes as well as medium size bottles has
increased in rural area. Peoples of every age are interested to use shampoo at regular
interval.

The preference of consumers towards shampoo is given in following table.

DEMAND OF SHAMPOO BRANDS

45 42
40 36
35
PERCENTAGE

30 CLINIC PLUS
25 SUNSILK
20 16 CHICK
15 OTHERS
10 6
5
0
CLINIC PLUS SUNSILK CHICK OTHERS
PRODUCTS

51
DEMAND OF SHAMPOO IN SACHE CATAGORY

35 32

PERCENTAGE
28
30
25
18
20
15 12 10
10 HEADS &SHOULDERS
5
0 PANTENE
SUNSILK

S
LK
E

S
ER

U
N

ER
SI

PL
CLINIC PLUS

TE
LD

TH
N

IC
U

SU
PA
OTHERS

O
O

N
H

LI
&S

C
S
D
EA
H

. BRANDS

The consumers preference towards shampoo are as follows:-

 42% prefers clinic plus.


 30% consumers prefers sunsilk.
 10% consumers go through Calvin Care’s Chick.
 8% consumers prefers other shampoos or non shampoo users.
Preference of shampoo in saches:-
 32% of consumers uses Heads & Shoulders.
 28% goes through Pantene.
 18% prefers sunsilk.
 12 % prefers clinic plus.
 10% includes non shampoo users or users of some other brands,

CONCLUSION:-

This analysis shows that a vast majority of rural consumers prefers HUL’s
clinic plus and Sunsilk in high and medium size sample. But on the other hand, in sachet
sample there is different story. More than 50% of the rural consumers prefers the brands
of P&G (Heads & Shoulders and Pantene).

52
DATA ANALYSIS OF CONSUMERS PREFERNCE TOWARDS DETERGENTS

Detergent is another more preferencable product for rural consumers. Approx


87.4% penetration level of detergent is gone to rural consumers. The preference of rural
consumers towards detergents is given in following table .

D EM AN D OF D E TER GEN TS

45 42
40
34
35 W HEE L
30 G HA RI
PERCENTAGE

25
TID E
20
13 S U R F E XE L
15
10 6 5 O TH E R S
5
0
W HE EL G HA RI TID E S U R F O TH E R S
E XE L
BRANDS

53
DEMAND OF DITERGENTS IN SACHE

10%
12% TIDE
43% SURF EXEL
ARIAL
OTHERS
35%

As per given in above table , the consumers preference towards detergents are as
follows:-

 42% consumers prefers HUL’s wheel in mediam or large


sample , but consumers not prefer it in sachet.
 34% consumers prefers ghari detergent in medium or large size
sample, but not in sachet.
 13 % consumers prefers P&G’s Tide in medium or large size
sample but it is leading brand in sachet category with 43%.
 Surf exel of HUL is second leading brand in sachet category
with 35% consumer preference which is prefers only 6% in
large samples due to it’s price.
 5% consumers prefers other local detergents for their personal
use.

54
CONCLUSION:-

As given in the above table, lump sum the half of the detergent market is
covered by HUL and P&G products. Nirma which was the initiator of introduction of
detergent in rural market, is currently out of the market. this condition shows that the
rural consumers are also want to quality products, only price is a factor in front of them.

DATA ANALYSIS OF CONSUMERS PREFERENCE TOWARDS UTENSIL


CLEANER:-

Utensil cleaner is one of the basic need of the consumers, because


consumers uses it at regular interval. Couple of months ago, the rural consumers does not
uses any utensil cleaner rather they use primary products like ash, mud or other things.
But at the present time the popularity of utensil cleaners has been developed in rural
market in high penetration level.
The consumers preference towards utensil cleaner is given in following
table:-

DEMAND OF CLEANER BRANDS

100
90
80
70
60
IN (%) 50 VIM
40
30 OTHERS
20 NO CLEANER
10
0
VIM OTHERS NO
CLEANER
BRANDS

55
As per given in the table, vim is the leading brand in the utensil cleaner
segment. 85% of the rural market is covered by vim , 10% consumers prefers other
brands where as 5% consumer are those who does not uses any utensil cleaner.

DATA ANALYSIS FOR RURAL CONSUMERS PREFERENCE TOWARDS


FAIRNESS CREAM:-

As per fairness cream is concern, there is not more brands are in the
competition. Only few brands of HUL and emami captures the market.a brief description
is given in the following table.

DEMAND OF FAIRNESS CREAM

70 65

60
PERCENTAGE

50 FAIR & LOVELY


40 PONDS
30 23 VICCO
20 OTHERS
10
10 2
0
FAIR & PONDS VICCO OTHERS
LOVELY
BRANDS

The HUL’s Fair & Lovely is most popular brand in the rural market
most of the consumers specially female consumers uses this brand. Approx 65% of rural
consumers uses Fair & Lovely as their best trusted brand. Second position is also
occupied by HUL’s product (Ponds) which is preferred by 23% of consumers, 10%
consumers prefers Vicco and 2% uses some other brands.

56
RURAL CONSUMERS PREFERENCE TOWARDS SAVING CREAM:-

Generally in the rural areas the consumers prefers barbers for the purpose
of saving or other relevant purpose. But in the semi-urban areas and some of the rural
areas, consumers are started to depend on their own saving kit. So what from the few
years, the demand of different savin creams of different companies has been increased.
A brief analysis of different brands of different companies is given in
following table:-

DEMANDOF SAVING CREAMS

45 42
40
35 30 PALMOLIVE
PERCENTAGE

30
25 VJHON
20 16
15 12 OLD SPICE
10 OTHERS
5
0
PALMOLIVE VJHON OLD SPICE OTHERS

BRANDS

The preference of consumers towards saving cream is described as follows:-

 42% of the consumers prefers Palmolive as their best choice.


 30% consumers prefers Vjohn.
 Gillete which is most demandable brand in urban areas has
very low market share in the rural market due to it’s little bit
high price.
After saving gel is generally not popular in the rural market.

CONCLUSION:-

57
The analysis of consumer preference toward saving cream shows that
such a vast area of market covered by Palmolive and Vjohn.

PREFERENCE OF CONSUMERS TOWARDS BISCUITS:-

Biscuit is one of the major beverage category brand of the FMCG


products for the rural areas. Consumers prefers it for the many reasons like taking with
tea, giving to guests, baby food etc. there are many companies exists in this segment.

A brief overview of consumers preference towards biscuits is given in


following table:-

D E MAN D OF B IS C U IT B R AN D S

70 62
60
50 P A RLE -G
PERCENTAGE

40 S UNF E A S T
30 23 B RITA NNIA

20 O THE RS
10
10 5
0
P A RLE -G S UNF E A S T B RITA NNIA O THE RS
BRANDS

Parle-G is very old and most trusted biscuit brand for the rural
consumers. From many years , consumers prefers it due to it’s low price, good taste, and
availability. At the present time, it captures approx 62% of total rural market share. From
the few years ITC’s Sun feast creats a good demand among the rural consumers. 23% of
rural consumers prefers sunfeast and also it’s demand is increasing due to it’s taste and

58
good publicity and distribution. Consumers prefer 10% Britaania brands and 5%
consumers prefers other brands.

CONSUMERS PREFERENCE TOWARDS DIFFERENT TEA BRANDS:-

In the segment market, generally consumers had prefer local tea , but
from the few years they starts to use some brands of the different tea companies because
of the avaibility of tea in small sachets. The following table provides a brief details about
the different tea brands popular in the rural market.

DEMANDOF TEA DIFFERENT BRANDS

10%

11% 32%
TAZA
TATA TEA
DOUBLE DIMOND
TAJ MAHAL
21% OTHERS

26%

The data analysis of consumers’ preference towards tea is


discussed as follows:-

 32% consumers prefers taza as their best choice.


 26% of the rural consumers prefers tata tea.
 21% of the rural consumers prefers double diamond.
 11% consumers prefers taj mahal tea.

59
 10% consumers are among those who prefers some other tea
nrands.

CONCLUSION:-

As per given in the above table taza and tata tea are the leading tea brands
in the rural market.

DATA ANALYSIS OF CONSUMERS PREFERENCE TOWARDS DIFFERENT


HAIR OIL BRANDS:-

The rural consumer preferences towards different hair oil brands are given
in the following table:-

DEMAND

5%

18%
31%
HERBAL OILS
DABUR AMLA
PARASUIT
BAJAJ ALMOND
21% OTHERS

25%

rural consumers prefers mostly herbal/cool oils, e.g- Navratna,


himtaj, Himgange,etc. 31% of the rural consumers prefers herbal oils because of their
multipurpose use. They use these oils as medicine also. 25% of the rural consumers
prefers dabur amla, third place occupied by Maico’s Paraschut which is prefers by 21%

60
of rural consumers. 18% consumers prefers Bajaj Almond and 5% prefers some other
hair oil brands.

SWOT ANALYSIS

A SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a tool


used to provide a general or detailed snapshot of a company's health. Think of your
SWOT as a tune-up that every business needs periodically to diagnose and fix what’s a
bit worn, what’s on the verge of breaking down, or what’s already broken and needs
replacement--so that you can keep the business humming—even better than it has in the
past.

 SWOT offers professional managers an effective evaluative technique to


aid the decision making process.
 It can not find the solution for you, but it will ensure that issues are:
identified, classified and prioritized clearly, showing the problem in terms
of key underlying issues. Decision makers can then see the answer.
 It's a four-part approach to analyzing a company's overall strategyor the
strategy of its business units. All four aspects must be considered to
implement a long-range plan of action.

You can develop the basic analysis in a brainstorming session with


members of your company, or by yourself if you are a one-person shop. The business of
management today is characterized by complex issues and continuous change. Frequently
the related decisions and actions are characterized by trying to understand the complexity
of the issues involved so that an appropriate decision can be made. While this kind of
applied decision making is not an exact science, SWOT analysis is internationally known
as a method of understanding the issues which are involved. In doing so, ideas can be
shared between managers and even integrated into a wider picture for subsequent
analysis.

61
Strengths:
 We are able to respond very quickly as we have no red tape, no need for higher
management approval, etc.
 We are able to give really good customer care, as the current small amount of
work means we have plenty of time to devote to customers
 Our lead consultant has strong reputation within the market
 We can change direction quickly if we find that our marketing isnot working
 We have small overheads, so can offer good value to customers

Weaknesses:
 Our company has no market presence or reputation
 We have a small staff with a shallow skills base in many areas
 We are vulnerable to vital staff being sick, leaving, etc.
 Our cash flow will be unreliable in the early stages

Opportunities:
 Our business sector is expanding, with many future opportunitiesfor success
 Our local council wants to encourage local businesses with work where possible
 Our competitors may be slow to adopt new technologies

Threats:
 Will developments in technology change this market beyond our ability to adapt?
 A small change in focus of a large competitor might wipe out anymarket position
we achieve

62
 The consultancy might therefore decide to specialize in rapid response, good
value services to local businesses. Marketing would be in selected local
publications, to get the greatest possible market presence for a set advertising
budget. The consultancy should keep up-to-date with changes in technology
where possible.

A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm usually can be classified as
strengths (S) or weaknesses (W), and those external to the firm can be classified as
opportunities (O) or threats (T). Such an analysis of the strategic environment is referred
to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's resources
and capabilities to the competitive environment in which it operates. As such, it is
instrumental in strategy formulation and selection. The following diagram shows how a
SWOT analysis fits into an environmental scan:

SWOT Analysis FrameworkEnvironmental Scan

Internal Analysis External Analysis

Strengths Weaknesses Opportunities Threats

SWOT Matrix

Strengths

A firm's strengths are its resources and capabilities that can be used as a basis for
developing a competitive advantage. Examples of such strengths include:
 patents
 strong brand names

63
 good reputation among customers
 cost advantages from proprietary know-how
 exclusive access to high grade natural resources
 favorable access to distribution networks

Weaknesses

The absence of certain strengths may be viewed as a weakness. For example, each of the
following may be considered weaknesses:
 lack of patent protection
 a weak brand name
 poor reputation among customers
 high cost structure
 lack of access to the best natural resources
 lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. Take the case
in which a firm has a large amount of manufacturing capacity. While this capacity may
be considered a strength that competitors do not share, it also may be a considered a
weakness if the large investment in manufacturing capacity prevents the firm from
reacting quickly to changes in the strategic environment.

Opportunities

The external environmental analysis may reveal certain new opportunities for profit and
growth. Some examples of such opportunities include:
 an unfulfilled customer need
 arrival of new technologies
 loosening of regulations
 removal of international trade barriers

64
Threats

Changes in the external environmental also may present threats to the firm. Some
examples of such threats include:
 shifts in consumer tastes away from the firm's products
 emergence of substitute products
 new regulations
 increased trade barriers

The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities.


Rather, it may have a better chance at developing a competitive advantage by identifying
a fit between the firm's strengths and upcoming opportunities. In some cases, the firm can
overcome a weakness in order to prepare itself to pursue a compelling opportunity.

To develop strategies that take into account the SWOT profile, a matrix of
these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is
shown below:

SWOT / TOWS Strengths Weakness


Opportunities S-O strategies W-O strategies
Threats S-T strategies W-T strategies

S-O strategies pursue opportunities that are a good fit to the company's strengths.

W-O strategies overcome weaknesses to pursue opportunities.

S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability
to external threats.

65
W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it
highly susceptible to external threats.

Limitations

• Skill set shortage


• Maintaining high quality standards
• Lack of talent pool
• Unable to do primary research
• Confidentiality
• Enhanced risk management
• Time constraint

66
CONCLUSION:

As I has analyzed the various data based on questionnaire, a fact has came
into light that HUL’s products are the most known and popular Brand in context of home
FMCG products in rural market followed by DABUR, ITC and P&G. Because of huge
product line, cheaper cost, brand loyalty, good publicity and advertisement, the rural
consumers generally prefers the products of HUL in all segments.

Except it, people firstly prefer for good quality and comparatively low prices products.

67
SUGGESTIONS

The rural market is very large in compare to the urban market as well as it
is more challenging market. The consumer wants those products which are long lasting,
good, easy to use and cheaper. The income level of rural consumers is not as high as the
income level of urban consumers that’s why they want low price goods. It is one of the
reason that the sell of sachet is much larger in the rural area in all segments.

It is necessary for all the FMCG major companies to provide those


products which are easy to available and affordable to the consumers. It is right that the
profit margin is very low in the FMCG products, but at the same time the market size is
much large in the rural area. The companies can reduce their prices by cutting the costs
on the packaging because the rural consumers don’t need attractive packaging.
Application of 4A* is also a major task for the major companies in this area.

68
BIBLIOGRAPHY

.
• Arthur A Thompson, Jr. A J Strickland III, Strategic Management, Thirteenth Edition:
New
Delhi, Tata McGrawhill publishing Company Limited, 2003) Chapter-4, Page 121.
• Balmer, J.M.T. (1998), "Corporate identity and the advent of corporate marketing",
Journal of
Marketing Management, Vol. 14 pp.936-96.
• Chernatony, L., McDonald, M. (1998), Creating Powerful Brands in Consumer, Service
and
Industrial Markets, Butterworth-Heinemann, Oxford.,
• Chopra.S and Meindl, Supply Chain Management; Strategy, Planning and Operation,
Pearson Education Asia, New Delhi, 2001.
• Clemons, E.K. (1999) Marketing Operation and the Boundary of the Firm, Harvard
Business
School Press, 219–42.
• Donald R Cooper, Pamela S Schindler, Business research methods (Sixth edition,
New
Delhi, Tata McGrawhill publishing company limited, 2002) Chapter-18, Page 577.
• Durkin, M., Bennett, H. (1999), "Employee commitment in retail industry:
identifying and
exploring hidden dangers", International Journal of Brand Marketing, Vol. 17 No.3, pp.124-
34.
• J Paul Peter, Jerry C Olson, Consumer Behavior and Marketing Strategy ( Mc
Grawhill,

69
International edition, 1999 ), Section 1, page 17.
• Jain P.C, Monika Bhatt, Consumer behavior in Indian Context (S Chand and
company
limited, First Edition, 2003, New Delhi 110055), Chapter1, page 1-6, Chapter2, Page
7-19.
Chapter 13, page 113-140.

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http://www.scribd.com

Appendix

QUESTIONAIRE: -------

NAME:-
OCCUPATION:-
TOTAL INCOME: - A) BELOW 6000 p.m
B) 6000 TO 12000
C) MORE THAN 12000

ADDRESS:-

70
DIST.:-
STATE;-
PHONE NO.:-

1) WHICH TYPE OF TOOTHPASTE YOU USE?


A) PEPSODENT__ B) COLGATE__ C) CLOSE UP__ D) OTHERS__.

2) WHICH DETERGENT YOU USE?


A) SURF EXCEL__ B) TIDE__ C) NIRMA__ D) OTHERS__.

3) WHICH SOAP DO YOU USE?


A) LUX__ B) LIFEBOY__ C) REXONA__ C) OTHERS__.

4) WHICH SHAMPOO USES BY YOU?


A) SUNSILK__ B) HEADS &SHOULDERS__ C) PANTENE__ D) OTHERS__.

5) WHICH UTENSIAL CLEANER USE BY YOU?


A) VIM__ B) OTHERS__ C) NO CLEANER USES__

6) WHICH TYPE OF SAVING USE BY YOU?


A) GILLETE__ B) PALMOLIVE__ C)OLD SPICE__ D) OTHERS__.

7) WHICH FAIRNESS CREAM USES BY YOU?


A) FAIR & LOVELY __ B)POND’S__ C)VICCO__ D) OTHERS__

8) WHICH TYPE OF TALC YOU PREFER?


A) DENIM__ B) PONDS__ C)BORO PLUS__ D) OTHERS__

9) ANY DEODERENT USE BY YOU…………….


A) AXE__ B) REXONA__ C)Fa__ D) OTHERS__.

10)WHICH BLADE YOU USES FOR SAVING?


A)555__ B) 7 ‘O’ CLOCK__ C)WILKINSON__ D) OTHERS__.

71
11) WHICH BISCUIT YOU PREFER?
A) PARLE-G__ B) SUNFIST__ C)BRITANNIA__ D) OTHERS__

72