Background

• A definition of consumer behaviour –

– …the decision process and physical activity individuals engage in when evaluating,
acquiring, using, or disposing of goods and services.

• CB is a subset of Human Behaviour

Behavioral Sciences have studied Human Behaviour

• BS disciplines which have greatly contributed to our understanding of consumers are :

– Psychology : study of the behaviour and mental processes of individuals

– Sociology : study of the collective behaviour of people in groups

– Social psychology : study of how individuals influence and are influenced by groups

– Economics : study of people’s production, exchange, and consumption of goods and

services

– Anthropology : study of people in relation to their cultural and racial heritage

Why Study Consumer Behaviour

• CB affects, directly and significantly, decisions

• Decisions in the market place have other effects, in turn !

• Micro perspective : understanding consumers for the purpose of enabling a co to accomplish its
objectives; eg the need of advertising managers / product designers to understand the
consumer

• Societal perspective : macro or aggregate level; collective behaviour of consumers; eg western

world and automobile tptn – cars, highway systems/services, petro prods, where many live and
how daily life is run (shop, eating, entertainment)

Foundations of Consumer Behaviour (2 h)

Customer oriented marketing

..the need for studying consumer behaviour emanates from the demands of customer oriented
marketing

• According to Marketing Experts –

‘Successful marketing requires that companies fully connect with their customers. Adopting a
holistic marketing orientation means understanding consumers – gaining a 360-degree view of both
their daily lives and the changes that occur during their lifetimes. Gaining a thorough, in-depth
consumer understanding helps to ensure that the right products are marketed to the right consumers in
the right way

Customer Oriented Marketing

• Consumers’ needs and wants, co objectives, integrated strategy

• Mkt-opportunity analysis, eg fitness centres/ eqpt

• Target-mkt selection, eg deodorant soap Irish Spring captured 15% mkt share – Col Palm
identified unique group thru segmentation

• Mktg-mix determination, eg expensive watches

Influences on Buying Behaviour

• Cultural factors

• Social factors

• Personal factors

Consumer Buying & Consumption Process

• Making a purchase with little or no influence from others

• Purchase involving joint decision

• Purchasing for someone else

 • Purchase situation may involve at least one person in each such role, or a single individual can
take on several roles

• Focus on actual buyer useful – decisions…..

Consumer Buying & Consumption Process (….contd)

Classification of roles

• Initiator – individual who determines that some need or want is not being met and authorizes a
purchase to rectify the situation

• Influencer – person who by word or action, intentional or unintentional, influences the purchase
decision, actual purchase, and/or the use of the product or service

• Buyer – individual actually making the purchase transaction

• User – person most directly involved in the consumption or use of the purchase

Consumer behaviour involves

• A mental decision process

• Physical activity

• Actual act of purchase is just one stage in a series of mental and physical activities that occur
during this phase

• Some of these activities preceded the actual buying, while others follow it

• Consumption system – who, how, when, where….

• All these factors capable of influencing the adoption of products or services

Primary psychological processes involved are

• Motivation

• Perception

• Learning

• Memory

– We shall study these in details as we go along….

Consumer Decision Making Models

• External environmental variables influencing behaviour – culture, subculture, social class, social
group, family, personal influences

• Individual determinants of behaviour – learning / memory, personality/ self-concept, attitudes,

motivation/ involvement

• Consumer’s decision process – problem recognition, information search (internal & external),
info processing, evaluating, purchase process, post-purchase behaviour

• Level of Consumer Involvement

• Decision Heuristics and Biases

• Mental Accounting

Researching the Consumer

• Exploratory research – consumer feedback, focus groups; primary objective is hyothesis

formulation, ie forming a conjectural statement about the relationship between tow or more
variables

• Conclusive research – builds upon exploratory research; main objectives are to describe
consumer behaviour and to offer explanations for its causes; also, behaviour forecast and
methods of influencing it can be determined

• Market segmentation

Personal Factors (2 h)

Demographics

• Age – stage in life cycle : people buy different goods and svcs over a lifetime

• Gender – differing needs, preferences

• Occupation – influences consumption patterns; eg factory worker’s outfit vs co director’s

apparel, software engineer vs construction engineer

• Education – fashions mindset, shapes choice process and preferences, can catalyse income
Economic Status

• Buying behaviour vis-à-vis buy-not-buy or product choice greatly affected by economic

circumstances

• Income : level, stability, time pattern – personal income, disposable income, discretionary
income

• The problem with specification of ‘necessities’ and the usefulness of the concept of subjective
discretionary income (SDI)

Needs and Motivation

• Needs and motivation related to demographics and economic logic

• Different stages of life produce varying needs – say, progression from toys to walking stick;
similarly motivation – amusement to functionality

• Economic circumstances form the logic of one man’s luxury being seen by another as necessity

Level of Involvement and Decision Making Type

• Involvement defined in terms of the level of engagement and active processing undertaken by
the consumer in responding to a marketing stimulus

– Is related to consumer’s values and self-concept, which influence the degree of personal
importance ascribed to a product or situation

– Can vary across individuals and different situations

– Is related to some form of arousal

• Involvement is characterised by – intensity or degree of arousal and directional influence

• Dimensions of involvement

– Antecedents : person, stimulus/object, situations – a persons needs, values, interests,

etc and closeness of the product (or stimulus) to these, in relation to the use (situational
context) of the product – govern involvement

• Properties of involvement

– Intensity : degree > high or low, ie how much a consumer will invest in decision making
for purchase
 – Direction : focus or target < strong influence of antecedents; eg women and perfume,
men and cars

– Persistence : length of time consumer remains engaged; eg bird watchers, sport fishing,
auto enthusiasts

• High involvement decision making

• Low involvement decision making

• Flowing from the above :

– Central route (to processing) in which cognition and extensive critical evaluation leads to
attitude formation followed by behaviour

– Peripheral route, in which cognition, at low attention, continues with weak brand
knowledge and interest, without developing strong attitude about any of the specific
brands; thus mere familiarity or association with non-central cues, like good shop
ambience or salesperson, leads to decision

• Marketing strategies are tailored to account for these

Psychographics

• Personality

– A set of distinguishing human psychological traits that lead to relatively consistent and
enduring responses to environmental stimuli

– Traits such as self-confidence, dominance, autonomy, deference, sociability,

defensiveness, and adaptability

– Major Personality Theories

• Psychoanalytic Personality Theory – id, ego, superego; the reality principle,

defence mechanisms (repression, projection, identification, reaction formation)

• Social Theories

• Trait and Factor Theories

– Can be a useful variable in analyzing consumer brand choices

Brands also have personalities, and consumers are likely to choose brands whose personalities match
their own
 • Brand personality : the specific mix of human traits that may be attributed to a particular brand;
eg one such identification

– sincerity (down-to-earth, honest, cheerful)

– Excitement (daring, spirited)

– Competence (reliable, intelligent)

– Sophistication (upper-class and charming)

– Ruggedness (outdoor-type and tough)

• Ruggedness – Levis, competence – BBC, LH

Lifestyle

• A person’s pattern of living as expressed in activities, interests, and opinions

• Lifestyle portrays the ‘whole person’ interacting with his or her environment

• Broadly, two segments : money-constrained (Wal-Mart’s target thru low prices bringing high
sales) or time-constrained (breakfast on feet – bagels rather than cereals)

• Lifestyle segmentation further into brand-user, product-user, situation segmentation…..

• AIO (activity, interest, opinion) analysis

Self-concept

• Self-image > a person’s perception of himself which includes his physical being, other
characteristics such as strength, honesty, and good humour in relation to others, and even
extending to include certain possessions and his creations

• How one views oneself – actual self-concept

• How one would like to view oneself – ideal self-concept

• How one thinks others see one – others’ self-concept

• Affects publicly consumed products as compared to privately consumed goods; congruence with
actual or ideal self-concept
Interpersonal Factors
Culture

• Culture refers to the cumulative deposit of knowledge, experience, beliefs, values, attitudes,
meanings, hierarchies, religion, notions of time, roles, spatial relations, concepts of the universe,
and material objects and possessions acquired by a group of people in the course of
generations through individual and group striving.

• Culture is a collective programming of the mind that distinguishes the members of one group or
category of people from another

• Culture consists of material and non-material components :

– Material culture: consists of all the physical substances that have been changed and
used by people, such as tools, automobiles, roads, and farms; in the context of markets
and CB, artifacts of material culture would include all the products and services which
are produced and consumed, eg Big Bazaar, Spencers

– Non-material culture: includes the words people use, the ideas, customs, and beliefs
they share, and the habits they pursue; eg the way in which consumers shop in
supermarkets, our desire for newer and better products, and our responses to the word
“sale”

Culture (….contd)

• Significance of culture lies in –

– The understanding of the extent to which people are more than just chemistry,
physiology, or a set of biological drives and instincts

– Thus, although all customers may be biologically similar, their views of the world, what
they value, and how they act differ according to their cultural backgrounds

Culture & Marketing Decisions

• Culture influences consumers – historically acknowledged

• All activities people engage in are culturally determined

• All purchases of goods are made either to provide physical comfort or to implement the
activities that make up the life of a culture

• …..an understanding of culture enables the marketer to interpret the reaction of consumers to
alternative marketing strategies.
 • Culture manifests through –

• National character

• Differences in subcultures such as blacks, Jews, and Hispanics in America, and regional
population groups in India

• Silent language of gesture, posture, food and drink preferences, and other nonverbal
clues to behaviour

• Symbols in society; semiotics – how signs function within a culture ie anything that
conveys a meaning : advertising uses this to invest products with meaning for a culture
whose dominant focus is consumption

• Taboos, or prohibitions in a culture, relating to various things such as the use of

particular colours, phrases, or symbols

• Ritualised activities in which people participate at home, work, or play, both as

individuals and as members of a group. Such behaviour occurs in a fixed episodic
sequence, and tends to be repeated over time

Cultural Manifestations

• Cultural meaning can be communicated by consumer goods

• Commonly observed consumption rituals

– Morning tea/coffee, newspaper, TV/radio news, weather, traffic

– Shower and grooming : items used

– Dresses for work : as appropriate

– Drives : car model

– En route visits temple, posts a b’day card

– Business meetings / lunch

– En route home takes in a movie, beverage

– Home for dinner over TV, then bed

• These activities are associated with various types of rituals : media, household, grooming,
religious, gift-sending, business, eating,entertainment / recreation, bedtime
 • Observe how rituals involve aspects of consumer behaviour processes in obtaining goods and
services, exchanging them, or using and disposing of them

Characteristics of Culture

Culture(s) is / (are)

• Invented : ideological system (ideas, beliefs, values, and ways of reasoning in defining what is
desirable or not), technological system, organisational system

• Learned

• Socially shared

• Similar but different

• Gratifying and persistent

• Adaptive

• Organised and integrated

• Prescriptive

• Cultural Values
• Can be defined as

• A widely held belief or sentiment that some activities, relationships, feelings, or goals are
important to the community’s identity or well-being

• Or

• Centrally held and enduring beliefs that guide actions and judgments across specific situations
and beyond immediate goals to more ultimate end-states of existence

• Values produce inclinations to respond t specific stimuli in standard ways

• A specific behaviour is expected to either help or hinder the attainment of some value or group
of values

• Consumers then, are motivated to engage in behaviours designed to enhance the achievement
of certain values and to avoid those behaviours perceived to hinder the attainkent of certain
value states

• Values vs attitudes
• Values are culturally determined

• Values are learned from social interaction, largely from our families and friends in settings such
as schools and other places of aggregation

• Values strongly influence consumer hehaviour; even though specific situations may dictate
slightly different actions, overall there is much similarity in consumer behaviour within a given
culture, such as in tastes, methods of shopping, etc

• A marketer must understand society’s basic value structure so that strategy decisions are
consistent with ingrained cultural patterns

• Much easier to harmonize with the culture than to attempt to change fundamental cultural
values

Core Cultural Values

• Individualism – interrelated with ideas such as freedom, democracy, nationalism, and

patriotism; founded on a belief in the dignity, worth, and goodness of the individual

• Equality

• Activity

• Progress and achievement

• Efficiency and practicality

• Mastery over the environment

• Religious and moral orientation

• Humanitarianism

• Youthfulness

• Materialism

• Social interaction and conformity

Values and Consumer Behaviour

• Culture is a strong force in the consumer’s milieu affecting his or her choice of behaviour

• Marketers have long recognised the importance of appealing to consumers’ values in marketing
• Values guide actions, attitudes, and judgments

Illustrative Listing of Indian Contrasts

INDIAN VALUES NON-INDIAN VALUES

Leaders are the masters

Competition

Individual Emphasis

Assertive

Formal Politeness

Impatient

Saving

Time - Fleeting

Respect for Youth

Conquest over Nature

Religion = Segment of Life . . . Intellectual, Gnostic

Verbal

Nuclear Family

Novelty

Eye-to-eye Contact

Analytical Problem Solving . . . Piece by Piece

Happiness = Wealth Accumulation

Leaders are the servants

Cooperation

Group Emphasis
 Passive

Informal Courtesy

Patient

Sharing

Time - Constant

Respect for Age

Harmony with Nature

Religion = Way of Life . . . Sacramental, Symbolic

Non-verbal

Extended Family

Tradition

No Eye-to-eye Contact

Holistic Problem Solving . . . Vision of Total

Happiness = Spiritual Harmony

Implications of Cultural Change

for the marketer

• Values are dynamic, not static or fixed

• Cultural change may happen gradually, as an evolution, or rapidly; the latter places more stress
on the system

• Marketers need

– to understand that cultures do change and

– to appreciate the implications this may have for consumer behaviour

e.g. frozen foods

Cultural Change & Marketing Strategies

• What the consumer wants, expects, associates

• Will affect product planning, pricing, distribution channels, promotion

• Increasing importance of market segmentation

– Knowledge of consumer value orientations provides a measurable set of variables,

related to needs, which gives the marketer deeper insight

– Growing diversity of individual tastes, abetted by increasing incomes and the concept of
pleasure

– Finer segmentation of the market on the basis of value profiles

Cross-cultural Understanding of Consumer Behaviour

• Global outlook

• Cultural differences among international and regional markets, influence consumer behaviour

• Time

• Thought and communication process

• Personal space

• Materialism and achievement

• Family roles

• Religion

• Competitiveness and individuality

• Social behaviour

e.g. Goodyear : found consumers make three key decisions when buying
tyres – outlet, brand, and price – and the sequence of their pairing critical; identified four groups
for global marketing purposes : quality buyers, value buyers, price buyers, and commodity
buyers. While segment sizes vary from country to country, the elements in each segment’s
profile remain largely the same; the extent to which these elements vary determines how
Goodyear must customise its marketing programs

Decision areas for the International Marketer

• Elements of CB analysis in a cross-cultural setting

– Determine underlying values and their rate of change; what are more strongly held

– Evaluate the product concept as it relates to this culture : does it harmonize with
current and evolving values; what changes; positive values; satisfies what needs

– Determine characteristic decision-making process

– Determine appropriate promotion methods

– Determine appropriate distribution channels

– Determine appropriate pricing approaches

Market Segments

• As in domestic, successful marketing in international also requires mkt segmentation

• Illustrative case of one survey identifying across 14 countries, five distinct global segments with
shared attitudes, values, actual purchasing patterns:

– Strivers

– Achievers

– Pressureds

– Adapters

– Traditionals

But their consumption pattern can be distinct

Marketing Strategies

• Across boundaries-cultures, separate marketing mixes and programs may be needed

– Product considerations : home appliances use in Germany vs Spain – 128 : 54

– Promotion considerations

– Distribution channel considerations

– Pricing considerations
 Indian Culture & Changes

• Cultural values in India are good health, education, respect for age and seniority. But in our
culture today, time scarcity is a growing problem, which implies a change in meals. Some
changes in our culture:

• 1.Convenience: as more and more women are joining the work force there is an increasing
demand for products that help lighten and relieve the daily household chores, and make life
more convenient. This is reflected in the soaring sale of Washing machines, microwaves,
Pressure cookers, Mixer grinders, food processors, frozen food etc.

• 2.Education: People in our society today wish to acquire relevant education and skills that
would help improve their career prospects. This is evident from the fact that so many
professional, career oriented educational centers are coming up, and still they cannot seem to
meet the demand. As a specific instance count the number of institutions offering courses and
training in computers that has opened in your city.

• 3. Physical appearance: Today, physical fitness, good health and smart appearance are on
premium today. Slimming centers and beauty parlours are mushrooming in all major cities of
the country. Cosmetics for both women and men are being sold in increasing numbers. Even
exclusive shops are retailing designer clothes.

• 4.Materialism: There is a very definite shift in the people’s cultural value from spiritualism
towards materialism. We are spending more money than ever before on acquiring products
such as air-conditioners, cars CD players etc, which adds to our physical comfort as well as
status.

Subcultures

• Culture - consists of basic behavioural patterns which exist in a society

• However, all segments of a society may not have the same cultural patterns

• Within the heterogeneous national society more homogeneous subgroups can be distinguished

• These groups are subcultures – having values, customs, traditions, and other ways of behaving
that are peculiar to a particular group within a culture, eg students, academics, professional
sportspersons, musicians, etc

• Individuals may be members of more than one subculture; thus marketers must identify the
most relevant sub…..

Sub-cultural Segmentation
• Marketers also segment overall societies into smaller subgroups (subcultures).

• A subculture consists of people who have the same ethnic origin or customs or behaviors.

• Sub-cultural divisions are based on various socio-cultural and demographic variables such as
nationality, religion, geographic locality, race, age, and gender

• CB in the sub-cultural context explores marketing opportunities created by specific sub-groups

within society

Sub-cultural Segmentation

• Marketers also segment overall societies into smaller subgroups (subcultures).

• A subculture consists of people who have the same ethnic origin or customs or behaviors.

• Sub-cultural divisions are based on various socio-cultural and demographic variables such as
nationality, religion, geographic locality, race, age, and gender

• CB in the sub-cultural context explores marketing opportunities created by specific sub-groups

within society

Two Broad Subcultures

• Ethnic – normally minority group of a society; identification based on what a person is when
born; descend from common forbears; tend to reside in the same area, distinct from other
groups, over generations; marry within; share a common sense of peoplehood (kindredness)

• Commonly, three ethnic types – race, nationality, religion

• Age

• youth subculture

• olders subculture

Youth Subculture

• Money to spend – discretionary almost entirely

• Primary purchaser product patterns – clothes, music, entertainment, travel, cosmetics, fashion
accessories, electronic items (including games)

• Style, colour, make, model

• Emergence of brand loyalties; may be long lasting

• Shopping behaviour – rely more on personal sources for information on high value products and
on media for others

• At the product evaluation stage, price (….discounts) and brand perceived as important

• Promoting to youth – all media; gimmicky ads, use of celebrities, sports themes, humour

Olders Subculture

• Product p – brand, demand guarantees and warrantees, less experimenting unless

recommended

• Shopping behaviour – near homes, store loyalty particularly with high income and high value,
value for money

• Promoting – all media; quality, comfort, independence

MajorIndian Sub-cultural Categories

Categories Examples

Nationality original nationality : indian, nepali,

bangladeshi, pakistani ancestral pride is manifestedin CB termsby their
consumption of ethnic foods, travel to
the homeland, purchase of ethnic cultural
artefacts, art, music

Religion hinduism, islam, buddhism,

jainism, christianity (140
different organised religious subcultures
symbolic and ritualistic products

Geographical regions NorthIndian, SouthIndian,

North Eastern, Western, Eastern, etc many languages, food
habits, clothing, etc

Race Aryan (high consumption/ experimental/ flamboyant), Dravidian

(conservative/ subtle/ non-experimental), Mongoloid (fashion conscious/ trendy/ techno-
inclined)
 Age appreciate different music, movie, lit, clothing
between generations

Gender Traditionally society assigns certain traits to males and females

‡Males: aggressiveness, competitiveness, providers
‡Females: gentleness, talkativeness, neatness, nurturers
‡Within every society certain products are either male or female eg.Cigars, pants, ties-males
and colognes, hair dryers, hair sprays-females

internet use: Males seek out investments, free software, discovery;females-reference materials,
online books, medical information

Men are likely to purchase more on the internet than women because of the latter’s
concern with privacy and security

Occupation govt, business, professional, exec

Social class upper, middle, lower

Social Class

• A group consisting of a number of people who have approximately equal positions in a society

• Positions may be achieved or ascribed/ inherited

• Opportunity may exist for upward or downward movement to other classes

Basic Characteristics of Social Class

• Social class exhibit status – linked to status ie one’s rank in the social system, as perceived by
other members of society

– Symbols of status – the need for prestige and how products satisfy this; the attributes of
such products

• Blurring of symbolism – technology, mass marketing, functionality, upward shift

of products

• S c are multidimensional – not determined solely by one criterion; mix of occupation, income,
heredity

• S c are hierarchical – vertical order

• S c restrict behaviour – stay within a class due common traits

• S c are homogeneous – similar attitudes, activities, interests, and other behaviour patterns –
thus similar media, purchases, shopping locations; which marketers can take advantage of thru
suitable mktg mixes

• S c are dynamic – closed and open systems; if latter, people can move up or down thru
achievements

Social Class categorization

• Upper, middle, lower

• Upper-upper, lower-upper, upper-middle, lower-middle, upper-lower, lower-lower

• Problems in measurement : based on an average of the person’s position ignoring

inconsistencies like high income-low education; assumed to be stable ignoring mobility; ignores
reference group effects from other classes; examines usually only the adult male wage earner in
the family

Role of social class in segmenting markets

• S c and income related to lifestyle patterns

• S c and income related to consumer behaviour patterns – product purchase patterns : shopping
habits, store preferences, and media usage

• S c may not often be a relevant basis ie segmentation by other criteria, eg age / gender, more
appropriate

• For undifferentiated products benefits may be less

• S c segmtn is usually more effective when used in conjunction with addl variables eg life-cycle
stage, ethnic group

Social Class and Consumer Behaviour

• Products and services consumed

• Shopping behaviour

• Promotional response patterns

• Price-related behaviour

Reference Groups & Opinion Leaders

• Group – consists of people who have a sense of relatedness as a result of interaction with each
other

• Or

– Two or more individuals who share a set of norms, values, or beliefs and have certain
implicitly or explicitly defined relationships to one another such that their behaviours
are interdependent

• Classification of groups by

– Content or function

– Degree of personal involvement : primary and secondary

– Degree of organisation : formal and informal

• Group properties – status, norms, role, socialisation, power

Reference Groups

• Reference groups are those an individual uses (ie refers to) in determining his judgments,
beliefs, and behaviour OR one whose presumed perspectives or values are being used by an
individual as the basis of her/his current behaviours – use as guide for behaviour in a specific
situation

Types of Reference Groups

• Membership

• Nonmembership

– Anticipatory aspirational group

– Symbolic aspirational group

• Positive versus negative

• Influence on consumers group properties (ref. Sl. 59)

Reasons for reference-group influence

• Informational benefits

• Utilitarian benefits

• Value-expressive benefits- +ive / -ive may come into play

• Comparative influence
 Variability of reference-group influence on consumers

• Variability among products – conspicuousness; seen or identified by others; influence on prod

purchase or choice of brand; publicly / privately consumed luxury / necessity : impact on prod /
brand

• Variability among group – urge to conform : group cohesiveness; proximity to grp members;
indiv’s relationship; similarity to grp characteristics, outlook, values

• Variability among individuals – personality; social character; demographic

• Variability by type of influence – type of product and relevance of the influence in terms of
informational, utilitarian, value-expressive

• Variability by situation – nature of the consumer situation and the reference influence connect :
patronage of retail stores, home maintenance services, etc

Opinion Leaders

• People who are able to exert personal influence on others, in a given situation

• Ability to influence others through verbal communication, as others seek advice and info

• Can influence +ively or –ively

• Consumers tend to be influenced by those with whom they identify

• O L present in every group and each status level, but may be more functional at higher income /
status level

Characteristics of Opinion Leaders

• Long-term involvement with the product category – enduring involvement

• Enhanced knowledge about the product, leading to opinion leadership

• Tends to be product specific

• Functionss through communications and observations

• Usually within the same social-class, but viewed as of higher status

• Tend to be more gregarious and willingness to act differently

• Greater exposure to mass media, relevant to their interest

• Expertise and sociability

• Tend to be older in age, particularly in eastern world, eg India, Indonesia, Korea – value maturity
 Situations

• High involvement product purchase – seek info and advice

• Low involvement purchase – less likely to seek direct opinion; but may observe others group
members, esp those viewed as leaders

• Stimulating opinion leadership – marketers can advertise with endorsement of health related
products by doctors

• Generate communications concerning a product by sending samples to potential and influential

customers – cosmetics to beauty clinics; salesmen and retailers can encourage current
customers to pass on to others by word-of-mouth

• Market mavens – neighbourhood expert

Family

• A type of small group

• Often predominant in its influence over consumer behaviour

• Primary group (characterised by intimate, face-to-face interaction)

• Reference group (with members referring to certain family values, norms, and standards in their
behaviour)

• Strongly bonded group, functioning as an economic unit, earning and spending money

• Thus individual and collective consumption priorities, decide on products and brands, where to
buy, how to use to further family members’ goals

• Moulded often by the family they grew up in

FLC

• Bachelor stage

• Newly married couples

• Full Nest I

• Full Nest II

• Full Nest III

• Empty Nest I

• Empty Nest II
• Solitary Survivor I

• Solitary Survivor II

Income and needs vary with change in the FLC stages

- buying behaviour will differ accordingly

Non-traditional FLC

Some of the stages identified :

• Bachelor I

• Young couple : female head; married/ unmarried; no kids

• Full Nest I : female head; md / unmd; kid<6

• Single Parent I / II

• Delayed full nest : female head 35-64; youngest child 6 or +

Family Decision-making

• When two or more members are involved as opposed to individual decisions

• How money is to be spent

• Role structure (instrumental and expressive; initiator, influencer / opinion leader, info gatherer,
decision maker, purchaser); power structure (patriarch, matriarch, equalit); resolve conflict

• Husband / wife influences :

• H tends to dominate in products like hardware, sports eqpt, financial svcs, etc

• W tends to dominate – women’s clothing, toiletries, groceries, kitchenware, child clothing, etc

• Autonomous decisions – women’s jewellery, cameras, men’s casual clothing, toys and games

• Joint decisions – fridge, furniture, TV, family car; greater tendency for this now, with influence of
working wives

• Implications for marketers depending on who decides :

• Media selection

• Advt msge target

• Requirement of separate ad campaigns

• Education, occupation, and income of hus/ wife shapes who tends to decide; the better person
does so

• Increasing influence of children

• Perceived knowledge of prod, importance to them, more purchasing power

• The effects of authoritarian parents, neglecting, democratic, permissive

Interpersonal Factors and Symbolic Consumption

• As recognized since long, consumption serving to signal social status, group membership, or self-
esteem is a socially contingent activity

• The corresponding expenditures are motivated mainly by the symbolic value they have for
transmitting the signal

• This presupposes some form of social coordination on what are valid, approved symbols

• Unlike consumption not serving signaling purposes, the technological characteristics of the
goods and services consumed may be secondary that counts is their socially agreed capacity to
function as a symbol 

• Consumption central to meaningful practice of daily life

• Consumption choices not only from product’s utilities, but also symbolic meanings

• Not only to create and sustain self, but also to locate in society

• The latter may also enslave us in the illusive world of consumption

Environmental Factors
Product offerings and innovations

• Product exists in an environment

• The nature of the physical product and service features are influenced by consumer behaviour

– What size, shape, and features should the prod have

– How should it be packaged

– What aspects of service are most important to consumers

– What types of warranties and service programs should be provided

– What types of accessories and associated products should be offered

• Consumers’ attempts to directly evaluate physical prod attributes – intrinsic cues

• Difficulty in distinguishing between different prod offerings on the basis of direct attributes, eg
taste of colas

• May be able to discriminate between brands, but not be able to determine whether these
differences are important in predicting which brand will provide greater satisfaction, eg best
grade of waterproofing, adhesives, carpeting, paint, etc

• Use of extrinsic cues : consumer’s experience, how cues are encoded (wrapper saying ‘freshly
packed’, ‘hygienically sealed’); not encoded meaningfully (chemical names); additional
inferential beliefs or interpretations (by association)

Product offerings-new

• New-product innovation is an essential element of market dynamics

• Among various definitions – ‘an innovation is a product, service, attribute, or idea that
consumers within a mkt segment perceive as new and that has an effect on existing
consumption patterns

• Continuous innovns – least disrupting to established consumption patterns; prod alteration only,
eg fluoride toothpaste, salt in toothpaste, auto model variants

• Dynamically continuous innovns – more disrupting, but usually not altering estbld patterns; new
prod or alteration, eg wall TV, mobile phone with qwert key pad

• Discontinuous innovns – new prod with new behaviour patterns, eg genset to inverters, pc to
laptop, swipe card tech

• Some offerings and innovations influence how, when, where, why, or whether we acquire
products

• Mkt segmentation and segment consumer behaviour lead to importance of how consumers
perceive the marketer’s prod

• Cause for product positioning

• Positioning on : prod features, benefits, usage (or situation, eg Campbell’s soup, Gatorade), user
(Johnson baby oil), competition

Delivering product
• The place variable involves consideration of where and how to offer products and services for
sale

• Also concerned with the mechanisms for transferring goods and their ownership to consumers

• What type of retails outlet

• Retail outlets – location and number

• Logistics of supplying retailers

• How much control necessary over channels

• What image and clientele should the retailer seek to cultivate

The When

• The time dimension :

– when do consumers buy – seasonality, occasions, demographics;

– also working hours, free time, 24 hours necessity;

– purchase time – existing and new prods;

– in-shop browsing and decision-making time

Value ….or, price

• Marketers must make decisions regarding the prices to charge for the company’s products or
services and any modification to those prices

• These will determine the revenues the firm will generate

• How price-aware are consumers in the prod category

• Price sensitivity among brands

• What reduction needed to encourage buying during new intros and promotions

• What discount size for cash, seasonality, etc

Letting the consumer know

• Promotion to communicate aspects of firm and its offerings – goals and methods

• Methods of promos and specific sits

• Most effective means for gaining attention

• Methods which best convey intended msge

• Advt repeat - periodicity

Public Policy Issues

• Comparative advertising – compare the co’s brand directly with competitor’s; present prod info
on which consumers can base purchase decisions; encourages competition & can lead to
lowering of prices (Pepsi-Coke)

– Consumers dislike comp ads : due lacking in reliability and usefulness

– Confuse consumers and foster –ve attitudes

• CB and govtl decision making

– Govt services : govt provision of public svcs can benefit significantly from an
understanding of the consumers; eg public tptn – metro vs car (address long lines, last
mile issues, crowding and behaviour)

– Govt & other agencies for consumer protection : regulating business practices to protect
consumers’ interest and welfare; also designed to influence certain consumer actions
directly; protection against claims not substantiated by research (food supplements,
toothpastes); anti-smoking campaigns

• Consumerism – activities of govt, business, and independent orgns that are designed to protect
the rights of consumers

• Why :

– Disillusionment with the system

– Performance gap

– Consumer info gap

– Advertising content

– Impersonal and unresponsive mktg institutions

– Intrusions of privacy

Consumer’s Fundamental Rights

• Right to safety

• Right to be informed

• Right to choose
• Right to be heard

Safety

• Unsafe product and physical injury

• Drug controller : medicines and allied prods

• Certification authorities : RTOs, DGCA, Municipality (elevators)

• ISI, AGMARK, etc

Information Receipt, Processing, and Outcomes

Information

• Deception : capacity to deceive – puffery to deception; claim-fact discrepancy; claim-fact

interaction

• Corrective advtg

• Affirmative disclosure

• Availability of sufficient info – unit pricing, nutritional labeling, dating, information overload

Choice

• Consumers must have choice to benefit from market forces interplay

• A different take – consumers should be given not what they want, but what is ‘best’ for them

• Too much choice may confuse and lead to unsuitable choice

Hearing and redressal

• Consumer inputs as a means of setting govt policies and complaints directed to businesses – the
facility and response

• Restitution

• Punishment

Environmental Concerns
• Right to a clean environment

• Concern about potential environmental damage caused by consumer products and packaging

• Companies trying to protect the environment – majority consumers for it

• Change in shopping and lifestyle to help protect the environment

• Consumer mindset changing – willingness to pay extra for the environment – yet not enough in
ratio; a challenge

Privacy

• Consumer information collected, merged, and exchanged through computer and

communication technologies has become a tool of power

• Concern over threats to privacy

• Public still willing to give personal info when convinced about the need and fairplay

• Consumer privacy protection policies

Social and ethical issues

• Good businesses have responded to this responsibility :

– Thru varied constitution of their Board of Directors, emphasis on ethics, and use of
social performance disclosures (social audits)

• Marketing as the most visible activity of an orgn thus has the onus of developing useful
products, fair pricing of prods and svcs, and promoting them in an accurate manner

• What should be considered ethical : the relevance of an ethical base

– Relative standards : utilitarianism, intuitionism

– Absolute standards

• Consumer responsibilities : obligation – choose wisely, keep informed, put safety first, help
protect the environment

Marketer response to consumer issues

• Understanding the issues – heed the consumer voice and complaints

• Designing a consumer response system – understanding what consumers experience,

establishing a consumer advisory board, listening to consumers and responding effectively,
estblng a corp consumer affairs/ svcs unit, educating consumers
 Information Receipt, Processing, and Outcomes

Stimulus, Exposure, and Attention

• Stimulus serves as the raw material to be processed

• Internally produced stimulus like hunger pangs, and stimuli which impinge upon the five senses
of taste, touch, smell, vision, and hearing

• A stimulus is not in isolation, but of a larger stimulus situation consisting of many stimuli

• Acquisition process enables consumers to confront certain stimuli in their environment and
begin to process them

• Exposure, a part of the acquisition process, has two major categories :

• Active search : to seek out specific types of stimuli, eg nutritional content per serving of
a baby food; influenced by this factor under conscious control; internal, external

• Passive reception : consumers confront stimuli in the process of living their daily lives;
exposure to advts (TV, magazines), news reports, info as by-product of shopping
activities; advtsr tries to counter zapping by chameleon advt

• Sensation

• Awareness threshold

• Differential threshold; Weber’s Law

• Attention : allocation of processing capacity to stimuli

• Voluntary and involuntary – former enables filtering, the latter helps keep in touch with
environment

• Characteristics – can attend to a limited number of items at any time, many stimuli
require attention to be processed while some do not, can be allocated to stimuli on a
rapid basis

• How consumers allocate their attention – mainly affect involuntary attention :

• Selective attention : stimulus factor – colour, novelty and contrast, size and position,
humour,

• Selective attention : individual factors – attention span, adaptation, perceptual vigilance

and defence

Encoding & Decoding of Message Processing

• Encoding – a highly individualised process that is used to derive personal meaning from stimulus
experiences

• Subsequent actions and thoughts based on interpretations derived from stimuli rather than on
the actual stimuli themselves

• Processing the sensations (from the stimulus) – individual ability, knowledge and experience

– Feature analysis

– synthesis stage

– catergorisation

• Opportunity – situation, time, aids

• Motivation or willingness – inclination, incentive to engage

• Depth of processing – degree of effort consumer expends in developing meaning from the
stimulus

Perception

• Perception is the way in which an individual gathers, processes, and interprets information from
the environment.

• Perception is the process of making sense out of an experience – the imputing of meaning to
experience

Factors ImpactingPerception

• Internal:

Sensory Abilities
Comprehension Skills
Memory Capacity
Needs
Experience/Knowledge
Involvement
Confidence
Pre-dispositions
(Attitudes, Beliefs, Mood)

• External:
 Stimulus(I) Characteristics:
Motion, Intensity, Shape,
Format, Color, Contrast,
Location, Size
Competing Stimuli

Setting Characteristics

Selective perception

• The various elements of selective perception are:

selective exposure
selective attention
selective comprehension
selective retention

Selective comprehension

• Selective comprehension:

This stage involves interpreting discrepant information so that it is consistent with

beliefs and attitudes

• Perception

• The process by which an individual uses information to create a meaningful picture of the
world by

• selecting,

• organizing

• interpreting

• Perception is important because people selectively perceive what they want and it affects
how people see risks in a purchase.

Selective Perception

• Filtering

• exposure,

• comprehension, and

• retention
 – in the human brain’s attempt to organize and interpret information.

• Selective exposure

– Consumers can pay attention to messages that are consistent with their own attitudes
and beliefs

– Consumers can  ignore messages that are inconsistent.

• Selective comprehension

– Involves interpreting (distorting?) information so that it is consistent with a person's

attitudes and beliefs.

• Selective retention

– Consumers do not remember all the information they see, read, or hear.

• Subliminal perception

– Consumers see or hear messages without being aware of them.

– This is a hotly debated issue with more popular appeal than scientific support.

– Research suggests that such messages have limited effects on behavior

Perceived Risk

• Anxieties felt

• Consumes  cannot anticipate the outcomes of a purchase

• Believe that there may be negative consequences.

• Marketers try to reduce a consumer's perceived risk and encourage purchases by strategies
such as providing

– Free trial of a product

– Securing endorsements from influential people

– Providing warranties and guarantees.

Learning

• Those behaviors that result from repeated experience and thinking.

Behavioral Learning

• The process of developing automatic responses to a situation built up

• through repeated exposure to it.

Four variables central to how consumers 

learn from repeated experience are:

• Drive - a need that moves an individual to action

• Cue - a stimulus or symbol perceived by consumers

• Response - the action taken by a consumer to satisfy the drive

• Reinforcement - the reward

– Employed in conjunction with the methods of learning connections :

• Classical conditioning

• Instrumental conditioning

Marketers use two concepts from behavioral learning theory:

• Stimulus generalization - occurs when a response elicited by one stimulus (cue) is generalized
to another

– using the same brand name for different products is an application of this concept

• Brand extension aspects play on this and marketers frequently use this to
advantage (reference should be made vis-à-vis brand management)

• Stimulus discrimination - refers to a person's ability to perceive differences in stimuli

– the advertising for Hayward X000 beers is an example of this concept

Cognitive learning

• Involves making connections between two or more ideas

• Or, simply observing the outcomes of others’ behaviors and adjusting one's accordingly

Brand loyalty

• Is a favorable attitude and consistent purchase of a single brand over time

• Brand loyalty differs across cultures, countries, etc

Beliefs and Attitudes Attitude Formation

• A learned predisposition to respond to an object or class of objects in a consistently favorable
or unfavorable way.

• Shaped by our values and beliefs, which are learned.

• Values

– personally or socially preferable modes of conduct or states of existence that are

enduring.

• Beliefs

– consumer's subjective perception of how well a product or brand performs on

different attributes.

Degree of learning

– Rate, wearout, maintain, extinction, recovery, recall

Memory and Retrieval

• Experience has shown that all that consumers have ‘learned’ is not always readily retrievable
– eg brand names, shelf location, etc may be recalled easily, but other details not so

• Structure of memory and its operation is relevant to divine consumer behaviour

Memory Systems – characteristics

Structure of memory and its operation :

• Multiple store approach – sensory, short-term, long-term

– Sensory : fraction of a second, all perceived by sensors, direct representation of

reality, forgetting by decay (size, shape, colour – used heavily by advtsrs)

– Short-term : < 1 min, limit 7 items approx, indirect (thru chunking), decay (tele nos.)

– Long-term : many years, unlimited store, indirect (clustering via meaningfulness),

forget due interference (new phone models and features)

• Levels of processing – treatment of stimuli how rigorous

• Activation model – stimuli activating only an appropriate section of memory; spreading

activation (eg sports-car attributes extending to info on other sports-cars)

Retrieval of information
• Accessing information in long-term memory and activating it into consciousness

• Correlated with other material from s-t memory and processed into meaningful package for
use

• Influences :

– Extent of original learning

– Goal of original learning

– Contextual relevance

Advertising applications

• Advtg msge with unique aspects – long term impact on memory

• Order in which material is presented – beginning and end most remembered

• Msges that encourage immdte rehearsal – remembered (eg tele no., address)

• Chunked – more processing and better retention (7 items)

• Amount of info transferred to long term memory is a function of time avble for processing

• Cue-dependent – eg babbling mountain brook for healthy water

• Meaningfulness of individual – better retained

Methods

• Visual material

• Interactive imagery

• Showing mistakes

• Incomplete msges

• Mnemonic techniques (jingles, numbers, melodic patterns)

• “Habit strength" - said to develop as a function of practice

• Habits were depicted as stimulus-response connections based on reward

• Responses (rather than perceptions or expectancies) participate in habit formation, the

process is gradual, and reward is an essential condition

Adoption & Diffusion of Innovation

• Any idea, practice, or material artifact perceived to be new by the relevant adopting unit

– Continuous, dynamically continuous, discontinuous

• Adoption – acceptance and continued use of a product or brand by an individual

• Adoption process – awareness, comprehension, attitude, legitimation, trial, adoption

• Some consumers pass thru the adoption process early in the product’s life or it could be later

• Relevant for marketers : early stages of the adoption process, mass media appear most
effective in creating awareness; later stages : personal sources of info, so effective personal
selling and word-of-mouth communications at these points

Diffusion Process

• The nature of the process by which innovations spread

• Diffusion process refers to a group phenomenon (as against the indiv phenomenon for
adoption), indicating how an innovation spreads among consumers

• Trickle-down, trickle-across, subcultural group’s propagation, leadership

• Innovators, early adopters, early majority, late majority, laggards

• Factors influencing rate of diffusion – relative advantage, compatibility, complexity,

trailability, observability, cost

• Marketing implications – from product design to packaging, distribution and selling, to

promotion

Purchase, Consumption, & Post-purchase

• Problem Recognition(awareness of need)--difference between the desired state and the actual
condition. Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to
eat.
Can be stimulated by the marketer through product information--did not know you were
deficient? See a commercial for a new pair of shoes, stimulates your recognition that you need
a new pair of shoes.

Problem Recognition

• Marketers develop products and services to help consumers solve problems

• Marketers also attempt to help consumers anticipate and recognise problems ….. sometimes
well in advance of their occurrence
 Process of Problem Recognition

• Consumers must become aware of the problem through information processing arising as a
result of internal or external stimuli

• This leads to motivating consumers; then arousal and activation to engage in some goal
directed activity ie purchase decision-making

• This response action for solution finding depends on the

– magnitude of the discrepancy between the current state and the desired or ideal,
and / or

– the importance of the problem for the concerned consumer

• Any time the desired state is perceived as being greater than or less than the actual state, a
problem exists

• Important to appreciate that it is actually the consumer’s perception of the actual state that
stimulates problem recognition and not some ‘objective’ reality

• Relative importance also is a critical concept in several purchase decisions because almost all
consumers have budget or time constraints

Types of Consumer Problems

Immediacy of problem solution is a relevant aspect in determining

– How soon solution is needed

– Length of time involved in decision-making

– Intensity of decision effort

• Routine – those where the difference between actual and desired states is expected to be felt
and would call for immediate solution

• Emergency – unexpected and need immdte solution

• Planning – expected in the future, but immdte solution not called for

• Evolving – unexpected and there is no need for an immdte solution

Activating Problem Recognition

• Influencing the desired state

• Influencing perceptions of the actual state

• Influencing the timing of problem recognition

• Utilising problem-recognition information

– Analyzing purchase-intention categories

– Analyzing conversion of purchase intentions

Types of Decisions

• The myriad decision options of today’s market place may be summed up in five main types :

– What to buy

– How much to buy

– Where to buy

– When to buy

– How to buy

• Routine Problem Solving or Nominal Decision-Making

• Limited Problem Solving or Limited Decision-Making

• Extensive Problem Solving or Extended Decision-Making

All are related to the level of involvement

Information Search

• Knowledge obtained about product / services, or facts related to these, thru mental as well as
physical information-seeking and processing activities which one engages in to facilitate
decision making regarding some goal-object in the marketplace

• After problem recognition, the natural progress is to information search

• Forms of search :

– Prepurchase search

– Ongoing search

– Internal search

– External search

Types and Sources of Information

• Types :

– Info about existence and availability of products and service offerings

– Info useful in forming evaluative criteria

– Info on properties and characteristics of alternatives

• Sources :

– Marketer dominated sources

– Consumer sources

– Neutral sources

• The amount of external search that consumers engage in varies considerably across
individuals and different purchase situations

• Influences on external-search behaviour :

– Market conditions

– Buying strategies

– Individual factors

– Situational factors

– Perceived risk

• Influencing situations

• Types of risk

Evaluation Process

• Evaluation involves those activities undertaken by the consumer to appraise carefully, o the
basis of certain criteria, alternative solutions to market-related problems

• The search process determines what the alternatives are, and in the evaluation process they
are compared so that the consumer is ready to make a decision

Criteria

• The standards and specifications the consumer uses in evaluating products and brands

• Definition of the preferred product/brand features that consumer seeks in a purchase and
may be either objective or subjective in nature
• Evaluative criteria may vary from one consumer to another, as also product to product

• Criteria evaluated by consumer are likely to differ in their importance, usually with one or two
criteria being more important than others

• Types :

– Salient

– Determinant

– Critical

The marketer should be careful in assuming that a certain feature ranked as

most important by consumers is actually determinant

• Reducing the range of alternatives

• Evaluating alternatives

– CPB (choice by processing brands)

– CPA (choice by processing attributes)

– Though CPB strategy seems to be common, research also indicates that consumers in
early stages of the decision process use a CPA strategy, switching to a brand-
processing approach in later stages

– Consumers may use noncompensatory or compensatory processes as decision rules in

evaluating product-alternative attributes

• Noncompensatory decision rules

– Disjunctive rule : setting minimum stds and selecting one for eliminating

– Conjunctive rule : setting minimum level of acceptability for each criterion

– Lexicographic rule : assessment on criteria in order of importance priority

– Sequential elimination rule : establish acceptable performance minima for each

evlautive criterion and then proceed to evaluate each brand and liminate any ehich do
not measure up to these minima

Decision rules (….contd)

• Compensatory decision rule - consumers allow perceived favourable ratings or brand

evaluative criteria to offset unfavourable evaluations
• Consumers tend to initially use rules enabling easy reduction of alternatives, and then use
more rigorous one to assess the remaining brands for a final decision

Important for Marketer

• Determine sources of information

• Determining source influence

• Determining which criteria are used by consumers

• Determining the relative importance of criteria used by consumers

• Determining consumers’ evaluations of brand criteria performance

• Determining consumers’ cue usage

• Influencing consumers’ evaluation

– Altering cue characteristics

– Altering information value

However, criteria that fly in the face of consumers’ common-sense perceptions find
difficulty in acceptance

Choice Making and Purchase Decision

• Why do people shop ?

– Personal motive

– Social motive

• Except for a very small percentage, the vast majority of sales takes place in stores

• Choosing an outlet or a store is critical step in purchase, and hinges upon various factors

Choice of Outlet

Determinants

• Store location – intercity, intracity, interstore choices

• Store design and physical facilities

• Merchandise (and image)

• Advertising and sales promotion

• Personnel

• Customer services

• Clientele

In-store purchasing behavior

• Merchandising techniques

– Store layout and traffic patterns

– Point-of-purchase media

– Product shelving : shelf height, shelf space, price awareness, promotional pricing,
discount coupons

– Packaging

– Brand choice : among known brands, between known brands and local/private brands

– Personal selling effects : buyer-seller dyad

Non-store Purchasing

• Direct marketing

– TV home shopping networks

– Mail order

– Internet

– Door to door selling

• Shopping convenience most important motivator

• Subject to risk of buying factor

Purchasing Patterns

• Two important patterns

– The extent to which consumers develop repeat purchasing patterns : nature of brand
loyalty, effect of out of stock conditions

– The extent to which purchases are unplanned : impulse purchasing – pure impulse,
suggestion impulse, reminder impulse, planned impulse

Paying for the Purchase

• Store checkouts should be easy

• Acceptance of a variety of credit and debit cards

• Smooth cash transaction

• Depending on the store layout/system, easy bagging

Consumption and Post-consumption behavior

• The post-purchase phase – product installation and/or use; decisions on products or services
related to the item purchased

• Product set-up and use :

– Providing information and assistance

– Understanding the user’s consumption system

– Decisions about warranties

• Related products and services

– Buyers’ interests in related items

Post-purchase Evaluation

• Consumer satisfaction/ dissatisfaction – disconfirmation of expectations : positive and

negative; can be related to instrumental performance and symbolic performance

• Consumer complaint behaviour

• Post-purchase dissonance : will motivate the person to reduce it; will avoid situations that
produce more dissonance

• Consumer’s dissonance : probability and magnitude can be related to –

– Degree of irrevocability of decision

– Importance of decision to consumer

– Difficulty of choosing among alternatives

– Individual’s tendency to experience anxiety

Dissonance Reduction

• Changing product evaluations – increase desirability of the purchased item

• Seeking new information – to confirm the wisdom of their choice; may be through devaluing
alternatives

• Changing attitudes – decrease importance of the purchase decision

• Marketing implications for the marketer’s action :

– Confirming expectations

– Inducing attitude change

– Reinforcing buyers

Product Disposition

• Disposition alternatives and determinants

• Disposition choice can be influenced by :

– Psychological characteristics of decision maker

– Factors intrinsic to the product

– Situational factors extrinsic to the product

• Alternatives for disposing of (routinely) :

– Get rid of it permanently – trash it, give it away, trade it, sell it

– Get rid of it temporarily – rent or loan it

– Keep - for use, new use, or store

• Marketing implications

– Public policy effects of disposition, eg environment

– Marketing strategy factors (to facilitate disposing of by consumer

• Disposing of to raise funds for new purchase

• Disposing of to create space for new

• Forecasting of replacement buys

• Identification of reasons for disposing of may enable marketer to gain

knowledge of why consumer wants replacement

Indian Consuming Classes

 Snapshot

• 300 million odd middle class - the Real consumers - is catching the attention of the world

• Estimated over 600 million effective consumers by 2010-12; India is bound to emerge as one of
the largest consumer markets of the world

• About one-third of households in India can afford white goods, such as washing machines,
refrigerators and air conditioners.

• However, consumers are price-conscious, and demand for many white goods is restrained by
long replacement cycles in urban areas.

• India has around 192 million households, as per India's Marketing Whitebook (2006) by Business
World

• Of these only a little over six million are 'affluent' – that is, with household income in excess of
INR 215, 000.

• Another 75 million households are in the category of 'well off' immediately below the affluent,
earning between INR 45,000 and INR 215,000.

• This is a sizable proportion which offers excellent opportunity for organized retailers to serve.

Consumer Profile

• One of the key reasons for increased consumption is the impressive growth of the middle class.

• Around 70 per cent of the total households in India reside in the rural areas.

• The total number of rural household estimated to rise from 135 million to 153 million in the
period 2001-02 to 2009-10. This presents the largest potential market in the world.

• According to the study conducted by NCAER :

– the number of `lower middle income' group in rural areas is almost double as compared
to the urban areas, having a large consuming class with 41% of the Indian middle class
and 58% of the total disposable income

Potential

• The Indian rural market has been growing at 3-4% per annum, adding more than 1 million new
consumers every year and now accounts for close to 50% of the volume consumption of fast-
moving consumer goods (FMCG) in India

• Some projections forecast the market size of the fast moving consumer goods sector at around
US$ 23.25 billion
• As a result, it is becoming an important market place for fast moving consumer goods as well as
consumer durables.

• Interestingly, there were nearly 70 mn households (33% of the total) with an income of more
than US$3,000 in 2006. These "well-off" households already owned relatively expensive
consumer durables, such as air conditioners and refrigerators.

Age & Income Research

• India – a young nation

– 550 mn+ under the age of 20 by 2015

– In the age group of 15-19 years, above average growth in urban and rural areas

– Population in the age group of 0-14 years is 65%

– Today brand identification is a major factor in motivating purchase by youngsters

(Ernst & Young, 2006)

• Income classes

– 70 mn+ earn Rs. 8,00,000+ ($18,000) a year – number to rise to 140 mn by 2011

India's Income classes

• The following offers a good picture, even though the data pertains to the period 1990-00 - 2005-
06

RICH (annual income > US$ 4,700)

* Own cars, PCs
3million households
6milliion households

CONSUMING (US$ 1000-4700)

* Have bulk of banded consumer goods, 70% of 2-wheelers, refrigerators, washing machines
55million
75million

• CLIMBERS (US$500-1000)
* Have atleast one major durable (mixer, sewing machine/tv)
66million
78million

ASPIRANTS (US$350-500)
* Have bicycles, radios and fans
 32million
33million

DESTITUTES (Less than US$350)

* Not buying
24million
17million

Source: The Great Indian Retail Story 2006, Ernst & Young.

Consumer Behavior

• Availability of lifestyle spending options is increasing for Indian consumers and inducing higher
spends on "status acquisition“

• Traditionally, Indian consumer is cautious about debts. In recent past, this attitude has changed
radically and in recent year's credit is no more a feared entity.

• Indian consumer buying behavior to a large extent has a western influence. Foreign brands have
gained wide consumer acceptance in India and they are much more open for experimentation.

• Beauty parlors in cities, eateries, designer wear, watches, hi-tech products are a few instances
which reflect these changes.

• Purchasing priorities in India also influence the level of sales of individual products.

• Penetration data bear this out: televisions in use in 2006 were estimated at 95 per 1,000
populations, far higher than the level for white goods. This reflects the growing demand for
entertainment in India.

• The emergence of a larger middle and upper middle classes and the substantial increase in their
disposable income has changed the nature of shopping in India from need based to lifestyle
dictated

• The self-employed segment has replaced the employed salaried segment as the mainstream
market, thus resulting in an increasing consumption of productivity goods, especially mobile
phones and 2 - 4 wheeler vehicles

• There is also an easier acceptance of luxury and an increased willingness to experiment with the
mainstream fashion, resulting in an increased willingness towards disposability and casting out
from apparels to cars to mobile phones to consumer durables

(Ernst & Young report, 'The Great Indian Retail Story, 2006‘)