Impact of culture and habit on Indian consumer behaviour

“…In the last four years, the Indian economy had grown by 8.6% and in the last two years by 9.2%. The race is getting faster and more intense. We want to continue at this rate. If we do so, by 2015, we would have doubled our per capita income and by 2023, we would have become a middle income country…”- P. Chidambaram, Finance Minister of India [1]

The electricity utility retail service in India, Tamil Nadu from the nineteenth century was under the state ownership. However people today think that direct state ownership is tied with damaging political interference, which leads to unnecessary investment and employment policy (martin and parker, 1997). Consequently Aharoni (1996) argued that privatisation in many countries have been occurring due to failures of state ownership and appreciable profit management. This paper mainly focuses on consumer perception with respect to privatization.

State owned enterprise in most of the countries consists of different sectors, in which public utility industry is an important one. Especially in Indian utility industry is completely challenging now because of its poor consumer service and negative eye on it. State owned firms are tending to be large and monopolistic, which results in poor service. Privatization in one form or another is expected to lower cost of production and a higher quality of service to consumers. In certain industries notably electricity and telecommunications, privatisation is associated with an “unbundling” of activities to promote completion. For example vertically- integrated electricity company can be divided into separate corporations responsible for generation, transmission and distribution with activities that are not “naturally monopolistic” opened up to competition.

Rationale on Topic Selection:

The first and foremost reason for choosing the topic of the study is to lay out before the reader the state of the Indian energy sector at a moment in time when it is in great flux. More specifically the area of research needed is to give a more definite picture of how international companies can establish its venture in the Indian consumer retail energy market. Secondly, it is an area of interest of the author as he wants to examine the theory of consumer’s perception with reference to UK and India which is very relevant fact in the growing retail market.

Aims and Objectives for the Research (Background and Issues/Issues underlying the research)

The purpose of this research is to examine the impact of culture and habit on the consumer behaviour of the average Indian consumer with reference to the organized retail environment. This is in order to determine the cultural factors that influence the buying behaviour of consumers so as to examine how best to effectively address these issues.

Consumer behaviour is influenced by a wide variety of micro and macro factors but cultural factors have one of the biggest effects on buying behaviour, yet it is also the hardest to pin down in quantifiable terms as it deals largely with elements of human psychology.

India has one of the world’s largest consumer markets in terms of sheer figures. Yet it is notoriously difficult to gain entry into this fickle nation, one of the reasons being the strong cultural factors that govern this market.

In this report, the researcher aims at identifying the urban retail environment in India and its potential, consumer behaviour and the key cultural factors that influence buyer behaviour in this market.

The principle aim of this study was to investigate and critically analysis the Indian consumers perception and its impact on operational performance of international companies like e-on, EDf, Tata power, etc in India. The study was carried out through the critical use and appraisal of the current and academic theories on consumers’ decision making processes and buyer behaviour using both primary and secondary research data. The aim was to address the gap between available literature and demand for further research on the subject by adopting a clearly defined and structured primary research design, utilizing both quantitative and qualitative research methods

To study the socio-economic profile of Indian consumers to determine the market potential.

To examine the effectiveness of consumer relation and private companies in the Indian market.

Finally getting advantages and disadvantages of privatization towards the consumer

The primary objective is to establish the feasibility of private electric distribution company in the Indian markets and to create a marketing strategy for case company to enter the markets in India. If the chosen strategy can be applied without high investment needed in India, the case company will benefit from a quick way to enter the markets and building their company image while they continue the search for partners for starting business in India.

LITERATURE REVIEW

Marketing Strategy

The principles of marketing in an organization are that to meet the requirements or expectation of the people to satisfy their needs on whom they depend for survival (Blythe, 2003). Hence the summary of theoretical framework, the key focus in this research is the marketing strategy and development of marketing strategy which will be guided by a clear vision, mission and objectives.

Marketing strategy is defined as the analysis, strategy development, and implementation activities in selecting market target strategies for the product-markets of interest to the organisation, setting marketing objectives, and developing, implementing, and managing the marketing positioning strategies designed to meet the needs of customers in each market target (Cravens, 1999).

Strategic marketing is a market-driven process of strategy development, taking into account a constantly changing business environment and the need to achieve high levels of customer satisfaction (Webster, 2002). Strategic marketing focuses on organisational performance rather than the traditional concern about increasing sales. Marketing strategy builds competitive advantage by combining the customer-influencing strategies of the business into an integrated array of market-focused actions (Day, 2000). Strategic marketing links the organisation with the environment and views marketing as a responsibility of the entire business rather than a specialized function (Sundaram & Black, 1995).

Because of marketing’s boundary orientation between the organisation and its customers, channel members, and competition, marketing processes are central to the business strategy planning process (Day, 1994). Strategic marketing provides the expertise for environmental monitoring, for deciding what customers groups to serve, for setting product specifications, and for selecting which competitors to position against (Sundaram & Black, 1995). Successfully integrating multifunctional strategies is critical to providing high levels of customer satisfaction (Kotler, 2004). Customer preferences for product attributes must be transformed into product design and production guidelines. Success in achieving high-quality products and services requires finding out which attributes of product and services quality drive customer satisfaction (Cespedes, 1992).

Effective strategic marketing requires business planners to be almost obsessive about understanding the needs of their customers (Gluck, 1995). In today’s highly competitive global environment, the success of any consumer-focused programme will almost certainly involve imaginative product development, integrated distribution methods, and well calibrated pricing and state-of-the-art communications (Peter, Olson, & Grunert, 1999).

2.2 Marketing Strategies Influenced by Consumer Perception and Behaviour

The study of consumer attitude is a key foundation stone upon which to build effective marketing strategies. Although the world has known selling, buying and advertising for many centuries, the concept of using a multidimensional, coordinated approach to commercializing products only came into practice during the twentieth century (Solomon, 2007). The days of aggregation – using a single strategy and a single product to satisfy the needs of all markets – are fast disappearing (de Kluyver, 2000). The world is now a very complex, and the people who inhabit it are living increasingly complex lives. To increase the effectiveness of their efforts, contemporary marketers have come to rely heavily on an informed understanding of consumer behaviour (Dubois, 2000). They start by gathering relevant marketplace intelligence that takes into account qualitative as well as quantitative consumer profiles.

A good understanding of consumer behaviour principles enables the marketer to design more effective marketing strategies. According to Schiffman and Kanuk (2000), consumer behaviour is simply as investigations into the way individuals make decisions on how to spend their available resources (time, money, effort) on personal and household products. Sheth et al. (1999) add that the consumer may act as buyer, payer, user or any combination of these roles at any given time. An even more comprehensive view can found in Hoyer and Maclnnis (2001). They suggest that a proper study of consumer behaviour ought to consider what occurs before people consume something, what goes on during the consumption period itself and how consumers handle the disposal of what they have consumed.

Models of consumer attitudes aim to identify the stages through which a consumer passes on the way from identifying a need through to making a purchase and consuming a product or service (Diagram in Appendix-7 explains how individual and environmental factors influence purchasing decisions). Blackwell et al. (2006, p. 92) points out that ‘Consumers often express satisfaction with their present brand but still engage in brand switching.’

2.3 Marketing Strategies Influenced by European Consumer Buying Perception and Behaviour

Some general trends in European society are worth mentioning. These changes have created market opportunities for some industries and stable or declining demand for others. For example, the increase in the number of working women has clearly accelerated the development of mail order sales and more generally speaking of any new selling formulas or products (frozen food, for example) which make it possible to save time (de Rouffignac,1990). The decrease in [the] size of the family due to cohabitation, divorce, and diminishing birth rate has led to an increase in do-it-yourself, barter and the appearance of a type of consumption characterized as ‘tribal’ by some observers (Maffesoli, 1988; Badot and Cova, 1995; Cova, 1995). Serious concerns regarding the economic situation could lead to more fragmented forms of consumption in which production and consumption interpenetrate each other. Rochefort (1995), in a recent book, describes the development of this new generation of consumers that he calls the ‘entrepreneurial consumers’.

The ageing of the population has also become a major problem in Europe. A French statistical study (Darmon et al., 1991) suggests that this ageing has indeed had a significant effect on areas such as health, food, leisure and transportation. The market for those over 50 years of age has thus become a prime target today (see Treguer, 1994; Burt and Gabbott, 1995; Guerin, 1995, as well as the July-August 1994 issue of Admap). According to Rybarski (Marketing Week, 2 July 1993), 80 per cent of individual assets in Britain belong to people over 50 years of age. Banks, insurance companies, press and travel agencies have been among the first businesses to attempt to develop new products and services for older consumers (Aylott & Mitchell, 1999).

Elderly consumers typically purchase in small quantities, often in stores close to their residence, favor traditional food preparations, earlier meal-times, have specific service needs in terms of home delivery, product installation and repairing; they are over consumers of the daily press and of TV and radio broadcasts (East, Lomax, Willson & Harris, 1994). Their behaviour is, none the less, quite varied and it would be wrong to consider this segment as homogenous. This point is well illustrated in a study carried out by CREDOC on the eating habits of seniors (Greiveldinger et al., 1990) as well as in a special report presented in the 16th October 1995 issue of CB News.

2.4 Marketing Strategies Influenced by Indian Consumer Buying Perception and Behaviour

Many research studies were conducted by renowned institutions in the recent past in different parts of the world to examine the magnitude of consumer behaviour in the emerging retail market. They have noticed that Indian consumers are concerned for the high degree of value orientation (Ciarlante & Schutte, 1998). Such orientation to value has labeled Indians as one of the most discerning consumers in the world. Even, luxury brands have to design a unique pricing strategy in order to get a foothold in the Indian market. They have a high degree of family orientation. This orientation in fact, extends to the extended family and friends as well. Brands with identities that support family values tend to be popular and accepted easily in the market (India Retail Report, 2007). Most of the consumers are also associated with values of nurturing, care and affection. These values are far more dominant that values of ambition and achievement. Products which communicate feelings and emotions get with the Indian consumers (Bijapurkar, 2007). Apart from psychology and economics, the role of history and tradition in shaping the Indian consumer behavior is quite unique. Perhaps, only in India, one sees traditional products along side modern products (Goswami & Mishra, 2007). For example, hair oils and tooth powder existing with shampoos and toothpaste.

The Indian consumer has undergone a remarkable transformation. Just a decade or two ago, the Indian consumer saved most of his income, purchased the bare necessities and rarely indulged himself. Today, armed with a higher income, credit cards, exposure to the shopping culture of the west and a desire to improve his standard of living, the Indian consumer is spending like never before (Nair, 2007). Organised retail with its variety of products and multitude of malls and supermarkets is fueling his addiction. His new mentality, in turn, is fueling the growth of organised retail in India (Sundaram, 2009).

Young Shoppers

India’s population is young, very young (See Appendix-8(a) for India’s bottom-heavy age pyramid and Appendix-8(b) for age-data for the populations of several countries). Most consumers have grown up with television, the internet, and have been exposed to the standards of living and consumer culture abroad (Gupta, 2008). This generation is also making money at a younger age and lots of it, thanks to call centers and other avenues of employment opening up that cater to students in college and schools. As a result they are ready to spend most, if not all of their income on apparel, accessories, and electronics (Jaffrelot & der Deer, 2008).

Higher Incomes

Liberalization of the country’s economy has brought a number of employments opportunities. With the entry of a number of multinationals and the expansion of domestic corporations, job prospects in the country are looking up (Green & Keegan, 2007). As a result, incomes and consumption are projected to increase rapidly over the next couple of years (See Exhibit 9 for the personal disposable income and Exhibit 10 for the private consumption per head in India). This sets the stage for a very exciting and promising retail market in the future.

The Working Women

The working woman segment is the one, which has seen a tremendous growth in the late nineties. This segment has opened the floodgates for the Indian retailers. The working woman today has grown out of her long-standing image of being the homemaker. Today, she is rubbing shoulders with men, proving herself to be equally good, if not better. Working women have their own mind in decision to purchase the products that appeal to them (Times of India 2009).

No Money, No Problem

The finance sector has already seen a huge expansion. Unlike a decade ago, credit cards and short-term loans have become easily accessible and have contributed to the emergence of a consumer culture in India (Banerjee, 2008). Credit card rewards schemes, flexible financing options and all the other common lures are tempting the Indian consumer to shop. With loans for everything from a home to an automobile freely available, the Indian consumer can start spending on big-ticket items that were traditionally within his reach only after years of savings (Craven, 2005).

Urbanization

According to the study based on Indian booming retail sector (Ambani, 2008), urbanization is taking place in India at a dramatic pace and is influencing the life style and buying behaviour of the consumers. The current urban middle and upper class Indian consumer buying behaviour to a large extent has western influence. There is an increase in positive attitude towards western trends. The Indian consumer has become much more open-minded and experimental in his/her perspective. There is now an exponential growth of western trend reaching the Indian consumer by way of the media and Indians working abroad.

Consumer Perception Definition:

Presented below are the most comprehensive and informative definitions of Consumer perception, put forth by the numerous scholars, authors and specialists:

The American Marketing Association (2008) defines consumer perception from the buyer’s perspective

“The dynamic interaction of affect and cognition, behaviour, and environmental events by which human beings conduct the exchange aspects of their lives.”[1]

While the American Marketing Association defines consumer perception from the buyer perspective, Hawkins, Best, Coney & Mookerjee (2007) examine it as a field of study. The following is the definition put forth by the quartet:

“The field of Consumer Behaviour is the study of individuals, groups or organizations and the processes they use to select, secure, use and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society”[2]

Belch & Belch (2004) defines consumer behaviour as

“The process and activities people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to satisfy their needs and desires.”[1]

Mowen & Minor (2001) define it as

“The study of the buying units and the exchange processes involved in acquiring, consuming, and disposing of goods, services, experiences, and ideas.”[2]

From the above definitions we can conclude that consumer perception is a complex, multidimensional process in the study of consumers in their buying environment. There are many different schools of thought with regards to consumer behaviour such as the experiential, the decision making and the behavioural perspective. For the purposes of this study, the researcher is concentrating on the behavioural perspective, specifically the impact of culture & habits and its effects on the buying behaviour of the average consumer.

Privatization is a great success. Since 1991 some 78 state-owned companies have been sold to private owners, with the government realizing $47.6 billion from these sales. The bulk of this has wisely been put toward retiring the enormous public debt. It is estimated that in the next three years $65 billion to $80 billion will be realized from privatization, primarily from the energy industry and telecommunications. (Weinberger, C. W. (1998) ‘BRAZIL: WEATHERING THE ASIAN STORM’, Forbes, 161 (9), pp. 37-37).