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CONSUMER BEHAVIOR

UNIT-I: Introduction: Nature, Scope and meaning of consumer behavior-consumer and marketing strategy-Determinants of consumer behavior-Models of consumer behavior (Nicosia, Howard Seth Model, The Engel Kollat-Blackwell Model) Profile of the Indian Consumer.

Introduction: Consumer behavior is comparatively a new field of study which evolved just after the Second World War. The sellers market has disappeared and buyers market has come up. This led to paradigm shift of the manufacturers attention from product to consumer and specially focused on the consumer behaviour. The evaluation of marketing concept from mere selling concept to consumer oriented marketing has resulted in buyer behavior becoming an independent discipline. The growth of consumerism and consumer legislation emphasizes the importance that is given to the consumer. Consumer behavior is a study of how individuals make decision to spend their available resources (time, money and effort) or consumption related aspects (What they buy? When they buy?, How they buy? etc.).

The heterogeneity among people makes understating consumer behavior challenging task to marketers. Hence marketers felt the need to obtain an in depth knowledge of consumers buying behavior. Finally this knowledge acted as an imperative tool in the hats of marketers to forecast the future buying behavior of customers and devise four marketing strategies in order to create long term customer relationship.

Consumer Behaviour It is broadly the study of individuals, or organizations and the processes consumers use to search, select, use and dispose of products, services, experience, or ideas to satisfy needs and its impact on the consumer and society.

Customers versus Consumers The term customer is specific in terms of brand, company, or shop. It refers to person who customarily or regularly purchases particular brand, purchases particular companys product, or purchases from particular shop. Thus a person who shops at Bata Stores or who uses Raymonds clothing is a customer of these firms. Whereas the consumer is a person who generally engages in the activities - search, select, use and dispose of products, services, experience, or ideas.

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Consumer Motives Consumer has a motive for purchasing a particular product. Motive is a strong feeling, urge, instinct, desire or emotion that makes the buyer to make a decision to buy. Buying motives thus are defined as those influences or considerations which provide the impulse to buy, induce action or determine choice in the purchase of goods or service. These motives are generally controlled by economic, social, psychological influences etc. Need for Study of Consumer Behaviour The study of consumer behavior helps everybody as all are consumers. It is essential for marketers to understand consumers to survive and succeed in the competitive marketing environment. The following reasons highlight the importance of studying consumer behaviour as a discipline.

Before understanding consumer behaviour let us first go through few more terminologies: Who is a Consumer ? Any individual who purchases goods and services from the market for his/her end-use is called a consumer. In other words a consumer is one who consumes goods and services available in the market. Example - Tom might purchase a tricycle for his son or Mike might buy a shirt for himself. In the abo examples, both Tom and Mike are consumers.

What is consumer Interest ? Every customer shows inclination towards particular products and services. Consumer interest is nothing but willingness of consumers to purchase products and services as per their taste, need and of course pocket.

Let us go through the following example: Both Maria and Sandra went to the nearby shopping mall to buy dresses for themselves. The store manager showed them the best dresses available with him. Maria immediately purchased two dresses but Sandra returned home empty handed. The dresses were little too expensive for Sandra and she preferred simple and subtle designs as compared to designer wears available at the store.

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In the above example Sandra and Maria had similar requirements but there was a huge difference in their taste, mind set and ability to spend. What is Consumer Behaviour? Consumer Behaviour is a branch which deals with the various stages a consumer goes through before purchasing products or services for his end use. Why do you think an individual buys a product ? Need Social Status Gifting Purpose Why do you think an individual does not buy a product ? No requirement Income/Budget/Financial constraints Taste When do you think consumers purchase products? Festive season Birthday Anniversary Marriage or other special occasions There are in fact several factors which influence buying decision of a consumer ranging from psychological, social, economic and so on. The study of consumer behaviour explains as to: Why and why not a consumer buys a product? When a consumer buys a product? How a consumer buys a product?

During Christmas, the buying tendencies of consumers increase as compared to other months. In the same way during Valentines week, individuals are often seen purchasing gifts for their partners. Fluctuations in the financial markets and recession decrease the buying capacity of individuals.

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In a laymans language consumer behaviour deals with the buying behaviour of individuals. The main catalyst which triggers the buying decision of an individual is need for a particular product/service. Consumers purchase products and services as and when need arises

DEFINING CONSUMER BEHAVIOR:


Consumer Behavior may be defined as the interplay of forces that takes place during a consumption process, within a consumers self and his environment. - this interaction takes place between three elements viz. knowledge, affect and behavior; - it continues through pre-purchase activity to the post purchase experience; - it includes the stages of evaluating, acquiring, using and disposing of goods and services. The consumer includes both personal consumers and business/industrial/organizational consumers.

Consumer behavior explains the reasons and logic that underlie purchasing decisions and consumption patterns; it explains the processes through which buyers make decisions. The study includes within its purview, the interplay between cognition, affect and behavior that goes on within a consumer during the consumption process: selecting, using and disposing off goods and services.

Consumer behavior explains the reasons and logic that underlie purchasing decisions and consumption patterns; it explains the processes through which buyers make decisions. The study includes within its purview, the interplay between cognition, affect and behavior that goes on within a consumer during the consumption process: selecting, using and disposing off goods and services. The behavior that consumers display in searching for, purchasing, using, evalauting and disposing of products and services that they expect will satisfy their needs. - Schiffman and Kanuk ..the decision process and physical activity engaged in when evaluating, acquiring, using or disposing of goods and services." - Loudon and Bitta

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The study of consumers as they exchange something of value for a product or service that satisfies their needs - Wells and Prensky Those actions directly involved in obtaining, consuming and disposing of products and services including the decision processes that precede and follow these actions. -Engel, Blackwell, Miniard the dynamic interaction of effect and cognition, behavior and the environment by which human beings conduct the exchange aspects of their lives -American Marketing Association

NATURE and SCOPE OF CONSUMER BEHAVIOR:

Nature of Consumer Behavior: The subject deals with issues related to cognition, affect and behavior in consumption behaviors, against the backdrop of individual and environmental determinants. The individual determinants pertain to an individuals internal self and include psychological components like personal motivation and involvement, perception, learning and memory, attitudes, self-concept and personality, and, decision making. The environmental determinants pertain to external influences surrounding an individual and include sociological, anthropological and economic components like the family, social groups, reference groups, social class, culture, sub-culture, cross-culture, and national and regional influences.

The subject can be studied at micro or macro levels depending upon whether it is analyzed at the individual level or at the group level.

The subject is interdisciplinary. It has borrowed heavily from psychology (the study of the individual: individual determinants in buying behavior), sociology (the study of groups: group dynamics in buying behavior), social psychology (the study of how an individual operates in group/groups and its effects on buying behavior), anthropology (the influence of society on the individual: cultural and crosscultural issues in buying behavior), and economics (income and purchasing power).

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Consumer behavior is dynamic and interacting in nature. The three components of cognition, affect and behavior of individuals alone or in groups keeps on changing; so does the environment. There is a continuous interplay or interaction between the three components themselves and with the environment. This impacts consumption pattern and behavior and it keeps on evolving and it is highly dynamic.

Consumer behavior involves the process of exchange between the buyer and the seller, mutually beneficial for both.

As a field of study it is descriptive and also analytical/ interpretive. It is descriptive as it explains consumer decision making and behavior in the context of individual determinants and environmental influences. It is analytical/ interpretive, as against a backdrop of theories borrowed from psychology, sociology, social psychology, anthropology and economics, the study analyzes consumption behavior of individuals alone and in groups. It makes use of qualitative and quantitative tools and techniques for research and analysis, with the objective is to understand and predict consumption behavior.

It is a science as well as an art. It uses both, theories borrowed from social sciences to understand consumption behavior, and quantitative and qualitative tools and techniques to predict consumer behavior.

Scope of Consumer Behavior:


The study of consumer behavior deals with understanding consumption patterns and behavior. It includes within its ambit the answers to the following: - What the consumers buy: goods and services - Why they buy it: need and want - When do they buy it: time: day, week, month, year, occasions etc. - Where they buy it: place - How often they buy it: time interval - How often they use it: frequency of use

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The scope of consumer behavior includes not only the actual buyer but also the various roles played by him/ different individuals.

Basic Components:
Decision making (Cognitive and Affect): -this includes the stages of decision making: Need recognition, Information search, Evaluation of

alternatives, Purchase activity, Post purchase behavior. Actual purchase (Behavior): -this includes the visible physical activity of buying of goods and/or service. It is the result of the interplay of many individual and environmental determinants which are invisible.

Examples: Let us take two examples.


Example 1: A child goes to a kindergarten school. She comes back home and asks her parents to buy her a set of color pencils and crayons. Now the roles played are: 1. Initiator: the child in nursery school 2. Influencer: a fellow classmate 3. Decider: the father or the mother 4. Buyer: the father or the mother 5. User: the child

Example 2: The lady of a house who is a housewife and spends her day at home doing household chores watches TV in her free time. That is her only source of entertainment. The TV at home is giving problem. She desires a new TV set, and says that she wants an LCD plasma TV. Now the roles played are: 1. Initiator: the housewife (mother) 2. Influencer: a friend / neighbor

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3. Decider: the husband or the son 4. Buyer: the husband or the son 5. User: the family Consumer behavior focuses specifically on the Buyer and often User. But also analyzes impact of other roles. Buyers Sellers: and They are the key elements in consumer behavior. They have needs and wants and go through a complex buying process, so as to be able to satisfy the need through purchase of the good or service offering. They enter into an exchange process with the seller, which leaves both the parties (buyer and seller) better off than before. In fact the exchange process is value enhancing in nature, leading to satisfaction of both the parties.

APPLICATION OF CONSUMER BEHAVIOR:


An understanding of consumer behavior is necessary for long term success and survival of a firm. It is viewed as the edifice of the marketing concept, an important orientation in marketing management. According to the marketing concept, the marketer should be able to determine needs and wants of the target segment and provide product and service offerings more effectively and efficiently than competitors. It is essentially a customer-centered philosophy, which aims at understanding customer needs and wants, providing the right product and service, and deriving customer satisfaction; make what you can sell rather than sell what you make.

An understanding of the study of consumer behavior helps formulate appropriate marketing strategies for a firm keeping in view the consumer and his environment. It has a number of applications; the main application bases are as follows:

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Analyze the environment

The knowledge of consumer behavior can be applied to help identify opportunities and fight threats. The opportunities could be in terms of newer customers, newer markets, unfulfilled needs and wants (through a study of consumer individual determinants and other environmental influences). The threats could be fought by developing and implementing appropriate marketing strategies to best fit the environment.

The marketing strategies need to be dynamic and constantly evolving keeping in view the uncertainty in the environment; Environmental uncertainty is a function of complexity and dynamism. Complexity is defined in terms of the number, strength and interrelatedness of the various factors in the environment that a firm has to deal with. Dynamism relates to how quickly the changes take place in the environment.

Segmentation, targeting and positioning:

The study of consumer behavior may be applied to segment the market, select the target market and position the product or service offering. Identifying the target segment, understanding their needs, providing the right product and service offering and communicating about the offering all of these help a marketer succeed in the long term and ensure his survival and success in a changing environment.

a) Segment the market: The marketer needs to identify distinct customer groups with needs and wants, classify them on basis of descriptive characteristics and behavioral dimensions. The descriptive characteristics may take forms of age, gender, income, occupation, education, family size, family life cycle, gender, lifestyle, personality, religion, generation, geography, nationality, and social class. The behavioral dimensions take forms of benefits, uses, use occasion, usage rates, and loyalty status.

b) Select target market: The marketer then selects one or more markets to enter. The segment(s) that should be targeted should be viable; there should be a fit between the market attractiveness

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and the companys objectives and resources. The marketer would be able to assess the viability of a segment on the basis of the following criteria, viz., measurability, substantiability, accessibility, differentiability, and actionability.

c) Position the product offering in the mind of the customers: The marketers should be able to communicate the distinct and/or unique product characteristics.

Designing the Marketing Strategy:

There exists interrelatedness between the Consumer, the Environment and the Marketing strategy.

a) Consumer: The consumer has his needs and wants as well as product preferences; Thus, there exists an interplay of Cognition (knowledge about products and alternatives), Affect (feelings of favorableness and unfavorableness) and Behavior (action: buy or not to buy). b) Environment: This refers to forces in the environment, which make the environment complex and dynamic. c) Marketing strategies: This implies setting up of goals and then achieving them through the design of an appropriate marketing mix.

The Marketing Strategy should be designed to influence consumers (Cognition, Affect and Behavior) and be influenced by them. It should be flexible and ever evolving with changes in the customer needs and wants; as well as, changes in the environment in which it operates. The knowledge of consumer behavior can be applied to develop a best fit between consumer needs and wants, the environment in which the firm operates; and, the firms goals and objectives.

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Designing the Marketing Mix: 4 Ps

The study of consumer behavior may be applied to design the 4 Ps.

a) Product: The term product includes both tangible products and intangible services. The issues to address consist of name (brand), size, shape, features, labeling, packaging, accessories and supplementary products, terms of sale and services, after sales etc. b) Price: This includes the pricing of the product offering. The major components include, form of payment, terms and conditions of payment, discounts, price sensitivity, differential prices and customer reaction, imagery (price increase and customer reaction, price decrease and customer reaction). c) Place and Distribution: This includes the marketing channel, and comprises decisions regarding choice of channel (direct or indirect), location, accessibility and availability of product offering, wholesaling, retailing, logistics etc. d) Promotion: This includes marketing communication, and the major issues comprise decisions on communication/promotion mix, the message and media strategy (the content, appeal and context).

Application in Governmental and The knowledge of consumer behavior finds relevance even in Non-profit Organizations and Social Governmental and Non-profit Organizations and Social Marketing. Marketing: Governmental and Non-profit Organizations have the society as its

customers and need to understand them so as to be able to serve them better. Social marketing involves propagation of ideas; attempts at such circulation and spread of ideas for moral and social upliftment can be more successful if there is a proper understanding of the these consumers (i.e., the public and society)

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WHY STUDY CONSUMER BEHAVIOR?


The subject of Consumer Behavior is viewed as the edifice of the marketing concept, an important orientation in marketing management. The knowledge of Consumer Behavior helps the marketer understand and predict the consumption patterns and consumption behaviors of people. It helps them gain insights as to why a consumer behaves differently to another consumer; as well as, why a consumer behaves differently in different times and buying situations. The study helps them understand the internal (individual determinants) and external (environmental factors) forces that impel people to act out different consumption patterns and behaviors. The study helps the marketer in: a) Analyzing the environment: identifying opportunities and fighting threats b) Segmenting, targeting and positioning c) Designing the marketing-mix d) Designing the marketing strategy e) Governmental and Non-profit Organization and Social Marketing

MODELS OF CONSUMERS MODELS OF CONSUMER BEHAVIOR


5.1 Models of Consumers 5.2 Models of Consumer Behavior: General Models 5.3 Models of Consumer Behavior: Basic Models 5.4 Models of Consumer Behavior: Specific Models

Introduction:
Consumers are different. Although the decision making process is the same, they have varying perspectives and this impacts the final decision. Consumer behavior models help a marketer in identifying and understanding a wide range of variables that could explain consumer behavior. In this way these models help a marketer understand and predict buyer behavior, and they help the marketer

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formulate better marketing programs and strategies. Researchers have attempted to study the dynamics of consumer decision making consumer behavior from varying orientations, and various models have been proposed. These models have evolved from the economic paradigm of the 1940s, to the irrational, impulsive, emotional and vulnerable social consumer of the 1950s and 1960s, to the information processor of the 1960s and 70s, to the cognitive and rational consumer post 1980s. The purchase paradigms have also evolved; there is the cognitive paradigm, where purchase is regarded as an outcome of problem solving; the reinforcement paradigm, where purchase is regarded as a learned behaviour; and the habit paradigm, where it is regarded as a pre-established routine pattern of behaviour

MODELS OF CONSUMERS:
Consumers approach the marketplaces differently; they go though the buying decision process differently as it gets impacted by internal and external forces. Researchers have attempted to understand the dynamics of consumer decision making and they have classified four varying views and perspectives, the underlying forces operating within consumers that could be employed to approach the marketplace. These are i) Economic ii) Cognitive iii) Passive iv) Emotional. i) Economic view: According to the economic perspective of studying consumers, the consumer is regarded as being rational. The model assumes that there exists in the market a state of perfect competition; the consumer is aware of the various alternatives; he has the knowledge and ability to rank all of these; and he finally takes a rational decision. He takes a decision and makes a choice as after taking into account the cost and benefit, and the overall value in economic terms. ii) Cognitive view: The consumer is regarded as being a problem solver, who searches for products to fulfill his needs/wants. Consumer decisions are based on information gathering and processing. The consumer is believed to take decisions after a lot of thought and deliberation, so as to get maximum benefit and value. iii) Passive view: Here, the consumer is regarded as irrational and impulsive, who easily succumbs to the selling and promotional efforts of the marketer. It is assumed that the consumers are submissive to the self-serving interests of the marketer and the salespersons are powerful. iv) Emotional view: The consumer is regarded as being emotional and impulsive. who takes decisions based on moods and emotions. Marketers must put in efforts and create positive mood and emotions.

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MODELS OF CONSUMER BEHAVIOR: General Models: The consumer models refer to varying orientations and perspectives with which consumers approach the marketplace and how/why they behave as they do. They refer to how the varying orientations impact the buying decision process and overall buyer behavior. Various models have been proposed by researchers; these models can be classified as (a) General models (b) Specific models. This session deals with the General Models. The Specific Models are dealt with in the next session.

GENERAL MODELS: There are four models that fall under this category, viz. Economic model, Psychological model, Psychoanalytic model and Sociological model

i) The Economic model: The economic model explains buying behavior from an economic perspective; The assumption is that resources are scarce viz. a viz unlimited needs; a consumer seeks value: he wants maximum benefit at minimum cost. The economic models showed concern as to how scarce resources were allotted to satisfy the unlimited needs and wants. Economic models can be further classified into Micro economic models and Macroeconomic models.

Micro economic models: The micro economic models focus on the act of purchasing; they focus on what an average consumer would purchase and in what quantity; they also ignore why and how the needs/wants get prioritized, and how the behavior is underpinned.

According to the micro economic view, consumers are rational in nature and value utility. With resources being scarce, they would allocate money on their purchases in a way that satisfies them maximally. The consumer decisions are thus based on benefit to cost ratio; the consumer would settle on an alternative that provides the highest ratio in terms of marginal utility.

The limitations of studying consumer behavior with this orientation is that consumers are not always rational, and they seek average /adequate satisfaction and not total satisfaction. Also, consumers assess the benefit to cost ratio differently; they define the two variables cost and benefit variedly; the issue is subjective. The view is also silent about other forces that operate during the buying process.

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Macro economic models: The macro economic models focus on the overall trend in the economy that has an impact and is also impacted upon by buying patterns. They focus on the aggregate flows in the economy. Conclusion about consumer behavior are made after analyzing such flows. This approach could also be studied with two orientations: a) Relative income hypothesis: A persons expenses is influenced by his social surrounding and group. With his income being constant, the relative expenses and the resultant savings will not change, until and unless, there is a big change in the total income. The hypothesis holds that what and how much a consumer spends is not solely dependent on income, but is influenced by peers.

b) Permanent income hypothesis: Even if the total income increases, people initially exhibit inertia towards spending as they want to accumulate wealth; so purchasing pattern does not change immediately. The limitations of studying consumer behavior with this orientation is that the view is silent about other forces that operate during the buying process

ii) The Psychological model: The psychological model, also called the Learning Model or the Pavlovian Learning Model, was proposed by classical psychologists led by Pavlov. According to this model, consumption behavior and decision making is a function of interactions between human needs and drives, stimuli and cues, responses and reinforcements.

People have needs and wants; They are driven towards products and services (stimuli and cues), which they purchase (response), and they expect a satisfying experience (rewards and reinforcements); Repeat behavior would depend on reinforcement received. The model believes that behavior is deeply affected by the learning experiences of the buyers; and learning is a product of information search, information processing, reasoning and perception. Reinforcement leads to a habit formation and the decision process for an individual becomes routinized, leading to brand loyalty. Consumers also learn through trial and error and resultant experiences that get stored in our memory.

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The limitations of studying consumer behavior with this approach is that the model seems incomplete. Learning is not the only determinant in the buying process and the decision making. The model totally ignores the role played by (a) other individual determinants like perception, personality (the subconscious), attitudes; as well as (b) interpersonal and group influences.

iii) Psychoanalytic model: The psychoanalytic model was proposed by Sigmund Freud. The model tries to explain consumer behavior as a resultant of forces that operate at subconscious level. The individual consumer has a set of deep seated motives which drive him towards certain buying decisions According to the model, buyers needs and desires operate at several levels of consciousness. Not all of the behavior is understandable and explainable by the person. Also not all of human behavior is overtly visible and explainable. Sometimes, the behavior may not be realized and understood by the person himself. Such causes can be understood by drawing inferences from observation and casual probing. There have been two more contributions that have been made to the psychoanalytic approach, these are a) Gestalt model b) Cognitive theory Gestalt model: The model based on Gestalt principles (meaning patterns and configuration) lays emphasis on the perceptual processes that impact buying behavior. According to this model, consumption behavior and decision making is based on how a consumer perceives a stimuli ( the product and the service offering and the 4 Ps) viz a viz. the external environment and his own prior experiences.

Cognitive theory: The model proposed by Leon Festinger, views the consumer as one who faces a feeling of anxiety (dissonance), while he is making a purchase; this is because he is faced with many alternatives, all of which seem desirable. Post-purchase, this dissonance increases even further. There is an imbalance in the cognitive structure; and the consumer tries to get out of this state as soon as he can. So a buyer gathers information that supports his choice and avoids information that goes against it.

iv) Sociological model: The model is based on findings of Thorstien Veblen, and focuses on the role played by social groups and social forces. A persons consumption pattern and buying behavior is affected by social factors; his family, friends, peers, social groups, reference group and culture have a major role to play. According to the model, man is perceived as a social animal, and thus he conforms

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to norms of its culture, sub culture and groups amongst which he operates. Emulative factors and social influences have a big role to play in consumer decision making.

MARKETING IMPLICATIONS OF MODELS MODEL Economic model: IMPLICATION -Consumers are price sensitive; they look out for a value proposition and thus buy those offerings that give them more benefit vis a vis cost.

a) Micro economic

-As a marketer, this implies that he should offer to customers a Value proposition.

-Deals and sales promotion can also impact buying decisions to his favor. Con consumer purchases are affected by fluctuations in the economy.

b) Macro economic

Consumers learn from experiences of self and others. would buy products and Services that are rewarding and would bring positive reinforcement.

Psychological model

-Marketers should arrange for product demonstrations. should also encourage trials: free samples, testing and sales promotion can help elicit trials. Consumer finds the product usage satisfying; he would go for a repeat purchase.

Psychoanalytic model: -While consumers may look for functional benefits while buying a product, they are also affected by hedonic elements. The marketer also needs to understand the consumer psyche and design the 4Ps accordingly; this has implications on pricing and promotion.

a) Gestalt

This has implications for brand management; branding, brand associations and Imagery.

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b) Cognitive

-This is related to post-purchase behavior; the marketer needs to help minimize the Consumers post-purchase dissonance.

Sociological model

- A persons purchase behavior is affected by his culture, sub culture and social group; - Opinion leadership and social group appeals.

MODELS OF CONSUMER BEHAVIOR: Basic Models: i) Model of Consumer Buying: The consumer market is defined as end user markets. Also called Business to Consumer markets, or B2C markets, the product and service offering is bought by the consumer for his personal use. The decision making process in consumer markets is different from the one that takes place in business or industrial markets.

According to Kotler and Armstrong, the basic model of consumer decision making process comprises three major components, viz., marketing and other stimuli (these act as influences), the buyers black box (these are related to the consumer) and the buyer responses (this is the response part). The components/processes as well as the working dynamics are explained as follows: 1. Marketing and other stimuli: A consumer is confronted with a stimulus in the environment. This stimulus could be of two kinds; a) One that is presented by the marketer through the marketing mix or the 4Ps, product, price, place and promotion;

-product: attributes, features, appearance, packaging etc. -price: cost, value, esteem (prestige) -place: location and convenience, accessibility -promotion: advertising, sales promotion, personal selling, publicity, direct marketing.

b) The other that is presented by the environment, and could be economic, technological, political and cultural.

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2. Buyers black box: The stimuli that is presented to the consumer by the marketer and the environment is then dealt with by the buyers black box. The buyers black box, comprises two sub compone nts, viz., the buyers characteristics and the buyer decision process. The buyers characteristics could be personal, psychological, cultural and social.

a) Personal: -age and life-cycle stage (family life cycle: single, newly married couples, full nest I, full nest II, full nest III, empty nest I, empty nest II, solitary survivor -occupation (occupation affects consumption patterns) -economic situation -lifestyle (pattern of living as Activities, Interest, Opinions, AIOs) -personality (personality is defined in terms of traits; these are psychological characteristics which lead to relatively consistent patterns of behavior towards the environment) and self-concept (self-concept is reflective of identity; how a person perceives himself including attitudes, perceptions, beliefs etc). Products and brands also have a personality; consumers are likely to choose such brands whose personalities match their own self. b) Psychological: -motivation (motives; urge to act to fulfil a goal or satisfy a need/want) -perception (ability to sense the environment and give meaning to it through the mechanisms of selection, organization and interpretation). -learning (a relatively permanent change in behavior as a result of ones experience; relates to memory; learning could be experiential based on direct experience or conceptual based on indirect experience;

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consumer learning could be based on marketing communication/seller provided information, personal word of mouth and/or experiential). -beliefs (thoughts that a person holds about something; these are subjective perceptions about how a person feels towards an object/person/situation) and attitudes (a favorable or unfavorable disposition/feeling towards an object, person or a situation). c) Cultural: -culture (a sum total of values, knowledge, beliefs, myths, language, customs, rituals and traditions that govern a society). Culture exerts the broadest and the deepest influence; eg. Influences on our eating patterns, clothing, day to day living etc. Cultural influences are handed down from one generation to the next and are learned and acquired). -sub-culture (subset of culture: smaller groups of people within culture with shared value systems within the group but different from other groups; identifiable through demographics). -social class: ordered and relatively permanent divisions/stratifications in the society into upper, middle lower classes; members in a class share similar values, interests, lifestyles and behaviors; the division is based on combination of occupation, income, education, wealth, and other variables. d) Social: -family: most important influence; (there occurs in a family what is referred to as socialization; family of orientation: parents and siblings; family of procreation: spouse and children; further some decisions are husband dominated, some are wife dominated and some are joint; roles played by family members), family life cycle (stages through which a family evolves; Peoples consumption priorities change and they buy different goods and services over a lifetime).

-friends and peers, colleagues. -groups: reference groups {these are people to whom an individual looks as a basis for personal standards; they are formal and informal groups that influence buying behavior; reference groups could be direct (membership groups) or indirect (aspirational groups); reference groups serve as information sources, influence perceptions, affect an individuals aspiration levels; they could stimulate or constrain a persons behavior}. - opinion leaders (they influence the opinion of others based on skills, expertise, status or personality). -roles and status: the role refers to the expected activities and status is the esteem given to role by society.

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Research and studies into these factors can provide a marketer with knowledge that can help him serve the consumers more effectively. These characteristics affect the buying decision process, which comprises five steps:

a) Problem recognition: This is the first stage where a person recognizes that there is a problem or a need to fulfill. This may either be an actual state (AS Type), where a problem has arisen and needs to be sorted out; the product is failing, or the consumer is running short of it, and thus needs a replacement. A problem could also be a desired state (DS Type), where there is an imbalance between the actual state and the desired state; another product seems better and superior to the one that is being currently used, and so the consumer wants to buy it.

A need could be triggered off by an internal stimulus or an external stimulus. Marketers need to identify what could trigger a particular need. b) Information search: After a need is recognized, the consumer goes for an information search, so as to be able to make the right purchase decision. He gathers information about the product category and the variations, various alternatives and the various brands. Such a search could be ongoing, specific or incidental. The consumer could recalls information that is stored in his memory (comprising information gathered and stored, as well as his experiences, direct and indirect). He could also seek information from the external environment. The sources of information search could be personal (family, friends, peers and colleagues), commercial (marketers communication in the form of advertising, salespersons, publicity etc), public (mass media, consumer forums, government rating agencies) and experiential (self and others experiences). Personal contacts are highly influential sources, public sources are highly credible. c) Evaluation of alternatives: Once the consumer has gathered information and identified the alternatives, he compares the different alternatives available on certain features. These are those features that a consumer considers in choosing among alternatives; these could be functional/utilitarian in nature (benefits, attributes, features), or subjective/emotional/hedonic (emotions, prestige etc.).The consumer also uses decision rules that help a consumer simplify the decision process. At the end of the evaluation, purchase intentions are formed.

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d) Purchase decision: After the consumer has evaluated the various alternatives, he selects a particular brand. Consumer purchases may be trials/first purchases or repeat purchases. The consumer may further have to make decisions on where to buy from, how much to buy, whom to buy from, when to buy and how to pay. It is noteworthy that a purchase intention (desire to buy the most preferred brand) may not always result in a purchase decision in favor of the brand; it could get moderated by attitudes of others and unexpected situational factors

e) Post purchase behavior: After the purchase, the consumer uses the product and re evaluates the chosen alternative in light of its performance viz. a viz. the expectations. He could be experience feelings of neutrality (Performance meets expectations), satisfaction (Performance exceeds expectations) or dissatisfaction (Performance falls short of expectations). This phase is significant as it (i) acts as an experience and gets stored in the memory; (ii) affects future purchase decisions; (iii) acts as a feedback.

3. Buyer responses: While in the black box, the buyer also takes a decision with respect to the product, brand, dealer, timing and amount.

II) MODEL OF INDUSTRIAL BUYING: The business/industrial market is defined as a market that buys, transforms/processes and sells further, either for further transformation/processing or, for consumer use. The business market consists of all the organizations, that buy goods and services for further use in the production and supply of other goods and services that are sold to others. Also called Business to Business markets, or B2B markets, the product and service offering is bought by one business organization and further processed/transformed/assembled consumer for further sale either to another business consumer or a personal consumer. The business markets are very different from consumer markets; they are huge in terms of size and investment; contain fewer but larger and bulkier buyers; they are geographically concentrated; its a derived demand and there is more inelasticity; demand also fluctuates very rapidly. The buying situation that an industrial buyer faces could range between a straight rebuy, a modified-rebuy and a new-task. These situations are based on the complexity of the problem being solved, the newness of the product requirement, the risk involved, the number of people involved in the buying process, the time available in hand.

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With business markets being different than industrial markets, the decision making process in business/industrial markets is also different from the one that takes place in consumer markets. The buying decision is taken in a very formal and professional manner by a group of people who are referred to as the buying center. It is highly formalized, bureauctartic and very complex. The buyers and sellers work very closely and try to build long term alliances and partnerships

According to Kotler and Armstrong, the basic model of business consumer decision making process comprises three major components, viz., the environment (these act as influences), the buying organization (these are related to the buying center, the decision process and the influences) and the buyer responses (this is the response part). The components/processes as well as the working dynamics are explained as follows: 1. The Environment: The environment surrounding the business organization comprises the

marketing stimuli in terms of the marketing mix or the 4Ps, product, price, place and promotion; It also comprises the other stimuli in terms of economic, technological, political, cultural and competitive environment. They environment acts as a stimulus to act; it provides strengths and opportunities and also helps identify weaknesses and threats. 2. 2. The Buying Organization: The buying organization comprises the buying center which goes

through the entire buying process. The buying center is the decision making unit of the buying organization; it is a formally defined unit and comprises people from various departments and functional areas; the various members of the unit, vary in personal background, interest and preferences as also their buying motives, habits and orientations. Membership, power balance and dynamics vary for different products and buying situations. In case of a new-task, when the product/service is being purchased for the
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first time, the engineering and the RandD personnel have a major role to play and act powerful; In cases of the straight-rebuy (routine purchases; repeat orders) and modified-rebuy situations (where product specifications are modified), purchase department acts powerful.

There are various factors that influence the buying decision in industrial buying behavior, viz, environmental, organizational, interpersonal and individual. a) Environmental: - Economic: Various stages in the business cycle (inflation, depression, recession etc) and their resultant impact on money flows in the economy, level of demand , government orientation towards economy and monetary policies (interest rates etc). - Technological: Rate of technological change; Technology transfer and adoption; Technology versus environment; Kind of technology adopted. - Competitive: Amount of competition (number of competitors); Nature of competition; Dynamics of competition. - Political: Political stability/instability; Governmental philosophy and orientation towards investment, growth and development. - Natural environment: Availability of natural resources; Impact of industry on the environment; Environmental depletion; Environmental pollution; Waste and disposal etc.

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b) Organizational: - Philosophy and orientation of the founder, directors and executives. - Company vision, mission and strategy. - Objectives of the company. - Policies and procedures for purchase (Centralized versus decentralized; Quality versus price; Short term versus long term contracts; Intranet and extranet; Supply chain management; Partnership management). - Structures, systems for purchase: Buying center constituents, power dynamics and balances. c) Interpersonal and Individual: The buying center comprises people from various departments and functional areas. Every constituent is an individual in himself. He is different from others in terms of demographic and psychographic backgrounds in terms of age, income, personality, risk attitude, culture etc. The buying centre is diverse in terms of varying interests and orientations towards buying, as well as varying interests, authority, status, empathy, and persuasiveness. The decision making process in industrial buying is much more elaborate and complex than consumer buying. Robinson and Associates have identified eight stages and called each of the stages as buyphases. a) Problem recognition: The buying process begins when someone in the organization identifies a

need. A need could be triggered off by an internal stimulus or an external stimulus. b) General need description: The product/service requirement is laid out in very broad terms. c) Product specification: Then the concerned department/person specifies the products characteristics and requirements. d) Supplier search: Business organizations generate for themselves a list of vendors. This list is drawn up from trade directories, websites, trade shows etc. In case of a straight rebuy or a modified rebuy, the buyer can refer to such a database. In cases of a new-task, he would have to search for new vendors. e) Proposal solicitation: Thereafter, the buyer would invite suppliers to submit their trade proposals; such an invitation could be placed in the newspapers, trade journals and company websites. The vendors are asked to submit details related to the product specifications, features, price, delivery time and period etc f) Supplier selection: After the proposals have been submitted by the vendors, the buyer would go in for an evaluation of the suppliers. The buying center would establish the evaluative criteria, i.e. the basis on which the vendors would be evaluated. These criteria would vary across products/services, buying

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situations etc. In cases of government organization, the prime consideration while evaluating suppliers is the price.

The buying center needs to take decisions on: - how many suppliers to use. - whether quality is a major determinant or price is a major determinant. - total evaluation of the supplier, including his reputation. g) Order-routine specification: Once the busying center has taken a decision on the selection of the vendor, the formal requisition is made in terms of listing the technical specifications, quantity required, delivery terms, negotiated price, payment terms, damages, return policies etc. h) Performance review: The buyer reviews the performance of the chosen supplier(s) on a regular basis. This evaluation helps the buyer later in cases of straight rebuy and modified rebuy. On the basis of an evaluation, the relationship/contract with the supplier is continued or terminated.

3.

Buyer responses: While in the black box, the buyer also takes a decision with respect to the

product/service choice, supplier choice, order quantity, delivery terms and times, service terms and payment

MODELS OF CONSUMER BEHAVIOR: SPECIFIC MODELS I


The consumer models refer to varying orientations and perspectives with which consumers approach the marketplace and how/why they behave as they do. They refer to how the varying orientations impact the buying decision process and overall buyer behavior. Various models have been proposed by researchers; these models can be classified as (a) General models (b) Specific models. The previous session dealt with the General Models. This session deals with two Specific Models. The rest of the Specific Models are dealt with in the next section.

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SPECIFIC MODELS: The models that have been explained in this session are Howard and Sheths model and Nicosias model.

i) The Howard Sheth model (1969): Howard and Sheth used the term buying behavior and not consumer behavior as the industrial buyers and consumers are similar in most aspects. While the model was proposed in the 1960s, for industrial buying, the term buyer is used to connote both industrial consumers and personal consumers. Through the model, Howard and Sheth, tried to explain buyer rationality while making purchase decisions even in conditions of incomplete information. While they differentiated between three levels of decision making, EPS, LPS and RPS, the model focuses on repeat buying/purchase. The model has four major components, viz., stimulus inputs (input variables), hypothetical constructs, response outputs (output variables), and, exogenous variables.

a) Stimulus inputs (Input variables): The input variables refer to the stimuli in the environment; they take the form of informative cues about the product/service offering; these information cues could relate to quality, price, distinctiveness, service and availability. The informational cues could be Significative, Symbolic, (both of which are commercial and can be controlled by the marketer) and Social (non-commercial and uncontrollable by the marketer; family, reference groups and social class). All these three types of stimuli provide inputs concerning the product/brand to a consumer.

- Significative stimuli: The product/brand information that the marketer provides, comprises the significative component; it deals essentially with the brand characteristics.

- Symbolic stimuli: this is the psychological form with which a buyer perceives the product and service offering (brand); it is figurative (verbal and visual product characteristics) and perceptual and depends on how the offering has been positioned; it emanates from advertising and promotion efforts.

-Social stimuli: this is the information about the product or service offering that comes from the social environment viz. family, groups, society and culture at large.

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b) Hypothetical constructs: Howard and Sheth classified the hypothetical constructs into two major groups, viz., perceptual constructs and learning constructs. These constitute the central part of the model and deal with the psychological variables which operate when the consumer is undergoing the decision making process. - Perceptual constructs: The perceptual constructs deal with how a consumer obtains and processes information received from the input variables. Once the buyer is exposed to any information, there is an attention; this attention towards the stimuli depends on the buyers sensitivity to information in terms of his urge and receptivity towards such information. Not all information would be processed and the intake of information is subject to perceived uncertainty and lack of meaningfulness of information; this is referred to as stimulus ambiguity. This reflects the degree to which the buyer regulates the stimulus information flow. Stimulus ambiguity occurs when a consumer does not understand the message from the environment; it could trigger off a need for a specific and active search for information and thus lead to an overt search for information. The information that is gathered and processed may suffer from perceptual bias if the consumer distorts the information received so as to fit his/her established needs/beliefs/values/experiences etc.

- Learning constructs: The learning constructs relate to buyer learning, formation of attitudes and opinions, and the final decision. The learning constructs are seven in number, and range from a buyers motive for a purchase to the final satisfaction from a purchase; the interplay of these constructs ultimately leads to a response output or a purchase. The motives refer to the goals that a buyer seeks to achieve through a purchase and the corresponding urge towards action or the purchase activity. The brand comprehension is the knowledge and information that the buyer has about the various brands in his evoked set. The buyer forms an order of preference for the various brands; this order of preference is based on the choice criteria (decision mediators). The decision mediators are the evaluative criteria and the application of decisions rules by the buyer to the various purchase alternatives.

Based on the choice criteria, the attitudes are formed for the varying brands. The attitudes reflect the predisposition of the buyer; preference toward alternative brands; and, feelings of like/dislike towards the offerings. The brand potential of the evoked set determines the buyer's perception and confidence level of the brands that he is considering to purchase. The purchase intention is a cumulative outcome of the
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interaction of buyer motives, choice criteria, brand comprehension, resultant brand attitude and the confidence associated with the purchase. Satisfaction, another learning construct, involves the post purchase evaluation (whether expectation from an offering matches the performance) and resultant impact (positive/negative) on brand comprehension. c) Response outputs (output variables): The output variables refer to the buyers action or response to stimulus inputs. According to Howard and Sheth, the response outputs comprise five constituents, viz., attention, comprehension, attitude, intention and purchase. These could be arranged in a hierarchy, starting from attention and ending up with purchase.

- Attention refers to the degree or level of information that a buyer accepts when exposed to a stimulus. It reflects the magnitude of the buyer's information intake. - Comprehension is the amount of information that he actually processes and stores; here, it refers to brand comprehension which is buyers knowledge about the product/service category and brand. - The attitude is the composite of cognition, affect and behavior towards the offering; the attitude reflects his evaluation of the brand and the like/dislike based on the brand potential. - Intention refers to the buyers intention to buy or not to buy a particular offering. - Purchase behavior refers to the actual act of buying. The purchase behavior is a cumulative result of the other four constituents.

d) Exogenous variables: The Howard and Sheth model also comprises certain constant exogenous variables that influence some or all of the constructs explained above, and thereby impact the final output variables. These are explained as Inhibitors or environmental forces that restrain the purchase of a favored brand; eg., importance of the purchase, price, financial status of the buyer, time at the disposal of the buyer, personality traits, social pressures etc.

Working relationships between Constructs and the Model:


Through their model, Howard and Sheth explain the buying decision process that a buyer undergoes, and the factors that affect his choice decision towards a brand. The process starts when the buyer is exposed to a stimulus. As a result of the exposure, stimulus ambiguity occurs, which leads to an overt search for information. The information that is received is contingent upon the interplay between the attitudes and

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the motives. In other words, the search for information and the conclusions drawn would be filtered by perceptual bias (that would be a result of attitude, confidence, search and motives). It may alter the existing patterns of motives and choice criteria, thereby leading to a change in the attitude towards the brand, brand comprehension, motives, purchase intention and/or action. The final purchase decision is based on the interaction between brand comprehension, strength of attitudes towards the brand, confidence in the purchase decision and purchase intention. The actual purchase is influenced by the buyer's intentions and inhibitors, which he confronts. The entire process is impacted by various exogenous variables like the importance of purchase, price, time available to make the purchase, social and cultural influences etc. After the purchase, the buyer experiences satisfaction if the performance matches and exceeds expectation; this satisfaction would strengthen brand comprehension, reinforce the confidence associated with the buying situations, and strengthen the intention to repeat purchase of the brand. With a satisfying purchase decision, the buyer learns about buying in similar situations and the behavior tends to get routinized. The purchase feedback thus influences the consumers attitudes and intention.

Through their model, Howard and Sheth explain the buying decision process that a buyer undergoes, and the factors that affect his choice decision towards a brand. The process starts when the buyer is exposed to a stimulus. As a result of the exposure, stimulus ambiguity occurs, which leads to an overt search for information. The information that is received is contingent upon the interplay between the attitudes and the motives. In other words, the search for information and the conclusions drawn would be filtered by perceptual bias (that would be a result of attitude, confidence, search and motives). It may alter the existing patterns of motives and choice criteria, thereby leading to a change in the attitude towards the brand, brand comprehension, motives, purchase intention and/or action. The final purchase decision is based on the interaction between brand comprehension, strength of attitudes towards the brand, confidence in the purchase decision and purchase intention.

The actual purchase is influenced by the buyer's intentions and inhibitors, which he confronts. The entire process is impacted by various exogenous variables like the importance of purchase, price, time available to make the purchase, social and cultural influences etc. After the purchase, the buyer experiences satisfaction if the performance matches and exceeds expectation; this satisfaction would strengthen brand comprehension, reinforce the confidence associated with the buying situations, and strengthen the

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intention to repeat purchase of the brand. With a satisfying purchase decision, the buyer learns about buying in similar situations and the behavior tends to get routinized. The purchase feedback thus influences the consumers attitudes and intention.

An Assessment of the Model The model is an integrative model that incorporates many of the aspects of consumer behavior; it links together the various constructs/variables which may influence the decision making process and explains their relationship that leads to a purchase decision. It highlights the importance of inputs to the consumer buying process. It was one of the first models to divulge as to what constitutes loyalty towards a specific product. It helped gain insights in to the processes as to how consumers process information. The model is user friendly and is one of the few models which has been used most commonly and tested in depth. However, the limitation lies in the fact that the various constructs cannot be realistically tested; some of the constructs are inadequately defined, and thus do not lend to reliable measurements.

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ii) Nicosias model of Consumer Decision Process (1966): The model proposed by Francesco Nicosia in the 1970s, was one of the first models of consumer behavior to explain the complex decision process that consumers engage in during purchase of new products. Instead of following a traditional approach where the focus lay on the act of purchase, Nicosia tried to explain the dynamics involved in decision making. Presenting his model as a flow-chart, he illustrated the decision

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making steps that the consumers adopt before buying goods or services; decision aiming was presented as a series of decisions, which follow one another. The various components of the model are seen as interacting with each other, with none being essentially dependent or independent; they are all connected through direct loops as well as feedback loops. Thus, the model describes a flow of influences where each component acts as an input to the next. The consumer decision process focuses on the relationship between the marketing organization and its consumers; the marketing organization through its marketing program affects its customers; the customers through their response to the marketers action, affects the subsequent decisions of the marketer; the cycle continues.

The various components that are further distinguished into main fields and subfields of the model are marketer's communication affecting consumers attitude, consumer's search and evaluation, purchase action, consumption experience and feedback. The first field ranges from the marketer (source of message) to the consumer (attitude); the second from the search for to the evaluation of means/end(s) relation(s) which forms the preaction field; the third field relates to the act of purchase; and the fourth to feedback. The output from one field acts as the input for the next. These are explained as follows:

1.

Marketer's communication affecting consumers attitude: This comprises Field 1 (i.e. from

the source of a message to the consumers attitude). The consumer is exposed to the firms attributes through the marketing communication; this marketing communication could take place impersonally via mass media (TV, newspaper, websites, etc) as well as personally. The information could relate to the firm attributes as well as the product, price and distribution. This message relating to the firms attributes affects the consumers perception, predisposition and attitude toward the firm and its offering. Of course, the impact on perception and attitude is also dependent upon the consumers personal characteristics, values, experiences, culture, social influences etc. Thus, the marketers communication affects the consumers attitude. 2. 2. Consumer's search and evaluation: After an attitude is formed, the consumer moves to Field 2 of the model, i.e. the consumers search for and evaluation of means/end(s) relation(s) which forms the preaction field. The consumer searches for information about the product category and the varying alternatives, and thereafter evaluates the various brands on criteria like attributes, benefits, features etc. These criteria could be based on his learning and past experiences as well as the marketer's inputs. This step creates a motive in the mind of the consumer to purchase the product.
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3. Purchase action: The motivated state leads to Field 3 of the model, i.e. the decision making on the part of the consumer and the act of purchase. The consumer finally gets into action and buys the product from a chosen retailer. 4. Consumption experience and feedback: The purchase action leads a consumer to Field 4 of the model which is consumption experience and feedback. After purchasing the product, and the resultant consumption, the consumer may have two kinds of experiences. A positive experience in terms of customer satisfaction may reinforce his predisposition with the product/brand and make him loyal towards it. A negative experience on the other hand, implying consumer dissatisfaction would affect his attitude negatively, lower down evaluations about the product/brand and even block his future purchases. This Filed provides feedback to the marketer, who can modify its mix accordingly.

In the first field, the marketer communicates with the customer and promotes an unfamiliar product to him; depending upon the existing predispositions and his evaluation, the consumer develops an attitude. In the second field, the consumer searches for information and evaluates it based on his attitudes; thereafter, he develops a motivation to act. In the third field, he makes and purchase and in the fourth field, he would provide feedback and also memorize his experience and learning for future use. Thus, the firm communicates with consumers through its marketing messages and the consumers react through an act of purchase. Both the firm and the consumer influence each other.

An Assessment of the Model Nicosias model is an integrative model that tries to integrate the body of knowledge that existed at the time of its formulation in the area of consumer behavior. It was a pioneering attempt to focus on the conscious decision-making behavior of consumers, where the act of purchase was only one stage in the entire ongoing decision process of consumers. The flowcharting approach proposed by Nicosia, simplifies and systemizes the variables that affect consumer decision making. It contributes to the step by step "funnel approach" which views consumers movement from general product knowledge toward specific brand knowledge and from a passive position to an active state which is motivated toward a particular brand. However, the model suffers from limitations in the sense that the model proposes assumptions, boundaries and constraints that need not be realistic. It has been argued that attitude, motivation and experience may not occur in the same sequence. Variables in the model have not been clearly defined. Factors internal to the

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consumer have not been defined and dealt with completely. The mathematical testing of the model and its validity are questionable.

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CONSUMER DECISION MODEL The Consumer Decision Model (also known as the Engel-Blackwell-Miniard Model) was originally developed in 1968 by Engel, Kollat, and Blackwell and has gone through numerous revisions; the latest publication of the model is depicted in Figure

It can be seen that many of the elements of the model are similar to those presented in the Theory of Buyer Behaviour (Howard andSheth 1969), however the structure of presentation and relationship between the variables differs somewhat. The model is structured around a seven point decision process: need recognition followed by a search of information both internally and externally, the evaluation of alternatives, purchase, post purchase reflection and finally, divestment. These decisions are influenced by two main factors. Firstly stimuli is received and processed by the consumer in conjunction with memories of previous experiences, and secondly, external variables in the form of either environmental influences or individual differences. The environmental influences identified include: Culture; social class; personal influence; family and situation. While the individual influences include: Consumer resource; motivation and involvement; knowledge; attitudes; personality; values and lifestyle (Blackwell,Miniard et al. 2001).

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Entry to the model is through need recognition when the consumer acknowledges a discrepancy between their current state and some desirable alternative. This process is driven by an interaction between processed stimuli inputs and environmental and individual variables. After a need has been acknowledged the consumer embarks on a search for information, both internally through the consumers memory bank of previous experiences, and externally. The authors argue that the model is suitable for use in explaining situations involving both extended problem solving and limited problem solving by modifying the degree to which various stages of the model are engaged in by the consumer (Loudon andDella Bitta 1993). The depth of information search will be highly dependant on the nature of problem solving, with new or complex consumption problems being subjected to extensive external information searches, while simpler problems may rely wholly on a simplified internal search of previous behaviour. Information is said to pass through five stages of processing before storage and

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use, namely: exposure, attention, comprehension, acceptance and retention (Blackwell,Miniard et al. 2001).

The alternative consumer choices are evaluated by the establishment of beliefs, attitudes and purchase intentions. This process of evaluation is influenced by both the environmental variables and the individual variables. Intention is depicted as the direct antecedent to purchase which is the only outcome tolerated by the model. Inhibitors are not explicitly depicted as mediating between intentions and purchase, however the environmental and individual influences are again said to act on purchase. Situation is listed as an environmental influence, and while this factor is not clearly defined, it could include such factors as time pressure or financial limitations which could serve to inhibit the consumer from realising their purchase intentions (VanTonder 2003).

Consumption is followed by post-consumption evaluation which serves a feedback function into future external searches and belief formation. Divestment is depicted as the final stage in the consumption process acknowledging that the product purchased is likely to be disposed of at some point post consumption. Engel, Blackwell and Kollats Model: Engel-Blackwell-Miniard Model of Consumer Behavior The Engel, Kollat and Blackwell Model, also referred to as the EKB model was proposed to organize and describe the growing body of knowledge/research concerning consumer behavior. A comprehensive model, it shows the various components of consumer decision making and the relationships/interactions among them. The model went through many revisions and modifications, with attempts to elaborate upon the interrelationship between the various components and subcomponents; and, finally another model was proposed in the 1990s which came to be known as the Engel, Blackwell and Miniard Model (EBM). The model consists of five parts, viz. information input, information processing, decision process stage, decision process variables, and external influences. 1. Information input: The information input includes all kinds of stimuli that a consumer is exposed to and triggers a kind of behavior. The consumer is exposed to a large number of stimuli both marketing (advertising, publicity, personal selling, demonstrations, store display, point of purchase stimuli) as well as non-marketing sources (family, friends, peers); thus the various stimuli compete
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for consumers attention. These stimuli provide information to the consumer and trigger off the decision making process.

2. Information processing: Stimuli received in the first stage provide information; the information is processed into meaningful information. The stage comprises consumers exposure, attention, perception/comprehension, acceptance, and retention of information. The consumer is exposed to stimuli (and the accompanying information); attention determines which of the stimuli he will focus upon; thereafter he would interpret and comprehend it, accepts it in his short term memory and retains it by transferring the input to long-term memory. 3. Decision-process stage: At any time during the information processing, the consumer could enter into this stage. The model focuses on the five basic decision-process stages, viz., problem recognition, search, alternative evaluation, choice, and outcomes (post-purchase evaluation and behavior).

There is problem recognition; this is followed by a search for information, which may be internal based on memory. The search of information is also impacted by environmental influences. Thereafter, the consumer evaluates the various alternatives; while evaluation, belief lead to the formation of attitudes, which in turn affect the purchase intention. The next stage is the choice and purchase, which gets impacted by individual differences. Finally there is an outcome, in the form of satisfaction and dissatisfaction. This outcome acts as a feedback on the input and impacts the cycle again. Environmental influences, individual differences and social influences, directly and indirectly influence each of the stages of the decision process.

However, EKB proposed that it is not necessary for every consumer to go through all the five stages; it would depend on whether the problem is an extensive or a routine problem-solving behavior.

4. Decision process variables: The model proposes individual influences that affect the various stages of the decision making process. Individual characteristics include constructs like demographics, motives, beliefs, attitude, personality, values, lifestyle, normative compliance, etc.

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5. External influences: The model also proposes certain environmental and situational influences that affect the decision making process. The environmental influences include Circles of Social Influence, like culture, sub-culture, social class, reference groups, family and other normative influences; situational influences include consumers financial condition The decision process comprises five stages from need recognition to outcome. The outcome in the form of satisfaction/dissatisfaction acts as the input in then next cycle of a similar purchase. Each of the components is directly or indirectly impacted by environmental influences, individual differences and social influences. The model incorporates many constructs that impact consumer decision making. It tries to explain clearly the interrelationships between stages in the decision process and the various variables. They attempted to relate belief-attitude-intention. An attempt was made to define the variables and specify functional relationships between the various constructs. However, the model fails to adequately explain as to how each of these influences consumer decision making. Critics argue that there are too many variables; these have not been defined; the model is vague and complex; and the validity of the model has been questionable. The model was revised in the 1990s and proposed again as the Engel, Blackwell and Miniard (EBM) model

The EKB model went through a series of revisions and modifications and finally it was proposed as the Engel, Blackwell and Miniard Model. The model consists of four sections viz., information input; information processing; decision process and variables influencing the decision process. The variables and the working relationship is similar to the EKB but has been slightly modified. Information received from marketing and non-marketing stimuli feeds into the informationprocessing section of the model. The information section of the model comprises various stages like exposure, attention, comprehension, acceptance and retention. After passing through these stages, it goes into the memory. Then this information that is stored in the memory acts as an initial influence on the need recognition stage. If internal information is inadequate there is a search for external information. The model focuses on the decision process stages: need recognition, search, prepurchase alternative evaluation, purchase, consumption, post-purchase alternative evaluation and divestment. Divestment as a construct was additionally added as a m odification over the EKB

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model. Divestment relates to options of disposal, recycling or remarketing. The entire process is influenced by environmental influences and individual differences. Critique of the Consumer Decision Model One of the key strengths of the Consumer Decision Model is that it has continued to evolve since original publication in 1968 (J.F. Engel,Kollat et al. 1968), evolutions that should have improved the explanatory power of the model in light of advances in consumer behaviour theory and knowledge. One such evolution is the inclusion of such factors as consumption and divestment, embracing contemporary definitions of consumer behaviour which include such stages of consumption in their scope (Peter andOlson 2008, Schiffman andKanuk 2007, Solomon,Bamossy et al. 2006).

The model provides a clear depiction of the process of consumption making it easy to comprehend and intuitively pleasing (Foxall 1990). The mechanistic approach is, however, criticised to be too restrictive to adequately accommodate the variety of consumer decision situations (Erasmus,Boshoff et al. 2001, Loudon and Della Bitta 1993).

In parallel with the Theory of Buyer Behaviour, the influence of environmental and individual factors is purportedly specific to certain process within the model. This is counter intuitive, and ignores other impacts that such variables may have on the wider processes, for example, individual differences may exert significant influence on the marketing stimuli a consumer is firstly exposed to and secondly, how these stimuli are received and processed.

The environmental and individual variables have drawn criticism due to the vagueness of their definition and role within the decision process (Loudon andDella Bitta 1993); for example the influence of environmental variables is identified, but their role in affecting behaviour is not well developed. Further, the role of individual motives for purchase is only alluded to within need recognition, appearing to somewhat neglect a rich theoretical and important area of consideration (Bagozzi,GurhanCanli et al. 2002, Loudon and Della Bitta 1993).

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PROFILE OF THE INDIAN CONSUMER The recent years have witnessed rapid transformation and vigorous profits in Indian retail stores across various categories. This can be contemplated as a result of the changing attitude of Indian consumers and their overwhelming acceptance to modern retail formats. Asian markets witness a shift in trend from traditional retailing to organized retailing driven by the liberalizations on Foreign Direct Investments. For example, in China there was a drastic structural development after FDI was permitted in retailing. India has entered a stage of positive economic development which requires liberalization of the retail market to gain a significant enhancement. The Indian consumption patterns are slowly converging with global norms. The Indian consumer is now spending more on consumer durables, apparel, entertainment, vacations and lifestyle related activities. Entertainment, clothing and restaurant dining are categories that have been witnessing a maximum rise in consumer spending since 2002. India is on the radar screen in the retail world and global retailers and at their wings seeking entry into the Indian retail market. The market is growing at a steady rate of 11-12 percent and accounts for around 10 percent of the country's GDP. The inherent attractiveness of this segment lures retail giants and investments are likely to sky rocket with an estimate of Rs 20-25 billion in the next 2-3 years, and over Rs 200 billion by end of 2010. Indian retail market is considered to be the second largest in the world in terms of growth potential. Challenges facing the Organized Retail Industry: Despite the rosy hopes, some facts have to be considered to positively initiate the retail momentum and ensure its sustained growth. The major constraint of the organized retail market in India is the competition from the un-organized sector. Traditional retailing has been deep rooted in India for the past few centuries and enjoys the benefits of low cost structure, mostly owner-operated, therein resulting in less labor costs and little or no taxes to pay. Consumer familiarity with the traditional formats for generations is the greatest advantage to the un-organized sector. On the contrary, organized sector have big expenses like higher labor costs, social security to employees, bigger premises, and taxes to meet.

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Availability and cost of retail space is one major area where Government intervention is necessary. Liberalizing policy guidelines for FDI needs focus as well. Proper training facilities for meeting the increasing requirements of workers in the sector would need the attention of both Government and the industry. Competition for experienced personnel would lead to belligerence between retailers and higher rates of attrition , especially during the phase of accelerate d growth of the retail industry. The process of avoiding middlemen and providing increased income to farmers through direct procurement by retail chains need the attention of policy makers. Taking care of supply chain management, mass procurement arrangements and inventory management are areas that need the focus of entrepreneurs. India is now on the radar of global retailers. Accelerated development of retailing industry in t he country and building brand value of domestic products is essential not only for marketing our consumer products more efficiently , but also for the development of our own retailing industry. According to KSA Technopak 300 million odd middle class - the Real consumers - is catching the attention of the world with over 600 million effective consumers by 2010. India is bound to emerge as one of the largest consumer markets of the world by 2010. 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. As per India's Marketing White book (2006) by Business world, India has around 192 million households. 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 the 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 is expected to rise from 135 million in 2001-02 to 153 million in 2009-10. This presents the largest potential market in the world. According to the study conducted by NCEAR, the number of `lower middle income' group in rural areas is almost double as

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compared to the urban areas, having a large consuming class with 41% of the Indian middle class and 58% of the total disposable income. 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 fastmoving consumer goods (FMCG) in India. The market size of the fast moving consumer goods sector is projected to be more than double to US$ 23.25 billion by 2010 from the present US$ 11.16 billion. As a result, it is becoming an important market place for fast moving consumer goods as well as consumer durables. 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 own relatively expensive consumer durables, such as air conditioners and refrigerators.

600 mn+ effective buyers by 2010 550 mn+ under the age of 20 by 2015 70 mn+ earn Rs. 8,00,000+ ($18,000) a year number to rise to 140 mn by 2011 India's Income classes 1990-00 2005-06 6milliion households 75million

RICH (annual income > US$ 4,700) * Own cars, PCs CONSUMING (US$ 1000-4700) * Have bulk of banded consumer goods, 70% of 2-wheelers, refrigerators, washing machines CLIMBERS (US$500-1000) * Have atleast one major durable (mixer, sewing machine/tv) ASPIRANTS (US$350-500) * Have bicycles, radios and fans DESTITUTES (Less than US$350) * Not buying

3million households 55million

66million 32million 24million

78million 33million 17million

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Consumer Behavior: Availability of lifestyle spending options is increasing for Indian consumers and that 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. According to Ernst and Young report, 'The Great Indian Retail Story, 2006', 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. Consumer Spending: The rate of growth of spending on discretionary items (unlike basic necessities like food) has been growing at an average of 9 per cent per year over the past five years. A nation of savers, India, has now altered into a nation of spenders. KSA Technopak's Consumer Outlook 2004 report estimates that an average Indian spends 40% of his monthly salary on food and grocery and 8% on personal care products.

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Indian consumer spending basket (2003):


Consumer durables 53% Books and Music 32% Movies and Theater 38% Vacation 32% Home Textiles 29% Mobile phones 96% Payment Household help 48% Computer / peripherals 10%

Consumer Spend (Year 2006)


Total Consumer Spend : Rs. 20,00,000 cr ($ 445 bn) Retail : Rs. 12,00,000 cr ($ 270 billion) double digit growth expected Organized Retail: Rs. 55,000 cr ($ 12.4 bn) at current prices 40%+ annual growth expected Scope for Organized Retail: Rs. 2, 00, 000 cr ($ 45 bn) by 2010. Av. Salary hike of 15+ per cent:

there will be lot more consumption.

Leading retailers' sales growth: 50-100% in 2005-06 Urban-Rural divide in Spending (%) Category Entertainment Consumer Services Durables Misc. Consumer goods Clothing and Footwear Food Rural 33 44 50 57 61 64 Urban 67 56 50 43 39 36

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The demanding assertive Indian consumer is now sowing the seeds for an exciting retail transformation that has already started bringing in larger interest from International Brands / formats. With the advent of these players, the race is on to please the Indian consumer and its time for the Indian Consumer to sit back and enjoy the hospitality of being treated like a King.

India is gradually moving up as a Global emerging economical force and is already considered as an international hub for information Technology, Automobiles, Malls both of Indian and foreign companies and Textiles particularly synthetic. No comprehensive study of the Indian consumer has been undertaken so far. We have to rely on the fragmented studies that have been conducted by different agencies. When we attempt to draw a profile of the Indian consumer, we tread on difficult territory. With due recognition of this limitation, we are outlining a broad profile of the Indian consumer, including his buying motives and habits. India being very vast geographically, consumers here are naturally scattered over a vast territory. As the country is also marked by great diversity in climate, religion, language, literacy level, customs and calendars, lifestyles and economies status, here consumers present a complex and bizarre group. The heterogeneity holds many implications for a marketer, especially to those going in for national marketing.

Broad profile of the Indian consumer


Demographics: Size of population: According to the Census 2001 the population of India stood at 1,027 million, of which 742 million lived in rural areas and 285 million in urban areas. Literacy and education: According to the Census 2001, the nations average literacy rate is 65.4 percent. There is a rise in growth of literacy rate since 1951 and it has increased substantially in the last decade.

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From now onwards there will be a faster progress in checking illiteracy as the proportion of youngsters enrolled in schools is going up and more and more neo-literates are also emerging from the adults, as a result of the National Literacy Program. Over 21 percent of all adults in the country now read some publication or the other. In urban areas, the percentage is over 56. The government has targeted to achieve 80 percent literacy on a nationwide basis in the next 10 years. A vast educated manpower: It is a paradox; on the one hand, India has the highest concentration of illiterates in the world; and on the other, it has the second highest concentration of literates and third largest pool of educated and technically trained manpower in the world. India has a strong pool of engineers, scientists and technically educated persons. In modern fields like information technology, India has been displaying its strength very clearly in recent years. Diversity, the Hallmark: Indian consumers are not a homogeneous lot. They are marked by great diversity. It is this diversity that strikes us first when we look at Indian consumers that is diversity in religion, language, culture, tradition, social customs, and dress and food habits. Religious diversity: The one billion people of India belong to seven different religious groupsHindus, Muslims, Christians, Sikhs, Buddhists, Jains and Zoroastrians. In addition, there are other persuasions and there are sects, sub-sects, castes and sub-castes. Each religion has its own hierarchic structure, concretized through centuries of practices. Each caste has its own customs established over generations. In birth and death, in marriage and family life, the individual is entangled in the chores of his religion or caste. What is welcome for one religion is taboo for the other; and something totally banned in one religion is an accepted practice in another. Linguistic diversity: The same diversity is seen in the matter of language. Sixteen languages have been specified in the Constitution of India as national languages. In addition, there are hundreds of dialects. In several places, many amalgams of languages have been formed as a result of shifting populations. If a

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marketing man has to approach the entire national market of India, this linguistic diversity is a big challenge. Diversity in dress and food habits: As far as dress is concerned, India holds out the picture of widely varying styles. Almost every state, or religious community, has its own traditional styles of dress. The same is the case with ornaments and Jewellery. As regard food, rice is the staple food in the South and wheat in the North. Of course, in several of the southern states people now consume wheat products as co-food items. Likewise, certain southern dishes have become popular in the north. Still the basic difference in food habits remains. There are certain communities, which are strict vegetarians. For meat eaters, there are several restrictions; for the Hindu, beef is taboo, for the Muslim, pork is taboo, for the Christian, both are delicious. Some use coconut oil as the cooking medium, some use groundnut oil, and some others, mustard or gingelly oil. The conclusion if a marketer wants to market his products in India he has to consider all the above diversified aspects before planning the marketing strategy. Accordingly the advertisements, sales promotion activities, distribution channels and retailing plans must be drawn in order to successfully sell the goods whether for B2B or consumer goods through malls and retailers. When India opened its economy to the global marketplace in the early 1990s, many multinational corporations rushed in to pursue its middle-class consumersan estimated 200 million peopleonly to confront low incomes, social and political conservatism, and resistance to change. It turned out that the Indian consumer was a tough one to figure out and win over. Things are changing. Although attitudes remain complex, they have shifted substantially toward consumerism, particularly over the past decade. The countrys recent economic performance is a factor, of course. For three years, GDP growth has been strong and sustained, at an average annual rate of around 8%. The populations demographic profile also plays a role: Indians constitute a fifth of the worlds citizens below age 20. So a youthful, exuberant generation, weaned on success, is joining the ranks of Indian consumers.

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To examine the changes in attitude, the Gallup Organization conducted two surveys of more than 2,000 respondents gauging the habits, hopes, plans, and evolution of the Indian consumer in the decade from 1996 to 2006. (For a similar look by Gallup at Chinese attitudes, see William McEwen et al., Inside the Mind of the Chinese Consumer, HBR March 2006.) In collaboration with our colleagues Raksha Arora and Prasun Basu, we mined the data and emerged with three key insights. Indians are getting more materialistic. Indians are often stereotyped as deeply spiritual people who reject materialistic values. Our research suggests that this stereotype no longer reflects reality. For instance, almost half of Indias urban population had adopted a work hard and get rich ethos by 1996; another 9% had done so by 2006. Indians are more motivated than ever by personal ambition and a desire for material success, and they put in the hours it takes to achieve those goals. A recent Gallup poll of more than 30 countries showed that, with an average workweek of 50 hours, India ranks among the hardest working nations globally. (The average in the United States is 42 hours; major European nations such as Germany, France, and the UK have workweeks of fewer than 40 hours.) Consumerism is becoming a way of life in India. An analysis of Indians savings goals underscores the increase in materialism. Although long-term plans remain a high priority, lifes pleasures in the here and now have gained importance over the past decade. Indians desire to set money aside for electronics and durables has grown so dramatically that it has nearly caught up with their desire to save for their childrens education. Travel and entertainment have also gained ground.

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Interestingly, this trend does not apply only to the youngit holds true for people aged 15 to 55. And it is not merely a large-city phenomenon; people in smaller towns espouse these values as well. Among durable goods, high-tech luxury items are increasingly in demand. The number of Indians who own or use mobile phones, for example, has grown 1,600%not surprising in a country that is adding more than 3 million subscribers a month. The number of people who own or use computers or laptops is up 100%, albeit from a very small base. Ownership of music systems and televisions is also on the rise.

The Indian consumption patterns are slowly converging with global norms. The Indian consumer is now spending more on consumer durables, apparel, entertainment, vacations and lifestyle related activities. Entertainment, clothing and restaurant dining are categories that have been witnessing a maximum rise in consumer spending since 2002. Source: The Great Indian Retail Story 2006, Ernst and Young. Source: KPMG/Research

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