LITERATURE REVIEW On Consumer Behaviour towards Consumer Durables

Submitted to: Dr. K.S. Sharma

Submitted by:Sagar Pachauri

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Contents:1. Acknowledgement 2. Objective 3. Overview 4. Industry Analysis 5. Literature review 6. Findings 7. Conclusion

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Acknowledgement
I am thankful to Dr. K.S. Sharma for providing me the task of preparing the Literature Review on Consumer Behaviour towards Consumer Durable. We at Lovely believe in taking challenges and the Literature Review provided me the opportunity to tackle a practical challenge in the subject of marketing. This Literature Review tested my patience at every step of preparation but the courage provided by my teachers helped me to swim against the tide and move against the wind.

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OBJECTIVE:
Objective of the study is to study the consumer behaviour towards consumer durables. Here we have to study how Indian consumer is behaving, how he behaved in past and what are the future estimates about. The study is based upon the secondary data, after going through the secondary data we have to draw a conclusion.

OVERVIEW:
India in its 62 years of journey has seen manifold increase in the income of its denizens (Rs. 38,084as on 2009) and this has led to paradigm shift in the purchasing behaviour of the people here. There is a noticeable shift in the consumers preference in favour of higher end, technologically superior branded products, the demand being fueled by increasing consumer awareness and preference for new models. This shift is also because of the increase in manufacture of branded products and narrowing down of price between branded and non-branded goods. Competition has forced the companies to offer efficient after sales service and support and this, in turn, has swayed customer preference for branded products. Post liberalization there has been inundation of goods transcending the borders and the customer has a wider choice; breaking the shackles of the consumers regarding limitations of choices. Indian consumer durables market used to be dominated by a few domestic players like Godrej, Allwyn, Kelvinator, and Voltas. But post-liberalization many foreign companies have entered into India, dethroning the Indian players and dominating the market. The major categories in the market are CTVs, refrigerators, airconditioners and washing machines. The rural market is growing faster than the urban markets, although the penetration level in rural area is much lower. The CTV segment is expected to be the largest contributing segment to the overall growth of the industry. The rising income levels, double-income families and increasing consumer awareness are the main growth drivers of this industry. In addition to them the young nature of population and easy finance options are also fuelling the market and its dynamics. Consumers today are more indulgent in market place than their predecessors. There has been shift in the definition of needs and wants. For example a mobile phone is more of a need today then a want. Westernisation has influenced the psyche of the Indian customers to a degree. This report is an attempt to reflect the changes in the consumer buying behaviour in the Indian Market especially in home appliances buying.

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KEY GROWTH DRIVERS FOR CONSUMER DURABLES

Rise in disposable income: The demand for consumer electronics has been rising with the increase in disposable income coupled with more and more consumers falling under the double income families. The growing Indian middle class is an attraction for companies who are out there to woo them. Availability of newer variants of a product: Consumers are spoilt for choice when it comes to choosing products. Newer variants of a product will help a company in getting the attention of consumers who look for innovation in products. Product pricing: The consumer durables industry is highly price sensitive, making price the determining factor in increasing volumes, at least for lower range consumers. For middle and upper range consumers, it is the brand name, technology and product features that are important. Availability of financing schemes: Availability of credit and the structure of the loan determine the affordability of the product. Sale of a particular product is determined by the cost of credit as much as the flexibility of the scheme. Rise in the share of organized retail: Rise in organized retail will set the growth pace of the Indian consumer durables industry. According to a working paper released by the Indian Council for Research on International Economic Relations (ICRIER), organized retail which constituted a mere four percent of the retail sector in FY07 is likely to grow at 45-50% per annum and quadruple its share in the total retail pie 16% by 2011-2012. The share will grow with bigger players entering the market. Innovative advertising and brand promotion: Sales promotion measures such as discounts, free gifts and exchange offers help a company in distinguishing itself from others. Festive season sales: Demand for colour TVs usually pick up during the festive seasons. As a resultmost companies come out with offers during this period to cash in on the festive mood. This period will continue to be the growth driver for consumer durable companies. MAJOR HURDLES AND CHALLENGES PLAGUING THE CONSUMER DURABLES SECTOR: Threat from new entrants, especially global companies: The domestic consumer durables sector faces threat from newer companies, especially from global ones who have technologically advanced products to offer. Rivalry and competition: Presence of a large number of players in the domestic consumer durables industry leads to competition and rivalry among companies. Threat from rivalry and competition poses a threat to domestic companies.
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Potential markets remaining yet untapped: A large segment of the domestic market, mostly the rural market is yet to be tapped. Tapping this yet untapped and unorganized market is a major challenge for the Indian consumer durables sector. Threat from substitute products/services: The domestic consumer durables industry is plagued by threats from substitute products. Easy accessibility to theatres/multiplexes, especially in urban areas has turned off the viewership from TV to a large extent. With the advent of a horde of FM radio stations, radio sets have now substituted TVs. Customer power with respect to availability of choice: The availability of a wide product line on account of most products being homogeneous, poses a threat for companies operating in the consumer durables sector. Customers have the choice of both domestically produced and imported goods, with similar features.

INDUSTRY ANALYSIS
WHITE GOODS Refrigerators Washing machines Air conditioners Speakers and audio Equipment KITCHEN APPLIANCES/BROWN GOODS Mixers Grinders Microwave oven Irons Electric fans Cooking range Chimneys CONSUMER ELECTRONICS Mobile phones Televisions MP3 players DVD players VCD players

ATTRACTIVE AREAS FOR INVESTMENT High-end colour TVs

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 High-end, flat screen TVs, plasma display panels and liquid crystal display TVs registered an average of more than 100 percent growth in 200708 and the trend is expected to continue.

Split air conditioners

Split air conditioners have been growing much faster than window air conditioners, growing at 97 percent in 200607 compared to 32 percent growth for window air conditioners.

Distribution and retail

With the rural and semi-urban markets opening up avenues for expansion, the need to have a strong distribution network is crucial for companies to remain price competitive.

Mobile phones
The mobile phone market grew at 29 percent in 200708 over the previous year. The market is expected to grow at a compound annual growth rate (CAGR) of about 28.3 percent from 2006 to 2011.

LITERATURE REVIEW
1. Mr. S. L. Rao describes some experiences in launching new products and some insights into consumer behaviour that drove them or arose from them. he describes events that took place in the period from 1957 to 1976. Product launches in those years were centered round manufacturing capability. The consumer had limited choice. So did the manufacturer who had limited options in features that he could offer in the product. But most did consider what the consumer wanted, her considerations in taking the purchase decision, and ways in which it could be in favour of a particular product. The consumers attitudes, habits and preferences were relevant and were studied. Today of course this is much more the case. Production capacities, packaging, pricing, use instructions, distribution, advertising and promotion, should usually have resulted from the understanding and interpretation of these consumer attributes. Many products succeeded despite the lack of such preparatory studies because of the monopoly that was conferred by production and import licensing and the copying of products that had succeeded in overseas markets. In the illustrations that I give, consciously and in a planned manner or intuitively, consumer behaviour was at the core of all decisions that had to do with the product. Over time, the consumers concerns began to be integrated into all decisions relating to new products, and marketing strategy became business strategy. I have some examples of the early application of this development.

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Many products and brands that dominated consumer franchise for many years and others that were successfully launched, have declined or disappeared now after many years. The reasons have been varied: changing economic situation; new consumer contexts, behaviours and preferences; competing products offering better value choices to the consumer; lack of nimbleness of the company in adapting to changing markets; and inability to change product images and product forms to meet new directions in consumer behaviour. While product and brand lives have been extended in some cases, there are many instances when life extension has not worked. Even the most dominating brands seem to have limits to their lives. For any chance of success, careful risk-taking, determination and courage are essential 2. Here the author Mr. Ashutosh describes about rural consumer behavior .He is telling that The literacy rate and also the employment rate in the villages have increased considerably over the last few years, and because of these factors, there is a major shift in the taste of the people. This change in taste and buying behavior of the people led many companies to tap this new breed of customers.Marketers needs to understand the consumer behavior of the rural market and then design marketing programs in which they need to associate the brand with the lifestyle of the rural people. They need to be addressed in their own language, by their own hero and associate the brand with celebrations, festivals, melas, and other cultural activities for enhancing brands market presence.

Social & Behavioral Influence Cultural & Social Practices Influence of Perception Attitude to Quality & Price: Small pack sizes get acceptance in the markets, as they can pay only a small price because of the nature of income. And also, the rural population is quality conscious. Brand preference and Loyalty: High in rural markets, and because of this, the brand switching is less compared to that of urban markets.

3.According to Business marketing Research Inflation and price rise have long been the causes of worry among the Indian consumers. Various states and national Government seems to have gone in deep slumber about this burning issue. In such a scenario, the very thought of setting up retail chain could help control prices comes like a cool breeze in sweltering summer. Presently, there are 200 retail stores in the country with promoters and organizers who are optimistic and positive that the retail sales depot may help in containing the soaring prices. Retail sector of Indian economy is undergoing a paradigm shift. This sector has grown substantially and rapidly during the past few years and liberalized policies indicate its even faster growth. India,
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known as Nation of Shopkeepers, has the highest shop density in the worldone retail outlet for around 90 persons. Retail industry, which is US$300 billion in 2006, is likely to reach 427 billion US dollars by 2010 and to 637 billion US dollars by 2015. 4. According to Mr.B.B.Goyal and S. Jagwinder Singh India has been acknowledged as one of the most promising and fastest growing economy of the world. Besides urban and semi-urban areas, rural India has a huge potential. Many foreign brands are dominating particularly in consumer durable category. The purpose of the study is to understand the comparative attitudes of rural and urban Indian consumers towards the foreign products against Indian products. Both rural and urban consumers have rated foreign products very high as compared to domestic products. Rural consumers were found more impressed than their urban counterparts with foreign products in terms of maintenance services, technical advancement, prestige, durability, quality/performance, and wide choice of size and model. No significant differences were observed between rural and urban consumers in terms of good style and appearance. Indian producers in the coming times are going to face a very strong threat from foreign brands, particularly in consumer durable category. 5. According to Chandrasekaran Kathiravanaa, Natarajan Panchanathamaa and Sivasundaram Anushanb brand attributes consist of bits of information that are linked to a brand name in consumer memory and that, when combined with the brand name, make up a brands image .The brand attributes themselves come from a variety of sources, including consumer experiences, marketing communications, and/or word of mouth . The linkages between the brand name, its attributes, and other brands in the marketplace mean that associated attributes can be unique to the consumer, unique to the brand, or shared with other brands . Two-wheeler is an important product item in modern society both urban and rural areas. Consumers mainly purchase the product for their covenience. Gradually it is becoming more popular in the consumers' world and its demand is world- wide .Consumers purchase

decisions for two wheelers are always influenced by a number of factors, which lead them to select a particular brand in preference to others. In this study ten attributes are considered as important cause, which lead consumer to select a particular brand of two-wheeler. This study examines products from a high involvement consumer product category. Researchers include brand, which is highly similar on measurable attributes such as cylinder capacity (CC). The reasoning is that the nature of the competitive marketplace offers many brands within distinct subcategories and this may provide further understanding of brand choice relating to present market conditions.

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6. According to Bhagaban Das ,Sangeeta Mohanty and Nikhil Chandra Shil consumers buying behavior is divergent and situational. For durable products, such behavior got different dimensions again. To make the study simple and informative, color television is used to represent the consumer durable markets. Television, as a product, is getting the status of essential commodity all over the world. The potential of TV market is indeed quite enormous. The Indian consumers were indifferent in choosing the brand since a lot of close substitutes were available in the market. However, they have changed ever since the India liberalized its economy. Choosing the right brand of television is difficult enough when there were half a dozen brands and all of these claimed to give excellent picture quality. Marketing managers are interested not only in the product but also the behavior of the consumers because it gives them the right orientations for product development and positioning. The level of consumer's satisfaction provides the scope for repeated purchases and brand loyalty that lead to optimum profitability. This research finds that consumers' perception on buying color television is mostly affected by the factors, such as, structural add-ons, words of mouth, technical features, durability, ground reality etc. 7. According to The FICCI Survey, based on feedback and interaction with representatives of consumer durables industry, allied industry organizations, associations, Government agencies and public sector undertakings, reveals that sector is poised for a quantum leap due to technological improvements, falling prices due to competition, aggressive marketing and declining import tariffs. The Survey reflects the changing dynamics of consumer behaviour luxury goods are now being perceived as necessities with higher disposable incomes being spent on lifestyle products. There is a discernible shift in the consumers preference in favour of higher-end, technologically superior branded products, the demand being spurred by increasing consumer awareness and preference for new models. This shift is also explained by the growing trend of products being manufactured in the organized sector of the economy and the narrowing down of the price differential between branded and non-branded goods. Competition has forced companies to offer efficient after sales service and support and this, in turn, has swayed customer preference for branded products. The Survey highlights the positive growth trends in consumer durable segments white goods and consumer electronics during April-March 2004-05 and points to sustained growth during 2005-06 because of emerging opportunities and strong fundamentals of the economy.

8. The Indian consumer durables industry has witnessed a considerable change in the past couple of years. Changing lifestyle, higher disposable income coupled with greater affordability and a surge in advertising has been instrumental in bringing about a sea change in the consumer behavior pattern. This industry consists of durable goods used for domestic purposes
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such as televisions, washing machines, refrigerators, microwave ovens, mobile phones etc. The growth in the consumer durables sector has been driven primarily by factors such as the boom in the real estate & housing industry, higher disposable income, emergence of the retail industry in a big way coupled with rising affluence levels of a considerable section of the population. As per a survey conducted by FICCI on the Indian consumer durables industry, a shift in consumer preferences towards higher-end, technologically advanced branded products has been quite discernable. This shift can be explained by narrowing differentials between the prices of branded and unbranded products added with the high quality of after sales service provided by the branded players. The shift has also been triggered by the availability of foreign branded products in India owing to lower import duties coupled with other liberal measures as introduced by the government. The consumer durables industry can be broadly classified as consumer electronics and consumer appliances. The consumer appliances category can be further segmented as white and brown goods.

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FINDINGS
The rising rate of growth of GDP, rising purchasing power of people with higher propensity to consume with preference for sophisticated brands would provide constant impetus to growth of White goods industry segment. Penetration of consumer durables would be deeper in rural India if banks and financial institutions come out with liberal incentive schemes for the white goods industry segment, growth in disposable income, improving lifestyles, power availability, low running cost, and rise in temperatures. While the consumer durables market is facing a slowdown due to saturation in the urban market, rural consumers should be provided with easily payable consumer finance schemes and basic services, after sales services to suit the infrastructure and the existing amenities like electricity, voltage etc. Currently, rural consumers purchase their durables from the nearest towns, leading to increased expenses due to transportation. Purchase necessarily done only during the harvest, festive and wedding seasons. Rural India that accounts for nearly 70% of the total number of households, has a 2% penetration in case of refrigerators and 0.5% for washing machines, offers plenty of scope and opportunities for the white goods industry. The urban consumer durable market for products including TV is growing annually by 7 to 10 % whereas the rural market is zooming ahead at around 25 % annually. According to survey made by industry, the rural market is growing faster than the urban India now.The urban market is a replacement and up gradation market now. The increasing popularity of easily available consumer loans and the expansion of hire purchase schemes will give a moral boost to the price-sensitive consumers. The attractive schemes of financial institutions and commercial banks are increasingly becoming suitable for the consumer. Consumer goods companies are themselves coming out with attractive financing schemes to consumers through their extensive dealer network. This has a direct bearing on future demand. The other factor for surging demand for consumer goods is the phenomenal growth of media in India. The flurry of television channels and the rising penetration of cinemas will continue to spread awareness of products in the remotest of markets. The vigorous marketing efforts being made by the domestic majors will help the industry. The Internet being now used by the market functionaries that will lead to intelligence sales of the products. It will help to sustain the demand boom witnessed recently in this sector. The ability of imports to compete is set to rise. However, the effective duty protection is still quite high at about 35-40 per cent. So, a flood of imports is unlikely and would be rather need based. Reduction in import duties may significantly lower prices of products such as microwave ovens, whose market size is quite small in India. Otherwise, local manufacturing will continue to stay competitive. At the same time, there will

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be some positive benefits in the form of reduction in input costs. Washing machines and refrigerators will also benefit from lower input costs.

According to a study by the McKinsey Global Institute (MGI), Indian incomes are likely to grow threefold over the next two decades and India will become the world's fifth-largest consumer market by 2025. In the given scenario, urban markets will continue to fuel the Indian economy for quite some time to come. Moreover, expenditure by the middle class accounts for the bulk of Indias urban consumer expenditure. About 61 per cent of total urban income comes from households that can be classified as middle classearning between US$ 1,493 and US$ 9,955 a year. Further, India is likely to see rapid urbanisation, with around 45 per cent of Indians living in urban areas by 2050, up from 30 per cent in 2007-08, according to a study by National Council of Applied Economic Research's (NCAER). According to a report by McKinsey, India's overall retail sector is likely to grow to US$ 419.93 billion by 2015. According to global real estate consultant, CB Richard Ellis, India has moved up to the 39th most preferred retail destination in the world in 2009, up from 44 last year. The turnover of the organised retail segment in India is pegged at around US$ 8.1 billion. It is expected to reach US$ 51 billion by 2010. Retail opportunity is slated to rise by about US$ 160 billion in India in five years. In urban India, modern retail is likely to grow from the current 9.6 per cent of total retail to 26 per cent in the next five years, as per Technopak Advisors The Indian consumer durables market seems to be relatively untouched by the economic slowdown. The consumer durable goods output witnessed a 2.5 per cent rise in durables output in the first quarter of 2009, according to a report by the Development Bank of Singapore (DBS). Colour televisions have seen an increase in sales, growing 2 per cent to 2.8 million units. Whirlpool is on the expansion mode and is targeting a 22 per cent share of the US$ 423.28 million washing machine market in India by the end of 2009, and is launching a range of new products with an investment of US$ 4 million for the same. Moreover, a large number of hi-technology durables are expected to flood the US$ 4.03 billion Indian durables market in 2009. Samsung, LG, Haier and Videocon are among companies planning new product launches in the coming months.

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CONCLUSION
Consumer durable goods industry is growing more than expected in India because of huge population of India. The Indian consumer remains one of the most upbeat globally. In fact, it is widely believed that the Indian market will fuel the growth of multinational companies in the coming years. While most leading companies are cutting costs in the US and Europe, they see India as a strategic market, which can fuel their growth.

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