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AN STUDY ON
CONSUMER PSYCHOLOGY
In
NILGIRIS
Bangalore
Dissertation submitted in partial fulfilment of the requirements for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
BANGALORE UNIVERSITY
By
MEHUL KUMAR
Reg.No:091PCMA012
2009 - 2011
Under the guidance of
Dr. C .Girish
Professor
CMR CENTER FOR BUSINESS STUDIES#5, Bhuvanagiri, OMBR Layout, Banaswadi,
BANGALORE-560 043
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STUDENT`S DECLARATION
I hereby declare that this Dissertation titled CONSUMER PSYCHOLOGY Submitted
by me to the Department of Management, Bangalore University in partial fulfillment for the
award of the Degree of Master of Business Administration, Bangalore University, is a
bonafide work carried out by me under the guidance of Dr.C.Girish. This has not been
submitted earlier to any other University or Institution for the award of any Degree or
Diploma or Certificate or Published any time.
Place: Bangalore Mehul kumar
Date: (091PCMA012 )
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CERTIFICATE FROM GUIDE
This is to certify that dissertation titled Consumer Psychology submitted in partial
fulfillment for the award of the Degree of Master of Business Administration, Bangalore
University was carried out by Mehul Kumar (091PCMA012) under my direct supervisionand guidance.
This has not been submitted to any other University or Institution for the award of any
Degree/Diploma/Certificate.
Place: Bangalore Guide Name
Date: Dr.C.Girish
CMR Center for Business studies
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ACKNOWLEDGEMENT
I owe deep sense of gratitude to my beloved institution, CMR center for Business Studies,
for molding me into a real management student.
My project wouldnt have been successful without the material assistance of a number ofpeople. I would like to acknowledge the help rendered by each of them. I express profound
gratitude and thanks to all the people who have been extremely inspirational and helped me
to complete this project.
I would also like to take this opportunity to express my deep gratitude and thanks to my
project guide Dr.C.Girish CMR CBS for his most valuable guidance and critical evaluation
throughout the course of project work. I would also like to thank all my faculty members for
their valuable suggestions.
Finally, my heart full thanks to my beloved parents and friends with whose love, blessings,
guidance, suggestions and encouragement, I could come up to this stage.
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EXECUTIVE SUMMARY
Having an insight into the mind of the consumer is extremely important in developing marketing
strategy especially in a country like in India where diversity is the norm. The insights about the
consumer behavior come from empathy with the consumer and familiarity with the socio economic
and cultural environment. It also needs sound analysis of consumer behavior. This programme
focuses on methodology to enable understanding of consumer psychology for marketing decisions.
Consumer psychology includes consumer decision making, Individual determinants of
behaviour, Perception, Motivation, attitudes, personality, learning and Environmental influences.
Nilgiris is one of the supermarkets in South India with leading chain of retail stores
providing consumers a shopping experience that hinges around freshness of produce,
superior quality and better value. From humble beginnings in the hills around Ooty and
Coonoor at the turn of the twentieth century, Nilgiris has grown from being a Dairy Farm
specializing in butter to a supermarket chain of over 90 stores spread across Indias southern
states.
With the mission of constantly improving and upgrading capacities to satisfy
consumers through a wide range of food products and service offered at the right quality,
quantity and price supported by innovative solutions, Nilgiris is all set to embrace emerging
technologies and be recognized for its integrity, customer focus and commitment to quality.
This report consists of the detailed study of the consumer psychology which revolves aroundthe consumer decision making. it includes understanding the consumers of Nilgiris, both
existing and prospective with the help of a sample survey of consumers.
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CHAPTER 1
INTRODUCTION
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Consumers mind is all most comparable with the mind of a fickle minded mistress. It is a
Pandoras Box. Its potential is unlimited. Its excitement and desire to full fill the just and
immediate wants is endless. Consumers or customers are the embodiment of the values and
virtues of psychology of human mind. Analyzing the psychology of consumers is just like a
blind man testing an elephant. In the fitness of things, a study of consumer mind or
psychology is interesting, exciting and useful to everyone in the supply chain of production
and marketing good and services.
Having an insight into the mind of the consumer is extremely important in developing
marketing strategy especially in a country like in India where diversity is the norm. The
insights about the consumer behavior come from empathy with the consumer and familiarity
with the socio economic and cultural environment. It also needs sound analysis of
CONSUMER BEHAVOIUR. This programme focuses on methodology to enable
understanding ofCONSUMER PSYSCHOLOGY for marketing decisions.
Introduction to consumer psychology: Consumer decision making Individual determinants
of behaviour, Perception, Motivation, attitudes, personality, learning and Environmental
influences.
Consumer Psychology seeks to explain human, or consumer behavior, in two basic ways:
what the consumer wants and what the consumer needs. The logical explanation for
fulfilling the needs is a simple one. If a person lives in New York, that person needs a winter
coat to survive the cold outside. But why the person buys a particular style or color hinges
on the more complex issues of why a particular choice is made. The Society for Consumer
Psychology is a division of the American Psychological Association (APA). The group's
main focus is conducting scientific research, development and practice in the field. Its
quarterly journal, Journal of Consumer Psychology as well as another publication, Journal of
Consumer Research and Psychology and Marketing, periodically serves as the voice of those
engaged in the understanding of why people buy what they buy.
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The key to unlocking consumer psychology understands that desires rule over needs when it
comes to consumer purchase. In a modern world with hundreds of brands of toothpaste,
where new food products and electronic gadgets emerge daily, it is the interest ofpsychologists, as well as those marketing the products, to understand the relationship
between financial and psychological factors that make people buy what they buy. In fact,
consumer psychology utilizes more than simply psychology. It must study economics and
culture too. Accordingly, there are several principles at play when examining this issue.
Psychology views certain factors that include:
The Gestalt principle. If you want to know why a particular restaurant is popular, itis important to understand what cultural implications are present beside the food.
The Iceberg principle. What could be the superficial or seemingly rational reasona person might have for making a purchase (the need)? What other factors (wants)
influence it? For instance, even if shoes are purchased as foot protection, the desired
shoe may be open-toed, strapless, and come with six-inch heels
The Dynamic principle. People and their motivations constantly change, whetherinfluenced by social, economic, or psychological factors. The millionaire who grew
up in dire poverty might still buy the cheapest margarine because the psychological
motivation takes time to catch up to the economic status and
Image and Symbolism. From product spokespersons to the picture on a candy barwrapper, the ever-elusive association people make with a product might be a big
factor in whether or not they buy it, more than the nature or quality of the product
itself.
In 1957, a writer named Vance Packard started a minor revolution with his book, The
Hidden Persuader. Packard uncovered the manipulations of the advertising community, done
to ensure a certain brand of a product becomes a best-selling item. He urged consumers to be
cautious and not fall prey to hidden meanings or symbols in advertising, and pointed out
less-than-honest representations of what a product could do for the buyer. The book was
popular, and people started looking for the subtle messages in everything from liquor ads to
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spaghetti packages. What they also did, and often, are buying the product anyway. Their
awareness did not necessarily combat their emotional needs.
Psychologists understand that in the burgeoning economy of the early twenty-first century
people's needs and wants are continually growing too. In the 1970s and early 1980s,
household items such as computers and video recorders were new, and counted as luxuries.
By 1999, by virtue of a changing society, those items had become more than simple
luxuries, as schools and businesses often came to require their use. Complex human
behavior can take one invention and create a hierarchy of needs around it. Whereas
economists or marketing strategists might look to numbers-wages or interest levels-
psychologists know that something more motivates the consumer purchase trends. Theyhave discovered that often in the most depressed economic times, the sales of luxury items
go up.
Consumer psychology is a pursuit that is likely to expand now that an estimated $5 billion
worth of products were purchased online by the spring of 2000. Online shopping habits
might differ drastically from catalogue sales or in-store purchases. These trends are just
beginning to be studied, and certainly consumer psychologists will be studying buying
habits well into the twenty-first century.
INDUSTRY PROFILE
Retail is India's largest industry. It accounts for over 10 per cent of the India's GDP and
around eight per cent of the employment. Retail sector is one of India's fastest growing
sectors with a 5 per cent compounded annual growth rate. India's huge middle class base and
its untapped retail industry are key attractions for global retail giants planning to enter newer
markets. Driven by changing lifestyles, strong income growth and favorable demographic
patterns, Indian retail is expected to grow 25 per cent annually. It is expected that retail in
India could be worth US$ 175-200 billion by 2016. The organized retail industry in India
had not evolved till the early 1990s. Until then, the industry was dominated by the un-
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organized sector. It was a sellers market, with a limited number of brands, and little choice
available to customers. Lack of trained manpower, tax laws and government regulations all
discouraged the growth of organized retailing in India during that period. Lack of consumerawareness and restrictions over entry of foreign players into the sector also contributed to
the delay in the growth of organized retailing. Foundation for organized retail in India was
laid by Kishore Biyani of Pantaloon Retails India Limited (PRIL). Following Pantaloon's
successful venture a host of Indian business giants such as Reliance, Bharti, Birla and others
are now entering into retail sector. A number of factors are driving India's retail market.
These include: increase in the young working population, hefty pay-packets, nuclear
families in urban areas, increasing working-women population, increase in disposable
income and customer aspiration, increase in expenditure for luxury items, and low share of
organized retailing. India's retail boom is manifested in sprawling shopping centers,
multiplex- malls and huge complexes that offer shopping, entertainment and all food all
under one roof. But there is a flip side to the boom in the retail sector. It is feared that the
entry of global business giants into organized retail would make redundant the neighborhood
kiryana stores resulting in dislocation in traditional economic structure. Also, the growth
path for organized retail in India is not hurdle free. The taxation system still favors small
retail business. With the intrinsic complexities of retailing such as rapid price changes,
constant threat of product obsolescence and low margins there is always a threat that the
venture may turn out to be a loss making one. A perfect business model for retail is still in
evolutionary stage. Procurement is very vital cog in the retail wheel. The retailer has to fight
issues like fragmented sourcing, unpredictable availability, unsorted food provisions and
daily fluctuating prices as against consumer expectations of round-the-year steady prices,
sorted and cleaned food and fresh stock at all times. Trained human resource for retail is
another big challenge. The talent base is limited and with the entry of big giants there is a cat
fight among them to retain this talent. This has resulted in big salary hikes at the level of
upper and middle management and thereby eroding the profit margin of the business. All the
companies have laid out ambitious expansion plans for themselves and they may be
hampered due lack of requisite skilled manpower. But retail offers tremendous for the
growth of Indian economy. If all the above challenges are tackled prudently there is a great
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potential that retail may offer employment opportunities to millions living in small town and
cities and in the process distributing the benefits of economic boom and resulting in
equitable growth.Retailing consists of those business activities involved in the sale of goods and services to
consumers for their personal, family, or household use. Retailing comprises of four
elements:
Customer Orientation Coordinated Effort Value-driven and Goal Orientation.
Drivers of change in retailing
Changing demographics and industry structure Expanding Computer technology Emphasis on lower cost and prices Emphasis on convenience and service Focus on productivity Added experimentation
India emerges as most attractive retail market. According to AT Kearneys report Emergi
Market Priorities for Global Retailers, The 2006 Global Retail Development Index TM, India ran
as the most attractive emerging market as a retail destination. Indias retail market has grown by 10
on an average in the past five years. The report attributes the changing retail landscape in the countr
to the increasing mobility among the middle and upper classes and increasing urbanization. The tab
below displays the ranking of different countries and the various parameters considered in arriving
these rankings
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Essentials of Retailing
Customer orientation: The retailer makes a careful study of the needs of the customer and
attempts to satisfy those needs.
Goal orientation: The retailer has clear cut goal and devises strategies to achieve those
goals.
Value driven approach: The retailer offers good value to the consumer with merchandise
having the price and quality appropriate for the target market.
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Coordinated efforts: Every activity of the firm is aligned to the goal and is designed to
maximize its efficiency and deliver value to the consumer.
Four Axes of Retail scale up
The broad parameters along which the retailing activity can be scaled up. It represents the
choices available before a retailer in terms of how the business model can be designed. The
four parameters are the products that can be offered, the markets in which the retailer may
have a presence, the retailing format that may be adopted for operation and the profile of the
customers that are identified as the target segment. These four parameters are interlinked
and together frame the strategic disposition of the retail business.
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\Stages in growth of Organized Retail
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CHAPTER 2
RESEARCH DESIGN
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Having an insight into the mind of the consumer is extremely important in developing marketing
strategy especially in a country like in India where diversity is the norm. The insights about the
consumer behavior come from empathy with the consumer and familiarity with the socio economic
and cultural environment. It also needs sound analysis of CONSUMER BEHAVOIUR. This
programme focuses on methodology to enable understanding of CONSUMER PSYSCHOLOGY for
marketing decisions.
TITLE OF THE STUDY
A detailed study in the area of CONSUMER PSYCHOLOGY for NILGIRIS
SUPERMARKET
STATEMENT OF THE PROBLEM
Nilgiris do not adopt the latest trends, fads and not in favour of diversifying their products as
a result the company is losing its hold in the retail market.
OBJECTIVES OF THE STUDY
To study the buying strategy of customers towards NILGIRIS. To explain why consumer behavior is a central topic in marketing. To present a simple model of consumer decision-making. To provide some simple tools that can be used for thinking about consumers,
speculating about their possible behaviors, analyzing marketing problems from a
consumer-behavior perspective, and most important of all, designing studies that
investigate consumer behavior in a concrete product and market context.
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SCOPE OF THE STUDY
The scope is limited to operations of Nilgiris Superstores limited, Bangalore. The study confines itself in understanding the customers' view point of the marketing
mix strategies of NILGIRIS in BANGALORE.
RESEARCH DESIGN
RESEARCH METHODOLOGY
Data Sources:
1. Primary Data
Primary data is the information collected for research purpose at hand. Primary data was collected
through an interview with the help of a structured questionnaire, which contained quires that were
relevant to the purpose of the study as well as pertinent; industry related questions. The present study
questionnaire makes use of both open ended and close ended questions.
2. Secondary Data
Secondary data is the information which already exists. Secondary data is collected from journals,
magazines, books, dissertations etc. The secondary data for this research was obtained from
company profile, corporate magazines, corporate broachers, websites, journals etc. Various books
and other published matter were also referred to for sorting, tabulating and analysing the raw data
collected. Very little research specific data was available; hence much emphasis was given to
primary data.
RESEARCH APPROACH
Survey method was adopted in order to collect the primary data required for the study.
RESEARCH INSTRUMENT
Questionnaire was designed with open-end and close-end questions. The Questionnaire was
designed in such a manner so as to cater to all the areas and aspects of the study.
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SAMPLING PLAN
SAMPLING UNIT: A customer visiting NILGIRI is identified as the sampling unit. SAMPLING PROCEDURE: Random Sampling SMAPLE SIZE: 157
DATA ANALYSIS
Simple statistical tools such as averages, ranking, means etc. are used. Graphs and charts are also
used to have a better pictorial understanding.
PLAN OF ANALYSIS
The collected data has been classified, tabulated, analysed and interpreted in an organised manner.
Inferences have been drawn carefully and methodically with supportive guidance to avoid
discrepancies in the survey. Conclusions have been drawn and suggestions have been made to the
best of knowledge.
All the work is done under the assumption that the data collected from the respondents was accurate.
Throughout the survey and throughout the time the report was prepared, errors and mistakes have
been made minimal despite the knowledge of the fact, various hindrances are bound to occur.
Utmost care has been taken while preparing this report to see that it can be clearly understood by the
reader as well as beneficial to the company.
LIMITATIONS OF STUDY
Some of the limitations of this study are:
Due to geographic constraint the study was limited to BANGALORE City.
It is assumed that the information given by the respondents is true as per their knowledgeand hence the chances of biased information is remote but definitely cannot be ruled out.
Due to the limited number of respondents, the finding may not be the same for the wholepopulation.
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CHAPTER 3
COMPANY PROFILE
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HISTORY:
Nilgiris Dairy Farm was founded in the year 1905 by Mr. Muthuswamy Mudaliar. He
started with selling butter and added fresh sales. Due to good principles of business and
services he developed the business and enjoyed great goodwill and reputation. He installed
first cream separator in Southern India in 1896.
In the year 1939, he opened a Branch in Bangalore on Brigade Road, starting with 10
pounds of butter sales per day that is Rupee 10 business in a day. Mr M Chenniappan, son of
Mr. Muthuswamy Mudaliar was placed in charge of Bangalore operation. He was supplying
milk and cream to the military dairy farm at Hebbal and the prisoners of war camp also. It
served British defense and citizens who stayed in India at that time. The business grew and
ventured into a small coffee/milk bar, slowly a small bakery was added and a little later the
milk bar started supplying breads, dairy products including ice cream. Mr. M
Chenniappanns brother Mr. M S Mani, the present managing director joined the business in
1950 and together started the full fledged mechanized bakery. Mr. M S Mani is in charge of
administration of the company and appointment of senior executives as well as acquisition
and development of company properties. The two units in Bangalore make about 2000
loaves of bread and few hundred varieties of buns, cakes, chocolates biscuits etc.
For the last 30 years the bakery unit has been organizing the Annual Cake Show and the
exhibition cum cake sale in which every year a special item is made to almost a life size
model of well known place made out of tons of sugar.
The true to life sugar and chocolate models are displayed
for the public to admire. Some of the pieces created in the past include Taj Mahal, Vidhana
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Soudha, St. Marys Basilica, Giffet Tower, Kargil, Titanic, The United Nations Building,
Kerala Boat Race, Bugee Jumping, Windmill etc.
MR. C Ramachandran, the first son of Mr. M Chenniappan is totally in charge of this annual
feature as managing director of the Bakery unit.
In 1960, a milk processing plant was set up at Erode and a milk selling unit was set up at
Madras. Mr. M Chellayan, another brother, studied at NDORI. He went abroad for further
training. He is in charge of the dairy operations at Erode and also in charge of the
supermarkets at Coimbatore and Erode.
In 1970, on a visit to Europe, Mr. M Chenniappan saw the self help department stores in
operation there and this kindled the idea of opening a similar store at Bangalore. In 1971, the
small operation of Nilgiris Dairy Farm was upgraded into a fully fledged self help
supermarket, the first of its kind in southern India. The family partnership business was also
converted into a private limited company in the year 1971.In 1984; a supermarket was set up
at Madras with restaurant and lodging.
A branch at Mangalore was opened around this period. It is a family business. Now the
fourth generation has also got into the business. Every male member in the family had
foreign training in different lines and has developed their departments. From Rs. 10/-
business a day in 1939, today they do a turnover of over Rs. 80 crores a year.
Nilgiris have set up a diary division at Bommasandra, where they have started
manufacturing cheese. They have also set up a chocolate factory ay Bommasandra. At the
bread unit Veerasandra Industrial Unit, about 20,000 loaves of bread is prepared every day.
Nilgiris have bakeries at Erode, Coimbatore and Chennai.During the last 30 years; Nilgiris
have grown into a chain of supermarkets. The company now runs six supermarkets in direct
management, i.e. 4 at Bangalore - Brigade road, Airport Road, Kammanahalli, Cox Town
and Golden Enclave. 2 at Erode -one at Chennai and one at Coimbatore.
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The company is managed by the board of directors, where the sons are also directors, who
are all technically qualified in bakery, dairy, supermarket operations and the like, heading
the respective divisions on a full time basis.
Nilgiris have also over the last two years, exported some of the Nilgiris products to
Singapore, Switzerland, United States, Germany and Australia. The dairy division handles
around 50,000 liters of milk daily with the plant at Erode as well as Bangalore. They also
procure another 5000 liters of milk at Bangalore form nearby sources.
Apart from supplying milk at Bangalore, Coimbatore and Chennai, Nilgiris also have the bi-
products of a daily production of 600kg of butter, 400kg of ghee, 600kg fresh cream and
about 150kg of cheese. They also have the Nilgiris Nest, lodging provided along with their
supermarkets at Bangalore, Chennai and Coimbatore. They have four star facilities at
reasonable rates.
Of the 80 crores turnover, 20 crores are from their dairy division alone. At the supermarkets
in Bangalore and Chennai, they have daily turnover of around Rs.5 lakhs each and they have
more than 2000 customers walking in for shopping daily.
Supermarket operation
They provide an ambient atmosphere; display well cleaned, and properly packed items under
the Nilgiris brand-bakery products, dairy products, instant food items, spice powders and the
whole list of provisions as also fresh vegetables. Of course, all popular brand gods are stored
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in plenty always. For the convenience of the customers, they have provided barcode and
computerized billing system. The customer receives the neatly printed bill with full details
of products, quality, quantity, price, tax etc. It is the most successful business as far as thepopularity of the brand name of Nilgiris is concerned.
It costs them a lot of money to run a store like this and they are today, the only supermarket
chain operating in India. It is to be noted that 50% of their business comes from their own
dairy, bakery and other products whereas the other half of the turnover comes from branded
goods, of other National and Multinational companies. Air conditioned and carefully
structured for a comfortable shopping experience, the Nilgiris chain of supermarkets use the
latest in automation technology and software to ensure that visitors have a very pleasant
shopping experience.
Nilgiris Supermarket
The main supermarket at Brigade Road Bangalore has branches at Airport Road,
Kammanahalli, and Cox Town. Chennai, Erode, Coimbatore and franchisee outlets at
Vishakapatnam, Hyderabad and Pondicherry.
Mini CounterAt the entrance of the supermarket, there is a mini counter, which is only for dairy products
like milk, curds, buttermilk, flavored milk, sandwich bread, fruit and milk bread, etc. Pure
coffee powder, ghee, mushroom, lacto soy milk i.e. plain milk, mishti doi, pudding (choco,
vanilla and chocolate), srikand, yoghurt, table butter, cream, paneer, processed cheese,
mozzarella cheese etc are available in this mini counter for those customers who need quick
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service only in dairy products. Only required quantity is kept in this counter. This is a busy
counter with the number of customers.
ServicesIn this counter the milk coupons are provided to the interested customers of liter and 1
liter. They also provide home delivery. One booklet is allotted for one month, wherein one
booklet consists of 30 coupons. A separate register for orders of the customers is written
down. This counter also maintains the complaint register wherein the customer writes down
the complaints regarding their dissatisfaction. As the company renders good service and
satisfies the needs of the customer there is no complaint registered. The launch coupons are
also provided which are known as the Bemel Coupons.
Departmental Stores
It provides an ambient atmosphere, display well cleaned, all popular brand goods are stored
in plenty always and properly packed items under the Nilgiris brand. The work force of the
department is 55.The credit facility is provided only for corporate officers and those
customers who provide bank guarantee.
Soaps And Detergents:This counter is mainly for soaps and detergents meant for the convenience of the customer
to select easily available for them. There are 55 different types of soaps, the mail supplier is
HLL. The major sales are Pears, Mysore Sandal, Lux, Rexona etc of 125gms & 75gms in
each quantity are sold about 10-20 pieces per day as per the customers requirement. There
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are different types of detergents like Rin, Rin Supreme, Henko, Surf, Ariel, Tide etc.
250gms are sold maximum.
Toothpastes:This counter also includes toothpastes of different types. The major sales among the pastes
are Pepsodent, Close Up, and Colgate etc. These items are received from Godown.
Cosmetics:This counter is separated into 2 parts, one is at entrance which displays all the cosmetics and
it functions mainly in selling lipsticks, nail polish, lip liner, eye liner etc. The major
suppliers are Lakme, Tips and Toes, Elle 18, Revelon etc. The other counter includes
lipsticks, nail polish, body sprays, perfumes, creams and lotions, shampoos, talcum powder,
hair oil etc.
For Creams the suppliers are Garnier, Ponds, Fair and Lovely etc.
For Shampoos the suppliers are Sunsilk, All Clear, and Panteen etc.
For Talcum powder the suppliers are Ponds, Nivea, and Axe etc.
Biscuits:There are varieties of biscuits available in this counter like Britania, Parle, Kelloggs,
Nutrine, Kwality etc. This counter is convenient for those customers to choose the product
of their own choice as per the taste and preference.
Chocolates:The tempting chocolates like Eclairs, Nutrine, Parle, Parrys, and Cadbury are available and
apart from these there are also Nilgiris home made chocolates available. We can also find
the imported chocolates in this counter.
Dry Fruits:Dry fruits like almond, sultana, apricot, pista, prunes, cashew nuts, figs, dates, walnuts etc
are available in this counter. Dry fruits are the major running products. The dry fruits are
purchased in bulk and are repacked for sales.
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Bakery:In this counter we find Nilgiris bread, rich plum cakes, rusk, sesame, garlic roll, cookies,
pizza base, pav bread, coconut sandwich, bread crumb, Danish Pasta are available.
Beverage and Sweets:Snacks are available in this counter like butter murukku, jackfruit chips, tapioca chips,
banana and potato chips, savouries and also haldiram products are available.
The mouth-watering sweets like jamoons, ladoos, burfis, cotton candy, pedas, and Mysore
pak are available in this cunter. Apart from this even fast foods are available like amosas,
puris etc.
Tea and Coffee:The name of activation of nerves is Tea. The tea and coffee are available in attractive
packages under the brand name like Nescafe, Sunrise, Broke Bond, Nilgiris herbal tea, Tata
Lipton, Duncans, Tetley etc. are available in this counter.
Health Food:This counter mainly attracts the health conscious customers. The Dabur Chyawanprash,
Nature Care, Nutri foods, Herbal Health Care Drink, Soya Flour, High Fiber Wheat Flour,
Health Mix etc are available. In this counter mainly ayurvedic products are available.
Imported Goods:In this counter all the imported products are displayed like frigate strawberry jam, pure
comb honey from New Zealand, sandwich spread, barilla, fettuccine, farfel are available
under the brand name Kraft.
Juices:Different varieties of juices to quench the thirst available is different flavours sun sweet
prune juice, Nortonapple juice, real grape, mango, orange, mixed fruits, Tropicana. Apart
from this beverages are also available like Coke, Pepsi, Mirinda etc.
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Home Made Sweets:The Nilgiris home made sweets are available in this counter white truffles, coconut, plain
truffles, milk truffles, orange truffles, cream caramel, pistachio tups etc. These aremanufactured in Nilgiris itself
Spices:Different varieties of spices like pepper, jeera, ajwine, khus-khus, white and black til,
mustard, methi, tirmeric stick etc under the brand name Everest, MDH, BMC, Bhadshah and
also Nilgiris brand name.
Provisions:Provisions like cereals, rice, atta, maida, instant mix chilly powder etc, are available in this
counter. The Nilgiris provisions are fixed at 10 % discount.
Oil and Ghee:All types of oils are available in this counter like Dhara, Saffola, Elite, Nature fresh, Corn
drop, Godrej, Cook lite, Sundrop, Parachute, Nilgiri Ghee, and Vanaspathi etc.
Pickles, Jams and Squash:In this counter mainly salt and fast food stuff is available. Different types of noodles and
smoodles (Maggi and Top Raman), Macaroni, Jelly, Custard powder, mustard powder,
variety of papads are available. Instant mixes are also available.
Baby Products:This counter is basically meant for baby products which contain baby food such as Cerelac,
Nestle, Lactogen, Milk powder, Milo, Badam mix, Drinking Chocolate, Horlicks,
AMULYA, Baby soaps and oils such as Johnson and Johnson, Baby cream, and nappies are
available.
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Frozen Items:In this counter the items are kept under frozen condition so that it shouldnt spoil. The items
kept under frozen are pizza, cheese, fish meat, fish steaks, mutton samosa, prawns and dairyproducts like amul malai, cheese, butter, srikand, ice creams, curds etc, the fresh green peas
are also kept here. There are 5 refrigerators to refrigerate the items.
Plastic and Utensils:The home appliances are displayed like plastic trolley, perfumed candles, agarbattis, paper
plates, glasses, boxes, hot pots, marts etc. All types of plastic items are available in this
counter.
The supermarket is fully computerized with 9 total numbers of computers. Each counter is
given a counter number.
The Nilgiris Cake Shop
The Nilgiris cake shop, with its wide range of oven-fresh pastries, puffs and milk shakes and
fruit juices gives a great pep to the tired shopper.
Nest
The pioneers in dairy products have not ignored the need for hospitality for the visiting
tourists. The Nilgiris Nest at Bangalore, Chennai and Coimbatore has ergonomically
designed rooms for perfect relaxation. The affordable lodging is surely a wise visitors
choice.
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CAFE
The tastefully furnished Nilgiris Caf spreads lip-smacking variety of delicacies for the
discerning customer. The plush interior, coupled with courteous service is a tourists delight.
Vision:
Nilgiris will be recognized for its Integrity, Customer focus and commitment toQuality
They will create a dynamic organization dictated to Business Excellence throughTrust, Team Work & concern for our commitment
They will also make use of the best technology to expand their Retail Networkacross the Country.
To enhance their 100 Years of Experience.
Mission:
Be a trusted partner who provides the best products & services the world has to offer,at the best quality in the most convenient setting.
Create an efficient and transparent global supply chain by the creation and optimalutilization of world-class infrastructure and international partnerships, thus creating
more value for their customers, suppliers, partners and stake-holders.
Bring prosperity to millions of Indian producers, especially their Customers, byproviding the most attractive returns for their efforts in Quality and Availability. Be
a capable and dependable partner to them right through their creation process and
help them become more successful.
Unleash the initiative, creativity & energy of Indian workforce through creation ofnew jobs, & provide their employees a supportive, rewarding environment to work
and grow.
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Inspiration
A customer is the most important visitor on their premises. He is not dependent on Nilgiris.
They are dependent on him. He is not an interruption on their work. He is the purpose of it.He is not an outsider on their business. He is a part of it. They are not doing a favour to him
by serving him. He is doing them a favour by giving them an opportunity to do so.
Purchase policy
They stock and sell around 6,000 different items in their store. They believe in ordering
goods to ensure all the items are available at all times. However, they take into account the
movement pattern of each item supply period as well as the value of the items, and
accordingly place orders frequently for the products which have to reach them from
outstation. They are ordering a largely quantity of items which are fast moving and the items
which are slow moving. They stock only much smaller quantities for not more than 10-12
days requirement, thereby keeping their inventory level in control.
Nilgiris have to keep a close watch on the market trend and accordingly place orders at the
most advantageous rate for some of suppliers like groceries. They have to continuously
monitor the profitability on each product, which they buy to ensure that a certain assured
minimum profit margin is available on each purchase.
Computerized accounting system, wherein every order is checked and goods inward notes
are prepared in detail to show them the margins available to them. While introducing a new
product in their store, they have to discuss with the suppliers and ensure that the product is
taken on consignment basis to be put on trial sale in their store. After the product moves
fairly well within 15days period, they place further order for large quantity subject to the
condition that their minimum required margin of profit is assured in the purchase. They also
ensure that as a large supermarket chain, all Nilgiris branches/franchise unit enjoy the
benefit of same rates/margin to all of them.
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Supplies co-operation, better margin for mutual growth statistics
The product of popular brands is no doubt required by all the customers. It is a pity that the
manufacturers offer very low margins of 4-5% on the sale value, whereas their companyoverhead today stands at around 12.5%. It is the Nilgiris own products sale which partly
offsets the very poor margins on the branded goods. In spite of the odds, they do continue
their service and keep their image but at what cost? Today, sales on credit card is followed
everywhere with great hesitation. They had also started accepting credit cards. Credit cards
do bring in lot more business but again, this business is at their cost. In Chennai, they have
been accepting these cards for the past couple of years, around 30% and of their business are
on credit cards.
At Coimbatore, around 16% sales are on credit card. The credit card business at Bangalore is
also fast going up. It must be noted here that on every sales, they have to pay a turnover tax
of around 1.75 to 3% and as on credit sales they have to meet 3-4% by way of card service
charges.
To meet this, they have been continuously discussing with the brand majors, asking them to
realize that a modern retail supermarket offering their products in such convenience to the
customers in large volume turnover should not be treated on par with the small kirana stores.
Slowly the manufactures are realizing this and with reluctance they are coming forward to
meet a part of their demand with the maximum retail price fixed on all products, they cannot
survive in the business unless brand leaders recognize their service and offer better margins.
In fact, over the last few years, as a result of their constant discussions, with the major
manufactures/ suppliers, they have been given a special status by some of these companies.
Taking into account their strategy and stocking items afresh all the time and the large
volumes involved in their store and their own number of units whereby suppliers volume of
sales has grown considerable, they have come forward to treat them on par with C&F
agents/distributors and agreed to give direct supplies at better rates.
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Nilgiris Today
Today, decades of efforts to achieve total quality in product and service have taken Nilgiris
to summit of total achievement. The corporate office at Brigade Road, Bangalore is fully
automated with every transaction computerized. Nilgiris vans are plying all over to ensure
timely distribution of Nilgiris products to various locations. Besides India, Nilgiris products
are available in countries like Singapore, Germany, Australia, Malaysia and Sri Lanka.
Competitors:
Amul
Britannia Nandini Modern bread Kwality Sweet chariot
Human Resource Department of Nilgiris
Human Resource Department is one of the most essential departments here though it does
not directly contribute to the production or sales. The department continuously trains its
existing employees and builds a healthy working environment within the company.
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Human Resource:
Human Resource Planning is done by Managing Director, Human Resource Manager with
consultation with HR executives. They forecast the future demand and supply of the righttype of people in the right number. After the human resource planning is done, job
description and job specification is carried out. Job description describes the job title,
location and the job specification describes what is the educational qualification required for
the vacant post, how much experience is needed, what kind of training should be given,
what kind of physical skill is required etc.
Recruitment and selection:
For recruitment and selection Nilgiris uses both internal source as well as external source.
The internal sources of Nilgiris include present employees and employee referrals. That
means hen a job is vacant the employees who are already with Nilgiris is given preference if
that particular employee suits or fits for the vacant job. Another source of internal
recruitment is employee referrals, i.e. the employees refer or recommend someone who is
known to him and who fits for the vacant job.
The external source of recruitment in Nilgiris includes advertisement and placement cell.
The selection process in Nilgiris includes preliminary interview, employment interview,
selection decision, physical examination, and job offer and employment control.
Security Section:
Security arrangement of the company is provided by NESS National Ex-service man
security agency. It is headed by Major R.P Gopinathan. They provide security services to
many leading organization. The remuneration and welfare of these securities are taken care
by NESS and Nilgiris. NESS recruits the securities and sent them to different organization
which comes under this agency.
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Orientation Program in Nilgiris:
Orientation Program in Nilgiris is conducted for all the new employees in Nilgiris. Nilgiris
usually follow an informal orientation program wherein the HR manager or HR executivesintroduce the new employee to his colleagues and new work conditions.
Training and Development in Nilgiris:
Training and development does not play a major role in Nilgiris. They have only on the job
training, wherein the supervisor train the new employee and make him aware of the new
work condition. Training is very necessary for imparting skills to employees. Workers or
laborers need skills to operate machines and use other equipments with least damage and
scrap. So the supervisor trains the labour on the usage of machine.
Performance Appraisal in Nilgiris:
Assessment of an individuals performance is very essential for every organization. Nilgiris
also do performance appraisal for its employees. The performance of each employee is
measured against factors such as job knowledge, co-operation, attendance, punctuality etc.
Rating scale method is used for performance appraisal by Nilgiris. In rating scale method
several numerical scales are involved, each representing a job related performance criterion
such as job knowledge, initiative output, attendance, attitude, punctuality, co-operation etc.
Each scale ranges from excellent, good, and fair which is rated as 50%, 50-75% and above
75%. The HR manager of Nilgiris checks the appropriate performance level on each
criterion, and then computes the employees total numerical score. The number of points
scored is linked to salary increase.
Remuneration in Nilgiris:Remuneration is the compensation an employee receives in return for his or her contribution
to the organization. Nilgiris also provide good remuneration to its employees according to
the relative worth of the job. Employees get salary and fringe benefits. Their fringe benefits
include provident fund, gratuity, medical care by ESI hospitals, accident relief although
there has never been a case of accident in the factory premises, uniform, Rs 10 per day for
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meal, loan facilities. Employees also get overtime salary. Women get maternity leave.
Employees get bonus during festivals. Employees also get pension facilities after pension
from the company
Employee Welfare in Nilgiris:
Employee welfare helps to motivate and retain employees. Nilgiris provides some intra-
mutual facilities to its employees like medical facilities, compensation for accidents, supply
of drinking water, provision of safety measures, toilets, etc.
Labour Union in Nilgiris:
There is no labour Union in Nilgiris. One admissible fact in Nilgiris is that they never had a
labour problem till date neither they formed any Labour Union.
CONCEPTUAL BACKGROUND
The study of consumers helps firms and organizations improve their marketing strategies by
understanding issues such as how the psychology of how consumers think, feel, reason, and
select between different alternatives (e.g., brands, products, and retailers); the psychology of
how the consumer is influenced by his or her environment (e.g., culture, family, signs,
media); The behavior of consumers while shopping or making other marketing decisions;
Limitations in consumer knowledge or information processing abilities influence decisions
and marketing outcome; how consumer motivation and decision strategies differ between
products that differ in their level of importance or interest that they entail for the consumer;
and how marketers can adapt and improve their marketing campaigns and marketing
strategies to more effectively reach the consumer. The study of consumers helps firms and
organizations improve their marketing strategies by understanding issues such as how
The psychology of how consumers think, feel, reason, and select between differentalternatives (e.g., brands, products, and retailers);
The psychology of how the consumer is influenced by his or her environment (e.g.,culture, family, signs, media);
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The behavior of consumers while shopping or making other marketing decisions; Limitations in consumer knowledge or information processing abilities influence
decisions and marketing outcome; How consumer motivation and decision strategies differ between products that differ
in their level of importance or interest that they entail for the consumer; and
How marketers can adapt and improve their marketing campaigns and marketingstrategies to more effectively reach the consumer.
One "official" definition of consumer behavior is "The study of individuals, groups, or
organizations and the processes they use to select, secure, use, and dispose of products,
services, experiences, or ideas to satisfy needs and the impacts that these processes have on
the consumer and society." Although it is not necessary to memorize this definition, it brings
up some useful points:
Behavior occurs either for the individual, or in the context of a group (e.g., friendsinfluence what kinds of clothes a person wears) or an organization (people on the job
make decisions as to which products the firm should use).
Consumer behavior involves the use and disposal of products as well as the study ofhow they are purchased. Product use is often of great interest to the marketer,
because this may influence how a product is best positioned or how we can
encourage increased consumption. Since many environmental problems result from
product disposal (e.g., motor oil being sent into sewage systems to save the recycling
fee, or garbage piling up at landfills) this is also an area of interest.
Consumer behavior involves services and ideas as well as tangible products. The impact of consumer behavior on society is also of relevance. For example,
aggressive marketing of high fat foods, or aggressive marketing of easy credit, may
have serious repercussions for the national health and economy.
There are four main applications of consumer behavior:
The most obvious is for marketing strategyi.e., for making better marketingcampaigns. For example, by understanding that consumers are more receptive to
food advertising when they are hungry, we learn to schedule snack advertisements
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late in the afternoon. By understanding that new products are usually initially
adopted by a few consumers and only spread later, and then only gradually, to the
rest of the population, we learn that (1) companies that introduce new products mustbe well financed so that they can stay afloat until their products become a
commercial success and (2) it is important to please initial customers, since they will
in turn influence many subsequent customers brand choices.
A second application is public policy. In the 1980s, Accutane, a near miracle cure foracne, was introduced. Unfortunately, Accutane resulted in severe birth defects if
taken by pregnant women. Although physicians were instructed to warn their female
patients of this, a number still became pregnant while taking the drug. To get
consumers attention, the Federal Drug Administration (FDA) took the step of
requiring that very graphic pictures of deformed babies be shown on the medicine
containers.
Social marketing involves getting ideas across to consumers rather than sellingsomething. Marty Fishbein, a marketing professor, went on sabbatical to work for the
Centers for Disease Control trying to reduce the incidence of transmission of
diseases through illegal drug use. The best solution, obviously, would be if we could
get illegal drug users to stop. This, however, was deemed to be infeasible. It was also
determined that the practice of sharing needles was too ingrained in the drug culture
to be stopped. As a result, using knowledge of consumer attitudes, Dr. Fishbein
created a campaign that encouraged the cleaning of needles in bleach before sharing
them, a goal that was believed to be more realistic.
As a final benefit, studying consumer behavior should make us better consumers.Common sense suggests, for example, that if you buy a 64 liquid ounce bottle of
laundry detergent, you should pay less per ounce than if you bought two 32 ounce
bottles. In practice, however, you often pay a size premium by buying the larger
quantity. In other words, in this case, knowing this fact will sensitize you to the need
to check the unit cost labels to determine if you are really getting a bargain.
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There are several units in the market that can be analyzed. Our main thrust in this course is
the consumer. However, we will also need to analyze our own firms strengths and
weaknesses and those of competing firms. Suppose, for example, that we make a productaimed at older consumers, a growing segment. A competing firm that targets babies, a
shrinking market, is likely to consider repositioning toward our market. To assess a
competing firms potential threat, we need to examine its assets (e.g., technology, patents,
market knowledge, and awareness of its brands) against pressures it faces from the market.
Finally, we need to assess conditions (the marketing environment). For example, although
we may have developed a product that offers great appeal for consumers, a recession may
cut demand dramatically.
In 1957, a writer named Vance Packard started a minor revolution with his book, The
Hidden Persuader. Packard uncovered the manipulations of the advertising community, done
to ensure a certain brand of a product becomes a best-selling item. He urged consumers to be
cautious and not fall prey to hidden meanings or symbols in advertising, and pointed out
less-than-honest representations of what a product could do for the buyer. The book was
popular, and people started looking for the subtle messages in everything from liquor ads to
spaghetti packages. What they also did, and often, are buying the product anyway. Their
awareness did not necessarily combat their emotional needs.
Psychologists understand that in the burgeoning economy of the early twenty-first century
people's needs and wants are continually growing too. In the 1970s and early 1980s,
household items such as computers and video recorders were new, and counted as luxuries.
By 1999, by virtue of a changing society, those items had become more than simple
luxuries, as schools and businesses often came to require their use. Complex human
behavior can take one invention and create a hierarchy of needs around it. Whereas
economists or marketing strategists might look to numbers-wages or interest levels-
psychologists know that something more motivates the consumer purchase trends. They
have discovered that often in the most depressed economic times, the sales of luxury items
go up.
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Consumer psychology is a pursuit that is likely to expand now that an estimated $5 billion
worth of products were purchased online by the spring of 2000. Online shopping habits
might differ drastically from catalogue sales or in-store purchases. These trends are justbeginning to be studied, and certainly consumer psychologists will be studying buying
habits well into the twenty-first century.
(Electronic equipment run by firms such as A. C. Nielsen will actually recognize the face of
each family member when he or she sits down to watch).
It is now possible to assess the relative impact of a number of factors on the consumers
choicee.g.
What brand in a given product category was bought during the last, or a series ofpast, purchase occasions;
Whether, and if so, how many times a consumer has seen an ad for the brand inquestion or a competing one;
Whether the target brand (and/or a competing one) is on sale during the store visit; Whether any brand had preferential display space; The impact of income and/or family size on purchase patterns; and Whether a coupon was used for the purchase and, if so, its value.
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A split cable technology allows the researchers to randomly select half the panel members
in a given community to receive one advertising treatment and the other half another. The
selection is truly random since each household, as opposed to neighborhood, is selected toget one treatment or the other. Thus, observed differences should, allowing for sampling
error, the best result of advertising exposure since there are no other systematic differences
between groups.
Interestingly, it has been found that consumers tend to be more influenced by commercials
that they zap through while channel surfing even if they only see part of the commercial.
This most likely results from the reality that one must pay greater attention while channel
surfing than when watching a commercial in order to determine which program is worth
watching.
Scanner data is, at the present time, only available for certain grocery item product
categoriese.g., food items, beverages, cleaning items, laundry detergent, paper towels,
and toilet paper. It is not available for most non-grocery product items. Scanner data
analysis is most useful for frequently purchased items (e.g., drinks, food items, snacks, and
toilet paper) since a series of purchases in the same product category yield more information
with greater precision than would a record of one purchase at one point in time. Even if
scanner data were available for electronic products such as printers, computers, and MP3
players, for example, these products would be purchased quite infrequently. A single
purchase, then, would not be as effective in effectively distinguishing the effects of different
factorse.g., advertising, shelf space, pricing of the product and competitors, and
availability of a couponsince we have at most one purchase instance during a long period
of time during which several of these factors would apply at the same time. In the case of
items that are purchased frequently, the consumer has the opportunity to buy a product, buy
a competing product, or buy nothing at all depending on the status of the brand of interest
and competing brands. In the case of the purchase of an MP3 player, in contrast, there may
be promotions associated with several brands going on at the same time, and each may
advertise. It may also be that the purchase was motivated by the breakdown of an existing
product or dissatisfaction or a desire to add more capabilities.
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Physiological measures are occasionally used to examine consumer response. For example,
advertisers may want to measure a consumers level of arousal during various parts of an
advertisement. This can be used to assess possible discomfort on the negative side and levelof attention on the positive side.
By attaching a tiny camera to plain eye glasses worn by the subject while watching an
advertisement, it is possible to determine where on screen or other ad display the subject
focuses at any one time. If the focus remains fixed throughout an ad sequence where the
interesting and active part area changes, we can track whether the respondent is following
the sequence intended. If he or she is not, he or she is likely either not to be paying as much
attention as desired or to be confused by an overly complex sequence. In situations where
the subjects eyes do move, we can assess whether this movement is going in the intended
direction.
Mind-reading would clearly not be ethical and is, at the present time, not possible in any
event. However, it is possible to measure brain waves by attaching electrodes. These
readings will not reveal what the subject actually thinks, but it is possible to distinguish
between beta wavesindicating active thought and analysisand alpha waves, indicating
lower levels of attention.
An important feature of physiological measures is that we can often track performance over
time. A subject may, for example, be demonstrating good characteristicssuch as
appropriate level of arousal and eye movementduring some of the ad sequence and not
during other parts. This, then, gives some guidance as to which parts of the ad are effective
and which ones need to be reworked.
In a variation of direct physiological measures, a subject may be asked, at various points
during an advertisement, to indicate his or her level of interest, liking, comfort, and approval
by moving a lever or some instrument (much like one would adjust the volume on a radio or
MP3 player). Republican strategist used this technique during the impeachment and trial of
Bill Clinton in the late 1990s. By watching approval during various phases of a speech by
the former President, it was found that viewers tended to respond negatively when he
referred to speaking truthfully but favorably when the President referred to the issues in
controversy as part of his private life. The Republican researchers were able to separate
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average results from Democrats, Independents, and Republicans, effectively looking at
different segments to make sure that differences between each did not cancel out effects of
the different segments. (For example, if at one point Democrats reacted positively andRepublicans responded negatively with the same intensity, the average result of apparent
indifference would have been very misleading).
Research sequence, In general, if more than one type of research is to be used, the more
flexible and less precise methodsuch as focus groups and/or individual interviews
should generally be used before the less flexible but more precise methods (e.g., surveys and
scanner data) are used. Focus groups and interviews are flexible and allow the researcher to
follow up on interesting issues raised by participants who can be probed. However, because
the sample sizes are small and because participants in a focus group are influenced by each
other, few data points are collected. If we run five focus groups with eight people each, for
example, we would have a total of forty responses. Even if we assume that these are
independent, a sample size of forty would give very imprecise results. We might conclude,
for example, that somewhere between 5% and 40% of the target market would be interested
in the product we have to offer. This is usually no more precise than what we already
reasonably new. Questionnaires, in contrast, are highly inflexible. It is not possible to ask
follow-up questions. Therefore, we can use our insights from focus groups and interviews
to develop questionnaires that contain specific questions that can be asked to a larger
number of people. There will still be some sampling error, but with a sample size of 1,000+
responses, we may be able to narrow the 95% confidence interval for the percentage of the
target market that is seriously interested in our product to, say, 17-21%, a range that is much
more meaningful.
Cautions: Some cautions should be heeded in marketing research. First, in general,
research should only be commissioned when it is worth the cost. Thus, research should
normally be useful in making specific decisions (what size should the product be? Should
the product be launched? Should we charge $1.75 or $2.25?)
Secondly, marketing research can be, and often is, abused. Managers frequently have their
own agendas (e.g., they either would like a product to be launched or would prefer that
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it not be launched so that the firm will have more resources left over to tackle their favorite
products). Often, a way to get your way is to demonstrate through objective research that
your opinions make economic sense. One example of misleading research, which wasreported nationwide in the media, involved the case of The Pentagon Declares War on
Rush Limbaugh. The Pentagon, within a year of the election of Democrat Bill Clinton,
reported that only 4.2% of soldiers listening to the Armed Forces Network wanted to hear
Rush Limbaugh. However, although this finding was reported without question in the
media, it was later found that the conclusion was based on the question What single thing
can we do to improve programming? If you did not write in something like Carry Rush
Limbaugh, you were counted as not wanting to hear him.
Segmenting, Targeting, and Positioning
Segmentation, targeting and positioning together comprise a three stage process. We first
(1) determine which kinds of customers exist, then (2) select which ones we are best off
trying to serve and, finally, (3) implement our segmentation by optimizing our
products/services for that segment and communicating that we have made the choice to
distinguish ourselves that way.
Segmentation involves finding out what kinds of consumers with different needs exist. In
the auto market, for example, some consumers demand speed and performance, while others
are much more concerned about roominess and safety. In general, it holds true that You
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cant be all things to all people, and experience has demonstrated that firms that specialize
in meeting the needs of one group of consumers over another tend to be more profitable.
Generically, there are three approaches to marketing. In the undifferentiated strategy, allconsumers are treated as the same, with firms not making any specific efforts to satisfy
particular groups. This may work when the product is a standard one where one competitor
really cant offer much that another one cant. Usually, this is the case only for
commodities. In the concentrated strategy, one firm chooses to focus on one of several
segments that exist while leaving other segments to competitors. For example, Southwest
Airlines focuses on price sensitive consumers who will forego meals and assigned seating
for low prices. In contrast, most airlines follow the differentiated strategy: They offer high
priced tickets to those who are inflexible in that they cannot tell in advance when they need
to fly and find it impractical to stay over a Saturday. These travelersusually business
travelerspay high fares but can only fill the planes up partially. The same airlines then
sell some of the remaining seats to more price sensitive customers who can buy two weeks
in advance and stay over.
Note that segmentation calls for some tough choices. There may be a large number of
variables that can be used to differentiate consumers of a given product category; yet, in
practice, it becomes impossibly cumbersome to work with more than a few at a time. Thus,
we need to determine which variables will be most useful in distinguishing different groups
of consumers. We might thus decide, for example, that the variables that are most relevant
in separating different kinds of soft drink consumers are (1) preference for taste vs. low
calories, (2) preference for Cola vs. non-cola taste, (3) price sensitivitywillingness to pay
for brand names; and (4) heavy vs. light consumers. We now put these variables together to
arrive at various combinations.
Several different kinds of variables can be used for segmentation.
Demographic variables essentially refer to personal statistics such as income, gender,education, location (rural vs. urban, East vs. West), ethnicity, and family size.
Campbells soup, for instance, has found that Western U.S. consumers on the
average prefer spicier soupsthus, you get a different product in the same cans at
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the East and West coasts. Facing flat sales of guns in the traditional male dominated
market, a manufacturer came out with the Lady Remington, a more compact, handier
gun more attractive to women. Taking this a step farther, it is also possible tosegment on lifestyle and values.
Some consumers want to be seen as similar to others, while a different segmentwants to stand apart from the crowd.
Another basis for segmentation is behavior. Some consumers are brand loyali.e., they tend to stick with their preferred brands even when a competing one is on
sale. Some consumers are heavy users while others are light users. For
example, research conducted by the wine industry shows that some 80% of the
product is consumed by 20% of the consumerspresumably a rather intoxicated
group.
One can also segment on benefits sought, essentially bypassing demographicexplanatory variables. Some consumers, for example, like scented soap (a segment
likely to be attracted to brands such as Irish Spring), while others prefer the clean
feeling of unscented soap (the Ivory segment). Some consumers use toothpaste
primarily to promote oral health, while another segment is more interested in breathe
freshening.
In the next step, we decide to target one or more segments. Our choice should generally
depend on several factors. First, how well are existing segments served
by other manufacturers? It will be more difficult to appeal to a segment that is already well
served than to one whose needs are not currently being served well. Secondly, how large is
the segment, and how can we expect it to grow? (Note that a downside to a large, rapidly
growing segment is that it tends to attract competition). Thirdly, do we have strengths as a
company that will help us appeal particularly to one group of consumers? Firms may
already have an established reputation. While McDonalds has a great reputation for fast,
consistent quality, family friendly food, it would be difficult to convince consumers that
McDonalds now offers gourmet food. Thus, McDs would probably be better off targeting
families in search of consistent quality food in nice, clean restaurants.
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Positioning involves implementing our targeting. For example, Apple Computer has chosen
to position itself as a maker of user-friendly computers. Thus, Apple has done a lot throughits advertising to promote itself, through its unintimidating icons, as a computer for non -
geeks. The Visual C software programming language, in contrast, is aimed a techies.
Michael Treacy and Fred Wiersema suggested in their 1993 book The Discipline of Market
Leaders that most successful firms fall into one of three categories:
Operationally excellent firms, which maintain a strong competitive advantage bymaintaining exceptional efficiency, thus enabling the firm to provide reliable service
to the customer at a significantly lower cost than those of less well organized and
well run competitors. The emphasis here is mostly on low cost, subject to reliable
performance, and less value is put on customizing the offering for the specific
customer. Wal-Mart is an example of this discipline. Elaborate logistical designs
allow goods to be moved at the lowest cost, with extensive systems predicting when
specific quantities of supplies will be needed.
Customer intimate firms, which excel in serving the specific needs of the individualcustomer well. There is less emphasis on efficiency, which is sacrificed for
providing more precisely what is wanted by the customer. Reliability is also
stressed. Nordstroms and IBM are examples of this discipline.
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Technologically excellent firms, which produce the most advanced productscurrently available with the latest technology, constantly maintaining leadership in
innovation. These firms, because they work with costly technology that needsconstant refinement, cannot be as efficient as the operationally excellent firms and
often cannot adapt their products as well to the needs of the individual customer.
Intel is an example of this discipline.
Treacy and Wiersema suggest that in addition to excelling on one of the three value
dimensions, firms must meet acceptable levels on the other two. Wal-Mart, for example,
does maintain some level of customer service. Nordstroms and Intel both must meet some
standards of cost effectiveness. The emphasis, beyond meeting the minimum required level
in the two other dimensions, is on the dimension of strength.
Repositioning involves an attempt to change consumer perceptions of a brand, usually
because the existing position that the brand holds has become less attractive. Sears, for
example, attempted to reposition itself from a place that offered great sales but unattractive
prices the rest of the time to a store that consistently offered everyday low prices.
Repositioning in practice is very difficult to accomplish. A great deal of money is often
needed for advertising and other promotional efforts, and in many cases, the repositioning
fails. To effectively attempt repositioning, it is important to understand how ones brand and
those of competitors are perceived. One approach to identifying consumer product
perceptions is multidimensional scaling. Here, we identify how products are perceived on
two or more dimensions, allowing us to plot brands against each other. It may then be
possible to attempt to move ones brand in a more desirable direction by selectively
promoting certain points. There are two main approaches to multi-dimensional scaling. In
the prior approach, market researchers identify dimensions of interest and then ask
consumers about their perceptions on each dimension for each brand. This is useful when
(1) the market researcher knows which dimensions are of interest and (2) the customers
perception on each dimension is relatively clear (as opposed to being made up on the spot
to be able to give the researcher a desired answer). In the similarity rating approach,
respondents are not asked about their perceptions of brands on any specific dimensions.
Instead, subjects are asked to rate the extent of similarity of different pairs of products (e.g.,
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How similar, on a scale of 1-7, is Snickers to Kitkat, and how similar is Toblerone to Three
Musketeers?) Using computer algorithms, the computer then identifies positions of each
brand on a map of a given number of dimensions. The computer does not reveal what eachdimension meansthat must be left to human interpretation based on what the variations in
each dimension appears to reveal. This second method is more useful when no specific
product dimensions have been identified as being of particular interest or when it is not clear
what the variables of difference are for the product category.
Information Search and Decision Making
Problem Recognition. One model of consumer decision making involves several steps.
The first one is problem recognitionyou realize that something is not as it should be.
Perhaps, for example, your car is getting more difficult to start and is not accelerating well.
The second step is information searchwhat are some alternative ways of solving the
problem? You might buy a new car, buy a used car, take your car in for repair, ride the bus,
ride a taxi, or ride a skateboard to work. The third step involves evaluation of
alternatives. A skateboard is inexpensive, but may be ill-suited for long distances and for
rainy days. Finally, we have the purchase stage, and sometimes a post-purchase stage (e.g.,
you return a product to the store because you did not find it satisfactory). In reality, people
may go back and forth between the stages. For example, a person may resume alternative
identification during while evaluating already known alternatives.
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Consumer involvement will tend to vary dramatically depending on the type of product. Ingeneral, consumer involvement will be higher for products that are very expensive (e.g., a
home, a car) or are highly significant in the consumers life in some other way (e.g., a word
processing program or acne medication). It is important to consider the consumers
motivation for buying products. To achieve this goal, we can use the Means-End chain,
wherein we consider a logical progression of consequences of product use that eventually
lead to desired end benefit. Thus, for example, a consumer may see that a car has a large
engine, leading to fast acceleration, leading to a feeling of performance, leading to a feeling
of power, which ultimately improves the consumers self-esteem. A handgun may aim
bullets with precision, which enables the user to kill an intruder, which means that the
intruder will not be able to harm the consumers family, which achieves the desired end-
state of security. In advertising, it is important to portray the desired end-states. Focusing
on the large motor will do less good than portraying a successful person driving the car.
Information search and decision making. Consumers engage in both internal
and external information search.
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Internal search involves the consumer identifying alternatives from his or her memory. For
certain low involvement products, it is very important that marketing programs achieve top
of mind awareness. For example, few people will search the Yellow Pages for fast food
restaurants; thus, the consumer must be able to retrieve ones restaurant from memory
before it will be considered. For high involvement products, consumers are more likely to
use an external search. Before buying a car, for example, the consumer may ask friends
opinions, read reviews in Consumer Reports, consult several web sites, and visit several
dealerships. Thus, firms that make products that are selected predominantly through
external search must invest in having information available to the consumer in neede.g.,
through brochures, web sites, or news coverage.
A compensatory decision involves the consumer trading off good and bad attributes of a
product. For example, a car may have a low price and good gas mileage but slow
acceleration. If the price is sufficiently inexpensive and gas efficient, the consumer may
then select it over a car with better acceleration that costs more and uses more gas.
Occasionally, a decision will involve a non-compensatory strategy. For example, a parent
may reject all soft drinks that contain artificial sweeteners. Here, other good features such
as taste and low calories cannot overcome this one non-negotiable attribute.
The amount of effort a consumer puts into searching depends on a number of factors such as
the market (how many competitors are there, and how great are differences between brands
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expected to be?), product characteristics (how important is this product? How complex is
the product? How obvious are indications of quality?), consumer characteristics (how
interested is a consumer, generally, in analyzing product characteristics and making the bestpossible deal?), and situational characteristics (as previously discussed).
Two interesting issues in decisions are:
Variety seeking (where consumers seek to try new brands not because these brandsare expected to be better in any way, but rather because the consumer wants a
change of pace, and
Impulse purchasesunplanned buys. This represents a somewhat fuzzy group.For example, a shopper may plan to buy vegetables but only decide in the store to
actually buy broccoli and corn. Alternatively, a person may buy an item which is
currently on sale, or one that he or she remembers that is needed only once inside the
store.
A number of factors involve consumer choices. In some cases, consumers will be
more motivated. For example, one may be more careful choosing a gift for an in-law than
when buying the same thing for one self. Some consumers are also more motivated
to comparison shop for the best prices, while others are
more convenience oriented. Personality impacts decisions. Some like variety more than
others, and some are more receptive to stimulation and excitement in trying new
stores. Perception influences decisions. Some people, for example, can taste the difference
between generic and name brand foods while many cannot. Selective perception occurs
when a person is paying attention only to information of interest. For example, when
looking for a new car, the consumer may pay more attention to car ads than when this is not
in the horizon. Some consumers are put off by perceived risk. Thus, many marketers offer
a money back guarantee. Consumers will tend to change their behavior through learning
e.g., they will avoid restaurants they have found to be crowded and will settle on brands that
best meet their tastes. Consumers differ in the values they hold (e.g., some people are more
committed to recycling than others who will not want to go through the hassle). We will
consider the issue of lifestyle under segmentation.
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Families and Family Decision Making
The Family Lifecycle. Individuals and families tend to go through a "life cycle:" The
simple life cycle goes from
For purposes of this discussion, a "couple" may either be married or merely involve living
together. The breakup of a non-marital relationship involving cohabitation is similarly
considered equivalent to a divorce.
In real life, this situation is, of course, a bit more complicated. For example, many couples
undergo divorce. Then we have one of the scenarios:
Single parenthood can result either from divorce or from the death of one parent. Divorce
usually entails a significant change in the relative wealth of spouses. In some cases, the non-
custodial parent (usually the father) will not pay the required child support, and even if he or
she does, that still may not leave the custodial parent and children as well off as they were
during the marriage. On the other hand, in some cases, some non-custodial parents will be
called on to pay a large part of their income in child support. This is particularly a problem
when the non-custodial parent remarries and has additional children in the second (or
subsequent marriages).
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In any event, divorce often results in a large demand for:
Low cost furniture and household items Time-saving goods and services
Divorced parents frequently remarry, or become involved in other non-marital relationships;
thus, we may see
Another variation involves
Here, the single parent who assumes responsibility for one or more children may not form a
relationship with the other parent of the child.
Integrating all the possibilities discussed, we get the following depiction of the Family Life
Cycle:
Generally, there are two main themes in the Family Life Cycle, subject to significant
exceptions:
As a person gets older, he or she tends to advance in his or her career and tends toget greater income (exceptions: maternity leave, divorce, retirement).
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Unfortunately, obligations also tend to increase with time (at least until onesmortgage has been paid off). Children and paying for ones house are two of the
greatest expenses.Note that although a single person may have a lower income than a married couple, the
single may be able to buy more discretionary items.
Family Decision Making. Individual members of families often serve different roles in
decisions that ultimately draw on shared family resources. Some individuals are information
gatherers/holders, who seek out information about products of relevance. These individuals
often have a great deal of power because they may selectively pass on information that
favors their chosen alternatives. Influencers do not ultimately have the power decide
between alternatives, but they may make their wishes known by asking for specific products
or causing embarrassing situations if their demands are not met. The decision maker(s) have
the power to determine issues such as:
Whether to buy; Which product to buy (pick-up or passenger car) Which brand to buy; Where to buy it; and When to buy.
Note, however, that the role of the decision maker is separate from that of the purchaser.
From the point of view of the marketer, this introduces some problems since the purchaser
can be targeted by point-of-purchase (POP) marketing efforts that cannot be aimed at the
decision maker. Also n
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