Consumer is the King by Aman Jalan

CONSUMER BEHAVIOUR 

ABSTRACT

Consumer is the king of any business. Understanding consumer needs and wants is the foremost task of any marketeer.

Consumer behaviour is the study of psychological, physical and social actions when individuals, groups or organizations buy, use and dispose of products, services, ideas, and practices. In simpler terms, it is the study of how a consumer will make its buying decision and the factors that influence those decisions. These factors may be the consumer's emotions, attitudes, and preferences.

This paper explores how consumers all around the world are divergent in their behavior towards purchasing a particular product, the various strategies that sellers use in order to identify these peculiarities, and how they use this information to maximize sales. The Indian Market is worth over a trillion dollars today, and the Indian consumer is cognizant of all the options and makes informed choices while choosing to purchase a product. Due to their unique behavioral patterns, we will be focusing on the Indian consumer behavior. 

INTRODUCTION

According to marketers, understanding the compelling reason for which a consumer purchases a particular good or service over the other is pivotal in identifying which product is in demand and which product is obsolete. It often leads them to improve existing products and services as well as innovate newer ones.

An excellent example is the advent of food delivery apps like Swiggy and Zomato. During Covid, all eateries were shut down. People were tired of cooking and were missing their favourite foods. Restaurants too were losing out on business. The service of safely delivering food from restaurants to homes proved to be a great success and has garnered a turnover of 57 billion rupees in just a span of four years.

The study of consumer behaviour encompasses

·     What they buy

·     Why they buy it

·     When they buy it

·     Where they buy it from

·     How often they buy it

·     How they use and dispose of the product

Consumers in India behave in a dynamic and complex way which is shaped by the country's diverse cultural, economic, and social landscape. With a population exceeding 1.4 billion, India presents a unique market characterized by a mix of traditional values and rapid modernization.          

The Indian market is segmented into various economic classes, from affluent urban consumers to price-sensitive rural populations. Rising disposable incomes, especially in the burgeoning middle class, have led to increased spending on lifestyle products, luxury items, and technology. The standard of living has consistently improved since the last twenty years, with the GDP per capita rising by 261% since 2004. This has led to an increase in demand for luxury goods. 

IMPORTANCE

Understanding consumer behavior is called consumer behavior analysis. Customers don’t always do what they say they will, so customer behavior analysis can identify what’s really happening when they encounter your brand. By examining customer-generated data and your own operational data using qualitative and quantitative approaches, you can identify how customers behave at each interaction and understand what drives that behavior. 

1. Identifying Needs and Wants: By studying consumer behavior, companies can identify the needs and wants of their customers. This will provide valuable information to producers such as what to produce, how much to produce, thus ensuring higher customer satisfaction and loyalty.  For example, cold countries such as France and Switzerland are feeling the need for air conditioners now due to global warming. Thus, after studying this behavior, companies will realize this demand and increase production to meet this demand. 

2. Market segmentation and Targeting: Analyzing consumer behavior helps in segmenting the market into distinct groups of consumers with similar characteristics and needs. For example, after analyzing, a company manufacturing protein bars might discover that 75% of its consumers belong to the age group of 18-30 years. This segmentation helps companies to target their market more accurately, thereby improving the efficiency and effectiveness of their campaigns. 

3. Product Development and Innovation: By studying consumer behavior, companies can predict future markets, which will lead to the development of new products or improve/alter the existing ones. This can inspire innovation and improve designing to effectively satisfy consumers. For example, mobile phone manufacturers changed their design to make the phones much sleeker so that consumers can conveniently carry them in their pockets. 

4. Attracting New Customers and Increasing Customer Loyalty: Analyzing consumer behavior doesn’t just give companies valuable insights into their existing customers – it will also help in attracting new ones. According to Invesp, selling to an existing customer has a probability rate of 60-70%, but selling to a new customer is only 5-20%. 

METHOD

These steps should be taken to analyse a consumer’s behaviour:

1. Segment Your Audience: The first step to a customer behavior analysis is segmenting your audience. Key segmentation models are demographic segmentation (age, gender, etc.), psychographic segmentation (personality, values, etc.) and geographic segmentation (country, town, etc.)

2. Gather qualitative and quantitative data on customer behavior: Once the customers are segmented, companies are able to start evaluating their data for customer behavior patterns. This information falls into two types: quantitative data and qualitative data.

a.     Qualitative data includes information such as:

·       Purchase history

·       Website visits and views

·       Social media engagement

·       Conversion reports for marketing/sales activity

·       How many customer service tickets they've raised and whether their issues were resolved quickly.

     b. Quantitative data describes what happens when customers take action. It gives the “why” behind customer actions (or lack of, in some cases).

Qualitative data covers information such as:

·       Direct customer feedback (collected through surveys and questionnaires)

·       Conversation analytics data (such as emotion, intent and effort)

3. Evaluate your data for behavior insights: Businesses will start evaluating their information for behavioral insights, ideally using a customer behavior analytics tool. There are 2 kinds of tools used:

a)    Types of buying behavior

b)    Approach towards buying

Types of buying behavior

· Extended Decision- Making: How much time does the consumer invest before deciding to buy a product? This includes asking friends, reading reviews, and looking at comparisons online. 

· Limited Decision- Making: Customers might be limited in what they buy due to availability. Are they buying a product because it is the only one available in the market?

·  Habitual Buying Behavior: What do customers regularly seek out and buy? 

·  Variety-Seeking Buying Behavior: Sometimes, there are several very similar options in the market. Customers might be driven to buy and try several of the same product over time to see what the differences are. Are your customers comparing you to others in your market offering the same thing?

Consumer Behavior Approaches

·The Economic Man Approach: This theory suggests that customers always choose the lowest price product when offered a range of similar products at varying prices. Customers are believed to be driven by making the “rational” decision when reconciling their need and the limited money they have to meet that need.

·The Cognitive Approach: This theory suggests that consumers act with a particular mental process in mind. This includes recognising they have a need, searching for information, evaluating their choices, making a purchase and then evaluating whether that purchase was a good one.

·The Behaviorist Approach: This theory suggests that consumers’ behavior is shaped by stimuli and past experience. Negative and positive experiences serve as lessons to either avoid or do the same action again.

CONSUMER BEHAVIOR IN THE INDIAN MARKET

Consumer behavior varies drastically from country to country. While in the western world, countries such as Germany, Italy, and France, both the lower a­­nd upper class show similar buying behavior, in countries like India the upper class have a tendency to buy luxury cars, gadgets, and personal care products. However, people from the lower class are unable to spend money on these purchases, according to “marketingtutor.net”. Understanding and studying individuals’ demand is critical while trying to sell goods and services in the Indian Market.

India has seen an unprecedented growth in the advancement of technology in the past decade. The proliferation of smartphones and internet access has transformed consumer behavior. E-commerce is booming, with consumers increasingly opting for online shopping due to convenience and competitive pricing. Social media platforms also play a critical role in shaping consumer opinions and trends. With a high birth rate of 16.949 births per 1000 people, a large percentage of its population is under 35, who drive market trends. They are tech-savvy, brand-conscious, and more inclined towards global products and services, yet they also value brands that resonate with local culture and traditions. India has a prominent divide between its urban and rural consumers. While the urban is influenced by global trends and exhibit high brand loyalty, rural consumers are driven by functionality and value-for-money. Marketing strategies must, therefore, be tailored to address these divergent needs effectively.

Decision- making process: The consumer decision-making process among Indians is influenced by a blend of traditional values and modern trends. This process typically involves five stages: need recognition, information search, evaluation of alternatives, purchase decision, and post-purchase behavior. 

1. Need recognition: Indian consumers often identify their needs based on cultural norms, family requirements, and social status. For example, during festivals like Diwali, there is a heightened demand for new clothes, sweets, and electronics as these purchases are part of the cultural celebrations. Additionally, changes in life stages, such as marriage or the birth of a child, can trigger the recognition of new needs.

2.    Information Search: Indian consumers are meticulous information gatherers. They rely heavily on word-of-mouth, seeking advice from family and friends, which is deeply rooted in the collectivist culture. With the advent of the internet, there is a significant rise in online searches, reviews, and social media influences. Urban consumers, in particular, utilize online resources extensively, while rural consumers might still depend more on traditional media and community recommendations. Eighty-five percent of Indian consumers check at least two data points (beyond prices and discounts) when they’re buying something, and roughly 50% do some sort of online research. Among the sorts of information that people look for are product reviews, manufacturing and expiration dates, and how a product compares with alternatives in terms of features.

3. Evaluating Alternatives: This stage involves comparing different products and brands based on various attributes such as price, quality, features, and after-sales service. Indian consumers are value-conscious and often seek the best deal for their money. The growing middle class exhibits a penchant for branded products that offer a combination of quality and status. However, regional preferences and local brands also play a crucial role, especially in rural markets.

4. Purchase Decision: The final purchase decision is influenced by several factors, including promotional offers, store ambiance, and salesperson behavior. In India, family opinion can significantly impact the final decision. Emotional factors, such as trust in a brand or a recommendation from a respected family member, can be decisive.

5. Post-Purchase Behavior: After purchasing, Indian consumers evaluate their satisfaction with the product or service. Positive experiences can lead to brand loyalty and word-of-mouth promotion, while negative experiences can result in complaints and a switch to competing brands. Given the community-oriented culture, sharing experiences with family and friends is common, amplifying the impact of post-purchase behavior on future consumer decisions.

Changes in Indian consumer Behavior: In the last decade, there has been a significant change in the attitude of Indian shoppers. Factors such as higher disposable income, changes in tastes and preferences, and technological advancements are responsible for this change. 

1. Shopping to Stay Trendy: A desire to be in sync with the latest trends is increasingly driving purchases among Indian consumers. More than 60% of the respondents that were surveyed said that in the past year, in at least one category, they had purchased something because it was trendy and they felt like upgrading—not necessarily because they needed a replacement. Not surprisingly, the categories that ranked high for trendiness had products that tended to be those that someone might see and notice. For instance, in the year leading up to the survey, 58% of people buying gadgets such as tablets and laptop computers, and 53% of consumers buying four-wheel vehicles, purchased their products just to stay up to date with the latest in the market.

   
   

2. Advent of Health and Wellness Awareness: Health consciousness has seeped into the national conversation in recent years, and our survey shows that 57% of consumers now spend on health and wellness. This includes 46% of consumers who are spending on services such as health checkups, gym memberships, and diet consultations, and 40% of consumers who are spending on healthier food.

3. Valuing Experiences Over Products: In recent years, there has been a shift in the attitudes of urban Indians. They no longer want to prioritize (Jain) saving for their future- instead they want to live in the present. About 37% of urban Indians are trading down in certain products such as jewelry, mobile phones and apparel and spending on experiences like travel, adventure sports and theater. This shift in attitude can also be partly attributed to the positive attention which such experiences bring on social media. 

4. Renting Over Buying: In recent years, both high income and low income consumers are bending towards renting rather than buying. Not only is renting more affordable than buying, it also provides flexibility. Increasing number of young Indian professionals on temporary assignments prefer to not only rent their homes, but also furniture, smartphones and clothes.

MAGGI CASE STUDY 

Maggi is one of the most iconic brands in Indian business history and has been an integral part of every Indian child. However, from the business standpoint, the most fascinating thing about Maggi is that back in 1983, both Maggi and instant noodles were completely alien to the majority of Indians. Nestlé single handedly created a 937 cr market and has been a market leader in the domain for 38 years. Despite giant rivals like ITC, Marico and Unilever, Maggi holds 60% market share in the instant noodle segment. The company managed this feat by studying the Indian consumer’s behavior in depth and utilized the information effectively. Instant Ramen Noodles was already an established market in Japan but not in other Asian countries like India. While most brands spent time and resources on how to penetrate a market, Nestlé instead spent time and money to find which market to penetrate. So instead of entering the Japanese market, where Nissin was already holding a monopoly, Nestlé preferred to avoid competing against them and instead looked at India, where they could establish their own monopoly. Nestlé believed in the fundamental marketing principle that ‘If you try to sell to everyone, you will end up selling to no one!’ So, their marketing team worked towards recognising their ideal target audience and picked 2 categories- Mothers and Children. 

The company realized that during that time, Indian working mothers were looking for a tasty and less tedious snack to give their kids after school. It was Nestlé’s intricate understanding of the mothers’ pain of being too tired to make an evening meal for the children which made them attractive. They managed to sell an emotion, rather than a product.

They purposely showed their TV commercials between kids’ programs and showcased a mother with kids enjoying the taste.  Apart from this tactic, Nestlé also reached out to school kids, sponsored quizzes and events and gave them free samples of Maggi.  By studying the Indian consumer’s behavior further, they realized that a majority of the population is cost conscious and were not shifting to a ready-made packaged product. So, they launched Chotu (or small) Maggi which was priced at just 5rs, and managed to penetrate into the lower segment of the market. In addition, the communication was done in local vernacular languages and the efficient distribution system reached 2.2 million outlets across the country. 

In the early 2000’s, Indians started becoming health- conscious. Studying this change in behavior, Maggi launched Vegetable Atta Noodles, advertising it as healthy noodles made with whole wheat and vegetables, thereby retaining its no.1 spot in the instant noodles category. 

Maggi faced a setback when it was banned in 2015. It disappeared from the stores for 5 months and their market share went from 75% to 0 % within no time. But as soon as the ban was lifted, they came up with a “We Miss You Too” campaign, where the brand asked fans to share stories about how much they missed Maggi on social media. It turned out to be one of the most successful campaigns of Nestlé and sales skyrocketed. By 2017, Maggi was back to the #1 spot in the market, with a 60% share in the instant noodles market.

CONCLUSION

All in all, a thorough analysis of consumer behavior will enable businesses to get answers to the following questions:

• How does a customer access your brand? Is it through online searches for products, social media posts, marketing emails?

• When are they most likely to purchase a product in terms of day, week, month, season?

• What stops them from completing a purchase? Is it a broken payment system or a price point?

• What marketing or sales campaigns worked on them?

• What encouraged them to make multiple purchases?

• What did customers feel that made them make a purchase?

• Why were customers driven to make a purchase in the first place?

• How hard was it to make a purchase for these customers?

This knowledge enables companies to tailor their products, services, and marketing strategies to meet the specific needs and preferences of their target audience. By analyzing consumer behavior, businesses can predict market trends, identify potential opportunities, and create more effective promotional campaigns.

Consumer behavior studies also help in segmenting the market, allowing for more personalized marketing efforts that can lead to increased customer satisfaction and loyalty. By recognizing the factors that influence purchasing decisions, such as cultural, social, personal, and psychological elements, companies can better position their offerings to appeal to different consumer segments. Moreover, understanding consumer behavior is essential for innovation. It helps businesses to design new products that resonate with consumers' evolving needs and preferences. It also assists in identifying and addressing any pain points in the customer journey, thereby improving the overall customer experience.

BIBLIOGRAPHY

https://www.bcg.com/publications/2019/ten-trends-altering-consumer-behavior-india

https://www.marketingtutor.net/what-is-consumer-behavior/#google_vignette

https://www.bcg.com/publications/2019/ten-trends-altering-consumer-behavior-india

https://economictimes.indiatimes.com/news/economy/indicators/view-indias-consumer-market-a-1-trillion-investment-opportunity/articleshow/94157242.cms

https://marketing91.com/consumer-behavior/