CONSUMER BEHAVIOUR FOR DURABLE GOODS: A CASE STUDY OF RURAL PUNJAB MS. SHUMEET KAUR* MS. ASHITA CHADHA** *Assistant Professor, Chandigarh University, Gharuan (Punjab), India **Assistant Professor, Chandigarh University, Gharuan (Punjab), India ABSTRACT India has one of the world s fastest growing consumer durables market worth an estimated Rs. 30,000 crore. India is the world's 12th largest consumer market. By 2025, it is projected to be ahead of Germany, the fifth largest (McKinsey Report 'The rise of Indian Consumer Market', 2007). India is witnessing a surge in demand, with the urban consumer durables market growing at almost 10% p.a., and the rural durables market growing at 35% p.a. and slated to grow 40% in 2011-12. (ASSOCHAM Research Bureau) The potential in growth lies not in urban India but more in rural India. The urban market has now largely become a product replacement market while the rural market will provide growth by increased sales volume. This study was carried out to understand consumer behaviour of rural households while purchasing consumer durables. Consumer durable goods from three different product categories; television and computer (electronic product), refrigerator, washing machines, microwave and air conditioners (home appliance) and automobile (motorcycle and car) were selected for study. INTRODUCTION Around 35 per cent of the total sales of consumer durable items come from rural and semiurban markets, which will grow by 40 to 45 per cent in the near future. The consumer durable industry is growing at a fast pace and sees a strong demand in the coming period with the growing affordability of products as well as general buoyancy in the economy, said Mr. Dilip Modi, President of ASSOCHAM. The market for consumer durables is estimated at Rs. 300 billion and is expected to reach Rs. 500 billion by 2015 with mobile phones, TVs (LEDs) and music systems among the growth drivers. With India being the second fastest growing economy at a rate of 8 per cent and a huge consumer class of nearly 70 per cent in rural areas, consumer durables have emerged as one of the fastest growing industries. The consumer durable sector contributes around 8 per cent to the Index of Industrial Production (IIP) and provides jobs to professionals, skilled, 10
semi skilled and unskilled workers, particularly women in the rural and semi-urban areas every year. The household consumer expenditure survey for 2009-10, released by the National Sample Survey Office (NSSO), reveals that rural Indian households are spending more on consumer goods like durables, beverages and services as compared to their expenses on such things five years back. The 66th round of the National Sample Survey showed that monthly per capita expenditure (MPCE) in rural India was Rs 953.05 in 2009-10. Changing lifestyle, higher disposable income coupled with greater affordability and a surge in advertising has been instrumental in bringing about a sea change in the consumer behavior pattern. Apart from steady income gains, consumer financing and hire-purchase schemes have become a major driver of the consumer durables industry. The state like Punjab gets a favorable ranking in terms of ownership of assets, consumer durables, two-wheelers, and cars in rural areas. In rural Punjab there are many families whose one or more family members have gone abroad. Their standard of living is even far better than many of the urban residents. Literature Review Consumer Durables are products which don t wear out quickly, yielding utility over time rather than at once. Most consumer goods are durable to some degree, and the term is used in a more restricted sense to denote relatively expensive, technologically sophisticated goods with high involvement at the time of purchase. The consumer durables segment can be segregated into consumer electronics (TVs, Mobile phones, Laptops/Computers and audio systems) and consumer appliances (white goods like refrigerators, washing machines, air conditioners, brown goods like microwave ovens, vacuum cleaners and dishwashers), automobiles (cars motorcycles and scooters). The durable goods are mass-produced in anticipation to consumers demand and involve huge capital cost (Downham and Treasure, 1956). The rural population, largely ignored till some time back by the private sector due to its low income level, low literacy rate and high distribution cost because of improper infrastructure facilities, has suddenly gained attention due to its untapped potential. Opportunities of rural marketing in India are not in income but in numbers. The vast size of the rural market of 150 million households is estimated to expand to 250 million by 2015. Many companies including MNCs and regional players have started developing marketing strategies to lure the untapped hinterland market. Consumer durable companies like Godrej Consumer Products Ltd. and LG Electronics derive 15-20 percent of the business from rural India. Other impressive brand names such as Nokia, 11
Samsung, Sony, Voltas, Phillips and Whirlpool are captivating the rural consumer s interest. FMCG giants like HUL, ITC, Marico, Colgate-Palmolive, Britannia, Nestle and Coca Cola India are becoming household names because of their brand recognition. Automobile companies like Maruti Suzuki India, Hyundai Motors are continuously developing appropriate products, schemes and services to attract the burgeoning rural market. Japan's Honda Motor, is pushing its small capacity 100-cc economy bike model to get closer to rural Indian consumer. The company, which sold its stake in the alliance (Hero Honda) with Hero brand, is reversing its sales strategy to lay the thrust on rural India which has been a major contributor in the former alliance s revenue. C. K. Prahalad's inspired vision of a fortune at the bottom of the pyramid is being clearly pinpointed by the fact that there is vast potential for profits in the rural markets. Industry experts believe that rural India will play an active role in the country s upcoming progress. Players in different industries like telecom, media, information technology, healthcare, banking and education are participating intensely offering services to rural households to generate profits. Durable purchases, by and large, are group decisions for three reasons: one it involves a considerable outlay of the family; second the user of the product may not necessarily be the one who actually pays for it; and third it is bought for the use of several members of the family. Rural customers are fundamentally different from their urban counterparts in purchasing high involvement products like consumer durables. In the urban family, the entire family is involved in making a purchase, however, in the village community women have little contact with the market and the male makes the purchase decision (Anand and Krishan, 2008). The various socio-economic, cultural and psychological factors that influence the purchasing pattern of respondents were analysed (Ashok 2007). The study revealed that various economic factors such as increase in family income, the availability of attractive sales promotional schemes, the availability of surplus funds and the perceived risk in terms of technological obsolescence in that order influenced purchase of the durable products. Consumer s behavior is also influenced by social factors, such as the consumer s small groups, family and social roles and status. The study showed increase in the number of nuclear families, need for comfort /sophistication, education and level of occupation, each had accounted for a high level of influence and one s standard of living / status accounted averagely on purchasing pattern of durable products. A person s buying choices are mostly influenced by four major psychological factors: motivation, perception, learning and beliefs and attitudes. The increase in competition among sellers of various brands, the technological 12
superiority seen among the products and increasing consumer s expectations, price differentials among various brands/ sellers and brand loyalty among consumers in that order influenced purchasing pattern of consumers. The exploratory study conducted in the campus of Indian Institute of Technology Roorkee (Rahman and Bhattacharyya, 2003 b) found the average usage of kitchen refrigerator was five-and-a-half years and for a colour TV was five years. Two-wheelers have become more important particularly among middle income group of consumers in India. Consumers consider price, maintenance, fuel efficiency, appearance, durability, and resale value as important attributes while buying two wheelers. Factor analysis yielded five factors that motivated the consumers in their purchase decisions. These were fuel efficiency, maintenance cost, price, image and warranty. Cost, image, and service influenced the selection of motorcycles. But all variables were rated equally in case of scooters and mopeds. In terms of total satisfaction, all bike owners were found fully satisfied with style, scooter users with durability, and moped-owners with brake conditions. The job knowledge of the mechanics was the most significant consideration for selecting dealer or non-dealer service centers (Ahmed, 2001). Objectives of the study To study the factors affecting purchase of consumer durables To study how frequently consumer change the consumer durables in automobiles (car and motorcycles), home appliances (refrigerator, air conditioner, microwave and washing machines) and electronics (television and computer). To study the effect of factors which influence the frequency of change of consumer durables Hypotheses The customers income has no effect on consumer s purchase of the number of consumer durables in automobiles (car and motorcycles), home appliances (refrigerator, air conditioner) and electronics (television). There is no effect of family size on the number of consumer durables (car, motorcycle, television, air conditioner and refrigerator) being used. 13
Methodology The study, descriptive in nature, has been carried out in rural Punjab in September - October 2011. Forty one households were selected for study on the basis of non probability convenience sampling. Rural area corresponds to villages of Punjab. The sample does not cover people of semi-urban areas such as towns/sub-towns. A structured questionnaire was used having closed ended and ranking based questions. Questionnaire was prepared to study the opinions and attitudes of respondents while making consumer durable purchases in three segments of automobiles (car and motorcycles), home appliances (refrigerator, air conditioner, microwave and washing machines) and electronics (television and computer). Apart from the demographic details the respondents were requested to rank the alternatives for those consumer goods that were being used in the household. Ranks have been assigned by using the Weighted Average Score. The Hypotheses have been tested by using the Chisquare Test and the additive property of Chi-square is used to conduct comparative analysis. Limitations of the study 1. The sample size is too small to generalize the findings across the one of the most populous country like India. 2. Only a few products from three categories have been selected. However there are large number of consumer durables within a product category such as washing machines, water purifiers, generator sets, and appliances like mixers, geyser etc. that carry different utilities at different values for different strata of consumers. 3. There are many households which may have not any one or more of these selected items and they were also not likely to buy in near future. Analysis and Discussion The results are summarized as follows: The hypothesis that customers income has no effect on consumer s purchase of the number of consumer durables was rejected as the calculated 2 is more than the tabulated 2 at 5% level of significance. Calculated value of 2 is 35.71 > tabulated value of 2 is 21.03 at 5% level of significance, value for df(12), hence the difference is significant and our hypothesis is not accepted. Thus, there is a relationship between the income of the consumer and the number of consumer durables purchased. This is further emphasized by another closed ended question asked where the respondents were asked if they preferred financial schemes for purchase of goods 14
and almost 73 percent answered that they were interested in such schemes as it became affordable to own highly priced consumer durables. The second hypothesis that there is no effect of family size on the number of consumer durables (car, motorcycle, television, air conditioner and refrigerator) being used was accepted as the additive property of Chi-square was used to conduct the comparative analysis. Table 1: Comparative Values of Chi-square for different consumer durables Consumer Durable Car Motorcycle Refrigerator Air Conditioner Television Total Value* 1.156 1.333 3.754 4.097 1.416 11.755 Degree of 2 2 2 2 10 Freedom * Significant at 0.05 level of significance Calculated value of 2 is 11.75 < tabulated value of 2 is 18.31 at 5% level of significance, value for df(10), hence our hypothesis is accepted. It can therefore be interpreted that the size of the family does not influence the number of consumer durables that people purchase. The number of consumer durables like refrigerators, washing machines, computers, microwave and television are not dependent on the size of the family. A related question asked to the respondents regarding the timing of purchase of consumer durables showed 71 percent bought products at the time of need, 17% in the festival season and few times during promotional schemes and on special occasions. This could be attributed to the fact that the disposable incomes and literacy rate in the rural areas is on the rise and with time the rural population will purchase products and services even when their need is not great. Table 2 shows the study of factors affecting purchase of consumer durables. The weighted average method was adopted to rank the factors such as technology, price, quality, services, power consumption/efficiency, easily available and product features. The highest rank was given to price which means that people are price conscious and give lot of weightage to the cost of the product. Technology also plays a major role in the purchase decision as this factor is rated first or second by most of the respondents. Table 3 also shows that most consumers are influenced to change their consumer durable products due to improved technology as the advancement in technical features gives a superior experience to the customer. The least ranked was easily available, as another question answered that almost 52 percent of the 15
consumers bought products from retailers in the city or exclusive brand shops (34%). The rest bought from retailers in the village. So, availability of the product is not an important factor but the availability of services does influence the purchase decision to some extent. Table 2: Factors influencing the purchase decision of the consumer durables Factors Average Score Average Rank Rank Services 25.20 3.15 3 Quality 48.82 6.10 6 Price 8.77 1.10 1 Power Consumption 41.65 5.21 5 Technology 17.22 2.15 2 Easily Available 58.01 7.25 7 Product Features 33.25 4.16 4 The study showed results that almost 38 percent consumers changed their household products between 3-5 years and 34 percent changed between 6-10 years. Most quickly motorcycles were changed then cars and computers between 3-5 years. Sometime computer/laptops wer upgraded or changes even before 3 years. Reasons attributed to the requirement of these changes were latest technology and the brand name. Thus, it was seen that people inhabiting the villages are also showing brand recognition and becoming brand conscious. Television, air conditioners, refrigerators and washing machines were changed between 6-10 years time. Table 3: Shows the factors influencing the change of consumer durables Reason for change of Consumer durable WAS Rank Latest Technology 1.559 1 Promotional Scheme 3.588 4 Prestige 4.059 5 Brand Name 2.441 2 Surplus Money 2.735 3 Another reason for the buying of additional consumer durables like television, refrigerator, car or motorcycle was that surplus funds were available with the household. Promotional schemes did not allure the consumer to buy an additional product or change the present one. 16
Prestige plays an important role while changing automobiles like cars and motorcycles but home appliance were not changed because of prestige issues. The study shows that consumers are becoming more knowledgeable, exploratory and moving out of villages to gather information and select their products. The change in consumer buying habits and spending power of the rural population is compelling companies to target marketing strategies to the rural areas. Today, the consumers are more concerned about value satisfaction for the money exchanged, brand image and performance than ever before and it is for the companies to meet the customers requirement to convert them into highly profitable marketing opportunities. References 1. Ahmed, N. (2001), Two-wheeler purchase preference, Indian Management, Vol. 44 (10), pp 63-65. 2. Anand, N and Krishna, R(2008), Rural Brand Preference determinants in India, Marketing to rural Consumer, pp. 1-5 3. Ashok, D & Ms. Subashree P (2001), Key challenges confronted by Indian Industries in Liberalization era, The Economic Challenger, No.03, Issue: 10, pp. 25-26. 4. Rahman, Z. and Bhattacharyya, S. K. (2003), Sources of first mover advantages in emerging markets - an Indian perspective, European Business Review, Vol. 15 (6), pp 361-371. 5. Singh, J. (2011), A Comparison Of Rural And Urban Buying Of Consumer Durables, Global Journal of Management and Business Research, Volume 11 Issue 5 Version 1.0 pp 63-69. 6. http://www.assocham.org/prels/shownews.php.id=2689 [Accessed on October3, 2013] 7. http://blog.nielsen.com/nielsenwire/consumer/rural-india-presents-notable-growthopportunity/ [Accessed on September 23, 2013] 8. http://www.thehindubusinessline.com/todays-paper/tp-opinion/article993407.ece [Accessed on September 25, 2013] 9. www.ibef.org/industry/consumermarket/ruralmarket.aspx [Accessed on September 28, 2013] 10. http://blogs.rediff.com/shinyvikas/2010/02/22/indias-rural-market-the-fortune-at-thebottom-of-the-pyramid/ [Accessed on September 29, 2013] 17