Research On Consumer behavior towards Psychological prices in retail stores.

Submitted To: Amit Submitted by:

Jyoti Yadav Atul Mor
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Table of Contents
Introduction ............................................................................................................................................. 3 Stages of the Consumer Buying Process................................................................................................... 3 Types of Consumer Buying Behavior....................................................................................................... 5 Categories that Affect the Consumer Buying Decision Process:- .............................................................. 5 Consumer buying behavior ...................................................................................................................... 7 The Strategy ............................................................................................................................................ 7 Buying behavior ...................................................................................................................................... 8 Psychological prices ................................................................................................................................ 8 India retail industry.................................................................................................................................. 8 Objective of the research........................................................................................................................ 11 Parameters ............................................................................................................................................. 11 Variables ............................................................................................................................................... 11 Research Methodology .......................................................................................................................... 12 Sample plan ........................................................................................................................................... 12 Tabulation ............................................................................................................................................. 12 Sample .................................................................................................................................................. 13 Instruments used .................................................................................................................................... 13 Methods of data collection ..................................................................................................................... 13 Results................................................................................................................................................... 14 Questionnaire ........................................................................................................................................ 26

Introduction
What is consumer buying behavior? Buying behavior is the decision processes and acts of people involved in buying and using products. Need to understand: Why consumer make the purchases that they make? What factors influence consumer purchases? The changing factors in our society. Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to analyze buying behavior for: Buyers reactions to a firms marketing strategy has a great impact on the firms success. The marketing concept stresses that a firm should create marketing mix (MM) that satisfies (gives utility to) customers, therefore need to analyze the what, where, when and how consumers buy. Marketers can better predict how consumers will respond to marketing strategies.

Stages of the Consumer Buying Process

Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexity...discussed next. The 6 stages are: 1. Problem Recognition (awareness of need) Difference between the desired state and the actual condition. Deficit in assortment of products. Hunger-Food. Hunger stimulates your need to eat. Can be stimulated by the marketer through product information-did not know you were

deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes.

2. Information searcho Internal search, memory. o External search if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc. A successful information search leaves a buyer with possible alternatives, the evoked set. Hungry, want to go out and eat, evoked set is o o o o Chinese food Indian food burger king Klondike Kates etc .

3. Evaluation of Alternatives Need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. May decide that you want to eat something spicy, Indian gets highest rank etc. If not satisfied with your choice then return to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives. 4. Purchase decisionChoose buying alternative, includes product, package, store, method of purchase etc. 5. Purchase--May differ from decision, time lapse between 4 & 5, product availability. 6. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction.Cognitive Dissonance- have you made the right decision. This can be reduced by warranties, after sales communication etc. After eating an Indian meal, may think that really you wanted a chinese meal instead.

Types of Consumer Buying Behavior

Types of consumer buying behavior are determined by:  Level of Involvement in purchase decision. Importance and intensity of interest in a product in a particular situation.  Buyers level of involvement determines why he/she is motivated to seek information about a certain products and brands but virtually ignores others

Categories that Affect the Consumer Buying Decision Process:A consumer, making a purchase decision will be affected by the following three factors:     Personal Psychological Social Personal

Unique to a particular person. Demographic Factors Sex, Race, Age etc. Who in the family is responsible for the decision making? Young people purchase things for different reasons than older people

Psychological factors
Psychological factors include: Motives:A motive is an internal energizing force that orients a person's activities toward satisfying a need or achieving a goal. Actions are effected by a set of motives, not just one. If marketers can identify motives then they can better develop a marketing mix. MASLOW hierarchy of needs!!  Physiological
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Safety Love and Belonging Esteem Self Actualization

Need to determine what level of the hierarchy the consumers are at to determine what motivates their purchases.

Social Factors
Consumer wants, learning, motives etc. are influenced by opinion leaders, person's family, reference groups, social class and culture.

Opinion leaders-Spokespeople etc. Marketers try to attract opinion leaders...they actually use (pay) spokespeople to market their products. Michael Jordon (Nike, McDonalds, Gatorade etc.)

Can be risky...Michael Jackson...OJ Simpson...Chevy Chase Roles and Family Influences-Role...things you should do based on the expectations of you from your position within a group. People have many roles.

Husband, father, employer/ee. Individuals role are continuing to change therefore marketers must continue to update information.

Family is the most basic group a person belongs to. Marketers must understand:
that many family decisions are made by the family unit Consumer behavior starts in the family unit family roles and preferences are the model for children's future family (can reject/alter/etc) family buying decisions are a mixture of family interactions and individual decision making family acts an interpreter of social and cultural values for the individual. The Family life cycle: families go through stages, each stage creates different consumer demands: bachelor stage...most of BUAD301 o newly married, young, no children...me o full nest I, youngest child under 6 o full nest II, youngest child 6 or over o full nest III, older married couples with dependant children o empty nest I, older married couples with no children living with them, head in labor force 6      

empty nest II, older married couples, no children living at home, head retired solitary survivor, in labor force solitary survivor, retired

Modernized life cycle includes divorced and no children.

Consumer buying behavior

The study of consumers helps firms and organizations improve their marketing strategies by understanding issues such as how:
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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. How marketers can adapt and improve their marketing campaigns and marketing strategies to more effectively reach the consumer.

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The Strategy
 To offer value to the customers.  As the store would offer a large mix of producs at a discounted price,the name big bazaar was finished.  Price was the basic value proposition at big bazaar.  Prices of the product were 5 to 60 lower than the market price.

Buying behavior
Consumer buying behavior include:    Cultural factor. Social factor. Personal factor. Psychological factor.

Psychological prices
Psychological pricing or price ending is a marketing practice based on the theory that certain prices have a psychological impact. The retail prices are often expressed as "odd prices": a little less than a round number, e.g. $19.99 or $2.98. The theory is this drives demand greater than would be expected if consumers were perfectly rational. Psychological pricing is one cause of price points. The psychological pricing theory is based on one or more of the following hypotheses:  Consumers ignore the least significant digits rather than do the proper rounding. Even though the cents are seen and not totally ignored, they may subconsciously be partially ignored. Some suggest that this effect may be enhanced when the cents are printed smaller (for example, $1999).  Fractional prices suggest to consumers that goods are marked at the lowest possible price.  When items are listed in a way that is segregated into price bands (such as an online real estate search), price ending is used to keep an item in a lower band, to be seen by more potential purchasers.  Judgments of numerical differences are anchored on left-most digits, a behavioral phenomenon referred to as the left-digit anchoring effect. This hypothesis suggests that people perceive the difference between 1.99 and 3.00 to be closer to 2.01 than to 1.00 because their judgments are anchored on the left-most digit

India retail industry

The Indian retail industry is the fifth largest in the world. Comprising of organized and unorganized sectors, India retail industry is one of the fastest growing industries in India, especially over the last few years.

According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, India retail industry is the most promising emerging market for investment. In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross Domestic Product) of the country. In 2009, it rose to 12%. It is also expectedtoreach22%by2010. According to a report by North bride Capita, the India retail industry is expected to grow to US$ 700 billion by 2010. By the same time, the organized sector will be 20% of the total market share. It can be mentioned here that, the share of organized sector in 2007 was 7.5% of the total retail market.

Retail is usually classified by type of products as follows:

 Food products  Soft goods - clothing, apparel, and other fabrics.  Hard goods ("hardline retailers") - appliances, electronics, furniture, sporting goods, etc.

There are the following types of retailers by marketing strategy:

1. Supermarkets - sell mostly food products; Packaged food aisles in a Fred Meyer store in
Portland, Oregon 2. Department stores - very large stores offering a huge assortment of "soft" and "hard goods"; 3. Discount stores - tend to offer a wide array of products and services, but they compete mainly on price;

4. General merchandise store - a hybrid between a department store and discount store; 5. Warehouse store- low-cost, often high-quantity goods piled on pallets or steel shelves; warehouse clubs charge a membership fee; 6. Variety store or "dollar store" - extremely low-cost goods, with limited selection; 7. Demographic - retailers that aim at one particular segment (e.g., high-end retailers focusing on
wealthy individuals

Pantaloon:Pantaloon is one of the biggest retailers in India with more than 450 stores across the country. Headquartered in Mumbai, it has more than 5 million sq. ft retail space located across the country. It's growing at an enviable pace and is expected to reach 30 million sq. ft by the year 2010. In 2001, Pantaloon launched country's first hypermarket Big Bazaar. It has the following retail segments: o o o o Food & Grocery: Big Bazaar, Food Bazaar Home Solutions: Hometown, Furniture Bazaar, Collection Consumer Electronics: e-zone Shoes: Shoe Factory 9

o o o o

Books, Music & Gifts: Depot Health & Beauty Care: Star, Sitara E-tailing: Futurebazaar.com Entertainment: Bowling Co.

Tata Group
Tata group is another major player in Indian retail industry with its subsidiary Trent, which operates Westside and Star India Bazaar. Established in 1998, it also acquired the largest book and music retailer in India Landmark in 2005. Trent owns over 4 lakhs sq. ft retail space across the country.

Reliance
Reliance is one of the biggest players in Indian retail industry. More than 300 Reliance Fresh stores and Reliance Mart are quite popular in the Indian retail market. It's expecting its sales to reach Rs. 90,000 crores by 2010.

AV Birla Group
AV Birla Group has a strong presence in Indian apparel retailing. The brands like Louis Phillipe, Allen Solly, Van Heusen, Peter England are quite popular. It's also investing in other segments of retail. It will invest Rs. 8000-9000 crores by 2010.

The Future
The retail industry in India is currently growing at a great pace and is expected to go up to US$ 833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%. As the country has got a high growth rates, the consumer spending has also gone up and is also expected to go up further in the future. In the last four year, the consumer spending in India climbed up to 75%. As a result, the India retail industry is expected to grow further in the future days. By the year 2013, the organized sector is also expected to grow at a CAGR of 40%.

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Objective of the research

To study the consumers behavior towards psychological pricing.  To analyze how the customer influence towards the psychological prices.  To know that which products psychological prices affect the customer buying more.  To analyze that is psychological prices influence towards impulsive buying.

Parameters
    Family Youngsters Decider of the family Women of the family

Variables
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Age (Uncontrol) Education (Uncontrol) Lifestyle (Control) Family size (Control) Purchaser (Control) Income (Control) Motivating factor (Uncontrol) Attitude towards the priced product (Control) Ideal price (Control) Attitude towards the quality (Control)

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Research Methodology
Research problems :products. To study buying behavior of consumer for indigenous and imported

Data source :-

Primary data and secondary data. Survey approach

Research approach:-

Research methodology :- Exploratory method Research Instruments :- Questionnaire

Sample plan
Population definition :
Sample:- malls, Super Market Extent: Delhi / NCR

Sample methods Sample Size Primary data

: : :

Random simple sampling 75 Questionnaire

Tabulation
After all the questionnaires were collected back, the responses were tabulated. Each answer of the respondent was tabulated to its respective category.

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Sample
While deciding about the sample of research, it is required from the researchers point to pay attention to these under mentioned points:  Sample Units: A decision has to be taken concerning a sampling unit before selecting a sample, sampling unit before selecting a sample, sampling unit may be a geographical one such as state, district, village Etc. so in this research sampling unit is Delhi/NCR.  Source list: It is also called sampling frame from which sample is to be drawn, it caters name of all the items of a universe.  Sampling Size: This refers to the no. of items to be selected from the universe to constitute a sample. Sample size in this research is 75 customers.  Sampling Procedure: it is decide about the technique to be used in selecting items for the sample. In this we used the random sampling on the basis of first results,which is from 75 respondents.

Instruments used
We collected primary data through sample survey or census surveys from the selected elements in malls and super markets. So for this purpose we have used the most popular tool of primary data collection through direct communication with respondents. The tools we used are questionnaires. Source of data: Data required for the study was collected through primary sources i.e. Market Survey.

Methods of data collection

Actually data is of two kinds so researchers should keep in mind both types of data. 1. Primary data: Primary data are those, which are collected afresh and for the time and this happen to be original in character. 2. Secondary Data: Secondary data are those data which have already been collected by someone else and which have already been used as per required. There are basically two sources to collect secondary data ; 1.Internally : provided by the company/organization. 2.Externally: various publication of central, state and local Government. a)Books, magazines, newspapers b) Internet etc.

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Results 1.Customers monthly income

High income group Middle income group Lower income group No income group 5% 50% 20% 25%

5% 25% high income group middle income group lower income group 50% 20% on income group

Interpretation:
The above diagram shows the distribution of income level of customers coming in the retail stores. Among the 75 respondents 50% of customers are of middle income level that is between Rs10000 40000 per month. Least number of customers visiting Big bazaar are the higher income level people (> Rs.60000 pm) that constitute only 5%. The lower income level of people coming to big bazaar constitutes of 20%. 25% of people belong to no income group which mostly consists of students.

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2.Customers visit to Retail stores

Weekly Monthly Quarterly No unplanned basis 29% 34% 23% 14%

14% 29% Weekly Monthly 23% Quartely No unplanned basis

34%

Interpretation:
From this we interpret that in retail stores 34% customers visit monthly, 29% customer visit weekly 23% customers visit quarterly and 14% customers visit on planned basis , it means mostly customers visit weekly and monthly basis for purchase their requirements.

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3. Preferanceable place for shopping

Big Bazaar Pantaloon K Raheja Corp. Group Reliance Trends 50% 15% 15% 20%

20%

Big Bazaar Pantaloon 50% 15% K raheja corp.Group Reliance Trends

15%

Interpretation:
After analysis this data, we interpret that 50% customers go to Big Bazaar because of large stock availability, affordable prices, publicity, etc. 20% customer go to reliance trends, 30% customer go to pantaloon and shooper stops.

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4.Products mostly purchased by customers in Retail stores

Clothes Grocery Food Item Leather Item Electronic Item Gift Item Any other Item 60% 70% 50% 25% 15% 10% 10%

10%

10%

15%

60%

Clothes Grocery

25%

Food Item Leather Item Electronic Item Gift item

50% 70%

Any other Item

Interpretation:
From this analysis I interpret that customers demand are high for grocery and clothes followed by food items in retail stores. Electronic items have a little demand by the customers. Gift items and other items are not much in demand by the customers. I can interpret that clothes, grocery and food items are the major products which hold maximum number of customers. So retail
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stores should maintain its psychological pricing and product quality to keep hold of the customers and also it should keep more qualitative products of gift and leather items so that people would go for more purchase of these items from it. Retail stores has many local branded products of grocery and cloths and it is successfully selling it. It should also include branded products so that more sales can take place.

5.Buying just due to psychological prices

Yes No 55% 45%

45%

Yes No 55%

Interpretation:
After analyzing, this we interpret that 55% consumer buy some products just due psychological prices and 45% consumers doesnt affect by the pricing strategy of retail stores they just see quality or other factors.
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6.Expenditure pattern of customers coming in to the retail stores

Below Rs.500/-single visit 500-1000/- single visit 1000-1500/-single visit 1500-2000/-single visit 34% 22% 22% 22%

22% 34% Below Rs.500/500-1000/1000-1500/More than1500 22%

22%

Interpretation:
From this we interpret that most of the customers purchase goods in bulk which leads them to spend a lot. Volume sales are high in retail stores. Customers tend to purchase more goods from retail stores as it provides goods at a discounted rate. Probably those persons who spend more in a visit to big bazaar are purchasing on a monthly basis. Those customers who are spending more money just due to psychological prices that is more than Rs 1500 are mostly coming in just to
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move around and spend time. In the process they used to spend money on food items and also purchase some products while roaming in it. Impulse buying behavior of customers comes in to play to a large extent. More discounts shall be provided to people who does bulk purchase. This will encourage people to purchase more products.

7.Type of product influence impulsive buying

Clothes Grocery Accessories Electronics 40% 25% 25% 10%

10%

40% 25%

Clothes Grocery Accessories Electronics

25%

Interpretation:
After this, we interpret that 40% customer ready to buy clothes after seeing psychological prices,25% customer only buy grocery which are need and available the same or alternate on less

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price. 25% customer buy accessories due to psychological price and 10% customer only want to buy electronics item.

8.Parameters effect your buying decision

Price Quality Both price and quality Easy availability 10% 20% 20% 50%

10% 20%

Price Quality Both price and quality 20% 50% Easy availability

Interpretation:
After this, we noted that for purchase 50% customer see both price and quality they think only priced product has quality, 40% customer influence by the price and quality only, only 10% customer influence by easy availability.

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9.Rating of shopping
Excellent Good Ok Others 65% 15% 10% 5%

30% 35% Excellent Good Ok Others

15%

20%

Interpretation:
We interpret that 30% customer says its excellent ,20% say its good, 15% customer say its ok not so good not so good, and 35% customer says that its nothing its just tool to increase the sales.

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10.Does these goods has quality

Yes No 70% 30%

30%

yes No

70%

Interpretation:
We interpret, that 70% customer agree that these type of product has quality these type of prices are fixed just to increase the sales there is no link with the quality, but 30% disagree with this they think that these product does have quality.

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11. Digits have more impact on impulsive buying

Series of 9 Series of 4 Series of 1 Series of 5 60% 10% 10% 20%

20%

series of 9 series of 4 10% 60% 10% series of 1 series of 5

Interpretation:
From this I interpret that in retail stores 60% customers are effected by series of 9 like 99,199,299,149.. , 10% customer are effected by series of 1 like 101,111,10% customers are effected by series of 4 like 134,144,and 20% customers are effected by series of 5 like 165,95,45.., it means mostly customers are change their buying after seeing the series of 9.

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Suggestions
y Retail stores should include more of branded products its product category so as to attract the brand choosy people to come in to big bazaar. y It should make different cash counters for different customers. Cash counter and credit card payment counter should be placed differently in order to reduce the rush and save the customers time. This will be a kind of motivator for the customers of retail stores. y The service of the sales person is needed to be improved. Personal care should be taken by the sales person for the customers so that the customers feel good. y During the off peak hours retail stores should provide some offers to its customers so that people would be encouraged to come to retail stores during off peak hours. The customers who are present in the mall during the off peak hours of big bazaar will definitely go in to retail if surprise offers are made at that time. y Customer care department is needed to take proper care of customer complaints and queries. The person sitting at the help desk of big bazaar should be able to provide all necessary information to the customers whenever it is required. y The infrastructure is needed to be changed a bit during weekends as heavy crowd comes in to big bazaar during those days.

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Questionnaire
PART-1
Name: Age: Gender: Address: Qualification: Profession: Ph.

PART-2
Q1. Whats your monthly income? a) b) c) d) Below 10,000 20,000 40,000 40,000 60,000 More than 60,000

Q2. How frequently do you visit Retail stores? a) b) c) d) Weekly Monthly Quarterly On unplanned basis

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Q3. Where do you like to go for shopping? a) b) c) d) Big bazaar Reliance K raheja corp group Pantaloons

Q4. What type of products do you mostly purchase as in Retail stores? a) b) c) d) e) f) g) Cloths Grocery Food Item Leather Item Electronic Item Gift Item Any other Item

Q5.

Do u buy products just for discounted price? a) Yes b) No

Q6. On an average how much amount of money do you spend in a visit just due to psychological prices to Retail stores? a) Below 500 b) 500 1000 c) 1000 1500 d) More than 1500

Q7.

If answer of Q8. yes, which type of product do u like to buy? a) b) c) d) Clothes Grocery Accessories Electronics

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Q8. What parameters effect you are buying decisions? a) b) c) d) Price Quality Both price and quality Easy availability

Q9. How do u rate shopping in retail stores on psychological prices? a) b) c) d) Excellent Good Ok Others

Q10. Do you think that psychological prices product have quality? a) Yes b) No Q11. Which digit makes you to do impulse buying? a) b) c) d) Series of 9 Series of 1 Series of 4 Series of 5

Q12. Any suggestions regarding the psychological prices in retail stores? . ..

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Bibliography
BOOKS
Kotler Philip, marketing management, (Pearson education, 12th edition)

Malhotra K. Naresh, marketing research (An applied orientation), Berman B and Evans J.R, Retail Management (Pearson education, 10th edition)

INTERNET WEB PAGE

y y y y y Bigbazaar.co.in Organizedretail.co.in Retail seminar. In Literature review on Big Bazaar.com Retailing.co.in

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