PREFACE

This paper has been written to analyze the consumers behavior in out of
stock situations of different products and services ( electricity, gas, UBL Wallet card, Thyroxin and GAS dry batteries) . To compile this study besides secondary sources of data available in the shape of written work and certain databases compiled by different governmental and private organizations were also consulted. However to seek true response of the consumers, different types of consumers were also contacted by our group members and their responses were recorded through questionnaire served to them. Though presently no real shortage except electricity and gas exists in Pakistan , yet people were asked to share their feelings from the past experiences. At times to identify and access specific consumer segments of certain products like medicines , cosmetics or branded eatables also become very difficult , however we have made an endeavor to approach all such real or potential consumers and seek their response. We are sure that effort put in by our group will be recognized and acknowledged and will prove to be a source of seeking additional information and reference on consumers behavior in case of out of stock situation of electricity , gas , , UBL Wallet card, Thyroxin and GAS dry batteries.

CONSUMERS BEHAVIOR IN OUT OF STOCK SITUATION Introduction Consumers behavior towards any product or service depends upon his/her perceived value , need or demand for that product or service. Consumers need , demand or perception about certain products / services can be consistent or inconsistent . So we can say that Consumers behavior can depend not only on the factors mentioned earlier but it can depend upon some situational or external factors as well e.g.; the perceived value/need / demand for cold drinking water to a person while travelling in hot summer while passing through desert will be different than once the same person is travelling through an icebound area. Similarly need / demand or value of any product/ service varies from person to person depending upon various intrinsic and extrinsic factors. Out of Stock situation means once consumer faces shortage of any product or service for utilization. In case of consumer goods we can say it is a situation once inventory stock becomes scarce on retail outlets. Out of stock situation may occur because of :a. Increased demand due to population increase, seasonal changes , changing trends or income / other factors. b. Decrease in production due to some technical , administrative or financial reasons. c. Intentionally holding stock ( in monopolistic or Oligopoly situations) by distributing channels or producing units with an aim to earn higher profits in future by creating artificial shortage . d. Decrease in production due to non availability of raw materials required for production.

Consumers behavior in Stock out situations will vary as per the perceived value / position of the product / service in consumers mind. In out of stock situation consumer can behave in any of the following manners depending upon their need/ demand or perceived value:-

a. Frustrate the consumer , who may opt for switching over the store , thus weakening the customer- seller relationship. b. Consumer may start looking for the substitute or alternative product / service. c. In Frustration Consumers may decide to boycott the product and decide to not purchase at all. Studies find shopper response to out-of stocks depends on brand-related antecedents (e.g. brand equity), product and category-related antecedents (hedonic level), store-related antecedents (e.g. service or price-oriented), shopper-related antecedents (e.g. shopper age) and situational antecedents (e.g. purchase urgency). In this study , Consumers behavior in out of stock situation for following products / services has been carried out:a. b. c. d. e. Electricity ( service) Natural Gas (service) Thyroxin ( A medicine) Sugar ( FMCG) Coure ( A car)

Consumers Behavior in out of stock Situation for Electricity Today electricity has become an essential part of our lives , however our dependence on it varies according to activity level , social status , purchasing power , lifestyle , and many other factors. To understand consumers behavior in out of stock situation for electricity we would have to first identify the different consumer segments of electricity and their need / demand and perceived value for this service. For better and easy understanding we have divided the consumer market of electricity in to following segments:a. b. c. d. Industrial Consumers Commercial Consumers Agricultural Consumers Domestic Consumers iUrban consumers iiRural consumers

Industrial Consumers Though in Pakistan this segment is not quite large in population, yet because of heavy consumption it is the largest segment of electricity consumption. Consumption requirements of various industrial segments varies not only due to the nature of industry but due to activity level and installed machinery as well .e.g. two textile units which in nature of industry may be identical but may have different requirements for electricity basing upon number of machines, their power and activity level. Similarly a furnace industrial unit and a sugar producing industrial units will also have different requirements, depending upon the different nature, activity level and installed capacity / requirements of the machines. According to consumption requirements in Pakistan Industrial consumers have been divided in to four main categories, known as B1, B2, B3 and B4 consumers. For almost all types of industry power supply is life line , without electricity the wheel of the industry can not be kept into motion. In Pakistan PEPCO( comprising 10 power distribution companies) / KESC have the monopoly over power distribution in their respective areas of responsibility , so all of the consumers are totally dependant upon these power distribution companies for purchase of electricity. The substitutes/ alternative available in the shape of self generation is an expensive solution , which is even not suitable in the long run , due to heavy maintenance cost , frequently increasing fuel prices and no subsidy otherwise granted by the government. Presently Pakistans Industry is facing the worst power shortage in the industry , which has resulted into:a. Decreased productivity . b. Increase in cost of production due to switching over on self generation , during hours of load shedding. c. Marked reduction in industrial investment by the business community. d. Trade deficit, due to more dependence on imports as productivity in domestic industry has been reduced. e. Overall economic downfall of the economy.

f. Decrease in exports volume of the country. g. Increased Unemployment, due to intensive shut downs . Because of these adverse effects of power shut down on industry and economy of the country, following change in Industrial consumers behavior has been identified as a result of intensive interviews , and consulting secondary data already :a. Consumers (industrialists) are highly frustrated over this situation, as they have no alternative choice for switching over to some other supplier of electricity and substitute in the shape of self generation is not only an expensive choice but also maintenance heavy as well. b. As Consumers are facing reduced productivity, so are facing acute financial crunch as well and have resorted to default their liabilities against power supplying companies and other institutions. c. Due to extensive shut downs as industries are facing financial crunch so some industrial consumers resort to electricity theft , so that their liabilities for power consumption remain minimum , within affordable limits. d. In frustration many of the consumers have already shifted to Bangladesh and many more are planning to shift their industries to Iran , Bangladesh China and UAE , where uninterrupted power will be made available to them. e. Industrialists are seeking to get permission for mass scale production of electricity to meet the industrial needs of certain industrial areas (Sialkot Chamber of Commerce and industries). Commercial Consumers Commercial consumers of electricity in Pakistan include traders, vendors and small business owners, and other commercial venues e.g. hotels, marriage halls, cinema houses etc; who utilize electricity at their work place for either their use or for the convenience of other consumers visiting their trade centers, markets or business venues. Though in classic sense power distribution companies are also the commercial consumers of electricity (as they purchase in bulk from power

generation companies and then supply it to end users), however for keeping scope of the study confined up to end users only, we will not regard power distribution companies as commercial consumers here. Recent power shortage in the country has affected this segment of consumers as well adversely. Following are the few effects of power shortage on commercial consumers of electricity: a. Because of power shortage government has laid down strict timings for closing down the markets at night. b. During summer once it becomes almost impossible ( due to scorching heat) to shop in day hours , shoppers also prefer to go at night , but due to restrictions imposed , shop keepers and buyers both face lot of problem and in turn curse the government for its mismanagement. c. Marriage ceremonies and other celebrations have to be finished well in time, due to which business of such commercial venues is also affected adversely. d. Due to disconnecting Power supply of commercial sign posts, the marketing promotional activities are also affected. e. Certain commercial activities heavily depend upon power supply e.g. dry cleaning, printing press, motor workshops , Gold smiths, Carpenter workshops etc ; such businesses have to bear the maximum disadvantage. Now let us see that how this power shortage affects consumers behavior. Consumers behavior can be summarized as under:a. Consumers, who can afford the additional cost of alternative source of electricity go for such solutions as , installation of gasoline/ diesel generator , Solar cells or UPS. b. Despite the fact that power tariffs are already quite high for the commercial consumers in Pakistan , yet consumers are willing to pay even more increased rates provided that they are assured of uninterrupted supply.

c. However long durations of power shut downs have made the commercial consumers frustrated. Effects of this frustration in their general attitude( particularly of small business owners and shop owners of consumers products, where turnover of customers require continuous service and have limited resources , due to which cannot adopt alternative source of power supply ) towards customers can be noticed significantly. d. To balance the extra financial burden of alternative power source , some of the commercial consumers tend to spread over this cost over their services or products, thus burdening end users. e. To compensate their financial burden of alternative power source some of the commercial consumers resort to illegal methods of power theft. Agricultural Consumers Pakistans 67 % of the population lives in villages and is mostly dependent upon agriculture related businesses. Though, in our agriculture sector dependence on power sources is not that high as in the developed countries, yet a quite reasonable portion of agricultural activities depends upon availability of electricity. In our agricultural sector electricity is mostly utilized for energizing tube well motors to irrigate the farming lands and crops. With more land coming under cultivation and reduction of irrigation water , this dependence is increasing day by day on electricity and other sources of power generation. Despite the fact that electricity tariffs in Pakistan are quite high for agricultural consumers as compared to the other competitive countries of the region, yet these are much affordable as compared to the prices of diesel operated tube wells and their operating expenses and the onetime cost of Solar tube wells , and their maintenance costs. Due to shortage of electricity in the country , besides Industrial consumers the worst affected segment of electricity consumers is the agricultural consumer. As Urban and industrial consumers are more organized and can raise their voices against long shut downs more effectively than farmers and agricultural consumers

, so power distribution companies have started victimizing these simple consumers in a way that in rural areas no schedule for power shut downs is observed and out of 24 hours approximately from 8 hours to 20 hours of load shedding is being forced upon. Moreover to cover their line losses (technical or due to corrupt practices of WAPDA employees) , heavy electricity bills with self generated detection bills are also being served to the agricultural consumers. In this situation following changes in agricultural consumers have been seen :a. Those consumers, who can afford the extra cost of running tube wells on Diesel or Solar Cells, have started shifting their dependence from WAPDA to these alternatives. b. Due to illegal corrupt practices of WAPDA employees, whereby consumers are being served with unjustified detection bills, many have started thinking to become part of this corrupt mafia , so that they can safeguard their true interest. c. Despite non availability of electricity for major portion of the day yet huge electricity bills being received have forced many Small farmers to default payments, because of which their connections are disconnected and in some of the cases these small farmers have started purchasing water from other tube well owners on reasonable prices. d. Because of non availability of electricity and otherwise reduction in natural irrigation water, during 2011 a marked reduction in the cultivation of rice was observed , which requires huge water for cultivation. Domestic Consumers Urban consumers:- Maximum consumption of electricity in Pakistan is by domestic consumers. Though urban population constitutes only 37% of Pakistans population, yet maximum usage of electricity is carried out by this segment of electricity consumers. Due to power shortage following behavior has been observed in the urban domestic consumers of electricity:a. As Extreme weather conditions exist in most of the Pakistan, and very limited options are available with the public to keep their houses warm

or cool , so their maximum dependence is on electricity. Non availability of electricity has affected individuals health and behavior adversely. Despite the fact that people are made to pay heavy electricity bills , yet non assurance of continuous power supply has frustrated the nation and their tolerance level has reduced. b. In modern living styles , life has become too much dependant on electricity , now households starting from kitchen, laundry , dusting, personnel hygiene and day to day housekeeping in every field are dependent upon electricity operated machines and gadgets. Due to non availability of electricity their daily life routine and schedules have also been affected adversely, whose effects can be seen in the shape of frustration, lower tolerance level , restlessness and deteriorating health conditions. c. Due to more information, marketing techniques of the producers of alternative power source generating products, consciousness of social status and dependence on electricity, large number of people are purchasing UPS and generators. d. In the quest of social status ,desire for luxurious life, and much more dependence on electricity people are even stepping ahead of their purchasing power and are willing to purchase alternative power generating gadgets ( may it ruin their financial situation). Rural Domestic Consumers:- Though now a days electricity network has been spread over to almost all of the villages of Punjab , Sind , KPK and Balochistan, yet there are quite a number of villages which are still without electricity . The rural areas where till now electricity has not reached ,they may have a desire for electricity but still their lives have not become dependent upon it , thus do not consider it as a necessity of life . Even the residents of those villages which have electricity facility but are located deep in the country side , do not much depend on electricity as they have the alternative option for heating (wood fire etc) and Cooling ( vast shady fields). However, life style in villages with more literacy level and developed infrastructure of communication is similar to those of urban areas and has almost similar behavior.

Consumers Behavior In OOS Situation of Natural Gas Natural Gas Natural gas is one of the cheapest sources of power supply world over. Indigenous natural gas is the largest source of energy supply in Pakistan contributing 27.7 million TOEs (45.4%) in 2009/10. Consumption of indigenous natural gas has grown rapidly in all sectors of the economy (residential, commercial, industrial, transport and power) over the past 15 years, driven by growing availability of gas and a low, government-controlled gas price as compared with alternate fuel prices. As a result, Pakistan has developed a vast natural gas transmission and distribution network across the country. However Pakistans indigenous natural gas reserves are declining and a low gas price has become a significant disincentive in attracting new gas supplies, either through increased domestic exploration activities or via imports of liquefied natural gas (LNG) or regional gas pipeline imports. If current gas policies persist, Pakistans natural gas supply is expected to decline from 4 billion cubic feet per day (bcfd) in 2010/11 to less than 1 bcfd by 2025/26. This will lead to a growing gas/energy shortfall reaching 8 bcfd (over 50 million TOEs) by 2025/26 and will depress Pakistans average GDP growth rate over the next 15 years. To overcome on the gas shortage in the country government has started to enforce gas load shedding for all types of consumers including Industrial, Domestic and commercial. Consumers behavior in the wake of this forced gas load shedding can be summarized as :a. Domestic Consumers:- To understand the behavior of domestic consumers in out of stock situation of the natural gas , first we will have to identify the uses of natural gas by domestic consumers. Domestic consumers largely utilize natural gas for cooking or heating purposes. As compared to other sources of fuel it is the cheapest source available to consumers and causes minimum pollution , thus there are almost negligible health hazards associated with its usage. Being cheaper source and ease of use it is the foremost priority of those consumers where it is available, and even at places where its supply has not been made people prefer to use LPG instead of fire wood or Kerosene oil , which are not only costlier than gas but injurious to health as well. In case of gas shortage people try to adjust their domestic cooking

activities according to the schedules of its availability. Housekeeping Ladies make their schedules such that meal for two/ three times is prepared at a time once gas is available. In some parts of the major cities like Lahore, Faisalabad and Sialkot the worst situation of gas shortage was experienced during 2011, where gas had become almost non available throughout the winter season. Consumers of such areas had the most serious problem of meeting their fuel requirements as , alternative / substitute (wood, oil or coal ) were either too expensive or had many hazards associated with them. To get their gas supply restored the citizens of these areas including ladies had resorted to agitation, which had ultimately resulted into violence at many places. However those consumers, who could afford LPG, had adopted it as a substitute for cooking and Solar geyser as substitute of gas geyser. b. Commercial Consumers: - Commercial consumers of natural gas included hotels, restaurants , and CNG stations and gas operated commercial vehicles. Hotels and restaurants start using LPG as substitute for cooking and Solar geysers for hot water supply to end users. As LPG is expensive as compared to natural gas , so the extra burden is to be either borne by the service providers or is spread over to the end users. CNG station owners are the worst effected sub segment of commercial users , as it costs approximately Rs 20 to Rs 30 million in installing a CNG station these days in Pakistan , and for almost half of the weak gas supply to these commercial consumers remain disconnected , because of which it becomes very difficult for them to recover fixed charges as well as even operating expenses in some of the cases. The investors of CNG stations are in high state of frustration and many are planning to sell off their license. Some start recovering their losses through illegal practices thus shifting financial burden to end users ( adding impurities and manipulating measurement scales). c. Industrial Consumers:- Like commercial consumers , industrial consumers are also facing the acute shortage problem , which has affected their business activities , the worst hit industrial segments include Furnaces, Steel rerolling mills , Sizing factories , chemical mills and fertilizer industries. Because of gas shortage in Punjab almost 4 days a week industry remains shut down and toll is to be borne by the poor employees , who are being laid off due to no work load. Production of

many industries has also declined significantly , due to which GDP has also declined and economy is facing critical problem. Due to decreased production many industries have failed to fulfill the requirement of domestic as well as foreign consumers/ markets, which has not only resulted into decline in exports , but increase in local prices as well. Many industrialists have already winded up their business from Pakistan and shifted to other countries and many more are planning to do so. Due to this shortfall and remaining industry closed down industrialists are defaulting their liabilities one after the other, because of which the financial institutions are also facing the problems of recovering their capital and pursuing increasing liquidation cases.