ASSIGNMENT CONSUMER BEHAVIOR

Submitted to Ms. Prabhjot Kaur

Submitted by Jotsaroop Singh

CULTURE ROLE

This article tries to study the customers attitude towards celebrity endorsements in emerging country like India. Since 1980s when television became a household item in India, brands have been using celebrities to promote their products. In the recent years this trend of using celebrities to endorse the brand has become even more prominent. But not all celebrity endorsements have been successful in the country. This means that even though people in India follow celebrities passionately, celebrity endorsements in all situations do not produce an effective response. One of the main advantages of using celebrity for endorsement of brands is that celebrities have their own popular image which helps in creating or changing the image of the brand. It is important for the companies to select celebrities whose public persona match with the companys products and their target customers. This phenomenon is known as congruence of celebrities and customers. Many researchers have given theories to explain the celebrity endorsement process. These include the Source Credibility Model, the Source Attractiveness Model, the Product Match-up Hypothesis, and the Meanings Transfer Model. The Source Credibility Model proposes that the effectiveness of a message depends on perceived level of expertise and trustworthiness in an endorser. On the other hand, in the Source Attractiveness Model, it is contended that the effectiveness of a message depends on similarity, familiarity and liking for an endorser. The product Matchup hypothesis states that the effect of the celebrity endorsement depends upon the perceived fit between brand and celebrity image. Previous research in marketing and consumer behavior has found culture to be an important determinant of consumer behavior. The dimensions of culture were proposed by Hofstedein 1980 and since then researchers have confirmed them in various cultures around the world and have used them to analyzemany marketing issues. This papercontends that congruence between celebrity and consumer in celebrity endorsement can be explained by dimensions of culture and this congruence explains some of the phenomenon related with celebrityendorsement in Indian context. Culture has been defined as some complex force which influences people in the society and causes them to act in a specific way. It also helps to distinguish people of one society from another society. Some of the key elements of culture are language, artifacts, beliefs and values.The three frameworks proposed by Hofstede, Trompenaars, and Schwartz shared the similar conceptual view of culture in that they consider each culture, i.e. country to have a shared set of core values and norms guiding their members behavior. However, among the numerous studies, Hofstede work to identify value systems across different cultures has been most well accepted and most widely cited. The typology of cultural dimensions proposed by Hofstede is
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used for this study since it has been extensively used in marketing and advertising literature to study cross-national differences. Most of the studies on celebrity endorsement process have been done in the U.S.A. This study uses India and U.S.A. to study the celebrity endorsement process in India as these countries differ from each other culturally. Hofstede reported differences between the Indian and American cultures on three of these dimensions: power distance, individualism-collectivism, and long-term versus short-term orientation.Power distance explains the way a society handles inequality among its members.A high power distance ranking indicates inequalities of power and wealthwhile a low power distance ranking indicates that society de-emphasizes the differences between citizen power and wealth.India has a score of 77 on Power Distance Index against the United States score of 40. Indias score indicates a high level of inequality of power within the society whereas US score is indicative of greater social equality. Individualism and collectivism describe the relationship between the individual and the collectivity that prevails in a given society.A high score on Individualism Index indicates that individuality and individual rights are emphasized within the community. Alternatively, a low score on Individualism Index signifies a nation of collectivist nature with close ties between individuals and close family members. The United States has score of 91 on Individualism Index, suggesting a society with high individualisticattitudes. Indias score on Individualism Index is 48, indicating a society with high collective orientation.Long-term orientation specify those cultures which place more importance on values associated with future orientation while shortterm orientation cultures place more importance on values associated with past and present orientations. India focuses more on long term orientation whereas U.S.A. focuses more on short term. High power distance means that people in India take successful artists and athletes as having referent power and identify themselves with them in various ways like idolizing them, revering them, and imitating them and their life-styles. Because of high power distance, celebrities can endorse multiple brands effectively. Because of high collectivism in India, the use of regional celebrities is effective to sell products in a specific location. When endorsing a brand which is in crisis, sing a celebrity is more effective in along term orientation culture like India. In case of a celebrity not performing, its impact on the brand that it endorses is lower in countries with high power distance and long term orientations. One has to be careful while using Hofstedes dimensions of culture as these were given 40 years ago and a lot has changed since then. One also has to consider the fact that environmental factors such as political, legal, and economic systems affect the value systems of population and will have to be considered when values are considered.

THE INDIAN CONSUMER MARKET

Indian consumers buying power has increased significantly in the last ten years. The opening up of new markets like urban women or rural population has also made it difficult for the companies to create brand loyalty. With the increase in buying power of consumers, consumption has increased manifold. Urban markets are driven by status, then quality and lastly price. But rural markets are primarily driven by prices. Three major segments have emerged in the Indian markets. These are the kids, the youth and the urban women. The kids not only influence the buying of products like toys and confectionery but also other products. Kids have become more influential in purchase decisions taken by parents. This is because the relationship between children and parents has changed over the time, with parents becoming more indulged in the lives of their children. The youth include people below the age of 25 years. The youth of India is both tech savvy and cultured. They are even patriotic in the modern sense. The urban women on the other hand want to break away from traditional shackles and play a more prominent role in decision making. The rural population poses a unique challenge to the companies. It has shown the highest growth in terms of demand but the rural population is still mostly uneducated. This has made it difficult for companies to communicate and promote their products to the rural people. India has always been a diverse market, with different consumer segments exhibiting varied buying behavior. Over the times the Indian consumer has become more risk taking in terms of credit. Hence we have seen a huge increase in the sales of credit cards. Education has always been given more preference in India than healthcare. This is contrary to developed world where health is given more importance. Even in rural areas education is taking a precedence when it comes to consumer spending. Another area where consumer spending ahs increased is communication which includes mobile phones, computers, internet etc. There is a great deal of optimism surrounding the Indian consumer market. With double-digit growth rates, new consumer segments and an ever increasing range of products and services, the sector seems to have it all. But consumer marketers accept that the industry is faced with a talent crunch and if companies fail to tackle this issue in the present, there will be a huge gap in effective leadership in the future. Companies need to create internal processes and structures that encourage an entrepreneurial spirit, while giving individuals the time and space to think beyond their immediate action areas. One issue that worries the modern market is the organizational structure of the companies. Instead of promoting development it is impeding progress. One such issue is the move from a hierarchi-cal to a matrix organisation, which has reduced the time available to senior management to sit back and reflect on the larger picture of growth.
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A common classification that is used by marketers to describe the Indian population is the SocioEconomic Classification (SEC).SEC is the classification of Indian consumers on the basis of two parameters: Occupation and education of the chief wage earner (head) of the household.According to SEC, urban Indian households are classified on the basis of the two parameters education and occupation into SEC A1, A2, B1, B2, C, D, E1, E2.The SEC classification helps the marketers to identify segments that have a high consumption potential and is also used by media planners to decide the media which gives the client maximum effectiveness.The model is based on the assumption that higher education leads to higher income thus higher consuming potential. This may not be true in all cases. A new classification has emerged known as New Consumer Classification System (NCCS) which calculates a Household Potential Index (HPI), which takes into account parameters like ownership and consumption of media services and products, along with other demographics.

NORTH AND SOUTH INDIA

With globalization the world has become borderless, with countries opening their markets for global companies. International marketing is all about crossing borders to new markets, extending the scope of a product of brands market share. Consumers across markets accept products on different terms based on their cultural preferences and background. Therefore, the understanding and acknowledgement of these different cultural preferences have proved relevant.Countries often have regional differences that must berecognized when introducing or planning a marketing strategy for a product. With a growing economy, generating new jobs and immense opportunities for the Indian people, the Indian market is opening up for the potential for brands and products from all over the world to be introduced on this market.The cultural diversity of India presents a challenge for the marketer trying to focus his marketing strategy and consideration should be made on how to approach the market. India is one country, but with many different groups of consumers. Two groups being the regions North and South.North India has more of the Indian population as the geographic area is larger and encompasses more states than the South. While comparing age, north India has larger share of younger population. In terms of income south India has more white collared jobs thus a better standard of living. In case of education also south India does better than north India. South India also has a better sex ratio although both north and south have a sex ratio less than 1000. As North India has larger percentage of rural and illiterate people compared to the South, it must be expected that consumers read advertising differently in the two regions.North India tends to have a more traditional household compared to South. This tells something about the decisionmaking in household consumption. North India has larger family on an average compared to South and also a lower sex ratio which indicates the dominance of males in decision making. It has been argued by experts that culture has a direct impact on buying behavior of people. Along with culture, another dimension that influences buying behavior is the identity. Hofstede states that a culture consists of different layers.The outer layers are symbols, heroes, and rituals. The inner layer represents the values set by the national culture. Hofstede has applied certain dimensions in the measurement of the national cultures. These include- Uncertainty avoidance (High vs. Low), Power distance (High vs. Low), Individuality vs. Collectivism, Masculinity vs. Femininity and Long-term orientation vs. Short-term orientation. Power distance shows that in India there isacceptance of high level of inequality of power and wealth in the society. India is more of a collectivist nation with people living in joint families. Although this tradition is slowly changing especially in urban India. India also rank high in masculinity, thus showing that in India societies or families are male dominated.

Indian consumers are unified by Bollywood movies which has overcome the cultural differences between North and South India. North India has mainly hindi speaking population whereas south India has diversity in language. Both physical appearance and dress style separates Northern and Southern women and men.Although the young, middle class Indian seems to take an approach towards a more western dress style, and hence, a more homogenous dress style. Heroes in India come from different background like politics, bollywood, cricket and lately entrepreneurship. In India overtime the implementation of norms, rituals and traditions from different cultures and religions has taken place. Hence, the Indian consumer will be open to new products.Indians can be brand loyal but are not reluctant to try new products. Brands are seeing a growth in sales within several different product categories.Celebrity endorsement is very common in India because of high power distance. Status is important in India which leads to materialism and thus higher sales of luxury products. Entering into a new market or nation is all about marketing. When entering a new nation a company can use standard product and marketing strategies or adapt to the culture of new country. Although standardization can lead to initial profits, in the long run adaptation is the more successful strategy. The most important difference between North and South India is in the role of the female. South India experiences a higher level of educated, working females, who become more independent and influential in their purchasing decision power. Another major difference is that North Indian family households tend to be more traditional than South Indian. Southern families tend to become more nuclear; the existence of extended families is larger in North India. Along with differences North and South India also have a lot of similarities like high level of young population, common heroes like bollywood stars and cricketers. All these differences and similarities have to be kept in mind by companies trying to enter India.

RISE OF INDIAN CONSUMER (MGI)

Indian consumer market has been growing at a very fast rate since 1990. This is because of a number of reasons which include poverty alleviation among others. Poverty has been reducing in India at a steady rate. With development and urbanization, the average income of semi-urban and rural people have increased thus increasing their spending power. Discretionary spending has increased compared to basic spending.But there are question marks over the growth story of India, whether it will be able to sustain growth rate over the coming years. Indias service sector has shown a significant growth rate. But to sustain growth, Indian service sector will have to significantly improve productivity and its share of employment. Indias households can be divided into five economic groups based on annual disposable income. Deprived group include families less than 90,000 Rs annual income. They focus mostly on necessities. Aspirers having annual income between 90,000 and 2,00,000 almost spend half their income on basic necessities. Seekers having annual income between 2,00,000 and 5,00,000 whereas strivers have income between 5,00,000 and 10,00,000. Global Indians having annual income over 10,00,000 have global tastes and a high standard of living. With the deprived economic group decreasing rapidly, Indias middleclass is rising significantly. Growth doesnt affect everyone equally and hence the gap betweenthe rich and the poor has been increasing steadily. Indias national saving rate has been very high for the past two decades and has even surpassed Japans saving rate. There is a significant difference in the income growth between rural and urban areas because of difference in education level, difference in types of jobs available and other demographic factors. Accessibility is one of the major problems for marketing in rural India and with ever increasing urbanization, this problem is slowly declining. The urban middle class is expected to experience unprecedented growth with people leaving deprived and aspirers economic groups to move to seekers and strivers. Major cities are expected to grow at a rapid pace and niche cities are also expected to grow. Rural poverty is expected to decline significantly by 2025. Current Indian government has pledged to reduce rural poverty leading to an overall development of the country. Partnership between agribusinesses and rural villagers, shifts further down the food processing value chain and continued shift towards higher value added farm activities are certain trends that point to the development of rural population. The emergence of new population into the global market provides the global companies with unique opportunities. For companies to attain customers in India there are two strategies, first to provide the standard product at availing global prices and the second is to cut down the price which will decrease the profit per product but offers large volume of sales. But over the time multi nationals will have to adapt to the Indian culture and provide them with products and

services which satisfy their needs. Innovation, adaptation and a deeper understanding of Indian consumers will help the global companies to compete in India. Certain issues which impede the expansion of global companies into Indian economy are lack of investment in education and infrastructure, poor discipline in fiscal matters, poor macroeconomic management etc. Food industry has increased at a rapid rate but to sustain growth the food industry require dramatically improved infrastructure and streamlined processes across the supply chain. Expansion of transport services is linked directly to economic growth of the country. One of the subcategory of transport industry is the transport goods including two wheelers and four wheelers. The automotive sector has seen a significant growth in recent times.