CHAPTER-3

THEORETICAL FRAMEWORK

SEGMENTATION, CONSUMER ‘BUY’OLOGY, WOMEN CONSUMERS IN

INDIA, INDIAN FMCG SECTOR, BEAUTY MARKET, RETAILING

3.1 INTRODUCTION

Segmentation has been endorsed as a powerful marketing strategy that is

enthusiastically adopted by marketers, academicians and researchers. Today clear
understanding of the customers and their buying behavior is the core of marketing.
Hence it becomes essential to know and respond to the changing needs of these
customers and their shopping behaviour. Women consumers are the growing segment
at present. The women consumers are smart in their choice and buying behavior. They
expect shopping to be more a pleasant experience than a simple purchase.
Organizations are aware of this fact and are increasing their exposure to women
related products. One such product is cosmetics. Indian women are more conscious of
their appearance and are aware of the various brands of products. Besides cosmetics is
also looked up from health, fitness and safety point of view. A boom in the Indian
fashion market and change in the lifestyle have contributed to the rise in demand for
products. This sector is growing in the upward trend since men too have started
competing with women due to the growing consciousness in their aesthetics sense.
Cosmetics are offered in retail outlets since they are part of FMCG and this changing
trend in the lifestyle has posed a challenge to the marketers.

Hence segmentation of FMCG, consumer buyology, women consumers, FMCG

sector and beauty market have been talked about in this chapter

3.2 SEMENTATION- TARGETTING - POSITIONING

Market segmentation is subdividing and disaggregating a market into distinct subsets

of customers, where any subset may conceivably be selected as a market target to be
reached with a distinct marketing mix. It is a crucial tool with the purpose of

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 (1)
identifying and delineating the likeminded group of buyers . It helps to find the
potential homogenous group of customers or whose demand for a uniquely configured
product or a service that supports a sustainable market opportunity, which ultimately
satisfies their needs and wants with the right product or service.

The rationale for segmenting is that customers within segments typically have more in
common with each other than with customers in the other remaining segments. This
commonality helps focus marketing efforts toward each segment. Basically,
customers who share similar characteristics on key defining attributes are presumed to
have similar needs, and this similarity allows development of specialized products and
2).
messages that uniquely addresses those needs.( Hence it has gained momentum and
importance with the benefits of fully understanding the market, accurately predicting
consumer behaviour and increased exploitation of opportunities in the new and
existing markets. Segmenting customers and prospects into groups with shared
characteristics is a frequently used method of limiting risk. In effect, this approach
allows a company to move toward a "one product for one customer" business
3)
model. (

Market segmentation is concerned with individual or group differences in response to

specific market variables such as preferences, interest, opinion, lifestyles, media
4
habits, and so on . The strategic presumption is that if these response differences
exist, they can be identified, and are reasonably stable over time, and if the segments
can be efficiently reached, the company may increase its market share beyond that
obtained by assuming market homogeneity. There are a number of approaches and
variables to segment the market.

3.2.1 VARIABLES USED

The variables that are very often used for segmenting (4) in marketing research studies
are:

(a) Geographic variables – Region, country size, density of area, and climate

(b) Demographic variables – age, gender, marital status, family size,

education, occupation, income ,religion, nationality and language

48
 (c) Psychographic variables – personality, lifestyle, value and attitude
(d) Behavioural variables – benefit sought, product usage rate, brand loyalty
and buying centre

3.2.2 TYPES OF SEGMENTATION (5)

Customers’ requirements are various and differ in their preference. It is very difficult
to please all the customers with one product; but can serve a group with the same
product. Hence, the need for segmentation. Segmentation can be formed with various
bases. Given below are the various types of segmentation-

(1) Geographic Segmentation: This is the most common form of market

segmentation, wherein companies divide the market based on geographic area
or location. People living in the same location will have similar needs, but will
differ from those of adjacent areas. This type of segmentation is useful for
marketers to identify the geographically based differences for a product or
service. It is easily reachable by various means of communication.

(2) Demographic segmentation: The market is divided based on population

characteristics such as age, gender, education, family, occupation, income and
so on. This type of segmentation is the most cost-effective and accessible way
of identifying the target group. It is easier to measure than other variables. It
gives meaning to psychographic and socio-cultural research studies.
Demographic segmentation always plays some role in a segmentation strategy.

(3) Psychographic segmentation: The market is divided based on personality,

buying motives, interests, opinion, attitudes and values of the consumer. Thus
it helps in identifying promising consumer segment and therefore highly
valuable to the marketers.

(4) Benefit segmentation: This type of segmentation is based on the benefits

expected by the consumers and helps marketers to identify the most important
benefits sought by the customers. It helps in identifying consumer preferences,
indicates their lifestyle and hence highly valuable for the marketers in
providing opportunities especially with regard to new product and services.

49
 (5) Use-related segmentation: This type of segmentation categorizes customers
based on their usage level of the products, degree of awareness and brand
loyalty. They are the situational factors that help marketers in retention of their
customers.

(6) Hybrid segmentation: This segmentation is formed by a combination of

several segmentation variables that help marketers in arriving at the right
consumer segment. Psychographic and demographic profiles when combined
together work best in providing powerful information about the target group. It
is based on the idea that people living close to one another will have similar
taste, requirements, preferences, consumption pattern and lifestyle. Thus it
helps the marketers in framing right strategies for sales promotion, selection of
retail outlet and appropriate merchandise mixes and ultimately to retain the
key customers.

3.3. CONSUMER ‘BUY’OLOGY

Customers are the lifeblood of any organization and are behind the success of various
products and brands. They are more knowledgeable and sophisticated, thereby
becoming very powerful. Hence managing relationship with these customers is vital
for organization.

Consumer takes only 2.5 seconds for making a purchase decision and makes
favourable decision for the competitors’ product in just 4 seconds while choosing
from the store shell. It is a Revolution! Thus ‘buy’ology includes the subconscious
thought, feeling, desires that drive purchase decisions. It is a fascinating, captivating
and shocking journey in the minds of present day customer.(6)

Gaining better understanding of how consumers make decisions is of paramount

importance and value, both theoretically and practically, to all those who are
involved. Hence segmentation of FMCG, consumer buyology and behaviour, impact
of segmentation on consumer behaviour, segmentation and consumer buying process
of cosmetic buyers in India are discussed in this chapter.

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3.3.1 STRUCTURING OF CONSUMER ‘BUY’OLOGY AND BEHAVIOUR

Consumer behaviour as a body of knowledge emphasizes on the study of both

physical activities and decision making processes that occur in the process of search,
evaluation, acquiring, use and disposal of products (Figure 3.1). Consumer behaviour
encompasses vast areas of human activities which have direct interface with
technology. Borrowing heavily from diverse areas such as psychology, sociology,
economics and anthropology the subject has vast sweep and come in handy to adapt
technology to everyday needs of society. Backed by abundant wealth of information
on areas such as consumers’ tastes, shopping habits, store patronage and life style, it
has become possible for many marketing research firms to come up with reliably
accurate work on many aspects of marketing including product demand forecast,
perception of brand image and brand equity position.

Consumer behaviour has been influencing marketing strategies such as desire for and
access to information, desire for customized products to fit customer needs .and a
greater value orientation to a larger extent since mid 1990s.Consumer behaviour study
has many advantages. It helps in formulating right marketing strategy, segmentation
of market, development of new products, product orientation, reorientation of
packaging, formulation of advertisement and sales promotion policies.

3.3.2 FACTORS INFLUENCING CONSUMER BEHAVIOUR

Consumer behaviour reflects the totality of a consumers’ decision and the dynamic
(7)
process which is influenced by multiple factors . The figure given below shows the
various factors that influence consumer buying behaviour.

(a) Cultural factors: They are a set of socially acquired values that a person learns
from his family and other key institutions, which is passed on from one
generation to the next. Cultural trends reflect the social values of the
population and have implications on market segmentation, product
development and advertising. In addition to this, sub-culture is part of culture
which includes religion, racial groups and nationalities.

51
(b) Social factors: This is composed of individuals sharing similar values,
interests and behavior. They are homogenous and differentiated by socio-
economic status. The social class is identified on the basis of variables such as
occupation, income, education and wealth. These influence the buyer’s
behavior to a greater extent.
Social class consists of two major sub- factors namely reference groups and
social roles and status. Reference groups influence consumer behavior in three
ways – they disclose new lifestyle and behavior, influence attitudes and self-
concept and create pressures for conformity. The reference group includes
family, friends, colleagues, peers and has normative and informational
influence on customers.

(c) Psychological factors include personal motivation, perception, senses,

attention and attitude of the individual.

(d) Personal factors are age, stages in life cycle, personality and lifestyle

(e) Socio-economic factor: price is an important socio-economic factor which is

perceived differently by consumers based on their income level. It is the basis
for affordability.

(f) Marketing communication such as advertising, sales promotion, public

relations, direct marketing and personal selling act as means to deliver
message to target audiences.

Figure 3.1 clearly indicates the various factors that influence consumer buying
behaviour and decision- making process

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 Figure 3.1
Consumer buying behavior influences and process

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3.4 WOMEN CONSUMERS IN INDIA

Indian consumer market is highly dynamic, vibrant and filled with a lot of challenges
for the organizations catering to this market, resulting in multiplicity of products and
services. The consumer market is growing at the rate of fifteen to twenty percent
annually. The consumer profile is booming with respect to income, habits and
lifestyles, tastes and preferences, interests and opinions which are going to drive our
economy to be the fifth largest consumer market by 2025 8 .

Women occupy a significant position in the society. They are multitasked and have
an important role in the development of family, society and nation. It would not be an
exaggeration if it is said that “without women the world would cease to function”.

Today they have started getting back their deprived right of equality with men. Indian
women have distinguished themselves in various spheres of life as architect,
astronaut, administrator, politician, diplomat, doctor, engineer and so on 9. It is opined
that gender is the most important and powerful determinant of how a person views the
world and the markets and that it is stronger than other demographic factors such as
age and income10. Women consumers are distinct and unique segment for many
products, be it cosmetics, apparel, shoes or two wheelers. Thus, today women in India
are emerging as unchallengeable consumer power.

Indian women perceive beauty not only in terms of anatomy, but also in terms of a fit
body, confident attitude and impressive personality.

3.4.1 CHANGING LIFESTYLES

India has one of the fastest growing economies with a growth rate of 8.3 percent in
2010. Today, it is becoming a large and globally important consumer economy.
Lifestyle changes are observed in Indian consumers mainly due to changes in the
demographic characteristics and the values.

It is the revolution of, by and for women- driven desire for more. Some of the visible
changes in lifestyle are

54
 (1) Changes in the traditional purchasing roles of male and female:

Working women are on the increase. Hence the double income

phenomenon has become very common in urban India. With such a paradigm
shift women take active participation in decision-making process.

(2) Indian family systems have undergone a dramatic change resulting in more
and more nuclear families in the urban centers in the recent past
(3) Women are professionally qualified and female workers are prevalent at all
levels.
(4) Consumers are more inclined towards health and nutrition
(5) Consumers are multitasking and adapting to greater time pressures, growing
self- awareness and more value oriented approach
(6) Impact of communication technology (Internet)
(7) There is acceptance of equality between the genders

This new financially independent and discerning target market is found to be actively
involved in purchase decisions which were once male dominated. About 80 percent of
the family purchase is decided by women. Many marketers have understood women
consumers of today who form a sizeable segment in recent years.. They are trying to
match the women purchase roles with suitable offerings.

3.4.2 ROLE OF WOMEN

Women are intelligent, hard-working, efficient in their work, loving and caring. They
are quality conscious and want the best for their family.

Women are (11)

The centre of household consumption and expenditure

The driving force behind trading up and trading down
Responsible for the real growth of household income and family
Influence and control more than 75 percent of the discretionary spending in
developed markets all over the world
Identify themselves as the principal shoppers in their households

55
 Research carefully the purchases
Have a sharp instinct for value and clarity in their own individual preferences
and purchases
Can or crash the success of a brand within months of its launching

3.4. 3 WOMEN CONSUMERS IN INDIA AND CHENNAI

Shopping plays a vital role in women’s activity list and have a special significance for
women consumers. Women as consumer have unique bargaining skills. Her
involvement in shopping goes unchallenged irrespective of the product proposed to
(12)
purchase. Women enjoy every bit of shopping For women, shopping is
interpersonal, human fashion and for men it is just instrumental. In a nutshell, ‘men
buy and women shop”. (13)

Indian women constantly face the challenge of having too much to do and too little
time for it. They are classified under two categories namely professionals and home-
makers.(14)

Home makers are aspirational, quality conscious, efficient and smart buyers. They
have functional and emotional contact with a particular brand. They survey to obtain
information about attributes, benefits and repercussions of a particular brand or
product before actually purchasing it(14) . They are the key decision- makers for both
(15)
small products and consumer durables. India has the world’s largest number of
professionally qualified and more working women than any other country in the world
(12)
.

Women enjoy every bit of their shopping activity. They have unique bargaining skills
and her involvement and purchase decisions are unchallengeable. Women, as
consumers tend to be more interested in shopping experience on many dimensions.
They do

take the role of a consumer irrespective of educational level and purchase with
care
cast an eagle eye on the price - value of the products
give attention to all the details communicated in the market

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 have sizeable spending power
evaluate and purchase based on three factors of benefit namely technical,
functional and emotional

The percentage of working women in Chennai is 26. Education and employment

opportunities are available in plenty in Chennai. This has led to the increase in
earning and purchasing power of women and as a result they actively participate or
independently influence the purchase decisions of the family.

Chennai is one of the emerging competitive centers and almost all international
brands of products and service are available. The city is transforming and rising to
international standards with regard to various amenities and the city has developed
malls – the one-stop solution for the retail activities. As a result there is a significant
change in the conservative consumers of Chennai, especially in women. Their
decision making styles include brand consciousness, high quality consciousness /
perfectionist, fashion conscious, confused over choice of products, impulsive / brand
indifferent, novelty and variety seeking and recreational shopping.

There is evidence that male and female consumers differ substantially in their buying
(10, 13)
behavior and response to various stimuli from the market . The female
consumers develop smart purchasing tactics, coping strategies and avoid financial
stress as much as possible. In a nutshell, women consumers are now a distinct
segment for many products, especially for cosmetics. Organizations are increasing
their exposure to women related products.

3.5. INDIAN FMCG SECTOR – A RINGSIDE VIEW

Fast moving consumer goods (FMCG) are retail goods that are basic necessities. They
are purchased with least possible effort as they are available everywhere. These
products are generally come for replacement frequently or fully used up over a short
period of time. It is also known as consumer packaged goods (CPG). It covers an
extensive variety of consumable goods like grocery items, perishable items, beauty
and cosmetics, pharmaceutical, paper and plastic products.(15,16)

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The beauty products consists of personal care, oral care, hair care, skin care, personal
wash cosmetics and toiletries, deodorants, perfumes, feminine hygiene, paper
products household care, laundry soaps and synthetic detergents.

3.5.1 FMCG PRODUCTS

FMCG are by nature defined as bulk products, meaning they are produced and
consequently sold in large quantities through wholesalers and retailers. The enormous
sales in this industry combined with relatively low entry barriers in many parts of the
industry results in the stiff competition and often low margins.

The FMCG market has three major segments namely household, personal care and
food and beverages, as shown in figure 3.2

Figure 3.2

Major segments of FMCG market

HOUSEHOLD CARE Fabric wash, Household cleaners

Oral care, hair care, skin care,

FMCG PERSONAL CARE Cosmetics/deodorants, Perfumes,
Feminine hygiene and Paper
products

FOOD and BEVERAGES Health beverages, staples, cereals,

snacks

Source: Source: The Cosmetic sector in India, Italia (2009)

The characteristics of FMCG product are perceived from consumers’ perspective and
marketers’ angle.

From Consumers’ perspective – it is frequent purchase, availability in wide choice

and brand, consumed by everyone irrespective of status, level of income and place of

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stay, once consumed do not exist, utilize marketing mix and advertisement plays a
very important role., low involvement in buying and product with strong brand
loyalty(exception to this).

From Marketers’ angle – it is bulk consumption, quick turnover, relatively low cost,
short life cycle, comes for replacement within a short period, has a well established
distribution network, utilize marketing mix in which advertisement plays a very
important role, highly competitive due to the presence of many players. In a nutshell,
it is goods for all and goods consumed by all.

In this industry, the consumer involvement in purchasing is low; but majority of the
buyers are brand loyal (which is an exception to this rule). Consumer involvement
depends on the degree of relevance of purchases made by them. Hence mostly it is
impulse buying. Consumers can shift to other brands if they are not satisfied with the
product and services. Regular procurement of the products used or those items used
daily are of little perceived risk because of the choice of brand switching.
Involvement is dependent not only on the nature of product, but also on consumer
psychology. In a nut shell, FMCG culture is dynamic, something that is hard to
develop but easy to lose (17).

Table 3.1 shows the market growth rate of Personal Non-durables and Table 3.2
shows segment wise growth rate.

Table 3.1
Market growth rate

2005 Market 2025 Market

Market Growth Compound
Size Size Annual
Category (Billion, Indian
(Billion, Indian (Billion, Indian Growth Rate
Rupees,2000) %
Rupees, 2000) Rupees, 2000)

Personal
products and
1,274 7,424 6,150 9.2
services

Source: The Cosmetic sector in India, Italia (2009) (18)

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 Table 3.2
Segment wise Growth Rate

Sl. No. Category Growth rate

1. Skin care 15%

2. Hair Dyes and Colours 15%

3. Colour Cosmetics 15%

4. Men’s Grooming 12%

5. Deodorants and Perfumes 30%

Source: The Cosmetic sector in India, Italia (2009) (18)

Two challenges face the industry. First, the lion’s share of the market will
be composed of first time buyers (who until now unable to afford packaged goods and
have utilized only home- made solutions).

Second, low cost distribution organized industry today faces high cost to
reach remote rural areas, as well as significant competition from local informal
players who are able to provide cheaper products. The market is all about volume and
companies will need to device lean and efficient distribution system to operate
profitably at the required prices.

3.5.2 FMCG Industry

Fast Moving Consumer Goods (FMCG) sector is a large and important part of almost
every economy in the world. The goods produced by the industry are basically
necessities and the inelastic nature of the goods makes their impact on economies
worldwide significantly.

India’s FMCG sector is the fourth largest sector in the economy. It stands apart from
other industries due to the following facts (19)

(1) FMCG companies are behind the biggest brands in the world
(2) This industry is highly dynamic and constantly evolving

60
 (3) Its firms thrive on employee and customer retention, encourage customer
loyalty
(4) This industry can beat the recession
(5) It satisfies the high expectations of the consumer.

FMCG industry is characterized by a well established distribution network, low

penetration level, low operating cost, lower per capita consumption and intense
competition between the organized and unorganized segments. The total FMCG
market as on 2011 is in excess of Rs. 85,000 crores. The growth rate of the market is
10-11percent for the past five years consecutively.

The FMCG industry consists of both a supplier side that manufactures the goods and a
retail side such as wholesalers, Supermarkets that sell the products. FMCG is widely
distributed and are accessible whenever and wherever the customer wishes to
purchase it.

3.5.3 GROWTH DRIVERS

The Key drivers instrumental for the growth of FMCG sector are

(1) Growing population

(2) Extensive coverage including access to rural areas
(3) Increase in consumption
(a) Increased disposable income
(b) GDP growth
(c) Youth driving the consumption
(d) Multiple earning members in a family
(e) Annual increase in salary – India reports 12 percent plus salary
increase over the past five to six years, which is the highest
globally
(f) Decrease in the tax rate for income- from 27 percent in 2003 to
nine percent in 2011
(4) Up trading
(a) Using premium sophisticated products

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 (b) Increasing income ,women’s participation in workforce, lifestyle
changes
(5) Growth in Organized retail
(a) In urban distribution , organized retail adds to shelf space visibility
(b) FMCG sector extends its rural distribution by over fifty percent
since 2004
(c) Rural distribution thrust through rural development projects like
Shakthi, Choupal Sagar, Aadhar,
(6) Improved distribution network in both urban and rural areas
(7) Awareness of the product/brand driven by media proliferation
(8) Innovation and consumer’s receptiveness towards it
(9) Rapid urbanization
10) Changing lifestyles
11) Growth of young population segment- Indian population comprises of fifty
nine percent of Youngsters below thirty years and this composition would
remain the same in the next decade too. This augurs well for the industry
because these youngsters have the willingness to spend more
12) Investment in technology and Improvement in technical know- how

Looking and feeling good will remain important though it is expected a share-of-
wallet from the apparel category to fall slightly. Pent-up consumer demand for
personal products and services led to a doubling of this category’s share-of- wallet
from 4 percent to 8 percent in 1995 to 2005 with the aggregate market growing at an
annual growth rate of 11.3 percent during this period. Indian consumers’ share of
spending on personal items will match that of consumers in other countries (20).

3.5.4 CHALLENGES AND OPPORTUNITIES

A list of challenges and opportunities prevails in this sector. They are

(1) The changing diverse consumer preferences

(2) Increasing competition
(3) Ability to win rural consumers – about 33 percent of Indian consumer base is
at present in rural markets

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 (4) Rising logistics and procurement costs
(5) High inflation
(6) Removal of import restrictions had resulted in the entry of organizations from
around the world replacing and competing with domestic brands
(7) Fast evolving lifestyle and premium products
(8) Emergence of private labels
(9) Counterfeits and pass-offs
(10) Infrastructural bottlenecks

Purchase routine cannot be fixed in case of FMCG because needs, preferences,

resources and behaviour differ from individual to individual (21).

The entry of vast number of new consumers into the world economies from emerging
markets will represent one of the most important opportunities available to consumer
goods companies over the coming decades. China will be the largest contributor with
over 213 million middle and upper household entering the consumer market over the
next 20 years, but India will follow closely with 123 million.

At present, urban India accounts for 66 percent of total FMCG consumption, while
rural India accounts for the remaining 34 percent. However, rural India accounts for
more than 40 percent consumption in major FMCG categories such as personal care,
fabric care, and hot beverages. In urban areas, home and personal care category,
including skin care, household care and feminine hygiene, will keep growing at
relatively attractive rates.

The companies face two basic strategic choices in serving these FMCG markets. One
option is to offer products and services at prices comparable to those in other major
markets, focus on top- end, which is still relatively small today and wait for that
segment to grow as income rises. The global class in India is already able to afford
internationally priced products. It comprises of 1.2 million households today, and is
expected to grow at a rate of 86 percent to reach almost 2 million households by 2012.

The other option is to drive price-points down and face the consequent pressure on
margins, but tap into the extraordinary volume that these emerging markets offer.
Many Indian companies already compete at such price points, so that the challenges

63
they face will be different. The key battle ground where Indian multinational
companies will meet will be in the fast growing lower - middle class urban seeker
group. This group will begin to expand. These new urban seekers are new consumers
who for the first time will have money to spend for enjoyment. Companies will face
the following challenges - educating the first time consumers about unfamiliar
products and services, creating brand awareness, tailoring service and support with
regard to the particular needs of these new consumers. At the same time however
these new consumers would represent an important opportunity as their patterns,
tastes are not yet established and there are few brand loyalties.

3.6. BEAUTY MARKET - COSMETIC INDUSTRY

Better looks are the expectations of each and everyone irrespective of their status.
Enchanting eyes, soft skin, silky hair, neatly cut and painted nails and so on adds on
to the beauty of the individual, capturing the attention and inspiring. Cosmetics are
the underlying fact that helps to build, maintain and enhance beauty in the human
body. Today, apart from enhancement of beauty, cosmetics are also being looked at
from safety and ethical point of view.

With the crowning of women in the international beauty pageant in the post-
liberalization period (after 1991) cosmetics had gained more importance and the
industry came to the limelight. Since then, the growth of the industry has been on the
upward trend – a rare phenomenon seen even at the time of recession. Thus, the
industry emerged as one of the unique industries holding huge potential for further
growth.(22)

The word cosmetics is derived from the Greek word “Kosmetike Teckne” meaning
“Ornament and dress”. Food and drug Administration has defined Cosmetics as that
which is intended to be applied to the human body for cleansing, beautifying,
promoting attractiveness or altering the appearance without affecting the body’s
structure or functions. It claims to nourish, feed and fortify skin and other organs.

Chambers Encyclopedia defines cosmetics as (a) articles intended to be rubbed,

poured, sprinkled or sprayed on, introduced into or otherwise applied to the human
body or any part thereof for cleaning, beautifying, promoting attractiveness or altering
the appearance and

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(b) articles intended for use as a component of such articles. Now a variety of
cosmetic and toiletries ranging from natural to sophisticated items are available in the
market. The pattern and preference of use of these items vary according to different
segments of gender, age and socio-economic class. (23)

According to Indian cosmetic sector analysis 2009-2012, the Indian cosmetic industry
is expected to witness fast growth rate owing to growing disposable income of the
middle class households, growing consumer awareness and changing lifestyle. (24) The
industry has promising growth prospects for the existing as well as new products due
to the rising concern for beauty by both men and women.

It is usually women who used to pamper themselves with the cosmetic products to
enhance their facial features and skin. Gradually men too have started using
cosmetics. An urban male with strong aesthetic sense spends lot of time on his
appearance and lifestyle, prefers to dress up in a trendy way and act like women with
respect to self care. A large percentage of them have a monthly date with a beauty
salon. They want to look stylish all the times. This has given rise to umpteen numbers
of products and brands. In 1909, hair coloring was added on to the list of facial
cosmetics and skin creams. Today cosmetics are many and are used round the year.

The retailers need to experiment with a format that attracts both men and women
shoppers. Research suggests that beauty consciousness among people in general is
changing. That is human beings wanted to satisfy the need to look and feel good. This
created a boom in the cosmetic and toiletries sector across the world. Literature on the
Indian cosmetic and toiletry industry are scarce.

Some of the major global players are Lakme - (owned by Unilever) and Ponds from
India, Revlon, USA, Oriflamme cosmetics, USA, L’Oreal Group and Avon products
Inc, USA , Color Bar cosmetics, MAC cosmetics (Make-up Art cosmetics),Canada.. (24)

3.6.1 COSMETIC PRODUCTS AND THEIR CLASSIFICATION

Cosmetics are substances used to enhance beauty and appearance of human body.
They are generally mixtures of chemical compounds. The relevant market segments in
the Indian cosmetic product market are Skin and body care products, hair dyes and

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colours, colour cosmetic, oral care, personal wash, deodorants and perfumes, and
men’s grooming products. Herbal cosmetic industry is now driving the growth in the
beauty business in India. (24)

Manufacturers have broadly classified cosmetics into decorative and care cosmetics (25).

Decorative cosmetics consists of color cosmetics and fragrances.

Care cosmetics includes

a) Skin care: skin care creams, lotions, powders, perfumes, moisturizers and so
on.
b) Hair care: hair colors, hair sprays and gels
c) Oral care
d) Colour cosmetics: lip stick, lip gloss, finger and toe nail polish, eye and facial
products
e) Fragrances: deodorants, hand sanitizer

3.6.2 INDIAN COSMETIC INDUSTRY AND ITS CONSUMERS

The Indian cosmetic industry has witnessed a strong growth in a short span in the
recent past. The industry came to limelight in a much bigger way since 1991. The
range of cosmetic and beauty products in India has immensely widened and
witnessing rapid growth. The future looks exceptionally bright. The Indian cosmetic
industry has a plethora of brands both herbal and non-herbal. The reasons behind its
growth are the increasing purchasing power, fashion consciousness, focuses on health
and fitness among women consumers in India.(24) The customers have greater access
and purchase alternatives. (29)

The Indian women view cosmetic products as a self-esteem need and perceive them
not just in terms of beauty, but in terms of impressive personality with a fit body and
confident attitude.(30) Hence they look for more sophisticated mass-market cosmetics.
They have moved beyond using basic toiletries, shampoo and soap brands, like
women all over the world want products to help to take better care of them. Looking
good is not only important for interpersonal relations, it has become imperative

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for success in professional lives too. The opening up of the markets has also ensured
that the market is competitive globally and with competition this category has
blossomed and has a promising growth.

The Indian cosmetic industry is defined as skin care, hair care, color cosmetics,
fragrances and oral care segment which stood at an estimated US$ 2.5 billion in 2008
and is expected to grow at seven percent. In India Lakme and Ponds have traditionally
(28)
a strong hold. Other players include Himalayas, Blossom, Dabur and so on. The
beauty market also consists of Beauty Salons and Cosmetic treatment centers.

Demand for beauty products is growing day by day. Size of Indian cosmetic industry
globally is $274 billion and in India it is $ 4.6 billion. It registered an impressive sales
of INR 288.7 billion in 2010 and INR 264.1 billion in 2011, according to Indian
cosmetic sector analysis (2009-12).(26)

In 2009, cosmetic industry registered a sales of INR 356.6 Billion (US$ 7.1 Billion)
with an impressive growth rate of 7.5 percent approximately, despite global recession. (28)

The Indian cosmetic market which is of a few major Indian players like Lakme and
Ponds (27) has seen a lot of foreign entrants to the market in the last few years. Today
there are many leading cosmetic brands competing in India. Some of the leading
brands that are the first choice of ladies are Lakme, Ponds, Revlon, Oriflame, L’Oreal,
Chambor Maybeline, Avon, MAC(Make-up Art Cosmetics), Color Bar and Street
Wear.

‘Go natural’ is the current trend among consumers. Hence, Herbal cosmetics are now
driving the growth in the beauty business in India. It has a plethora of brands such as
Forest Essentials, Biotique, Himalaya, Emami, Blossom Kochhar, VLCC, Dabur and
Lotus. It is expected to grow at the rate of ten percent annually.

Western India is the largest market for cosmetics in India holding a share of 28
percent. East and North east India are fast growing regions. The per capita spending
on cosmetics in India is as low as Rs.30 as compared to Rs. 1500 in other Asian
countries. (30)

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The Indian market consists of two segments namely Premium segment and Economy
segment. The premium segment is more brands conscious and fewer prices sensitive,
while the economy segment is more prices sensitive and less brand conscious. The
consumers in economy segment adjust their consumption either by reducing
consumption or by changing the brand.(23) Multinationals and few large players
dominate the premium segment and the economy segment consists more of
unorganized players and brands with mass appeal.

Word of mouth, recommendations by family, friends, peers and in-store consultants

have been the major driving force for Indian consumers. Advertising and promotions
as also in-store displays are effective promotional tools. Electronic and print media
are helping to spread awareness about cosmetics and brand availability in India. In
addition to this, the film industry is also fuelling the growth of this sector in India by
projecting the concern for beauty and making the consumers realize the importance of
good looking and appearances.(30) And the factors that influence the final purchase
decision making are quality, price, availability and breadth of merchandising.(31)

Women form more than 75 percent of traffic in cosmetics section. Most of them are
brand loyal and seek value for their money. Men and women have their own shopping
styles and preferences.

3.6.3 GROWTH DRIVERS IN INDIAN COSMETIC MARKET

Indian market is a price conscious/ sensitive market and companies offering cosmetic
and personal care products have been formulating new strategies to suit the
(27)
customers’ preferences and budgets, thereby establishing a niche market for them.
This trend would continue to give rise to market expansion and better market share.

The following are the reasons behind the rise and rapid growth of beauty market all
over India (28)

1) Market size: The market size of Indian cosmetics sector is US$ 1.5 billion and
it is growing at 20 percent annually. Premium brands are gaining sales as the
Indian women are exposed to global scenario. Increasing market size is the

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 direct result of the changing socio-economic status of Indian consumers ,
especially women.(23)

2) Booming middle class due to their rising disposable income and improved
purchasing power has spurred sales. Women are no longer confined to homes.
Today, they are out most of the time, competing with men in all the professions
and on par with men in sharing decision making.

3) Birth of new segment: Initially the beauty products were associated with
women. But today men have also started using them.

4) Marketing Strategies: The cosmetic industry in India is moving towards a

more advanced and specialized products since the consumer awareness has
transformed from functional products to a health conscious advances and
specialized products. Hence organizations have identified and formulated new
strategies to attract them.

Also, different consumer purchasing behaviour due to divergent mindset in

urban, semi urban and rural areas of India has enabled companies to implement
and use different strategies in these segments. This has also led to the
development of innovativeness in these segments such as different pricing
methods, retailing, E-tailing .

5) There has been a rising consciousness on fashion, health and beauty of

consumers which has led to individual’s living style. The change in lifestyles
has been a major supporting factor.

6) Focus on Innovation: The different buying patterns of consumer have made

organization come out with new innovativeness to spur customer attraction and
improve sales. In Urban markets, customer excitement is renewed through
brand extension, exciting product formulation (like herbal-base).

Emergence of salon hair care, fragrance skin care, men’s grooming lay
emphasis on specialized features, differentiation among brands, rising brand
awareness, visibility through various media and enhanced distribution at a

69
 larger level. Economic conditions, optimistic GDP growth rates are getting
translated into higher purchasing power across various segments which are
pushing the manufacturers to produce a wider variety.

7) Demographic shift like fast growing bottom of the pyramid and especially the
youth segment

8) Entrance to rural India

9) Mounting aspirations of consumers on personal hygiene, health and beauty

consciousness exposed due to technological developments and pervasive media

10) Influence of western culture led to increase in demand.

11) Positioning – using various challenges like color cosmetics, good distribution
Network, “being fashionable” lifestyle concept among the ever growing youth
segment, customized beauty solutions and so on.

12) Delivery of customer value: Services and products are increasingly intertwined
and competition is growing steadily. So delivering customer value is not simple
as it used to be. Hence organizations must take steps to increase the benefits
and decrease the sacrifices.(23)

3.6.4 FUTURE OF COSMETIC INDUSTRY IN INDIA

The rising beauty consciousness in both men and women has helped cosmetic
industry to register a remarkable growth in India. The changing trends in shopping
behavior and cosmetics usage is posing a challenge for the marketers, especially the
retailers by competing with other segment of products for space in the shelves of retail
outlets.

According to ASSOCHAM, size of Indian market will rise to $ 1.4 Billion in the next
two to three years with a projected growth rate at a CGAR Of 10 percent. The
increased awakening on beauty consciousness drives the players to heavily invest and
acquire a sizeable market, thereby maintaining a unique potential in further growth. A
large number of organizations, both indigenous and international have extended their

70
 (29)
range of products to different provinces in India . Thus India would possess the
largest cosmetic consumer in the nearest future. It is no wonder that retail industry is a
unique industry with good potential and prospects.

3.7 RETAILING

The adage that Customer is the king is more relevant in today’s scenario since it is
customers who initiate product development, drive the sale and allied retail
operations. Retailing is the final step in supply of products and services meant for
consumption. It breaks the bulk and offers products in small quantities. The word
‘retail’ is derived from the French word ‘retaillier’.

The retailers observe the ever changing expectations of the consumers. They also
keep track of competition, changes in technology, socio-economic climate of the
nation in which they operate, simultaneously. Hence it is a fast changing industry,
calling for new strategies very frequently. No wonder it is a challenging sector too.
Some of the challenges faced by retailers in the recent past in the global scenario are
the emergence of new market in India and China, the empowered consumer,
technology enabled efficiencies and the rising of electronic age.

3.7.1 RETAIL IN INDIA

Retailing is a dynamic industry. Retailing is a major force in our economy. It is one

of the pillars of Indian economy. It accounts for 14-15 percent of our GDP. The
Indian retail market is estimated to be US$ 500 billion. The significance of retail is
apparent from its contribution to the economy in terms of the employment generated
by the industry.

Retailing has a tremendous impact on our economy. The retail industry is the second
largest employer in India. Presently 7 percent of the total labor force is employed in
the r retail sector. It offers a wide range of career opportunities including store
management, merchandising and owning a business.

About 300 new malls, 1,500 supermarkets and 325 departmental stores are likely to
come up in India in the near future, according to market analysts .

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Retail in India is one of the fastest growing sectors on par with FMCG and Cosmetic
sectors. It holds fifth largest position in the world. It controls a significantly higher
portion of trade in India.

India is a country with unity among diversity and hence a unique challenging market
amongst the Asian countries.

The changing trends in cosmetics usage is creating challenge for the retailers by competing
with other segment of products for shelf space in their outlet.

3.7.2 DRIVERS OF RETAIL CHANGE IN INDIA

The drivers of retail change in India are

(a) Socio- Economic factors: India is a nation with large middle class, youth
population who spends a great deal of time and money on their appearance
and lifestyle.
(b) Changing income profiles: Economic growth has fuelled personal disposable
income in India with the middle class as its backbone.
(c) The Age factor: India is an ‘young’ nation with 70 percent of its population
below 40 years and in that more than 47 percent below 20 years. Economically
these active young Indians hold the key to India’s prosperity.
(d) The Changing role of women; Today women take most of the decisions for
their family . Their shopping behavior and purchasing habit is different from
that of men. Also purchasing habit differs from working category to
housewives.
(e) The evolving family structure: The proliferation of nuclear families has
translated into higher spending on retail goods and thereby is in favour of
organized retailing.
(f) The Changing consumption basket: The opportunities available for the youth
segment in terms of employment and spending power has brought about
changes in the aspirations and spending patterns of these consumers.

72
 (g) Increased credit friendliness: The variety credit facilities available in India
for the consumers in terms loans and credit card facilities has radically
changed their mindset and their defining of capital expenditure and revenue
expenditure.
(h) Geographical dispersion of market potential: Coverage in urban markets and
entrance to rural markets is definitely an opportunity for modern trade.

With these multiple drivers for the consumption boom, India has become an attractive
market for the foreign marketers and investors.

3.7.3 RETAIL MARKETING AND ITS IMPORTANCE

Retail marketing is the range of activities the retailer undertakes in order to promote
the awareness and sales of the products and services they deal with.

Customers get access to a broad category of merchandise, variety of products and

services. Retailing helps to create place, time and possession utilities. A retailer’s
service enhances the product’s image. Retailers provide information to the mass
through advertising, displays, signs and sales personnel.

They act as the vital link between the manufacturers and the end users. They create
value by

Providing breadth of assortment of products and services

Breaking bulk, which means offering in products in smaller quantities tailored
to individual consumers and households
Holding inventory
Providing services

3.7.4 FMCG IN RETAIL BUSINESS

FMCG sell quickly and for a lower price. Yet they play a vital role in retail business.
The following are the advantages for FMCG in retail sector.

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 (1) Cumulative profit: FMCG have a low profit margin. But since they are sold in
huge quantities the low profit margin gets accumulated and adds up to a
sizeable value. This forms a significant portion of the retailers’ total profit for
that fiscal period.
(2) Cross merchandising opportunities: Products from different categories close to
one another can be marketed through retail outlets.
(3) Brand appeal: Retailers rely on brand appeal to drive sales. Customers have
pre-existing emotional relationship with those brands known to them already
when they spot it on retailers’ shelves. This would enable to build trust
between the retailer and the customer and it transforms into a sale with no
extra effort.
(4) Diversification: The profit accumulated helps the retailer to offset slow sales
for other products.

Thus retailing is a dynamic sector, bringing in lot of benefits as also challenges to

both marketers and the shopping phenomena.

3.8 CONCLUSION

Consumer behaviour covers a vast area of human activities and has been influencing
marketing strategies for a long time. It is affected by various factors and hence is one
of the most important research topics in marketing. Indian consumers are highly
dynamic and especially, women consumers. They are more conscious of their
appearance and are aware of the various brands of cosmetic products. Also a boom in
the Indian fashion market and change in the lifestyle have contributed to the rise in
demand for these products. Cosmetic industry therefore has a promising future.

There are many approaches and variables to segment a market. Segmenting these
prospects into groups with shared characteristics would benefit the organization in
increasing its market share. Thus segmentation would continue to be the powerful
marketing tool that would best help marketers to know their potential customer and in
satisfying their needs and wants through right products and services.

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References

3.1. SEGMENTATION

1. Caroline Tynan A and Jenifer Drayton, “ Market segmentation” Journal of

Marketing Management, Issue 2, No 3, 1987, Pp 301-335
2. Srabanti Mukherjee. “Consumer behavior”, Cengage learning, 2012, Pp 7-10
3. Kaisa Snellman, “From one segment to a segment of one- The evolution of
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“Market Segmentation Research: Beyond Within and Across group
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3.2. CONSUMER ‘BUY’OLOGY

6. Jay D Lindquist, and Joseph M Sirgy , “Consumer Behavior”, Cengage

Learning India Private limited, New Delhi, 2009.
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3.3. WOMEN CONSUMERS IN INDIA

8. Mc Kinsey report,2007, “ The Bird of Gold: The rise of Indian consumer

market”,
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 12. “Men buy, women shop: the sexes have different priorities when walking
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3.4. Indian FMCG sector

14. http://EZineArticles.com/?expert= Johnny E Smith

15. “Fast Moving consumer Goods”,http://en.wikipedia.org/wiki/ Fast-moving
consumer_goods, 9, May 2013.
16. Sankar Radhakrishnan, January 3,2003, “ What’s special about FMCG
companies ?”
17. “The Cosmetic sector in India - Profile 2009” by Italia, Italian trade
Commission, www.aceglobalonline.com
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McKinsey Global Institute, May 2007

20. Amandeep singh, “Impact of demographical factors on the purchasing

behaviour of the customers’ with special reference to FMCG: An Empirical
study”, March 2011, International Journal of Research in Commerce &
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3.5. Beauty Market - Cosmetic Industry

21. http://www.indianmirror.com/

22. Chaubey D S and Lokendra Yadav, February 2013, “Consumer sensitivity

towards pricing of cosmetic products: An empirical study”, International
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23. http://www.reportlinker.com/p0119505/Indian-Cosmetic-Sector-
Analysis.html, April,2011

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 24. http://en.wikipedia.org/wiki/cosmetics#cosmetic industry

25. http://www.rncos.com/index.htm January, RNCOS, 2013.

26. Ablett, J., et al. “The Bird of Gold: The Rise of India’s Consumer Market”,
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3.6. RETAILING

31. Swapna Pradhan, “Retailing Management”, Tata McGraw Hill education

private limited, New Delhi, 2008.

32. Chetan Bajaj and Nidhi V Srivastava, “Retail Management”, Oxford

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