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Trading Down Behavior Post Recession
Pallavi Priyanka Shambu Nandanan
Swapnil Salvi
Trishna Jobanputra Vikram Baheti
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* Brown, 2010
Trading down is where customers opt for a less luxurious but more affordable substitute rather
than the product or brand they prefer mainly due*.to economic downturn It may also be factored as
few customers reduce the amount of consumption for few products but still continuing to use the.same brand
The consumers started making more mindful choices
and conservative shopping preferences as opposed
.to impulse buying The customers are ready to replace their preferences for a small drop in, .quality and a substantial drop in prices
Trading Down
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* Nielsen 2009
According to the Nielsen survey
One in three global consumer will continue to economize on gas and
electricity One in six will continue to cut down on
take away mealsOne in six global consumer will continue
,to purchase cheaper grocery product spend,less on new clothes cut down on out of
home entertainment and one in seven will.*reduce telephone expenses
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* Weidauer, 2009
Trading Down Behavior - , ,Broad scale trading down across products brands
and retailers will give way to more reasoned and.rational purchases
- , . .,Deal seeking behaviour e g taking advantage of
, , ,sales using coupons comparison shopping will not- .be completely abandoned post recession (Private label brands especially in Fast Moving
)Consumer Goods categories will remain a significant factor due to their high quality at
.*lower prices
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* Nielsen, 2009
Four key trends in the
*new marketA demand for simplicityA call for ethical business governance A desire to economize A tendency to flit from one offering to
.another
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Objectives
To observe the trading down behaviours of customers post economic recovery
Whether customers stick to the recessionary habits
or do they return to their preferred productsHow the purchase decisions are affected during and post recession?
Has private labels gained market share during and post recession and are they going to stay for
long?
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Research Methodology Sample Size : 250 Sampling technique : Simple Random
Sampling Simple Random Sampling
Nominal Scale
Ordinal Scale (4- Point Likert Scale) Interval Scale
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Tools Used Factor Analysis Cross Tab Analysis Chi-Square Significance Test Correlation Coefficient Analysis Percentage Analysis
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demography
82% Female, 18% Male 78.4% families in Services and 21.6% families inBusiness
Ethnicity: 28% North, 22.4% South, 16.4% East and 33.2% West
Age Groups: 39.2% in 0-29 yrs, 35.6% in 30-39 yrs, 19.6% in 40-49 yrs 5.3 % above 50 yrs
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..preference factors contd
Quality concerned and brand loyal demography not worried about prices(negative correlation between factors)
Advertising/Marketing and Sales and Promotional Activity factors consideredsynonymous (high positive correlation)
Correlation Analysis
-ost Re ce ss iono st Re ce ss ion Prices of the
Product Quality of the
product Availability
of the product Brand name Previous
experience/Advertising
Marketing Family Friends
Opinion Sales and
Promotionalactivity
Correlation Price of the product
1 - .0 064 - .0 188 - .0 177 .0 127 .0 109 - .0 094 .0 159
Quality of the product - .0 064 1 .0 104 .0 074 .0 045 .0 001 - .0 025 .0 135
Availability of theproduct
.0 188 .0 104 1 .0 024 - .0 094 .0 052 .0 279 - .0 019
Brand name
- .0 177 .0 074 - .0 024 1 .0 073 .0 102 .0 028 .0 053
Previous experience
.0 127 .0 045 - .0 094 .0 073 1 .0 354 .0 277 .0 54
/Advertising Marketing .0 109 .0 001 .0 052 .0 102 .0 354 1 .0 253 .0 602
Family Friends Opinion
- .0 094 - .0 025 .0 279 .0 028 .0 277 .0 253 1 .0 206
Sales and Promotionalactivity
.0 159 .0 135 - .0 019 .0 053 .0 54 .0 602 .0 206 1
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- -Comparing the pre recession and post recession consumer preferences for
purchase
Extraction Method: Principal Component Analysis.Rotation Method: Varimax with Kaiser Normalization.a. Rotation converged in 5 iterations.
AnalysisFactor1: Primarily a measure of sales and promotional activity but also increases with the increasing scores of
Advertising/Marketing and previous experience. As each of these variables increases so do the other two.Factor2: Primarily a measure of Availability of the product. It is also influenced by Family and friends opinion.Factor3: Primarily is a measure of Brand name only.
Factor Analysis
re Recession
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-Comparing the pre recession and-post recession consumer
preferences for purchase
Extraction Method: Principal Component Analysis.Rotation Method: Varimax with Kaiser Normalization.a. Rotation converged in 5 iterations.AnalysisFactor1: Primarily a measure of sales and promotional activity but also increases with the increasing scores of Advertising/Marketing and
previous experience. As each of these variables increases so do the other two.Factor2: Primarily a measure of Availability of the product. It is also influenced by Family and friends opinion.Factor3: Primarily is a measure of Brand name only.So we can infer from the trends that the Shopping behaviour of the customer Pre and Post Recession has not shown a significant change.
Factor Analysis
ost R ecession
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*MHI Shift Post Recession Cross tabulation
The above figure shows that 96.3% people with Income > 1Lac did
not shift back to other affordable products Post Recession. We can inferfrom the above table that 33.3% of people with Income
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*MHI Shift Post Recession Cross tabulation
a. 2 cells (20.0%) have expected count less than 5. The minimum expected count is3.02.
AnalysisHo: Consumers have shifted post recession depending upon their MHI.H1: Consumers have not shifted post recession depending upon their MHI.Chi Value( ) : 17.523 Table Value: 9.49 Table Value < Hence we reject the Null Hypothesis Ho and we conclude that Consumers have not
shifted post recession depending upon their MHI.a.b.
Cross Tabulation Analysis
-hi Square Tests
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*MHI Shift Post Recession Crosstabulation
a. Not assuming the null hypothesis.b. Using the asymptotic standard error assuming the null hypothesis.c. Based on normal approximation.
AnalysisAs the correlation coefficient value is -.237, it indicates that as the income increases there is no change in the
buying behavior of the consumer so there is a negative correlation between the two.
Cross Tabulation Analysis
y mm et ri c M ea su re s
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Correlation of Working Profile with the,shopping pattern of consumers in Kirana
,Modern Format MallsPre Recession Kirana
Cross Tabulation Analysis
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Correlation of Working Profile with the,shopping pattern of consumers in Kirana
,Modern Format MallsPre Recession Modern Format
Cross Tabulation Analysis
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Correlation of Working Profile with the,shopping pattern of consumers in Kirana
,Modern Format MallsPre Recession Mall
Th e inferen ce w e can m a ke from the ab ove three tab les b etw ee n the Sh op ping pa ttern of con sum e rs an d the ir. % . % W ork Profile is tha t 50 4 of pe op le w orking Full tim e prefer sh op ping at K iran a Stores w hile 40 7 of N ot
. W o rkin g p op u lation also p refers w orkin g at K iran a S tores K iran a Stores are ea sily acce ssible an d w ith in ea sy. . %rea ch of the po pu lation Th e second inferen ce that w e can m ake from the ab ove tab le is tha t 56 3 of pe ople
. % -w orking Full tim e prefer sho p p in g at M od e rn Form at w hile 3 7 5 of N ot w orking po p ulation p refers sho p p ing at. . % . %M od ern Form at Stores 6 1 5 of Fulltim e w orking po pu lation prefers shop ping at M alls an d 30 8 of N ot w orking
.p op u la tion p re fe rs sh opp in g a t M a lls
Cross Tabulation Analysis
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Correlation of Working Profile with the,shopping pattern of consumers in Kirana
,Modern Format Malls C h iS q u are Test
A n a ly sis:o B u yin g b eh av iou r of cu stom ers in K iran a S tores is no t d ep en d en t o n th e w o rk p ro file p re rece ssion
:1 Buying behaviour of customers in Kirana Stores is dependent on the w ork p ro file p re rece ssio n(C hi Va lu e : .3 416
: .Tab le Va lue 7 8 2>Tab le Value
.H en ce w e accep t th e N u llH ypo th esis H o H en ce w e con clu de tha t B uy ing.b eh a vio u r o f cu stom e rs is n o t d ep en d en t on th e w ork p ro file p re recession
Chi Square Test
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Correlation of Working Profile with the,shopping pattern of consumers in Kirana
,Modern Format MallsSymmetric Measure
A s th e co rre la tion co efficien t va lu e is . ,099 it in d ica tes th a t th e re is m in im a l o r no co rre la tion b e tw een B u yin g b eh av iou r of custom ers
.an d w ork p rofile S am e re su lt can b e seen p re recession in th e case of B uy ing be h aviou r of custom ers from M od ern Form at an d.M alls
Correlation Coefficient Analysis
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Correlation of Working Profile with the,shopping pattern of consumers in Kirana
,Modern Format MallsPost Recession Kirana
Cross Tabulation
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Correlation of Working Profile with the,shopping pattern of consumers in Kirana
,Modern Format MallsPost Recession Modern Format
Cross Tabulation
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Correlation of Working Profile with the,shopping pattern of consumers in Kirana
,Modern Format MallsPost Recession Mall
Th e in feren ce w e can m ake from th e a b ov e th ree ta b les b etw ee n th e S h o p p in g p attern o f. %con sum ers an d the ir W ork Profile is tha t 5 2 8 of p eo ple w orkin g Full tim e p refer
. %shop p in g a t K ira n a S to res w hile 3 7 7 o f N o t W o rkin g p op u lation a lso p refe rs w orkin g a t.K iran a Stores K iran a Stores are ea sily accessible an d w ithin easy rea ch of the
. . %p op u lation Th e secon d in feren ce tha t w e can m a ke from the ab ov e tab le is th at 5 7 0 of. % -p eo p le w orkin g Full tim e p refer sh op p in g at M o d ern Form a t w h ile 3 7 7 of N ot w orkin g
. . %po pu lation prefers sho pp ing at M od ern Form at S tores 62 0 of Full tim e w orking. %po pu lation prefers shop ping at M alls an d 31 0 of N ot w orking po pu lation prefers
.sh op p in g a t M a lls Cross Tabulation
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Correlation of Working Profile with the,shopping pattern of consumers in Kirana
,Modern Format MallsChi Square Test
A n a ly sis:o B u yin g b e h a viou r o f cu stom e rs in K ira n a S to re s is n o t
d e p e n d e n t on th e w ork p ro file p ost rece ssion:1 Buying behaviour of customers in Kirana Stores is
d e p e n d e n t on th e w ork p ro file p ost rece ssion(C h iV alu e : .3 416: .Tab le Va lu e 7 8 2>Tab le Value
.H en ce w e acce pt th e N u llH ypo th esis H o H en ce w e con clu d e th at B u yin g b eh av iou r of custom ers is n ot d ep en d en t on th e
.w o rk p ro file p ost re ce ssion
Chi Square Test
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/ /More preference to Deals Discounts Comparison*post recession Age Cross tabulation
, . %From tab le 1 w e can infer tha t 3 9 5 of the p op ulation in the A ge- . %grou p of 0 2 9 yea rs and 36 9 of the po pu lation in the A ge grou p of
- / /30 3 9 years prefers D ea ls D iscount C om parison Sh opp ing Post.R ecession W e can also com preh en d from the tab le tha t the Youn g
/ /p op u la tion m a in ly p re fe rs D e a ls D iscou n t C om p a rison S h op p in g Po st.R ece ssion
Cross Tabulation
0 1 2 3 4 Tota l M ore p refe re nce to/ /D ea ls D isco u n ts C om p ariso
n Po st R ece ssion
0 %C oun t w ithin M ore preference to
/ /D ea ls D isco un ts C om p ariso n Po st R ece ssion
1 8. %3 9 1
1 6. %3 4 8
1 0. %2 1 7
2. %4 3
0. %0
4 6. %1 0 0 0
1 %C oun t w ithin M ore preference to
/ /D ea ls D isco un ts C om p ariso n Po st R ece ssion
7 7. %3 9 5
7 2. %3 6 9
3 6. %1 8 5
9. %4 6
1. %5
1 9 5%1 0 0
Total %C oun t w ithin M ore preference to
/ /D ea ls D isco un ts C om p ariso n Po st R ece ssion
9 5. %3 9 4
8 8. %3 6 5
4 6. %1 9 1
1 1. %4 6
1. %4
2 4 1. %1 0 0 0
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/ /More preference to Deals Discounts Comparison
*post recession Age Cross tabulationAnalysis Ho: Good Deals, Discounts or Comparison
Shopping does not depend upon age groupspre recession
H1: Good Deals, Discounts or ComparisonShopping does depend upon age groups prerecession
Chi Value( ) : .499 Table Value: 9.49 Table Value > Hence we accept the Null Hypothesis Ho. Hence
we conclude that Good Deals, Discounts orComparison Shopping does not depend upona e rou s re recession.
Chi Square Test
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across categories
Percentage Analysis
Shift i C t g i
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Shift in Categories
S ig n ifica n t freq u en cy red u ction s( . %),see n in R estau ran ts 9 0 1 6
( . %)H olid ay Trip s 8 9 63 an d M ov ies( . %)82 21
Q u an tity red u ction s h ig h est in( . %), ( %)Petrol 6 8 8 3 E lectricity 5 5
( %)an d Ind ulg en ces 50
B ran d Sw itch in g m ost p rom in en t in
( . %),G roce rie s 76 92 A ppa re l( . %) ( . %)70 87 and Cosmetics 54 35
Percentage Analysis
S it h b k t i
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Switch back post recession
Tra din g d ow n an d p ost recession sw itchin g b ack h ave occu rred m ost
sig n ifican tly an d:con sisten tly in
: . %A p p a re l S h op p in g 5 0 8 T D. %an d 3 9 2 TU
: . %M ovie s 4 9 2 TD an d. %3 9 2 TU
: . %R e sta u ra n ts 4 8 8 T D a n d. %4 1 2 TU:TD Trad in g D ow n:TU Trad ing U p
Percentage Analysis
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Luxury goods should be promotedaggressively
More options in leisure goods andindulgences
New strategies should be introduced in themarket to make it economical for thecustomers.
Economical sub- brands should beintroduced
Various lucrative discounts and offers to be
introduced to attract customers.
Suggestions
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ReferencesAccenture (2009 ), The Road to Recovery A report on consumer behavior in the new economy.
Alix & Partners (2009), The Alix Partners European Economic Outlook(SM) survey.
Arussy, Loir. CRM Magazine, Jul2009, Vol. 13 Issue 7, p12-12, 1p.
Brown (2010), Milward. Post-recession Marketing: Addressing a New, More Mindful Consumer.
Chatterjee, Satyajit.(2009) The Peopling of Macroeconomics: Microeconomics of Aggregate ConsumerExpenditures. Federal Reserve Bank of Philadelphia Business Review , Quarter One, pp. 1-10.
Christopher D Carroll, Jeffrey C Fuhrer, David W. Wilcox.(December 1994), The American EconomicReview, Vol 84, Issue 5.
Consumers in a Post Recession world (September 2009). A Nielsen Report.
Ducasse, Patrick, Cliff Grevler, Carol Liao and Catherine Roche(2010). A New World Order of Consumption- Consumer in a Turbulent Recovery. BCG Publications.
Dynan, Karen. Changing Household Financial Opportunities and Economic Security. Journal of Economic Perspectives , Fall 2009,vol. 23, no. 4, pp. 49-68.
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Thank You