DISSERTATION REPORT ON

CONSUMER BEHAVIOUR IN INDIA

SUBMITTED BY:

Rohan Jangid

BBA 2011-2014

UNDER THE GUIDANCE OF

Name of the Guide: Prof.Aparna Kanchan

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DECLARATION

I hereby declare that the work reported in this thesis titled Consumer Behavior in

India done by me as dissertation project is original work and not copied from

anywhere.

I also declare that this project was done under guidance of Prof. Aparna Kanchan

Signature of the Guide Rohan Ashok Jangid

Prof. Aparna Kanchan

Date:

2

ACKNOWLEDGEMENT

I feel immense pleasure to give the credit of my project work not only to one

individual as this work is integrated effort of all those who concerned with it. I

want to owe my thanks to those entire individual who guided me to move on the

track. This project report entitled ‘Consumer Behavior in India’ is the outcome of

my hard work and dedication.

First of all, I express my sincerest debt of gratitude to the almighty God

who always supports me in my endeavors. I would like to thanks Mr.Ashok Jangid,

for helping me. He always proves as an excellent project guide and without his

guidance this report would not have been successful. I have seen in him an

exceptional leader and will try to follow and implement some of the techniques I

have learnt from him.

I extend my profound gratitude for Prof.Aparna Kanchan (programme

coordinator) for their cooperation in providing the required information for the

completion of the project.

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LITERATURE REVIEW

Literature review is important for the following reasons:

1. To build knowledge and identify the research methodology.

2. To help focus and refine your research question by articulating the

knowledge.

3. Provide intellectual context for your work and situate it within the field.

A literature review is an evaluative report of information found in the literature

related to your selected area of study.  The review should describe summaries,

evaluate and clarify this literature.  It should give a theoretical base for the research

and help you (the author) determine the nature of your research. Works which are

irrelevant should be discarded and those which are peripheral should be looked at

critically.

You will need to search the existing literature in order to describe and analyze the

similarities, differences, consistencies and inconsistencies and issues within your

research topic.  

 A review of the literature is an essential part of your academic research project.

The review is a careful examination of a body of literature pointing toward the

answer to your research question. 

Literature reviewed typically includes scholarly journals, scholarly books,

authoritative databases and primary sources. Sometimes it includes newspapers,

magazines, other books, films, and audio and video tapes, and other secondary

sources.

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Primary sources are the origin of information under study, fundamental

documents relating to a particular subject or idea. Often they are firsthand

accounts written by a witness or researcher at the time of an event or

discovery. These may be accessible as physical publications, as publications

in electronic databases, or on the Internet. 

Secondary sources are documents or recordings that relate to or discuss

information originally presented elsewhere. These, too, may be accessible as

physical objects or electronically in databases or on the Internet.

All good research and writing is guided by a review of the relevant literature. Your

literature review will be the mechanism by which your research is viewed as a

cumulative process. That makes it an integral component of the scientific process. 

PURPOSE OF LITERATURE REVIEW:

The purpose of the literature review remains the same regardless of the research

method you use. Through the literature review you will discover whether your

research question already has been answered by someone else. If it has, you must

change or modify your question. 

Literature reviews provide you with a handy guide to a particular topic. If you have

limited time to conduct research, literature reviews can give you an overview or act

as a stepping stone. For professionals, they are useful reports that keep them up to

date with what is current in the field. For scholars, the depth and breadth of the

literature review emphasizes the credibility of the writer in his or her field.

Literature reviews also provide a solid background for a research paper’s

investigation. Comprehensive knowledge of the literature of the field is essential

to most research papers.

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TOPIC OF CONTENTS

LITERATURE REVIEW……………………………………………………………………………………..

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EXECUTIVE SUMMARY:

Possibly the most challenging concept in the marketing is to deal with

understanding the consumer behavior. This research paper explains consumer

behavior of India. The purpose of this research paper is to find out the factors that

are affecting the consumer behavior and what strategies can be formed to adopt

those changes and achieve the long term growth and success. The synthesis of this

research paper is based on the secondary data sources as well as the observation of

buying behavior of consumers. The attitude of Indian consumers has undergone a

major transformation over the last few years. The Indian consumer today wants to

lead a life full of luxury and comfort. He wants to live in present and does not

believe in savings for the future. An important and recent development in India’s

consumerism is the emergence of the rural market for several basic consumer

goods. Consumer behavior is affected by a lot of variables, ranging from personal

motivations, needs, attitudes and values, personality characteristics, socio-

economic and cultural background, age, sex, professional status to social

influences of various kinds exerted by family, friends, colleagues and society as a

whole.

We have developed a HSSE model that is: Health, Safety, Sophistication and

Environment of Indian consumer. In this research we have found that today’s

consumers strictly follow their culture, tradition and values, as a result of which

foreign companies were forced to give an Indian touch to them in order to succeed

in India. McDonalds, MTV, Pepsi, Star TV, Coca Cola India and many more had

to indianise themselves to flourish in India. The Indian consumers have shown

another major change in their buying behavior. They just don’t want availability of

products; they also want better experience, services and ambience. This has led to

8

the growth of shopping malls where a shopping, entertainment and better facility is

all available under one roof. The tastes and preferences of the current generation

are changing rapidly. The current generation does not mind paying extra for better

facilities and ambience. One thing is for sure that the pace of change in the needs,

desires and wants of the Indian consumers will be even steeper and will further

change drastically in the near future. So to achieve sustainable long term success

and growth, the marketer will have to understand that how consumers will respond

to different product features, price and advertising appeal has a great advantage

over its competitors.

-

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INTRODUCTION

Possibly the most challenging concept in the marketing is to deal with

understanding the buyer behavior. The attitude of Indian consumers has

undergone a major transformation over the last few years. The Indian

consumer today wants to lead a life full of luxury and comfort. He wants

to live in present and does not believe in savings for the future. An

important and recent development in India’s consumerism is the

emergence of the rural market for several basic consumer goods. The

Indian middle class has provided a big boost to the consumer culture

during the recent past and it is hoped that their buying behavior will

continue to change in the coming future. Due to fast growth of the

services sector per capita income of people of India is also increasing.

The number of middle class is increasing due to another fact that people

are fast shifting from agriculture to the services and industry sector

where growth prospects are reasonably high as compared to the

agriculture sector which is showing slow growth.

The consumption pattern of a country depends on liberalization of

economic policies, buying habits of the younger generation, financial

independence at a young age, increase in number of nuclear families and

increase in media exposure of the people. The tastes and preferences of

the current generation are changing rapidly. The current generation does

not mind paying extra for better facilities and ambience. Another major

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factor that has led to increased consumerism is the growth of credit

culture in India. The Indian consumer does not feel shy to purchase

products on credit and pay tomorrow for what they use or buy today.

This tendency has led to a tremendous increase in purchase of homes,

cars, two-wheelers and consumer goods. The market for luxury products

in India is also climbing at an astonishing rate as compared to a decade

ago when it was almost negligible. The reason behind this is that the

purchasing power of people of India is rising very steeply. The Indian

consumer today is highly aware about the product, price, quality and the

options available with him. The purchasing is done by keeping all these

factors in mind. Today, price is not the only consideration as it was a

few years back when prices played a major role in purchasing.

Marketers are trying hard to capture this ever increasing Indian middle

class as they form the bulk of Indian consumers

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OBJECTIVE: THE PURPOSE OF THIS

RESEARCH PAPER IS :

To understand the changing behavior of consumer and develop

strategies to adopt those changes to achieve sustainable long term

growth and success.

To identify the factors affecting the consumer behavior of India.

To identify changes in marketing strategies of marketers due to

changes in consumer behavior of India.

to identify the future trends in consumer behavior.

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RESEARCH METHODOLOGY: -

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The research design selected for this study is descriptive. This research

paper explains the changes occurred in consumer behavior of India. The

research work is intends to cover new facts about consumer behavior

and changes in marketing strategies those changes to achieve long term

sustainable growth and success. The synthesis of this research paper is

based on the secondary data sources. We have observed some consumers

at various players like at shopping Hall, Talkies, Market Street, Beauty

Parlors, Hotels, Restaurants, School, College and various social

gatherings. In this research we have seen which Member of family has

the greater influence in the purchase of particular products or services

either the husband, or wife or the children or they have equal influence.

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Factors Affecting Consumer Behavior:-

Consumer behavior is affected by a lot of variables, ranging from

personal motivations, needs, attitudes and values, personality

characteristics, socio-economic and cultural background, age, sex,

professional status to social influences of various kinds exerted by

family, friends, colleagues and society as a whole. The combinations of

these various factors produce a different impact on each one of us as

manifested in our different behavior as consumers. The various factors

that affect buying behavior of in rural India are:

1. Environment of the consumer - The environment or the surroundings,

within which the consumer lives, has a very strong influence on the

buyer behavior, egs. Electrification, water supply affects demand for

durables.

2. Geographic influences - The geographic location in which the

consumer is located also speaks about the thought process of the

consumer. For instance, villages in South India accept technology

quicker than in other parts of India. Thus, HMT sells more winding

watches in the north while they sell more quartz watches down south.

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3. Influence of occupation – The land owners and service clan buy more

of Category II and Category III durables than agricultural

laborers/farmers.

4. Place of purchase - (60% prefer HAATS due to better quality, variety

& price) Companies need to assess the influence of retailers on both

consumers at village shops and at haats.

5. Creative use of product – Example- Godrej hair dye being used as a

paint to color horns of oxen, Washing machine being used for churning

lassi. The study of product end provides indicators to the company on

the need for education and also for new product ideas.

Cultural factors Influencing Consumer Behavior:-

Cultural factors exert the broadest and deepest influence on consumer

behavior. The marketer needs to understand the role played by the

buyer's culture. Culture is the most basic element that shapes a person’s

wants and behavior. In India, there are so many different

16

Cultures, which only goes on to make the marketer's job tougher. Some

of the few cultural factors that influence buyer behavior are:

1. Product (color, size, design, and shape): There are many examples

that support this point. For example, the Tata Sumo, which was launched

in rural India in a white color, was not well accepted. But however,

when the same Sumo was re-launched as Spacio (a different name) and

in a bright yellow color, with a larger seating capacity and ability to

transport good, the acceptance was higher.

Another good example would be Philips audio systems. Urban India

looks at technology with the viewpoint of „the smaller the better‟.

However, in rural India, the viewpoint is totally opposite. That is the

main reason for the large acceptance of big audio systems. Thus Philips

makes audio systems, which are big in size and get accepted in rural

India by their sheer size.

2. Social practices: There are so many different cultures, and each

culture exhibits different social practices. For example, in a few villages

they have common bath areas. Villagers used to buy one Lifebuoy cake

and cut it into smaller bars. This helped lifebuoy to introduce smaller 75-

gram soap bars, which could be used individually.

3. Decision-making by male head: The male in Indian culture has always

been given the designation of key decision maker. For example, the

Mukhiya‟s opinion (Head of the village), in most cases, is shared with

17

the rest of the village. Even in a house the male head is the final decision

maker. In rural areas, this trend is very prominent.

4. Changes in saving and investment patterns: From Gold, Land, to

Tractors, VCR‟s, and LCD TV‟s etc.

Consumer’s decision making process:-

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CHARACTERISTICS OF INDIAN CONSUMERS:-

Different Segments of Indian Consumer:-

The Socialites: Socialites belong to the upper class. They prefer to

shop in specialty stores, go to clubs on weekends, and spend a good

amount on luxury goods. They are always looking for something

different. They go for high value, exclusive products. Socialites are also

very branding conscious and would go only for the best known in the

market.

The conservatives: - The Conservatives belong to the middle class.

The conservative segment is the reflection of the true Indian culture.

They are traditional in their outlook, cautious in their approach towards

purchase; spend more time with family than in partying and focus more

on savings than spending. Slow in decision making, they seek a lot of

information before making any purchase. They look for durability and

functionality but at the same time is also image conscious.

The working women:-The working woman segment is the one, which

has seen a tremendous growth in the late nineties. This segment has

opened the floodgates for the Indian retailers. The working woman today

has grown out of her long-standing image of being the homemaker.

Today, she is rubbing shoulders with men, proving herself to be equally

good, if not better. Working women have their own mind in decision to

purchase the products that appeal to them. 19

Youth segments:-

The rise of generation next‟ has been written about with unbridled

optimism and enthusiasm, based on the coming of age of liberalization

children. They are global in their worldwide view and have been

exposed to enormous information unlike their parents, raised amidst a

consumption-friendly and consumption encouraging social discourse.

They are expected to be at the forefront of creating a new, modern, west-

embracing consumer society, as well as yield the demographic dividend

that will drive economic growth.

The New Indian Consumer Market Structure:-

There are five types of consumer groups based on what they consume

and created a framework:

The Rich: - The rich who have most of the luxury goods like cars, PCs,

air conditioners and are generally the consumers of premium products.

The Consuming Class: - Consumers which have 70 percent of the

„utility‟ durables like two wheeler, refrigerators, washing machines and

the bulk of regular FMCGs.

The Climbers: - Consumers which have at least one major durable in

their homes – either a mixer or a sewing machine or perhaps a television

set. They are main consumer of population segment consumer goods.

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The Aspirants: - Consumers who are just entering consumption and have

the very basics

Goods like a watch, a bicycle, a radio, or a table fan.

The Destitute: - Consumers who own and consume practically nothing,

living as they do from hand to mouth.

(Source: S.L.Rao and I. Natrajan, Indian Market Demographic, 1994) 11

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RURAL CONSUMER OF INDIA:-

Rural Consumers majorly look into the value that the product offers.

They associate value with the Benefits that the product offers, its

availability, and its Cost. When talking of benefits, they look at the

features of the product as well as the Packaging and attractiveness,

availability, whether or not the products are available at Retail Shops

and Haats, cost, whether or not the product is reasonably priced.

Rural Consumer – Occupation, income, Culture, Perception, Attitude

Benefits: product features Packaging

Availability

Retail Shop Haats

Cost price

Value 12

The Differences in

Buyer Behavior:- Rural

Urban

Conservative Innovative

Values, aspirations,

needs - traditional and

Follow trends

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based on culture, social

customs, beliefs

(including International)

Eldest Male Member

KDM

Varies

Collective Sanction Unheard of

CULTURAL FACTORS INFLUENCING CONSUMER

BEHAVIOR:-

Cultural factors exert the broadest and deepest influence on

consumer behavior. The marketer needs to understand the role played

by the buyer's culture. Culture is the most basic element that shapes

a person’s wants and behavior. In India, there are so many

different Cultures which only goes on to make the marketer 's

job tougher. Some of the few cultural factors that influence buyer

behavior are:

23

1. Product (color, size, design, and shape):

There are many examples that support this point. For example, the

Tata Sumo, which was launched in rural India in awhile color,

was not well accepted. But however, when the same Sumo was

re-launched as Spacious (a different name) and in a bright yellow

color, with a larger seating capacity and ability to transport good, the

acceptance was higher. Another good example would be Phil ips

audio systems. Urban India looks at technology with the

viewpoint of „the smaller the better 

‟

. However, in rural India,

 

The viewpoint is totally opposite. That is the main reason for the large

acceptance of big audio systems. Thus Philips makes audio systems,

which are big in size and get accepted in rural India by their sheer size.

2. Social practices

: There are so many different cultures, and each culture exhibits

different social practices. For example, in a few villages they

have common bath areas. Villagers used to buy one Lifebuoy

cake and cut it into smaller bars. This helped l ifebuoy to

introduce smaller 75-gram soap bars, which could be used

individually.

3. Decision-making by male head

24

: The male in Indian culture has always been given the designation

of key decision maker. For example, the Machidas opinion (Head of the

village), in most cases, is shared with the rest of the village. Even in

arouse the male head is the final decision maker. In rural areas,

this trend is very prominent.

4. Changes in saving and investment patterns:

From Gold, Land, to Tractors, VCRs, LCD TV’S etc.

25

TODAY’S CONSUMER:-

The Indian consumers of today are unique in the followingaspects: 1)

Indian consumers have become value sensitive and are not much price

sensitive as was the case earlier. If they feel that a particular product

offers them more value and its price is high, even then they are willing

to buy the product.2) The Indian consumers strictly follow their

culture, tradition and values, as result of which foreign

companies were forced to give an Indian touch to them in order to

succeed in India. McDonalds, MTV, Pepsi, Star TV, Coca Cola India

and many more had to Indianite themselves to f lourish in

India. Karva Chauth is celebrated with more zeal and enthusiasm than

the Valentine Day.

3) The Indian consumer of today gives preference to features of a

product rather than its brand name. The trend that higher segment

consumers only buy the top brands has also come to an end.

4) Even after liberalization Indian companies and brands are doing very

well. It is clearly evident from the fact that despite many foreign brands

being sold in India, Raymond is st i l l India’s largest text i le

company and Haldiram is doing well despite the presence of

McDonalds and Pizza Hut.

5) The consumers today are not confined to a single brand and prefer

change rather than sticking to the same brand. Not often do we see

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any home with cars of the same brand or household products of the

same brand.

6) The use of credit card for shopping is a new emerging

trend in India. Also consumers are availing credit or loan from

banks and other financial institutions to fulfil their needs and wants.

 

7 ) T h e I n d i a n c o n s u m e r s h a v e s h o w n a n o t h e r m a j o r

c h a n g e i n t h e i r b u y i n g behaviour. They just don’t want

availabil i ty of products; they also want better  experience,

services and ambience. This has led to the growth of shopping

malls where a shopping, entertainment and better facility is all available

under one roof.8) The rural Indian consumers are also showing signs of

change. They have all the modern amenities at their home and their

standard of living is fast improving. The rural households have earned

huge money due to price rise in real estate. They areal so shifting

towards industrial and services sector; hence their purchasing power is

increasing. It is reflected in their living standard and possession

of all electronic gadgets and luxury cars

.9) There is a st i ff competi t ion in the Indian market today

and i t has become a buyer ‟s market from sellers market. Customers

are the ultimate beneficiary of the fierce competition in the market.

Competition has reduced prices to a great extent and has forced the

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manufacturer to maintain product quality to sustain in the highly

competitive market

Change at a glance:-

Many remarkable changes have taken place in Indian consumer

buying behavior over the last five years. Some of them are:

1) Television penetration rose to 50% of total population in

2005 as compared to35% in 2000

2) Refrigerator penetration rose to 12% in 2005 as compared to 9.4%

in 2000.

3) 12% of total population had telephone connections in 2005

as compared to6.5% in 2000

4) A v e r a g e a g e o f h o m e o w n e r s h a s c o m e d o w n t o

2 8 - 3 0 y e a r s i n 2 0 0 5 a s compared to 40 years in 2000

5) Number of mobile users in India is 130 million and number

of internet users is40 million.

6) Credit card penetration has grown to 10 times between 2001 and

2005.

7) Indian consumers now prefer multiplexes as compared to

traditional cinema halls, although multiplexes are costlier than

traditional cinema halls.

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8) The tastes and preferences of consumers are changing. Consumers

today prefer luxury products l ike expensive watches, sun

glasses, mobile phones, ant ique jeweler, etc.,

STUDY OF CONSUMER BEHAVIOR IN INDIA

Buying behavior of consumers in India has changed, and education, age,

income, economic scenario, media and technology play a predominant

role in shaping the way people shop, according to a report by the

Retailers Association of India (RAI) and consultancy firm KPMG.

The report, based on a study done to understand the buying behavior of

Indian consumers, states that the Indian consumer today is more

educated. The fact that a large chunk of these customers are youth is

changing the way people are shopping and this has a direct implication

on various aspects of shopping such as the choice of brands.

"The Indian retail industry is presently one of the world's top five retail

markets in terms of economic value and the industry is experiencing

exponential growth, with retail development taking place not just in

major cities and metros, but also in smaller towns," Anand Ramanathan,

associate director, management consulting, KPMG in India, said.

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According to the report, rapid urbanization and lifestyle changes have

increased time-starved consumers exponentially and the segment that

values convenience has grown.

Buying behavior of BoP (bottom of the pyramid) consumers who have

an average household income below Rs 1, 00,000 a year has also

changed thanks to impact of government schemes. The segment,

however, still remains largely untapped, and local influencers seem to

determine the purchasing habits when it comes to the BoP segment in

small cities, the report said.

The report reveals that the youth constitutes a considerable proportion of

the online users, and growth in online retail has been driven by increased

value consciousness, small city aspirations and growing importance of

convenience.

Retailers are focusing on satisfaction on key service parameters and

loyalty, which can be driven by strengthening front end operations.

Though high-end segments such as apparel and consumer electronics

dominate the online retail segment, new segments are increasingly

gaining popularity. The growth of categories such as grocery retailing

can be attributed to a mix of increasing comfort with trying new 'non-

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traditional' categories coupled with improved value, the report said.

A Rurban market, which refers to locations apart from top tier cities that

are vastly untapped, are home to the majority of the Indian market and

consists of a large number of heterogonous sub-groups that remain

largely underserved and are characterized by increased brand

consciousness.

The rurban segment has consumers adopting newer channels of purchase

to overcome inherent purchase barriers. Online players have also

stepped in to fill the demand-supply gap created by the lack of physical

stores in these cities.

Amid growing brand consciousness, companies may also need to cater

to strong 'local' tastes of rurban consumers, which may involve tweaking

the product, marketing and supply chain as well, according to the report.

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INTERNET AS CONSUMER BEHAVIOR

internet is influencing consumer behavior as 7 out of 10 buyers know the

exact brand and model they want to buy with the help of online research

before entering the store, a study by Google India has said.

According to the study conducted by Nielsen on behalf of Google India,

seven out of 10 of the respondents said they know the exact brand and

model they want to buy with the help of online research before entering

the store.

Also, 40 per cent of the respondents said they took help of online

information for making purchase decisions for technology products.

“This study highlights two facts about Internet in India — it is not just

helping create awareness but is substantially impacting decisions of final

purchases and secondly, it is impacting decisions in tier II cities as well

and mobiles are emerging as a strong medium to connect to the

Internet,” Google India VP and MD (Sales and Operations) Rajan

Anandan told reporters here.

The insights will be shared with clients to help them understand how

offline behavior of consumers is changing with increasing Internet

penetration and how important it has become to strengthen one’s digital

assets, he added.

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The study found that most searches were for laptops (54 per cent),

followed by mobile phones (39 per cent), digital cameras (38 per cent)

and televisions (33 per cent).

Tech and consumer electronic products emerged as the second most

searched category, after travel, with query volumes growing at over 31

per cent year-on-year.

Samsung emerged as the most searched mobile phone brand, followed

by Nokia and phone (Apple). In laptop category, Dell topped searches,

followed by HP and Samsung, while Apple iPod, Aakash and Samsung

were most searched tablet PCs.

Sony, Canon and Nikon were the most searched camera brands, while

Sony, Samsung and LG were most searched television brands.

Voltas, LG and Samsung topped search for ACs; while LG, Whirlpool

and Godrej were most searched refrigerator brands.

Asked about the reasons to visit retail stores for purchase, respondents

said they wanted to get a ‘look and feel’ of the product, check out deals,

negotiate for price, get details on guarantee, get more information on the

selected model and some installation advice.

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Over 57 per cent respondents also said they changed their mind about

the brand/model they wanted to purchase when they look for

information online as they come across newer models.

While researching online, respondents said they were looking for prices

of the products, followed by product photographs, specifications, videos,

product reviews, locating stores and visiting product comparison sites.

The study also found that Internet is now second only to TV to create

awareness for technology products, especially in metros and Tier-I

cities, the study said.

The study titled ‘Tech Shopper Report’ was conducted across 12 cities

in India covering top 4 metros and tier I and II cities like Chandigarh,

Kanpur, Kochi and Bhubaneswar across 3,677 respondents. The offline

interviews were done outside 200 multi-brand and single-brand stores.

The study also looked into the price range of different products for

which buyers undertook online research and found that the research

intensity was higher for high value products.

For example, the research intensity increased when price exceeded Rs

7,000 for mobile phones, Rs 30,000 for television sets and laptops.

The average duration of online research for products in this price range

was about 2 weeks, it added.

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“The retailers’ ability to influence a buyer’s mind is diminishing and

companies need to look at engaging buyers online about their products

and offerings,” Mr. Anandan said.

While the technology vertical is one of the early adopters of digital

advertising medium but there is tremendous scope and opportunity for

players to fully leverage the digital medium to engage buyers online

including mobile — which is growing faster than the PC, he added.

About 46 per cent of the respondents said they used mobile Internet for

research and 22 per cent of participants from tier II cities said they used

mobile as the sole device for accessing Internet for research.

India is one of the fastest growing economies in the world. In the past

decade (2000-2010), India’s gross domestic product (GDP) has grown at

an average rate of 7.27 percent. According to the Planning Commission

estimates, the economy is projected to grow at the rate of 9-9.5 percent

during the 12th Five Year Plan period (2012-2017). GDP growth has

been accompanied by a rise in per capita income. 

The real household disposable income has more than doubled since

1985. With the rise in income, consumption patterns have changed and a

new middle class has emerged, which is growing at a fast pace. Various

35

studies have forecasted that in the next decade middle class would be the

dominant section of the Indian population.

For instance, McKinsey & Company (2007) forecasted that if the Indian

economy grows at the rate of 7.3 percent between 2005 and 2025, then

by 2025, 583 million Indians will be in the middle class, which is

equivalent to the current population of countries like Australia. The

share of middle class in the total population will increase from around 5

percent in 2005 to 41 percent in 2025. 

They will be a predominant force behind the increase in consumer

spending and will account for 59 percent of the country’s total

consumption by 2025. This will further strengthen India’s position,

which is emerging as a leading consumer market. In 2007, India was

ranked as the twelfth largest consumer market in the world and by 2025

it is expected to be the fifth largest consumer market after the United

States (US), Japan, China and the United Kingdom (UK).

WHO ARE THE INDIAN MIDDLE CLASS?

Globally there is no definition of the middle class.Moreover; the

definition varies across the developing and developed countries. There

have been a few studies that have tried to define the middle class. For

instance, Birdcall et al. (2000) defined the middle class as those with

incomes between 75 percent and 125 percent of the median in each

36

country. Bhalla (2009) takes an absolute approach, defining the middle

class as those with annual incomes over $3,900 in purchasing power

parity terms. 

Banerjee and Duflo (2008) identified the middle class in developing

countries as those earning between $2 and $10 a day. The World Bank

classifies economies into different income groups that include categories

such as low income - $1,005 or less, lower middle income - $1,006 -

$3,975, upper middle income - $3,976-$12,275 and high income -

$12,276 or more.

In India there is no official definition of the middle class. Survey-based

studies such as those conducted by the National Sample Survey

Organization (NSSO) classify Indian households into different income

groups but do not specifically define the middle class. The National

Council for Applied Economic Research (NCAER) define the Indian

middle class as those whose annual household income falls in the

income group of Rs. 2,00,000 - Rs.10,00,000 ($4,000-$21,000) (see

Table 1). The majority of other studies such as the McKinsey &

Company (2007) and Saxena (2010) have used the NCAER data and

definitions of the Indian middle class.

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Whatever may be the definition used and the estimate of the size of

Indian middle class, different studies show that although the size of the

middle class is now small compared to the population, it is growing at a

faster pace than the overall population and will be the largest segment in

the next ten to fifteen years.

Some key characteristics of consumption pattern of the Indian middle

class

The growing middle class in India and their consumption pattern has

drawn global attention not only because India is a large market but it is

also different from other emerging markets. A large proportion of

India’s GDP is consumed. The share of consumption in total GDP is

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higher than that of investment. According to the Central Statistical

Organization (CSO) estimates, 60 percent of the GDP was consumed in

2010 which is much higher than that in China.

In India, the majority of the consumption expenditure is on food

compared to other countries (see Table 2). However, this pattern is likely

to change in the future as expenditure on discretionary items is

increasing and that on food is reducing with the rise in income. With the

rise in income there will be a shift in Indian population from low-income

to middle-income and middle class will spend less on food than the low-

income group. 

Table 2 shows that the consumption pattern in India in 2025 is likely to

be different from 2005, as the middle class will drive the consumption

pattern in 2025. This class will be able to and willing to spend on

healthcare, education, recreation, personal products and services. 

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A recent survey conducted by the Boao Review Magazine across nine

cities in Asia including New Delhi, India, found that the consumption

pattern of middle class in large cities in India is not widely different

from their global counterparts of other Asian cities, especially with

respect to spending on food.

The growing Indian middle class and their consumption will drive the

consumer goods market in the future. For instance, commodities such as

cars and air-conditioners, which were in the past considered as luxury 40

items, are now considered as necessities. In fact, small car ownership in

India has shown a double-digit growth. It has grown at a compound

annual growth rate of 12.7 percent for the period 2004-05 to 2010-11.

With the growth of the middle class, a number of Indians have upgraded

from owning two wheelers and using public transport to owning small

cars. Due to the high demand in this segment a number of international

and Indian manufacturers such as Nissan, Renault and Tata motors have

forayed into the small car segment. There is a shift in preferences for

products. For instance, in the case of apparels the trend of getting shirts

stitched has been replaced by a rising demand for ready-made shirts. The

changes in consumer demand will be a major opportunity as well as a

challenge for businesses as they have to gear their products and business

models to cater to the demand of the middle class.

This challenge is further propelled by the fact that the Indian middle

class is not a homogenous group. In food there are distinct preferences

across states and even within states. There are regional differences in

branded and non-branded products and willingness to pay for such

products. For instance, based on a survey of 300 Indian middle class and

high income consumers Mukherjee et al. (2012) found that middle class

Indian consumers in cities like Kolkata and Chennai prefer Indian

brands and mid-price ranges for products like shoes and handbags while

those in cities like Mumbai and Delhi prefer high-end/luxury brands or

41

unbranded products. The study also shows that preferences for brands

vary across product categories. As shown in Figure 1, for some product

categories, such as watches and dietary supplements, consumers largely

purchase branded products. In categories like apparel, footwear and

handbags, they buy both branded and non-branded products, while in

categories like fresh fruits and vegetables, the bulk of the purchases are

non-branded products.

This is due to reasons such as availability of brands, consumers’

perception about the quality and reliability of brands, among others. In

the case of fresh fruits and grocery there is limited availability of brands.

However, in the case of furniture even though branded products do exist,

Indians like to customize their products to suit their personal

requirements and, therefore, they prefer local carpenters.

There are also differences in perception and preferences for Indian and

foreign brands. Various studies highlight that the Indian middle class has

a distinct preference for foreign brands (Mukherjee et al, 2012).

Kumar et al. (2007) found that Indian consumers prefer American

brands over local brands for their uniqueness and good quality.

Bandyopadhyay and Banerjee, (2003) based on a primary survey of

consumers in the cities of Ahmedabad and Calcutta, highlight that

country-of-origin is an important determinant of consumers ‘shopping

behavior and products of advanced countries enjoy a positive country-

42

of-origin effect. Results also indicate that foreign products are not

perceived differently even if they are manufactured domestically.

Unlike their global counterparts, the Indian middle class are less

conscious of branded purchases. Their brand knowledge and loyalty is

also low (Mukherjee et al. 2012). This is partly because the concept of

branded products in India is relatively new and foreign brands have

entered into the market over the past two decades.

The majority of the luxury brands such as Giorgio Armani (Italy), Louis

Vuitton (France), Rino Greggio (Argentina), Signature Kitchens

(Malaysia) and Crocs Inc. (United States of America) (Chattopadhyay et

al.,2011) have only entered into the Indian market after 2006 when the

government allowed 51 percent FDI in single-brand retail subject to

certain conditions. Using an aided awareness technique Mukherjee et al.

(2012)

Found out that brands that are globally well advertised are more likely to

be well known.

Indian consumers are also highly price sensitive. Kumar and Bishnoi

(2007) used an exploratory-cumdescriptive analysis and concluded that

rural Indian consumers are willing to buy a variety of products and

brands if their prices are lowered in the future. A KPMG (2005) study

43

also concludes that within the fast moving consumer goods (FMCG)

range, low priced products constitute the majority of sales volume.

IMPACT OF THE RISING MIDDLE CLASS ON

ECONOMIC GROWTH

In future, the rise of the middle class and their consumption pattern is

expected to bring noticeable changes in the Indian economy. Rise in per

capita income of the growing middle class will further propel

urbanization. 

According to McKinsey & Company (2007), in 2005, around 53 percent

of the consumption was in the rural area but by 2025, 62 percent of the

consumption will be in the urban area. This will lead to development of

smaller cities, which are now growing at a very fast pace. These cities

will host a large number of middle class and by 2025 around two-thirds

of the Indian middle class will be outside metro cities like Delhi and

Mumbai.

The use of financial services by the middle class is likely to give a push

to the growing trends of retail banking and credit card usage. The middle

class will also demand better healthcare and education services. Since

they will be willing to pay for these services, private companies will

have a role in Delivery of these services.

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Their discretionary expenditure on recreation activities, leisure travel,

and entertainment and luxury items will increase. As income increases,

the middle class will not only diversify their consumption baskets, but

will demand better quality of and innovation in the products they

purchase.

ISSUES AND WAY FORWARD

The Indian middle class is growing at a fast pace and their consumption

patterns are diversifying towards discretionary expenditure. Their brand

consciousness and demand for luxury products is low but is likely to

increase with rise in disposable incomes. In future, the growing middle

class will not only have a higher standard of living but will also invest

more on housing, health care, transportation and education, among

others. 

This will lead to economic development. While rise in demand for new

services and innovative products will fuel consumerism, higher

expenditure on education will expand the Indian human capital pool.

However, there are certain issues which need to be addressed to sustain

the growth of the middle class.

In the past two years, on the one hand, annual household income of the

Indian middle class has been rising. On the other hand, there has been

high inflation, especially food inflation, which has impacted the real

45

disposable income. To curb inflation, the government increased interest

rates which had a recessionary impact on consumer goods sectors like

the car industry and even slowed down the GDP growth rate. The GDP

growth rate declined from 7.8 percent in 2010- 11 to 6.9 percent in

2011-12. This can have an adverse impact on the per capita income and

consumption of the middle class. 

The middle class in India is increasingly demanding good quality and

innovative products. The poor quality infrastructure and poor Delivery

of services can create dissatisfaction among the middle class. To fill this

gap between demand and supply, the service providers in the public and

private sectors need to understand the growing and changing tastes and

preferences of the Indian middle class. To give an example, quality of

education and employability of the Indian labor force is a growing

challenge. Since the rising demand for education has not been matched

by the limited supply of government-run institutes and universities, there

has been an upsurge of private educational institutes and universities.

However, there is no system of proper accreditation and the quality of

education varies across different institutions. There is also a gap between

the level of formal education and on-the-job skill requirements. 

As the middle class are increasingly becoming willing to pay more for

education they are increasingly becoming dissatisfied with the quality of

education and its employability.

46

In India the incidence of corruption and bribery is high. The middle class

who is educated and aware has started to express their discontent

towards lack of transparency and poor governance. This class is more

receptive towards reforms. Mukherjee et al. (2012) pointed out that the

educated and middle-income class is more receptive towards allowing

foreign direct investment (FDI) in multi-brand retail. Reforms in India in

the past few years have slowed down creating further dissatisfaction

amongst the middle class.

Today, the low-income groups form the majority of households and they

are the majority of the voters. The high-income group is the influential

class but the middle class is virtually ignored. However, with the rise in

middle class, in future their demands cannot be ignored in a democracy

like India. Policy makers should now start to focus on the needs of the

middle class.

In order to ensure sustainable development of the Indian consumer

market and maintain India’s position of an attractive investment

destination, it is important that corrective actions are taken to address the

issues mentioned above. The Indian government needs to encourage

investment in research and product development. Brand India is missing

on the global front. That is because the Indian government has always

focused on developing India as a manufacturing hub and little attention

has been paid on developing and promoting Indian brands. Indian

47

manufacturers need to be encouraged to produce superior quality

products matching up with global standards. This will fuel demand both

in the global market and domestic market. To bring down the

inflationary spirals the government needs to invest in supply chain

management. Robust infrastructure development is also needed to ensure

sustainable development of sectors such as retail and to reduce the rural-

urban divide. The quality of education should improve. For this the

government needs to lay down basic standards for both public and

private institutes and universities. Also, there is need for setting up

vocational training centers for imparting specialized skills required in

sectors such as IT, healthcare, etc. Strengthening the governance

mechanism is a prerequisite for equitable growth and development. The

Indian government also needs to pay attention towards formulating

regulations especially for sectors that have recently undergone major

developments such as the retail sector. 

Although the Indian middle class has an important role to play in India’s

economic development and in the future will be the largest section of the

population, there is hardly any research in India which analyses their

needs, consumption pattern, etc. and makes policy recommendations. It

is important for the Indian government to have regular survey- based

studies to analyze the consumption pattern of this class. Since India is

not a homogenous market, the study should have pan-India coverage to

48

capture more variations in consumers ‘shopping behaviors and

perceptions across different regions of India.

THE NEW INDIAN CONSUMER

When India opened its economy to the global marketplace in the early

1990s, many multinational corporations rushed in to pursue its middle-

class consumers—an estimated 200 million people—only to confront

low incomes, social and political conservatism, and resistance to change.

It turned out that the Indian consumer was a tough one to figure out and

win over.

Things are changing. Although attitudes remain complex, they have

shifted substantially toward consumerism, particularly over the past

decade. The country’s recent economic performance is a factor, of

course. For three years, GDP growth has been strong and sustained, at an

average annual rate of around 8%. The population’s demographic profile

also plays a role: Indians constitute a fifth of the world’s citizens below

age 20. So a youthful, exuberant generation, weaned on success, is

joining the ranks of Indian consumers.

To examine the changes in attitude, the Gallup Organization conducted

two surveys of more than 2,000 respondents gauging the habits, hopes,

plans, and evolution of the Indian consumer in the decade from 1996 to

2006. (For a similar look by Gallup at Chinese attitudes, see William

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McEwen et al., “Inside the Mind of the Chinese Consumer,” HBR

March 2006.) In collaboration with our colleagues Raksha Arora and

Prasun Basu, we mined the data and emerged with three key insights.

Indians are getting more materialistic.

Indians are often stereotyped as deeply spiritual people who reject

materialistic values. Our research suggests that this stereotype no longer

reflects reality. For instance, almost half of India’s urban population had

adopted a “work hard and get rich” ethos by 1996; another 9% had done

so by 2006.

Indians are more motivated than ever by personal ambition and a desire

for material success, and they put in the hours it takes to achieve those

goals. A recent Gallup poll of more than 30 countries showed that, with

an average workweek of 50 hours, India ranks among the hardest

working nations globally. (The average in the United States is 42 hours;

major European nations such as Germany, France, and the UK have

workweeks of fewer than 40 hours.)

Consumerism is becoming a way of life in India.

An analysis of Indians’ savings goals underscores the increase in

materialism. Although long-term plans remain a high priority, life’s

pleasures in the here and now have gained importance over the past

decade. Indians’ desire to set money aside for electronics and durables

50

has grown so dramatically that it has nearly caught up with their desire

to save for their children’s education. Travel and entertainment have also

gained ground.

Interestingly, this trend does not apply only to the young—it holds true

for people aged 15 to 55. And it is not merely a large-city phenomenon;

people in smaller towns espouse these values as well.

Among durable goods, high-tech luxury items are increasingly in

demand. The number of Indians who own or use mobile phones, for

example, has grown 1,600%—not surprising in a country that is adding

more than 3 million subscribers a month. The number of people who

own or use computers or laptops is up 100%, albeit from a very small

base. Ownership of music systems and televisions is also on the rise.

51

As rapid socio-economic changes sweep across India, the country is

witnessing the creation of many new markets and a further expansion of

the existing ones. With over 300 million people moving up from the

category of rural poor to rural lower middle class between 2005 and

2025, rural consumption levels are expected to rise to current urban

levels by 2017.

Consumer durables involve any type of products purchased by

consumers that are manufactured for long term use. As opposed to many

goods that are intended for consumption in the short term, consumer

durables are intended to endure regular usage for several years or longer

before replacement of the consumer product is required. Just about every

household will contain at least a few items that may be properly

considered to be of a consumer durable nature. A combination of

changing lifestyles, higher disposable income, greater product awareness

and affordable pricing have been instrumental in changing the pattern

and amount of consumer expenditure leading to robust growth of

consumer durables industry.

OBJECTIVES OF THE STUDY

With the basic objective of enquiring the potentiality of rural markets in

Guntur District in

Andhra Pradesh. This study aims to enquire:

52

1. The pre-purchase rural consumer behavior towards consumer goods

2. The usage rate of consumer durable products in rural areas in Guntur

district

3. To identify the role of various socioeconomic, cultural and

psychological factors that influences the purchasing pattern of rural

consumers;

4. Finally, to suggest some measures for effective implementation of

marketing strategies by various consumer durable goods companies with

reference to rural and urban areas in Guntur district.

PRIMARY DATA

Primary data is the information co

collected or generated by the researchers for the purpose of

the project immediately at hand. Questionnaires are used to collect this

primary data. Questionnaires are the most frequently used methods of

data collection. These methods are considered to have

particularly relevance to collect data on personal preference social

attitudes, opinions, beliefs and feelings etc. In Andhra Pradesh. Guntur

is one of the Major districts, in which majority of people are living in

rural areas. This study has selected is villages from Guntur,

Narasaraopet and Tenali revenue divisions in Guntur district. In each

revenue division researcher has selected two villages depending on socio

53

economic standards of villages. One is developed and another is under

developed village. In Narasaraopet revenue division this study selected

Ravipadu and Uppalapadu. In Tenali revenue division

this study selected Pedaravuru and Samgam Jagarlamudi. In Guntur

revenue division this study selected Nambur and Koppuravuru villages

as per their socio economic conditions. Totally 600 samples collected

from six villages in Guntur district, Andhra Pradesh.

SECONDARY DATA

Secondary data refers to the information that has been collected by

someone, other than those involved in the research project at hand for

the purpose. Secondary data can be gathered from various sources.

Usually a consumer does not purchase the durables immediately after

feeling the need for the same; he takes time and ponders over the issue.

We can get an idea about how much a rural consumer usually takes for

pondering over the issue with the help of above table 1.

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Thus, it is evident that more than one-third respondents took two to six

months and another more than one third respondents took six or more

months for pondering over selecting their desired brands. Only 11%

respondents and 14.3% of respondents purchased their selected brands

just below two months take time to purchase, they might be rich people.

But it appears that almost nearly 75% of the respondents took mor

e than two months to be engaged in actual purchase.

In fact, rural people are very cautious before purchasing the durable.

They pondered over the issue several times before purchasing the article.

It might be due to the fact that they have little scope of earning

additional money outside their usual sources. In other words, for them

marginal utility of money is very high, so they are very cautious

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CONCLUSION

Indian rural consumer durable market is very vast size and having lot of

opportunities. To capture the rural markets, the industries which are

producing/ marketing the consumer durables for that they has the follow

the different types of creative strategies to tapping the rural markets.

And to know consumer behavior is also important for tapping rural

markets.

1)Modify the product to market it more suitable for the needs/usage

conditions of rural consumer.

2) Develop entirely new products for rural markets.

3) To capture durable market share, the organizations has to consider the

pull strategy and push strategies in rural market.

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