MM07

Consumer Behaviour

Assignment I

Assignment Code: 2010MM07B1 Date of Submission: 30th September 2010

Maximum Marks: 100

Attempt all the questions given at the end of the Case. All questions carry equal marks.

Section A

1. What is the interrelationship between the consumer behaviour discipline and the marketing concept?

2. A breakfast cereal manufacturer wants to test whether a “new improved” version of its well established
wheat brand would cause current heavy users to consumer more of the product that they normally do.
What experiment might the company use for this purpose?

3. Write critical note on the diversity of Indian consumers?

4. What is the function of culture and why is the study of culture important to marketer?

Section B

5. Case Study

Luggage becomes a Lifestyle Statement

Travel is part and parcel of today’s life. It may be business travel, a family holiday trip, pilgrimages, vacation
in native place or a close cousin’s wedding – traveling goes on. Once the destination is decided, the family
members usually start working on the luggage they will carry. Earlier luggage meant steel trunks, unbranded
bags and the ubiquitous holdall. Today, luggage has become a lifestyle statement, and one takes a lot of pride
in walking down the lane with a sleek VIP or a Samsonite bag. Baggage rules that restrict heavy luggage also
have seen the big players of soft luggage sport a smile. Most of the market is still unorganized but given the
BPO boom, the spending syndrome and rising income levels, coupled with affordable air travel, the luggage
industry has been having a growth spree. The industry is also dishing out more stylish products and new
revenue streams are also opening up – what with aggressive plans to cater to ladies’ bags segment.

The branded luggage market in India is shared by leading brands like VIP, Samsonite, Aristocrat and Safari. In
1971, Dilip Piramal bought VIP Industries from Jal Engineers. In 1988, he bought Universal, which is the
company owning the Aristocrat brand. The two firms, however, were not merged. While Samsonite is

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positioned well in the premium segment and is the global leader in the segment, Safari and Aristocrat are
relatively smaller brands.

While the total luggage market is to the tune of Rs 1550-1600 crore, nearly 60 percent of it is still unorganized.
In branded luggage, soft luggage has a share of approximately 25-30 percent and the balance is hard luggage.
The soft luggage market is growing at a rate of 30-35 percent annually.

Based on toughness, the luggage market can be classified into soft luggage and hard luggage. Evidently, there
is more movement in the soft luggage segment while the hard luggage is near saturation.

If one considers need-based segmentation, there can be categories like business segment, holiday segment and
casual segment. Such a segmentation would help players draft communication strategies that focus on the
proverbial `why buy’ question. Of late, it is not rare to see families and like-minded groups taking off for a
short holiday – the reasons may be varying but the frequency is definitely high. This seems partly due to the
high-pressure work environment which makes such decisions absolutely natural.

The industry can be segmented based on size and price, into premium, medium and low-price segment. The
corresponding market sizes are pegged at Rs 120 crore, Rs 250 crore and Rs 130 crore, approximately.

VIP is the clear market leader with a share of around 61 per cent. Of this, 54 percent is held by the CIP brand
and 7 percent is attributable to the `Alfa’ brand. However, in the premium segment, Samsonite is believed to be
having a share of close to 80 percent. Samsonite is planning to venture into the medium segment with its
`American Tourister’ brand. Safari and Aristocrat hold smaller percentage of shares.

One favourable factor is that Indians are increasingly spending more on lifestyle products. Soft luggage is
slowly becoming a lifestyle product and people do like to make a fashion statement. Further, there is a big BPO
population that likes to feed itself on modern products and follow the philosophy of `have money, will buy’.
The richer middle class is also a clear sign of better times for luggage segment. The mushrooming mails and
higher interest of consumers and investors in the organized retail space is also helping the segment in a big way.

Blowplast handles the retail sales and distribution for VIP. After the buyout from Jal Engineers, VIP was
initially converted into a 100 percent subsidiary of Blowplast, VIP incurs around Rs 18-20 crore on adspends
across various brands and it has a share of 65-70 percent of the industry.

Samsonite recently had an advertisement featuring none other than the chairman of Virgin Airlines, Richard
Branson. Samsonite has also done away with its old logo and has a new tagline today. The swirl at the end in
the logo has moved to the centre of the brand now. The ad shows Branson as quoting. “To me, business isn’t

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about wearing suits or pleasing stockholders. It’s about being true to yourself, your idea and focusing on the
essentials”, while the new base line signs off saying, `Life is a journey’. Evidently, the communication seems
to position soft luggage as a style statement.

Samsonite has come out with its premium line `Black Label’ and is also focusing on marketing is `American
Tourister’ range. American Tourister would bring revenues for Samonite through its sales in the medium
segment. They are planning to set up exclusive own stores. Samsonite is looking at Rs 4 crore sales revenue
from the Black Label collection in premium segment alone.

VIP has also got its act together. Last year, it acquired the Carlton brand based in Britain and plans to set up
exclusive retail outlets for selling its high-end products. It has launched three 1VIP Lounges’, its retail outlets
in Ahmedabad. The company also sells the premium `Delsey’ brand. VIP has targeted sales of Rs 90 crore
from its soft luggage portfolio during 2006.

Blowplast believes that the key to maintaining leadership is to be relevant to the consumers across time frames.
VIP has always ensured this and the new brand identity makeover is another step towards this objective. They
will launch products that are category leaders. Their new campaigns are aimed at presenting the new look and
profile of VIP of today’s consumer so that they can relate to the brand as always. They are even updating their
retail identity to present a new shopping and brand experience to their consumers.

Both VIP and Samsonite are having plans to venture into the ladies’ bags segment. This seems to be a green
pasture for them as well as an additional revenue stream. The returns and growth rate are believed to be huge in
this area.

As more and more people become conscious of the world being a connected village, frequent travel is the
immediate fallout. As luggage slowly moves up to become a lifestyle segment, style is becoming a key. The
luggage segment clearly is on a growth track. The rich BPO employee, progressing economy, blooming mails
as well as growing organized retail are all busy laying the foundations of sustainable growth for this industry.

Case Questions

1. Explain how the leading brands are utilizing market opportunities to achieve growth.
(10)
2. Compare the products and strategies of VIP and Samsonite and bring out their strong points in brand
building.
(10)

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 MM07
Consumer Behaviour

Assignment II

Assignment Code: 2010MM07B2 Date of Submission: 15th November 2010

Maximum Marks: 100

Attempt all the questions given at the end of the Case. All questions carry equal marks.

Section A

1. Explain the `Black Box’ model of consumer behaviour?

(20)
2. “While marketers once avoided the older market, today they are anxious to know more about elderly
consumer’s especially affluent elderly”. Comment on this statement that why it is important to target
elderly consumers in today’s market scenario. Give examples.
(20)
3. Write short notes on:-

a) Importance of buying motives

b) Ads acting as motivators to consumer behaviour
c) Perception
d) Learning Stage
(5x4)
4. Explain briefly about:

i) Behaviour Theory
ii) Nicosia Model
iii) Howard-Sheth Model
iv) Angel – Blackwel Model
(5x4)
Section B

5. Case Study

How Coca-Cola Became 'The Real Thing' in India

When The Coca-Cola Company began looking into expanding operations into India, the initial marketing data
showed great opportunities. After all, India’s economy is the thirteenth largest in the world when adjusted for

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purchasing power parity, and it is growing at 6% a year. The country has a vibrant stock market – the market
cap as a percentage of GDP has grown from 12% in 1990 to 41% in 2001. There are also 180 million
households and 290 million economically active consumers – defined as monthly households with income
greater than $60 per month.

Encouraged by this and other research, the soft-drink giant entered India and soon found itself in a battle for
market share and survival. Recently, Stan Sthanunathan, vice president of Knowledge & Insights with The
Coca-Cola Company, spoke to MBA students in a global business environments course at Emory University’s
Goizueta Business School about the challenges of doing business in India.

According to Sthanunathan, succeeding in India meant scrapping the business model that had worked well in
other locales and shifting its initial focus more toward the customer and away from business operations. “Only
by really understanding the Indian consumer and taking into account data and knowledge from the country’s
soft drink industry, culture, consumer behavior, languages, geography, was Coca-Cola able to finally find the
insight it needed to put into place a plan of action to successfully compete in the market,” explains
Sthanunathan.

A country of opportunities and challenges

Coca-Cola’s challenge was formidable: the company’s business in India was ailing, with severe competition
from a local beverage company. The first plan of action was to focus on consumer behavior: why weren’t
people buying Coca-Cola?

Closer examination of the country and consumer behavior enabled executives to better define the problem and
eventually, find the seeds of a solution. “The country has poor infrastructure, is very complex and has a
fragmented retail landscape,” observes Sthanunathan. “India has only 5 million retail outlets, which are mostly
‘mom and pop’ stores – 2 million in urban areas and 3 million in rural areas. Organized retail, like
supermarkets, account for only 2% of total sales, and 40% of urban outlets have daily turnover of less than
$20.”

More importantly, India has historically modest consumption habits, with low consumption of goods considered
to be “non-essentials,” such as chocolate (34 million consumers), ketchup (25 million) and ice cream (81
million). This meant that drinking Coca-Cola was viewed as a luxury. Value is also important to the Indian
consumer, as 90% of volume products sold fall in the low price segments. “They are willing to pay a bit more
for a product if they gain a lot more in volume,” says Sthanunathan. “The companies that are doing well in India
are high volume and high growth with low margin.”

To complicate matters, Sthanunathan says that there really is not just one India that Coca-Cola needed to
consider in its marketing strategy. Sthanunathan’s native land is exceedingly diverse and complex, with 29

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states, 6 Union territories, 4,000 cities, 650,000 villages, 16 official languages and over 1,650 dialects. Indians
also represents all major religions, including Hindus, Muslims, Christians, and Sikhs.

In addition, India has diverse ideologies, cultures, clothing and food preferences that vary by regions (East,
West, North, South and Andhra). There is also a stark contrast between urban and rural India, with more than
70% of Indians living in rural areas and just 4% of the population living in the top six cities. “This 4% of
consumers, however, accounts for 27% of India’s purchasing power, and a third of Indians – many of them in
rural areas - live below the poverty line. The disposable income index for urban is 100 versus 52 for rural,”
says Sthanunathan, who provided strategic guidance to the Coca-Cola team executing the turnaround.

From data to knowledge: finding common ground

Despite India’s complexity, the company soon discovered there was common ground on which to build a
strategy. Two major points helped solidify the wealth of knowledge company officials had gleaned and
provided insight that created the foundation of its action plan.

First, throughout India there is a love for cricket and movies. Corporate India spends $50 to $75 million
annually on soccer tournament endorsements and shelled out $100 million on the 2003 World Cup. It also
boasts the largest film industry in the world with 13,000 theaters and 700 movies and 900 short films shown
annually. Some 13 million Indians watch movies every day.

Second, Coca-Cola officials learned that soft drinks were seen as a luxury item, only consumed for special
occasions. Coffee, tea and water outpaced soft drink consumption at home. Another significant fact about the
country’s soft drink industry showed that the price value equation is tenuous, with growth stalling with any
price increase. To complicate matters, some retailers were charging more than the standard 5 rupees for the
product.

Coupled with this was the discovery that there was low brand specification at the time of purchase, meaning
many consumers simply asked for a “cold drink” and did not specify a particular brand. “Cold drinks” also
were not nearly as available in India as in the United States, with soft drinks available in only 15% of retail
outlets. Furthermore, soft drinks have a highly seasonal demand with more than 50% of the volume occurring
from March to June.

Armed with this insight, Coca-Cola launched a marketing campaign to leverage “Thanda” or “cold” and link it
with the culture’s passion for movies. The soft-drink giant hired one of the biggest movie star’s in India to do a
series of television advertisements that branded Coca-Cola the “cold drink.” The star was seen in languages and
costumes native to each region of the country ordering “Thanda.” The commercials humorously depicted the
star’s frustration with receiving anything but Coca-Cola, and ended with the tag line “Cold Means Coca-Cola.”

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Using the same movie star, Coca-Cola communicated directly to the consumer, noting that they should only
expect to pay 5 rupees for the product, and that they should reinforce this with any retailer who tries to sell
Coca-Cola for a different price.

With the television commercials a huge success, Coca-Cola turned its sights to re-engineering its systems to
make cold Coca-Cola products available throughout the country. The company partnered with the nation’s
leading appliance manufacturers to offer refrigerators to retailers at negotiated rates (60% of market value) and
used its relationship with Citibank to finance the appliances for retailers. The move resulted in a win-win
situation for all parties –the retailer, Citibank, and Coca-Cola. “The stature of the retailer grew in the
neighborhood since it became one of a few or the only one store in an area to have a refrigerator and offer cold
drinks, while Citibank gained access to smaller towns,” Sthanunathan told students. Coca-Cola supplemented
the refrigerators with low cost ice-boxes for rural areas that experience frequent power shortages.

Another part of the re-engineering effort for Coca-Cola resulted in lowering the weight of its bottles by 10%,
yielding a savings in shipping and transportation.

Finally, Coca-Cola targeted the distribution and transportation issues in the rural areas by employing the use of
a “Jugaad,” a makeshift/alternative arrangement for tractors used in rural areas. The Jugaads were low cost and
maintenance free, offering excellent stability on undulated roads where autos might overturn.

“It worked like magic,” Sthanunathan says, with consumption increasing dramatically. Coca-Cola turned the
corner in profits only 2 years after implementing the new model.

Case Questions

1. What marketing strategy did Coca-Cola adopted to tackle the consumer behaviour in India at the time
of launch? (10)

2. “It was the re-launch of Coca-Cola in India, after it took off in 1977. Though being a familiar brand in
the country, this time it faced tough competition from local brands and archrival `Pepsi’. “Where do
you think that Coca-Cola lost somewhere to Pepsi in capturing the big market shares in the initial
stages. Analyze and give reasons.

(10)

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