Pranav Project Sem 4 Final

1.1 INDUSTRY PROFILE:

1.11 Electronic Industry

Indian Electronics industry dates back to the early 1960's. Electronics was one industry

initially restricted to the development and maintenance of fundamental communication

systems including radio-broadcasting, telephonic and telegraphic communication, and

augmentation of defense capabilities. Until 1984, the electronics Industry was primarily

government owned and then in 1980s witnessed a rapid growth of the electronics

industry due to sweeping economic changes, resulting in the liberalization and

globalization of the economy.

The economic transformation all over the world was motivated by two compelling

factors- the determination to boost economic growth, and to accelerate the development

of export-oriented industries, like the electronics industry. By 1991 in the country private

investments - both foreign and domestic were encouraged. The easing of foreign

investment norms, allowance of 100% foreign equity, reduction in custom tariffs, and

relicensing of several consumer electronic products had attracted remarkable amount of

foreign collaboration and investment.

The domestic Electronic industry also responded favorably to the policies of the

government. The initiatives of the electronics field to private sector enabled entrepreneurs

to establish the industries to meet demand in the market. Improvements in the Indian

Electronics industry have not been limited to a particular segment, but encompass all its

sectors. This pace made in the areas of commercial software, telecommunications,

electronics, instrumentation, positioning and networking systems, and defense. The result

therefore has been a significant trade growth that began in the late 1990's. The Indian

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Electronics Industry is a text for investors who consider India as a potential investment

opportunity.

Indian electronics companies had majorly benefited from the economic liberalization

policies of the 1980's, including the loosening of restrictions on technology and

component imports, de-licensing, foreign investment, and reduction of excise duties.

Output from electronics plants in India grew from Rs1.8 billion in FY 1970 to Rs8.1

billion in FY 1980 and to Rs123 billion in FY 1992. Most of the expansion took place in

the production of computers and consumer electronics. Indian Production of Computer

rose from 7,500 units in 1985 to 60,000 units in 1988 and to an estimated 200,000 units

in 1992. During this period, major advances were made in the domestic computer

industry that led to more sales.

Figure 1.1 – Share of Consumer Durables

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Like every other industrial sector in India, the Indian Electrical Industry too is slowly

emerging from out of its "protective cover". For far too long has Indian Industry

remained shackled and consequently inward looking. Over the past fifty years there was

no exposure to global players and competition, with the result that the Industry grew up

in a sheltered environment, dependent on the Government for everything, from licenses

to protection to tariffs. Each one of these interventions was aimed at securing protection

for oneself and ensuring growth of one’s own organization at the cost of industry and the

nation at large. Lack of global competition encouraged a "cost plus" approach, where

every conceivable cost increase was passed on to the customer. There was thus no

motivation to reduce costs.

The consumer durables market in India was estimated to be around US$ 5 billion in

2007-08.More than 7 million units of consumer durable appliances have been sold in the year 2006-07

with colour televisions (CTV) forming the bulk of the sales with 30 percent share of volumes.CTV,

refrigerators and Air-conditioners together constitute more than 60 per cent of the sales in terms of the

number of units sold. In the refrigerators market, the frost-free category has grown by 8.3

per cent while direct cool segment has grown by 9 per cent. Companies like LG,

Whirlpool and Samsung have registered double-digit growth in the direct cool

refrigerator market. In the case of washing machines, the semi-automatic category with a

higher base and fully-automatic categories have grown by 4 per cent to 526,000 units and

by8 per cent to 229,000 units, respectively. In the air-conditioners segment, the sales of window ACs

have grown by 32 per cent and that of split ACs by 97 per cent. Since the penetration

in the urban areas for these products is already quite high, the markets for both C-TV and

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refrigerators were shifting to the semi-urban and rural areas. The growth across product

categories in different segments is assessed in the following sections

As per the recent survey, the global electrical & electronics market is worth $1,038.8

billion, which is forecasted to grow to $ 1,216.8 billion at the end of the year 2008. If we

talk of electrical & electronics production statistics, the industry accounted for $1,025.8

billion in 2006, which is forecasted to reach $1,051.5 billion in future.

The consumer durables market is divided into two segments – consumer electronics, also

known as the brown goods (television, digital camera, audio-video systems, computers,

electronic accessories, etc) and consumer appliances or the white goods (air conditioners,

refrigerators, microwave ovens, other household appliances, etc.).

In its initial years, the sector relied greatly on media and advertising for consumer

penetration. Liberalization of markets in late 1990s saw the entry of global players like

Samsung and LG and a shift in focus towards product innovation. Accessibility to high-

end products was, however, low till mid 2000s. Last few years has seen high end and

aspiration products like air conditioners and High Definition TVs gain stronghold in the

market.

The industry size for consumer durables stands at Rs 350 billion (as on March 2012). The

sector rides and relies on the state of the country’s economy. With household incomes in

top 20 cities across India expected to grow at 10 percent annually over the next eight

years, and concepts of easy loans, equated monthly installment (EMI) charges,

availability of credit, etc., become commonplace, the Indian consumer is likely to spend

more on both utility and luxury consumer goods.

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The consumer durables sector is marked by stiff competition between market players to

launch newer models and versions of products, discounts and schemes. The key players

in the consumer durables sector are MNCs like LG, Samsung, Blue Star, Daikin, Hitachi,

Sony, etc. LG and Samsung account for the largest shares of the market, and it is

estimated that India’s share in their global revenues will double to 12 per cent in FY15

from 6 per cent in FY10 and similarly from 2.5 per cent to 5 per cent respectively.

Figure 1.2 – Share of Electronic goods in India

At the outset, it must be stated that the reduced domestic demand is at best a temporary

phenomenon. The power sector in India is bound to grow and this will undoubtedly boost

demand from the Utilities, quite apart from the industrial demand which will continue to

grow with increased industrial output. The poor financial health of the SEBs is however a

damper that cannot be wished away in the short term. This will continue to plague

corporate in the Electrical Industry, until the SEB restructuring and unbundling brings a

turnaround in the medium term.

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India’s consumer electronics devices market, defined as the addressable market for

computing devices, mobile handsets and AV products in 2009–10 is estimated to be US$

6.28 billion, indicating a growth of 18 per cent over the previous year. It is projected at

about US$29.4bn in 2011. This is expected to increase to US$52.6bn by 2015, driven by

rising incomes and growing affordability.

Spending on consumer electronics devices is projected to grow at an overall CAGR of 12

per cent through 2015, with the key segments including low-cost mobile handsets, colour

TVs, set-top boxes and notebook computers. Only nine out of 1,000 people in India own

a computer, one-fifth of the level in China, while Indian handset population penetration is

about 57 per cent.

Analysis and data of the domestic electronics manufacturing sector. We assess the

regulatory and business operational issues facing manufacturers - including openness to

foreign investment, infrastructure, IP issues and the global demand context - and their

impact on the production of electronics goods, which is again broken down via market

sub-sectors.

Among consumer electronics, 21-inch colour TV continues to dominate the market with a

65 per cent share. Computers accounted for about 32 per cent of Indian consumer

electronics spending in 2010. BMI forecasts Indian domestic market computer hardware

sales (including notebooks and accessories) of US$9.5bn in 2011, up from US$8.4bn in

2010. Sales were up by as much as one-third in 2010 compared with the previous year.

With PC penetration of around 2 per cent, the computer hardware compound annual

growth rate (CAGR) for the 2011-2015 will be about 15 per cent.

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Estimates provided by Corporate Catalyst India (CCI) indicate that the consumer

durables market is expected to double at 14.8 per cent CAGR to USD12.5 billion in

FY15 from USD6.3 billion in FY10. Further, demand from rural and semi-urban areas is

expected to expand at a CAGR of 25 per cent to USD6.4 billion in FY15 from USD2.1

billion in FY10.

All major companies in this sector have elaborate expansion plans for the near future.

Japan’s Panasonic plans to invest USD208 million by 2014 by setting up manufacturing

units and an advanced R&D centre.

India’s domestic video, audio and gaming device market is expected to grow to a value of

US$21.7bn in 2015. TV will remain the core product in this category, with sports events

such as the 2011 ICC Cricket World Cup driving demand for TV set upgrades. LCD TV

set sales are projected to pass 3.7mn in 2011, while vendors also report strong growth in

the LED TV set segment.

1.12 Apparels Industry

Apparels sector in India is a diverse and heterogeneous industry, which covers a wide

variety of products from hi-tech synthetic and wool fibers to yarns to fabrics to apparels,

cotton fibers to yarns to fabrics to home textiles to high fashion apparels (knitted and

woven). This diversity of end products corresponds to a multitude of industrial processes,

enterprises or market structures.

Apparels industry is in a stronger position now than it was in the last six decades. The

industry, which was growing at 3: 4 percent during the last six decades, has now

accelerated to an annual growth rate of 9: 10 percent. There is a sense of optimism in the

industry and textile and apparels sector has now become a sunrise sector.

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The catalysts, which have placed the industry on this trajectory of exponential growth are

a buoyant domestic economy, a substantial increase in cotton production, the conducive

policy environment provided by the Government, and the expiration of the Multi Fiber

Agreement (MFA) on 31 December, 2004 and implementation of Agreement on Textiles

and Clothing (ATC).

The buoyant Indian economy, growing at the rate of 8 percent, has resulted in higher

disposable income levels. The disposable income of Indian consumers has increased

steadily. The proportion of the major consuming class (population that has an annual

income of more than US$ 2000) has risen from 20 percent in 1995-96 to 28 percent in

2001-02. This is expected to move up to 35 percent by 2005-06, and to 48 percent by

2009-10. This translates into a growth of 9.3 percent over the next 8 years, and will result

in higher spending capacity, manifesting itself in the greater consumption of textiles and

apparels.

The Indian textile and apparels industry consumes a diverse range of fibers and yarn, but

is predominantly cotton based. A significant increase in cotton production during the last

two: three years has increased the availability of raw cotton to apparels industry at

competitive prices, providing it with a competitive edge in the global market. The

Government has also provided industry a conducive policy environment and initiated

schemes, which have facilitated the growth of the industry. The Technology Mission on

Cotton has increased cotton production and reduced contamination levels. The

Technology Up gradation Fund Scheme (TUFS) has facilitated the installation of the

state-of-the-art / near state-of-the-art technology/machinery at competitive capital cost.

The rationalization of fiscal duties has provided a level playing field to all segments,

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resulting in the holistic growth of the industry. Besides the governments permission to

allow import of a number of textile and apparels resources in terms of trimmings,

embellishments, consumables and accessories, fabrics, linings/interlinings, etc. has made

the apparels export industry in India much more competitive than ever before.

Not only this, the government, of late has been giving a lot of attention to strengthen

infrastructure like roads, ports, power, water, telecommunications, etc. to supplement the

efforts put in by the Indian textile and apparels industry to become a surprise industry.

To provide Indian consumers with world-class quality in textile and apparels

and retail services, the government has recently allowed single-brand overseas retailers

to set up retail shops in India. The multi-brand overseas retailers/super markets/investors

are already in India to conduct wholesale business to feed existing retailers with quality

products.

Apparel is one of the basic necessities of human civilization along with food, water and

shelter. The Apparel Industry reflects people’s lifestyles and shows their social and

economic status. The Apparel and Textile industry, is India’s second largest industry after

IT Industry. At present, it is amongst the fastest growing industry segment and is also the

second largest foreign exchange earner for the country. The apparel industry accounts for

26% of all Indian exports. The Indian government has targeted the apparel and textiles

industry segments to reach $50 billion by the year 2015. China on the other hand, has

already reached their target of $52 billion in 2004, and therefore, it is very possible for

India to reach its target soon. One of the most interesting features of the apparel industry

is that, it migrates from high cost nations to the low cost nations. The growth of the

domestic demand for clothing in India is linked with the success of the retailing sector.

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India presently has entered the second phase of growth and is witnessing a massive rise in

the domestic demand. This is primarily due to the rise in the standard of living caused by

the rise in the middle-income groups. In our present economic world of demand and

supply, price and quality are the key factors, which determine the success of any

business. The key element here though, is the cost of labor. India and China have a

comparative advantage in this industry though, their vast labor forces and the relatively

low cost of labor. Since, India and China have the advantage of making textiles and so

fabric costs are lower than in other countries, they have become the Apparel sourcing

choice for many international companies. Sourcing choices arise from profitability. This

includes considering costs, such as, buying factors of production, like land, buildings and

machines versus factors affecting revenues, including pricing, marketing, and

distribution. The issues of labor, material, shipping costs and tariffs structure also affect

the sourcing choices. Since, apparel production is a labor-intensive activity, wage rates

are also a major factor in sourcing decisions. Textile and apparel is a privileged exports

sector in India contributing 30 % of total exports. And it has valid reasons. A long history

of fine textiles, easy availability of the finest raw material, natural or manmade, classic

weaving, manual or mechanized, labor availability and flexible production capacity;

India's textile industry is vertically integrated from raw material to finished product,

including fiber production, spinning, knitting and weaving, and apparel manufacture.

Government of India through export promotion councils is promoting the industry

globally by holding fairs and exhibitions. Despite that, our study of the industry brought

forth another fact. Not all the companies can afford to be a part of such promotional

shows; not all the buyer organizations have a reach to them either. Further there are

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industries as garment accessories and technology, which some time back did not figure

anywhere. We offered our clients very cost-effective solutions to present their product

and interact with each other on a global scale. Through the websites/ catalogs the

manufacturers could present their latest and the best products and the buyers and the

suppliers both could get the best deal out of it.

Quotas or quantitative restrictions imposed by developed nations, which restrained the

export growth of the Indian textiles and apparels industry for over four decades, were

eliminated with effect from 01 January 2005. This has unshackled Indian textiles and

apparels exports, and this is evident from the growth registered in the quota markets.

Apparels exports to the USA during 2005 and 2006 increased by 34.2 and 7.08 percent

respectively, while textiles exports during 2006 to the US showed an impressive 12.42

percent growth. Similarly, in Europe, apparels exports increased by 30.6 and 17.50 %

respectively in 2005 and 2006, while textile exports registered 2.2 and 3.5 percent growth

in the similar period respectively. The increasing trends in exports are expected to

continue in the years to come.

If we look at the US and EU import statistics for apparels alone, we find that these major

global players are not inclined to source exclusively from China and India is considered

as the second most preferred destination for major global retailers due to its strength of

vertical and horizontal integration.

The Indian government has always and is continuing to consider the role of textiles and

apparels manufacturing units in India as very critical in achieving the objectives of faster

and more inclusive growth, and has laid emphasis on policies aimed at creating an

environment in which entrepreneurship can flourish. The apparels industry is targeted to

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grow at the rate of 16 percent in value terms to reach the level of US$ 115 billion

(exports US$ 55 billion; domestic market US$ 60 billion) by 2012, while the fabric

production is expected to grow at the rate of 12 percent in volume terms. Apparels alone

are expected to grow at the rate of 16 percent in volume terms and 21 percent in value

terms, while exports are expected to grow at the rate of 22 percent in value terms.

The Indian apparel industry also has a vast existence in the economic life of the country.

It plays a critical role in the economic development of the country with its contribution to

industrial output, export earnings of the country and the generation of employment. The

Indian apparel industry has seen remarkable changes in the past few years and it is also

one of the India's largest foreign exchange earners. Embroidery being the traditional art

form of the country has contributed hugely for apparel industry. Indian embroidery

market stands out as being extraordinary in the international markets. For more

comprehensive information on Indian textiles, home decor, clothing and fashion

accessories

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1.13 Major Players in Apparel Industry

StoreName

Aditya BirlaNuvo

Raymond Koutons ArvindMills

ITC Wills

Product Range

Men’s, Women’s &Kidswear

Men’s &Womenswear

Family Store

Men’s, Women’s &Kids wear

Men’s, &Women’swear

Brands • Esprit • Peter-England • Van Heusen • Allen Solly• Louis-Philippe

• Park Avenue • ColorPlus• Parx• Notting Hill • Zapp!

• Koutons• Charlie Outlaw • Les Femme • Koutons-Junior

• Lee • Wrangler • Nautica• Jansport• Kipling • Tommy

• John Players • Miss Players • Club WIlls

Tie Ups Many International Players- Louis Philippe, Van Heusen etc.

All company hold brands

All company hold brands

Many International Players- Wrangler, Nautica, etc.

All Company hold brands

Media Used for promotion

Print, electronic, hoardings, In store

Print, electronic, hoardings, In store,

Hoardings, print, POP



Quality Different quality in different brands

High Quality Medium Quality

Different quality in differentbrands

High Quality

Loyalty Program

For Some Brands

No No For Some Brands

Yes

Table 1.1 Different players in Apparel Industry

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1.2 Objectives of Study:

a) To gain the overview of the consumer purchase behavior towards the sales

promotion.

b) To study the effect of promotional strategies on consumer purchase behavior in

the electronics & apparels.

c) To study the impact of the sales promotions on Brand Switching, stock piling,

customer loyalty etc.

1.3 Scope of study

The focus of the study is limited to the study of consumer behavior in terms of Brand

Switching and Stock Piling as affected by the sales promotion. The study is focused on

the electronics and apparels sector. Geographically study is confined to Delhi. The main

scope of this study is to ascertain the effect of Sales Promotion on Brand Switching and

Stock Piling Behaviour of Consumers.

1.4 Methodology used for Data Analysis:

Research Design Descriptive

Universe Delhi

Sample Size 100

Sampling Technique Convenience

Project Approach Survey method

Instrument Used Standardized questionnaire

Data Type Primary and secondary

Statistical Tool Used Correlation and Regression

Table 1.2: Research Methodology Framework

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1.5 Research Design

The Research design employed for the study is a combination of descriptive . Descriptive

research design is taken as we are trying to observe the effect of promotional strategies

on consumer purchase behavior in the electronics & apparels.

1.6 Sample Statistics

1.61 Size: Sample Size of 100 is taken using unaided Judgment technique. Due to time

and resource constraints the sample size taken is small.

1.62 Sampling Technique: Data is collected on the convenience basis due to large

population size. Convenience sampling is a non-probability sampling technique where

subjects are selected because of their convenient accessibility and proximity to the

researcher.

1.7 Data Sources

1.71 Primary Sources

Data is collected from the end users belonging to different age groups with the help of the

standardized questionnaire which is divided into two parts Part A compromising of the 19

questions and Part B consist of Demographics of respondents. The reliability of the same

is tested via Cronbach's (alpha) whose value came out to be0.879 which is more than

0.6. Hence the instrument used for data collection was highly reliable.

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1.72 Reliability Statistics

Cronbach's Alpha N of Items

.879 19

Table 1.3 – Reliability statistics

1.73 Secondary Sources

The secondary data is collected from the company’s magazines, journals and various

websites. Secondary data is data collected by someone other than the user. Common

sources of secondary data for social science include censuses, organizational records and

data collected through qualitative methodologies or qualitative research.

1.8 Correlation

Correlation is a technique used to find out the relationship between the two variables.

Correlation can be positive and negative as well. The positive correlation shows that there

is positive relationship among the variables and negative correlation shows that there is

no relationship among them. Correlation is computed into what is known as the correlation

coefficient, which ranges between -1 and +1.

The most familiar measure of dependence between two quantities is the Pearson product-

moment correlation coefficient, or "Pearson's correlation." It is obtained by dividing the

covariance of the two variables by the product of their standard deviations. Karl Pearson

developed the coefficient from a similar but slightly different idea by Francis Galton.

The population correlation coefficient ρX,Y between two random variablesX and Y with

expected values μX and μY and standard deviations σX and σY is defined as:

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http://en.wikipedia.org/wiki/Qualitative_research

http://en.wikipedia.org/wiki/Census

http://en.wikipedia.org/wiki/Social_science

http://en.wikipedia.org/wiki/Data

1.9 Regression

Linear regression is an approach to modeling the relationship between a scalar variable

and one or more explanatory variables denoted X. The case of one explanatory variable is

called simple linear regression. For more than one explanatory variable, it is called

multiple linear regression. (This term should be distinguished from multivariate linear

regression, where multiple correlated dependent variables are predicted, rather than a

single scalar variable.)

Regression Analysis could be used for a variety of purposes in research. It could be used

to test whether an overall relationship exists between the dependent variable and a set of

independent variables. It can also be used to measure the relative importance of various

independent variables in explaining the dependent variables. The other use of regression

analysis is for a prediction of values of dependent variable, that is knowing the values of

the independent variables one can predict the values of the dependent variable. In

Regression analysis, it is assumed that there is a variable that is influencing another

variable.

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1.10 HYPOTHESIS

HYPOTHESIS 1

H0: Sales promotion does not have significant impact on Stockpiling Behaviour of

consumers. (Electronics)

Ha: Sales promotion has significant impact on Stockpiling Behaviour of consumers.

(Electronics)

HYPOTHESIS 2

H0: Sales promotion does not have significant impact on Brand Switching. (Electronics)

HA: Sales promotion has significant impact on Brand Switching. (Electronics)

HYPOTHESIS 3

H0: Sales promotion does not have significant impact on Stockpiling Behavior of

consumers. (Apparels)

Ha: Sales promotion has significant impact on Stockpiling Behavior of consumers.

(Apparels)

HYPOTHESIS 4

H0: Sales promotion does not have significant impact on Brand Switching (Apparels)

HA: Sales promotion has significant impact on Brand Switching (Apparels)

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2.1 Literature Review

The properties of sales promotion can be defined as (Boddewyn & Leardi, 1989, p. 365):

“Techniques and devices commonly used on a temporary basis, to make goods and

services more attractive to distributors or final customers by providing them with some

additional benefit or inducement (incentive) or the expectations of such a benefit,

whether in cash, in kind (nature) and/or services, whether immediately or at a later time,

whether freely or conditionally.” Boddewyn&Leardi, (1989, p. 365), states the following

sales promotional types: reduced prices and free offers, premium offers of all kind,

vouchers and samples, the supply of trading tramples, promotions which are linked with

charity, and furthermore promotions related to prize of different kinds, including some

other incentive programs. All these are employed by companies to increase the

profitability through motivating consumer’s to make an immediate purchase. Another

form of sales promotion is a group promotion. A group promotion would be to offer two

complementary but different products (for example/- soap and toothpaste) being sold

together maybe at a reduced price for a limited time. Some researches prove that sales

promotions do not have a constant or continued effect on volume of sales of a firm which

tend to diminish and come at the initial level at which it was before the sales promotion is

being offered (Dekimpe, Hanssens and Silva-Risso 1999; Pauwels et al. 2002; Srinivasan

et al. 2000). However the usefulness of sales promotion, that whether it promotes, the

long term growth and profitability among brands for which it is projected is not

compulsory. (Kopalle, Mela and Marsh,1999). Research conducted by Ailawadi and

Neslin (1998) revealed that sales promotions motivate the consumers to make immediate

purchases and also positively impacts the consumption volume.

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A research conducted by Dekimpe et al. on four different product categories to find out

the permanent and temporary effects of sales promotions on sales volume. Their research

has proved that there are rarely any permanent affect of sales promotions on the volume

of sales. Thus showing that sales promotion does not change the structure of sales over

the long run, this implication is analyzed through our research also. However the long run

profitability of sales promotion is largely linked with the cost parameters and magnitude

of response, but we have made brand loyalty the benchmark of long term impact, because

it is consumer’s brand loyalty that ultimately increases the customer lifetime value, i.e. an

important indicator of future profitability. Dekimpe et al. also revealed in the research

that the diminishing impact of sales promotion may also be because of choice of brand,

quantity which is purchased and category incidence. This dimension is also covered in

our research through the analysis of extraneous variables.

In another research conducted by KoenPauwels (2002) he has examined the permanent

impact of sales promotion on accumulative annual sales for the two product categories

which include storable and perishable products. It was found that perishable and storable

product categories lack permanent effects of sales promotion. Furthermore it is revealed

that affects of sales promotion are short lived and persist only on average 2 weeks and at

most eight weeks for both product categories. The research’s results prove the common

concept that sales promotion makes only benefits which are temporary for the established

brands.

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Bawa and Shoemaker (1987) have probed the assumption that households who are deal

prone in one product class will tend to be deal prone in other product classes in a coupon

setting. A household is considered to be coupon-prone to the extent that the proportion of

purchases made with a coupon is above average across many product classes. Although

prior studies suggested that individual households do not engage in highly consistent

behavior when purchasing in different classes (e.g., Cunningham 1956, Massy et al.

1968, Wind and Frank 1969), households were found to be more consistent in their use of

coupons across product classes than would be expected if their purchase behavior were

independent across classes.

Kincade, Doris H.; Woodard, Ginger A.; Park, Haesun (2002) studied Buyer–seller

relationships for promotional support in the apparel sector which is critical for success.

The purpose of the study was to define promotional support categories offered to apparel

retailers by manufacturers, to identify the retailer's perceptions of the offering frequency

and importance of the promotional support, and to investigate the relationship between

offering frequency and perceptions of importance. Results indicated that monetary

support was regarded as the most important promotional support. A positive and

significant correlation was found between items the buyers perceived as important and

the frequency of offerings of these items.

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Liu, Yuping, (2007) found out the Long-Term Impact of Loyalty Programs on Consumer

Purchase Behavior and Loyalty. Using longitudinal data from a convenience store

franchise, the study found out that consumers who were heavy buyers at the beginning of

a loyalty program were most likely to claim their qualified rewards, but the program did

not prompt them to change their purchase behavior. In contrast, consumers whose initial

patronage levels were low or moderate gradually purchased more and became more loyal

to the firm. For light buyers, the loyalty program broadened their relationship with the

firm into other business areas. Thus there is a need to consider patronage to decide

rewards for loyalty programs.

Deeter-Schmelz, Dawn R.; Moore, Jesse N.; Goebel, Daniel J, (2000) examined Prestige

clothing shopping by consumers by a confirmatory assessment and refinement of the

PRECONscale. Aspects studied include background on the symbolic aspects of consumption;

prestige shopping behavior; reassessment and refinement of the PRECON scale and impact

of income and age on prestige shopping. The paper concludes with managerial implications

for the United States apparel retailers dealing in prestige clothing.

Kincade, Doris H.; Woodard, Ginger A.; Park, Haesun (2002) studied Buyer–seller

relationships for promotional support in the apparel sector which is critical for success. The

purpose of the study was to define promotional support categories offered to apparel retailers

by manufacturers, to identify the retailer's perceptions of the offering frequency and

importance of the promotional support, and to investigate the relationship between offering

frequency and perceptions of importance. Results indicated that monetary support was

regarded as the most important promotional support.. A positive and significant correlation

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was found between items the buyers perceived as important and the frequency of offerings of

these items.

In the context of French market, Meyer-Waarden, Lars; Benavent, Christophe. (2006)

studied the Impact of Loyalty Programs on Repeat Purchase Behaviour based on the

Behavior Scan single-source panel which has been compared with the store data base . The

double jeopardy phenomenon was present and loyalty programs did not substantially change

market structures. When all companies had loyalty programs, the market was characterized

by an absence of change of the competitive situation. (2006) studied the Impact of Loyalty

Programmes on Repeat Purchase Behaviour based on the Behavior Scan single-source panel

which has been compared with the store data base . The double jeopardy phenomenon was

present and loyalty programmes did not substantially change market structures. When all

companies had loyalty programs, the market was characterized by an absence of change of

the competitive situation

Erdem and Keane (1996) and Gonul and Srinivasan (1996) establish that consumers are

forward looking. Erdem et al. (2003) explicitly model consumers ‘expectations about future

prices with an exogenous consumption rate. In their model, consumers form future price

expectations and decide when, what, and how much to buy. Sun et al. (2003) demonstrate

that ignoring forward looking behaviour leads to an over estimation of promotion elasticity.

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Blattberg, Eppen, and Liebermann and Hastak (1979) find evidence that promotions

are associated with purchase acceleration in terms of an increase in quantity purchased

and, to a lesser extent, decreased inter purchase timing. Researchers studying the brand

choice decision-for example, Guadagni and Little (1983) and Gupta (1988)-have found

promotions to be associated with brand switching. Montgomery (1971), Schneider and

Currim (1990), and Webster (1965) found that promotion-prone households were

associated with lower levels of brand loyalty.

Blattberg, Peacock, and Sen (1976, 1978) describe 16 purchasing strategy segments based

on three purchase dimensions: brand loyalty (single brand, single brand shifting, many

brands), type of brand preferred (national, both national and private label), and price

sensitivity (purchase at regular price, purchase at deal price). There are other variables that

may be used to describe purchase strategies, examples are whether the household purchases a

major or minor (share) national brand, store brand, or generic, or whether it is store-loyal or

not. McAlister (1983) and Neslin and Shoemaker (1983) use certain segments derived from

those of Blattberg, Peacock, and Sen but add a purchase acceleration variable to study the

profitability of product promotions.

24

2.2 Theoretical Description

2.21 Sales Promotion

Sales promotion is an important component of a small business's overall marketing

strategy, along with advertising, public relations, and personal selling. The American

Marketing Association (AMA) defines sales promotion as "media and non-media

marketing pressure applied for a predetermined, limited period of time in order to

stimulate trial, increase consumer demand, or improve product quality." But this

definition does not capture all the elements of modern sales promotion. One should add

that effective sales promotion increases the basic value of a product for a limited time and

directly stimulates consumer purchasing, selling effectiveness, or the effort of the sales

force. It can be used to inform, persuade, and remind target customers about the business

and its marketing mix. Some common types of sales promotion include samples,

coupons, sweepstakes, contests, in-store displays, trade shows, price-off deals, premiums,

and rebates.

Businesses can target sales promotions at three different audiences: consumers, resellers,

and the company's own sales force. Sales promotion acts as a competitive weapon by

providing an extra incentive for the target audience to purchase or support one brand over

another. It is particularly effective in spurring product trial and unplanned purchases.

Most marketers believe that a given product or service has an established perceived price

or value, and they use sales promotion to change this price-value relationship by

increasing the value and/or lowering the price. Compared to the other components of the

marketing mix (advertising, publicity, and personal selling), sales promotion usually

25

operates on a shorter time line, uses a more rational appeal, returns a tangible or real

value, fosters an immediate sale, and contributes highly to profitability.

In determining the relative importance to place on sales promotion in the overall

marketing mix, a small business should consider its marketing budget, the stage of the

product in its life cycle, the nature of competition in the market, the target of the

promotion, and the nature of the product. For example, sales promotion and direct mail

are particularly attractive alternatives when the marketing budget is limited, as it is for

many small businesses. In addition, sales promotion can be an effective tool in a highly

competitive market, when the objective is to convince retailers to carry a product or

influence consumers to select it over those of competitors. Similarly, sales promotion is

often used in the growth and maturity stages of the product life cycle to stimulate

consumers and resellers to choose that product over the competition—rather than in the

introduction stage, when mass advertising to build awareness might be more important.

Finally, sales promotion tends to work best when it is applied to impulse items whose

features can be judged at the point of purchase, rather than more complex, expensive

items that might require hands-on demonstration.

2.22 Theories of Consumer Behaviour applied to Sales Promotion

Sales promotions set in motion a complex interaction of management decisions and

consumer behavior. If managers are ever to assume the “driver’s seat” in this interaction,

they must understand not only how but also why consumers respond to promotions

(Blattberg and Neslin 1990). The field of consumer behavior provides a rich collection of

concepts and theories that shed light on this question. In this section, we have selected the

26

topics from consumer behavior that are most applicable to sales promotions. In

accordance with the theories of consumer behavior discussed in the previous section, we

discuss the relevant topics for each of these theories for the field of sales promotions.

2.23 Economic Model applied to Sales Promotion

The relevance of the economic theory for the field of sales promotions is quite

straightforward. Temporary price reductions for certain products mean relaxations of the

budget constraint, i.e. the possibility to purchase more of the same product. Economic

theory would also imply that households with low storage costs and transaction costs are

more inclined to buy on promotion. However, as discussed before in section 2.22, the

economic model represents a quite oversimplified model of consumer behavior,

neglecting, for example, consumers’ mental decision-making, tastes, etc. It therefore

provides us with general knowledge about consumer reactions to price and income

changes, but no insights \in how other types of sales promotions influence consumer

decisions

27

2.24 Types of Sales Promotion

Types of Sales Promotion are as follows:-

a) Consumer Promotions

Consumer sales promotions are steered toward the ultimate product users—typically

individual shoppers in the local market—but the same techniques can be used to promote

products sold by one business to another, such as computer systems, cleaning supplies,

and machinery. In contrast, trade sales promotions target resellers—wholesalers and

retailers—who carry the marketer's product. Following are some of the key techniques

used in consumer-oriented sales promotions.

b) Price Deals

A consumer price deal saves the buyer money when a product is purchased. The main

types of price deals include discounts, bonus pack deals, refunds or rebates, and coupons.

Price deals are usually intended to encourage trial use of a new product or line extension,

to recruit new buyers for a mature product, or to convince existing customers to increase

their purchases, accelerate their use, or purchase multiple units. Price deals work most

effectively when price is the consumer's foremost criterion or when brand loyalty is low.

Manufacturers sustain the cost of advertising and distributing their coupons, redeeming

their face values, and paying retailers a handling fee. Retailers who offer double or triple

the amount of the coupon shoulder the extra cost. Retailers who offer their own coupons

incur the total cost, including paying the face value. In this way, retail coupons are

equivalent to a cents-off deal.

28

Manufacturers disseminate coupons in many ways. They may be delivered directly by

mail, dropped door to door, or distributed through a central location such as a shopping

mall. Coupons may also be distributed through the media—magazines, newspapers,

Sunday supplements, or free-standing inserts (FSI) in newspapers. Coupons can be

inserted into, attached to, or printed on a package, or they may be distributed by a retailer

who uses them to generate store traffic or to tie in with a manufacturer's promotional

tactic. Retailer-sponsored coupons are typically distributed through print advertising or at

the point of sale. Sometimes, though, specialty retailers or newly opened retailers will

distribute coupons door to door or through direct mail.

c) Contests or Sweepstakes

The main difference between contests and sweepstakes is that contests require entrants to

perform a task or demonstrate a skill that is judged in order to be deemed a winner, while

sweepstakes involve a random drawing or chance contest that may or may not have an

entry requirement. At one time, contests were more commonly used as sales promotions,

mostly due to legal restrictions on gambling that many marketers feared might apply to

sweepstakes. But the use of sweepstakes as a promotional tactic has grown dramatically

in recent decades, partly because of legal changes and partly because of their lower cost.

Administering a contest once cost about $350 per thousand entries, compared to just

$2.75 to $3.75 per thousand entries in a sweepstake. Furthermore, participation in

contests is very low compared to sweepstakes, since they require some sort of skill or

ability.

29

d) Special Events

According to the consulting firm International Events Group (IEG), businesses spend

over $2 billion annually to link their products with everything from jazz festivals to golf

tournaments to stock car races. In fact, large companies like RJR Nabisco and Anheuser-

Busch have special divisions that handle nothing but special events. Special events

marketing offers a number of advantages. First, events tend to attract a homogeneous

audience that is very appreciative of the sponsors. Therefore, if a product fits well with

the event and its audience, the impact of the sales promotion will be high. Second, event

sponsorship often builds support among employees—who may receive acknowledgment

for their participation—and within the trade. Finally, compared to producing a series of

ads, event management is relatively simple. Many elements of event sponsorship are

prepackaged and reusable, such as booths, displays, and ads. Special events marketing is

available to small businesses, as well, through sponsorship of events on the community

level.

e) Premiums

A premium is tangible compensation that is given as incentive for performing a particular

act—usually buying a product. The premium may be given for free, or may be offered to

consumers for a significantly reduced price. Some examples of premiums include

receiving a prize in a cereal box or a free garden tool for visiting the grand opening of a

hardware store. Incentives that are given for free at the time of purchase are called direct

premiums. These offers provide instant gratification, plus there is no confusion about

returning coupons or box tops, or saving bar codes or proofs of purchase.

30

Other types of direct premiums include traffic builders, door openers, and referral

premiums. The garden tool is an example of a traffic-builder premium—an incentive to

lure a prospective buyer to a store. A door-opener premium is directed to customers at

home or to business people in their offices. For example, a homeowner may receive a

free clock radio for allowing an insurance agent to enter their home and listening to his

sales pitch. Similarly, an electronics manufacturer might offer free software to an office

manager who agrees to an on-site demonstration. The final category of direct premiums,

referral premiums, reward the purchaser for referring the seller to other possible

customers. Mail premiums, unlike direct premiums, require the customer to perform

some act in order to obtain a premium through return mail. An example might be a

limited edition toy car offered by a marketer in exchange for one or more proofs-of-

purchase and a payment covering the cost of the item plus handling. The premium is still

valuable to the consumer because they cannot readily buy the item for the same amount.

f) Continuity Programs

Continuity programs retain brand users over a long time period by offering ongoing

motivation or incentives. Continuity programs demand that consumers keep buying the

product in order to get the premium in the future. Trading stamps, popularized in the

1950s and 1960s, are prime examples. Consumers usually received one stamp for every

dime spent at a participating store. The stamp company provided redemption centers

where the stamps were traded for merchandise. A catalog listing the quantity of stamps

required for each item was available at the participating stores. Today, airlines' frequent-

flyer clubs, hotels' frequent-traveler plans, retailers' frequent-shopper programs, and

31

bonus-paying credit cards are common continuity programs. When competing brands

have reached parity in terms of price and service, continuity programs sometimes prove a

deciding factor among those competitors. By rewarding long-standing customers for their

loyalty, continuity programs also reduce the threat of new competitors entering a market.

g) Trade Promotions

A trade sales promotion is targeted at resellers—wholesalers and retailers—who

distribute manufacturers' products to the ultimate consumers. The objectives of sales

promotions aimed at the trade are different from those directed at consumers. In general,

trade sales promotions hope to accomplish four goals:

1) Develop in-store merchandising support, as strong support at the retail store level is

the key to closing the loop between the customer and the sale.

2) Control inventory by increasing or depleting inventory levels, thus helping to

eliminate seasonal peaks and valleys.

3) Expand or improve distribution by opening up new sales areas (trade promotions are

also sometimes used to distribute a new size of the product).

4) Generate excitement about the product among those responsible for selling it. Some of

the most common forms of trade promotions—profiled below—include point-of-

purchase displays, trade shows, sales meetings, sales contests, push money, deal loaders,

and promotional allowances.

32

h) Point-Of-Purchase (POP) Displays

Manufacturers provide point-of-purchase (POP) display units free to retailers in order to

promote a particular brand or group of products. The forms of POP displays include

special racks, display cartons, banners, signs, price cards, and mechanical product

dispensers. Probably the most effective way to ensure that a reseller will use a POP

display is to design it so that it will generate sales for the retailer. High product visibility

is the basic goal of POP displays. In industries such as the grocery field where a shopper

spends about three-tenths of a second viewing a product, anything increasing product

visibility is valuable. POP displays also provide or remind consumers about important

decision information, such as the product's name, appearance, and sizes. The theme of the

POP display should coordinate with the theme used in ads and by salespeople.

i) Trade Shows

Thousands of manufacturers display their wares and take orders at trade shows. In fact,

companies spend over $9 billion yearly on these shows. Trade shows provide a major

opportunity to write orders for products. They also provide a chance to demonstrate

products, disseminate information, answer questions, and be compared directly to

competitors. Related to trade shows, but on a smaller scale, are sales meetings sponsored

by manufacturers or wholesalers. Whereas trade shows are open to all potential

customers, sales meetings are targeted toward the company's sales force and/or

independent sales agents. These meetings are usually conducted regionally and directed

by sales managers. The meetings may be used to motivate sales agents, to explain the

product or the promotional campaign, or simply to answer questions. For resellers and

33

salespeople, sales contests can also be an effective motivation. Typically, a prize is

awarded to the organization or person who exceeds a quota by the largest percentage.

j) Push Money

Similarly, push money (PM)—also known as spiffs—is an extra payment given to sales-

people for meeting a specified sales goal. For example, a manufacturer of refrigerators

might pay a $30 bonus for each unit of model A, and a $20 bonus for each unit of model

B, sold between March 1 and September 1. At the end of that period, the salesperson

would send evidence of these sales to the manufacturer and receive a check in return.

Although some people see push money as akin to bribery, many manufacturers offer it.

k) Deal Loaders

A deal loader is a premium given by a manufacturer to a retailer for ordering a certain

quantity of product. Two types of deal loaders are most typical. The first is a buying

loader, which is a gift given for making a specified order size. The second is a display

loader, which means the display is given to the retailer after the campaign. For instance,

General Electric may have a display containing appliances as part of a special program.

When the program is over, the retailer receives all the appliances on the display if a

specified order size was achieved.

34

l) Trade Deals

Trade deals are special price concessions superseding, for a limited time, the normal

purchasing discounts given to the trade. Trade deals include a group of tactics having a

common theme—to encourage sellers to specially promote a product. The marketer might

receive special displays, larger-than-usual orders, superior in-store locations, or greater

advertising effort. In exchange, the retailer might receive special allowances, discounts,

goods, or money. In many industries, trade deals are the primary expectation for retail

support, and the marketing funds spent in this area are considerable. There are two main

types of trade deals: buying allowances and advertising/display allowances.

m) Buying Allowances

A buying allowance is a bonus paid by a manufacturer to a reseller when a certain

amount of product is purchased during a specific time period. For example, a reseller who

purchases at least 15 cases of product might receive a buying allowance of $6.00 off per

case, while a purchase of at least 20 cases would result in $7.00 off per case, and so forth.

The payment may take the form of a check or a reduction in the face value of an invoice.

In order to take advantage of a buying allowance, some retailers engage in "forward

buying." In essence, they order more merchandise than is needed during the deal period,

then store the extra merchandise to sell later at regular prices. This assumes that the

savings gained through the buying allowance is greater than the cost of warehousing and

transporting the extra merchandise. Some marketers try to discourage forward buying,

since it reduces profit margins and tends to create cyclical peaks and troughs in demand

for the product.

35

The slotting allowance is a controversial form of buying allowance. Slotting allowances

are fees retailers charge manufacturers for each space or slot on the shelf or in the

warehouse that new products will occupy. The controversy stems from the fact that in

many instances this allowance amounts to little more than paying a bribe to the retailer to

convince them to carry your company's products. But many marketers are willing to pay

extra to bring their products to the attention of consumers who are pressed for time in the

store. Slotting allowances sometimes buy marketers prime spaces on retail shelves, at eye

level or near the end of aisles. The final type of buying allowance is a free goods

allowance. In this case, the manufacturer offers a certain amount of product to

wholesalers or retailers at no cost if they purchase a stated amount of the same or a

different product. The allowance takes the form of free merchandise rather than money.

n) Advertising Allowances

An advertising allowance is a dividend paid by a marketer to a reseller for advertising

their product. The money can only be used to purchase advertising—for example, to print

flyers or run ads in a local newspaper. But some resellers take advantage of the system,

so many manufacturers require verification. A display allowance is the final form of trade

promotional allowance. Some manufacturers pay retailers extra to highlight their display

from the many available every week. The payment can take the form of cash or goods.

Retailers must furnish written certification of compliance with the terms of the contract

before they are paid. Retailers are most likely to select displays that yield high volume

and are easy to assemble.

36

2.25 Limitations of Sales Promotion

Although sales promotion is an important strategy for producing quick, short-term,

positive results, it is not a cure for a bad product, poor advertising, or an inferior sales

team. After a consumer uses a coupon for the initial purchase of a product, the product

must then take over and convince them to become repeat buyers. In addition, sales

promotion activities may bring several negative consequences, including "clutter" due to

the number of competitive promotions. New approaches are promptly cloned by

competitors, as each marketer tries to be more creative, more attention getting, or more

effective in attracting the attention of consumers and the trade. Finally, consumers and

resellers have learned how to milk the sales promotion game. Consumers may wait to buy

certain items knowing that prices will eventually be reduced, for example, while resellers

have become experts at negotiating deals and manipulating competitors against one

another.

37

2.26 Stockpile

A stockpile is a pile or storage location for bulk materials, forming part of the bulk

material handling process.

Stockpiles are used in many different areas, such as in a port, refinery or manufacturing

facility. The stockpile is normally created by a stacker. A reclaimer is used to recover the

material. Stockpiles are normally stacked in stockyards in refineries, ports and mine sites.

A simple stockpile is formed by machinery dumping coal into a pile, either from dump

trucks, pushed into heaps with bulldozers or from conveyor booms. More controlled

stockpiles are formed using stackers to form piles along the length of a conveyor, and

reclaimers to retrieve the coal when required for product loading, etc.

Consumer stockpiling is a fundamental consequence of sales promotion (Neslin 2002). It

occurs because the promotion induces consumers to buy sooner or buy more than they

would have otherwise (Blattberg, Eppen, and Lieberman 1981; Neslin, Henderson, and

Quelch 1985).

Either way, consumers end up with more quantity than they would have had in the

absence of promotion. Blattberg, Eppen, and Lieberman (1981) show that promotion-

induced stock piling allows retailers to transfer inventory holding costs to consumers.

Evidence of consumer stockpiling is found directly in panel data analyses of purchase

incidence and quantity (Bucklinand Gupta 1992; Bucklin, Gupta, and Siddarth 1998;

Chintagunta and Haldar 1998; Gupta 1988),and indirectly in the detection of post-

promotion dips in weekly sales data (Macé and Neslin2004; van Heerde, Leeflang, and

Wit tink 2000 and 2004).

38

2.27 Brand Switching

Brand switching is the process of choosing to switch from routine use of one product or

brand to steady usage of a different but similar product. Much of the advertising process

is aimed at encouraging brand switching among consumers, thus helping to grow market

share for a given brand or set of brands.

Convincing consumers to switch brands is sometimes a difficult task. It is not unusual for

customers to build up a great deal of brand loyalty due to such factors as quality, price,

and availability. To encourage switching brands, advertisers will often target these three

areas as part of the strategy of encouraging brand switching.

Price is often an important factor to consumers who are tight budgets. For this reason,

advertisers will often use a price comparison model to entice long time users of one brand

to try a new one. The idea is to convince the end user that it is possible to purchase the

same amount of product while spending less money. Ideally, this means that the

consumer can use the savings for other purchases, possibly even a luxury item of some

sort. The idea of more discretionary resources in the monthly budget can be an effective

in the encouragement of jumping brands.

Reason Behind Brand Switching

The fortunes of established brand are driven by consumers fluctuating desires, not by

changed perceptions. When a consumer switches around within a set of brands, it’s

because his or her fluctuating desires temporarily alter how important it is that her or she

receives the benefits of one brand vs another. Once a product has been used, a

39

consumer’s perception of it rarely changes, but desires for the perceived benefits of

competing brands often fluctuate and it’s this that creates brand switching.

Conventional wisdom presents a very different view. Ever since the valid concept

emerged that brands are positioned perceptually, marketers have taken it for granted that

brand switching occurs because advertising has changed perceptions – or because of

promotion or lack of product availability. They assume for advertising to succeed it can

must move consumer’s perceptions closer to their ideal.

However, when consumers brand perceptions are tracked for an established brand, one

finds they are rarely any different during or after a campaign that increased market share

than they were before, because the share went up, these tracking results are usually

dismissed as meaning only that perceptual changes were too subtle to measure or that

some critical attribute was missed. Had this research been taken at face value, marketers

Would now be looking at their brands very differently and established brand would be

managed more profitably.

2.28 Relationship between Sales Promotion and Brand Switching

The long run impact of sales promotion is studied by us through measuring the

relationship between consumer’s perceptions of sale promotion and consumer’s brand

switching . Sales Promotion of any product leaves an impact on the acquiring behaviors

of the consumers for a particular product or brand that the consumer will not buy

otherwise (Alvarez and Casielles, vc 2005). The research also revealed that for the

product categories which have more percentage of loyal consumers, any activity of sales

promotion

40

3.1 Data Presentation

3.11 Demographics of Respondents

Demographics Demographics Number of

Respondents

% of

Respondents

Gender Male 50 50%

Female 50 50%

Profession Business man 1 1%

Service 19 19%

Student 78 78%

Others 2 2%

Age 21-30 89 89%

31-40 7 7%

41-50 4 4%

Above 50 _ _

Location North Delhi 52 52%

South Delhi 10 10%

East Delhi 9 9%

West Delhi 24 24%

Central Delhi 5 5%

Table 3.1 – Demographics of Respondents

41

3.2Testing Hypothesis

For testing the Hypothesis Regression test has been applied

3.21 Formula FOR REGRESSION:

3.22 Elements of a regression equation:

The regression equation is written as Y = a + bX +e

‘Y’ is the value of the Dependent variable (Y), what is being predicted or

explained.

‘a’ or Alpha, a constant; equals the value of Y when the value of X=0

‘b’ or Beta, the coefficient of X; the slope of the regression line; how much Y

changes for each one-unit change in X.

‘X’ is the value of the Independent variable (X), what is predicting or

explaining the value of Y‘e’ is the error term; the error in predicting the value

of Y, given the value of X (it is not displayed in most regression equations

42

3.3 HYPOTHESIS 1

H0: Sales promotion does not have significant impact on Stockpiling behaviour of

consumers. (Electronics)

H1: Sales promotion has significant impact on Stockpiling behaviour of consumers.

(Electronics)

Statement no. 1 to 7 measures the stock piling and statement no 13-19 measures the

Sales Promotion.

Model R R

Square

Adjusted

R Square

Std. Error of

the Estimate

Change statistics Durbin watsonR square

changeF change

df1

df2

Sig. F change

1 .548a .300 .293 5.072 .300 42.089 1 98 .000 1.936

a) Predictors: (constant) Sales Promotion Total

For testing Hypothesis 1 Regression testing has been applied.

3.31 Correlations

Sales Promotion

Total

Stock Piling Total

Sales Promotion Total Pearson Correlation

Sig. (2-tailed)

N

1

100

.548

.000

100

Stock piling Total Total Pearson Correlation

Sig. (2-tailed)

N

.548

.000

100

1

100

43

Model

Un-standardized

Coefficients

Standardized

Coefficients

t. Sig.B Std error

Beta

1. (Constant)

Sales promotion Total

8.255

.542

1.810

.084 .584

4.560

6.488

.000

.000

a) Dependent Variable: Stock piling Total (Electronics)

3.32 Analysis:-

The value of correlation between the two variables stock Piling and sales promotion is

0.548, which is positive in direction and which is significant also. The value of the R2

is .300 which means that sales promotion has significant impact of 30% on stock piling

behavior of consumers as when there is sales promotion in electronics then promotions

impact directly on stock piling.

Regression equation between the two variables can be established as follows :-

Y = 8.255 + 0.542b.

3.33 Interpretation:-

As the p value (=0.000) obtained from regression table is less than the value of alpha

0.05, so the null hypothesis is rejected and the alternate hypothesis is accepted. Thus it is

verified that sales promotion has significant impact on stock piling behaviour of

consumers in electronics.

44

3.4 HYPOTHESIS 2

H0: Sales promotion does not have significant impact on Brand Switching. (Electronics)

HA: Sales promotion has significant impact on Brand switching. (Electronics)

Statement no. 8 to 12 measures the Brand Switching and statement no 13-19 measures

the Sales Promotion.

Model R R

Square

Adjusted

R Square

Std. Error of

the Estimate


changeF change

df1

df2

Sig. F change

1 .568a .323 .316 3.465 .323 42.788 1 98 .000 1.462

a) Predictors: (Constant) Sales Promotion Total

For testing Hypothesis 2 Regression testing has been applied.

3.41 Correlations

Sales Promotion

Total

Stock Piling Total


Sig. (2-tailed)

N

1

100

.568

.000

100


Sig. (2-tailed)

N

.568

.000

100

1

100

45

Model

Un-standardized

Coefficients

Standardized

Coefficients

t. Sig.B Std error

Beta

1. (Constant)


5.098

.391

1.237

.057 .568

4.122

6.840

.000

.000

a) Dependent Variable: Brand Switching (Electronics)

3.42 Analysis:-

The value of correlation between the two variables Brand Switching and sales promotion

is 0.568, which is positive in direction and which is significant also. The value of the R2

is .323 which means that sales promotion has significant impact of 32.3% on Brand

switching as when there is sales promotion in electronics then promotions impact directly

on Brand Switching.

Regression equation between the two variables can be established as follows :-

Y = 5.098 + 0.391b.




verified that sales promotion has significant impact on Brand Switching in electronics.

46

3.5 HYPOTHESIS 3

H0: Sales promotion does not have significant impact on Stockpiling Behavior of

consumers. (Apparels)

Ha: Sales promotion has significant impact on Stockpiling behavior of consumers.

(Apparels)

Statement no. 1 to 7 measures the stock piling and statement no 13-19 measures the

Sales Promotion.

Model R R

Square

Adjusted

R Square

Std. Error of

the Estimate


changeF change

df1

df2

Sig. F change

1 .418a .175 .166 5.180 .175 20.730 1 98 .000 2.116


3.51 Correlations

Sales Promotion

Total

Stock Piling Total


Sig. (2-tailed)

N

1

100

.418

.000

100


Sig. (2-tailed)

N

.418

.000

100

1

100

47

Model

Un-standardized

Coefficients

Standardized

Coefficients

t. Sig.B Std error

Beta

1. (Constant)


15.496

.382

1.976

.084 .418

7.841

4.553

.000

.000

a) Dependent Variable: Stock Piling (Apparels)

3.52 Analysis:-

The value of correlation between the two variables Stock piling and sales promotion is

0.418, which is positive in direction and which is significant also. The value of the R2

is .175 which means that sales promotion has significant impact of 17.5% on stock piling

behaviour of consumer as when there is sales promotion in apparels then promotions

impact directly on stock piling behaviour of consumers.

Regression equation between the two variables can be established as follows:-

Y = 15.496 + 0.382b.




verified that sales promotion has significant impact on stock piling behaviour of

consumers in apparels.

48

3.6 HYPOTHESIS 4

H0: Sales promotion does not have significant impact on Brand Switching (Apparels)

HA: Sales promotion has significant impact on Brand switching (Apparels)

Statement no. 8 to 12 measures the brand switching and statement no 13-19 measures the

Sales Promotion.

Model R R

Square

Adjusted

R Square

Std. Error of

the Estimate


changeF change

df1

df2

Sig. F change

1 .484a .234 .226 3.879 .234 29.940 1 98 .000 1.916


3.61 Correlations

Sales Promotion

Total

Stock Piling Total


Sig. (2-tailed)

N

1

100

.484

.000

100


Sig. (2-tailed)

N

.484

.000

100

1

100

49

Model

Un-standardized

Coefficients

Standardized

Coefficients

t. Sig.B Std error

Beta

1. (Constant)


7.995

.343

1.480

.063 .484

5.403

5.472

.000

.000

a) Dependent Variable: Brand Switching (Apparels)

3.62 Analysis:-

The value of correlation between the two variables Brand switching and sales promotion

is 0.484, which is positive in direction and which is significant also. The value of the R2

is .234 which means that sales promotion has significant impact of 23.4% on Brand

switching as when there is sales promotion in apparels then promotions impact directly

on Brand Switching.

Regression equation between the two variables can be established as follows:-

Y = 7.995 + 0.343b.




verified that sales promotion has significant impact on Brand switching in apparels.

50

4.1 Findings of the study:-

The study deals with the impact of the Sales Promotion on the Brand Switching and

Stock Piling behaviour of consumers, since the objective of the study was to study the

effect of promotional strategies on consumer purchase behavior in the electronics

industry & apparels industry.

a) Brand Switching usual takes place when a customer does not get any beneficial

scheme or promotional scheme on a brand which he/she is using. Sometimes customers

switch to non-favourite brand due to good promotional offers.

b).It has been statistically approved that stock piling and sales promotion in electronics

are not directly related to each other. Customers do not stock the electronics products as

the technology keeps on changing from time to time so these products cannot be stocked.

Also electronics is not a convenience good and are generally require a considerable

investment to purchase it.

c) Some past studies shows that there is a direct relationship between sales promotion and

brand switching. Customers usually switch the brands when they get an attractive offer

from another brand, but it does not help all the brands and it is beneficial for short term

purposes.

d) Sales promotion is also a technique to retain the present customers. Usually some

brands give special promotional offers to their existing customers, so that they don’t

switch the brand. This can help in stock piling of the products as customer will tend to

buy more products of same brand.

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e) Customers also stock the products because the products are available at cheaper prices

and in case of electronics customers go for promotional offers where they get more then

one product in less amount.

f) When the sales promotions are on in the apparels, customers usually stock the product

for the future purposes, so there are some other factors responsible for the stock piling.

g) In the apparels industry, when the company provides more and more discounts, brand

losses its identity in market. When the sales promotion increases for the apparels, 72.4%

of the customers usually switch to the another brand to gain the competitive advantage.

h). As the sales promotion increases, the 87% of the respondents usually stock the

apparels to stock the products. Aggressive promotions have the direct impact on the

brand switching due to which brand loses its market share and its image is affected.

i) Women are usually attracted by the promotions due to which they usually switch to

brand in the apparels sector.

j) While purchasing electronics, family decision plays a vital role and thus sometimes

sales promotion does not affect the purchaser’s intention.

k) In Electronics industry, the customer may not switch the brand because he/she may be

brand loyal. Electronics cannot be purchased again and again, so customers will purchase

the same brand which they usually buy and will not switch to another brand.

l) Regression was also used to find out the impact of sales promotion on brand switching

and stock piling behaviour of consumers.

52

4.2 Limitation of the study

a) Sample size was restricted to 100 only which acted as a constraint

b) The responses given by respondents are not always accurate because the respondents

give the response according to their interpretation.

c) Survey is a time consuming process but the time to collect the data for research was

very less.

d) This study is limited to Delhi only and result may differ if conducted in other regions.

Also it measures the consumer preference in electronics and apparels industry. If the

same study is repeated for other industry consumer preference of sales promotion

schemes may vary.

e) The study is limited to sales promotion schemes of electronics and apparels industry

categories only and result may vary if study is conducted for other product categories.

f) There are other variables besides sales promotion schemes which affect brand

switching and stock piling behaviour of an individual consumer.

g) Evaluation is based on the primary data generated through questionnaire and accuracy

of the findings entirely depends on the accuracy of such data and unbiased responses of

the customers.

53

4.3 Scope for Further Study

The scope of the present is that the focus of the study is limited to the study of consumer

behavior in terms of brand switching and stock piling as affected by the sales promotion.

The study is focused on the electronics and apparels sector. Geographically study is

confined to Delhi. The main scope of this study is to ascertain the effect of sales

promotion of the sales promotions on brand switching and stock piling.

The researcher of the present study believes that the basic questions of the study have

been answered. The current study was aimed at yielding descriptive result on which type

of sales promotion is more preferable. The other important finding of the current study

was the relationship between such variables as Brand switching and stock piling

behaviour with preference to sales promotional. However, this will not answer the

question ―how these relationships occurred. Therefore, in this regard further study is

needed to investigate the reasons behind these associations. As it is mentioned in the

study, the purpose was to investigate preferable sales promotional tool for electronics and

apparels industry. The authors of this study strongly believe that significant findings can

be generated by investigating the topic under different industries as well as in other

product categories also.

54

5.1 Recommendations

a) Since there is the inverse relationship between Sales promotion and Brand switching

so the Innovative Sales Promotions techniques must be used such as free sales services

etc in electronic industry to maintain a reasonable customer base so as to decrease brand

switching.

b) Attracting customers is one thing but retaining them is a tedious task which requires

great effort. So in order to maintain a large customer base both these industries have to

introduce new promotional strategies to enhance their brand.

c) Excessive sales promotions erode quality and image of brand therefore sales promotion

as a strategy should be used in precautious manner so as to balance between its

immediate and long term effects.

d) Discounts as a tool of sales promotion if used frequently will deteriorate brand image.

Other innovative ways such as loyalty cards by the companies etc must be introduced to

support the sales promotion function and attract and retain customers.

e) Customers are more price sensitive so they switch to another brand easily during

promotional period. The companies dealing in apparels should create the brand loyalty

among the customers by providing them quality products in better prices as to retain the

customers during promotional period as well.

f) Since the Electronics products are not being purchased in bulk so the companies should

use several other sales promotion activities during the festive season.

g) In both the industries namely apparel and electronic brand switching is a major

concern which beckons a need for developing effective steps to minimize it

55

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http://forum.johnson.cornell.edu/faculty/gupta/Is%20three-fourths%20of%20the%20sales%20promotion....pdf

ANNEXURE A : QUESTIONNAIRE

I Pranav Khullar, student of Gitarattan International Business School

affiliated to Guru Gobind Singh Indraprastha University, New Delhi. As a

part of our academic curriculum I am undertaking this research titled “A

Study of Impact of Sales Promotions on Brand Switching and stock piling

Behaviour of Consumers”. Would request your cooperation in form of

honest responses. Rate the statements as per your interest & knowledge from 1 to 5, where 5 is most

considerable, 4 is considerable, 3 is neutral, 2 is less considerable & 1 is very less

considerable.

Part A :-

S.No SCALE ITEMS ELECTRONICS APPARELSSTOCK PILING

1I tend to buy more products when sales

promotions are on. 1 2 3 4 5 1 2 3 4 5

2My basket size increases when sales promotion

are on. 1 2 3 4 5 1 2 3 4 5

3I get drooled by sales promotions and purchase

more products. 1 2 3 4 5 1 2 3 4 5

4 I purchase products in bulk when sales

promotions are on to take the low cost advantage. 1 2 3 4 5 1 2 3 4 5

5Discounts are a major contributor of impulsive buying.

1 2 3 4 5 1 2 3 4 5

6I buy products even when not required during

promotions.

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1 2 3 4 5 1 2 3 4 5

7I usually stock products when sales promotions

are on. 1 2 3 4 5 1 2 3 4 5

BRAND SWITCHING

8 I don’t mind switching my usual brand to take

advantage of promotional offers. 1 2 3 4 5 1 2 3 4 5

9 Price consciousness is higher than Brand

Consciousness. 1 2 3 4 5 1 2 3 4 5

10 Sales promotion attract me to purchase the

product that I have never used it. 1 2 3 4 5 1 2 3 4 5

11 If u get an attractive promotional offer in the

product other then you preferred most, will you

switch over. 1 2 3 4 5 1 2 3 4 5

12 I do not switch my Brand even if competitor products are on heavy discounts.

1 2 3 4 5 1 2 3 4 5

SALES PROMOTION13 I wait for promotions to purchase products.

1 2 3 4 5 1 2 3 4 514 I delay my purchases till there is an attractive

offer. 1 2 3 4 5 1 2 3 4 5

15 Before shopping I see where all promotional

offers are running. 1 2 3 4 5 1 2 3 4 5

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16 Promotions are an important evaluation criteria of

product selection. 1 2 3 4 5 1 2 3 4 5

17 It’s a pleasure shopping during promotional

period. 1 2 3 4 5 1 2 3 4 5

18 I normally buy a brand which is on deal

1 2 3 4 5 1 2 3 4 519 I prefer to wait to take the advantage of

promotional schemes. 1 2 3 4 5 1 2 3 4 5

Part B :-

NAME

SEX Male Female

PROFESSIONBusiness Man Service Student Others

AGE 21-30 31-40 41-50 Above 50

LOCATIONEast Delhi West

DelhiNorth Delhi

South Delhi

Central Delhi

EMAIL ID

THANK YOU FOR YOUR PARTICIPATION AND SUPPORT !

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ANNEXURE B: RELIABILITY STATISTICS OF THE

INSTRUMENT USED IN PRIMARY DATA

Reliability Statistics

Cronbach’s Alpha Cronbach’s Alpha Based on Standardized Items

N of items

.879 .879 19

Item Total Statistics

Item Statistics Mean Std.

Deviatio

n

N

I tend to buy more products when sales

promotion are on.

3.1667 1.11675 30

My basket size increases when sales

promotion are on.

2.7333 .86834 30

I get drooled by sales promotions and

purchase more products.

2.5000 1.07479 30

I purchase products in bulk when sales

promotions are on to take the low cost

advantage.

2.9000 1.34805 30

Discounts are a major contributer of

implusive buying.

3.1000 1.12495 30

I buy products even when not required

during promotions.

2.3000 1.34293 30

I usually stock products when sales

promotion are on.

1.7667 .85836 30

I don’t mind switching my usual brand to 2.7000 1.08755 30

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take advantage of promotional offers.

Price consciousness is higher than Brand

consciousness.

2.6333 1.27261 30

Sales promotion attract me to purchase the

product that I have never used it.

2.3000 1.05536 30

If u get an attractive promotional offer in

the product other then you preferred most,

will you switch over..

2.6000 1.03724 30

I do not switch my Brand even if

competitor products are on heavy

discounts.

2.5667 1.10433 30

I wait for promotions to purchase products. 2.4667 1.13664 30

I delay my purchases till there is an

attractive offer.

2.6000 1.22051 30

Before shopping I see where all

promotional offers are running.

3.0333 1.24522 30

Promotions are an important evaluation

criteria of product selection.

2.8333 1.20583 30

It’s a pleasure shopping during promotional

period.

2.9667 1.15917 30

I normally buy a brand which is on deal 3.0667 1.22990 30

I prefer to wait to take the advantage of

promotional schemes.

2.8000 1.29721 30

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Pranav Project Sem 4 Final

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