research on factors affecting impulse buying

Program & Batch: PGDM (DCP) 2012-14Term: VCourse Name: Consumer BehaviorName of the faculty: Dr. Sita MishraTopic/ Title : Factors affecting Impulse Buying in an FMCG

Product CategoryOriginal or

Revised Write-up:

Original

Group Number: 5Contact No. and email of Group Coordinator:

+91 9810995672, [email protected]

Group Members: Sl. Roll No. Name1 12DCP-051 Karthik Akunuru2 12DCP-067 Mohit Jain3 12DCP-073 Nikhil Saxena4 12DCP-085 Rahul Agarwal5 12DCP-086 Rahul Bhardwaj6 12DCP-101 Satyam Gupta7 12DCP-122 Utkarsh Nagar

Factors affecting Impulse Buying in an FMCG Product Category2013

Factors affecting Impulse Buying in an FMCG Product Category

A Project Report for

Consumer Behavior

Post-Graduate Diploma in Management

By

Group-5

Under the guidance of

Dr. Sita Mishra

Assistant Professor

Marketing

Institute of Management Technology, Ghaziabad

AUGUST, 2013

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Certificate of Approval

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The following Term Project Report titled Factors affecting Impulse Buying in an FMCG Product Category" is hereby approved as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of Post-Graduate Diploma in Management for which it has been submitted. It is understood that by this approval the undersigned do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn therein but approve the Term Project Report only for the purpose it is submitted.

Name Signature1. Faculty Examiner Dr. Sita Mishra

ACKNOWLEDGEMENT

Words are indeed inadequate to convey our deep sense of gratitude to all those who have helped us in completing this academic project to the best of our ability. Being a part of this project has certainly been a unique and a very productive experience for us. We are really thankful to our faculty, Dr. Sita Mishra, for making all kinds of arrangements for us to carry out the project successfully. His timely guidance and help enabled us in solving all kinds of queries regarding the project work.

Last but not the least we would like to thank all our colleagues at IMT-G, who have directly or indirectly helped us with their moral support for the completion of this project.

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Table of Contents

1. Introduction6

2. Rationale for the Project.7

3. What is Impulse Buying? ......................................................................................................8

4. Consumer Behavior in Impulse Buying.8

5. Chocolate Industry Worldwide..9

6. Chocolate Industry in India...11

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7. Identifying an FMCG Product Category characterized by Impulse Buying..12

8. Research Methodology..12

9. Primary Research

a. Part 1: Identifying an FMCG Product Category characterized by Impulse Buying

13

b. Part 2: Factors affecting Impulse Buying of

Chocolates.14

10. Conclusion & Recommendations..17

11. Appendices19

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Introduction

Impulse buying is to buy some product or service in an unplanned way, just before a purchase.

Feelings and emotions play a decisive role in buying a product just because of its exposure at

the right time with might be a right message. Marketers and retailers have learnt to exploit

these impulses which are related to basic want for instant gratification. Many items are

strategically placed near the payment counter where, most of the times, a customer has to wait

for few minutes for his turn and view the prominently displayed items and cant help himself

but pick few of the items out of instant gratification. These items trigger impulse buyers to

purchase what had not considered purchasing at the first place. Alternatively impulse buying

can occur when a potential buyer spots something related to a product that stimulates a

particular passion in him like flag of some country over a DVD. Apart from effective retail

communication impulse buying can also take place because of the discount offers.

Impulse items can be anything, a new product, samples or well established products at

surprisingly low prices. Though impulse buying is not restricted to FMCG products, still

FMCG products are the item where this phenomenon is at most used and is most appropriate.

There can be products like candy, gum, mints and chocolate or products like DVDs and CDs or

stationery items like pen, pencils, and erasers or in the summer time retailers put their

refrigerators near the counter to increase the sales of cold drinks and juices. Following are

some factors related to products which trigger impulse buying:

Packaging: It attracts the at most attention of a customer. A celebration pack of

chocolates packed in a fancy way is definitely going to attract a customer.

Scent: On the way to a cash register a deodorant or a shampoo or some item with a nice

aroma is going to attract the customers attention

Sale: A discounted item is always appealing to a customer for all the saving a customer

can do over it.

Shelf Placement: Certain items are put at the eye level in order to increase the visibility

of the item.

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Thus FMCG products are easy to expose to the customers and have a lot of appeals which can

attract customer to go out of their way and make the purchase. Retailers are very particular

about what all products to place near the counter and impulsive buying contributes

significantly in the overall sales.

Rationale for the Project

Impulse buying has always been a challenge in marketing due to its complex nature. Impulse

buying is a difficult and multifaceted phenomenon which is responsible for a huge volume of

the products sold each year. Consumer researchers have focused on identifying the various

factors which induce impulse buying in different developed countries. In the developing

economies, there is a necessity to study the impulse buying because of the latest development

in retailing and huge cultural differences when compared to developed economies. Increase in

salaries, life style and credit availability have made impulse buying a widespread phenomenon

across the different retail formats. Making an attractive shopping environment and in-store

stimuli is very important to increase the sales through the unplanned purchase. Current Indian

retailing environment could provide a lot of scope for consumers to become impulsive in

different product categories. The universal nature of impulse buying can be capitalized by

retailers to benefit their respective businesses. The combination and synergistic effect of the

many factors influencing impulse buying could lead to more sales, thus benefiting the

marketers and retailers. The following are some reasons to study impulsive buying behavior of

the customers with reference to FMCG products:

Effect of various external stimuli on the impulse buying behavior

Effect of various internal stimuli on the impulse buying behavior

Effect of product and situational related factors on impulse buying behavior

Effect of demographics and socio-cultural aspects on impulse buying behavior

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What is impulse buying?

An impulse purchase or impulse buying is a spur of the moment, unplanned decision to buy a

product or service, made just before the actual purchase. One who makes such a purchase is

called an impulse purchaser or impulse buyer. Emotions and feelings play a major role in

purchasing, as per many researches. This is triggered when the person sees the product or is

exposed to a well-crafted promotional message. Marketers and retailers tend to exploit these

impulses to buy which are tied to the basic want for instant gratification. It is often seen that

consumers end up buying products at retail stores that they didnt really plan to buy. This is

because consumers behaviour is often driven by their unconscious mind, which makes them

do impulse buying. Such purchases ranges from small (chocolate, clothing, magazines) to

substantially large (jewellery, vehicle, work of art) and usually (about 80 percent of the

time) lead to problems such as financial difficulties, family disapproval, or a feeling of guilt or

disappointment.

Consumer behaviour in impulse buying

Impulse purchasing is an important phenomenon for researchers in consumer behaviour and

retailing. Studying consumer behaviour regarding impulse purchases is important and was

started long back. The classification of a purchase as planned or impulse began with the Stern

(1962) study where he provided the basic framework of impulse buying by categorizing a

buying behaviour as planned, unplanned, or impulse. Planned purchases involve time-

consuming information-searching with rational decision making, whereas unplanned buying

refers to all shopping decisions made without any advance planning. Impulse buying is

distinguished from the unplanned buying in terms of quick decision making. In addition to

being unplanned, an impulse purchase also involves experiencing a sudden, strong, and

irresistible urge to buy. Iyer (1989) further distinguished that all impulse purchases are

unplanned, but unplanned purchases are not always impulsively decided. Han et al. (1991)

modified the Stern (1962) classification of impulse mix in context of fashion products and

developed as four types of impulse buying:

i) Planned impulse buying

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Factors affecting Impulse Buying in an FMCG Product Category2013ii) Reminded impulse buying

iii) Suggestion or fashion-oriented impulse buying

iv) Pure impulse buying

Planned impulse buying is partially planned but specific product or categories are not decided

by the shopper. They are further determined on the basis of the different sales promotions

inside the shop. Reminder impulse buying occurs when the buyer is reminded of the need of

the product noticing it in the shop. Pure impulse buying is a novelty or escape purchase which

a shopper breaks the trend of usual shopping.

"Traditional" marketer-controlled stimuli such as the product itself, the product's position on

the shelf, atmospherics (Kotler, 1972), salesmanship, tie-ins have been identified by consumer

researchers as prompts for unplanned or impulse purchases.

Chocolate Industry Worldwide

Chocolate is one of the most popular foods of the world. From its origin in South America to

its consumption in Europe, chocolate has a very long and rich history. Chocolate has been

traded internationally for many centuries now, both nationally and internationally.

Consumption of chocolate, especially Dark Chocolate and other sugar free chocolates, are

growing because of their health benefits. Chocolates come in many flavors, sizes and

packaging. The word chocolate originated from a Spanish word. Chocolate is made from the

beans we get from cacao tree. They are very bitter and usually sugar is added to the cocoa

solids.

A brief History:

The origins of chocolate can be traced back to people from ancient Maya and Aztec

civilization, which first made the spicy drink made from roasted cacao beans. Cacao has been

cultivated in Mexico and America for at least past 3 millennia from 1100BC. The secret for

making chocolate was taken to France in 1615. They adopted the chocolate drink quickly and

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Factors affecting Impulse Buying in an FMCG Product Category2013it gradually spread to other European nations. As European nations colonized different parts of

the world, they setup cacao plantations to ensure a constant supply of chocolate.

The following figure shows the places where cocoa beans are produced.

Different Types:

There are many different types of chocolates. They are broadly classified into 4 main

categories.

1. Dark chocolate

2. Sweet chocolate

3. Milk chocolate

4. White chocolate

Many chocolate manufacturers have created a variety of products from bar chocolates to fudge,

so that they could attract different kinds of customers with varying needs.

The following shows the revenue for the top 10 chocolate manufacturers in the world.

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Chocolate Industry in India

The chocolate industry in India is mainly dominated by two companies Cadbury and Nestle.

The market leader is Cadbury which has a lion's share of about 70 percent. During early 90s,

Cadbury had a market share of over 80 percent, but then entered Nestle and spoiled the scene.

The Gujarat Co-operative Milk Marketing Federation (GCMMF) and Central Arecanut and

Cocoa Manufactures and Processors Co-operative (CAMPCO) are the other companies which

are operating in the Indian chocolate segment. Competition in this segment is becoming very

fierce with the entrance of companies like Mondelez, Mars, Nestle, Perfett Van Melle, Parle

and ITC which are launching new products. A wide variety and innovative products like a

lollipop that can overcome boredom, sugar-free mint for calorie conscious, a toffee that can

boost romance, and dark chocolates that are bitter at the same time sweet have come up in the

market.

The Indian chocolate industry is Very fragmented with a range of products catering to a

variety of consumers and age groups. There are different types of bars/slabs, jellies, lollipops,

toffees and sugar candies. Given the huge population in the country it is a surprise to note that

the Per capita chocolate consumption is very low at 120gms whereas in countries like Ireland,

Germany and Belgium it is more than 11kgs. However, Indians consumed around 22,000 tons

of chocolate last year.

India's chocolate market is estimated to be around Rs 3,000 crores while the organized

confectionery market is around Rs 2,000 crores. The overall chocolate market is said to be

growing at 15% a year, while the growth in modern retail is almost double of that rate.

Awareness about chocolates is very high in urban areas, which has a population of about 38

crore, at over 95%. TechSci Research recently published a report stating that India's chocolate

market is expected to reach about $3.2 billion by 2018 due to increasing gifting culture and

increase in the income.

Higher disposable incomes and a taste for richer chocolates in recent times have ensured a

steady growth of the premium chocolate market in India. With a market share of 10 per cent of

the Rs 2,000-crore chocolate market, the premium segment is pretty small. Yet, it is growing at

a steady rate of 30-40 percent per annum, according to industry estimates.Group 5 Page 15

Factors affecting Impulse Buying in an FMCG Product Category2013Both chocolate and sugar confectioneries have a very low penetration levels in India, in fact,

even lower than biscuits, which reach out to about 56 per cent of the households. The launch of

lower-priced, smaller bars of chocolate in the last few years and positioning of chocolate by

the companies as a substitute to traditional sweets during festivals, have boosted the sales of

the chocolates to a large extent especially during the festive seasons.

Identifying an FMCG Product Category characterized by Impulse Buying

Consumers going for impulse Buying do not think much about the consequences or give a

much considered thought before making a purchase. Impulse buying, as the name suggest, is a

phenomenon done impulsively where buying done by consumer is done without any evaluation

and carried out in a unreflective manner. The consumer going for impulse buying focuses on

the instant gratification which buying of the product provides rather solving some (pre)existing

problems or need to find a predetermined need in the mind of the consumer. Nonetheless to

say, impulse buying is a hedonically complex process and simulates an emotional process.

As per the researchers like, Rook and Hook (1983) identified 5 important elements assisting in

impulse buying:

1. A spontaneous and sudden desire to buy

2. A presence of Psychological Disequilibrium

3. An onset of psychological struggle and conflict

4. A reduction in cognitive evaluation

5. A lack thought process regarding the impulse buying consequences.

Research Methodology

This project relies on primary research to achieve the objectives undertaken. The research is divided into two parts:

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The first part deals with identifying an FMCG product category that is characterized by impulse buying.

Once an FMCG category has been identified, the second part deals with identifying which factors affect impulse buying in that particular category.

Primary Research

Part 1: Identifying an FMCG product category that is characterized by impulse buying

Questionnaire Design

Focusing on the rationale of the project, we identified a set of objects which can be categorized

under the umbrella of impulse buying products. In order to understand the consumer behavior

in context of impulse buying, we as group members developed a Qualifying Question which

states the following:

While shopping, which of the following products have you usually ended up buying

unplanned (impulse buying)?

These categories are: **

1. Personal Care Example like Toothpaste, Hair oil etc.

2. Home care Example like Detergent s soaps, bathing soaps.

3. Foods Examples like Chocolates, Ice Creams.

4. Beverages Examples like Tea, Juices.

(**Please refer the questionnaire in the appendix 1A.)

Method of Survey

The group members took the survey on the personal device assistants like tabs and went to one

of the Big Bazaar outlets of city Ghaziabad. In addition to this, they also visited other retail

outlets like Easy Day, Goel Super Markets (a nearby retail supermarket Shop).

Results from Part 1 of Primary Research

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Factors affecting Impulse Buying in an FMCG Product Category2013The group members requested the customers to fill the questionnaire, and recorded the results.

As per results from the survey, Chocolates is a product category for which maximum

respondents said they made impulse buying. Using the results from part 1 of the research, we

narrow our project scope to factors affecting impulse buying in this particular product

category, i.e., Chocolates.

(For detailed results, refer Appendix 1B)

Part 2: Factors affecting Impulse Buying of Chocolates

Questionnaire Design

From the exploratory study we found out that buying a chocolate is generally an impulsive

decision.

Now we will try to find the answers for

What are the attributes which make this category for impulse buying?

At what all places does it take place?

What impact does the pricing of chocolates have on customers decision?

What are the internal and external motivations to buy a chocolate?

Why that particular brand of chocolate?

Few potential place where identified after a brainstorming session such as supermarket,

general shops, bakery, gift shops, etc. Placement of chocolates within these stores was another

factor looked at upon. Some broad categories within this factor would be places like the billing

counter or sweet and chocolate sections. The case when the customers themselves ask about

chocolates when they are not visible was also covered. To estimate on average how much a

customer is willing to pay for buying chocolate during an impulse decision, a question was

asked where respondents were asked to choose a price range from a list of price ranges.

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Factors affecting Impulse Buying in an FMCG Product Category2013Questions on how discounts and other promotional activities affect their buying decision were

also asked.

To understand the extrinsic and intrinsic motivation factors, questions on packaging, such as

image on the packet, size of the packet, material use for packing etc. were asked. Even

questions related to health consciousness were incorporated in the survey.

(Please refer the questionnaire in the appendix 2A.)

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Factors affecting Impulse Buying in an FMCG Product Category2013Analysis of Results of factors affecting Impulse Buying of Chocolates

(For detailed results, refer Appendix 2B)

Place of Impulse Purchases: Most impulse buying of chocolates takes place in supermarkets

and general stores.

Placement of Chocolates within stores: A very small percentage (10%) of respondents said

that they asked for the chocolates themselves. For the rest 90%, impulse buying happened

because the chocolates were kept at an approachable/visible place within the store, i.e., either

in shelves meant for chocolates or at stands placed near the billing counter. Majority of the

respondents said that they were tempted into buying chocolates when they were placed near

the billing counter.

This finding was also supported by the fact that 63% respondents said they bought chocolates

impulsively because they were waiting in the billing queue and picked up chocolates placed in

stands placed nearby.

Most Favorable Price Range: Most of the respondents (48%) bought chocolates in the price

range of Rs.21-40 impulsively.

Effect of Advertisements on Impulse Buying: 52% of respondents disagreed that they

remembered a particular chocolates advertisement which led them to impulsively make the

purchase. 18% respondents were neutral to the idea and only 30% remembered the

advertisements that led to impulse buying. This is an astounding finding that indicates that

chocolate ads, even though creative, do not lead to impulse buying.

Impact of Packaging Color: From survey results, it is found that the color of packaging plays

a major role in inducing impulse buying. 54% of respondents said that they were attracted by

the color of packaging that led them into buying a particular chocolate.

Impact of Discounts: Most of the respondents (63%) disagreed with the notion that discounts

like price discounts, extra grammage etc. compel them into making chocolates impulsively.

There could be two plausible reasons for this:

There are rarely any discounts offered on chocolatesGroup 5 Page 20


Discounts on chocolates do not lure consumers into buying chocolates impulsively

Appeal of New Brands: Launching new brands of chocolates can also induce impulse buying,

though not to a great extent. There was a small but significant portion (39%) of respondents

that bought chocolates impulsively just because they wanted to try a new brand.

Brand Pull: Majority of the respondents (76%) were pulled into buying chocolates

impulsively because they had a liking for a particular brand. This implies that brand plays a

major role in influencing impulse buying in chocolates.

Word-of-Mouth (WOM) Marketing: More than half of the respondents bought chocolates

impulsively because some of their relatives or friends had advised them to try that chocolate.

WOM marketing led them to buy chocolates impulsively.

Buying Induced by Other Users: Majority of respondents said that they were tempted when

they saw other consumers eat or buy chocolates.

Effect of Sales Force: Almost all the respondents declined the notion that they bought

chocolates impulsively because they had been approached by a salesman to try a chocolate. A

possible reason for this could be that sales force is seldom used to promote chocolates.

Effect of other Packaging aesthetics: As per the survey, text and images on the packaging

and the quality of packaging do not play a major role in attracting consumers towards buying a

chocolate impulsively. However, a unique shape does attract consumers.

Induced Craving: Almost all the respondents (88%) said that they felt a craving for chocolates

when they saw them and that led them into buying chocolates impulsively. It is scientifically

proven that eating chocolates releases certain hormones like endorphins, serotonin, and

phenylethylamine that enhance our happy moods. Endorphins cause feelings of euphoria and

trigger the release of sex hormones. Serotonin is a necessary chemical in our brain for us

to be in a happy mood and to be aroused. Phenylethylamine (PEA) increases the pulse rate

and feelings of excitement, resulting in sensations similar to those experienced when one is in

love. These feelings of pleasure that chocolates give may be one of the reasons why people

feel a craving for chocolates and get tempted into buying them.

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Factors affecting Impulse Buying in an FMCG Product Category2013Buying chocolates also had a positive correlation with being in a happy mood (72%

respondents said they bought chocolates because they were in a good mood).

Calorie-Consciousness: Most of the respondents (60%) who were tempted into impulse

buying of chocolates do not care for the extra calories that are associated with chocolates.

Other way of interpreting this would be to say that calorie conscious consumers do not buy

chocolates impulsively.

Other factors: Chocolate ingredients and energy provided by them do not have a significant

effect on impulse buying of chocolates.

Conclusions & Recommendations

To induce impulse buying of chocolates, marketers should ensure that chocolates are

placed at locations within the store where they have a good visibility and preferably

within physical reach of consumers.

To induce impulse buying, most of the chocolates placed near the billing counter should

be in the range of Rs. 21-40. Then there can be chocolates in the range up to Rs.20 and

from Rs.41-60. Chocolates above Rs.60 do not induce much impulse buying and

should account for a very small, if at all, proportion of chocolates placed near the

billing counter.

The color of packaging plays a major role in attracting consumers towards chocolates

and this attribute should be used carefully by marketers to induce buying. Further

research would be required to determine colors/color combinations most effective in

inducing impulse buying of chocolates. Such a research is out of scope for this study.

A strong brand image should be created by using a sound advertising strategy.

Marketing campaigns should focus on the most distinctive characteristics of chocolates

like taste, packaging and establish an emotional connect with the consumers. Marketers

should strive to have a strong recall for their brands in the minds of consumers to

promote impulse buying.Group 5 Page 22


Since most of the buyers are tempted into buying chocolates impulsively when they see

others buying or eating chocolates, marketers can use this observation by placing

posters or displays in supermarkets which depict people eating chocolates.

The fact that WOM marketing plays a major role in inducing impulse buying of

chocolates combined with rising role of social media in marketing, marketers should

strive to form online communities on social media platforms to promote their brands of

chocolates and use WOM marketing to promote impulse buying of their brands.

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Appendices

Appendix 1A: Questionnaire to determine FMCG Product Category characterized by

Impulse Buying

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Factors affecting Impulse Buying in an FMCG Product Category2013Appendix 1B: Summary of Results from Questionnaire in Appendix 1

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Appendix 2A: Questionnaire to determine factors affecting impulse buying in chocolates

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Factors affecting Impulse Buying in an FMCG Product Category2013Appendix 2B: Summary of Responses from questionnaire on Factors affecting impulse

buying in Chocolates

From where have you bought chocolate(s) unplanned? (Tick as many as relevant)

Please check the ones which are relevant to you:

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Factors affecting Impulse Buying in an FMCG Product Category2013What would be the most suitable price range in which you usually buy chocolates unplanned?

I remembered its advertisement when I saw the chocolate

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Factors affecting Impulse Buying in an FMCG Product Category2013The color of the packaging was attractive

There were some discounts on the chocolate like price discounts, 10% extra free etc.

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Factors affecting Impulse Buying in an FMCG Product Category2013Wanted to try a new brand

Most chocolates under this brand taste good

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Factors affecting Impulse Buying in an FMCG Product Category2013My Friend/Relative advised me to try a particular chocolate

I saw someone else buy/eating it; I got tempted to buy a chocolate.

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Factors affecting Impulse Buying in an FMCG Product Category2013A salesperson approached me to buy it

I was waiting in the queue, saw the chocolates in a nearby shelf; added it to my cart.

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Factors affecting Impulse Buying in an FMCG Product Category2013The images on the packaging were attractive

The text on the packaging was attractive

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Factors affecting Impulse Buying in an FMCG Product Category2013Shape of the chocolate packaging was unique/attractive

Quality of packaging material was good

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Factors affecting Impulse Buying in an FMCG Product Category2013I bought the chocolate because of its unique ingredients (pure veg./nuts etc.)

I felt a craving for it when I saw it

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Factors affecting Impulse Buying in an FMCG Product Category2013I was happy/in a good mood, so I bought a chocolate

I was feeling low, bought chocolate to uplift my mood

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Factors affecting Impulse Buying in an FMCG Product Category2013Chocolates give me instant energy

I dont care about the calories; wanted to indulge myself, so bought a chocolate

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Primary ResearchPart 1: Identifying an FMCG product category that is characterized by impulse buyingQuestionnaire DesignMethod of SurveyAppendix 1A: Questionnaire to determine FMCG Product Category characterized by Impulse Buying

research on factors affecting impulse buying

Documents

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fmcg product category2013the

fmcg product category2013group

fmcg product category20137

impulse buying13b

term project report

project work

academic project