A STUDY OF IMPACT ON BUYING BEHAVIOUR WITH RESPECT TO PROMOTIONAL ACTIVITIES
AMAN SINGH BANA
LITERATURE REVIEW 4
1. Personal Selling: 5
2. Advertising: 5
3. Sales Promotion: 5
4. Publicity: 6
5. Public Relation: 6
6. Point of Purchase Display: 6
7. Packaging: 6
8. Direct Mail: 6
9. Other Forms of Promotion: 6
CASE STUDY : TATA NANO 7
CONSUMER SURVEY 16
The purpose of this research paper is to determine the effects of promotional activities on the consumer buying behaviour and the advantages of these kind of activities to the consumers. After the initial research , a survey questionnaire was created to determine the attitude of the consumers towards the promotional activities and so as to have an insight on the decision making process of the consumers. The survey of 120 consumers provided some vital information on the attitude of customers towards discounts offered by the companies and other promotional activities.
Promotion is used by by the retailers or manufacturers to attract customers to buy more of the good and services offered by the company. Promotional activities today include not only advertising but also various activities like offering discounts, buy 1 get 1 offers, on pack offers and many more such kind of activities to attract more and more consumers.
In order to improve the marketing strategies companies should look to addressing the below mentioned points while designing their marketing strategies.
• Consumer psychology while choosing among different brands and alternatives.
• How consumer is affected by his peer groups , family and other factors?
• What kind of advertisements have a long lasting impact on consumers?
• How lack of information affects the decision making process of the consumer?
In the survey conducted it was seen that around 36% of people are motivated by discounts while choosing a particular product and about 80% people claim that they have bought goods during a sale which they were not planning to buy which indicates that discounts play a major role in attracting new consumers. Consumers also seem to believe that the promotional activities are of advantage to them as the increase their information about the product and help them in better decision making while buying a product.
This report reviews the concepts and theories relevant to promotional activities. The literature
review will consist of buying process and various types of promotional activities.
The consumer buying process
• Consumers needs and wants are not the same
• An understanding of consumer needs is essential for market segmentation and the development of the marketing program.
• Marketers must create the appropriate stimuli to foster need recognition.
• Consumers trust internal and personal sources of information than external sources.
• Consumers narrow their potential choices to an evoked set of suitable alternatives that may meet their needs.
Evaluation of alternatives
• Consumers translate their needs into wants for specific products or brands.
• Marketers must take steps to understand consumers choice criteria and the importance they place on specific product attributes.
• Marketers must ensure that their products are in the evoked set of potential alternatives.
• A consumer's purchase intention and the actual act of buying are distinct concepts.
• Several factors may prevent the actual purchase from taking place.
• Marketers must ensure that their product is available and offer solutions that increase possession utility.
Post purchase evaluation
• Post purchase evaluation is the connection between the buying process and the development of long term customer relationships.
• Marketers must closely follow consumers' responses.
Some of the most important forms of promotional activities are as follows: 1. Personal Selling 2. Advertising 3. Sales Promotion 4. Publicity 5. Public Relation 6. Point of Purchase Display 7. Packaging 8. Direct Mail 9. Other Forms of Promotion.
Personal selling and advertising are the two best known forms of promotion. In terms of cost and market impact, it is the most important form. Personal selling is an important part of promotional programme. It is commonly supported by advertising. The other forms of promotion are sales promotion, publicity and public relation. It is important for the successful promotional programme. The other methods of promotion are point of purchase display, packaging and direct mail.
1. Personal Selling:
It is the most important, the most effective and the most costly form of promotion. It is the best means of oral or face to face or direct communication. Personal presentation has the prospect of effecting sales. Its effect is to push the product through the distribution channel.
It is an impersonal method of communication as well as an impersonal salesmanship for mass selling and it is a means of mass communication. Advertising is also an important form of promotion and it costs less than personal selling.
3. Sales Promotion:
The marketing activities other than advertising, publicity and personal selling are known as sales promotion. It serves as a bridge between personal selling and advertising. It is an aggressive method of a selling.
It is a non-personal stimulation of demand as advertising. It stimulates demand for a product or service or a business unit by making publicity in radio, television or stage.
5. Public Relation:
It is a form of promotion. It creates, develops and maintains a bright image of an organisation on the public. Thus the goodwill of the seller increases and leads to good selling and promotes the sale of goods. Under competition and consumer-oriented marketing it is very effective.
6. Point of Purchase Display:
It is the silent salesman that attracts the buyers' attention to the product and makes them decide to buy. Promotion at the point of purchase is more effective. Proper display of products is done by manufacturers or distributors. It varies widely. Automobile show-room with promotional literature and pricing information helps the buyers to test the products. Display serves to examine the product and make buying decision. With the combination of personal selling and advertising, display gives the maximum effectiveness.
It differentiates and protects a product. It plays two critical promotional roles. First it calls the attention of the customer to the product in retail stores. Secondly it carries the selling messages and other information to make buying decision. Package provides product protection, ease of handling, selling ability, convenience and information. It attracts the customers.
8. Direct Mail:
Newspaper advertisement reaches lakhs of people, while direct mail is sent to the selective customers. It will attract the customers to buy the goods. It is more effective than advertisement, because it gives information directly. It is a supplement to other forms of promotion. It helps the product awareness or acceptance. It increases purchase probabilities, when buyers are contacted directly or when they see displays.'
9. Other Forms of Promotion:
Sampling is one form of special promotion. Sampling of new food products, and other consumer products, especially sample medicines to doctors are to introduce the new products to the consumers. Couponing is yet another form of promotion.
CASE STUDY : TATA NANO
India is a company with majority of its population residing as low income group. Buying a car is still a dream for many people in India. Cars are restricted strictly to people belonging to upper middle class and above them. However, in the year 2008, Ratan Tata under the banner of Tata Motors limited announced the launch of its new car, which would be a revolutionary product in the automobile sector. He called it as 1 lakh Rupee car and so was publicized in all the mass media across the nation. The dream of a Middle and even lower middle class household to have their own car came alive with this announcement from Tata Motors. It was hailed to be the next generation technology and was also lauded by International media as well. However, it was a totally different story that unfolded when the car actually rolled on the roads.
When Tata Nano was announced in the month of January, 2008 it was over hyped to be the car of every Indian. The price of Nano was said as Rs. 1 lakh or $2500, as said by Ratan Tata, the Chairman of the Tata Group at that point of time. It became a dream car for every person belonging to the lower middle class and even the lower class. However the ministry of transport also raised concerns about the congestion on roads that the car would bring in as people may start to use it regularly for their day to day transportation.
Tata Motors basically Segmented and targeted the following groups of Indian population:
1. The Middle class
• Mainly the lower middle class
• Upper lower class
2. Usually the two-wheeler users
3. Family with 3-4 members who have troubles while travelling on a 2-wheeler.
Tata Motors positioned the car as per the following catch lines and slogans:
• 1 lakh car to fulfill all your dreams!
• Cars are not just for the rich
Tata Nano was launched in the segment of being a cost leader in the broad market to attract maximum number of the population. We can place it in the quadrant as shown in the picture below at the point of time of its launch.
With Tata Nano being launched in the Indian market it now gave the power to the common man of India to dream to own his own car. The advertisements and media publications highlighted the emotional quotient showing the happiness of children when they see a car coming their home and the delight on the face of the family members who depicted a middle class group.
The struggling India class who had a monthly salary of less than Rs.6000 per month and constituted more than 110 million households also got the encouragement to dream of buying a car.
Mr. Ramesh Mangaleswaran, the partner of McKinsey and co predicted that in Mumbai alone the 2 million people who rode a motorcycle everyday would now try to lift themselves up to buy a Tata Nano.
It was also expected that Tata Nano would create a revolutionary change in the lifestyle, specially with respect to commutation of the common man and would become a face of the Indian lower class just like Bajaj Scooter once became for the middle class.
The after launch issues
Ratan Tata kept his promise and the Indian market saw Nano ready to roll on the roads in the month of July, 2009. At the beginning the sales for the car was very high but gradually it started to decline on a per month basis. There are several reasons that have been figured out for a downfall like that.
Problems with the car:
• Not suited at all to be used in hilly terrains
• There were incidents of car engine catching fire and excess of heating
• Engine used to make a lot of noise and people even started comparing it with an auto
• Interiors were dull with insufficient leg space
• The entire body of Nano was very light and would get spoilt even if slightly bumped.
Pricing related issues:
• It was promised and also publicized as to be the 1lakh rupee car of the Indian market. However when it came for selling it costed around Rs, 25 thousand more. This was a hefty sum for their target customers who were belonged to the lower section of the middle class.
Issues with Promotion:
• As there was an excess of hype in the market for the Tata Nano, instead of becoming the Smart car of the Indian Market, it became the “The Cheapest Car”.
• Also while promoting the entire product from Tata Motors the marketers as well as the designers of the car missed out on the most important behavior of the Indian Consumer.
• When an Indian consumer buys a car, or even anything that is seen to the public, the consumers think
• What his/her neighbors are going to think about him and his car.
• How will the car represent him in the society?
• What will the public think when the consumer will take out his entire family in the car?
• And many more…
• Car is regarded as a status symbol for the customer.
• Hence the USP of the Tata Nano “The car for every Indian” ideally worked against it and despite having heavy bookings initially the sales went down gradually.
(graph source: cartoq.com)
From the perspective of the Consumer based brand equity model (CBBE), the attributes mentioned in the report earlier had the following perceptions:
• Convenience: True
• Comfort: Doubtful as Boot space etc were less
• Pride: Strong No
• Status Symbol: Doubtful
• Display of smartness: Doubtful
• Economic/ Easy on pocket: True
• Mileage/Fuel efficiency: True
• Power: Doubtful
• Car personality: Very weak
Other key issues
Complacency: Tata Nano received around 200000 bookings initially. This made them probably feel complacent and they didn't bother for improvising of implementing any new advertising strategy to keep the interest of the people intact. In fact, when the first fire incident was reported, the advertisement strategy followed henceforth only looked reactive and enhanced instead negative publicity.
Unclear target audience: Tata Nano was actually considered to be targeted at the people who had never thought of buying a car. It was targeted at motor cycle riders, second hand car owners and other families in the lower middle class group. Now this led to a somewhat contradictory situation. As per the target audience the media and the society accepted this as a Poor man's car. However Ratan Tata in his earlier press conferences had mentioned that he wanted to position Tata Nano as an ‘affordable, all weather family car”. So it was a clear mismatch in the concept that Ratan Tata had it in his mind and how the marketers actually positioned it in the market.
Confused customers: When Nano later raised its price to overcome the negatives of the first model, the price became much higher. In fact the top end Model of Tata Nano is presently (2014) quoted at an on road price of around Rs.2.6 lakhs in Bangalore and so is the price in other places as well. This type of pricing with the same Nano model which the poor man also owned, confused the customers. As mentioned earlier people in India while buying the car also think about the social status they would get associated with if they drive the car. So the customers thought of instead adding a few more thousands and buying another car in the market which was repeatedly and consistently doing good, i.e. “Maruti”.
Year 2013- The re-launch
In the year 2013 Tata motors re-launched Tata Nano with all new features and advertising campaigns. The re-launch focused primarily on:
--Youth: Targeting the youth of the country the new Nano had fancy settings like settings and color combinations such as farm side or adventure sports.
-- Rational Benefits: The advertisements and campaigns this time focused on the smartness factor. They educated the prospective customers on “Why not buy a Nano when it gives everything at a half price”. It also highlighted once again the Rational benefit of Fuel efficiency in a new way.
--Tie Ups: This time Tata Nano followed a new type of campaign al together. They started to sponsor programs on MTV that encouraged adventure sports and extended the campaign to National television. Like the series Roadies aired on MTV where the participants have to travel on a Hero Karizma they tried to implement a similar strategy where the participants were asked to travel across India in a Tata Nano. This also highlighted how tough the car was built.
-- Safety: It focused on the emotional aspects of a parent and advertised in a way that parents can actually give their kids a Tata Nano instead of giving them bikes as car is compared safer to a bike. This would also make them smart parents.
When the Re-launch had been planned the experts had predicted that it was actually too late for Tata Nano to implement such strategies and come up once again in the market expecting a good response. As they predicted, the same happened. Even with all these new features embedded in the new Nano the car failed to grab the sales number and instead the sales fell down more and more.
From the perspective of Consumer behavior Tata Nano is a product with complex buying behavior. It is a high involvement product and is sensitive to high differences between various brands.
People are concerned about the safety issues so Tata Nano should address the safety needs of the people. The complex buying behavior people seek a lot of information before they actually buy any product. Therefore, Nano should make effective communication to such segments who are its prospective customers. Also, there are a lot of satisfied Nano customers as well. Nano should use their references and indeed their help to publicize about the brand through word of mouth publicity in a positive aspect.
During the market survey it was also observed that many people wanted to buy Nano however, they were skeptical to buy the car as they were not aware on how to Drive a car. This was also seen earlier when Maruti had entered the market and Maruti opened up driving schools. Similarly Tata Motors should also open up Driving schools or Training schools to interact more with the customer and gain trust and loyalty instead.
Post Purchase Feedback
As mentioned in the point above as well, there are many customers of Tata Nano who are happy of their purchase. This point can be leveraged upon to attract more customers for the little car. Also it was found during a survey after Nano's failure that people didn't find it safe and often treated and regarded it as a Toy car. Nano should look up to include additional safety systems in its car and should also communicate these new additions very aggressively to change the outlook of the people towards Tata Nano.
Focus on Females
Often it has been seen and observed that females associate themselves to Tata Nano easily. They find it easy and convenient to drive because of its small size, yet features required to commute. Tata Motors should think of launching special editions of the car targeting the Female drivers. This should also be advertised on similar grounds. This can turn risky as the car then may be perceived only for Women but launching of special edition on occasions such as Mother's day or Women's day would suffice and can prove to be useful marketing.
Besides Targeting the Females Tata Nano should also look ahead to target other segments of the society who can be their prospective buyers. Initially they had messed up on segmenting and targeting with contradictions in their vision and working. Their prospective customers can be:
• College going kids who consider cars to be cool and parents who think cars are comparatively safer
• New people joining the IT and bank sector
• Old age people who regard costly car as waste of money or just need a simple and convenient means of transport
• Small cabs. This has been successful in Sri Lanka as well where they have been using Tata Nano as taxis.
A survey conducted of 130 respondents provided several insights were provided on the mindset of a consumer while making a purchase. It as seen that most consumers were influenced by discounts and advertisements about the product while making a purchase. Most of the consumers believed that TV ads had a long lasting impact on their minds indicating that TV ads are the best option to promote a product. Also people tend to believe that brands endorsed by a celebrity are of high quality and it changes the perception of consumer towards the product.
• How often do you go shopping ?
2. Which factor influences you the most while choosing your brand ?
The results show that 23% of people are most affected by the advertisements while choosing a brand. While 20% of people are influenced by their family and work place and 21% are influenced by the peer groups.
It clearly suggests that advertisements play a major role in decision making process of the consumer. Companies should make sure that they align their marketing strategies with the buying process of the consumer. Advertisements instil a sense of curiosity in the minds of a consumer which motivates them to check a product and buy it.
3. What motivates you during the buying process? (in order of preference with 1 being the highest)
The results show that 70% of people are motivated the most by the discounts and advertisements while making a purchase. What's more interesting is that around 60% people stated that they keep need for products as 4th or 5th factor while deciding which product to buy which indicates that discounts and other promotional activities play with the psyche of the consumer and influence them to buy more. Discounts were stated as 1st or 2nd factor by 50% of the people whereas, 53% of the people are influenced by the advertisements. The results clearly show that promotional activities play a major role in attracting new customers as well as retaining old customers
4. According to you what kind of advertisement have a long lasting impact?
It is clearly evident that TV advertisements have a long lasting impact on the minds of a consumer and they reach out to the maximum no. of audience. Various brands hire celebrities to do the advertisements and they invest highly when it comes to TV advertisements.
Quality advertisement and celebrity endorsements create a huge impact on the minds of a consumer and it enhances the image of the product. Companies start promoting their products much before their launch to create a awareness for their product and identify the correct market segment to target.
5. Do quality advertisements change your perception about the product ?
6. Do you believe that brands endorsed by celebrities are of good quality ?
This clearly shows that quality advertisements and celebrity endorsements act as a major influence when it comes to the consumer buying process. Around 82% of the respondents believe that quality advertisements change their perception about the product and only 15% people believe that brands endorsed by the celebrities are not of good quality while the rest 85% think otherwise.
7. How often will you buy on sale goods that you were not planning to buy ?
The results clearly indicate that the consumers tend to buy on sale goods which they won't have
bought otherwise. This shows that sales and promotional activities attracts more customers and increase the sales of the company.
About 82% of the respondents claim that they have bought on sale goods that they were not planning to buy. It is clear that companies use seasonal discount sales so as to attract more customers and increase their customer base.
8. Do you agree that sales promotions would cheapen the image of the products that are on sale?
One downside to the sales promotions is that 45% consumers believe that sales cheapen the image of the product. So it becomes increasingly important for the brands especially high end brands to plan their market strategies accordingly.
The rest 55% of the consumers don't think that sales promotion affects the image of the product and they look forward to purchasing products when they are offered for a discount. Many Indian consumers, look forward to seasonal sales and discounts when planning to buy a product.
9. Do you think that offers made by the companies are beneficial for you ?
19% of the respondents believe that offers made by the companies are beneficial for the customers and not only a tool for companies to increase their sales.
While 74% of the respondents believe that sometimes offers are beneficial and at other times they are used by the companies to get rid of the standing stock.
Also 7% of the people believe that offers are not at all beneficial for the customers.
10. Do you think brand sell what they advertise ?
The main problem is the misleading advertisements used by some companies , such advertisements mis-inform the consumers and create a false image about the product. They are used to manipulate the customers.
70% of the respondents believe that the product advertised matches the product sold by the companies while the other 30% still believe that companies use advertisements to manipulate the customers and create a false image of their product.
11. Do you think promotional activities are must for a brand to attain success?
Inspite of the mixed reactions seen above people still believe that promotional activities are a must for a brand to attain success and establish themselves in the market. Companies should conduct proper market research to develop their market strategies as per the expectations of the consumer
In this report we have discussed about the definitions and concepts of promotional activities, and sales promotions and how they are related to business objectives as well as the components of the consumer buying process. Understanding the concept through the help of the case study on TATA NANO was very crucial in finding out how promotional acivities can make a product success or a failure.
The report also sums up the survey done on 130 people about how promotional activities affect their buying behavior Finally, the consumer buying process was researched and discussed so that an analysis of how consumers go about buying a product and how firms can influence consumers during the course of the buying process could be performed. By knowing the five steps consumers take in the buying process, it becomes more possible to develop ways to affect their decision making process. With knowledge of what consumers do and consider when they buy along with the various means firms have available via promotions in affecting consumer decisions.
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