Factors affecting buying behavior at the point of sale

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A Study of factor affecting impulse buying behavior by rural

consumers at the point of purchase

A dissertation submitted in partial fulfillment of the requirements

for the award of

PGDM

by

Tushar

Part-time Post Graduate Programme in Management

Management Development Institute

Gurgaon 122 007

August, 2013

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A dissertation submitted in partial fulfillment of the requirements

for the award of

PGDM

by

Tushar

under the guidance of

Shri Dr. Chinmaya Kulshrestha

Assistant Professor

MDI, Gurgaon

Part-time Post Graduate Programme in Management


Gurgaon 122 007

August, 2013

3

Certificate of Approval

The following dissertation titled A Study of factor affecting impulse buying behavior by rural

consumers at the point of purchase is hereby approved as a substantive work/study in management

carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the

award of PGDM 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 dissertation only for the purpose it is submitted.

Dissertation Examination Committee for evaluation of dissertation

Name Signature

1. External Examiner

_______________________ ___________________

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Certificate from Dissertation Advisory Committee

This is to certify that Mr. Joshi Tushar Kumar, a participant of the Part-time Post Graduate

Programme in Management has worked under our guidance and supervision. He is submitting this

dissertation titled A Study of factor affecting impulse buying behavior by rural consumers at the

point of purchase in partial fulfillment of the requirements for the award of the PGDM.

This dissertation has the requisite standard and to the best of our knowledge no part of it has been

reproduced from any other dissertation, monograph, report or book.

Dr. Chinmaya Kulshrestha Mr.

Assistant Professor


Gurgaon Gurgaon

16th August 2013 16th August 2013

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Abstract



by

Joshi Tushar Kumar Govindlal

For companies to attain commercial success, it is important that managers understand consumer behavior. The relationship between consumer behavior and marketing strategy is emphasized because the success of companies’ marketing strategies depends upon managers’ understandings of consumer behavior (understanding of consumer behavior is especially important during a recession -Kotler and Caslione (2009). When consumer buys some products indicates how well the company’s marketing strategy has been executed.

The study of customer behavior is based on consumer buying behavior, with the customer playing three distinct roles: Shopper/payer, buyer & consumer. Research has shown that consumer behavior is difficult to predict, even for experts in the field (Armstrong & Scott, 1991). Consumer behavior involves the psychological processes that consumers go through in recognizing their needs, finding ways to solve these needs, making purchase decisions (e.g., whether to purchase a product and, if so, which brand and where), interpret information, make plans, and implement these plans (e.g., by engaging in comparison shopping or actually purchasing a product).

This study is focused around impulse buying of low involvement products, meaning purchase made by consumer without planning in advance. This work is an attempt to find out the factors that drive consumer’s buying behavior – Target spend, occasion, price, promotion, display etc. The study is based on the primary data collected from consumers at NCR as well as Gujarat with the help of structured questionnaire. Data analysis has been done using SPSS & XLSTAT software. The statistical analysis method employed in this study is Factor Analysis & PCA.

Impulse buying is a sudden and immediate purchase with no pre-shopping intentions either to buy the specific product or to fulfill a specific buying task. The finding of the study indicates that pricing strategies, store characteristics, situational factors and promotional activities mostly influence the impulse buying behavior of consumers. In case of pricing factor, it is noticed that products with reduced price is bought as impulse purchase. Also income level of consumers affects impulse purchase positively.

In case of store factor, it is important how the stores induce consumers to be impulsive. POS offers, display of product in shelf and behavior of sales person are influencing consumers to be impulse buyers. Marketers for rural India should put more efforts creating attractive and eye catching POS offers & product display providing information regarding new products. Relation with store keeper, his/her friendliness and attention are necessary to attract customers.

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Findings also indicate that situational factors such as popularity (brand) of product, comments of reference group and requirements of products in festival seasons influence impulse buying. Branded products organized in the shelf of local store at hand reach; help to recall its need. If family members or friends go with the consumer, they motivate him/her to be impulsive by suggesting prominent & existing brands.

Last factor of this study is advertisement activity. It can be specific brand offer, advertisement of product in print and visual media or any sort of promotion of products in village are during mela / haat that initiate impulse buying behavior of consumers.

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Acknowledgement

I owe a deep gratitude and heartfelt thanks to Dr Chinmaya Kulshrestha, who has encouraged and guided me

throughout my research work. I also express my heartfelt gratitude to my revered guide for his unmitigated support,

meticulous reviews, in depth inquiries and advice on the work. It has added immense value to thesis. I want to thank

Mr. Anoop Manohar, my industry guide for provide inputs from real business side as well as Misha from Knowledge &

Insights group of Coca-Cola India, Rahul from Ipsos research agency for their suggestions & support during this work.

Thanks are due to Dr. Neelu Bhullar, Chair Person, PTPGP program, Management Development Institute, Gurgaon

for her hard inspiration and providing valuable support. I also want to share my gratitude towards staff members –

Shrinivas, Ravinder and Tokas for being instrumental and excellent communication between student and institute to

ensure timeliness. Without them it would have been not possible to complete the research work.

Again, I sincerely express my profound gratitude to all faculty members of MDI providing immense learning during my

study tenure that is what has enabled me to complete this work and made difference to my life.

It need special appreciation and thanks to my colleagues at Coca-Cola - Diana, Lopa, Prashant and Mili for helping

and encouraging me throughout the study & research tenure and accommodating at various challenging occasions like

business travels & meetings.

During these two and half years of long hours of work and ups & downs, my family and friends stood by me. My wife

Mamta & son Jaytirth needs special mention for putting up with my crazy working hours and preoccupations.

I want to thank my friends Harsh, Khushhal, Muneesh, and Neeraj as well as all classmates – for standing beside me

during all ups & downs during whole tenure of MDI.

My mother, father and brother are always there to support through tough times and encouraged me constantly, always.

I express my deep sense of gratitude to all the respondents who participated in the survey of the study and spared their

valuable time to provide the requested responses

All are not mentioned but none is forgotten.

Tushar Joshi

Gurgaon

16th

August 2013

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Table of Contents

Page

Abstract V

Acknowledgement VII

Table of Contents VIII

List of Figures X

List of Tables XI

List of Appendices XII

List of Abbreviations XIII

I SECTION – 1

1.1 Introduction 1

1.2 Business Problem 4

1.3 Research Problem 5

1.4 Research Questions – Objectives 6

1.5 Hypothesis 6

II SECTION – 2

2.1 Secondary Research 7

2.1.1 Review of Literature 7

2.2 Primary Research 23

2.2.1 Study Methodology 23

2.2.2 Factors selected of Study 24

2.2.3 Sample 24

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2.2.3.1 Profile of final Sample 25

2.2.3.2 Research Procedure 25

2.2.3.3 Questioners 26

III SECTION – 3

3.1 Result & Discussion 27

3.2 Conclusion & Recommendations 34

3.3 Limitations & Future Research 35

IV SECTION – 4

4.1 Bibliography 36

4.2 Appendices 42

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List of Figures

Figure No. Description Page

1 Competition Strategy 10

2 Black Box Model of Consumer behavior 11

3 Consumer buying decision making process 18

4 Graphical representation of communalities 32

5 PCA mapping of factors 33

6 Screen Plot of Eigen values 47

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List of Tables

Table No. Description Page

1 Factors Affecting Consumer Buying Behavior 19

2 Profile of respondents 25

3 Table 3: KMO and Bartlett's Test 28

4 Percentage Variation Explained 29

5 Rotated Component Matrix 30

6 Factors Nomenclature 30

7 Communalities of different components 31

8 Communalities against different components for graphical format 31

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List of Appendices

Appendix

No.

Description Page

1 Preliminary questionnaire 42

2 Final Survey questionnaire 44

________________________________

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Abbreviations

VOC: Voice of Customer / Consumer

FMCG: Fast Moving Consumer Goods

NCAER: National Council for Applied Economic Research

Rs. : Rupees

INR: Indian Rupees

CSR: Corporate Social Responsibility

NDTV: New Delhi Tele Vision

MNC: Multi-National Corporations

NGO: Non-Government Organizations

NCR: National Capital Region

KMO: Kaiser-Meyer-Olkin

PCA: Principal Component Analysis

Qi: Question i

Sig.: Significance

Ho: Null Hypothesis

H1: Alternate Hypothesis

SPSS: Statistical Package for Social Sciences

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SECTION: 1

1.1 Introduction

Retailer’s shop is certainly an important medium for direct conversation with consumer. To ensure

effective communication, there is need of congruence between all four Ps of marketing: product-

package-price-promoter (retailer in most of the cases). When consumer walks up to retail counter – Its

retailer / package / brand should spell out a crisp and winning Shop Speech for product. This

phenomenon is more critical for all low involvement categories. Point of sale is always critical place for

gaining authentic consumer & business insights / VoC.

Currently majority of trade in rural India (where 70% of Indian population lives) is happening at

conventional retail outlets. Again rural India has untapped potential that do not have ready access to

modern form of outlets as of now. In future, I expect traditional stores will go through a transformation

or consolidation to survive against environmental changes.

In last few years now, the lure of rural India has been the subject of animated discussion in corporates.

And there are many reasons too. With urban markets getting saturated for several categories of FMCG

and with rising rural incomes, marketing executives are fanning out and discovering the strengths of the

large rural markets as they try to expand their markets. Today, the idea has grown out of its infancy and

dominates discussions in any corporate boardroom strategy session.

A survey by the NCAER, India's premier economic research entity, shared report that rise in rural

incomes is keeping pace with urban incomes. From 55 to 58 per cent of the average urban income in

1994-95, the average rural income has gone up to 63 to 64 per cent by 2001-02 and touched almost 66

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per cent in 2004-05. The rural middle class is growing at 12 per cent against the 13 per cent growth of

its urban counterpart. Even better, the upper income class those with household incomes of over Rs

one million [$22,700] per annum is projected to go up to 21 million by 2009-10 from four million in 2001-

02. It will have a 22 to 23 per cent rural component. Higher rural incomes have meant larger markets.

Already, the rural tilt is beginning to show. A study by the Chennai-based Francis Kanoi Marketing

Planning Services says that the rural market for FMCG is worth $14.4 billion, far ahead of the market

for tractors and agro-inputs which is estimated at $10 billion. Rural India also accounts for sales of $1.7

billion for cars, scooters and bikes and over one billion dollars of durables. In total, that represents a

market worth a whopping $27 billion.

It is no wonder that Indian firms as well as MNCs have cottoned on to the idea of a resurgent rural India

waiting to happen. Now Coke's rural growth far outstrips its urban growth. Coke has recently started a

CSR campaign of support my school for empowering rural schools with Toilets, Drinking water and

other facilities. This initiative is supported by NDTV as well as other 60 corporates. Coke is not the only

MNC to have cottoned on to the rural lure. Hindustan Lever Ltd, the $2.3 billion Indian subsidiary of

Unilever, the country's largest FMCG Company, has also got on the track. Its Project Shakti uses self-

help groups across the country to push Lever products deeper into the pyramid. Its program creates

income-generating capabilities for underprivileged rural women; improves rural quality of life by

spreading awareness of best practices in health and hygiene; empowers the rural community by

creating access to relevant information through community portals and it also works with NGOs to

spread literacy.

Vertical integration of the food market from farm to fork becomes the best way to achieve literacy and

serve the interest of every stakeholder in the chain the farmer, the processor, the retailer and the

consumer. As Ashok Gulati of the US-based International Food Policy Research Institute put it, the

future of Indian agriculture in general and the farmer in particular depends on the how soon they can

become globally competitive. Indian economic policy realizes this. Between the 8th (1992-97) and the

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10th (2002-07) Five Year Plans, successive governments have tripled the spending on rural

development from $6.82 billion to $20.2 billion. All this potential has got India's big business houses

rushing to enter and expand rural businesses.

Tata Chemicals ran a chain called Tata Kisan Kendra, which offer farmers all the products and services

ranging from agriculture inputs to fiancé options. Today, the Tata has 421 franchisee-run centers and

reaches out to over 3.6 million farmers. Like the Tatas the Mahindra group has successfully established

a synergy between its current businesses and the planned rural forays.

Such lucrative business environment of rural India force marketer to understand variances exist with

theses consumer buying behaviors especially for the target industry of low involvement products. This

study is taken up to critically analyze this topic and bring out business relevant information.

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1.2 Business Problem

It’s been strongly perceived that retail transformation will not only increase complexities in product

handling but strategically offer differentiator to trade partner and encourage consumer preference at

point of purchase. A relevant differentiator can only be delivered by consumer focused value addition

by innovation. In my current as well as past role of innovation offered me opportunities to close

collaboration with consumer and retailer during innovation process.

Majority of products in food and beverage are indulgence products and consumer does impulse

purchase. The current political environment has changed to imbibe modern trade at very fast pace, It is

also very critical to understand the change in buying behavior of rural consumer in changing definition

of trade.

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1.3 Research Problem

Consumer buying behavior and especially rural consumer in emerging economy like India is always

evolving. The typical decision making process of buying would get distorted while purchase of

indulgence products and impulse buying transaction. In case of rural consumer, the coinage pricing

make beverages to compete against all set of products from confectionary to biscuit – It is very critical

to find out the value calculation frame work of these consumer. This in turn helps to identify right value

proposition and relevant differentiator for these consumers.

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1.4 Research Questions

1. What are the factors affecting the impulse buying behavior?

2. What significant macro factors driving impulse purchase at the point of sale?

1.5 Hypothesis

Ho: There is significant indifference of all the factors affecting impulse buying decision

H1: There is significant difference of all the factors affecting impulse buying decision

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SECTION - 2

2.1 Secondary Research

2.1.1 Review of Literature

John Mano Raj and Selvaraj highlighted that in the end it is certain that FMCG companies will have to

really gain inroads in the rural markets in order to achieve double digit growth targets in future. There is

huge potential and definitely there is lot of money in rural India but the smart thing would be to weigh in

the roadblocks as carefully as possible. The companies entering rural market must do so for strategic

reasons and not for tactical gains as rural consumer is still a closed book and it is only through

unwavering commitment that the companies can make a dent in the market. Ultimately the winner

would be the one with the required resources like time and money and also with the much needed

innovative ideas to tap the rural markets. Define unique value proposition for rural customers

In Accenture Report on Rural Consumer (2013), pointed that many companies make the mistake of

treating rural consumers as a single homogeneous market. They fail to understand the diversity within

these regions—which are fragmented in terms of size, buyer needs, values and spending power.

Companies also tend to offer the same value proposition to rural consumers that they offer to urban

consumers. The value proposition usually centers on the product’s functional benefits and pays little

attention to how the product meets rural consumers’ unique needs and wants. As competition

intensifies in rural markets, companies will find it increasingly difficult to win customers using such

“push” strategies. To gain market share, businesses will need to tailor their value propositions and

position their brands to target specific consumer segments and create deeper connections with them.

Our research found that companies realize the importance of local market intelligence. They are

making serious investments in the development of capabilities such as customer analytics to gain

insights into rural consumers and their latent needs. These capabilities include segmenting rural

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consumers, tracking price elasticity and identifying new higher margin markets, including geographies

and product and service categories

Steve Gaskin (2013) specifically mentioned to asked very critical questions and answer that before

selecting conjoint analysis for identifying product attributes driving sales

1. Is a utility-based market share the right model?

2. Who is the decision maker?

3. Can the product be adequately described and realistically valued using a set of discrete

features? Or is a holistic view more appropriate?

4. To what degree are product choices determined by more subjective considerations, such as

aesthetics?

5. Are all of the important attributes included, and are the various levels realistic? If so, are there

too many of them for people to evaluate?

6. Can people intelligently evaluate the attributes? Can the attributes be expressed in terms that

are understandable and relevant to customers?

7. Are there enough customers out there to complete our survey? And if so, can we afford to

recruit them?

Pundit (2003) stated in workbook about Indian rural market, where its vast size and demand base offers

great opportunities to Companies. Two-thirds of Indian consumers live in rural areas and almost half of

the national income is generated here. It is only natural that rural markets form an important part of the

total market of India.

The report published by National Council of Applied Economic Research (2010) mention that with about

74 per cent of its population living in its villages, India has perhaps the largest potential rural market in

the world. It has as many as 47,000 haats (congregation markets), compared to 35,000 supermarkets

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in the US. Plus, of the total FMCGs demand in India, nearly 53 per cent comes from the rural market.

For consumer durables, the figure is 59 per cent. In the area of communication, companies have

perhaps failed to recognize that a rural consumer may be buying a particular brand or even the product

category itself (particularly durables) for the first time. With hardly any key influencer within the village

and few sources of information (since print and electronic media have limited reach), the rural

consumer feels inhibited and ill equipped to buy confidently. To communicate effectively with rural

audiences, it is important to understand the aspirations, fears and hopes of rural customers, in relation

to each product category, before developing a communication package to deliver the product message.

Hence, there is a strong need to build reassurance and trust about product quality, service support and

company credentials in the minds of rural consumers. This is best done through the face-to-face 'below

the line' touch, feel and talk mode at haats, melas and mandis.

Sarita and Paresh (2012) states that marketing strategies is the most difficult because it concerns the

timing of individual marketing decision. It can also be highly technical because a market strategy calls

for a comprehensive review of all factors that are likely to affect prices in the future. Marketing strategy

involves careful scanning of the internal and external environments. Internal environmental factors

include the, plus performance analysis and strategic constraints. External environmental factors include

customer analysis, analysis, as well as evaluation of any elements of the technological, economic,

cultural or political/legal environment likely to impact success. As information related to marketing

strategy is highly technical extension staff must join the hands together with Agricultural economist,

Agribusiness specialist and Agricultural marketing specialist.

Matthey, Johnson and Hari (2011) highlighted following key factors for capturing consumer liking in

rural area in their report in Harvard Business Review.

Affordability: In our experience, though, a far more robust approach to creating an affordable emerging

market offering is to trade off expensive feature and functions that people don’t need for less expensive

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one they do need. To get that right requires a clear understanding of the context in which the offering

will be sold – which calls for further field work, preferably of a collaborative rather than a merely

observational kind. This is good product –development advice in any market. In fact, it applies to

indigenous players operating close to home, like Godrej as well as to Western companies confronting

the unfamiliar.

Integrate the Elements: Business models can be conceived in variety of ways. Our approach focuses

on the basics and also on factors that make it difficult to move from an existing model to a new one –

margin requirements, overhead, and “resource velocity” (the capacity to generate a given volume of

business within a specific time frame). It has four parts: the customer value proposition, a profit formula,

key processes, and key resources the company must use to deliver the CVP repeatedly and at scale.

Creating competitive advantage lies in integrating these elements to produce value for both the

customer and the company. That’s easy to say but devilishly hard to do. Mapping the traditional

functions of your company to these broad categories will show you how much you’d have to change to

integrate those functions into a new business model.

Fig. 1 Competition Strategy: Price & Differentiator

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Fig. 2 Black Box Model of Consumer behavior (“Marketing” by W. Keegan, S. Moriarty, T.

Duncan, 1992, p. 193. Englewood Cliffs, NJ: Prentice-Hall.)

Manmath and Saroj (2012) emphasize during their buying behavior study in north India, that they

grouped all the factors under 8 different groups

1. Accessibility Factors

Out of the Accessibility factors easy accessibility to the store was treated as a major service factor by

the customer. It was followed by variables like proximity of store to the residence, credit facility by the

store, less traffic, free home delivery, fast billing and effective complaint handling system, good after

sales service, convenient location, error free billing and easy product return policy by the store.

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2. Satisfaction Factors

The major factors that defined satisfaction were low level prices, high quality, high ethical standards

and environmentally friendly products. It was followed by variables such as prompt complaint handling,

skillful and professional salesmen, affordability of products, safe mode of payment, better layout of the

store, honest dealings by the store, prompt service, early opening of the store and least billing errors.

3. Sales Workforce Factors

The major factors that affected consumer behavior were education of sales personnel, experience,

helping nature, neat and clean look, cheerfulness and knowledge level.

4. Tangibility Factors

The ambiance and the physical environment have a major influence on the customers buying behavior.

The major factors that affect the buying behavior are air conditioning, elevators, cleanliness, free

parking, proper lighting, good security, neat and clean wash rooms and proper ventilation.

5. Promotion Factors

Discounts and coupons had a major influence on buying behavior. It was followed by exchange offers,

low priced product and other attractive schemes. Promotional factors do play a major role deciding and

choosing a store. Majority of the stores do use short term promotional tools to attract customers. The

best example one can think of is Wednesday bazaar of Big Bazaar and Food Bazaar.

6. Assortment Factors

For majority of customers variety came in the form of having a bakery within the store, food section,

more private labels and national brands and finally a lot of fresh fruits and vegetables. These give

ample reasons for customers to visit a particular retail store.

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7. Trustworthy Factors

A major factor that defines loyalty is better after sales service by the store. It is also found that in most

of the cases loyalty is linked to low prices. Rewards and discounts increase satisfaction leading high

loyalty in the customer. A satisfied customer is less price sensitive and may not bother so much about

the price. Quality products offered by the store have a significant impact on the loyalty.

8. Surveying Factors

Customers also like to explore different brands each time they go for shopping. Many customers like

explore new outlets for a change. It helps customers to compare prices, products and offers and

choose the best deal. Majority of customers take the help of salesmen while shopping. Seeking help is

more in case of technical products and less in case of personal care items. It is also found that majority

of customers in Indore is not yet used to the concept of internet shopping.

Dibbs et al (1997) highlighted on brand that any other features as we‖ as this allows for intangibles

such as brand image as a point of differentiation and not only the tangible visual features.

Ambler (2003) takes on similar viewpoint to that of Dibb et al (1997) by expanding the definition further

as a name, symbol or design that identifies one or more product and it is something that is bought by

the consumers. Ambler (2003) further emphasize the difference between a product and a brand by

highlighting that unlike a product, which can be produced in a factory and it can be copied by a

competitor, a brand is unique. Earlier definitions by Ambler (1995) was based on a consumer oriented

approach by defining a brand as a promise of the bundles of attributes that someone buys and provide

satisfaction. The attributes that make up a brand may be real or illusory, rational or emotional, tangible

or invisible.

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Wood (2000) supports this view and highlights that a brand can be defined from different perspective

such as consumers' perspective and/or from the brand owner's perspective. In addition, brands are

sometimes defined in terms of their purpose, and sometimes described by their characteristics.

According to Leiser (2004), the understanding of brands today is far beyond the simplistic view of a

logo, tagline or advertising image but a set of expectations and associations evoked from experience

with a company or product. Furthermore, it is all about how customers think and feel about what the

business or product can deliver across the board.

Batey (2008) elicit differences between a product and a brand as follows: You buy a product for what it

does; you choose a brand for what it means.

A product sits on retailer‘s shelves; a brand exists in consumer’s minds.

A product can quickly be outdated; a brand is timeless.

A product can be copied by a competitor; a brand is unique.

Davis (2002) reiterates that consumers do not have a relationship with a product or service but he/she

may have a relationship with a brand because a brand is a set of promises and therefore the strongest

brands own a place in the consumer‘s mind Furthermore, strong brands can increase the value of a

company as investors are willing to pay more for intangible asset such as a strong brand

According to Aaker (1996), a strong brand has a strong brand equity which is a set of assets such as:

brand name awareness, brand loyalty, perceived quality and brand associations. However building

strong brands is a challenge in today‘s environment as there are substantial pressures and barriers

both internal and external. Aaker (1996), further highlights that one needs to understand these

pressures and barriers in order to develop strong brand strategies. Some of the barriers highlighted by

Aaker (1996) are: price, proliferation of competitors, fragmented media and so forth.

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At this point, it is useful to define what mean by the terms "expected price" and "price promotion."

Following Thaler (1985), it is viewed that the price consumers use as a reference in making purchase

decisions as the price they expect to pay prior to a purchase occasion. Further, the expected price may

also be called the "internal reference price"

(Klein and Oglethorpe 1987) as opposed to an external reference price such as the manufacturers'

suggested list price. Finally, a brand is on price promotion when it is offered with a temporary price cut

that is featured in newspaper advertising and/ or brought to consumers' attention with a store display

sign. Specifically, during a price promotion, they are apt to perceive a price "gain" and react positively;

correspondingly, when the deal is retracted, they are apt to perceive a price "loss" and are unlikely to

purchase the brand.

Neslin and Shoemaker (1989) offer yet another alternative explanation for the phenomenon of lower

repeat purchase rates after promotional purchases. They argue that the lower repeat purchase rates

may be the result of statistical aggregation rather than actual declines in the purchase probabilities of

individual consumers after a promotional purchase. Specifically, "if the promotion attracts many

consumers who under non promotion circumstances would have very low probabilities of buying the

brand, then on the next purchase occasion the low probabilities of these consumers bring down the

average repurchase rate among promotional purchases" As indicated above, one of the key reasons for

the discounting of discounts is the lack of credibility of advertised savings, particularly when the

advertised savings level increases. This line of reasoning can be extended to the credibility of the store

offering the discount.

Barnes (1975) found that respondents gave higher prestige department stores' advertisements

consistently higher mean scores on believability than they gave to advertisements for low-prestige

discount stores. Because of the high credibility of high-image stores, the credibility of discounts offered

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by them will also be higher. In a study, Biswas and Blair (1991) show that reference price claims of

discount stores are discounted more than those of non-discount stores.

According to Monroe (1990), consumers' purchase evaluations of a product are based on its perceived

value, which is defined as the ratio of a product's perceived quality and its perceived price; that is,

perceived value = perceived quality/perceived price. As indicated earlier, a brand name lends credibility

to a product so that a promotional discount on a name brand does not affect its quality perception as

much as a discount on a store brand. Therefore, when a store brand is promoted, its perceived price

goes down but so does its perceived quality. A similar promotion for a name brand reduces its

perceived price, but the decline in its perceived quality is likely to be less than that for the store brand.

The net result is that a promotion is likely to induce a greater change in the perceived value and hence

a greater CI for a name brand than for a store brand. Similarly, less discounting of discounts is likely to

occur for the high-image stores than for the low-image stores, which leads to higher perceived savings

for the high-image stores.

Many consumer purchasing decisions are goal oriented (Bagozzi, 1997; Bagozzi and Dholakia, 1999).

Such goals are important as they direct other stages of the consumer’s decision process. Broadly, there

are different levels of consumer goal specificity (Lawson, 1997). People with abstract goals tend to

search across product categories and consider a wider range of information as relevant. For example, if

the goal is to get away from work and have fun (an abstract goal), consumers may consider multiple

activities including going to a movie, visiting friends, or taking a vacation. Many options are relevant and

attentions are spread across multiple product categories. On the other hand, if the goal is to buy a

microwave oven (a concrete goal), only microwave oven information is relevant and tends to get

people‘s attention. In the market place, consumer goals vary along a continuum ranging from no goal,

abstract goal to concrete goal. Goals guide consumers ‘information gathering and decision processes.

Goals are associated with different levels of consumer involvement.

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(Howard and Kerin, 2006) which guide the allocation of attention as well as other cognitive resources

for information processing (Peterman, 1997).When consumers have an abstract goal or no goal at all,

the involvement with any particular purchase is low and they may spread out their attention and no

single piece of information may be regarded as particularly relevant.

However, when they have a specific purchase goal, their involvement is high and they are more

focused in their information search and processing and perceive some types of information to be more

relevant than others. As Bargh (2002) has indicated, the particular goal in place changes everything –

the focus of attention and the evaluation of objects and events, as well as memory for events Although

the importance of consumer goals has been recognized in previous research, it has not been explicitly

incorporated in research on consumers‘ perceptions of price have specific purchase goals.

Mazumdar et al. (2005) in a summary of reference price research called for more research examining

shopping occasions (i.e. planned vs. unplanned purchases) as an important moderating factor of the

effects of various types of reference price information.

Lan Xia and Kent B. Monroe (2008) examined how consumer’s prior purchase goals interact with

promotion characteristics to influence their perceptions of price promotions and their willingness to buy.

Pride & Ferrell 2007 and Hansen 2007 highlighted purchase decision making process of consumer.

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Fig. 3 Consumer buying decision making process

Oussama Mansour (2013) established that knowing and assessing core personality traits combined

with a standardized set of skill measures provides clear indicators for probable success in a customer-

facing role. We identify core behaviors of your customer-facing employees that make the biggest

difference for your business. They are

32

Trust

Tact

Empathy

Conformity

Focus

Flexibility

Deepti (2010) has mentioned in brand context that there is hardly any brand stickiness in rural

consumption. Nirma is simply referred to as the pila powder and surf as the nila powder. Because of

illiteracy the packaging of products plays an important role. It is also easy for spurious products to find a

foothold in rural markets. RC Cola packaged as Pepsi and Hello Chips a copy of Lays are widely sold.

Therefore it is important that companies give their products shorter names in the local languages and

educate the customer about the significance of their brands. Pictures and endorsement by local stars

will also help in increasing brand awareness.

Table -1: Factors Affecting Consumer Buying Behavior

Researcher Major factors

Enis (1974) personal factors, social factors

Cross and Peterson (1987) social factors, physical factors

Dibb and Etal (1991) personal factors, social factors, physical factors

Cohen (1991) marketing mix, physical factors

Zikmond and Amico (1993) social factors, environmental factors, individual factors

McCarthy and Perreault (1993) physical factors, social factors

Narayyana and Raol (1993) physical factors, social factors, cultural factors

Keegan (1995) social factors, cultural factors, economic factors, geographic

factors

33

Setlow (1996) personal factors, marketing mix, environmental factors

Stanton (1997) social factors, physical factors, attitudinal factors

Lancaster and Reynold (1998) physical factors, social factors, cultural factors

Kotler and Armstrong (2007) physical factors, social factors, cultural factors, personal

factors

Straughan and Roberts (1999) demographic factors, lifestyle

Pride and Ferrell (2000) social factors, physical factors, attitudinal factors

The significant motives that influences the ultimate purchase decision:

1. Fear - To deal with theft, you may buy a burglar alarm(out of fear)

2. Desire for money: Purchasing when the price declines.

3. Vanity: Purchasing expensive items to be admired by others such as jewelry etc.

4. Pride: Possessing luxurious items for high position in the society

5. Love and affection : When purchasing toys, dresses for your child, it is out of affection

6. Sex and romance: Spending much on dresses ornaments etc.

7. Fashion: Imitation motives: Old people dress like the young.

8. Possession: e.g. collection of stamps, coins etc.

9. Health and Physical well-being: Purchasing health foods, vitamins etc.

10. Comfort and convenience: Purchasing equipment like refrigerator, microwave etc.

Economic factors affecting the buying behavior

1. Disposal personal income:

This represents potential purchasing power that a buyer encompasses. The change in income has a

direct relation on buying habits.

2. Size of family income:

34

The size of family and family income influences the spending and saving patterns. Generally spending

habits of large families is greater than small families.

3. Income expectations:

The expected income to receive in future whether high or low has a direct effect on the buying behavior

and spending plans.

4. Propensity to consume and to save:

This refers to the habit of spending or saving with the disposal income of buyers. If the buyers give

priority to current needs, they dispose of their income. If buyers give priority to future needs, they spend

less.

5. Liquidity of Fund:

The current buying plans are effected largely by liquidity of assets i.e., cash and assets readily

convertible into cash, e.g. bonds, bank balances etc.

6. Consumer Credit:

Economic model suggests behavioral hypothesis:

o Lower the price of the product, higher the sales.

o Lower the price of substitute products; lower the sales of the product.

o Higher the real income, higher the sales of the product.

o Higher the promotional expenses, higher the sales.

Internal influences of buyers

•Psychographics (lifestyle)

•Personality, motivation, knowledge,

•Attitudes

•Beliefs and feelings

•Values

•Demographics.

35

External influence of buyers

•Culture

•Sub-culture

Refers to groups of people with shared value systems based in common life experiences

-Hispanic consumers

-African American consumers

-Asian American consumers

-Mature consumers

•Locality

•Royalty

•Ethnicity

36

2.2 Primary Research

2.2.1 Study Methodology

The aim of the survey was to obtain information regarding the influences of the factors on consumer

behavior when consumers purchase electrical appliances. After completing the literature review, I

decided to create a research model and implement it to understand and analyze how Indian rural

consumers made purchase decisions while making impulse purchase decision for low involvement

products.

The study is conducted on the basis of two sources of information: primary and secondary sources.

Secondary research was done by review of literature to identify factors based on work done by various

researchers. The first cut trial research was using preliminary questionnaire to understand suitability of

questions and designing final set of questions to conduct large research. The questionnaire also

contain some demographic & personal data like name, age, gender, income etc. (questionnaire is given

in the Appendix). The first part of the questionnaire is designed on Likert Scale

Strongly Agree = 5

Agree = 4

Neutral = 3

Disagree = 2

Strongly Disagree = 1

Where consumers are asked questions and results were recorded by tick mark on ten statements.

These ten statements are selected on the basis of variables that are found in previous researches of

impulse purchasing. Finally consumers are asked to remember their experience about impulse or

unplanned purchase. Questionnaire is used to collect primary source of information. Websites, articles

and books are the secondary sources of information. Sampling unit are NCR and Gujarat. Data are

collected from the customers who regularly purchase from local Mom & Pop stores. Target sample size

was 300; sampling technique is non-probability convenience sampling. Researcher tries to find out

37

customers who have shown interest in survey and respondents are asked questions after completion of

their purchase. Statistical tools, SPSS as well as XLSTAT, is used in order to classify the factors of

impulse purchasing behavior in rural India. Small local communities & huts are considered as rural area

for convenience purpose. There are some limitations of this project. It is focused on the impulse buying

behavior on local stores only. It can be done in extensive way in shopping malls and other areas of

purchasing. Sample can be large; in fact more regions can be covered.

2.2.2 Factors selected for study

Price

Promotion Scheme on Price

Target Money to Spend

POS offers

Display of Product in Store

Store Location & familiarity with store person

Product Brand

Opinion Leader

Occasions

Advertisement Activities

2.2.3 Sample

I targeted 300 responses from subscribers and was finally successful in getting 146 responses. The

sample has been selected based on people residing in Delhi & NCR and Gujarat. In the next phase, the

collected sample data will be analyzed using statistical models followed by a quantitative interpretation.

The consumer profile is as follows

38

2.2.3.1 Profile of final sample

Total: 146

Attribute Profile of Respondents Percent, % Nos.

Gender: Male 73.29 107

Female 26.71 39

Age: 7 to 17 year 41.78 61

18 to 25 year 23.29 34

26 to 45 year 34.25 50

More than 46 0.68 1

Region: City 82.19 120

Village 17.81 26

Monthly household income: Below 5000 54.11 79

5001 – 10000 12.33 18

10001 and above 29.45 43

Not Disclosed 4.11 6

Table:2 – Profile of respondents

2.2.3.2 Research Procedure (Data Collection)

The data was primarily collected in the form of surveys, conducted online. The questionnaire was filled

up while interacting with consumers at the stores / houses, during the month of July and August 2013.

The data was specifically collected from the consumers who has recently done unplanned purchase of

low involvement food &/or beverage product.

39

2.2.3.3 Questionnaires

There were two surveys were conducted.

1. Pilot research – with 12 respondents

2. Final research – with 146 respondents

40

SECTION – 3

3.1 Results & Discussions

For analysis of primary research data, the statistical analysis and testing was performed by SPSS as

well as XLSTAT software. First factor analysis has been performed to identify the key dimensions

affecting impulse purchase of products by Indian rural consumers. The respondent ratings are subject

to principal axis factoring with varimax rotation to reduce potential multicolinearity among the items and

to improve reliability on the data. These ten factors were reduced to four combined factor dimensions

which explained 67.695% of the overall variance indicating that the variance of original values is well

captured by these four factors.

I studied PCA mapping of these four factors using XLSTAT software and these analysis indicated the

distinctness among these factors. These factors are uncorrelated and fall in different quadrants.

From the table it is observed that KMO is 0.597, indicating no error in 60% of the sample observations.

Bartlett’s test of sphericity indicates that strength of relationship among variables is strong. It presents

good idea to proceed to factor analysis for the data.

Ho: There is significant indifference of all the factors affecting impulse buying decision

H1: There is significant difference of all the factors affecting impulse buying decision

The value of Chi-square test (103.592 with significance level 0.000) signifies the rejection of null

hypothesis. It means there is a significant difference between the factors affecting impulse buying

decisions. The Eigen values for the factors are, as expected, in decreasing order of magnitude as going

from factor or component 1 to factor or component 10. Eigen value for a factor indicates the total

variance attributed to that factor. The total variance accounted for by all 10 factors is 10, which is equal

41

to the number of variables. The Eigen value of factor 1, factor 2, factor 3 and factor 4 are sequentially

2.579, 1.792, 1.386 and 1.012, which is more than the required level of 1.

Factor 1 account for a variance of 2.579 which is 25.792% of the total variance. Factor 2 accounts for a

variance of 1.792 which is 17.924% of the total variance. Factor 3 accounts for a variance of 1.386

which is 13.859% of the total variance. Factor 4 accounts for a variance of 1.012 which is 10.121% of

the total variance. It can be interpreted that 10 variables are now reduced to 4 components or factors

contributing 67.695% of the total variance, which defines that these four factors do have more variance

considering the required level of 60% cumulative variance.

Table 3: KMO and Bartlett's Test

KMO 0.579

Bartlett's Test of Spearicity Approx. Chi-Square 103.592

Degree of freedom 45

Sig. 0.000

Table 4 reports the factor loadings for each variable on the rotated factor matrix makes it simple for

taking decision. Factor 1 has deep relationship with variable 1, 2 and 9; factor 2 has relationship with 4,

5 and 6; factor 3 has relationship with 7, 8 and 10 and factor 4 has relationship with 3.

With the help of table 5, we can categorize each statement depending upon the factor loadings and are

shown in next table. If table 3 is observed carefully, it can be found that highest loading of each variable

is categorized under each factor.

42

Table : 4 Percent Variation Explained

Initial Eigen value Extraction Sum of Squared Loading

Rotation Sum of Square Loading

Total % of Variance Cumulative Total

% of Variance

Cumulative % Total

% of Variance

Cumulative %

1 2.5792 25.792 25.792 2.5792 25.792 25.792 1.9829 19.829 19.829

2 1.7924 17.924 43.716 1.7924 17.924 43.716 1.8718 18.718 38.547

3 1.3858 13.858 57.574 1.3858 13.858 57.574 1.4836 14.836 53.383

4 1.0121 10.121 67.695 1.0121 10.121 67.695 1.4312 14.312 67.695

5 0.8233 8.233 75.928

6 0.6881 6.881 82.809

7 0.6171 6.171 88.98

8 0.5173 5.173 94.153

9 0.3600 3.600 97.753

10 0.2247 2.247 100.00

Extraction Method : Principal Component Analysis

The factors are labeled considering the strength of association with the variables. The coefficients

between the statements and the factors are taken according to the statement affecting the factor.

Factor 1 includes discount price of product, various schemes and consumers’ income status are

the factors of impulse buying behavior which broadly defines about the pricing & promotion.

Factor 2 includes superstore’s offer, display of product in superstore and behavior of sales

person which represent the Psychological.

Factor 3 includes popularity of product, comments of reference group and requirements of

products in occasions which represent Brand strength.

Factor 4 presents Advertisement. Overall, various internal and external factors affect the

impulse buying behavior of the consumer which is explained by the above findings.

43

Table : 5 - Rotated Component Matrix

Question back ground

Component

Factor 1 Factor 2 Factor 3 Factor 4

Price 0.848 0.041 0.084 0.290

Promotion Scheme on price 0.671 -0.136 0.166 -0.287

Advertisement activity 0.066 -0.052 0.029 0.900

POS offers -0.145 0.781 0.008 -0.153

Display of product in store -0.093 0.704 -0.100 0.226

Store location & familiarity -0.041 0.495 0.132 0.058

Product Brand 0.173 -0.507 0.530 -0.144

Opinion leader 0.058 -0.326 0.808 0.088

Target money to spend 0.862 -0.240 -0.097 0.021

Occasion -0.009 -0.278 0.690 0.073

Extraction Method: Principal Component Analysis Rotation Method : Varimax with Kaiser Normalization

Table:6 - Factor Nomenclature

Factor – 1

Price Price & Promotion Promotion Scheme on Price

Target Money to Spend

Factor – 2

POS offers

Psychological Display of Product in Store

Store Location & familiarity with store person

Factor – 3

Product Brand

Brand Opinion Leader

Occasions

Factor – 4 Advertisement Activities Advertisement

44

Table : 7 - Communalities of different components

Factor 1: Communalities

Q1: Coinage base pricing of product 0.812

Q2: Price off on expected coinage pricing (Rs. 4, Rs. 8, Rs. 9) 0.579

Q9: Target money to be spend on indulgence product 0.811

Factor 2:

Q4: POS offers : Buy to 2 get 1, Free product on another 0.654

Q5: Reach of product to pick up by consumer / visibility 0.565

Q6: Known shop, familiarity of shop owner 0.61

Factor 3:

Q7: Popularity of product & Brand image 0.59

Q8: Reference group & opinion leaders 0.771

Q10: Product to be consumed in group - guest at home 0.811

Factor 4:

Q3: Product sampling, earlier experience of usage 0.819

Table: 8 - Communalities against different components for graphical format

Factors Communalities

Coinage Pricing 0.812

Price Promotion 0.579

Available money 0.811

POS offers 0.654

Display of Product 0.565

Store 0.61

Brand 0.59

Social circle 0.771

Occasions 0.811

Advertising Activities 0.819

45

Fig: 4: Graphical representation of communalities

0.55

0.6

0.65

0.7

0.75

0.8

0.85

46

Fig- 5: PCA mapping of factors (representing all quadrants)

Price

Promotion Scheme on price

Advertisement activity POS offers

Display of product in store

Store location & familiarity

Product Brand

Openion leader

Target money to spend

Occasion

Factor 1

Factor 2

Factor 3

Factor 4

-1

-0.5

0

0.5

1

-1.5 -1 -0.5 0 0.5 1 1.5

F2

(29.5

0 %

)

F1 (49.19 %)

Biplot (axes F1 and F2: 78.69 %)

47

3.2 Conclusion and Recommendations

Impulse buying is a sudden and immediate purchase with no pre-shopping intentions either to buy the

specific product or to fulfill a specific buying task. The finding of the study indicates that pricing

strategies, store characteristics, situational factors and promotional activities mostly influence the

impulse buying behavior of consumers. In case of pricing factor, it is noticed that products with reduced

price is bought as impulse purchase. Also income level of consumers affects impulse purchase

positively.

In case of store factor, it is important how the stores induce consumers to be impulsive. POS offers,

display of product in shelf and behavior of sales person are influencing consumers to be impulse

buyers. Marketers for rural India should put more efforts creating attractive and eye catching POS

offers & product display providing information regarding new products. Relation with store keeper,

his/her friendliness and attention are necessary to attract customers.

Findings also indicate that situational factors such as popularity (brand) of product, comments of

reference group and requirements of products in festival seasons influence impulse buying. Branded

products organized in the shelf of local store at hand reach; help to recall its need. If family members or

friends go with the consumer, they motivate him/her to be impulsive by suggesting prominent & existing

brands.

Last factor of this study is advertisement activity. It can be specific brand offer, advertisement of

product in print and visual media or any sort of promotion of products in village are during mela / haat

that initiate impulse buying behavior of consumers.

48

3.3 Limitations & future research

This paper is not focused on the satisfaction level of the impulse buyers. However, it is important to

know whether consumers are satisfied on their impulse purchase or they feel regret after impulse

purchase. Future research is needed to explore this state of affairs.

The limitation was for available resources and time. I could only cover 2 geographies of convenient

travel were possible. In addition – 146 people might be less for extrapolating these results across Rural

Indian consumer has huge diversity.

49

SECTION - 4

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55

4.2 Appendices

Appendix – 5.1: Pilot Research questionnaire

Please, Answer The Following Questions As Thorough as Possible. For purchase of beverage / confectionary / other __________________

1. Did you think of item before coming to store ? Yes No

2. Did you think of brand before coming to store ? Yes No

3. Did you think of which store to go for? Yes No

4. Did you think of any parameters before coming to store? Temperature Taste (Sweet / Sour) Color Fruit / Non Fruit Liquid / Solid Packaged / Unpackaged Price Point Any other ..

5. How do you select store ? Closest to me Offer low prices / discount Where I am treated with respect Looks Clean and authentic Other …………………

6. How did you get the product? Asked for the pack by pin pointing Picked up the arm length available product Asked to store keeper for options

- Within Category - Within Price Point - Within any other criteria ……………….

7. Did you end up with

New Brand – Known Category Known Brand – Known Category

56

New Brand – Unknown Category Known Brand – New Category

8. Did price point is important for product you bought? Yes No

9. Does deviation from coinage pricing (Rs. 1,2,5,10,15, 25) make you skip this product and buy anything else ?

Yes No

10. Did you hear your friends / family / other people talking about product you bought ? Yes No

11. Did you consider color / package shape for selecting this product? Yes No

12. Does easy pronunciation of product name important for you to ask for product? Yes No

13. Did you think of quality / hygiene while purchase of this product ? Yes No

14. Will you recommend this product to your other friends / family ? Yes No

15. Can you tell story about – How did you selected this one product out of whole options available at shop.

Gender: Age: Region: Village: Name: Monthly household income: Number of Family members: Job:

57

Appendix – 5.2 Final Survey Questioners

1. Do you consider lower price of product for unplanned behavior?

a. Strongly Agree (Always)

b. Agree (Some time)

c. Neither agree nor Disagree (Neutral)

d. Disagree (rarely)

e. Strongly Disagree (Never)

2. Do you select price off products above regular priced items?






3. Does earlier experience of products, samples motivate buying?






4. Do schemes run by store keeper motivate you buying?




58



5. Does display of item near hand reach, visible range motivate buying ?






6. Does your relation with store / store keeper important for selecting product?






7. Does familiarity with brand / product important while doing unplanned purchase ?






8. Does earlier talk / friend’s / family’s recommendation important for unplanned pick up ?


59





9. Do you carry some budget for impulse purchase products ?






10. Does unplanned purchase for guest / group consumption purpose make select specific brand /

category?






Name:

Gender: M / F

Age: < 17 Y / 18 – 25 Y / 26 – 45 Y / >46 Y

Region: City / Village

Monthly Household income:

Less than 5000 INR / 5001 – 10000 INR / more than 10001 / Not willing disclose

60

Appendix – 5.3 PCA Analyses

Principal Component Analysis:

Eigenvalues:

F1 F2 F3 F4

Eigenvalue 0.285 0.171 0.111 0.012

Variability (%) 49.188 29.499 19.200 2.113

Cumulative % 49.188 78.687 97.887 100.000

Eigenvectors:

F1 F2 F3 F4

Factor 1 -0.409 0.787 -0.084 0.454

Factor 2 0.828 0.115 -0.213 0.506

Factor 3 -0.369 -0.606 -0.102 0.698

Factor 4 0.108 0.030 0.968 0.225

0

20

40

60

80

100

0

0.05

0.1

0.15

0.2

0.25

0.3

F1 F2 F3 F4

Cu

mu

lati

ve v

ari

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ilit

y (

%)

Eig

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axis

Scree plot