Impulse Buying Report

Impulse Buying

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Impulse Buying Submitted To: Sir. Anis Hassaan Zuberi Instructor: Consumer Behavior

Submitted by:

Qurat-ul-ain Riaz (06-146) Sidra Tanveer (06-228) Mehreen Raza (06-419) Najma Javed (06-013)

Submitted on: -2-

April 29th, 2008

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Table of Contents Contents

Page ……………………………………………………………4

Introduction Literature review

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Management problem Hypotheses

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Research design Sampling plan Limitations Results

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…………………………………………………………...10 ……………………………………………………………..11 ………………………………………………………………12

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Conclusion & Recommendations………………………………………………..17 Questionnaire

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Introduction Pakistan is a growing economy with a real GDP growth rate of 5%. The real private consumption expenditure has grown at an average rate of 7.4 percent per annum during the last four years resulting in the emergence of a strong middle class with growing purchasing power. This has resulted in people vying for a more comfortable and urbanized lifestyle. The mushroom growth of coffee houses, eateries, supermarkets, etc., is a proof of that. In the past three decades, much research has been conducted internationally to define to understand the psychological, economic and retail implications of such a trend. One area of interest has been “impulse buying”. Impulse buying occurs when a consumer experiences a sudden, often powerful and persistent urge to buy something immediately. The impulse to buy is hedonically complex and may stimulate emotional conflict. Also, impulse buying is prone to occur with diminished regard for its consequences.Marketers and retailers tend to exploit these impulses which are tied to the basic need for instant gratification. Recently several supermarkets have been established in the urban cities of Pakistan. The most prominent ones in Karachi are Imitiaz, Agha’s, EBCO, Naheed, Shaz & DMart.

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Literature Review

Pakistan: The Research Context According to the Economic Survey (2006-07), the real GDP growth rate of Pakistan has been 7% per annum in the last 5 years and the per capita income has grown by 11% to $ 925. The real private consumption expenditure has grown at an average rate of 7.4 percent per annum during the last four years resulting in the emergence of a strong middle class with growing purchasing power and with increase in the working population and simultaneous decrease in the share of dependent population has declined, the disposable incomes and current consumption has increased. This increase in consumer spending has led to more shopping and consequently has justified a research into the incidence and nature of impulse purchases. Also, with changing demographic trends, gender roles in purchase behavior have changed considerably in urban Pakistan with women being more active in shopping now. Most of the researches on impulse buying behavior have been conducted in the Western society which is considerably more advanced than Pakistan. The objective of this research is to explore the incidence of and difference of impulse buying behavior at Naheed Super Store, with respect to factors such as product category, grocery bill and number of products bought, and the shopper’s gender. Conceptual Framework Cobb and Hoyer and Kollat and Willet have defined impulse buying simply as unplanned purchasing. Rook (1987) gave a narrow and more specific meaning to impulse buying, which included behavioral elements. The definition of impulse is as follows “Impulse buying occurs when a consumer experiences a sudden, often powerful and persistent urge to buy something immediately. The impulse to buy is hedonically complex and may stimulate emotional conflict. Also, impulse buying is prone to occur with diminished regard for its consequences.”

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The understanding of impulse purchasing was greatly improved through Stern's identification of four distinct classifications of impulse purchasing: planned, pure, reminder and suggestion impulse purchasing. The four categories are as follows: (1) Pure impulse buying is a novelty or escape purchasing which breaks a normal buying pattern; (2) Reminder impulse buying occurs when a shopper sees an item and remembers that the stock at home is exhausted or low or recalls an advertisement or other information about the item and a previous decision to buy; (3) Suggestion impulse buying occurs when a shopper sees a product for the first time and visualizes a need for it, even though he has no previous knowledge of it; and (4) Planned impulse buying occurs when a shopper enters the store with some specific purchases in mind, but with the expectation and intention to make purchases that depend on price specials, coupon offers, and the like. Conceptual Definition Impulse buying is defined as a buying action undertaken without the problem having been previously recognized or a buying intention formed prior to entering the store Operational Definition Based on the literature review we plan to follow the following definition for the purpose of our research. Shoppers are asked upon exiting the store what items they purchased. For each item, they are then asked some variant of the question when they decided to buy; before or after entering the store. The items purchased whose decisions were made after entering the store are impulse purchases (Bellenger, Robertson, and Hirschman).

Factors Affecting Impulse Buying Behavior Many researches have been carried out to study the nature of impulse buying and various factors that affect it. Impulse buying is influenced by a variety of economic, situational, personality, time, location and even cultural factors. Researches have also been conducted to understand the underlying motivational factors behind impulse buying. Similarly researches have been conducted

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to study factors that moderate impulse buying behavior. Consumers engage in impulse buying to satisfy hedonic desires for fun, novelty and variety; also impulsiveness is correlated with consumer’s desires to fulfill self esteem and self actualization needs Gender Differences in Impulse buying Several previous researches on impulse buying have paid some attention to the role gender plays in determining this behavior. These researches show that men’s and women’s shopping behavior differs on many levels. Kollat and Willet (1967) found that women tend to engage in more impulse buying as compared to men. It is also argued that women because of their propensity to shop more in general, make more impulsive purchases. Transaction Size affecting Impulse Buying Kollat and Willet (1967) used two measures of transaction size: number of different products purchased and the grocery bill. They found out that

the increase in size of the grocery bill and

number of purchases made resulted in an increase in unplanned impulse purchases. Therefore, we offer the following proposition. Shopping List and Impulse buying Studies conducted by Kollat and Willet (1967) indicated that one of the factors that affects impulse buying is the presence of a shopping list. This however only holds true if the transaction size is greater than 15. When more than 15 or 20 products are purchased, shoppers having a list make a smaller percentage of unplanned purchases. However, when less than 15 or 20 products are bought, the shopping list does not affect the percentage of unplanned purchases. In order to study the effects on the presence of a shopping list on impulse purchase behavhior, we present the following proposition.

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Management Problem translated into Research Objectives

Research Problem  To study the incidence of impulse purchase decisions with respect to five factors.

Research Questions  What is the incidence of impulse purchase in Naheed Super Store?

Research Objectives  To study the incidence of impulse buying in supermarkets of Karachi.

 How does incidence impulse buying vary due to the presence of a shopping list?

 To study whether purchase intentions are influenced by factors such as the gender of the shopper, presence of a shopping list, the number of products purchased and the size of the grocery bill.

 Does increase in the size of grocery bill increase the incidence of impulse purchase decisions?  Does impulse buying increase as the number of products purchase increase?  Is the incidence of impulse buying higher among males than females?

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Hypothesis Based on our discussion & literature review, we arrived at the following hypotheses which we would be testing. Hypothesis 1: There is at most 20% incidence of impulse buying in Naheed Super Store. Hypothesis 2: There is association between gender and impulse buying behavior. Hypothesis 3: Rate of Impulse buying increases with the size of the bill. Hypothesis 4: Rate of Impulse buying increases with the number of different products bought. Hypothesis 5: There is association between presence of shopping list & impulse buying behavior.

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Research Design

Type of research The research was of exploratory nature and involved conducting interviews of shopper leaving supermarkets to crystallize and better understand the problem at hand and a few factors that affect it. Data Collection Method Secondary Data Articles on impulse buying were studied. Primary Data We collected information from the subjects by means of a survey. Furthermore the major technique that we used to approach our subjects was the intercept technique i.e. approaching them without prior notification or appointment. Personal intercept interviews were used to collect information in a face to face situation. The survey was conducted at Naheed Super Store. Measurement Technique A questionnaire was designed by the researchers to be administered during the personal interview. Care was taken to avoid loaded, double barreled, biased questions.

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Sampling Plan

Population Definition Men and women of age 18 and above who have shopped at Naheed Super Store in April, during day time. Sampling Frame Naheed was selected to conduct the research. Sampling Unit One shopping party. Sampling Method Non-probability convenience sampling - any shopping party leaving the Super store after making some purchases. Sample Size Total sampling size of 80. Sampling Plan The four researchers were spilt into two interviewing teams. One of the two interviewers was stationed at the super market exit to select a shopping party leaving the super market after making some purchases. The respondent was qualified by determining whether they were carrying any shopping packages and their willingness to participate in the research. After introduction the second researcher administered the questionnaire through a personal interview. The questionnaire was completed and filled by the researcher herself. The interview was terminated by thanking the respondents for their participation.

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Limitations

1. People in our country are not very used to research hence they were not very receptive or did not know how to respond to certain questions. 2. As students, the researchers had limited amount of resources (time, money, etc) to spend on this research. 3. This research has been conducted only in one supermarket (Naheed) the findings cannot be extended to all the supermarkets in Karachi. Hence the findings are only applicable to Naheed. 4. This research focuses on the incidence of impulse buying and a few factors affecting it such as gender of the shopper, size of the shopping bill, presence of a shopping list and the number of items purchased. This does not suggest that these are the only factors that influence impulse buying decisions. 5. Some other influencing factors such as in-store stimuli (communication mix, shelf placement), consumer traits other than gender, situational factors (mood, time, money) and normative traits of decision making have not been studied. Hence, the findings of this study cannot be extended to those areas.

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Results Hypothesis 1: Incidence of Impulse buying Our results showed that the incidence of impulse buying is significantly greater than 20%.

Hypothesis 2: Association of Unplanned Purchases with Gender

13 21

Female 36 10

Column Total 49 31

34

46

80

Male Impulse Planned Row Total

Table 1 This table indicates that men plan well ahead before entering shopping markets than females. They economize on their time and efforts and stick to their needs and decisions. Females do not plan extensively before entering and are more inclined to be attracted to in-store stimuli.

F / Pl 13%

M / Im 16%

M / Pl 26%

F / Im 45% Figure 1 Kollat and Willet, women purchase a higher percentage of products on an unplanned basis because they make more purchases. When the number of purchases is held constant, men and women have the same degree of susceptibility to unplanned purchasing. However, our analysis indicates that in Naheed Super Store, the number of products purchased by respondents has no affect on impulse - 14 -

buying tendency. Thus, the impulsive behavior in our research can be attributed to solely to gender. Women are more susceptible to engage in impulsive behavior in supermarkets. Hypothesis 3: Shopping bill and impulse buying behavior Shopping bill is also a measure of transaction size. The Figure 2 depicts that there is no relationship between unplanned purchasing and shopping bill.

Percentage of Unplanned Purchases

Relationship between Shopping Bill & Percentage of Unplanned Purchases 40% 30% 20% 10% 0% 0-500

501-1000

10011500

15012000

20012500

25013000

30013500

Over 3501

Shopping Bill (Rs)

Figure 2

This is line with our findings relating to the number of products purchased in which we found no correlation between the number of products and the impulse buying behavior. Generally we can conclude that people who buy more will have more shopping bill and will be engaging in less impulse buying. Hypothesis 4: Number of Products bought and Impulse buying The percentage of unplanned purchases has no significant correlation with the number of different products bought by shoppers in Naheed Super Store. Our findings show that as the number of different products a customer intends to purchase increases, the difference between actual and intended purchase decisions do not vary. Even though the greater the number of products purchased, the greater the exposure to in-store stimuli but the number of products bought on impulse do not increase. Hence, we conclude, that in instances

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where customers shop for a larger number of items they plan well ahead and there are little chances of impulse buying. This can be because as customers plan for larger items they try to economize on their time and effort – hence little or no impulse purchases. However, when customers shop for a few needed items or engage in random shopping, they are more inclined to engage in impulse buying. Hypothesis 5: Shopping list and Impulse buying Behavior We found no significant association between the two variables. We interpret that the shopping list contains only basic items and when people enter the super market they engage in impulse buying. Hence we conclude that the tendency of a consumer to engage in impulse buying has no association with the shopping list. Also from the Table 2 we can conclude that majority of the people do not carry shopping list with them (44%) or carry it only sometimes (35%). This shows there is natural tendency amongst shoppers not to carry shopping lists with them.

Planned Unplanned

Shopping list 12 11 23

No Shopping List 20 37 57

32 48 80

Table 2 List / Im 14%

No List / Pl 25%

List / Pl 15%

No List / Im 46%

Figure 4

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Kollat and Willet (1967) found that a shopping list influence purchases when more than 15 products are purchased. In our study, amongst those respondents who did buy more than 15 products only 44% could be categorized as impulse buyers and 42 % of these were carrying a shopping list. From this we can conclude no effect as such of shopping list on the rate of impulse buying even when large number of different products is bought.

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Conclusion and Recommendations Our research shows that impulse buying is a phenomenon common amongst the female shoppers in Karachi. This can be because usually women buy for the whole family, not only for themselves. So as they shop they are reminded of the items needed by others as they come across the products in store and thus buy them. Also women generally have greater time on hand to do shopping as compared to men; hence increasing their tendency to engage in impulse buying. This has important implications for the in-store placement of products. Products with which women can be attracted to buy on impulse, such as frozen food, spices and other household & food items, should be prominently displayed in-store so as to generate impulse purchases. The impact of presence of shopping list, size of the shopping bill and number of products purchased was found to be insignificant. Even the people carrying a shopping list engaged in impulse purchases. This can be because most of the items on the shopping list were collective use items or those needed by other people whereas personal use items were bought on impulse. Some of the people were carrying shopping lists made by someone else (who was not in the shopping party) such as the chef, mother-in-laws and spouses. The bill size and the number of items purchased are two measures to define the transaction size. Overall, both of them turned out to have no significant correlation with impulse buying. This shows that people who come to make large number of purchases plan their shopping beforehand and hence engage in less impulse buying. This maybe because they have already spent so much time spending what they had planned to buy, that there is little time left to make other unplanned purchases. We found high incidence of impulse buying in snacks and confectionaries. This maybe because they are placed near the counter or at visible places in the Supermarket so as to attract people to buy them. We also found frozen food to be one of the recurring items on the list of unplanned products by the respondents. These incidences of impulse buying maybe because the deep freezers with transparent doors carrying the frozen food items are placed right at the entrance of most of the superstores, hence catching people’s attention as they enter or about to leave the store. Thus the importance of in-store stimuli can be inferred from our study as we did not specifically test for their significance. This can be the topic of future researches. - 18 -

Questionnaire This questionnaire is for an academic research paper designed to assess consumer buying behavior at superstores. Your information will be kept confidential and the responses will be aggregated for analysis. We appreciate your participation.

Name: _________________________________________________________________ Age: 21-29

30-39

40-49

Gender:

Male

Female

50-65

Area of residence: _______________________________________________________ Household Income: ______________________________________________________ 1. How often do you go shopping? • Twice a week • Weekly • Twice a month • Monthly 2. What did you come to buy today? (Please tick one) • • • •

Monthly ration Weekly grocery A few needed items Random shopping

3. Do you usually carry a shopping list? • • •

Never Sometimes Always

4. Are you carrying a shopping list today? • •

Yes No

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5. Did you stick to your shopping list? • • • •

Strongly agree Agree Disagree Strongly disagree

6. How many items did you buy today?

7. How many of these items had you planned to buy before entering the store? • • • • • • • • •

1-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41+

8. Did you buy something that you had not planned on buying? • •

Yes (if yes answer the next question) No

9. If yes, please give the name of the products?

10. Among the 3 product categories, did you buy something that you had not planned on buying?

Product name Confectionary Snack food Deodorant Other

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Quantity

Price

11. What is the approximate size of your bill?

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