Study on Consumer Buying Behavior of Decorative Paints

Submitted To: Prof. Jojo Joy. N

Submitted By:
Group Number B 9 Haniya Eram (11139)

Harish Sankar N I (11140) Himanshu Tipre (11141) Kausthub Sinha (11145)

Table of Contents
Abstract ................................................................................................................................................... 3 Paint Industry in India ............................................................................................................................. 3 Some Facts .......................................................................................................................................... 4 Segmentation of paints ....................................................................................................................... 4 FY12 for Paint Industry........................................................................................................................ 5 Prospects............................................................................................................................................. 5 Research Objective ................................................................................................................................. 6 Methodologies ........................................................................................................................................ 6 Sampling.................................................................................................................................................. 7 Characteristics of Survey Respondents................................................................................................... 7 Analysis ................................................................................................................................................... 7 Regression Analysis of Berger Paints .................................................................................................. 7 Stochastic Analysis on understanding the Mind space for Paint Brands ............................................ 8 Stochastic Analysis for Understanding the Influencer effect on Consumers Mind to Make Decisions ............................................................................................................................................................ 9 Jacard Analysis to Rank the Factors taken for Purchase Decision ...................................................... 9 SWOT Analysis to Understand Strength and Weakness of Brands................................................... 10 Asian Paints ................................................................................................................................... 10 Berger Paint .................................................................................................................................. 10 Dulux Paint .................................................................................................................................... 10 Shalimar Paint ............................................................................................................................... 10 Nerolac Paint ................................................................................................................................. 11 Consumer Insights................................................................................................................................. 11 Conclusion ............................................................................................................................................. 14 Appendix ............................................................................................................................................... 15 Pictures ............................................................................................................................................. 18

Abstract
Painting was not given importance when decision were made regarding a house construction, but over the years due to the increase in competition, growth in infrastructure, consumer awareness about beauty, ambience and upkeep of their building, the consumer has become aware about the importance of buying best paints. Initially the decision to buy paints depended up on the contractor or the construction firm but now it has slowly become part of the final users decision. The paint industry has its 53% controlled by Asian paints followed by Berger Paints 19% , Kansai Nerolac 16%, Akzo Nobel (8%) and Shalimar Paints (2.5%). To differentiate one from the other the Indian Paint firms has employed techniques like implementation of colour mixing equipment at dealers shop, computerization of the supply chain, ensuring return on investment for the dealer. From the consumer point of view paint firms have ventured in to providing free brochures on SMS, technical support for consumers in choosing colour, price estimation for the painting project, combinations, new product innovations like Eco friendly/ lead free green paints. The industry is estimated to grow at the phase of more than 12% over the next 5 years with government support for construction and infrastructure sector, the growth possibility are immense. The study looks forward to understand how a firm needs to channelize their effort, and the impact of branding exercise by firm in customer buying decision of paints.

Paint Industry in India

Indias strong economic growth has propelled the paint industry to double-digit growth over the past few years and has made it Asia Pacifics fastest growing paint market. Despite fast growth, Indias per capita paint consumption is still abysmally low at ~2kg/year. Due to increased Government funding for infrastructure, demand for paints both in industrial and decorative segment is set to rise, thereby rendering Indian paint industry to be poised for further growth.

Nearly ~65% of the paint market is organized. The organized market is highly concentrated and a classic example of an oligopoly, where entry barriers are high and the top-5 players capture most of the market, while the unorganized market is highly fragmented with over 2,000 players

Some Facts
The paint industry is expected to grow at 12-13% annually over the next five years. FY12 was a challenging year for the industry as a whole due to subdued demand across key sectors and rising inflation. The unorganised sector controls around 35% of the paint market, with the organised sector accounting for the balance. In the unorganised segment, there are about 2,000 units having small and medium sized paint manufacturing plants. Top organised players include Asian Paints, Kansai Nerolac, Berger Paints and ICI

Segmentation of paints

Decorative: Major segments in decorative include exterior wall paints, interior wall paints, wood finishes and enamel and ancillary products such as primers, putties etc. Decorative paints account for over 77.3% of the overall paint market in India. Asian Paints is the market leader in this segment. Demand for decorative paints arises from household painting, architectural and other display purposes. Demand in the festive season (SeptemberDecember) is significant, as compared to other periods. This segment is price sensitive and is a higher margin business as compared to industrial segment. Industrial: Three main segments of the industrial sector include automotive coatings, powder coatings and protective coatings. Kansai Nerolac is the market leader in this segment.
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User industries for industrial paints include automobiles engineering and consumer durables. The industrial paints segment is far more technology intensive than the decorative segment.

FY12 for Paint Industry

FY12 was a mixed bag for the paint companies. While all the 3 players viz. Asian Paints, Kansai Nerolac and Berger Paints reported strong growth in sales, operating margins came under severe pressure due to raw material price inflation. Top-line growth was boosted by strong demand from the rural markets. Nonetheless, the demand environment in the industrial segment continues to remain challenging due to hawkish interest rate environment. Performance on the margins front was a big disappointment. Rising prices of crude oil and titanium dioxide increased the overall expenditure thereby impacting profitability growth. However, companies are undertaking a gradual and calibrated price increase to shield margins. Nonetheless, as a complete pass on of raw material price increase is not possible in the industrial segment, the blended margins continue to suffer. All the key players are in an expansion phase. Asian Paints plant in Khandala, Maharashtra is under construction and is expected to be commissioned by 4QFY13. Kansai Nerolacs capacity expansion plans at Jainpur and Bawal culminated during the year. Berger Paints has also undertaken capacity expansion for its plants located in Andhra Pradesh (AP). The first phase of the project in AP is expected to be completed in the middle of 2013. Further, expansion of water based plant at Rishra and Goa is also on track.

Prospects
The market for paints in India is expected to grow at 1.5 times to 2 times GDP in the next five years. With GDP growth expected to be between 5-6% levels, the top three players are likely to clock above industry growth rates in the future, considering they have a strong brand and good reach. Decorative paints segment is expected to witness higher growth going forward. The fiscal incentives given by the government to the housing sector have benefited the housing sector immensely. This will benefit key players in the long term

Although the demand for industrial paints is lukewarm it is expected to increase going forward. This is on account of increasing investments in infrastructure. Domestic and global auto majors have long term plans for the Indian market, which augur well for automotive paint manufacturers like Kansai Nerolac and Asian-PPG. Increased industrial paint demand, especially powder coatings and high performance coatings will also propel topline growth of paint majors in the medium term.

Research Objective
To understand the primary factors considered by customers in buying a paint. To understand the influence of various people in buying decision (Family, Construction people) and the buying process of consumers. Impact of branding and advertisement on sales and revenue. Consumer perception about various paint brands and preferences. Impact of channel motivation activities, technical support activities at dealers point on sales of the paint brands. To study the promotion and differentiation practices of market challenger firms and reaction from the leader.

Methodologies
Survey at 3 independent retail firms in Mysore to understand the pull employed by the paint firms Survey of people in the age of 20 above who are influenced by the branding and advertisement. Who are possible to buy a house in the next 5 years. SWOT analysis of the branded shop and unbranded independent shops. Regression analysis of investment in advertisement and sales returns. Finding the factors that are considered before making a buying decision. Jacard analysis of the factors considered before buying decision to find out the prominent factors. Stochastic Analysis to measure the mind space for customers for various brands and influencers in buying process.

Sampling
Two Independent paint retail shops in Mysore Youth population the age range above 20 who are interested in buying or building a house in the coming 5 years. People going for PG Education , working engineers, consultants were taken for the study.

Characteristics of Survey Respondents

The sample taken for study consists of 52 people in the age range of 22 to 47. 51 % of the studies population has annual income below Rs.20000, 32% between Rs.20000 and Rs.40000, 17% above Rs.40000. 58% of population has used Asian Paints for their houses and 15% Berger Paints. Most of the respondents are belonging to PG Students, software engineers and Consultants. The survey for consumers was done online and for retailers was done by visiting the hard ware shops in Mysore city.

Analysis
Regression Analysis of Berger Paints
Year Mar 12(12) Mar 11(12) Mar 10(12) Mar 09(12) Mar 08(12) Mar 07(12) sales 2,901.20 2,299.10 1,822.28 1,688.52 1,521.68 1,322.16 Selling exp 280.2 216.2 168.49 146.76 129.76 114.26

The regression analysis is done with sales and selling expenditure for the past six years. It is showing a very strong relation between the both. As the selling expenses have increased there

is an increase in sales. As from the data it can be seen that company is spending heavily on selling expenditure which have directly impacted on sales.

Here the regression value shows the confidence level is .99 so there is positive relationship between sales expenditure (which includes advertisements and other push strategies employed) and Return through sales revenue for the example of Berger Paints.

Stochastic Analysis on understanding the Mind space for Paint Brands

The analysis showed that consumers mostly prefer Asian Paints followed by Berger, Nerolac, Dulux and Shalimar Paints.

Stochastic Analysis for Understanding the Influencer effect on Consumers Mind to Make Decisions

The analysis showed that painters have the highest influence on the consumers with respect to the decision making on paint purchase followed by friends, contractor, shops, Advertisement and family.

Jacard Analysis to Rank the Factors taken for Purchase Decision

Jacard analysis has given the insight that brand image leads the consumer in making preference followed by Durability aspect of paint, Colour sections and varieties, Thickness, ease of cleaning after painting, eco friendliness, price and technical supports.

SWOT Analysis to Understand Strength and Weakness of Brands

Asian Paints

The major strength of the brand is its brand image and people in Mysore are extremely loyal to the brand according to the retailer inputs also. The colour varieties offered are also a strength of Asian paints Pricing aspect is the only weakness but for a firm with huge brand loyalty charging premium is common. The brand offers good technical support like paint mixing, guidance on painting.

Berger Paint

The thickness of the paint is strength in terms of view of the consumers. The major opportunities for the brand are in technical support, durability, brand image. The threats for the brand is it need to have a look at the pricing, eco- friendly paints need to be advertised and brought to the people. According to the consumers they consider ease of cleaning the Berger Painted walls as it major weakness.

Dulux Paint

Technical support offered, durability, proper pricing and ease of cleaning are considered the opportunities for Dulux Paint. The major weakness is its brand image.

Shalimar Paint

Pricing, technical support, and thickness are the opportunities for Shalimar paints.

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In terms of weakness the brand has very weak image and durability in terms of lasting.

Nerolac Paint

Nerolac has got a good brand image as it strength along with proper pricing. Nerolac need to look at threats by improving technical support and colour varieties offered. The weakness in terms of SWOT is the paint thickness aspect.

Consumer Insights
From the learning which had been conducted about the Decorative paints the following are the informations that have been gathered: 1. According to retailers repeat customers prefer to buy Asian paints because of the continuing tradition and brand equity. Fear of untried brands in terms of durability is also an issue. 2. The only way according to the retailers to gain the mind space is by brand building exercises and technical support. 3. The technical supports offered are not being effective as the consumers come at the time of painting and the supports like studio system (where in various design concepts and look for the building with various shades are given free of cost to consumer) it takes a minimum of 15 days to deliver the service from Asian Paints technical division Chennai. And consumers are also less aware of the importance of choosing shades. 4. There is no major fight in terms of pricing, pricing is almost same for all the brands 5. There are no major growths in Mysore region for the Paint demand and the major influencer is the Contractors, Painters in terms of decision making. 6. All the paint sales are routed through the dealers and in case if there is a direct sale happening a percentage of the profit is given by the paint firm to the hardware shops or in terms of discounts. 7. The demand for the ecofriendly paints has not gained momentum due to extreme high prices the cost of a normal emulsion will be Rs.260 but in case of ecofriendly green paints the same will cost more than Rs.500.

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8. Most of the consumer / repeat purchasers do go for the same brand and same retailer and in many cases paints being from any brand has to be re-painted with in 4 years after painting. 9. Consumers behavior in terms of buying paints is still in Low need for Cognition with less involvement and major decision from others like contractors, and Painters. Most of the consumers have blind faith in Brands like Asian Paints even if others have better offering. 10. People have started evincing interest towards protective coating paints for the exterior wall especially in the premium class of population and in the case of B2B sales like Builders. 11. Consumers prefer Asian Paints to any other paints because Asian Paints has been an incumbent in the paint industry form a long time. The distribution network of the Asian Paints is well established and this has helped in consolidating its presence through a number of loyal contractors, who usually prefer Asian Paints to the consumers. The decision regarding the paints is taken by the contractor or the painter but the colours are selected by the consumers. Asian Paints was also the first company to introduce the concept of lead free paints and it was closely followed by Nerolac. Consumers perception about Asian Paints is mostly about functional aspects. Consumers perceive Asian Paints as an economical, value for money and trusted brand name. Low to high NFC consumers prefer this paint. Commonly used by urban, semi urban and rich rural folks consumers. 12. Nerolac is still considered as a foreign premium brand, though not many consumers prefer this because it is not seen as equally economical as Asian Paints. It has more of an emotional function and consumers who want preferably eco green paints go for Nerolac. Consumers with an affinity towards environment and the side effects of the paints are more inclined to buy this paint. High NFC consumers prefer this paint. Commonly used by urban consumers. 13. Berger Paints on the other hand has created an image of decorative paints and consumers whose tendency is towards luxury and beauty go for berger paints. Since the number of contractors who prefer berger tend to emphasis more on the interior decoration of the house and its has got little or no functional aspect, but more of an emotional aspect. Berger and Nerolac are also seen as higher standard paints and consumers who are willing to spend a bit more on the one time construction of their

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houses go for Berger Paints. High NFC consumers prefer this paint. Commonly used by urban consumers. 14. Shalimar paints on the other hand are economical no frills and not much of the concerned with the effects on health or the environment. They prefer Shalimar instead of others because they just want to get their house painted. Purely functional aspect. NFC is very low. The brand is seen as cheap and of low quality. Few consumers usually get the exterior painted by Asian Paints and the interior painted by Shalimar paints. It is popular among the rural- urban and semi urban households. 15. Consumers prefer Asian Paints to any other paints because Asian Paints has been an incumbent in the paint industry form a long time. The distribution network of the Asian Paints is well established and this has helped in consolidating its presence through a number of loyal contractors, who usually prefer Asian Paints to the consumers. The decision regarding the paints is taken by the contractor or the painter but the colours are selected by the consumers. Asian Paints was also the first company to introduce the concept of lead free paints and it was closely followed by Nerolac. Consumers perception about Asian Paints is mostly about functional aspects. Consumers perceive Asian Paints as an economical, value for money and trusted brand name. Low to high NFC consumers prefer this paint. Commonly used by urban, semi urban and rich rural folks consumers. 16. Nerolac is still considered as a foreign premium brand, though not many consumers prefer this because it is not seen as equally economical as Asian Paints. It has more of an emotional function and consumers who want preferably eco green paints go for Nerolac. Consumers with an affinity towards environment and the side effects of the paints are more inclined to buy this paint. High NFC consumers prefer this paint. Commonly used by urban consumers. 17. Berger Paints on the other hand has created an image of decorative paints and consumers whose tendency is towards luxury and beauty go for berger paints. Since the number of contractors who prefer berger tend to emphasis more on the interior decoration of the house and its has got little or no functional aspect, but more of an emotional aspect. Berger and Nerolac are also seen as higher standard paints and consumers who are willing to spend a bit more on the one time construction of their houses go for Berger Paints. High NFC consumers prefer this paint. Commonly used by urban consumers.

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18. Shalimar paints on the other hand are economical no frills and not much of the concerned with the effects on health or the environment. They prefer Shalimar instead of others because they just want to get their house painted. Purely functional aspect. NFC is very low. The brand is seen as cheap and of low quality. Few consumers usually get the exterior painted by Asian Paints and the interior painted by Shalimar paints. It is popular among the rural- urban and semi urban households.

Conclusion
The top 5 companies make up more than 80% sales of the organized market. The market share of the organized sector is continuously improving as consumer preference is shifting towards better products offered by the leading brands. Established Foreign companies have entered the Indian market by acquiring existing Indian companies. Kansai Paints, Japan entered the Indian Market by acquiring Nerolac, Akzo Nobel, the worlds largest Paint company, entered the Indian market by acquiring ICI Paints (now Akzo Nobel India.) Asian Paints is the market leader in the Indian Paint Industry and gets the major portion of its revenue from the Decorative segment. Over the years, it has outperformed its peers in every aspect by wide margins. This is mainly due to its strong moat (competitive advantage) which lies in its strong Brand Equity and an extensive Distribution Network. The companys Net sales, Net Profit and Book Value have grown with a 5 year CAGR of 22%, 27% and 28% respectively. Also the companys debt is very low and its ROIC has been 40% on an average over the last six years. Kansai Nerolac holds the second position in the Indian Paint market, and is the market leader in the Industrial Paint Segment, owing to its leadership position in the Automobile Paint segment. It is the subsidiary of Kansai Paints Ltd., the leading Japanese paint company. Berger paints has the third position and derives its major revenue from the Decorative segment. Dulux/Akzo Nobel (former ICI Paints) is the subsidiary of the worlds largest Paint Company and is at the fourth position. Shalimar Paints is at the fifth position. Consumer perception about Asian Paints is that it is economical and a highly recommended by contractors and painters.41% of the respondents prefer Asian Paints and almost 60% of the market share in South India is captured by Asian paints.

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Berger was the second choice among the respondents though it happens to be the third fast moving brand in south india as per the details collected form the retailers and wholesalers.

Appendix
Consumer Survey Questionnaire I. 1. 2. 3. 4. 5. 6. Questions being asked to the consumers regarding paints Name of the consumer? Age of the consumer? Average Monthly Income? <20000 20000- 40000 >40000 Name the Paint Brand that was used for your house? Reason for choosing the brand? Do you consider the following factors while buying paint?

Brand Name Durability of Paint Colour Combinations offered by the brand Previous User Experience Price of the Paint Brand Technical Support of Brand at Paint Shop Thickness of Paint Ease of cleaning wall painted by specific Brand Eco Friendliness (Like Lead Free) 7. Choose the paint brands which you prefer Berger Nerolac Asian paints Shalimar dulux 8. Who among the following are helpful in giving suggestions for your paint purchase decisions Painter Construction Contractor Paint Hardware Shop Friends Family Advertisement
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9. Rate the following factors considered while making purchase decision for paints Brand Name Durability Colour combinations Previous user experience Price Technical Support Thickness Ease of cleaning the wall 10. Do you think Asian Paints has the following qualities Brand Name Durability Colour Combinations Better Price Technical Support Thickness Ease of Cleaning Eco Friendliness 11. Do you think Berger Paints has the following qualities Brand Name Durability Colour Combinations Better Price Technical Support Thickness Ease of Cleaning Eco Friendliness 12. Do you think Shalimar Paints has the following qualities Brand Name Durability Colour Combinations Better Price Technical Support Thickness Ease of Cleaning Eco Friendliness 13. Do you think Dulux Paints has the following qualities Brand Name Durability Colour Combinations Better Price
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Technical Support Thickness Ease of Cleaning Eco Friendliness

14. Do you think Nerolac Paints has the following qualities Brand Name Durability Colour Combinations Better Price Technical Support Thickness Ease of Cleaning Eco Friendliness Questionnaire for Retailers II. Questions asked to the retailers and the wholesalers 1. Name of the shop: N.P.Bharamiah & Sons 2. Area: Ashoka Road, Lashkar Mohalla 3. Brands sold: Nerolac, Berger 4. Interior paints Nerolac premium gold(Rs.260) 70% sold Beauty smooth(Rs.140) only 15-20% sold Berger Premium emulsion (Rs.250) 15-20% sold Acrylic distemper(Rs.160) 60-65% sold

5. Push strategies employed: discount of 5% on all the paints but discount of 15% given during festivals 6. Functional and emotional aspects: depending on the TV advertisements and the opinions of neighbours 7. Influencer: painters, contractors and only 20% customers are particular wrt the brand 8. Eco green paints are very slow movers with only 5% consumers asking for it

III.

Questions asked to the retailers and the wholesalers 1. Name of the shop: Salar Masood & Sons 2. Area: Ashoka Road, Lashkar Mohalla 3. Brands sold: Asian Paints
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4. Interior paints Royale luxury Emulsion (higher range Rs.350) Premium Emulsion(medium range Rs.220) Tractor Emulsion (economy range Rs.175) Royale Shyne luxury Emulsion(higher range Rs.450) Royale Glitter (higher range Rs.570) 5. Push strategies employed: discount of 5-7% on all the paints but discount of 12-15% given for contractors working with Asian Paints for 5 yrs and more 6. Functional and emotional aspects: almost 60% of the market is captured by Asian Paints, so the consumers prefer a well known brand 7. Influencer: painters, contractors and 50% customers are particular wrt the brand 8. Asian Paints was the pioneer in lead-free paints and is a market leader in the whole of south India

Pictures

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