Trading Down Behavior Post

Recession
Pallavi Priyanka
Shambu Nandanan
Swapnil Salvi
Trishna Jobanputra
Vikram Baheti
 Trading Down
Trading down is where customers opt for a less
luxurious but more affordable substitute rather
• than the product or brand they prefer mainly due
• to economic downturn*. It may also be factored as
few customers reduce the amount of consumption
for few products but still continuing to use the
same brand.

The consumers started making more mindful choices

and conservative shopping preferences as opposed
to impulse buying. The customers are ready to
replace their preferences for a small drop in
quality, and a substantial drop in prices.

* Brown, 2010
 According to the Nielsen survey
• •One in three global consumer will
• continue to economize on gas and
electricity
•One in six will continue to cut down on
take away meals
•One in six global consumer will continue
to purchase cheaper grocery product, spend
less on new clothes, cut down on out of
home entertainment and one in seven will
reduce telephone expenses.*

* Nielsen 2009
 Trading Down Behavior
•Broad-scale trading down—across products, brands,
and retailers—will give way to more reasoned and
• rational purchases.
••Deal-seeking behaviour, e.g., taking advantage of
sales, using coupons, comparison shopping, will not
be completely abandoned post-recession.
•Private label brands (especially in Fast Moving
Consumer Goods categories) will remain a
significant factor due to their high quality at
lower prices.*

* Weidauer, 2009
 Four key trends in the
new market*
• •A demand for simplicity
•A call for ethical business governance
• •A desire to economize
•A tendency to flit from one offering to
another.
•

* Nielsen, 2009
 Objectives
•To observe the trading down behaviours of customers
• post economic recovery
••Whether customers stick to the recessionary habits
or do they return to their preferred products
•How the purchase decisions are affected during and
post recession?
•Has private labels gained market share during and
post recession and are they going to stay for
long?
•
 Research Methodology
• Sample Size : 250
• Sampling technique : Simple Random
Sampling
• Simple Random Sampling
• Nominal Scale
• Ordinal Scale (4- Point Likert Scale)
• Interval Scale
•

•
 Tools Used
• Factor Analysis
• Cross Tab Analysis
• Chi-Square Significance Test
• Correlation Coefficient Analysis
• Percentage Analysis
•
 Analysis of targeted
demography
• 82% Female, 18% Male
• 78.4% families in Services and 21.6% families in
Business
• Ethnicity:
• 28% North,
• 22.4% South,
• 16.4% East and
• 33.2% West
• Age Groups:
• 39.2% in 0-29 yrs,
• 35.6% in 30-39 yrs,
• 19.6% in 40-49 yrs
• 5.3 % above 50 yrs
• Household Structure:
• 71.2% Nuclear Families
• 15.6% Nuclear Families with Elders
• 12% Joint Families
• 1.2% living alone or with
siblings/roommates
•

• Education:
• 70.4% Graduates
• 24.8% Post Graduates
• 4.8% below 12th Std
 Correlation of different
preference
Pre - Recession
factors
  Prices of the Quality of the Availability of Brand name Previous Advertising/ Family Friends Sales and
Product product the product experience Marketing Opinion Promotional
activity

Correlation Price 1 -0.132 0.219 -0.201 0.092 0.126 -0.131 0.201

of the product

Quality of the -0.132 1 0.103 0.087 0.028 -0.04 0.015 0.065

product

Availability of the 0.219 0.103 1 -0.018 -0.108 0.096 0.245 -0.057

product

Brand name -0.201 0.087 -0.018 1 0.099 0.073 0.084 0.076

Previous experience 0.092 0.028 -0.108 0.099 1 0.371 0.275 0.552

0.126 -0.04 0.096 0.073 0.371 1 0.266 0.646

Advertising/Marketi
ng

Family Friends -0.131 0.015 0.245 0.084 0.275 0.266 1 0.186

Opinion

Sales and 0.201 0.065 -0.057 0.076 0.552 0.646 0.186 1

Promotional
activity

•
• Negative correlations shown on Quality and Brand Name v/s Price cement the
hypothesis that people concerned with the former two factors are not worried
about prices during and post recession
• Similar views on Advertising/Marketing and Sales and Promotional Activity factors
unchanged post recession.

Correlation Analysis
 Correlation of different
preference
Post - Recession
factors contd..
  Prices of the Quality of the Availability Brand name Previous Advertising/ Family Friends Sales and
Product product of the product experience Marketing Opinion Promotional
activity

Correlation Price of 1 -0.064 -0.188 -0.177 0.127 0.109 -0.094 0.159

the product

Quality of the product -0.064 1 0.104 0.074 0.045 0.001 -0.025 0.135

0.188 0.104 1 0.024 -0.094 0.052 0.279 -0.019

Availability of the
product

-0.177 0.074 -0.024 1 0.073 0.102 0.028 0.053

Brand name

0.127 0.045 -0.094 0.073 1 0.354 0.277 0.54

Previous experience

0.109 0.001 0.052 0.102 0.354 1 0.253 0.602

Advertising/Marketing

-0.094 -0.025 0.279 0.028 0.277 0.253 1 0.206

Family Friends Opinion

0.159 0.135 -0.019 0.053 0.54 0.602 0.206 1

•
Sales and Promotional
activity

•
• Quality concerned and brand loyal demography not worried about prices
(negative correlation between factors)
•

• Advertising/Marketing and Sales and Promotional Activity factors considered

synonymous (high positive correlation)

Correlation Analysis
 Comparing the pre-recession and post-
recession consumer preferences for
purchase
Pre Recession

•
•

•Extraction Method: Principal Component Analysis.

•Rotation Method: Varimax with Kaiser Normalization.
•a. Rotation converged in 5 iterations.

•Analysis
•Factor1: Primarily a measure of sales and promotional activity but also increases with the increasing scores of
Advertising/Marketing and previous experience. As each of these variables increases so do the other two.
•Factor2: Primarily a measure of Availability of the product. It is also influenced by Family and friends opinion.

•Factor3: Primarily is a measure of Brand name only.

•
•
Factor Analysis
 Comparing the pre-recession and
post-recession consumer
preferences
Post Recession
for purchase

•Extraction Method: Principal Component Analysis.

•Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 5 iterations.
•Analysis

•Factor1: Primarily a measure of sales and promotional activity but also increases with the increasing scores of Advertising/Marketing and

previous experience. As each of these variables increases so do the other two.

•Factor2: Primarily a measure of Availability of the product. It is also influenced by Family and friends opinion.

•Factor3: Primarily is a measure of Brand name only.

•So we can infer from the trends that the Shopping behaviour of the customer Pre and Post Recession has not shown a significant change.

•
•
Factor Analysis
 MHI * Shift Post Recession Cross tabulation
MHI * Shift Post Recession Crosstabulation

• The above figure shows that 96.3% people with Income > 1Lac did
not shift back to other affordable products Post Recession. We can infer
from the above table that 33.3% of people with Income<30000 showed a
significance change and shifted back to affordable product. The table also
shows that people with different Income groups did not shift back to other
affordable products.
•

•
Cross Tabulation Analysis
 MHI * Shift Post Recession Cross tabulation
Chi - Square Tests

a. 2 cells (20.0%) have expected count less than 5. The minimum expected count is
3.02.
•Analysis

•Ho: Consumers have shifted post recession depending upon their MHI.

•H1: Consumers have not shifted post recession depending upon their MHI.

•Chi Value(χ) : 17.523

•Table Value: 9.49

•Table Value < χ

•Hence we reject the Null Hypothesis Ho and we conclude that Consumers have not

shifted post recession depending upon their MHI.

a.
b.
Cross Tabulation Analysis
 MHI * Shift Post Recession Cross
Symmetric Measures tabulation

•a. Not assuming the null hypothesis.

•b. Using the asymptotic standard error assuming the null hypothesis.
•c. Based on normal approximation.

• Analysis
• As the correlation coefficient value is -.237, it indicates that as the income increases there is no change in the
buying behavior of the consumer so there is a negative correlation between the two.
•

Cross Tabulation Analysis

 Correlation of Working Profile with the
shopping pattern of consumers in Kirana,
Modern Format, Malls

Pre Recession Kirana

•

Cross Tabulation Analysis

 Correlation of Working Profile with the
shopping pattern of consumers in Kirana,
Modern Format, Malls

Pre Recession Modern Format

•

Cross Tabulation Analysis

 Correlation of Working Profile with the
shopping pattern of consumers in Kirana,
Modern Format, Malls

Pre Recession Mall

•

T h e in fe re n ce w e ca n m a ke fro m th e a b o ve th re e ta b le s b e tw e e n th e S h o p p in g p a tte rn o f co n su m e rs a n d th e ir
W o rk Pro file is th a t 5 0 . 4 % o f p e o p le w o rkin g Fu ll tim e p re fe r sh o p p in g a t K ira n a S to re s w h ile 4 0 . 7 % o f N o t
W o rkin g p o p u la tio n a lso p re fe rs w o rkin g a t K ira n a S to re s . K ira n a S to re s a re e a sily a cce ssib le a n d w ith in e a sy
re a ch o f th e p o p u la tio n . T h e se co n d in fe re n ce th a t w e ca n m a ke fro m th e a b o ve ta b le is th a t 5 6 . 3 % o f p e o p le
w o rkin g Fu ll tim e p re fe r sh o p p in g a t M o d e rn Fo rm a t w h ile 3 7 . 5 % o f N o t-w o rkin g p o p u la tio n p re fe rs sh o p p in g a t
M o d e rn Fo rm a t S to re s. 6 1 . 5 % o f Fu ll tim e w o rkin g p o p u la tio n p re fe rs sh o p p in g a t M a lls a n d 3 0 . 8 % o f N o t w o rkin g
p o p u la tio n p re fe rs sh o p p in g a t M a lls .

Cross Tabulation Analysis

Correlation of Working Profile with the
shopping pattern of consumers in Kirana,
Modern Format, Malls
C h iS q u a re Te st

A n a ly s is
H o : B u yin g b e h a vio u r o f cu sto m e rs in K ira n a S to re s is n o t d e p e n d e n t o n
th e w o rk p ro file p re re ce ssio n
H 1 : Buying behaviour of customers in Kirana Stores is dependent on the
w o rk p ro file p re re ce ssio n
C h i V a lu e ( χ) : 3 . 416
Ta b le V a lu e : 7 . 8 2
Ta b le V a lu e > χ
H e n ce w e a cce p t th e N u llH yp o th e sis H o . H e n ce w e co n clu d e th a t B u yin g
b e h a vio u r o f cu sto m e rs is n o t d e p e n d e n t o n th e w o rk p ro file p re re ce ssio n .

Chi Square Test

 Correlation of Working Profile with the
shopping pattern of consumers in Kirana,
Modern Format, Malls

Symmetric Measure
•

A s th e co rre la tio n co e fficie n t va lu e is . 099 , it in d ica te s th a t th e re is

m in im a l o r n o co rre la tio n b e tw e e n B u yin g b e h a vio u r o f cu sto m e rs
a n d w o rk p ro file . S a m e re su lt ca n b e se e n p re re ce ssio n in th e
ca se o f B u yin g b e h a vio u r o f cu sto m e rs fro m M o d e rn Fo rm a t a n d
M a lls.

Correlation Coefficient Analysis

 Correlation of Working Profile with the
shopping pattern of consumers in Kirana,
Modern Format, Malls

Post Recession Kirana

•

Cross Tabulation
 Correlation of Working Profile with the
shopping pattern of consumers in Kirana,
Modern Format, Malls

Post Recession Modern Format

•

Cross Tabulation
Correlation of Working Profile with the
shopping pattern of consumers in Kirana,
Modern Format, Malls
•Post Recession Mall
•

T h e in fe re n ce w e ca n m a ke fro m th e a b o ve th re e ta b le s b e tw e e n th e S h o p p in g p a tte rn o f
co n su m e rs a n d th e ir W o rk Pro file is th a t 5 2 . 8 % o f p e o p le w o rkin g Fu ll tim e p re fe r
sh o p p in g a t K ira n a S to re s w h ile 3 7 . 7 % o f N o t W o rkin g p o p u la tio n a lso p re fe rs w o rkin g a t
K ira n a S to re s. K ira n a S to re s a re e a sily a cce ssib le a n d w ith in e a sy re a ch o f th e
p o p u la tio n . T h e se co n d in fe re n ce th a t w e ca n m a ke fro m th e a b o ve ta b le is th a t 5 7 . 0 % o f
p e o p le w o rkin g Fu ll tim e p re fe r sh o p p in g a t M o d e rn Fo rm a t w h ile 3 7 . 7 % o f N o t-w o rkin g
p o p u la tio n p re fe rs sh o p p in g a t M o d e rn Fo rm a t S to re s. 6 2 . 0 % o f Fu ll tim e w o rkin g
p o p u la tio n p re fe rs sh o p p in g a t M a lls a n d 3 1 . 0 % o f N o t w o rkin g p o p u la tio n p re fe rs
sh o p p in g a t M a lls. Cross Tabulation
 Correlation of Working Profile with the
shopping pattern of consumers in Kirana,
Modern Format, Malls
Chi Square Test
•

A n a ly sis
H o : B u yin g b e h a vio u r o f cu sto m e rs in K ira n a S to re s is n o t
d e p e n d e n t o n th e w o rk p ro file p o st re ce ssio n
H 1 : Buying behaviour of customers in Kirana Stores is
d e p e n d e n t o n th e w o rk p ro file p o st re ce ssio n
C h iV a lu e ( χ) : 3 . 416
Ta b le V a lu e : 7 . 8 2
Ta b le V a lu e > χ
H e n ce w e a cce p t th e N u llH yp o th e sis H o . H e n ce w e co n clu d e
th a t B u yin g b e h a vio u r o f cu sto m e rs is n o t d e p e n d e n t o n th e
w o rk p ro file p o st re ce ssio n .
Chi Square Test
Correlation of Working Profile with the
shopping pattern of consumers in Kirana,
Modern Format, Malls

S o w e ca n in fe r fro m th e a b o ve tw o ch i va lu e ta b le s
th a t th e re is n o sig n ifica n t d iffe re n ce b e tw e e n B u yin g
b e h a vio u r o f cu sto m e rs a n d w o rk p ro file p o st
re ce ssio n .
Correlation Coefficient Analysis
 More preference to Deals/Discounts/Comparison
post recession * Age Cross tabulation
MT oota
rel p re fe re n ce to 10 C o u n t % w ith in M o re 9710 578 718 826 3124 60 9231 1 104 14T2 o496 ta
15 l
D e a ls/ D isco u n ts/ C o m p a riso p re fe re n ce to 3 9 . 451 % 3 64 . 598 % 12 819 . 157 % 4 . 63 % . 450 % 1 0 0 .% 0%
n P o st R e ce ssio n D e a ls/ D isco u n ts/ C o m p a riso
n Po st R e ce ssio n

Fro m ta b le 1 , w e ca n in fe r th a t 3 9 . 5 % o f th e p o p u la tio n in th e A g e
g ro u p o f 0 - 2 9 ye a rs a n d 3 6 . 9 % o f th e p o p u la tio n in th e A g e g ro u p o f
3 0 - 3 9 ye a rs p re fe rs D e a ls/ D isco u n t/ C o m p a riso n S h o p p in g Po st
R e ce ssio n . W e ca n a lso co m p re h e n d fro m th e ta b le th a t th e Yo u n g
p o p u la tio n m a in ly p re fe rs D e a ls/ D isco u n t/ C o m p a riso n S h o p p in g Po st
R e ce ssio n .

Cross Tabulation
 More preference to Deals/Discounts/Comparison
post recession * Age Cross tabulation

Analysis
•

• Ho: Good Deals, Discounts or Comparison

Shopping does not depend upon age groups
pre recession
• H1: Good Deals, Discounts or Comparison
Shopping does depend upon age groups pre
recession
• Chi Value(χ) : .499
• Table Value: 9.49
• Table Value > χ
• Hence we accept the Null Hypothesis Ho. Hence
we conclude that Good Deals, Discounts or
Comparison Shopping does not depend upon
Chi Square Test
Trading Down Behavior
across categories

Percentage Analysis
Shift in Categories

S ig n ifica n t fre q u e n cy re d u ctio n s

se e n in R e sta u ra n ts ( 9 0 . 1 6 % ),
H o lid a y Trip s ( 8 9 . 6 3 % ) a n d M o vie s
( 82 . 21 % )

Q u a n tity re d u ctio n s h ig h e st in
Pe tro l ( 6 8 . 8 3 % ), E le ctricity ( 5 5 % )
a n d In d u lg e n ce s ( 5 0 % )

B ra n d S w itch in g m o st p ro m in e n t in
G ro ce rie s ( 7 6 . 9 2 % ), A p p a re l
( 70 . 87 % ) and Cosmetics ( 54 . 35 % )

Percentage Analysis
Switch back post recession
Tra d in g dow n and p o st
re ce ssio n sw itch in g b a ck
h a ve o ccu rre d m o st
sig n ifica n tly and
co n siste n tly in :

A p p a re l S h o p p in g : 5 0 . 8 % T D
a n d 3 9 .2 % T U

M o vie s: 4 9 . 2 % TD and
3 9 .2 % T U

R e sta u ra n ts: 4 8 . 8 % T D a n d
4T D1 . 2: %
TraTdUin g D o w n
T U : Tra d in g U p

Percentage Analysis
•
Suggestions
• Luxury goods should be promoted
aggressively
• More options in leisure goods and
indulgences
• New strategies should be introduced in the
market to make it economical for the
customers.
• Economical sub- brands should be
introduced
• Various lucrative discounts and offers to be
introduced to attract customers.
 Managerial Implications
•
• Economical small packets of products and also
very large packets of products can be
introduced in the market to make it
economical for the customers.
• Companies can implement down marketing
strategies Eg: Gap introducing Old Navy
• Innovations could be in all the strata of
marketing and promotions, such as trade
promotions, online promotions and sales,
product display, advertising and branding to
packaging.
• Economical combo meals
• Easy instalment/payment schemes for Holiday
trips , food purchases etc
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•

 
•

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•

 
•

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•

 
•

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•

 
•

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•

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•

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•

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•

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•

 
•

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•

Consumption- Consumer in a Turbulent Recovery.” BCG Publications.

 
•

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•

Economic Perspectives, Fall 2009,vol. 23, no. 4, pp. 49-68.

•
• Thank You