IIPMCHANDIGARH

PROJECT REPORT ON:

INTERVIEWING CONSUMER AND DETERMINING DEMAND CURVE

OF ONE NECESSARY AND ONE LUXURY ITEM.CALCUTE PRICE

ELASTICITY OF THESE ITEMS AND INTERPRET THE RESULT

Submitted By:

Vikrant Baghi

Rohit Aggarwal

Yogeshwar Dhaliwal

Ravinder Kumar Garg

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Declaration

We hereby declare that the project title "Interviewing consumer and determining demand curve

of one necessary and one luxury item" is a work of our own and all reference sources have been

accurately reported and acknowledged. We would also mention that our information gathered,

analyzed and documented for this project is entirely in our possession which is authentic and

genuine. We will mention that the work done is not purchased or acquired by any unfair means

or any external sources. The data and the information presented in the report are accurate and

updated to the best of our knowledge. However, for the purpose of the project, information

already compiled in many sources has been utilized.

Place: Signature:

Date:

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Acknowledgement

We are grateful to thank our Dean Mr. Amit Baruah and Assistant Mrs. Samuya Baruah for

giving us this great opportunity to do this project.

We also extend our thankfulness to our beloved parents and friends for their continuous

encouragement at every moment.

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TOPIC

Determining Demand Curve

When the cost of a commodity changes, demand for that commodity will also change. The term

"demand" refers to the total amount of the commodity that is consumed. Usually, when cost goes

up, demand goes down. For example, when the cost of beef goes up, total beef sales will go

down. It is also true that when the price of a commodity goes down, consumption usually goes

up.

Demand curves plot the relationship between price and demand (consumption). The horizontal

axis (X axis) shows the unit price of the commodity, and the vertical axis (y axis) shows the total

amount of that commodity consumed at each of the prices.

Because less of a commodity is consumed when the price goes up, the demand curve drops.

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What is a Necessary Item?

In economics a necessity good is a type of normal good. Like any other normal good, when

income rises, demand increases. But the increase for a necessity good is less than proportional to

the rise in income, so the proportion of expenditure on these goods falls as income rises. This

observation for food is known as Engel's law. The income elasticity of a necessity good is thus

between zero and one.

Necessity goods are goods that we can't live without and won't likely cut back on even when

times are tough, for example food, power, water and gas.

The more necessary a good is, the lower the price elasticity of demand, as people will attempt to

buy it no matter the price.

What is a Luxury Item?

In economics, a luxury good is a good for which demand increases more than proportionally as income

rises, in contrast to a "necessity good", for which demand increases less than proportionally as income

rises.

Luxury goods are said to have high income elasticity of demand: as people become wealthier,

they will buy more and more of the luxury good. This also means, however, that should there be

a decline in income its demand will drop. Income elasticity of demand is not constant with

respect to income, and may change sign at different levels of income. That is to say, a luxury

good may become a normal good or even an inferior good at different income levels, e.g. a

wealthy person stops buying increasing numbers of luxury cars for his automobile collection to

start collecting airplanes (at such an income level, the luxury car would become an inferior

good).

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Socioeconomic significance

Certain manufactured products attain the status of "luxury goods" due to their design, quality,

durability or performance that are remarkably superior to the comparable substitutes. Thus,

virtually every category of goods available on the market today includes a subset of similar

products whose "luxury" is marked by better-quality components and materials, solid

construction, stylish appearance, increased durability, better performance, advanced features, and

so on. As such, these luxury goods may retain or improve the basic functionality for which all

items of a given category are originally designed.

There are also goods that are perceived as luxurious by the public simply because they play a

role of status symbols as such goods tend to signify the purchasing power of those who acquire

them. These items, while not necessarily being better (in quality, performance, or appearance)

than their less expensive substitutes, are purchased with the main purpose of displaying wealth or

income of their owners. These kinds of goods are the objects of a socio-economic phenomenon

called conspicuous consumption and commonly include luxury vehicles, expensive watches and

jewelry, designer clothing, yachts, and large residences, urban mansions and country houses.

Market characteristics

Some luxury products have been claimed to be examples of Veblen goods, with a positive price

elasticity of demand: for example, making a perfume more expensive can increase its perceived

value as a luxury good to such an extent that sales can go up, rather than down

A luxury brand or prestige brand is a brand for which a majority of its products are luxury goods.

It may also include certain brands whose names are associated with luxury, high price, or high

quality, though few, if any, of their goods are currently considered luxury goods.

.

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COMPANIES

COLGATE COMPANY

Organizer: Colgate Company is headed by Mr. Ian Cook, Chairman, President and CEO.

Company’s Profile: The small soap and candle business that William Colgate began in New

York City early in the 19th century is now, more than 200 years later, a truly global company

serving hundreds of millions of consumers worldwide.

Our 200-year history reflects the strength and innovation that Colgate people have used to

constantly transform our Company and identify new opportunities. With global brands sold in

over 200 countries; Colgate, Mennen, Palmolive, Ajax, Soft-soap, and Hill’s Pet Nutrition are

among the world's most recognizable household names, trusted and relied upon by consumers

everywhere.

Colgate People, working around the world, share a commitment to our three core corporate

values: Caring, Global Teamwork and Continuous Improvement. These values are reflected not

only in the quality of our products and the reputation of our Company, but also in our dedication

to serving the communities where we do business.

Products: Colgate manufactures a wide range of products with different brands as follows:

Oral Care: Toothpastes, Toothbrush, Toothpowder, Whitening Products.

Personal Care: Body Wash, Liquid Hand Wash, Shave Preps, Skin Care, Hair Care.

Household Care: Surface Care

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Objective of study: To determine the demand curve of Colgate Toothpaste as necessary item.

Toothpaste Face Wash Cream Skin Care

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HONDA CARS IN INDIA

Organizer: Honda Company is headed by Mr. Soichiro Honda, Founder, Honda Motor Co.

Company’s Profile: Honda Siel Cars India Ltd., (HSCI) was incorporated in December 1995 as

a joint venture between Honda Motor Co. Ltd., Japan and Siel Limited, a Siddharth Shriram

Group company, with a commitment to providing Honda’s latest passenger car models and

technologies, to the Indian customers.

The Honda City, its first offering introduced in 1997, revolutionized the Indian passenger car

market and has ever since been recognized as an engineering marvel in the Indian automobile

industry. The success of City as well as all its other models has led HSCI to become the leading

premium car manufacturer in India. The total investment made by the company in India till date

is Rs. 1620 crores, further investment of RS. 1000 crore is planned and being currently invested

for the coming second plant in Rajasthan. The company has a capacity of manufacturing 100,000

cars.

Sales and Distribution Network:

Honda Siel Cars India has a strong sales and distribution network spread across the country. The

network includes 106 facilities in 63 cities. HSCI dealerships are based on the “3S Facility”

(Sales, Service, Spares) format, offering complete range of services to its customers.

The City is manufactured with 74% indigenization level.

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Honda Products: It is one of the largest cars manufacturers in India.

Honda Jazz Honda Accord Honda Civic

Honda City Honda Civic Hybrid Honda CR-V

Objective of Study: To determine the demand curve of Honda City as Luxury Item.

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Research Methodology:

Questionnaire

Luxury Item

1. What do luxury brands mean to you?

Upper class

Premium price

Creative design trends

Extravagance

Prestige

Good marketing strategies

2. What following qualities do exclusive brands need to have?

High price

Well known fashionable designing

Brand Equity

A special retail location

3. Is Honda City Car one of them according to your opinion?

Yes

No

4. What evocation does the Honda City represent for you? Choose one answer

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Luxury brand

Big industry

Exclusivity

Accessories

5. Have you ever bought a Honda City?

Yes

No

If your answer is 'No', jump to question 12.

6. Are you attracted to it?

Yes

No

7. What amount did you spend?

Less than 100000

Between 100000 to 300000

More than 300000

8. Who bought it?

Family

Friends

Yourself

Boyfriend/Girlfriend

9. How do you feel after buying this car item?

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I feeling good

It means a lot if it given to me as a gift

Its dependent on the type of item

Nothing special

10. How many times a year do you sell and buy Car?

Never

1-2 times

3-4 times

Over than 5 times

11. Do you prefer to buy luxury car from foreign brands?

Yes

No

12. Do you think that luxury goods are more accessible nowadays?

Yes

No

13. What do you do for a living?

Full Time student

Full time student with a part time job

Part time student

Full time worker

14. What is your Monthly Income?

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Between 10000 to 15000

Between 15000 to 20000

Between 20000 to 25000

Necessary Item

1. What do you mean by necessary item?

Easily accessible by every consumer

Only accessible by few consumers

Should be differentiated in two categories elite and lower

2. Is Toothpaste a necessary item?

Yes

No

3. Are necessary items costly or cheap at present?

Yes, It is costly

No, It is cheap

No idea

4. Let us take the example of Colgate. Suppose the price of Colgate at present is Rs. 25 per

50 gm which is comparatively less. Would you buy it.

Yes

No

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5. How much would you buy?

More

Less

6. If the price of Colgate goes down to Rs. 20 per 50 gm then how much would you prefer to

buy?

More than earlier one

Less than earlier one

7. If the price of Colgate goes up to Rs. 35 per 50 gm then how much would you prefer to

buy?

More

Less

Would prefer to buy its substitute

8. As per you what is very important item for living?

Necessary, required by every person

Luxury, ability of only few rich persons to buy it

9. What is your Educational Qualification?

High Schools

Under Graduate

Graduate

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Post Graduate

Professional

10. What do you do for living? Are you satisfied with it?

I do job and I am satisfied

I do job but I am not satisfied

I do business and I am satisfied

I do business but I am not satisfied

11. What is your monthly income?

Between 5000 to 10000

Between 10000 to 15000

Between 15000 to 20000

Sources of Data:

The data is basically primary in nature.

It was obtained from the customers.

Data Collection Method:

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Our communication approach was basically structured questioning, that is personal interview

with the aid of printed questionnaires.

Data Analysis:

Appropriate statistical analysis will be adopted. The data will be tabulated and analyzed.

Limitations of the Study:

The study is limited to the Colgate (necessary item) and Honda City (Luxury Item).

Since the time is less the researcher has taken a sample of 20 people and it will not reveal

the whole population of a country.

Data Analysis

And Interpretation

Data Analysis and Interpretation:

The following information contains the data interpretation of the questionnaires. The

respondent’s responses for the questions have been interpreted and a finding has been made

based on the respondents responses.

Frequency Table for the Demographic Details of the Colgate Respondent’s

Table: 1

Category of the Respondents

Frequency Percentage

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High Class 5 25%

Medium Class 10 50 %

Lower Class 5 25 %

Total 20 100

Interpretation:

From the above table 25% respondents are belonging to the age category of High Class. And %

respondents are belonging to the category of Mid Class and 25% respondents are belonging to

the category of Lower Class.

Table: 2

Gender of the Respondents

Frequency Percentage

Female 8 40 %

Male 12 60 %

Total 20 100

Interpretation:

From the above table 40% respondents are belonging to the category of female. And the

remaining 60% respondents are belonging to the category of male.

Table: 3

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Educational Qualification of the Respondents

Frequency Percentage

School 2 10 %

UG 10 50 %

PG 6 30 %

Professional Course 2 10 %

Total 20 100

Interpretation:

From the above table 10% of respondents are belonging to the category of school and

professional course each. And 50% of respondents are belonging to the category of UG. And

30% of respondents are belonging to the category of PG.

Table:4

Occupation of the Respondent

Frequency Percentage

Salaried Person 10 50 %

Professionals 3 15 %

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Businessman/Housewife 7 35 %

Total 20 100

Interpretation:

From the above table 50% of respondents are falling under the category of salaried person. And

15% of respondents are falling under the category of professionals and 35% of respondents are

belonging to the category of business/housewife.

Table: 5

Income level of the Respondents

Frequency Percentage

Rs.5,000-Rs.15,000 7 35 %

Rs.15,001-Rs.25,000 5 25 %

Rs.25,001-Rs.35,000 3 15 %

Above Rs.45,000 5 25 %

Total 20 100

Interpretation:

From the above table 35% of respondents are falling under the income range between Rs.5, 000-

Rs.15, 000. And 25% are falling under the income range between Rs.15, 001-Rs.25, 000. And

15% of respondents are falling under the income range between Rs.25, 001-Rs.35, 000. And

25% of respondents are falling under the income range between Above Rs.45, 000.

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Calculation of Price Elasticity and interpreting the result:

After interviewing the consumers about Colgate toothpaste the following result has been

interpreted:

When price of Colgate Toothpaste is low, demand is high but when its price is increased the

demand falls and consumers go for its substitute toothpaste because its price is less as compared

to Colgate and is also under their budget level.

For e.g. say Price of Colgate is Rs. 25 per 50 gm and more than 60% of the toothpaste consumers

are buying it but when its price is increased to Rs. 35 per 50 gm then those 60% consumers may

go down to 30% (whereas few consumers will not move because either they are high class

people for whom price does not matter or those people who are brand conscious). Hence demand

will fall and these consumers will go for other toothpaste say X which is not costly is under their

budget.

Frequency Table for the Demographic Details of the Honda City (Luxury Item)

Respondent’s

Table: 6

Age of the Respondents

Frequency Percentage

20-40 yrs 15 75 %

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Above 40 yrs 5 25 %

Total 20 100

Interpretation:

From the above table 75% of respondents are falling under the age group of 20yrs-40yrs. And

25% of respondents are falling under the group of above 40 yrs.

Table: 7

Gender of the Respondents

Frequency Percentage

Female 3 15 %

Male 17 85 %

Total 20 100

Interpretation:

From the above table 15% of respondents are belonging to the female category and 85% of

respondents are belonging to the male category.

Table: 8

Education Level of Respondents

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Frequency Percentage

UG 2 10 %

PG 14 70 %

Professional 4 20 %

Total 20 100

Interpretation:

From the above table 10% of respondents are belonging to the category of UG. And 70% of

respondents are belonging to the category of PG. And 20% of respondents are belonging to the

category of professionals.

Table 9.

Occupation of the Respondents

Frequency Percentage

Salaried Person 7 35 %

Businessman 4 20 %

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Professionals 4 20 %

Managerial 5 25 %

Total 20 100

Interpretation:

From the above table 35% of respondents belong to the category of salaried person. And 20% of

respondents are belonging to the category of businessman and professionals. And 25% of

respondents are belonging to the category of managerial.

Table: 10

Income Level of the Respondents

Frequency Percentage

Rs.5,000-Rs.15,000 5 25 %

Rs.15,001-Rs.25,000 2 10 %

Rs.25,001-Rs.35,000 5 25 %

Rs.35,001-Rs.45,000 4 20 %

Above Rs.45,000 4 20 %

Total 20 100

Interpretation:

From the above table 25% of respondents are falling under the income level of Rs.5, 000-Rs.15,

000 and Rs.25, 001-Rs.35, 000. And 10% of respondents are falling under the income level of

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Rs.15, 001-Rs.25, 000. 20% of respondents are falling under the income level of Rs.35, 001-

Rs.45, 000 and above Rs.45, 000.

Calculation of Price Elasticity and interpreting the result:

After interviewing the consumers about Colgate toothpaste the following result has been

interpreted:

There are few consumers who like to buy Honda city cars even though price is high because it is

a sign of their status for them in the society or few people like to but it as it is their capability to

buy. Whereas there are few consumers who don’t have that much capability to buy the car as

compared to others.

Conclusions:

Since both the items are not comparable with each other because there is a huge

difference in them as Colgate is a necessity whereas Honda City is luxury item.

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But Honda City is little bit below the line in customer capability when compared to

Colgate because there are few consumers who can buy the Honda City as of High Class

whereas middle class or lower class people cannot buy due to average income.

Profit for the Honda City is high as compared to Colgate because its cost is very high.

But Demand for the Colgate is high then Honda City.

When price of Colgate increases consumers may shift to other substitutes

When price of Honda City increases very less people shift to other substitutes because

few consumers are brand conscious.

Suggestions and Recommendations:

Prices should be such that most of the consumers should be able buying it.

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There should be customer feedback system so that while revising the price of the

products their advices shall be considered.

The Honda City should launch cars that are easily accessible by the middle class as did

by TATA Motors.

The Honda City can concentrate on their elite consumers more but should not ignore

others.

BIBILOGRAPHY:

Research Methodology

Statistical Analysis – S.P. Gupta

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Websites:

www.colgate.com

www.honda. com

www.wikipedia.com

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