TITLE OF PROJECT:

EFFECT OF PRICE CHANGE ON FOOD ORDERING COMPANIES

SUBMITTED BY

TANMAY KARMARKAR 16010324231

PRANITI GANJOO 16010324246
RAYONA BASU 16010324248

DIVISION: C

BATCH: 2016 – 21

Symbiosis Law School, Hyderabad

Symbiosis International (Deemed University), Pune

In

MARCH, 2019

Under the guidance of

Dr. Rajnikanth M.

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 CERTIFICATE

The project entitled ‘EFFECT OF PRICE CHANGE ON FOOD ORDERING

COMPANIES’ Submitted to the Symbiosis Law School, Hyderabad for

MARKETING RESEARCH as part of internal assessment is my original work

carried out under the guidance of Dr. RAJANIKANTH from June to September.

The research work has not been submitted elsewhere for award of any

publication or degree.

The material borrowed from other sources and incorporated in the work has

been duly acknowledged. I understand that I myself could be held responsible

and accountable for plagiarism, if any, detected later on.

Signature of the candidates:

Tanmay Karmarkar:

Praniti Ganjoo:

Rayona Basu:

Date: 25 MARCH 2019

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 INTRODUCTION

Food prices are a primary determinant of consumption patterns, and high food prices may
have important negative effects on nutritional status and health, especially among poor
people. The global food price crisis of 2007-08 focused international attention on the effect of
changes in food price on nutrition and health. Estimates from the United Nations Food and
Agriculture Organization suggest that in 2008 an additional 40 million people were pushed
into hunger by the global rise in cereal prices, and evidence is accumulating that dietary
diversity and quality have been negatively affected by food price rises, particularly among the
poorest. In contrast, the governments of wealthy countries are increasingly adopting fiscal
measures that change the relative price of foods to promote healthy diets. Simulation studies
have suggested that imposing taxes on foods such as sugar sweetened beverages or foods
high in saturated fats and salt could result in reductions in obesity and cardiovascular
mortality, although because of a lack of relevant data the actual impact of such taxes on
different population subsections is largely unknown.

The relation between demand for a given food and its own price among consumers is known
as the “own price elasticity of demand.” These elasticities are coefficients that describe the
percentage by which the demanded quantity of a food changes in response to a 1% increase in
the price of the food. The coefficients are calculated by dividing the percentage change in the
quantity demanded by the percentage change in the price and are usually derived as part of
econometric models known as “demand systems.”

Own price elasticity of demand is usually negative, because demand almost always decreases
as prices increase. However, the magnitude of the elasticity may be larger or smaller
depending on the availability and closeness of substitute foods, necessity of the food, the
proportion of budget spent on it, and the time period. All of these factors can be included in
the demand system models.

For example, confectionery tends to have larger elasticity, as for most people it is not a
necessity and also has a relatively high price, thus requiring a larger proportion of the
available budget. Dietary staples, such as cereals, tend to have smaller elasticity, because
these foods are necessities in the diet, are usually cheaper, and people conserve their income
for spending on such essentials when prices increase. In a similar way, low income countries
tend to have higher price elasticities for all foods than high income countries, because food

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represents a large share of total income in these countries, hence price changes have a larger
impact on budget allocation.

What is Price Change?

Price is the second important element of the marketing mix that needs to be properly
determined and price change always took place in the market due to various factors. It is
general that the successfully determined price of any product or service also requires some
change due to many factors. This price change or price changes may be due to the changing
demand or as a result of inflation or it may be originate as a reaction to the competitor prices..
Price Change is of two types:

Price Cut

Price cut is related to lower the existing prices of products or services. There are many
situations that force a business to cut the price of its product or services. Following are some
of these compelling conditions.

Price Increase

It is obvious that the price increase is related to increasing of the price of the product or
service in the business. If price change is effective, it can be responsible for the extra
proportion of profits. For example, if a business earns 30 % profit on a specific amount of
sales, then it can earn 33 % profit on the same proportion of sales by simply increasing the
price of its product and services.

OBJECTIVES

 To study the effect of price change on consumption.

 To study the effect of price change on sales of food ordering apps.
 To study the impact of various aspects on food ordering companies according to
Demographics through a set of questionnaire and survey.

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 RESEARCH METHODOLOGY

 The study was conducted by using convenient method and was administrated through
questionnaire.
 The data collected is primary data. This was conducted to know the reference group
of the consumers in urban India with varying ages, occupations and economic
background.
 The questionnaire was mixed with one which constitutes open ended questions along
with multiple choices and rating scales.

REVIEW OF LITERATURE

Companies are bound to face market situations where they are required to initiate price
changes. It means, either they are to cut the prices or increase the present prices to survive,
maintain status quo or further growth. Initiating price changes involves two possibilities of
price cuts and price increases.

Agwu, Dr. Edwin. (2014): International Journal of Research in Management, Science &
Technology (E-ISSN: 2321-3264). This study examined the effect of pricing strategies on the
purchase of consumer goods. Also examined in this research is the effect of internet (online
presence) on informed purchase decision. The research intended to answer questions on the
extent to which competitor's price affects purchase of products, how customers perceive the
value-based pricing concept of firms and the extent to which online pricing inform customer
purchase decision. This paper being descriptive and historical relied heavily on secondary
sources of information. The research utilized a descriptive and historical method and relied
heavily and solely on secondary instruments as sources of data. Findings from the data
obtained indicate that consumers have a perception of value reflected in prices of firms’
products. It also shows that competitors price affect the purchase of firm products and that
online pricing informs and affects purchase decision. This study contributes to knowledge in
series of issues associated with pricing strategies and purchase decision process. This
research recommends that as much as firms should focus on communicating value to
customers through prices, firms should also be on the watch for competitor’s prices and
examine how much it affects purchase of their products.

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Huang, Ava & Dawes, John & Lockshin, Larry & Greenacre, Luke. (2017): Price
elasticity is a widely used measure of consumers’ willingness or ability to pay for goods and
services. This research examines the price elasticity of high-priced brands. We define high-
priced brands as those that sell at or above the price point at which consumers begin to
consider that product to be luxurious or premium in the category (Kapferer et al., 2014;
Sjostrom et al., 2016). More specifically, we use high-priced wine brands as the context for
this research. Wine is an ideal product to use because it has a wide price range, and can be
purchased for various consumption situations. When prices are high we anticipate that
elasticities may no longer function as they do in everyday consumer packaged goods markets.
Instead, they might become smaller or possibly even positive if consumers are prepared to
pay for the quality they desire. We employ stated choice experiments to investigate how
Situational Factors, Consumer Factors and Contextual Factors influence price elasticities for
high-priced wine brands in Australia. Results are that price elasticity estimates for the high-
priced brands in this study are −1.8 on average. This is lower than the commonly reported
figure of −2.6 for brands in general; however, in one part of the experiment respondents
chose for a ‘high-importance’ occasion.

Smaller price elasticities were found when (1) the perceived importance of the consumption
situation was high, (2) among regular high-priced wine buyers, and (3) among brands with a
higher initial price position. These results demonstrate that the patterns of price elasticity for
high-priced products are mainly similar to that for other FMCG products, but consumers are
slightly less responsive.

ANALYSIS AND INTERPRETATION

The data collected by way of a survey shall be analyzed with the help of graphical analysis
tools, by way of this survey report.

The data shall be analyzed and interpreted by way of graphs and pie-charts in order to
understand the market standing of various food ordering companies and the reasons behind
the choices that are made by the consumers.

Below are the graphical interpretations pertaining to the food ordering industry in order to
understand the nature and scope of the choices that are made by the consumers and how the
change in price of products affects the market of position of such companies?

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 Graphical Analysis:

Interpretation 1:

The above data represents the age groups that order food through food ordering companies,
on an average. As it can be observed maximum consumption through food ordering
applications is by young adults. Hence, it can be concluded that the target audience for food
deliver applications is primarily the youth. However, the other age groups are also close to
the young adults when it comes to usage of food ordering applications. Thus, age and
consumption through food ordering applications are not inversely proportionate.

Interpretation 2:
The above data represents the average occupation of the consumers of food ordering
applications. As it can be observed, the maximum consumers of food ordering applications

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belong to the student category. Hence the target market for food ordering companies is
students.

Interpretation 3:
The above data represents that the monthly income of consumers of the food ordering
companies. As it can be observed, the maximum consumption is made by consumers earning
less than Rs 10,000 per month. Hence it can be concluded that the income of consumer does
not affect the consumption drastically and that consumers find food ordering apps more
pocket friendly.

Interpretation 4:
The above data represents how frequently consumers use food ordering applications. As it
can be observed, most consumers use the food ordering apps once a week and there are very

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few consumers who do not use it on a weekly basis. Hence, it can be concluded that food
ordering applications have captured majority of the market and is being used widely.

Interpretation 5:
The above data represents the cuisine preference of consumers. As it can be observed,
majority consumers prefer ordering fast food through food ordering applications, followed by
Indian and Oriental food. Hence, it can be concluded that the food ordering applications have
made these cuisines widely available to the consumers.

Interpretation 6:
The above data represents the most preferred food ordering application. As it can be
observed, the most preferred food ordering application is Swiggy, followed by Zomato.
Hence it can be concluded that Swiggy and Zomato have captured majority of the market and
are the most extensively used food ordering applications.

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 Interpretation 7:
The above data represents the reason why consumers prefer their favourite food ordering
application. As it can be observed, consumers prefer their favourite food ordering application
majorly due to the discounts that are offered to them. Hence, it can be concluded that the
choice of food ordering application of consumers highly depend upon the discounts offered to
the consumers.

Interpretation 8:
The above data represents which food ordering applications are seen as pocket friendly by the
consumers. As it can be observed, the consumers believe that Swiggy is the most pocket-
friendly food ordering application, followed by Zomato. Thus, it can be concluded that
Swiggy is the most pocket friendly food ordering application since it offers more number of
discounts to the customers and thereby is chosen as the most preferred food ordering
application by customers.

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 Interpretation 9:
The above data represents the influence of price on the usage of food ordering applications,
on a scale of 1-5 wherein 1 stands for unlikely and 5 stands for most likely. As it can be
observed, price is quite likely to influence the choice of customers. Hence, it can be
concluded that price and demand are inversely related and therefore consumers will be
willing to use food ordering applications when the prices are lower or when the prices are
lowered through discounts and offers.

Interpretation 10:
The above data represents whether consumers compare the prices of the same food item as
offered by other food ordering applications before placing an order. As it can be observed,
majority of the consumers compare the prices of the food item before placing an order.
Hence, it can be concluded that the food ordering application offering the lowest price will be
preferred over the others.

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 Interpretation 11:
The above data represents the mode of payment used by consumers. As it can be observed,
the consumers use all modes more or less equally; however, net banking takes a lead. It can
be concluded that electronic modes of payment are used a lot more as opposed to cash on
delivery and the reason behind such practice may be the additional offers available on e-
payment methods.

Interpretation 12:
The above data represents whether consumers are likely to switch their preference of food
ordering applications, if another application succeeds in providing higher discounts for the
same food item. As it can be observed, the consumers are highly likely to switch their
preferences if some other food ordering application offers higher discounts. Hence e, it can be
concluded that discounts and reduced prices affect the choice of customers gravely.

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 Interpretation 13:
The above data represents the categories for which consumers are willing to pay higher
charges. As it can be observed, consumers are willing to pay more for Late Night Delivery
and Quality of Food, followed by speedy delivery. Thus, it can be concluded that customers
are willing to pay a higher price for extra services or better quality products.

Interpretation 14:

The above data represents the amount of delivery charge that consumers may be willing to
pay. As it can be observed, majority of the consumers are willing to pay a delivery charge
which is below Rs. 20, followed by the range between Rs.20-50. Hence, it can be concluded
that consumers are not willing to pay additional charges above the amount of Rs. 20 and will
prefer a food ordering application which will not demand high additional costs.

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 Interpretation 15:

The above data represents the influence of advertisements about offers provided, upon the
choice made by consumers with respect to food ordering applications, on a scale of 1-5
wherein 1 stands for unlikely and 5 stands for most likely. As it can be observed, it is quite
likely for consumers to be influenced by the advertisement of offers provided by the food
ordering application, for the purpose of making a choice. Hence, it can be concluded that
advertising about offers available can be an effective tool for marketing and creating a
position in the minds of the consumer.

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 FINDINGS AND SUGGESTIONS:

With a population of over 1.2billion, India is undeniably one of the biggest consumer markets
in the world today. Moreover, 50% of this population fall under the age of 25, and the rest
before the age of 35 years; making India among the youngest population in the world too.
Most of the fast food demand comes from age group 18-40 years. What’s more, by the year
2025 the Indian middle-class demographic is expected to touch 550 million. Young India’s
appetite is one of the key drivers for demand in the food and beverage industry on the whole.

The following are the findings on the basis of the survey conducted among a sample space of
approximately 100 people:

 On an average 68% of the consumers use a food ordering application at least once a
week and more than 75% of such consumers are below the age 30. This shows that
food ordering apps have captured their target market of young adults.
 The consumers are observed to have varied preferences and tastes with respect to
cuisines such as Italian, Oriental, Fast Food, Indian, and Continental. Thus it can be
concluded that food ordering applications provide for an array of cuisines to their
consumers.
 More than 43% of the consumers prefer Swiggy over Zomato, Food Panda and Uber
Eats. Swiggy is followed by Zomato at 32%, Uber Eats at 12.3% and Food Panda at
9.4% as per consumer share. The reason behind such preference is the discounts
offered by the application to its customers, along with other parameters such as
variety of restaurants, loyalty programs and speedy delivery.
 Furthermore, Swiggy is considered to be the most pocket-friendly food ordering
application by over 44% of the consumers, followed by Zomato (33%), Uber Eats
(10.4%) and Food Panda (9.4%)
 It has been observed that consumers are highly influenced by the pricing of food items
while ordering food items through food ordering applications. Furthermore, more that
54% of the consumer base compares the prices of the same food item on various
applications before ordering from any one of the options available. This makes it lucid
that pricing techniques highly influence the demand for food items by way of food
ordering applications.

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  Moreover, majority of the consumers pertain to e-payment option to avail discounts.
More than 55% of the consumers are likely to switch to a different food ordering
application if that application offers more discounts and loyalty points.
 It has been observed that consumers are ready to pay higher charges for additional
facilities such as speedy delivery, late night delivery, good quality food and packaging
of the food. However, majority consumers are not willing to pay more than Rs. 20 for
normal delivery, as opposed to other services.
 Additionally, it has been observed that consumers’ choice of food ordering
application is also significantly influenced when consumers see advertisements of
offers on various platforms.

Suggestions:

1. Food Ordering Companies must adopt aggressive internet marketing on social media
platforms for advertising their offers, discounts and loyalty programs to capture the target
market i.e. the young adults since youngsters are in close contact round the clock, with the
internet.

2. Food Ordering Applications must focus more on their loyalty programs in order to attain
customer retention and at the same time strike a balance between loyalty programs and
discounting techniques. In that way the company will gain and retain its customers, even
amidst cut-throat competition.

3. Food ordering companies must take measures to reduce their delivery charges and invest in
additional services such as speedy delivery and late night delivery by increasing the number
of employees.

4. The companies must also focus on providing an array of cuisines as per the demands of the
customer.

5. The food ordering companies must conduct a periodical feedback survey in order to gauge
the demands of the customers, their preferences and their grievances. Through this, not only
will the companies get a lead on what they should improve, they will also gain the loyalty of
customers by depicting that their opinions matter.

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 CONCLUSION

The changing urban lifestyle of the average Indian is dramatic enough to be favourable for
the food-on-the–go and quick home delivery models to grow at higher rates. The ever-
increasing population crowded metro cities and longer travel times are drivers for the
convenient, ready-to eat and cheaper options of having food and groceries delivered at your
doorstep. Companies that are aware of the huge potential for growth may venture straight in,
but only the fittest will survive. Businesses who keep their value proposition and their brand
active in consumer’s minds, will take the biggest share of the Indian online food service pie.

REFERENCES:
The above survey report would not have been successfully made without gaining guidance
from the below mentioned articles and websites:

 Agwu, Dr. Edwin. (2014). A Review of The Effect of Pricing Strategies on The
Purchase of Consumer Goods.
 Huang, Ava & Dawes, John & Lockshin, Larry & Greenacre, Luke. (2017).
Consumer response to price changes in higher-priced brands. Journal of Retailing and
Consumer Services.
 https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/zomato-swiggy-
and-ubereats-paying-higher-cash-on-delivery/articleshow/65142563.cms?from=mdr
 https://theaims.ac.in/resources/online-food-service-in-india-an-analysis.html
 https://www.thehindubusinessline.com/info-tech/in-race-for-customers-food-delivery-
firms-are-offering-big-discounts/article24822754.ece

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QUESTIONNAIRE:

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