What is the effect of regular versus irregular

installment payment on consumption and

renewal intentions?

by
Akash Solanki (pgp08070)
Aman Saxena (pgp08072)
Anuj Garg (pgp08074)
Pravin Maurya (Pgp08038)
Submitted to-
Prof. S. K. Pandey

Indian Institute of Management Rohtak

JULY 2018
 Acknowledgment

We would like to express most profound appreciation to our professor Mr. Shivendra Kumar
Pandey, who has shown the attitude and substance of a mentor: he continuously and
persuasively conveyed a spirit of adventure regarding research and scholarship and excitement
regarding teaching. Without his supervision and constant help, this research would not have been
possible.
Lastly, we would like to thank our institute, IIM Rohtak, for providing us with an opportunity to
gain deep insight into this subject and helping us with the resources for the same.
 Declaration

I certify that

a. The work included in the project is original and has been done by myself.
b. The work has not been submitted to any Institute for any degree or diploma.
c. I have followed the guidelines administered by the Institute in writing the project report.
d. I have adhered to the norms and guidelines given in the Ethical Code of Conduct of the
institute.
e. Whenever I have used materials (data, theoretical analysis, and text) from other sources,
I have given due credit to them by citing them in the text of the thesis and giving their
details in the references.
f. Whenever I have quoted written elements from other sources, I have put them under
quotation marks and given proper credit to the sources by citing them and providing
required details in the references.
Table of Contents

1. Abstract .................................................................................................................................. 5
2. Design/Methodology/Approach ............................................................................................ 5
3. Findings ................................................................................................................................ 5
4. Research Implications……………………………………………………………………….………………………….5

5. Practical implications…………………………………………………………………..……………………………….5

6. Originality/Value…………………………………………………………….…………………………………………….6

7. Definition……………………………………………………………..………………………………………………………….6
8. Introduction…………………………………………………………………………………………………………………….6
9. Research Design…………………………………………………..………………………………………………………….7
10. Discussion……………………………………………………………………………………………………………….…….8
11. Managerial Implications………………………………………………………………………………………………..9
12. Limitations……………………………………………………………………………………………………………………10
Abstract:
This problem is important to study as the mutual funds selling companies are not aware of which
kind of SIP schemes are more successful, the one which gives regular payments or the one giving
irregular payments. These companies also want to know that what effect does it create on
consumer behavior regarding the renewal of the service.

Design/Methodology/Approach:
A sample of 40 participants was utilized in four experiments. A randomized design was used, and
experimental manipulations were achieved using quantitative research.

Findings:
1. People belonging to the age group of less than 35 are more likely to renew the banking
service which provides regular payments
2. People who are married are more prone to take a stable payment banking service
3. People who have a regular income are choosing the banking service with the regular
payment
4. Preference of SIP which provides the services of investing in equated monthly installment
distributed equally over the year is more than the ones which provide payment to be
done at any time of the year

Research Implications:
The study indicates regular payments in banking schemes is more preferred over irregular
payments.

Practical implications:
For a customer, renewal intentions of a SIP and loan depend on various factors such as age,
marital status, income type (regular and irregular) and the type of installments, i.e., regular and
irregular. Based on the research we can say people who are married or having regular income
prefer to take banking service with regular payments. Also, people prefer SIP which provides
monthly installment than the ones which provide payment to be done at any time of the year.
Originality/Value:
The study is perhaps the first one to study the effects of regular and irregular payments on
consumer behavior for consumption and renewal of service.

Keywords – Renewal Intention, Regular/Irregular payment schemes, SIP

Definitions:

Regular Payments: Regular payment here means the time of paying the installments is changing
keeping the amount of the installment fixed.

Irregular Payments: All other cases left from Regular payments come under Irregular payments,
like any payment scheme where if the amount of a monthly installments changes, or if the
timeline changes.

Introduction:

For a customer, renewal intentions of a product depend on customer satisfaction. In the case of
making payments, there are two methods available on the basis of the needs of the customers.
Some customers prefer to pay on a regular basis and others on an irregular basis. It depends on
various factors such as our cash flows, risk appetite, tax benefits, business model, individual
behavior (conservative or unconventional), occupation, age, income and even marital status.
Nowadays banks provide loans keeping EMIs as the payments options, but mutual funds, on the
other hand, can be done using a SIP or on a lump sum basis also. It can be said that the people
know what they want at a particular time, but they do not know how would they react if there
are more flexibilities in making payments. For a manager, it is important to know consumer preference
of Bank scheme payments based on their demographics.

Even the companies are not able to predict what behavior will the user follow and what should
be provided to the user, Borrowers’ selection into rigid versus flexible repayment schedule the
rigid contract (Giorgia Barboni and Parul Agarwal, JOB MARKET PAPER). It represented that the
rigid payment schedule is considered the” outside” option for borrowers.
Research Design:

It is a pragmatic approach, i.e., a mix of quantitative and qualitative approach. It is quantitative

because it involves statistical analysis. For the research, we will be using one or more hypothesis.
Also, we may use different techniques to collect data simultaneously like initiating with focus
group interviews and then constructing a questionnaire to measure the attitudes to carry out the
statistical analysis. The research question at hand includes predictions about the possible
relationships or associations between the variables. The analysis would also involve the use of
statistical computer packages. And we assume that the people involved in the study will not be
affected by external factors and are a representative sample of a wider population

Management Decision Problem: Which one should be implemented with regular or irregular
payments?

Marketing Research Problem:

What are the effects of regular and irregular payments on consumption and renewal intentions

Hypothesis:

1. Regular payment scheme has a positive impact on the membership renewal and
consumption.
2. Irregular payment scheme has a negative impact on the membership renewal and
consumption.

Scheme Regular
payments
attributes-
Consumption and
Risk renewal intentions

Return Irregular
payments
Period
 a. Type of research design-
Descriptive research- As this research is used to describe the behavior of the sample
population after regular and irregular payments.
b. Information needs-
Answer: We will need the information about consumer choices for regular and irregular
installments in a SIP scheme
c. Data collection from secondary sources-
Data would be collected through focus group interviews and face to face interviews. The
data would be primary as it would involve collecting directly from the source. We will also
collect data through observations and construct a structured questionnaire.
d. Scaling techniques-
Ordinal and Interval Scale
e. Questionnaire development -
A combination of both unstructured and structured questions based on MRP and
hypothesis
f. Sampling techniques-
A convenient sampling of around 80-100 inputs
g. Fieldwork-
Focus group interviews and survey at different banks and their customers
Results

Test Objective Test Performed Results

Which age group should be
targeted for which type of
payment method
Is there any difference between
consumption of payment
Both are categorical variables
hence, Crosstab; Chi-Square
Both are categorical variables
hence, Crosstab; Chi-Square
From the Cross Tab Chi-Square,
we conclude that the number of
people belonging to the age
group of less than 35 is more
likely to renew the service which
provides regular payments.
Hence, we will target those for
regular payments
From the Cross Tab Chi-Square,
we can see that the people who
methods between married and
unmarried people
Does the occupation of the
person play a role in the
payment pattern, regular
irregular
If offered two types of services,
one with regular payments and
the one with irregular payment,
then which type of method is
most preferred
Both are categorical variables
hence, Crosstab; Chi-Square
Both are metric variables hence,
Paired T-test
are married are more prone to
take a stable payment service.
This can be due to the stability
they want in the life, as they
may have a family to look upon,
so they seem not to be risky at
all. They do not want the pain of
paying a huge payment in a
single time, or they want their
credit scoring to be as good as
possible, they want the
payment at the earliest. As they
do not want the possibility of
transfer of that pain from them
to their family in case of
accidents or other factors.
From this Cross Tab, we can see
that the people who have a
regular income are choosing the
service with the regular
payment. This must be because
of the fact that they have a
regular monthly income and
hence they want to pay their
loans or any other payments
from that month salary only and
save some amount for the
future. Also, it has been
observed that there are other
payments like electricity bill,
school fees, and telephone and
other bills which are paid on a
monthly basis. Hence, we can
state this as one of the reason
and the results even support the
same
From the pair T- test we found
that the mean of regular
payment is more the mean of
irregular payment over a year.
Therefore while formulating
banking schemes, it is preferred
to go with regular payment
installment schemes.
Discussions:

As per our literature review, we expected that people do not like rigid payment schemes. They
like some kind of flexibility in the payment options in banking schemes. However, the research
suggests that people prefer regular payment options rather than irregular payments distributed
throughout the year. In the Mutual Funds market, mutual funds are provided in two ways, one
in a lump sum time and the other in the form of SIP (Systematic Investment Planning). The
incoming salary of a person in a job is on a monthly basis; their expenses are even on a monthly
basis. Electricity bills, phone bills, and all the bills of their basic amenities are monthly, hence in
general monthly installments are preferred. There are some more advantages that why people
prefer SIP over Lump Sum Mutual funds.
1. The main difference between these two types is the dependence on the timing of entry.
Lump Sum is more prone to the market condition, while SIP provides immunity to the investment.
If someone invests in Lump sum in the market and market drops suddenly then the whole amount
is at risk while SIP is less prone to this market dependency.
2. Systematic Investment approach tends to average out the volatility associated with the
market in favor of the investor.
3. During the period of 2007 to 2017 market went down drastically and regained but SIP was
able to capture the volatility and resulted in better overall yields.

Managerial implications

People who are married or having regular monthly income are considered to take less risk. So,
managers should provide them regular installment in banking schemes. Also, People belonging
to the age group of less than 35 are more likely to renew the banking service which provides
regular payments. So, the managers should provide regular installment banking scheme to
youngsters. Preference of SIP which provides the services of investing in equated monthly
installment distributed equally over the year is more than the ones which provide payment to be
done at any time of the year. That means people like SIP with regular payments So the managers
should include more regular payment SIP in their portfolio.
Limitations

The conclusions were based on the data of 40 responses. Even though efforts were put in trying
to gather responses from various groups of people, this may not be a representative sample for
your business. Due to the asymmetry in data collected, the survey could have captured more
insights about consumers who consume the regular payment schemes than those who would be
registering for irregular payment schemes.

Grammarly score:- 100

Plagiarism : 0%
Appendix

Questionnaire
Q1. Name
Q2. Gender a) male b) female
Q3. Age a) <30 b)30-40 c)40-50 d)>50
Q4. Annual Income a)<5 Lacs b)5-25 Lacs c)25-50 Lacs d)>50 Lacs
Q5. Marital Status a) yes b) no
Q7. Occupation a) Regular income Job b) own business
Q8. Suppose you have a loan agreement from a financial institution for a year, how would you
like to receive the money from that institution
a)All the Money at the initiation

b)Equated monthly installments (EMI) distributed over the whole year (Jan-Dec)

c)Equal monthly installments in the first 6 months (Jan-June)

d)Equal monthly installments in the last 6 months (June-Dec)

e)Equal monthly installments starting after first 3 months(April-Sept)

f)All the money at the end

Q9.Now it's time to repay that loan, how much pain does it feel while repaying at the following
moments? Rank them (1 being most painful and 7 being least painful)
a) All the Money at the initiation
b) Equated monthly installments (EMI) distributed over the whole year (Jan-Dec)
c) Equal monthly installments in the first 6 months (Jan-June)
d) Equal monthly installments in the last 6 months (June-Dec)
e) Equal monthly installments starting after first 3 months(April-Sept)
f) All the money at the end

Q10. If given a chance to invest in a SIP (Systematic Investment Plan) for a year, where you can
pay at any time in the year, just that the amount of installment remains constant. On a scale of 1
to 7 (1 being least likely and 7 being most likely), how willing are you to consume this service?
Q11. If given a chance to invest in the same SIP, but here you have to invest in equated monthly
installments distributed equally over the whole year. On a scale of 1 to 7 (1 being least likely and
7 being most likely), how willing are you to consume this service?
Q12. Which one are you likely to renew?

a) One with regular payments

b) One with irregular payments