Car Market and Buying Behavior- A study of Consumer Perception

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Car Market and Buying Behavior- A study of Consumer Perception

   

 

Towards The Partial Fulfillment of

Post Graduate Diploma in Management


Table of Content

  1. Executive Summary………………………………………06
  2. Introduction………………………………………………..08
  3. Overview of the Auto segment…………………………14
  4. Review of Literature………………………………………20
  5. Objective of the study……………………………………29
  6. Scope of the study………………………………………..30
  7. Research methodology………………………………….32
  8. Limitation of the study…………………………………..39
  9. Car’s Profile………………………………………………..40
  10. Finding and Analysis…………………………………….51
  11. Cross Tabulation………………………………………….68
  12. Conclusion…………………………………………………71
  13. Scope of the Study……………………………………….74
  14. Annexure…………………………………………………...75

Executive Summary

The automobile industry today is the most lucrative industry. Due to the increase in disposable income in both rural and urban sector and easy finance being provided by all the financial institutes, the passenger car sales have increased at the rate of 38% per annum in June 2005-06 over the corresponding period in the pervious year. Further competition is heating up in the sector with a host of new players coming in and other like Porsche, Bentley, Audi, and BMW all set to venture in the Indian markets. One factor that could help the companies in the marketing of their product is by knowing and creating a personality for their brands.

This report attempts to answer some of the questions regarding brand personality of selected cars in India by conducting the market research. This report is categorized into parts, deals with introduction to brand personality, companies selected, product and the industry.  

The automobile industry today is the most lucrative industry. Due to the increase in disposable income in both rural and urban sector and easy finance being provided by all the financial institutes, the passenger car sales have increased at the rate of 25% per annum in June 2005-06 over the corresponding period in the previous year. Further competition is heating up in the sector with a host of new players coming in and others like Porches, Bentley, Audi, and BMW all set to venture in Indian markets. One factor that could help the companies in the marketing of their products is buying Behavior of the consumers. The Buying Behavior of the customers can be studied by knowing their perceptions about the cars in the market and about the possible entrants in the market. One such technique is by knowing and creating a personality for the brands.

This personality sketching will help in knowing what a customer (or a potential customer) thinks about a given brand of car and what are the possible factors guiding a possible purchase. Similarly, the idea of measuring the customer satisfaction will serve the same purpose of determining the customer perception. Thus, by measuring the” willingness of existing users of a car to recommend it to others” will help the car manufacturers to chalk out the entire Customer Buying Behavior.

 

        The reports shall attempt to answer some of the questions regarding brand personality of selected cars in India by conducting a market research. The market research will be helpful for the new car entrant companies in India to find out the possible gaps between the customer expectations and the present market offerings. This way these companies will be able to find their share in the ever-expanding Indian market pie.

The research will track the customer satisfaction in the following two layers:

  • Product related Parameters

  • Dealers related parameters

The customer satisfaction index will be calculated for the car brands taken into consideration.

It will be mainly a primary research and the information will be gathered from both primary and secondary research. The study will analyze the applicability of existing research concepts, theories, and tools for evaluating consumer satisfaction.

 

  • INTRODUCTION

INTRODUCTION

It is true fact that if you are satisfied you recommended to others. Word of mouth and customer satisfaction play a very important role in determining market perception about an automobile. It is the market perception that determines the success of a company and so it is very important for the car manufacturers to measure the “willingness of existing users of a product to recommend it to others”. The same is a lot of interest to customers as well for it helps them make the purchase decision.

A car is one of the most significant purchases that an Indian household makes and this project addresses the most important question that perplexes car manufacturers:

“What makes the perfect car that influence will willfully purchase?”

The project highlights the factors that influence the buying decision of a consumer.

The factor under consideration would be:

  • Price
  • Income of the consumer
  • Features in the car
  • Safety standard
  • Warranty scheme
  • Finance facility

Is an Indian consumer ready for more? Which is the driving motive behind the effective demand of the car? How the coming of new models like swift does is going to effect the buying decision of consumer and especially the Tata 1 lakh car.

In other words, from the spread of choices offered by various manufacturers under various segments, of which one the customer will finally turn the ignition on and drive.

Customer satisfaction index: some of the most advance thinking in the business world recognizes that customer relationships are best treated as assets, and that methodical analysis of these relationships can provide a road map for improving them

“If you cannot measure it, you cannot improve it.” – Lord William Thomson Kelvin (1824-1907)

Clause 8.2.1 in ISO9000: 2000 states:

“As one of the measurements of the performance of the quality management system, the organizations shall monitor information relating to customer perception as to whether the organization has met customer requirements. The method for obtaining and using this information shall be determined”

The requirement has been there in the QS9000 standard clause 4.1.6 which says:

“… Trends in customer satisfaction and key indicators of customer dissatisfaction shall be documented and supported by objective information. These trends shall be compared to those of competitors, or appropriate benchmarks, and reviewed by senior management.”

There is obviously a strong link between customer satisfaction and customer retention. Customer’s perception of service and quality of product will determine the success of the product or service in the market.

With better understanding of customer’s perceptions, companies can determine the actions required to meet the customer’s needs. They can identify their own strengths and weaknesses, where they stand in comparison to their competitors, chart out the path future progress and improvement. Customer satisfaction measurement helps to promote an increased focus on customer outcomes and stimulate improvements in the work practices and processes used within the company.

Customer expectations are the customer-defined attributes of your product or service. We cannot create satisfaction just by meeting customer’s requirements fully because these have to be met in any case. However falling short is certain to create dissatisfaction.

Major attributes of customer satisfaction can be summarized as:

  • Product quality
  • Product packaging
  • Keeping delivery commitments
  • Price
  • Responsiveness and ability to resolve complaints and reject reports
  • Overall communication, accessibility and attitudes

We cannot begin to address the customer satisfaction issue we define the parameters and measures clearly.

The customer satisfaction index represents the overall satisfaction level of that customer as one number, usually as a percentage

The buying process involves the following steps:

        

“The fact that word of mouth sales are a big deal in this industry has also helped. Industry players and market surveys reveal that 20-30 percent of sales are through word of mouth”.

For the purpose of the project has undergone through

  • Surveying the relevant consumer base through exhaustive questionnaire.
  • Understand the elements underplaying in each segment
  • Deducing A analytical overview through different statistical methods

Recommendation comes from satisfaction and satisfaction comes from

OVERVIEW OF THE AUTO SEGMENT

Indians have emerged as avid car enthusiasts sporting their prized possessions as status symbols and speed machines. Foreign car companies have discovered the Indian consumer as well as the R & D potential in the Indian technical fraternity and are setting up manufacturing plants right and left across the country at lower costs. The Indian automobile industry is currently experiencing an unprecedented boom in demand for all types of vehicles. This boom has been triggered primarily by two factors:

 (1) increase in disposable incomes and standards of living of middle class Indian families estimated to be as many as four million in number; and

(2) The Indian government's liberalization measures such as relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports, and banking liberalization that has fueled financing-driven purchases.

       

                   Industry observers predict that passenger vehicle sales will triple in five years to about one million, and as the market grows and customer's purchasing abilities rise, there will be greater demand for higher-end models which currently constitute only a tiny fraction of the market. These trends have encouraged many multinational automakers from Japan, U. S. A., and Europe to enter the Indian market mainly through joint ventures with Indian firms.

India is increasingly becoming a global automotive hub both for the vehicles and component industry. India is fast integrating itself into the world economy and open to international automotive companies, who are increasingly investing in India.

The Indian automotive and component industry is looking to increase the quality of production from existing levels, to develop new products and to increase exports. In the long run India is well set to become a key market for automotive and component manufacturers in terms of local demand and as a base for export.

Additionally, companies such as GM, Daimler Chrysler, Toyota, Delphi and MICO/Bosch are utilizing India’s well developed IT / software capabilities and have set up R&D hubs here for their global operations


Industry Size

  • The domestic Indian passenger car market (including utility vehicles) totaled  900,000 units (with a CAGR of 10 per cent over the past 4 years) while the exports were 130,000 million units (with a registered CAGR of 68 per cent over the past 4 years) during financial year 2004

  • The Indian two-wheeler Industry is one of the largest in the world, and is expected to maintain robust growth in the future

  • At the back of this phenomenal automotive growth is the success of the Indian auto component industry. Presently a US$ 6.7 billion industry, it is expected to almost treble in less than eight years time to US$ 17 billion by 2012

  • India offers a distinct technological and cost-competitive advantage, which global Original Equipment Manufacturers (OEMs) and automotive suppliers are leveraging for both manufacturing and research facilities.  The passenger car market is projected to grow at a CAGR of 12.3 per cent over the next few years. Growth in the mid-size and premium car segments is expected to outpace the overall market growth.

Indian Automobile Industry

Automobile Industry in India is still in its infancy but growing rapidly. The opportunities in the automobile industry in India are attracting big names with the big purse and they are investing vigorously in infrastructure, design and development, and marketing. Automobile industry in India is today poised for the big leap.

  •  India is the 2nd largest two wheeler manufacturer in the world
  • Second largest tractor manufacturer in the world
  • 5th largest commercial manufacturer in the world
  • 3rd largest car market in Asia, surpassing China in the process

Automobile industry Contributes 17% of the total indirect taxes collected by the exchequer & is a driver of product and process technologies, and has become a excellent manufacturing base for global players, because of its

  • high machine tool capabilities
  • Extremely capable component industry
  • Most of the raw material locally produced
  • Low cost manufacturing base
  • Highly skilled manpower
  • Special capability in supplying large volumes

Indian Automobile Manufacturers in India and Plant Locations

Domestic and Foreign Vehicle Manufacturers:

Passenger Vehicles


The main domestic manufacturers of passenger vehicles are as follows:

  • Maruti Udyog
  • Tata / Telco
  • Mahindra / Mahindra
  • Hindustan Motors

Foreign competitors manufacturing locally including Hyundai, Ford, General Motors, Honda, and Toyota.

Car demand has seen a turnaround since mid 2001 thanks to heavy discounts and cheaper finance. A large number of new models, both locally assembled and imported, have also revitalized the market.


In terms of volumes:

  • The A/B segments are where India’s strength and future lies. The A/B segment accounts for over 65% of the total passenger vehicles produced. Competition in this segment is stiff with Maruti the market leader with around 55% market share. New models from Telco (Indica), Hyundai (Santro) and Fiat (Palio) however are eroding Maruti’s long standing dominance in this segment.
  • The mid / luxury range is developing with the introduction of Ford (Ikon), Hyundai (Accent/Sonata) and Skoda (Octavia), although the volumes are not significant.
  • The UV segment remains sluggish with growth at just over 1%. The clear market leader, Mahindra (44% market share) posted increased sales of 9% in the first 3 quarters of 2002/03. Toyota and Telco domestic UV business remains flat.

Commercial Vehicles

The main Indian companies in the Commercial Vehicle segment are:

  • TATA Engineering and Locomotive Company (TELCO)
  • Ashok Leyland
  • Bajaj Tempo Ltd
  • Eicher Motors Ltd
  • Swaraj Mazda

There is only one international company currently manufacturing CVs in India, Volvo but again volumes are not large. Other global players are active, although in partnership with one of the domestic manufacturers E.g.:- IVECO (manufacturing their range of trucks in association with Ashok Leyland.

There has been a significant turn around in this segment over the last 18 months with over 30% growth being seen in terms of both production and sales.

This sector has received a huge boost with India’s massive demand from the infrastructure sector (particularly roads), cyclical fleet replacement by fleet owners and an upturn in the cement and steel sectors.


Automobile Manufacturers Market Share

Passenger Cars                                                               LCV

0.604 Mn                                                                        0.083 Mn

  •  Maruti (JV of Suzuki), leading the market,  
  •  Tata and M&M are the   key players

  1.  Followed by Hyundai and Tata, together hold close to 75% of market

  1.  Daewoo stopped production, mainly due to financial issues 2 years back

  • Review of Literature

Brand Personality

A brand is “a set of expectation and association evoked from a company or product. A brand is how your key constituents- customers, employees, shareholders etc. experience what you do.” Some brands are of such great importance to people, that we speak of them as a part of one’s life and identity, being used to express one. Some would say that these brands have their own personality, the brand personality, which can be defined as “the set of human characteristics associated with a given brand”. Thus, it includes such characteristics as gender, age and socioeconomic class, as well as such classic human personality is both distinctive and enduring.

Based on the premise that brand can have the personalities in much the same way as humans, brand personality describe brands in terms of human characteristics. Brand personality is seen as valuable factor in increasing brand engagement and brand attachment, in much the same way as people relate and bid to other people. Much of the work in the area of brand personality is based on translated theories of human personality and using similar measures of personality attributes and factors. Brand personality refers to the set of human characteristics we associated with the brand. A common way of determining this is to reply on the metaphor: “If the brand was a person, what would he/she be like?” we then list and group the traits to describe the brand as, for example: caring, approachable and trustworthy. However, there is a lot more we can do.

Because many people interact with brands as though they were other people, it is important to understand what a brand personality consists of, and how its characteristics can be used to affect the relationship between the brand and its user. Knowing and understanding the brand personality gives a good insight into this relationship, and into peoples’ attitudes towards the brand, and is also as important guide to communicating the brand.

VALUES AND CHARACTERISTICSS OF BRAND PERSONALITY

People’s personalities are determined largely through the value and beliefs they have, and other personality characteristics they develop. An example of value or belief is honesty.

Many people believe in being honest in everything they do and say. An example of characteristic is confidence. This is not a belief, but more of a behavior. There are, of course, many value/beliefs and characteristic that a person may have, but there are some that are particularly likeable. It is these likeable values and characteristics that people are inevitably attracted. Examples of these include dependability, trustworthiness, honesty, reliability, friendliness, caring, and fun-loving.

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There are about two hundred words that describe personality characteristics, and these can be used for putting personality into brands. To illustrate how people think in personality terms when making judgments about brands, here are the results of consumer research into how people feel about tow companies. When asked question: “if these companies are people, how would you describe them?” their replies were:

These two companies are actually competitors in a service industry. If you were asked of these two companies you would like to be your fiends, you would probably choose company B, as ...

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