a study on consumer behaviour in use of

A STUDY ON CONSUMER BEHAVIOUR IN USE OF ‘B’ SEGMENT CARS IN INDIA

SECTION II

FUNDMENTAL CONCEPTS RELATED TO THE TOPIC

2.1 MEANING AND DEFINITIONS

Consumer Behaviour The task of marketing is to identify consumers‟ needs and wants accurately, then to

develop products and services that will satisfy them. For marketing to be successful, it is not

sufficient to merely discover what customers require, but to find out why it is required. Only by

gaining a deep and comprehensive understanding of buyer behaviour works to be mutual

advantage of the consumer and marketer, allowing the marketer to become better equipped to

satisfy the consumers‟ needs efficiency and establish a loyal group of customers with positive

attitudes towards the company’s products.

Consumer behaviour can be formally defined as--the acts of individuals directly involved in

obtaining and using economic goods and services, including the decision processes that precede

and determine these acts. The underlying concepts of this form a system in which the individual

consumer is the core, surrounded by an immediate and a wider environment that influences his

or her goals. Passing through a number of problems solving stages leading to purchase decisions

ultimately satisfied these goals. In the past, the main input to the theory of consumer behaviour has

come from psychology. More recently, the interdisciplinary importance of consumer behaviour

has increased such that sociology, anthropology, economic and mathematics also contribute to

the science relating to this subject.

Factors Affecting Consumer Behaviour 1. Social and Cultural Influences

Culture is learned behaviour that has been passed down over time, reinforced in our daily lives

Through the family unit and through educational and religious institutions. Cultural influences,

Therefore, are powerful ones and if a company does not understand the culture in which a

VIVA IMS 2010-11 Page 22


Particular market operates, it cannot hope to develop products and market them successfully in that

market.

In some cases, they constitute individual market segments for certain product areas.

Subcultures can also exist within the same racial groups sharing common nationality. Their bases

may be geographical, religious or linguistic differences and marketers must recognize these

differences and should regard them as providing opportunities rather than posing problems.

2. Specific Social Influences

Social Class This is the most prominent social influence. Traditionally, one of the chief determinants of social

class was income. Since pay structures have a great deal in terms of the lower C2, D and E

categories moving more towards level previously enjoyed by the higher A, B and C1 categories

over past thirty years or so, classification of consumers on the basis of lifestyle is becoming more

meaningful today. Income aside, social class is an indicator of life-style and its existence exerts a

strong influence on individual consumer and their behaviour.

Reference Groups This can be described as a group of people whose standards of conduct mould an individual

disposition, beliefs and values. This group can be small or large. Reference group can range from the

immediate family to individual is unlikely to deviate too far from the behaviours norms laid down

by the members of a club or hobby group. Reference group theory not state that individualism

cannot exist within a group but it does suggest that even rigid independent thinkers will at least be

aware of what is considered normal within a group.

In a small group by the family the advice and opinion of these who are regarded as

knowledge will be highly regarded. Such people are termed opinion leaders. Extraneous to

groups‟ influences might also be at the work in opinion forming, and here there is the existence of

opinion leaders who are outside of the immediate group. The opinion followers take up their

opinions. In the case of a number of products, deliberate direct appeal is made to the so-called snob

appeal. This is done by using marketing of company’s products acceptable to opinion leaders, or

famous personalities (Who are paid for their endorsement) in the hope that other sectors of the

population will follow them.

VIVA IMS 2010-11 3


The family life cycle traditionally contains six stages, although more recently different

division has been quoted. These divisions are:

Unmarried--Here, financial commitments and family responsibilities tend to be low, with

disposable income being high. These younger unmarried consumers tend to be more leisure

oriented and more fashion conscious. This segment thus comprises a very important market for

many are and innovative products.

Young newly married couples and no children--This group focuses its expenditure on that item

considered necessary for setting up home.

Young married couples with children--Outlay here is children oriented, and there is little surplus

cash for luxury items. Although they are respective to new product ideas. This group sees

economy as being the over-riding factor when making purchases.

Older married couples still with children at home--Disposable income will probably have

increased, often with both parents working and children being relatively independent. In some

cases children may be working and the parents are able to be engaging increasingly in leisure

activities often in the form of more than the standards annual holidays. Consumers durable,

including major items of furniture, are often replaced at this stage. Such purchases are often

made with different motivation to the original motivations of strict functionality and economy

that was necessary at an earlier life cycle stage.

Older married couples with no children living in the home--Here, disposable income can be

quite high. However, tastes are like to be firmly rooted reflected in unchanging patterns. Thus

marketers will have difficulty when attempting to change predisposition, soothe best policy will

be through attempts to refine and add value rather than to introduce new concepts and ideas.

Older retired couples and single people--At this stage, most consumers durable have been

purchased although occasional replacements will be required. Purchasing is low and pattern of

purchasing is conservative and predictable. This group of consumers increasing rapidly. Such

people tend to be less reliant solely on the State Pension, many having subscribed to

occupational pension from former employers, which boost the state pension. This allows to leads

more active lives and the tourist industry now actively targets this particular market segment.



Individual Buyer Behaviour As well as being influenced by the outside environment, people also have their own individual

beliefs. It is important that we should know that these are in order that we can better understand

how individuals respond to marketing efforts. Individuals are different in terms of how they look,

their education, their feelings and their responses to marketing efforts. Some will behave

predictably and other less predictably according to an individual’s personality. The individual

consumer absorbs information and develops attitudes and perceptions. In marketing terms, this

will affect an individual need as well as determining how to satisfy them. The task of marketing

is to identify patterns of behaviour which are predictable under given conditions, which will

increased the marketer ability to satisfy customer needs, which is at the very base of marketing.

In order to more fully understand this concept we shall concentrate on five psychological

concepts to understand buyer behaviour. These five psychological concepts are:

Personality and Self-concept This means how we think other people see us, and how we see ourselves. As individuals we

might wish to create a picture of ourselves that is acceptable to our reference group. This is

communicated to the outside world by our individual behaviour as it is related to our purchase and

consumption of goods. The sum of this behaviour is an individual self-statement and is a

nonverbal form of communication.

Self is influenced by social interaction and people make purchases that are consistent

with their self-concept in order to protect and enhance it. The constant process of re-evaluating and

modifying the self-concept results from a changing environment and changing personal

situations. Personality is the principal component of the self-concept of the self-concept. It has a

strong effect upon buyer behaviour. Many purchase decisions are likely to reflect personality, and

marketer must consider personality when making marketing appeals.

2. Motivation

An early thinker insofar as motivation in concerned was the psychologist Sigmund Freud

who lived between 1856 and 1939. His theories have been criticized, but his theories are of

fundamental value. He was responsible for identifying three level of consciousness.



The conscious, which includes all sensations and experience of which we are aware. The

preconscious, which includes the memories and thoughts, which we have stored from our

experience and we can bring to mind when are wish. The unconscious that is the major driving

force behind our behaviour and this include are wishes and desires, of which we are not always

aware.

Within these levels of consciousness there are mental forces at work attempting to reconcile our

instincts with the social world in which we live and there are not always in accord so we

experience emotional difficulties. Freud’s terms for these are:

The id, which is the reservoir for all our psychological and sensual instincts. It is selfish and

seeks instant gratification regardless of social consequences.

The superego, which develops as we grow and learn from family, friends, teachers, and other

influences. It functions as our internal representation of the values and morals of the society in

which we have grown up. It is a potent force and comes in to conflict with the demands made your

id for the gratification of what might be anti social desires.

The ego, which attempts to resolve the conflict between the id and the superego and tries to

redirect our id impulses in to socially and morally acceptable modes of expression.

Marketers are interested in motivation when it relates to purchasing behaviour. This behaviour

related to the motive for wishing to possess the goods or services in question, and it has been

termed goal-related behaviour. For a motive to exist there must be a corresponding need. Motives like

hunger, thirst, warmth, and shelter are physiological. Others, like approval, success and

prestige are psychological. Motives like staying alive are instinctive while motives like

cleanliness, tidiness and proficiency are motives that are learned during life. We can also discern

between rational and emotional motives. Most purchasing decisions are a composite of such

motives, quite often a deciding factor might be price which is of course more of an economic

restriction than motive. It can therefore, be seen that a number of motives might be at play when

making a purchasing decision--some motives are stronger than other is and the final decision might

be a compromise solution.



In 1954 the psychologist Abraham Maslow put forward his classic Hierarchy of Needs, which is

shown in the Figure 1 given below. This hierarchy is now central to much thinking in buyer

behaviour.

Fig.1 Hierarchy of Needs (From A. H. Maslow)

Physiological needs are concerned with self-preservation and these are the basic needs of life

involving those elements required to sustain and advance the human race. Safety needs relate to

protection against danger and deprivation. Once the more basic needs have been satisfied,

behaviour is influenced by the need for belonging, association and acceptable by others. In many

texts the next two needs are put together, but here we have separated respect and self-esteem in

terms of qualification and recognition above this. The final need is what Maslow termed Self

actualization, which means self-fulfilment in terms of becoming that entire one is capable of

being and one has reached the pinnacle of personal potential.

It is argued that when more basic needs like hunger and thirst have been satisfied, then

individual will move towards satisfying higher order needs towards the apex of the pyramid and

look increasingly for satisfactions that will increase status and social acceptability. When the

apex of the pyramid has been reached and other satisfaction has been achieved the prime

motivation is then one of acquiring products and accomplishing activities that allow self-

expression. This can be in the from of hobbies, particularly collecting, which may have been

desired for a long time, but have been neglected until the lower order needs have been satisfied.

It is of course not possible to formulate marketing strategies on the hierarchy theory on its own.

Its real value is that it suggests that marketers should understand and direct their efforts at the

specific needs of their customers, wherever the good’s one is attempting to promote is in the

hierarchy.


Self Actualization

Esteem Needs

Social Needs

Sefty Needs

Physiological Needs


3. Perception

Unlike motivation that required retention to stimulus, perception relates to the meaning that is

assigned to that stimulus. As marketers are interested in how buyers perceive and react to

products in relation to such matters as quality, aesthetics, price, and image, since products not

only exist in practical terms, but also how the are perceived by consumers in relation to need

satisfaction. This perception by buyer is affected by the nature of the product itself, by the

circumstances of the individual buyer, and by the buyers‟ innate situation in terms of how ready

they are to make the purchase in terms of needing it at a particular point in time, it is, of course,

necessary the product or service (i.e. the stimulus) receives the attention of the potential buyer.

Attitudes Our strongest basic attitudes are implemented in our formative years and these come largely from

the influence of our close family group another social interaction. More refined attitudes develop

later. In marketing terms, the sum total of our attitudes can be regarded as a set of conditions

that a potential buyer has in relation to stores or companies go out of their way to engender

favourable attitude and it is why manufacturers see to induce loyalty towards their particular

brand of products. Once this attitude has been establishes in the mind of the customer, it might be

difficult to alter. Even a minor dissatisfaction can against a manufacturer or retail establishment,

and a method of attempting to change attitude is through promotional appeals and through a program

of public.

5. Learning

Experience precedes learning and this can alter perceptions and attitudes. It is also intensifies a shift

in behaviour, so when a buyer perceives that certain products are more favourable than others within

his or her reference group, repeat purchases are made to promote this acceptability. Every time a

satisfactory purchase is made, the consumer becomes less likely to depart from this purchasing

behaviour. The result is brand loyalty, and the ultimate success of marketing is in terms of

customer making repeat purchase of becoming brand loyal.

A fundamental aim of marketer is to bring about satisfaction for their customer and this is

cardinal to the concept of the marketing. Having looked at some of the issues that make up

consumer behaviour, we can now like at the consumer central goal. Because they are continually



Occupied in the quest for satisfaction, competitive offerings will always have potential appeal.

Firms must seek continuous improvement to the products or services and the levels of support

they provide. This is a matter of balancing costs and potential profit with customer demands, as

total satisfaction, except in a minority of cases, is an unrealistically expensive goal.

Models of Consumer Behaviour

Now that we have examined the psychological factors that influence consumer buyer behaviour

now we are in a position to examine some consumer models. The aim is to bring together our

present.

Understanding by presenting a series of models that endeavour to explain the purchase

decision in relation to pertinent variables.

The Buyer Decision Process

Different buying tasks present different levels of complexity to the purchaser. The AIDA model

that is presented in Figure 2 considers the steps leading to a purchase in the form of a sequential

problem solving process.

Awareness

Interest

Desire

Action

Fig. 2 AIDA Model of

Buying Behaviour

Late Dr. E. K. Strong first promoted this classical model in 1925 and it is still useful

today because it is easy to apply as it describes the activities involved in the buyer process.

Products and services vary in the complexity of decision making involved in their acquisition.



The purchase of a new shower unit, for instance, is more complicated than the purchase of a tube of

shower gel.

Robinson, Faris, and Wind in 1967 put forward a model that viewed purchasing as a

problem. This is shown in Figure 3 and it describes the activities involved in the purchasing

Purchase Marketing Inputs

Consumer Decision

Product Product Choice

Place Location Choice

Psychologica

l

Input

Culture

Problem Recognition

Information Search

Evaluation of Alternatives

Fig. 3 The Buyer Decision Model

process.


An individual needs a particular product. Information will be short from a variety of

sources including family and friends (Called word of mouth) from advertising, from catalogues,

from visits to retail establishments, and from many other sources. The more complex the

products the greater will tend to be this information search. The task of marketing is to ensure

that the company products receive high exposure during these information search periods and

that the best point of product is emphasizes during the evaluation of alternatives phase. This will

put the company’s product in the best light prior to the purchase decision because even then the

consumer is still susceptible to further influences in relating to marketing the correct choices.

Marketer must also be aware of post purchase behaviour because this can affect repeat

business and forward looking companies attach as much importance to after sales services as they

do to making the initial sales.

The Adoption Process

The buyer decision model (Figure 3) was not specifically designed for new products and its

substance was concerned with search and problem solving. Everett Rogers advanced the model

shown in Figure 4, and it related to new products. It is being with awareness. Marketers must first

create awareness and then assist customer with subsequent stages of the process.

Consumers‟ cannot being to consider a new product or service as a solution to need related

problems without this awareness. Successfully innovative products should attempt to be problem

solving as far as the customer is concerned.

Awareness

Interest/Information

Evaluation

Trial

Fig. 4 The Adoption Process



Awareness can come about as a result of the marketing effort of the company or simply by

word of mouth communication. If the product has potential interest and appeal, then potential

purchasers will seek further information. Consumer then evaluates the new products against

existing products, and then makes an initial adoption by obtaining a trial sample. Which might be a

free sample or a trial purchase?

A more detailed model is suggested in Figure 5 that develops that adoption process. A

series of inputs feed in to the knowledge base. The self-input includes the psychological notions of

perception, attitudes, motivation, and learning. Similar to other inputs, they set the scene for

knowledge to be interpreted into a favourable situation of awareness. Figure 5 also shows that

persuasion governs the rate of adoption that is affected by relative advantage, compatibility,

complexity, trial opportunity, and absorbing power..

It can be seen that various inputs contribute to knowledge, ranging from personal factors

to company marketing activity. Persuasion is an important phase and here a number of factors,

which are function of the product itself, can lead to the decision whether or not to purchase the

Relative Advantage

Compatibility

Complexity

Trial Ability

Absorbability

Fig. 5 New Product Purchasing Decision Process

new product or service in question. The decision means adoption or rejection. If it is adoption,

them good experience can lead to its continued adoption, but if the experience of the product or

service is bad then it will be discontinued. Conversely, rejection, or later adoption, perhaps, in

the latter case through hearing good experience of reference group members, who have



purchased. Continued adoption and later adoption need confirmation in order to continue the

repeat purchase pattern.

It is important that we look innovator categories insofar as purchasing behaviour is

concerned because consumers, as individuals, can be more, or less, respective to new product or

service idea.

The process of the diffusion of innovations proposes that certain groups of consumers will

take on new ideas more quickly than other groups and they tend to influence later consumer

groups. These groups have particular common features.

Innovators are the first small segment to take on new product ideas and they are likely to be

younger people, from well educated, relatively they affluent background and having a high social

status. They are more probably unprejudiced, discerning people whose understanding of the new

product has been more objectively ascertained than through a sale people or company from

promotional material.

Early adopters, possesses some of the characteristics of innovators, but they are more part of

local systems, acting as opinion leaders within their specific group.

Early majority adopters tend to be above average in terms of social class and rely upon

company promotional efforts for data. Opinion leaders of the early adopter category will tend to be

their biggest inspiration.

Late majority adopters tend to adopt the product or services because earlier groups have

generally accepted it.

Laggards make up the final group. They tend to be more careful and older and of lower

socio-economic standing. Clearly, adopter category will tend to differ depending upon the new

product or service being marketed.

Hierarchy of Effects

Lavidge and Steiner produced a Hierarchy of Effects model of purchasing behaviour in 1961. The

model starts at the awareness stage, but it could be argued that there is a stage prior to this, which

is when the potential purchaser is completely unaware of the product or service offering, and it is



Through marketing communication that such awareness is made known.

Awareness

Knowledge

Liking

Preference

Conviction

Purchase

Fig. 6 The Innovation Adoption Model

The model is described in Figure 6.



2.2 Historical Perspective of the topic

LEADING PLAYERS AND SEGMENTS IN WHICH THEY OPERATE

Manufacturer SegmentsAshok Leyland LCVs, M&HCVs, Buses

Asian Motor Works M&HCVs

Atul Auto Three wheelers

Bajaj Auto Two and Three Wheelers

BMW India Cars and MUVs

Daimler Chrysler India Cars

Eicher Motors LCVs, M&HCVs, Buses

Electrotherm India Electric Two Wheelers

Fiat India Cars

Force Motors Three Wheelers, MUVs and LCVs

Ford India Cars and MUVs

General Motors India Cars & MUVs

Hero Honda Motors Two Wheelers

Hindustan Motors Cars, MUVs and LCVs

Honda Two Wheelers, Cars and MUVs

Hyundai Motors Cars and MUVs

Kinetic Motor Two Wheelers

Mahindra & Mahindra Three Wheelers, Cars, MUVs, LCVs

Majestic Auto Three Wheelers

Maruti Suzuki Cars, MUVs

Piaggio Three Wheelers, LCVs

Reva Electric Car Co. Electric Cars

Royal Enfield Motors Two Wheelers

Scooters India Three Wheelers

Skoda Auto India Cars

Suzuki Motorcycles Two Wheelers



Swaraj Mazda Ltd. LCVs, M&HCVSs, Buses

Tata Motors Cars, MUVs, LCVs, M&HCVs, Buses

Tatra Vectra Motors M&HCVs

Toyota Kirloskar Cars, MUVs

TVS Motor Co. Two Wheelers

Volvo India M&HCVs, Buses

Yamaha Motor India Two Wheelers

Passenger Car Market Serves as an Apt Illustration on Segmentation The passenger car players went about the segmentation task methodically and dissected the

market comprehensively and deeply. The following three realities had contributed towards the

phenomenon:

1. As car buyers had come to form a large and diverse group, deep segmentation

became essential in the car market.

With each passing year, the composition of car buyers in India was becoming increasingly

diverse. And, car buyers displayed all the aspects of „buyer behaviour‟. Several variables besides

„preferred price slot‟ now found a place in buyers‟ consideration set. Segmenting the buyers in a

simplistic way and on a single variable such as „the preferred price slot‟ alone was no longer

enabling the players to gauge how buyers selected their cars and why they preferred certain

specific cars. Comprehensive and deep segmentation had now become a necessity.

2. Competition necessitated deep segmentation.

Second, the car market now becoming more competitive by the day. New players were entering

the scene every now and then. The heightening competition necessitated deep differentiation of

offers.



3. Deep segmentation had also become feasible

Simultaneously, the market was also, by now, lending nicely for deep segmentation. There were

distinct groups of car buyers with widely varying and clearly distinguishable needs. Players

found it feasible to spot groups the varied significantly from one another - in the way they

bought their car and the criteria they employed in buying it.

While car buyers in any market/country do display some variations among them in the

approach to car buying, the case of car buyers in India in this respect was quite unique.

SEGMENTATION

In the context of automobile sector, we would be classifying it in the following ways-:

BASED ON THE PRICE OF THE CAR BASED ON THE LENGTH OF THE CAR

BASED ON THE USER SEGMENT

BASED ON THE PRICE OF THE CAR

On the basis of price of car we can segment the car in following ways-:

Economy Segment The economy segment of car ranges up to Rs. 2.5 lacs. The products in

this segment are Maruti 800, Alto and the newly launched product of TATA

motors.

i.e. NANO.

Mid- Size Segment The mid-size segment of car ranges from 2.5 lacks to 4.5 lacks. It includes the

products like Hyundai santro, Marutizen, Tata Indica etc.



Luxury car segment

The luxury segment of car ranges from 4.5 lacs to 10 lacs. It includes the products

like Honda city, Hyundai Verna, Mahindra Scorpio etc.

Super luxury car segment The super luxury segment of car ranges above 10 lacs. This segment satisfies the

elite class of the society. It includes the products like Skoda Laura, Honda

Accord, BMW, Mercedes, Audi etc.

BASED ON THE LENGTH OF THE CAR

A segment- Cars that are less than 3.5 meters long (800, Omni)

B segment- Cars between 3.5 meters to 4 meters long( Zen, SX4, Santro)

C Segment- Cars between 4 meters to 4.5 meters long (Verna, Honda city, ford fiesta)

D segment- Cars that are more than 4.5 meters long( Mercedes, Sonata, Accord, Skoda)

BASED ON THE USER

Segmentation of automotive sector is also based on the user of the products. Like the example of

TATA Motors, when it observed that their product „INDICA‟ is used extensively by the taxi

operators, it came up with a new model of the car having Round Tail Lights to distinguish it from

the car having vertical tail lights used by the individual buyers.

Individual Buyers

Taxi operators

Government /non-government institutions



AUTOMOBILE INDUSTRY IN INDIA In India there are 100 people per vehicle, while this figure is 82 in China. It is expected that

Indian automobile industry will achieve mass motorization status by 2014.

CARS BY PRICE RANGE

Maruti 800, Alto, OmniUnder Rs. 3 Lakhs

Reva

Ambassador

Fiat Palio

Hyundai Santro, Getz

Rs. 3-5 Lakhs Chevrolet Opel Corsa

Maruti Zen, Wagon R, Versa, Esteem, Gypsy

Ford Icon &Fiesta

Tata Indica, Indigo XL, Indigo Marina

Chevrolet Swing, Optra Magnum, Tavera

Hyundai Accent, Elantra

Mahindra Scorpio

Maruti Baleno

Toyota InnovaRs. 5-10 Lakhs

Tata Safari

Mitsubishi Lancer, Mitsubishi Cedia

Honda City ZX

Mahindra Bolero

Hyundai Sonata Embera

Toyota Corolla

Rs. 10-15 Lakhs Ford Mondeo & Endeavour

Chevrolet Forester

Skoda Octavia & Combi



Honda Civic

Honda CR-V

Maruti Suzuki Grand Vitara

Terracan & Tucson

Mitsubishi Pajero

Rs. 15-30 Lakh Audi A4

Opel Vectra

Honda Accord

Mercedes C Class

Toyota Camry

Audi A6, A8 &Audi TT

BMW X5, 5 Series & 7 Series

Rs. 30-90 Lakhs Mercedes E Class, S Class, SLK, SL &CLS-Class

Porsche Boxster, Cayenne, 911 Carrera & Cayman S

Toyota Prado

Bentley Arnage, Bentley Continental GT& Flying Spur

Above Rs. 1 Crore Rolls Royce Phantom

Maybach



TARGET MARKETS The segment that gives the greatest opportunity to the marketer is called target marketing.

VOLVO MOTORS

Volvo Motors develops its cars for buyer to whom automobile safety is a major

concern. Volvo therefore positions it’s as a safest a customer can buy.

HYUNDAI MOTORS

Hyundai marketing strategy is differentiated marketing. Its primary consumer

target is middle to upper income professionals who need true value for their

Money and comfortable ride in city conditions. Its secondary consumer target is college students who

need style and speed. Its primary business target is midsized to large sized corporate that want to

help their managers and employees by providing them a car for ease of transport. Its secondary

business target is entrepreneurs and small business owners who want to provide discounts to

managers buying a new car.

Each of the four marketing strategies conveys Hyundai differentiation to the

target marketing segments identified above.

Hyundai Santro is targeting middle professionals

Accent was launched to target corporate clients



NICHE MARKET

A niche is a more narrowly defined group seeking a distinctive mix of benefits. Marketers

usually identify niches by dividing a segment into sub segments.

BMW is targeting high class people but it is mainly targeting the young people

who earn a lot of money up to the age of 35-40 years and want to have a

stylish saloon.

Mercedes is also targeting high class people but it is mainly targeting the CEO‟s,

chairmen, etc of age group of 50-60 years.

Sales

4% 3% 3% 6%

4%

7%

14%

14%

Maruti Suzuki

Hyundai

Tata Motors45%

M&MGM

Ford

Toyota

Honda

Above diagram shows the market share with respect to market share of Passenger Vehicle

makers. Source: Society of Indian Automobile Manufacturers (SIAM), 4P‟s Business &

Marketing, Vol.VI, Issue 3, 25Feb-10 March 2011 issue.



Consumer Behaviour: Turning to the Web and New C2C Tools

Consumers today have a multitude of sources from which to gather information during the

vehicle buying process, but the Internet tops the list. The web has become a standard resource in the

shopping process for eight out of 10 consumers when researching car purchases. However, the way

they use it is changing. As the web matures, vehicle buyers are visiting fewer sites and focussing

more on manufacturer and C2C websites and less on third-party information sites and independent

e-tailer sites.



Offers in the „B‟ Segment

Maruti Hyundai• Zen Estilo • Santro• WagonR • New• Alto VX Santro Xing

(1100) • Getz• Swift • i 10

Others• Indica V2

(Tata)• Chevrolet

Spark (GM) • Uno (Fiat) • Palio (Fiat)

The advent of the „B‟ segment was a concomitant outcome of the opening up of the economy and

the deli censing of the car industry in the 1990‟s. While a sizeable segment of buyers wanting to buy

„B‟ segment cars were present all along, there were no good offers till the mid-90s. the regulated

regime had ensured it. Maruti was content with its monopoly in the „A‟ segment with its 800 and

did not feel the need to offer any car in the „B‟ segment. Once the economy was opened up, and

the car industry was deli censed, things changed.

The new players did not enter the „A‟ segment as there they could not match Maruti on

cost. They preferred to serve the „B‟ segment and upwards. Those who preferred to serve the „B‟

segment hoped to upgrade a part of the „A‟ segment buyers. The buyers were, also by now,

itching to have better vehicles. Maruti, Hyundai and Tata Motors also selected the „B‟ segment,

as their target market as it matched their resources, capabilities and ambitions. Even though some



other players also tried to nibble a bit at the segment with their offers in the „C‟ segment, none

other than Maruti, Hyundai and Tata Motors actually entered the segment. It was only years later

that GM entered the segment with its Spark.

Maruti knew others would now come up with their offers in the „B‟ segment. So, it

brought its own offer, the Zen, into the segment ahead of competition. Many developments

followed in the next few years. The buyers were the beneficiaries. They now had offers that

matched their needs. With a dozen products, the segment became a keenly contested one. Santro was the bestseller for 3 successive years. Wagonr was also doing well, but was cannibalizing the

Zen.

The „more car per car‟ - Indica Tata Motors offered the Indica to the sub-segment that looked for a

car with more space. Indica was a 1400cc, and five - door

hatchback. It had enough interior space to seat families. In selling the

Indica, Tata Motors relied heavily on this advantage. It also

communicated strongly that the Indica was a car with larger space. It

described the Indica, the „more car per car‟. The customer perceived the car as offering good value

for money. Indica met with some resistance in the market, with some problems relating to quality.

Tata Motors quickly attended to it and came up with the upgraded Indica V2.

The „tall boy‟ Santro Hyundai also located a sub-segment within the „B‟ segment. It saw

the group that looked for a compact car with more headroom than

both Zen and Maruti 800 as a market with potential. Hyundai

offered such a car in the „B‟ segment - the „tall boy‟ Santro. Hyundai also tried to deliver better the Zen on some of the vital

parameters - power and fuel efficiency. For example, which the Zen had kept as its priorities.

Santro’s torque was nicely matched to the speeds envisaged on city roads. In addition it offered

spacious interiors and higher ground clearances. And, the target segment did perceive it as a

good buy.



Maruti comes up with the WagonR Maruti also recognized that there was a sub-segment that wanted

a car with more headroom. Maruti made a suitable offering to

these buyers from its own stable, the WagonR. The launch of

WagonR signified the recognition on the part of Maruti - the merit

of having a car like the tall boy. Maruti provided, in the WagonR,

high driver seat and large cabin-space like the Santro had done. Interestingly, the WagonR was the

senior, though in India, it had arrived after the Santro. It had been developed by Suzuki way back

in 1993 for Japan’s KeiJidosha or K-car (small car) segment. And it had become Japan’s largest

selling car.

The Getz Hyundai launched the Getz. The Getz was positioned at the higher end of

the „B‟ segment and carried a 1.3 litre engine. It was also offered as a

lower-end SUV. The Getz was a fairly spacious car with comfortable

space for five. Dimensionally, the Getz was wider and longer than the

Swift, Maruti’s offer in the same class.

The Swift

Closely following the Getz from Hyundai, Maruti launched its

higher end compact car - Swift. The Swift was a 1.3 litre 87 bhp

hatchback. It had an able engine. In addition it had attractive looks.

It had all round visibility, firm and comfortable seating, space for

four and a very robust structure. Maruti described the Swift as a nice, peppy, swash-buckling and

flamboyant hatch. The Zxi version had air bags, ABS and tubeless tyres. Maruti positioned the

top-end Swift Zxi, for the same segment for which Hyundai had placed its top-end Getz and for

which Ford and Hyundia has placed their bottom-end variants in the “C” segment - the Ikon and

the Accent.



Maruti adapts the Swift for India A good 25 Maruti engineers from India had collaborated for the design with Suzuki in Japan

over two years. With the collaboration, it was possible for Suzuki to pack the car with many

India relevant features. These included a higher ground clearance, more headroom in the rear, a

more robust suspension and more powerful air-conditioning.

GM Chevrolet Spark The features and benefits of the Chevrolet Spark can be grasped from

GM‟s communication.

„Big-car luxury. At a Small car price.

(The Spark with AC, came at a price of Rs. 2.89 lakh, and could boast of

airbag/ ABS/ Alloy wheels). Luxury and fun, Full of life.

The Spark is loaded with plush features that’ll spoil you silly. While its cheeky personality

ensures you have the time of your life. Every time you get behind the wheel. Take it for a spin and

experience big car luxury at small car price.‟

GM also claimed that it gave the „Best in Class‟ Mileage (16.9 kmpl) and „Best in Class‟ space. It

came with 3 years or a 100,000 km warranty. It was an industry first.

The car also came with the Chevrolet promise: Rs. 12,999 maintenance cost for 3 yrs/45000 kms.

This was not a service package; no upfront payment was required.

Hyundai i10 Hyundai brought in the i10 and highlighted its features and benefits as

follows:

„Compact cars will never be the same.

Hyundai announces the World Premiere of the exciting new Hyundai

i10; Drive an international car in India first, and let the world catch up

later. IRDE-Intelligent Response Drive Technology, with a highly efficient 1.1 L power train,

console- integrated, uniquely positioned, gearshift. A category first.

Motor-driven power steering, keyless entry, power windows, tilt steering and electronic trip

meter. Anti-Lock Braking System (ABS) ensures more responsive wheel movement.

Dual air bags and seatbelt pretensioners for whiplash protection. Integrated headrest in the

driving seat for enhanced comfort. Stylish sunroof for an extra touch of class.‟



DEMAND DETERMINANTS Increased Affordability - The demand for passenger cars are driven mainly by greater

Affordability, which in turn increases the aspiration level of customers. The growing population,

esp. the middle class and the upper middle class contribute a major portion to the demand of

passenger vehicles. Passenger vehicle segment has addressed mainly the youth and the people

from the IT industry who forms major chunk of the population.

Demographic Drivers - Cars being aspiration products, purchase decisions are influenced by

overall economic environment. Increase in per capita income to $1032 ($2932 PPP), increased

working member per family and the changing lifestyle leads to increase in the consumption

tendency of the customer and leads to preference of cars over two wheelers.

Product Life Cycle - Factors like the rapid pace of new product introductions, rising income

levels and a buoyant used car market have shrunk the average replacement cycle for cars.

According to Chisel statistics, over the last decade, car replacement cycle has shrunk from 10

years to nearly 5 years at present. With more than one working member in the family concept of a

second car is also in rise in urban India.

Availability of Easy Financing Options - Availability and cost of vehicle finance is a

key driver for passenger vehicle demand across the world. In India, vehicle finance has been

steadily rising over the years facilitated by competition amongst banking and NBFC participants.

The interest rates and EMIs have also declined over the years. But during the FY 2008-09, esp.

SepDec 2008 period witnessed a reversal of trends. Tight liquidity conditions and risk aversion in

the banking system led to sharp decline in vehicle financing.

Low Penetration Levels - Passenger Vehicles has been traditionally seen as luxurious item in

India, esp. so in rural areas. At present India has a vehicle ownership of 11 Passenger Vehicles per

1000 citizens which is low when compared with other ownership propensities in the world. This is

due to limited demand of passenger vehicles in rural India. Today, the Passenger Vehicle

manufactures are ready to break the myth by exploring the rural market which consists of 2/3rd of the

population. They are ready to penetrate the market with aggressive strategy, product mix and

increase the availability of finance by having tie-ups with financial institutions.



New Offerings - Car sales increases when a new model hits the market. Due to escalation in

competition in the Indian car market, frequency of new model launches has increased. In the past one

year Indian car market has seen many new launches to by all Passenger Vehicle

manufactures to sustain in the market.

Increased Distribution Reach - Distribution is another key factor in driving demand.

Increase in distribution reach brings a large number of households into the target population.

Having realized the purchasing power of people in the rural areas, companies are expanding

their distribution network in those areas also.

Effect of Improving Roads and Gasoline Price - In India, infrastructure with respect to

roads is improving at a brisk pace, which helps in increasing the efficiency of the passenger vehicle.

In India, effect of gasoline price does not affect the industry much.

RESOURCE AVAILABILITY India is a place of resources and many international companies come here to start their business

due to the resource factor. Labour resource, an essential requirement for the automobile industry can

be obtained in abundance in India at cheap cost.

So, all manufacturers prefer to invest in India. Another factor for investment is, the availability of

supplier in India who can deliver quality material to their customers. Other resources like land,

power etc. is also available in abundance in India.



The key factors that contribute to competitiveness of a country or a location can be summarized in

following figure:

Human Resource Development Employment is always a major factor when measuring the significance of any economic activity.

The automotive industry, on account of its backward and forward linkages, is a significant

generator of employment - both direct and indirect. While direct employment is by way of

workers engaged in the production of automobiles and auto components, indirect employment is

generated in feeder and supplier industries to the automotive industry, such as the vehicle

financing and insurance industry, vehicle repair, service and maintenance outfits, automobile and

auto component dealers and retailers, vehicle drivers and cleaners, tyre industry amongst others.

Thus steps are needed to ensure that demand - supply gap, both quantitative and qualitative, in

terms of human resources, does not arise.



Customer preferences and trends in India: India is slightly different from other countries and its preference varies accordingly. Indian

people requirements vary and can be broadly classified in to six segments. They have been listed

below:

Potency Buyers - Youth belong to this segment as they buy cars to attract opposite sex and

feel powerful and their most concerns are brand image of trendy and innovative appeals from

the group.

Utility Buyers - They are people who belong to the middle class segment of the country and

they buy cars for basic transportation and care for family. These people always want value

for money and cost of ownership are the benefits these buyers are associated with.

Prestige Buyers - These buyers are those who buy cars for need of prestige. They are least

price sensitive and desirous of latest / futuristic features in cars.

Adventure Buyers - They seek fun and adventure to increase their popularity. SUVs find

preference for these buyers.

Status Buyers - They are buyers who want to show-off success and attract attention. Superior

craftsmanship and best technology are imagery issues that this group relates to.

Liberation Buyers - They are the smallest of the six segments. These buyers seek increased

freedom and latest technology. Safety consciousness is relatively higher among them.

Apart from the above listed preferences, it also varies in terms of color, size and engine

preference for gaining desirable performance. There is also significant regional and city-by-

city difference in preferences. Given by high fuel prices and vehicular congestion in cities the

preference of compact cars is distinct in the Indian middle class. In India, significant number of

aspiring buyers prefer black colored car as opposed to any other color.



Going “Green‟: Fuel Efficiency Takes Centre Stage

Fuel efficiency and environmental issues have moved to the forefront in consumers‟ minds and

in automotive industry forums thanks to factors including global warming, fluctuating gasoline

prices, and proposed legislation to increase fuel efficiency and reduce CO2 emissions. This

growing interest in so-called green vehicles was evident in this year’s Cars Online research.

More than one-quarter of respondents said they currently own or lease a fuel-efficient vehicle

while almost half said they are planning to buy or thinking seriously about buying a fuel-efficient

vehicle. Not surprisingly, the numbers for alternative-fuel vehicles were lower. Just 2% of

respondents currently own an alternative-fuel vehicle and 11% are planning to buy or thinking

seriously about buying one. The most common type of alternative-fuel vehicle represented in the

survey was gas/ electric hybrids, named by about half of current alternative-fuel car owners.

Biodiesel vehicles were the second most common, named by 15%. The alternative-fuel market

remains in transition and it’s still too early to tell how it will ultimately shake out, although sales are

expected to continue to grow. For example, J.D. Power and Associates predicts that U.S. sales of

hybrid vehicles will increase by 35% in 2007, compared with 2006.

Current ownership of fuel-efficient and alternative-fuel vehicles tended to be quite consistent

across gender and age groups, although the oldest consumers were somewhat more likely to be

seriously thinking about buying an alternative-fuel car.



Why Buy a Green Vehicle?

Fuel economy is the number one factor driving consumer decisions about green vehicles (named

by 57% of respondents), followed by the impact on the environment (23%). Tax credits and cost

factors were less important. Some consumers pointed to less tangible reasons such as “it makes

me feel better.” This is in line with research conducted by CNW Marketing Research. When

asked why they bought a Toyota Prius, 57% of Prius owners said because it “makes a statement

about me.” However, the Cars Online research uncovered some differences in the reasons behind

consumer decisions about green vehicles. For example, European consumers were more likely to

cite environmental impact as a primary factor, while more respondents in China and the U.S.

pointed to fuel economy. Older consumers were somewhat more likely to identify fuel economy

as a primary factor, compared with the youngest respondents (18-34). Men put more emphasis

than did women on fuel economy, while a higher proportion of women identified environmental

impact as the primary reason driving their decisions about green vehicles.


a study on consumer behaviour in use of

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