Changing Scenario of Buyer Behavior of Automobile in India

by

Prepared Alok kumar

Contents
1. Introduction 2. Why Indian market? 3. Major players 4. India as a manufacturing base for global players 5. Brand personality of cars 6. Factors affecting buyer behavior 7. Major attributes of customer satisfaction 8. Reasons behind increased purchase of cars

9. Reasons behind more deliberation towards a brand 10. Factors influencing satisfaction after the purchase 11. What customers generally look for? 12. Habits, needs and attitudes of Indians 13. Factors affecting dealers choice 14. The game played by perception 15. Why automobile industry reached a peak level in sales this season 16. References

Introduction
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:
Increase in disposable incomes and standards of living of middle class Indian families estimated to be as many as four million in number; and 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.

Gross turnover of the automobile industry in India Year 2004-05 2005-06 2006-07 2007-08 2008-09 (In USD Million) 20,896 27,011 34,285 36,612 38,238

Domestic market share (200910)

Passenger vehicles 15.86% Commercial vehicles Three wheelers Two wheelers 4.32% 3.58% 76.23%

Festive Month Reflected in Auto Sales in October 2010

For April-October 2010 over same period last year
Production grew by 33.07%. Passenger cars grew by 34.29%. Utility vehicles grew by 21.85%. Multi-purpose vehicles grew by 50.45%. Commercial vehicle segment grew at 37.77%.

Why Indian market?

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 Indias well developed IT / software capabilities and have set up R&D hubs here for their global operations.

 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. Prosperity in the country is on the rise and people are ready to look beyond the price tag. Change in the lifestyle and perception of people encouraging ownership of two cars in the household: small car for daily use and larger family car for the weekend. Better infrastructure around cities leading to increased traveling.

Major players
According to data provided by the Society of Indian Automobile Manufacturers, the share of Mahindra & Mahindra (the Scorpio, Bolero and Xylo) has gone up from 43 per cent in 2007 to 55 per cent in 2009; during the same period, Tata Motors has fallen from 22 per cent to 13 per cent. Others in the fray are Toyota (the Innova and Fortuner), General Motors (the Tavera and Captiva), Honda (the CRV), Maruti Suzuki (the Grand Vitara), Hyundai (the Terracan and Santa Fe) and Ford (the Endeavour).

Reasons for India being a manufacturing base for global players

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

Brand personality of cars

Are you what you drive? That is what are companies seem to be asking and in the same breath trying to convince you about. In other words, are you the Hyundai accent owner who commands immediate respect wherever she goes or are you the suave executive from the Chevrolet ad who is ever ready to share a moment with loved one? With a plethora of new models in the market, and generic benefits (such as space or fuel efficiency) of a particular car segment hardly a distinguishing factor between car models, marketer are increasingly differentiating on the emotional pay-off a particular car model/brand provides to the customer. For instance, while advertising for entry level or smaller cars tends to focus more on the rational or functional benefits of the vehicles, the differentiations is increasingly on the emotional benefits when it comes to high end cars.Generally, it has been seen as one move up the value chain, the differentiation is more on the emotional pay-off. People buy car as an extension of their personality rather than just features. A car, in India, helps build up show off, social esteem value. The advertising would also vary according to the segment which one is targeting. We find that typically profile of an Optra consumer is someone who is in the age group of 35-45years and has a chauffer. He buys a car not only for himself but also for the family and tries to make up, for not being able to spend enough time, by indulging beloved ones. The positioning goes well with the companies catch lines of for a special journey called life.

High end car maker Skoda auto too, through its advertising, attempts to connect with its consumer on emotional level. Car is the extension of the personality and our advertising shows the consumer to be youthful, image-conscious and even bit a macho. The campaign jointly made by Skodas marketing department and ad agency IB&W not only communicates the quality of the brand but an appreciation for the finer things in life. The target Skoda consumer is a SEC A1, primarily male, businessman or someone in the senior management, says Shashank vaid, manger (marketing), Skoda Auto India. Surely, image building does come higher in the consumers scheme of priorities when buying a new car than ever before. According to Bhatia, as long as advertising for cars is strongly differentiated and sharply positions the model and at the same time satisfies a defined need segment, it shall have the capability to break the clutter and creates a unique and compelling reason for consumers to purchase. One good example of this is Ford Ikon- the josh machine made a tremendous impact on consumers in offering to satisfy a clear need. Interestingly, the strategy marketer follow changes a bit when it comes to addressing the smaller car category with the rational benefits of a brand tending to be the focal point of the campaign. We have found that typically a buyer for a smaller car (sub Rs 4 lac) looks for aspects such as reliability and fuel efficiency.

 The perception of the car in terms of its performance and design, quality, sales, after sales, cost of ownership, apart from brand image, all impact upon the purchase decision. A case in point is the Maruti 800 campaign in which the kids who is playing with a toy Maruti 800 exclaims to his dad (when asked how long will he keep on running the car), papa ki Kara, petrol khatam hi nahin Honda. The ad cleverly conveys that the car just keeps going on and on. It ends with the voiceover telling us that Maruti Suzuki is most fuel-efficient car. Brand image is not driven by good advertising alone but is significantly impacted upon by the cars performance and design, quality, and the cost of ownership. Among the three, product quality has the highest correlation with brand image. Small car buyer seeks capability in advertising, and fuel efficiency is relatively more important to them. Technology, innovation, and good influence premium mid-size buyers. One reality for us in India is that the market is extremely price/value conscious.

Factors affecting buyer behavior

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

Major attributes of customer satisfaction

Match between the price of the car and the income of the customer Features in the car Service facility Safety standard Warranty scheme Finance facility

Reasons behind increased purchase of cars

Increase in disposable income Better safety at roads Increase in the number of professionals Family needs Increase in family size Suits your lifestyle and personality

Reasons behind deliberation towards a brand

Affordable price Technical superiority over competition Comfort Manufacturers image Value for money Safety After sale services

Under this, the company took a conscious decision to reposition and re-launch Bolero as an entry level SUV as against a plain utility vehicle. A detailed consumer research was undertaken on different usage segments of the category. Research studies suggested that competing brands such as Tata Sumo had a powerful equity in commercial segment but negligible presence as a personal vehicle. There was an opportunity to capitalize on emotive drivers such as Pride of Ownership through attributes such as product styling and an aspirational imagery. This led to the launch of new Bolero variants. It was also important to evolve distinct spaces for both Bolero and Scorpio to prevent cannibalization. Towards this end, the Bolero was repositioned as an entry level SUV with an attitude of Taking on Anything, offering an affordable option for young, upwardly mobile consumers while the Scorpio was targeted at those who had arrived in life and for whom the brand was an extension of their lifestyle.

Factors influencing satisfaction after the purchase

Seats design Leg Room Dash Board Interior Color Music System Adjustable Front Seat Headrest Crossbar under Dashboard Air Bags Anti Lock Breaking System Aerodynamic Shape Intensity of front lights

What customers generally look for?

Fuel consumption and Mileage (km/ltr) Cost of ownership (eg., Diesel engine, maintenance cost, etc.) Pick Up Stability at higher speed Top speed Ease of driving and driving comfort Resale value Value for money Enough space for large families

 Sedan owners wanted a higher sitting position and ground clearance, and the ability to drive comfortably on unpaved or potholed roads. MUV owners, on their part, wanted better styling, whereas SUV owners were looking for better ride quality and handling. Ingress and egress were also a concern for SUV owners.
Source: Tatas crossover experiment, Nov. 08, 2010.

Habits, needs and attitude of Indians

All Indians are in a hurry to take off as soon as the traffic signal turns green; they therefore need that additional pick up. Similarly, a car has to be easy to park. Indians often accommodate three passengers on the back seat; so it is essential to give good comfort towards the rear of the car.

Factors affecting dealers choice

Distance (Proximity) Advertisements (Promotions) Technical Facilities Cost of Service Availability of Spares Information Provided Service Time Charges Staff Car Handling (Delivery & service) Assured Customer Transactions Ambience of Service Center Finance ( Credit) Schemes

The game played by perception

The dominance of the rural and semi-rural areas in the overall sales of the Bolero is also due to M&Ms long association in the tractor and agricultural equipment segment. Most of the Boleros are owned by senior villagers like a Sarpanch or farmers who hold large tracts of farming land. This vehicle proves to be their status symbol and this further helps drive the aspirational value.

Why automobile industry reached a peak level in sales this season?

Easily available finance Discounts and offers in new models Festival bonus Positive market sentiment Increasing purchasing power of the people Easy liquidity in the system helping in keeping interest rates low Source: Nov. 13, 2010, Business Standard

Cut throat competition

Volkswagen wants to dislodge Toyota as the worlds largest car maker by 2018. The gap between the two is not huge. In 2009, Volkswagen sold 6.29 million cars against Toyotas 7.81 million cars. India could well decide who wins finally. Volkswagen has launched the Polo hatchback and sedan (Vento), and invested Rs 3,200 crore in a new factory at Chakan near Pune that can roll out 110,000 cars in a year. The Etios could be Toyotas answer. So far, Toyota has been present in just 15 per cent of the Indian market with the Altis, Camry, Innova, Fortuner, Prius, Prado and Land Cruiser. The Etios will expand it to around 50 per cent. It will compete against the likes of Maruti Suzuki Swift, Hyundai i20, Nissan Micra, Volkswagen Polo and Ford Figo. Toyota has spent over Rs 3,000 crore in a production facility for the car near Bangalore. Its capacity will be 100,000 cars per annum, which can be doubled in the future. It wants to sell 70,000 Etios, hatchback as well as sedan, in 2011, which could double its sales in the country. By 2015, Toyota wants to sell 300,000 in India. Rivals say Toyota is a little late to hit the market. Still, much is at stake. Nothing can be left to chance.

References
Sites visited www.siamindia.com www.autocarindia.com www.overdrive.com www.hyundai.co.in www.ibef.org Books consulted Building Strong Brands- David A Aaker