LAL BAHADUR SHASTRI INSTITUE OF MANAGEMENT, DELHI

Analysis of Consumer Behavior in Passenger Car Segment in India

Trimester IV Submitted to prof. Gaurav Joshi

Submitted by : Anu Lall- 138 Kanika Monga- 140 Sikander Singh- 156 Lipika Arora- 181 Vishal Jagwani- 169 Manisha Chugh- 195

1|Page

Preface

The following is a report on Marketing Research project done by Group-3, Section C as a part of PGDM General Course at Lal Bahadur Institute of Management. The title of the project is Analysis of consumer behavior in Passenger Car Segment in India.

2|Page

Table of Contents

Chapter No. 1 2 3 4 5 6 7 8 9

Chapter Name Introduction Literature Review Research objectives and Problem Research Methodology Finding and Analysis Influence of External factors and sociocultural environment Influence of Psychological factors Consumer Decision Making Model Recommendations and Conclusion

S.no 4 8 10 11 13 18 24

3|Page

Chapter 1 Introduction

India is one of the most populous countries in the world with a population of over 1.3 billion, about one-fifth of the world's total population. This study aims in understanding consumer buying behavior in the Indian car industry. The car segment is highly competitive with well established and flourishing global and local brands. Moreover, consumers in India are now more informed, sophisticated and demanding. Urban consumers have been especially exposed to western lifestyles through overseas travel.

Abstract
The automotive industry in India is one of the larger markets in the world and had previously been one of the fastest growing globally, but is now seeing flat or negative growth rates. India's passenger car and commercial vehicle manufacturing industry is the sixth largest in the world, with an annual production of more than 3.9 million units in 2011. According to recent reports, India overtook Brazil and became the sixth largest passenger vehicle producer in the world (beating such old and new auto makers as Belgium, United Kingdom, Italy, Canada, Mexico, Russia, Spain, France, and Brazil), grew 16 to 18 per cent to sell around three million units in the course of 2011-12. In 2009, India emerged as Asia's fourth largest exporter of passenger cars, behind Japan, South Korea, and Thailand. In 2010, India beat Thailand to become Asia's third largest exporter of passenger cars. As of 2010, India is home to 40 million passenger vehicles. More than 3.7 million automotive vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second (after China) fastest growing automobile market in the world in that year. According to the Society of Indian Automobile Manufacturers, annual vehicle sales are projected to increase to 4 million by 2015, no longer 5 million as previously projected.

4|Page

The production of passenger vehicles in India was recorded at 3.23 million in 2012-13 and is expected to grow at a compound annual growth rate (CAGR) of 13 per cent during 2012-2021, as per data published by Automotive Component Manufacturers Association of India (ACMA). The major players in Indian Automobile Industry are Maruti Suzuki, Hyundai, Tata, General Motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes Benz etc.

Buying behavior in Passenger Car Segment:

The concept of buying behavior is of prime importance in marketing and has evolved over the years. It is important to understand consumer buying behavior as it plays a vital role in creating an impact on purchase of products. The human wants are unlimited and always expect more and more. Car Models are no exception to this behavior. This lead to constant modifications of Car Models & its features and today we see a new model coming into the market practically every quarter.

The market is a very important place to study the behavior of consumers and also provide useful insights what a consumer requires in a product. It is only through research that a company will be able to study the buying behavior of consumers. 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. Customers perception of service and quality of product will determine the success of the product or service in the market. With better understanding of customers perceptions, companies can determine the actions required to meet the customers 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. The marketing strategy is successful if consumers can see a need which a companys product can solve and, offers the best solution to the problem. For a successful strategy, the marketer must lay emphasis on the product/brand image in the consumers mind. Position the product according to the customers likes and dislikes. The brand which matches the desired image of a target
5|Page

market sells well. Sales are important and sales are likely to occur if the initial consumer analysis was correct and matches the consumer decision process. Satisfaction of the consumer, after the sales have been affected, is important for repeat purchase. It is more profitable to retain existing customers, rather than looking for new ones.

Companys Product

Competitors product

Consumer Decision

Superior Value Expected

Customer Satisfaction

Perceived Value Delivered

Sales

Customer Satisfaction Process Buyer decision processes are the decision making processes undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product or service. Consumers have to make different kinds of decisions everyday according to their different needs. Some of the decisions are playing critical roles in consumers daily life, for example, purchasing a new home or purchasing a car, whereas sometimes the decisions are made on a virtually automatic basis. This model focuses on the companys product and the competitors product that includes two reference points: an initial which is internal to the company-expectations and buying objectives, and a final one that takes into account the expectation of a superior value which thus makes the sales for the company. If the consumer experiences that the perceived value is delivered, the consumer becomes satisfied.

The customer buying behavior can be defined as the buying behavior of the final customers who purchase goods and services for personal consumption. A company gets great advantages by understanding how customers respond to marketing stimuli that include the four P s: product,

6|Page

price, place and promotion. Other stimuli in the customers environment such as economic, technological, political and cultural also affect all customers buying decision. All these stimuli enter the buyers black box where they, through the buyer decision process, are turned into a set of buyer responses.

7|Page

Chapter-2 Literature Review

The aim of the study is to identify, describe and analyze the factors that have an impact on brand preference. The literature review is done to clarify the underlying concepts in brand preference and to unearth the factors that have been found to affect brand preference. In spite of the significant role that the car industry plays in the nations economy, there is an acute paucity of literature on the car industry, particularly on the passenger car industry. This is one of the serious limitations the researchers had to encounter during the course of the study. This section contains the parsimonious list of empirical research conducted in this area internationally and nationally.

Abdul et al. (2006), in their study, noted that consumer behavior is influenced strongly by cultural, social, personal and psychological factors. Cultural factors include the set of basic values, perceptions, wants and behavior learned by a member of society from the family and other important institutions. The social factors include consumers family, small group, social roles and status. The personal characteristics, such as buyers age, lifecycle stage, occupation, economic situation and lifestyle, influence a buyers decision. A persons buying choices are further influenced by four major psychological factors: motivation, perception, learning, beliefs and attitudes. Tan (2003) conducted a study to identify the factors affecting adoption of new product innovations in the consumer electronic industry of Singapore using qualitative and quantitative research techniques. The researchers considered two brands, and using factor analysis, seven factors were identified as critical in affecting adoption of a player. These factors were relative advantage, perceived risk, complexity, compatibility, observability, image and trialability. Suresh and Raja (2006) made an attempt to measure the customer satisfaction level of small cars. In this study, the customer satisfaction was measured by using the variable attributes, namelyafter-sales service, ability to understand customer needs, behavior and knowledge of the mechanics, warranty, prompt delivery, 24-hour customer care, information about the cars, horsepower, engine capacity, power steering, technology, fuel capacity, acceleration, easy finance, convenience and accessibility, ground clearance, easy processing and documentation, price, discount and rebates, fuel efficiency, maintenance cost, luggage capacity,

8|Page

safety measures, model and color of the car, music accessories, engine pickup, availability of spares, cost of labor and spares.

Smita (2006), in her study, pointed out the importance of celebrity endorsement in advertisement and concluded that advertisers use endorsers to add excitement and glamour to their brands. Basically, celebrity endorsements give a brand a touch of glamour in the minds of people, and the hope that a famous face will provide added appeal and recognition in a crowded market. Jaspreet (2005), in his study, suggested that price, brand image, product, performance, new model launches, distribution network, after-sales support and availability of value-added after sales services are the factors that determine competition in the Indian passenger car industry and also suggested that demand for cars depends on a number of factors. The key factors affecting demand for passenger cars in India are fuel costs, prices of cars, per capita income, introduction of new models, incidence of duties and taxes, the quality of road infrastructure and availability and cost of consumer financing. Based on the review of the aforesaid earlier studies, the authors identified below mentioned major factors that influence buying decision:

1. Value for Money 2. Safety 3. Riding Comfort 4. After Sales Maintenance 5. Exterior Design 6. Status Seeking 7. Resale Value 8. Car Performance

9|Page

Chapter 3 Research objectives and Problem

The problem identified from the information need felt makes us arrive at the following management problem. A multinational Automobile Company is planning to establish their business operations in India. The top management has to make a decision on Should a new car be introduced? What can the company do to be successful in Indian automobile market? How the consumer behaves in India while buying a new car? What is the expectation of the customer from the car- Quality, Price, Service, Features?

Research ObjectivesThe questions mentioned above regarding the launch of a new car by an automobile giant in India make us arrive at these objectives of the following study: To identify of the factors that affect the buying behavior of consumer with respect to Passenger Car Segment in India. To study the impact of external factors on consumer buying behavior. To analyze the impact of psychological field in decision making process of consumer with respect Passenger Car Segment in India.

10 | P a g e

Chapter 4 Research Methodology

Research methodology is a way to systematically solve the research problem. It deals with the various steps that are generally adopted by a researcher in studying the research problem along with the logic behind them. A research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure.

The type of research design selected for this study is Descriptive in nature. A descriptive research uses a set of scientific methods and procedure to collect raw data structures that describe the existing characteristics of a defined target population of a market structure. The data and information generated through this descriptive design can provide the decision makers with evidence that can leave to course of action.

Data Collection Technique

Collection of data for the purpose of the research study is in the form of primary data and secondary data, as the study being empirical in nature. Primary data includes experts suggestions, executives opinion, face-to-face interviews, and survey questionnaires. Data will be collected by the way of a questionnaire. Further, secondary data sources include detailed personal interviews, observation records, research related documents, published books, article, newspapers, published, and unpublished research work of various institutions.

Qualitative Research
In-depth interviews were carried out as a qualitative research tool for pursuing the study. An interview has been defined as a conversation directed to a definite purpose other than satisfaction in the conversation itself. An interview is a purposeful conversation used to gather

11 | P a g e

descriptive data in the subjects own words so that the researcher can develop insights on how subjects interpret some piece of the world . In-depth interviews were carried out for the study in order to uncover the beliefs, attitudes, feelings and emotions of the respondents. In-depth interview encourages respondents to share as much information as possible in an unconstrained environment. We chose following experts and a telephonic interview was conducted Mr. Rakesh Giri (Sales Manager, M &M, Ludhiana) Mr. Parminder Singh (Sales Manager, Maruti Suzuki, Ludhiana)

Sampling
Convenience Sampling was done for the purpose of this research. Area of Study Delhi-NCR region Sources of Data - The sources of data are primary in nature. For the purpose of collection of data, a questionnaire was prepared. Sample Size - On the basis of reliability and accessibility, sample size was arrived at 120 for the study.

Chapter- 5
12 | P a g e

Findings & Analysis

Demographics

Gender
100.00% 80.00%

50.00%
0.00% MALE

20.00%
FEMALE

The sample chosen for this study consisted of around 96 males and 24 females making a ratio of 4:1 male to female.

Family Monthly Income group

0.4 0.3 22.86% 34.29% 28.57%

0.2
0.1 0 < Rs. 25000

14.29%

Rs. 25000 - Rs. Rs. 50000 - Rs. 50000 75000

> Rs. 75000

The next demographic feature of the sample was family monthly income and the above graph shows that the respondents chosen for the study were mostly from well off families and we see that only 22.86% of the respondents lie in the bracket of less than Rs 25ooo per month whereas 62.86% of the respondents have family income greater than Rs 50,000. When the respondents were asked of their favorite car brand, we got the following response:

13 | P a g e

35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00%

31.43% 17.14% 11.43% 2.86% 8.57% 2.86% 2.86%

14.29% 8.57%

We see that Maruti Suzuki tops the list at 31.43% followed by Honda and Toyota at 17.14% and 14.29% respectively. Brands such as Hyundai, Renault, and Skoda were amongst the least preferred brands for the respondents.

Driving Habits 80.00% 60.00% 40.00% 20.00% 0.00% Daily Weekly Monthly Rarely Students Professionals Others

For most of the respondents, the driving was a daily affair. The students, professionals, housewives, businessmen drive on a daily basis for their work.

14 | P a g e

Most Important Factors that Influence Buying Decisions

The five most important factors that affect buying behavior are: Safety Value For Money Riding Comfort After Sales Service Exterior Design

According to research, Safety is the top most important factor for Indian car buyers and followed by Value for Money. It is quite obvious that India being a middle income country. Third most important factor is Riding Comfort. The reason for this can be, because most of the households in India have only one Car, so they want their family car to be high in comfort. After Sales Service and Exterior design are fourth and fifth most important factors respectively.

Exterior Design After Sales Service Riding Comfort

0.12 0.18

0.36 0.47

0.53

0.34 0.22 0.12

Very Imp 0.67 0.42 0.53 0.66 0.50 0.60 0.70 Imp Neutral

Value For Money

Safety -

0.06 0.10 0.20 0.30 0.34 0.40

15 | P a g e

Analysis
Attribute-based Perceptual Mapping
The number and nature of dimensions consumers use to perceive different brands in marketplace. The positioning of current brands on these dimensions. The positioning of consumers ideal brand on these dimensions. Where the gap lies in the market? Brand Names: Maruti, Hyundai, Tata, Honda, Toyota, Renault and Mahindra

Perceptual Map

Influence of Media Channel

16 | P a g e

Media Channel
60% 40% 20% 0%
52% 21% 23% 27% 12% 41%

Many people preferred looking for reviews of consumers on Social blogs before purchasing. Word of mouth plays a very important role while purchasing a new car. Also, people gave importance to the suggestions & opinions of the salesperson working at the dealership. Around 21% people look for advertisements in print media.

Chapter- 6
17 | P a g e

Influence of External Factors

Culture
Consumer purchasing decisions are often affected by factors that are outside of their control but have direct or indirect impact on how we live and what we consume. One example of this is cultural factors. Culture represents the behavior, beliefs and, in many cases, the way we act learned by interacting or observing other members of society. In this way much of what we do is shared behavior, passed along from one member of society to another. Yet culture is a broad concept that, while of interest to marketers, is not nearly as important as understanding what occurs within smaller groups or Sub-Cultures to which we may also belong. Sub-cultures also have shared values but this occurs within smaller groups. For instance, sub-cultures exist where groups share similar values in terms of ethnicity, religious beliefs, geographic location, special interests and many others. RITUALS & CEREMONIES Rituals are part of culture. A ritual is a type of symbolic activity consisting of a series of steps (multiple behaviors) occurring in a fixed sequence and repeated over time. Most important rituals tend to be replete with ritual artifacts (products) that are associated with or somehow enhance the performance of the ritual. For special occasions, such as wedding anniversaries, some types of products are perceived as more appropriate as gifts than others, e.g. jewellery rather than everyday household items. Marketing Implications: As part of their efforts to convince customers to purchase their products, marketers often use cultural representations, especially in promotional appeals. The objective is to connect to consumers using cultural references that are easily understood and often embraced by the consumer. By doing so the marketer hopes the consumer feels more comfortable with or can relate better to the product since it corresponds with their cultural values. Additionally, smart marketers use strong research efforts in an attempt to identify differences in how sub-culture behaves. These efforts help pave the way for spotting trends within a sub-culture, which the
18 | P a g e

marketer can capitalize on through new marketing tactics (e.g., new products, new sales channels, added value, etc.).

INFLUENCE OF RITUALS & CEREMONIES ON CONSUMER BUYING BEHAVIOR For the research study rituals taken into consideration are : Festivals Weddings Starting of a new job Job Promotion Birthdays & anniversaries

Question asked from the respondents was, On which special occasion you purchased your car?

Income below Rs.25000

45% Respondents having income less than Rs.25000 responded that they have purchased their car at the time of festivals.

19 | P a g e

Income between Rs.25000-Rs.50000

Income between Rs.50000-Rs.75000

Respondents having income between Rs.25000-Rs.50000 & Rs.50000-Rs.750000 also purchased their cars on wedding occasions and a few respondents also bought their cars on birthdays.

Income above Rs.75000

Respondents having Income more than Rs.75000 purchased their cars on weddings, Birthdays & anniversaries and on festival season as well.

20 | P a g e

INFERENCE As our target segment is lower middle class and upper middle class people. So, MNC which is entering into India should do sales promotion at the time of festivals for different states. As, mostly middle class people wait for festivals for buying a new car because at that time they get many discounts & offers. SOCIAL CLASS A social class is a group of people who have the same social, economic, or educational status in society. While income helps define social class, the primary variable determining social class is occupation. To some degree, consumers in the same social class exhibit similar purchasing behavior. In many countries, people are expected to marry within their own social class. When asked, people tend to say they are middle class, which is not always correct. While some products may appeal to people in a social class, you cant assume a person is in a certain social class because they either have or dont have certain products or brands. Social class is measured on the basis of Objective measure that is, Income. SLOTS < Rs.25,000 Rs.25,000-Rs.50,000 Rs.50,000-Rs.75,000 > Rs.75,000 PERCENTAGE 23% 14% 35% 28%

Social class is categorized into 4 categories i.e, Lower class, Lower Middle class, Upper Middle class & Upper Class. Mostly respondents are from Upper middle class category.

21 | P a g e

INFLUENCE OF SOCIAL CLASS Question asked was: Does Social Class influence your buying decision of a car?

60% 50% 40% 30% 20% 10% 0% Lower Class

49%

54%

35% 21%

Percentage

Lower Upper Upper middle Class class

Upper Class

Mostly Upper middle class & Upper class people think that social class do matter at the time of purchasing a new car. Like upper class people will prefer buying an expensive car due to their high social status, on the other hand lower class people will only think about their need for buying a new car.

SOCIAL FACTORS A reference group is any person or group that serves as a point of comparison (or reference) for an individual in forming either general or specific values, attitudes, or a specific guide for behavior. They help us understand the impact of other people on an individuals consumption beliefs, attitudes, and behavior. It helps marketers choose their methodology to affect desired changes in consumer behavior. From a marketing perspective, reference groups are groups that serve as frames of reference for individuals in their purchase or consumption decisions.

22 | P a g e

Most market researchers consider a persons family to be one of the most important influences on their buying behavior. Like it or not, you are more like your parents than you think, at least in terms of your consumption patterns. Many of the things you buy and dont buy are a result of what your parents bought when you were growing up. Companies are interested in which family members have the most influence over certain purchases. Companies often hire celebrities to endorse their products to appeal to peoples reference groups.

INFLUENCE OF SOCIAL FACTORS It includes groups (reference groups, aspirational groups and member groups), family, roles and status. This explains the outside influences of others on consumer purchasing decisions either directly or indirectly.

60% 50% 40% 30% 20% 10% 0%

54% 48%

Family members Friends

32% 18% 10%

Co-workers/seniors at work Children Celebrities

1
According to the research, Mostly people get influenced by co-workers & friends while purchasing a new car, also presence of celebrity also plays a role in influencing people. Company entering into India must focus upon including a celebrity in the advertisements and also option of test drive should be provided to the consumers. This will help the company in spreading awareness about the new car.
23 | P a g e

Chapter 7
Influence of Psychological Factors Personality Factors While considering various factors influencing the consumer behavior one of the psychological factors which was considered during the study was Personality Factors, and to study that the Trait Theory was applied which takes into account quantitative and empirical factors. The tests which measure such traits are o Consumer Innovativeness o Consumer Materialism o Consumer Ethnocentrism The first trait measured was the influence of gender on consumer decision making. Personality and Gender

Inference: It was observed that both male and females preferred smaller cars as compared to cars of bigger size. This is because the driving in cities is difficult and due to parking issues, people prefer a smaller car in comparable ranges.

24 | P a g e

But in comparison between two genders, inclination of males was towards big sized cars as compared to females. This particular character can be associated to personality traits based on gender and how it can help the marketers to form decision.

Consumer Materialism It checks the degree of consumers attachment to worldly possessions. For this Social Status and Appearance factors were included in the list of factors for rating on the scale of 7 in relation to their importance. Social Staus:

It can be inferred that for Upper Middle and Upper class, social status factor plays a great role in decision making. This means if the company is targeting different segments of products then it must attach the social status value to products for upper segment of people. Also students lie in Lower class in this table as their income is zero, so their inclination to social status is more as compared to lower middle class people.

25 | P a g e

Appearance :

Inference: According to the data collected the appearance factor played the most important role for Upper class people and followed the same trend as of Social Status factor.

Consumer Innovativeness: This deals with how receptive a person is to new consumer-related experiences. To check this factor we asked a question : You are interested in buying new innovative products

26 | P a g e

The innovativeness was highest in upper class and substantial impact was on lower class too comprising of students. Almost 63% of the Upper class people agreed on this factor. Ethnocentrism: The consumers likelihood to accept or reject foreign made products.

This question judged the ethnocentricity of the individuals. Lower middle class were the most ethnocentric people followed by Upper middle class.

Product Personality and Colour

It was observed that white was the most preferred option followed by Black and Silver. Ehite being an auspicious colour depicted the mentality of the Indian consumers.

27 | P a g e

Attitude Factors:
According to the Multi attribute theory, it is known that a consumers basis its opinion about a product based on the positive and negative attributes present in it. So if certain attributes considered important for an individual are present in a product then it forms a positive attitude to that product. 4 major factors which impacted the most in this area were discovered and evaluated. Safety Factors

Upper middle class and upper class were rated highly. For lower class, many people said that they will not consider it. Features

28 | P a g e

Family/ Friends/Co-workers

Influence of family and friends was very important for upper middle class while it was not important for upper and lower class. Advertisement

Advertisements were not important for most of the groups and they followed a neutral approach.

29 | P a g e

PERCEPTION
Perception involves ,selection , organisation and interpretation of stimulus. The perceptions consumers have of a business and its products or service have a dramatic effect on buying behaviour. Thats why businesses spend so much money marketing themselves, honing their customer service and doing whatever else they can to favourably influence the perceptions of target consumers. With careful planning and execution, a business can influence those perceptions and foster profitable consumer behaviour. Influencing Perception

Consumers continually synthesize all the information they have about a company to form a decision about whether that company offers value. In a sense, consumer perception is an approximation of reality. Businesses attempt to influence this perception of reality, sometimes through trickery and manipulation but often just by presenting themselves in the best possible light. For example, advertisements often trumpet the quality and convenience of a product or service, hoping to foster a consumer perception of high value, which can pay off with increased sales. Reaching Consumers

A key factor in influencing consumer perception is exposure. The more information consumers have about a product, the more comfortable they are buying it. As a result, businesses do all they can to publicize their offerings. However, this causes a problem: When every business bombards consumers with marketing messages, consumers tend to tune out. To influence consumer perception, a business not only must expose its product to consumers, it also must make its product stand out from the crowd. Risk Perception

Consumer risk perception is another factor businesses must take into account when trying to encourage buying behaviours. The more risky a proposition is, the more difficult it is to get consumers to act. If consumers arent familiar with a brand of product, they cant assess the risk involved; i t could be poorly built, for instance, or too costly compared to substitutes. Businesses can overcome this hesitancy by offering as much product information as possible in the form of advertisements or by encouraging product reviews. Allowing potential customers to handle the product in stores or test it at home also decreases risk perception, as does offering a flexible return policy. Customer Retention 30 | P a g e

Successful businesses dont relax once a customer makes a purchase. Rather, they continue to foster perceptions that result in profitable behaviours. Once consumers have tried a product, the task becomes maintaining a good reputation and establishing brand loyalty. Offering superior customer service is an effective tactic because it maintains the perception that the business cares about its customers best interests. In return, customers become loyal to the business, which secures a consistent revenue stream for the company and makes it more difficult for competitors to poach customers.

PERCIEVED QUALITY
According to the consumers perceived quality is classified into two category intrinsic and extrinsic concerns. Intrinsic Concern The concern which deals with the inner needs to satisfy a quality of a product is termed as intrinsic perceived quality.Appearance/Style & Colour of the car falls under the category. Extrinsic Concern - The concern which deals with the external needs to satisfy a quality of a product is termed as intrinsic perceived quality such as After Sales Support- which is essential to determine the overall quality of the product. From the graph below it can be seen that for the lower middle class segment ie income group of 25000-50000 , the perceived extrinsic quality is the highest ie. 34 % - followed by upper middle class ie. Income group of 50,000 750000 ie 25%. Hence the middle class segment value perceived quality for consumer decision making model.

31 | P a g e

Figure Percentage of After Sales Support for different income groups

16% 25%

<25000 25000-50000 50000-75000 >75000 34% 25%

PERCEIVED PRICE
The manufacturers arrive at a pricing based on the income class of the consumers they target , hence obtaining and maintaining a profitable investment in the long run. The consumers in the passenger car segment in put in the satisfaction-based pricing and efficiency pricing categories. Satisfaction Based Pricing Recognizing and reducing customers perceptions of uncertainty Service Guarantees, Benefit driven.

Efficiency Pricing Sharing with customers the cost saving that the company has achieved by understanding , managing and reducing the costs of providing the service Cost leader pricing

32 | P a g e

PERCIEVED RISK
The consumers often perceive risks in consuming or using, or before buying the products based on the market image of brand. The risk in high involvement products basically revolve around value for money ie price and the quality offered. Two important factors for perceived risk are: Overall Warranty

Resale Value

From the below graphs it can be inferred that

the upper middle class segment

value the overall

warranty the most followed by resale value. Whereas the for the lower middle class value resale value more in comparison to overall warranty since for them economic return play a major role.

Figure showing perceived risk for various Income groups

33 | P a g e

PERCIEVED RISK
OVERALL WARRANTY
40%

RESALE VALUE
45% 40%
35% 30% 25%

35%

30%

25%

20%
20%

15%
15% 10% 10% 5% 0% <25000 25000-50000 50000-75000 >75000 <25000 25000-50000 50000-75000 >75000

5%

0%

FUNCTIONAL RISK
The various kinds of risk associated with the functionality of the product is termed as functional risk. In addition to the perceived risk functional risk is also a perception because since the company is a new launch in India consumers does not have a prior experience of the product. The various factors for functional risk are : Technology used Engine Capacity Features (Power Brakes, Power Steering, Power Windows) Safety Features (ABS, Central Locking, Air Bag) Mileage Availability of Genuine Spares

34 | P a g e

Figure showing Functionality risk for various Income groups

Figure showing Functionality risk for various Income groups

35 | P a g e

Features (Power Brakes, Power Steering, Power Windows)

Safety Features (ABS, Central Locking, Air Bag)

15%

10%

15% 24%

<25000

<25000
25000-50000 50000-75000 40% >75000 33% 28%

25000-50000 50000-75000 >75000

35%

Figure showing Functionality risk for various Income groups

Mileage

Availability of Genuine Spares

50% 45% 40% 13% 35%

7%

30%
<25000 25% 20% 37% 25000-50000 50000-75000 43%

>75000

15%
10% 5% 0%

<25000

25000-50000

50000-75000

>75000

36 | P a g e

The figure shows the functionality risk of technology used and engine capacity , features ,safety features , mileage and availability of genuine spare parts are given the utmost value by the consumers belonging to the upper middle class followed by the lower middle class in comparison to the other income groups.

LEARNING
What is Consumer Learning? Consumer Learning is the process by which individuals acquire the purchase and consumption knowledge and experience they apply to future related behaviour. Most of the learning is incidental. Some of it is intentional. Basic elements that contribute to an understanding of learning are: 1. Motivation 2. Cues 3. Response 4. Reinforcement There are 2 theories on how Individuals learn: 1. Behavioural Theory 2. Cognitive Theory Both contribute to an understanding of consumer behaviour. Behavioural Theorists view learning as observable responses to stimuli, whereas Cognitive Theorists believe that learning is a function of mental processing.

Behavioural Learning Theories

1. Classical Conditioning : Includes Repetition, Stimulus generalization and Stimulus discrimination. 2. Instrumental Conditioning: Instrumental Learning theorists believe that learning occurs through a trial and error process in which the positive outcomes in the form of results or

37 | P a g e

desired outcomes lead to repeat behaviour like Repeat Purchase or Repeat Positive Word of Mouth. 3. Both positive and negative reinforcement can be used to encourage the desired behaviour. The timing of repetitions influences how long the learned material is retained. Learning usually persists longer with distributed re-enforcement schedule, while mass repetitions produce more initial learnings. 4. Observational Conditioning or Vicarious Learning: Cognitive learning theory holds that the kind of learning most characteristics of humans is PROBLEM SOLVING. Cognitive theorists are concerned with how information is processes by the human mind: how it is stored, retained, and retrieved. Involvement theory proposes that people engage in limited information processing in situations of low relevance to them and people engage in extensive information processing in situations of high relevance. TV is a low involvement medium for learning and print and interactive media encourage more cognitive information processing. Measures of consumer learning include recall and recognition tests, cognitive responses to advertising, and attitudinal and behavioural measures of brand loyalty. A basic issue among researchers is whether to define brand loyalty in terms of consumers behaviours or the consumers attitude towards the brand. Brand Equity refers to the inherent value a brand name has in the marketplace. Brand Loyalty consists of both attitudes and actual behaviours toward a brand and both must be measured. For marketers, the major reasons for understanding how consumers learn are to teach them that their brand is best and to develop brand loyalty. The various options were given to the consumers for brand recall. The brands such as Maruti, Hyundai and Tata was recalled for Value for Money and good After sales service and Toyota, Honda and Renault were recalled for good on Safety, Riding comfort and Exterior.

References

38 | P a g e

1. Abdul Haneef M, Abdul Karim B A and Edwin Gnanadhas M (2006), Consumer Buying Behaviour of Two Wheelers in Tirunelveli City, Tamil Nadu, Indian Journal of Marketing, Vol. xxxvi, No. 4, pp. 49-60. 2. Smita Sharma (2006), Celebrity Endorsement is it the Only Survival Recipe for Marketers?, Indian Journal of Marketing, Vol. xxxvi. No. 10, pp. 3-14 3. Tan Tsu Wee T (2003), Factors Affecting New Product Innovation in the Consumer Electronic Industry-Singapore, Management Review, Vol. 6, No. 1. 4. Suresh A M and Raja K G (2006), Measuring Customer Satisfaction for Small Cars: An Empirical Study, Indian Journal of Marketing, Vol. XXXVI, No. 2, pp. 3-12. 5. Jaspreet Singh Mithras (2005), A Study on Passenger Car Industry in India with Reference to Maruti Udyog Limited, Unpublished M.Phil. Dissertation, Bharathiar University, pp.154-162.

39 | P a g e