COMPANY PREFERENCES OF THE CUSTOMERS

OF INDIAN TIRE INDUSTRY

“ There never was in the world two opinions alike, no more than
two hairs or two grains; the most universal quality is diversity.”
-Michel De
Montaigne
It is said that it is the customer who is
considered the God and the success of every
organization depends on the buying decision of
the customers. Therefore, so as to attract the
customers, the organizations apply a number
of traits of promotion like personal selling,
direct marketing and advertising in different
media (print, TV, or out-door) etc. This concept
applies in every industry, including the tire
industry.

An Introduction to Tire Industry

Tire industry is capital intensive industry, and as capacities come in spurts, it leads to constant demand-
supply imbalance and consequent cyclicality in prices. The variable costs are also very high, with raw
material forming 70% of the costs. Production process is technically intensive and globally huge sums
are invested in R&D. Tire demand is derived demand, dependent on the auto industry, both for OEM
and replacement market. The major segments are truck and bus (T&B) tires and car tires. Value share
of T&B is about 73%. Replacement market forms largest segment (about 58%) followed by OEM (about
22%). Exports account for about 15%.

With global demand slowing down, there is a consolidation of capacities through mergers etc. The
domestic tire industry broadly mirrors the market characteristics of global industry. However, due to
rough road conditions,

rugged, suitable and cheaper cross-ply tires are in vogue. Consumption of natural rubber is therefore
proportionately high.

Aims and Objectives of the Research

The consumer behavior is defined as the buying behavior of a customer so as to satisfy his or her
needs. For the satisfaction of such needs, the marketers provide them with various products under
different company’s name and brand names. It is up to the consumer to decide upon the choice of the
company. So as to attract the potential customers, the companies in every industry go for tools like
advertising. This advertising may or may not help the companies to increase the sales of their product.

This is true in case of the tire industry. Here, the basic aim of research is to study the impact of
advertising on the sales of tires in the domestic tire market. In other words, it is an attempt to study –
How the consumer buying behavior is affected by the advertising of the product, i.e., how the company
preferences in the domestic tire market of the customer is affected by the advertising strategies of the
companies.

The objective of this research is to study that how the frequency of advertising for a particular tire
company, in a fortnight, affects the sales, in other words, the company preferences of the customer.

Hypothesis
 In this research certain assumptions or hypothesis have been made. This has been done to facilitate
the study. This hypothesis can be stated as follows:

H-0: The company preferences of the customers in the domestic tire market are affected by the
frequency of advertisements they see in a fortnight.

An alternative hypothesis is stated in case the null hypothesis is rejected. This hypothesis is stated as:

H-1: The company preferences of the customers in domestic tire market are not affected by the
frequency of the advertisements they see in a fortnight.
Literature Surveys

While working upon this research paper, a number of similar research papers were studied so as to
draw some inference that what has already been studied and how does the advertisements affects the
sales of a particular company.

A research paper “ Buying Behavior of Shampoo among College Going Girls in Bikaner City “ written by
Mr. Pramod Kumar Gupta, says that the advertisements do affect the buying behavior. The research
done by him is more of a theoretical research rather than an empirical research. The sample size he
had considered is of 50 students. He has taken a hierarchical model depicting the role of advertising in
buying decisions for shampoos in the girls. For this he has done a regression analysis taking the sales
as a dependent variable and the frequency of advertisement shown as an independent variable. After
running the regression, and doing the analysis of the results, it was analyzed and concluded that the
buying behavior in college going girls for buying a shampoo is certainly affected by the advertisements
shown in different media although there are certain other factors also which may influence the buying
pattern. Factors like preferences for an herbal shampoo or a clinical shampoo.

Another research paper written by Mr. Arvind Vaid, Mr. Kunal Seth, Mr. Bharat Chavda and Mr. Anurag
Gupta titled as “A Study of the Brand Loyalty of Cigarette Smokers “ also studies the customer
 preferences for a

particular cigarette brand. The design of this is a descriptive design and the method used by them for
the collection of data is the Questionnaire method. Originally they had interviewed 114 persons but
selected 100 as their sample size. The analysis techniques used by them for their research analysis
were:

ü Chi-square test

ü Graphical method

ü Mean, Median

ü Cross-tabulation

ü Z-test

Their main objective of conducting the research was to study the affect of advertising on the brand
loyalty of the consumers. After conducting the research they deduced that a brand loyal consumer
would not shift from one brand to another on finding the advertisement of the new brand attractive.
Neither the brand loyalty would be affected by the change in price, change in income or the introduction
schemes like free gift offer by the other brand. Also, they analyzed that the youngsters are more
influenced by the advertisements than other age group smokers.
Research Methodology

Research design:

Problem: How does the frequency of advertisements affect the company preferences of the customers
in the domestic tire industry.

Hypothesis: The null hypothesis and the alternative hypothesis are stated as follows:

H-0: Frequency of advertisements does not affect the company preferences of the customers’ i.e. the
sales of the company.
 H-1: Frequency of advertisements does affect the company preferences of the customers’ i.e. the sales of the
company.

What to Observe?: The affect of the frequency of advertisements on the customer preferences. For
this, the sales figures of different companies in the Indian tire industry are compared with the respective
frequency figures of the advertisements of the respective companies.

How to Observe?: The various methods used for observation are:

ü Questionnaires

ü Personal Interviews

ü Economic and Auto Industry Journals

ü Advertising Magazines/Newspapers

Model Used: The model used here is a simple Karl Pearson’s Coefficient of Correlation.
How to Record Observations?: The observations are recorded in a tabular form.

Inference: it would help the organization to decide the optimal level of advertisement investment for
boosting the sales and in turn making the company’s product a preferable company of the potential
customers.

Model Used:
 The model used in this research is the model for Karl Pearson’s Correlation Coefficient. Correlation is
relationship, which exists between a dependent and independent variable. In this case, the dependent variable
is the sales of the companies and the independent variable is mean frequency of the exposure of
advertisements to the customers.

Correlation may be defined as the relationship between two variables where the change in one has significance
change in another. It is said to be a perfect one if the deviation in one variable is followed by a corresponding
and proportional deviation in another.

Karl Pearson’s coefficient of correlation is a measure of intensity or degree of linear relationship between two
variables. Correlation coefficient between two random variables X and Y, usually denoted by r(X,Y), is a
numerical measure of relationship between them. In this case X is the sales of the company (dependent
variable) and Y is the frequency of exposure of advertisements to the potential customers (independent
variable).

Data Collection:
 The data for the research is collected by using the different methods of data collection. The various
tools of data collection used for this research paper are enumerated as follows:

ü Questionnaires – A questionnaire is prepared and distributed among the sample size.

ü Interviews – Target sample size was interviewed regarding the preferences of the tire company they
prefer for their vehicle, and the impact of the advertisements of that company on their purchase decision.

Companies’ Profiles

Apollo Tires Ltd.: -

It is one of the leading tires manufacturing companies in India. It manufactures automobile tires, tubes
and flaps. Well entrenched in T&B (trucks and bus) tire replacement segment which comprises the bulk
of the market. Though its presence in 2-wheeler and passenger car segment is low. Though going
through low in FY’99, Apollo Tires Ltd. Has posted sales growth of 17% YOY in first 9 months of year.
However, rising cost of material inputs and increased competition has put pressure on operating
margins. The company has, however, succeeded in holding on to its market share by affecting a
change in product-mix with production of more car radials.

CEAT Ltd.: -

A part of the RPG Goenka Group, CEAT Ltd. is the second largest tire manufacturers in country after
MRF. CEAT manufactures truck and bus, passenger car, scooters and LCV tires. The company is a
dominant player in T&B and passenger car tire segments with a market share of 14% and 17%
respectively. In FY 2000,CEAT did well to posting a 21%YOY sales growth in replacement market for
T&B tires. It is presently focussing on

catering to the passenger car and 2-wheeler industry. Towards this, it is commissioning a new radial tire
factory in 2001.
Goodyear India Ltd.: -

Goodyear India Ltd. is a 74% subsidiary of the $13.5 bn. Goodyear Tire & Rubber Co., U.S., the world’s
third largest tires company. In FY ’99

company increased its turnover by 24.2%YOY,thanks to increased capacity at its Ballabhgarh facility
and improved off take from South Asia Tires Ltd. in Aurangabad. Goodyear India Ltd. has now come to
occupy 11.3%of the domestic market share in the industry.

JK Ltd.: -

It is one of the leading domestic tire producers and a pioneer in radial tires in India. JK Ltd. has a
presence in T&B, passenger car, LCV and tractor tire segments. It has largest market share of 23% in
the T&B segment after the takeover of Vikrant Tyros. The company also leads in LCV tire market by
having 24% of the market share.

Analysis

After running the correlation and performing the t-test on the data collected, it is seen that the sales of a
company are affected by the exposure frequency of the advertisements. In other words, the H-0 (null
hypothesis) is rejected and the alternative hypothesis, H-1, i.e. the customer preferences for a particular
tire company in the domestic tire market a re affected by the exposure to the no. of times an ad of a
company shown to the customer, is accepted.
Conclusion

It can be concluded from this research, that the customer prefers those tiers for which the company
concerned exposes him frequently through the various media forms like print, TV, hoarding etc.
Although other factors like his income, type of vehicle, the road conditions of his city, does play an
important role for making a purchase decision, advertising helps him to identify the players in the
market. Therefore, it is important for any marketer to study the consumer behavior and henceforth
create and apply suitable promotional strategies.