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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 companys
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

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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 companys 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.
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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.
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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 individuals 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 selfconcept 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.
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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. Freuds 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.

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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.

Sel
f

Fig.1 Hierarchy of NeedsAct


(From A. H. Maslow)
uali
zati
on
concerned

Physiological needs are


with self-preservation and these are the basic needs of
Esteem
Needsrequired to sustain and advance the human race. Safety needs
life involving those elements
relate to protection
against
danger and deprivation. Once the more basic needs have
Social
Needs
been satisfied, behaviour is influenced by the need for belonging, association and
Sefty
Needs
acceptable by others.
In many
texts the next two needs are put together, but here we have
separated respect
Physiological
and self-esteem
Needs
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 goods one is attempting to promote
is

in

the

hierarchy.
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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
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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.
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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

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

Psy
cho
logi
cal
Inp
ut

Culture

Problem Recognition

Information Search

Evaluation of Alternatives
Fig. 3 The
Buyer
Decision
Model

process.

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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 companys 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

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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
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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
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Through

marketing

communication

that

such

awareness

Awareness

Knowledge

Liking

Preference

Conviction

Purchase
Fig. 6 The Innovation Adoption Model

The model is described in Figure 6.

is

made

known.

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2.2 Historical Perspective of the topic


LEADING PLAYERS AND SEGMENTS IN WHICH THEY OPERATE
Manufacturer

Segments

Ashok 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

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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

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.

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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.

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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

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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

Under Rs. 3 Lakhs

Rs. 3-5 Lakhs

Maruti 800, Alto, Omni

Reva

Ambassador

Fiat Palio

Hyundai Santro, Getz

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
Rs. 5-10 Lakhs

Toyota Innova

Tata Safari
Mitsubishi Lancer, Mitsubishi

Cedia Honda City ZX

Mahindra Bolero

Hyundai Sonata Embera

Rs. 10-15 Lakhs

Toyota Corolla

Ford Mondeo & Endeavour

Chevrolet Forester

Skoda Octavia &

Combi
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Honda Civic

Honda CR-V
Maruti Suzuki

Grand

Rs. 15-30 Lakh

Vitara

Terracan & Tucson

Mitsubishi Pajero

Audi A4

Opel Vectra

Honda Accord

Mercedes

Class
Toyota

Camry

Rs. 30-90 Lakhs

Audi A6, A8 &Audi TT

BMW X5, 5 Series & 7 Series

Mercedes E Class, S Class, SLK, SL &CLS-Class

Porsche Boxster, Cayenne, 911 Carrera &

Cayman

Above Rs. 1 Crore

Toyota Prado

Bentley Arnage, Bentley Continental GT& Flying Spur

Rolls Royce Phantom

Maybach

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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 its 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

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

Sales
Maruti Suzuki
Hyundai

4% 3% 3% 6%
4%

45%

7%

Tata Motors
M&M
GM
Ford

14%
14%

Toyota
Honda

Above diagram shows the market share with respect to market share of Passenger Vehicle
makers. Source: Society of Indian Automobile Manufacturers
Marketing, Vol.VI, Issue 3, 25Feb-10 March 2011 issue.

(SIAM), 4Ps Business &

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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.

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Offers in the B Segment

Maruti

Hyundai

Zen Estilo
WagonR
Alto VX
Xing
(1100)
Swift

Santro
New
Santro
Getz
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 1990s. 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

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
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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

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.
Santros 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

good buy.

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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 Japans KeiJidosha or K-car (small car)
segment. And it had become Japans 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, Marutis 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, swashbuckling

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.

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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 GMs 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 thatll 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.
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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.
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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.

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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.

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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.

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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 years 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 fuelefficient
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 its 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.

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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.

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