Marketing Group Project

MOTOR CYCLES

Group – B3

Ashok Kumar Verma 0083/48

Ashwani Panwar 0084/48
Avnish Kumar 0091/48
Bipin Kumar Singh 0096/48
Debanjan Munsi 0107/48
Dinesh Kumar Soni 0118/48
Naresh E 0122/48
Rakesh Surineni 4022/18
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Contents
ABSTRACT........................................................................................................................................ 3
Project Objective .......................................................................................................................... 3
Brief description of Indian motorcycle industry ................................................................................. 4
Key players in the Two-wheeler Industry....................................................................................... 5
Analysis............................................................................................................................................. 6
General Information from the Survey ............................................................................................... 6
Segmentation of Consumers on the basis of age........................................................................... 6
Segmentation of Consumers on the basis of Income Distribution ................................................. 8
Primary Purpose / Use of the Bike ............................................................................................... 10
4Ps of Marketing ............................................................................................................................. 12
Price ............................................................................................................................................ 12
Product ....................................................................................................................................... 12
Product Life Cycle ................................................................................................................... 12
Place ............................................................................................................................................13
Promotion ................................................................................................................................... 15
Impact of advertisements........................................................................................................ 15
Customer Evaluation and Response ............................................................................................. 17
Conclusion ...................................................................................................................................... 18
Additional Considerations ............................................................................................................... 18
Sources ........................................................................................................................................... 20

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 ABSTRACT
Four major factors that influence consumer buying behaviour are

1. Personal factors
2. Psychological factors
3. Social factors
4. Cultural factors
Main focus of marketing lies on consumer and product and making value propositions to
consumers. Personal factors that determine consumer behaviour are personality, attitude,
values, gender, marital status etc. Social factors like family, reference groups, role, and
status also influence purchase decision. Psychological factors that influence consumer
behaviour are motivation, perception, learning, belief etc. Cultural factors are social class,
and factors specific to different regions.

Project Objective
The objective of the project is to study the consumer buying behaviour and analyze the
effect of 4Ps of marketing in the context of motorcycle purchase decision. The effect of
consumers’ opinion of motor bikes regarding features like appearance, mileage, price,
brand etc and other factors that impact consumers’ choice of a particular brand of motor
bike was studied.

Scope of Project – Scope of project was limited to study consumer behaviour and the
effect of 4 Ps i.e. Product, Place, Price and Promotion on the consumer buying decision.

Project approach

We studied motorcycle market in India and its growth. Major players in Indian motorcycle
market were studied to find market leaders and four dealers of different brands were
selected for dealer survey. Primary as well as Secondary data was collected to know
consumer preferences while making purchase decisions.

We studied all possible factors that influence purchase decision and consumer behaviour.
Then a questionnaire was made for consumer. A consumer survey of sample size 150 was
done to study consumers’ response to major factors that affect decision making in
motorcycle market.

A dealer survey was also conducted to know the consumer preferences from dealers’
perspective. A dealer questionnaire was also prepared and a dealer survey of four dealers
was done. Dealers of following brands were surveyed for this purpose:

1. TVS
2. Bajaj
3. Honda

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4. Hero (earlier known as Hero Honda)

Data from annual report of motorcycle companies was also collected.

The data collected from various sources was analysed and interpreted. Based on
interpretation of data conclusions were drawn.

Brief description of Indian motorcycle industry

Indian motorcycle industry:

India is the second largest manufacturer of two-wheelers in the world. Bikes constitute
major segment of Indian two wheeler industry, the other two being scooters and mopeds.
Indian two-wheeler industry had a small beginning in the early 50's. The two-wheeler
market was opened to foreign competition in the mid-80s. With the availability of fuel
efficient low-power bikes, demand swelled. This resulted in the introduction of four stroke
bikes (100cc category) which gained the top slot. The first Japanese motorcycles were
introduced in the early eighties. TVS Suzuki and Hero Honda brought in the first two-stroke
and four-stroke engine motorcycles respectively. In the 90s the major growth of annual
growth rate of 25% on an average for motorcycle segment was brought mostly by Japanese
motorcycles. With a successful launch of ‘Pulsar’ Bajaj entered high-power bike segment in
2001.

Indian population prefers two wheelers because of their small manageable size, low
maintenance cost, lower price, easy loan repayments and the fact that in India roads are
congested and narrow. Motorcycle market is composed of broadly two segments: Regular
segment and premium segment. Regular segment mainly represents need based market
segment where motorcycles are used for office commutation, business purpose and other
local travel of needful nature. Basic features of bike are main consideration. Premium class
motorized two wheelers are seen as a status-symbol by the rich and the youth and style,
engine power, brand etc are major influence on purchase decision. Indian two-wheeler
industry has grown at very fast rate in the last few years.

Major Factors which led to growth of Two-Wheeler industry are –

o The Gross Domestic Product has grown at 8%

o The average family income has increased
o Financing has become easier
o Reduction in taxes and duties
o Introduction of international standards in India
o Economic and fuel-efficient engines
o Teenagers and youth using more and more motorcycles

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Indian two-wheeler industry has grown at rate of 25% in 2009-10 and 27% in 2010-111 and
reached a size of 13.3 million units. ICRA expects two-wheeler industry to grow at CAGR of
10-12% in next five years to reach 21-23 million units by 2015-16. Hardening interest rates,
increasing fuel costs and rising commodity prices may lead to moderation in growth rate of
this industry growth in the short term, but medium to long term growth rate is expected to
remain high.

Several new players may enter into Indian market; in fact Mahindra launched a motorcycle
last year. Entry of new players will intensify competition. Future growth is likely to come
from rural and semi-urban areas. Premium segment growth will come mainly from urban
and semi-urban areas and new product development or entry of new foreign players. Wide
distribution network, Strong product capability and supply chain will be the necessary
conditions for competitive advantage.

Key players in the Two-wheeler Industry:

There are many two-wheeler manufacturers in India. Major players in the 2-wheeler
industry are Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and TVS Motor
Company Ltd (TVS).

The other key players in the two-wheeler industry are Kinetic Motor Company Ltd (KMCL),
Kinetic Engineering Ltd (KEL), LML Ltd (LML), Yamaha Motors India Ltd (Yamaha), Royal
Enfield Ltd (REL) and Honda Motorcycle & Scooter India (P) Ltd (HMSI).

Data collection:

As a part of this project, we mapped the customer preferences by direct data collection
from consumers and visiting four motor cycle dealers to understand the retail scenario. The
customer-surveys were one-on-one surveys, surveys using social-networking platforms like
facebook and online survey tools like survey monkey, with consumers spread across various
age groups, socio-economic backgrounds and occupations to get first-hand information on
what factors affect their buying behavior. We also studied the effect of factors like the
brand value, price, latest fads, maintenance costs, advertising (both TV and newspapers),
advice sought from friends and colleagues, the craze among youth for motorcycles and
social status issues affecting the consumer. We extracted information regarding the effects
of pricing and design on motorcycle purchase from dealers. Other important information
was also obtained with the data collected from sources including effects of colours and
designs on purchase behavior. We also used secondary data collected from the various
databases and other sources to analyze the present Motor Cycles market.

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Analysis:

 Customer buying behaviour analysis: Understanding customer preferences and

factors that affect the buying patterns
 Motorcycle is a limited occasion or one time purchase for a large section of Indians
thus involving a lot of thought and deliberation. So we looked into the factors from
whom the buyer seeks opinion while buying a motorcycle. These factors are Family,
Friends & colleagues and dealers.

Figure 1: Sources of advice

As per the data collected most buyers seek for the advice of their friends and colleagues
indicating the factor that motorcycle is a public luxury that has a high status value and the
comments and experience of friends and colleagues are adhered to in more than half the
cases. The family opinion is very low coming to only 18% and the individual decision
without taking advice of anyone is 20%, which indicates that some people may be very
individualistic in their choices and are not influenced by the family and society advices. The
dealers’ influence in customer decision is very minimal indicating the role involvement of
dealers being limited only to selling the bikes.

General Information from the Survey:

Segmentation of Consumers on the basis of age

44%
56% <25
>25

Figure 2: Age groups of respondents

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Our main focus was on getting data from younger groups as we expected the general
motorcycle consumer to be from mainly two groups –

1) Young and Dynamic: People in the age-group of 18-25 who purchase mostly high
end bikes.

Figure 3: Preferences of relatively young respondents

This group’s purchase decisions are starkly influenced by brand name and style than by any
other issue. So if we analyse on the importance weights given by the number of
respondents, a large percentage of them considered driving comfort to be of paramount
importance followed by Style and Brand name. For this particular consumer group price is a
secondary issue and mileage also takes a backseat. Surprisingly, maintenance and warranty
issues are also considered moderately important even though our expectations were that
their importance score would be quite high.

2) Middle aged groups: People in the age-group of 25-45 who are generally married
men with a family who purchase durable and high comfort level Motorcycles

Figure 4: Preferences of middle aged respondents

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This group’s purchase decisions were primarily focussed solely on price and mileage. The
choices of motorbikes were primarily focussed on these two. Again surprisingly brand name
is given high moderate importance in making the purchase decision with maintenance and
service quality taking the back seat. This can be explained by the fact that due to rising
income levels, people prefer buying a new motorbike than repairing an old one. The cost-
sensitive consumer who would put that on a high importance list seems to be markedly
absent and the market scenario seems to suggest a change but more study needs to be
done to make any credible conclusions. The data collected from the dealers confirmed the
above inclination of the young population as the maximum bikes sold by the 3 dealers in
last 6 months to the age group (25-35) are high power bikes mostly of more than 150CC and
to the age group (>35) are bikes less than 135CC. The above results are also supported by
the dealers’ survey result where the only thing we could make out extra is the colours of the
bike which dealers rated as a very high influence factor.

Segmentation of Consumers on the basis of Income Distribution

According to the research results shown in the graph, the middle class segment which falls
between Rs90000-500000 is increasing at a very faster rate and our sample size consists of
respondents from this middle class group.

Figure 5: Income groups of respondents

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The Income distribution was mostly on a monthly income basis, with survey concentrated
on moderately high income groups.

1) Moderate to Low income group: Monthly income less than 30000 per month.

Figure 6: Preferences of Moderate to low income respondents

If we consider the importance weights given in the above graph, we can safely conclude
that mileage and maintenance get a huge importance alongwith brand name. Surprisingly
price and style are not that important. The price-sensitive consumer seems to prefer a
lower running cost over initial purchase and driving comfort seem to be getting a due
importance due to changes in perceptions among the consumer group.

2) High Income group

Figure 7: Preferences of High income respondents

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 Primary Purpose / Use of the Bike

Figure 8: Primary purpose/use of the bike

Figure 9: Occupation Distribution of Customers Surveyed

We found that most motorcycle users are working professionals and a large percentage of
students.

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The survey conducted by ICRA in Delhi to know the most economical mode of transport
shows that 2 wheeler holds 2nd position and that is the reason preferred most by the
working professionals and students as mode of transport. That means external sources like
petrol prices could be an importance factor in consumer buying behavior due to which
consumer can delay the buying decisions or may opt some other means of transport like
public transport.

Figure 9: Importance of various factors

From an overall importance chart, we can infer that price, mileage and style have a very
high importance for most consumers validating the claim that for a medium priced product
like motorbikes where consumers take time to make their decision overall effectiveness of
the purchase is evaluated on these dimensions and in a price-sensitive country like India,
price is likely to dominate the purchase decision. But, what was surprising from the survey
is that, comfort level was given an extra-ordinarily high weightage with Maintenance and
service costs not so important. Hence, companies like Honda Mortorcycles India Limited
are not at a significant disadvantage due to lack of adequate number of distributors.
Warranty and free service also score significantly low making any efforts in that direction
not worthwhile for the marketers.

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 4Ps of Marketing:

Price:

Considering a separate analysis on the effect of price overall, we found that a moderately
large proportion of people considered price an important determinant in their purchase
decision while a slightly smaller number reported it to be extremely important. We can infer
that in the final choice of the product, price is an important determinant in a price-sensitive
market like India

Product:

Motorcycle as a product can be broadly divided into 2 categories

1: Mileage oriented
The mileage oriented segment consists of 100 cc to 125 cc bikes which are low on power but
offer excellent mileage and great value for money. The major consumers in this segment
are daily commuters who require maximum fuel efficiency and low maintenance costs. The
price range starts from Rs. 35000 to Rs 45000. The top bikes in this segment include Platina
and Discover from Bajaj Auto, CD Dawn and CD Deluxe from Hero MotoCorp.

2: Design and comfort oriented

This segment includes bikes above 125cc and is more youth centric who give design, style
and power more preference to mileage and are willing to pay extra for these features.
These motorcycles are sporty, well designed and more powerful. These motorcycles largely
attract young riders passionate for style, performance and comfort. The price range in this
sector is from Rs. 50000 to Rs 70000.

Product Life Cycle

The Indian Motorcycle industry is extremely competitive and with the advent of better
technology the life cycle of the product is getting shorter. The ever changing demand of
consumer has put more pressure on the manufacturers to come out with new innovations
and better designs in the product to capture greater market share. Thus the manufacturers
are putting more focus on Research and Development and coming up with new models of

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improved technology to serve the market. The effect of shorter life cycle can be seen as
companies phase out their old models and producing new and different variants of the
models which are popular with consumers. The examples for this are different versions and
variants of Bajaj Pulsar where the company is launching a new model every year with
enhanced features and better technology. The below table shows the average age of
motorcycle in India.

Place:

In Indian context the motorcycles are sell/ Purchase through very limited number of
marketing channels. The major types of marketing channels are as follows-

1. Company’s Outlet
2. Company’s Dealer
3. Sub- Dealer
Market Segment
These marketing channels are basically work in
coordination with each other in different
 Metro Cities
demography and geography to cater the need of
 Urban Markets
different market segments. These segments are
 Semi Urban Market
as follows-
 Rural Market
Company’s Outlet is specially worked to target
consumer in Metro cities. In these markets the sale is normally higher than other segments
and purchase is driven by performance, comfort and brand equity of the motorcycle. In
metro cities the consumer’s disposable income is higher than that of other segments so
purchase is not much affected by price factor. So, companies prefer to open there own
outlets in metro cities which help them to save on dealer margin and maintain the brand
equity in term of product and service quality. It also help to serve the products meant for
niche segment.

Urban market segment is target by company’s dealers, this dealer network work on the
franchise model. Dealers are allotted as per company policy and the motorcycles are
delivered to them from company’s production unit directly as per sales forecast and prior
booking. These dealers are more familiar with the local requirements and consumer
behaviour.

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Semi Urban Market and Rural markets are targeted through the intensive distribution
network of dealer and sub dealers. This model is also work on the franchise model and quite
helpful in market penetration and growth.

The various factors which affected the sale growth through these distribution networks are
as follows-

 Place and Position of dealer

 Customer friendly
 Finance options
 Schemes and discounts
 Technical knowhow

Place and positioning of dealer in target market segment play a very significant role in
ascertaining the sales and reach of the product. As we did not have the STP details of
individual brand so, we taken that factor in a standardize framework to carry out our
market analysis.

Figure 10: Dealers influence on customer purchase

The above facts are well supported by the dealer’s survey results where we found that
being customer friendly helps the dealers a lot in attracting the new customers and
retaining the old customers. Also surprisingly only 30% of the customers opt for the
financing options which shows that availability of easy loans doesn’t attract more sales.
Also the hygiene factors like bike registration, free servicing holds a lot of importance as it
saves the consumer from lot of painful registration activities.

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Also the fact that financing is no more a very influencing decision factor for the consumers
is also proved by the research report done by ICRA.(Please refer the above graph). The
reducing importance of finance availability is also due to the increasing number of rural
consumers which don’t rely much on the organized financing sector.

Promotion:

Impact of advertisements
TV ads for motorcycles are relatively scarce, especially when it comes to mainstream
programs, simply because motorcyclists make up such a small percentage of TV viewers.
Still, there have been some great ad campaigns mounted by the motorcycle manufacturers
over the years, even if most of them never got the kind of exposure we think they deserved.
As the motorcycle market in India has matured, the quality of advertisements for
motorcycles has definitely improved. While historically BAJAJ has had an excellent list of
ads right from their "HAMARA BAJAJ” campaign, many other manufacturers have also
tried to improve their advertisements beyond the "mileage" and "price" factors while
starting poll might be cumbersome in terms of listing down all the ads.

If we think on some of these ads that caught the public's imagination, if not help the
company improve its sales. But if we consider the impact of the sales on low price bikes, the
conclusion that advertisements impact sales is still debatable. Our results indicate a very
low effect of advertisements on the consumer’s final purchase decision as shown below in
the graph. This data was collected from the consumer and most of them responded that
they acted independently.

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 Figure 11: Effect of Advertisements and promotions

But as shown in exhibit 1, only TVS has reported a decrease in its advertisement
expenditure, while Bajaj Auto Ltd has actually increased its advertisement expenditure with
a clearly discernible spike in sales. Details are in Exhibit 1 with values taken from Company
Annual Reports. if we consider the impact on the high income segment, a clear image on
brand loyalty emerges. As is mentioned in our study, brand name and comfort have a very
high weight-age on the overall purchase decision of the consumer and it also has an impact
on his repurchase decision. Dealer study revealed a very high weight-age on the colours and
style combinations among bikes and this is where the bike advertisements make a huge
impact. Any advertisement giving a huge emphasis on brand building has been amazingly
successful in the segment. If we consider Bajaj Pulsar, which is the one of the current
market leaders in the segment, its advertisements have definitely made a huge impact in
disproving the fact that only Japanese bikes deliver on power and style. They showed that
Indian bikes can also deliver. Any advertisement directed at the youth with credible
performance has led to a spike in sales. If we consider recent results, the second biggest
two-wheeler manufacturer, Bajaj Auto registered a 16% increase in sales during the month
of August with overall sales of 3.82 lakh units as against 3.29 lakh units during the
corresponding period of 2010, as reported in newstonight.in. The motorcycle sales of the
company remained up by 17% to 3.38 lakh units as against 2.89 lakh units during August
last year. Commercial vehicle sales have jumped 11% to 44,685 units as compared to 40,188
units same time last month. These are clear indications of the incredible success of their
advertisement campaigns.

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Customer Evaluation and Response
Repurchase Decision

Replacement demand to be a key contributor to 2Wheeler industry volumes

According to estimates, around 50% of the total domestic sales of 2W are now made to
first-time buyers5, 30% to customers looking to upgrade from their existing vehicle, and
20% to buyers seeking a second vehicle for the household. The break-up suggests that
currently around 50% of the sales in the domestic 2W market are made to replacement
buyers. Industry estimates also suggest that the 2W ownership cycle has now shrunk to less
than five years. Considering that the industry has sold around 79 million 2W in the domestic
market since the turn of the century, the total replacement demand works out to a fairly
large number (refer Table). Add to this the healthy growth in sales to first-time buyers in
recent years, driven in particular by sales to the rural market, the replacement opportunity
could only increase in the future.

From the consumer perspective, although replacement involves fresh capital spending, the
inducement of upgrading to an improved technology 2W, having better performance,
features and more attractive styling; complemented with increased spending propensity
are expected to be the prime ingredients feeding replacement demand.

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Conclusion:

After analysis our findings substantiate the fact about consumers that in high involvement
purchases, advice from friends and family is paramount and price sensitivity declines with
income increase and brand choice gets more important. The motorcycle market, similar to
cars is broadly comprised of two segments, one price and mileage sensitive and another
design and comfort oriented. The average consumer in both the segments shows markedly
different behavior in relation to advertisements with the style sensitive consumer being
more influenced by advertisements than the price-sensitive segment. Overall, it was found
that maintenance and service provided by dealers were given secondary weightage as far
as purchase decision is concerned indicating a move to repurchasing than repairing
motorcycles – a sign of a more consumerist culture.

Additional Considerations:

Companies take regular feedback from the dealers, before launching any new bike. Dealers
give data to the companies on consumer preferences and once a new bike is launched,
feedback is taken after 2-3 months and based on the feedback companies modify and
relaunch the products if needed.

Exhibit 1

Advertisement Spends of the Two Companies

Advertisement Cost as a percentage of Net Sales

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Bajaj Auto Ltd

Rs in Million

2010 2009 2008

Advertisement Cost 1,402.00 852.00 1271.5

Net Sales 121180 90500 90,000

% of Net Sales 1.156956593 0.946666667 1.412778

TVS Auto Ltd

Rs in Crores

2011 2010 2009

Avertisement Cost 185 157 91

Net Sales 6433 4543 3741

% of Net Sales 2.875796673 3.455866168 2.432505

Note – Values in the given exhibit are taken directly from Companies’ Annual Reports

Exhibit 2

Note: Prices data taken from ICRA site.

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Sources:

1) Questionnaire Administered to Customers via face to face (given larger weightage)

and surveymonkey
2) Questions and Opinion Sought from Dealers
3) Philip Kotler: Marketing
4) Two Wheeler Industry- An ICRA Perspective
5) Census 2001, Statistical Outline of India 2009-10

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