Chapter 4

A Study on Value Enriching Factors in Automobile

Tyre Marketing to Address Value for Money
Perspectives

The underlying marketing philosophy of this chapter is that customer‟s need is not static rather it
is individualistic, self-benefitting and changeable. Therefore, marketing analysts and strategists
should change and orient strategies time to time by innovations and/ or remodeling of general
marketing theories and practices so that there will be no gap between marketing offers and
customers‟ needs. The customers have set a new era of materialism where they become more
realistic and patronize value for money in their purchase and consumption pattern in all kinds of
products and services. This burgeoning value seeking desire has led to expansion of the middle
of the market segment. The automobile tyre is not an exception rather tyre customers seek more
value to price because the product is itself a value or utility and safety product of relatively
higher price applying in dynamic usage. In line with this customer‟ need profile ,tyre companies
should undergo strategy of making cost-effective product/ brand and unique service offer that
are to be positioned within the range of segment‟s acceptable price range. The underpinning
objective is to increase sales effectiveness of value delivering tyre brands to reap profits. This
chapter analyzes marketing philosophy in automobile truck bus tyre marketing through
theoretical description and empirical study.

4.1 Introduction

In the pace of dynamic market environment a new paradigm is emerging where the upscale is
gradually phasing out and the down scale is coming up. The Indian market is not an exception
which is traditionally a substantial middle class segment. Combined middle class and lower
income group constitute 60% of value of the total market pie (Outlook, 2006). This income
related population class has its own consumption pattern and behaviour which present a key
driver of this uprising economy (Rao, 2008). The accelerated growth momentum of the middle
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market compels business strategists to emphasize on value and value delivered of goods and
services as customers want more benefits against what they pay. Moreover, under certain
circumstances they even become more demanding and unwilling to pay for firm‘s inefficiencies
or mistakes across its value chain system. As a result, to cater value market segment is very mind
boggling and in uncertainty industry situation supplier firms are experiencing continuous
pressure from unfavorable competitive forces that render them to depend on midmarket value
segment- commonly known as ditch of business. Therefore, enriching customer value becomes
central of global business competitiveness. Practice of existing strategic management tools does
not yield intended profits and not fully effective to cope up price pressure. It posits a real
challenge to marketing strategists and management thinkers to find out a fruitful anvil of creating
and delivering unique value to customers. At the same time, it is equally an uphill task in getting
equitable returns for the value delivered. Addressing firm‘s performance, application of Porter‟s
(1980) competitive strategy model looks inappropriate to today‘s business relevance in acquiring
competitive advantage, but a typology of competitive strategies having a balanced portfolio of
the three approaches i.e. cost leadership, differentiation and focus is the need of the hour that
would be based on creative marketing insights, innovations and efficiency. The underpinning
core competencies are to be honed and manifested as a problem solving institution that will cut
across the so-called Porter‘s ―Stuck up in the middle‖ by effective and efficient utilization of
firm‘s organic as well as inorganic resources in the journey to achieve excellence.

In a total production volume of a company, excepting prestige brands, volume brands are
relatively priced near the market average and economy brands are sold at the low end of the
market (Chatterjee et al, 2010). Automobile tyre is such a product class where tyre buyers are
more value oriented and associated with intense perceived risks of service failure. The prevailing
business scenario and categorically the product tyre itself have created this type of a value
sensitive market environment. Hence, it is essential to understand market paradigm shift and
accordingly improve knowledge of marketing in order to change mindset to encounter stiff
challenge. On the other hand, it is necessary to measure market propensity in the light of current
business landscape to devise conducive marketing strategies to bridge firm‘s offerings and
customer needs. That is why the researcher has encompassed market requirements through the
study of a mid-value tyre brand and its service within the value buyers‘ acceptable price range.

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4.2 Determining Footprint of Strategy Formulation

First of all, the researcher has tried to determine a strategic direction of competitive value and
therefore, it is necessary to identify potential strategic gap of delivering the best value to the
firm‘s targeted segment with respect to its competitors. A two dimensional value/ price matrix in
relative term (Fig.4.1) has been conceptualized to meet the purpose. Relative customer value is
synonymous to customer value need or relative quality index determined by the firm. Relative
price charging is the comparative amount paid by customers and largely depends on cost
structure of the firm.

Fig. 4.1: Customer Value – Price Matrix

High Low

D A

Expensive relation Outstanding value

Relative
customer (Potential profit sacrifice) (High order strategic fit)
value
Gap
(Quality
index)
C B

Base value Discount relation

(Low order strategic fit) (Over charging strategy)

Low Relative price High

(Customer Willingness to pay)

Source: Self- generated

There are four cells in this matrix. ―Cell A‖ is the outstanding value of delivering high customer
value i.e. high quality index at relatively high price that is termed as high order product quality –
price strategic fit and is ready to win the market. ―Cell B‖ is the discount relation of delivering

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low customer value at high price that the customers perceive it as overcharging strategy. ―Cell
C‖ is the base value strategy of delivering low customer value at low price which is termed as
low order strategic fit and ―Cell A‖ is the expensive relation of delivering high customer value at
relatively low price that is called as potential profit loss of the supplier.

4.2.1 Analysis of the Customer Value – Price Matrix

Cell A: It is the outstanding value of a high order strategic fit between a marketer‘s offer in
terms of superior value pack which exerts customer‘s willingness to pay extra and deserves
to earn premium price for best suited customer requirements.

Cell B: It is the discount relation where seller‘s overcharging price strategy mismatches with
customer‘s willingness to pay higher price relative to competitors‘ value package. If it is a
monopoly market structure then supplier can reap higher profit. This marketing strategy
cannot run long and customers will leave the supplier if other market structures prevail.

Cell C: It represents a base value pack– economy delivery, a low order strategic fit that
earns lower profit or no profit satisfying low end customers. It becomes hard to survive only
by manufacturing and marketing economy products and the strategy can be treated as a short
term measure. This may serve product visibility in market and contributes to increase in
market share.

Cell D: It expresses expensive relation as seller sacrifices equivalent profit at the cost of
customer delightfulness. This aggressive marketing strategy may be undertaken as a market
entry strategy or market share increase tool to drive out competitors and reap profit
thereafter.

The cell B and cell D both represent strategic conflict and counterproductive. They can be
resolved by strategy alteration. The identified strategic gap is from cell C to cell A which ushers
a ―Journey of excellence‖ from low order to high order strategic fit. Delivering technical quality
as well as functional quality is essential to make the firm synergistically effective in serving
company‘s targeted customer segment(s).

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4.3 Understanding Customer Oriented Organization Structure

The researcher views that achieving excellence begins with organizing firm‘s resources to focus
on its customers. In this respect, a customer oriented company envisions an inverted pyramidal
structure (fig. 4.2) in which business actors as per specified level take the respective role and
responsibility.

Fig.4.2: An Inverted Pyramid of Organizational Hierarchy

Target segment (s)

Fro t li ers to fulfill o pa ’s o je ti es, a d

customer requirement and empowered to satisfy
customer needs

Middle management to deploy

and control resources to transform
a problem state to a solved state

Top management to
organize, allocates,
direct resources, and
formulates strategies

Source: self-generated

In this organizational hierarchy, company‘s targeted segment(s) occupies the base of the inverted
pyramid. In level–1 position, there exits front liners who are continuously interacting with
customers i.e. company‘s marketing and sales force. Level-2 position describes middle
management and level-3 represents top management holding the apex position.

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4.3.1 Analysis of the Inverted Hierarchy Pyramid Model

The above model has been analysed in today‘s market perspectives in the following way.

Pyramid Base: The customers represent the bottom line of business entities i.e. the profit zone.
Therefore, the company should be customer oriented. The strategy is to broaden this base to
grow and earn more profit.

Level 1: In this level, the organization deploys its marketing and sales force to interact with
customers to maximize values of company‘s marketing offers to customers. They are engaged to
fulfil company‘s objectives, customer requirements and empowered to satisfy customers‘ needs.

Level 2: In this level, the managers recruit and nurture manpower. They convey company‘s
objectives to the front line force, deploy and control resources to transform customers‘ problem
state to a solved state.

Level 3: This is the apex level where corporate body takes strategic decisions for business
growth by providing and allocating resources. It develops business objectives and strategies
focussing on customer value to meet company‘s short term goal as well as long term goal.

The researcher also views that strategic ―inflow of information‖ from base of the pyramid i.e.
customer base as ‗market in‘ marketing approach and on the other hand, strategic ―out flow of
activities‖ is directed from the apex/ corporate body through managers and company‘s marketing
and sales people to reach customers i.e. ‗product out‘ marketing approach. These two approaches
are complementary to each other and important business aspects for company‘s survival and
growth.

4.4 Building Competitive Strategy Based on Value Chain Model

In order to be a customer oriented company the researcher has attempted to devise a conceptual
framework of competitive strategy based on a value chain model conducive to automobile tyre
marketing as outlined in the figure 4.3. Lowering cost of product/ service and maximizing value
to customer are the prime objectives of this strategic value chain. In this customer oriented value
chain model there are eight value contributing elements which are interacting with each other

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and are subjected to accrue value viz. design and development, procurement or supply chain,
manufacturing operation, automobile tyre, quality, order and distribution, market i.e. OEM
(Original Equipment Manufacturer), replacement and export and customer support. The extent of
value out of the total value chain realized within the tyre and marketing offer together determines
the extent of margin as customers‘ willingness to pay additional money. Incremental margin is
the outcome of extent of customer satisfaction while the product and marketing offer meet their
requirements. Design and development, procurement, manufacturing operation and the product,
automobile tyre as a whole constitute customer requirement while quality, order and distribution,
market represented by OEM, replacement and export and support to customer as a whole make
customer satisfaction.

Fig. 4.3: Strategic Value Chain of Tyre Marketing

Source: Self-generated

4.4.1 Analysis of the Tyre Value Chain Model

Automobile tyre is a utilitarian product on which customers rely on its technicality as well as
functionality to their solution in a cost-effective way. This unique customer insight is directed to
robust aestheticism primarily as initial motivation to buy the product and then functional or
performance aspects as sustained motivation for repeat purchase of that product. Unique
customer insights are derived from the abstract ideas or views stemming from consumer survey
or in-depth interview. These are imbedded as technical (what) and functional (how) qualities of
product configured in tyre design and engineering within a defined technology paradigm as well
as innovative marketing activities respectively. Hence, ingrained customer value captured in

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design and engineering passes through several value interacting activities down the line across
the value chain and finally manifested to full value realization to customers and other
stakeholders of the company.

The firm optimizes cost to each value enriching activity across the multiple directions of value
chain. Low cost design kick-starts procurement of raw materials followed by lowering
conversion cost in manufacturing operations. This leads to operating margin. Strategic
manufacturing emphasizes linkages and support activities in production line flow of materials
and components towards end product to ensure plugging-off value drain. At plant level,
resources are organized to maximize value in product realization process streamlined to customer
requirements. Cost-effective design, supply chain and manufacturing operations are the unique
manufacturer value enrichment that leverages marketers to undergo aggressive and innovative
marketing efforts to outperform. In time delivery creates customer convenience which adds
further value. Need based strategic variations of finished goods supply to OEMs (Original
Equipment Manufacturer), replacement consumer market and export is the key to maximize
capacity utilization as well as profit realization. The firm optimizes its distribution in order to
capture larger value out of its total value chain. This necessitates change or modification of
strategy in value communication, brand repositioning, and periodic study of market
attractiveness. Customer support i.e. customer assistance is the 1st and last order marketing
fulcrum to full value actualization before and after sales and innovations in this field plays an
important role between customer requirements and customer satisfaction. The firm accrues value
in the form of quality tailored to customer requirements whereas customer satisfaction is the
extent of value entitlement which is actualized in the form of tangible and intangible benefits to
their solutions with respect to price the customers pay. Relative magnitude of margin depends on
how the firm‘s efficiency and effectiveness match customer satisfaction with customer
requirements compared to competitors‘ value chain and that fundamentally differentiates the
winners from losers.

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4.4.2 Relevance of the Theoretical Models

The researcher has discussed the above theoretical strategic marketing models in the light of
today‘s business aspects where value to customer is getting center stage day by day. The
highlighting points are –

With respect to specific market and competitors, relative customer value – relative price strategic
fit is the most important marketing consideration in which a company if stays at low order strategic
fit, it should continuously pursue to reach high order strategic fit for survival, growth, and
supremacy over market.

Focus on customer is the main mantra of toda ’s a d to orro ’s arketi g. Without usto er
orie tatio a o pa a ot last lo g. All the arketi g strategies a o pa ’s orporate od
devises should be towards customer focus.

An automobile tyre manufacturer should adapt a customized strategic value chain in which flow of
value addition into the product and marketing offer must address customer requirements which
should lead customer satisfaction. Then only a tyre company can increase margin through
usto ers’ repeat pur hase a d i rease arket share by increase in sales effectiveness.

4.5 Understanding Marketing Models in Automobile Tyre Industry

Automobile tyre industry, by nature is of high involvement and high risk in which the products
are subjected to dynamic and environmental atrocities. This has led customers more cautious
while selecting tyre brands and emphasize more on utilitarian i.e. value aspects. These cause
them becoming value buyers. It is noteworthy that the vast and expanding Indian tyre market is
of predominantly bias technology. The customers are enough matured to deal with product
performance, price and manufacturer‘s value proposition. All these factors have gradually shifted
customers towards value seeking command. Moreover, old bias technology, pile up inventories,
over capacity of manufacturers‘ bias tyre manufacturing facility, creeping demand of new age
steel radial tyres, and inconsistent tyre price have led customers more demanding and bargaining.
All these intrinsic and extrinsic factors have significant influence to expansion of midmarket
value segment. This market segment sets a price zone in which customers aspire more benefits

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from products and other marketing offers that render suppliers‘ lower profitability. It has high
price elasticity of demand and thus profit maximization comes from lowering price and
increasing sales volume. Any mistake or incorrect pricing may cause customer switch to
competitors. At other hand, competitive density is very high. Suppliers‘ profit realization comes
at the cost of satisfaction from customers‘ total value actualization. But it is imperative that
manufacturers have to cater this determining mid value segment. Ultimate success comes from
how a tyre company captures share percent of this market value pie and efficiently lowers down
cost of product through efficient and effective formulation and application of strategies and
execution of value chain. In this respect, the researcher has attempted to study the preferences of
the mid-market segment with reference to high risk – high involvement truck and bus tyre
product category.

4.6 Strategy Formulation

In order to gain market share through increase in sales by analyzing customer needs and
preferences Birla Tyres has formulated the following strategies.

● Analyzing each existing tyre brand in the 10.00-20 size, 16PR (ply rating) ( table -1,and
table-2, appendix, pp I-V) which is the main tyre size in truck and bus segment category
product mix and selecting a mid value offering tyre brand historically satisfying the middle
of the market segment.

● Finding out the scope of opportunity to scale up production and marketing efforts to reach
customers.

● Inducing price competitiveness by (1) maximizing production rate (2) quality improvement
(3) reduction of cost of production through benchmark analysis.

● Value analysis and Value engineering is to be done to account technological proportions

meeting target customer value profile as well as company‘s profitability.

● To impart better look, style of the tyre brand is to be improved by cosmetic change brought
in new moulds and the existing moulds are to be reworked and modified.

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● To review tyre brand performance periodically and continuously improved to suit customer
requirements and customer satisfaction so that the tyre brand should always remain in the
customers‘ buying considerate zone.

● Positioning is to be strengthened by enhancing brand value and value delivered in terms of

monetary units compared to competing brands.

● In compliance with promotion activities in the replacement market, company image and
brand image are to be further honed and enhanced through increasing share percentage of
institutional sales (B2B) and OEMs.

● Perceived risks are to be minimized by highlighting product performance (least failure rate)
as well as extended service proposition.

● To protect tyre brand, multi brand strategy is to be pursued by introducing flanker brands.
Moreover, company promotes brand equity as stimulus generalization agent to its flanks to
pull whole 10.00-20 size category sales.

4.7 Implementation of Strategies

The company has analyzed each tyre brand in its 10.00-20 size product category in terms of its
price positioning in the company‘s product mix in competition (table-1 and table-2, appendix, pp
I - V). It reveals that 10.00-20 BT 112, 16 PR tyre brand is at the middle of the product mix
which has historically delivered consistent value to the customers of the mid value market
segment in competition with competitors‘ tyre brand. Therefore, this tyre is selected as the most
value delivering brand to cater mid-market value segment. The strategists have undergone action
plans against each strategic point discussed in section 4.6 and implemented the same in the year
2009 as given under.

As the company has enough capacity to produce tyres, there is a huge scope to scale up
production of main brand10.00-20 BT 112, 16 PR and its flanker brands.

Economies of scale and volume discount in purchasing raw material have been applied to bring
down cost of production. Moreover, cost of outbound logistics i.e. cost of transportation and
trans-shipment has been lowered by volume dispatch of the said tyre brand to company‘s sales

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deports across the country. The company adopted maximum production with least number of
days operation principle and practiced quality management system in its entire manufacturing
process that helped to reduce cost of conversion and hence, cost of production. In this aspect, the
company time to time does analyze benchmark analysis through market intelligence and product
reverse engineering technique. The firm nurtures and upgrades the tyre brand continuously with
the pace of changing market and competitors‘ move. It is noteworthy that Apollo Tyres Limited
and MRF, India, the top two majors of domestic tyre market are taken as benchmarks.

Considering value, product design is reviewed and accordingly value analysis-value engineering
is executed focusing target cost – target pricing approach to make product –market strategic fit.
In this regard, the tyre brand has been tailored to mid-value customer segment by changing its
component ingredients and reducing weight so that price competitiveness would be induced
without affecting quality. Marketing strategy backed by efficient manufacturability has been
extended to replacement (end users) market in order to make 10.00-20 BT 112 a cost leader tyre.

Aesthetic appeal of the tyre brand has been induced by minor changes in design on tread and
sidewall surface that describes look and feel to the tyre customers. In this respects, old moulds of
the product are reworked to new ones to have effective utilization of fixed capital assets.

On the basis of 10.00-20 BT 112, 16PR field failure tyre return analysis, corrective actions are
taken accordingly and the same has been conveyed and tested in the market to evaluate
effectiveness of corrective actions.

Positioning is strengthened focusing on comparative value features: higher customer benefits –

lower CPKM (cost per kilometer), higher retread-ability, consistency in performance, lower fuel
consumption, lower rolling resistance and reliable tyre within 10.00-20 product category that can
emulate competitors‘ brands.

The said tyre brand has been represented as customer‘s one of the most preferred and dependable
brands, perceived risks are reduced through promoting customer advocacy (WOM) and
highlighting least failure rate and relaxing its warranty policy.

With usual promotion activities, company and 10.00-20 BT 112 brand image are further
enhanced through supplying 10.00-20 BT 112–NEW (flanker brand) to OEMs (Original
Equipment Manufacturer) like Tata Motors and Ashok Leyland.

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To diffuse competitive density as well as protect major 10.00-20 BT 112 brand the strategists
have pursued multi-brand strategy with differential pricing by producing more flanker brands
like, TISON DLX etc. having cosmetic changes in physical appearance but possess equivalent
performance. This eases distribution to multiple business outlets, increase visibility on dealer
shelf space, and convenience, maintain stable market price and minimize channel conflict. It is
evident that highest willingness to pay and hence, increasing market share provide handsome
profit margin.

4.8 Description of the Study

In this chapter the study is to analyze automobile tyre domestic market propensity while
customers are buying tyres as per their needs and preferences. To get this under current business
landscape, the strategists have devised marketing strategies and implemented action plans to
address customer requirements by offering a value packed product. This study has to measure
sales effectiveness of the mid-value tyre brand, 10.00-20 BT 112 over the years through sales
data analysis under the formulated marketing strategies described in the preceding section 4.6
and 4.7. After that the study has been extended to segment domestic tyre market with respect to
customers‘ value seeking desire and explore that mid-value market segment pie is increasing day
by day.

4.9 Research Technique Used for the Study

The type of research technique used in this case is secondary data – Birla Tyres‘ in-house
monthly sales report and market survey data. Data used are from the year 2005 to 2012 to collect
SKU (Stock Keeping Unit) wise sales of 10.00-20 BT 112, and its derivatives (flanker brands)
and other 10.00-20 size tyres in 10.00-20 product category in which 10.00-20 BT 112 belongs.

The researcher has sequentially designed statistical techniques to analyze sales data in the
following way:

ANOVA study is done to observe the variation in sales means of the above said tyre brand
between 2005 – 2008 and 2009 – 2012.Then Paired t test is conducted to analyze the difference
in sales means between the said two periods resulted due to the said tyres‘ more benefit
delivering dimensions and finally, Chi Square Goodness of Fit test is performed on categorical

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variable i.e. sales of 10.00-20 BT 112 tyre brand to observe if there happens any sales pattern
difference in 2009 – 12 with respect to 2005 – 08. If happens then it can be said that sales
increase of the said tyre brand takes a different pattern in 2009 – 12 due to increase of its value
out of strategies undertaken by the firm.

The survey has been conducted by a questionnaire (appendix, pp VI-IX) contained in two parts.
The 1st part was designed to collect demographic data of the fleet owners. The second part of the
questionnaire contains a number of statements. The aim is to collect data on the critical factors/
dimensions (given below) which influence customers‘ tyre buying desire towards a particular
type of tyre within the whole range of company‘s product mix and that of competitors offering
similar products in the same market place. The survey was conducted in the period Jan. – Mar.,
2009, at outskirt of Kolkata city, namely, Barrackpore and BT road area. Random sampling
technique is used over 200 numbers of population size in which population unit is fleet owner of
any age bracket who are in transport business and involved in tyre buying. To do survey, before
administering the final questionnaire it was tested in a small pilot run.

The researcher has designed to perform analysis of survey data by using statistical data analysis
tools: One Variance test, Chi Square Goodness of Fit test, and One Proportion test.

Drawing from the past studies, and expert judgment four consumer attributes have been
identified to assess consumer decision making before going to actual buying of a particular tyre.
The product related and non-product related attributes used in questionnaire to understand and
catch tyre buying propensity and pattern are as follows:

(1) Product performance and quality

(2) More benefits to price

(3) Price sensitiveness

(4) Influence of reference group

After collecting data (both secondary and survey) it was analyzed through various statistical
techniques in order to reach conclusion.

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4.9.1 Understanding Automobile Tyre Buying Factors

As per industry sources, Indian automobile tyre customers exhibit value seeking intensity.
Though meaning of value and its expectation are individualistic but tyre customers show a
similar kind of collectivistic purchase across the country irrespective of marketing regions.

• Product Performance and Quality: This is a buying factor on which customers use tyres in
super heavy load application and evaluate tyre performance on durability, load carrying
capability, and sustainability. They determine tyre quality on robust look, larger dimensions;
higher tread non-skid depth (NSD), tyre weight and higher ply rating i.e. 18 PR instead of
normal 16 PR. The customers are not price sensitive and pay premium price but expect better
performance under severe over load application. They are generally loyal to few tyre
manufacturers and specific tyre brands which satisfy their specific needs.

• More Benefits to Price: This is a buying factor on which customers use tyres in medium load
– high speed application and evaluate tyre performance on tyre tread mileage, CPKM (cost per
kilometer), trouble free product, at least three times retread-ability, service, and reasonable price.
These are the characteristics of tyre mid-market value segment and always expect more benefits
to price. The customers are in general value sensitive rather than price sensitive and staunch
loyal to tyre manufacturers that offer super brand value tyres.

• Price Sensitiveness: This buying factor emphasizes that price of the tyre is the most important
factor of tyre selection and customers always compare manufacturers‘ price competitiveness of
different tyre brands available in same market place. The competing tyres are subjected to the
same application under same operating conditions. They always try to buy comparatively lower
price tyre within the same group of competing brands. When the price of one tyre brand
increases, they immediately switch to another tyre brand which has not undergone price hike and
thus do not change their tyre buying budget. The customers are not brand loyal and set a
considerate zone of handful number of competing tyre brands (table-.1, and table-2, appendix, pp
I-V). They are very much prone to manufacturers‘ promotional prodding and discount sales.

• Influence of Reference Group: In this buying factor, there are certain tyre customers, like new
entrants or less experienced in the transport business or having social character of other
directedness personality who look to others for direction on what is right or wrong while taking

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tyre buying decision. They do not have personal decision and they value to group decision and
conform to purchase the tyres what the group or the opinion leader suggests. In tyre industry,
influence of reference group or opinion leader plays a significant role of making a tyre
manufacturer‘s sales opportunity. Marketing strategists are always trying to reach this group or
opinion leaders.

4.10 Hypothesis Formulation

The aim of this research is to do a study on sales of 10.00-20 BT 112, 16 PR mid-value tyre
brand which has undergone marketing strategies for midmarket value segment. This is to analyze
its sales performance and sales trend in terms of statistical analysis whether difference in sales
numbers across 2005 – 2012 is a normal sales fluctuation or it exhibits real and significant
change. In addition, this is also to examine consumers‘ tyre buying pattern whether buying is
encompassed by value seeking desire. From this market input the study has tried to segment the
market and also find out which segment is dominant and increasing. Accordingly, the following
hypotheses are formulated:

H01: The increased sales of 10.00-20 BT 112 of the period 2009 – 2012 compared to 2005 –
2008 only represent sampling variation and there is no such real and significant difference
between two sales periods as such. The customer value increasing marketing strategies have not
been reflected and realized in terms of sales increase.

Ha1: There is significant sales increase of 10.00-20 BT 112 in the period 2009 -2012 compared
to 2005-2008 as a result of product and marketing strategies undertaken in 2009 which have
rightly addressed midmarket tyre customers‘ value seeking desire and value expectations.

H02: There is no change in mean scores between 2009-2012 sales and 2005-2008 sales of 10.00-
20 BT 112 or difference between mean sales of the stated two periods is zero. There is no such
positive impact of undertaken product and marketing value enriching strategies on sales in the
period of 2009 -2012.

Ha2: There is significant sales increase in 2009 - 2012 period as the product and marketing offer
have positively impacted on customer value seeking desire that has been evidenced by the
increase in sales numbers of 10.00-20 BT 112 tyre brand.

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H03: There is no statistically upward shifting of 10.00-20 BT 112 sales in 2009-2012 than that of
2005 - 2008.

Ha3: There exist significant upward sales shifting of 10.00-20 BT 112 in 2009-2012 in
comparison with 2005-2008 sales.

H04: The population (fleet owner) variability with respect to value seeking factors/ dimensions is
equal to the observed and calculated standard deviation/ variance.

Ha4: The population variability with respect to value seeking factors or dimensions is not equal
the calculated standard deviation/ variance but less than that value.

H05: The observed frequency of different customer tyre buying factors associated to buying
decision is in full agreement with hypothetical population of equal proportion (expected
frequency).

Ha5: The observed frequency is not in agreement with hypothetical population of expected
frequency and tyre customers are well segmented in terms of their tyre buying factors as they
have assigned different choices to differently positioned tyre brands.

H06: The proportion of fleet owners is the half of the population in the survey area possessing
―value for money‖ buying characteristics as they expect more value to price.

Ha6: The population proportion of the fleet owners seeking ―value for money‖ in the survey area
is greater than half (50%) of the population and hence, it is to be interpreted that majority of the
population units are associated with seeking more values from tyre and market offer.

4.11 Data Analysis and Findings

The above hypotheses need to be tested quantitatively using statistical techniques as described in
the proceeding subsections. In each case, outcome of the analysis i.e. interpretation has been
given to reach conclusion.

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4.11.1 Secondary Data Analysis

From the annual sales reports of Birla Tyres, year wise monthly average sales data are computed.
Year wise periods are arbitrarily considered from 2005 to 2012 (given in table 4.1) to understand
the sales effectiveness of 10.00-20 BT 112 tyre brand. It is to observe any change in sales pattern
between periods 2005 -08 and 2009 – 12. It is to be noted that product re-engineering is done in
the year 2009 in respect to product‘s design change along with marketing strategies to make
product – market strategic fit to position 10.00-20 BT 112 tyre brand a better value offering tyre.

Table –4.1: Original Sales Data of 10.00-20BT 112, 16 PR and 10.00-20 Size Category
Period : 2005 - 2008
Zone wise average monthly domestic Sales (X 1000) in numbers
Zone 2005 2006 2007 2008 Average 10.00-20
10.00- category
10.00- 10.00-20 10.00- 10.00-20 10.00- 10.00-20 10.00- 10.00-20 20 BT sales
20 BT category 20 BT category 20 BT category 20 BT category 112
112 sales 112 sales 112 sales 112 sales sales
East 1.4 22.0 1.15 18.0 1.27 22.2 1.38 21.5 1.3 20.93
Central 2.4 14.0 1.8 8.4 2.32 17.3 2.7 17.0 2.30 14.2
North 1.2 23.1 1.0 17.5 1.4 28.4 1.73 30.4 1.33 24.85
South 3.4 12.0 2.8 10.0 4.3 16.2 4.5 14.2 3.73 13.1
West 0.90 10.4 0.60 7.76 0.78 12.4 0.93 11.5 0.80 10.5
Period : 2009 - 2012
Zone wise average monthly domestic Sales (X 1000) in numbers
Zone 2009 2010 2011 2012 Average 10.00-20
10.00- category
10.00- 10.00-20 10.00- 10.00-20 10.00- 10.00-20 10.00- 10.00-20
20 BT sales
20 BT category 20 BT category 20 BT category 20 BT category
112
112 sales 112 sales 112 sales 112 sales
sales
sales sales sales sales
East 6.5 28.2 6.8 27 7.4 30.1 8.0 30.8 7.17 29.0
Central 11.7 28.3 10.44 28.55 13.4 30.8 13.22 29.7 12.2 29.3
North 9.0 46.6 10.0 50.8 10.2 52.2 10.48 51.4 9.92 50.25
South 5.0 16.5 5.12 16.7 5.92 19.8 6.2 20.4 5.56 18.35
West 4.90 20.0 5.90 21.0 5.93 23.6 5.28 23.5 5.50 22.0

Source: Birla Tyres‟ in-house sales data: 2005 -2012

Rearranging data from table -4.1, the researcher gets table-4.2.

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Table-4.2: Rearranged Zone wise Sales Data 10.00-20 BT 112 Tyre and 10.00-20 Size
Category-2005 – 08 vs. 2009 – 12.

(X 1000 numbers)

Zone Average sales of 10.00-20 BT 112 vs. total 10.00-20 tyre category sales
Average monthly sales: Average monthly sales:
2005 - 2008 2009 - 2012
10.00-20 BT Total 10.00-20 10.00-20 BT Total 10.00-20
112 category 112 category
tyres tyres
East 1.3 20.93 7.17 29.0
Central 2.3 14.2 12.2 29.3
North 1.33 24.86 9.92 50.25
South 3.73 13.13 5.56 18.35
West 0.8 10.5 5.5 22.0
Total 9.46 83.62 40.35 148.9
Average sales of 1.892 16.724 8.07 29.78
all zones

Increase of 10.00-20 BT 112 sales = (8.07 - 1.892) / 1.892 = 326.53%

Increase of 10.00-20 tyre category sales = (29.78 - 16.724) / 16.724 = 78.07%

Interpretation: The original sales data as given in the table 4.1 are processed and rearranged
accordingly as given in the table 4.2. It is seen that there is a huge increase of 10.00-20 BT 112
sales in the period 2009-2012 over 2005-2008 which shows 326% increase of this particular tyre
brand. But 10.00-20 size tyre category sales (78.07% increase) has not increased up to same pace
in this period in comparison with 10.00-20 BT 112 tyre brand.

• ANOVA Test: One Way

Observing important difference (as given in table-4.2) between two sales averages represented
by two columns with respect to total sales average of both periods, the researcher would like to
test if the difference is statistically significant.

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Null hypothesis: The average 10.00-20 BT 112 sales of 2005-2008 (1.892) and 2009-2012
(8.07) only represent sampling variations from overall average sales (4.98), not real differences
in sales-effectiveness as compared between the two periods.

Alternative hypothesis: The average 10.00-20 BT 112 sales of 2005 -2008 (1.892) and 2009-
2012 (8.07) represent no sampling variations from overall average sales (4.98), but show real
differences in sales-effectiveness of the stated two periods.

The researcher uses 95% confidence level to reach conclusion.

From the above table-4.2, we get sales test data of 10.00-20 BT 112 tyre brand in the following
table 4.3 for carrying out ANOVA test.

Table-4.3: Sales Test Data of 10.00-20 BT 112 Tyre Brand

(X 1000 numbers)
Average sales
Zone Period2005 - 2008 Period2009 - 2012 Both periods
Total sales
East 1.3 7.17 8.47
Central 2.3 12.2 14.5
North 1.33 9.92 11.25
South 3.73 5.56 9.29
West 0.8 5.5 6.3
Total 9.46 40.35 49.81
Mean 1.892 8.07 4.98

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Table-4.4: ANOVA Summary

Source of DF Variation ( SS ) MS Estimated p-value

variation variance
Between 1 95.42 95.42 19.42 0.002
columns
Within 8 39.60 4.95
(Unexplained
( Error )
Total 9 .135.02

Appropriate test statistics: F (cal) = (95.42 / 4.95) = 19.42

ŋ2 (strength of effect of value consciousness on sales) = Variation between column / total

variation = 95.42 / 135.02 =0.7067.

Interpretation: At 95% confidence level the critical value of F for 1 d.f. in the numerator and
d.f.8 in the denominator is 5.32. From the ANOVA summary given in the table 4.4, it is seen that
since calculated F statistic (19.42) is much higher than critical value and p-value is 0.002 which
is less than 0.05, the researcher has good evidence to reject null hypothesis and concludes that
the differences observed in the two column means compared to total mean are statistically
significant and not due to sampling variation i.e. 2005 - 2008 and 2009 - 2012 periods must have
caused different average sales. Moreover, value of ŋ2 indicates that 70.67 % of variation in sales
between two periods is accounted for by the said tyre brand‘s value delivering effectiveness
towards customers‘ more value seeking purchase intention indicating a moderately strong effect.

• Paired T- Test

It is required to test whether the means of sales 2009 -2012 and sales 2005- 2008 in a paired
manner zone to zone consideration in the population are equal or the average of the former
period sales is greater than the average of the later period sales.

Null hypothesis: H0 (µ 2009-12 = µ 2005-08). In other words, it is required to test the statement that
there is no difference in the mean sales of the stated two periods.

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Alternative hypothesis: There is the real difference of mean of sales i.e. sales 2009 - 2012
significantly differs and shows higher in numbers than sales 2005 - 2008 as 10.00-20 BT 112
tyre brand treated with value enriching strategies has positively impacted on customers
preference as they got more values from product and related marketing offers i.e. H1 (µ 09> µ 08 ).
To reach conclusion 95% confidence limit has been considered.

Paired T-Test and CI: 112 Sales 2009 -12, BT 112 Sales 2005-08

Paired T for BT 112 sales 2009 -12 - BT 112 sales 2005-08

N Mean St.Dev SE Mean

BT112 sales 2009 -12: 5 8.07 2.92 1.31
BT 112 sales 2005-08: 5 1.89 1.16 0.52
Difference: 5 6.18 3.20 1.43

95% lower bound for mean difference: 3.13

T-Test of mean difference = 0 (vs.> 0): T-Value = 4.32, P-Value = 0.006

Considering 10.00-20 BT 112 sales in the table-4.2 given above, and analyzing data having with
sample size 5 number paired samples (N = 5) and 95% lower bound for mean difference 3.13,
calculated T value is 4.32 and p-value is 0.006. Critical t ≥ t0.05 at 5% level of significance at 4
d.f is 2.13.

Interpretation: As calculated T-value (4.32) is larger than tabulated T-value 2.13, it is

significant. Likewise, p-value (0.006) is lesser than 0.05 which means if we reject null
hypothesis we will do insignificant error (0.6% only). Therefore, the researcher has ample
evidence to reject null hypothesis and accepts that 326.53% sales increase of 10.00-20 BT 112 in
2009 – 2012 period over 2005–2008 period is real and statistically significant in terms of 10.00-
20 BT112 tyre brand‘s sales effectiveness. It has significantly addressed its value delivering
ability to woo value seeking mid-market tyre customers.

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•Chi Square Goodness of Fit Test

The researcher observes that 10.00-20 BT 112 tyre brand sales period of 2009-2012 shows a
different sales pattern over period of 2005-2008 that he would like to test.

Null hypothesis: Period 2009-2012 sales pattern is not different from 2005-2008 sales patterns.
The difference in data of the two columns only reflects sampling variation which is not
statistically significant.

Alternative hypothesis: Period 2009-2012 sales pattern is different from 2005-2008 sales pattern.
The difference in data of the two columns is not due to sampling variation but is statistically
significant. To conclude this, researcher uses 95% confidence level.

Table – 4.5: Sales Pattern Test of 10.00-20 BT 112 Tyre Brand

(X 1000 numbers)

Zone 2009 - 2012 Scale down to Percentage 2005 - 2008 Percentage

10.00-20 BT112 2005 – 2008
10.00-20 BT112
average sales average sales
average sales (Fe)
(Fo)
East 7.17 4.03 4.82 1.3 1.55
Central 12.2 6.85 8.20 2.3 2.75
North 9.92 5.57 6.66 1.33 1.59
South 5.56 3.12 3.73 3.73 4.46
West 5.5 3.09 3.69 0.8 0.96
Nonusers 108.55 60.96 72.90 74.16 88.69
Total 148.90 83. 62 100.00 83.62 100.00

Table 4.5 data have been derived from original sales data given in table 4.1.

Hence, using data from table-4.5, estimated 2 =∑ (Fo – Fe)2/ Fe = 36.9536, where, Fo = observed
frequency and Fe = expected frequency.

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Chi-Square Goodness-of-Fit Test for Categorical Variable: 09-12 BT 112 Average Sales
vs.05-08 Average Sales

Historical Test Contribution

Category Observed Counts Proportion Expected to Chi-Sq
3.09 1 1.30 0.015547 0.09328 8.8138
3.12 1 2.30 0.027505 0.16503 4.2245
4.03 1 1.33 0.015905 0.09543 8.5741
5.57 1 3.73 0.044607 0.26764 2.0040
6.85 1 0.80 0.009567 0.05740 15.4782
60.96 1 74.16 0.886869 5.32122 3.5091

N N* DF Chi-Sq P-Value

6 0 5 42.6038 0.000

WARNING: 5 cell(s) (83.33%) with expected value(s) less than 1. Chi-Square

approximation probably invalid.

Critical value of 2 at 95% confidence level with d.f. 5 is 11.07.

Interpretation: The estimated value is much higher than the critical value and p-value is 0.000
i.e. less than 0.05. Therefore, there is enough evidence to reject null hypothesis and thus the
researcher concludes that the difference in sales patterns is statistically significant and is not
resulted from sampling variation. This indicates an upward shift in sales pattern of 10.00-20 BT
112 tyre brand in the period 2009 – 2012 over the period 2005 - 2008.

• Phi Co-efficient (ö) can be used to measure strength of association between the two periods of
sales (YoY).

ö = √ 2 / N, where N = sample size.

= √ 36.9536 / 83.62 = 0.67

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Value of Phi-coefficient shows that the degree of association is moderately strong which
provides deep insights and meaningful directions to the strategists that if other market parameters
remain the same, then a strategically derived value delivering tyre brand can rightly address
value seeking automobile tyre customers and can increase sales numbers and hence can reap
profit by serving midmarket value segment.

4.11.2 Survey Data Analysis

The respondents who represent fleet owners are asked how they would select tyres before going
to actual tyre purchase. On the basis of their responses they are classified into four distinct
categories: (1) premier tyre of high performance and high quality, (2) emphasis on more value
tyres i.e. more benefits to price, (3) price sensitiveness preferring cheaper i.e. economy tyres, and
(4) choice as per reference group or opinion leader. The purpose of the study is to find out the
possibility of market segmentation by analyzing customers‘ purchasing factors (table-4.6) based
on their needs and value expectations.

Table-4.6: Customers‟ Tyre Buying Factors

Purchase of preferred Number of respondents Percentage (%)

brands
Premier tyre of high 33 16.5
performance and high
quality
Emphasis on more value 103 51.5
tyres i.e. more benefits to
price
Price sensitiveness 29 14.5
preferring cheaper and
economy tyres
Choice as per opinion 35 17.5
leader or reference group
Total 200 100
Source: Survey data: Jan. – Mar., 2009

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• One Variance Test:

On the basis of sample observations from the table- 4.6 calculated variance is 1255 (shown
below). The researcher hypothesizes that the population variance will be equal to 1255 and will
not be less than this value. In other words, it is to take that this variance value in population
reflects clear distinction among the population (fleet owner) about their value seeking
dimensions. This hypothesis is to be tested statistically at 5% level of significance.

Descriptive Statistics: No. of Respondents

Variable N N* Mean SEMean St .Dev Variance Median

No.s of respondent 4 0 50.0 17.7 35.4 1254.7 34.0

Test and CI for One Variance: No. of Respondents

Method

Null hypothesis: Sigma-squared = 1255

Alternative hypothesis: Sigma-squared < 1255

The chi-square method is only for the normal distribution.

The Bonett method is for any continuous distribution.

Statistics

Variable N St.Dev Variance

No.sof respondent 4 35.4 1255

95% One-Sided Confidence Intervals

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 Method Upper Bound for St.Dev Upper Bound for Variance
Variable Chi-Square 103.4 10698
Number of respondents Bonett 147.3 21702

Tests
Variable Method Test Statistic d.f. P-Value
Number of Chi-Square 3.00 3 0.609
respondents Bonett — — 0.500

Interpretation: From the above calculation, p-value is 0.609 which is more than 0.05 far above
researcher‘s defined cut-off point (α level). Hence, the assumption is true. Thus, the alternative
hypothesis is rejected and the null hypothesis is accepted. We can say that population variance
goes not below 1255. Customers have varying value seeking factors what they perceive on tyre
brand value dimensions.

• Chi-Square Goodness of Fit Test

It is required to test the observed difference of tyre customers‘ tyre purchase factors (table-4.6)
that there is a significant categorical difference in product preference in terms of product and
service factors what buyers assign to their value expectations. In other words, it is to determine
market segmentation of the entire population under the study.

Deriving data from table 4.6, the researcher gets the rearranged data given in the following

Table -4.7 which are used in Chi-Square estimation.

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Table4.7: Survey Data for Chi Square Estimation

Purchase of Number of Percentage Number of Percentage

preferred respondents respondent (%)
(% )
brands (Fo) (Fe)
Premier tyre of 33 16.5 50 25
high
performance and
high quality
Emphasis on 103 51.5 50 25
more value tyres
i.e. more
benefits to price
Price 29 14.5 50 25
sensitiveness
preferring
cheaper and
economy tyres
Choice as per 35 17.5 50 25
opinion leader or
reference group
Total 200 100 200 100

Null hypothesis: There is no real difference in purchasers‘ product preference and they exhibit
commonality in value expectations. The observed purchase difference is arisen only due to
sampling variations.

Alternative hypothesis: There is real difference in tyre purchasers‘ product preference and they
exhibit difference in value expectations. The observed purchase difference is statistically
significant that is not due to sampling variations.

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Chi-Square Goodness-of-Fit Test for Observed Counts in Variable: Number of
Respondents

Contribution
Category Observed Test Proportion Expected to Chi-Sq
1 33 0.25 50 5.78
2 103 0.25 50 56.18
3 29 0.25 50 8.82
4 35 0.25 50 4.50

N D.F. Chi-Sq P-Value

200 3 75.28 0.000

Here expected frequency (Fe) in each of four categories is assigned equal probability i.e. 50 out
of total sampling unit 200 against each observed frequency (Fo) 33, 103, 29, and 35 respectively
( (table-4.7). The researcher has taken 95% confidence. Degree of freedom = 3, Chi-Square value
= 75.28, P-value = 0.000.

Interpretation: Tabulated Chi-Square value at d.f. 3 and 95% confidence limit is 7.81. As the
calculated Chi-Square value (75.28) at d.f. 3 and 95% confidence limit is much greater than the
tabulated value and p-Value (0.000)is less than 0.05 there is no strong evidence in favour of null
hypothesis. Therefore, it is rejected and conclude that significant difference in purchase
behaviour exists i.e. customers are separated and form distinct clusters that is resulted from
distinct categorical differences about their needs and value expectations.

• One Proportion Test

From table-4.6, it is found that out of 200 respondents 33 numbers seek products of high
performance and high quality, hence represents high end buyers. 103 number of respondents
need high value tyres i.e. seek more benefits to price. Thus combined this two category
customers represent 136 number of fleet owners (assuming that the upscale i.e. premier high
performance and quality seeking customers are gradually phasing out and leaning towards mid-
market value segment), out of 200 numbers are to be considered as volume buyers who are more

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benefit seekers with respect to price they pay. This combined customer group represents 68% of
the value pie of total tyre market. Therefore, it requires to examine stochastically whether this
customer segment is playing a pivot role on market dynamics on value centricity. This is also to
know that under the assumption whether this middle of the market value centric customers are
populating more and more in coming years.

Null hypothesis: H0: (P = 0.5) i.e. proportion of tyre purchaser seeking more value from product
and its serviceability is half of the population.

Alternative hypothesis: H1: (P>0.5) i.e. proportion of tyre purchaser seeking more value is more
than half of the population.

Appropriate test statistic: Z test of proportion

Level of significance (α) = 0.05

Test and CI for One Proportion

Test of p = 0.5 vs p > 0.5

95% Lower Exact

Sample X N Sample p Bound P-Value
1 136 200 0.680000 0.621479 0.000

Interpretation: Under sample observations and statistical calculation p-value is 0.000 which is
much below of 0.05. Therefore, there is ample evidence to reject null hypothesis and thus to
accept alternative hypothesis. Hence, it is concluded more than half of the population (fleet
owner) are volume buyers who seek more values from the product and market offer. Moreover,
tyre market is leaning towards value centric middle market and in the coming years this segment
will further grow up along with phasing out of upscale tyre customers who are seemingly coming
down to this segment and jointly drive the tyre market towards value centricity.

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4.12 Findings of the Study

From preceding analysis it is evidenced that the tyre market is leaning towards more value
orientation and tyre customers are becoming value seekers from the product, its serviceability
and other marketing offers. In other words, market is brewing up to midmarket and market
dynamics is changing rapidly as customers are associating their buying factors to value for
money. This leads to shifting focus of tyre business towards value centricity. It is evidenced by
the market survey as 68% of fleet owners (including the upscale high performance and quality
seekers) constitutes volume buyers and is the larger segment who is seeking more value
dimensions from the product and service bundle. This provides both challenge and opportunity to
marketing strategists. But 78.07 % increase of 10.00-20 size tyre category sales does not keep in
the same pace with 10.00-20 BT 112 tyre brand sales which registers 326.53 % sales increase.
This phenomenon implies possibility of cannibalization by 10.00-20 BT 112 brand to other
brands of 10.00-20 size category. Therefore, to gear up sales in totality, tyre marketers need to
incorporate competitive elements into other tyre brands in line with 10.00-20 BT 112 tyre brand.
To formulate a long term marketing strategy, newer brands with innovative pricing strategy is
required in the same 10.00-20 tyre product line.

4.13 Managerial Implications

 Research findings show that increasing propensity of tyre u ers’ alue seeki g desire has ha ged
the market dynamics i.e. tyre market is brewing up to mid-market value segment representing
volume buyers who need more benefits to price. For volume buyers the price of tyres is set near
about the market average.

 Toda ’s a d to orro ’s usi ess le i o ould e to ater the iddle of the arket alue seeki g
customers that provides both challenge and opportunity to marketing managers.

 There is high probability of cannibalization that a good value product may eat up the other similar
kind products in the product category. Therefore, to gear up sales, incorporation of value offering
attributes into other tyre brands and 10.00-20 BT 112 flanker brands is necessary to eat up
o petitors’ produ ts ot o produ ts.

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 New products/ brands or existing products enriched with high value having improved pricing
strategy are required in the same product line as a long run strategy.

4.14 Conclusion

This study gives a clear picturesque of customer proclivity towards value sensitive middle of the
market. This indicates that present market condition needs more attention and comprehensive
marketing plan through innovation in product and pricing strategies. From the study it is also
evident that traditional competitive strategies do not effectively meet today‘s and tomorrow‘s
business intents. Business focus on mid-market segment is a big challenge in balancing company
and customer‘s profitability. But a conducive and balanced business model on customer focus
strategies based on manufacturing excellence and marketing innovations would be a business
solution. This signifies the increasing trend of sales pattern of 10.00-20 BT 112 that caters the
needs of value sensitive middle market. From this viewpoint, the study provides a business
direction and clear understanding of market dynamics that helps to formulate a competitive,
value packed, flexible and long term business model which will transform changing customer
requirements into customer satisfaction.

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