consumer behavior project_sourav mukherjee

Consumer Behavior

Project on

The factors affecting a Consumer Decision while purchasing Cars.

Submitted to Prof. A.N Bhattacharya

Submitted by-

Alok Kumar Singh

Chirag Vashishta

Nitin Mathur

Rohit M. Varghese

Sourav Mukherjee

ACKNOWLEDGEMENT

We would like to thank to Prof. A.N Bhattacharya Sir, without whom our project would not have been

possible. We are grateful to him for having taken time off his busy schedule and having given us

insightful advice to get this project completed .We express our gratitude to him for imparting in us

quality knowledge of the subject of consumer behavior.

We thank our college, IILM GSM for having given us this opportunity to put to practice, the theoretical

knowledge that we imparted from the program. We take this opportunity to thank our parents and

friends who have been with us and offered emotional strength and moral support. We would also like to

thank our batch mates and friends for their support and help.

At last, we would like to thank the almighty God for his blessings.

Contents

TOPICS PAGE

Executive Summary

01

Automobile Industry in India. 02

Market Segment 08

Consumer Buying Behavior 10

Study on Consumer Behavior (Survey

portion) 16

Conclusion and Recommendation 21

Annexure 22

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Executive Summary

The Indian Automotive Industry after de-licensing in July, 1991 has grown at a spectacular rate on an

average of 17% for last few years. The industry has now attained a turnover of Rs. 1, 65,000 crores ( 34

billion USD, assuming 1$ = Rs. 46) and an investment of Rs. 50,000 crores. Over Rs. 35,000 crores of

investment is in pipeline. The industry is providing direct and indirect employment to 1.31 crore people.

It is also making a contribution of 17% to the kitty of indirect taxes. The export in automotive sector has

grown on an average CAGR of 30% per year for the last five years. The export earnings from this sector

are 4.08 billion USD out of which the share of auto component sector is 1.8 billion USD during the year

2009-10. Even with this rapid growth, the Indian Automotive Industry’s contribution in global terms is

very low. This is evident from the fact that even though passenger and commercial vehicles have

crossed 2.9 million units mark in 2009-10 its share in world market is just 2.9 %. Indian automotive

exports are just 0.5 % of global automotive trade.

Automotive industry per-se is volume driven and requires lots of R&D and infrastructural support, the

innovation and up gradation is lifeline of this industry. The labor and capital is very critical factor in

automotive industry, cheap labor, favorable exchange rates, low interest rates are favorable factors in

India. The automotive industry with its deep backward linkages (such as metals, glasses, fiber, rubber)

and forward linkages (such as trucking, warehousing, credit, financing, advertisement and logistics) has

been recognized as the most important sector for the growth of economy and GDP specifically.

Automotive sector has also a very important role in agriculture sector with more farm related

machinery and vehicles. With high and rapid growth in Indian middle class population, increasing

numbers of educated youth, easy credit facility, cheap labor, exports incentives, strategic location of

India in world and Asia. These advantages should be leveraged in providing a world class product at

optimum price and adding value to the society.

Government is also doing its best, in policy, by giving infrastructural support like SEZs, R&D centers,

specialized institution, and encouraging state of the art manufacturing plants especially by world

leading car makers. We in our survey tried to understand the basis psychology behind consumer mind

and their behavior at the outlet. We had questionnaire which was filled by 30 respondents and our

focus was on factors having influence on their purchasing decision.

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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.

Industry Overview-

Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the Automobile

Industry of India has come a long way. During its early stages the auto industry was overlooked by

the then Government and the policies were also not favorable. The liberalization policy and various

tax reliefs by the Govt. of India in recent years has made remarkable impacts on Indian Automobile

Industry. Indian auto industry, which is currently growing at the pace of around 18 % per annum,

has become a hot destination for global auto players like Hyundai, Volvo, General Motors, Toyota ,

Mercedes Benz, Volkswagen, Fiat, BMW and Ford. A well developed transportation system plays a

key role in the development of an economy, and India is no exception to it. Gross turn over of the

Indian automotive industry.

GROSS TUNROVER OF THE AUTOMOBILE INDUSTRY IN INDIA

Year (IN USD MILLION) 2004-05 20,896 2005-06 27,011 2006-07 34,285 2007-08 36,612 2008-09 38,238

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Domestic Market Segment wise share in Automotive Industry

Domestic Market Share for 2009-10

Passenger Vehicles 15.86 Commercial Vehicles 4.32

Three Wheelers 3.58 Two Wheelers 76.23

SIAM (Society of Indian Automobile Manufacturers) forecast 2010:

Automobile segments 2010-2011 growth over 2009-2010 (%)

Passengers Cars 12-13

Utility vehicles 13- 14

Commercial vehicles (goods) 19-20

Commercial vehicles (buses) 4-5

Two wheelers 9-10

Three wheelers (goods) 5-6

Three wheelers (passengers) 8-9

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Automotive Industry Trends

Automobile Production Trends (Number Of Vehicles) Category 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Passenger Vehicles

989,560 1,209,876 1,309,300 1,545,223 1,777,583 1,838,593 2,351,240

Commercial Vehicles

275,040 353,703 391,083 519,982 549,006 416,870 566,608

Three Wheelers

356,223 374,445 434,423 556,126 500,660 497,020 619,093

Two Wheelers

5,622,741 6,529,829 7,608,697 8,466,666 8,026,681 8,419,792 10,512,889

Grand Total

7,243,564 8,467,853 9,743,503 11,087,997 10,853,930 11,172,275 14,049,830

Automobile Domestic Sales Trends(Number of Vehicles) Category 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Passenger Vehicles

902,096 1,061,572 1,143,076 1,379,979 1,549,882

1,552,703

1,949,776

Commercial Vehicles

260,114 318,430 351,041 467,765 490,494 384,194 531,395

Three Wheelers

284,078 307,862 359,920 403,910 364,781 349,727 440,368

Two Wheelers

5,364,249 6,209,765 7,052,391 7,872,334 7,249,278

7,437,619

9,371,231

Grand Total 6,810,537 7,897,629 8,906,428 10,123,988 9,654,435

9,724,243

12,292,770

Automobile Exports Trends(Number of Vehicles) Category 2003-

04 2004-05 2005-06 2006-

07 2007-08

2008-09

2009-10

Passenger Vehicles 129,291 166,402 175,572 198,452 218,401 335,729 446,146

Commercial Vehicles 17,432 29,940 40,600 49,537 58,994 42,625 45,007

Three Wheelers 68,144 66,795 76,881 143,896 141,225 148,066 173,282

Two Wheelers 265,052 366,407 513,169 619,644 819,713 1,004,174

1,140,184

Grand Total 479,919 629,544 806,222 1,011,529

1,238,333

1,530,594

1,804,619

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Two wheeler company wise share in Export Market-

Two wheeler domestic share Company Wise-

Passenger vehicles market share Company wise in Exports-

6 | P a g e

Passenger Vehicles domestic market share company wise-

Commercial vehicles company wise market share in exports-

Commercial vehicles domestic market share company wise-

7 | P a g e

Rankings-

• World’s second largest two wheeler market.

• Asia’s third largest passenger vehicles market.

• World’s fifth largest truck and buses market.

• World’s fourth largest commercial vehicles market.

Change in last 25 year-

• Closed market, Growth of market limited by supply, outdated models Number of players-

Five.

• Number of players increase to six with JV between GOI and Suzuki to form Maruti Udyog

Ltd.

• Sector deli censed in 1993,Major OEMs started assembly in India, Implementation of value-

added tax (VAT), Imports allowed from April 2001.Number of players — >35

• Recent acquisition of Jaguar and Land Rover brands by Tata Motors and launch of world’s

cheapest car, Tata Nano, has placed the Indian automobile market on the global automotive

map.

• Increasing availability of smaller and affordable cars has helped in the expansion of the

passenger vehicles market in India.

• The Indian automotive industry is expected to be the world’s seventh-largest automobile

market by 2016 and the third largest by 2030, only behind China and the US

Major Manufacturers in Automobile Industry

• Maruti Udyog Ltd.

• General Motors India

• Ford India Ltd.

• Eicher Motors

• Bajaj Auto

• Daewoo Motors India

• Hero Motors

• Hindustan Motors

• Hyundai Motor India Ltd.

• Royal Enfield Motors

• Telco

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Market Segments--

Indian automotive cluster-

North—Ashok Leyland, Swaraj Mazda ,Honda SIEL, Bajaj Auto, Force motors, Maruti Suzuki, Amtek Auto, Piaggio, Eicher motors, Tata motors, Hero group.

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West -Fiat, Volkswagen, Bharat forge, GM, Ashok Leyland, M&M, Bajaj Auto, Eicher, Skoda ,Tata motors, Renault Nissan.

East-Hindustan motors, Tata motors, International auto, Exide, simpson & co.

South-Toyota kirloskar, Royal Enfield,Volvo, BMW, Bosch ,TVS motors, Ford .

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Personal Selling

Consumer buying behavior Final (or ultimate) consumers purchase for:

• personal,

• family, or

• household use

Organizational consumers purchase for:

• further production,

• usage in operating the organization, and/or

• resale to other consumers

Consumer Buying Behavior

The decision processes and acts of final household consumers associated with evaluating, buying, consuming, and discarding products for personal consumption

Consider the purchase an automobile. You generally will not consider different options until some event triggers a need, such as a problem needing potentially expensive repair. Once this need has put you "on the market", you begin to ask your friends for recommendations regarding dealerships and car models. After visiting several dealerships, you test drive several models and finally decide on a particular model. After picking up your new car, you have doubts on the way home, wondering if you can afford the monthly payments, but then begin to wonder if instead you should have purchased a more expensive but potentially more reliable model. Over the next five years, the car has several unexpected breakdowns that lead you to want to purchase a different brand, but you have been very happy with the services of the local dealership and decide to again purchase your next car there.

In this particular case, the following generic model of consumer decision making appears to hold:

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• Need Recognition • Information Search • Evaluation of Alternatives • Purchase Decision • Post-purchase Behavior

Influences on the generic model

• External o group

-e.g., cultural, family, reference group influences o Environmental/situational

-e.g., time of day, temperature and humidity, etc. • Internal

o Lifestyle, personality, decision making process, motivation, etc.

Group influences on consumer behavior

Culture

The set of basic values, beliefs, norms, and associated behaviors that are learned by a member of society

Note that culture is something that is learned and that it has a relatively long lasting effect on the behaviors of an individual. As an example of cultural influences, consider how the salesperson in an appliance store in the U.S. must react to different couples who are considering the purchase of a refrigerator. In some subcultures, the husband will play a dominant role in the purchase decision; in others, the wife will play a more dominant role.

Social Class

A group of individuals with similar social rank, based on such factors as occupation, education, and wealth, comprise the Social Class.

Reference Groups

Groups, often temporary, that affects a person's values, attitude, or behaviors

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• E.g., your behaviors around colleagues at work or friends at school are probably different from your behaviors around your parents, no matter your age or stage in the family life cycle. If you were a used car salesperson, how might you respond differently to a nineteen year old prospect accompanied by her boyfriend from one accompanied by two girlfriends?

Opinion leader

A person within a reference group, who exerts influence on others because of special skills, knowledge, personality, etc, comprises the Opinion Group.

• You might ask the webmaster at work for an opinion about a particular software application. Software manufacturers often give away free beta copies of software to potential opinion leaders with the hope that they will in turn influence many others to purchase the product.

Family A group of people related by blood, marriage, or other socially approved relationship, comprise Family Group.

Environmental / Situational Influences on Consumer Behavior

Personality: A person's distinguishing psychological characteristics that lead to relatively consistent and lasting responses to stimuli in the environment

We are each unique as individuals, and we each respond differently as consumers. For example, some people are "optimizers" who will keep shopping until they are certain that they have found the best price for a particular item, while other people are "satisfiers" who will stop shopping when they believe that they have found something that is "good enough." If you are a salesperson in a retail shoe store, how might you work differently with these two personalities?

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Lifestyle and Psychographics Lifestyle is a pattern of living expressed through a person's activities, interests, and opinions. Psychographics is a technique for measuring personality and lifestyles to developing lifestyle classifications

Motivation: Multiple motives:

• Manifest known to the person and freely admitted

Consumers usually have multiple motives for particular behaviors. These can be a combination of:

• Latent unknown to the person or the person is very reluctant to admit

Involvement

• intensity of interest in a product and the

Has to do with an individual's

• importance of the product for that person

The purchase of a car is much more risky than the purchase of a quart of orange juice, and therefore presents a higher involvement situation. This modifies the way that the generic model works.

As involvement increases, consumers have greater motivation to comprehend and elaborate on information salient to the purchase. A life insurance agent, for example, would typically be more interested in contacting a young couple who just had a baby than an eighteen year old college student - even though the new parents might be struggling to make ends meet while the student is living more comfortably. Although the annual investment into a policy is much lower if started at a younger age, most young college students are not open to thinking about long term estate planning. A young couple with a new child, however, is much more open to thinking about issues associated with planning for the child's future education, saving to buy a house, or even saving to take an extended vacation upon retirement.

Post-purchase consumer behavior

Satisfaction

After the sale, the buyer will likely feel either satisfied or dissatisfied. If the buyer believes that s/he received more in the exchange than what was paid, s/he might feel satisfied. If s/he believes that s/he received less in the exchange than what

14 | P a g e

was paid, then s/he might feel dissatisfied. Dissatisfied buyers are not likely to return as customers and are not likely to send friends, relatives, and acquaintances. They are also more likely to be unhappy or even abusive when the product requires post-sale servicing, as when an automobile needs warranty maintenance.

The above idea can be modeled as Homans' basic exchange equation:

Profit = Rewards - Costs

Unfortunately, even a buyer who "got a good deal" with respect to price and other terms of the sale might feel dissatisfied under the perception that the salesperson made out even better for the sales process.

This idea is called equity theory, where we are concerned with:

Outcomes of A

Inputs of A

vs.

If Mary believes that the insurance agent is recommending a product merely because he receives a higher commission, she will likely be displeased with the relationship and will not take his recommendation. If the agent is able to show

Outcomes of B

Inputs of B

Consider, for example, that you have purchased a used car for $14,000 after finding that the "e-blue book" value is listed at $16,000. You are probably delighted with the purchase until you accidentally meet the prior owner who had received a trade-in of $10,000 on the car just a few days before.

An issue related to this is attribution theory. According to attribution theory, people tend to assign cause to the behavior of others. Mary's life insurance agent advises her to purchase a whole life policy, while her accountant advises her, "buy term insurance and invest the difference.” The reason, explains the accountant, "is that insurance agents receive substantially higher commission payments on sales of whole life policies."

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Mary that the recommended product is the best solution for her situation, then she will likely attribute his recommendation to having her best interests in mind and will not be concerned about how it is that he is compensated for his services.

Cognitive Dissonance

It has to do with the doubt that a person has about the wisdom of a recent purchase

It is very common for people to experience some anxiety after the purchase of a product that is very expensive or that will require a long term commitment. Jane and Fred, for example, signed a one year lease on an apartment, committing themselves to payments of $1500 per month. A week later, they are wondering if they should have instead leased a smaller $900 apartment in a more rough part of town; they are not sure if they really can afford this much of a monthly obligation. Dick and Sally, on the other hand, ultimately rented the $900 apartment, and now are wondering if the savings in rent will be offset by noisy and sometimes unsafe conditions in this neighborhood.

Perhaps neither couple would be experiencing this anxiety if their landlords had given them just the smallest of assurances that they had made a good decision. After a close on products that are expensive or that require a long term commitment, the salesperson should provide the prospect with some reasons to be happy with the decision. Allow the car buyer to reinforce her own positive feelings by calling her a week after the purchase to ask how things are going. Call the new life insurance policy holder after two months to see if there are any questions; a lack of questions can only help the buyer to convince himself that he did the right thing.

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Male73%

Female27%

No. of Respondents

Study on Consumer Behaviour

Methodology

The study is based on primary data collection with a sample size of 30 respondents

residing in National Capital Region of Greater Noida, India. The questionnaire used for the

sample survey is a structured and non-disguised questionnaire and consisted of two major

sections. The first section intended to collect the various demographic factors; the second

section intended to collect the various opinions containing questions about the various

factors affecting the car purchasing decision. A five point Likert scale was used to capture

the consumers responses ranging from strongly agree to strongly disagree.

Data collection

The study entailed data collection with the help of a questionnaire from the residents of

National Capital Region of New Delhi, India. Data was collected by personally contacting

the respondents and explaining in detail about the survey.

Fig 1-Gender

Descriptive profile of respondents (n=30)

Findings and analysis-

Out of 30 respondents, 73% are male and 27 % are female.

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7

15

4 4

0

5

10

15

20

No. of Respondents

OccupationService

Business

Student

House-wife

020No. of Respondents

No. of Respondents

51 & Above 4

36-50 12

26-35 10

18-25 3

Below 18 1

AGE

Fig 2 Occupation:

Majority of the respondents

are businessman followed by

services class.

Fig 3 Ages:


are between the age group of

36-50 followed by 26-35 which

clearly indicates the

purchasing power of

respondents for car is

optimum at the between 36 -

50.

Fig 4

Factors Strongly Agree

Agree Neutral Disagree Strongly Disagree

Price of the Car 4 14 2 6 4 Mileage & Power 6 15 4 4 1

Looks & Safety 5 16 5 4 0

Festival Season/Offers 2 10 15 1 2

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0 20 40 60

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

4

14

2

6

4

6

15

4

4

1

5

16

5

4

0

2

10

15

1

2

Car technicalities

Price of the Car

Mileage & Power

Looks & Safety

Festival Season/Offers

0 20 40 60

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

6

10

10

3

1

3

7

13

5

2

8

7

10

3

2

7

8

13

1

1

Showroom factors

Installment Payment & Insurance Facility

Location Of The Car Dealer Shop

Information Provided By Salesperson

Availability Of Variety Of Cars Under One Roof

Majority of the people

agrees that Price,

power, Mileage, looks,

safety and festive

offers are important

factors for their

purchasing decisions.

For a significant

number of respondents

festive offers were less

important in purchasing

decision.

Fig 5

Factors Strongly Agree


Installment Payment & Insurance Facility

6 10 10 3 1

Location Of The Car Dealer Shop

3 7 13 5 2

Information Provided By Salesperson

8 7 10 3 2

Availability Of Variety Of Cars Under One Roof

7 8 13 1 1

Majority of the

respondents have

neutral or positive

response towards

showroom related factors

and special facility in the

show room. For many of

the respondents the

location of the showroom

was less important than

showroom facilities.

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0 20 40 60

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

10

10

7

3

0

12

14

4

0

0

12

12

6

0

0

9

15

6

0

0

company's network

Car Accessories

Easy Availability Of Spare Parts

Availability Of Service Station

After Sales Service

Fig 6

Factors Strongly Agree Agree Neutral Disagree Strongly Disagree

Car Accessories 10 10 7 3 0

Easy Availability Of Spare Parts 12 14 4 0 0

Availability Of Service Station 12 12 6 0 0

After Sales Service 9 15 6 0 0


agrees or strongly agrees that

special facility provided by the

dealer or company’s strong

network has a positive impact

towards their purchasing

decision. A very strong feeling

was attached with the

company’s network and large

number of respondents expect

after sales service as

important factors.

Fig 7


Suggestions from Family Members & Friend Circle

12 10 5 3 0

Advertisements And Promotions 4 1 15 5 5

Information Provided By Various Car Related Magazines

5 4 11 6 4

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0 10 20 30 40

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

12

10

5

3

0

4

1

15

5

5

5

4

11

6

4

information source

Suggestions from Family Members & Friend Circle

Advertisements And Promotions

Information Provided By Various Car Related Magazines

Majority of the

respondents feel that

family & friends are

their first and

credible source of

information followed

by advertisements

and magazines.

Surprisingly,

advertisements came

out to be not so

effective factor

influencing the decision but it surely helps in bringing brands in their evoked set.

Fig 8


Status Symbol 5 4 11 6 4

Brand Name 6 6 10 7 1

For majority of the respondents status symbol is not a very influencing factor but on the other

hand brand name was important factor for majority of the respondents.

Fig 9


Family Needs 8 8 5 5 4

Personal Usage 7 8 10 4 1

Majority of the respondents feel that family and personal need was foremost important factors for

the purchase of the car.

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Conclusions and Recommendations

Since Indian Automobile market is continuously in the prowl of surging as a major car

manufacturer, people are purchasing car as there is increase of income of common people

as well as change in tastes and preferences of consumers. It is important for the car

manufacturers and car dealers to be able to understand the different factors affecting the

extent in car purchasing behaviour. The factor analysis results indicate that factor 1 (table

7) which consists of Information provided by salesperson; safety; easy availability of

spare parts; technology are affecting the car purchasing behavior. People are more

conscious about the on spot information provided about various cars who serves according

to the needs and wants of the customer. The type of technology used and the wider reach

of the service stations also affect the most on car purchasing decision. While government

obligations and various policies like import duties, custom exemptions is seen as second

most affecting driver (factor 2, table 7) of purchase of cars. Factor 3 includes family

needs; brand image; income level; special family programs/events like Anniversary,

Birthday; insurance facility; credit card acceptance; car accessories affects customers car

purchase decision causing a variance of 3.080.This shows that importance of family

decisions, special occasions in family and the various services provided by car dealers.

Factor 4, Table 7 includes installment payment facility; location of the car dealer shop;

looks; availability of service station showing customers accessibility to the service

provided. Factor 5 shows the impact of various promotional activities and extra care taken

by car dealers. Factors 6 shows the impact of suggestion provided by family members and

peers as well as price and after sales service provided. Factor 7 includes the

infrastructural benefits of the shop and the variety of cars it stores .The last but not the

least ones shows the impact of factors of technical specifications of the car and the festive

season offers

Overall, various internal and external factors like extra care facilities, location of the

shops, various information provided by car dealers, advertisement and print media

promotions, features of the car in all are contributing in making car purchasing behaviour

of customers.

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Annexure Opinion Survey

Section I-Demographic Factors

Name……………………………………………………………Gender…………..

Age

Below18 18-25 26-35 36-50 51 and above

Occupation

Service Business Student Housewife

Section II

According to you which of these Factors are Affecting Car Purchasing Decision in Noida. Please fill according to instruction in bracket given below

(SA-Strongly Agree; A-Agree; N-Neutral; DA-Disagree; SDA-Strongly Disagree)

Sl.No Statements Strongly Agree


1. Price Of The Car

2. Suggestions from Family Members & Friend Circle

3. Family Needs

4. Status Symbol

5. Brand Name

6. Festival Season/Offers

7. Advertisements And Promotions

8. After Sales Service

9. Installment Payment &

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Insurance Facility

10. Location Of The Car Dealer Shop

11. Information Provided By Salesperson

12. Availability Of Variety Of Cars Under One Roof

13. Information Provided By Various Car Related Magazines

14. Mileage & Power

15. Looks & Safety

16. Car Accessories

17. Easy Availability Of Spare Parts

18. Availability Of Service Station

consumer behavior project_sourav mukherjee

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