Consumer decision making in automobile industry

Report On

A CONSUMER DECISION MAKING IN AUTOMOBILE INDUSTRY

By: Nitesh Singh Pundir 12BSP0799 Section- A

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Table of Contents

Topic

Page

Abstract

3

Introduction

4

Objective of the study

6

Literature Review

7

Methodology

8

Limitations of the Study

8

Data Analysis

9

Findings and Suggestions

13

Scope of further research

13

Conclusion

13

Appendix

14

Bibliography

16

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ABSTRACT:

The growing middle class population of India and the paucity of reliable public transport system is leading to a large number of vehicles added to the roads every day. Demand in Automobile, FMCG and retail is growing at a faster pace than anticipated due to rise in its consumption patterns which is creating demand and margins for Indian Inc. India is the second largest producer of two-wheelers in the world. In the last few years, the Indian two-wheeler industry has seen spectacular growth. The country stands next to China and Japan in terms of production and sales respectively. The present scenario of especially decision making process of purchasing vehicles, and its importance, current trends are highlighted. In this article study for the demand of vehicles and influencing factors like family, friends, dealers, service and mileage for the process of purchasing vehicles is done.

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INTRODUCTION Automobile Industry: Automobile industry is one of the fastest growing industries of the world. With more than 2 million new automobiles rolling out each year, on roads of India, the industry is set to grow further. Automobile industry made its silent entry in India in the nineteenth century. Since the launch of the first car in 1897, India automobile industry has come a long way. Today India is the largest three wheeler market in the world and is expected to take over China as the second largest automobile Industry in the coming year. Indian automobile industry; manufacturing cars, buses, three wheelers, two wheelers, commercial vehicles, heavy vehicles, provides employment to a large number of workforce. The abolition of license raj in 1991opened the doors for international automobile manufacturers. A number of leading global automotive companies entered into joint ventures with domestic manufacturers of India and thus started the large-scale production of automobiles in India. Some of the well-known players of Indian automobile industry include: Hindustan Motors, Maruti Udyog, Fiat India Private Ltd, Ford India Ltd., General Motors India Pvt. Ltd, Toyota Kirloskar Motor Ltd among others. The production of automobiles in India is mainly for the domestic customers. Cars with 79% of automobiles in India, dominate the automobile industry in India. The Indian Automobile Industry is manufacturing over 11 million vehicles and exporting about 1.5 million every year. The dominant products of the industry are two wheelers with a market share of over 75% and passenger cars with a market share of about 16%. Commercial vehicles and three wheelers share about 9% of the market between them. About 91% of the vehicles sold are used by households and only about 9% for commercial purposes. The industry has attained a turnover of more than USD 35 billion and provides direct and indirect employment to over 13 million people. Some facts on Automobile industry in India: 

India has the fourth largest car market in the world



India has the largest three wheeler market in India



India is the second largest producer of two wheelers in the world



India ranks fifth in the production of commercial vehicles.



Hyundai Motors ranks second in car production in the world.

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Consumer Decision Making Process: “Consumer behaviour describes how consumers make purchase decisions and how they use and dispose of the purchase goods or services” therefore we can understand the importance of consumer behaviour for a marketer and as a vital process during the decision purchase process. A marketer needs to identify who their consumers are in order to be capable of selling their products, generate revenue and profitability but also to be able to satisfy them for future purposes such as market share through recognition, and only once identifying their consumer‟s behaviour can success be achieved. In relation to purchasing a car why would it be essential for a marketer to be able to understand its consumers behaviour in order to target them more effectively?, this is mainly due to the fact of the car industry having a wide range of variety‟s that car manufactures offer its consumers making it competitive. Consumer Buying Behaviour:

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Problem Recognition: In this information processing model, the consumer buying process begins when the buyer recognizes a problem or need. When we found out a difference between the actual state and a desired state, a problem is recognized. When we find a problem, we usually try to solve the problem. We, in other words, recognize the need to solve the problem. Information Search: When a consumer discovers a problem, he/she is likely to search for more information . We actively seek information by visiting stores, talking to friends, or reading magazines, among others. Through gathering information, the consumer learns more about some brands that compete in the market and their features and characteristics.

Evaluation and Selection of Alternatives: How does the consumer process competitive brand information and evaluate the value of the brands? Under this, a consumer is trying to solve the problem and ultimately satisfying his/her need. In other words, he/she will look for problem-solving benefits from the product. The consumer, then, looks for products with a certain set of attributes that deliver the benefits. Thus, the consumer sees each product as a bundle of attributes with different levels of ability of delivering the problem solving benefits to satisfy his/her need.

Decision Implementation: To actually implement the purchase decision, however, a consumer needs to select both specific items (brands) and specific outlets (where to buy) to resolve the problems. Once the brand and outlet have been decided, the consumer moves on to the transaction (“buying”). Post-purchase Evaluation: “Did I make the right choice? Should I have gone with other brand?” This is a common reaction after making a difficult, complex, relatively permanent decision. This type of doubt and anxiety is referred to as post-purchase Evaluation.

OBJECTIVE OF THE STUDY: 

To study the consumer decision making process of consumer.



To identify the factors influencing consumers, in brand selection while purchasing the automobile.



To identify the consumer‟s choice of preference while purchasing the automobile.

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LITERATURE REVIEW: J.D. Singh (1981) conducted a survey on „A study of brand loyalty in India‟. The primary objective of this study was to examine the state of art regarding brand loyalty among consumers in India.

Nishar Ahamed N. (1997) examined the factors determining purchase and post-purchase behaviour of two wheeler users. His findings revealed that friends and neighbours' form the most important source which is followed by one‟s own experience, family members, news papers and observation. Parker and Anderson (1994) examined the consumer‟s preferential expectation concerning attributes, the objects and their post-trial perception of the attributes. The findings suggested that differences did exist among individuals in terms of the appropriateness of various preference models.

Arjun Chowdhri (2006) has remarked that brand commitment is an important determinant in

buying behaviour for consumers.

Rachel Dardis and HoracioSoberon-Ferrer (1994) have investigated the rapport between automobile attributes and household characteristics to consumer preferences for cars. The analysis was confined to households that purchased new cars in 1986 and employed twostage probit analysis. Results indicated that the coefficients of five automobile quality attributes were statistically significant while the coefficients of most household characteristics were not significant. Households were interested in more fuel efficient and heavier cars as well as cars with lower depreciation rates and a lower frequency of repair are more likely to buy Japanese than non-Japanese cars.

Gary A. Knight (1984) has compared the consumer preferences on automobile made abroad

and made in the home country by both home country and foreign firms. Indeed he has suggested that the country of manufacture and product quality strongly influence consumer decision making in globally available product categories.

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METHODOLOGY: Data Collection Primary Data: Survey method was used to collect the primary data from the respondents. A structured questionnaire was prepared to extract responses from the respondents. The study was conducted on a sample of 96 consumers. Secondary Data: Secondary data was collected from books, articles, Internet and previous research papers that had been conducted by the company representatives and officials.

Respondent Profile 

Age group: 45% below the age of 30 years.



Education: 50% of the respondents were educated up to SSC



Occupation: Agriculture (4%), private service (70%), small businessmen (24), others (2%).



Income Profile: 80% of the respondents had annual Income of less than Rs.1, 50,000



Source of Finance: 59% of the respondents purchased the two-Wheeler on cash Payments and remaining opted for loans.

LIMITATIONS OF THE STUDY 1) The study was conducted in 7 days that is not enough for such a vast topic. 2) No proper data was available. 3) There is a big number of automobile companies carry out the research more efficiently. 4) As the nature of research was exploratory so it was difficult to cover each and every buyer. 5) Many buyers don’t express their original perception and views because of biasness. Page 8 of 16

DATA ANALYSIS: 

In this study, a number of statistical techniques like simple percentage and chi-square test have been used in order to study the objectives.

1. Sources of Information. Sources of Information

No. of respondents

Percentage( % )

Friends/ relatives

55(24)

57.29(18.375)

Previous experience

31(24)

32.30(2.041)

Media

6(24)

6.25(13.5)

Showrooms Total

4(24) 96

4.16(16.667) 100

The above Table1 shows that Majority of the respondents are influenced by their Friends/relatives (57.29%) and the major source of information followed by previous experience (32.30%). . Hypotheses: (H0): There is no Significance relationship between sources of information and the influence on purchase decision of vehicles. (H1): There is Significance relationship between sources of information and the influence on purchase decision of vehicles. X2 Cal= 50.583 Degree of freedom = (r-1) = (4-1) =3 X2 Table for 3df at 5% level of significance = 7.815 X2 Cal= 50.583 X2 Calculated Value >X2 Table Value Hence, there is Significance relationship between sources of information and the influence on purchase decision of vehicles.

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2. Influencing Role on the Brand selection. Influencing factors Family members

No. of respondents 56(24)

Percentage( % )

Friends / relatives Media

31(24)

32.29(2.047)

5(24)

5.20(15.047)

Sales person at showroom

4(24)

4.16(16.667)

Total

96

100

58.34(42.667)

A consumer‟s buying behavior is influenced by cultural, social like…reference group, family, personal factors like…age, occupation, life style, personality and income. The above Table 2 reveals that the most of respondents were influenced by Family members (58.34%) and friends/relatives (32.29%) are the most important influencers in making the final choice. It is once note worthy that media (5.20%) and salespersons at the showrooms (4.16%) play a very small role. Hypotheses: (H0): There is no Significance relationship between sources of influencing factors on brand selection for purchasing vehicles. (H1): There is Significance relationship between sources of influencing factors on brand selection for purchasing vehicles. X2 Cal= 76.428 Degree of freedom = (r-1) = (4-1) =3 X2 Table for 3df at 5% level of significance = 7.815 X2 Cal= 76.428 X2 Calculated Value >X2 Table Value Hence, there is Significance relationship between sources of influencing factors on brand selection for purchasing vehicles.

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3. Person accompanying at the Time of Purchase. Person accompanying

No. of respondents

Percentage (%)

Friends/ relatives

43(24)

44.80(15.047)

Alone

29(24)

30.20(1.047)

Family members

21(24)

21.87(0.375)

Mechanic

3(24)

3.13(18.375)

Total

96

100

Marketers must fully understand both the theory and reality of consumer behaviour. A consumer‟s buying behavior is influenced by cultural, social, and personal factors. At the time of purchase of product friends are most influenced factor. In this above Table 3 it is observed that 44.80% of the respondents were accompanied by friends / relatives at the time of Purchase, while 30.20% respondents were went alone, and 21.87% of the respondents were accompanied by family members.

Hypotheses: (H0): There is no Significance relationship between sources of Person accompanying at the time of purchasing vehicles. (H1): There is Significance relationship between sources of Person accompanying at the time of purchasing vehicles. X2 Cal= 34.844 Degree of freedom = (r-1) = (4-1) =3 X2 Table for 3df at 5% level of significance = 7.815 X2 Cal= 34.844 X2 Calculated Value >X2 Table Value Hence, there is Significance relationship between sources of Person accompanying at the time of purchasing vehicles.

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4. Factors Influencing the Purchase Decision.

Preferences

No. of respondents

Percentage ( % )

Mileage Quality

35(24) 25(24)

36.46(5.042) 26.04(0.042)

Design

17(24)

17.70(0.375)

Price

10(24)

10.42(8.167)

Offer / gifts

6(24)

6.25(13.5)

Service

3(24)

3.13(18.375)

Total

96

100

A number of factors come to the fore when purchasing a two-wheeler. These include price, design, mileage, quality, service availability, etc…. In this above Table 4 reveals that 36.46% of respondents were preferred to mileage, 26.04% of respondents preferred to quality, 17.70% of respondents were preferred to design,10.42% for price, 6.25% offers/gifts and only 3.13% of respondents service. Hypotheses: (H0): There is no Significance relationship between sources of preferences factors influencing at the time of purchasing vehicles. (H1): There is Significance relationship between sources of preferences factors influencing at the time of purchasing vehicles. X2 Cal= 45.501 Degree of freedom = (r-1) = (6-1) =5 X2 Table for 3df at 5% level of significance = 11.070 X2 Cal= 45.501 X2 Calculated Value >X2 Table Value Hence, there is Significance relationship between sources of preferences factors influencing at the time of purchasing vehicles.

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FINDINGS & SUGGESTIONS: 1. Majority of the sample respondents are influenced factors like friends, family, mileage, advertisement and service in selection of brand. 2. Majority of respondents are influenced by Family members and friends at the time of Brand selection. 3. Most of the consumers are giving their preference to mileage only. 4. Consumers are influenced by financial facilities; companies should improve the availability of loans to increase sales in markets.

SCOPE FOR FURTHER RESEARCH: Indian automobile market has been growing fast in a dynamic way. There is lot of scope for future research pertaining to different areas. 1. Automobile market in rural and semi urban area. 2. Studies may be undertaken to find out why buyers switch one brand to other. 3. Case studies of consumer behaviour for selected brands. 4. Comparative Studies of the performance of different brand of automobile

CONCLUSION: Currently; there is high demand for the automobiles across all the segments. With the growing economy, people are left with more disposable income to be spent on meeting their mobility needs on automobiles. Banks and other financial institutions have an assortment of vehicle loan schemes with attractive rates of interest and convenient number of instalments; it will give additional support to the automobile sector, to boost sales across various segments.

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Appendix Consumer Survey:

NAME:AGE:PHONE NO.:-

Q1. Do you have any vehicle?



Yes



No

Q2. If yes which vehicle do you have?



4 Wheeler



2 Wheeler

Q3. What is the brand name of your second hand car?



Maruti Suzuki



Hyundai



Honda



Tata



Chervolet



Other

Q4. What was the need of buying second hand car?



Business purpose



Domestic use



Safety



status



Others

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Q5. What were the sources of information about vehicles?



Friends\Relatives



Family Members



Media



Showrooms



Previous Experience

Q6. What influence you on selection of brand? 

Family members



Friends / relatives



Media



Sales person at showroom

Q7. Who accompanies you at the Time of Purchase? 

Mechanic



Friends/ relatives



Alone



Family members

Q8. What Factors Influences your Purchase Decision?  Mileage 

Quality



Design



Price



Offer / gifts



Service

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BIBLIOGRAPHY Wikipedia search: (www.wikipedia.com) www.mouthshut.com www.studygalaxy.com www.decisionanalyst.com www.studymode.com

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