53397772 royal enfield
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Devising a strategy to enhance salesof Royal Enfield bikes
Version: 1.0
Submitted to: Prof. J.N. Godinho
By: Gaurav (04PGHR ), Gulshan (04PGHR ) , Manasi (04PGHR ) , Neelesh
(04PGHR ), Shaveta (04PGHR45 )
Au tho rs , 2004
Devisingast r
ategytoenhancesalesof
RoyalEnfiel d
bikes
14
th
December2
004
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Table of Contents
Table of Contents i
1 Acknowledgement 1
2 Executive Summary 2
3 Introduction 3
3.1 About the company 33.2 Marketing Network 33.3 Collaborations 33.4 Manufacturing 43.5 Infrastructure and Technology Collaborations 4
4 SWOT Analysis 6
5 Market Environment 7
6 Consumer Behavior 9
6.1 Description of sample 9
6.2 Analysis of consumer survey 116.3 Buying Behaviour 14
7 Competitive Scenario 16
7.1 Porters five forces 167.2 Factors influencing buying decision 187.3 Comparative Analysis in Motorcycle Industry 18
8 Recommendations 20
8.1 Entry into other segments 208.2 Aggressive marketing & Advertising for brand reinforcement 208.3 Rejuvenating dealership network 208.4 Product Innovation 208.5 Financing schemes 21
9 References 22
9.1 Textbooks 229.2 Web References 22
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1 Acknowledgement
This project is aimed at understanding the Marketing Practices and
implementation, through Royal Enfield bikes. The attempt has been to
tie the various factors like Environment, Competitors and Consumers to
understand the effectiveness of the present target market of the
product. On the basis of the same, the Strengths, Weaknesses,
Opportunities and Threats of/to Royal Enfield bikes have been
identified. Also, an attempt to suggest some recommendations for
increase in sales of the companys bikes has been made. Several
people have played a significant role towards the successful completion
of this project work and the researchers extend their gratitude to them.
A deep sense of gratitude is owed to Mr. J.N. Godinho, Professor,
Management Development Institute, Gurgaon who extended support
and assistance throughout the project duration. Needless to say, his
knowledge and experience have served as a continuous source ofencouragement and motivation. Without his invaluable support and
guidance this project would not have been possible.
Also a note of thanks to the exclusive dealer of Royal Enfield bikes, Mr.
Amit Chawla, who helped in understanding the sales and competition in
the bike industry.
Finally a note of thanks is due to all those too many to single out by
names, who have helped in no small measure by cooperating during
the project and by providing constructive criticisms.
Group VII
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2 Executive Summary
Royal Enfield is a motorcycle manufacturer, having its current base in
India. The company is the currently leading the 350 c.c. bike segment
with their flagship product Bullet. This report is an outcome of a study
conducted to boost their sales, as part of our Marketing Practices
Course assignment.
There are several forces at work in every sector and every industry of
an economy. The dynamic nature of every industry keeps the pulses of
the companies operating in each sector racing. Our strategic analysis
report is focussed on marketing and sales of Royal Enfield as a
company. It also delves at all those forces at work that could
potentially change the fortunes of a company. Be it a company that
wants to enter a new market segment or a company that wishes to
strategically position its products, this report is an invaluable tool for
all. The report analyses the performance of the leading players in themotorcycle industry which are competitors of Royal Enfield or
potentially can be one.
This report outlines the study conducted for investigating the lean areas
for Royal Enfield from a marketing and sales perspective. Also analyses
have been mentioned at appropriate places in support of the same. To
conclude, it provides a broad map of various strategies to boost Royal
Enfield sales.
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3 Introduction
3.1 About the company
Royal Enfield India was set up in 1955 when it started receiving 350ccbikes in kits from the UK and assembling them in Chennai, India. But,
eventually the entire bike was manufactured in India and a couple of
years later the Company started manufacturing the 500cc Bullet. By its
sheer power, unmatched stability, superior riding comfort and rugged
good looks, the Bullet dominated and continues to dominate the Indian
roads. It is the dream choice of every motorcyclist in India with even
the Indian Army and Police endorsing the Bike.
In 1990, Royal Enfield entered into a strategic alliance with the Eicher
Group, - a Rs.10 billion conglomerate and later merged with Eicher
Group in 1994. The Eicher Group is one of India's leading automotive
groups with diversified interests in the manufacture of Tractors,
Commercial Vehicles, Automotive Gears, Exports, Garments,
Management Consultancy and Motorcycles.
Since then, the Company has made considerable investments in
modernizing its manufacturing technology and systems and in 1996,
when the Government decided to impose stringent norms for emission,
Royal Enfield was the first motorcycle manufacturer to comply. Royal
Enfield is amongst the first few Indian companies to obtain the WVTA
(Whole Vehicle Type Approval) for meeting the European Community
norms.
3.2 Marketing Network
To feel the pulse of the customers, Royal Enfield has set up a wide
network of 13 marketing offices, 223 dealers in all major cities and
towns, 25 spare parts distributors and stockists and 150 Authorized
Service Centers. The Company also exports motorcycles to over 30
countries like the USA, Japan, Bahrain, UK, Germany and many
European countries through 5 international offices, 25 importers and
over 200 dealers across the globe.
3.3 Collaborations
Royal Enfield has existing technical tie-ups with:
AVL, Austria For new engines
FW Egli For high power engines for 535cc and 624cc.
Criterion Engineers, UK - For a new 5 speed transmission system
DB Designs, UK - For styling
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The headquarters of Royal Enfield Motors is situated at
Thiruvottiyur, Chennai, Tamil Nadu, India.
3.4 Manufacturing
Royal Enfield's manufacturing operations go through a series of
modernization and improvement efforts, with a number of automated
processes. The Company has put in place modern manufacturing
practices like Cellular layouts, Statistical process controls and Flexible
manufacturing systems. The Chennai manufacturing facility has
received the ISO 9001 certification and for managing its operations in a
clean and safe environment, it has obtained the ISO 14001-quality
certification.
Royal Enfield ensures that all the components used in the bikes are
sourced from the best vendors in the Indian automotive industry, who
are geared to supply according to the Companys stringent quality
standards. The company works closely with all of its suppliers, givingthem technical and managerial support while maintaining practices like
Direct-On-Line and Vendor Self-Certification.
3.5 Infrastructure and Technology Collaborations
To manufacture quality bikes that are well known worldwide for their
reliability and toughness state-of-the-art infrastructure is required, and
that is just what Royal Enfield has done at their Chennai manufacturing
facility.
An active in-house Research & Development wing is constantly at workto meet changing customer preferences and the challenges of Indian
and International environment standards. When introducing a new
product, this team undertakes all related planning which includes a
rigorous customer contact program, design, concurrent engineering and
testing processes. The bike Design team at Royal Enfield is well
equipped with high-end CAD/CAM workstations and the latest modeling
software. Top-notch designers work continuously to come up with
innovative bikes designs to meet the markets expectations.
Royal Enfield was also amongst the first Indian companies to introduce
Enterprise Resource Planning (ERP) systems to manage its operations.
It also has an online supply chain management system in operation.
Presently there are five models of Royal Enfield bikes in the market
viz.,
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Thunderbird Bullet Machismo The 2004 Bullet Electra
Bullet 350 Bullet 500
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http://www.royalenfield.com/product.asp?products_id=16&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=17&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=9&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=10&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=19&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=19&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=10&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=9&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=17&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=16&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=16&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=17&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=9&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=10&products_location=indiahttp://www.royalenfield.com/product.asp?products_id=19&products_location=india -
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4 SWOT AnalysisOpportunities
o Introduction of bikes inentry and executive level
segment
o Encourage the sales with
advertisement
Threats
o Movement of industrytowards premium
segment e.g. Karizma
225c.c, Aquila etc.
o Entry of exclusive
foreign players
Strengths
o No competition in 350c.c
bikes
o Proven product durability
o Customer retention
o Online supply chain
management
o ERP operated operations
o Introduce customer
relationship management
o Entry of other players
in 350 c.c segment
Weaknesses
o High Prices
o Less Advertisement
o No bike in entry and
executive level segment
o No/little product
innovation
o Lack of attractive finance
schemes
o Increasing awareness by
advertisement
o Innovating with styling of
bikes
o Offering better finance
schemes
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5 Market Environment
In the last six years, the domestic two-wheeler industry has seen
structural changes. The motorcycle industry has been growing largely
at the expense of the scooter and moped segments. Scooters having
bottomed out, and mopeds likely to do so soon, the motorcycle industry
is bound to have a slower rate of growth - and this may lead to a price-
war and pressure on volumes and growth of the high volume players.
Growth will be fuelled by new introductions, tapping new segments and
encouraging faster replacement / up-gradation through introduction of
differentiated / customized offerings. For both motorcycle
manufacturers and their suppliers, the risk would be of building/ adding
huge capacities in anticipation of continued high growth rates. The
motorcycles have consistently gained market share from the scooter
and moped segments to corner a share of 41% of total two-wheeler
sales. The table below gives an idea about the strides made by the
motorcycle segment since 1993:
The motorcycle market is broadly structured into economy/commuter
bikes and power, style and leisure bikes. The economy segment of themarket comprises of entry level bikes and typically has the 100 cc
motorcycles. The power, style and leisure segment comprises of bikes
up to 180 cc. Royal Enfield is the only player in the 250 cc and above
category and is positioned as the power and leisure bike manufacturer.
Hero Honda is the leading player in the motorcycle market, with market
share close to 48% followed by Bajaj Auto at 24%. Other players in the
market are TVS motors, Yamaha Motors, LML and Kinetic Engineering.
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(in %) Scooter Motorcycle Moped
FY93 47.2 25.2 27.6
FY94 47.5 26.7 25.8
FY95 46.8 29.5 23.7
FY96 46.0 30.4 23.6
FY97 43.9 33.0 23.1
FY98 41.5 37.2 21.3
FY99 39.0 41.0 20.0
FY2000 33.2 47.6 19.2
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The Indian motorcycle industry can be broadly categorized in to Indian
motorcycles and Indo-Japanese motorcycles. The Indo-Japanese
motorcycle segment is dominated by Hero group, Bajaj and Escorts in
collaboration with Japanese vehicle manufacturers Honda, Kawasaki
and Yamaha respectively. The Indian motorcycles segment is
dominated by Bajaj (M80), Escorts and Royal Enfield.
In motorcycles sales, western region leads with a market share of 40%
of the total motorcycle sales. South and north regions come second and
third with a market share of 27.5% and 17.4% of total motorcycle
sales respectively.
Over the last couple of years since 2000-01, the motorcycle market has
more than doubled to over 4.3 million units in 2003-04. The industry is
expected to continue to grow in future also due to new products,
availability of low cost finance and increase in replacement demand
coupled with shift in customer preference to motorcycles over scooters.
Different players with their offerings of bikes in different segments have
been listed below:
Company Entry LevelExecutive
Level
Premium
Level
Bajaj Auto CT100
Caliber115Saffire
Spirit
Discover
Pulsar150 DTSiPulsar180 DTSi
Wind 125
Eliminator
Hero Honda CD-Dawn
CD100Splendor
Passion
Ambition 135
CBZ
Karizma
Honda Activa/Dio EternoUnicorn
Kinetic Boss EX
Boss 115Velocity
GF170 Comet
LML AdernoFreedom 110
Freedom 125
Royal Enfield
--- ---
Bullet 500Bullet 350ElectraMachismo
ThunderbirdTVS Centra
Max 100Star
Fiero F2/FXVictor GLX
Yamaha Yamaha Crux Enticer
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6 Consumer Behavior
It is very important for an organization to understand its consumers
buying behavior. Only when a company understands its consumers, it
can modify its offerings to ensure maximum consumer benefit.
Somewhere decisions relating to all 4 Ps are taken keeping in mind the
consumer preferences. Since today all companies are following
marketing concept, all decision making activities surrounds consumers.
To understand the consumer buying behavior, we undertook a market
research to understand what people think about Royal Enfield as a
brand and how much is their level of awareness with respect to brand.
The objectives of the consumer behavior study are:
Factors influencing the buying behavior of consumer
The price-demand relationship analysis
Consumer Loyalty towards the brand
Consumer awareness of the brand
The primary source of data is personal interviews and questionnaire of
individual customers selected on the basis of relevance and judgment,
given the academic nature and the duration of the study.
The study was carried out in Gurgaon. The primary focus was on
following parameters:
Psychographic and Behavioral parameters
Brand Awareness
Comparative attributes
Substitutability
Brand Usage Pattern
Brand Loyalty
Following page comprises of the description of the survey sample andthe analysis of the consumer survey.
6.1 Description of sample
Sample size- 25
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Occupation
Students
Service
Business
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Age Group
35yrs
Income Group
100000-200000
200001-300000300001-500000
>500001
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The personal details were very important. As they enabled us to
analyze the consumer behavior on the basis of very important personal
factors like age, occupation, and economic circumstances.
6.2 Analysis of consumer survey
The findings of the survey conducted are listed below:
Which vehicle do you own and for how many years? Please specify
the brand also.
The purpose of this question is to find out the number of users of
motorcycles and further which is the most popular brand among the
customers. The answers are tabulated as following:
Company Brand No. of users
Hero Honda CBZ
Karizma
Splendor
2
1
1
Bajaj Auto Ltd. CT100
Pulsar 180
Caliber Croma
Pulsar 150
1
1
1
2
Royal Enfield Bullet 350 1
TVS Fiero 1
LML Energy 1
Yamaha RXZ
YBX
2
2
Kinetic Challenger 1
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For what purpose do you use bike?
This was framed to find out what benefit do people buy bikes. Here
we observed that 80% of the sample bought bikes for office/college
purposes and about 10% used these for commercial purpose, rest
being for occasional use.
How do you come to know about new bikes and promotional
schemes?
The distribution of peoples response for this question is shown in
the chart given below. This question confirmed that most of the
awareness for brand comes from TV advertisements followed by
word of mouth of friends and print media like auto specific
magazines and general newspaper advertisement. This also
confirmed the importance of advertisement for sales and
awareness.
Please rate the following factors you would consider before buying abike, according to your preference.
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Print Media
TV Advertisem ents
Friends & Family
Showroom dealers
On road parking lots
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The attributes the consumer bears in mind while considering the
purchase of a motorcycle have been tabulated below. The sum of
the scores given by the respondents (on a scale of 8) to a particular
attribute was divided by the total number of respondents to reach
an average score per attribute. Mileage seems to be the mostimportant attribute for the bike buyers. Appearance is vital to
the acceptance of a product and it is not surprising to findthat it scores heavily among the respondents. Price followsappearance in the ranking and because a majority of buyers isfrom upper middle class and students, it has an importantfactor to ponder upon. Next in line is after sales servicefollowed by finance options and maintenance. SurprisinglyCOMFORT has been ranked quite low and resale value isranked last. This shows that the consumer assumes thepurchase for life time. But it is essential for any product to setup proper after sales service centers in reach for thecustomers.
Attributes Average Score
Mileage 7.2
Looks 6.8
Maintenance 4.5
Comfort 1.4
After sale Service 4.9
Price 5.2
Resale Value 0.7
Finance Options 4.6
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Which bank would you like to take financial loans from?
Most of the responses were in favor of State Bank Of India which
shows people have more faith in the govt owned banks than the
private banks.
Who/what would you consult before buying the bike?
The response to this question has helped to understand the
reference groups/influencers for the buying decision. Weve come
to know that the family, friends and colleagues have influenced the
decision of the buyer much.
6.3 Buying Behaviour
Difficult or uninteresting delegated tasks sometimes require from
HIGH INVOLVEMENT LOW INVOLVEMENT
SIGNIFICANT
DIFFERENCE
BETWEEN BRANDS
COMPLEX BUYNIG
BEHAVIOUR
VARIETY SEEKING
BUYING BEHAVIOUR
FEW DIFFERENCES
BETWEEN BRANDS
DISSONANCE REDUCING
BUYING BEHAVIOUR
HABITUAL BUYING
BEHAVIOUR
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Family
Friends
Colleagues
Magazines &
Brochures
Showrooms
Internet
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NUMBER OF PEOPLE CONSULTED
60%25%
15% THREE OR
MORE
TWO
ONE
Following is the distribution of people who consulted one or two or
more than three different sources before taking the final decision to
buy the bike:
From the above data, we can infer that most of our sample consulted
more than 3 people before making the final decision. This is clear
indication that the consumer are very highly involved in the purchase of
a bike, which is understandable considering that bike is an expensive
and long term buy for most.
Also, judging by the response we got, the brand image of a high end
purchase like a motorcycle influences the buying behavior greatly, it is
indicative of the kind of after- sales services that the consumer can
expect. The kind of distribution network that Royal Enfield has in India
has helped promote its brand image in a big way. Moreover, it is the
market leader in premium segment bikes as well, which develops the
customers interest in the purchase from Royal Enfield.
Therefore with reference to the figures given above, we can conclude
that the customers of bikes exhibit complex buying behavior.
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7 Competitive Scenario
7.1 Porters five forces
Potential Entrants
Strengths:
Stable returns
Access to distribution channels
Industry growth rate
High product differentiation
Weakness:
High buyers switching costs
Incumbents defense of market
share
High capital requirements
Suppliers
Strengths:
Cater to strong buyers
Supplied product isimportant input
Weakness:
Many competitivesuppliers
No credible threat ofdownstreamintegration
Industry Competitors
Strengths:
High market growth rate
Existing strong or aggressivecompetitors
Strategic stakes are high
Weakness:
High level of productdifferentiation
High switching costs for thebuyers
Brand identification
Buyers
Strengths:
Large number ofbuyers
Buyers incentives
Sources ofinformation
Strong brandidentity
Many substitutes
Proportion ofincome spent onthe purchase
Weakness:
High Switching
costs
Fragmentedbuyers
High productimportance
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Substitutes
Strengths:
Technological advancement
Many substitutes like scooters& A segment cars
Weakness:
Price differences
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7.2 Factors influencing buying decision
Its not easy to make a best choice in bikes. The specifications, style,
power, price, riding comfort and ruggedness make all the difference in
the buying behavior of customers. These factors interrelate in
complicated ways to influence the buying decision Following are the
major factors on the basis of which it is decided that which bike isbetter:
Powertrain
Fuel economy
Mileage
Style
Price
Top speed
Features e.g. e-start option
Engine
Weight
Riding comfort
In the modern technology industry, competition among rival firms is
generally constructive. Firms strive for a competitive advantage over
their rivals, primarily by providing better products and support. A
number of highly competitive brands in the market have been snapping
at the heels of Goliaths like Bajaj Eliminator, Hero Honda Karizma and
Kinetic Comet.
7.3 Comparative Analysis in Motorcycle Industry
Legend
2 Highest
1
0 Lowest
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Players--> BajajHeroHonda
RoyalEnfield Kinetic
Comparative Factors
Mileage
Looks
Maintenance
After sale service
PriceEffective sales promotion
Finance Options
Performance
Dealership system
Spare Parts Availability
Total 16 13 7 5
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Comparative Analysis in Motorcycle Industry: Competitors of Royal Enfield
bikes have been studied under various parameters and a comparison has been
drawn for these in the above excel sheet.
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8 Recommendations
8.1 Entry into other segments
As we can see from the data showing the growth trend of motorcycleshare in Indian Auto market, a clear indication of rising appetite of the
Indian consumers for the motorcycle. Going by the demographics, it
can be inferenced that an auto company has the scope of selling bikes
in variety of segments. So it is highly recommended for Royal Enfield as
a company to venture into other segments as well. But due diligence
should be made on brand positioning of the new models, as consumers
identify the Royal Enfield brand with the tough and sturdy Bullet
product. This concern can be taken care of by launching a new product
range under the umbrella of a new brand, specifically for light & sporty
bikes Like: Reiko (110 c.c.), RE Steel/Falcon (150-180 c.c.), RE
Classic/Sports (250-300 c.c.) etc.
8.2 Aggressive marketing & Advertising for brandreinforcement
This might come to the readers as a surprise that Royal Enfield has
started marketing again after 21 years. The last advertisement they did
was in 1983. Recently they have started advertising through television
media etc. But they need to be aggressive in their marketing
campaigns seeing the current market landscape in Indian Auto market.
8.3 Rejuvenating dealership network
It has been noticed during research that the dealers are not customer
oriented and they have become complacent in this regard. This attitude
was getting them business as Royal Enfield Bullet is a niche product
where they didnt have any competition until now. But off late the
scenario has been changing. The marketing is witnessing introduction
more powerful and feature rich bikes with affordable tags. So thrust
should be made to educate the dealers about the new threat which in
reality is an opportunity as well for them. Also equipping them with
knowledge and paraphernalia to run sales focused marketing
campaigns.
8.4 Product Innovation
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This is one product which beat all the shelf life determination. The
product has changed little since its introduction decades before. This
has been advantageous to an extent, if we speak of Bullet alone. But in
the wake of 21st century, the consumers who are so informed about
the features esp. the ones who have really propelled the growth of
motorcycle share in two wheelers; we can safely conclude that
launching variants and new innovative models can definitely fuelgrowth. The company has introduced certain new models with
convention gear structure i.e. left side gear paddles. Features like
electric start, disc brakes are also underway, to be introduced in all
models. These have been introduced in one model only as of now. Also
through technical innovations in engines, they are trying to increase
mileage & acceleration of the bikes, the features which are becoming
instrumental in decision making of purchasing bikes.
8.5 Financing schemes
This is one company which is still to capitalize on the opening of thebanking sector. Their bikes still get up to maximum of 70% finance by
most of the banks, which is an inhibiting factor for an average
consumer, which was confirmed by our survey. We recommend a two
pronged strategy for addressing the same.
Diversifying into auto financing like Bajaj.
Tie-ups with both private and public sector banks: Our survey
showed that the potential consumers of Royal Enfield products are
inclined towards public sector banks like SBI. And for the new
light /sporty variants or models from Royal Enfield( if they plan to
launch), a tie up with private banks would be beneficial due to their
proven capability to woo the 21-30 yrs age group segment who are
the primary drivers of the motorcycle sales growth esp. for the
trendy bikes.
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9 References
The following references were used in the study and the author has
tried to mention at relevant places about the same in the document.
9.1 Textbooks
Marketing management by Philip Kotler
Advertising and consume behavior by Sutherland
& Sylvester
9.2 Web References
www.bajajauto.com
www.royalenfield.com
www.eicher.com
www.herohonda.com
www.icicibank.com
Apart from above, discussions with dealers of Royal Enfield based in
Gurgaon (NCR) also formed an integral source of information for this
report.