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 two-

stage 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.

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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 4(24) 4.16(16.667)Total 96 100

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


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


2. Influencing Role on the Brand selection.

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Influencing factors

No. of respondents

Percentage( % )

Family members 56(24) 58.34(42.667)

Friends / relatives

31(24) 32.29(2.047)

Media 5(24) 5.20(15.047)

Sales person at showroom

4(24) 4.16(16.667)

Total 96 100

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


X2 Cal= 76.428




Hence, there is Significance relationship between sources of influencing factors on


3. Person accompanying at the Time of Purchase.

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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




Hence, there is Significance relationship between sources of Person accompanying at

the time of purchasing vehicles.

4. Factors Influencing the Purchase Decision.

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Preferences No. of respondents Percentage ( % )

Mileage 35(24) 36.46(5.042)Quality 25(24) 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


X2 Cal= 45.501




Hence, there is Significance relationship between sources of preferences factors


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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.

Appendix

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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

Q5. What were the sources of information about vehicles?

Friends\Relatives

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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

BIBLIOGRAPHY

Wikipedia search: (www.wikipedia.com)

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www.mouthshut.com

www.studygalaxy.com

www.decisionanalyst.com

www.studymode.com

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