MARKETING MANAGEMENT II

PROJECT REPORT on Mahindra and Mahindra Motorcycle Launch

Submitted by:

Rupa Deepanju Sagar Panchal Sarath S Shashank Doveriyal Srinivasa Krishnan S

(2012261) (2012262) (2012272) (2012292) (2012312)

KLIO
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Two Wheeler market size:

The Indian two-wheeler industry is divided into three segments namely motorcycles, scooters and mopeds. Sales of the Indian two-wheeler industry were estimated at around Rs 650 billion in value terms and 15.4 in volume terms at the 2011-12. The industry has posted healthy growth over the past 5 years, growing at a CAGR of 15 per cent and 12.7 per cent, in value and volume terms respectively. In volume as well as value terms, motorcycles lead the two-wheeler market. In 2011-12, share of motorcycles in sales volumes was 77.6 per cent. The two wheeler industry is dominated by three players - Hero MotoCorp, Bajaj Auto and TVS Motors together contribute around 80 per cent of the domestic sales volumes. Over last 5 years, the domestic industry has clocked a growth at a CAGR of 11.3 per cent during 200708 to 2011-12.

Motorcycles segment continue to rule the market

Motorcycles can be further divided into three segments - economy, executive and premium. The economy segment comprises lower-end motorcycles (priced at Rs 30,00040,000 when launched), whereas the executive segment (launch price between Rs 40,00050,000) and premium segment (launch price higher than Rs 50,000) constitute higher-end motorcycles. The share of the economy segment in total motorcycles sales has been declining gradually over the last few years, falling from 33.1 per cent in 2007-08 to 23.7 per cent in 2011-12, as players are shifting their focus to 110-125 cc motorcycles. This has led to increase in share of the executive segment to total motorcycles sales from 53.4 per cent in 2007-08 to 57.9 per cent in 2011-12. The share of the premium segment has gone up to 18.4 per cent in 2011-12 from 13.5 per cent in 2007-08. Hero MotoCorp, the market leader, holds a dominant market share of per cent and 68.7 per cent in the executive segment and economy segment respectively; whereas Bajaj Auto leads the premium segments with a market share of around 42.1 per cent. Global players - Honda, Yamaha and Suzuki - have been expanding their presence in the Indian motorcycles segment. Combined share of the three players has increased significantly from 7.4 per cent in 2007-08 to 11.7 per cent in 2011-12.

TWO-WHEELER: PLAYER-WISE SHARE IN DOMESTIC SALES

HMSI is emerging as a strong player and has intensified the competition in domestic market. Domestic sales of HMSI have grown at CAGR of 23.6 per cent during 2006-07 to 2011-12 and has a market share of 14.9 per cent as on 2011-12. HMSI gained market share, due to strong volumes from its model launches in the executive and premium motorcycles segments as well as healthy growth in scooters. Foreign players like Yamaha Motors and Suzuki Motorcycles India are still struggling to gain a substantial market share. Mahindra & Mahindra Ltd also entered the two-wheeler industry with the acquisition of Kinetic Motors in 2008-09. However, it is yet to gain a substantial market share in domestic market.

Two Wheelers: Player-wise growth in domestic sales

Motorcycle sub-segments
The motorcycle segment is further classified into economy, executive and premium segments depending on engine capacity and the price the model at the time of launch. As of 2011-12, the executive segment accounts for the largest pie with a share of 64.5 per cent while economy and premium segments accounts for around 18.4 per cent and 17 per cent respectively.

Economy Bajaj Auto holds a dominant market share of 46 per cent in total economy subsegment as it has strong presence (around 75 per cent share) in exports of economy segment. Whereas, Hero MotoCorp holds leadership position in domestic economy segment with its model CD Dawn Dlx. It is the company's largest selling model which accounts for 42 per cent of domestic economy segment which are mainly sold in rural and semiurban areas where the company has strong presence.

Economy segment: Player-wise total market share Executive Hero MotoCorp continues to be the leader with around 66 per cent market share in the sub-segment. Its two major selling models i.e. and - constitute over 60 per cent of the total sales volumes in the executive segment. However, Splendor Passion the company has been losing market share due to capacity constraints as well as new model launches by its peers. Over the past five years, HMSI gained maximum market share of around 5 per cent with variant launches and expansion of dealership in the executive segment. Bajaj Auto launched Discover 150 and Boxer 150 which enable it to gain market share in last three years. TVS Motors also re-launched its model Flame, Victor and a new model - Jive in the last two years, but was unable to garner any significant market share in the executive segment given lackluster feedback to new launches and limited distribution reach. Despite its technical expertise, Yamaha Motors has so far been unable to grab any market share in the executive segment.

Executive segment: Player-wise total market share Premium Bajaj Auto had re-launched its major selling models in the premium segment (Pulsar 150, Pulsar 180 and Pulsar 220) offering more features in last two years. This enabled Bajaj Auto to gain market share in premium segment from 45.3 per cent in 2009-10 to 47.3 per cent in 2011-12. However, over last five years, Bajaj Auto has lost maximum market share of around 5 per cent mainly to Yamaha Motors. Hero MotoCorp and TVS Motors also launched an advanced version of their models in last couple of years but were unable to gain market share in the premium segment. The only player who has garnered significant market share (around 15 per cent) over the last 5 years in the segment is Yamaha Motors with major new launches like FZ 16, SZ and Fazer.

Premium segment: Player-wise total market share

GROWTH IN RURAL MARKET:

The growth in two-wheeler demand would be aided by rapid increase in the number of addressable households in the rural market and higher penetration levels in urban markets. During the past five years, the addressable household (defined as number of households above the threshold income for a motorcycle of Rs 90,000, excluding inflation adjustment) in urban and rural India is estimated to have grown annually by around 10 per cent and 20 per cent, respectively. During 2009-10 to 2014-15, the increase in relevant households is expected to be at a slower pace, with urban households growing at around 4 per cent and rural households at 7 per cent, annually. Increasing model launches, attractive financing options and price points will aid increase in penetration levels in the urban addressable market. But the incremental demand for two-wheelers would largely come from rural markets with lower motorcycle penetration and strong growth in the number of rural addressable households.

Factors affecting rural incomes (direct and indirect)

Value of crop output: Is a direct measure of farm income levels which is calculated as a sum product of crop production and their prices: Crop output: Production of four major crops - wheat, rice, cotton and sugarcane MSP and wholesale prices: Minimum support prices (MSP) used for production procured by government and wholesale prices for production sold in mandis.

Agricultural credit: Agricultural credit allocated by the government in the Union Budget for the agricultural sector. This includes only credit to farmers and not salaries to PSUs. It is an indirect measure influencing purchasing power and hence has a multiplier impact on income generating ability of a farmer.

Government initiatives: Initiatives taken by the government for rural development

Loan waiver: Agricultural debt waiver and debt relief scheme announced by the Government in 2008. NREGA: The National Rural Employment Guarantee Scheme (NREGA) was launched in February 2006 and currently covers 614 districts across the country. The objective of the Act is to provide every rural household with a guarantee of at least 100 days of employment during a financial year by providing opportunities for unskilled manual work. Expenditure on rural development: In terms of roads, bridges, expenditure on schools, education, health, among others.

These measures provide balance sheet strength to a farmer and schemes like NREGA and rural development enhance non-farm income capabilities of rural India.

Further, appreciation in land prices in rural areas in the past five years has had a positive effect on the borrowing capacity of the farmer, as it acts as a cushion for the banker and his confidence in lending to the farmer increases.

All the above mentioned schemes will continue to have a positive effect on farmers' income in the coming years. Over the last five years (2004-05 to 2009-10), farm purchasing power posted a CAGR of 19 per cent, attributable to the above mentioned factors. Over 50 per cent of rural households currently lie below threshold income levels, indicating greater scope for migration of households into higher income segments. Over 50 per cent of rural households yet to attain motorcycle affordability.

Rural total households, addressable market size and penetration levels

Short-term segmental demand

Growth to decelerate in 2012-13 with slowdown in rural sales.

Within the two-wheeler industry, the motorcycle segment is expected to grow by 5-7 per cent in 2012-13 as against 11.9 per cent in the previous year. The GDP growth forecast for 2012-13 currently stands at 5.5 per cent as against 7 per cent forecast at the beginning of the year. More importantly, agricultural GDP growth is expected to slow to 'zero' per cent as against 3 per cent projected earlier owing to drought conditions in major states. This bleak outlook on farm incomes would significantly hamper motorcycle sales since over 40 per cent of the demand is derived from rural areas, and more importantly majority of incremental volumes have been driven by rural areas in the past 12 months, while urban demand has continued to post meagre growth. Supply-side factors like an improving finance scenario and higher rate of new product launches would provide some impetus to demand. In 2010-11, however, twowheeler financiers launched innovative products like direct cash collection (DCC) and low internal rate of return (IRR) schemes. This led to greater affordability and aided the growth of players in semi-urban and rural areas. However, in 2011-12, high interest rates and higher risk premiums within the two-wheeler finance market limited the growth in finance penetration levels and eliminated the finance-led impetus to demand seen in 2010-11.

Finance penetration is expected to trend upwards again as the interest rate cycle turns and players continue to pursue finance-led growth aggressively in an attempt to garner market share in non-metro areas. To summarise, domestic two-wheeler sales growth is expected to continue moderating in 2012-13 given negative cues on rural incomes and continuing sluggishness in urban demand. Consumer sentiment remains weak across all segments given the negative macro-economic cues, high fuel prices and inflationary expectations. The bleak outlook on farm incomes would significantly impact motorcycle sales wherein growth is largely driven by rural demand.

Long-term segmental demand

Motorcycles: Rural demand to drive sales over the long run

Motorcycles: demand trend We expect rural motorcycle sales to grow at 14-16 per cent during 2011-12 to 201617, due to factors like strong growth in farm and non-farm incomes, greater potential for migration into higher income brackets, infrastructure penetration etc. Over 50 per cent of rural households are yet to migrate into the motorcycles addressable market as of 2011-12 (as per internal estimates). Motorcycle penetration (as a percentage of the addressable market) has actually declined in rural markets over the last 5 years (despite an increasing share in higher sales) owing to the exponential growth in the addressable base, which has grown at a robust 14-16 per cent CAGR. Being under-penetrated at 26-28 per cent, the rural market provides ample potential for growth. Hence, we expect a greater part of incremental motorcycle demand to come from rural markets; rural motorcycle penetration levels are expected to rise to levels of 40-42 per cent. Even at the end of 2016-17, around 3035 per cent of rural households would still lie below motorcycle threshold income levels, signalling continued scope for growth in those markets until 2020.

BUYING BEHAVIOR OF RURAL CONSUMERS

To understand the buying behaviour of rural consumers, we must go to the factors that influence their buying behaviour. The factors include: 1. 2. 3. 4. 5. Cultural environment. Geographic location. Education/literacy level. Usage. Involvement of others in the purchase.

Some of these points are discussed in some detail below:

1. INFLUENCE OF CULTURE:
Culture and tradition influence perception and buying behaviour. For example, the preference in respect of colour, size and shape is often the result of cultural factors. Rural consumers perception of products is strongly influenced by cultural factors.

2. GEOGRAPHIC LOCATIONS:
Rural consumer behaviour is also influenced by the geographic location of the consumers. For example, nearness to feeder towns and industrial projects influence the buying behaviour of consumers in the respective clusters of villages. To cite one more example of how geographic location affects buying behaviour, we can point out the fact that the lack of electricity in many rural households acts as a barrier to the purchase of certain consumer durables.

3. EDUCATION/ LITRACY LEVEL:

Literacy level of the customers plays an important role in making the final decisions. Actual purchase is made after consulting the educated people among the group. In case of bikes the young people between the ages of 20 to 40 is consulted. 4. USAGE: The situation in which the consumers utilize the product also influences their buying. Since rural consumers cannot use washing powders/detergent powders that much, as they wash their clothes in streams or ponds, they go in more for washing bars and detergent cakes. Similarly in case of bikes, five factors motivate the consumers in their purchase decisions. These were fuel efficiency, maintenance cost, price, image and warranty. Rural customers expect it to be in functional class (i.e.) they expect more ruggedness and durability in uneven roads.

5. INVOLVEMENT OF OTHERS IN THE PURCHASE:

The elderly person of the family usually will play the role of Decision maker while purchasing bike. Apart from head of the family, others play the role of Influencers in the purchase decision. An increase in literacy coupled with greater access to information has resulted in this development. The marketer has to reckon the role of the influencers while sizing up the buying behaviour of rural consumers. All the above factors influence the buying behaviour of rural consumer and their responses to marketing mix variables and reference points they use for purchase decisions.

MAHINDRA & MAHINDRA Overall Company Profile:

The following data provide the income and the growth of the various sectors of the company during the year 2011-12. The Automotive and Farm Divisions of the company have recorded a growth of 35.3%, thereby increasing the net income from Rs.23,894 to Rs.32,319 crores. The income of Mahindra Finance grew by 41.3 per cent to Rs.2,794.6 crores for the year ended 31st March, 2012 as compared to Rs.1,977.5 crores. Mahindra Forgings Ltd. registered a total income of Rs.43,468 Lakhs as against Rs.36,002 Lakhs in the previous year registering a growth of 21%. Mahindra Lifespace Developers Limiteds total income as a standalone entity was Rs.52,112 lakh as compared to Rs.50,685 lakh in 2010-11. Club Mahindras total income grew at 19 per cent from Rs.53,416 lakh in 2010-11 to Rs.63,658 lakh in 2011-12. Mahindra Satyam recorded a total income Rs.59,643 Million from operations. Tech Mahindras consolidated revenues increased to Rs.54,897 Million from Rs.51,402 Million in the previous year, at a growth rate of 6.8%. Mahindra Ugine Steel Company Limited registered a total income of Rs.1541.52 crores from Rs.1342.91 crores at growth rate of around 15%.

STP Analysis:
Segmentation: Based on
Demographic: Age Gender Income Occupation

Geographic: Region

Psychographic Lifestyle Opinions and interests Benefits sought Usage

Behavioural Attitude

Targeting
Age: 25-50 yrs. This groups purchase decisions were primarily focussed solely on price and mileage. Brand name is given high moderate importance in making the purchase decision with maintenance and service quality taking the back seat. This can be explained by the fact that due to rising income levels, people prefer buying a new motorbike than repairing an old one. The cost-sensitive consumer who would put that on a high importance list seems to be markedly absent and the market scenario seems to suggest a change but more study needs to be done to make any credible conclusions. The data collected from the dealers confirmed the above inclination of the young population as the maximum bikes sold by the 3 dealers in last 6 months to the age group (25-35) are high power bikes mostly of more than 150CC and to the age group (>35) are bikes less than 135CC. The above results are also supported by the dealers survey result where the only thing we could make out extra is the colours of the bike which dealers rated as a very high influence factor. Gender: Males Income: <30,000/Mileage and maintenance get a huge importance along with brand name. The price-sensitive consumer seems to prefer a lower running cost over initial purchase and driving comfort seem to be getting a due importance due to changes in perceptions among the consumer group. Occupation: Working class Region: Rural and semi-urban. Benefit sought: Basic transportation with higher fuel economy and lower operating costs.

Positioning:
Klio will be positioned as M&Ms next rugged automobile series. M&Ms core competencies like ruggedness, reliability and resilient with better mileage at very affordable price, will be the positioning factor. Also the performance, price and the date of launch of the vehicle can be used for positioning.

Date of Launch:
The date of launch is November 1st 2012 because the product is purely focused on rural areas and the rural population will be interested to buy the bike around this time perceiving that due to festival season people must be willing to buy the bike.

Differentiation:
FEATURES
Name: Type: Top Speed: Fuel Consumption: City Fuel Consumption: Highway

ENGINE SPECIFICATIONS KLIO 125

Commuter 107kph 53 67 Displacement: Engine: Maximum Power: Maximum Torque: Gears: Clutch: Bore: Stroke: No. of Cylinders: Cylinder Configuration: Valve Per Cylinder: Engine Block Material: Chassis Type: Cooling Type: Carburetor: 0 to 60: 124.6cc 124.6cc, 4-stroke 12.7 Bhp @ 9000 rpm 11.2 Nm @ 7000 rpm 5 Speed Wet Multi Plate Type 0 0 1 NA 4 NA Semi Double Cradle Frame Air Cooling NA 5.91 sec.

ACTIVE AND PASSIVE SAFETY

Suspension(Front): Suspension(Rear): Brakes: Brakes(Rear): Stand Alarm: Telescopic Fork Nitrox Monohock 200mm Petal Disc 130mm Drum Locked gear type when stand is not withdrawn

COMFORT AND CONVENIENCE

Fuel Guage: Self Start: Tacho Meter: Trip Meter: Alloys: Warranty: Speedometer: Passenger Footrest: Passenger Backrest: Step-up Seat: Pass-light: Low Fuel Indicator: Low Oil Indicator: Low Battery Indicator: High Oil Temp. Indicator: Choked Air Filter Indicator: Analogue yes None None NA Digital yes None None yes yes yes yes none None

OTHER SPECIFICATIONS
Weight: Ground Clearance: Fuel Tank: Wheelbase: Electrical System: Headlamp: Battery Type: Battery Voltage: Battery Capacity: Horn: Wheel Type: Wheel Size: Tubeless: Colors: 122.00 kg 170.50 mm 10.00 ltrs 1305.00 mm DC Ignition, Digital CDI 35/35W Maintenance Free 12V 5Ah 0 3-spoke Alloys 2.75x17" - 3.00x17" mm Yes Blue, Black, Grey, Red

4 Ps Analysis:
PRODUCT
It will be a 125 cc bike, with mileage 60 to 65 Kmph Primary colors like red, green and blue will be the preference. It will be in functional class in which features are given more importance. Digital meters, Mono-shock rear suspension, petal disc break, anti-vibration frame, self-start will be the points of parity. It will be priced between Rs. 40,000 to Rs. 45,000 It will be in the class of Executive bikes. Price will target the middle income and upper middle income groups.

PRICE

PLACE
It will be launched in most of the rural markets in India. Semi urban and rural markets will be the main target.

PROMOTION
Ruggedness of the bike will be portrayed in all the advertisements. The strong brand image of Mahindra tractors in rural markets will be used. Opinion leaders will be the target in advertisements, as they play the important role of influencers in the purchase decisions. Age group between 20 to 40 will be the target customers. Advertisements will display how the bikes will help people in self-employment, as this feature will closely relate to the target customers. Sponsorship will be done for events involving rural games. Mahindra Finance will be linked for easy financing of bikes. As rural and upper & middle income level, want lower operating cost. So, promotion will be focused on easy availability of service station and repair.

Conclusion:
Acquisition of the business assets of the Kinetic Motor Company in 2008 gave Mahindras a smooth entry into the Two-wheelers Market. This brought them to the fullcircle in their portfolio of transportation solutions. Given the current market scenario, we see a huge potential in the rural and semi-urban market for the launch of the new motorcycle as they are coming up as major demand drivers for bikes in the country. More than 70% of the population lives in rural and semi-urban areas. With the increasing urbanisation and thus, the purchasing power of the people in rural areas and saturating urban markets, we see rural and semi-urban market as the potential market. Above all, targeting rural market can be seen as capitalising on the brand name of Mahindra & Mahindra which is like a household name due to the expansive presence of Mahindra tractors.

References:

http://www.mahindra.com/ www.mahindra2wheelers.com/ india.wsj.com crisil.com icra.com http://www.wbiconpro.com/ http://www.siamindia.com/