Study of Consumer Buying Behaviors and Perceptions in Gearless 2-Wheeler Segment

Section: Finance

GROUP 1

Team Members Ankit Rungta (10FN-016) Akanksha Singh (10FN-008) Chandan Rathor (10FN-033) Aditya Singh (10FN-005)

Executive Summary
Objective: To study the buying behaviour of the Indian consumer for gearless 2-wheeler segment and analyze the same to get insights into consumer psychographics and demographics. Type of research: Primary research Methodology: A questionnaire was prepared and a survey was conducted to study attribute importance and profile of consumers interested in the gearless 2-wheeler segment. Factor analysis was also done. Demographics: 57% of the respondents were female and 43% male Roughly 45% of the respondents covered were students The average respondent was single, female, a student of less than 25 years of age and belonging to the upper middle-class The data collected was mined/analyzed for deeper insights into consumers psychographic profiles, buying behaviour, important decision-making criteria and preferences. Some conclusions follow Respondents belonging to the lower-middle-class showed a majority of 75% who would consider buying a scooty and 21% not interested 50% of male respondents were interested in scooties while 71% of female respondents showed their support for the segment Only a minority of 22% relate scooties to the value propositions offered by Hero Honda Pleasure viz. girls, style and fun The ego-defensive function is satisfied for another 16% of respondents by scooty as a product

CONTENTS

References ..26

Acknowledgements

We would like to express our sincere thanks to Assistant professor Dr. Bikram Jit Rishi for his constant encouragement and guidance during this project. He has been a constant source of inspiration and has helped us at each step of the project. He has been very kind and patient while suggesting us the outlines of this project and correcting our doubts. We are highly grateful for all the time and effort he put in for discussions and reviews. His constructive criticism of approach to the problem and the result obtained during the course of this work has helped us to a great extent in bringing our work to its present shape. We would also like to show our gratitude to all the people who participated in the survey conducted and, despite their busy schedules took pain to fill the questionnaire. Without them we wouldnt have been able to do any analysis and are highly indebted to them.

Introduction

The Macro View: The automotive industry in India is one of the largest in the world and one of the fastest growing globally. India manufactures over 17.5 million vehicles (including 2 wheeled and 4 wheeled) and exports about 2.33 million every year. It is the world's second largest manufacturer of motorcycles, with annual sales exceeding 8.5 million. As of 2010, India is home to 40 million passenger vehicles and more than 3.7 million automotive vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second fastest growing automobile market in the world. A total of 9.4 m two-wheelers were sold in India in FY10, a growth of a strong 27% over the previous year. Motorcycles accounted for 78% of the total two wheelers sold. Although economic growth came in much below than 9%, low interest rate, availability of credit and a low based effect helped two wheeler sales to grow strongly. The scooters (geared & ungeared) improved their sales considerably, largely due to improved performance of the ungeared scooter segment. Key Players: The largest player in the two wheeler industry for eight consecutive years, Hero Honda commands a lion's share in the category. It has a market share of 41.35% and volume size of 37.2 lakh units in '09-'10. The second largest player in the industry is Bajaj Auto which registered a growth of 25% in volumes by selling 24.02 lakh units in '09-'10. The company saw its two wheeler market share touch 26.70% in 09-10. TVS Motors cornered a market share of 18.94% backed by sales of 17.04 lakh units. In addition to the 'big three' there are a number of small players fighting for salience viz. Kinetic, Yamaha, Suzuki, LML etc. In a nutshell the followings factors can be distinguished for the growth of 2wheeler industry in India: 1) Easy accessibility to cheap consumer loans 2) The increase in the average income of the family. 3) The reduction in duties and taxes.

4) Convenience with regards to commuting as compared to the public transport system. 5) Continuous innovations in technology making the bikes economic and fuelefficient. 6) The first choice among youths and teenagers. Market Share:

Source: Indian Auto Industry Two-wheeler Segment in India by indiareports.in on February 20, 2010

Research Methodology

Type of Research: 1) Primary Survey to gain insight into the buying behavior and perception in the gearless two-wheeler segment 2) Secondary A study of current marketing practices with focus on Hero Honda Pleasure to relate to insights gained from survey

Questionnaire Design: No of distinct questions = 14 Reverse flowerpot approach used for structure(Closed-ended to Openended questions) Demographic profiling done (5 questions) Attitude towards the segment (4 questions) Attitude towards and perception of the brands (2 questions) Cognitive needs and perceptions of respondents (2 questions with series of attributes on the Likert scale)

Sampling: Type of Sampling: Convenience sampling (online) No of respondents: 37 Statistical Tools Used: SPSS for Factor Analysis

Observations

Demographic Profile

Summary: 21 female and 16 male respondents A decent mix of professions dominated by students at around 46% Sample is skewed towards youngsters with 26 respondents at 25 years or below. However, this is relevant for this particular study as Hero Honda Pleasure focuses on the youth segment, in particular, the young girls. Effectiveness/ineffectiveness of current communications of the brand may be roughly estimated 78% unmarried respondents. However, this study does not attempt to study the marital status demographic as it seems less relevant for the category. 65% belonged to the lower-middle class while 35% belonged to the uppermiddle class. It is assumed that the people interested in buying scooties would belong to the middle class in almost all cases. The segregation into the two sub-classes was achieved based on the ownership of products and assets like car, AC, house, etc.

Attitude towards the scooty segment

Summary: Overall, 62% of the respondents said they would consider buying a scooty, while 30% would not consider buying a scooty and 8% undecided Respondents belonging to the lower-middle-class showed a majority of 75% who would consider buying a scooty and 21% not interested On the other hand, the upper-middle-class shows milder interest at 38% while 46% would not consider buying scooties at all The disparity of opinion between the two sub-classes may be attributed to prior ownership of substitutes like car and motor-cycles in the uppermiddle-class segment

 50% of male respondents were interested in scooties while 71% of female respondents showed their support for the segment The figures for female interest may have been lower due to lower interest in the upper-middle-class or dissatisfaction with past performance. There were also a few respondents worried about road safety.

Frequency of Use

The frequency of use is based on the experiences of users of scooties and

expectations/requirements of potential buyers. As much as 70% of the respondents showed some requirements and could indicate greater market potential. It must also be considered that some of these requirements are currently fulfilled through competitor products or substitutes like cars, motorcycles, scooters and other scooties

Factors influencing Motivation

Only a minority of 22% relate scooties to the value propositions offered by Hero Honda Pleasure viz. girls, style and fun 78% of respondents were interested in scooties because of its utilities or just because they need it This may indicate a flaw in the current marketing strategy of Hero Honda Pleasure, not to mention other brands in the segment, most of which use the indirect approach of communication. We must not consider the only-for-girls strategy a failure outright. It must be noted that Hero Honda Pleasure gauged consumer perception and realized that while motorcycles where targeted at men, no vehicle appealed to women directly. The innovative strategy of Pleasure, launched in 2006 was closely imitated by several competitors. Pleasure gained a respectable market share, offering stiff competition to established brands like TVS Scooty Pep and Honda Activa. Hero Hondas biggest innovation was to set up showrooms exclusively for women. Just 4 Her is staffed entirely by young saleswomen and intended to make customers feel comfortable they can even take a test drive away from a male sales clerks condescending eyes.

 Pleasure scooters which cost about Rs43,000 ($970) account for over 26,000 of the more than 400,000 two-wheelers that Hero Honda sells each month. About 10 per cent of sales are made through the Just 4 Her showrooms. However, it is perhaps time to look beyond the young girls for a larger customer base

Word-Association Tests Two open-ended word association questions were put to the respondents to gain a preliminary insight into the attitude of customers towards scooties and their perception of the Pleasure brand.

The stereotype of scooty for women seems to become less popular, with only 16% relating scooties to women The ego-defensive function is satisfied for another 16% of respondents by scooty as a product 46% however view the scooty simply for its utility and requirement in daily life

 A respectable 68% hold a positive to very favorable perception towards

Pleasure as a brand 19% of respondents have an indifferent or negative stance, possibly due to non-requirement of the product or past dissatisfaction 14% of the respondents could not be categorized into positive and negative opinionated groups due to vague responses

Brand Recall

It is found that respondents were more familiar with brands like Honda
Activa and TVS Scooty than Hero Honda Pleasure. Nevertheless, around 65% of respondents recalled Hero Honda Pleasure as a brand compared to over 90% respondents recalling TVS Scooty and Honda Activa

 The hiring of Priyanka Chopra as brand ambassador has been relatively

more effective than other competitors using celebrities. Around 66% of respondents remembered the Hero Honda Pleasure advertisement.

Factor Analysis
The data obtained through the questionnaire administration was subject to various analyses to understand its validity and infer some meaning out of them. Data Analysis using SPSS: KMOs adequacy test and Bartletts Test of Sphericity:

The Kaiser-Meyer-Olkin measure of sampling adequacy tests whether the partial correlations among variables are small. Bartlett's test of sphericity tests whether the correlation matrix is an identity matrix, which would indicate that the factor model is inappropriate. The KMO measures the sampling adequacy which should be greater than 0.5 for a satisfactory factor analysis to proceed. Another indicator of the strength of the relationship among variables is Bartlett's test of sphericity. Bartlett's test of sphericity is used to test the null hypothesis that the variables in the population correlation matrix are uncorrelated.

Case Processing Summary N Cases Valid Excludeda Total 37 0 37 % 100.0 .0 100.0

a. Listwise deletion based on all variables in the procedure.

Reliability Statistics

Cronbach's Alpha N of Items .848 10

KMO and Bartlett's Test Kaiser-Meyer-Olkin Sampling Adequacy. Bartlett's Sphericity Test Measure of Approx. Square df Sig. of .617 Chi- 164.9 67 45 .000

Interpretation: KMOs test: Value of KMO is above 0.5 hence we can accept the sample taken as adequate ( as per Kaiser (1974)) Bartletts test: The observed significance level is .0000. It is small enough to reject the hypothesis. It is concluded that the strength of the relationship among variables is strong. It is a good idea to proceed a factor analysis for the data. Total Variance Explained Initial Eigen values Extraction Sums Squared Loadings of Rotation Sums Squared Loadings of

% of % of % of Compon Tot Varian Cumulativ Tot Varian Cumulativ Tot Varian Cumulativ ent al ce e% al ce e% al ce e% 1 2 3 4.32 43.208 43.208 1 1.35 13.556 56.764 6 1.25 12.519 69.283 2 4.32 43.208 43.208 1 1.35 13.556 56.764 6 1.25 12.519 69.283 2 2.72 27.256 27.256 6 2.34 23.464 50.720 6 1.85 18.563 69.283 6

4 5 6 7 8 9 10

.833 8.333 77.616 .643 6.428 84.044 .515 5.154 89.198 .437 4.374 93.573 .385 3.848 97.421 .141 1.413 98.834 .117 1.166 100.000

Extraction Method: Principal Component Analysis.

Interpretations: This shows that there are 3 factors which have now been formed (1.00 being the threshold value to include a factor).

Rotated Component Matrixa Component 1 2 3

Which of these following features .817 should your Scooty have? [Should be a reputable brand] Which of these following features .730 should your Scooty have? [Should be comfortable] Which of these following features .686 should your Scooty have? [Should be affordable] Which of these following features .677 should your Scooty have? [Should have good mileage] Which of these following features .605 should your Scooty have? [Should be stylish] Which of these following features .252 should your Scooty have? [Vehicle financing options should be available] Which of these following features .249 should your Scooty have? [Special promotional offers should be available] Which of these following features should your Scooty have? [More storage space] Which of these following features .164 should your Scooty have? [Higher top speed] Which of these following features .260 should your Scooty have? [Range of colors]

.136

.291

.397

.560

.449

.200

.827

.774

.235

.632

.606

.825

.289

.707

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 10 iterations.

Interpretations: Shows which question of the questionnaire are part of which variable. For eg first five question forms one factor which is later named value for money.

Total Variance Explained Extraction Sums of Squared Rotation Sums of Squared Loadings Loadings Comp onent Cumulative % 1 2 3 43.208 56.764 69.283 Total 2.726 2.346 1.856

Extraction Method: Principal Component Analysis.

Component Matrix Comp onent 1 1 2 3 .691 -.272 -.670 2

Transformation

3 .411 .910 .055

.594 -.313 .741

Component Matrix Comp onent 1 1 2 3 .691 -.272 -.670 2

Transformation

3 .411 .910 .055 Principal

.594 -.313 .741

Extraction Method: Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

From the above factor analysis, it can be found that 3 relevant factors could be extracted from the research data. These factors are formed by a unique combination of variables. The list of factors and the variables that are a part of the factors are as follows: Sno Relevant factors Value for money 1 Original questions 1. Which of these following features should your Scooty have? [Should be a reputable brand] 2. Which of these following features should your Scooty have? [Should be comfortable] 3. Which of these following features should your Scooty have? [Should be affordable] 4. Which of these following features should your Scooty have? [Should have good mileage] 5. Which of these following features should your Scooty have? [Should

be stylish] 2 Value Added Features 1. Which of these following features should your Scooty have? [Vehicle financing options should be available] 2. Which of these following features should your Scooty have? [Special promotional offers should be available] 3. Which of these following features should your Scooty have? [More storage space] 3 Ego-Defensive Features 1. Which of these following features should your Scooty have? [Higher top speed] 2. Which of these following features should your Scooty have? [Range of colors]

Recommendations We may make some reasonable assumptions about Hero Honda Pleasures
reach to customers at different stages in the technology adoption lifecycle Pleasures customer base consists of at least the innovators and the early adopters It is also reasonable to presume that some measure of the early majority has also been captured for the segment based on Pleasures performance till date However, the early majority for the category most probably encompasses all women fit to ride a vehicle It would make sense to open up the target segment to involve more than the young woman Attitude towards the category suggests that the most overwhelming motivation for buying a product like Hero Honda Pleasure is its utility. Some direct communication, even if interspersed with the indirect communication used by Pleasure presently, may be effective Hero Honda Pleasure may also look at reestablishing itself as a unisex brand, or launch a for-males counterpart to Pleasure, targeting men with a view to increasing customer base. For this particular strategy, launching a male-counterpart model would be better so as to not eat into Pleasures current market share. However, this might be difficult in the absence of availability of capital. Although the brand may look at either of the two strategies discussed above and choose one course of action However, the preliminary evidence suggests a bias towards motivation by cognitive features and it may be a good idea to follow the technology adoption lifecycle and first enlist the support of older women.

References

https://www.indiastat.org/ http://www.wikipedia.com Comstat 2007 from (www.fcbulkconstrat.com) Hero Honda Official Website www.consumerpsychologist.com/ marketingteacher.com//lesson-defining-consumerbehavior.html