Consumer Behaviour - A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market

A study of the relevance of consumer “perception” in the A2- segment of the Indian passenger car market Group assignment for Consumer Behaviour INDIAN INSTITUTE OF MANAGEMENT, BANGALORE September 17, 2009 Authored by: Amardeep Verma (0910003) & Gopalakrishnan D (0910021) Executive Post Graduate Programme (EPGP)

Table of Contents INDIAN AUTO INDUSTRY OVERVIEW .............................................................................. 2 BRAND ANALYSIS .......................................................................................................... 4 A. SUB-COMPACT ................................................................................................... 5 B. COMPACT ........................................................................................................ 6 C. PREMIUM COMPACT ............................................................................................ 8 D. SUPER HATCH .................................................................................................... 9 APPLICATION OF CONCEPTS OF PERCEPTION TO BRANDS................................................ 10 CONCEPT #1: SENSATION .............................................................................................. 10 CONCEPT #2: ABSOLUTE THRESHOLD ................................................................................ 11 CONCEPT #3: DIFFERENTIAL THRESHOLD ........................................................................... 11 A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 CONCEPT #4: PERCEPTUAL SELECTION .............................................................................. 11 CONCEPT #5: FIGURE AND GROUND ................................................................................. 11 CONCEPT #6: GROUPING .............................................................................................. 11 CONCEPT #7: CLOSURE ................................................................................................ 12 CONCEPT #8: PERCEPTUAL INTERPRETATION ...................................................................... 12 CONCEPT #9: CONSUMER IMAGERY .................................................................................. 12 CONCEPT #10: POSITIONING BASED ON SPECIFIC BENEFIT......................................................... 12 CONCEPT #11: PERCEIVED QUALITY ................................................................................. 12 CONCEPT #12: PERCEPTION OF RISK ................................................................................. 13 MARKETING STRATEGY TO LAUNCH A NEW BRAND ........................................................ 13 STRATEGY FOR LAUNCHING IN SUB-COMPACT SEGMENT ........................................................... 13 STRATEGY FOR LAUNCHING IN PREMIUM-COMPACT SEGMENT .................................................... 14 REFERENCES ............................................................................................................... 15 EXHIBITS .................................................................................................................... 16 EXHIBIT 01: SALES OF CARS IN INDIAN INDUSTRY FROM 1997-98 TO 2008-09. ................................. 16 EXHIBIT 02: WALLET SHARE OF INDIAN CUSTOMERS FOR TRANSPORTATION ................................... 16 EXHIBIT 03: SALES OF CAR MANUFACTURERS IN INDIAN DOMESTIC MARKET FROM 2004-05 TO 2008-09 .. 17 EXHIBIT 04: SEGMENT-WISE DOMESTIC MARKET SHARE OF PASSENGER CARS IN INDIAN MARKET FROM 2004-05 TO 2008-09 ............................................................................................................... 17 EXHIBIT 05: MODEL-WISE DOMESTIC SALES OF A2 SEGMENT CARS IN 2008-09 ................................. 17 EXHIBIT 06: SUB-SEGMENTS OF A2 SEGMENT, NO. OF VARIANTS AND EX-SHOWROOM PRICES ............... 18 EXHIBIT 07: ADVERTISEMENTS OF ALL MODELS IN A2 SEGMENT .................................................. 19 EXHIBIT 08: POSITIONING DIAGRAMS ( => POSITIONING OF NEW PRODUCT) ............................... 27 EXHIBIT 09: PRICES AND CUSTOMER PERCEPTION OF VARIOUS ASPECTS OF CARS .............................. 35 EXHIBIT 10: PRODUCT FEEDBACK BY CONSUMERS ON WWW.MOUTHSHUT.COM .............................. 36 1

A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market Group assignment for Consumer Behaviour INDIAN AUTO INDUSTRY OVERVIEW India is emerging as one of the world’s fastest growing passenger car markets. The Indian passenger A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 vehicle market, which constitutes around 80% of automobile sales, has immense growth potential as passenger car stock stood at around 11 per 1,000 people in 2008. Rising per capita income and the changing demographic distribution are conducive for growth. India has the highest proportion of population below 35 years (70% potential buyers). The total automobile industry in India is 10 million vehicles per annum. Passenger cars contribute to approximately 16% of the total automobile sales. The total automobile sales have been growing at a CAGR of 9% over the last decade whereas the passenger cars have managed to clock a growth of 12% CAGR during the same period. The sales trend of passenger vehicles is as shown exhibit 01. The reason for the wonderful growth of the passenger car industry has been the increase in the wallet share of transportation for Indian consumers and the shift in the wallet share from basic necessity to discretionary items over the last few decades. This trend is forecasted to continue (exhibit 02) as per the study done by Mc.Kinsey Global Institute and hence the passenger car industry is poised for similar consistent growth. The passenger car industry in India is very competitive with almost every prominent global manufacturer being present in the country. There are 18 passenger vehicle manufacturers as listed below: 1. Maruti Suzuki 2. Hyundai 3. Tata Motors 4. Fiat 5. General Motors (Chevrolet) 6. Ford 7. Honda 8. Toyota 9. Mahindra & Mahindra 10. Skoda 11. Mercedes Benz (Daimler Chrysler) 12. BMW 13. Hindustan Motors 14. Volkswagen 2

15. Nissan 16. Audi 17. Volvo 18. Porsche The share of sales of the 13 prominent manufacturers, for the last 5 years, is given in exhibit 03. Maruti Suzuki is the leading passenger car manufacturer in India with a market share consistently above 50% over the last few years followed by Hyundai and Tata Motors. The passenger car industry is segmented into 6 segments, from A1 to A6, depending on the length of the vehicle. This classification is done by SIAM, the Society of Indian Automobile manufacturers of India. The classification criterion (in meters) for the various segments is as given below: A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 1. A1(Mini) : < 3.4 m 2. A2 (Compact) : 3.4 to 4.0 m 3. A3 (Mid-size) : 4.0 to 4.5 m 4. A4 (Executive) : 4.5 to 4.7 m 5. A5 (Premium) : 4.7 to 5.0 m 6. A6 (Luxury) : > 5.0 m As we can see from the table in exhibit 04, the A2 segment sales comprise the majority of the passenger market share. Moreover, the contribution of the segment has been increasing consistently over the last 5 years from 60% in 2004-05 to 72% in 2008-09. Strong economic growth combined with higher disposable incomes has driven the passenger vehicle sales in the A2 segment. Hence, for our analysis, we shall study the various cars present in the A2 segment. The offerings from the various manufacturers in the A2 segment are as given below: 1. Maruti Suzuki (6 models) – Alto, Zen Estilo, WagonR, A-star, Ritz, Swift 2. Hyundai (4 models) – Santro, i10, Getz, i20 3. Tata (1 model) – Indica 4. Fiat (2 models) – Palio, Punto 5. Chevrolet (2 models) – Spark, Aveo UVA 6. Ford (1 model) – Fusion 7. Honda (1 model) – Jazz 8. Skoda (1 model) – Fabia There are a total of 60 different passenger cars offered by various manufacturers in the country of which 18 cars belong to the A2 segment itself which shows the intense competition present in the segment. Apart from Maruti Suzuki Ritz, Honda Jazz and Fiat Punto, the remaining 15 models were in the market in the last year. The 3 models mentioned here are the latest models launched in the A2 segment in the Indian market after March 2009. The sales of the various models in the A2 segment for 2008-09 are shown in exhibit 05. The pie chart for the same is given below. 3

A-Star Getz Aveo - UVA Fabia i20 Fiat Palio Fusion Spark Estillo Alto Santro i10 Wagon R Swift Indica A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 The top selling model in the A2 segment is the Maruti Alto followed by Maruti WagonR and Tata Indica. In the following sections, we shall analyze each brand, understand the positioning of each with respect to the other and understand how the concepts of “perception” are applicable to various brands. Finally, we shall attempt to develop a suggested marketing strategy to launch a new brand in the A2 segment in the Indian passenger car market. BRAND ANALYSIS As the A2 segment is the biggest segment of the Indian passenger car industry hence the segmentation within this segment is much finer and more complex than any other segment of the industry. The reason for such fine segmentation is to serve the diverse needs of customer and tap the maximum opportunity available to generate substantial volumes. We have tried to identify the sub-segment based on the price of the entry level variant of the particular model as usually the entry level or the next variant is the top selling variant for the particular model, and not the top variant. Hence, there are 4 clear sub-segments in the A2 segment. The segmentation is done on the basis of the clear price band differentials as each segment is targeted towards a different segment of customers. The 4 sub-segments and the respective price ranges (ex-showroom price) are as given below: 1. Sub-compact : < Rs.2.5 lacs 2. Compact : Rs.2.5 lacs to Rs.3.5 lacs 3. Premium compact : Rs.3.5 lacs to Rs.4.5 lacs 4. Super-hatch : > Rs.4.5 lacs After obtaining the ex-showroom prices in Bangalore for these models, the various models in each of the sub-segments and the price of the entry level variant are as per the table given in exhibit 06. The broad requirements/ priorities of customers when choosing a vehicle in each of the sub-segment is as follows: 4

1. Sub-compact a. Price b. Fuel consumption c. Brand reputation d. Dealer satisfaction 2. Compact a. Price b. Brand reputation c. Fuel consumption d. Dealer satisfaction 3. Premium compact a. Brand reputation A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 b. Price c. Looks d. Fuel consumption 4. Super-hatch a. Looks b. Brand reputation c. Price d. Comfort The data with regard to the price has been obtained from the websites of the respective manufacturers and that of the customer perception has been calculated through a combination of ratings in various auto-magazines and the customer feedback available on the website www.mouthshut.com (exhibit 10). The positioning diagrams for each sub-segment have been made by using the data collected (exhibit 08). The crude data collected, based on which the positioning diagrams are made, is given in exhibit 09. The perception maps have been prepared in the order of importance of parameter to the customers in each sub-segment. Hence, the perception maps have been made only for the relevant factors for the respective segment. Even though there are many vehicles in each sub-segment, the target consumer for each model is different. The latest advertisement of each model is given in exhibit 07. By analyzing each ad we can understand the type of consumer being targeted by each company for its respective model(s). The analysis of each model to understand its target segment and the company’s strategy with the product is discussed below. A. Sub-compact a. Maruti Alto – “Let’s Go” – “Aapka Sachha Humsafar” Targeting through ads and perception desired by company: This is the cheapest car in the segment with no other model priced anywhere close. If we see the TV commercial, then this stands out quite clearly as a new couple is depicted moving around the town in the car and having fun. The ad also has an Indian touch with the background music being in Hindi. Moreover, all the ads focus on high mileage of the product which is the second best in the segment. Hence, the company desires to create an image of it as the most economical car to 5

buy and maintain. This is targeted as the replacement for Maruti 800 which was the entry level car in the market for a long time. Target customer type: First time car buyer. Target customer demographics: Lower middle class, new couple. Age group of 25-30 yrs. B. Compact a. Maruti WagonR – “For the smarter race” Targeting through ads and perception desired by company: The TV commercial depicts an aggressive man who acts smart in difficult situations. Moreover, he is tech savvy too. In print ads the car is compared with electronic gadgets and claimed to be “smarter” than them. Hence, this was meant for customers who are pragmatic rather than more inclined towards aesthetic appeal and want a practical car which can be used for all family purposes. For this A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 very reason an LPG variant of the car was launched for customers who are concerned about the fuel costs. Target customer type: Individualistic and smart new generation. Target customer demographics: Middle class. Maybe second time buyer. Age group of 25-35 yrs. b. Maruti Zen Estilo – “Take a fresh view of life” Targeting through ads and perception desired by company: The initial ads of this model (before the recent facelift) were targeted towards the female buyers as the shape was considered to be quite feminish. Moreover, the company had brought out colours like pink and purple which were supposed to be preferred by female buyers. Hence, this product was meant to be perceived as a product for women. But, now the product is targeted towards the young city couple who want a “cute” car and desire fun. Target customer type: Was targeted towards female drivers but now towards Young couple. Target customer demographics: Middle class. Maybe second time buyer. Age group of 25-35 yrs. c. Maruti A-star – “Stop @ nothing” Targeting through ads and perception desired by company: The launch of this product was associated with a bollywood celebrity “Farhan Akhtar” who had become famous after his movie where he acts as a rock star. Hence, the product was targeted towards the typical youth who love rock music and want a stylish zippy car primarily for city use. For this reason, the car comes with the latest K-series engine of Maruti Suzuki in order to cater to the technology savvy consumers and also the car doesn’t have a large rear luggage space. Due to the superior technology the car offers the highest mileage as compared to any petrol vehicle in the Indian car market. Target customer type: Youth who love zipping in city and are technologically savvy. Target customer demographics: Middle class. Age group of 20-25 years. d. Hyundai Santro – “First car. First choice” Targeting through ads and perception desired by company: The car was the first tall boy model in the Indian car market. It was initially targeted to the young middle class who wish to associate themselves with energy and trend. It is visible from the fact that the brand 6

ambassador for Hyundai is Shahrukh Khan who is a youth icon. The product was earlier linked with bringing in and successfully marketing various new technologies to this country like the Zip drive , eRLX engine etc. But, now the product’s targeting has shifted to the first time buyer as comes our very clearly from the tag line of the product. Even the ad depicts a couple proud of purchasing Santro as their first car. For the same reason, the car was launched with a stripped down variant (without AC and Power steering) in order to position it low on the entry level price. Subsequently the economical LPG variant was recently launched. Target customer type: First time buyer looking for a popular car. Target customer demographics: Middle class. Age group of 25-35 yrs. e. Hyundai i10 – “Catch the i” Targeting through ads and perception desired by company: The i10 was launched by Santro in order to take the place that Santro had in the Indian market so that Santro could be A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 introduced as the entry level car offering from Hyundai for the first time buyers. Hence, even though the pricing of the base model is kept in this sub-segment, there are 9 variants with various “first-in-class” features like sunroof which is primarily meant for product to be perceived as a superior product. It also comes with a technologically superior engine (Kappa engine) which was introduced to attract the technologically inclined consumers. The “i” stands for innovative, intelligent and inspiring which is the image that the company wants the product and its customers to be associated with. The TV commercial for i10 shows Shahrukh Khan challenging his professor on automotive concepts by showing the vehicle. This also clearly brings out the technological prowess of the vehicle which the company wants the market to perceive. Target customer type: Repeat buyer who is inclined towards technology and styling. Target customer demographics: Middle class (targeted to upper also). Age group of 20- 30 yrs. f. Tata Indica – “More car per car” – “Changes everything” Targeting through ads and perception desired by company: This car was launched for consumers who are more focused on economy and space rather than quality and performance. It is the cheapest diesel vehicle available in the Indian market which makes the car economical to purchase and use. The tag line clearly communicates the essence of having more space inside the car which was a major USP of the product. Tata introduced the Xeta variant with smaller engine to price it closest possible to the Maruti Alto and make it the car for the first time buyer which it introduced the Vista with latest design and engines in order to position it to the upper middle class segment of the society. Target customer type: Xeta for the first time buyer and Vista for the repeat buyer who is willing to spend more for better technology and contemporary looks. Target customer demographics: Xeta for the lower middle class and Vista for the middle class. Age group of 25-45 yrs. g. Chevrolet Spark – “Full of life” Targeting through ads and perception desired by company: The TV commercials and the print ads of the product showcase the product as being lively, interactive and bubbly. The ad showcases a young college going boy who tries to impress girls by using the car while the car itself gets excited and starts winking. In order to make the customer perceive the product as being economical, the product was sold at the psychological prices of below 3 lacs 7

(i.e. 2.99 lacs) for some time. The company also gives 3 year warranty and 3 year complete free service (including labour and parts) to its customers. Recently the LPG variant was also launched. Target customer type: Young, bubbly college going crowd. Target customer demographics: Upper middle class college goer. Age group of 20-25 years. h. Fiat Palio – “The drive of the new generation” Targeting through ads and perception desired by company: The TV commercial depicts a young guy chasing a train on a parallel road to keep in sight with his better half while bringing back the nostalgia of the song “Mere sapnon ki rani……” in order to give it the Indian touch. The ad hence also focuses on the superior performance of the vehicle without making much noise by not intervening with the song. Fiat is known for its superior diesel engine A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 technology and it is what the company wants the consumers to perceive through advertisements which claim the same (“Multijet diesel”). Target customer type: Customer who wants superior diesel technology at an affordable price. Target customer demographics: Middle class. Age group of 25-35 yrs. C. Premium Compact a. Hyundai Getz – “Gets you everywhere” – “Drive global” Targeting through ads and perception desired by company: Even this product is targeted to the modern youth who want sufficient space in the car which was promoted as the USP thru various commercials of the product. The product is positioned as a successful car in Europe and positioned to customers who want a product which has proven its mettle in foreign markets. In the initial phase, the car was launched to position it in the upper spectrum of the A2 segment in terms of price but soon the poor market response (due to the showcased USP which was not unique neither was the styling contemporary) forced the company to introduce a cheaper model with a smaller engine. Target customer type: Upper middle class buyer who loves partying with friends and is looking for more space in the interior. Target customer demographics: Middle class. Age group of 25-35 years. b. Chevrolet Aveo UVA – “Bada dil, badi car” Targeting through ads and perception desired by company: All the TV commercials and print ads for this model focus on the cabin space of this product as compared to other models inn the segment. One of the ad shows a mega size chimpanzee trying to sit in the car while another ad shows an entire football team fitting inside the car to reach the venue for the match. This is also clearly evident from the tag line for the product which is mentioned above. Target customer type: Upper middle class buyer who likes Chevrolet brand and particularly wants extra space in a hatchback. Target customer demographics: Upper middle class. Age group of 25-45 yrs. c. Fiat Punto – “A bold new drive” Targeting through ads and perception desired by company: The TV commercials and print ads for this product focuses on the personality of the product and the owner as being bold. The ad portrays a confident and bold individual, and hence focuses more on the bold 8

looks of the model. The entire focus of the promotions is to make the customers perceive that the product has bold looks and hence is suited for individuals who are confident and bold in nature. In a way it wishes to challenge the personality of an individual who is seeing the advertisement. Target customer type: Buyer who wants to make a style statement and feels that he has a bold personality. Target customer demographics: Upper middle class. Age group of 25-45 years. d. Maruti Swift – “You’re the fuel” Targeting through ads and perception desired by company: All the advertisements of this product focuses on portraying the product as being peppy to drive. The TV commercial depicts a young couple having fun and feeling thrilled by taking a drive in the vehicle. Hence, the product is targeted towards the urban vibrant couple who enjoy going out on quick rides. A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 The product was very competitively priced as compared to its counterparts offered by competitors. The looks and the peppiness of the engine are the main strengths which made the product a huge success in the market. Diesel engine was introduced a few years back in this model which added to the thrill of driving this vehicle and helped carry on the peppy image in the minds of consumers. Target customer type: Urban young couple who love peppy rides Target customer demographics: Upper middle class. Age group of 25-35 yrs. e. Maruti Ritz – “Live the moment” Targeting through ads and perception desired by company: The TV commercial depicts the various features of the product which contribute to the overall aesthetic appeal. The ad showcases an individual who takes a drive away from a corporate life to a scenic location in order to enjoy the moment in which he is living. The car is positioned to those who are technologically inclined as the vehicle comes fitted with the latest K-series engine from Maruti. The ads focus a lot on the individual and encourage enjoying each and every moment. The car embodies this spirit and supposedly helps an individual in living the present moment. Target customer type: Urban working population who wish to truly enjoy every moment and not lead a monotonous life. Target customer demographics: Upper middle class. Age group of 30-45 yrs. D. Super hatch a. Hyundai i20 – “i got it all” – “the uber cool is here” Targeting through ads and perception desired by company: This comes under the category of super-hatches wherein the customer prefers a hatchback design even though it is as costly as an entry level sedan. The ad shows a high profile person being tracked by helicopters and how using this car he is able to deceive them. The ads also portray the product as being cool and contemporary. The tag line describes the product as being amazingly chic and stylish. It also tries to leverage the superior brand image of the “i”- series products launched thru i10 in India. Target customer type: Customer who likes to be seen as cool and wants to make a style statement. Target customer demographics: Upper middle class/ high class. Age group of 25-45 yrs. 9

b. Skoda Fabia – “Because you’re special” Targeting through ads and perception desired by company: The TV commercial depicts a young guy purchasing a new Fabia car. As soon as he sits in the car, the world outside him starts treating him like a king by welcoming him on red-carpet and showering flowers on him. As soon as he shuts off the engine, the ambience again turns to normal. Hence, the car depicts that Skoda Fabia customers will have a royal feel on driving this vehicle. Even the print ad shown in the exhibits depicts the “royal” treatment part of ownership of the vehicle. Target customer type: One who likes to be treated as special and wants to be respected like a “king”. Target customer demographics: High class. Age group of 25 to 45 yrs. c. Ford Fusion – “The no-nonsense car” Targeting through ads and perception desired by company: This car is positioned to A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 consumers who frequently go on wild trails and outstation trips. The ad depicts the capability of the car to be able to accommodate all items required for a picnic/ trekking trip and also shows the capability of the vehicle to move over uneven terrain. The tag line wishes to make the customer perceive that the car is very practical rather than being flashy. The car is typically a cross over between an SUV and a car. Target customer type: Family person who wants a car for both daily commuting and outdoor trekking trips. Target customer demographics: High class. Age group of 35-45 yrs. d. Honda Jazz – “One life. Why so serious?” Targeting through ads and perception desired by company: This is the costliest hatch-back car in the Indian market and hence is purely targeted to buyers who buy a hatch because they appreciate Honda’s quality. The ad depicts a young couple moving around the city and all other car owner feeling envious on seeing the car. Moreover, the ad also shows the unique versatility of the rear seats to be able to accommodate any kind of item which would not be possible to carry in other cars. The ad purely focuses on the concept of breaking out of seriousness of life and enjoying the car. The company wants the car to be perceived as “fun for the young”. Target customer type: A person who wants to have fun, is concerned about the utility of the car in helping him transport weird items (like flowerpot shown in ad) and wants to be envied by the onlookers. Target customer demographics: High class. Age group of 25-35 yrs. APPLICATION OF CONCEPTS OF PERCEPTION TO BRANDS Concept #1: Sensation The concept of sensation is quite applicable to this industry as all manufacturers focus on TV and print advertising as the prime media to reach the target audience. Most of them particularly rely on “sonic branding”. For example, nowadays Maruti Suzuki ends all its TV commercials with a part of the jingle which was the corporate ad for the company. Hence, even if one is not viewing the ad, the jingle makes us remember the brand only by hearing and reinforces the brand in our minds. 10

Concept #2: Absolute th reshold The ads for all models undergo a change once every 3 to 6 months. This is to bring novelty factor to the ad and gain attention of the target consumers. Once the same ad is played repeatedly for a long time the consumers start ignoring it as they no longer “see” them. Changing the ad (without changing the theme) provides the necessary sensory input to catch the attention of the audience. Concept #3: Differential Threshold In order to keep the models alive, car manufacturers keep making cosmetic changes to the product from time to time. But, at the same time they take care of this fact that the change is not drastic and the new upgrade should evolve similar product associations to avoid confusing the consumer. This is evident from the Zen Estilo ad in exhibit 07 wherein the ads for old and new model are shown but only the A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 target consumer can identify the cosmetic change without Estilo losing its identity. This strategy is also employed while increasing the price of the products. The price increases for a Rs.3-4 lac car are in the range of Rs.5,000 each year so that consumers do not notice the price increase. Similarly the technological improvements which lead to significant change in the performance (noticeable) are highlighted in ads like the introduction of the K-series engine by Maruti which makes a substantial improvement in mileage of the car which can be measured by the consumer. Concept #4: Perceptual Selection In order to catch the attention of target consumers, car companies employ a wide variety of tactics. For example, they use danglers on the outside mirror of old cars mentioning “buying of old car and upgrading to new car”. Hence, they try to target old car customers as they feel that they must be having a “need” to get their car exchanged with a new one and try mediums which tries to grab the selective attention of target consumers. Concept #5: Figure and Ground This is an important factor in the success or failure of particular ads. Usually the car manufacturers avoid celebrities unless the brand is either unknown or very new to the market. This happened with Maruti when Amitabh Bachhan was hired for the Versa ad and instead of showcasing the strengths of the product, the customer’s mindshare and attention was taken over by the celebrity leading to failure of the commercials and eventually the product. Since then Maruti has avoided any celebrity and focuses on showcasing the unique aspects of the products in its ads to make the product as the “figure” and the theme of the ad as the “ground”. Concept #6: Grouping The ad for each product runs on a particular theme, for example Maruti Swift has theme of “fun and joy”, Skoda Fabia has the theme of “royal treatment”, Hyundai Santro has the theme of “first car choice”, Fiat Punto showcases the user as being “bold”. Hence, on seeing the ads, consumers associate the products with their respective choice and themes and prefer the brand/product whose theme matches their preferred or targeted lifestyle. 11

Concept #7: Closure Closure theory is used by marketers by using sonic branding or by using symbols. An example of sonic branding is the way all Maruti Suzuki ads end in a jingle which is a small part of the corporate ad of the company. This helps customers associate the product especially the new ones with the company. Some brands like the Fiat Punto have a symbol for the particular model which itself is sufficient to communicate the attributes and associations with the model in any part of the world. The same is A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 depicted above. Concept #8: Perceptual interpretation This tool is also used much by brand marketers in order to play with customer perceptions. For example, there was a stereotype in the Indian market that small cars will always be cheap. But, with the launch of Honda Jazz at Rs.7 lacs, the company wants to break this stereotype and wishes to position its product to the high class individuals who can use this small flexible car when having fun. Similarly, Zen Estilo used the stereotype of launching the product in striking colours like pink and purple in order to make the product appeal to female users as such colours are often correlated with females in our society. Concept #9: Consumer Imagery All the ads which we have discussed earlier in our brand analysis focus on showing an individual or a celebrity or a situation. This is shown in order to capitalize and help in correlating his image with the image closest to what he is or what he wants to be in the ads. Due to closer association, the company targets the specific consumers with matching associations. For example Hyundai Santro = Young couple’s first car, Maruti Swift = Young bubbly couple, Fiat Punto = Bold individual etc. Umbrella positioning also has effect on the success of the product. For example, any inexpensive product from Maruti would be a success, any product from GM in India is considered unreliable and costly to maintain, any product from Fiat is expected to have after sales service issues. Concept #10: Positioning based on specific benefit This is used by products which have a clear distinction with the competing products. For example, Indica is sold as “more car per car” which emphasizes on the superior interior space of the car, Aveo UVA is also sold as “bada dil, badi car: which too essentially emphasizes at the superior interior space of the car as compared to the competitor’s offerings. Concept #11: Perceived Quality Over the years, Honda has built an image of superior quality of its products. Even with the launch of Honda Jazz, Honda did not want to lose the image it had created in minds of consumers. Hence, by positioning its price as proxy for quality, Honda has positioned Jazz as the costliest car in the segment. Similarly all Japanese cars are selling well in India (Suzuki, Honda and Toyota) as compared with 12

American cars (GM, Ford) as Japanese vehicles are perceived of higher quality and lower maintenance as compared to their American counterparts. Concept #12: Perception of risk This is a critical factor in the purchase of a product like car as it is a big ticket item and hence consumers minimize the risk by various means like seeking more info through internet, purchasing based on previous brands, purchasing by brand image (that is why Fiat and GM are struggling in India) etc. in order to reduce the customer’s perceived risk all manufacturers offer warranty on their products for atleast 2 years. Some companies like GM offer the same for 3 years in order to boost customer confidence in their brand (due to poor perceived image) while others offer to extend warranty at an additional nominal cost. A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 MARKETING STRATEGY TO LAUNCH A NEW BRAND On analyzing the positioning diagrams and the customer preferences, we can position any new product in such a way that the product attains a unique position and the target segment customers can easily identify themselves with the product. We assume that the new product which is going to be launched is not from the stable which has the best brand reputation, but it is at 4 as compared to 5 (best in the segment). On analyzing the positioning diagrams and the market trends, we conclude that the potential for success is there only in 2 sub- segments i.e. the sub-compact and the premium compact, and not the compact and the super-hatch. The reason for this is that these 2 sub-segments are relatively uncluttered and the price positioning does suit the preference of the Indian consumer who is quite value conscious. The compact sub-segment is overcrowded and hence it will be difficult for a product to find a unique positioning, while the prices of the super-hatches interferes that of the sedan segment which a value conscious consumer will go for rather than buying a hatchback car at the price of a sedan. The marketing strategy for the 2 sub-segments will be as follows: Strategy for launching in sub-compact segment 1. Product – Highly economical product which delivers superior fuel consumption than Maruti Alto. Even the service charges of the dealer need to be economical as the customer is looking for value for money rather than special treatment. 2. Price – Rs.1.9 lacs 3. Place – Use the existing distribution channels 4. Promotion – Following will be the points for promoting the product: a. Low price of Rs.1.9 lacs b. Fuel efficiency must be atleast 20 kmpl and the comparative maintenance costs must be worked out and shown lower than Maruti Alto. c. The standard warranty on the vehicle must be for 3 years with unlimited mileage as few customers are unlikely to use it for long drives. This will help in boosting the brand reputation and in reducing the risk perception of the consumer. 13

d. The customer can be sold some concept like packaged services (while purchasing vehicle or during service) in order to portray high service assurance at fixed costs. e. The vehicle can be targeted to the rural areas thru opinion leaders bank managers and panchayat heads in order to render more credibility of the brand. f. The ads must position the product as the “first time car” and showcase a small and lower middle class nuclear family which helps them fulfill small wishes with the joy of moving together. g. In order to bring compulsion from the family of the target consumers, the product ads must be brought out on family channels like Zee TV, Star Plus. h. The product must also be promoted by having kiosks outside the banks as such customers would physically visit banks for their financial transactions. Strategy for launching in premium -compact segment A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 1. Product – The product should have contemporary design and should deliver higher fuel efficiency than the best in the sub-segment (maybe 17 kmpl) 2. Price – Rs.3.8 lacs 3. Place – Use the existing distribution channels 4. Promotion - Following will be the points for promoting the product: a. The advertisements must showcase the looks and styling of the car in order to appeal the product to the consumers. It must also emphasize the superior technology of the engine which helps deliver the superior mileage. b. As the brand reputation is not assumed to be the best hence the product must be supported by comprehensive warranty in order to reduce the customers’ perceived risk. The standard warranty on the vehicle must be for 3 years. c. The product must be promoted towards the urban young middle class (age of 25-35 yrs) as their disposable incomes would be higher but looks will enhance their status more than fuel efficiency factor. d. The product can be showcased and promoted at prominent malls and within corporate campuses in cities. e. The ads must be brought pout on lifestyle channels for young generation like Zoom, MTV etc and also on popular websites like Yahoo, Google etc. so that it catches the attention of the target audience. 14

REFERENCES 1. Book on “Consumer Behaviour and Branding” by Prof.S.Ramesh Kumar, 2009 edition 2. Book on “Consumer Behaviour” by Leon G.Schiffman and Leslie lazar Kanuk, Ninth impression 3. Mc.Kinsey Global Institute report (www.mckinsey.com) 4. Crisil Research, Society of Indian Automobile Manufacturers 5. Websites: a. www.marutiudyog.com b. www.hyundai.co.in A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 c. www.chevrolet.co.in d. www.tatamotors.com e. www.fiat-india.com f. www.hondacarindia.com g. www.skoda-auto.co.in h. www.india.ford.com i. www.mouthshut.com j. www.google.co.in 15

EXHIBITS Exhibit 01: Sales of cars in Indian industry from 1997 -98 to 2008-09. Passenger Vehicles (PVs) 18,00,000 16,00,000 14,00,000 12,00,000 10,00,000 8,00,000 A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 6,00,000 4,00,000 2,00,000 - Exhibit 02: Wallet share of Indian customers for transportation 16

Exhibit 03: Sales of car manufacturers in Indian domestic market from 2004-05 to 2008-09 Cars — Player-wise domestic market share (%) (Units) 2004-05 2005-06 2006-07 2007-08 2008-09 1 BMW India Pvt Ltd - - - 0.2 0.2 2 DaimlerChrysler India Ltd 0.2 0.2 0.2 0.2 0.3 3 Fiat India Ltd 0.7 0.1 0.2 0.3 0.7 4 Ford India Ltd 3.0 3.1 3.7 2.6 2.1 5 General Motors India Ltd 1.9 1.3 1.6 3.8 3.8 6 Hindustan Motors Ltd 1.8 1.7 1.2 0.9 0.6 7 Honda SIEL Cars India Ltd 4.3 4.6 5.5 4.9 4.1 8 Hyundai Motors India Ltd 17.3 17.9 18.1 18.0 20.0 A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 9 Mahindra & Mahindra Ltd - - - 2.2 1.1 10 Maruti Suzuki India Ltd 50.9 51.7 51.0 51.4 52.2 11 Skoda Auto India Pvt Ltd 0.9 1.1 1.2 1.2 1.1 12 Tata Motors Ltd 17.7 17.1 16.6 13.8 13.2 13 Toyota Kirloskar Motor Ltd 1.3 1.1 0.7 0.6 0.7 Source: CRISIL Research, SIAM Exhibit 04: Segment -wise domestic market share of passenger cars in Indian market from 2004 -05 to 2008-09 Passenger cars — Segment-wise domestic market share (%) Segment 2004-05 2005-06 2006-07 2007-08 2008-09 A1: Mini 14.2 10.1 7.4 5.8 4.0 A2: Compact 60.5 64.9 69.9 71.4 72.6 A3: Mid-size 21.8 21.6 18.3 18.8 19.8 A4: Executive 2.8 2.6 3.8 3.5 2.8 A5: Premium 0.7 0.7 0.6 0.5 0.7 A6: Luxury 0.0 0.0 0.0 0.1 0.1 Grand total 100.0 100.0 100.0 100.0 100.0 Source: CRISIL Research, SIAM Exhibit 05: Model -wise domestic sales of A2 segment cars in 2008 -09 Passenger cars — Model-wise domestic sales Player Model 2008-09 % contr 1 Maruti Suzuki India Ltd Alto 2,12,568 24.0% 2 Maruti Suzuki India Ltd Wagon R 1,34,768 15.2% 3 Tata Motors Ltd Indica 1,11,253 12.6% 4 Maruti Suzuki India Ltd Swift 1,10,071 12.4% 5 Hyundai Motors India Ltd i10 1,06,095 12.0% 6 Hyundai Motors India Ltd Santro 91,478 10.3% 17

7 Maruti Suzuki India Ltd Estillo 32,694 3.7% 8 General Motors India Ltd Spark 32,528 3.7% 9 Maruti Suzuki India Ltd A-Star 21,295 2.4% 10 Hyundai Motors India Ltd Getz 9,436 1.1% 11 General Motors India Ltd Aveo - UVA 7,299 0.8% 12 Skoda Auto India Pvt Ltd Fabia 5,798 0.7% 13 Hyundai Motors India Ltd i20 4,993 0.6% 14 Fiat India Ltd Fiat Palio 3,527 0.4% 15 Ford India Ltd Fusion 2,141 0.2% 8,85,944 100% Exhibit 06: Sub-segments of A2 segment, no. of variants and ex -showroom A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 prices No. of Base Player Model variants price SUB- COMPACT 1 Maruti Suzuki India Ltd Alto 4 2,26,279 COMPACT 2 Tata Motors Ltd Indica 12 2,57,360 3 Hyundai Motors India Ltd Santro 5 2,63,999 4 Maruti Suzuki India Ltd Estilo 4 3,16,035 5 Maruti Suzuki India Ltd Wagon R 7 3,16,650 6 General Motors India Ltd Spark 7 3,19,838 7 Hyundai Motors India Ltd i10 9 3,31,738 8 Fiat India Ltd Fiat Palio 7 3,38,488 9 Maruti Suzuki India Ltd A-Star 3 3,44,650 PREMIUM COMPACT 10 Hyundai Motors India Ltd Getz 6 3,99,000 11 General Motors India Ltd Aveo - UVA 3 3,99,938 12 Fiat India Ltd Punto 8 4,02,293 13 Maruti Suzuki India Ltd Swift 8 4,05,355 14 Maruti Suzuki India Ltd Ritz 7 4,18,683 SUPER-HATCH 15 Hyundai Motors India Ltd i20 9 4,80,241 16 Skoda Auto India Pvt Ltd Fabia 8 4,87,920 17 Ford India Ltd Fusion 3 5,94,000 18 Honda SIEL Jazz 3 7,15,000 18

Exhibit 07: Advertisements of all models in A2 segment 1. Maruti Alto – “Let’s Go” – “Aapka Sachha Humsafar” A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 2. Maruti Zen Estilo – “Take a fresh view of life” 19

3. Maruti WagonR – “For the smarter race” A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 20

A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 21 5. Maruti Swift – “You’re the fuel” 4. Maruti A-star – “Stop @ nothing”

8. Hyundai i10 – “Catch the i” 6. Maruti Ritz – “Live the moment” 7. Hyundai Santro – “First car. First choice” A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 22

9. Hyundai Getz – “Gets you everywhere” A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 10. Hyundai i20 – “i got it all” – “the uber cool is here” 11. Tata Indica – “More car per car” – “Changes everything” 23

13. Fiat Punto – “A bold new drive” 12. Fiat Palio – “The drive of the new generation” A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 24

14. Chevrolet Spark- “ Full of life” A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 15. Chevrolet UVA – “Bada dil. Badi car” 16. Ford Fusion – “The no nonsense car” 25

17. Skoda Fabia – “Because you’re special” 18. Honda Jazz – “One life. Why so serious?” A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 26

A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 27 A. Sub-compact Exhibit 08: Positioning Diagrams ( => Positioning of new product)

A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 28

A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 29 B. Compact sub-segment

A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 31 C. Premium compact sub-segment

A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 33 D. Super-hatch sub-segment

Exhibit 09: Prices and customer perception of various aspects of cars Price Fuel options available No. of No. of Base Player Model fuel Petrol Diesel LPG variants price options SUB- COMPACT 1 Maruti Suzuki India Ltd Alto 4 2,26,279 1 Yes No No COMPACT 2 Tata Motors Ltd Indica 12 2,57,360 3 Yes Yes Yes 3 Hyundai Motors India Ltd Santro 5 2,63,999 2 Yes No Yes 4 Maruti Suzuki India Ltd Estilo 4 3,16,035 1 Yes No No 5 Maruti Suzuki India Ltd Wagon R 7 3,16,650 2 Yes No Yes 6 General Motors India Ltd Spark 7 3,19,838 2 Yes No Yes A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 7 Hyundai Motors India Ltd i10 9 3,31,738 1 Yes No No 8 Fiat India Ltd Fiat Palio 7 3,38,488 2 Yes Yes No 9 Maruti Suzuki India Ltd A-Star 3 3,44,650 1 Yes No No PREMIUM COMPACT 10 Hyundai Motors India Ltd Getz 6 3,99,000 2 Yes Yes No 11 General Motors India Ltd Aveo - UVA 3 3,99,938 1 Yes No No 12 Fiat India Ltd Punto 8 4,02,293 2 Yes Yes No 13 Maruti Suzuki India Ltd Swift 8 4,05,355 2 Yes Yes No 14 Maruti Suzuki India Ltd Ritz 7 4,18,683 2 Yes Yes No SUPER-HATCH 15 Hyundai Motors India Ltd i20 9 4,80,241 2 Yes Yes No 16 Skoda Auto India Pvt Ltd Fabia 8 4,87,920 2 Yes Yes No 17 Ford India Ltd Fusion 3 5,94,000 2 Yes Yes No 18 Honda SIEL Jazz 3 7,15,000 1 Yes No No Consumer Rating Fuel Space Dealer Brand Recommen Player Model consumptio Comfort Reliability Looks inside satisfaction reputation dation % n SUB- COMPACT 1 Maruti Suzuki India Ltd Alto 3 4 5 3 4 4 5 82% COMPACT 2 Tata Motors Ltd Indica 5 2 4 5 3 4 4 75% 3 Hyundai Motors India Ltd Santro 4 3 4 4 4 4 5 85% 4 Maruti Suzuki India Ltd Estilo 3 4 4 4 4 5 5 89% 5 Maruti Suzuki India Ltd Wagon R 4 4 4 4 4 3 5 88% 6 General Motors India Ltd Spark 4 3 5 4 4 4 3 78% 7 Hyundai Motors India Ltd i10 4 3 4 4 4 4 5 84% 8 Fiat India Ltd Fiat Palio 5 2 4 5 4 5 2 91% 9 Maruti Suzuki India Ltd A-Star 3 4 5 4 4 4 5 90% PREMIUM COMPACT 10 Hyundai Motors India Ltd Getz 5 3 4 3 4 4 5 90% 11 General Motors India Ltd Aveo - UVA 5 3 3 4 4 3 3 78% 12 Fiat India Ltd Punto 4 2 3 4 4 5 2 94% 13 Maruti Suzuki India Ltd Swift 4 4 5 3 4 5 5 82% 14 Maruti Suzuki India Ltd Ritz 4 4 5 4 4 5 5 95% SUPER-HATCH 15 Hyundai Motors India Ltd i20 4 4 4 4 4 5 5 89% 16 Skoda Auto India Pvt Ltd Fabia 3 3 4 4 4 4 4 38% 17 Ford India Ltd Fusion 4 4 3 3 4 3 3 70% 18 Honda SIEL Jazz 5 4 3 4 5 5 5 67% 35

Exhibit 10: Product feedback by consumers on www.mouthshut.com a. Chevrolet products A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 b. Fiat products c. Ford products 36

A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 37 d. Honda products e. Hyundai products

f. Maruti Suzuki products A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 38

A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market | 9/17/2009 39 h. Tata products g. Skoda products

Consumer Behaviour - A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market

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Consumer Behaviour - A study of the relevance of consumer “perception” in the A2-segment of the Indian passenger car market Document Transcript

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