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Marketing Group Project

MOTOR CYCLES

Group – B3

Ashok Kumar Verma 0083/48

Ashwani Panwar 0084/48

Avnish Kumar 0091/48

Bipin Kumar Singh 0096/48

Debanjan Munsi 0107/48

Dinesh Kumar Soni 0118/48

Naresh E 0122/48

Rakesh Surineni 4022/18

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Contents ABSTRACT........................................................................................................................................ 3

Project Objective .......................................................................................................................... 3

Brief description of Indian motorcycle industry ................................................................................. 4

Key players in the Two-wheeler Industry ....................................................................................... 5

Analysis............................................................................................................................................. 6

General Information from the Survey ............................................................................................... 6

Segmentation of Consumers on the basis of age........................................................................... 6

Segmentation of Consumers on the basis of Income Distribution ................................................. 8

Primary Purpose / Use of the Bike ............................................................................................... 10

4Ps of Marketing ............................................................................................................................. 12

Price ............................................................................................................................................ 12

Product ....................................................................................................................................... 12

Product Life Cycle ................................................................................................................... 12

Place ............................................................................................................................................ 13

Promotion ................................................................................................................................... 15

Impact of advertisements ........................................................................................................ 15

Customer Evaluation and Response ............................................................................................. 17

Conclusion ...................................................................................................................................... 18

Additional Considerations ............................................................................................................... 18

Sources ........................................................................................................................................... 20

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ABSTRACT

Four major factors that influence consumer buying behaviour are

1. Personal factors

2. Psychological factors

3. Social factors

4. Cultural factors

Main focus of marketing lies on consumer and product and making value propositions to

consumers. Personal factors that determine consumer behaviour are personality, attitude,

values, gender, marital status etc. Social factors like family, reference groups, role, and

status also influence purchase decision. Psychological factors that influence consumer

behaviour are motivation, perception, learning, belief etc. Cultural factors are social class,

and factors specific to different regions.

Project Objective

The objective of the project is to study the consumer buying behaviour and analyze the

effect of 4Ps of marketing in the context of motorcycle purchase decision. The effect of

consumers’ opinion of motor bikes regarding features like appearance, mileage, price,

brand etc and other factors that impact consumers’ choice of a particular brand of motor

bike was studied.

Scope of Project – Scope of project was limited to study consumer behaviour and the

effect of 4 Ps i.e. Product, Place, Price and Promotion on the consumer buying decision.

Project approach

We studied motorcycle market in India and its growth. Major players in Indian motorcycle

market were studied to find market leaders and four dealers of different brands were

selected for dealer survey. Primary as well as Secondary data was collected to know

consumer preferences while making purchase decisions.

We studied all possible factors that influence purchase decision and consumer behaviour.

Then a questionnaire was made for consumer. A consumer survey of sample size 150 was

done to study consumers’ response to major factors that affect decision making in

motorcycle market.

A dealer survey was also conducted to know the consumer preferences from dealers’

perspective. A dealer questionnaire was also prepared and a dealer survey of four dealers

was done. Dealers of following brands were surveyed for this purpose:

1. TVS

2. Bajaj

3. Honda

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4. Hero (earlier known as Hero Honda) Data from annual report of motorcycle companies was also collected.

The data collected from various sources was analysed and interpreted. Based on

interpretation of data conclusions were drawn.

Brief description of Indian motorcycle industry

Indian motorcycle industry:

India is the second largest manufacturer of two-wheelers in the world. Bikes constitute

major segment of Indian two wheeler industry, the other two being scooters and mopeds.

Indian two-wheeler industry had a small beginning in the early 50's. The two-wheeler

market was opened to foreign competition in the mid-80s. With the availability of fuel

efficient low-power bikes, demand swelled. This resulted in the introduction of four stroke

bikes (100cc category) which gained the top slot. The first Japanese motorcycles were

introduced in the early eighties. TVS Suzuki and Hero Honda brought in the first two-stroke

and four-stroke engine motorcycles respectively. In the 90s the major growth of annual

growth rate of 25% on an average for motorcycle segment was brought mostly by Japanese

motorcycles. With a successful launch of ‘Pulsar’ Bajaj entered high-power bike segment in

2001.

Indian population prefers two wheelers because of their small manageable size, low

maintenance cost, lower price, easy loan repayments and the fact that in India roads are

congested and narrow. Motorcycle market is composed of broadly two segments: Regular

segment and premium segment. Regular segment mainly represents need based market

segment where motorcycles are used for office commutation, business purpose and other

local travel of needful nature. Basic features of bike are main consideration. Premium class

motorized two wheelers are seen as a status-symbol by the rich and the youth and style,

engine power, brand etc are major influence on purchase decision. Indian two-wheeler

industry has grown at very fast rate in the last few years.

Major Factors which led to growth of Two-Wheeler industry are –

o The Gross Domestic Product has grown at 8%

o The average family income has increased

o Financing has become easier

o Reduction in taxes and duties

o Introduction of international standards in India

o Economic and fuel-efficient engines

o Teenagers and youth using more and more motorcycles

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Indian two-wheeler industry has grown at rate of 25% in 2009-10 and 27% in 2010-111 and

reached a size of 13.3 million units. ICRA expects two-wheeler industry to grow at CAGR of

10-12% in next five years to reach 21-23 million units by 2015-16. Hardening interest rates,

increasing fuel costs and rising commodity prices may lead to moderation in growth rate of

this industry growth in the short term, but medium to long term growth rate is expected to

remain high.

Several new players may enter into Indian market; in fact Mahindra launched a motorcycle

last year. Entry of new players will intensify competition. Future growth is likely to come

from rural and semi-urban areas. Premium segment growth will come mainly from urban

and semi-urban areas and new product development or entry of new foreign players. Wide

distribution network, Strong product capability and supply chain will be the necessary

conditions for competitive advantage.

Key players in the Two-wheeler Industry:

There are many two-wheeler manufacturers in India. Major players in the 2-wheeler

industry are Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and TVS Motor

Company Ltd (TVS).

The other key players in the two-wheeler industry are Kinetic Motor Company Ltd (KMCL),

Kinetic Engineering Ltd (KEL), LML Ltd (LML), Yamaha Motors India Ltd (Yamaha), Royal

Enfield Ltd (REL) and Honda Motorcycle & Scooter India (P) Ltd (HMSI).

Data collection:

As a part of this project, we mapped the customer preferences by direct data collection

from consumers and visiting four motor cycle dealers to understand the retail scenario. The

customer-surveys were one-on-one surveys, surveys using social-networking platforms like

facebook and online survey tools like survey monkey, with consumers spread across various

age groups, socio-economic backgrounds and occupations to get first-hand information on

what factors affect their buying behavior. We also studied the effect of factors like the

brand value, price, latest fads, maintenance costs, advertising (both TV and newspapers),

advice sought from friends and colleagues, the craze among youth for motorcycles and

social status issues affecting the consumer. We extracted information regarding the effects

of pricing and design on motorcycle purchase from dealers. Other important information

was also obtained with the data collected from sources including effects of colours and

designs on purchase behavior. We also used secondary data collected from the various

databases and other sources to analyze the present Motor Cycles market.

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Analysis:

Customer buying behaviour analysis: Understanding customer preferences and factors that affect the buying patterns

Motorcycle is a limited occasion or one time purchase for a large section of Indians thus involving a lot of thought and deliberation. So we looked into the factors from whom the buyer seeks opinion while buying a motorcycle. These factors are Family, Friends & colleagues and dealers.

Figure 1: Sources of advice

As per the data collected most buyers seek for the advice of their friends and colleagues indicating the factor that motorcycle is a public luxury that has a high status value and the comments and experience of friends and colleagues are adhered to in more than half the cases. The family opinion is very low coming to only 18% and the individual decision without taking advice of anyone is 20%, which indicates that some people may be very individualistic in their choices and are not influenced by the family and society advices. The dealers’ influence in customer decision is very minimal indicating the role involvement of dealers being limited only to selling the bikes.

General Information from the Survey:

Segmentation of Consumers on the basis of age

Figure 2: Age groups of respondents

44%56% <25

>25

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Our main focus was on getting data from younger groups as we expected the general

motorcycle consumer to be from mainly two groups –

1) Young and Dynamic: People in the age-group of 18-25 who purchase mostly high

end bikes.

Figure 3: Preferences of relatively young respondents

This group’s purchase decisions are starkly influenced by brand name and style than by any

other issue. So if we analyse on the importance weights given by the number of

respondents, a large percentage of them considered driving comfort to be of paramount

importance followed by Style and Brand name. For this particular consumer group price is a

secondary issue and mileage also takes a backseat. Surprisingly, maintenance and warranty

issues are also considered moderately important even though our expectations were that

their importance score would be quite high.

2) Middle aged groups: People in the age-group of 25-45 who are generally married

men with a family who purchase durable and high comfort level Motorcycles

Figure 4: Preferences of middle aged respondents

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This group’s purchase decisions were primarily focussed solely on price and mileage. The

choices of motorbikes were primarily focussed on these two. Again surprisingly 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.

Segmentation of Consumers on the basis of Income Distribution

According to the research results shown in the graph, the middle class segment which falls

between Rs90000-500000 is increasing at a very faster rate and our sample size consists of

respondents from this middle class group.

Figure 5: Income groups of respondents

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The Income distribution was mostly on a monthly income basis, with survey concentrated

on moderately high income groups.

1) Moderate to Low income group: Monthly income less than 30000 per month.

Figure 6: Preferences of Moderate to low income respondents

If we consider the importance weights given in the above graph, we can safely conclude

that mileage and maintenance get a huge importance alongwith brand name. Surprisingly

price and style are not that important. 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.

2) High Income group

Figure 7: Preferences of High income respondents

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Primary Purpose / Use of the Bike

Figure 8: Primary purpose/use of the bike

Figure 9: Occupation Distribution of Customers Surveyed

We found that most motorcycle users are working professionals and a large percentage of

students.

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The survey conducted by ICRA in Delhi to know the most economical mode of transport

shows that 2 wheeler holds 2nd position and that is the reason preferred most by the

working professionals and students as mode of transport. That means external sources like

petrol prices could be an importance factor in consumer buying behavior due to which

consumer can delay the buying decisions or may opt some other means of transport like

public transport.

Figure 9: Importance of various factors

From an overall importance chart, we can infer that price, mileage and style have a very

high importance for most consumers validating the claim that for a medium priced product

like motorbikes where consumers take time to make their decision overall effectiveness of

the purchase is evaluated on these dimensions and in a price-sensitive country like India,

price is likely to dominate the purchase decision. But, what was surprising from the survey

is that, comfort level was given an extra-ordinarily high weightage with Maintenance and

service costs not so important. Hence, companies like Honda Mortorcycles India Limited

are not at a significant disadvantage due to lack of adequate number of distributors.

Warranty and free service also score significantly low making any efforts in that direction

not worthwhile for the marketers.

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4Ps of Marketing:

Price:

Considering a separate analysis on the effect of price overall, we found that a moderately

large proportion of people considered price an important determinant in their purchase

decision while a slightly smaller number reported it to be extremely important. We can infer

that in the final choice of the product, price is an important determinant in a price-sensitive

market like India

Product:

Motorcycle as a product can be broadly divided into 2 categories

1: Mileage oriented The mileage oriented segment consists of 100 cc to 125 cc bikes which are low on power but

offer excellent mileage and great value for money. The major consumers in this segment

are daily commuters who require maximum fuel efficiency and low maintenance costs. The

price range starts from Rs. 35000 to Rs 45000. The top bikes in this segment include Platina

and Discover from Bajaj Auto, CD Dawn and CD Deluxe from Hero MotoCorp.

2: Design and comfort oriented

This segment includes bikes above 125cc and is more youth centric who give design, style

and power more preference to mileage and are willing to pay extra for these features.

These motorcycles are sporty, well designed and more powerful. These motorcycles largely

attract young riders passionate for style, performance and comfort. The price range in this

sector is from Rs. 50000 to Rs 70000.

Product Life Cycle

The Indian Motorcycle industry is extremely competitive and with the advent of better

technology the life cycle of the product is getting shorter. The ever changing demand of

consumer has put more pressure on the manufacturers to come out with new innovations

and better designs in the product to capture greater market share. Thus the manufacturers

are putting more focus on Research and Development and coming up with new models of

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improved technology to serve the market. The effect of shorter life cycle can be seen as

companies phase out their old models and producing new and different variants of the

models which are popular with consumers. The examples for this are different versions and

variants of Bajaj Pulsar where the company is launching a new model every year with

enhanced features and better technology. The below table shows the average age of

motorcycle in India.

Place:

In Indian context the motorcycles are sell/ Purchase through very limited number of

marketing channels. The major types of marketing channels are as follows-

1. Company’s Outlet 2. Company’s Dealer 3. Sub- Dealer

These marketing channels are basically work in

coordination with each other in different

demography and geography to cater the need of

different market segments. These segments are

as follows-

Company’s Outlet is specially worked to target

consumer in Metro cities. In these markets the sale is normally higher than other segments

and purchase is driven by performance, comfort and brand equity of the motorcycle. In

metro cities the consumer’s disposable income is higher than that of other segments so

purchase is not much affected by price factor. So, companies prefer to open there own

outlets in metro cities which help them to save on dealer margin and maintain the brand

equity in term of product and service quality. It also help to serve the products meant for

niche segment.

Urban market segment is target by company’s dealers, this dealer network work on the

franchise model. Dealers are allotted as per company policy and the motorcycles are

delivered to them from company’s production unit directly as per sales forecast and prior

booking. These dealers are more familiar with the local requirements and consumer

behaviour.

Market Segment

Metro Cities

Urban Markets

Semi Urban Market

Rural Market

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Semi Urban Market and Rural markets are targeted through the intensive distribution

network of dealer and sub dealers. This model is also work on the franchise model and quite

helpful in market penetration and growth.

The various factors which affected the sale growth through these distribution networks are

as follows-

Place and Position of dealer

Customer friendly

Finance options

Schemes and discounts

Technical knowhow

Place and positioning of dealer in target market segment play a very significant role in

ascertaining the sales and reach of the product. As we did not have the STP details of

individual brand so, we taken that factor in a standardize framework to carry out our

market analysis.

Figure 10: Dealers influence on customer purchase

The above facts are well supported by the dealer’s survey results where we found that

being customer friendly helps the dealers a lot in attracting the new customers and

retaining the old customers. Also surprisingly only 30% of the customers opt for the

financing options which shows that availability of easy loans doesn’t attract more sales.

Also the hygiene factors like bike registration, free servicing holds a lot of importance as it

saves the consumer from lot of painful registration activities.

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Also the fact that financing is no more a very influencing decision factor for the consumers

is also proved by the research report done by ICRA.(Please refer the above graph). The

reducing importance of finance availability is also due to the increasing number of rural

consumers which don’t rely much on the organized financing sector.

Promotion:

Impact of advertisements

TV ads for motorcycles are relatively scarce, especially when it comes to mainstream

programs, simply because motorcyclists make up such a small percentage of TV viewers.

Still, there have been some great ad campaigns mounted by the motorcycle manufacturers

over the years, even if most of them never got the kind of exposure we think they deserved.

As the motorcycle market in India has matured, the quality of advertisements for

motorcycles has definitely improved. While historically BAJAJ has had an excellent list of

ads right from their "HAMARA BAJAJ” campaign, many other manufacturers have also

tried to improve their advertisements beyond the "mileage" and "price" factors while

starting poll might be cumbersome in terms of listing down all the ads.

If we think on some of these ads that caught the public's imagination, if not help the company improve its sales. But if we consider the impact of the sales on low price bikes, the conclusion that advertisements impact sales is still debatable. Our results indicate a very low effect of advertisements on the consumer’s final purchase decision as shown below in the graph. This data was collected from the consumer and most of them responded that they acted independently.

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Figure 11: Effect of Advertisements and promotions

But as shown in exhibit 1, only TVS has reported a decrease in its advertisement

expenditure, while Bajaj Auto Ltd has actually increased its advertisement expenditure with

a clearly discernible spike in sales. Details are in Exhibit 1 with values taken from Company

Annual Reports. if we consider the impact on the high income segment, a clear image on

brand loyalty emerges. As is mentioned in our study, brand name and comfort have a very

high weight-age on the overall purchase decision of the consumer and it also has an impact

on his repurchase decision. Dealer study revealed a very high weight-age on the colours and

style combinations among bikes and this is where the bike advertisements make a huge

impact. Any advertisement giving a huge emphasis on brand building has been amazingly

successful in the segment. If we consider Bajaj Pulsar, which is the one of the current

market leaders in the segment, its advertisements have definitely made a huge impact in

disproving the fact that only Japanese bikes deliver on power and style. They showed that

Indian bikes can also deliver. Any advertisement directed at the youth with credible

performance has led to a spike in sales. If we consider recent results, the second biggest

two-wheeler manufacturer, Bajaj Auto registered a 16% increase in sales during the month

of August with overall sales of 3.82 lakh units as against 3.29 lakh units during the

corresponding period of 2010, as reported in newstonight.in. The motorcycle sales of the

company remained up by 17% to 3.38 lakh units as against 2.89 lakh units during August

last year. Commercial vehicle sales have jumped 11% to 44,685 units as compared to 40,188

units same time last month. These are clear indications of the incredible success of their

advertisement campaigns.

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Customer Evaluation and Response

Repurchase Decision

Replacement demand to be a key contributor to 2Wheeler industry volumes

According to estimates, around 50% of the total domestic sales of 2W are now made to

first-time buyers5, 30% to customers looking to upgrade from their existing vehicle, and

20% to buyers seeking a second vehicle for the household. The break-up suggests that

currently around 50% of the sales in the domestic 2W market are made to replacement

buyers. Industry estimates also suggest that the 2W ownership cycle has now shrunk to less

than five years. Considering that the industry has sold around 79 million 2W in the domestic

market since the turn of the century, the total replacement demand works out to a fairly

large number (refer Table). Add to this the healthy growth in sales to first-time buyers in

recent years, driven in particular by sales to the rural market, the replacement opportunity

could only increase in the future.

From the consumer perspective, although replacement involves fresh capital spending, the

inducement of upgrading to an improved technology 2W, having better performance,

features and more attractive styling; complemented with increased spending propensity

are expected to be the prime ingredients feeding replacement demand.

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Conclusion:

After analysis our findings substantiate the fact about consumers that in high involvement

purchases, advice from friends and family is paramount and price sensitivity declines with

income increase and brand choice gets more important. The motorcycle market, similar to

cars is broadly comprised of two segments, one price and mileage sensitive and another

design and comfort oriented. The average consumer in both the segments shows markedly

different behavior in relation to advertisements with the style sensitive consumer being

more influenced by advertisements than the price-sensitive segment. Overall, it was found

that maintenance and service provided by dealers were given secondary weightage as far

as purchase decision is concerned indicating a move to repurchasing than repairing

motorcycles – a sign of a more consumerist culture.

Additional Considerations:

Companies take regular feedback from the dealers, before launching any new bike. Dealers

give data to the companies on consumer preferences and once a new bike is launched,

feedback is taken after 2-3 months and based on the feedback companies modify and

relaunch the products if needed.

Exhibit 1

Advertisement Spends of the Two Companies

Advertisement Cost as a percentage of Net Sales

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Bajaj Auto Ltd

Rs in Million

2010 2009 2008

Advertisement Cost 1,402.00 852.00 1271.5

Net Sales 121180 90500 90,000

% of Net Sales 1.156956593 0.946666667 1.412778

TVS Auto Ltd

Rs in Crores

2011 2010 2009

Avertisement Cost 185 157 91

Net Sales 6433 4543 3741

% of Net Sales 2.875796673 3.455866168 2.432505

Note – Values in the given exhibit are taken directly from Companies’ Annual Reports

Exhibit 2

Note: Prices data taken from ICRA site.

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Sources:

1) Questionnaire Administered to Customers via face to face (given larger weightage)

and surveymonkey

2) Questions and Opinion Sought from Dealers

3) Philip Kotler: Marketing

4) Two Wheeler Industry- An ICRA Perspective

5) Census 2001, Statistical Outline of India 2009-10