Small Car Segment

Submitted by: Group # 8

Raunaq Singh : 08EM-034

Deepankar Agarwal : 08EM-014

Sumit Agrawal : 08EM-045

Sushan Rungta : 08EM-048

Small Car Segment

INDEX

1) Introduction

2) Executive Summary

3) Introduction to consumer Behaviour and Perception.

Consumer Behaviour

Bases of Consumer Behaviour

Consumer Perception

4) Industry Insight

Industry Background

Current Market Scenario

5) Passenger Car Segmentation

Classification of Indian Car Market

Key Demand Drivers

6) Pricing

7) Research Methodology

8) Research and Data Analysis

Data Analysis

Research analysis (Graphs)

9) Conclusions and Recommendations

Small Car Segment

10) Scope and Limitations

11) Bibliography

12) Annexure -Questionnaire

Small Car Segment

INTRODUCTION

You can't decide what exactly is it that you want. You ask yourself: "Do I want power, or do I want fuel-efficiency? Which car offers me the best combination of both? Is seating for five with a toothbrush tucked in enough for me, or do I need place to pack in a wardrobe for the weekend? Am I happy with the plain Jane Maruti 800, or can I and should I stretch for that sexy Palio?" Diesel or petrol? Big or small? Tough questions huh?

Well, in today’s scenario with competitive marketing and globalization, the job for the consumers has become very tough and confusing whether to buy A or to buy B. The market is so vast, competitive and complex that it often confuses the buyers. The decision taken for buying a product and choosing one is more often incomplete and sometimes not fully satisfactory.

In Small Segment Cars the options are wide and identical to each other. In Indian scenario the small segment cars have the biggest share in the car industry. It directly aims at the middle class and lower middle class of the society. Even the upper classes do find it of immense satisfaction and utility. Therefore the buyers are in a bulk for this segment. But what is not clear here, is that the buyers are not fully aware of all features & what is provided by whom. This seems to be the point of discussion and study on which this project is based on.

Small Car Segment

EXECUTIVE SUMMARY

The objective of this project is to determine the decision making process by the consumer while purchasing a small segment Car.

Firstly, we took mainly three brands of small cars, Maruti-800 \ Zen, Indica and Santro for a comparative study of small car segment. We got the companies’ broad background; their entry into the segment, their positioning strategies of cars and other factors affecting the consumer’s buying behavior.

Later we went through the process of filling the questionnaires, to know exactly what the customer’s of small cars perceived about their cars. A sample size of hundred respondents was taken. Sample unit was a customer who owned a small car. Secondary data from various sources like magazines, journals etc was also collected.

The findings showed that the consumer’s who owned small cars basically wanted good performance, after sales service and a car at their budget, a less expensive one.

All the cars taken for the sample showed that the consumers perceived them as almost same in all the attributes like safety, comfort and luxury. Respondents liked Indica more for its looks, whereas Maruti’s after sales service was perceived to be good.

But, at the end the research was limited due to small sample size, small sample area and time constraints.

OBJECTIVES OF THE PROJECT

1. Examine the psychographics of potential small size car customers.

2. Probe the buying behavior of car owners.

3. To study the attributes of different brands of small cars.

4. To probe into consumer’s knowledge about cars.

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INTRODUCTION TO CONSUMER BEHAVIOR

AND PERCEPTION

CONSUMER BEHAVIOR

BASIS OF CONSUMER BEHAVIOR

CONSUMER PERCEPTION AND SENSATION

Small Car Segment

CONSUMER BEHAVIOR

The study of consumer behavior is the study of how individuals make decisions to spend available resources on consumption related items. It includes the study of what they buy , why they buy it, where they buy it, how often they buy it and how often they use it.Consumer Behavior has been variously defined and with varying stress and focus. Consumer behavior can be described as acts directly involved in obtaining and using economic goods and services. It also includes the preceding decision process and influence the experience obtained from such acts. Consumer Behaviour is “the way people act in the exchange process “. Consumer Behaviour is “the behaviour that consumer display in searching for, purchasing, using and evaluating products, services, and ideas which they expect will satisfy their needs”.Another definition of Consumer Behaviour can be said as “those actions directly involved in obtaining, consuming, and disposing of products and services, including the decision processes that precede and follow these actions.Consumer Behaviour keeps changing, consumer preferences of yesterday may not hold well today and tomorrow-new motivations, and new aspirations may take hold. It is this ever-changing nature of consumer’s behaviour that provides a challenge to marketing professionals, and is responsible for dubbing the consumer “as a moving target”.Consumer Behaviour is the action people takes in purchasing and using products and services, including the mental and social process that precede and follow these actions.

CONSUMER PERCEPTION

Perception can be defined as “how we see things around us”. Two individuals may be subject to same stimuli under the same apparent conditions, but how each person recognise them, and interprets them is highly individual process based on each person’s own need, values and expectation.Perception is defined as a process, which an individual selects, organizes and interprets stimuli into a meaning full and coherent picture of the world.A stimulus is any unit of input to any of the senses example of stimuli includes product, packages, brand names and commercials. Sensory receptors are the human organs that receive sensory inputs. All of these functions are called into play either singly or in combination in the evaluation and use of most consumer products.

Small Car Segment

INDUSTRY BACKGROUND

Overview of Indian automobile

Indian automobile industry is riding high with overwhelming economic growth

rate of 8.4% in 2005-06. The industry has been growing at CAGR of 16.33% from

2001-02 to 2005-06 in terms of production.

This is easy to understand because the per capita disposable income of the people

has gone up remarkably. Over the last five years, per capita personal disposable

income has gone up by around 8%, which has increased purchasing capacity of the

people in the country.

Other factors have also contributed to this high growth in Indian automobile sector.

These include lowering age of first car users, shorter replacement cycles, rising

dual income families, new technology, which is lowering cost of ownership, low

car penetration in the country and most importantly growing steel production in the

country. In addition, wide variety and easily available financing options are also

some of the major reasons for surge in demand for automobiles in India.

Domestic sales have grown at CAGR of 14.27% from 2001-02 to 2005-06. The

commercial vehicle segment, in particular, has increased at CAGR of 24.35%

during the above-mentioned period; whereas total sales of passenger cars in

domestic market have increased at CAGR of 14.02%. In terms of production,

commercial vehicles have registered a CAGR of 24.55% from 2001-02 to 2005-06;

while passenger vehicles have registered a CAGR of 18.24%. There is a declining

trend in mopeds production as well as in sales in the domestic market. During

2001-02, mopeds production and sales have declined at CAGR 2.93% and 5%

respectively.

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Current Market Scenario

India's domestic passenger car sales have increased by 22.01%, up from 882,208 in

2006 to 1,076,408 units in 2007. Overall, the automobile industry posted a 13.50%

growth.

Global Automotive Financial Review forecasts the Indian passenger car market

sales will rise up to19 lakh cars by the end of 2010 leading to a growth of above

50% and there will be more than 2 million cars in the Indian car market.

The passenger car segment has seen an impressive growth in the Indian automobile

market because of the change in standard of living, their high-end incomes, easy

monthly installment (EMIs) and loan schemes offered by banks and financial

institutions to buy cars. Indian car market has received a major boost due to these

reasons and now foreign players are moving in to capture a market share.

Small Car Segment

PASSENGERS CAR SEGMENTATION

Passenger Cars Segmentation

The segmentation of the passenger car market in India is vastly different from that in the developed nations. In India, the economy segment accounts for the largest share of the cars sold, as compared to mid-range segment in the mature markets. The economy and the premium segment face the lowest competitive threats, while the premium segment will witness intense competition due to lower volumes.

Segment-Wise Classification of the Indian Car Market

Segment

Range Price (in lacks) Models

Economy Maruti 800, Maruti Omni, Premier, Fiat , Reva.

Mid-range 3 –4 Uno, Zen, 118 NE, Ford Fiesta, Fiat

Premium 5– 7 Esteem, Contessa, Opel Astra, Ford Escort, Cielo, Mitsubishi Lancer, Hyundai Accent

Key Demand Drivers

Traditionally, disposable income was perceived as the one critical factor that drove passenger car demand. However, household income is no longer the single most important factor in determining the demand for vehicles. Other critical factors are the mobility needs of people and the availability of cheap finance. The number of high-income households is growing very rapidly, more so in the rural areas. The development of the used car market will also play a major role, as the customers will be encouraged to trade in their old cars. The key to the growth of future markets is to make maintenance-free vehicles, to improve the road infrastructure, and to reformulate fuels and lubricants so as to reduce vehicle-operating costs.

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PRICING

In any business, nothing is more dangerous than using money as the magnet for attracting customers. It kills loyalty, mangles margins, and encourages defections. But it is the Unique Selling Price the only road to success in the intensely competitive automobiles business?

Those in the race for winning over the Rs. 7,500-crore small cars market seem to believe so. We have seen Maruti Udyog Ltd (MUL) announcing first ever price cuts – from Rs 6,998 to Rs 36,808 on its different models – to deflect attention from the launch of the Telco’s Indica. It was, of course, Hyundai Motors that had set the pace by putting a ticket of Rs 2.99 lakh on the basic model of its Santro. Then, even as customers rubbed their eyes in disbelief at the Indica’s Rs 2.59 lakh entry price.

In the small car segment, the only ‘P’ that, suddenly, seemed to matter was the second in the Product-Price-Promotion-Place marketing-mix.

The typical Indian car-buyer is obsessed with post-purchase pricing. Which is, in effect, the cost of maintenance and the possible re-sale value. And obviously, the lower the selling price of a second hand model, the less is the purchaser’s incentive to opt for it.

However, not every company plays the price-card. Instead of cutting the price of Santro, Hyundai Motors has launched an enhanced version with product features like power steering, and product-plus features like better service and customer-care. Hyundai arrived at the pricing strategy after a careful analysis.

Attempting to sell the lowest priced car in every segment will not enable a company to survive.

Hyundai realised the difficulty to compete in the car markets and decided to go for sharp differentiation strategy. In order to avoid the price game, it decided to reinforce the individualistic positioning of the brand and tried to match the customer’s perception that the car is commodity using other differentiators. Hyundai opted against the drop in prices, one reason being the fact that, buyers are shopping for brand associations and customers are unlikely to let their decisions be swayed by savings of a few thousands.

Sure, the lower price will be an attraction to the first-time buyer who is, essentially, stretching his budget to buy personal transportation. The less the stretch, the more is the likelihood of actually buying a car instead of, say, a two-wheeler. So, even a drop of Rs.1000 in the small cars segment could expand its size.

Thus price can be a selling proposition for only one segment of customers. But a company that seeks life-long customers, who progressively move up its product ladder, cannot rely on price alone for success.

Small Car Segment

The response of the customers to the Santro seems to indicate a market in the small car segment, which is prepared to pay premium for a superior features and performance. Santro and launch of Accent appear to be a conscious effort on Hyundai’s part to meet the needs of different customers in the small car market. Maruti’s response of cutting down on price seems to be a defensive measure aimed at retaining market share by concentrating on the price sensitive market segment. The Hyundai has stretched both price and feature thresholds and created market for itself.

Entry of Hyundai has changed the very nature of the competition as it has introduced contemporary product into the market.

Small Car Segment

RESEARCH METHODOLOGY

A research design is the arrangement of condition for collection and analysis of data in a manner that to, combine relevance to research purpose with economy in procedure.

Research Design is conceptual structure within which research is conducted. It constitutes the blue print of collection, measurement and analysis of data. Research Design is needed because it facilitates the smooth sailing of various research operations, thereby making research as efficient as possible yielding maximum information with minimum time, effort and money. Research Design stands for advance planning of methods to be used for collecting relevant data and techniques to be used in the analysis .The design helps researcher to organize his ideas whereby it will be possible for him to look for flaws and inadequacies.

MAJOR OBJECTIVES OF THE PROJECT

Examine the psychographics of small size car customers.

Probe the buying behavior of car owners.

To examine the decision making process of the customers while purchasing a small segment car.

Small Car Segment

Sources of primary and secondary data:

The major aim of the project was to analyze the competition of different car brands in the market. Therefore we had to get considerable information about the competing small cars. For this we had to go through a lot of secondary data.

A lot of issues of auto India, Motoring and Motor India were consulted

A comparison of small size cars is given in the table. Since the research aims at finding the attitude of people towards the different brands of cars, a conclusive research was conducted. The data collection form was designed in the form of a standard questionnaire because it is more reliable than unstructured format. By reducing the chance or the sample to influence results through different questions and through different judgment of answers and what to record, the structured questionnaire produces more reliable results i.e. if the research project is repeated in the same manner, similar results will be obtained.

Most of the questions asked in the questionnaire were closed ended with a few open-ended questions also, to know consumers general views. Some questions are designed for the purpose of cross checking the samples genuineness in filling the questionnaire.

For the purpose of analysis, ranking scale is used to rank the preferences of attributes of the customers. (Semantic differential scale is used to understand the images of brands of cars as perceived by the consumers. This scale is used because it permits the development of descriptive profiles that facilitates the comparison of competitive items.)

Universe: The universe is entire group of items the researchers wish to study and about which they plan to generalize. For this, the universe consists of people of Delhi who own small car. Selecting the sample: for this project, a probability sampling method is used. Probability sampling method is that in which every item in the universe has a known chance of being chosen in the sample. Here the sample size consists of 30 residents of Delhi. The probability sampling is preferred because:

It is the only sampling method that provides essentially unbiased estimates having measurable precision. If the investigator requires this level of objectivity, then some variant of probability sampling is essential.

The probability sampling permits the researchers to evaluate in quantitative terms, the relative efficiency of alternate sampling techniques in a given situation. Usually this is not possible in non-probability sampling.

Small Car Segment

DATA ANALYSIS

Sample size - 30

Respondents - 27

Owners of Santro - 6

Owners of Zen - 9

Owners of Indica - 6

Owners of 800 - 4

Owners of other cars – 3

Small Car Segment

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

PRICE

LOOKS

SAFETY FEATURES

INTERIORS

VALUE ADDED ACCESSORIES

COLOUR

LOW MAINTAINENECE COSTS

FUEL EFFICIENCY

BOOT SPACE

GEAR BOX

COMFORT

FACTORS AFFECTING PURCHASE DECISION

% OF RESPONDENTS

RESPONDENTS’ RANKING OF ATTRIBUTES

Attributes Preference Rank

SAFETY 1

PERFORMANCE 2

COST 3

LOW MAINTENANCE 4

AFTER SALES SERVICE 5

BRAND NAME 6

CREDIT FACILITY 7

Small Car Segment

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

TELEVISION MAGAZINES FRIENDS DEALERS MECHANICS OTHER CARDEALERS

SOURCES OF INFORMATION

percentage of customers

Small Car Segment

0%

10%20%30%

40%50%60%

70%80%90%

SANTRO INDICA MARUTI ZEN MARUTI 800

BRAND RECALL

BRAND RECALL

Small Car Segment

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

TELEVISIONS

NEWSPAPERS

HOARDINGS

MAGAZINES

AUTO EXHIBITIONS

ANY OTHER

EFFECTIVE MEDIUM FOR BUYING CARS

EFFECTIVE MEDIUM FOR BUYING CARS

WHICH CAR IS THE BEST IN OVERALL PERFORMENCE

SANTRO

INDICA

MARUTI-800

MARUTI ZEN

Small Car Segment

CONCLUSIONS AND RECOMMENDATIONS

Consumers of small cars are seeking a very good overall performance in a car than any other attributes. Most of the consumers prefer Small cars and mid sized cars for their good mileage, good acceleration, easy driveability, requiring small rooms for parking. Good looks hardly count for the buyers of small cars.

Again a good after sales service and low maintenance in a vehicle is a garnish on customer’s delight. Safety and credit facility are almost ignored factors in purchasing a small car.

Family wields the highest influencing power in making a purchase decision for an Indian consumer. Friends and media also have a good impact on decision-making. A very few customers get influenced by dealers also.

Usually consumers get detailed information through friends, magazines, other car owners and dealers whereas, they get the product information from the other sources like television, hoardings etc.

Earlier Maruti used to have very high Brand recall but now Hyundai has taken over followed by Indica, Zen and then Maruti 800.This gives Maruti a fight to retain its leadership position.

Indica and Santro has outscored Zen and Maruti 800 in brand recall with their scintillating marketing and advertising strategies and made their punch lines, “Add spice to life” and a “Complete family car” more conspicuous. Santro has created a niche position for itself as a celebrity’s car, Shahrukh Khan’s car. Their advertisement showing Shahrukh Khan sponsoring the car, showing its unmatchable features have made Santro synonymous to Shahrukh Khan.

Zen has in the recent years been able to create a brand name for itself. Zen and Santro are perceived as cars with a more feminine appeal. Hence they need to be positioned as the cars for today’s women.

The dream cars of the consumers are high luxury cars like Mercedes S-class, BMW, Ferrari, Pajero, Rolls Royce, Jaguar, Porsche, the cars with a class apart when it comes to their brands images, cars which flaunt status, style, wealth and attitude of the people owning them, cars which are considered to the best on the globe.

Most of the respondents are in an income bracket of Rs.20001 to Rs.25000 and above Rs.25000. This indicates that most of the car owners belong to either middle, upper middle or upper class segment.

Small Car Segment

While purchasing a car a safety is the most important criterion followed by price, fuel efficiency, looks and comfort etc.

When the consumers were asked to rank the factors they consider being important in buying a car, ranking the factors from 1 to 7 where ‘1’ is the highest preference rank ‘7’, the lowest preference rank, safety is the highest concern followed by Performance of a car as it outweighs its style and cost on the consumer’s list of priorities to buy a car. Performance, be it engine make up, fuel efficiency in city conditions, smoothness, pick up, drivability, is consumer’s first preference in their look out on attributes in making a decisions for buying a car.

The car owners as the third most important factor, considered the cost and low maintenance of a car.

After sales service and brand name were the fifth and sixth preferences of the respondents. Credit facility was ranked next on the preference scale.

Given the city conditions, the consumers needed a very good overall performance of cars. Small cars taking less space with no parking problems, easy drivability in heavy traffic conditions, easy gearshifts and good fuel efficiency makes them the most preferred ones.

The small car owners being mostly the professional class or the upper middle class were very cost conscious and due to their busy life styles preferred low maintenance in their cars.

Sources of Information

The small car consumers are high search information seekers, most of them using at least 3 sources of seeking the information. They believe that extensive search is necessary to make a good buy. Having owned fewest cars previously, they had very less information about the cars.

The survey showed that a highest number of consumers sought friends as a source of information. Even as a majority of them went for magazines and other car owners as a source of seeking information, a good number of consumers went to dealers for getting the information. Television as a source of information was also used by a number of consumers and a very few of them went to mechanics in search of information.

Most of these small car buyers being first time purchasers usually go for friends, automobile magazines or other car owners to get information about the various products and brands in the market to know the most favorable brand or products and later they seek further information from dealers and other sources once they are through their choice process and have decided upon a particular brand or brands to buy.

During the buying process family is the biggest influencer followed by friends and media.

Small Car Segment

The most efficient medium of advertising is television, followed by magazines and newspapers. Auto exhibitions also play a significant role in communicating about the small segment cars.

Satisfaction Level

Most of the small car consumers are somewhat happy with their purchases. A probe into respondents’ satisfaction level, ranking from 1 to 5 where ‘1’ was full satisfaction and ‘5’ full dissatisfaction with their cars, gave 70% as an average figure of satisfaction level.

Out of a total of 30 respondents, 19 ranked their satisfaction level as ‘1’, 6 ranked ‘2’, 1 ranked ‘3’, 1 ranked ‘4’ and only one respondent showed null satisfaction. The main reasons which were quoted for their satisfaction were driving comfort, good fuel efficiency, small is cute, easy parking, less maintenance, good pick-up and a perfect car for a small family.

Advertisement Recall

The most interesting part of the research being the brand appeal part of it, where four celebrities, Shahrukh Khan, Hrithik Roshan, Aishwarya Rai and Rani Mukherjee were given and respondents were asked to suggest any car which came to their mind. Almost all the respondents named Santro for Shahrukh khan. Hyundai has almost positioned Santro as Shahrukh Khan’s car and his personal choice through the advertisement where Shahrukh himself narrates the supervisor performance of car. Any other brand of car could not catch up with such a familiarity of a car with a celebrity.

For Hrithik Roshan, most of the people preferred tough looking cars like BMW, Bolero, Safari, Pajero, Sumo, Honda sports car etc. Aishwarya gave people an appeal of sleek beauty through cars like Lancer, Ferrari, Zen, Matiz, Mercedes, etc. Rani Mukherjee stole away respondents minds with small car like Zen, Matiz, and Santro, sometimes a bit bulky like ambassador and van.

A perceptual ranking of various attributes of Maruti 800, Zen, Indica and Santro was also taken. A total analysis of people’s average rankings showed people’s perceptions about various attributes like safety, performance, comfort, luxury of the 4 cars. All these small cars showed very less variances in perceptions of people regarding their safety, comfort, luxury and overall performance with ranks ranging between ‘2’ and ‘3’ showing moderate satisfaction.

A change in consumer’s perceptions could be noticed when Santro was ranked 3rd showing a slight disagreement with its good looks. Indica was

Small Car Segment

ranked 2nd satisfactory with its new look and fine edges in its new model of V-2. Zen was ranked 1 st for its trendy and cute outlook. The interiors of Zen were much liked by the consumers as compared to Indica and Santro. Mainly in specific description the dash board of Zen attracted the most.

SCOPE AND LIMITATIONS

The sample size being very small, that is only thirty respondents, limited the scope and study of the project.

Taking the convenience sampling might have led to some bias as people with different age groups have different perceptions. For example people with age above 35 years have more awareness then people between the age group of 20 and 30 years.

Time constraints put boundaries to the sample area and hence limited the extent

of the study.

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BIBLIOGRAPHY

Reference books:

Consumer behavior. By Schiffman and Kanuk

Internet:

www.marutiudyog.com

www.hyudaimotorindia.com

www.autoweb.com

http://html.rincondelvago.com/consumer-decision-process.html

http://www.cygnusindia.com/pdfs/Supply%20Chain%20Management%20in%20Automobile%20industry.pdf

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ANNEXURE

QUESTIONNAIRE

A survey of consumer perception about small cars

Personal details :

Name :

No. of members in family :

Monthly household income :

1. Do you own (Please tick) Car Two wheeler

2. If you do own a car?

Name

Model

Colour

3. Are you satisfied with it?

4. How much do you spend on maintenance on a monthly basis?

___________________________________.

5. Name some cars in the small car segment in India?

Small Car Segment

6. Can you relate the following cars to their ads?

Maruti 800

Zen

Indica

Santro

7. Rate the following attributes according to your preferences while buying a new car?

Price :Looks :Safety features :Interiors :Value added accessories :Color :Stability while driving :Low maintenance costs :Fuel efficiency :Boot space :Gearbox :

9. Rate the following cars as per your perception on the basis of the attributes specified (5 excellent to 1 poor)?

Attributes ZEN SANTRO MARUTI 800

INDICA

Sales and ServicePriceFuel EfficiencySmooth RideLuxuryValue for MoneyLooksComfortSafetyStyle / Looks

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13. Where would you or where from do you get the relative information for buying a car for yourself?

Television Friends Dealers Mechanics Magazines Other car owners

14. Who influences you the most while making a decision to buy a small segment car? Media

Friends Family others

15. What are the sources of advertising that you recall, as a influencing factor to you? Is it: -

o Television :o Newspaper :o Hoardings :o Magazines :o Auto Exhibitions :o Any other :

15. Comment on the following cars as to how can there be any improvements?

ZEN

INDICA

MARUTI 800

SANTRO

16. Which of the four cars mentioned below is the best in overall perspective to you?

(Rank 1 as the best and so on)

SantroZenIndicaMaruti 800

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15. Which car will you associate with the following personalities? Shahrukh Khan Hrithik Roshan Aishwarya Rai Rani Mukherjee

Thank you, Sir\Madam for spending your precious time in filling this Questionnaire. Your opinion values a lot for us. Thank you.

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