FACTORS AFFECTING CAR BUYING BEHAVIOUR OF CUSTOMERS
Introduction
Each year they extend the scope and depth of their survey to explore new
and evolving trends within the retail side of the automotive industry, with
a particular focus on consumer buying habits. This year, however, we have
broadened the scope to explore in greater detail environmental issues,
including fuel-efficient and alternative-fuel vehicles, as well as consumer
use of new online tools, such as web logs, discussion forums and search
engines. These additional areas of focus reflect changes in today's
automotive landscape. The industry is clearly in transition, with static
sales in almost all developed markets; growing pressure from Asian
manufacturers; eroding customer loyalty; and increased emphasis on
environmental and regulatory compliance. Consumer behaviour will be a
primary force in determining how this transition will evolve. Getting
closer to the customer in today's highly competitive landscape is essential
for the entire industry and is no longer just a retail issue. It requires
all organisations across the supply chain to work as a single enterprise,
sensing and responding rapidly to consumer demand in a co-ordinated manner.
This year's research involved almost 2,600 consumers in five countries:
China, France, Germany, the United Kingdom and the United States.
Interestingly, we found significant commonalities among responses across
the more mature markets, with differences still quite apparent in the
emerging Chinese automotive market. This report highlights these results,
as well as country-specific differences. The executive summary provides an
overview of key findings from the study, and the sections that follow offer
more in-depth data and analysis on consumer behaviour, environmental
issues, web usage, lead management and customer loyalty. The automotive
world today is changing; consumers are changing. And the speed of change is
continuing to accelerate.
Executive Summary
Competitive pressures and increasing complexity have led automotive
companies to look for an edge wherever they can find it. Improved consumer
insight into vehicle shopping and buying behaviour can provide that
valuable advantage. Vehicle manufacturers and dealers develop and execute
more effective strategies in areas such as sales, marketing and
advertising, after sales service, Customer Relationship Management (CRM)
and manufacturer/dealer collaboration.
automobile Industry in india
In India there are 100 people per vehicle, while this figure is 82 in
China. It is expected that Indian automobile industry will achieve mass
motorization status by 2014.
Industry Overview
Since the first car rolled out on the streets of Mumbai (then Bombay) in
1898, the Automobile Industry of India has come a long way. During its
early stages the auto industry was overlooked by the then Government and
the policies were also not favorable. The liberalization policy and various
tax reliefs by the Govt. of India in recent years has made remarkable
impacts on Indian Automobile Industry. Indian auto industry, which is
currently growing at the pace of around 18 % per annum, has become a hot
destination for global auto players like Volvo, General Motors and Ford.
A well developed transportation system plays a key role in the development
of an economy, and India is no exception to it. With the growth of
transportation system the Automotive Industry of India is also growing at
rapid speed, occupying an important place on the 'canvas' of Indian
economy.
Today Indian automotive industry is fully capable of producing various
kinds of vehicles and can be divided into 03 broad categories: Cars, two-
wheelers and heavy vehicles.
Snippets
The first automobile in India rolled in 1897 in Bombay.
India is being recognized as potential emerging auto market.
Foreign players are adding to their investments in Indian auto
industry.
Within two-wheelers, motorcycles contribute 80% of the segment size.
Unlike the USA, the Indian passenger vehicle market is dominated by
cars (79%).
Tata Motors dominates over 60% of the Indian commercial vehicle
market.
2/3rd of auto component production is consumed directly by OEMs.
India is the largest three-wheeler market in the world.
India is the largest two-wheeler manufacturer in the world.
India is the second largest tractor manufacturer in the world.
India is the fifth largest commercial vehicle manufacturer in the
world.
The number one global motorcycle manufacturer is in India.
India is the fourth largest car market in Asia - recently crossed the
1 million mark.
Segment Know how
Among the two-wheeler segment, motorcycles have major share in the market.
Hero Honda contributes 50% motorcycles to the market. In it Honda holds 46%
share in scooter and TVS makes 82% of the mopeds in the country.
40% of the three-wheelers are used as goods transport purpose. Piaggio
holds 40% of the market share. Among the passenger transport, Bajaj is the
leader by making 68% of the three-wheelers.
Cars dominate the passenger vehicle market by 79%. Maruti Suzuki has 52%
share in passenger cars and is a complete monopoly in multi purpose
vehicles. In utility vehicles Mahindra holds 42% share.
In commercial vehicle, Tata Motors dominates the market with more than 60%
share. Tata Motors is also the world's fifth largest medium & heavy
commercial vehicle manufacturer.
Miscellaneous
Hyderabad, the Hi-Tech City, is going to come up with the first automobile
mall of the country by the second half of 2008. It would be set up by city-
based Prajay Engineers Syndicate in area of more than 35 acres. This
'Autopolis' would have facilities for automobile financing institutions and
insurance services to create a complete range of services required for both
auto companies and customers. It will also have a multi-purpose convention
centre for auto fairs and product launches.
Cars by Price Range
"Under Rs. 3 Lakhs"Maruti 800, Alto, Omni "
" "Reva "
"Rs. 3-5 Lakhs "Ambassador "
" "Fiat Palio "
" "Hyundai Santro, Getz "
" "Chevrolet Opel Corsa "
" "Maruti Zen, Wagon R, Versa, Esteem, Gypsy "
" "Ford Icon & Fiesta "
" "Tata Indica, Indigo XL, Indigo Marina "
"Rs. 5-10 Lakhs "Chevrolet Swing, Optra Magnum, Tavera "
" "Hyundai Accent, Elantra "
" "Mahindra Scorpio "
" "Maruti Baleno "
" "Toyota Innova "
" "Tata Safari "
" "Mitsubishi Lancer, Mitsubishi Cedia "
" "Honda City ZX "
" "Mahindra Bolero "
" "Hyundai Sonata Embera "
"Rs. 10-15 Lakhs "Toyota Corolla "
" "Ford Mondeo & Endeavour "
" "Chevrolet Forester "
" "Skoda Octavia & Combi "
" "Honda Civic "
"Rs. 15-30 Lakh "Honda CR-V "
" "Maruti Suzuki Grand Vitara "
" "Terracan & Tucson "
" "Mitsubishi Pajero "
" "Audi A4 "
" "Opel Vectra "
" "Honda Accord "
" "Mercedes C Class "
" "Toyota Camry "
"Rs. 30-90 Lakhs "Audi A6, A8 & Audi TT "
" "BMW X5, 5 Series & 7 Series "
" "Mercedes E Class, S Class, SLK, SL & CLS-Class "
" "Porsche Boxster, Cayenne, 911 Carrera & Cayman S "
" "Toyota Prado "
"Above Rs. 1 Crore"Bentley Arnage, Bentley Continental GT & Flying Spur "
" "Rolls Royce Phantom "
" "Maybach "
The following links gives the complete picture of Indian Auto Industry:
"Automobile "The first auto vehicle rolled out in India at the end "
"History "of 19th century. Today, India is the the 2nd largest "
" "tractor and 5th largest commercial vehicle "
" "manufacturer in the world. Hero Honda with 1.7M "
" "motorcycles a year is now the largest motorcycle "
" "manufacturer in the world. "
"Industry "On the cost front, OEMs eyeing India in a big way to "
"Investment "source products and components at significant "
" "discounts to home market. On the revenue side, OEMs "
" "are active in the booming passenger car market in "
" "India. "
"Industry Growth "The passenger car and motorcycle segment in Indian "
" "auto market is growing by 8-9 per cent. The "
" "two-wheeler segment will clock 11.5% rise by 2007. "
" "Commercial vehicle to grow by 5.2 per cent. "
"Vehicle "India is the 11th largest Passenger Cars producing "
"Production "countries in the world and 4th largest in Heavy "
" "Trucks. Maruti Udyog Ltd. is the leading 4-wheelers "
" "manufacturer. Hero Honda is the leading 2-wheelers "
" "manufacturer. "
"Auto Export "Passenger vehicle exports have grown over five times "
" "and two-wheeler exports have reached more than double."
" "Exports of auto components, whose manufacturing costs "
" "are 30-40 per cent lower than in the West, have grown "
" "at 25% a year between 2000 to 2005. "
"Auto Companies "Hero Honda is the largest manufacturer of motorcycles."
" "Hyundai Motors India is the second largest player in "
" "passenger car market. Tata Motors is the fifth largest"
" "medium & heavy commercial vehicle manufacturer in the "
" "world. "
"Vehicle "Know about the number of vehicles registered as "
"Distribution "Transport or Non-Transport in the Indian states and "
" "Union Territories. "
"Associations "Get all the contact details of Automobile Association "
" "of Upper India (AAUI), Automotive Research Association"
" "of India (ARAI), Automobile Association of Southern "
" "India (AASI), Automotive Component Manufacturers "
" "Association of India (ACMA) and more "
Major Manufacturers in Automobile Industry
Maruti Udyog Ltd.
General Motors India
Ford India Ltd.
Eicher Motors
Bajaj Auto
Daewoo Motors India
Hero Motors
Hindustan Motors
Hyundai Motor India Ltd.
Royal Enfield Motors
Telco
TVS Motors
DC Designs
Swaraj Mazda Ltd
Government has liberalized the norms for foreign investment and import of
technology and that appears to have benefited the automobile sector. The
production of total vehicles increased from 4.2 million in 1998- 99 to 7.3
million in 2003-04. It is likely that the production of such vehicles will
exceed 10 million in the next couple of years.
The industry has adopted the global standards and this was manifested in
the increasing exports of the sector. After a temporary slump during 1998-
99 and 1999-00, such exports registered robust growth rates of well over 50
per cent in 2002-03 and 2003-04 each to exceed two and- a-half times the
export figure for 2001-02.
Anticipating Consumer Changes
What do these findings tell us? They make it clear that consumer behaviour
is evolving and that automotive companies need to anticipate this evolution
in order to be part of, or even influence, the changes. Is your company
ready? What changes will you need to make? Companies will need to take a
look at their multi-channel approach as they consider the potential market
for online sales. Effective web strategies will be vitally important, as
the online landscape evolves rapidly with the emergence of powerful
consumer-to-consumer tools like blogs, discussion forums, social networking
sites and virtual worlds. Automotive companies will need to stay focussed
on environmental developments and evolving consumer attitudes about fuel-
efficient and alternative-fuel vehicles. As with the web, green issues are
dynamic and it's still too early to determine their ultimate impact on the
automotive industry. Manufacturer/dealer collaboration in the form of
effective retail integration and integrated lead management will become
more important than ever to satisfy increasingly sophisticated and
demanding consumers and to retain loyalty. And companies will need to
establish and maintain a true two-way dialogue with individual customers
through personalised communication. While this topline review provides a
summary of key findings from this year's Cars Online study, the sections
that follow offer more in-depth data and analysis of consumer behaviour,
environmental issues, web usage, lead management and customer loyalty.
Consumer Behaviour: Turning to the Web and New C2C Tools
Consumers today have a multitude of sources from which to gather
information during the vehicle buying process, but the Internet tops the
list. The web has become a standard resource in the shopping process for
eight out of 10 consumers when researching car purchases. However, the way
they use it is changing. As the web matures, vehicle buyers are visiting
fewer sites and focussing more on manufacturer and C2C websites and less on
third-party information sites and independent e-tailer sties.
Manufacturer Sites a Key Information Source
Just two years ago, information websites were identified as the number one
information source by web users responding to the Cars Online survey (tied
with family and friends and manufacturer specific dealer), named by 55% of
consumers. This year, they dropped to the number four source, named by 41%
of web users. In comparison, manufacturer sites are now the top source for
consumers who use the web when researching vehicles, named by 70% of
respondents. Two years ago manufacturer sites held the number three
position, named by 43% of web users. The use of dealer websites has
remained steady, with about half of web users turning to these sites.
At the same time, the use of new online consumer-to-consumer tools such as
blogs, RSS (Really Simple Syndication) feeds, user-generated content,
social networking sites and web forums is growing. In this year's study,
29% of web users indicated that they use these kinds of tools when
researching during the vehicle shopping process, up from 21% a year ago.
(For a more detailed analysis of the use of these new online tools see
separate section on "Web Usage.") Interestingly, it is not just the young
generation who use the web to research vehicles. Almost half of consumers
50 and older visit manufacturer sites, nearly the same number as those in
the 18 to 34 age group. The numbers do fall off, however, when it comes to
blogs and web forums. About 30% of the youngest consumers rely on these new
tools, compared with just 12% of those 50 and older. As web usage rises,
consumer reliance on other more traditional information sources is on the
decline. Take print advertising, for example, which has shown a steady
downward trend particularly among consumers who rely on the web during the
vehicle shopping process. This year, just 20% of web users said they use
print ads when researching vehicles, compared with 32% in 2005. The message
for automotive companies is clear: Consumers trust the information they
receive from manufacturer and C2C sites. Vehicle manufacturers and dealers
need to be aware of how fast online changes are occurring and continually
adjust their marketing mix and resources accordingly to anticipate
tomorrow's mix. Marketing funds directed toward more traditional media such
as print advertising should be regularly re-examined for ROI.
Key Factors in Vehicle Choice
When it comes to making their final decision about which vehicle to buy,
consumers focus on factors such as reliability, safety, price and fuel
economy. At the bottom of the list are cash-back incentives, named by fewer
than half of consumers. The importance of incentives as a deciding factor
has declined for the past several years, indicating that consumers today
seem less interested in gimmicks when it comes to their car purchases.
Where consumers are in the buying cycle can make a difference in how they
rank the factors that influence their vehicle choice. For example,
additional warranty coverage is important to consumers who are furthest
away from the point of purchase; it was named by 69% of respondents who
were 13 to 18 months from purchase. However, the number declines as
consumers get closer to actually buying the car: 55% of respondents who
were within three months of purchase said extra warranty coverage was
important. This reflects the fact that consumers will narrow down the
factors that really matter to them as they get closer to the point of
purchase. Demographic factors such as age and gender accounted for some
variances. For example, older consumers tend to put more emphasis on
reliability and safety than do younger respondents. Those in the 50-plus
age group were also more concerned with environmental issues and fuel
economy. The youngest respondents were most likely to rate the ability to
research information on the Internet as an important factor in their
vehicle decision. Women tend to rate most of the factors as more important
than do men. The difference was most pronounced for cash-back incentives,
low financing, safety, environmental issues, fuel economy and additional
warranty coverage.
Going 'Green': Fuel Efficiency Takes Centre Stage
Fuel efficiency and environmental issues have moved to the forefront in
consumers' minds and in automotive industry forums thanks to factors
including global warming, fluctuating gasoline prices, and proposed
legislation to increase fuel efficiency and reduce CO2 emissions. This
growing interest in so-called green vehicles was evident in this year's
Cars Online research.
More than one-quarter of respondents said they currently own or lease a
fuel-efficient vehicle while almost half said they are planning to buy or
thinking seriously about buying a fuel-efficient vehicle. Not surprisingly,
the numbers for alternative-fuel vehicles were lower. Just 2% of
respondents currently own an alternative-fuel vehicle and 11% are planning
to buy or thinking seriously about buying one. The most common type of
alternative-fuel vehicle represented in the survey were gas/ electric
hybrids, named by about half of current alternative-fuel car owners.
Biodiesel vehicles were the second most common, named by 15%. The
alternative-fuel market remains in transition and it's still too early to
tell how it will ultimately shake out, although sales are expected to
continue to grow. For example, J.D. Power and Associates predicts that U.S.
sales of hybrid vehicles will increase by 35% in 2007, compared with 2006.
Current ownership of fuel-efficient and alternative-fuel vehicles tended to
be quite consistent across gender and age groups, although the oldest
consumers were somewhat more likely to be seriously thinking about buying
an alternative-fuel car.
Why Buy a Green Vehicle?
Fuel economy is the number one factor driving consumer decisions about
green vehicles (named by 57% of respondents), followed by the impact on the
environment (23%). Tax credits and cost factors were less important. Some
consumers pointed to less tangible reasons such as "it makes me feel
better." This is in line with research conducted by CNW Marketing Research.
When asked why they bought a Toyota Prius, 57% of Prius owners said because
it "makes a statement about me." However, the Cars Online research
uncovered some differences in the reasons behind consumer decisions about
green vehicles. For example, European consumers were more likely to cite
environmental impact as a primary factor, while more respondents in China
and the U.S. pointed to fuel economy. Older consumers were somewhat more
likely to identify fuel economy as a primary factor, compared with the
youngest respondents (18-34). Men put more emphasis than did women on fuel
economy, while a higher proportion of women identified environmental impact
as the primary reason driving their decisions about green vehicles.
PERSONAL SELLING:
CONSUMER BUYING BEHAVIOR
CONSUMER BUYING vs. ORGANIZATIONAL BUYING
Final (or ultimate) consumers purchase for:
personal,
family, or
household use
Organizational consumers purchase for:
further production,
usage in operating the organization, and/or
resale to other consumers
Consumer Buying Behavior
The decision processes and acts of final household consumers associated
with evaluating, buying, consuming, and discarding products for personal
consumption
Consider the purchase an automobile. You generally will not consider
different options until some event triggers a need, such as a problem
needing potentially expensive repair. Once this need has put you "on the
market", you begin to ask your friends for recommendations regarding
dealerships and car models. After visiting several dealerships, you test
drive several models and finally decide on a particular model. After
picking up your new car, you have doubts on the way home, wondering if you
can afford the monthly payments, but then begin to wonder if instead you
should have purchased a more expensive but potentially more reliable model.
Over the next five years, the car has several unexpected breakdowns that
lead you to want to purchase a different brand, but you have been very
happy with the services of the local dealership and decide to again
purchase your next car there.
In this particular case, the following generic model of consumer decision
making appears to hold:
=====>need recognition
=====>information search
=====>evaluation of alternatives
=====>purchase decision
=====>postpurchase behavior
Now consider the purchase of a quart of orange juice. You purchase this
product when you do your grocery shopping once per week. You have a
favorite brand of orange juice and usually do your grocery shopping at the
same store. When you buy orange juice, you always go to the same place in
the store to pick it up, and never notice what other brands are on the
shelf or what are the prices of other brands. How is it that the generic
model above works differently in this second scenario? Why does it work
differently? Why would we generally need the ministrations of a sales
person in the sale of a car, but we generally do not need the help of a
salesperson in the purchase of orange juice?
How can the marketer of orange juice get a consumer like you to exert more
effort into information search or to consider alternative products? How is
it that the marketer of your brand got you to ignore alternative competing
brands? What is the involvement of salespeople in sales promotions that
might be associated with products such as orange juice?
Consumer behavior researchers are not so interested in studying the
validity of the above generic model, but are more interested in various
factors that influence how such a model might work.
INFLUENCES ON THE GENERIC MODEL
external
o group
-e.g., cultural, family, reference group influences
o environmental/situational
-e.g., time of day, temperature and humidity, etc.
inernal
o lifestyle, personality, decision making process, motivation,
etc.
GROUP INFLUENCES ON CONSUMER BEHAVIOR
Culture
the set of basic values, beliefs, norms, and associated behaviors that are
learned by a member of society
Note that culture is something that is learned and that it has a relatively
long lasting effect on the behaviors of an individual. As an example of
cultural influences, consider how the salesperson in an appliance store in
the U.S. must react to different couples who are considering the purchase
of a refrigerator. In some subcultures, the husband will play a dominant
role in the purchase decision; in others, the wife will play a more
dominant role.
Social Class
A group of individuals with similar social rank, based on such factors as
occupation, education, and wealth
Reference Groups
Groups, often temporary, that affect a person's values, attitude, or
behaviors
E.g., your behaviors around colleagues at work or friends at school
are probably different from your behaviors around your parents, no
matter your age or stage in the family life cycle. If you were a used
car salesperson, how might you respond differently to a nineteen year
old prospect accompanied by her boyfriend from one accompanied by two
girlfriends?
Opinion leader
A person within a reference group who exerts influence on others
because of special skills, knowledge, personality, etc.
o You might ask the webmaster at work for an opinion about a
particular software application. Software manufacturers often
give away free beta copies of software to potential opinion
leaders with the hope that they will in turn influence many
others to purchase the product.
Family
A group of people related by blood, marriage, or other socially
approved relationship
ENVIRONMENTAL / SITUATIONAL INFLUENCES ON CONSUMER BEHAVIOR
Circumstances, time, location, etc.
Do you like grapes? Do you like peas?
You might like grapes as a snack after lunch, but probably not as a dessert
after a fancy meal in a restaurant. You might like peas, but probably not
as a topping on your pancakes. Everyday situations cause an interaction
between various factors which influence our behaviors. If you work for tips
(a form of incentive related to commission) as a waiter or waitress, you
must certainly be aware of such interactions which can increase or decrease
your sales.
If you are doing your Saturday grocery shopping and are looking for orange
juice, you are probably much more sensitive to price than if you stop at
the quick store late at night, when you are tired and cranky, after a late
meeting at the office. A prospect shopping for a new automobile while
debating the wisdom of a necessary expensive repair to his car might be
more interested in what cars are on the lot than in shopping for the best
deal that might involve a special order.
INTERNAL INFLUENCES ON CONSUMER BEHAVIOR
Personality
A person's distinguishing psychological characteristics that lead to
relatively consistent and lasting responses to stimuli in the environment
We are each unique as individuals, and we each respond differently as
consumers. For example, some people are "optimizers" who will keep shopping
until they are certain that they have found the best price for a particular
item, while other people are "satisficers" who will stop shopping when they
believe that they have found something that is "good enough." If you are a
salesperson in a retail shoe store, how might you work differently with
these two personalities?
Lifestyle and Psychographics
lifestyle is a pattern of living expressed through a person's
activities, interests, and opinions
psychographics is a technique for measuring personality and lifestyles
to developing lifestyle classifications
Motivation: Multiple motives
Consumers usually have multiple motives for particular behaviors. These can
be a combination of:
manifest
known to the person and freely admitted
latent
unknown to the person or the person is very reluctant to admit
Note: different motives can lead to the same behavior; observing behavior
is not sufficient to determine motives.
What are the thoughts of John's friend?
What is John's manifest motive?
What might be his latent motive?
How might a salesperson discover these motives? What features should a
salesperson emphasize?
Involvement
Has to do with an individual's
intensity of interest in a product and the
importance of the product for that person
The purchase of a car is much more risky than the purchase of a quart of
orange juice, and therefore presents a higher involvement situation. This
modifies the way that the generic model works.
As involvement increases, consumers have greater motivation to comprehend
and elaborate on information salient to the purchase. A life insurance
agent, for example, would typically be more interested in contacting a
young couple who just had a baby than an eighteen year old college student
- even though the new parents might be struggling to make ends meet while
the student is living more comfortably. Although the annual investment into
a policy is much lower if started at a younger age, most young college
students are not open to thinking about long term estate planning. A young
couple with a new child, however, is much more open to thinking about
issues associated with planning for the child's future education, saving to
buy a house, or even saving to take an extended vacation upon retirement.
TYPES OF CONSUMER PROBLEM-SOLVING PROCESSES
Routinized
used when buying frequently purchased, low cost items
used when little search/decision effort is needed
e.g., buying a quart of orange juice once per week
Limited Problem Solving
used when products are occasionally purchased
used when information is needed about an unfamiliar product in a
familiar product category
Extended problem solving
used when product is unfamiliar, expensive, or infrequently purchased
e.g., buying a new car once every five years
Under what sorts of conditions would the assistance of a salesperson be
needed? Not needed?
POST-PURCHASE CONSUMER BEHAVIOR
Satisfaction
After the sale, the buyer will likely feel either satisfied or
dissatisfied. If the buyer beleives that s/he received more in the exchange
than what was paid, s/he might feel satisfied. If s/he believes that s/he
received less in the exchange than what was paid, then s/he might feel
dissatisfied. Dissatisfied buyers are not likely to return as customers and
are not likely to send friends, relatives, and acquaintences. They are also
more likely to be unhappy or even abusive when the product requires post-
sale servicing, as when an automobile needs warranty maintenance.
The above idea can be modeled as Homans' basic exchange equation:
Profit = Rewards - Costs
Unfortunately, even a buyer who "got a good deal" with respect to price and
other terms of the sale might feel dissatisfied under the perception that
the salesperson made out even better.
This idea is called equity theory, where we are concerned with:
Outcomes of A
Inputs of A
vs.
Outcomes of B
Inputs of B
Consider, for example, that you have purchased a used car for $14,000 after
finding that the "e;blue book" value is listed at $16,000. You are probably
delighted with the purchase until you accidentally meet the prior owner who
had received a trade-in of $10,000 on the car just a few days before. That
the dealer appears to have received substantially greater benefit than you
could lead to extreme dissatisfaction, even though you received good value
for the money spent.
(Note that the selling dealer might actually have paid $12,000 for the car
at a statewide dealer's auction, and then might have incurred another
$1,000 in expenses associated with transporting the car and preparing it
for sale. Management of buyer perceptions is very important!)
An issue related to this is attribution theory. According to attribution
theory, people tend to assign cause to the behavior of others. Mary's life
insurance agent advises her to purchase a whole life policy, while her
accountant advises her, "buy term insurance and invest the difference.".
The reason, explains the accountant, "is that insurance agents receive
substantially higher commission payments on sales of whole life policies."
If Mary believes that the insurance agent is recommending a product merely
because he receives a higher commission, she will likely be displeased with
the relationship and will not take his recommendation. If the agent is able
to show Mary that the recommended product is the best solution for her
situation, then she will likely attribute his recommendation to having her
best interests in mind and will not be concerned about how it is that he is
compensated for his services.
Cognitive dissonance
It has to do with the doubt that a person has about the wisdom of a recent
purchase
It is very common for people to experience some anxiety after the purchase
of a product that is very expensive or that will require a long term
commitment. Jane and Fred, for example, signed a one year lease on an
apartment, committing themselves to payments of $1500 per month. A week
later, they are wondering if they should have instead leased a smaller $900
apartment in a more rough part of town; they are not sure if they really
can afford this much of a monthly obligation. Dick and Sally, on the other
hand, ultimately rented the $900 apartment, and now are wondering if the
savings in rent will be offset by noisy and sometimes unsafe conditions in
this neighborhood.
Perhaps neither couple would be experiencing this anxiety if their
landlords had given them just the smallest of assurances that they had made
a good decision. After a close on products that are expensive or that
require a long term commitment, the salesperson should provide the prospect
with some reasons to be happy with the decision. Allow the car buyer to
reinforce her own positive feelings by calling her a week after the
purchase to ask how things are going. Call the new life insurance policy
holder after two months to see if there are any questions; a lack of
questions can only help the buyer to convince himself that he did the right
thing.
Methodology
The study is based on primary data collection with a sample size of 100
respondents residing in National Capital Region of New Delhi, India. The
questionnaire used for the sample survey is a structured and non-disguised
questionnaire and consisted of two major sections. The first section
intended to collect the various demographic factors; the second section
intended to collect the various opinions containing questions about the
various factors affecting the car purchasing decision. A five point Likert
scale was used to capture the consumers responses ranging from strongly
agree to strongly disagree. The different statements regarding the various
factors affecting the car buying behavior of customers were generated based
on literature review as well as expert opinion in an iterative manner. It
could be therefore said that the itemized scale in this case actually asks
the respondents to rank their opinions in a decreasing order of importance.
Data analysis was done using SPSS software. The statistical analysis
methods employed was factor analysis. To study the impact most frequently
indulged in weighted average method was used.
Data collection
The study entailed data collection with the help of a questionnaire from
the residents of National Capital Region of New Delhi, India. Data was
collected by personally contacting the respondents and explaining in detail
about the survey. A total of 120 customers from different areas were
contacted and 100 correctly completed questionnaires were obtained from all
the customers, the break-up of which is given in Figure 1,2 and 3
Descriptive profile of respondents (n=100)
Gender
Fig 1
Fig 2
Age
Occupation
Fig 3
Findings and Analysis
Factor Analysis for factors affecting car purchasing decision
Factor analysis was performed to identify the key dimensions affecting
purchase of cars provided by different car manufacturing companies. The
respondent ratings were subject to principal axis factoring with varimax
rotation to reduce potential multicollinearity among the items and to
improve reliability on the data (see Table 6: Rotated Factor Matrix).
Varimax rotation (with Kaiser Normalization was converged in thirty-one
iterations. Thirty items were reduced to nine orthogonal factor dimensions
which explained 73.555% of the overall variance (Table 4) indicating that
the variance of original values was well captured by these nine factors.
The nine factors and their components is given in table 7.
Reliability of Data
Table 1: KMO and Bartlett's Test
"Kaiser-Meyer-Olkin Measure of ".769 "
"Sampling Adequacy. " "
"Bartlett's Test"Approx. "1650.00"
"of Sphericity "Chi-Square "0 "
" "df "435 "
" "Sig. ".000 "
Kaiser-Meyer-Olkin
[Index for comparing the magnitudes of the observed co-relation
coefficient to the magnitude of the partial correlation coefficients]
From the above table, we can interpret that there is no error in
76.9% of the sample and in the remaining 23.1%, there may occur some
sort of error.
"Bartlett's Test of Sphericity"
[Strength of relationship among variables is strong. It presents
good idea to proceed to factor analysis for the data.]
Ho : There is significant indifference of all the factors
affecting car purchase decision
H1 : There is significant difference of all the factors
affecting car purchase decision
The observe significance level is 0.0000 which is less than .05,
which is small enough to reject the hypothesis. It means there is a
significant difference between the factors affecting car purchasing
decisions.
Communality"- Common Factor Variance
Communality of each statement refers to the
variance being shared or common by other statements. With reference to the
first statement, the extraction is .833 which indicates that 83.3% of the
variance is being shared or common to other statements. Refer Table 2.
"Eigen Value": Indicates the amount of variance in the original variables
accounted or by each component. The total initial variance in the new
components will be 30.
Table 2: Communalities
" "Initial"Extract"
" " "ion "
"S1 "1.000 ".833 "
"S2 "1.000 ".692 "
"S3 "1.000 ".760 "
"S4 "1.000 ".800 "
"S5 "1.000 ".695 "
"S6 "1.000 ".795 "
"S7 "1.000 ".746 "
"S8 "1.000 ".731 "
"S9 "1.000 ".783 "
"S10 "1.000 ".875 "
"S11 "1.000 ".851 "
"S12 "1.000 ".782 "
"S13 "1.000 ".642 "
"S14 "1.000 ".628 "
"S15 "1.000 ".674 "
"S16 "1.000 ".715 "
"S17 "1.000 ".662 "
"S18 "1.000 ".707 "
"S19 "1.000 ".653 "
"S20 "1.000 ".728 "
"S21 "1.000 ".762 "
"S22 "1.000 ".710 "
"S23 "1.000 ".642 "
"S24 "1.000 ".687 "
"S25 "1.000 ".835 "
"S26 "1.000 ".684 "
"S27 "1.000 ".803 "
"S28 "1.000 ".683 "
"S29 "1.000 ".857 "
"S30 "1.000 ".650 "
Extraction Method: Principal Component Analysis.
Table 3: Total Variance Explained
"Component"Initial Eigenvalues "Extraction Sums of "Rotation Sums of Squared "
" " "Squared Loadings "Loadings "
" "Total "% of Variance "
"Component 1 "Explain a variance of 3.398,"11.327% "
" "which is 11.327 % of the " "
" "total variance of 30 " "
"Component 2 "Explain a variance of 3.327,"22.083% "
" "which is 10.756 % of the " "
" "total variance of 30 " "
"Component 3 "Explain a variance of 3.080,"32.350% "
" "which is 10.268 % of the " "
" "total variance of 30 " "
"Component 4 "Explain a variance of 2.556,"40.870% "
" "which is 8.520 % of the " "
" "total variance of 30 " "
"Component 5 "Explain a variance of 2.543,"49.345% "
" "which is 8.476 % of the " "
" "total variance of 30 " "
"Component 6 "Explain a variance of 2.356,"57.200% "
" "which is 7.855 % of the " "
" "total variance of 30 " "
"Component 7 "Explain a variance of 1.909,"63.564% "
" "which is 6.364 % of the " "
" "total variance of 30 " "
"Component 8 "Explain a variance of 1.718,"69.289% "
" "which is 5.725 % of the " "
" "total variance of 30 " "
"Component 9 "Explain a variance of 1.280,"73.555% "
" "which is 4.266 % of the " "
" "total variance of 30 " "
Fig 4
With the help of table 3 and 4, we can interpret that 30 statements are now
reduced to 9 components contributing 73.555% of the total variance. With
the help of Fig1. Scree plot, we can just visualize that nine factors are
reduced with eigen value greater than 1.0000
Table 5. Component Matrix:
This table reports the factor loadings for each variable on the unrotated
components or factors.
Component Matrix
" "Component "
" "1 "
" "
" "
"Factor 2: "
" "
" "
"S10 : Government Policies And Regulations "
"S11 : Import Duties Imposed By Government "
" "
" "
"Factor 3: "
" "
"S3 : Family Needs "
"S5 : Brand Image "
"S6 : Income Level "
"S8 : Special Family Programs/Events Like Anniversary, Birthday "
"S15 : Insurance Facility "
"S18 : Credit Card Acceptance "
"S26 : Car Accessories "
" "
" "
"Factor 4: "
" "
"S14 : Installment Payment Facility "
"S16 : Location Of The Car Dealer Shop "
"S24 : Looks "
"S28 : Availability Of Service Station "
" "
" "
"Factor 5: "
" "
"S4 : Status Symbol "
"S12 : Advertisements And Promotions "
"S17 : Home Delivery Facility "
"S30 : Overall, I Am Satisfied With My Car I Own "
" "
" "
"Factor 6: "
" "
"S1 : Price Of The Car "
"S2 : You Take Suggestions Of Your Family Members "
"S9 : Family Members & Friend Circle "
"S13 : After Sales Service "
" "
" "
"Factor 7: "
" "
"S20 : Availability Of Variety Of Cars Under One Roof "
"S21 : Information Provided By Various Car Related Magazines "
" "
"Factor 8: "
" "
"S22 : Mileage "
"S23 : Power "
" "
" "
"Factor 9: "
" "
"S7 : Festival Season/Offers "
Table 8: Component Score Coefficient Matrix
" "Component "
" "1 "2 "3 "4 "5 "6 "
"1. "Price Of The Car " " " " " "
"2. "You Take Suggestions From " " " " " "
" "Your Family Members " " " " " "
"3. "Family Needs " " " " " "
"4. "Status Symbol " " " " " "
"5. "Brand Name " " " " " "
"6. "Income Level " " " " " "
"7. "Festival Season/Offers " " " " " "
"8. "Special Family " " " " " "
" "Programs/Events Like " " " " " "
" "Anniversary, Birthday " " " " " "
"9. "Family Members & Friend " " " " " "
" "Circle " " " " " "
"10. "Government Policies And " " " " " "
" "Regulations " " " " " "
"11. "Import Duties Imposed By " " " " " "
" "Government " " " " " "
"12. "Advertisements And " " " " " "
" "Promotions " " " " " "
"13. "After Sales Service " " " " " "
"14. "Installment Payment " " " " " "
" "Facility " " " " " "
"15. "Insurance Facility " " " " " "
"16. "Location Of The Car Dealer" " " " " "
" "Shop " " " " " "
"17. "Home Delivery Facility " " " " " "
"18. "Credit Card Acceptance " " " " " "
"19. "Information Provided By " " " " " "
" "Salesperson " " " " " "
"20. "Availability Of Variety Of" " " " " "
" "Cars Under One Roof " " " " " "
"21. "Information Provided By " " " " " "
" "Various Car Related " " " " " "
" "Magazines " " " " " "
"22. "Mileage " " " " " "
"23. "Power " " " " " "
"24. "Looks " " " " " "
"25. "Safety " " " " " "
"26. "Car Accessories " " " " " "
"27. "Easy Availability Of Spare" " " " " "
" "Parts " " " " " "
"28. "Availability Of Service " " " " " "
" "Station " " " " " "
"29. "Technology " " " " " "
"30. "Overall, I Am Satisfied " " " " " "
" "With My Car I Own " " " " " "
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