Deloitte India Mfg Driving Through Consumers Mind

7/23/2019 Deloitte India Mfg Driving Through Consumers Mind

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Driving through theconsumers mind Considerations for

Car purchase

February 2014www.deloitte.com/in


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Key Terms 3

Introduction 4

About the Study 5

Purchase Drivers 6

Brand Considerations 12

Brand Perception 20

Conclusion 24

Appendix 25

Contacts 27

Contents


3/28Driving through the consumers mind 3

Key Terms

Gen X Born between 1965 - 1976falling in the age group of 37 to 48 years

Gen Y Born between 1977-1994falling in the age group of 19 to 36 years

OEMOriginal equipment manufacturers


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Introduction

Today, India stands as one of the top ten automotivemarkets in the world and is likely to scale-up to thirdposition by 2020, thanks to the expanding middle-classpopulation with buying potential. This expectationhas already led to a number of key global OriginalEquipment Manufacturers (OEMs) to establish theiroperations in India.

In spite of the longer term promise, the OEMs have hadto deal with a very sluggish market in the recent past.While some individual products have had spectacularsuccess, the others are struggling to maintain volumes.In this context, we wanted to explore the purchaseconsiderations that can potentially help the OEMs intargeting better. We also wanted to explore if there hasbeen any behavioural change in the slow years that themarketers can take advantage or be wary of.

During the year 2013, we surveyed over 1800respondents in India. This was a part of a globalinitiative where our survey covered over 23,000 peoplein 19 countries. We have used the responses receivedfrom the sample population in India alone to drawinferences and conclusions in this report.

While there were some respondents who did notown a vehicle or owned a two-wheeler, the sample

is signicantly car owning and as a result is skewedtowards the current geographical dispersion of carpopulation in India. This results in the dominance ofurban consumers in the sample size. Further, the samplemay not represent the various brands proportionate tomarket share those brands may enjoy. Though we haveattempted to cover a large cross-section of consumers,this random sample may have limitations of representingall the strata of car owners or car buyers. Please refer tothe Appendix-1 for details of respondent proles.

While analysing data or drawing inferences, wehave taken only statistically signicant data intoconsideration. As true to most surveys, the analysispresented in this report may be taken as directionallyvalid and may not accurately reect the realities relatingto a brand, customer category, etc. The reader is advisednot to take the conclusions or the inferences drawn asprofessional counsel or assume these to be premises onwhich they would make decisions.

We hope that this report will help provide additionalperspectives to OEMs in devising their marketingstrategies to drive future growth.



About the study

Based on the dataset we had, our endeavour was toanswer the following:1. What are drivers for the new vehicle purchase

decision?2. How many brands are considered by the potential

consumers for vehicle purchase both car owners andnonowners?

3. What are the key attributes that consumers look in avehicle during the purchase process?

We have attempted to answer the above questions asper the consumer decision making process illustratedbelow:

Purchase Drivers

Identify the driverswhich may impact thevehicle purchase usingthe past purchasingbehavior and next

purchase inputs

Demographic factors such as age,gender, residential location etc.

# of brands in consideration set

Brands by vehicle price range

Key brands on different attributes

Past purchasing behavior

Current preferences & lifestyle

Next purchase considerations

Determine theconsideration set fordifferent consumertypes and theirrequirements

Understand theperception ofthe brands in theconsideration set andidentify key attributes

required in the vehicle

Consideration Set Brand Perceptionof Car Owners


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Purchase

Drivers



Capturing the purchase triggers

First-time buyers

Unlike the developed markets where a car is boughtto cater to an individuals requirement, the Indian rsttime car buyer, looks to buy a car for his family primarily.Contrary to the popular belief that the car buyer ismotivated by the opportunity to make a statement ofsuccess, it is interesting that this is a very rational andpractical requirement. Given that the rst time buyerhas really no comparable reference, it is natural that thisbuying decision is not inuenced by the improvementof fuel efciency factor.

Respondents from both Gen X and Gen Y categorieshave expressed similar requirements for their rst car,irrespective of their gender.

Top Reasons for Vehicle Purchase

My familymembers or

dependents canuse it

Need for morespace/larger

vehicle

New technologyavailable

Can afford tobuy/lease

another vehicle

Improve fuelefciency

Improvereliability

Purchasevehicle with a

betterbrand/image

8x

x

R e l a t

i v e s c a l e w

i t h r e s p e c

t t o B r a n

d I m a g e

( 1 X =

% r

e s p o n

d e n

t s f o r w

h o m

B r a n

d i m a g e

a c t e d a s p u r c

h a s e

t r i g g e r

)

01

2

3

4

5

6

7

8

9

Family needs is rated as the top triggerin purchase decision of a car, and is 8xmore important as a trigger than betterbrand image.

This section covers the reasons the car buyerslook to buy a car. It also explores the differencebetween the rsttime and repeat buyers.


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Once the decision to buy is made, the study reveals thatthe rst-time buyers use reliability, the dealer servicesand resale value as lters while making brand choices.However, it was observed that female respondentsattached less importance to reliability and dealer abilityas compared to the male respondents.

Repeat buyers

0%

20%

40%

60%

80%

100%

Important

Overall Female Male Overall Female Male Overall Female Male Overall Female MaleDealerships ability torepair and service

Ability to repair / servicevehicle on your own

Re-sale value Reliability (e.g., lowmaintenance required)

% o

f R e s p o n

d e n

t s

Rating of Attributes for Choosing a Vehicle (First time buyers)

Neutral Not Important

Note: Ratings / points were captured on a 5 point scale. Rating of 4 & 5 as important, 3 as neutral and 1&2 as not important

New technologyavailable

Need for more space/

larger vehicle

My family members ordependents can use it

Can afford to buy/

lease another vehicle

Improve fuel efciency

Improve

reliability

Purchase vehicle with abetter brand/image

Top Reasons for Vehicle Re-purchase

3x 3x

x R e l a t

i v e s c a l e w

i t h r e s p e c

t t o B r a n d

I m a g e

( 1 X =

% r

e s p o n

d e n

t s f o r w

h o m

B r a n

d

i m a g e a c

t e d a s p u r c

h a s e

t r i g g e r

)

0

1

2

3

4

Technology and need for more space arerated as the top triggers in purchasedecision of a car, and are 3x moreimportant as a trigger than better brandimage.



Unlike the rst time buyer, the repeat buyerunderstandably looks to upgrade, going by the reasonscited by the respondents. A more sophisticated productis the primary requirement. While most purchase driverswere common across the repeat buyers, the responsesgiven by Gen X and Gen Y presented an interesting mix.While technology stood out as a ruling factor for GenY, Gen X gave precedence to larger space requirement.This trend held true irrespective of the respondentsgender.

Interestingly, Gen X male alone have rated can afford tobuy as a reason ahead of the utility for family members,thereby suggesting their desire to use the car as astatement of success.

As is the case of rst time buyers, the repeat buyersalso use reliability, the dealer services and resale valueas lters to making brand choices. However, the Gen Xattached more importance to the vehicle reliability ascompared to Gen Y.

Overall Gen X Gen Y Overall Gen X Gen Y Overall Gen X Gen Y Overall Gen X Gen Y

Dealerships ability torepair and service

Ability to repair / servicevehicle on your own

Re-sale value Reliability (e.g., lowmaintenance required)

% o f

R e s p o n

d e n

t s

Rating of Attributes for Choosing a Vehicle (Repeat buyers)

l

0%

20%

40%

60%

80%

100%

Note: Ratings / points were captured on a 5 point scale. Rating of 4 & 5 as important, 3 as neutral and 1&2 as not important


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Are the usage patterns undergoing changes?

The study suggests that the average time betweenpurchases of two cars was almost 6-7 years.

Respondents considered changing their car after it hadclocked a distance of 50,000 to 55,000 km.

While males typically drive a car for 55,000 km or morebefore making a new purchase, female consumerschange cars after 45,000 km.

The distance consideration also varied between GenX and Gen Y consumers, as the former preferred tochange their cars after driving a longer distance ascompared to the other sub-set.

Size of the vehicle also matters. Vehicles like van andwagons are driven for more than 60,000 km beforechanging.

It is perhaps understandable that consumers preferenceschange faster as the price of vehicles goes up.

Note: The average time between purchases has been calculated as the sum of the average vehicle age and average time to next vehiclepurchase for each respondent. The total distance travelled per year has been calculated based on the average working travel time. It has beenassumed that the number of working days per year is 300 days to accommodate the travel not related to work.

0

10

20

30

40

50

60

70

80

3.00

4.00

5.00

6.00

7.00

8.00

9.00

Overall Female Male Gen X Gen Y

Time & Distance between Purchases

Time Distance

T i m e

i n y e a r s

( Y e a r )

D i s t a n c e

( 0 0 0 ) k m

The respondents provided the indication of the point ofpurchase which typically falls between 6 and 7 yearsafter having travelled 50,000 to 55,000 kilometers



Future usage trends

% o

f T o t a l R e q u i r e m e n

t

T i m e

i n Y e a r s

0%

20%

40%

60%

80%

100%

Current Usag e Usage afte r 5 YearsPersonalCar Moped TaxiPvtCarpool RentalCar PublicCarPoolPublicTransportation

Increase in usageof personal carsby ~5% over thenext 5 years

Bike Walking

6.3

5.6

5.20

5.40

5.60

5.80

6.00

6.20

6.40

Time Period betweenPurchases - Current

Time Period betweenPurchases - 5 years

later

Time Period between Vehicle PurchasesUsage of Transportation Means - Overall

I m p a c t on

P ur c h

a s e of N

ew V

eh i c l e s

Note: The expected time period between purchases after 5 years has been calculated based on the change in the usage of personal carsfrom 35% to 40%. Considering that the distance between purchases typically remain same, the time period reduces in the same ratio as theincrease in the usage (i.e. 40%/35% = 1.13)

Consequent to the increased usage, it is expected thatthe time for which people would own a car to reducefrom the current 6+ years to about 5.5 years.

The share of the personal car is expected to increaseover the next ve years, at the cost of other mobility

solutions. This increased usage is driven largely by GenY and women drivers


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Brand

consideration



Mapping the consumer mindset

Brand considerationMost of the car buyers both rst time and repeat consider 3 5 brands from which they make their nalselection.

This trend seems to be true for the last seven yearscovering both the high growth and difcult periods.Clearly, the buyer goes through a detailed evaluation

Note: The sum of all the stacks in the graph does not add to 100% as data has been depicted only for the last six years and some did not

respond. Please read the graph on incremental basis and not on cumulative basis while you transition from one year to next.

No. of Brands Typically Considered (By Car Age)

% o

f R e s p o n

d e n

t s

Number of Brands Considered

0%

5%

10%

15%

20%

25%

1 2 3 4 5 6 7 8 9 10

< 1 year (2013) 2 years (2011) 3 years (2010)

4 years (2009) 5 years (2008) 6 years (2007)

7 years (2006)

Once the decision is made to buy a car, and afterthe respondents cited their selection parameters,we asked them as to how they made their brandchoices.

irrespective of the economic circumstances that he/shemay be in.

However, SUV and mini-van owners tend to look formore number of brands before they make their selectionas compared to consumers who consider a hatchbackand sedan.


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Price-point buying patterns

Respondents Considering 6 or more Brands (By Car Value)

% o

f R e s p o n

d e n

t s

0%

10%

20%

30%

40%

50%

2 - 4 Lakhs 4 - 6 Lakhs 6 - 8 Lakhs 8 - 12 Lakhs 12 - 16 Lakhs 16 - 30 Lakhs

As the buyers go through the repeat purchase, theydont necessarily behave any different from the rst timebuyer in shopping around. It does not seem to be a casewhere they identify themselves with a brand in terms ofpersonality or performance.

We asked the owners of different brands as to howmany other brands they considered before theymade their selection of the brands they owned. Notsurprisingly, we found a large number of them lookingat several options, with some interesting variationsacross brands.

Respondents Considering >= 4 Brands (By Car Brand)

% o

f R e s p o n

d e n

t s N um

b e r

of

b r a n

d s

3.7 3.7 3.8 3.8 3.9 3.9 3.8 3.7 3.8 3.64.0

4.3 4.0

0

1

2

3

4

5

6

7

8

0%

20%

40%

60%

80%

100%

Brand1

Brand2

Brand3

Brand4

Brand5

Brand6

Brand8

Brand9

Brand10

Brand11

Brand12

Brand13

LuxuryCars

Greater or equal to 4 brands Less than 4 brands Median

Note: We are not drawing any brand comparisons and therefore the brand names have been masked

The number of brands considered remains similar fornon-luxury as well as luxury cars, indicatingimportance of value proposition in both the consumersegments.



The urban, sub-urban and rural trends

0%

20%

40%

60%

80%

100%

Rural Suburban Urban

1 2 3 4 5 6 7 8 9 10 or more

No. of Brands Typically Considered by Location

% o

f R e s p o n

d e n

t s

Note: The sum of all the stacks in the graph may not add to 100% as some of the individuals did not respond

Rural buyers tend to look at a more limited numberof options. This could be a function of the choicesavailable and the price points they consider. The analysisin the following two graphs gives the number of brands

considered by the buyers over the last seven years.

Rural consumers take lesser number of brands intoconsideration as compared to the semi-urban or urbanconsumers.


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0%

20%

40%

60%

80%

100%

2013 2012 2011 2010 2009 2008 2007

1 2 3 4 5 6 7 8 9 10 or more

No. of Brands Considered during Last Purchase (Urban)

% o

f R e s p o n d e n

t s

Vehicle Purchase Year


There is an increasing trend amongst the urbanpopulation of going with a single brand, which could beon account of familiarity of the brand, loyalty programsof OEMs, or the aspirational value offered by a brand atthat point of time for a particular product.

No. of Brands Considered during Last Purchase (Rural/Semi Urban)

0%

20%

40%

60%

80%

100%

2013 2012 2011 2010 2009 2008 2007

1 2 3 4 5 6 7 8 9 10 or more

% o

f R e s p o n

d e n

t s

Vehicle Purchase Year


When you look at the 80 percentile level, the number ofbrands considered remains comparable. However, thenumber of buyers considering lesser number of brandshas been reducing.



Car type & pricing trends


The consideration set increases with the rise in thecar price point across Gen X and Gen Y car owners.Gen X consumers, who own a car between Rs 6 to 8Lakhs, tend to evaluate more number of brands, withmore than 40% evaluating 6 or more cars for their lastpurchase. However, less than 20% of Gen Y consumersevaluated 6 or more cars across the pr ice range.

No. of Brands Typically Considered (By Car Price and Age Groups)

% o

f R e s p o n d e n

t s

0%

20%

40%

60%

80%

100%

1 2 3 4 5 6 7 8 9 10 or more

Gen X Gen Y Gen X Gen Y Gen X Gen Y Gen X Gen Y

2 - 4 Lakhs 4 - 6 Lakhs 6 - 8 Lakhs 8 - 12 Lakhs

With the increase in the car price, consumers tend toevaluate greater number of brands, with Gen Xconsidering more brands as compared to Gen Yconsumers


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The trend further differs in case of the type of vehicle

owned by the respondents; both Gen X and Gen Yhave a consideration set of 3 to 5 cars while evaluatingsedans and hatchbacks.

Sedans are placed at the top of the consideration setby the current hatchback owners for their next vehiclepurchase while SUVs are preferred by the current sedanowners.

No. of Brands Typically Considered (By Car Type)

% o f

R e s p o n

d e n

t s

0%

20%

40%

60%

80%

100%

1 2 3 4 5 6 7 8 9 10 or more

Hatchback Sedan

Gen X Gen Y

Hatchback Sedan

Car Type Selected for Next Vehicle Purchase

% o

f R e s p o n

d e n

t s

0%

20%

40%

60%

80%

100%

Hatchback Sedan SUV Van/Minivan

Sedan SUV Hatchback Coupe Wagon Van/Minivan Convertible

Current Vehicle Type



Car Type Selected for Next Vehicle Purchase

% o

f R e s p o n

d e n

t s

0%

20%

40%

60%

80%

100%

2 - 4 Lakhs 4 - 6 Lakhs 6 - 8 Lakhs 8 - 12 Lakhs 12 - 16 Lakhs

Current Vehicle Price Range

Sedan SUV Hatchback Coupe Wagon Van/Minivan Convertible

Similarly, respondents with cars in the price range of Rs2 to 6 Lakhs are more likely to consider sedans for theirnext purchase. This highlights the consumer aspirationto purchase a larger car and move up the segment.

However, SUVs owners buck the trend with morethan 50% of SUV owners expressing a desire to go foranother SUV in their next purchase.


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Brand

perception



Identifying key inuencers

Last purchase considerations by type of vehicle

Brands Considered for Last Purchase (By Vehicle Type)

% o

f R e s p o n

d e n

t s

Current Vehicle Type

0%

20%

40%

60%

80%

100%

Van/Minivan Hatchback Sedan SUV

Brand 1 Brand 2 Brand 3 Brand 4 Brand 5 Brand 6 Brand 7

Brand 8 Brand 9 Brand 10 Brand 11 Brand 12 Brand 13 Others


Interestingly, when customers were asked to specicallymark the brands they considered before making theirselection, they ended up with more number than theirstated position of considering 3 to 5 brands. This wouldsuggest they started with a long list of several brandsbut seem to think of a smaller number as a serious set

of possibilities

When we looked at the brands considered by existingcar owners, we are able to see that the SUV ownerstend to consider more brands as compared with van/ mini-van users. From the number of brands that areconsidered, it is apparent that product types other thanwhat they eventually select are considered. This furtherstrengthens the view that India is a price-point drivenmarket.

Consumers tend to look at offeringsacross brands and also offerings at theprice band they are considering, whilemaking the purchase.


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Last purchase considerations by value of car


Based on the responses obtained from car owners abouttheir last purchase, the number of brands contributingmindshare of around 40% does not change in the 2~12Lakhs price range. However, at the higher price points,

the brands that constitute the top 40% change.

Brands Considered for Last Purchase (By Car Value)

0%

20%

40%

60%

80%

100%

2 - 4 Lakhs 4 - 6 Lakhs 6 - 8 Lakhs 8 - 12 Lakhs 12 - 16 Lakhs

Brand 5

Brand 10

Brand 1

Brand 6

Brand 11

Brand 2

Brand 7

Brand 12

Brand 3

Brand 8

Brand 12

Brand 4

Brand 9

Others

% o

f R e s p o n

d e n

t s

Current Vehicle Price Range



It is an interesting situation the OEMs have to deal with.The car buyers considered several brands and madetheir choices and will once again consider several brandswhen they are in the market to buy their next car.

However, as owners, they seem to be reasonably happywith what they have. It is therefore incumbent uponthe OEMs to convert this satisfaction into brand loyaltyand repeat purchase.

Ratings of car owners of their own brands

Ratings on different attributes by brand owners

Attributes

B r a n

d s

Highest Rated Attributefor a Brand

Lowest Rated Attributefor a Brand

BrandReputat ion Reliabil ity

OverallQuality

Performance& Handling Safety

Value forMoney Interiors Styling

Technologyfeatures

FuelEfciency

ResaleValue

Brand 1

Brand 2

Brand 3

Brand 4

Brand 5

Brand 6

Brand 7

Brand 8

Note: Ratings / points were captured on a 5 point scale (1. for Poor, 2, 3, 4, 5. for Excellent) by owners of their brands. Above heat map forbrands is for illustrating the shift in trends. The representation above is not intended for making any comparisons between brands as therespondent datasets are independent and hence not comparative. Therefore, the brand names have been masked.


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Conclusion

The Indian car buyer comes across as a very rationalperson during the entire process, contrary to thepopular notion of car buying being a very emotionalactivity. There are very practical reasons to buy a car space, need of the family or to upgrade to a higherquality of vehicle. Once the need for a car is established,the buyer looks for quality of service, product reliabilityand re-sale value.

Given these factors, the potential buyer looks at severalproducts, presumably at the same price point, andtends to make the nal selection. This appears to be adeliberate and a detailed process.

The lessons for the OEMs seem to be It helps to appeal the rational side of the buyer. While the brand itself and the perceptions around it

are important, the buyer looks at the quality of thedealership for service, vehicle reliability and resalevalue to shortlist the brands.

The chance of almost all brands to get into theconsideration of a buyer seems bright.

Consumers not complaining should not to bemisunderstood to mean satisfaction and brandloyalty! Most of the consumers would tend to lookat all possible options before making the next buyingdecision, at least, at the present moment. Whileonly a very small number of customers seem to beloyal to a brand, the population, however, seems tobe growing. This would, therefore, suggest a needto revisit loyalty programs to make the ownershipexperience compelling.

There may be a case for the expectations of thecustomers to be managed appropriately through thelife cycle of the product, to be in a position to beconsidered favourably for the next purchase. Given thefact that there is likely to be greater usage of the car,and lesser period for which it is owned, it may be animperative to plan the relationship management in aneffective way.



Appendix


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Respondent prole

Overall, 1813 respondents were a part of the survey,

of which 1066 respondents comprising ~ 59% of thesurvey population belong to Gen Y, while ~ 22% belongto Gen X and 16% belong to the Baby Boomerssegment. The four-wheeler owners also show a similarage prole.

In the overall population almost ~ 79% had purchasednew vehicle during their last purchase. In the sample

related to car owners, ~ 91% had purchased a new carduring their last purchase. In the context of the above,all the analysis and conclusions in the report are alignedto behaviour exhibited by consumers during new vehiclepurchase.

By Respondent Age

1%

59%

22%

16%

2%

Overall Respondents

1%

57%

24%

17%

2%

Car Owners

16-18 years Gen Y (19~36 years)

Gen X (37~48 years) Boomers (49~67 years)

68 years and older

91%

9%

79%

21%

By Used Vehicles vs. New Vehicles

Overall Respondents Car Owners

New Old



Contacts

Ajay TiwariEmail: [email protected]: +91 (0) 124 679 2887

MS ManiEmail: [email protected]: +91 (0) 22 6619 8552

Sumeet KumarEmail: [email protected]: +91 (0) 124 679 2000

Vijay IyerEmail: [email protected]: +91 (0) 22 6622 0504

Kumar KandaswamiSenior Director & Manufacturing Leader,Deloitte in IndiaEmail: [email protected]: +91 (0) 44 6688 5401


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This survey report prepared by Deloitte Touche Tohmatsu India Private Limited (DTTIPL) contains general information only, and none ofDeloitte Touche Tohmatsu Limited, its member rms, and their related entities (Deloitte Network) are, by means of this rendering accounting,business, nancial, investment, legal, tax, or other professional advice or services. While due care has been taken to ensure the accuracy ofthe information contained herein, no warranty, express or implied, is being made, by DTTIPL as regards the accuracy and adequacy of theinformation contained herein.

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Deloitte India Mfg Driving Through Consumers Mind