PHASE – II
Buying behavior of consumers towards luxury cars
SHIRAZ NAGARIA (177149) | SUMMER INTERNSHIP 2020 | 14 TH JUNE,2020
Submitted To- Dr. Shashank Thanki
INTRODUCTION TO PROBLEM.
The automobile industry in India is tightly competitive. This study aims at understanding the
buying patterns of luxury car buyers in the Indian market. The industry may seem to carry a very
insignificant percentage share in the total sales across the country, but it has a huge impart for the
consumers’ choice and the generated revenue for the government. The study aims at
understanding the dimensions of the buying behavior of various age groups in India.
LITERATURE REVIEW
Literature review is an important component in any research study to be done successfully. Due
to unavailability of much information on studies pertaining particularly to luxury car purchasing
behavior, the following relevant studies have been reviewed in order to gain more knowledge
towards the methodology, problem and hypothesis and are detailed as
P. Thulasi[1] Consumer Buying Behavior is the decision processes and acts of people involved
in buying and using products. Need to understand is why consumers make the purchases that
they make, what factors influence consumer purchases, the changing factors in our society. A
Branded car company needs to analyze buying behavior for: 1. Buyer’s reactions to a firms
marketing strategy has a great impact on the firm’s success. 2. The marketing concept stresses
that a firm should create a Marketing Mix (MM) that satisfies (gives utility to) customers,
therefore need to analyze the what, where, when and how consumers buy. 3. Marketers can
better predict how consumers will respond to marketing strategies. Though extensive research
has been applied for the study as the consumer preference or buying behavior may be changed
over time.
Vikram Shende[2] Consumer behavior consists of all human behavior that goes in making before
and post purchase decisions. One can succeed in the competitive market only after understanding
the complex consumer behavior. An understanding of the consumer enables a marketer to take
marketing decisions which are compatible with its consumer needs. From study there are various
major class of consumer behavior determinants and expectations, namely socioeconomic,
psychological, political, geographical, demographic and Product & Technology. Further
classification of human behaviors under main categories will enable car manufacturer to align
their strategies in concurrence to customer behavior. While purchasing mini segment car though
customer is highly cost conscious but this segment is also upgrading their requirements and due
to rise in disposable income, with in segment migration is observed, Customer is more inclined
to purchase Suzuki Swift, 120. For mid-size segment customer focus is for safety, driving &
seating comfort, brand. Also this segment requires value for money, best features and customer
friendly vehicles. In higher segment cars like Executive and Premium brand image is main
deciding factor which gives assurance of meeting their needs in terms of safety, performance and
feature requirements. Global brands are highly preferred in Executive and above segments. So
car companies should adopt the “Think-Global, Act-Global”. Approach in strategy making
which involves standardization across the world. Brand global presence is judged by consumers
based on availability around the globe with standardized products, brand name, distribution
channels and communications. By going global, the company will enjoy an increase in market
share, which indicates increase in demand for their products. With that, the company can
produce with economies of scale, reduce cost per unit and increase production efficiency
resulting in serving customers efficiently and economically. Most importantly, compared to local
brands, companies with global brands will be able to penetrate into markets more easily,
regardless to high or low status seeking consumers, global brands with proper strategy will
enable them to achieve an enhanced global image.
Ms.Puja Ahuja (2014), India is a country which has varied cultures, beliefs, customs and beliefs.
In such a complicated market, it becomes difficult for any foreign brand to enter and mark their
presence and creates a perception within the local audience. When we talk about the luxury cars,
the big brands that come to our minds at first instance are: BMW, Audi, Land Rover, Jaguar and
Mercedes-Benz. It is learnt that for any brand to design the strategies, it is important to firstly,
understand the buying decision of the people and also the demographic factors are to be taken
into consideration. Every country has their specific trends which are followed and then the
citizens decide on which products to the purchased. If we look into the deeper picture, there are
various factors that determines the consumer behavior and these factors can get influenced by:
the political policies which means the taxes and other restrictions levied by the local government,
apart from this the other factors could be the brand awareness, the availability of the substitutes
and another important factor that has recently got importance is the Age group and the male,
female preferences. The luxury cars in India have recently got importance in the country. These
cars are basically purchased by a person who belongs to rich category and are millionaires. In
past few years, there is huge increase in the number of millionaires in India and the purchasing
capacity of the people has also increased. Thus, the luxury car company have taken advantage of
this fact and has integrated in the Indian market and has launched cars for the millionaires. The
biggest challenge that is faced by the companies are to satisfy their customers even after their
product is sold, because in India the sales are affected by the word of mouth and that too the
sales are influenced by what the aspirants’ neighbors or family member has bought as it is in
accordance with their status symbol.
India became the fourth largest auto market in 2018 with sales increasing 8.3 per cent year-on-
year to 3.99 million units. It was the seventh largest manufacturer of commercial vehicles in
2018. (IBEF, March2020). The country with 1.4 Billion people, consists of various class of
population, distinct by income levels. This study aims at those portions of the population that can
actually afford a premium luxury brand automobile. In India, usually these people are considered
HNIs- High NetWorth Individuals or UHNIs- Ultra High NetWorth Individuals. India is a huge
market for vehicles and possesses very high potential for luxury cars. Whereas, the luxury car
market penetration level in the country is low but leading luxury car manufacturers are betting on
the market’s potential. At present, the penetration rate of luxury cars in the country is
approximately 1.2%. Luxury cars sales in the country have increased at a rapid pace since 2012,
with approximately 17% rise in sales in 2017, with Mercedes-Benz dominating the market
studied. Mercedes sold 15,300 units in 2017 at a growth rate of 15.63%. Whereas, the BMW sold
9,800 units at a growth rate of 24.66% and Audi sold 7,876 units in 2017.
German luxury carmaker Mercedes Benz India emerged as the largest selling luxury car brand in
India in 2019 even as its sales skidded by 11.3 per cent, the steepest ever in a year in well over a
decade.
With this, Mercedes has held on to the number one position for the fifth consecutive year
bettering the four-year reign of arch rival BMW between 2009 and 2012. The Stuttgart-based
company, which also holds the pole position in global luxury car sweepstakes, sold 13,786 units
in India last year against 15,538 units in 2018.
STATEMENT OF PROBLEM
The luxury automobile sector in India is filled with tight competition from all players in the
market. Brands like Mercedes-Benz, BMW & Audi are top rivals in most major cities. The
research is conducted to understand the reasons behind the purchase decision of the buyer who
wants to buy that particular brand and why. The buying behavior of consumers in this industry
plays a vital role in reshaping the company’s existing marketing strategy to a revised strategy
that fills in the demand.
OBJECTIVES
Understanding the consumer’s behavior is an important aspect to any business. The study
primarily focuses on the relationship between various factors that influence the vying behavior of
consumers towards luxury cars in India. The main objectives of the study are:
The objective of the study is to understand the buying behavior of the consumers with
respect to purchasing a luxury car in India.
Another objective is to provide scope for further study in this segment as not much
details are available in public sources regarding this issue.
In future scope to expand the same research study to a larger volume of of audience that
would help the brands capture more customers.
HYPOTHESIS
H1: the sample size populace earns income above 15lakhs per annum
H2: the consumers are willing to purchase a new luxury car
H3: they already own or owned a luxury car
H4: price of the vehicle is the most important factor before purchase
METHODOLOGY
In this paper, descriptive research will be applied as not much is known about the problem.
Descriptive research will help us understand the what, where, when and how but not the why part
of the problem. It is a qualitative research, which will help understand the phenomenon. The
study will be conducted via a survey method with a sample size of 60. The sample populace will
be chosen on convenience basis. The respondents will have to be fulfilling the hypothesis
statements. The population will be restricted to India. The scope of the study is limited to
existing owners and prospective buyers of luxury cars in India. The study will be conducted via a
survey form sent to particular focused group of people.
SAMPLING DESIGN
In the study, the existing owners and the prospective owners of luxury cars in India will be the
population under study. The sample size of the study would be 60. The sample is chosen as
convenient sampling. The research requires study of a focused group of people, who own or are
planning to buy a luxury car. The scope of study is small; hence a small sample size is justified.
The owners of such cars are usually corporate executives, professionals or businessmen. In India,
it is considered that only the rich can afford such import brands.
THE SAMPLE
Following the guidelines of conducting a research in marketing, the sampling plan has been
formed. Convenience sampling has been used to present the findings. A sample of 60
respondents has been chosen through friends and family, and through personal sources of people
who own luxury cars and those people who know others who own luxury cars.
DATA COLLECTION TOOLS
A structured questionnaire has been devised for the collection of data. The questionnaire is
carefully structured to understand the problem accurately. A pilot study could not be conducted
here due to lack of time and due to a small sample size. The probability of error will be tried to
reduce to the minimum.
DATA ANALYSIS
Out of the 60 respondents in the survey, majority of the respondents are males. The purchase of a
vehicle in a typical Indian household is influenced highly by the head of the family, usually a
male role played by the husband/ father in the household. The male role in the household may
insist suggestions from members of the family, but ultimately, the decision making power rests
in the hands of the male head of the family. Another reason for high male respondents may be
because the number of male users of cars is high in most places.
Purchasing a luxury car or owning one in India is a matter of carrying a social status, an
impression on others that you are where you are because of your hard work and you can show it
with the car you own. Typically, in India, people don’t easily invest in luxury cars. This is quite
obvious because there are other investment opportunities they would prefer over a car. The study
showed that the respondents, from various age groups, the category of above 38 years of age is
the highest. A deeper study brought to light that most of the respondents in the <38 years of age
category are business owners. The second highest toll is from the age group 27-32, where, the
respondents mostly own a luxury car, which exhibits a sign of success in the social groups.
In the above pie chart, it is quite evident that business owners consist a large portion of the
owners of luxury cars in India. Following are professionals, who purchase luxury cars to show
class and prestige. Business owners, who have high disposable incomes usually buy luxury cars.
The trend has been the same over the years. According to popular sources, the business owners
in India own most of the high end cars all over the country. Most of the car enthusiasts in India
are children of/ owners of luxury cars. Corporate executives do invest their savings in cars, but
not all of them prefer to have expensive luxury cars. Usually, the executives use company owned
cars with chauffeurs who drive them around.
Under this section, the income level of some respondents may be biased and untrue. But, on the
basis of the respondent’s answers, it can be drawn out that a large population under the study is
under the 20-30 lakhs of disposable income category. This could be because of bias from the
respondent’s side as some people are not comfortable disclosing the figures pertaining to their
income. The second rank is held by the income group of 30-40 lakhs of annul disposable income.
From the data analyzed, a large population under this category own more than one luxury car.
This is because either they have a larger family or having uses for the cars, such as one car for
the household work and the other for office routine.
Under this section, the number of owners of luxury cars is estimated. Out of a sample size of 60,
the number of respondents who own a luxury car is at 42. Out of the rest, 9 respondents don’t
own a luxury car, and a large chunk of these respondents belong to the income category of 20-30
lakhs. Instead of investing in luxury cars, they insist in investing in the domestically
manufactured cars. 15% of the respondents are planning to buy a car. These respondents already
have decided the factors that would influence their buying preference, which helped the study to
know the role of each factor in their buying behavior.
This is the most important part of the survey conducted. This part of the survey helps understand
why would the consumer buy that particular brand of car. There is stiff competition in the
automobile sector in India, even in the luxury cars segment. brand name plays the most
important role in the buying process of the consumer. Every brand has their unique selling
mechanisms, some in the way of discounts, some in after sales services, some provide free
services for a specific period of time. Secondly, the people who purchase these vehicles spend a
handsome amount on the cars, thus they will obviously want the driving comfort, which is the
second important factor while purchasing. Every brand has certain unique features that
differentiate them from other brands in the market. Every consumer looks for different features.
it is already known that an Indian consumer is very price sensitive. This case is also prevailing in
consumers buying luxury vehicles. The study shows that 24 respondents would look at the cost
of the vehicle before purchasing. 17 respondents, out of the total have also said that the average
per liter fuel consumption is also an important factor. This is mainly because these luxury cars
are performance cars and thus, fuel economy is quite low in most cars. A few respondents, who
know in near future they would wish to change their car have also mentioned that resale value
plays a major role in their buying process. Usually, the owners of luxury cars do not worry about
the resale value because they would end up buying another car and putting the former to other
uses.
Buyers who have knowledge of luxury cars, whether they own one or they have done their own
study from online sources, want some or the other technical attribute associated with the car.
Since most of the luxury cars would come under performance cars, 30% of the respondents
require that the car is best at performance, this could be based on the fuel economy or on top
speed of the car, whichever the consumer is looking for particularly. Owners who wish to use
their car for family purposes usually look for space as a technical attribute preference. Evidently,
if a person is spending that amount on a car, he will ask for safety features. currently in the
Indian market, under the luxury segment, Volvo rates the highest in terms of safety. The users
who want to use that car for a long period would ask for durability. But, in the study it is seen
that the respondents do not particularly look at the durability because the cars are obviously
durable, being an import, it would be made in such a manner.
Driving the same car as your peers may be important to some and may not be of importance to
others. Under the study, it is drawn that 18 respondents feel that it matters whether they drive the
same type of car as their peers. This trend is more with the professionals. In a likely scenario
where professionals meet together, they notice what type of clothes the other is wearing, the car
they drive, whether an SUV or a Sedan. Business owners also show a similar trend. Under the
study, 18 respondents say that it is very important to them that they drive the same car as their
peers, while 17 say that it is important for them to drive the same car as their peers, 9
respondents are neutral, 9 say that it is of less importance to them, while only 7 do not consider
that they drive the same car as their peers. An important fact that is drawn out from this is that
Indian buyers would prefer buying a car that is comparable to their peers.
The respondents who own a luxury car have answered this part of the survey. Mercedes-Benz
holds the highest share in the indian market, in the luxury cars segment. Mercedes-Benz, over the
years has introduced several cars which have gained high popularity. A UHNI would prefer
buying a Mercedes-Benz S-Class over other executive vehicles as the car shows a sign of
elegance and perfection. Most of the respondents own a Mercedes-Benz. Following the brand is
BMW, which is preferred by performance enthusiasts who look for the best ‘under the hood’
features. following BMW is AUDI, the brand which has gained a lot of popularity over the years.
The design of Audi cars shows the creation of the perfect car. Jeep has also managed to tap into
the market with the introduction of the Jeep Compass. The premium car brand tapped into the
SUV segment with the compass which enabled them to gain a good share in the market. Land
Rover, Volvo and Porsche are cars usually owned by UHNIs, so under the study, not much
information can be drawn out.
The satisfaction level amongst the owners of luxury cars is drawn from the above figure. It is
seen that most of the respondents are either satisfied or highly satisfied with the current car they
own. This satisfaction comes from the experience of the person after buying the car. The reasons
for satisfaction could be good driving experience, after sale services, fuel economy, safety
features, etc.
The respondents who have scaled their satisfaction at low or very low are proabably not satiafied
with the purchase as they expected more, or it is possible because they couldn’t match the
satisfaction they had from a previously owned vehicle.
Out of the respondents who actually answered here, it is important to note that only 2
respondents say that they wouldn’t buy the same brand of car again. This has multiple reasons. It
could be because the person wants to own diverse brands of cars, he may be dissatisfied with his
current car, or he expected more from the brand and they did not deliver accordingly. A high
frequency is seen in people who would actually want to or are thinking of buying the same brand
car. The brand they have bought probably serves them better. This would make them likely to
purchase from the same brand again.
CONCLUSION
From the above analysis of data from respondents through the survey, it is quite clear that what
the car brand does for the buyers matters a lot. The respondents have shown brand sensitivity and
price sensitivity, which tells us that the brand should work on keeping the customers under their
brand popularity. People would want to repurchase the same brand only if they are satisfied with
the previous purchase. Another important learning from the study is that Mercedes-Benz has
proven to be the most preferred brand for most respondents. It is not only in this study, but under
other studies as well, pertaining to particular locations, Mercedes-Benz has proven to be the
strongest. There exists stiff competition between Mercedes-Benz, BMW and Audi. After reading
through about the exposure of various brands in the Indian market, Historically, Mercedes-Benz
stands the oldest in the country. They managed to capture the market in the 1900s and they have
managed to be the strongest even today.
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