The Behaviour of Consumers for Hybrid Cars - Essay Example

? Consumer Behaviour Report CHIKA YAMAKAWA CONSUMER BEHAVIOR BARRY DUCAN 16TH of December Executive Summary This is a small study based on consumer behaviour for the Hybrid car models. Consumers are flooded with various variants of automobiles in the market place. These automobiles have different features, marketing mix, brand names and others. This becomes a tough choice for the consumer to select a product particularly a high involvement product like automobile. This study is an effort in the direction of understanding consumer behaviour for hybrid car segment in the Australian Market. Table of Contents Executive Summary 2 List of Figures and Tables 4 Introduction 5 Problem Statement 5 Research Background 5 Research Limitations 7 Literature Review 8 Theory of Planned behaviour 8 Automobile Industry 8 Key Insights 11 Research Methodology 12 Research Design 12 Research Methods 12 Data Collection 12 Primary Research 13 Secondary Research 14 Findings and Analysis 15 Findings 15 Primary Research 15 Secondary Research 19 Proposed Marketing Strategies 21 Conclusion 25 Reference 26 Appendix 1 Questionnaire 28 List of Figures and Tables Figure 1 Theory of Planned Behaviour 8 Figure 2 Age 15 Figure 3 Gender 16 Figure 4 Source of Information 16 Figure 5 Factors influencing buying decision 17 Figure 6 Preference of Hybrid car 18 Figure 7 Reasons of hybrid car selection 18 Table 1 Secondary Desk Research 14 Introduction Problem Statement To understand the factors affecting consumer behaviour and consumer decision making process for the hybrid car products. Research Background Automobile market is flooded with various choices of models to cater needs of consumers of different categories. There are many companies like Toyota, Ford, GM, Honda, Suzuki and others operating in the global market place and serving varying needs of consumers and markets. The product development in the automobile sector is not just based on needs and preferences of the consumer, but it is also capital intensive and highly technical process. The competition within the market place is high as open market places of most of the global destinations have allowed operations of national and international players. There are various companies providing various automobiles and known for certain factors such as Toyota is known for quality of its product. Ford is a well established brand name in the premium segment. The trend of manufacturing of environment friendly hybrid cars which reduces the level of pollution resulted from the traditional cars and engines have increased. Increasing awareness created demand for such environmental friendly products. Toyota has launched maximum number of successful variants in this category. At the same time other companies are following Toyota to gain from this growing segment by developing their own hybrid products. Lesser carbon di-oxide emission and higher environmental friendly nature increases the social acceptance of such cars. However there are technical limitations of these cars where researches are continued. The main hybrid variants available in the market place are the Toyota Prius, Honda Insight, and the Honda Civic Hybrids. Research Aims Research aim is to study consumer behaviour of the prospective automobile buyers for the hybrid cars in the Australian automobile sector. Research objectives: To understand the factors that affects the consumer decision making process To explore the marketing mix strategies adopted by the marketers in the marketing of different hybrid cars. Research Rationale This research helped in studying various aspects of the consumer behaviour for the hybrid car segment and developing a better strategic approach for the marketing of these products. Research Limitations Time, resource and location based restrictions are the primary set of limitations. Within the scope of study, researcher tried to fulfil the research aim and objectives. This study can be furthered for in-depth study on deep analysis of the focus of companies in hybrid car segment and capturing changing trends in consumer behaviour for this segment. Literature Review Theory of Planned behaviour According to Ajzen (1991 as cited by Edberg, 2009) theory of planned behaviour is about reasoned action that can be result of intention of an individual to perform the particular behaviour. The intentions of people determine the direction and willingness of their efforts. Figure 1 Theory of Planned Behaviour Source: Ajzen (1991 as cited by Edberg, 2009) Perceived behaviour control explains the extent to which an individual can dictate his behaviour. Attitude toward behaviour, intention, subjective norms and behaviour are the important components of the Theory of Planned Behaviour. Subjective norm consist of the perceived pressure from the society for in favour or against any particular behaviour. Automobile Industry According to Leer (2010) the fuel efficiency and mileage are the two primary factors for consideration of hybrid cars. However consumers can have different expectations depending on their demographic background and social needs. The choice of car depends on number of factors from individual preference to information available to make right purchase decision (Quester, Neal, Pettigrew, Grimmer, Davis and Hawkins, 2007). Peter and Olson (2005) suggest that automobile marketing strategy is based on the consumer needs and requirements. “The wind energy and hybrid vehicle industries may become allies in the fight to reduce gasoline consumption. Deployed together, gas-electric hybrid engines and advanced-design wind turbines could dramatically reduce world oil use. The United States could easily cut its gasoline use in half by converting its automobile fleet to hybrid cars as efficient as the Toyota Prius. This could be accomplished without any change in the number of vehicles, or any change in miles driven. It is simply a matter of taking advantage of the most-efficient propulsion technology on the market. (Brown, 2006)” Amine & Smith (2009) identified the factors that can have significant influence on the marketer and allow it to see the changing preferences and attitudes towards their needs in a specific market place. The change in customers’ reality is important to study within a complex business environment which a market should always explore (Amine & Smith, 2009). “Automakers are facing energy instability and higher gas prices, and customers are pushing for cleaner and more efficient solutions. New vehicles and fuels are gaining traction as Americans seek to address the world's most pressing concerns--terrorism (financed by Persian Gulf petro-dollars) and global warming” (Carr-Ruffino & Acheson, 2007). This has become one of the major reasons of the adopting hybrid cars by millions of customers across the world. The first decade of 2000 had been one of the greatest development in the area of fuel efficient technologies, better understanding of changing consumer preferences and development of more than forty various hybrid variants and other alternate fuel models. The green consumption is encouraged by various governments across the world including US, UK and Australia. The innovation and research in this area have been increased due to increasing concerns over the environment, depleting fossil fuels and energy issues on the global warming. Minsk, Ori & Howell (2009) list various factors like drive train for hybrid cars, better internal combustion, battery based charge off engine, torque advantage, speed variations, efficient use of energy sources as some of the important developments in this area. There are various studies going on various fuel options such as hydrogen based fuelling system and fuel, water based engines, solar and other engines. However the most challenging aspect of any other fuel option is the refilling of used ‘fuel’ such as hydrogen refilling stations and others. Entirely new infrastructure and support is needed for new fuel based engines and automobiles. The hybrid car owners are perceived as individuals helping themselves with better and environment friendly choices as well as others by creating lesser pollution. The growing demands and acceptance of the hybrid cars in various markets indicates that this can lead to be the core technology of the automobile sector. This saves money and allows better use of the fossil fuel and results in cleaner air for all (Carr-Ruffino & Acheson, 2007). Key Insights Consumers consider fuel efficiency and mileage to be as one of the primary factors for their buying decisions. There are various individual, demographic and socio factors influencing consumer buying behaviour. Consumer collects information from various sources in order to make purchase decisions for automobiles. Automobile companies such as Toyota pioneers in fuel efficient technologies. The change in customers’ reality is important to study within a complex business environment which a market should always explore. Minsk, Ori & Howell (2009) list various factors like drive train for hybrid cars, better internal combustion, battery based charge off engine, torque advantage, speed variations, efficient use of energy sources as some of the important developments in this area. Customers are also having environmental concerns along with the convenience, fuel efficiency and money savings for their automobile purchase decisions. Research Methodology Research Design Research design provides structure of a research (Creswell, 2009). This provides an opportunity to link various aspects of research together and develop a logical flow of the study. Research design consists of measures of the study. This is the stage where researcher determines if the study will be descriptive or explanatory (Creswell, 2009). In this study researcher has followed qualitative and quantitative research paradigms. Research Methods This study is based on mixed method approach. A combination of primary and secondary research methods has been adopted in order to answer the research questions and fulfil the research objectives. Structured questionnaire is used for collecting primary data. This data is collected from target segment to understand attitude, perception and preferences for decision making process for automobiles (Creswell, 2009). “A quantitative approach is one in which the investigator primarily uses post positivist claims for developing knowledge (i.e. cause and effect thinking, reduction to specific variables and hypotheses and questions, use of measurement and observation, and the test of theories). (Creswell, 2003, p.19) Secondary data has been collected from the journals and published work on different factors of automobiles, consumer behaviour and other marketing mix strategies. Data Collection Data has been collected from primary and secondary resources in following manner: Primary Research The primary data is collected from the automobile users. This provided consumer behaviour and attitude towards the hybrid cars. The structured questionnaire (see Appendix) has been circulated among the target respondents and their responses have been collected. The sample size is 35. According to Ott (1984) thirty is statistically valid sample size for the studies of academic purposes. The respondents were contacted on convenience basis at randomly. On the judgemental basis, researcher approached individuals who seem to have 18 years or above age group. Sampling Strategic sampling process is used in order to collect data. It is considered economic and effective (Saunders, Lewis & Thornhill, 2007). Respondents were approached randomly. Sample Size: 35 Definition of Population The population identified by researcher were young adult who are more likely to use or purchase automobiles. This included students and young professionals. Sampling Frame This consisted of people above the age of 18-70 years.. Sampling Unit This consisted of people with exposure or interest in automobile. Data Collection Process These respondents were informed regarding the research process, purpose and scope and requested to participate in the survey. The participation was voluntary and no respondent have been paid for his responses. The data collected was entered in MS Excel and descriptive analysis has been performed in order to see the nature and trends of data. Similar responses have been grouped together. Data is presented using figures in the Findings section of the paper. Validity According to Saunders, 2007) data collected from reliable sources and serious respondents is most likely to generate reliable data. Researcher has collected data using standard questionnaire for all the participants. Secondary Research Secondary research helped in identifying various the automobile industry and consumer behaviour in the Australian market. The information has been collected from various published articles and reports. Table 1 Secondary Desk Research Keywords Google Google Scholar Automobile industry 5,970,000 9,03,000 Australian Automobile industry 330,000 27600 Consumer behaviour Australian Automobile industry 276,000 11400 Theory of Planned behaviour 590,000 5,03,000 Theory of Planned behaviour (Publication since 2009) - 22700 Theory of Planned behaviour in business (Publication since 2009) - 17600 Taxi Australia - 36,900,000 Findings and Analysis Findings Primary Research Age Majority of the respondents are from the age group of 18 to 15 years. Figure 2 Age Gender Sixty percent of the total respondents are male and remaining forty percent females. Figure 3 Gender Advertisement on magazine and newspaper is the primary source of information for information search by the respondents. This is followed by automobile showrooms, advice of friends and family and online advertisement respectively. Figure 4 Source of Information Price of the automobile is the most important factor of consideration among the consumers followed by Mileage, fuel efficiency and other factors. Figure 5 Factors influencing buying decision 51% of the respondents believe that they would buy hybrid cars if the cost is the same. This is followed by 20% who agree to the statement. Six percent respondents do not agree where as 9 % somewhat disagree to the statement. Figure 6 Preference of Hybrid car Fuel efficiency and affordability are the two major factors of considerations. This is followed by environment friendliness and high quality products respectively. Figure 7 Reasons of hybrid car selection Secondary Research According to Carr-Ruffino & Acheson, (2007) Toyota is the most sold automobile in the hybrid car segment with more than 500000 hybrid sales, out of which 25000 hybrid car owners are in U.S. These automobiles help in reducing oil dependency of the tradition automobiles. Hybrid cars allow in keeping the environment less polluted by reducing the release of greenhouse gases. “Hybrids have saved more than an estimated one million barrels of crude oil, three million pounds of smog-forming gases, one million metric tons of carbon dioxide and 125,000 gallons of gasoline.” (Carr-Ruffino & Acheson, 2007) Toyota is the brand leader in the hybrid car segment. This has achieved economies of scale and able to produce high quality cars at lowest cost (Carr-Ruffino & Acheson, 2007). According of Carr-Ruffino & Acheson, (2007) Toyota is two generation ahead its competitor in terms of research and design of hybrid cars. For Pirus alone, Toyota has more than 650 patents. Like Toyota, Honda is also strengthening its footing in the hybrid segment with offering various competencies to the customers such as variety of engine, most efficient and versatile gasoline engine and development of clean technology. Ford offers Escape hybrid which is perceived o be the most environment friendly vehicle with 60% better mileage and 80% lesser smog. The diesel technology used by Ford in Escape has been taken from Toyota with the exchange of 20 full hybrid exchanges. Ford has nearly 350 patents for Escape. This is ethanol compatible. Carr-Ruffino & Acheson, (2007) state, “In 2004, GM rolled out the world's first hybrid truck to fleet customers. In 2005, consumers were presented with the Chevy Silverado hybrid and the GMC Sierra hybrid, which are "light hybrids" that come with electric outlets.” GM started with the biggest vehicles like buses, trucks and SUVs. This is leader of ethanol compatible vehicle manufacturers. There are various researches going on across the world on alternate fuel. Australia has the advantage of fossil fuel resources. Its geographic condition provides it various advantages. Carr-Ruffino & Acheson, (2007) “Australian researchers have produced a prototype of a home hydrogen fueling station. It's the size of a filing cabinet and can run on electricity generated by standard rooftop solar panels or a home wind turbine to turn water into hydrogen gas. The prototype can power a fuel cell vehicle or a hybrid with an engine converted to run on the hydrogen gas. The vehicle can then cruise for 100 miles per fill-up, producing no pollution.” Honda cars are present in the Australian market with Honda Civic, Honda Civic Sedan, whereas Toyota is present with the Toyota Camry Hybrid (which is first locally built hybrid car mode), Hybrid Synergy, Prius and Hybrid Camry Luxury. The Swedish car maker Volvo has also came with hybrid car C30 Electric for Australian market. According to Grover (2009) Toyota planned to launch eight hybrids in Australian market including new generation Prius. According to Taxi Council of Australia, there are 17,578 taxis in Australia. The number of jobs available in the taxi industry is more than 206,937,000. This is a growing sector with increasing demands of safe transformation for it passengers. Proposed Marketing Strategies In the previous sections, the external analysis from the secondary research and customer analysis from the primary research provided insights about the target market. Based on the information the market can be divided in two target segments; primary segment that would cater the needs of individual customers (B2C: business to customer) and secondary segment (B2B: business to business) that will target the taxi owners and taxi companies. In general, the target segment for the hybrid cars should have the following characteristics: In primary targets, they will be young individuals and professionals with starting of their career or mid of their career. In primary targets, they well informed and aware regarding the automobiles options available. In primary targets, they are innovators or early adaptors in the technology adoption life cycle. In primary targets, they prefer green solutions for their driving needs and given a right marketing mix; particularly pricing they prefer buying hybrid cars. In primary targets, they are informed customers who look for information from various sources like internet and automobile reports, magazines and others. Automobile purchase is high involvement process. In the secondary segment, they are looking for new ways to attract their consumers. Secondary target wants to serve their client in efficient and cost effective manner. They are looking for low operating cost solutions. Therefore the positioning of these hybrid cars will be based on the high end features, eco-friendliness and as a preferred choice for the successful and concerned individuals. Based on the targeting, segmentation and positioning proposed marketing strategies for the given scenario are as follows: Since the target consumers are either technology savvy or demand for better fuel technology based products lesser emissions of pollutants, the marketing strategies would be around the same factors. The marketers of hybrid cars needs to capitalise on the changing trends of Australian society and leverage on the opportunity existing for fuel efficient, eco-friendly automobile segment. This is a small segment which can be expected to grow due to the decreasing fossil fuel reserves across the world. Consumers like early innovators are likely to buy this product. Marketing mix of hybrid cars: Product Features and Benefits of Hybrid cars: Hybrid cars provide an alternative to the fossil fuel cars. These are eco-friendly. Superior technologies Competitive Advantage Fuel efficiency and mileage Differentiation Eco-friendly and future technology Complementariness Accessories, lucky draw coupons and others can be given, based on the model. Consumer service Availability of services like on the spot service by service vans, availability of components and service centres Price: Introductory and competitive pricing strategies can be adopted. Cost of the product Product cost can be based on manufacturer costing. Service Cost Service cost can be similar to the non-hybrid cars or lower than these. Discounts Discounts can be based on occasion (product introductory offers, festival discounts and special discounts) Place: Suppliers and intermediaries The suppliers and intermediaries can be encouraged to promote the product on store. The on store visibility of the products should be improved. Convenience and availability The product should be delivered with convenience to the client. The availability of hybrid products should be maintained. Promotion Advertisement Company can adopt Television (as it is highly preferred media), internet, print media mix and billboards at strategic locations to improve the visibility of the product. These should carry information on benefits and features of hybrid cars. The frequency of the advertisement should be similar to those of the highest selling brands of the segment and budget. Public Relations Public relations will be the most important tool for these automobiles. The public relations will help creating image of the product and placing it within the mind frame of the customers to consider an eco-friendly automobile option before buying their automobile. This will help improving the overall brand presence in the automobile sector. Target specific Strategies: Primary Target: Individuals (Young professionals) B2C Strategy The marketing strategies will be based on marketing mix discussed above. The product positioning needs to be strong enough to make the clients consider hybrid cars before buying any automobile. This can be achieved by good public relations and advertisement strategies. Companies can provide easy loans and service support to the consumers buying hybrid cars. Secondary Target (Taxi Companies) B2B strategy Taxi companies can be given special prices for buying more numbers of hybrid cars. The operating cost of hybrid cars is low. This can be one of the selling points for the marketers. Taxi companies can be approached and offered to have a differentiation strategy for that segment of consumers who will prefer eco-friendly and comfortable service. This can be effective strategy for differentiating and serving a niche which is expected to grow in future. “Get an eco-friendly and comfortable drive” Conclusion In order to conclude, the findings require to be compared with the Theory of Planned Behaviour. According to this theory attitude toward the behaviour, subjective norm, perceived behavioural control determine the intention which leads to behaviour. Intention is the stage where attention, interest and desires work. Behaviour is the phase of act. This is evident from the research that the hybrid cars provide better environment friendly options to the consumers. This is also a favourable social norm. Due to growing concerns of environment, it is perceived good to have green options. Customers’ perception is positive towards hybrid cars due to this fact. However the reasons consumers leave the choice if due to the price factor. The primary data reveals price to be the most important factor of consideration of car purchasing decision. The growing benefits of the hybrid cars are higher. The attitude towards buying hybrid car is that it is expensive to buy and maintain. Therefore it can be inferred that it lacks in the appropriate education and awareness among the target buyers. Hybrid technology has a good future to become the core technology of the automobile industry. In the case, governments intervene and encourage the selling of hybrids by providing discounts and benefits to the sellers and users, the care sales can increase for the hybrid segment. Government interventions will help in changing the attitude and perception of buying hybrid cars. The automobile companies are aware of the challenges ahead. This is the reason these automobile models made available in the market place with variety of marketing mix, Companies are changing their market mix particularly the pricing strategies and trying to offer hybrid at affordable yet profitable pricing. However, the technical requirements of such vehicles are such that the cost of production goes higher. Based on the primary research findings, it can be inferred that price factor is one of the significant factors of the target respondent groups. 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Quester, P., Neal, C., Pettigrew, S., Grimmer, M., Davis, T. & Hawkins, D. (2007). Consumer behaviour: Implications for marketing strategy (5th ed). North Ryde NSW: McGraw Hill. Appendix 1 Questionnaire Age 18-25 years 26 to 30 years 31 to 35 years 36 and above Gender Male Female Qualification Doctorate Post Graduate Pursuing Post graduation Graduate Pursuing Graduation High School Do you own a car? Yes No How will you collect information if you intend to buy a car? Automobile showrooms Advertisements on magazines and newspapers Online Advertisements Advice of Friend and family Others Which of the following parameter will be the most important factor for decision making process for available alternatives? Price Quality Mileage Fuel efficiency Environment friendly Service Maintenance cost Given the same cost, I would prefer Hybrid cars as compared to other cars. Very true Somewhat true Neither true nor false Somewhat false Very false Read More