BUYING BEHAVIOUR OF THE

CONSUMER OF SMALL CAR - A

FACTOR ANALYTIC APPROACH
Liberalization of INDIAN economy followed by the de
licensing of the passenger car industry has led to the
launch of a number of new brands in the Indian market
that has triggered the biggest ever battle for market
share. It has rewritten the rules of the game of Indian
auto-industry. The demand for small cars is going on a
very fast rate. With the arrival of multinationals
(recognized for their quality products), a cut-throat
competition has emerged in the car market. Thus , this
market holds many opportunities to explore the customer
preference for new as well as established brands of small
cars. For this purpose, the present study has been
undertaken with the objective to determine the factors
considered important by the customers while buying the
small car. For analysis, a multivariate data analysis
technique (factor analysis) has been used. It is a
statistical technique used to identify the major
characteristics that are considered important by
consumers of product/ services.
Opening of the Indian economy since 1991 has changed
the scenario in the passenger car sector from
monopolistic to a competitive market. Until 1991 the
choice of the car was limited to Ambassador and Fiat
models. In year 1983 the first small car of India named
Maruti 800 was launched in the market by Maruti Udyog

Limited(MUL) , a joint venture between Suzuki motor

corporation of JAPAN and Indian government . in 1993,
MUL launched another car ZEN in the market with
distinctive looks than MARUTI 800. Until mid-90s Maruti
was having monopoly over small car segment. With de
licensing and advent of globalization a large number of
MNCs entered India realizing the potential in the car
market.
Major among them were DAEWOO, FIAT, FORD, HONDA,
HYUNDAI, OPEL, TOYOTA and others. It began to look as
though virtually every car major in U.S.,JAPAN, KOREA and
EUROPE is going to plant its flag on Indian soil. The small
car is gaining more popularity. It is no longer being
perceived as a poor mans alternative to mobility. Its
advantages are clearly outlined in todays need, where
traffic congestion and economy related issues far outweight the status linked redundancy of owing a large car.
The sector covers nearly 60% of Rs14500 crore
automobile market. The players in small segment are
DAEWOO with MATIZ, HYUNDAI with SANTRO, FIAT with
UNO TELCO with INDICA and ofcourse MUL with M800 and
ZEN, with their international class designing , technology
and attractive pricing. Now with such an emerging cutthroat competition the question is, whether every
company will be able to face the same and thus survive.
Obviously only those who get all their strategies right will
win the contest.
To be successful, firms shall have to develop and
understanding of what consumers actually require, as

market has shifted from sellers market to buyers

market. There is no denying the fact that various factors
influence buying behavior of the consumer. In the same
manner, manner many variable/ attribute influence the
buying decision for a small car too. For some, appearance
is important while for others economy/ cost is most
important than look. Still for some others , safety is the
most important factor and so on. Thus, perceptions vary
from person to person.

OBJECTIVE OF THE STUDY

In view of above the present study is carried out with the
following specific objectives:
To determine the factors, which are considered important by
the consumer while buying a small car.
To compare the factors rate among all existing factors.
To analyse the preference and selection rate evolution.
To identify the factors associated with increase in small car
market.

PROBLEM CHOOSEN
Attributes like Price, safety , after sales services, design and
looks, brand name, mileage, advertisement , resale value, early
launch in the market, availability of spares, status symbol, easy
finance , internal roominess, ride handling and braking are some
of the most important factors which a customer chooses while
selecting a car.

The research will define the problem of what preference and with
how much importance do customers place from the factors
considered while choosing a car.

METHODOLOGY
The universe of the study was limited to the city of Ludhiana .
sampling unit was owner of any small car named MARUTI 800,
ZEN, SANTRO, MATIZ, UNO and INDICA. The sample sixe was
limited to 100 respondents. Non-probabilistic convenience
sampling technique was used to collect the data. For the
collection of primary data, a non-disguised structures
questionnaire was prepared which was administered personally to
the respondents after pretesting. The above presented attributes
were finalized after having discussion with local car dealers and
car owners.
LIKERTS scale was employed to determine factors where
respondents were asked to rate each attribute on 5 point scale
ranging from extremely important to extremely unimportant. The
data so collected was subjected to FACTOR ANALYSIS.

SURVEY
The factor analytic results are reported below in TABLE 1:
TABLE 1
FEATURES

PRICE
SAFETY

FACTO
R1

FACTO
R2

FACTO
R3

FACTO
R4

FACTO
R5

0.0962 0.2873 0.732

5
7
53
0.0847
- 0.2900
4 0.2829
3

0.2268
4
0.643
42

0.4572
8
0.1436
6

AFTER SALE
SERVICE

7
0.2974
1

0.3445
6

MILAGE

0.2493
2
0.676 0.3480 0.0533
78
3
6
0.4171 0.596 0.1079
6
21
3
0.2783 0.4325 0.714
2
2
6

ADVERTISEMENT

0.4100
7

RESALE VALUE
Early LAUNCH in
market
AVAILABILITY of
SPARES

0.0127
6
0.0284
8
0.4643
6

0.1234
1
0.0165
9
0.0972
2
0.1565
3
0.0909
1
0.0208
5

DESIGN AND
LOOKS
BRAND NAME

STATUS SYMBOL
EASY FINANCE
INTERIOR
ROOMINESS
RIDE HANDLING &
BRAKING
PERCENTAGE of
VARIANCE
CUMULATIVE
PERCENTAGE

0.4173
2

0.624 0.1575
32
9

0.4590 0.800
8
51
0.862 0.0325
1
5
0.0662
1 0.4141
- 0.728 0.0607
0.2519
72
3
0.1025 0.0384 0.728
7
9
72
0.775 0.2359 0.0342
04
2
7
0.2737 0.3438 0.2973
2
2
2

0.0801
7
0.2603
7
0.1987
5

0.653
26
0.1427
4
0.4342
2
0.3262
1
0.1975
1
0.1371
7
0.2373
3
0.676
92
0.1012
2
0.2132
2

0.3297
3
0.5739
2

0.3672
1
0.2932
1

20.2

17.6

10.4

8.4

8.1

20.2

37.8

48.2

56.6

64.7

SUMMARY OF FACTORS:
TABLE 2

FACTO
RS
1
(20.2)

2
(17.6)

3
(10.4)

4 (8.4)

5 (8.1)

FEATURES/ATTRIBUTES

FACTOR
LOADING

INTERIOR ROOMINESS
DESIGN AND LOOKS

0.77504
0.67678

EARLY LAUNCH in the

MARKET
STATUS SYMBOL
ADVERTISEMENT
BRAND NAME

0.8621
0.72872
0.62432
0.59621

RESALE VALUE
PRICE
EASY FINANCE
MILEAGE

0.80051
0.73253
0.72872
0.7146

SAFETY
RIDE HANDLING AND
BRALING

0.64342

AVAILABILITY OF
SPARES
AFTER SALE SERVICE

0.57392

0.67692
0.65326

The POSITIONING AND PROMOTION of the car is the second

most significant factor as it explains the 17.6% of the variation.
This factor includes established base, status symbol,
advertisement and brand name. That is why the car
manufacturers are spending huge amount on advertisement.
The COST OF OWNERSHIP and MAINTENANCE is the third
most significant factor and it explains 10.4% of the variation. The
factor includes the price tag, easy availability of finance,
economy in driving (mileage) and the resale value.

The factor that explains 8.4% of the variation is the concern

regarding the safety feature of the car. The new cars are
concentrating hard to be positioned as SAFE CAR.
A car comes under the category of CONSUMER DURABLE
PRODUCT and has fairly a long life of 15-20 years. That is why
the factor that explains 8.1% variation and is at number 5 as per
the perceptions of the consumers is the AFTER SALES SERVICE.
All the companies are trying to build a strong service and dealer
network.

LEARNING
On the basis of above data interpretation, following learning has
been obtained:
Though various factors influence buying behavior of the
small car, the most significant factors for the buyers are
considered to be SEATING CAPACITY, OUTLOOK, STYLE,
PROMOTION and POSITIONING of car, COST OF OWNERSHIP,
SAFETY and AFTER SALE SERVICES.
Needs of customer are multiplying rapidly.
Cars are no longer considered as 4 wheelers , but a ride is
now associated with performance, comfort and a choice of
specifications and financing options.
If firms understand customer behavior , they are able to
predict how customers are likely to react to various
beneficial changes in environmental cues and marketing
strategy.
Automobile firms should take into consideration the
attributes considered important by the consumers , as in this
competitive world only that industry will survive and succeed
which can provide the product with required specifications.

 Thus, by satisfying the needs of the customers any car

company can hope to unseat the leader and stay on the road
for sustainable success.