Strategic operations and supply chain management
Strategic operations and supply chain management Any student requiring help in assignments or dissertations on…
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The research report on the impact of consumer’s attitude in the operations of automobile industry reviews the process of buying behaviour of a consumer along with the intricacies involved in the process of doing that and then assessing the models of retaining the existing customer. With rapidly changing technology and advancement of business process, the role of organization is also changing in perceiving the needs and demands of its customer. The ever demanding customer has emerged as a major influencing agent in driving the functionality of operational model of business and has become a prominent entity in the business value chain. Automotive industries essentially are changing their existing business and operational structures and realigning the models to revolve around the customers by adoption of various customer centric models. The scope of the research report is divided into six sections: the literature review, methodology, analysis, discussion, recommendations and conclusion.
The literature review begins with the introduction of the role of modern day customer in influencing the operations of a manufacturing unit like automobile industry. Here we took the leverage in understanding all the theories of marketing, operations, strategy and consumer behaviour. The theories have revealed how the intricate process of purchase decision making model of a buyer is influenced by various external and internal factors. Further, we take a look on how the buyers attitude impacts a business function and how it can be influenced towards other aspects of firms functionality like how does the marketers decide their target audience and do the segmentation, what are the elements involved in positioning a brand image, can the buyer’s attitude be changed over a period of time, does adoption of customization, post purchase services and customer centric models actually help in retaining the existing customer base, how does a firm win loyalty from its customer, how does a firm satisfies the growing demands of a cost sensitive customer in the days of limited financing, has economic meltdown affected a cost intensive industry like automobile. With the help of established theories and work of eminent researchers, we outline the interplay of attitude of customer and the organizations operation and production functionality. The literature review thus concludes with the importance and challenges of adopting the customer centric models like CRM.
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The methodology section followed thereafter reflects the complete steps undertaken while conducting the survey. This section explains the methods why a particular method or approach was chosen for data collection, surveying and the statistical tools used for further analysis of data.
The analysis part is based on both the primary and secondary data from the primary survey data and the secondary data collected from Society of Motor Manufacturers and Traders Association reports on motor industries of UK in 2010. The same has enabled in the understanding of the parameters affecting the sales and volume of the industry over the ages (a period of ten years spanning from 1999-2009 was chosen). To support this, we have analyzed and presented data pertaining to innovation in terms of environmental friendly vehicles, sales performance and consumer influence in launch of new product by the companies.
The discussion section reflects on the changing needs of the modern consumer and the processes adopted by the firms in aligning with their needs. We also understand the importance of selecting the correct target group, effective communication strategies along with other strategy that enables a firm’s sustainability in the market. Before moving further we attempted to analyze the pros and cons of adoption of customer centric approach from the organization’s perspective.
We finally conclude with some recommendation for understanding of the behavioral aspect of the consumers in driving the company sales and repeating the business in future. The report ends with a summary of the findings from the report.
To identify, describe and review the effectiveness of consumer attitude in the functional and operational process of an organization and to develop an associated theory to manage it.
TABLE OF CONTENTS
Overview of operation of auto industry vis-a-vis customer……………………………..6
Significance of consumer’s attitude in business …………………….………………7
Techniques of gauging and delivering the consumers’ need …….…….……….11
Advancing behavioral aspect of consumer………………………………………………….16
Consumers impacting the operational business model ……………………….…..20
Understanding customer relationship ………………….………………………..22
Importance of customer relationship ……………………………………………25
Challenges involved in being customer responsive …….……………………..27
Customer as an entity ……………………………………………………………41
Consumer purchase and operation correlation ..………………………………….43
Strength of company versus consumer attitude ……………………………………44
Influences from external and internal sources impacting the consumer ……45
Account of company’s absorption of consumer attitude and transformation ……47
Risk and rewards analysis ……………………………………………………………49
Careful choosing of the particular aspect of attribute for production line………..50
Making the right selection… ………………………………….……………………….51
The aspects of successful strategy……….………………………………………….51
Negatives of sensitive strategy when loosely handled…………………………….53
Effective scaling of consumers attitude…………………………………………..…53
Means of retaining loyalty….………………………………………………………….55
The research seeks to:
From the ancient and humble origin of bullock carts to the present day Formula1, automobile industry has come up a long way. The industry that in effect was leading the manufacturing sector since 1900s with its contribution from mass production to lean production and significant employment generation, is now been exposed to the cut-throat competition of the post globalization era. The ease of information access has enabled the customers to keep a constant watch on the development and innovation across the sector, thus impressing an external force upon the industries to be at its technological, operational and innovation forefront so as to sustain its presence in the competitive market. Automobile industry as it stands today requires maintaining a strong foothold not just in operational and financial terms, but also in developing the acumen for prompt response to the ever changing and demanding needs of the customer.
As argued by Gopal, (2007) despite the ever growing demand for services and technologies in the automotive segment, the consumer is not at all willing to shell out an extra shilling for such advancements. Such that exerting an outward pressure on the automakers to design the operational model in such a way that it fulfills the needs of both the emerging market and cost sensitive customers. The area of focus has thus to be more towards innovation with limited financing (Gopal, 2007). Infact the coming future will decide the market leader essentially on the basis of cost effectiveness. The very fact which has also been attested by CEO of Leoni AG, Dr. Klaus Probst as, “Globalization, intense competition and pricing pressures will continue. In the end, cost leadership will be decisive in the supply business, even more than innovation” ((Spencer Stuart, 2006).
The pricing pressure exerted by the price sensitive consumers has forced the industry in not just the creation of ingenious product solution but also in leveraging its inherent strengths and diversifying its product portfolio by acquisition and partnership programs. Such steps infact helps in distributing the investment costs incurred over various quarters in the stiff financing days. As further opined by the CEO of Delphi Corporation Rodney O’Neal, cost reduction in an automotive sector is not always related to operations which accounts for around 70-80% of an organization’s asset, but to the rapport with the people who essentially helps in running the operation viz. the customers (Spencer Stuart, 2006). Interestingly in terms of operation a customer can vary from being an individual or a group to the next step in the process with differing needs. So much so any successful model needs to be customer centric.
The current time therefore demands for the adoption of a strategy that develops and offers the products and services as insisted by the market, to the extent of meeting the needs of the consumers while at the same time achieving the organization’s objectives and mission. According to Mintzberg (2000), the competitive and the business strategy is thus more like an act of clay crafting at the potter’s wheel. The effectiveness of the strategy is evolved in the image crafted through it, such that any image of sheer planning gets distorted when accepted unreservedly. Such that, when Ford was using only ‘black’ in painting all its car models, in the long run it lost to General Motors, as customers tend to seek variety in terms of color, and when not offered by one firm will immediately opt to seek what is available with the competitors. (Mintzberg, 1987; 2007).
This implies that the current market scenario is so aggressive that any reaction and action undertaken by the company acts as a decisive factor for its future in the market place. In Drucker’s (1959, 2007) words, ‘speed and risk of innovation’ aspects are the key in leading a market for a long term. The generic competitive strategy in terms of cost-lost leadership and differentiation helps in building a distinctive competence in certain key areas. This strategy which when is formulated in the right manner is essentially used for the creation of competitive advantage. (Ritson, 2008)
Continuing with the survival strand, the strategy followed by an operating unit marks the essential difference in sustaining its market share. As per Mintzberg (2007), strategy is the process of ‘deployment of one’s’ resources in such a way that will defeat the enemy’. The organizational structure thus, in terms of the resources and people are to be classified and grouped in such a way that focus on any product line ensures excellence in all technical terms. For the small and a focused group is expected to ease the process of association with the customer thereby resulting in a more creative way of selling and marketing. (Ritson, 2008)
The attitude of a consumer can impact a business on four major ways viz. designing of marketing strategies, public polices, social marketing and understanding of competitors behavior with respect to firms own stand and relation in the business.
Fig.1 Composition of consumer attitude – (Source: Mintzberg 2007)
The above figure is a clear depiction of the three prime attributes that comprises a consumer’s attitude which in fact are interdependent. Together they serve as the influencing force of a consumer’s action and reaction. Taking each at a time enables a marketer in proper understanding of the interplay in the users mind that drives their decision making process. As a consumer might have positive, negative or neutral belief regarding certain aspects which may be right or wrong when placed against other facts and figures. It is the belief that in many instances drives the feeling (affect) which can lead to intention (decision), though this is not the only way of flow. The factor of inter-dependence amongst them negates the possibility of linear flow. (Perner, 1999)
Designing of any strategies related to marketing are quintessential need for survival of a business. In this regard when there is an understanding regarding the behavior of the end user it eases the process of strategy formulation. For instance the event of buying a car is not just to fulfill one’s basic need. The requirement of this object of convenience arises only when the other needs meet the basic psychological requirement from food to safety (Mintzberg 2007). Once the consumer is at a stage when those needs are taken care of he tends to expand his horizon for other wants and desires and then seeks comfort in his lifestyle. Many a times, this aspect is also related to the feeling of fulfillment and personal success, like the act of owning a BMW. (Kapferer, 2003).
Again the buying pattern for vehicles tends to be startlingly different with respect to other products. In this case people tend to seek guidance from the peer group as well. So much so a marketer cannot expect a rapid sale of the products straight after its launch. The auto companies need to be at their financial best in order to ensure that it can stay afloat till the time the need for a vehicle develops in the consumer’s mindset. (Perner, 1999)
An interesting observation is that intervention by a public authority is very much required in emphasizing the need and importance of certain events. In case of auto industry the effects of carbon emission were attested by the government agencies thus infusing in the mind of the end users for acceptance of environmental friendly vehicles. The indirect influence by such public policies therefore helped the automakers in driving their sales towards green technologies and selling of their new launches under green categories.
Many strategies at its very beginning seem infeasible in propagation of a message and then inducing sales. For overcoming such hurdles automakers have not just used the mode of social marketing by directly attacking the customer’s emotional feel but also by innovation mode. The ignition interlock device is one such approach which inhibits the operation of the engine till the driver’s breathe specimen is tested free from alcohol. Such initiatives propagate the social cause along with molding the consumer’s sentiments. (Willis, et al, 2009)
Another vital aspect is of understanding both the consumer and the competitor’s power thereby defining and refining the company’s own placement in the wide marketplace (Kotler, 2003). For instance, if one automaker is targeting the luxury car segment its competitor might have been catering to the mid segment, targeting the average income household. Now with the advancement in economy and increase in the disposable income of the consumers, the user is developing inclination towards higher segments of car buying. In such situations, the conspicuous tendency that the company’s competitor firm might reposition themselves towards luxury segment arises. Knowing such events beforehand helps in enhancing ones’ competitive advantage.
Apart from the general attributes of behaviour there might be external influences that can drastically impact the buyer’s attitude and thus affect the automakers sales and production. One such event is the economic recession, as evident from the recent past the meltdown has significantly impacted the buying pattern of the consumers. The idea of luxury was driven to a back seat with the end user being more sensitive towards price fluctuation thereby laying more importance on aspects of warranty, aids of financing and other similar schemes. The initiative of commercial lending services for business buying of Ford vehicles is one such instance for customer attraction during tight financing. (Kotler, 2003)
Attitudes once formed is very difficult to change under normal condition, because while trying to change a consumer’s attitude it is observed that whenever the customer doubts the marketer in having some ulterior motive in deliberately bringing about this change the process become all the more difficult. Thus cautionary step has to be followed in the exercise of attitude change. (Perner, 1999) As a series of strategies are involved in the process, it is very much advisable of not adopting the same unless very necessary. Some such strategies for bringing about the change are as discussed:
Change can be brought by changing the effect that may not require changing their beliefs by implementation of classical conditioning technique of Pavlov. For instance if customer is assumed to have no previously set beliefs for a car, he can be influenced to finally buy a car by using the exposure effect. When the user is exposed to the same environment again and again by frequent advertising and displaying it at all probable places, he tends to develop a liking and unknowingly the object will enter his consideration set. Thus coming to the forefront while decision making. (Kim et al, 1998)
Next approach is of changing behavior. An average customer is under the impression that his behaviour is rational and thus not likely to be influenced by any gimmick. In such cases a marketer can lure them in switching their attitudes for brand by offering temporary price discounts, additional offers, coupons, schemes and packages. In all their rationality, the consumer tends to opt for the one with more add on benefits thus unknowingly letting a changeover. (Perner, 1999)
The most difficult aspect then is changing the belief which is like converting an unfavorable attitude to a favorable one. The approaches adopted to achieve the same are:
Techniques of gauging and delivering the consumers’ need
In order to earn ones place in the market it is essential to feel the pulse of the basic element of the marketplace that comprises of its customers and their attitude. This fundamental step will start taking shape once the numerous consumer bases are bifurcated into certain definite segments and picking up one at a time for marketing the firm’s products (Kotler, 2000). Once the foothold is established in one segment the firm can expand its operations to the other product segment with ease, for the firm now has already gained the confidence of its consumers by delivering their promise. The instance of Toyota depicts the same technique of benefitting from the positive attitude of its end user. For when Toyota entered it began by introduction of small cars like Corolla. After gaining the consumers’ confidence and letting them experience the firms quality of products and services it moved on to midsize cars like Camry and then later expanded to the luxury segment with Lexus. (Kotler and Armstrong, 2009)
Once a particular segment is identified and targeted the next important step is to place the same in such a way that the user is able to understand and relate the same with his requirement. This positioning of product on the basis of its own life cycle will be insignificant as long as it doesn’t perfectly fit into the market cycle. For it is the market that apart from deciding the dynamics of demand and supply, provides the platform for vendors and the consumer to meet and moulds the sentiments of its consumers, hence any imperfect fit will remain distantly remote from the appreciation and acceptance of the large consumer base. As it is the attitude of a customer that impacts the functioning and operation of a particular firm, positioning in this respect is an attempt to impact that mental setup of the prospect. (Ries et al, 1982)
Continuing with the above argument, Ries and Trout (1982) opines that despite the requirement of the crucial physical feature of products viz. four Ps (product, price, place, and promotion) in supporting the placement strategies, the communication tactics are very much vital in positioning or repositioning the firm’s or product’s image in the customers mind, like the comparative approach of BMW in de-positioning Mercedes Benz as “the ultimate sitting machine versus the ultimate driving machine”. (Kotler, 2000).
Depending on the product line the auto market can be segmented such that each segment pays a specific price for the products and services as offered to them. The widely accepted theory for setting up of price falls under nine broad strategies. On the basis on the below price strategy, in an auto industry Volvo and Ford Escort can be segmented for special need and convenience section, whereas Audi, Mercedes Benz and Rolls-Royce will cater to the luxury, gold standard and ultimate segment respectively. (Kotler, 2000).
Fig.2 Price-Quality Strategies, (Source: Kotler 2000)
Again as the present day customer is educated enough about the ‘true value’ of the product, it is effective when a company uses the perceived value while deciding the final price of the products. Doing so will enable a company in justifying its pricing with respect to its competitors, and thus increasing its sustainability in a cost sensitive market. For the perceived value tends to convince the consumer in paying high premium when it comes to buying an Audi, Mercedes or Rolls-Royce (Kotler, 2003)
The customer before making the final decision of product purchase needs to be well motivated, for it is through his attitude that the criteria for selection and rejection are chosen (Schiffman 2000). As an average person tends to retain only a fraction of all the information they are bombarded with, it is very important that any information provided correctly proposes the value of the brand while addressing the innate customer need. Thus this very part of retention which is selectively done through their mental faculties’ plays a very seminal role in decision making process, for any consumer will retain the information that is in accordance of their attitude, belief and values. (Schiffman, 2008)
Being exposed to numerous stimuli on a daily basis, an average man tends to respond to only that stimulus that is related to their current need, or those whose deviations are noticeably larger than the usual stimulus. Thus in order to pass though the mental screening of the consumer it is imperative for an organization to deliver their products in a way that is akin to their need. Further as a favorable attitude of the customer towards a particular brand tends to drive it business, marketers try to provide them with additional value added services so that the image of the organization and its products is imprinted not just in their awareness set but also escalates to the consideration set and them finally make its place in the choice set of decision making. (Schiffman, 2000)
Fig. 3 A simplified model of consumer decision making (Source: Schiffman 2000)
The above figure is the representative of the entire process of buying decision making in a simplified manner. It is clear from the figure how various factors are interrelated when a purchase decision is made. The understanding of the complete flow helps in gauging the response of a consumer and then presenting them with their desired solution. The interplay of various external and internal forces does open avenues for a marketer in both influencing the buyers’ attitude and absorbing the effects from their attitude
Thus the positioning of the products in alignment with the needs and requirements of the consumers helps in realization of their innate needs. As Kotler (2000) has pointed out when automobile safety became the prime concern for the consumer, the team of Volvo targeted at a particular segment of prospects that were seeking safety and thus positioned their car as the safest vehicle that a family can ride. Other player like Toyota lays more emphasis on the factors like competency of manufacturing, which when excelled will mentally satisfy the user and thus not just retain the existing end user base but also attract other groups through word of mouth.
The actual value will be derived when the firm and the targeted group of customer reach the same platform of finally closing the deal. Sales function of any firm plays a very vital role for they tend to form the interface between the company and the people. The theories of consumer sales have identified three aspects of customer’s primary needs which when satisfied by the sales force tends in value creation for the organization. These three needs has been identified as information regarding the product, its price and the promotional means, followed by the guidance and support for product usage and finally the partnership with the firm so as to seek a customized product. (Baran et al, 2000)
Fig.4 STP model (Source: Kotler 2000)
Apart from the above techniques the capabilities of innovative designs emerge as very critical elements for an auto industry as these factors tend to reap the benefits of being the first mover and capturing a substantial share in the market. When firm tends to treat their brand value as their core competency, like Ford, they tend to attempt for modes like first mover advantage, product expansion, outsourcing and tapping new markets, for financing is not the area of prime concern for such players. More so as certain consumer group are of the faith that acquisition and expansion drives are signs of a strong brand, firms encash from such attitudes as their operational strategies are already functioning in that direction. (Gopal, 2007)
Further the process of identifying a particular segment by observing the demographic, psychographic and behavioral differences enables the automakers in deciding their target market and thus positioning the product that can deliver the benefits the customer is expecting quietly. It is utterly important for automakers (or any marketer for that matter) in satisfying their target customer group as they are greatly dependent on the needs, tastes and trends of the consumers. More so the sales revenue for such company is majorly derived from two group’s viz. new customers and repeat customers. Being customer driven, helps the automobile company in the long run, as consumer sales is the largest source of revenue that can be generated by retaining the existing customer base. As a matter of fact the estimated cost in attracting new ones happens to be five times more than pleasing the existing ones. (Kotler, 2003)
Advancing behavioral aspect of consumer
In today’s world the value of a product or services is no longer defined by the firm alone, the real value is being determined only when its customers define it. The organization’s adoption of customer responsive model has brought in changes in the evaluation of other functionalities of the firm like sales, operation and distribution. In order to be a part of the change or influence the same, an auto company fundamentally needs to anticipate the evolution of consumer behaviour in terms of their attitude for fuel efficient and alternative fuel vehicles. For what is perceived as efficient by one buyer need not be the same for the other. If for one set of buyer vehicle is an essential commodity he would be considering the features of efficiency, whereas if vehicle happens to be under special need category the buyer would be more interested in the brand name and the status symbol attached to it.
The consumers buying choices are infact determined more by the subjective parameters rather than the objective ones. A company today cannot neglect any individual differences of customers (like their ‘attitudes’ and ‘specificity’) that forms their perception while deciding for purchase of a particular automobile piece. Further there exists a substantial difference between the fleet buyer and retail car buyers. For the consumption pattern of the business buyer (B2B) are more ‘routine’ and ‘functional’ in nature. Car designs (e.g. Lexus GS 300) with features like large and powerful engine, higher horsepower, higher speed and quick accelerations are considered suitable for workplace, at the same time delivering the complete value of the money spent. Now when the buyer happens to be an individual retail buyer he intends to seek benefits from the brand that are ‘experiential’ and ‘symbolic’. Therefore the fleet buyer whose basic need happened to a cost effective car and yet desired luxury possession bought the Lexus GS 300 SE. (Newman et al, 2009)
Again, there is an essential difference between an individual buyer and an organizational buyer. This distinction between two buying segments that has bifurcated the buyer, despite being useful has posed a problem in developing a generic understanding of consumer’s attitude (Wilson, 2000). Facts and figures as derived from reports confirm the fact that organizational buyer accounts for a substantial amount of products and solutions purchasing. This group of consumer is in fact considered more sophisticated than their individual group counterparts, not just for their risk-averse nature but also price sensitivity. This very group of buyers comprises a large gamut from resellers, agency producers, institutional and government buyers.
Fig. 5.Buyer decision model, (Source: Schiffman ,2000)
As an organizational buying involves more people than an individual venture, the decision making process also includes a large number of people based on their area of expertise. The final buying decision is then taken by the purchase specialist who takes the inputs on specifications from the department that has raised the demand for buying.
Before undertaking the decision to buy a consumer is guided by the general principles from problem recognition to post purchase evaluation of the model. The criterion tends to vary slightly with the significance and the need of the prospective purchase. As there is a certain amount of risk that is associated with the purchase of an automobile, decision making for the same, demands complete involvement on the part of the consumer. For instance, when the purchase is for a luxury car the evaluating criteria happens to be their attitude towards it, for the prospective buyer already owns a car and the post purchase experience in terms of services and delivery, sales and warranty etc will now come into action. Considering these facts, irrespective of its strong foothold and brand image in the luxury car segment Audi has pioneered in setting up of new codes for customer service by opening up its workshops and service centers. (Wyman, 2003)
The increasing intensity of competition has directly pulled the value of brand image towards a positive curve, such that with every rise in the production and operational standard the perceived image from the perspective of buying is on a constant rise. An interesting observation is that even the premier segment cars like BMW, Mercedes Benz needs to develop and refine the traits and values with the changing norms of the society so as to influence a buyer and retain the market share.
According to Kotler (2000) despite brand being the powerful image, its very image acts as a barrier while entering a new segment. For the image that has already been placed in the mind of the consumers as ‘luxury’, ‘utility’ or ‘convenience’ vehicle. Again for recreating the image the power of the brand needs to be unleashed by stretching it upward or downward into a new segment with the strategy of sub branding. Like introduction of Mercedes A Class ‘a small family car’. A luxury automaker thus also needs to segment their cars on the basis of their customer attitudes, thereby focusing on the ‘types of customer’ and catering to each of their need separately. One notable thing here is that owing to the differences in attitudes and specificity of consumers, what means luxury for one group might be perceived as ordinary for the other and vice-versa. (Newman et al, 2009)
An independent research conducted by University of South Carolina, on attitude reveals that a consumer tends to react favorably towards certain advertisements when there is a declaration about a negative aspect of the sponsoring brand (e.g. despite being safe, Volvo essentially is a clumsy car) and a positive aspect of the competitor’s brand (e.g. luxury car competitors have low price car, but service and performance doesn’t match up to Audi’s standard). (Perner, 1999)
Further for means of influencing effectively through advertisements, car endorsements are to be essentially done by ‘nationally syndicated auto columnist’ rather than an athlete. The use of comparative advertising does help in increasing the sales of the sponsoring brand, but is labeled illegal in many economies, also rather than increasing the sales volume in certain cultures the approach might completely backfire the sponsoring brand. Thus marketer needs to be very careful while adopting the mode of promoting its value proposition through advertising. (Busler, 2002)
As the modern day consumer happens to more internet savvy, it becomes imperative in checking the behaviour of the cyber customer also. Recent research of Perner (1999), proposed that customers despite being net savvy do not intently search for any particular information on the company’s official portal. Also it is very difficult in preventing them from prematurely ending their search in one given site and then drifting to the other (which in many cases been the competitors’ portal). For such cases it becomes imperative that the websites are designed in a way that it is interesting enough to hold the viewers attention for substantial amount of time. Apart from being user friendly the user nowadays desires an interactive window that solves requires effectively in terms of time and cost involved in shooting an email and wait for the response time. The response time thus reduced helps in developing the understanding of the product and fastens the decision making process towards the next step of purchase. (Perner, 1999)
Further owing to the rapid expansion of the web technology, hitting of a single search button exposes to substantial amount of data, and the site that gets the maximum hits happens to be on the top of the search list. In such cases it becomes essentially difficult in generation of traffic to one’s own site. This can be done through optimization of search engines, inviting traffic through online advertising etc. Another interesting medium is that of viral marketing that tends to promote the product through third party. As the general propensity of human behavior in going by the fact that when propagated by others the product must possess unique and valuable features, the scope increases in developing a favorable attitude. Viral marketing however, if used through emails fails to serve its designated purpose for they are treated as spam which infact tends to impact the brand image in a negative way. (Busler, 2002)
Consumers impacting the operational business model
Ensuring customer satisfaction plays a vital role from a marketer’s point of view as the buying decision is always effected by their attitude towards a brand, and the products and services as delivered by those brands. Such that for generation of a favorable response from the customer, the firms essentially need to be responsive towards their needs and promptly provide them with their desired solution. So much so ever since the genesis of the automobile industry it has maintained a focus of crafting custom-made cars to suit its customer’s requirements. As such tailor-made cars through craft production demanded for skilled labors, the production process and volumes tended to be very low. Thus, in order to meet the special needs of the customer, the existing operating process was replaced with the mass production technique (Dankbaar, 1997).
It was in fact with the introduction of the conveyor belt and the focus on the product strategy that the assembly time was substantially reduced, thereby reducing the waiting time for a desired finished product for the end user. With the changing time the demand and need from the consumers end kept changing which always provided the required thrust for innovation and also revamping of various products and service models suiting the current need. The hybrid car is the result of one such response towards customer’s need. This model was in fact designed as a response to the environmental pollution caused by emission of pollutant by the combustion engines. The hybrid cars however, operates on the principle of combination of both gasoline and electric power, which emits not only lesser pollutants by increasing the mileage of gas but also improves the efficiency of the engine thereby providing a better fuel economy. Other research carried by Gopal (2007) for studying the same has in fact proved that hybrid actually helps in bringing down the smog pollution by a significant amount of around 90%. (Gopal, 2007)
Again as a response towards the Kyoto Protocol, the automakers on one hand are participating in the emission trading systems and on the other are designing models that reduce the emission of carbon-dioxide. Some such techniques are like the downsizing of engine by combining it with turbocharger, sleeker models for reduction of aerodynamics haul, etc. Adoption of such practices not just increases the brand value of the firm in terms of social and environmental responsibilities but also influences the attitude of the consumers in a positive way.
The consumer today, in the name of modernity demands such features in the modern car that are ever increasing from the perspective of safety, customization, style, comfort and fuel efficiency to name a few. The industry thus is under the pressure while complying with the stringent societal rules like clean air, recycling, pedestrian protection, keeping check on the rising dependence on the imported fossil fuels on one hand and on the other maintaining the equilibrium of price and features while development of environmental and safety attributes in a new vehicle. (Humphrey, 2003)
Furthermore as the customers focus is shifted more towards the concept of going green, the automakers have taken a proactive step of meeting their future demands for a ‘clean and green car’. This remote concept, which is based on the same lineage of the technique of powering space shuttle, is expected to hit the market by 2020, with the introduction of fuel cell technologies in automobiles. So much so the prospects of competitiveness of the industry will be essentially associated with the traits of flexibility, customization and effective processes of production and operation management in the coming future. The demanding prospect of the upcoming future thus, establishes a mandate for the auto industry for the production of affordable products in alignment with the basic parameters of being “clean, lean and safe”. (Gopal, 2007)
Understanding customer relationship
In the age of tight financing, cost intensive businesses like automotive are confronted with the challenges of expanding consumer base by stoking their growth engines with aggressive spending. Thus in the time of uncertainty, the maintenance of the existing customers’ base acts as the sole medium of churning revenue. This mode of revenue is primarily being facilitated by the solution from Customer Relationship Management. It is thus, a technology that enables a company in not just improving the competence of an organization but also in acquisition, management, services, and value extraction from the customers. (Microsoft, 2009)
According to Anderson and Kerr (2002), CRM is a comprehensive approach for creating maintaining and expanding customer relationships. It is essentially the philosophy of business that visualizes the company’s strategy of dealing with its customers. This strategy of CRM not only aims at maximizing the profitability of the prospects relation with the company but also in shaping the activities related to sales, marketing, data analysis and customer services. With markets being more transparent and the information about products or their suppliers being accessible at an ease, consumers are constantly seeking for the companies that not only understand the needs but effectively respond with the relevant solutions and communicate the same through customer preferred channels. (Atos, 2002)
This technique further has been observed as the process of managing relationship on a continuous basis, so as to successfully achieve the purpose of directly improving the communication process of a company through the channels of business to business (B2B) and business to company (B2C). For any communication is considered effective only when a firm is able to engage into a customer interaction process yielding satisfaction with the services of the brand. One such method used under the CRM practice is the process of campaign management that helps in developing, delivering and scaling the efforts of marketing programs. The prime focus of such campaign is to successfully achieve the marketing cycle objectives along with driving sales, profit and the satisfaction of the customers. It is in fact with the transparency in process of facilitating information that enhances the value of the brand. (Baran et al, 2000)
There exist five major strategies that are inherent in the CRM cycle as discussed:
CRM technology thus not only maximizes the revenue opportunities of a firm by enabling their successful tracking of the customers and then leveraging from their interaction but also in improving the loyalty of their existing customer base. In addition to the above mentioned strategy the solution thus provided is also involved in optimization of firms operation by automation of their routine tasks and standardization of the best practices. So much so that in the times of financial crisis the CRM technology tends to provide the most apt solution for managing a firm and all its resources with limited financing. (Microsoft, 2009)
Fig. 6 CRM Cycle, Source: Atos 2002
Further this process of managing customer needs to be treated as a cyclical process, thereby developing relationship that is intensified as time passes by. The process thus not only maintains a healthy customer base but also helps in understanding and analyzing an extensive span of attributes like identification of new segments, drifts in the behavioral aspects of the customers, prediction of their reactions towards certain innovative campaign and estimation of revenue in terms of return on investment. (Atos, 2002)
The service to a customer becomes better when they are understood in a better way. When a company is able to extract the full value of a customer, the value of the brand also tends to rise, thereby creating a win-win situation for both the firm and its customers. The realization on the part of the consumer enables them to retain their favorability towards the brand thus enhancing the other related functionalities of production and operation.
Fig. 7 CRM Cycle, Source: Atos 2002
This process so much so is such a strategy of business that caters to every aspect of a business operation. The figure above depicts how the step by step approach of the system helps in deriving customer value.
Importance of customer relationship
The growing importance of consumers in the field of marketing, operation and the general functioning of industry has opened the new avenue of Customer Relationship Management. Maintaining a healthy relation with the customer is indispensable, as in this very sector the sale from them serves as the prime mode of revenue generator. A study carried out by Reichheld (1993) has revealed that rate of customer retention is directly proportional to rise in profits. For instance, a small increase of 5% can bring in a drastic rise of up to 95% on the value of the products. The same theory has also been attested by the McKinsey consultants that a repeat customer has twice the potential than a new customer in generation of gross revenue of an auto industry. (Reichheld, 1993). So much so a technological and innovative aid is constantly required in delivering of the promised services to the loyal customers, which indeed has been supported by the relationship management program. CRM thus, is considered as the new mantra of marketing. (Winer, 2001)
The traditional segmentation approach has been criticized for its nature of averaging out the service towards a group rather than offering customized service individually (Cox, 2006). Furthermore with the availability of other personalized marketing tools like ‘one-to-one’ marketing drives away the need for usual method of segmentation. For the customized service tends to provide a competitive edge to a particular firm against its competitors. The novel approach of mass customization therefore is a step beyond the one-to-one marketing catering to individual consumers with not just personal communication but products, solutions and services (Pine and Davis,1999).
Owing to the increasing effects of customer in firms’ operation, a new term has been introduced in the marketer’s lexicon called ‘Life time customer value’ (LCV). This concept is based on analyzing a customer database for understanding the firm current and future profitability, which when projected acts as a decisive factor for the target group. Other techniques like market basket analysis are also being used by the firms for understanding of the customers taste and their buying patterns. (Gupta et al, 2006)
Source: Journal of Service research
The wide array of choices at customers’ disposal has in fact increased the worth of the target customers in such a way that, customer service units are being observed as priority sections. For these sections apart from promoting CRM also serves as the sole point of contact of the customer with the firm and thus possess immense potential in replicating future businesses. Primarily there exist two types of services that help in boosting of customer relationships viz. reactive and proactive services. Former guides a customer (through means like 24 hours phone service, faxes, emails etc) whenever he encounters a problem and seeks advice. Latter is the process of anticipating the customer’s response and making the first move in sorting out the same. The proactive service thus acts more like a management of good account (The stationary office, 2007).
Again, as the present day customer is essentially internet savvy, web networking tools are being successfully used for both online and offline business purposes. The networking platform thus established enables a firm in not just developing a relationship between the consumer and the company but also in spreading the awareness about existing product, new launches or any other significant development (relating to customers) through various online communities. Such medium of communication tends to add a personal touch in any ordinary activity thereby developing an emotional tie with the existing customer, making it difficult on the customer’s part in severing the relationships from the other customer members of the community. (Winer, 2001)
An independent work of Sanchez, carried out in the past have revealed how the automotive industry is intertwined with the behavioral aspect of its consumers, which is in fact is better communicated through internet. (Sanchez, 2006). As in current times communication serves as the prime medium of trade, having posted an ad for purchase in the web acts as the first step of establishing a relationship with the consumer. Infact it has been observed that customers tend to be more open while responding through internet, thereby providing ample scope for development of the automotive industry. (Sun et al, 2006)
So much so the companies that are negating the importance of customer centric models for their business operations are very much likely to be easily surpassed by the ones who are responsive towards customer needs by adding an extra mile in the arena of future profitability.
Challenges involved in being customer responsive
Despite its various positive attributes the system however, is not immune from the consequence features that pose as a challenge for the companies. The survey carried out by Gartner (2006) depicts the fact that around 50% of the CRM implementation was considered a failure from a company’s point of view. No doubt the system does aids in analysis of huge customer databases, thereby increasing the chances of contacting any probable customer. The crux here is prior establishing a relation it is essential to understand whether the selected group is the right target who is genuinely interested in the company and its products, else the effort undertaken as such tend to lose the potential one while focusing on the wrong group. (Ueno, 2006)
With too many ad campaigns and too much of information it is becoming difficult to decide the credibility and dependability of any particular product. Moreover there is an existing group of customers who do not believe in any promotional schemes, for them it is essential that company provides personalized services. Again the sole medium of word of mouth cannot be always used for promotion of a company and its products. Therefore, a company not only has to promote its products but also discard certain services that do not gain headway. Further it is not always feasible to provide the services as per the demand of every individual customer, thus making the process of service delivery all the more difficult.
Apart from it the global competition has heated the already competitive ball game, enabling the end users to do a comparative study of the services as provided by the other players. Thus with this informal and indirect ‘clashing of titans’ , pressure on the company’s part is increasing in not just becoming adaptable to the rapidly changing demand scenario but even to be resilient towards the continuously developing world economy. Also the reluctance on the part of the consumers to explore and experiment any new concept at times makes it very difficult from the firm’s perspective in surveying the actual need of certain product and services. (Ueno, 2006)
The drive of innovation with umpteen experiments and models have brought all the players into such a state wherein the differentiating line of competitive advantage practically seems to diffuse, for all the players are now using identical technologies in their respective production models. The excessive use of models thus acting as a threat for overextension of brands with intensified competition amongst them. At the same time this lack of differentiation has driven the end consumers to micro-segments which again are increasing manifold with every passing day. The idea of attracting new customers by innovating with brand extension has in fact jeopardized the existing base, for identification of a strong brand is always on the basis of its sharp contours, which essentially needs to be maintained. Thus unlike the traditional models brand now needs to be differentiated by the means that can actually be perceived by its customers. (Wyman, 2003)
As no single study or literature on the behaviour of the consumer is yet able to completely comment and predict the decision making or the buying pattern, it becomes tricky for a firm to rightly gauge the mass mood. Further the buying of a new car is not for any technical fault or obsolescence, but an event that is essentially driven by the consumer’s need of a better car that can provide them with innovative solution. The search for such innovation amongst all the existing players in one way drives the demand elasticity and exerts the pressure on each company in providing updated solution with stringent financing policies. The industry so much so is torn between the two forces of cost reduction on one hand and dealing with the ecological conformity and high price performance enhancing technology on the other hand. (European Commission, 2006)
Having said this, a complete understanding of the behavioral pattern of the consumer with respect to the operational functionality of a company can be achieved only after practically visiting the production unit and analyzing their approach towards customers. This methodology has been discussed in the next section.
For understanding the relationship and impact of the consumer and their attitude upon the operations of the automobile industry, it is imperative that attitude is measured by collecting data by using the best suited method for carrying out the given analysis. Measuring of a consumer’s attitude helps in the understanding of their perception for certain products and services and thus enables in designing of marketing programs to support or change their existing attitudes. Again the segmentation for the niche market is essentially dependent on the attitudinal aspect of the strategy. This aspect when understood in entirety also helps in prediction of the success or failure rate of a scheme, campaign, product or services.
For measuring the attitude the three elements viz. belief, emotional feelings, and behavioral response, which are inherent to the process needs to be considered. An attitude once formed cannot be easily changed but for persistence and great pressure, thereby making it difficult to quantify or accurately scale its aspects. Generally accepted techniques for measuring of attitude is basically classified into two major groups based on observation and questioning. The questioning method involves the use of questionnaires based on self reports, verbal reaction and performance on objective tasks. The observation technique on the other hand uses the psychological reactions and overt actions. So much so data thus collected would not be easy in accurate measurement of an aspect of human behaviour. (Westfall et al, 2003)
Despite the difficulty of scaling and absence of devices for accurately measuring the attributes of human behaviour, the approach of attitude measurement is undertaken. As measuring this very behavioral aspect helps the marketers in gauging the needs and requirement of the consumer on the basis of their inclination and emotional attachment towards certain class of products and services, thus helps in designing the advertising and marketing programs that can directly impact the minds of the targeted segment of the consumers.
For understanding the impact of consumer’s attitude on automotive sector, the study will be based on the primary data collected from a sample size of 100 respondents who use or drive a car for both personal and commercial use. The questionnaire used for the said sample survey is structured and non-disguised, such that it comprises of two major sections one focusing on the attributes from demography and the other sections considering the various aspects for buyers decision while purchasing of a car. Then for analyzing of the collected data a five point Likert Scale was used for capturing of the respondents response that ranged from strongly agree to strongly disagree. The questions and statements for analysis of the ‘operations being impacted by the consumer’ is framed on the basis of the theory as understood in the literature review along with the opinion taken from the experts in an iterative manner. The itemized scale used in this respect solicits the responses to be ranked in the order of decreasing importance. The data thus received was analyzed statistically using the factor analysis method. Further the weighted average was also used in certain aspects to judge the frequency of certain attribute.
The pattern of the questionnaire used for this research was structured and non- disguised as in the structured format of the questions there is less chances of getting the responses influenced by use of different phrases. Also using a structured method ensures that if at all the survey needs to be repeated the results will be of similar nature.
Further when a set process of data extraction is present, it prevents the interviewer from the palpable predisposition of exploring and extracting more than the required information. Again as no standard yardstick exists in the measurement of such behavioral aspects, customized devices were created to suit the need of the study. Finally the data gathered and obtained by such methods are relatively easier to tabulate and interpret rather than the ones obtained by other means.
The scaling technique used was Likert scale as it is simplifies the studying of social attitudes and behavioral pattern by providing a scale value to the five responses pertaining to the favorable and unfavorable categories. This scale also can be easily used in the studies pertaining to respondent and stimulus centered, as the given study is respondent centered its serves the purpose rightly. Another notable aspect that the pattern of question is divided into two broad sections as categorizing data on the basic of demography and buying pattern helps in understanding the dynamics of psychographic demography that influences the buying behavior.
Finally the factor analysis was chosen as the statistical tool for analyzing the collected data as it is not only the apt technique for studying the behavioral aspects but also is very much relevant when the objective is to find out something latent and the set of data from observed variables shows a systematic interdependence. Infact this test seeks the resolution of a large set of measured variables with relatively less number of factors. (Kothari, 2003)
In this case as the impact of the attitude is to be studied with company’s operation, a personal visit to the company premises is also arranged for understanding their measures on the basis of response from the conducted survey. This personal interview infact enabled an in-depth questioning of the company personnel in understanding of the behavioral impact of the end user in the company’s outlook towards business in terms of advertising, production, distribution, pricing, servicing etc. Thus those operational aspects that otherwise were based solely on the theories were clarified by visiting the production plant. The supervisor of the production unit provided the qualitative information about how the assembly lines were designed to meet the demand for customized mass production in UK. The changing attitudinal pattern from the end user directly hits the production floor as even the yester year’s luxury cars are being designed in the affordable way for the current day’s cost sensitive consumer. In fact the previous key word called ‘innovation’ has been replaced by the recurring term ‘cost effectiveness’.
(The analysis is based on the research survey undertaken on a sample size of 100 car users and the data available from Society of Motor Manufacturers and traders Association reports carried out on a regular basis.)
With more than thirty manufacturing companies producing a wide range of vehicles from car, van, truck to specialist niche makers, automotive industry serves as the vital organ for the functioning of the UK economy. The survey conducted by SMMT (2010) has estimated that the industry with its turnover of £ 52 billion adds £ 10 billion to the country’s economy and creates 180,000 and 640,000 job opportunities with direct and indirect employment respectively. The industry with its annual production of one million cars and commercial vehicle along with the global supply network of over hundred markets, has thus established a strong foothold for itself in the market worldwide.
Fig. 7 Source: SMMT (2010)
The above data is the depiction of the annual production figure of cars in UK for a period span of ten years from 1999-2009. The figure clearly depicts how the UK automotive industry has flourished, primarily by exporting its production throughout the world. The export volume of produced cars stands at a substantially higher rate of 78% as compared to the domestic sales volume of 22% from the total production pool. Infact even when checked individually it has been founded that companies like Toyota and Jaguar exported around 85% and 80%of their total production respectively.
Again as confirmed by the NAIGT report, (2010) UK automotive manufacturing segment creates around three million engines annually, most of which happens to be that of small cars and are exported. The results as analyzed from our survey, confirmed this shift in the pattern from large cars to small cars. The respondents candidly voiced their hesitation in spending extra money post global meltdown. Some of the respondents also mentioned their concern for environmental and safety aspects for their decision of choosing smaller engines.
Fig. 8 Source: SMMT (2010)
The company supervisors have expressed their great concern at the sharp fall of new registration in the country. According to them the new registration slope is even steeper for commercial vehicles. The data from SMMT (2010) survey shows how after the financial crisis registration volume dropped by 11% in 2008, which however, has improved over the year to a decent 6% in 2009. Comparative analysis of the ten year long data shows that growing economy improved the general standard of living, thus enabling the consumer in climbing the hierarchy of needs and fulfilling their esteem need of owning a car. The registration volume thus witnesses a growth of more than 10% during favorable economical times. The loss of job and security propagated the propensity of saving the meager income thereby bringing down the figure by 11.3% during economic downfall.
Fig. 9 Source: SMMT (2010)
The effect of financial crisis was so havoc that it drastically affected the buying patterns of not just individual buyer but also the fleet segment, the fact that became clear after reviewing our sample of car users. On comparing the sales volumes in terms of retail and fleet buyer it seems that business segment was hardest hit, which is still in the process of recovering over the year. As business segment is guided by principles of cost minimization and sustaining during difficult times, the revamping of economy is also assessed conservatively. The private user respondents also expressed their change in the attitude of prioritizing a spending event after witnessing and experiencing job loss in the recent financial crisis.
Fig. 10 Source: SMMT (2010)
Further the change in attitude in the end-user does bring in a remarkable difference in the functioning and operational activities of a firm. For instance taking cue from the above data of annual sales on the basis of type of fuel engine used depicts a neat rise for the demand for alternative solution of fuel. The total sales in terms of engine show how the changing attitude of the buyer in adoption of a different technology over the years has been consistently stiff. As per the survey, the respondents were more inclined towards alternate fuel and engine efficiency. The demand for the diesel engine has boosted the production from 2002 onwards which was at par with the demand for petrol engine in 2007. This change in pattern, as confirmed by the production unit supervisor’s confirmed the fact that drift in the attitude of the consumer more towards the efficiency and effectiveness of cost, engine and fuel impacted in production of not just efficient diesel engine but also alternative fuel engine that reduces the emission of harmful pollutants.
Fig. 11 Source: SMMT (2010) – Registration of new motor vehicles each year.
The registration pattern for private vehicle as seen above became the victim of the economic crisis. The impact on its commercial counterpart’s registration volume was even more drastic. As evident from the given chart, the dip due to financial setback has prolonged over the year which dipped even further to touch the bottom with a 35.5% fall.
The research survey undertaken reveals another interesting aspect from the behavioral perspective. Upon visiting the production site, the assembly line consisted mainly of aluminum/silver colored parts; which wasn’t a coincidence but a deliberate response towards customer’s demand for light color cars. The revelation from company site when compared with data of 2009 versus 1999 production, showed how the color preference has changed over the age. Ten years back in 1999, the most preferred car color was red with 25% population using it and silver being the least preferred with only 10% of the cat buying population opting for it. A complete reversal of attitude took place in the course of ten years, for 25% of car users prefer silver or aluminum over the yester years red, which now appeals only 12% of the total population using cars.
Fig. 12 Source: SMMT (2010)
Additionally, colors are also used a source of identidying a brand that has been used in marketing from ancient times. The customer preference for colors tends to depicts their attitude towards life and thus reveals their lifestyle. For instance, ten years back the red color was associated with courage and intense passion and the consumer wanted to reflect the same through their vibrant selection of the wheels and flaunt the same on road. Again it used to fulfill the actualised need of driving a powerful machine, the concept further attested by the color, hence the demand for red and blue was more than any other color. For they were considered more macho. Ten years down the line aluminium or silver started ruling the roost , revealing a significant maturity amongst the buying population.
Fig. 13 Source: SMMT (2010)
UK automobile industry has always complied with the set rules and regulations established by the norms under Kyoto Protocol. In regards to its commitment towards the protocol the production units in UK auto sector have taken the initiative in production of clean, low carbon emitting engines and fuels. When inquired about their measures about carbon emission in the production unit, they confirmed the company’s active participation in emission trading. From the above two charts it therefore becomes evident that improving efficiencies of the production units have also substantially decreased the energy consumption pattern in the plants. Again the carbon-dioxide emission from the production units is put at check and thus ensuring the idea of strengthening the ecological balance.
Glancing the below graph shows how the production for cars with innovated designs has bought down the emission of fuel to a substantially low degree. The going green approach on the part of the consumer expressing the need for environment friendly, fuel efficient engine has been a key driver in propelling this production and bringing down the graph in the year 2009 to bare minimum. More than 70% of the respondents have in fact mentioned how they have rejected any car model if it did not meet the CO2 emission criteria; they are keener towards the use of hybrid and other fuel efficient engine that would also ensure safety.
Fig. 14 Source: SMMT (2010)
Thus, the drive of designing environment friendly and fuel efficient engines by the company have made the consumers respond positively, which resulted in rising number of registration for vehicles on the basis of their fuel type viz. petrol and electric based hybrid car engines. The graph clearly depicts how the growing price of gasoline has impacted in the demand stats for petrol/gas car pushing it to the bottom with new registration taking place only in unit digit in 2007.
Fig. 15 Source: SMMT (2010)
Automobiles ever since its genesis has aspired to provide the safest mode of transport. This very aspect seems to have fulfilled with the introduction of sleeker and efficient models that have remarkably reduced the accident rates thereby ensuring safety.
Fig. 16 Source: SMMT (2010)
The road safety thus emerges as another prime area that holds priority amongst the consumers of UK automotive industry. The survey expressed the concern from the respondents at the rising rate of accidents, thereby seeking a safe car. Further the data from the country’s casualty report depicts the fact that road accidents emerged as the main cause for most of the fatal injuries in the age group of 45 years and below. Such on road injuries and fatalities has bought a change in the behavioral pattern of the consumers while buying car, for safety feature topped their list of basic requirement. The above data substantiates the fact that taking cue from the attitudinal change of the end consumers the production was alignment mode towards the production of safe vehicles, thereby reducing the rate of on road causalities over the period of five years.
The industry further is expected to play a prime role in designing of vehicles that have all the enhanced features of safety through an integrated approach by involving both road users and public authorities for reduction of casualties.
Customer as an entity
Since times immemorial, the principles of trade and commerce were always revolving round the various aspects of a customer, who in turn helps in deriving the value for an organization. Any business entity will cease its existence in absence of the end user – the customer. Customer thus, has always been an integral part of the business entity, which in both direct and indirect manner helps in driving the innovative, developmental and other functional aspects of the organization. However, the mere presence of them is not sufficient in running a business as long as there is no participation from their end in terms of pushing the business cycle. A marketer appreciates this relationship and thus tries to extract the maximum value from it for sustaining the growth and development of his firm. Moreover the limited scope of choice and knowledge confined the horizon of the consumer for extensive survey and thus accept whatever was offered to them. Globalization and advancement in technology has in fact given wings to the always inquisitive customer in easy exploration of all the required information with the quick accessibility and availability of resources at his doorstep. Information search in the post globalization times thus is just a click away with various online sources like community portals, discussion forums, search engine, blogs, networking sites etc providing the vast sea of informative data. So much so a customer now has the leverage to carry out a comparative study of all the available resources while evaluating his pre purchase options and then settle for the option the provides the best value to his price.
Customer in the modern age thus is no longer at the mercy of the marketers in accepting every odd offer. The vast array of the available choices has infact increased his bargaining power for bidding for the best suited option. The increase in transparency in the functioning of markets has enabled them in exercising their bargaining power in a way of becoming demanding and seeking novelty at every other purchase. Thus changing the marketing arena to such an extent that the marketer has to work real hard even while retaining its existing customer base. For an automotive company infact, the major portion of their revenue is obtained from the consumer sales volumes, thereby making it even more important in maintaining the customer base.
Companies therefore are on the constant drive of innovation and diversification to maintain their pace with the evolving time. For the modern consumer is not only demanding in terms of enhanced features and attributes but is on a constant comparison of the services offered by the sponsoring brand’s competitors through the web research. So much so that in order to survive in the competitive age it is becoming increasingly critical for any marketer to position itself in such a way that it continues to maintain it’s a unique competitive advantage thereby securing its place in the final choice set of its customers.
The techniques of mass customization, customer support and relationship management are some such ways that has come into the picture for ensuring satisfaction to the existing base of customers on the post purchase basis. It has infact emerged as an important aspect that a dissatisfied customer not only leaves the company at his own accord but also prevents other prospective buyer in establishing their relationship with the company by their negative campaigning through word of mouth and online discussion forums, such that the bad word spread by various means will end up drastically affecting the business. Thus to maintain a favorable attitude from the existing customer and to further attract new customers the company needs to keep aligning its production as per the need and then position all its products in that way that can hit the evoke set of the consumers.
Another interesting finding from the studies is that the modern customer has become very cost sensitive after the global meltdown. Though he is not willing to compromise on the quality or other such attributes of a product, he does hesitate in paying a slight premium for the ad hoc and enhanced services. This has infact exerted a great pressure on the firms in delivering the quality product while at the same time keeping up with the effort of ensuring customer satisfaction. In a cost intensive company like automobile manufacturing the impact from the consumer’s attitude is even more, for major chunk of its sales revenue is driven by consumer sales.
Car, since ancient times is attached with the social status of the user, such that present day user is also essentially governed by some such principles while deciding its purchase; hence the user demands innovation and customization. So that taking the charge of a powerful combustible engine radiates the power and social esteem of an individual. Since vehicle has always formed a part of the esteem need of an individual mindset, he tends to seek more such attributes that can be perceived by the society as being luxury, expensive, strong and powerful.
Consumer purchase and operation correlation
The attitude of the consumer plays a vital role in impacting his decision towards purchase of a product. Buying behaviour in itself is an intricate process, and when it happens to be for a vehicle it demands even more involvement on the consumer’s part. For an average consumer buying of a car is like an investment that also entails additional risks factors. The companies thus have also started financing the purchases through arranging of easy loans through a third party so that the buyer is provided with all the solutions under one roof, along with easing him from the unnecessary pain and hassle while arranging for self financing. Other attractive packages with add on benefits like discounted offers, warranty, money back schemes etc are being offered to lure in not just the existing base of consumers’ but also in attracting a fresh and a new group customers. Thus, the companies have succeeded in extending the functionality of its existing manufacturing unit with another aspect of personalized servicing.
Further when too many choices are there at the disposal of the buyer, tends to make their life difficult by the need retaining every single attribute as propagated in every available product line of a company while making the final decision. To ensure that the image of a particular company is implanted in the consumer’s mind the marketer needs not only proper positioning of their product and services but also to highlight their features through repeated and effective advertising techniques. A right and repetitive approach of promotion tends to positively impact the buyer by helping him retain the sponsored brand’s features and thus make it a part of his choice set for future perusal. In such respect, the multi-channel approaches through web strategies also needs to be considered while taking the medium of online sales as a potential market in the coming future.
More so when the modern day consumer is so very internet and technology savvy it is easier to directly market with them by posting company related updates or any new launches through the virtual world of networking sites, discussion forums, blogs or other community portals. The auto company thus, constantly needs to keep in mind the continuously evolving and changing attitude of the customer towards fuel efficient and alternative fuel vehicles as a response to current environmental developments. The tracking of online communities helps a marketer in proactively responding to a customer’s need as the discussion in the peer group also acts as an influencing agent in the decision making process for certain future purchases.
Strength of company versus consumer attitude
As discussed in the theories the attitude of a customer can be influenced by a strong strategic positioning approach undertaken by the firm. The UK auto industry enjoys a strong global presence with business catering to premium and luxury segment of cars. The industry positioning infact provides a required positive thrust to its consumers in behaving favorably towards the company at large. The scope of the industry in terms of R&D and production of annual volumes, which serves as a backbone for the country’s economy establishes the strength of the industry. Such facts and figures thus impacts a consumer in a way that they feel that attaching with such strong entity will improve their esteem in the society.
Again, the strategies of repositioning and extension by upgrading or downgrading of a brand does tend to impact the customer to believe in its sustainability and ability to diversify thereby delivering products meeting the specificity of the user. Further when a company is onto a varied line of business it is assumed that any innovative drive undertaken by such companies will be cost effective, thereby providing the customized service to the end users without pinching their pockets.
The ultimate factors in deciding for the final choice of the vehicle is based not just on the factors of reliability, safety, price and fuel economy that are provided by almost every other automotive provider. It is with the provisions of other added features like additional warranty coverage and servicing facilities that impacts the buyer greatly. Further the modern and educated consumer is no longer interested or believes in the publicity stunts when the question is of buying a car, in such cases it is the strength of the firm that acts as the credibility factor for influencing the decision making process.
The image of a strong brand is perceived in a manner that can also meet the post service needs, hence the customers tends to behave favorably for any product as launched by a strong brand. The element of trust and additional social responsibility factors like responding to advanced technologies, commitments towards Kyoto Protocol etc are also inherent with a strong brand image.
Influences from external and internal sources impacting the consumer
An individual is exposed to a variety of influences as present in his external and internal environment. The cultural factors happen to be one such aspect that brings in a significant difference in the behavioral attributes of the consumer. As the UK auto industry caters to the worldwide consumer segment it is imperative on their part to understand how each community of consumer behaves and reacts. For what is acceptable for one cultural group might be radically against the other’s social and cultural norms. Thus, when an automaker understands how the cultural dynamic plays a vital role in strongly impacting the favorability of a brand and thus driving its sales, they can opt for culture specific model or business for an effective positioning of their products and solutions. Though expensive, the said strategy will not dilute the brand value as its image will be effectively identified from every possible cultural perspective. Thus, reaping the benefits of the money shelled out today, in the long run operation of the firm. (Ellis et al, 2002)
The account of buying a car is never an impulsive behavior thus seeking opinion from the reference group who tend to greatly impact the behavior of the end user. Depending on certain socially influencing parameters some consumers are likely to follow the complete footsteps as shown by the opinion leader. A certain buyer group tends to seek guidance and consultation from their peer group also, so as to ensure there is no event of cognitive dissonance as a result of post purchase behaviour.
For instance, in UK the awareness of social standard is significantly greater; therefore any buyer will first evaluate their social esteem and standard that is be arrived at as the post purchase effect. So much so, a major portion of the population shows the inclination towards luxury segment of car. Again in certain male dominated cultures the decision of car buying happens to be solely male domain, he being the head of the family, whereas other culture provides room for a joint decision by the spouses for a small family car ( at times such families also consider certain inputs as provided by the younger member of the family). The basic of segmentation and positioning in such cases needs to consider such aspects and attributes as well.
The other aspects of marketing like undifferentiating the consumers in a given market might not be very successful model for a company that caters to worldwide base of customers. Thus on one hand when it is not wise and advisable for such a firm to follow a concentrated model and cater only to a particular segment and leave the rest for its competitors, on the other hand it becomes essentially difficult in ensuring proper segmentation with the presence of numerous variables entities in the market.
Account of company’s absorption of consumer attitude and transformation
Recent studies have revealed that retention of existing customers is a profitable affair than attracting the newer ones. And retention can happen when the services of the sponsoring company yields so much of satisfaction that the probable need to look for a different service provider do not arise at all. Such level of service delivery has two folds effect of both retaining and attracting customers. Assessing the profitability of the said model, the firms have thus started adopting customer centric models that helps in serving the needs in a personalized way. CRM is one such model that meets such criterion of the firm in servicing of the clients.
Having a model at its place does not serve the purpose as long as the any innovation or a unique development of the firm is not being communicated to the mass population. Here communication medium will be futile if the message is not transmitted in an effective manner that is the end consumer fails to effectively to decode and understand the actual meaning that the firm seeks to communicate. Effective communication thus emerges as an indispensable mode for the company in spreading of news and other information related to new product launch, adoption of new technology and practices, taking charge of other social and moral responsibilities etc that will build the brand image and thus help in building the consumer’s faith in establishing a relationship with the firm.
Apart from effective communication a marketer also needs to ensure that automated processes of maintaining the customer database is regularly updated for keeping constant touch with them. The database also needs to be enhanced with periodic revision by addition of new information and deletion of redundant one so as to ease and streamline the process of maintaining relationship. Along with a 24 hour back-hand support the firms now are also providing updated reminders by sending text messages. For instance the servicing date of car is usually reminded by such text; the same has been followed for confirmation of booking and delivery of product, service or any value adding workshops related to car maintenance. Such processes also aid in keeping track of various query or consignments when ordered online.
Any firm including strong brands like BMW needs to keep revisiting their business model and refine their value propositions suiting the current societal norms. For with the continuously evolving trends from environmental, social and cultural standpoints any existing products needs to do the minimal required makeover so as to suit the needs and demands of the current generation. Moreover, the current generation does not hold any reservation for the luxury segment of the car; they are more willing to spend provided the given brand is able to reflect their personal attributes. In this context the color of the vehicle also plays a prominent role, for certain specific colors are believed to reflect certain specific personality traits. For instance the bright and fluorescent colors in vogue today are believed to give the sporty look was never found a single trace in ancient models. Using such colors is supposedly believed to add energy and strength to one’s personality. (Palmer et al, 2009)
Adoption of customer centric models has also enabled the firms in churning out the unnecessary details that complicates the system of management and communication. The process of automation has centralized the customer database thereby easing the process of maintaining and establishing relationship with the customer. Apart from this considering the techno savvy characteristics of the modern day customer, some companies are also launching self service portals which enables the customer in selecting and designing their own car along with keeping track of any service, product or grievances related information. This self service portal is more like an interactive window that is not only user friendly but also considers the inputs provided by the user while developing its future products.
To reap the most from the attitude of the consumer a marketer needs to understand how the customer can be influenced from various parameters and thus make the approach for building an alliance that would be mutually beneficial. Certain areas that needs to be focused for attaining the same is as discussed
Risk and rewards analysis
Human nature is certainly deceptive for one can never correctly predict anyone’s behavior in a given set of environmental conditional. The favorability shown by a group of customer towards a certain product range can never be taken for granted and align the production process fulfilling that need, for the rapid changing nature of the consumer might no longer seek that product and seek for something that is entirely different from the previous one. Even by involving the customer one cannot assure success in the market. The final product might even be rejected at the consumer level, who infact initiated the production process. This impulsive nature of the consumer might make a company to land up in soup if believed in entirety without reservation and survey. This kind of rejections might be on a very whimsical ground like, not meeting their required demand or too expensive for them to afford. Such instances, if occurred will incur a great loss from the operational perspective that will be very difficult to recover with immediate effect.
Another concern is that if an extra conservative approach is taken on the belief that a consumer has a very fickle set of mind that might change in the shortest possible span, thus acting wise from the company’s perspective by waiting for their matured outlook before placing the demand and then implementing the same into operation is not always seem as ‘wise’ in practical sense. Such process of wait and watch though might seem like a successful strategy in the beginning might fail drastically if the competitor grabs the opportunity of the rising demand and extracts the complete advantage by being the first mover in a particular segment identified by the sponsored company.
It has been widely accepted that even adoption of management processes like CRM is not always a success. For there tends to be evidence that around 50% of the method thus adopted results in failure. The appropriate selection of the target consumer group is very essential in such cases as all efforts will be futile if the selected target happens to be a wrong target group.
Thus any approach that is undertaken needs to be properly analyzed against its pros and cons before implementing the same on the production floor. Also a proper scaling of all the positive and negative attributes, while structuring a new operational plan is imperative for a meticulous plan helps not just the operation but also in choosing the correct medium and channels of distribution and promotion.
Careful choosing of the particular aspect of attribute for production line
Once it has been decided to bring about a change in the operational mode and production pattern, the plan should be properly drafted so as to understand which aspect of the attitude is taken under consideration and how to include the same in the production line. A clear roadmap is always beneficial in making such calculated moves in terms of innovative production schemes. Again setting the post production expectation beforehand will act as an indicator of response and the units that can be floated in the market initially. Thereby, assessing the future market with a realistic approach, that would lead towards achievement of the future goals.
Owing to the recent financial meltdown that has impacted the wage earners from all the walks of life by reducing their disposable income, the modern day customer has become essentially cost sensitive. Thus though on one hand he might desire for innovation and up gradation of technology and features for his car, on the other wants the best value for his price without shelling out an extra penny. For catering to the needs of such cost sensitive customer base, the cost intensive industry like automobiles should adopt for CRM technologies, which infact has emerged as the relief call in the times of economic downfall. The role of CRM is not just limited to relationship management but also to provide cost effective solutions by reducing the cycle time cost by use of automated data management and streamlining of the current business model. The use of this technology by maintaining the customer database and enhancing the relationship enables the survival strategy with cost effective efficiency. So much so such strategy can be considered the correct means of servicing and meeting consumer needs during uncertain days of critical economy.
One critical aspect however is that though it is believed that CRM can provide all the plausible solution for development of customer centric models, it has been observed that providing of personalized services to each and every customer individually becomes too taxing on the part of the sponsored company. Such instance of individual services if continued perennially tends to build such a pressure that the model ends up establishing a relation with a wrong target. Such wasted efforts are then likely to disappoint the existing customers rather than delighting them with the customized service solutions. The mode of interaction thus needs to be chosen with utmost care as in the age of stiff competition that one that places itself better can be decided a winner.
Further with too many ads promoting the benefits and other vital aspects of the firm are ending up in confusing the end user. For with too much of information at one go tends to bypass the mental faculties without any scope of registering and thus extracting the appropriate meaning and develop the proper understanding. This is also due to the highly competitive environment wherein each firm tries to override the other by being the first mover in providing the information, solution or delivering a product.
Making the right selection
Selection of the right target group is very important while designing a model so as to influence a consumer’s attitude. This targeted group should not only be responsive towards any factorial change but should also possess knowledge about a particular sector, which should include not only the product knowledge but also the creativity aspect. A target group thus selected can help in sample testing of a new product launch by the sponsored company.
The aspects of successful strategy
In order to succeed and lead in a particular segment, a company can follow certain specific approach. An automotive firm whose competitive advantage usually lies in its operational excellence needs to maintain and work upon its efficiency so as to provide customer reliable services at a much lower cost. When all the production and operational plants are efficiently running in tandem, the less turnaround time required on the process floor ensures fast and timely delivery that also save cost. Such firms tend to opt for mass production through assembly line thus focusing on standardization with lower cost, thereby meeting the needs of the cost sensitive section with a ‘true value car’.
All automotive firms cannot opt for cost intensive operating excellence for all its existing segments. Quality is something that cannot be compromised in an automotive industry, such that ensuring service excellence will act as another deciding factor for a firm’s success. A strong and established brand can establish its presence in a low cost segment also with introduction of a cheap car suiting needs of a low income group customer. Thus ensuring customization and personalized service acts as another decisive factor in drafting the success story of a brand
The technology being one of the drivers for sustaining in a competitive market ensures innovation at every stage of development thus maintains the strong foothold in the market. This section of automakers will tend to be expensive with its constant drive for innovation and refinement of existing business model, thereby keeping it ahead in the age of constantly rising demand, rapidly changing norms and advancing technology.
In order to remain competitive, the firm apart from adoption of the abovementioned techniques can also use the age old strategy of repositioning as a means of regaining the lost attraction. Once the automaker has identified that the current positioning of the brand is not driving the value onto the choice set of its customers, he might attempt in rearranging its value proposition so as to regain the declining power in effecting sales. This process however, is very difficult to achieve as it requires playing the role of changing the mindset of a customer with respect to an already existing brand. For once a value for a particular brand is perceived in the mind of its end user it is utterly difficult to replace the same with a fresh one.
Negatives of sensitive strategy when loosely handled
Downside of this approach lies in the fact that while trying to reposition, a brand might end up confusing the customer with the newly introduced changes and the fresh set of values, thereby incurring loss with dilution of brand value and confused positioning. Sometimes such confusion with repeated changing of a brand’s positioning leads the consumers in doubting its credibility. The firm in such cases runs the risk of doubtful positioning that would simply shatter the brand image.
Effective scaling of consumers attitude
The approach of multidimensional scaling can also be undertaken in identification of consumers’ attitude and their perceptions. This can be achieved in a twofold way of testing the users rating with a brand having a similar set of values and attributes and by adoption of the process of identification of their dimension of interest with respect to features and functional aspects of the best car as per their perception. Understanding the same is likely to help the automakers is targeting the right user group that exactly matches their need, thereby creating a win-win situation.
Throughout the process we have seen how the interplay of various factors manipulates the decision making and finally the buying process of the end user. In this context when it is understood that a customer will consider the purchase of a car only when he is able to recognize that he is facing problem. In the absence of the same the need of possession do not arise. This area of generating the problem is that sensitive that when tickled in the right direction will work in a favorable manner for the industry. For instance if the car model used by the user happens to be of dated version, influencing him for buying the updated version can only happen when the promotion of the new version shows a relative comparative benefit of one over the other. Such ads acts like a source of enlightenment and the user suddenly becomes aware of the problem that even he faces almost on regular basis, thus when the ad triggers at the problem area, the user begins with his search for resolving the same.
Further as the scope of an auto industry is not just limited to manufacturing of new car models, it can also influence a user with its other segments of services like its market for replacement of various automotive parts. Low income groups, cost sensitive user may not like the idea of straight away going for a brand new model and completely doing away with his existing car when the problem (is very minor, according to him) is just of speed or clean fuel. For such user group replacement market appears as the best option for they believe that best value is derived thus. This segment of market is not cost intensive as it is not based on any innovation, any design as demanded by its customer is simply copied from the existing brands.
As the low and middle income level consumer groups are likely to be guided by the aspect of perceived risk, it becomes imperative for the automaker in assuring that their position is hedged by schemes of money back, warranty, financing aids etc. In such cases the faith is reassured by the constructive steps and helps in attracting new prospective customers.
An interesting aspect which when followed in the marketing environment usually yields successful result is the aspect of classical conditioning model as introduced by Pavlov. An automaker can very well reap the benefit by adopting this technique of associating his brand with a series of events like driving a strong engine like Aston Martin and identifying with James Bond, his grace, intelligence and influence upon women which together heightens the social esteem and thus position and status in the society thereby satisfying the aspect of self actualization.
Means of retaining loyalty
Having said so, the automakers are also in the process of integrating the retail process with the integrated lead process in the form of manufacturer-dealer partnership for satisfying the ever demanding and sophisticated group of consumers, thereby gaining their loyalty.
Further by improving the after sales services a company tends to register its name in the consumers cognitive faculty, which will bring him back to the same service provider for receiving the same services. This aspect of consumer’s attitude is essentially governed by the operant conditioning technique, which when followed diligently can help an automotive firm in maintaining its foothold in the market.
One notable aspect of this technique is that it tends to function in the similar vein both in the case of positive and negative experience. Thus any case of dissatisfaction with the user will never bring him turn him towards that service centre for he strongly believes that experience will be repeated. So much so a marketer needs to ensure that his services are not limited with the only motive of minting fast money. For when such short term goals are undertaken, the long term benefit and future market share is completely lost. Thus for effective and efficient functioning of a company’s operation model, the prime churner of revenue viz. its customers are to be treated with sincere services and thereby enjoy the fruits of his lifelong favorability in terms of loyalty and attitude.
Since the times of commencement of business, the customer has been the focal point around who revolves the developmental and operational strategies. Buyers and sellers are in effect the two major and essential entities that drives not just a market place but also an economy. As a matter of fact, it is the consumer who with his role of influencing the purchasing cycle, happens to be the prime source of revenue generation for a firm. The very fact has always been appreciated by the marketers and has worked towards meeting the needs and demands of his esteemed customer. With the changing times, realizing its innate value for the existence of an organization the consumer has become constantly demanding. The customer today not only voices his needs and demands but seeks premium customized services without shelling out an extra shilling, in order to render support in the smooth functioning of an organization.
The change in economic scenario post the global meltdown has put a downward pressure on the companies in terms of taking up cost intensive plans. Thus, with an ever demanding and cost sensitive customer on one hand and pressure from limited financing on the other has made the cost intensive industries like automobile industry to seek for alternative solution of retaining their customer base with cost effective strategies. Maintaining a positive attitude of the customer has become indispensable in retaining the business. Moreover, as been proved by various studies, the cost incurred in attracting a new customer base happens to be five times as expensive as in retaining the existing consumer base. Appreciating the gravity of the matter the markets are approaching towards more customer centric models that ensure customer satisfaction even as a post purchase event.
Organizations thus have started adopting the CRM models that enables in providing cost effective customer service solution by means of automated centralized databases and streamlining of business processes. Any company that is not adopting the mode of customer centric approach are losing in the long run, as the customer tends to associate themselves with a brand only on the basis of specialized services that is offered to them. Is he is left dissatisfied then, then the company not just loses the existing prospect but also loses on the future ground as the bad word of mouth negatively impacts the brand image in the market.
Further, it has also been observed how repeat customer improves the business prospects. The study of customer’s attitude upon a firm’s operation revealed how every step of consumer decision making is observed by the sponsored company. And how, by understanding the behavioral pattern of a consumer a company tens to position itself and its products in the market, thereby driving sales. Apart from it another important aspect that emerged from the study is that the attitude once formed is hard to change but can be influenced with persistent pressure.
To reap from the benefits of the consumers’ attitude an organization needs to make certain fundamental changes that help him in the long run. So much so for a process, product or a solution to be successful it needs to measure its relevance in terms of the needs of the consumer and how it can be positioned in the hierarchy of consumer needs as per Maslow.
The scope of the paper was an attempt to understand the intricacies of process involved in customer buying behavior and how the attitude of the consumer impacts the production and operational functionality of an organization. As the study was undertaken for an automobile industry it was interesting to note how the social perspective drives a consumer is opting for a luxury car that is expected to reflect his personality. Various concepts and theories were studied and analyzed in the process of understanding the interplay between the functional dynamics of a firm and behavioral dynamics of an individual.
The research survey and the analysis undertaken have finally revealed how the behavior of the consumer is impacted from various internal external sources. The understanding the interplay helps in devising the business plan for the marketer. The survey also helped in developing an understanding of the consumer’s behavior and thus aided the process of designing models ensuring its success. The survey also helped in finding out the strategies that a firm can essentially follow to gain a competitive edge and win the loyalty of the customers. The study has thus reveals the techniques which when used by the firm can help them in devising better ways of doing and sustaining business even during the days of financial upheaval. The report so much so was not just a study of the impact of consumer behavior on an existing business but also an attempt in understanding the scope of a business in unleashing its inherent skills.