Chances and Restrictions of Measuring Consumer Behavior in the Automotive Industry

Table of Contents

1 Introduction

2 Basics of Consumer Behavior
2.1 What is Consumer Behavior?
2.1.1 Market Segmentation
2.1.2 Psychographics
2.2 The Analysis of Consumer Behavior
2.3 Meaning in the Automotive Industry

3 Measuring Consumer Behavior
3.1 How to obtain primary Consumer Behavior Information
3.2 Chances and Restrictions of Measuring Consumer Behavior
3.2.1 Chances
3.2.2 Restrictions

4 Practical Approach for the Automotive Industry
4.1 Chances and Restriction of Measuring Consumer Behavior
4.2 Harnessing the Power of the Internet
4.3 Case: New Intelligence on the Automotive Shopping Behaviors of Vehicle Buyers

5 Conclusion

List of cited literature

1 Introduction

Understanding consumer behavior is critical for any marketer. Consumer Behavior is especially important in regard to environmental products and services. A wide range of academic disciplines including economics, psychology and sociology makes it clear that there are many different motivations and influences that drive consumer behavior. Consumer behavior is dependent on few factors that need to be considered in any industry. In the automotive industry, there are several factors known.

The Internet as one knows well has its importance in nearly every form of trade. Trade is directly dependent on communication and these days the Internet is considered to be the most important and reliable means of communication for trade.

This assignment deals with the main topic consumer behavior and concentrates on the aspects chances and restrictions of measuring consumer behavior.

The work starts with basics of consumer behavior and answer the question ‘‘what is consumer behavior’’. Afterwards it follows an analysis with different types of consumer-roles and the meaning in the automotive industry. The third chapter is about measuring consumer behavior, methods of measuring and how companies can obtain primary consumer behavior information. The work deals with the topic of chances and restriction and transfers into the practical approach and reflection of the topic.

2 Basics of Consumer Behavior

2.1 What is Consumer Behavior?

Consumer behavior can be defined as the behavior that consumers display in searching for purchasing, using, evaluating and disposing of products, services and ideas which they expect will satisfy their needs. The study of consumer behavior is the study of how individuals make decisions to spend their available resources (which can be money, time or effort) on consumption-related items. It includes the study of what, why, how, when, where and how often consumers buy something.^[1]

Only in this way an organization will be able to influence and predict reasons for purchase. If management can understand these customer responses better than its competitors, then it is a potentially significant source of competitive advantage. The days when an organization could just produce a product and service in the hope that it might sell are rapidly disappearing. It is increasingly important for organizations to clearly understand the benefits wanted by customers as well as the reasons for purchase and with some goods, repurchase on a regular basis, both in home and international markets.^[2]

Consumer behavior is influenced by internal and external factors. The internal factors, which influence buying behavior are: demographics, psychographics (lifestyle), personality, motivation, knowledge, attitudes, beliefs and feelings. On the other side the external influences are: culture, locality, family, royalty, ethnicity, social class, reference groups, lifestyle and market mix factors.^[3]

2.1.1 Market Segmentation

A market is simply a group of users with similar needs. It follows from this that a market consists of subgroups or segments, containing users with slightly different needs to those of other segments. Market segmentation is therefore the process of identifying different groups of users within a market who could possibly be targeted with separate products or marketing programmes.^[4]

For example consider car and SUV buyers. When Ford was planning a gas-electric hybrid version of its Escape SUV, it identified market segments by gender, environmental consciousness, technology orientation and rough-road driving. More women than men were buying the regular gas Escape SUV – and many were first-time SUV buyers – yet there was also a sizeable segment of men, both “greenies and geeks”^[5], who were interested in powerful, spacious, all-wheel-drive hybrid vehicles. Digging deeper, the company learned that consumers in this segment were more affluent, better educated, older and watched less TV than the segment of non-hybrid Escape owners. Segmenting the market and understanding consumers’ needs helped Ford to design the new hybrid SUV and to create communications to reach the specific segment for that vehicle.^[6]

In general, consumer research helps marketers to develop product-specific plans as well as broader strategies for market segmentation, targeting and positioning. Research also supports more informed decisions about product, promotion (marketing communications), price and place (distribution). Here are some key-questions in order to develop a customer-oriented strategy:

- How is the market segmented?
- How profitable is each segment?
- What are the characteristics on consumers in each segment?
- Are customers satisfied with existing offerings?^[7]

2.1.2 Psychographics

Psychographics is an operational technique to measure lifestyles. It provides quantitative measures and can be used with the large samples needed of market segments. Psychographics measures are more comprehensive than demographic, behavioral and socioeconomic measures. Demographics identify who buys products, whereas psychographics focuses on why they buy.

The term psychographics is often used interchangeably with AIO measures. AIO measures describe the activities, interests and opinions of consumers. AIO components are defined as:

- Activity: although these acts are usually observable, the reasons for the actions are seldom subject to direct measurement
- Interest: the degree of excitement that accompanies both special and continuing attention to an object, event or topic
- Opinion: means a spoken or written answer that a person gives in response to a question. It describes interpretation, expectation and evaluation. Such as beliefs about other people’s intention or anticipation concerning future events^[8]

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AIO Categories of Lifestyle studies^[9]

2.2 The Analysis of Consumer Behavior

With many products it is or it seems to be easy to determine the customer. In general men choose to buy their tobacco and women choose to buy their tights on their own. Whereas with other products it is more complicated. At the decision making process there are more than one person involved. It is distinguished between five different roles, which are separate persons within the buying process, where more than one person participate in.

- Initiator: the person, who suggest first to buy a certain product or to use a certain piece of service
- Lobbyist: a person, whose views and suggestions influence the buying process
- Decision maker: the person, who finally decides on if, what, how and where something will be bought
- Buyer: the person, who actually buys the product
- Consumer: a person or group, who finally use the product

In the automotive industry there are all different types of consumer roles. So there is an initiator, who strikes on the idea and want to purchase a new car. Afterwards within the purchase decision process there are lobbyists again and again who would like to influence their opinion to the decision making process. For example it is often mentioned in literature that children often are indirect decision maker. This will be made clear in the following example: Inside of the flyleaf of the ‘’Sports Illustrated for Kids’’ magazine, which target group are children in the age of 8-14, has been shown an advertisement for the Chevy Venture Minivan of General Motors. This has been General Motor’s first attempt to reach to so called back-seat driver. The brand manager has placed their vehicle in shopping malls and has shown in the car a preview of Walt Disney’s new movie for children. These days children often give the last influence if adults are not sure about the purchase.^[10]

2.3 Meaning in the Automotive Industry

Consumer behavior research provides critical insights that can help automotive companies build more effective marketing programmes, lead management systems and web strategies. The right customer data can make automotive marketing more relevant to both consumers and events, while targeting can be more accurate and cost effective. But the question is what is right customer data and most importantly, how to you use that data? Companies must understand exactly what customers are looking for, how they shop for vehicles, what leads them to buy and how to maintain their loyalty. And the automotive companies must also understand how buying behavior changes based on factors such as demographics and ecological aspects.^[11]

Furthermore the current financial crisis is very important and has a huge influence on the sales figures of new vehicles worldwide. Due to the financial crisis the main part of population lose buying power. And in this situation many vehicle buyers do not think twice about whether they will buy or finance or even lease a car. In practice more and more people cannot afford to buy a car at a time, so they are forced to finance it.^[12]

Moreover, the automotive industry has to grapple with high gas prices, which have a huge influence on the buying behavior. That means that customer ask for fuel-saving cars and more economical cars. Consumer search activity for fuel-saving cars has a direct relation with gas prices. And if car manufacturer recognize this trend and this changing in consumer behavior, it is possible to gain a competitive advantage.^[13] The automotive industry have identified finding alternative fuel source as the number one trend facing the industry and are focused on producing low cost cars and hybrid engines to meet consumer demands. Quality and fuel efficiency are the two key factors for consumers in making a purchase in the next five years. Other top consumer criteria are safety and affordability.^[14]

[...]

^[1] cp. Schiffman, L.G. and Kanuk, L.L. (1987), p. 6

^[2] cp. Wright, R. (2006), p. 7

^[3] cp. w/o author (2008), w/o p., accessed on: 18.04.2009

^[4] cp. Croft, M.J. (1994), pp 1-2

^[5] greenies and geeks: Grüne und Streber

^[6] cp. Arnold, L. (2001)

^[7] cp. Hoyer, W.D., Macinnis, D.J. and Dasgupta, P. (2008), pp. 39-41

^[8] cp. Blackwell, R.D., Miniard, P.W. and Engel, J.F. (2001), p. 221

^[9] Adapted from: Blackwell, R.D., Miniard, P.W. and Engel, J.F. (2001), p. 222

^[10] cp. Kotler, P., Keller and Bliemel, F. (2007), p. 280

^[11] cp. Capgemini (2008), p. 1, accessed on: 15.04.2009

^[12] cp. FinancialCrisis.org (2008), w/p, accesses on : 15.04.2009

^[13] cp. Cars.com (2005), w/p, accessed on: 17.04.09

^[14] cp. KBMT12.com (2008), w/p, accessed on 17.04.09