Changing Value Perception

Pradeep Saxena, Sr Vice President, TNS Automotive

The automotive industry has been one of the key drivers of the resurgent Indian economy. It had seen a phenomenal growth from 2004 till recently with occasional blips. The constantly growing incomes and the widespread availability of finance in urban areas had made car buying easy for the consumers. As a result the Indian automobile industry became arguably one of the fastest growing industries in the world.

 
However the increasing NPAs of the banks leading to credit squeeze, coupled with high inflation rate, rising fuel prices followed by the global meltdown had to have its impact on the industry. It resulted in a negative buying sentiment in the second half of 2008. It is a sign of the growing maturity of the industry that even during such a tough time the car manufacturers stayed focused on customer expectations and kept delivering the best of products and services to the consumers.

According to the Four Wheeler Total Customer Satisfaction Study (2008) conducted by TNS Automotive a division of TNS Global, car buyers expressed a high level of satisfaction with the cars owned by them. More so, the ever growing diesel cars (across segments) were providing a high degree of satisfaction to their buyers, which is a far cry from the popular perception that the diesel cars may be cheaper to run but are poor in providing overall satisfaction to their owners. This is a testament to the continuous improvements made by the manufacturers in the diesel cars.

Starting with the smallest cars, the small petrol car segment seemed to have reached a level of saturation in terms of satisfaction. The entry compact segment actually experienced a marginal decline in the overall satisfaction over 2007. It is practically impossible to grow from this level with the current technology and design, but the industry can still focus on improving the service processes. Apart from expecting, quality service with respect to fixing problem the first time, entry compact users also expected the companies to rationalize the cost of service along with having a re-look at the parts that were covered under warranty.

The premium end of compact cars maintained its overall satisfaction level similar to 2007. Over the years, manufacturers have been able to offer products that have been of international quality. A few years back there was Swift followed by Aveo UVA and in 2008 there was Hyundai i10. As the designs have improved, so have the customer expectations. For example, clear visibility of the rear of the car while reversing emerged as a feature, which could become a differentiator for the model that incorporates it first. Ease of operation of controls was also a driver of satisfaction in this segment. On both of these features, the customers were not happy and expected the industry to take corrective actions. Mileage related problems, door lock issues and seat related problems were among the top three problems reported by the segment in 2008.

The industry had made steady progress in terms of designing good quality small diesel cars by virtue of improved diesel engines. Swift diesel is a good example of this trend wherein Maruti installed a good quality diesel engine in an already acceptable design. Similar is the case with Getz diesel. The results were quite visible in terms of improvement in customer satisfaction. Among all the aspects, which affect customer satisfaction - product performance and design along with quality led in scores. At the same time, diesel car users wanted lower engine noise - the bane of all diesel engines. They also wanted a good performance of engine when the AC is on. Braking ability seems to be another area of concern as brake related issues were among the top three quality problems. Though the industry has taken steps to ensure a good delivery on performance and design aspects, the problems reported per vehicle were the highest in this segment. The diesel buyers seemed to be value seekers. They expected a 'good deal' as a hygiene requirement. Its presence may not have increased their satisfaction but its absence caused dissatisfaction. In contrast, the small petrol car buyers also expected a good deal and felt very happy on getting it but its absence did not cause them so much distress as it caused the diesel buyers.

Midsize Diesel car segment also showed an improvement in satisfaction. As is well known, D'Zire continues to ride a wave of success even during poor market conditions. Ford Fiesta and Verna showed an improvement over the previous year and no model witnessed a significant drop. Overall the diesel segment was rocking.

For value seeking Indians, the entry-level sedans are proving to be a boon. Their prices start at the higher end of hatchbacks and therefore a three-box car has come within the reach of Indian middle class. Accordingly, the entry midsize segment witnessed significant increase in overall satisfaction. Since they are upgraders from a small car, they expect a higher order of delivery as well. Among the various facets of satisfaction, after-sales appeared to be an area of pain for them. For example, they expected the service staff to attend to them promptly - and this was a critical driver of satisfaction. A clear delighter for these customers was the empathy displayed by a service advisor while listening to their issues. Comfort while being seated inside the car was expected as a hygiene delivery by them but they were not happy with the current performance of the industry on this parameter.

The higher end of midsize sedans managed to hold on despite rising customer expectations. Similar to the entry midsize segment, after-sales service experience was an issue here also. The owners of midsize sedans were not satisfied with the quality of repairs. They also expected the problems to be fixed first time itself. On the product front, they were concerned about styling particularly the shape of taillights. Considering that they had bought a high-end sedan they expected a certain level of seating comfort but surprisingly even here the industry was not able to deliver on their expectations.

There was a clear improvement in satisfaction levels of premium midsize, entry luxury and the Premium SUV segment owners. These segments can boast of some of the latest international car models such as Honda Civic, Toyota Altis, the new Honda Accord, new Toyota Camry and Chevrolet Captiva. Clearly the customers of all these segments were feeling elated with this treatment.

The performance of entry luxury segment showed considerable improvement across all aspects of ownership. With the advent of latest international models, the car owners in this segment rated their cars' design and performance far better as compared to the industry average. However, on the quality front, noise and vibration related complaints were irritants to these customers. On the design front, they wanted the manufacturers to focus on improving the performance of brakes and also pay attention to the stereo systems. Since they don't personally bring the cars for service they demanded an explanation of the work done and the charges levied.

Among the various facets of ownership experience, the cost of ownership remains a critical driver of satisfaction over the years. As expected, high mileage remained an important need of car owners. It could only be expected with oil prices touching US$ 140 per barrel during 2008. Resulting inflation made the 'expenses on routine maintenance' go up in importance. High re-sale value was a delighter for consumers and a brand demonstrating high performance on this count could command competitive differentiation from other brands. Overall, the industry improved its performance over 2007 despite rising fuel prices.

While car owners in general were quite satisfied with the services they received at the dealerships, the manufacturers still needed to demonstrate more consistency in the implementation of their service processes. Despite growth in technology and improvement in tools, the customers didn't feel that their problems were getting fixed first time itself. It remained an area of improvement and a big driver of service satisfaction. The root cause lay in the high turnover of trained personnel at the dealerships and lack of training facilities in replenishing them.

While buying cars consumers expected the sales consultants to behave as advisors and therefore expected them to have complete knowledge of their products as well as competitive products. An improvement in performance in this area could improve satisfaction with sales process. In times of high interest rates and low availability of finance, consumers expected the dealers to be more transparent while explaining finance related matters.

Between the two aspects of product design and quality, the product design was given a marginally higher importance. Considering that India witnesses year long summer in most parts of the country, AC is used in cars quite regularly. Accordingly, a good performance of engine while AC is on was desired. This assumed significance because even the compact car owners demanded better ride quality from their cars. A few years back, good initial product quality and high vehicle dependability were delighters for the car buyers. They were not even expecting these. If a model delivered these, the result was a high level of satisfaction. In 2008 these became pure hygiene and were expected as a matter of right. It became possible due to improved design and quality of all models over the years.

Another interesting phenomenon was the increasing importance of a company's image in the customers' consideration. The study showed that a large proportion of customers wanted the manufacturers to be model corporate citizens. They also expected that all the key stakeholders in the organizations lived up to their claim of delivering quality service to customers.

With the booming economy, and lowering of excise duty the ownership of a car became relatively easy over the past two years. Whereas the average car prices remained almost stagnant, the incomes rose. As a result people needed fewer months of earnings to buy a car. In 2008 they needed 11.8 months of income as compared to 13.6 months in 2006 to buy a car. In contrast the maintenance costs of cars had gone up. In 2008, the proportion of repair costs in the total cost of ownership was to the tune of 14.3%, while fuel costs accounted for 68%.

While talking about upgradation to different vehicle segments, proportion of people switching from used cars to the entry compact segment has been declining over the years. In 2008, this number stood at a mere 2.8%. However, more and more two wheeler users were coming into this fold with their proportion standing at 62%. Another phenomenon that is being observed is the reduction in the proportion of people who upgrade from public transport to cars. In 2008, this proportion was down to 20% from 30% in 2005.

An important change in consumer behaviour that emerged from this study was about the segment-switching pattern. While data from 2002 and 2005 studies showed that consumers were upgrading one segment at a time e.g. moving from entry compact to premium compact, a look at the 2008 data showed a different pattern.

A high proportion of the users of premium compact segment (18.8%) tend to move directly into the regular midsize segment, thereby bypassing the traditional entry midsize sedans. This may be due to the fact that premium compact segment cars such as Hyundai i10 are rather closely priced with respect to the entry level sedans such as Indigo and Logan. Therefore, such buyers don't see any advancement in moving to low-priced sedans. Similarly, a large chunk of upper premium compact users (26%) move straight into the premium midsize category. Diesel small car owners tend to move into the SUV/MPV segment (38%). At the same time, the diesel midsize car owners tend to move within the segment, (43%). They just move from one brand to another - rather than switching to some other segment. This perhaps is due to a lack of diesel variants in the popular entry luxury brands such as Honda Accord and Toyota Camry.