Description
Behavior or behaviour is the range of actions and mannerisms made by organisms, systems, or artificial entities in conjunction with their environment, which includes the other systems or organisms around as well as the physical environment.
Car Purchasing Behaviour in Beijing: An Empirical Investigation
Umeå School of Business and Economics University of Umeå Master Thesis Spring Semester 2008 Supervisor: Agneta Marell Authors: Liu Dongyan Bai Xuan
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ACKNOWLEDGEMENTS
At first beginning, we would like to thank our supervisor Agneta Marell who gave us valuable suggestions and feedback, and guided us throughout our research. Furthermore, thanks all respondents who have participated in this study. At last, thanks our families who support us all the time.
Umea Spring May 2008
Liu Dongyan
Bai Xuan
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ABSTRACT
This study aims to give an overview on young Chinese consumers’ car purchase behaivor. This study is mainly focused on Beijing young people. Both primary and secondary data were gathered during the research. The results show that car purchasing decision is an important decision for most of Chinese consumers. Consumers get information from different channels, car sales staff, Internet, family/friend (word of mouth), car shows etc, but with the rapid development of Internet, a lot of consumers start to use Internet to get car information that Internet has become 2nd wisely used channel to get information in our study. The results of this study tells us that Chinese consumers take “safety” as the most important characteristic and take “value for money” as the second most important and “riding comfort” as the third important characteristic when purchasing a car. “saftey” and “value for money” are considered very importan, which might not be significantly different from western car customers. For “riding comfort”, most of Chinese family have only one car, so they use the car a lot for picking up family members, but in developed countries, it is common that each family has two or three cars, so “riding comfort” might not be considered as much important as in China. Chinese consumers take “after-sale maintenance” and “exterior design/size” as the forth most important factors when making the purchase decision. For “exterior design/size”, it indicates that Chinese people are status-seeking and Chinese people prefer to choose a bigger car with a good appreance (Mian Zi Che) to show their good social status and want to get respects from others. Chinese consumers put the least importance on resale value that is because second hand car market is not well developed in China, so Chinese consumers usually don’t consider the factor of resale value when they purchase cars. Chinese customers put the second least importance on equipment and interior, which explains again Chinese consumers pay more attention on outside rather than inside, i.e, car performance.
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Table of Contents
ACKNOWLEDGEMENTS............................................................................................................................ 2 ABSTRACT.................................................................................................................................................... 1 1. INTRODUCTION ................................................................................................................................. 1 1.1. 1.2. 1.3. 2. BACKGROUND ................................................................................................................................ 1 RESEARCH QUESTIONS .................................................................................................................... 1 RESEARCH PURPOSE........................................................................................................................ 2
SCIENTIFIC IDEAL AND PARADIGM ............................................................................................. 2 2.1. CHOICE OF STUDY ........................................................................................................................... 2 2.2. PERSPECTIVE .................................................................................................................................. 3 2.3. THEORETICAL AND PRACTICAL PRECONCEPTIONS ............................................................................ 3 2.4. SCIENTIFIC APPROACH .................................................................................................................... 4 2.5. RESEARCH APPROACH..................................................................................................................... 4 2.6. THE CREDIBILITY OF RESEARCH FINDINGS ........................................................................................ 5 2.6.1. Reliability .................................................................................................................................. 5 2.6.2. Validity...................................................................................................................................... 5 2.6.3. Generalisability ......................................................................................................................... 6
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RESEARCH METHODOLOGY .......................................................................................................... 7 3.1. 3.2. 3.3. 3.4. 3.5. RESEARCH DESIGN .......................................................................................................................... 7 DATA RESOURCE ............................................................................................................................ 7 QUESTIONNAIRE DESIGN ................................................................................................................. 7 SAMPLING METHODS ...................................................................................................................... 8 PRE-TEST & PERFORMED WORK ...................................................................................................... 9
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THOERITICAL FRAMEWORK ....................................................................................................... 10 4.1. CONSUMER DECISION PROCESS ..................................................................................................... 10 4.2. INTERNET MARKETING AND CONSUMER DECISION PROCESS........................................................... 14 4.3. UNDERSTANDING THE CONSUMER BUYING PROCESS ...................................................................... 17 4.3.1. Kolter’s Model of Buying Behavior .......................................................................................... 17 4.3.2. Classification of Product-related Attributes.............................................................................. 17 4.3.3. Two Basic Mechanisms about Social Process ........................................................................... 18 4.4. PROPOSED MODEL FOR THE CURRENT STUDY ................................................................................ 19
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INTRODUCTION TO CHINA’S AUTOMOBILE MARKET .......................................................... 20 5.1. 5.2. 5.3. 5.4. OVERVIEW OF CHINA’S PASSENGER CARS MARKET IN 2007 ........................................................... 20 THE PAST AND THE FUTURE OF CHINA’S PASSENGER CARS MARKET .............................................. 21 CHINESE GOVERNMENT’S POLICIES TOWARDS CAR INDUSTRY AND INDUSTRIAL STRUCTURE .......... 24 BEIJING’S PASSENGER CARS MARKET............................................................................................ 26
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EMPIRICAL FINDINGS AND DATA ANALYSIS........................................................................... 28 IN THIS CHAPTER, IT INCLUDES THREE PARTS: THE FIRST PART MAINLY INTRODUCES THE DEMOGRAPHIC INFORMATION OF RESPONDENTS, INCLUDING GENDER, AGE, INCOME AND EDUCATION AND THE FIRST PART ALSO INTRODUCES THE TYPE OF EMPLOYMENT OF ALL RESPONDENTS; THE SECOND PART OF THIS CHAPTER MAINLY INTRODUCES THE CAR OWNERSHIP, THE PURPOSE OF PURCHASING THE CAR AND THE PURCHASING PRICE OF THE CAR; THE THIRD PART OF THIS CHAPTER INTRODUCES INFORMATION SOURCE AND THE IMPORTANCE OF THE CAR PURCHASE DECISION. IN THE EMPIRICAL PART, WE REPORT THE FOLLOWING STATISTICS. PLEASE KINDLY SEE OUR EXPLANATION AND SOME EXAMPLES IN T ABLE 6.1.1:............................................................................ 28 6.1. PROFILE OF RESPONDENTS ............................................................................................................ 28 6.2. CAR OWNERSHIP ........................................................................................................................... 30 6.3. INFORMATION SOURCE AND THE IMPORTANCE OF CAR PURCHASE DECISION................................... 30 6.4. SATISFACTION OF CURRENT CAR ................................................................................................... 33 6.5. CAR PURCHASE CRITERIA AND IMPORTANCE OF E ACH ATTRIBUTE ................................................. 36 6.5.1. 6.5.2. 6.5.3. Examine the importance of each characteristic by comparing Mean (all respondents)............... 36 Examine the difference of the importance in means by gender (all respondents)........................ 38 Examine the difference of the importance in means by age (all respondents) ............................. 40
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6.5.4. Examine the difference of the importance in means by education (all respondents).................... 43 6.5.5. Examine the difference of the importance in means by different purchasing budgets (respondents who intend to buy a car within two years) .............................................................................................. 48 7. FINDINGS AND MANAGERIAL IMPLICATION........................................................................... 50 7.1 7.2 8. FINDINGS .......................................................................................................................................... 50 MANAGERIAL IMPLICATION ............................................................................................................... 52
LIMITATION AND SUGGESTIONS FOR FUTURE RESEARCH................................................. 53
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1. INTRODUCTION
In this chapter, we will present the topic that the thesis is going to discuss. It starts with the background discussion; then it introduces the research questions; finally, it ends with the research purpose.
1.1. Background
China is the most populous country in the world with a population of over 1.3 billion, about one-fifth of the world's total population. China has the world's fourth largest economy and second largest purchasing power parity. China is always taken as an emerging superpower due to its huge population, fast growing economy and large foreign investments and research. China has become a fast-growing auto market over the past decade, with sales surging tenfold to more than 5.0 million units in 2007. Growth has been driven by rapid economic growth and increasing wealth-double-digit average wage gains over the past decade and more than a three-fold surge in equity markets. Despite this rapid growth, vehicle penetration remains very low at only 27 vehicles per thousand people, compared with a G7 average of 610. With a population of 1.3 billion people and a vehicle fleet of only 35 million, China will continue to experience rapid growth. While car sales gains moderated to 22% in 2007 and will likely increase by 15% in 2008 to 5.9 million units, China is on target to overtake the United States and become the largest automotive market by roughly 2020. 1 For most people, purchasing a car is the second most important and expensive investment, next to purchase of a house; for the automotive manufacturers, first-time car buyers give them the opportunity to create positive brand image which definitely could be reflected on in next coming years because consumers could make repeat car purchasing. The passenger car market changed very rapidly due to the fierce competition and advanced technology, therefore, it requires the automotive manufacturers and car dealers to understand the consumers ’ preference on time and take fast actions to reflect market changes quickly. So, it would be very interesting to know consumers’ preference in today’s fast-changing passenger car market and how the customers’ buying process is (what the critical elements of making their purchasing decision are, what are the important information sources consumers used and how do consumers search for the information…).
1.2. Research Questions
Chinese culture is very distingwished from Western culture in many ways, so the purchasing behavior could be also very different, for example, in China, there are “face car” and Chinese people want to use the big and luxury cars to show their good social status and interact with others to save their face. Audi successfully launced Audi A6 long version which was desgined uniquly for China’s market. The success of Audi A6 long version in China is because Chinese people love their faces. Such a big German-made car could give Chinese people 'Face' very well. But in Europe or USA, most of people buy Audi, BMW or Mercedes because of the quality, safety standards or the joy of driving which cars bring to them. Additionaly, “Guan Xi” (relationship or networks) is important in Chinese people’s daily life, so friends or family recommendations on cars might play an important role during the decision process. Such cultural difference causes the different requirements towards car attributes between western people and Chinese people. Now American, European and Japanese automakers all see China
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Carlos Gomes (2008), “Emerging Markets Will Continue to Lift Global Auto Sales to Record Highs-China and Brazil Will Lead the Way in 2008, ” Global Economic Research, January 18, 2008
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as a growth market and have high hopes for China, so it is really interesting to conduct a study about the purchase behavior in China, so our research question is what the car purchase behavior in an emerging market, China Ø What are the most important characteritics considered when Chinese young consumers purchase a car? Ø What is the decision process when Chinese young consumers buy a car? This is to help managers understand the decision process and then make quick reactions to influence consumers purchasing decision.
1.3. Research Purpose
The purpose of this thesis is to understand the decision process and to identify the most important attributes of a car.
2. SCIENTIFIC IDEAL AND PARADIGM
This chapter will introduce choice of study, scientific approach and research approach we chose for our study and the credibility of research findings.
2.1. Choice of Study
To find and determine a subject we will study with, we started with a brainstorming to see what possible topics we are interested in. The technique of the brainstorming, taught as a problem-solving technique on many business and management courses, can also be used to generate and refine research ideas.2 And then to have a literature review to choose a most suitable subject which those previous studies have not done enough studies. The topic of automobile purchasing behavior is what we are interested in. There are not so many studies regarding car purchasing behavior which have been done so far for Chinese market and especially there are not enough studies regarding China’s young consumers’ car purchasing decision making, so we would like to focus on young people in Beijing. We choose Beijing as the representative city for our research because: firstly, Beijing, as the capital of China, is recognised as the political, educational, and cultural centre of the People's Republic of China. Beijing is also one of the four municipalities of China, which are equivalent to provinces in China's administrative structure and is one of the Four Great Ancient Capitals of China. Secondly, a high income is the basis of motorization. Beijing tops China's list of per-capita monthly income. The average per-capita monthly income in Beijing reached 1,822 yuan (227 U.S. dollars) in July, 2007, the highest in China, followed by Shanghai. 3 In cities like Beijing, Shanghai, the relatively rich people become car owners and the number of automobiles increases overnight. The fast growth of the number of car owners far outpaces the speed of road construction and parking areas4, so this is another reason for us why we choose Beijing as the representative city. Thirdly, many famous universities are in Beijing and millions of excellent graduates found their jobs and settled down in Beijing annually.These well-educated people have good purchasing power to buy cars.
Mark Saunders, Philip Lewis. Et. al.(2003), Research Methods for Business Students, 3rd Edition, Harlow: Financial Times,Prentice Hall, p20 3 “Beijing tops China's list of per-capita monthly income in July,” August 25th, 2006,http://english.peopledaily.com.cn/ 4 People’s daily, August 2004,http://english.peopledaily.com.cn/
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In our questionaire, we asked car consumers to rank the importance of each attribute, such as, price, performance, fuel consumption, safety, interior and exterior design, after-sale maintenance and overall brand…Previous research 5conducted in Shanghai has told us that Chinese people seek for status. Once Chinese people reach the top of the social pyramid, they are very confident (wealth, strong government connection) and they want everything the best –biggest, most luxurious car. Price is also important because of the internal competition between dealers (even the same brand). People now have more price options and knowledge, so that they become sensitive. 6We want to know how the situation in Beijing is and if Beijing young people are price-sensitive and status-seeking when compared with Shanghai people in the previous research conducted by Jason Ni (2007). We also asked some questions regarding information search. The traditional ways to get information are: get suggestions from trusted friends or family member, watch TV advertisements, read car magazines or talk with sales people in dealer’s shops, but with the increasing use of the Internet and other advanced technologies, it has given car consumers an edge in the vehicle buying process, making them less dependent on dealers. So, it is quiet important for auto manufactures and dealers to know well if there are any major shifts in the buying process due to the rapid expanding of Internet in order to keep pace with the changing consumer dynamics. Auto manufactures have to get a good empirical understanding of consumer behaviour to improve the customer/dealer relationship and to get increased sales and to strengthen the brand loyalty. We have studied a lot of things regarding Consumer Behavior, Consumer Analysis and Decision Making, in our Master’s program in Marketing in the University of Umea, so our chosen topic could be a good summary for our courses we had finished. In addition, we will do some statistical analysis by using SPSS we learned in our 2nd course, consumer analysis. Dongyan had a good work experience in a multinational automobile company, which could be very helpful in understanding of our topic. This is another reason why we chose this topic.
2.2. Perspective
Firstly, in our study, we take the enterprise’s management perspective to provide the management of the automobile companies, both Chinese local auto manufacturers and international auto manufacturers in China with results of the Chinese customers consumer behaviors towards cars and help auto manufacturers make the right decisions, but in order to get this information, we also have to take a consumer’s perspective in order to truly understand the consumer’s decision process, so enterprise and customer’s perspectives will be used interchangeably throughout the study. Secondly, there will be some kinds of theoritical significance too, especially in understanding the consumer decision process in car purchasing area, for example, we developed a model (Figure 4.6) in the theortical part in this study.
2.3. Theoretical and Practical Preconceptions
Knowledge, educations, social background and practical experiences constitute the theoretical and practical preconceptions.
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Jason Ni (2007), “Motorization and Vehicle Purchase Behavior in China: Case Study of Shanghai, Institute of Transportation Studies,” PhD dissertation, University of California at Davis, July, 2007 6 Jason Ni (2007), “Motorization and Vehicle Purchase Behavior in China: Case Study of Shanghai, Institute of Transportation Studies,” PhD dissertation, University of California at Davis, July, 2007
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Firstly, we both took Consumer behavior, Advanced Market Analysis and Executive Decision Making courses in Umea University, which could be very useful for our research. Secondly, before coming to Sweden to study for this Master program, we both studied and worked in China’s Capital Beijing for several years, so we know Beijing well and we know Beijing people well. That is one of the reasons we would like to have the survey conducted in Beijing. Thirdly, Dongyan had worked several years in automobile companies in Beijing. The work experience could help avoid a lot of problems, for example, for questionnaire design, Dongyan could quickly know the questions which are most important and relavant for manager’s decisions based on her working experience. Dongyan also have a lot of ideas regarding Chinese consumers’ purchasing behavior from her past daily work. After finishing the current study, we could compare the results from pratcial work and our current research. Additionaly, Bai Xuan worked at her part-time in a Marketing agency during her university time, so this practical work is just right fit for our study area.
2.4. Scientific Approach
For scientific approach there are three kinds of approaches, deduction, induction and a mixture of them, abduction. Deduction is a hypothesis testing theory and is the way of conclusion. 7From a theory, a hypothesis is formed and through logic conclusions, the result is achieved. 8 Induction is described as method for discoveries. 9 By Induction, the researcher infers the implications of the findings for the theory that prompted the research. In abduction processes, the researcher combines both induction and deduction. Deduction is often associated with quantitative research design. Induction is often associated with qualitative research design. In our study, we started with searching the consumer behvior theories related to the subject, and then we design a survey questionnaire for collecting quantitative data in order to analyze also interpret them and at last to give out a conclusion and implication in car purchasing decision making facts. That is to say, in this study, the scientific approach we mainly used is deduction and mixture of some induction.
2.5. Research Approach
There are two main research approaches in business research, quantitative and qualitative. Quantitative researchers are more concerned about issues of design, measurement, and sampling because their deductive approach emphasizes detailed planning prior to data collection and analysis. 10 Qualitative researchers are more concerned about issues of the richness, texture, and feeling of raw data because their inductive approach emphasizes developing insights and generalizations out of the data colleted.11 Quantitative approach is what we mainly used in our study. The first reason for the quantitative approach to be chosen is that as mentioned above, the deductive approach is often associated with quantitative research design. Another reason for the quantitative approach is that we want to generalize from our samples and make conclusions from the smaples. We don’t know the exact number of Beijing young people and collection data from each case is not possible and not nesseary for us, so we used questionnaire in our study to collect primary
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Holme, I. and Solvang, B, (1997).,Forskningsmetodik.,Lund: Studentlitteratur. Eriksson, L.T. and Wiedershiem-Paul, F. (2001). Att utreda, forska och rapportera. 9 Holme, I. and Solvang, B. (1997). Forskningsmetodik. Lund: Studentlitteratur. 10 W.Lawrence et al (2000), Social Research Methods, Qualitative and Quantitative Approaches, 4th Edition, Boston: Allyn and Bacon, p122 11 W.Lawrence et al (2000),Social Research Methods, Qualitative and Quantitative Approaches, 4th Edition, Boston: Allynand Bacon, p122
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data in order to make generalization from our samples. Once data is obtained, and then analyzed, it becomes the basis for conclusions and decision-making. 12
2.6. The credibility of research findings
It is important to make sure the credibility of data sources and theories choices in marketing research. We use such criteria, reliability, validity and generalisability, to keep critical in each process of our study to avoid any possible bias and errors which might happen.
2.6.1. Reliability
According to Mark Saunders, reliablity refers to the degree to which data collection method will yield consistent findings, similar conclusions will be reached by other researchers or there is transparency in how sense was made from the raw data.13 Jason Ni 14 did a similar study as our study for Shanghai in 2007. In his study, quantatitive research and most of statistical tests used in our study were also taken by him. The result got by him has some similiarity with our study, for example, Chinese car consumers are pricesensitive and status-seeking. Furthermore, for the primary data, we use Microsoft Excel to design the questionnaires for the survey, then we use the statistical analysis software, SPSS to analyze the data. Both of Excel and SPSS are used by most researchers quiet often in business research. We mainly use Descriptive Statistics, t-Tests, ANOVA-test and regression analysis in SPSS. We compared the two means difference with the t-Test, for example, we investigate if there is any mean difference between male and female group regarding each car attribute. t-Tests is appropriate to test the difference in only two groups, so we use ANOVA to examine the difference of in means by different age groups. In this study, we also use regression analysis to examine which factor is highly related to consumers’ satisfaction level. The multiple regression models could be a good predictor for consumers’ future purchasing. Throught the whole study, we take 90% confidence level. Both 95% confidence level and 90% confidence level are commonly used in statistical studies. For the secondary data and theory sources, we searched for scientific database and academic articles at the Umea University library and on the internet by using searching engine like Google scholar. We also use keywords, such as consumer behavior, car purchase, Beijing car market and plus “PDF”. Most of files we got by using this way were written by academic researchers. These sources are all public-used and relevant to the subjects we study with.
2.6.2. Validity
Validity is concerned with whether the findings are really about what they appear to be about.15 For the validity of theory choices, we do the literature review of studies in consumer behavior area, for example, we find theories regarding decision process by reading the popular marketing resesrach textbook by Michael R. Solomon (2003) and by reading Journal of
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Hair, J. Jr. et al. (2003), Essentials of Business Research Methods, International Edition, NY: Wiley, p 124-128
Mark Saunders, Philip Lewis. et al (2003), Research Methods for Business Students, 3rd Edition, Harlow: Financial Times, Prentice Hall, p488
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Jason Ni (2007), “Motorization and Vehicle Purchase Behavior in China: Case Study of Shanghai, Institute of Transportation Studies,” PhD dissertation, University of California at Davis, July, 2007
Mark Saunders, Philip Lewis. et al(2003), Research Methods for Business Students, 3rd Edition, Harlow: Financial Times, Prentice Hall, p101
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Consumer Marketing by Burton, S. & Babin, L (1989) and by reading Journal of Consumer Research by Puto, C. (1987). And at last we choose the most commonly used buying behavior theory by Phillp Kotler who is the farther of marketing. In our study, we design the questionnaire to collect data. It is one of the most popular research methods in the consumer behavior related subjects, that can be seen as the assurance of the validity of our choice in research strategy. During the survey, what should be carefully noticed is that there are two kind of errors might rise, sampling and non-sampling errors.16 Sampling errors mean that errors happened when the samples design is not suitable, as we will describe in next chapter, based on time and budget limitation, we use the non-probability convenience sample which possible to bring the occurring of error, so we enlarge the size of sample as possible as we can to get 192 samples in order to decline this kind of errors. For the non-sampling errors, that might occur when something wrong with the measurement, data recording and data analyzing, response rate and so on. We solve this problem with pre-test and re-send questionnaire methods which will give out details in next chapter (sampling methods). And for the questionnaire, Dongyan had worked in the marketing department in a multinational company in Beijing, so she has a lot of experience with the questionnaire design. Most of questions have been tested during her old work. In addition, we translated our questionnaire into Chinese language. We are also very careful for both the presentation to repondents and the ability for recording and analyzing the data for ourselves. That is to say that the language used is clear and unambiguous and the length and the contents of questionnaires are reasonable.
2.6.3. Generalisability
Whether the findings may be equally applicable to other research settings is the criteria named generalisability. When we design the questionnaire, we start with finding out questions related to our purpose of study such as possible factors that could influence purchase behavior in car purchasing progress and then developed, then after evaluating we choose these most relevant ones to form our questionnaire. The population of our study is Beijing young people. We choose young people because young people are increasingly becoming an important group of car buyers in China and representatives of Beijing car consumers. The average age of car owners dropped to 32 years old in 2006, four years less than in 2005. Surveys indicate that the 25-29 year-old age group accounts for the largest portion of potential car buyers in China, while those between the ages of 18 to 25 already represent more than 11% of overall purchases. With about 200 million people in the 20-29 age group and nearly 120 million in the 15-19 age group, long-term demand growth is assured. 17 We distributed our questionnaires among our friends and our friends’ friends and most of them are young people according to our survey result (92.1% of our respondents’ ages are below 40).
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Aaker, D. A. et al. (2004), Marketing Research, 8th Edition, NJ: Wiley, p373
Carlos Gomes (2008), Emerging Markets Will Continue to Lift Global Auto Sales to Record Highs-China and Brazil Will Lead the Way in 2008, ” Global Economic Research, January 18, 2008
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Beijing is a representative city of China’s developed cities, so the result of our study could be useful for other big and developed cities in China, such as Shanghai and Guangzhou. But due to the big demographic differences and China’s imbalanced regional development, so our result might not be so meaningful for other developing cities in China. In addition, because the economic situation and the consumer culture are different between China and European countries, therefore, the study is only limited to the Chinese market.
3. RESEARCH METHODOLOGY
This part includes the research design, data resource, questionnaire design, sampling methods and the performed work.
3.1.
Research Design
A cross-section design entails the collection of data on more than one case and at a single point in time in order to collect a body of quantitative or quantifiable data in connection with two or more variables, which are then examined to detect patterns of association.18 Crosssectional analysis occurs when a researcher wishes to compare findings across various cluster or market segments at a particular point in time to identify points of difference or similarity in performance or response pattern.19 Survey research comprises a cross-sectional design in relation to which data are collected predominantly by questionnaire or by structured interview on more than one case and at a single point in time in order to collect a body of quantitative or quantifiable data in connection with two or more variables, which are then examined to detect patterns of association.20
3.2.
Data Resource
Quantitative data are measurements in which numbers are used directly to represent the characteristics of something. Since they are recorded directly with numbers, they are in a form that lends itself to statistical analysis.21Qualitative data represent descriptions of things that are made without assigning numbers directly. Qualitative data are generally collected some type of unstructured interviews or observation. 22 For our survey, we need to collect emprical data and test the relationship between data, so we chose quantitative study. For primary data collection, we mainly designed the questionnaires and distributed the questionnaire by emails. For second-hand data collection, we mainly collect them by reading books, academic literature, journals and searching engine online.
3.3.
Questionnaire Design
The questionnaire comprises of two parts. The first part is the main part of the questionnaire, including 24 questions; it mainly asked respondents’ opinions and decisions of car purchasing and the factors which affect their purchasing decisions. 3 questions out of 25 are multiple-choice questions. All of 25 questions
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Bryman, Alan and Bell Emma (2003), Business Research Methods, Oxford University Press Hair, Joseph F et al, Chichester, (2007),Research Methods for Business, England ; Hoboken, N.J. : John Wiley & Sons Ltd., p129 20 Bryman, Alan and Bell Emma (2003), Business Research Methods, Oxford University Press 21 Hair, Joseph F et al, Chichester, (2007),Research Methods for Business, England ; Hoboken, N.J. : John Wiley & Sons Ltd., p151 22 Hair, Joseph F et al, Chichester, (2007),Research Methods for Business, England ; Hoboken, N.J. : John Wiley & Sons Ltd., p152
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are close-ended questions because they are easy to answer, take less time to answer, have less potential to errors, and make comparison, tabulation and analysis easier. 23 We used 5-point Likert scaled questions on which the respondents were asked to measure their satisfaction towards current cars and the importance of each factor in their future car purchasing. The scale used in our research is that “1” means “very dissatisfied” and “5” means “very satisfied” and “1” means” very unimportant” and 5 means “very important”. Liker-type scale statements were chosen to evaluate consumers’ attitude in our study because the Likert-type scale has been used by persuasion researchers for over three decades greatly. The original scale of this type was developed by Rensis Likert and was explained in his article, "A Technique for the Measurement of Attitudes," in Achieves of Psychology (1932). He reported very satisfactory reliability data for the scales developed with his procedure. 24 The second part is the demographic part, by which we asked the respondents about gender, age, income, household size, education level, occupation and employer category (government authorities, state-owned enterprises, private enterprises…)
3.4.
Sampling Methods
Our study was conducted by using a non-probability convenience sample due to the restricted timing and resources. Such kind of sampling method often allows a potential respondent to self-select into the sample and allows the researchers to choose who, where, and when to collect data. One of the shortcomings of this method is that the results may be nonrepresentative of the entire population. However, this method is quite common in business and management research as this can ensure a high response rate whereas probability sampling involves a lot of difficulty and costs (Bryman & Bell 2003). 25 For the data collection, we mainly collect our primary data by distributing questionnaires through emails. Firstly, we translated our questionnaire into Chinese language. Secondly, we sent our surveys by emails to our friends in Beijing. The reasons we used email data collection are by following: 1) it is easy for us to reach people since we are not in China now and we could be sure that we are investigating the right persons; 2) response rates for us are higher and response time are shorter than other methods. In our case, for some respondents, if there were no replies from them, we could send some reminding and follow-up messages and ask them to finish the questionnaires, and then the respondents usually replied us in a short time. 3) It has lower costs; so this kind of method is good for us, students which have very limited budget; 4) a big advantage of the email survey is the easy contact and instant feedback from e-mail respondents. Having just received a message from a researcher requesting further information or clarification on some replies, an instant reply could be expected. 26 In our study, we had several examples on this, for example, we could not open the excel file sent by one respondent and we asked him/her to send the questionnaire again; another example is that we found one answer from one questionnaire is missing, then we sent an email to this respondent for this question’s answer, finally we got the feedback quickly. However, there are also some disadvantages about emailing survey: 1) the design and the format of the email survey can be cumbersome to follow, which might discourage some respondents from answering (Schaefer and Dillman, 1998)27. We had some problems in terms
Aaker, D. A. et al. (2004), Marketing Research, 8th Edition, NJ: Wiley, p316-17 William E. A, James C. M , “The Likert Type Scale,”http://www.jamescmccroskey.com/publications/25.htm 25 Bryman, A and Bell, E (2003), Business Research Methods, Oxford University Press 26 Janet Ilieva, Steve Baron and Nigel M Healey (2001), “On-line Surveys in International Marketing Research: Pros and Cons, ”July 2001 27 Schaefer, R. and D. A.Dillman (1998), “Development of A Standard E-mail methodology. Results of An Experiment,” Public Opinion Quarterly, Fall, Vol. 62, i3
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of our questionnaire format and design. We designed the questionnaire by using Excel. We attached the Excel format questionnaire to the e-mail. We used “macro” function during our questionnaire design phase, so the questionnaire required the respondents to enable “macro” when opening the questionnaires. Some respondents were worried about this because they think maybe it has Internet virus, so they were not willing to open such kind of Excel file. In addition, people have different versions and features of Excel, for example, for some respondents, their status was in designing status, in order to answer the questions, and they had to go to tool box to choose to close the designing status. For some cases, the respondents had to decrease the safety grades to open our e-questionnaires due to the “macro” problem. Although we already gave respondents clear directions for such problems which may happen, but a lot of respondents were not willing to volunteer their time to fill out the questionnaires for which they could not receive any benefit, so a great deal of care must go into and choose the design and format of the e-mail survey in future research. 2) Lack of anonymity28. In our questionnaire, we asked the household income, so probably it could present a possible reason for recipients refusing to respond. We received 192 questionnaires back. We got 9 incomplete questionnaires totally. For the incomplete questionnaires, we sent respondents another emails to follow up and we got most of missing answers back. In the end, we got 189 usable questionnaires and 3 questionnaires out 9 incomplete questionnaires are not usable.
3.5.
Pre-test & Performed Work
The purpose of the pre-test is to identify if the questionnaire is able to provide all the information as expected by the researchers (Aaker et al. 2004, p327). 29Pre-test is to test if our questionnaire is user-friendly and if there any ambiguous questions exist, and if the time taken to finish the survey is too long. Another purpose of pre-test is that we could refine our questionnaires after we know our problems. We developed the questionnaire ourselves with our past experience, as said, Dongyan worked in a Marketing department in an international car company and Bai Xuan worked at her part-time in a market research company during her bachelor’s time. We also read many surveys published on the web. The contents and the format of the questionnaire were discussed with our supervisor. Finally, after consulting our supervisor, we deleted several questions which are irrelevant to our analysis; for example, the engine size of the consumer’s current car and other detailed car’s interior and exterior’s equipments because kind of questions are not so useful for our main academic research topic, the purchasing decision, but maybe more useful for a car producer. We also made some changes about questions regarding pre-purchase decisions. We added some questions about if the car purchasing decision is an important decision and if they discussed the decision at home or with friends. From these answers we might be able to conclude something about the time and complexity of the decision. Five consumers who were chosen to answer the questionnaires by emailing as the pre-tests. All of five respondents reported that they had no difficulty in answering the questions except that one guy thinks the questionnaire is a little bit long. One of guy reflected that he had some problems with opening Excel file by using the function of “enable macro”. To solve this problem, we wrote a detailed cover letter with clear direction statements on how to solve such kind of technical excel problems in the emails. In addition to explanation on how to answer the questions, in this cover letter, we also wrote some basic information about the questionnaire (who is investigated, who we are, how big is the sample size, this research is an
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Matthias Meckel, David Walters and Philip Baugh, “Mixed-mode Surveys Using Mail and Web Questionnaires, ” Electronic Journal of Business Research Methods, volume 3 Issue 1 2005, p69-80 29 Aaker, D. A., Kumar, V., & Day, G. S. (2004). Marketing Research, 8th ed. United States of America: John Wiley & Sons.
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academic research, what is the purpose of this research). We also mentioned that we will ensure the respondents’ privacy (including an explanation about personal questions, an explanation on why we asked information regarding income and household size and so on, a statement that we will not pass the respondents’ information to third parties). After finishing the data collection, we could see some future improvements for web-based survey. 1) Probably we could consider putting our questionnaires on some websites to make our respondents answer questions more easily to avoid the troubles caused by different Excel version and features using by different persons; the online-survey also could give us a shorter response time. 2) Furthermore, we could design our questionnaire programmed so that responses could be converted automatically into our data analysis software SPSS. This could save us a lot of time on data input and also avoid the input errors caused by key-in. It also could allow us to analyze the data right away after getting our questionnaires back. This time, we didn’t spend time on doing this, probably for the future research, we could improve it in this aspect. Now chapter three is close to the end. The following Figure 3.1 summarizes chapter two and chapter three. Our chosen scientific method, from research philosophy and approaches to data collection methods is shown in this following picture.
Deductive
nd
data, questionnaires
Sample, 2
Survey Cross Section
Data Collection Time Research Research Horizon Strategies Approach Methods s es Figure 3.1-Scientific Method “Onion” Used in Our Research Source: Saunders, M. et al. (2000), Research Methods for Business Students, 2nd Edition, Harlow: Financial Times/Prentice Hall, p85
4. THOERITICAL FRAMEWORK
The theoretical framework includes three parts. The first part presents the general consumer decision process and how consumers make their purchasing decisions throughout the whole purchase process; With the rapid development of Internet, Internet is playing an important role in consumer’s purchasing process, so we will have a discussion here about the Internet marketing and the decision process in the second part; the third part is about critical factors in consumers’ buying process.
4.1.
Consumer Decision Process
Buyer decision processes are the decision making processes undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product or 10
service.30 Consumers have to make different kinds of decisions everyday according to their different needs. Some of the decisions are playing critical roles in consumers’ daily life, for example, purchasing a new home or purchasing a car, whereas some times the decisions are made on a virtually automatic basis. There are not a lot published research articles available on the decision-framing process. Puto, C. proposed a conceptual model of the buying decision framing process, see Figure 4.1 below. 31 This model focuses on the information search phase which includes two reference points: an initial which is internal to the company-expectations and buying objectives, and a final one that takes into account the sales message and justification/reward of the offer. 32 Sales Messages
Expectations
Initial Reference Point Buying Objectives
Final Reference Point
Choice
Justification/ Reward
Figure 4.1-Proposed Conceptual Model of the Buying Decision-Framing Process
Source: Puto, C. (1987), “The framing of Buying Decisions” Journal of Consumer Research, December, Vol. 14, Issue 3, p 303
These two stages lead to the final choice. Burt and Babin developed a model, see Figure 4.2. This model is in line with previous one but gives an emphasis on an evaluation phase in the process. 33 Individual Difference Variables Coding of Alternatives Contextual Variables Decision Frame
Evaluation of Alternatives
Choices between Alternatives
Editing Phase
Evaluation Phase
Figure 4.2-Conceptual Framework of the Decision-Framing Processes
Source: Burton, S. & Babin, L (1989), “Decision-Framing Helps to Make the Sell,” Journal of Consumer Marketing, Vol.6, Issue 2, p18
http://en.wikipedia.org/wiki/Buyer_decision_processes Puto, C. (1987), “The framing of Buying Decisions, ” Journal of Consumer Research, December, Vol. 14, Issue 3, p 30103 32 Puto, C. (1987), “The framing of Buying Decisions, ” Journal of Consumer Research, December, Vol. 14, Issue 3, p 303 33 Burton, S. & Babin, L. (1989), “Decision-Framing Helps to Make the Sell, ” Journal of Consumer Marketing, Vol.6, Issue 2, p 17-19
31
30
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The most used model in consumer behavior could be found in most of marketing textbooks. This model includes five stages: problem recognition, information search, evaluation of alternatives, purchase decisions, and outcomes. Please kindly see Figure 4.3 below which provides an overview of the decision-making process.
Problem Recognition Consumer A realizes his needs for a car for daily use Information Search He uses different sources to find information about cars Evaluation of Alternatives He compares several models in terms of price and equipments Product Choice He chooses Toyota Corolla due to its value for money Outcome/Post Purchase Consumer A drives home the car and enjoys his purchase Figure 4.3-Stages in Consumer Decision Making Source: Consumer Behavior, 6th edition, Michael R. Solomon, p199 In the problem recognition phase, the consumer sees a big difference of his/her current state and ideal state. The consumer realizes there is a problem which needs to be solved. In our case, consumer A realizes that he wants a car for his daily transportation. The reasons are probably he moves to countryside from the city center and he needs driving the care from his new home to his office or probably he is not satisfied with his current car’s status, for example, probably the design is too out of date. Once a problem is recognized, the consumer enters into the information search phase. Consumers need right information to help him/her solve the problem. Information search is the process by which the consumer investigates his/her environment for right data to make a reasonable decision. 34 Information sources include two types: internal search and external search. Internal search involves a scan of information stored in memory to recall past experiences or knowledge regarding purchase alternatives. External search involves going
34
Stages in Consumer Decision Making
Michael R. Solomon (2003), Consumer Behavior, 6th edition, Upper Saddle River, N.J. : Pearson Prentice Hall,p202
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outside sources to acquire information such as personal sources, marketer controlled sources, public sources, or through personal experiences such as examining or handling a product. In our study, the internal search may mean the different car models in the consumer’s mind. For the external search, it may include the car advertisements, car makers’ websites, dealers’ introduction and friends and relative. The third stage is the evaluation of alternatives stage. Consumers are faced with different options and they have to narrow down different options and choose one of the options as the final one. The alternatives actively considered during a consumer’s choice process are his/her evoked set. The evoked set includes those products already in memory, plus those prominent in the retail environment. 35 For example, in our study, Consumer A probably didn’t know much about cars, especially the technical aspects of cars, so probably he had only considered a few major Japanese brands in his memory because he thinks Japanese brands represents value for money and good quality. If a company’s product is not included in the list of alternatives or if information about the product is not available to the customer, there is no opportunity to compete actively for the potential business. 36It is not impossible to change a customer’s evaluation but it is very difficult. Therefore the key to good marketing, according to Murray and O’Driscoll (1996), is to understand the evaluation criteria used by the customer as well as the strengths and weaknesses of the competitors. After the related alternatives from a category have been considered and evaluated, a choice would be made. Based on the decision, the customer will thereafter make the purchase decision and actually buy the product. 37 The customer’s decision is based partly on the quality and price of the product and partly on the policies and procedures of the company. 38 When Consumer A was looking at different cars, he focused on one or two Japanese brands he is familiar with and ignored other brands. Consumer A narrowed down his choices by only considering two specific brands. Evaluative criteria and determinant attributes are used. Evaluative criteria are the dimensions used to judge the merits of competing options.39 When comparing with alternative options, Consumer A could chose cars equipped with night vision and navigation which he thinks could be useful for his leisure trip to countryside, so night vision and navigation are considered as evaluative criteria. Cars without night vision and navigation will not be on Consumer A choices list. Another important point is that criteria on which products differ from one another carry more weight in the decision process than do those where the alternative are similar. If all brands being considered rate equally well on one attribute, consumers have to find other reasons to choose one over another. The attributes actually used to differentiate among choices are determinant attributes. 40. Consumer probably has considered Nissan Tiida and Toyota Corolla because these two models are both Japanese brands equipped with navigation and night vision, but Toyota Corolla has another option Consumer A thinks maybe necessary, back-up camera, so finally Consumer A takes Toyota Corolla as his final choice. In the decision process, Consumer A also uses “country-of origin” as a product signal. Consumer A has no too much product knowledge, but he trusts Japanese brands because he thinks most of Japanese brands are value for money.
Michael R. Solomon (2003), Consumer Behavior, 6th edition, Upper Saddle River, N.J. : Pearson Prentice Hall, p209 Murray, J and O’Driscoll, A. (1996). Strategy and Process in Marketing. Cornwall: Hartnolls Limited. 37 Kotler, P., Armstrong, G., Saunders, J. & Wong, V. (2001), Principles of Marketing , 5th European Ed. Lombarda: Rotolito 38 Turban, E., King, D., Lee, J., Warkentin, M. & Chung, M. (2002), Electronic Commerce. A Managerial Perspective. New Jersey: Pearson Education. 39 Michael R. Solomon (2003), Consumer Behavior, 6th edition, Upper Saddle River, N.J. : Pearson Prentice Hall , p212 40 Michael R. Solomon (2003), Consumer Behavior, 6th edition, Upper Saddle River, N.J. : Pearson Prentice Hall, p212
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Finally, there is a post-purchase stage where the customer evaluates the product and its usefulness based on their expectations of the product. 41 A satisfied customer sends positive messages or talks favorably to his/her friends or family members about the product/service. The satisfied customer will purchase other products from that company or have repeated purchasing in the future. Marketers could understand how to build brand loyalty and how to encourage favorable word-of-mouth communication by learning the post-purchase stage. The sequence, through which a customer passes, from recognition of a need through the consumption of a product to satisfy this need, is an insightful framework within which to comprehend customer behavior. This kind of information will provide the company with the basic knowledge required to make marketing decisions that are both relevant to the customer and competitively superior. 42
4.2.
Internet Marketing and Consumer Decision Process
There are reasons to believe that there are five stages in a customer buying process as stated in last part. Customers go through want/need recognition, information search, evaluation of alternatives, and make the purchase finally. As Internet is expanding rapidly, more customers use Internet for part or even all the buying process, marketers have to learn how to use emarketing strategies to move customers from need/want recognition to make the final deal. In our current study, Internet is the second most popular way for consumers to get car information. Because many consumers go through a similar buying process, marketers can use the five stages to plan and align marketing activities, thereby improving the customer experience. Online channel usage, as part or all the buying process, continues to grow, making e-marketing activity a strong influencer of purchasing decisions. Most marketers are familiar with the five stages of the customers' buying process, around which marketing activities can be planned and implemented. Within each stage, marketers have the opportunity to improve the customer experience and influence the customer through all stages toward a purchase. However, the mass adoption of the Web channel among customers has shifted the stages of the customer buying process from a mostly offline activity to an increasingly online activity. Many customers now go through the entire buying process online, or use the online channel though multiple steps of the process. For instance, a car buyer maybe recognize his/her wants for a car after watching an online advertising, collect data about the car online, look for references and recommendations about the car by posting a topic on an online forum or by chatting with somebody online and then make the purchase decision of the car at a nearby dealer shop. So, marketers must respond with specific emarketing techniques that address each stage of the process. By 2008, more than 40% of business-to-consumer (B2C) commerce (online and off) will be influenced by addressable branding and advertising, contextual marketing, community marketing and transactional marketing (0.8 probability). In each stage of the consumer buying process, e-marketing technologies can be best placed to help or lead customers toward a purchase (see Figure 4.4).
41 42
Kotler, P., Armstrong, G., Saunders, J. & Wong, V. (2001). Principles of Marketing , 5th European Ed. Lombarda: Rotolito. Murray, J and O’Driscoll, A. (1996). Strategy and Process in Marketing. Cornwall: Hartnolls Limited
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Problem Recognition
Addressable Branding, Advertising
Information Search
Contextual Marketing
Evaluation of Alternatives
Community Marketing
Product Choice
Transactional Marketing
Outcome/Post Purchase Figure 4.4-Consumer’s Buying Process (E-Marketing) Strategic Planning Assumption: By 2008, more than 40% of B2C commerce (online and off) will be influenced by addressable branding and advertising, contextual marketing, community marketing and transactional marketing (0.8 probability).
Source: Gartner (February 2007)
In the needs/wants recognition phase, the consumer sees a big difference of his/her current state and ideal state. The consumer realizes there is a problem which needs to be solved. This is the start of the customer buying process that deals with awareness. Here, e-marketing opportunities, such as addressable branding and advertising functionality, can help establish awareness and wants. Banner advertising, sponsorships, interstitials and others are emarketing activities that can expose customers to products and services. Data collections tools, such as Web analytics and online surveys, can start to quantify different needs and wants. In our case, car makers could get consumers input from such e-marketing activities. Since these activities are addressable, so customers can reply and communicate with a brand (click on a banner advertising, search for more information or request information) in real time. 43 After a problem is recognized, the consumer enters into the information search phase.Customers want to find out information about that product or brand. Contextual emarketing techniques (providing information from explicit searches or questions) are becoming extremely useful as a mechanism to find information and have become a routine step in the customer-buying process. The success of Google, Yahoo and Bai du (in China) and their contextual search functionality show the power of providing tools for the customers to search related information and answer consumers’ questions that help them during their buying process. Contextual marketing, such as search marketing (organic or paid), locationbased search (matching the user's location to proximity of product/service), customerpreference management tools and available RSS feeds, is a natural fit to align explicit information gathering with relevant answers. 44 For example, a lot of car websites provide
Adam Sarner (2007), “E-Marketing Improves the Customer's Buying Process, ” Gartner Research ,ID Number: G00146513, March 1st, 2007, p3 44 Adam Sarner (2007), “E-Marketing Improves the Customer's Buying Process, ” Gartner Research ,ID Number: G00146513, March 1st, 2007, p3
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online queries which could answer consumers’ questions and provide useful information for consumers’ decision making. The third stage is the evaluation of alternatives stage. Consumers are faced with different options and they have to narrow down different options and choose one of the options as the final one. After-sale service, product options, price, availability and convenience, are all part of the evaluation process. Getting recommendations and references from close friends, family members to get answers play an important role on evaluation phase. Community e-marketing functions, such as community marketing, customer feedback, message boards, customer reviews and blogs, will also provide the tools to help customers though the evaluation process toward their purchasing goal. 45 The forth stage is purchase stage, which also has e-marketing opportunity. Transactional emarketing activities, such as gift registries, e-mail marketing and online dialogue functionality, help consumers to final purchase or even additional purchases. For example, in our case, a customer has searched for a car on the company's site and read other people’s comments, then the customers is exposed by an online dialogue that displays available specification for his/her selection. Once the car is chosen, the customer is presented with matching car information before checking-out. There is one example about Japanese car maker, Lexus. Lexus usually displays specification-adjusted price (price in equal equipment level) on their websites. Customers who are willing to purchase Lexus can compare the prices of models which are in the same level with Lexus, for example, when a customers wants to purchase a Lexus RX350. He/she could get information about Mercedes ML350 price and BMW X5 3.0 with the same equipment level. This can result in a relevant cross-checking, providing a positive experience for the customer and an incremental sale for the company. The last phase is outcome and post-purchase behaviour. Internet has a big impact on this part too. For example, we could see a lot of positive or negative comments and feedbacks posted on some websites’ forums by some users regarding some products or service. If the products or service are good enough, the Internet really has a good impact for the future selling. In addition, car makers may set up a follow-up session on the company’s website, from there, auto makers could know consumers’ suggestions and feedbacks and improve themselves from each aspect. Lack of E-Marketing could damage the customer experience. E-marketing technology, when properly placed along the customer buying process, helps provide a seamless link from want/need to actual purchase. In fact, many times, a poor customer experience is the direct result of not having e-marketing tools in place. For example, a consumer may visit an auto maker's website to learn about a car which he is interested in. When the customer enters into the evaluation phase, this website doesn't give him/her any appropriate information with he needs, for example, no specification-adjusted price mechanisms or feedback or comments from other users about this car. As a result, the customer might go elsewhere for the evaluation, providing an opportunity for the competition to help the customer complete his/her buying process with potentially different results. 46
Adam Sarner (2007), “E-Marketing Improves the Customer's Buying Process, ” Gartner Research, ID Number: G00146513, March 1st, 2007, p4 46 Adam Sarner (2007), “E-Marketing Improves the Customer's Buying Process, ” Gartner Research, ID Number: G00146513, March 1st, 2007, p5
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4.3.
Understanding the Consumer Buying Process
This chapter includes three parts, firstly we will present Kolter’s model of buying behavior; as we know, product is one of four P’s in Kolter’s model, so in the second part of this chapter, we will present the three types of product-related attributes; finally, the other stimuli in Kolter’s model, social contexts, which may influnce consumer’s buying behavior will be presented.
4.3.1. Kolter’s Model of Buying Behavior
Understanding the automotive purchase process is crucial for automotive manufacturers and dealers. Huge amount of information available to consumers require manufacturers and dealers to understand consumer decision-making and the modes of influence which can affect consumer new car purchasing.47 Kotler et al. 48describes the customer buying behaviour as the buying behaviour of the final customers who purchase goods and services for personal consumption. A company get great advantages by understanding how customers respond to marketing stimuli that include the four P’s: product, price, place and promotion. Other stimuli in the customer’s environment such as economic, technological, political and cultural also affect all customers’ buying decision. All these stimuli enter the buyer’s black box where they, through the buyer decision process, are turned into a set of buyer responses. Please kindly see the Figure 4.5 below.
Figure 4.5-Model of Buying Behaviour
Source: Kotler et al., 2001, p191
In the Kotler’s model above, product is an important marketing stimuli; in our questionnaire, most of attributes regarding cars are product-related, so in the following part 4.3.2, we will break down the produt-related attributes into details.
4.3.2. Classification of Product-related Attributes
There are three types of product-related attributes. The classification schema, as proposed by Myers and Shocker (1981), for describing products, services, and brands includes three major types: 1) product referent, 2) task or outcome referent, and 3) user referent. 49 Product Referent. Physical characteristics or product referent characteristics are in the cognitive realm used by potential users/evaluators to describe a product/service in two subcategories. Physical Characteristics (PC) are the most objective types of product descriptors in the sense that they are measurable on some sort of physical scale, in our case,
Michael M, Nicole T, Tina K, Andrew D (2006), “Understanding the path to purchase-resolving the complexities that influence the decision, ”ACNielsen report presented at the ESOMAR Automotive Conference, Switzerland, March 2006, p2 48 Kotler, P., Armstrong, G., Saunders, J. & Wong, V. (2001). Principles of Marketing (5th European ed). Lombarda: Rotolito 49 Myers, James H. and Richard F. Chay (1981). Direct vs. Derived Estimates of Ideal Product Characteristics. Proceedings of the Association for Consumer Research, Advances in Consumer Research, Vol. 8
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for example, fuel consumption, power or equipment level. Pseudo-physical Characteristics (PPCs) are objective in nature but not quite as measurable as PCs on a physical scale. Nevertheless, they reflect physical properties that are generally perceived and understood as such by both sellers and buyers; e.g., strength, shininess, or smoothness. 50 Task or Outcome Referent. Attribute dimensions that reflect the perceived benefits or outcomes from using a product/service are labeled task or outcome referent. These attributes primarily involve instrumental types of outcomes in the affective realm and involve subjective evaluations. Additionaly, they can include the ambience of surrounding conditions while using the product or service. For example, a product or service can be shown being used in pleasant surroundings such as beautiful scenery or in the company of friendly people. Benefits consist of attributes that describe specific need-satisfaction outcomes from using a product or service or buying from a particular supplier. 51 Potential benefits can be described in straightforward ways, for example, “safety” “comfort” or “conveninence” in our study. User Referent. Attribute dimensions that reflect what usage of the product or service indicates or imply about the person who selects or uses it, are called user referent. These attributes reveal expressive properties that are also subjective in nature and referred to as Imagery. Imagery attributes suggest various types of associations that may be evoked by the product or service. They usually tell us how the product itself or use of the product epitomizes the user to other people. Phrases such as “the choice of high-status people,” “give a high-tech appearance” or “representative of premium car with best quality” are examples of Imagery attributes. Imagery is not intrinsic to the product itself, so such attributes need to be conveyed symbolically in promotions. 52
4.3.3. Two Basic Mechanisms about Social Process
For automotive industry, a continual inflow of new products and outflow of old ones can be seen. Prices alone cannot explain the differences in market dynamics. Social processes, such as imitation, conspicuous consumption, and status seeking, appear to play a decisive role in market dynamics, so social processes have to be taken into consideration to explain changing consumption patterns among groups. 53 Two basic mechanisms are assumed to underlie the social processes that can be witnessed. 54 In the first mechanism, the product choice of other people provides a practical heuristic to limit the set of options to choose between. Especially in conditions of uncertainty, people tend to observe the behavior of others to quickly find out about attractive solutions for a decision problem. In particular, the behavior of people similar on a relevant dimension may provide valuable information for decision making, for example, in our study, people with simliar education and purchasing budget show some simlilarity. The more people perform a particular behavior, the more frequently it will be observed, resulting in a self-reinforcing process propagating the behavior. Both situational factors (e.g., complex products, unstable markets, visibility of consumption) and personal characteristics (e.g., uncertainty tolerance,
50
J. David Lichtenthal, Stephen A. Goodwin (2005), Deriving Product Related Attributes with Business Buyer Input: Implications for Industrial Selling and Sales Force Management, ISBM Report 13-2005, p5-6 51 J. David Lichtenthal, Stephen A. Goodwin (2005), Deriving Product Related Attributes with Business Buyer Input: Implications for Industrial Selling and Sales Force Management, ISBM Report 13-2005, p6 52 J. David Lichtenthal, Stephen A. Goodwin (2005), Deriving Product Related Attributes with Business Buyer Input: Implications for Industrial Selling and Sales Force Management, ISBM Report 13-2005, p6 53 Marco A. Janssen, Wander Jager (2003), “Simulating Market Dynamics: Interactions between Consumer Psychology and Social Networks”, Artificial Life Volume 9, November 4th, 2003, Massachusetts Institute of Technology, p343-344 54 Jager, W. (2000). Modelling Consumer Behaviour. PhD thesis, University of Groningen
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motivation to comply) determine the extent to which people are inclined to use this type of social information. 55 The second mechanism is based on social needs that people have. People have needs to belong to a group (belongingness) and express their status and personality (identity). 56Hence using a certain product may have extra value because a particular group of people is already using it. For instance, one consumer may buy a large and luxury car partly because of the status attached to it. Here one may focus on people having higher (financial) abilities as sources of interesting opportunities for consumption. In case of car models, such social needs seem to play an important role in the product choice. The approaches of Veblen 57 and successors mainly focus on this second mechanism. Whereas the two mechanisms may operate separately, they often operate combined—for example, a person imitating the clothing style of others to belong to the group. 58
4.4.
Proposed Model for the Current Study
It is very important to know how all of the above elements, i.e, 4Ps, other stimuli (individual, economic and social contexts) work together during the purchase cycle. In our study, we ask car consumers oponions on each car attribute. In this part, we try to apply the theories mentioned in part 4.3 and develop a model for our current study. Please see Figure 4.6. value for money, resale value fuel consumption, power, performance, equip.& interior, exterior, advancing tech, eco-friendly comfort, safety, after-sale convenience
Product Place Promotion
Product Referent Outcome Referent
Market Stimuli
Internet communication Friends/family recommendation s Brand image Mian Zi Status-seeking Figure 4.6-Proposed Model for Current Study
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Product Choice of Other People Social Process Social Needs
Other Stimuli
Marco A. Janssen, Wander Jager (2003), “Simulating Market Dynamics: Interactions between Consumer Psychology and Social Networks”, Artificial Life Volume 9, November 4th, 2003, Massachusetts Institute of Technology, p344 56 Max-Neef, M. (1992). Development and human needs. In: P. Ekins and M. Max-Neef (Eds.), Real-life economics: Understanding wealth creation. London, New York: Routledge 57 Veblen, T. (1899). The Theory of the Leisure Class: An Economic Study of Institutions. New York: B.W. 58 Marco A. Janssen, Wander Jager (2003), “Simulating Market Dynamics: Interactions between Consumer Psychology and Social Networks”, Artificial Life Volume 9, November 4th, 2003, Massachusetts Institute of Technology, p344
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Based on Kotler’s model, we can divide the factors in our questionnarie into two categories “market stimuli” and “other stimuli”. Market Stimuli Our first research question (what are the most important characteritics when Chinese consumers purchase a car?) is related to “market stimuli” and our second research question (what is the decision process when Chinese consumers buy a car?) is related to “other stimuli”. Marketing Stimuli are 4Ps, product, price, place and promotion. In our model, “product” is the “car”; “price” is “car purchase price”; “place” means “distribution” and “channel”, such as 4S stores; “promotion” in our model means the incensitives given by car dealers or manufacturers. So, the market stimuli here means the consumers buy what kind of car with what price in which distribution channel with what kind of promotion activities given by car dealers. “Fuel consumption”, “power”, “performance”, “equipment & interior”, “exterior”, “advancing technology” and “eco-friendly” are physical characteristics and are measurable, so according to the classification schema proposed by Myers and Shocker, we should put them under the classification of “product referent”; “comfort”, “safety” and “after-sale convenience” are dimensions which reflect the perceived benefits or outcomes from using the car, so we classified them as “outcome referent”. Other Stimuli Regarding the second research question in our study, the decision process and the information source and so on could be describled as “other stimuli” according to Kotler’s model. “Friends/family recommendation”, “Internet communication”, “brand image”, “Mian zi” and “status-seeking” all exist in consumers’ buying environment and could affect consumers’ purchasing decision. “Friends/family recommendation” and “Internet communication” belongs to “product choice of other people” because friends/family members or Other internet users could affect the decision and provide a practical heuristic to limit the car choices; “social needs” here means that people have wants to belong a group and express their status and characteritistics, so “brand image”, “Mian zi” and “status-seeking” should be put under “social needs” mechanisms.
5. INTRODUCTION TO CHINA’S AUTOMOBILE MARKET
5.1. Overview of China’s Passenger Cars Market in 2007
According to China Association of Automobile Manufacturers, in 2007 the Chinese passenger car market kept a stable and healthy growth. By the end of 2007, the sales of passenger cars were increased to 4.7266 million units, a year-on-year increase of 23.46%. The cars with engine level above 1.6L had a quick increase compared with 2007. The sales of cars with displacement between 1.6L and 2.0L totalled around 1.4455 million units and a year-on-year rise was 45.67%; The sales of cars with displacement between 2.0L and 2.5L totalled around 0.5166 million units, a year-on-year increase of 26.56%; In addition, the sales of cars with displacement between 3.0L and 4.0L were around 12,100 units, a big year-on-year rise, 450%; But the demand of cars with smaller engines was not good. The sales of cars with displacement less than 1.3L were around 0.7302 million units and it accounted for 11.60% of total passenger cars sales. When compared with last year, the market share was decreased by
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3.7%. The sales of cars with displacement less than 1.0L were decreased by 30.90% when compared with 2006. 59 In 2007, the top ten car sales brands were: Santana (203,100 units, belongs to Shanghai Volkswagen); Jetta (211,100 units; belongs to FAW-Volkswagen); Excelle (196,680 units; belongs to Shanghai General Motor); Camry (170, 300 units; belongs to Toyota); Xia Li (132.500 units; belongs to Tianjin FAW, local brand); QQ (130, 200 units; belongs to Chery, local brand); Focus (125,000 units; belongs to Chang An Ford); Elantra (120,300 units; belongs to Beijing Hyundai); Accord (118,000 units; belongs to Guangzhou Honda); Family (113,700 units; belongs to Hainan Mazda). By the end of 2007, the top ten models accounted for 32% of total passenger cars sales. 60 A good thing is that local brands did a great job in 2007. By the end of 2007, the sales of local-production brands accounted for 26% of total amount of passenger cars in 2007. The top-ten local-made models were: Xia Li, QQ, Family, Cowin, F3, Jun Jie, Zi You Jian, A520, Benben and Geely JinGang. By the end of 2007, the 10 models accounted for 72% of local made cars sales. 61 The top ten car manufacturers in 2007 were: FAW-Volkswagen, Shanghai-Volkswagen, Shanghai-General Motor, Chery, FAW-Toyota, Dongfeng-Nissan, Guangzhou-Honda, Chang An-Ford and Dongfeng Peugeot Citroen. The sales of the top ten car manufacturers accounted for 62% of Chinese passenger vehicles sales. 62
5.2. The Past and The Future of China’s Passenger Cars Market
Ø China’s Passenger Cars Market- Starting from Scratch and Growing into a Giant within One Generation After joining the WTO, China's vehicle production and sales have moved into a fast growing period. Zhang Guobao, Vice Director of the National Development and Reform Commission said on April 16, "It is predicted China's vehicle production and sales will keep fast growing momentum during the 11th Five-year Plan period, especially private passenger cars". 63 For every ten new vehicles been sold around the world, more than one unit is sold in China, Xu Changming, Director of the Information Resource Development Department of the State Information Center says. 64 In 2006, China became the world's third largest vehicle manufacturer and the second largest new vehicle sales market. Passenger cars and minivans saw the fastest growth, especially the production of passenger cars which are increasing by 40% annually. Private vehicles have become the main consumption trend in China. Zhang says that a large amount of investments and expansion exist in the current auto industry. It is estimated that China has the potential to become the No.1 producing country by 2020.
59 60
Chinese Automobile Manufacturers Association report, 2007 Chinese Automobile Manufacturers Association report, 2007 61 Chinese Automobile Manufacturers Association report, 2007 62 Chinese Automobile Manufacturers Association report, 2007
63 64
“China's position as an auto giant confirmed, ” Xinhua News Agency, April 17th, 2007
“Ten per cent of world's new vehicles sold in China” Beijing Daily Messenger, January 30, 2007
21
China’s passenger vehicles market started from scratch and is growing into a giant within one generation. Please kindly find Figure 5.1 below, China’s passenger car market development for 30 years (from 1978 to 2007) (source: China Association of Automobile Manufacturers):
CAGR 20.34% CAGR 33.86%
5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 22 325 479 589 600 617 710 852 1,100 2,185 2,512 3,151 3,828 4,727
1978 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
China’s Passenger Car Market in ‘000 units Figure 5.1-China’s Passenger Car Market
Note: CAGR= Compound Annual Growth Rate, The year-over-year growth rate of an investment over a specified period of time. The compound annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered. This can be written as follows:
CAGR isn't the actual return in reality. It's an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate. You can think of CAGR as a way to smooth out the returns.
The main driving factors for such a growth are as follows: • Turn plan economy into market driven economy • Automotive industry starts from low base • Infrastructure improvement • Income increase • More private buyers
22
Ø Coming from the “Old Three” the Model Range Has Grown Tremendously Over The Last Years Total locally produced models
168 132
Santana
89 75 53
Jetta
12
1998
Market share 64%
Fukang
2002
28%
2003
19%
2004
17%
2005
10%
2006 H1
5.8%
Figure 5.2-Volume of Total Locally Produced Models
Source: Passenger car sales (CPCA Data), Internet search
Ø Price and Profitability Will Fall to Mature Market Level due to Fierce Competition
Sales Unused capacity
While announced passenger car production capacity goes up. . .
Million units 3.5 2.2 1.2
0.1 1.1 0.2 2 2.4 3.2 1.1
Chinese passenger car market price
6.4
2.6
Indexed 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 100 95 92
5.2
2.0 3.8
83 71 62
2002 Percent
100 80 60 40 93
2003
2004
2005
2006F
Average car price in 2005: RMB 127,200
. . . capacity utilization may go down
90
Price reductions in all segments in 2005:
68
Buick Regal:
62 59
-11% -10% -12% -14% -14%
Honda Accord 2.4: VW Bora: Audi A6:
2002
2003
2004
2005F
2006F
KIA Optima:
Figure 5.3-Passenger Car Production Capacity and Market Price
Source: media screening
23
5.3. Chinese Government’s Policies towards Car Industry and Industrial Structure
Ø The Government Is Determined to Develop The Chinese Automotive Industry to The Level of Global Competition Phases for China’s Automotive Industry Development Attract foreign investment
Technology transfer
Integration into global market via competitive domestic industry
•
Attract foreign investment with big market and low production cost Till now, all the major international auto-makers have established entity in China
•
Use JV as a platform to transfer technology from international partners Copying is to some extend tolerated by the government so as to help the learning process of local producers
• •
Develop technology and designs with full intellectual property Consolidate current more than 120 OEMs into a few major players with international competences Encourage local producers to commit global expansion and acquisitions
•
•
•
Under governmental macro-economic planning (NDRC), China shall become one of the major automotive manufacturers worldwide by 2010
Figure 5.4-Phases for China’s Automotive Industry Development
Source: media screening
Ø Market Explosion And Government Policies Lead to A Scattered And Confusing Industrial Structure
MMC VW Toyota Mazda Ford Chang’an Chang’an - Ford Suzuki Chang’an Chang’an Shenli Daewoo Geely Ford Nanjing Hafei Hafei Engines Volvo CNHTC Iveco Shaanx i HDT D’long FJMG Chongqing HDT FAW Hongta Harbin Sichuan Sichuan Toyota Xiamen Motors Yuejin Yuejin Jiangling SUV Transit ShenFei FAW-Jiabao SAICYizheng Shanghai VW (PC) SAIC SAIC/GM/W uling Shanghai GM (PC) SAIC/GM Shenyang Guizhou Hangtian Sanjiang Renault BJ Hyundai BAIC BJC Foton Mianyang Xinchen SH Diesel VW GM ISUZU Hino ISUZU Ford MAN SEM Qingling Nanya Iveco MMC ISUZU Fiat
FAW Yangzi FAW Car(Red Flag) FAW FAWJieFang TAIC Tianjing Huali Tianjin Toyota Tianjin
Toyota SUV FAW-VW Hainan Mazda
Xi’an Qinchuan Nissan Hyundai Kia Renault-Nissan Honda PSA
Guangzhou Honda (Export base) Honda Toyota Toyota Guangzhou Guangzhou Honda Direct holding Participation/Alliance Outside the three-big Foreign partners Possible changes Source: media screening
Fengshen Yueda Kia Zhengzhou (PC) (PC) Chaoyang Diesel Nissan DMC(HDT+PC) (Engine) SAWHonda Nissan SAW (Engine) Honda Diesel (SUV) DMC/ DCAC Cummins SAW-Renault GAI SAW-Hangzhou C Liuzhou Changhe Hefei Changhe JAC Co. JAC Van/HDT Ankai Liebao
SAIC/GM Dongyue
Jinbei
Brilliance BrillianceBMW Xinguang Brilliant
YBL
SAME
Toyota MMC BMW
Zhongxing
Suzuki
Hyundai
DCAC
MMC
DC Hyundai
Figure 5.5-Auto Industrial Structure
Source: media screening
24
Ø Cross-Relationship between International Players And Chinese Partners Adds To The Complexity
GAIC
BRILLIANCE
FAW
BAIC
(Mercedes-Benz)
SAW
YUE JIN
SEM
SAIC
HAFEI Joint Venture License Manufacturing Share Minority Share Majority
QIRUI JILI
CHANG AN
JIANG LING
Note: Foreign companies are subject to the following limitations: - 2+2 rule (maximum of 2 JV in commercial / passenger cars) - 50% rule (maximum 50% share in vehicle production JV) Figure 5.6-Cross-relationship between International Auto Companies and Chinese Partners
Source: media screening
Ø Ensuring A Healthy Development of Automotive Industry Is One of The Top Priorities Of Chinese Central Government
Objectives of overall Chinese Automotive Policies
Optimization of vehicle Technical standard system Environment Protection
Strive for further growth With quantitative target
Innovation and Domestic Brand Promotion
Overall Target: China shall become one of the major automotive manufacturers worldwide by 2010
Optimization of Industrial structure (Promotion of industrial Consolidation process)
Energy Saving
Integration into global automotive Market with WTO accession
Figure 5.7-Objectives of Overall Chinese Automotive Policies
Source: media screening
25
5.4. Beijing’s Passenger Cars Market
Ø A Stable Car Consumption Increase Except for Year 2004 Beijing, the capital of China, is recognised as the political, educational, and cultural centre of the People's Republic of China. Beijing tops China's list of per-capita monthly income. The average per-capita monthly income in Beijing reached 1,822 Yuan (227 U.S. dollars) in July, 2007, the highest in China, followed by Shanghai (a survey conducted by the National Bureau of Statistics). Figure 5.8 below is 2007 China’s passenger car registration data by province. From this figure, we could see BJ (348,004, accounted for 7.3% of the total number of registered cars of 2007) was in the 5th position, just below Guangdong (581,841 units), Zhejiang (426,415 units), Jiangsu (408,820 units) and Shangdong (404,131 units). The registered new cars in Shanghai totalled 173,551 units in 2007, which was far below Beijing.
700000 600000 500000 400000 300000 200000 100000 0
AN H B E UI IJI ON N G G QI N FU G JIA G U GA N A N NS GD U G U ON AN G G U GX IZ I H HA O U IN AN HE I L HE ON B E I G JI A HE N G N A HU N IN B NE H EI R M UN ON AN GO J IA L IA N G JIA S U N GX I J I LI LI A N ON NI I NG NG QI XI A NG S H HA A SH A I AN N X I SH DO A N NG G H S H AI AN SI CH XI U TI A N A NJ I TI N XI BET NJ IA YU N G NN ZH A EJ N IA NG
Beijing
Figure 5.8-China’s Car Registration Data by Province (2007)
Beijing Cars Registration Data (2003-2007) 400000 300000 200000 100000 0
2003 2004 2005 2006 2007
CH
348004 271254 207735 272028 285886
Figure 5.9-Beijing Car Registration Data (2003-2007) From Figure 5.9 above, Beijing Cars Registration Data (2003-2007), we could see clearly the car registration keeps a stable increase from 2003 to 2007 except for 2004. Many reasons caused the car sales declining in 2004: 1) car prices went down too quickly and consumers 26
delayed their purchasing and hoped to get a lower price; 2) traffic jams; 3) The soaring gasoline prices; 2) too expensive parking fees; 5) a lot of consumers who expected to buy cars in 2004 bought their cars in 2003 instead due to SARs happened in China to reduce the rate of infection by taking public transportation. Ø Beijing Plays an Important Role in China’s Auto Industry Beijing is playing a very important role in China’s auto industry. There are many auto manufacturers located in Beijing. Beijing Automobile Works Co., Ltd is one of the pioneers of Chinese automobile industry, the origin and epitome of the development of automobile industry in Beijing in the last half century, and the representative brand of the nation. The former Beijing Automobile Works was founded in 1958 as the second largest automobile factory in China. BAW takes the lead in China in independent R&D and manufacturing, the fruits of which are 4 series of product, military light off-road vehicles, civilian light off-road vehicles (SUV), trucks and amphibious vehicles; In 2002, Beijing Motor Investment Company and Korea Hyundai Motor Company established Beijing Hyundai Motor Company in 2002, which is a China and Korea joint venture; On August 8th, 2005, Beijing Automotive Industry Holding Corp and German-US auto giant, Daimler-Chrysler established Beijing Benz-DaimlerChrysler Automotive Co., Ltd. (BBDC) in Beijing; Beijing holds an international A-show per year, which has been recognized as the most important one in China by more and more global brands. Last year, about 1,500 manufactures from 20 countries/areas participated. Totally 572 passenger cars, 39 concept, 92 China premiere, 10 global premiere were in Beijing; totally over 650,000 visitors came and visited.
27
6. EMPIRICAL FINDINGS AND DATA ANALYSIS
In this chapter, it includes three parts: the first part mainly introduces the demographic information of respondents, including gender, age, income and education and the first part also introduces the type of employment of all respondents; the second part of this chapter mainly introduces the car ownership, the purpose of purchasing the car and the purchasing price of the car; the third part of this chapter introduces information source and the importance of the car purchase decision. In the empirical part, we report the following statistics. Please kindly see our explanation and some examples in Table 6.1.1:
Statistics Frequency Percentage Explanation A measure of the number of occurrences of a repeating event per unit time A way of expressing a number as fraction of 100 The Reasons of Using It and Examples Example: from Table 6.1.2, we could see how large male is relative to female in our investigation
The regression coefficients; also means the change in dependent variable per Unstandardized unit change in the predictor. The sum of Coefficients the observations divided by the number of observations Mean Standard Deviation
Example: from Table 6.3.4 and Formula Y=3.144+.158X, we see X is independent variable and Y is dependent variable. 0.158 changes of X will cause 1.0 point change of Y
The sum of the observations divided by From the mean, we could know the central the number of observations location of the data set, and from Standard Deivation, we know the spread of the data A measure of dispersion of a set of set values The probability of making a decision to reject the null hypothesis when the null We use the significance level 0.1 in this hypothesis is actually true. The decision study, so it mean if P-value < .1, we could is often made using the p-value: if the preject the null hypothesis. value is less than the significance level,then the null hypothesis is rejected. The proportion of variance in the dependent variable which can be predicted from the independent variables Example: R Square=20% means that only 20% of the variance of X's dependent variable can be explained by the independent variable
Significance Level
R Square
Table 6.1.1-Explanation and Examples of Statistics Used in Our Study
6.1. Profile of Respondents
As we could see from the following Table 6.1.2, there are 116 male respondents out of 189 respondents, which accounted for 61.4% of total respondents; regarding the age, 92.1% of people are under 40. The majority falls between ages 21-30, which accounted 51.9% of total respondents. In terms of the monthly household income, 84.7% of respondents’ monthly household incomes are below RMB 19,999. The monthly household incomes, both “below 5000” and “5000-9999” take the highest ratio, 25.9%. In terms of education, our respondents
28
are very highly-educated, 89.5% of the respondents have the university degree or post graduate degree or above. Table 6.1.2-Demographic Information of the Respondents Demographic Information of the Respondents
Characteristics Gender Measuring Group Male Female Less than 20 21-30 31-40 41-50 Above 50 Below 5000 5000-9999 10,000-14,999 15,000-19,999 Monthly Household Income 20,000-24,999 25,000-29,999 30,000-34,999 35,000-39,999 40,000-44,999 45,000-49,999 Above 50,000 Junior High School Senior high/Technical/Prof. Education College/University Post Graduate or Above Frequency 116 73 3 98 73 8 7 49 49 38 24 6 8 5 1 1 1 7 5 15 107 62 Percent 61,4 38,6 1,6 51,9 38,6 4,2 3,7 25,9 25,9 20,1 12,7 3,2 4,2 2,6 ,5 ,5 ,5 3,7 2,6 7,9 56,6 32,8
Age
In our survey, there are 162 employed people, including full-time employed and part-time employed. Table 6.1.3 shows that foreign invested company takes the highest percentage (26.5%) of the total; followed by the state-owned (24.1%) and private enterprises (22.2%). Table 6.1.3- Type of Employment
Category Government authorities State-owned Private enterprises Sino-foreign joint ventures Foreign invested company Self-employed Others Total Frequency 15 39 36 4 43 15 10 162 Percent 9.3 24.1 22.2 2.5 26.5 9.3 6.2 100 Cumulative Percent 9.3 33.3 55.6 58 84.6 93.8 100
29
6.2. Car Ownership
Among all of respondents, 134 respondents own cars: 110 out of 134 respondents registered under their names or other family members’ names (58.2%); 24 out of 134 respondents registered under their companies’ names (12.7%). 55 out of 189 respondents have no cars (29.1%). 43.3% of car owers use their cars for “personal purpose”, 37.3% of car owners use their cars for “family purpose” and only 19.4% of car owners in our survey use the cars for business purpose. Most of respondents (91%) purchased a brand new car and only 9% of respondents purchased a second-hand car. Table 6.2.1 shows that most of purchase prices fall between RMB 0-RMB 299,999, accounted for 84.3% of total respondents. Table 6.2.1-The Purchase Price
Frequency
Behavior or behaviour is the range of actions and mannerisms made by organisms, systems, or artificial entities in conjunction with their environment, which includes the other systems or organisms around as well as the physical environment.
Car Purchasing Behaviour in Beijing: An Empirical Investigation
Umeå School of Business and Economics University of Umeå Master Thesis Spring Semester 2008 Supervisor: Agneta Marell Authors: Liu Dongyan Bai Xuan
1
ACKNOWLEDGEMENTS
At first beginning, we would like to thank our supervisor Agneta Marell who gave us valuable suggestions and feedback, and guided us throughout our research. Furthermore, thanks all respondents who have participated in this study. At last, thanks our families who support us all the time.
Umea Spring May 2008
Liu Dongyan
Bai Xuan
2
ABSTRACT
This study aims to give an overview on young Chinese consumers’ car purchase behaivor. This study is mainly focused on Beijing young people. Both primary and secondary data were gathered during the research. The results show that car purchasing decision is an important decision for most of Chinese consumers. Consumers get information from different channels, car sales staff, Internet, family/friend (word of mouth), car shows etc, but with the rapid development of Internet, a lot of consumers start to use Internet to get car information that Internet has become 2nd wisely used channel to get information in our study. The results of this study tells us that Chinese consumers take “safety” as the most important characteristic and take “value for money” as the second most important and “riding comfort” as the third important characteristic when purchasing a car. “saftey” and “value for money” are considered very importan, which might not be significantly different from western car customers. For “riding comfort”, most of Chinese family have only one car, so they use the car a lot for picking up family members, but in developed countries, it is common that each family has two or three cars, so “riding comfort” might not be considered as much important as in China. Chinese consumers take “after-sale maintenance” and “exterior design/size” as the forth most important factors when making the purchase decision. For “exterior design/size”, it indicates that Chinese people are status-seeking and Chinese people prefer to choose a bigger car with a good appreance (Mian Zi Che) to show their good social status and want to get respects from others. Chinese consumers put the least importance on resale value that is because second hand car market is not well developed in China, so Chinese consumers usually don’t consider the factor of resale value when they purchase cars. Chinese customers put the second least importance on equipment and interior, which explains again Chinese consumers pay more attention on outside rather than inside, i.e, car performance.
1
Table of Contents
ACKNOWLEDGEMENTS............................................................................................................................ 2 ABSTRACT.................................................................................................................................................... 1 1. INTRODUCTION ................................................................................................................................. 1 1.1. 1.2. 1.3. 2. BACKGROUND ................................................................................................................................ 1 RESEARCH QUESTIONS .................................................................................................................... 1 RESEARCH PURPOSE........................................................................................................................ 2
SCIENTIFIC IDEAL AND PARADIGM ............................................................................................. 2 2.1. CHOICE OF STUDY ........................................................................................................................... 2 2.2. PERSPECTIVE .................................................................................................................................. 3 2.3. THEORETICAL AND PRACTICAL PRECONCEPTIONS ............................................................................ 3 2.4. SCIENTIFIC APPROACH .................................................................................................................... 4 2.5. RESEARCH APPROACH..................................................................................................................... 4 2.6. THE CREDIBILITY OF RESEARCH FINDINGS ........................................................................................ 5 2.6.1. Reliability .................................................................................................................................. 5 2.6.2. Validity...................................................................................................................................... 5 2.6.3. Generalisability ......................................................................................................................... 6
3.
RESEARCH METHODOLOGY .......................................................................................................... 7 3.1. 3.2. 3.3. 3.4. 3.5. RESEARCH DESIGN .......................................................................................................................... 7 DATA RESOURCE ............................................................................................................................ 7 QUESTIONNAIRE DESIGN ................................................................................................................. 7 SAMPLING METHODS ...................................................................................................................... 8 PRE-TEST & PERFORMED WORK ...................................................................................................... 9
4.
THOERITICAL FRAMEWORK ....................................................................................................... 10 4.1. CONSUMER DECISION PROCESS ..................................................................................................... 10 4.2. INTERNET MARKETING AND CONSUMER DECISION PROCESS........................................................... 14 4.3. UNDERSTANDING THE CONSUMER BUYING PROCESS ...................................................................... 17 4.3.1. Kolter’s Model of Buying Behavior .......................................................................................... 17 4.3.2. Classification of Product-related Attributes.............................................................................. 17 4.3.3. Two Basic Mechanisms about Social Process ........................................................................... 18 4.4. PROPOSED MODEL FOR THE CURRENT STUDY ................................................................................ 19
5.
INTRODUCTION TO CHINA’S AUTOMOBILE MARKET .......................................................... 20 5.1. 5.2. 5.3. 5.4. OVERVIEW OF CHINA’S PASSENGER CARS MARKET IN 2007 ........................................................... 20 THE PAST AND THE FUTURE OF CHINA’S PASSENGER CARS MARKET .............................................. 21 CHINESE GOVERNMENT’S POLICIES TOWARDS CAR INDUSTRY AND INDUSTRIAL STRUCTURE .......... 24 BEIJING’S PASSENGER CARS MARKET............................................................................................ 26
6.
EMPIRICAL FINDINGS AND DATA ANALYSIS........................................................................... 28 IN THIS CHAPTER, IT INCLUDES THREE PARTS: THE FIRST PART MAINLY INTRODUCES THE DEMOGRAPHIC INFORMATION OF RESPONDENTS, INCLUDING GENDER, AGE, INCOME AND EDUCATION AND THE FIRST PART ALSO INTRODUCES THE TYPE OF EMPLOYMENT OF ALL RESPONDENTS; THE SECOND PART OF THIS CHAPTER MAINLY INTRODUCES THE CAR OWNERSHIP, THE PURPOSE OF PURCHASING THE CAR AND THE PURCHASING PRICE OF THE CAR; THE THIRD PART OF THIS CHAPTER INTRODUCES INFORMATION SOURCE AND THE IMPORTANCE OF THE CAR PURCHASE DECISION. IN THE EMPIRICAL PART, WE REPORT THE FOLLOWING STATISTICS. PLEASE KINDLY SEE OUR EXPLANATION AND SOME EXAMPLES IN T ABLE 6.1.1:............................................................................ 28 6.1. PROFILE OF RESPONDENTS ............................................................................................................ 28 6.2. CAR OWNERSHIP ........................................................................................................................... 30 6.3. INFORMATION SOURCE AND THE IMPORTANCE OF CAR PURCHASE DECISION................................... 30 6.4. SATISFACTION OF CURRENT CAR ................................................................................................... 33 6.5. CAR PURCHASE CRITERIA AND IMPORTANCE OF E ACH ATTRIBUTE ................................................. 36 6.5.1. 6.5.2. 6.5.3. Examine the importance of each characteristic by comparing Mean (all respondents)............... 36 Examine the difference of the importance in means by gender (all respondents)........................ 38 Examine the difference of the importance in means by age (all respondents) ............................. 40
2
6.5.4. Examine the difference of the importance in means by education (all respondents).................... 43 6.5.5. Examine the difference of the importance in means by different purchasing budgets (respondents who intend to buy a car within two years) .............................................................................................. 48 7. FINDINGS AND MANAGERIAL IMPLICATION........................................................................... 50 7.1 7.2 8. FINDINGS .......................................................................................................................................... 50 MANAGERIAL IMPLICATION ............................................................................................................... 52
LIMITATION AND SUGGESTIONS FOR FUTURE RESEARCH................................................. 53
3
1. INTRODUCTION
In this chapter, we will present the topic that the thesis is going to discuss. It starts with the background discussion; then it introduces the research questions; finally, it ends with the research purpose.
1.1. Background
China is the most populous country in the world with a population of over 1.3 billion, about one-fifth of the world's total population. China has the world's fourth largest economy and second largest purchasing power parity. China is always taken as an emerging superpower due to its huge population, fast growing economy and large foreign investments and research. China has become a fast-growing auto market over the past decade, with sales surging tenfold to more than 5.0 million units in 2007. Growth has been driven by rapid economic growth and increasing wealth-double-digit average wage gains over the past decade and more than a three-fold surge in equity markets. Despite this rapid growth, vehicle penetration remains very low at only 27 vehicles per thousand people, compared with a G7 average of 610. With a population of 1.3 billion people and a vehicle fleet of only 35 million, China will continue to experience rapid growth. While car sales gains moderated to 22% in 2007 and will likely increase by 15% in 2008 to 5.9 million units, China is on target to overtake the United States and become the largest automotive market by roughly 2020. 1 For most people, purchasing a car is the second most important and expensive investment, next to purchase of a house; for the automotive manufacturers, first-time car buyers give them the opportunity to create positive brand image which definitely could be reflected on in next coming years because consumers could make repeat car purchasing. The passenger car market changed very rapidly due to the fierce competition and advanced technology, therefore, it requires the automotive manufacturers and car dealers to understand the consumers ’ preference on time and take fast actions to reflect market changes quickly. So, it would be very interesting to know consumers’ preference in today’s fast-changing passenger car market and how the customers’ buying process is (what the critical elements of making their purchasing decision are, what are the important information sources consumers used and how do consumers search for the information…).
1.2. Research Questions
Chinese culture is very distingwished from Western culture in many ways, so the purchasing behavior could be also very different, for example, in China, there are “face car” and Chinese people want to use the big and luxury cars to show their good social status and interact with others to save their face. Audi successfully launced Audi A6 long version which was desgined uniquly for China’s market. The success of Audi A6 long version in China is because Chinese people love their faces. Such a big German-made car could give Chinese people 'Face' very well. But in Europe or USA, most of people buy Audi, BMW or Mercedes because of the quality, safety standards or the joy of driving which cars bring to them. Additionaly, “Guan Xi” (relationship or networks) is important in Chinese people’s daily life, so friends or family recommendations on cars might play an important role during the decision process. Such cultural difference causes the different requirements towards car attributes between western people and Chinese people. Now American, European and Japanese automakers all see China
1
Carlos Gomes (2008), “Emerging Markets Will Continue to Lift Global Auto Sales to Record Highs-China and Brazil Will Lead the Way in 2008, ” Global Economic Research, January 18, 2008
1
as a growth market and have high hopes for China, so it is really interesting to conduct a study about the purchase behavior in China, so our research question is what the car purchase behavior in an emerging market, China Ø What are the most important characteritics considered when Chinese young consumers purchase a car? Ø What is the decision process when Chinese young consumers buy a car? This is to help managers understand the decision process and then make quick reactions to influence consumers purchasing decision.
1.3. Research Purpose
The purpose of this thesis is to understand the decision process and to identify the most important attributes of a car.
2. SCIENTIFIC IDEAL AND PARADIGM
This chapter will introduce choice of study, scientific approach and research approach we chose for our study and the credibility of research findings.
2.1. Choice of Study
To find and determine a subject we will study with, we started with a brainstorming to see what possible topics we are interested in. The technique of the brainstorming, taught as a problem-solving technique on many business and management courses, can also be used to generate and refine research ideas.2 And then to have a literature review to choose a most suitable subject which those previous studies have not done enough studies. The topic of automobile purchasing behavior is what we are interested in. There are not so many studies regarding car purchasing behavior which have been done so far for Chinese market and especially there are not enough studies regarding China’s young consumers’ car purchasing decision making, so we would like to focus on young people in Beijing. We choose Beijing as the representative city for our research because: firstly, Beijing, as the capital of China, is recognised as the political, educational, and cultural centre of the People's Republic of China. Beijing is also one of the four municipalities of China, which are equivalent to provinces in China's administrative structure and is one of the Four Great Ancient Capitals of China. Secondly, a high income is the basis of motorization. Beijing tops China's list of per-capita monthly income. The average per-capita monthly income in Beijing reached 1,822 yuan (227 U.S. dollars) in July, 2007, the highest in China, followed by Shanghai. 3 In cities like Beijing, Shanghai, the relatively rich people become car owners and the number of automobiles increases overnight. The fast growth of the number of car owners far outpaces the speed of road construction and parking areas4, so this is another reason for us why we choose Beijing as the representative city. Thirdly, many famous universities are in Beijing and millions of excellent graduates found their jobs and settled down in Beijing annually.These well-educated people have good purchasing power to buy cars.
Mark Saunders, Philip Lewis. Et. al.(2003), Research Methods for Business Students, 3rd Edition, Harlow: Financial Times,Prentice Hall, p20 3 “Beijing tops China's list of per-capita monthly income in July,” August 25th, 2006,http://english.peopledaily.com.cn/ 4 People’s daily, August 2004,http://english.peopledaily.com.cn/
2
2
In our questionaire, we asked car consumers to rank the importance of each attribute, such as, price, performance, fuel consumption, safety, interior and exterior design, after-sale maintenance and overall brand…Previous research 5conducted in Shanghai has told us that Chinese people seek for status. Once Chinese people reach the top of the social pyramid, they are very confident (wealth, strong government connection) and they want everything the best –biggest, most luxurious car. Price is also important because of the internal competition between dealers (even the same brand). People now have more price options and knowledge, so that they become sensitive. 6We want to know how the situation in Beijing is and if Beijing young people are price-sensitive and status-seeking when compared with Shanghai people in the previous research conducted by Jason Ni (2007). We also asked some questions regarding information search. The traditional ways to get information are: get suggestions from trusted friends or family member, watch TV advertisements, read car magazines or talk with sales people in dealer’s shops, but with the increasing use of the Internet and other advanced technologies, it has given car consumers an edge in the vehicle buying process, making them less dependent on dealers. So, it is quiet important for auto manufactures and dealers to know well if there are any major shifts in the buying process due to the rapid expanding of Internet in order to keep pace with the changing consumer dynamics. Auto manufactures have to get a good empirical understanding of consumer behaviour to improve the customer/dealer relationship and to get increased sales and to strengthen the brand loyalty. We have studied a lot of things regarding Consumer Behavior, Consumer Analysis and Decision Making, in our Master’s program in Marketing in the University of Umea, so our chosen topic could be a good summary for our courses we had finished. In addition, we will do some statistical analysis by using SPSS we learned in our 2nd course, consumer analysis. Dongyan had a good work experience in a multinational automobile company, which could be very helpful in understanding of our topic. This is another reason why we chose this topic.
2.2. Perspective
Firstly, in our study, we take the enterprise’s management perspective to provide the management of the automobile companies, both Chinese local auto manufacturers and international auto manufacturers in China with results of the Chinese customers consumer behaviors towards cars and help auto manufacturers make the right decisions, but in order to get this information, we also have to take a consumer’s perspective in order to truly understand the consumer’s decision process, so enterprise and customer’s perspectives will be used interchangeably throughout the study. Secondly, there will be some kinds of theoritical significance too, especially in understanding the consumer decision process in car purchasing area, for example, we developed a model (Figure 4.6) in the theortical part in this study.
2.3. Theoretical and Practical Preconceptions
Knowledge, educations, social background and practical experiences constitute the theoretical and practical preconceptions.
5
Jason Ni (2007), “Motorization and Vehicle Purchase Behavior in China: Case Study of Shanghai, Institute of Transportation Studies,” PhD dissertation, University of California at Davis, July, 2007 6 Jason Ni (2007), “Motorization and Vehicle Purchase Behavior in China: Case Study of Shanghai, Institute of Transportation Studies,” PhD dissertation, University of California at Davis, July, 2007
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Firstly, we both took Consumer behavior, Advanced Market Analysis and Executive Decision Making courses in Umea University, which could be very useful for our research. Secondly, before coming to Sweden to study for this Master program, we both studied and worked in China’s Capital Beijing for several years, so we know Beijing well and we know Beijing people well. That is one of the reasons we would like to have the survey conducted in Beijing. Thirdly, Dongyan had worked several years in automobile companies in Beijing. The work experience could help avoid a lot of problems, for example, for questionnaire design, Dongyan could quickly know the questions which are most important and relavant for manager’s decisions based on her working experience. Dongyan also have a lot of ideas regarding Chinese consumers’ purchasing behavior from her past daily work. After finishing the current study, we could compare the results from pratcial work and our current research. Additionaly, Bai Xuan worked at her part-time in a Marketing agency during her university time, so this practical work is just right fit for our study area.
2.4. Scientific Approach
For scientific approach there are three kinds of approaches, deduction, induction and a mixture of them, abduction. Deduction is a hypothesis testing theory and is the way of conclusion. 7From a theory, a hypothesis is formed and through logic conclusions, the result is achieved. 8 Induction is described as method for discoveries. 9 By Induction, the researcher infers the implications of the findings for the theory that prompted the research. In abduction processes, the researcher combines both induction and deduction. Deduction is often associated with quantitative research design. Induction is often associated with qualitative research design. In our study, we started with searching the consumer behvior theories related to the subject, and then we design a survey questionnaire for collecting quantitative data in order to analyze also interpret them and at last to give out a conclusion and implication in car purchasing decision making facts. That is to say, in this study, the scientific approach we mainly used is deduction and mixture of some induction.
2.5. Research Approach
There are two main research approaches in business research, quantitative and qualitative. Quantitative researchers are more concerned about issues of design, measurement, and sampling because their deductive approach emphasizes detailed planning prior to data collection and analysis. 10 Qualitative researchers are more concerned about issues of the richness, texture, and feeling of raw data because their inductive approach emphasizes developing insights and generalizations out of the data colleted.11 Quantitative approach is what we mainly used in our study. The first reason for the quantitative approach to be chosen is that as mentioned above, the deductive approach is often associated with quantitative research design. Another reason for the quantitative approach is that we want to generalize from our samples and make conclusions from the smaples. We don’t know the exact number of Beijing young people and collection data from each case is not possible and not nesseary for us, so we used questionnaire in our study to collect primary
7 8
Holme, I. and Solvang, B, (1997).,Forskningsmetodik.,Lund: Studentlitteratur. Eriksson, L.T. and Wiedershiem-Paul, F. (2001). Att utreda, forska och rapportera. 9 Holme, I. and Solvang, B. (1997). Forskningsmetodik. Lund: Studentlitteratur. 10 W.Lawrence et al (2000), Social Research Methods, Qualitative and Quantitative Approaches, 4th Edition, Boston: Allyn and Bacon, p122 11 W.Lawrence et al (2000),Social Research Methods, Qualitative and Quantitative Approaches, 4th Edition, Boston: Allynand Bacon, p122
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data in order to make generalization from our samples. Once data is obtained, and then analyzed, it becomes the basis for conclusions and decision-making. 12
2.6. The credibility of research findings
It is important to make sure the credibility of data sources and theories choices in marketing research. We use such criteria, reliability, validity and generalisability, to keep critical in each process of our study to avoid any possible bias and errors which might happen.
2.6.1. Reliability
According to Mark Saunders, reliablity refers to the degree to which data collection method will yield consistent findings, similar conclusions will be reached by other researchers or there is transparency in how sense was made from the raw data.13 Jason Ni 14 did a similar study as our study for Shanghai in 2007. In his study, quantatitive research and most of statistical tests used in our study were also taken by him. The result got by him has some similiarity with our study, for example, Chinese car consumers are pricesensitive and status-seeking. Furthermore, for the primary data, we use Microsoft Excel to design the questionnaires for the survey, then we use the statistical analysis software, SPSS to analyze the data. Both of Excel and SPSS are used by most researchers quiet often in business research. We mainly use Descriptive Statistics, t-Tests, ANOVA-test and regression analysis in SPSS. We compared the two means difference with the t-Test, for example, we investigate if there is any mean difference between male and female group regarding each car attribute. t-Tests is appropriate to test the difference in only two groups, so we use ANOVA to examine the difference of in means by different age groups. In this study, we also use regression analysis to examine which factor is highly related to consumers’ satisfaction level. The multiple regression models could be a good predictor for consumers’ future purchasing. Throught the whole study, we take 90% confidence level. Both 95% confidence level and 90% confidence level are commonly used in statistical studies. For the secondary data and theory sources, we searched for scientific database and academic articles at the Umea University library and on the internet by using searching engine like Google scholar. We also use keywords, such as consumer behavior, car purchase, Beijing car market and plus “PDF”. Most of files we got by using this way were written by academic researchers. These sources are all public-used and relevant to the subjects we study with.
2.6.2. Validity
Validity is concerned with whether the findings are really about what they appear to be about.15 For the validity of theory choices, we do the literature review of studies in consumer behavior area, for example, we find theories regarding decision process by reading the popular marketing resesrach textbook by Michael R. Solomon (2003) and by reading Journal of
12 13
Hair, J. Jr. et al. (2003), Essentials of Business Research Methods, International Edition, NY: Wiley, p 124-128
Mark Saunders, Philip Lewis. et al (2003), Research Methods for Business Students, 3rd Edition, Harlow: Financial Times, Prentice Hall, p488
14
Jason Ni (2007), “Motorization and Vehicle Purchase Behavior in China: Case Study of Shanghai, Institute of Transportation Studies,” PhD dissertation, University of California at Davis, July, 2007
Mark Saunders, Philip Lewis. et al(2003), Research Methods for Business Students, 3rd Edition, Harlow: Financial Times, Prentice Hall, p101
15
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Consumer Marketing by Burton, S. & Babin, L (1989) and by reading Journal of Consumer Research by Puto, C. (1987). And at last we choose the most commonly used buying behavior theory by Phillp Kotler who is the farther of marketing. In our study, we design the questionnaire to collect data. It is one of the most popular research methods in the consumer behavior related subjects, that can be seen as the assurance of the validity of our choice in research strategy. During the survey, what should be carefully noticed is that there are two kind of errors might rise, sampling and non-sampling errors.16 Sampling errors mean that errors happened when the samples design is not suitable, as we will describe in next chapter, based on time and budget limitation, we use the non-probability convenience sample which possible to bring the occurring of error, so we enlarge the size of sample as possible as we can to get 192 samples in order to decline this kind of errors. For the non-sampling errors, that might occur when something wrong with the measurement, data recording and data analyzing, response rate and so on. We solve this problem with pre-test and re-send questionnaire methods which will give out details in next chapter (sampling methods). And for the questionnaire, Dongyan had worked in the marketing department in a multinational company in Beijing, so she has a lot of experience with the questionnaire design. Most of questions have been tested during her old work. In addition, we translated our questionnaire into Chinese language. We are also very careful for both the presentation to repondents and the ability for recording and analyzing the data for ourselves. That is to say that the language used is clear and unambiguous and the length and the contents of questionnaires are reasonable.
2.6.3. Generalisability
Whether the findings may be equally applicable to other research settings is the criteria named generalisability. When we design the questionnaire, we start with finding out questions related to our purpose of study such as possible factors that could influence purchase behavior in car purchasing progress and then developed, then after evaluating we choose these most relevant ones to form our questionnaire. The population of our study is Beijing young people. We choose young people because young people are increasingly becoming an important group of car buyers in China and representatives of Beijing car consumers. The average age of car owners dropped to 32 years old in 2006, four years less than in 2005. Surveys indicate that the 25-29 year-old age group accounts for the largest portion of potential car buyers in China, while those between the ages of 18 to 25 already represent more than 11% of overall purchases. With about 200 million people in the 20-29 age group and nearly 120 million in the 15-19 age group, long-term demand growth is assured. 17 We distributed our questionnaires among our friends and our friends’ friends and most of them are young people according to our survey result (92.1% of our respondents’ ages are below 40).
16 17
Aaker, D. A. et al. (2004), Marketing Research, 8th Edition, NJ: Wiley, p373
Carlos Gomes (2008), Emerging Markets Will Continue to Lift Global Auto Sales to Record Highs-China and Brazil Will Lead the Way in 2008, ” Global Economic Research, January 18, 2008
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Beijing is a representative city of China’s developed cities, so the result of our study could be useful for other big and developed cities in China, such as Shanghai and Guangzhou. But due to the big demographic differences and China’s imbalanced regional development, so our result might not be so meaningful for other developing cities in China. In addition, because the economic situation and the consumer culture are different between China and European countries, therefore, the study is only limited to the Chinese market.
3. RESEARCH METHODOLOGY
This part includes the research design, data resource, questionnaire design, sampling methods and the performed work.
3.1.
Research Design
A cross-section design entails the collection of data on more than one case and at a single point in time in order to collect a body of quantitative or quantifiable data in connection with two or more variables, which are then examined to detect patterns of association.18 Crosssectional analysis occurs when a researcher wishes to compare findings across various cluster or market segments at a particular point in time to identify points of difference or similarity in performance or response pattern.19 Survey research comprises a cross-sectional design in relation to which data are collected predominantly by questionnaire or by structured interview on more than one case and at a single point in time in order to collect a body of quantitative or quantifiable data in connection with two or more variables, which are then examined to detect patterns of association.20
3.2.
Data Resource
Quantitative data are measurements in which numbers are used directly to represent the characteristics of something. Since they are recorded directly with numbers, they are in a form that lends itself to statistical analysis.21Qualitative data represent descriptions of things that are made without assigning numbers directly. Qualitative data are generally collected some type of unstructured interviews or observation. 22 For our survey, we need to collect emprical data and test the relationship between data, so we chose quantitative study. For primary data collection, we mainly designed the questionnaires and distributed the questionnaire by emails. For second-hand data collection, we mainly collect them by reading books, academic literature, journals and searching engine online.
3.3.
Questionnaire Design
The questionnaire comprises of two parts. The first part is the main part of the questionnaire, including 24 questions; it mainly asked respondents’ opinions and decisions of car purchasing and the factors which affect their purchasing decisions. 3 questions out of 25 are multiple-choice questions. All of 25 questions
18 19
Bryman, Alan and Bell Emma (2003), Business Research Methods, Oxford University Press Hair, Joseph F et al, Chichester, (2007),Research Methods for Business, England ; Hoboken, N.J. : John Wiley & Sons Ltd., p129 20 Bryman, Alan and Bell Emma (2003), Business Research Methods, Oxford University Press 21 Hair, Joseph F et al, Chichester, (2007),Research Methods for Business, England ; Hoboken, N.J. : John Wiley & Sons Ltd., p151 22 Hair, Joseph F et al, Chichester, (2007),Research Methods for Business, England ; Hoboken, N.J. : John Wiley & Sons Ltd., p152
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are close-ended questions because they are easy to answer, take less time to answer, have less potential to errors, and make comparison, tabulation and analysis easier. 23 We used 5-point Likert scaled questions on which the respondents were asked to measure their satisfaction towards current cars and the importance of each factor in their future car purchasing. The scale used in our research is that “1” means “very dissatisfied” and “5” means “very satisfied” and “1” means” very unimportant” and 5 means “very important”. Liker-type scale statements were chosen to evaluate consumers’ attitude in our study because the Likert-type scale has been used by persuasion researchers for over three decades greatly. The original scale of this type was developed by Rensis Likert and was explained in his article, "A Technique for the Measurement of Attitudes," in Achieves of Psychology (1932). He reported very satisfactory reliability data for the scales developed with his procedure. 24 The second part is the demographic part, by which we asked the respondents about gender, age, income, household size, education level, occupation and employer category (government authorities, state-owned enterprises, private enterprises…)
3.4.
Sampling Methods
Our study was conducted by using a non-probability convenience sample due to the restricted timing and resources. Such kind of sampling method often allows a potential respondent to self-select into the sample and allows the researchers to choose who, where, and when to collect data. One of the shortcomings of this method is that the results may be nonrepresentative of the entire population. However, this method is quite common in business and management research as this can ensure a high response rate whereas probability sampling involves a lot of difficulty and costs (Bryman & Bell 2003). 25 For the data collection, we mainly collect our primary data by distributing questionnaires through emails. Firstly, we translated our questionnaire into Chinese language. Secondly, we sent our surveys by emails to our friends in Beijing. The reasons we used email data collection are by following: 1) it is easy for us to reach people since we are not in China now and we could be sure that we are investigating the right persons; 2) response rates for us are higher and response time are shorter than other methods. In our case, for some respondents, if there were no replies from them, we could send some reminding and follow-up messages and ask them to finish the questionnaires, and then the respondents usually replied us in a short time. 3) It has lower costs; so this kind of method is good for us, students which have very limited budget; 4) a big advantage of the email survey is the easy contact and instant feedback from e-mail respondents. Having just received a message from a researcher requesting further information or clarification on some replies, an instant reply could be expected. 26 In our study, we had several examples on this, for example, we could not open the excel file sent by one respondent and we asked him/her to send the questionnaire again; another example is that we found one answer from one questionnaire is missing, then we sent an email to this respondent for this question’s answer, finally we got the feedback quickly. However, there are also some disadvantages about emailing survey: 1) the design and the format of the email survey can be cumbersome to follow, which might discourage some respondents from answering (Schaefer and Dillman, 1998)27. We had some problems in terms
Aaker, D. A. et al. (2004), Marketing Research, 8th Edition, NJ: Wiley, p316-17 William E. A, James C. M , “The Likert Type Scale,”http://www.jamescmccroskey.com/publications/25.htm 25 Bryman, A and Bell, E (2003), Business Research Methods, Oxford University Press 26 Janet Ilieva, Steve Baron and Nigel M Healey (2001), “On-line Surveys in International Marketing Research: Pros and Cons, ”July 2001 27 Schaefer, R. and D. A.Dillman (1998), “Development of A Standard E-mail methodology. Results of An Experiment,” Public Opinion Quarterly, Fall, Vol. 62, i3
24 23
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of our questionnaire format and design. We designed the questionnaire by using Excel. We attached the Excel format questionnaire to the e-mail. We used “macro” function during our questionnaire design phase, so the questionnaire required the respondents to enable “macro” when opening the questionnaires. Some respondents were worried about this because they think maybe it has Internet virus, so they were not willing to open such kind of Excel file. In addition, people have different versions and features of Excel, for example, for some respondents, their status was in designing status, in order to answer the questions, and they had to go to tool box to choose to close the designing status. For some cases, the respondents had to decrease the safety grades to open our e-questionnaires due to the “macro” problem. Although we already gave respondents clear directions for such problems which may happen, but a lot of respondents were not willing to volunteer their time to fill out the questionnaires for which they could not receive any benefit, so a great deal of care must go into and choose the design and format of the e-mail survey in future research. 2) Lack of anonymity28. In our questionnaire, we asked the household income, so probably it could present a possible reason for recipients refusing to respond. We received 192 questionnaires back. We got 9 incomplete questionnaires totally. For the incomplete questionnaires, we sent respondents another emails to follow up and we got most of missing answers back. In the end, we got 189 usable questionnaires and 3 questionnaires out 9 incomplete questionnaires are not usable.
3.5.
Pre-test & Performed Work
The purpose of the pre-test is to identify if the questionnaire is able to provide all the information as expected by the researchers (Aaker et al. 2004, p327). 29Pre-test is to test if our questionnaire is user-friendly and if there any ambiguous questions exist, and if the time taken to finish the survey is too long. Another purpose of pre-test is that we could refine our questionnaires after we know our problems. We developed the questionnaire ourselves with our past experience, as said, Dongyan worked in a Marketing department in an international car company and Bai Xuan worked at her part-time in a market research company during her bachelor’s time. We also read many surveys published on the web. The contents and the format of the questionnaire were discussed with our supervisor. Finally, after consulting our supervisor, we deleted several questions which are irrelevant to our analysis; for example, the engine size of the consumer’s current car and other detailed car’s interior and exterior’s equipments because kind of questions are not so useful for our main academic research topic, the purchasing decision, but maybe more useful for a car producer. We also made some changes about questions regarding pre-purchase decisions. We added some questions about if the car purchasing decision is an important decision and if they discussed the decision at home or with friends. From these answers we might be able to conclude something about the time and complexity of the decision. Five consumers who were chosen to answer the questionnaires by emailing as the pre-tests. All of five respondents reported that they had no difficulty in answering the questions except that one guy thinks the questionnaire is a little bit long. One of guy reflected that he had some problems with opening Excel file by using the function of “enable macro”. To solve this problem, we wrote a detailed cover letter with clear direction statements on how to solve such kind of technical excel problems in the emails. In addition to explanation on how to answer the questions, in this cover letter, we also wrote some basic information about the questionnaire (who is investigated, who we are, how big is the sample size, this research is an
28
Matthias Meckel, David Walters and Philip Baugh, “Mixed-mode Surveys Using Mail and Web Questionnaires, ” Electronic Journal of Business Research Methods, volume 3 Issue 1 2005, p69-80 29 Aaker, D. A., Kumar, V., & Day, G. S. (2004). Marketing Research, 8th ed. United States of America: John Wiley & Sons.
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academic research, what is the purpose of this research). We also mentioned that we will ensure the respondents’ privacy (including an explanation about personal questions, an explanation on why we asked information regarding income and household size and so on, a statement that we will not pass the respondents’ information to third parties). After finishing the data collection, we could see some future improvements for web-based survey. 1) Probably we could consider putting our questionnaires on some websites to make our respondents answer questions more easily to avoid the troubles caused by different Excel version and features using by different persons; the online-survey also could give us a shorter response time. 2) Furthermore, we could design our questionnaire programmed so that responses could be converted automatically into our data analysis software SPSS. This could save us a lot of time on data input and also avoid the input errors caused by key-in. It also could allow us to analyze the data right away after getting our questionnaires back. This time, we didn’t spend time on doing this, probably for the future research, we could improve it in this aspect. Now chapter three is close to the end. The following Figure 3.1 summarizes chapter two and chapter three. Our chosen scientific method, from research philosophy and approaches to data collection methods is shown in this following picture.
Deductive
nd
data, questionnaires
Sample, 2
Survey Cross Section
Data Collection Time Research Research Horizon Strategies Approach Methods s es Figure 3.1-Scientific Method “Onion” Used in Our Research Source: Saunders, M. et al. (2000), Research Methods for Business Students, 2nd Edition, Harlow: Financial Times/Prentice Hall, p85
4. THOERITICAL FRAMEWORK
The theoretical framework includes three parts. The first part presents the general consumer decision process and how consumers make their purchasing decisions throughout the whole purchase process; With the rapid development of Internet, Internet is playing an important role in consumer’s purchasing process, so we will have a discussion here about the Internet marketing and the decision process in the second part; the third part is about critical factors in consumers’ buying process.
4.1.
Consumer Decision Process
Buyer decision processes are the decision making processes undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product or 10
service.30 Consumers have to make different kinds of decisions everyday according to their different needs. Some of the decisions are playing critical roles in consumers’ daily life, for example, purchasing a new home or purchasing a car, whereas some times the decisions are made on a virtually automatic basis. There are not a lot published research articles available on the decision-framing process. Puto, C. proposed a conceptual model of the buying decision framing process, see Figure 4.1 below. 31 This model focuses on the information search phase which includes two reference points: an initial which is internal to the company-expectations and buying objectives, and a final one that takes into account the sales message and justification/reward of the offer. 32 Sales Messages
Expectations
Initial Reference Point Buying Objectives
Final Reference Point
Choice
Justification/ Reward
Figure 4.1-Proposed Conceptual Model of the Buying Decision-Framing Process
Source: Puto, C. (1987), “The framing of Buying Decisions” Journal of Consumer Research, December, Vol. 14, Issue 3, p 303
These two stages lead to the final choice. Burt and Babin developed a model, see Figure 4.2. This model is in line with previous one but gives an emphasis on an evaluation phase in the process. 33 Individual Difference Variables Coding of Alternatives Contextual Variables Decision Frame
Evaluation of Alternatives
Choices between Alternatives
Editing Phase
Evaluation Phase
Figure 4.2-Conceptual Framework of the Decision-Framing Processes
Source: Burton, S. & Babin, L (1989), “Decision-Framing Helps to Make the Sell,” Journal of Consumer Marketing, Vol.6, Issue 2, p18
http://en.wikipedia.org/wiki/Buyer_decision_processes Puto, C. (1987), “The framing of Buying Decisions, ” Journal of Consumer Research, December, Vol. 14, Issue 3, p 30103 32 Puto, C. (1987), “The framing of Buying Decisions, ” Journal of Consumer Research, December, Vol. 14, Issue 3, p 303 33 Burton, S. & Babin, L. (1989), “Decision-Framing Helps to Make the Sell, ” Journal of Consumer Marketing, Vol.6, Issue 2, p 17-19
31
30
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The most used model in consumer behavior could be found in most of marketing textbooks. This model includes five stages: problem recognition, information search, evaluation of alternatives, purchase decisions, and outcomes. Please kindly see Figure 4.3 below which provides an overview of the decision-making process.
Problem Recognition Consumer A realizes his needs for a car for daily use Information Search He uses different sources to find information about cars Evaluation of Alternatives He compares several models in terms of price and equipments Product Choice He chooses Toyota Corolla due to its value for money Outcome/Post Purchase Consumer A drives home the car and enjoys his purchase Figure 4.3-Stages in Consumer Decision Making Source: Consumer Behavior, 6th edition, Michael R. Solomon, p199 In the problem recognition phase, the consumer sees a big difference of his/her current state and ideal state. The consumer realizes there is a problem which needs to be solved. In our case, consumer A realizes that he wants a car for his daily transportation. The reasons are probably he moves to countryside from the city center and he needs driving the care from his new home to his office or probably he is not satisfied with his current car’s status, for example, probably the design is too out of date. Once a problem is recognized, the consumer enters into the information search phase. Consumers need right information to help him/her solve the problem. Information search is the process by which the consumer investigates his/her environment for right data to make a reasonable decision. 34 Information sources include two types: internal search and external search. Internal search involves a scan of information stored in memory to recall past experiences or knowledge regarding purchase alternatives. External search involves going
34
Stages in Consumer Decision Making
Michael R. Solomon (2003), Consumer Behavior, 6th edition, Upper Saddle River, N.J. : Pearson Prentice Hall,p202
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outside sources to acquire information such as personal sources, marketer controlled sources, public sources, or through personal experiences such as examining or handling a product. In our study, the internal search may mean the different car models in the consumer’s mind. For the external search, it may include the car advertisements, car makers’ websites, dealers’ introduction and friends and relative. The third stage is the evaluation of alternatives stage. Consumers are faced with different options and they have to narrow down different options and choose one of the options as the final one. The alternatives actively considered during a consumer’s choice process are his/her evoked set. The evoked set includes those products already in memory, plus those prominent in the retail environment. 35 For example, in our study, Consumer A probably didn’t know much about cars, especially the technical aspects of cars, so probably he had only considered a few major Japanese brands in his memory because he thinks Japanese brands represents value for money and good quality. If a company’s product is not included in the list of alternatives or if information about the product is not available to the customer, there is no opportunity to compete actively for the potential business. 36It is not impossible to change a customer’s evaluation but it is very difficult. Therefore the key to good marketing, according to Murray and O’Driscoll (1996), is to understand the evaluation criteria used by the customer as well as the strengths and weaknesses of the competitors. After the related alternatives from a category have been considered and evaluated, a choice would be made. Based on the decision, the customer will thereafter make the purchase decision and actually buy the product. 37 The customer’s decision is based partly on the quality and price of the product and partly on the policies and procedures of the company. 38 When Consumer A was looking at different cars, he focused on one or two Japanese brands he is familiar with and ignored other brands. Consumer A narrowed down his choices by only considering two specific brands. Evaluative criteria and determinant attributes are used. Evaluative criteria are the dimensions used to judge the merits of competing options.39 When comparing with alternative options, Consumer A could chose cars equipped with night vision and navigation which he thinks could be useful for his leisure trip to countryside, so night vision and navigation are considered as evaluative criteria. Cars without night vision and navigation will not be on Consumer A choices list. Another important point is that criteria on which products differ from one another carry more weight in the decision process than do those where the alternative are similar. If all brands being considered rate equally well on one attribute, consumers have to find other reasons to choose one over another. The attributes actually used to differentiate among choices are determinant attributes. 40. Consumer probably has considered Nissan Tiida and Toyota Corolla because these two models are both Japanese brands equipped with navigation and night vision, but Toyota Corolla has another option Consumer A thinks maybe necessary, back-up camera, so finally Consumer A takes Toyota Corolla as his final choice. In the decision process, Consumer A also uses “country-of origin” as a product signal. Consumer A has no too much product knowledge, but he trusts Japanese brands because he thinks most of Japanese brands are value for money.
Michael R. Solomon (2003), Consumer Behavior, 6th edition, Upper Saddle River, N.J. : Pearson Prentice Hall, p209 Murray, J and O’Driscoll, A. (1996). Strategy and Process in Marketing. Cornwall: Hartnolls Limited. 37 Kotler, P., Armstrong, G., Saunders, J. & Wong, V. (2001), Principles of Marketing , 5th European Ed. Lombarda: Rotolito 38 Turban, E., King, D., Lee, J., Warkentin, M. & Chung, M. (2002), Electronic Commerce. A Managerial Perspective. New Jersey: Pearson Education. 39 Michael R. Solomon (2003), Consumer Behavior, 6th edition, Upper Saddle River, N.J. : Pearson Prentice Hall , p212 40 Michael R. Solomon (2003), Consumer Behavior, 6th edition, Upper Saddle River, N.J. : Pearson Prentice Hall, p212
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35
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Finally, there is a post-purchase stage where the customer evaluates the product and its usefulness based on their expectations of the product. 41 A satisfied customer sends positive messages or talks favorably to his/her friends or family members about the product/service. The satisfied customer will purchase other products from that company or have repeated purchasing in the future. Marketers could understand how to build brand loyalty and how to encourage favorable word-of-mouth communication by learning the post-purchase stage. The sequence, through which a customer passes, from recognition of a need through the consumption of a product to satisfy this need, is an insightful framework within which to comprehend customer behavior. This kind of information will provide the company with the basic knowledge required to make marketing decisions that are both relevant to the customer and competitively superior. 42
4.2.
Internet Marketing and Consumer Decision Process
There are reasons to believe that there are five stages in a customer buying process as stated in last part. Customers go through want/need recognition, information search, evaluation of alternatives, and make the purchase finally. As Internet is expanding rapidly, more customers use Internet for part or even all the buying process, marketers have to learn how to use emarketing strategies to move customers from need/want recognition to make the final deal. In our current study, Internet is the second most popular way for consumers to get car information. Because many consumers go through a similar buying process, marketers can use the five stages to plan and align marketing activities, thereby improving the customer experience. Online channel usage, as part or all the buying process, continues to grow, making e-marketing activity a strong influencer of purchasing decisions. Most marketers are familiar with the five stages of the customers' buying process, around which marketing activities can be planned and implemented. Within each stage, marketers have the opportunity to improve the customer experience and influence the customer through all stages toward a purchase. However, the mass adoption of the Web channel among customers has shifted the stages of the customer buying process from a mostly offline activity to an increasingly online activity. Many customers now go through the entire buying process online, or use the online channel though multiple steps of the process. For instance, a car buyer maybe recognize his/her wants for a car after watching an online advertising, collect data about the car online, look for references and recommendations about the car by posting a topic on an online forum or by chatting with somebody online and then make the purchase decision of the car at a nearby dealer shop. So, marketers must respond with specific emarketing techniques that address each stage of the process. By 2008, more than 40% of business-to-consumer (B2C) commerce (online and off) will be influenced by addressable branding and advertising, contextual marketing, community marketing and transactional marketing (0.8 probability). In each stage of the consumer buying process, e-marketing technologies can be best placed to help or lead customers toward a purchase (see Figure 4.4).
41 42
Kotler, P., Armstrong, G., Saunders, J. & Wong, V. (2001). Principles of Marketing , 5th European Ed. Lombarda: Rotolito. Murray, J and O’Driscoll, A. (1996). Strategy and Process in Marketing. Cornwall: Hartnolls Limited
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Problem Recognition
Addressable Branding, Advertising
Information Search
Contextual Marketing
Evaluation of Alternatives
Community Marketing
Product Choice
Transactional Marketing
Outcome/Post Purchase Figure 4.4-Consumer’s Buying Process (E-Marketing) Strategic Planning Assumption: By 2008, more than 40% of B2C commerce (online and off) will be influenced by addressable branding and advertising, contextual marketing, community marketing and transactional marketing (0.8 probability).
Source: Gartner (February 2007)
In the needs/wants recognition phase, the consumer sees a big difference of his/her current state and ideal state. The consumer realizes there is a problem which needs to be solved. This is the start of the customer buying process that deals with awareness. Here, e-marketing opportunities, such as addressable branding and advertising functionality, can help establish awareness and wants. Banner advertising, sponsorships, interstitials and others are emarketing activities that can expose customers to products and services. Data collections tools, such as Web analytics and online surveys, can start to quantify different needs and wants. In our case, car makers could get consumers input from such e-marketing activities. Since these activities are addressable, so customers can reply and communicate with a brand (click on a banner advertising, search for more information or request information) in real time. 43 After a problem is recognized, the consumer enters into the information search phase.Customers want to find out information about that product or brand. Contextual emarketing techniques (providing information from explicit searches or questions) are becoming extremely useful as a mechanism to find information and have become a routine step in the customer-buying process. The success of Google, Yahoo and Bai du (in China) and their contextual search functionality show the power of providing tools for the customers to search related information and answer consumers’ questions that help them during their buying process. Contextual marketing, such as search marketing (organic or paid), locationbased search (matching the user's location to proximity of product/service), customerpreference management tools and available RSS feeds, is a natural fit to align explicit information gathering with relevant answers. 44 For example, a lot of car websites provide
Adam Sarner (2007), “E-Marketing Improves the Customer's Buying Process, ” Gartner Research ,ID Number: G00146513, March 1st, 2007, p3 44 Adam Sarner (2007), “E-Marketing Improves the Customer's Buying Process, ” Gartner Research ,ID Number: G00146513, March 1st, 2007, p3
43
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online queries which could answer consumers’ questions and provide useful information for consumers’ decision making. The third stage is the evaluation of alternatives stage. Consumers are faced with different options and they have to narrow down different options and choose one of the options as the final one. After-sale service, product options, price, availability and convenience, are all part of the evaluation process. Getting recommendations and references from close friends, family members to get answers play an important role on evaluation phase. Community e-marketing functions, such as community marketing, customer feedback, message boards, customer reviews and blogs, will also provide the tools to help customers though the evaluation process toward their purchasing goal. 45 The forth stage is purchase stage, which also has e-marketing opportunity. Transactional emarketing activities, such as gift registries, e-mail marketing and online dialogue functionality, help consumers to final purchase or even additional purchases. For example, in our case, a customer has searched for a car on the company's site and read other people’s comments, then the customers is exposed by an online dialogue that displays available specification for his/her selection. Once the car is chosen, the customer is presented with matching car information before checking-out. There is one example about Japanese car maker, Lexus. Lexus usually displays specification-adjusted price (price in equal equipment level) on their websites. Customers who are willing to purchase Lexus can compare the prices of models which are in the same level with Lexus, for example, when a customers wants to purchase a Lexus RX350. He/she could get information about Mercedes ML350 price and BMW X5 3.0 with the same equipment level. This can result in a relevant cross-checking, providing a positive experience for the customer and an incremental sale for the company. The last phase is outcome and post-purchase behaviour. Internet has a big impact on this part too. For example, we could see a lot of positive or negative comments and feedbacks posted on some websites’ forums by some users regarding some products or service. If the products or service are good enough, the Internet really has a good impact for the future selling. In addition, car makers may set up a follow-up session on the company’s website, from there, auto makers could know consumers’ suggestions and feedbacks and improve themselves from each aspect. Lack of E-Marketing could damage the customer experience. E-marketing technology, when properly placed along the customer buying process, helps provide a seamless link from want/need to actual purchase. In fact, many times, a poor customer experience is the direct result of not having e-marketing tools in place. For example, a consumer may visit an auto maker's website to learn about a car which he is interested in. When the customer enters into the evaluation phase, this website doesn't give him/her any appropriate information with he needs, for example, no specification-adjusted price mechanisms or feedback or comments from other users about this car. As a result, the customer might go elsewhere for the evaluation, providing an opportunity for the competition to help the customer complete his/her buying process with potentially different results. 46
Adam Sarner (2007), “E-Marketing Improves the Customer's Buying Process, ” Gartner Research, ID Number: G00146513, March 1st, 2007, p4 46 Adam Sarner (2007), “E-Marketing Improves the Customer's Buying Process, ” Gartner Research, ID Number: G00146513, March 1st, 2007, p5
45
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4.3.
Understanding the Consumer Buying Process
This chapter includes three parts, firstly we will present Kolter’s model of buying behavior; as we know, product is one of four P’s in Kolter’s model, so in the second part of this chapter, we will present the three types of product-related attributes; finally, the other stimuli in Kolter’s model, social contexts, which may influnce consumer’s buying behavior will be presented.
4.3.1. Kolter’s Model of Buying Behavior
Understanding the automotive purchase process is crucial for automotive manufacturers and dealers. Huge amount of information available to consumers require manufacturers and dealers to understand consumer decision-making and the modes of influence which can affect consumer new car purchasing.47 Kotler et al. 48describes the customer buying behaviour as the buying behaviour of the final customers who purchase goods and services for personal consumption. A company get great advantages by understanding how customers respond to marketing stimuli that include the four P’s: product, price, place and promotion. Other stimuli in the customer’s environment such as economic, technological, political and cultural also affect all customers’ buying decision. All these stimuli enter the buyer’s black box where they, through the buyer decision process, are turned into a set of buyer responses. Please kindly see the Figure 4.5 below.
Figure 4.5-Model of Buying Behaviour
Source: Kotler et al., 2001, p191
In the Kotler’s model above, product is an important marketing stimuli; in our questionnaire, most of attributes regarding cars are product-related, so in the following part 4.3.2, we will break down the produt-related attributes into details.
4.3.2. Classification of Product-related Attributes
There are three types of product-related attributes. The classification schema, as proposed by Myers and Shocker (1981), for describing products, services, and brands includes three major types: 1) product referent, 2) task or outcome referent, and 3) user referent. 49 Product Referent. Physical characteristics or product referent characteristics are in the cognitive realm used by potential users/evaluators to describe a product/service in two subcategories. Physical Characteristics (PC) are the most objective types of product descriptors in the sense that they are measurable on some sort of physical scale, in our case,
Michael M, Nicole T, Tina K, Andrew D (2006), “Understanding the path to purchase-resolving the complexities that influence the decision, ”ACNielsen report presented at the ESOMAR Automotive Conference, Switzerland, March 2006, p2 48 Kotler, P., Armstrong, G., Saunders, J. & Wong, V. (2001). Principles of Marketing (5th European ed). Lombarda: Rotolito 49 Myers, James H. and Richard F. Chay (1981). Direct vs. Derived Estimates of Ideal Product Characteristics. Proceedings of the Association for Consumer Research, Advances in Consumer Research, Vol. 8
47
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for example, fuel consumption, power or equipment level. Pseudo-physical Characteristics (PPCs) are objective in nature but not quite as measurable as PCs on a physical scale. Nevertheless, they reflect physical properties that are generally perceived and understood as such by both sellers and buyers; e.g., strength, shininess, or smoothness. 50 Task or Outcome Referent. Attribute dimensions that reflect the perceived benefits or outcomes from using a product/service are labeled task or outcome referent. These attributes primarily involve instrumental types of outcomes in the affective realm and involve subjective evaluations. Additionaly, they can include the ambience of surrounding conditions while using the product or service. For example, a product or service can be shown being used in pleasant surroundings such as beautiful scenery or in the company of friendly people. Benefits consist of attributes that describe specific need-satisfaction outcomes from using a product or service or buying from a particular supplier. 51 Potential benefits can be described in straightforward ways, for example, “safety” “comfort” or “conveninence” in our study. User Referent. Attribute dimensions that reflect what usage of the product or service indicates or imply about the person who selects or uses it, are called user referent. These attributes reveal expressive properties that are also subjective in nature and referred to as Imagery. Imagery attributes suggest various types of associations that may be evoked by the product or service. They usually tell us how the product itself or use of the product epitomizes the user to other people. Phrases such as “the choice of high-status people,” “give a high-tech appearance” or “representative of premium car with best quality” are examples of Imagery attributes. Imagery is not intrinsic to the product itself, so such attributes need to be conveyed symbolically in promotions. 52
4.3.3. Two Basic Mechanisms about Social Process
For automotive industry, a continual inflow of new products and outflow of old ones can be seen. Prices alone cannot explain the differences in market dynamics. Social processes, such as imitation, conspicuous consumption, and status seeking, appear to play a decisive role in market dynamics, so social processes have to be taken into consideration to explain changing consumption patterns among groups. 53 Two basic mechanisms are assumed to underlie the social processes that can be witnessed. 54 In the first mechanism, the product choice of other people provides a practical heuristic to limit the set of options to choose between. Especially in conditions of uncertainty, people tend to observe the behavior of others to quickly find out about attractive solutions for a decision problem. In particular, the behavior of people similar on a relevant dimension may provide valuable information for decision making, for example, in our study, people with simliar education and purchasing budget show some simlilarity. The more people perform a particular behavior, the more frequently it will be observed, resulting in a self-reinforcing process propagating the behavior. Both situational factors (e.g., complex products, unstable markets, visibility of consumption) and personal characteristics (e.g., uncertainty tolerance,
50
J. David Lichtenthal, Stephen A. Goodwin (2005), Deriving Product Related Attributes with Business Buyer Input: Implications for Industrial Selling and Sales Force Management, ISBM Report 13-2005, p5-6 51 J. David Lichtenthal, Stephen A. Goodwin (2005), Deriving Product Related Attributes with Business Buyer Input: Implications for Industrial Selling and Sales Force Management, ISBM Report 13-2005, p6 52 J. David Lichtenthal, Stephen A. Goodwin (2005), Deriving Product Related Attributes with Business Buyer Input: Implications for Industrial Selling and Sales Force Management, ISBM Report 13-2005, p6 53 Marco A. Janssen, Wander Jager (2003), “Simulating Market Dynamics: Interactions between Consumer Psychology and Social Networks”, Artificial Life Volume 9, November 4th, 2003, Massachusetts Institute of Technology, p343-344 54 Jager, W. (2000). Modelling Consumer Behaviour. PhD thesis, University of Groningen
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motivation to comply) determine the extent to which people are inclined to use this type of social information. 55 The second mechanism is based on social needs that people have. People have needs to belong to a group (belongingness) and express their status and personality (identity). 56Hence using a certain product may have extra value because a particular group of people is already using it. For instance, one consumer may buy a large and luxury car partly because of the status attached to it. Here one may focus on people having higher (financial) abilities as sources of interesting opportunities for consumption. In case of car models, such social needs seem to play an important role in the product choice. The approaches of Veblen 57 and successors mainly focus on this second mechanism. Whereas the two mechanisms may operate separately, they often operate combined—for example, a person imitating the clothing style of others to belong to the group. 58
4.4.
Proposed Model for the Current Study
It is very important to know how all of the above elements, i.e, 4Ps, other stimuli (individual, economic and social contexts) work together during the purchase cycle. In our study, we ask car consumers oponions on each car attribute. In this part, we try to apply the theories mentioned in part 4.3 and develop a model for our current study. Please see Figure 4.6. value for money, resale value fuel consumption, power, performance, equip.& interior, exterior, advancing tech, eco-friendly comfort, safety, after-sale convenience
Product Place Promotion
Product Referent Outcome Referent
Market Stimuli
Internet communication Friends/family recommendation s Brand image Mian Zi Status-seeking Figure 4.6-Proposed Model for Current Study
55
Product Choice of Other People Social Process Social Needs
Other Stimuli
Marco A. Janssen, Wander Jager (2003), “Simulating Market Dynamics: Interactions between Consumer Psychology and Social Networks”, Artificial Life Volume 9, November 4th, 2003, Massachusetts Institute of Technology, p344 56 Max-Neef, M. (1992). Development and human needs. In: P. Ekins and M. Max-Neef (Eds.), Real-life economics: Understanding wealth creation. London, New York: Routledge 57 Veblen, T. (1899). The Theory of the Leisure Class: An Economic Study of Institutions. New York: B.W. 58 Marco A. Janssen, Wander Jager (2003), “Simulating Market Dynamics: Interactions between Consumer Psychology and Social Networks”, Artificial Life Volume 9, November 4th, 2003, Massachusetts Institute of Technology, p344
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Based on Kotler’s model, we can divide the factors in our questionnarie into two categories “market stimuli” and “other stimuli”. Market Stimuli Our first research question (what are the most important characteritics when Chinese consumers purchase a car?) is related to “market stimuli” and our second research question (what is the decision process when Chinese consumers buy a car?) is related to “other stimuli”. Marketing Stimuli are 4Ps, product, price, place and promotion. In our model, “product” is the “car”; “price” is “car purchase price”; “place” means “distribution” and “channel”, such as 4S stores; “promotion” in our model means the incensitives given by car dealers or manufacturers. So, the market stimuli here means the consumers buy what kind of car with what price in which distribution channel with what kind of promotion activities given by car dealers. “Fuel consumption”, “power”, “performance”, “equipment & interior”, “exterior”, “advancing technology” and “eco-friendly” are physical characteristics and are measurable, so according to the classification schema proposed by Myers and Shocker, we should put them under the classification of “product referent”; “comfort”, “safety” and “after-sale convenience” are dimensions which reflect the perceived benefits or outcomes from using the car, so we classified them as “outcome referent”. Other Stimuli Regarding the second research question in our study, the decision process and the information source and so on could be describled as “other stimuli” according to Kotler’s model. “Friends/family recommendation”, “Internet communication”, “brand image”, “Mian zi” and “status-seeking” all exist in consumers’ buying environment and could affect consumers’ purchasing decision. “Friends/family recommendation” and “Internet communication” belongs to “product choice of other people” because friends/family members or Other internet users could affect the decision and provide a practical heuristic to limit the car choices; “social needs” here means that people have wants to belong a group and express their status and characteritistics, so “brand image”, “Mian zi” and “status-seeking” should be put under “social needs” mechanisms.
5. INTRODUCTION TO CHINA’S AUTOMOBILE MARKET
5.1. Overview of China’s Passenger Cars Market in 2007
According to China Association of Automobile Manufacturers, in 2007 the Chinese passenger car market kept a stable and healthy growth. By the end of 2007, the sales of passenger cars were increased to 4.7266 million units, a year-on-year increase of 23.46%. The cars with engine level above 1.6L had a quick increase compared with 2007. The sales of cars with displacement between 1.6L and 2.0L totalled around 1.4455 million units and a year-on-year rise was 45.67%; The sales of cars with displacement between 2.0L and 2.5L totalled around 0.5166 million units, a year-on-year increase of 26.56%; In addition, the sales of cars with displacement between 3.0L and 4.0L were around 12,100 units, a big year-on-year rise, 450%; But the demand of cars with smaller engines was not good. The sales of cars with displacement less than 1.3L were around 0.7302 million units and it accounted for 11.60% of total passenger cars sales. When compared with last year, the market share was decreased by
20
3.7%. The sales of cars with displacement less than 1.0L were decreased by 30.90% when compared with 2006. 59 In 2007, the top ten car sales brands were: Santana (203,100 units, belongs to Shanghai Volkswagen); Jetta (211,100 units; belongs to FAW-Volkswagen); Excelle (196,680 units; belongs to Shanghai General Motor); Camry (170, 300 units; belongs to Toyota); Xia Li (132.500 units; belongs to Tianjin FAW, local brand); QQ (130, 200 units; belongs to Chery, local brand); Focus (125,000 units; belongs to Chang An Ford); Elantra (120,300 units; belongs to Beijing Hyundai); Accord (118,000 units; belongs to Guangzhou Honda); Family (113,700 units; belongs to Hainan Mazda). By the end of 2007, the top ten models accounted for 32% of total passenger cars sales. 60 A good thing is that local brands did a great job in 2007. By the end of 2007, the sales of local-production brands accounted for 26% of total amount of passenger cars in 2007. The top-ten local-made models were: Xia Li, QQ, Family, Cowin, F3, Jun Jie, Zi You Jian, A520, Benben and Geely JinGang. By the end of 2007, the 10 models accounted for 72% of local made cars sales. 61 The top ten car manufacturers in 2007 were: FAW-Volkswagen, Shanghai-Volkswagen, Shanghai-General Motor, Chery, FAW-Toyota, Dongfeng-Nissan, Guangzhou-Honda, Chang An-Ford and Dongfeng Peugeot Citroen. The sales of the top ten car manufacturers accounted for 62% of Chinese passenger vehicles sales. 62
5.2. The Past and The Future of China’s Passenger Cars Market
Ø China’s Passenger Cars Market- Starting from Scratch and Growing into a Giant within One Generation After joining the WTO, China's vehicle production and sales have moved into a fast growing period. Zhang Guobao, Vice Director of the National Development and Reform Commission said on April 16, "It is predicted China's vehicle production and sales will keep fast growing momentum during the 11th Five-year Plan period, especially private passenger cars". 63 For every ten new vehicles been sold around the world, more than one unit is sold in China, Xu Changming, Director of the Information Resource Development Department of the State Information Center says. 64 In 2006, China became the world's third largest vehicle manufacturer and the second largest new vehicle sales market. Passenger cars and minivans saw the fastest growth, especially the production of passenger cars which are increasing by 40% annually. Private vehicles have become the main consumption trend in China. Zhang says that a large amount of investments and expansion exist in the current auto industry. It is estimated that China has the potential to become the No.1 producing country by 2020.
59 60
Chinese Automobile Manufacturers Association report, 2007 Chinese Automobile Manufacturers Association report, 2007 61 Chinese Automobile Manufacturers Association report, 2007 62 Chinese Automobile Manufacturers Association report, 2007
63 64
“China's position as an auto giant confirmed, ” Xinhua News Agency, April 17th, 2007
“Ten per cent of world's new vehicles sold in China” Beijing Daily Messenger, January 30, 2007
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China’s passenger vehicles market started from scratch and is growing into a giant within one generation. Please kindly find Figure 5.1 below, China’s passenger car market development for 30 years (from 1978 to 2007) (source: China Association of Automobile Manufacturers):
CAGR 20.34% CAGR 33.86%
5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 22 325 479 589 600 617 710 852 1,100 2,185 2,512 3,151 3,828 4,727
1978 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
China’s Passenger Car Market in ‘000 units Figure 5.1-China’s Passenger Car Market
Note: CAGR= Compound Annual Growth Rate, The year-over-year growth rate of an investment over a specified period of time. The compound annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered. This can be written as follows:
CAGR isn't the actual return in reality. It's an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate. You can think of CAGR as a way to smooth out the returns.
The main driving factors for such a growth are as follows: • Turn plan economy into market driven economy • Automotive industry starts from low base • Infrastructure improvement • Income increase • More private buyers
22
Ø Coming from the “Old Three” the Model Range Has Grown Tremendously Over The Last Years Total locally produced models
168 132
Santana
89 75 53
Jetta
12
1998
Market share 64%
Fukang
2002
28%
2003
19%
2004
17%
2005
10%
2006 H1
5.8%
Figure 5.2-Volume of Total Locally Produced Models
Source: Passenger car sales (CPCA Data), Internet search
Ø Price and Profitability Will Fall to Mature Market Level due to Fierce Competition
Sales Unused capacity
While announced passenger car production capacity goes up. . .
Million units 3.5 2.2 1.2
0.1 1.1 0.2 2 2.4 3.2 1.1
Chinese passenger car market price
6.4
2.6
Indexed 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 100 95 92
5.2
2.0 3.8
83 71 62
2002 Percent
100 80 60 40 93
2003
2004
2005
2006F
Average car price in 2005: RMB 127,200
. . . capacity utilization may go down
90
Price reductions in all segments in 2005:
68
Buick Regal:
62 59
-11% -10% -12% -14% -14%
Honda Accord 2.4: VW Bora: Audi A6:
2002
2003
2004
2005F
2006F
KIA Optima:
Figure 5.3-Passenger Car Production Capacity and Market Price
Source: media screening
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5.3. Chinese Government’s Policies towards Car Industry and Industrial Structure
Ø The Government Is Determined to Develop The Chinese Automotive Industry to The Level of Global Competition Phases for China’s Automotive Industry Development Attract foreign investment
Technology transfer
Integration into global market via competitive domestic industry
•
Attract foreign investment with big market and low production cost Till now, all the major international auto-makers have established entity in China
•
Use JV as a platform to transfer technology from international partners Copying is to some extend tolerated by the government so as to help the learning process of local producers
• •
Develop technology and designs with full intellectual property Consolidate current more than 120 OEMs into a few major players with international competences Encourage local producers to commit global expansion and acquisitions
•
•
•
Under governmental macro-economic planning (NDRC), China shall become one of the major automotive manufacturers worldwide by 2010
Figure 5.4-Phases for China’s Automotive Industry Development
Source: media screening
Ø Market Explosion And Government Policies Lead to A Scattered And Confusing Industrial Structure
MMC VW Toyota Mazda Ford Chang’an Chang’an - Ford Suzuki Chang’an Chang’an Shenli Daewoo Geely Ford Nanjing Hafei Hafei Engines Volvo CNHTC Iveco Shaanx i HDT D’long FJMG Chongqing HDT FAW Hongta Harbin Sichuan Sichuan Toyota Xiamen Motors Yuejin Yuejin Jiangling SUV Transit ShenFei FAW-Jiabao SAICYizheng Shanghai VW (PC) SAIC SAIC/GM/W uling Shanghai GM (PC) SAIC/GM Shenyang Guizhou Hangtian Sanjiang Renault BJ Hyundai BAIC BJC Foton Mianyang Xinchen SH Diesel VW GM ISUZU Hino ISUZU Ford MAN SEM Qingling Nanya Iveco MMC ISUZU Fiat
FAW Yangzi FAW Car(Red Flag) FAW FAWJieFang TAIC Tianjing Huali Tianjin Toyota Tianjin
Toyota SUV FAW-VW Hainan Mazda
Xi’an Qinchuan Nissan Hyundai Kia Renault-Nissan Honda PSA
Guangzhou Honda (Export base) Honda Toyota Toyota Guangzhou Guangzhou Honda Direct holding Participation/Alliance Outside the three-big Foreign partners Possible changes Source: media screening
Fengshen Yueda Kia Zhengzhou (PC) (PC) Chaoyang Diesel Nissan DMC(HDT+PC) (Engine) SAWHonda Nissan SAW (Engine) Honda Diesel (SUV) DMC/ DCAC Cummins SAW-Renault GAI SAW-Hangzhou C Liuzhou Changhe Hefei Changhe JAC Co. JAC Van/HDT Ankai Liebao
SAIC/GM Dongyue
Jinbei
Brilliance BrillianceBMW Xinguang Brilliant
YBL
SAME
Toyota MMC BMW
Zhongxing
Suzuki
Hyundai
DCAC
MMC
DC Hyundai
Figure 5.5-Auto Industrial Structure
Source: media screening
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Ø Cross-Relationship between International Players And Chinese Partners Adds To The Complexity
GAIC
BRILLIANCE
FAW
BAIC
(Mercedes-Benz)
SAW
YUE JIN
SEM
SAIC
HAFEI Joint Venture License Manufacturing Share Minority Share Majority
QIRUI JILI
CHANG AN
JIANG LING
Note: Foreign companies are subject to the following limitations: - 2+2 rule (maximum of 2 JV in commercial / passenger cars) - 50% rule (maximum 50% share in vehicle production JV) Figure 5.6-Cross-relationship between International Auto Companies and Chinese Partners
Source: media screening
Ø Ensuring A Healthy Development of Automotive Industry Is One of The Top Priorities Of Chinese Central Government
Objectives of overall Chinese Automotive Policies
Optimization of vehicle Technical standard system Environment Protection
Strive for further growth With quantitative target
Innovation and Domestic Brand Promotion
Overall Target: China shall become one of the major automotive manufacturers worldwide by 2010
Optimization of Industrial structure (Promotion of industrial Consolidation process)
Energy Saving
Integration into global automotive Market with WTO accession
Figure 5.7-Objectives of Overall Chinese Automotive Policies
Source: media screening
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5.4. Beijing’s Passenger Cars Market
Ø A Stable Car Consumption Increase Except for Year 2004 Beijing, the capital of China, is recognised as the political, educational, and cultural centre of the People's Republic of China. Beijing tops China's list of per-capita monthly income. The average per-capita monthly income in Beijing reached 1,822 Yuan (227 U.S. dollars) in July, 2007, the highest in China, followed by Shanghai (a survey conducted by the National Bureau of Statistics). Figure 5.8 below is 2007 China’s passenger car registration data by province. From this figure, we could see BJ (348,004, accounted for 7.3% of the total number of registered cars of 2007) was in the 5th position, just below Guangdong (581,841 units), Zhejiang (426,415 units), Jiangsu (408,820 units) and Shangdong (404,131 units). The registered new cars in Shanghai totalled 173,551 units in 2007, which was far below Beijing.
700000 600000 500000 400000 300000 200000 100000 0
AN H B E UI IJI ON N G G QI N FU G JIA G U GA N A N NS GD U G U ON AN G G U GX IZ I H HA O U IN AN HE I L HE ON B E I G JI A HE N G N A HU N IN B NE H EI R M UN ON AN GO J IA L IA N G JIA S U N GX I J I LI LI A N ON NI I NG NG QI XI A NG S H HA A SH A I AN N X I SH DO A N NG G H S H AI AN SI CH XI U TI A N A NJ I TI N XI BET NJ IA YU N G NN ZH A EJ N IA NG
Beijing
Figure 5.8-China’s Car Registration Data by Province (2007)
Beijing Cars Registration Data (2003-2007) 400000 300000 200000 100000 0
2003 2004 2005 2006 2007
CH
348004 271254 207735 272028 285886
Figure 5.9-Beijing Car Registration Data (2003-2007) From Figure 5.9 above, Beijing Cars Registration Data (2003-2007), we could see clearly the car registration keeps a stable increase from 2003 to 2007 except for 2004. Many reasons caused the car sales declining in 2004: 1) car prices went down too quickly and consumers 26
delayed their purchasing and hoped to get a lower price; 2) traffic jams; 3) The soaring gasoline prices; 2) too expensive parking fees; 5) a lot of consumers who expected to buy cars in 2004 bought their cars in 2003 instead due to SARs happened in China to reduce the rate of infection by taking public transportation. Ø Beijing Plays an Important Role in China’s Auto Industry Beijing is playing a very important role in China’s auto industry. There are many auto manufacturers located in Beijing. Beijing Automobile Works Co., Ltd is one of the pioneers of Chinese automobile industry, the origin and epitome of the development of automobile industry in Beijing in the last half century, and the representative brand of the nation. The former Beijing Automobile Works was founded in 1958 as the second largest automobile factory in China. BAW takes the lead in China in independent R&D and manufacturing, the fruits of which are 4 series of product, military light off-road vehicles, civilian light off-road vehicles (SUV), trucks and amphibious vehicles; In 2002, Beijing Motor Investment Company and Korea Hyundai Motor Company established Beijing Hyundai Motor Company in 2002, which is a China and Korea joint venture; On August 8th, 2005, Beijing Automotive Industry Holding Corp and German-US auto giant, Daimler-Chrysler established Beijing Benz-DaimlerChrysler Automotive Co., Ltd. (BBDC) in Beijing; Beijing holds an international A-show per year, which has been recognized as the most important one in China by more and more global brands. Last year, about 1,500 manufactures from 20 countries/areas participated. Totally 572 passenger cars, 39 concept, 92 China premiere, 10 global premiere were in Beijing; totally over 650,000 visitors came and visited.
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6. EMPIRICAL FINDINGS AND DATA ANALYSIS
In this chapter, it includes three parts: the first part mainly introduces the demographic information of respondents, including gender, age, income and education and the first part also introduces the type of employment of all respondents; the second part of this chapter mainly introduces the car ownership, the purpose of purchasing the car and the purchasing price of the car; the third part of this chapter introduces information source and the importance of the car purchase decision. In the empirical part, we report the following statistics. Please kindly see our explanation and some examples in Table 6.1.1:
Statistics Frequency Percentage Explanation A measure of the number of occurrences of a repeating event per unit time A way of expressing a number as fraction of 100 The Reasons of Using It and Examples Example: from Table 6.1.2, we could see how large male is relative to female in our investigation
The regression coefficients; also means the change in dependent variable per Unstandardized unit change in the predictor. The sum of Coefficients the observations divided by the number of observations Mean Standard Deviation
Example: from Table 6.3.4 and Formula Y=3.144+.158X, we see X is independent variable and Y is dependent variable. 0.158 changes of X will cause 1.0 point change of Y
The sum of the observations divided by From the mean, we could know the central the number of observations location of the data set, and from Standard Deivation, we know the spread of the data A measure of dispersion of a set of set values The probability of making a decision to reject the null hypothesis when the null We use the significance level 0.1 in this hypothesis is actually true. The decision study, so it mean if P-value < .1, we could is often made using the p-value: if the preject the null hypothesis. value is less than the significance level,then the null hypothesis is rejected. The proportion of variance in the dependent variable which can be predicted from the independent variables Example: R Square=20% means that only 20% of the variance of X's dependent variable can be explained by the independent variable
Significance Level
R Square
Table 6.1.1-Explanation and Examples of Statistics Used in Our Study
6.1. Profile of Respondents
As we could see from the following Table 6.1.2, there are 116 male respondents out of 189 respondents, which accounted for 61.4% of total respondents; regarding the age, 92.1% of people are under 40. The majority falls between ages 21-30, which accounted 51.9% of total respondents. In terms of the monthly household income, 84.7% of respondents’ monthly household incomes are below RMB 19,999. The monthly household incomes, both “below 5000” and “5000-9999” take the highest ratio, 25.9%. In terms of education, our respondents
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are very highly-educated, 89.5% of the respondents have the university degree or post graduate degree or above. Table 6.1.2-Demographic Information of the Respondents Demographic Information of the Respondents
Characteristics Gender Measuring Group Male Female Less than 20 21-30 31-40 41-50 Above 50 Below 5000 5000-9999 10,000-14,999 15,000-19,999 Monthly Household Income 20,000-24,999 25,000-29,999 30,000-34,999 35,000-39,999 40,000-44,999 45,000-49,999 Above 50,000 Junior High School Senior high/Technical/Prof. Education College/University Post Graduate or Above Frequency 116 73 3 98 73 8 7 49 49 38 24 6 8 5 1 1 1 7 5 15 107 62 Percent 61,4 38,6 1,6 51,9 38,6 4,2 3,7 25,9 25,9 20,1 12,7 3,2 4,2 2,6 ,5 ,5 ,5 3,7 2,6 7,9 56,6 32,8
Age
In our survey, there are 162 employed people, including full-time employed and part-time employed. Table 6.1.3 shows that foreign invested company takes the highest percentage (26.5%) of the total; followed by the state-owned (24.1%) and private enterprises (22.2%). Table 6.1.3- Type of Employment
Category Government authorities State-owned Private enterprises Sino-foreign joint ventures Foreign invested company Self-employed Others Total Frequency 15 39 36 4 43 15 10 162 Percent 9.3 24.1 22.2 2.5 26.5 9.3 6.2 100 Cumulative Percent 9.3 33.3 55.6 58 84.6 93.8 100
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6.2. Car Ownership
Among all of respondents, 134 respondents own cars: 110 out of 134 respondents registered under their names or other family members’ names (58.2%); 24 out of 134 respondents registered under their companies’ names (12.7%). 55 out of 189 respondents have no cars (29.1%). 43.3% of car owers use their cars for “personal purpose”, 37.3% of car owners use their cars for “family purpose” and only 19.4% of car owners in our survey use the cars for business purpose. Most of respondents (91%) purchased a brand new car and only 9% of respondents purchased a second-hand car. Table 6.2.1 shows that most of purchase prices fall between RMB 0-RMB 299,999, accounted for 84.3% of total respondents. Table 6.2.1-The Purchase Price
Frequency