Consumer Behaviour in Chinese Car Market - Research Proposal Example

Consumer behaviour in Chinese car market Contents Contents 2 Background 3 Literature 4 Research Questions and Objectives 7 Methodology and Research Methods 8 Research Strategy and the Underpinning Philosophy 8 The Research Design 9 The Data Collection Methods 11 Ethical Considerations 13 Planning and resources required 13 References 15 Appendix 17 Background China has in the past 20 years achieved spectacular economic growth which can be seen not only from the increase in the gross domestic product by tenfold, but it has been the home to the fastest growing consumer market in the world. The consumer market of China is dominated by vibrant and burgeoning middle class. With rise in the income level, there has been simultaneous increase in products which were considered to be out of reach initially and automobile falls into this domain. Approximately six million vehicles were sold in Greater China in 2005 and that number increased to approximately 19 million in 2012, thus making Grater China the largest automobile market in the world. They have achieved a compounded annual growth rate of 24 percent between 2005 and 2011 and undoubtedly China will remain the number of car buying nation for many years to come. It is estimated that new car sales in China will contributed 35 percent of the growth in world car market between 2011 and 2020. As the car market in China matures, the Chinese consumers are growing more sophisticated about the cars and their tastes are evolving. It is not surprising to see that automobile manufacturers around the world are placing their bet on China to be the very centre for their long term growth strategy. The consumer market though immature is fast becoming mature and complex. Still there is plenty of time for local and foreign automakers to capture a significant portion of the market share. Many consumers who have purchased entry level cars are now ready to upgrade themselves to better and newer models. Thus to succeed in such a demanding market it is the responsibilities of the automakers to understand the needs and wants of the consumer and the different expectations which varies from region to region. Thus the Chinese car market is becoming more like Europe, Japan and North America and or in some cases be even more complex due to many segment and regional differences. Literature Chinese automobile market is a huge and highly complex in nature. The complexity of the sales channel, sheer expanse of the geography and rapid pace of urbanization is over whelming. China has created 14 modern metropolises with more than 10 million populations along with 150 plus cities with a total population of more than one billion. The automakers need to address the diverse set of values, behaviours and preferences which influences the buying decisions of consumer. There are major consumer segments in China which are relevant in the burgeoning automobile market. One such group is domestic learning who tends to buy the Chinese brands may be because they have the feeling of loyalty to their country or maybe they have low disposable income which forces them to focus on the affordable domestic cars. But on the contrary there are three groups which are very much interested in buying foreign brands. One group, known as Young Royals is interested in exclusivity and is thus willing to pay more of such high end products. The other two groups are people, who have lower income but aspire to purchase sophisticated and trendier brands, and higher earning women and men who also eyes for high end exclusive products but are interested in established one which have been in the market for a long time. According to Arthur Wang, Wenkan Liao and Arnt-Phillip Hein (2012) recent research Chinese consumer relies on mainly four factors when it comes to deciding which car to buy. These are family members, colleagues, friends, social media and manufacturer websites (Wang, Lia and Hein, 2012, p. 3). In comparison to their global peers the Chinese consumer don’t buy cars after a simple visit to a dealership stores or buy a car after conducting preliminary research. For them the car buying experience is much more involved and deliberate and it involves Web-based searches together with test-drives at local dealerships. Thus the Chinese consumers when deciding to buy are more likely to rely on the Internet. According to Pierre Xiao Lu (2011) nearly 90 percent of the consumers conducted online research before any purchase. The Chinese consumers just like its peer consumers in developed world tends to research online and purchase offline and this is commonly referred to as ROPO effect which is growing (Lu, 2011, p. 132). According to Marieke de Mooij nearly 33 percent of Chinese consumers in 2010 purchased their product offline after looking for product, brand and pricing information along with consumer review (Mooij, 2010, 254). The figure increased to approximately 43 percent in 2011. Though this effect exists in the consumer goods space, similar phenomenon occurs in the automobile space also. According to Accenture 64 % of the Chinese consumers use the social media for purchasing a product and thus it is imperative that auto dealers and manufacturers needs to abstain investing huge amounts on radio and television advertising and use that money for establishing a strong social media presence (Accenture, 2013, p. 8). According to 2011 and 2012 Global Consumer Research studies of Accenture it was found that more than 90 percent Chinese consumers use micro blogs and social media for learning about the products and services of computers and 60 % of the Chinese consumers interact directly with companies on social media sites about their products or customer service. Further 66 % of the Chinese consumer has stated that negative or positive comments have had some impact on the decision making process of a product and interestingly not only the opinion of friends and family influences it but the post made by total strangers have biased their purchasing decisions (Hawkins and Mothersbaugh, 2010, p. 241). Jerry C. Olson and J. Paul Peter (1994) created Wheel of Consumer Analysis, a consumer behaviour model for explaining the car buying behaviour. They stated that the consumer behaviour is the dynamic interaction of cognition, affect, environmental events and behaviour which human begins conduct for exchanging aspects of their lives. Marketers can use the three elements, namely behaviour, environment and affect, of Wheel of Consumer Analysis to analyze the consumer behaviour. Figure 1: Wheel of Consumer Analysis (Source: Peter and Olson, 2007, p. 36) Affect and Cognition Both affect and cognition refers to the psychological and internal reactions which consumers may have in response to the objects which they view in the external environment or simply affect indicates feelings while cognition involves thinking. The decisions of the consumers will be affected based on whether the affective feelings are positive or negative. Thus when Chinese consumers go for car purchase, they give main emphasis on the many factors like attitude of sales people and option packages. But the important thing is that the Chinese dealers are sincere while conducting business instead of focussing on price. Behaviour This refers to the overt acts of the consumers. According to Zhao and Shen (1995) Chinese consumers pay more attention to the informational content in the advertisement and they consider themselves to be knowledgeable and sophisticated while purchasing. Environment This refers to all the external world of the consumers both at micro and macro level. It is the responsibilities of marketers to know the level of environmental analysis which is relevant for designing strategies. In Chinese society friends and colleagues, family members, manufacturer websites and social media are good reference providers during purchasing durable and large goods. Research Questions and Objectives The main research question is analysis of Car Purchasing behaviour in Chinese Market. The culture of China is different from Western cultures in a variety of ways and thus the purchasing behaviour is also different. In China, people want to use luxury cars to increase their social status. Keeping Chinese market in mind, Audi launched Audi A6 which became successful because Chinese people love their faces. This is in contrast to people in USA or Europe where people purchases cars like BMW, Audi or Mercedes for their safety standards, quality or the joy of driving such cars. Further the recommendations from known circles like friends, family on cars plays a prime role on the decision making process. Such kind of cultural differences results in different requirements of car attributes between the Chinese people and western people which influence the purchasing process of the car. But the phenomenal growth of automobile markets in China has raised hopes for many automobile makers in the world. Thus it is interesting to understand the purchasing behaviour of the people in China. Thus the main research question is analysing Car Purchasing behaviour in Chinese Market. This research proposal is further subdivided into two questions (Hague, Hague and Morgan, 2004, p. 142). The most important features looked after by Chinese consumers during car purchase. The decision process of Chinese consumers buying a car The above two questions will help the managers understanding the decision process and making quick reactions according to change in consumer purchasing decision. Methodology and Research Methods Research Strategy and the Underpinning Philosophy In business research there are two main research techniques namely qualitative and quantitative research. Quantitative researchers deal with the issues of design and sampling since they need to do detail planning before data collection and analysis. On the contrary qualitative researchers deal with the issues of richness, texture and feeling of raw data since they need to use inductive approach to develop insights out of the data collected. Here qualitative approach is mainly used because the aim of this research is to understand the consumer behaviour of Chinese car market. This involves understanding the values, feelings and perceptions of consumers and underline factors which influences their behaviour. The research also aims to identify the decision making process which needs a detailed response from the respondents. It is not possible to gather all the requisite information through quantitative techniques. Qualitative research will help capture the ideas of the people in a detailed way. Here the respondents are allowed to speak their mind openly and make the suggestions in case any. This is not possible for quantitative research. A qualitative research technique helps in understanding the dynamics of purchase decision dynamics. This is a good technique for studying the emotions and attitudes of respondents regarding car purchasing decisions in Chinese market. This study will also help in assessing the usability of social media, websites or other interactive products or services in the decision making process of Chinese customers. Thus qualitative research techniques will make the researchers use deduction in arriving at the results. Here 1000 people are chosen for the study and data is collected from each one of them. This research uses questionnaires to collect primary data for making generalization from the samples. Once the data is obtained it is used for analysing and becoming the basis for conclusion and decision making. In order to ensure credibility of research findings, each step in the study is carefully conducted to avoid any possible errors and bias which might happen. The Research Design A cross sectional analysis is done when a researchers wants to do comparison of findings of different clusters at a particular point of time for identification of points of difference or similarity in response or performance pattern. This technique involves collection of data on more than one case to collect a body of qualitative data to detect patterns of association. Here the research involves cross sectional design where the data are collected by means of questionnaires in more than one case and at a single point of time. Data collected through this means are used to examine the detected pattern of association. Out of the 1000 peoples surveyed 600 are males and 400 are females and 50 % belong to the age group of 21-30 and 40 % belong to the age group of 31-40. The car ownership and it was found that 80 % of the respondents owned a car while 20 % does not own a car. 40 % of the population registered their cars under their own name or under family names, 35 % of the cars use their cars for family purpose and only 20 % of the car owners use it for business purpose. 90 % of the respondents purchased a brand new car while only 5 % of the respondents have bought second hand car. The purchase price of most of the cars bought falls between RMB 0 – RMB 3, 00,000. 85 % of the respondents purchased cars in this domain. Many people still uses traditional ways for getting information like family and friends, dealer sales, car magazines and brochures. In past few decades the importance and rapid development of Internet has made daily life of people easy. Many individuals are using Internet for seeking information and it has become the number one way of information seeking. As people get younger, consumers get of buying age and they will spend more time on Internet and are purchasing more products on the Internet including cars. More than half of the respondents take between 2 weeks to 3 months length of time from the date of initial decisions before placing the order. 75 % of the respondents discussed their car purchasing decision with their friends and families. Further 80 % of the respondents contacted their dealers between 3 to 5 times and 20 % of the respondents contacted the dealer less than 3 times. 55 % of the respondents were the lone decision makers and they played an important decisive role. 20 % of the respondents were one of the decision makers but did not played the decisive role in the decision making process. 20 % of the respondents were the only decision makers while only 3 % of the respondents didn’t took any part in the decision making process. The satisfaction range of the respondents varied from very dissatisfied to very satisfied. After analysis it was founded that the overall satisfaction level among the respondents were relatively high while 55 % of the respondents went with fairly satisfied with current car. The main important finding were that car purchasing is an important decisions for most people in China and people take considerable length of time before purchasing the car. They spent the time in getting information from different channels like friends, families, car shows, social media etc. Social media is an important area for the car manufacturers to invest in for marketing their product and to most of the Chinese customers they purchases cars for family and personal use. The Data Collection Methods The data collection methods used here is mainly primary in nature. Questionnaires were used to collect the primary data and the questionnaires were distributed by means of email. Further secondary data was also used from academic literature, books, search engine online and journals. Validity indicates whether the findings are represents the thing which it was supposed to represent. Here questionnaire is used for data collection and it is one of the most popular methods of research in consumer behaviour and this can be viewed as the assurance of validity in the research proposal. Reliability indicates the degree to which the result in consistent in our measurement and it represents the degree to which the questions used to find information extracts same information each time it is used under similar conditions. The questionnaires were used under similar conditions and were given to all the respondents and each gave their answers after taking adequate time. Being open ended questions the respondents spoke their mind and thus reliability of the research proposal is proved (Kolb, 2008, p. 98). Generalisability indicates whether the findings may be applicable equally to other research setting. The questionnaire used in this research proposal starts with finding out questions which relates to the purpose of the study like factors which influence the car purchasing behaviour and after evaluating all the questions choose to use the most relevant ones to be part of the questionnaire (Wiid and Diggines, 2010, p. 59). China is a representative of many emerging economies and the result of the study can be used in other developed and big cities which have similar consumer cultures like Japan. But as the consumer cultures of Europe and China is different the study is only limited to certain South East Asian countries (Xu, 2005, p. 213). Ethical Considerations While conducting the research, ethical approval was taken for preparing the questionnaires. Approval was taken from the University Applied Research Committee to follow the nee Ethics Governance procedure. Informed consent was taken from all the participants and the name of all them was kept anonymous. All the participants were distributed a consent form and it tells the participants what they can expect during the research and what is expected from them. Further the participants were told that they could withdraw themselves from the study anytime they wish without any penalty .They were given the word that the results of the experiments will be made available to them. The consent forms used made the participants informed about the nature of study and made them aware of the hypothesis under study. Deception was not used while carrying out the research through false information regarding the nature of experiment in the consent form. The use of secondary data sources used didn’t required informed consent. In case of doubts of the researchers regarding ethical methods, it was resolved by means of peer review or by means of consultation with appropriate third parties. Steps were also taken regarding the welfare and dignity of all the participants. Planning and resources required Figure 2: Gantt chart The above figure represents the Gantt chart which is indicates the time period of using the resources. The above figure shows that the sampling of the population is done in time 1. During the same period questionnaire designing is started and this process ends in time 2. The research team took time 3 and time 4 for data collection step and finally time 5 and time 6 is taken for data analysis part. References Accenture. 2013. China’s automotive market. Available at: http://www.accenture.com/SiteCollectionDocuments/PDF/Chinas-Automotive-Market-Cosumer-Digital-Marketing-Insights.pdf. [Accessed on: 23 April. 2014] Hague, P., Hague, N. and Morgan, C.A. 2004. Market Research in Practice. London: Kogan Page Publishers Hawkins, D.I. and Mothersbaugh, D.L. 2010. Consumer Behavior: Building Marketing Strategy. London: McGraw-Hill Irwin Kolb, B. 2008. Marketing Research: A Practical Approach. London: Sage. Lu, P.X. 2011. Elite China: Luxury Consumer Behavior in China. New Jersey: John Wiley & Sons Mooij, M. 2010. Consumer Behavior and Culture: Consequences for Global Marketing and Advertising. London: Sage Peter, J.P. and Olson, J.C. 2007. Consumer Behaviour and Marketing Strategy. London: McGraw-Hill Education Wang, A., Lia, W. and Hein, A.P. 2012. Bigger, better, broader: A perspective on China’s auto marker 2020. Available at: Available at: http://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/Automotive%20and%20Assembly/PDFs/McKinsey%20%20Perspective%20on%20Chinas%20auto%20market%20in%202020.ashx. [Accessed on: 23 April. 2014] Wiid, J. and Diggines, C. 2010. Marketing Research. Cape Town: Juta and Company Ltd Xu, J. 2005. Market Research Handbook: Measurement, Approach and Practice. Lincoln: iUniverse Appendix 1. Do you own a car? 2. What is the main reason for purchasing the car? 3. Is the car brought brand-new or second hand? 4. What is the cost and brand of the car? 5. What is the information sources used for purchasing the car? 6. What was the length of time taken from initial decision to placing an order? 7. Have you ever discussed your car purchasing decision with your friends and family? 8. What is your role while purchasing the car? 9. How many times have you visited the dealers? 10. What is your satisfaction level about your current car? Read More