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Segmenting Two Wheeler Market in India: A Study of Rural Haryana – By Dr. Vinod Kumar Bishnoi, Ajay Kumar, Bharti
Indian rural market comprising of 742 million consumers serves as the most potential market of the
world. The rural consumers have started consuming everything from necessity goods to luxury items. 53 percent of FMCG product and 59 percent of consumer durables are sold in Indian hinterland. This paper is an attempt to segment the two wheelers market in rural Haryana by subjecting the responses of customers to cluster analysis. Cluster analysis gave three cluster solution. Cluster’s stability, internal validity and external validity which were tested using discriminant analysis, Tahane’s T2 statistic, Welch and Brown-Forsythe statistic and contrasts. Clusters were then carefully profiled to define the three segments of two wheelers market in rural Haryana. The three resulting clusters profiled as the conscious customers, aspiring traditional customers and the dogmatic customers. The conscious customer is biggest spender on two wheelers. They concentrate more onto quality, durability and performance of vehicle. Aspiring traditional customer can be good target for new entrants especially who makes light engine two wheelers in 100 CC range. These customers seek information through traditional communicational channels. Dogmatic customer has considerable income but they are not much active in asking much from the marketer. So the marketers need to work harder on these customers.
Key Words: Segmentation, Cluster Analysis, Rural Marketing, Two wheelers. velop the existing knowledge base in the field of management literature.
Indian economy has transformed from an extensively controlled to the liberal market driven economy after the first and second generation reforms. Initially the focus of multinational companies was easily accessible and well developed urban market. Soon, the proliferation of brands and intense competition led to the saturation of urban market. This forced companies to look for new market (Kashyap & Raut, 2008) like rural India.
All eyes turned to the most promising potential market with 742 million consumers ‘Indian rural market’ (Kashyap & Raut, 2008). For a marketer, Rural India means 700 million potential consumers, over 40 per cent of Indian middle class and about half the country’s disposable income. The consuming class household in rural equals the number in urban (Rehman, 2009). Haryana, a formidable state of northern India is no exception when one considers the rural parts of state. 15,029,260 individuals, 71 per cent of state population resides in its rural part of Haryana. These people have developed the rural Haryana as a market, as a result the market potential of rural Haryana is 53,455 crores rupees with per capita market size of 35,567 rupees.
Haryana as a state is enriching Indian economy by $ 30 billion US dollars and this contribution is
increasing with growth rate of 10.50 per cent and this figure is expected to reach to $130 billion by 2020. These projections are supported by strong workforce of 6.2 millions contributing to the
economy of the country (Census of India, 2001). It is extremely important to note that 55 per cent of motor cycles are produced in Haryana (IBEF, 2009; haryanaonline, 2008). With the overall improvement of state, the life style index of states has also gone up. Today rural Haryana customer’s expenditure has stretched to products like consumer durables, two wheelers and cars.
Review of Literature
The buying behaviour of rural consumers has acquired significant attention of the corporate biggies as they have started consuming high priced durables like motor cycles and other modern products (Ramaswamy & Namakumari, 1995, p.37; Pani, 2000). Rural consumer would prefer the performance of the product rather than the brands. If they are satisfied with the same brand, they may look for other products of the same brand (Sakkthivel, 2006). Once the marketer creates a positive attitude for the brand/ service, then it is very difficult to deviate the rural consumers. They not only seek comfort in their brand but also from the person who is selling them the brand (Mahapatra, 2006). Marketers need to understand the rural consumer with open mind. They need to understand the smallest looking aspects like majority of purchase decision are taken by eldest male family member in rural households, which are influenced by Indian customs, traditions and beliefs and it also requires social acceptance from villagers (Manchandani, 2003). Once they like the brand, they become brand loyal (Shivaraj and Kumar, 2006). Ruralites associate brands with rituals, festivals, and celebrations (Tathod and Pandiya, 2003). The rural
consumers are willing to improve their standard of living with hygiene and reasonably high quality products. Rural consumers are quality conscious (Kashyap, 2000; Sakkthivel and Mishra, 2005), experimental in nature (Kapoor, 2009) but with reasonable price offers (Kumar & Madhavi, 2006). Rural customer started buying two wheelers irrespective of income (Rao, 1999), understanding and segmenting them from different viewpoints become compulsive for marketers.
These transitions make it evident that urban marketing programs cannot be extended to rural areas. Values, beliefs, motives, aspiration and needs of rural consumers are not only different than urban consumers, but are different within themselves and hence they make different segments of markets within themselves and two wheelers industry in rural Haryana (which individually was responsible for 47.3 per cent (1995-96), 39.8 per cent (2001-02) and 48.3 per cent (2009-10) of entire motorcycle sale in country (NCAER, 2005) is not an exception to it.
With this understanding, Motorcycle Manufacturer Hero Honda has redefined its market segments. Rural accounts for approximately 40 percent of Hero Honda sales which take place in towns and cities. Company’s rural mission ‘Har gaon, har angan (every village, every courtyard) increased the brand awareness and resulted in sale of 15000-16000 motorcycles. Company promotes their brands in the months of May-June or October-November, which is harvesting season and the farmers have cash in their hands at that time. Easy availability of spare parts, and authorized machines, services centers and resale value are the reasons for the sale of Hero Honda in rural areas (Bhandari, 2009).
A study on rural and urban two wheeler owners of Warangal district of Andhra Pradesh infers that the rural consumers consider the mileage, price, and maintenance cost and road conditions while buying two wheelers. (Saibaba et al., 2008). Rural consumers prefer to buy two wheelers on cash basis rather than credit (Kumar et al, 2007).
The concept of rural market in India is still evolving and posses numerous challenges like understanding rural consumers, reaching products and services to remote locations, and communicating with heterogeneous rural audience (Kashyap, 2003). It is imperative for the marketer to visit the rural areas and assess the need of the rural consumers based on their lifestyle and habits (Pareek, 1999), segment the market according to their lifestyle, need and habits as it offers a very promising future (Sayulu and Ramana Reddy, 1996).
Objectives of the study :
The main objective of the study was to find out the market segments of two wheelers market in rural Haryana, to achieve this objective the following subobjectives have been formulated:
1. To identify the market segments for two wheelers in rural Haryana; and
2. To study the profile of customers of each segment.
Haryana state is administratively divided in 4 divisions: Gurgaon, Ambala, Hisar and Rohtak. Stratified random sampling was adopted to select two villages from each administrative zone such that one village is near to city and one is far from the city. Nearness is defined as that village which is within the range of 20 kilometres from nearby city and villages existing at a distance of more than 20 kilometres were categorised as far from the city. Questionnaire used in study was divided into two parts. First part measures the responses of villagers on quality, durability, additional features, warranty, cost and performance of two wheelers. Five extra statements related to two wheelers were randomly inserted in no particular order between the five dimensions to be measured. These five statement’s responses were not used in main analysis. (These statements served dual purpose: a) they acted as fillers in between reducing the probability of biasness. All responses in this part were noted on five point likert scale, b) they were used later to externally validate the clusters formed during analysis). Second part of questionnaire noted the responses about demographics and some other parameters (possessionof new or second hand two wheelers, two wheelers are gifted or purchased, brand of two wheelers, engine size of two wheelers).
Sampling Statistics and Data Collection
Prior to main study, pilot study was carried out by distributing 75 questionnaires. Out of 75 questionnaires, 54 were found suitable for analysis giving a return rate of almost 75 per cent. The
descriptive statistics for these 54 responses were calculated for the aspects of two wheelers to be
analyzed in this study. Maximum standard deviation was found for quality dimension of two wheelers (1.036). Taking the confidence interval of 95 per cent and precision level of 2.5 per cent, the appropriate sample size for this study was calculated to be 264 (n=SD2*z2/D2) (Malhotra and Dash, 2010). Expecting a response rate of around 75 per cent, to get 264 responses at least 350 questionnaires were to be distributed. Expecting some reduction in response rate as the sample increases, 50 questionnaires were distributed in each of eight villages culminating the total distribution of questionnaire to 400. As was expected, 290 questionnaire out of 400 (response rate of 72.4 per cent) were found fit for further analysis which are more than threshold mark of 264 as was determined statistically.
Results and Discussion
Responses of 290 customers who use bikes in rural Haryana on the parameters of quality, durability, performance, additive features and warranty were subjected to cluster analysis to segment the two wheeler market. Cluster analysis is more of art than science and care should be taken in clustering the segments. So, two step cluster analysis was performed to make formidable decisions on clusters. In the two step process, first the responses were subjected to hierarchical clustering using ward method. Sudden change in coefficients in the result of ward method was used as criteria to select the appropriate number of clusters. The process gave three cluster solution. Frequency distribution as result of ward method.
To make the clustering solution formidable, the centroids of all the variables were put as input in K means clustering analysis. K means clustering solution shuffled the membership of solution 2). Some respondents were moved from third cluster to first cluster and second cluster.
Stability of Clusters:
Clusters being an algorithm should always be checked for its stability. The stability of clusters were checked by applying Welch and Brown-Forsythe method. All the parameters were significant, showing the respondents belonging to different clusters and are of different opinion on all parameters for all clusters Table 3 shows that clusters are different from each other.Contrasts were also applied to individual cluster checking their differences with each other.
Contrasts were set to check the differences between cluster 2 and 3, cluster 1 and 2, cluster 1 and 3. Only two dimensions, quality between cluster 1st and 2nd and warrantee between 2nd and 3rd cluster was insignificant at 95 per cent significance level (Highlighted in bold with italics in table 4). Tamhane’s T2 Post Hoc statistics also gave exactly same result with exception of performance dimension between 2nd and 3rd cluster not coming significant with fractional margin. Contrast tests were also subjected to all dimensions for two clusters combined with the third left over cluster. The tests were found significant like previous contrast tests with one different non significant result about additive feature between 2nd cluster and 1st & 3rd both. The above tests show that clusters are significantly different and stable.
The last check of stability of clusters was done by applying discriminant analysis. Three clusters weretaken as groups in discriminant analysis. Apart from the dimensions of quality, durability, performance, additive features and warrantee; annual house hold income, cost of two wheelers and bike size were also taken in discriminant analysis. Both the functions in analysis of discriminant were found significant. Canonical correlation related with first function is 0.824 with eigen value of 2.123 explaining 66.2 per cent and second function correlation is 0.721 with eigen value of 1.082 explaining 33.8 per cent of variance. Both the functions were significant.
Wiki’s lambda value of first function through second is 0.154 which is very good. The analysis showed that 93.0 per cent of cases very correctly classified, which shows the stability of the groups or clusters.
Internal validation of Clusters
To internally validate the three cluster solution, the sample was randomly divided into two halves. Kappa statistic which is a measure of agreement was applied for all three clusters in both samples. The application gave value of 0.792 proving the internal validity of clusters. The 93.0 per cent correct classification result of discriminant analysis also supports the internal validity of clusters.
External validation of Clusters
Clusters were also validated externally by applying Welch and Brown-Forsythe statistics on 5 statements which were not considered in cluster formulation. All the five statements were found to be significant for three cluster solution confirming the external validity of clusters.
Profiling of Clusters
To profile the clusters, results of discriminant analysis, contrast statistic, tamhane’s T2 post hoc statistic, ANOVA, descriptive statistics for all the five dimensions of quality, durability, performance, additive feature and warrantee were analysed. After careful examination, the clusters were profiled as 1) The Conscious Customer, 2) Aspiring Traditional Customers and 3) The Dogmatic Customer.
The Conscious Customer
This group of customer is biggest and is very conscious and considerate about the aspect of quality, durability and performance of two wheelers. They do not seem to be compromising on these aspects. They belong to the higher income category of all. They are spread across all Haryana but are in less number in Rohtak region. Paralleling their income, they spend the highest amount on two wheelers and buy middle and upper segment two wheelers which are equal or more than 125 CC in engine size. This group hold Royal Enfield, Bajaj and TVS brand two wheelers in more number than other brands. This group holds the minimum number of Hero Honda two wheelers when compare to other two groups. Most of the people in group are either in private job or doing their own work.
Aspiring Traditional Customer
This group consist of people involved in the occupation of agriculture, has the lowest income of all three groups and are least educated. Despite being belonging to the traditional occupation of agriculture, lowest income group and not much educated, they are trying to match their counter parts in catching up the fast lifestyle and are buying two wheelers in plenty and are spending the more money on two wheelers as compare to third group who have moreincome than these customers. These people do not care about the quality, durability and performance aspects of two wheelers. If they are not capable to buy the new ones, they do not hesitate in buying the second hand two wheelers. They prefer light engine two wheelers, preferably 100 CC and ready to try ‘not so popular brands’ in two wheelers category (In rural Haryana) like Honda.
The Dogmatic Customer:
This is smallest, middle income group and most educated of all. Most of them are in government job.
Despite their income and education, most of them are having gifted two wheelers and they spend on
two wheelers almost as much as “Aspiring Traditional Customer” do. They prefer the two wheelers of Hero Honda and like heavy bikes in the rage of 150 CC. Despite their education level, they do not consider quality and durability kind of dimensions as an important factor while buying two wheelers.
The conscious customer is biggest spender on two wheelers. Companies of two wheelers, who seek
spending customers in rural part of Haryana, can concentrate more onto quality, durability and performance of vehicle. Their communication plan can hover around these aspects of two wheelers. Market share wise, Hero Honda is still keeping hold in rural Haryana but Bajaj is fast catching up with 35 per cent share in the segment of conscious customer. Hero Honda has to review their plans for this market. This segment is also trying new products and TVS is the new leading brand. New brand also has opportunity here. This group prefer middle segment bikes in 125 CC engine and hence can be a good target market for brands of middle segment two wheelers.
Aspiring Traditional Customer can be good target for new entrants especially who makes light engine two wheelers in 100 CC range. Unlike ‘Conscious Customer’, quality, durability and performance do not matter for them. They are traditional people and make second largest market in rural Haryana. Traditional channels of communication would prove out to be more beneficial for these people. Dogmatic Customer has considerable income but they are not much active in asking much from the marketer. In fact these people can be good market for heavy two wheelers makers. It would not be a bad idea to increase awareness about the USP’s of products like quality, durability and performance which should not be a difficult task keeping in view their education level as currently they are not considering these aspects much. This is a market which is to be worked upon.
Limitations and Future Directions
This study was preliminary in nature and conducted with some obvious aspects or dimensions in mind like quality, durability, performance, additive features and warrantee. Whereas there can be many more dimensions which would possibly be playing an important role during decision making. There is dearth of studies at local levels. Carrying out an exploratory study to find out all possible dimensions would be a great attempt which will also give a platform to work upon to researchers. Moreover, the objective of study was to surface up what was lying beforehand. Finding out reason, why these kinds of people like these specific kinds of two wheelers would be a challenging and inviting work and would give consumer behaviour of customers for two wheelers a new depth.
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