Purchasing Decisions Are A-Changing

Remember a time when the Chinese would visit luxury car showrooms with bulging pockets and snap up cars with, well, the snap of the...

Remember a time when the Chinese would visit luxury car showrooms with bulging pockets and snap up cars with, well, the snap of their fingers? Well, no longer.

A recent survey by TNS, a global marketing consultancy firm, has revealed that Chinese car buyer are wising up. Out of 1000 respondents, about 75% of them said that their final purchasing decision is motivated by promotional packages, including discounts, extended warranties or other freebies. Just last year, only 40% of people surveyed said that they were influenced by such marketing tactics.

The fact is that supply is fast outgrowing demand, and the Chinese consumers are now spoiled for choice. As global automakers are focusing more of their strategies in China, driving ever more supply into the country, they might find that selling their products will only get tougher. As it is, car buyers are taking 40% longer to purchase a vehicle compared to only a year ago.

TNS’ Global Development Director, Andy Turton, said, “The China of the past where hungry first time buyers dominated the market is gone…The balance of power has shifted into shoppers' hands and they know it."

The survey also found that purchasing decisions are influenced by social media, blogs, friends, family and car dealers. After going through the stages of decision making, only one in 10 actually buy the car that they had initially intended to. Thus, automakers have to work doubly hard to outshine their competitors, knowing that first impressions no longer count, but the subsequent ‘word-of-mouth’ transmitted via online platforms and the opinion leaders surrounding the would-be buyers. In a connected world, it has become harder and harder for automakers to hide any flaws in their products.

Over in India, another study by J D Power Asia Pacific shows that buyers of new vehicles are inclined toward models with less initial quality hitches. The survey takes into consideration 200 problem symptoms that encompasses 8 categories, including engine and transmission, exterior, driving experience and navigation, controls and displays, and so on.

The discovery is further supported by the fact that automakers with above industry average quality has seen a 6% increase in sales since 2011, while those whose customers have experienced more than average quality issues saw an 8% decline. As we have written earlier, many first time Indian buyers are opting for secondhand cars, due to lower entry level costs, higher fuel prices and higher interest rates. Automakers who want to sell new vehicles will thus have to iron out quality chinks if they want to see continued sales growth in India, despite increasing production costs and a less than robust economic situation.
In the US of A, analysts believe that younger buyers are not interested to purchase cars at all, opting instead to live in cities where the convenience of public transportation is available as well as car sharing services, like Zipcar. For those who are still interested to own a car, a recent study by Deloitte & Touche found that the shopping experience is 3 times as important as the vehicle’s design. This seems to be somewhat similar with the trend in China, whereby purchasers do not end up buying the car they first had in mind, but are influenced by the experience along the way. Carmakers in America will thus have to be increasingly creative in crafting the showroom experience, whether physical or virtual. Joe Vitale, the Global Automotive Leader from Deloitte, said, “They expect their automotive shopping experience to be on par with their retail and technology experiences."

Some automakers have indeed become really creative, merging crowdfunding programmes with the sale of some of their car models. The pioneer of the idea was Chrysler’s Dodge, which allowed potential buyers of the Dart model to register at Dodgedartregistry.com, and friends and family can then contribute to the purchase by sponsoring parts of the car, from the engine to the antenna. Buyers can also use their Facebook and Twitter to ‘solicit’ more sponsorship. Such programmes not only help to guide (or manipulate?) first time buyers with limited funds to decide on which car to procure, it also helps the automakers to move their less popular models. Now, that’s really clever.

With regards to the upcoming trend of alternative vehicles, a study by Penn, Schoen and Berland Associates LLC, an international market research firm, and the National Association of Convenience Stores surveyed petrol buyers on vehicle preferences. The results showed that about 74% would consider purchasing a hybrid vehicle, 54% would purchase a battery electric one, and 58% and 53% would consider fuel cell vehicles and natural gas vehicles respectively. This seemingly eco friendly inclination, however, is not largely attributed to any real concern for the environment, but rather because they are interested in more tax exemptions and better fuel economy. In other words, it’s all about the money.

image: livemint.com

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