29 Consumer Behavior Towards Tata Nano: A Perceptual Study 2010 IUP. All Rights Reserved.

Consumer Behavior Towards

Tata Nano: A Perceptual Study
* Reader, Department of Commerce and Business Management, GNDU Amritsar, India.
E-mail: bikramhundal@rediffmail.com
**Junior Research Fellow, Department of Commerce and Business Management, GNDU
Amritsar, India. E-mail: saurabhgrover1985@gmail.com
B S Hundal * and Saurabh Grover**
Tata Nano was one of the longest awaited and most talked about automobile
debuts in India. It is known as peoples car. It is an engineering marvel to come
out of India in terms of cost efficiency, fuel efficiency and space efficiency.
This paper is an attempt to study the consumer behavior and also their perception
towards car in the post-launch period. Factors that motivate buyers to purchase
this car have also been studied.
Introduction
Consumer behavior is the field of study that focuses on consumer activities. It should
be primary focus of every aspect of the firms marketing program. Consumption is
a key to understand why consumers buy products (Blackwell et al., 2007). In this
study, analysis has been made to judge the perception of individuals towards Tata
Nano after its launch. The small car market in India is increasing at a great pace.
The main players in the small car market like Tata Motors and Maruti Udyog are
competing fiercely. All the small car manufacturers are trying to out do each other
in terms of design, innovation, pricing, technology, etc., in order to increase their
market share. There is a healthy competition in the Indian small car market which
has intensified since the Indian government decided to boost the small car sector.
Due to this reason, excise duties have also been reduced. Demand for small cars
has increased due to aspirational lifestyle of people which makes them strive to
purchase a car early in life. Moreover these cars are more affordable and utilitarian.
Tata Nano was one of the longest awaited and most talked about automobile
debut in India (Farris et al., 2009). Tata Nano was launched in Mumbai on March 23,
2009. The car was priced of at Rs. 130,000 approximately. Tata Nano is an
engineering marvel to come out of India in terms of cost efficiency, fuel efficiency
and space efficiency.
To target the specific segment and also to tap bottom of pyramid, Tata Motors
has entered into agreements with 15 preferred banks/NBFCs for the Tata Nano
booking loan product. The preferred financial institutions areState Bank of India,
Tata Motor Finance, State Bank of Patiala, ICICI Bank, State Bank of Travancore,
The IUP Journal of Management Research, Vol. IX, No. 6, 2010 30
State Bank of Mysore, State Bank of Hyderabad, State Bank of Bikaner and Jaipur,
State Bank of Indore, Axis Bank, Punjab National Bank, Federal Bank, Corporation
Bank, Indian Bank and the Central Bank of India (http://www.tata.com/media/
releases/inside.aspx?artid=24zoKJrlFVk=).
Review of Literature
Goyal and Aggarwal (2008) attempted to find the relative importance of various
factors that attract the customers while selecting a particular car in its segment.
For the said purpose, the questionnaire was developed and respondents were
selected by convenience sampling method. As many as 277 respondents were
selected from Ludhiana city including 67 respondents with luxury cars and 117
with small cars. Various techniques like factor analysis, mean, standard deviation
and bivariate correlation had been used. The study revealed in the case of purchase
of luxury cars, the factors like horsepower, model, luggage capacity, accessories
and loan facility emerged as most significant; in the case of medium cars; after-
sales service, availability of spare parts, model, shape and engine capacity were
important; and in the case of small cars, the factors like accessories, engine capacity,
after-sales service and price were main considerations. So, it was recommended
that the car manufacturers had to properly understand the relative importance of
various attributes for the different segments of cars.
Kaushik and Kaushik (2008) investigated empirically customers preference
towards passenger car brands in South West Haryana region. They also considered
pre-purchase and post-purchase behavior and factors influencing the brand
preference of passenger cars. Judgmental sampling method was followed and study
was carried out in Bhiwani and Mahendragarh districts of Haryana during June-
August 2007. Cross tabulation and multi dimensional scaling techniques were used.
It was observed that Maruti 800, Alto and Wagon-R were favorite in that region
and customers were more influenced by friends and relatives rather than dealers
and sales persons. Brand name, fuel, efficiency and price were found to be primary
determinants for buying cars in that region.
Objective of the Study
The study basically aimed at examining the consumer behavior of individuals towards
Tata Nano after its launch. Specifically, the perception and their experience with the
car was examined and the factors that motivate them to purchase this small car.
Research Methodology
The present study is mainly based on primary data collected from around 100
respondents from Amritsar. These respondents were interviewed through a
pre-tested, well structured questionnaire which was administered personally.
Convenient and judgmental sampling method has been used keeping in view the
socioeconomic characteristics. Five-point scale has been used for the said purpose
ranging from strongly agree to strongly disagree. The families residing in the posh
31 Consumer Behavior Towards Tata Nano: A Perceptual Study
and planned colonies were selected for the survey. To find out the perception of
respondents towards Nano, factor analysis was used. Factor analysis is a set of
techniques which, by analyzing correlations between variables, reduces their
number into fewer factors which explains much of the original data, more
economically (Nargundkar, 2010). The survey was conducted during the period
from January 2010 to March 2010. The demographic characteristics of the
respondents depict that the majority of users of Tata Nano were in the age group
of 20-30 years and 64% of them were females and most of them were graduates.
Factor Analysis
Explanatory factor analysis is used to identify the underlying constructs and
investigate relationships among the key survey interval-scaled questions regarding
perception towards Tata Nano in the post-launch period. To test the suitability of
data, reliability test has been conducted and value of Cronbachs alpha comes out
to be 0.7678 which is significant. This significant value is derived by deleting three
variables that were lowering the value of alpha. So, factor analysis is applied to 24
statements (after deleting three statements). The following steps have been
conducted to analyze the data (Hair et al., 1995):
1. The correlation matrix is computed and examined. It reveals that there
are enough correlations to go ahead with factor analysis.
2. Kaiser-Meyer-Olkin measure of sampling adequacy is computed which is
found to be 0.577. It indicated that the sample is good enough for survey.
3. The overall significance of correlation matrices is tested with Bartlett Test of
Sphericity (approximately chi square = 669.097 and significant at 0) provided
as well as support for validity of the factor analysis of the data set (Table 1).
Hence, all these three standards indicate that the data is suitable for factor
analysis. Principal components analysis is employed for extracting factors.
Rotation Method
Orthogonal rotation with varimax was applied (Table 2). The latent root criterion is
used for extraction of factors. As per it, only the factors having latent roots or
eigenvalues greater than one are considered significant, and all the factors with latent
roots less than one are considered insignificant and disregarded (Hair et al., 1995).
There are only eight factors having eigenvalues exceeding one in our study.
The percentage of total variance is used as an index to determine how well the
Kaiser-Meyer-Olkin measure 0.577
of sampling adequacy
Bartletts test of sphericity Approx. Chi-Square 669.097
df 276.000
Sig. 0
Table 1: KMO and Bartletts Test
Tests Corresponding Values
The IUP Journal of Management Research, Vol. IX, No. 6, 2010 32
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33 Consumer Behavior Towards Tata Nano: A Perceptual Study
total factor solution accounts for what the variables together represent. The index
for present solution accounts for 63.956% of the total variation. It is pretty good
figure and we lost only 36% of the information content in our study.
Criteria for the Significance of Factor Loadings
In interpreting factors, a decision must be made regarding which factor loadings
are worth considering. A factor loading represents the correlation between an
original variable and its factor. The criterion given by Hair et al. (1995), where
factor loading based on sample size is taken as the basis for decision about
significant factor loading, was adopted. For our sample of 100 respondents, a
factor loading of 0.5 and above has been considered significant. All the eight
factors have been given appropriate names on the basis of variables represented
in each case (Table 3).
Table 3: Factors Extraction and Factor Loadings
Factor Name of
Statement
Factor
Number Dimension Loading
Status symbol Shifting from bike to Nano enhances social status. 0.737
F1
and reference Friends suggested me to buy this car. 0.692
group Nano is a family car. 0.664
Maintenance cost is low. 0.511
Nano is more accident prone. 0.703
Its an uncomfortable car. 0.674
F2
Risk and Rear engine may cause accidents. 0.627
discomfort Test drives are important for me but Tata dealers 0.511
dont provide it.
I cannot wait for a long time to purchase it. 0.402
Product Pick up is not effective. 0.802
F3 performance Engine is less powerful. 0.734
It is not suitable to drive on highways. 0.619
Congestion and Nano leads to more congestion on Indian roads. 0.848
F4 environmental Problem of parking is aggravated due to this car. 0.662
issues Nano is having adverse effect on environment. 0.447
Product High profile brand ambassador tempted me to 0.717
F5 promotion purchase it.
Dealers image encourages me to buy it. 0.538
Market It can be gifted to children instead of two wheelers. 0.744
F6 penetration Low price motivates me to buy it. 0.545
Company reputation effects my choice. 0.545
F7
Customer After sales service not easily available. 0.698
dissatisfaction Noisy engine. 0.601
Running and Fuel efficient car so less running cost. 0.734
F8 maintenance Spare parts availability should be there. 0.725
cost
The IUP Journal of Management Research, Vol. IX, No. 6, 2010 34
Factor 1: Status Symbol and Reference Group
It is most important factor as it explains 16.725% of the variations. Statements
like Shifting from bike to Nano enhances social status (0.737), Friends suggested
me to buy this car (0.692), Nano is a family car (0.664), and Maintenance cost is
low (0.511). So all these statements tempted a buyer to purchase this car.
Factor 2: Risk and Discomfort
Five variables are loaded on this factor. Nano is more accident prone (0.703), Its
an uncomfortable car (0.674), Rear engine may cause accidents (0.627), Test
drives are important for me but Tata dealers dont provide it (0.511) and I cannot
wait for a long time to purchase it (0.402) which signifies that people are less
satisfied with this car. This factor accounts for 11.467% of the variations.
Factor 3: Product Performance
This factor accounts for 8.081% of the variance. It includes pick up is not effective
(0.802), Engine is less powerful (0.734) and it is not suitable to drive on highways
(0.619). So all these statements state that there is some problem in the
performance of car.
Factor 4: Congestion and Environmental Issues
This factor includes Nano leads to more congestion on Indian roads (0.848);
Problem of parking is aggravated due to this car (0.662), Nano is having adverse
effect on environment (0.447). This factor accounts for 7.187% of the total variance.
Factor 5: Product Promotion
This is another crucial factor which accounts for 5.714% of the variations. This
includes High profile brand ambassador tempted me to purchase it (0.717) and
Dealers image encourages me to buy it (0.538). So, these are some of the
promotional tools which effects sales of Tata Nano.
Factor 6: Market Penetration
This factor accounts for 5.142% of the variations. The variables included in this
factor includes It can be gifted to children instead of two wheelers (0.744),
low price motivates me to buy it (0.545) and company reputation effects my
choice (0.545). So these strategies can be used to penetrate each segment of
the target market.
Factor 7: Customer Dissatisfaction
This factor results in 4.953% of the total variance. This factor exhibits the following
variablesafter sales service not easily available (0.698), noisy engine (0.601).
So due to all these variables, customers are dissatisfied with Nano.
35 Consumer Behavior Towards Tata Nano: A Perceptual Study
Factor 8: Running and Maintenance Cost
This factor results in 4.686% of the total variance. Statements under this factor
are Fuel efficient car so less running cost (0.734) and Spare parts availability
should be there (0.725). Thus we can say that it is an efficient car.
Conclusion
The perception of people towards Tata Nano after its launch has been worked out
with the help of questionnaire. The results of factor analysis revealed that
motivational variables like enhancement of social status, low maintenance cost,
etc., motivates a potential customer to purchase this car.
Some persons were disappointed with the working of this car as they considered
it risky. They think that Tata Nano is more accident prone as its a very small car
and moreover there were some reports regarding bursting of its rear engine in
case of rear collision. There is a huge waiting list for the purchase of this car and
more over it is uncomfortable due to less boot space.
There is a performance problem as its pick up is very low and engine is less
powerful. It is not suitable to drive on highways as its highest speed limit is only
80 km/h adding to dissatisfaction in customers.
It is a less expensive car when compared to other cars. Therefore even low
income group can buy it leading to high congestion on roads and adding to parking
problems.
Promotional strategies also tempted potential customers to buy it. Its brand
ambassador being Ratan Tata himself really helped it in increasing its sales. Dealers
image also affects customers decisions adding to high sales of Tata Nano.
The price of car is low, and so it can be gifted to children instead of two wheelers.
Its low price complemented with the Tatas market penetration strategy as with
this low price figure, it can even reach rural areas and capture this untapped market.
Some of the customers of Tata Nano were dissatisfied with the car due to bad
after-sales service and moreover its noisy engine disturbs the customer. At last, it
is recommended that Tata Nano is really a peoples car but company needs to
work more on its features and safety and enhance its production so that people
dont have to wait to purchase it.
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37 Consumer Behavior Towards Tata Nano: A Perceptual Study
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Reference # 02J-2010-10-03-01
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