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Consumer Behaviour of Luxury Automobiles

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TC

YEDЭTEPE UNIVERSITY

INSTITUTE OF SOCIAL SCIENCES

MRKT563B

Consumer Behaviour

FINAL PROJECT

Consumer Behaviour

of

Luxury Automobiles

by

Fatih ЦZTЬRK

20MBA109

Master of

Business Administration

ISTANBUL, 2003

TABLE OF CONTENTS

Page

Consumer Behaviour of Luxury Automobiles 3

Research Into Luxury Automobiles 3

Table 1 4

Consumer Behaviour of Luxury Automobiles' Customers 6-7

How Can Luxury Automobiles' Customers Be Segmented 8

Vals Typology and Luxury Automobile Customers 9

How Can Luxury Automobiles Be Segmented 10

Brand as Luxury Automobile Segmentation 10

Automobile's Price and Characteristics as Luxury Automobile Segmentation 11

Developed Country and Emerging Country Customers' Perceptions

of Luxury Automobiles 12

What Directs the Market Performances 12

Figure 1a 13

How Important Are The Luxury Automobiles' Characteristics. 14

How Important Are the Social Influences 15

How Can Vals Explain Thai And UK Luxury Auto. Customers 16

Recommendations 17-18

Conclusion 19

Figure 2 19

CONSUMER BEHAVIOUR OF LUXURY AUTOMOBILES

Total worldwide sales of premium luxury and entry luxury saloons and sports cars are of the order of 1.5 million units a year. The major luxury markets today are the USA, Germany, UK and Japan. The Ј21.1 billion UK new car market competes with France and Italy, to be the second biggest in Europe behind Germany. The new registration of luxury marques' cars in 1997 in UK alone was 154,506 units. In other markets, especially in South East Asia there are, of course, significant sales of luxury cars. However, these are limited to total volume either by the overall industry size or by local market conditions and preferences. Accordingly, the luxury car market overall is currently undertaking a social change with luxury brands seeming less remote, less different, and less exclusive with the quality of life improving. As a result, increasing competition between makes has intensified the importance of brand identity. As product standards continue to rise, the perceived image of a car make plays a key role in the buying decision. The premium marques such as BMW, Lexus, and Mercedes-Benz must develop attributes and values that reflect changing social values which influence buyers emotionally, in order to maintain their positions in different regions of the global market.

RESEARCH INTO LUXURY AUTOMOBILES

In the last seven years the research into customer perception and behaviour in the automobile has been driven by American researchers. Very few authors and writings have investigated customer perceptions of luxury cars and much of this work is focused on consumer loyalty and brand switching. The major research focus has been on low priced segment car ranges rather than the luxury segment in which choice between brand concept image and individual choice of potential buyers play a great role. Therefore, they have neglected customers' individual differences that provide different perceptions towards the automobiles or their marquees, which are important in purchase decision making. These research carry the beliefs that automobiles' customers 'merely' strive for 'product-related attributes' This agrees in line with Lancaster's theory (1966) that demanders buy groups of features rather than products, their opinions regarding the similarity of products must also be determined by features. Research into purchasing patterns, however, indicates that it is not the objective features (tangible or technical attributes) themselves, but rather the subjective perception of these that determines consumer choice.

There are differences between business-to-business (fleet) buyers and retail (non-fleet or private) car buyers. Business-to-business buyers are professionals and experts in terms of 'functional benefits' of cars bought for employees. Thus, their consumption is 'routine' and 'functional'. This may explain why Table 1 shows that significantly more Lexus GS300 are purchased as fleet cars (company cars) than BMW 728i from 1994 to 1997. While 728i and GS300 have equal insurance cost, GS300's price is lower and it possesses more powerful technical features: a larger engine, higher horse power, quicker acceleration, and higher maximum speed, and therefore is perceived to offer better value for money in the workplace. In contrast, preferences of retail customers for BMW 728i exceed Lexus GS300's and enable 728i to achieve higher sales in total from 1993 to 1997, despite the better offer and technical characteristics of GS300. This is because retail customers are amateur purchasers who spend their own money for non-routine consumption. Thus, they seek to gain 'experiential' or 'symbolic' benefits from the car brand instead. This demonstrates that there exist differences in specificity among individual customers.

Specificity may depend largely on how buyers discriminate,

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