CHAPTER 1

INTRODUCTION
BRAND LOYALTY
The American Marketing Association defines brand loyalty as:
1. "The situation in which a consumer generally buys the same manufacturer-originated
product or service repeatedly over time rather than buying from multiple suppliers within
the category" (sales promotion definition).
2. "The degree to which a consumer consistently purchases the same brand within a product
class" (consumer behavior definition). In a survey of nearly 200 senior marketing
managers, 69 percent responded that they found the "loyalty" metric very useful.
When consumers become committed to your brand and make repeated purchases over time.
Brand loyalty is a result of consumer behavior and is affected by a person’s preferences. Loyal
customers will consistently purchase products from their preferred brands, regardless of
convenience or price. Companies will often use different marketing strategies to cultivate loyal
customers, be it is through loyalty programs (i.e. rewards programs) or trials and incentives (i.e.
sales and free gifts). Companies that successfully cultivate loyal customers also develop brand
ambassadors-consumers that will market a certain brand and talk positively about it among their
friends. This is free word-of-mouth marketing for the company and is often very effective.
PURPOSE
Brand loyalty, in marketing, consists of a consumer's commitment to repurchase or otherwise
continue using the brand and can be demonstrated by repeated buying of a product or service, or
other positive behaviors such as word of mouth advocacy.
CONSTRUCTION
Brand loyalty is more than simple repurchasing, however. Customers may repurchase a brand
due to situational constraints (such as vendor lock-in), a lack of viable alternatives, or out of
convenience. Such loyalty is referred to as "spurious loyalty". True brand loyalty exists when
customers have a high relative attitude toward the brand which is then exhibited through
repurchase behavior. This type of loyalty can be a great asset to the firm: customers are willing
to pay higher prices, they may cost less to serve, and can bring new customers to the firm. For
example, if Joe has brand loyalty to Company A he will purchase Company A's products even if
Company B's are cheaper and/or of a higher quality. From the point of view of many marketers,
loyalty to the brand — in terms of consumer usage — is a key factor.
USAGE RATE
Most important of all, in this context, is usually the 'rate' of usage, to which the Pareto 80-20
Rule applies. Kotler's 'heavy users' are likely to be disproportionately important to the brand
(typically, 20 percent of users accounting for 80 percent of usage — and of suppliers' profit). As
a result, suppliers often segment their customers into 'heavy', 'medium' and 'light' users; as far as
they can, they target 'heavy users'.
LOYALTY
A second dimension, however, is whether the customer is committed to the brand. Philip Kotler,
again, defines four patterns of behavior:
1. Hard-core Loyal - who buy the brand all the time.
2. Split Loyal - loyal to two or three brands.
3. Shifting Loyal - moving from one brand to another.
4. Switchers - with no loyalty (possibly 'deal-prone', constantly looking for bargains or
'vanity prone', looking for something different).
FACTORS INFLUENCING BRAND LOYALTY
It has been suggested that loyalty includes some degree of pre-dispositional commitment toward
a brand. Brand loyalty is viewed as multidimensional construct. It is determined by several
distinct psychological processes and it entails multivariate measurements. Customers' perceived
value, brand trust, customers' satisfaction, repeat purchase behavior, and commitment are found
to be the key influencing factors of brand loyalty. Commitment and repeated purchase behavior
are considered as necessary conditions for brand loyalty followed by perceived value,
satisfaction, and brand trust. Fred Reich held, one of the most influential writers on brand
loyalty, claimed that enhancing customer loyalty could have dramatic effects on profitability.
Among the benefits from brand loyalty — specifically, longer tenure or staying as a customer for
longer — was said to be lower sensitivity to price. This claim had not been empirically tested
until recently. Recent research found evidence that longer-term customers were indeed less
sensitive to price increases.
PORTFOLIOS OF BRANDS
Andrew Ehrenberg, then of the London Business School said that consumers buy 'portfolios of
brands'. They switch regularly between brands, often because they simply want a change. Thus,
'brand penetration' or 'brand share' reflects only a statistical chance that the majority of customers
will buy that brand next time as part of a portfolio of brands they favor. It does not guarantee that
they will stay loyal. Influencing the statistical probabilities facing a consumer choosing from a
portfolio of preferred brands, which is required in this context, is a very different role for a brand
manager; compared with the — much simpler — one traditionally described of recruiting and
holding dedicated customers. The concept also emphasizes the need for managing continuity.
CAUTIONS
One of the most prominent features of many markets is their overall stability — or marketing
inertia. Thus, in their essential characteristics they change very slowly, often over decades —
sometimes centuries — rather than over months. This stability has two very important
implications. The first is that those who are clear brand leaders are especially well placed in
relation to their competitors and should want to further the inertia which lies behind that stable
position. This, however, still demands a continuing pattern of minor changes to keep up with the
marginal changes in consumer taste (which may be minor to the theorist but will still be crucial
in terms of those consumers' purchasing patterns as markets do not favor the over-complacent).
These minor investments are a small price to pay for the long term profits which brand leaders
usually enjoy. The second, and more important, is that someone who wishes to overturn this
stability and change the market (or significantly change one's position in it), massive investments
must be expected to be made in order to succeed. Even though stability is the natural state of
markets, sudden changes can still occur, and the environment must be constantly scanned for
signs of these.
FACTORS EXPLAINING BRAND LOYALTY
Although numerous studies attempting to explain brand loyalty have been largely inconclusive to
this point, the following results appear to be indicated:
 Some socioeconomic, demographic and psychological variables are related to brand
loyalty (when extended definitions are used) but tend to be product specific rather than
general across products.
 Loyalty behavior of an informal group leader influences the behavior of other group
members.
 Some consumer characteristics are related to store loyalty, which in turn is related to bad
loyalty.
  Brand loyalty is positively related to perceived risk and market structure variables such as
the extensiveness of distribution and market share of the dominant brand but it is
inversely related to the number of stores shopped.
The brand loyalty of the customer base is often the core of a brand's equity. If
customers are indifferent to the brand and, in fact, buy with respect to features, price,
and convenience with little concern to the brand name, there is likely little equity. If,
on the other hand, they continue to purchase the brand even in the face of competitors
with superior features, price, and convenience, substantial value exists in the brand
and perhaps in its symbol and slogans.Brand loyalty, long a central construct in marketing, is a
measure of theattachment that a customer has to a brand. It reflects how likely a customer will be
to switch to another brand, especially when that brand makes a change, either in price
or in product features. As brand loyalty increases, the vulnerability of the customer
base to competitive action is reduced. It is one indicator of brand equity which is
demonstrably linked to future profits, since brand loyalty directly translates into future
sales.
KEY SUCCESS FACTORS OF BRAND LOYALTY TOWARDS MARUTI
SUZUKI:
The Quality Advantage: Maruti Suzuki owners experience fewer problems with their vehicles
than any other car manufacturer in India. The Alto was chosen No.1 in the premium compact car
segment and the Esteem in the entry level mid - size car segment across 9 parameters.
A Buying Experience like No Other: Maruti Suzuki has a sales network of 307 states- of -the-
art showrooms across 189 cities, with a workforce of over 6000 trained sales personnel to guide
MUL customers in finding the right car.
Quality Service Across 1036 Cities: Maruti Suzuki scored the highest across all 7 parameters:
least problems experienced with vehicle serviced, highest service quality, best in-service
experience, best service delivery, best service advisor experience, most user-friendly service and
best service initiation experience.92% of Maruti Suzuki owners feel that work gets done right the
first time during service. The J.D. Power CSI study also reveals that 97% of Maruti Suzuki
owners would probably recommend the same make of vehicle, while 90% owners would
probably repurchase the same make of vehicle.
One Stop Shop: At Maruti Suzuki, customers will find all car related needs met under one roof.
Whether it is easy finance, insurance, fleet management services, exchange- Maruti Suzuki is set
to provide a single-window solution for all car related needs.
The Low Cost Maintenance Advantage: The acquisition cost is unfortunately not the only cost
customers face when buying a car. Although a car may be affordable to buy, it may not
necessarily be affordable to maintain, as some of its regularly used spare parts may be priced
quite steeply. Not so in the case of a Maruti Suzuki. It is in the economy segment that the
affordability of spares is most competitive, and it is here where Maruti Suzuki shines.
Lowest Cost of Ownership: The highest satisfaction ratings with regard to cost of ownership
among all models are all Maruti Suzuki vehicles: Zen, Wagon R, Esteem, Maruti 800, Alto and
Omni.
Technological Advantage: It has introduced the superior 16 * 4 hyper tech engines across the
entire Maruti Suzuki range. This new technology harnesses the power of a brainy 16-bit
computer to a fuel-efficient 4-valve engine to create optimum engine delivery. This means every
Maruti Suzuki owner gets the ideal combination of power and performance from his car.
MARUTI FINANCE
 Maruti has entered the Auto Finance Market to make quality and transparent finance
available to its customers.
 Maruti has partnered with the leading finance companies in India to provide highly
attractive Finance deals to its customers through its dealers.
 Maruti Finance is the program under which these deals are being offered exclusively to
customers of Maruti Vehicles.
 This will improve the vehicles Ownership experience of our customers and provide us a
chance to improve customer loyalty.
OBJECTIVES OF MARUTI FINANCE
1. To increase the reach of Maruti car Market.
 Organized Finance was available generally in bigger cities and towns.
 Auto finance is not available in smaller towns or customers pay higher interest on
vehicle loans.
 Maruti Finance has increased the reach of organized finance to more cities.
2. Better values Added Packages to customers.
  Discount on Extended Warranty for 2 years(3rd & 4rth year)
 Loans for accessories allowed under NF.
 Loans for insurance allowed under MF.
 Loans for extended warranty.
3. To improve Customer’s purchase experience by offering a standardized and
transparent finance system.
4. To bring ownership of customer to dealership and hence increase customer loyalty.
PARTNERS IN MARUTI FINANCE
 Maruti through a rigorous selection process has selected the top finance
companies to partner with, so that its customers get the best possible services and rates.
 Each dealer is aligned with 2 to 4 finance cost depending on city.
MARUTI INSURANCE
Why Maruti Insurance?
 Maruti has entered the insurance market to make quality & transparent insurance
available to its customers.
 Maruti Insurance is the program under which these deals are being offered exclusively to
its customers.
 This will improve the vehicle ownership experience of our customers and provide us a
chance to improve customer loyalty and retention.
BENEFITS OF MARUTI INSURANCE
To Customers-
 Nearly cashless repairs
 Quality service available
 Availability of bet insurance production.
 Convenience and fulfillment of nearly all transactions.
To Sales Staff-
 Better relationship with customers with increased and regular touch points.
 More incentives.
SERVICES OFFERED AND COVERAGE
 Optional Extended Warranty on Payment
For 3 years, OR 60,000 kms whichever is earlier.
For 4 years, OR 80,000 whichever is earlier.
 Mechanical, electrical & electronic components Engine, transmission, steering, suspension,
fuel system, brake system, air conditioning, electrical components, ECM etc.
MARUTI EXTENDED WARRANTY
 4Year peace of mind for customers- Customers can feel reassured that he is covered in
the event of any unexpected failure in his vehicle.
 Increased customer’s confidence- Customers see that the manufacturer is very confident on
the quality of their product.
 Building customer relationship- Opportunity to interact with customer to sell more
services, accessories and repeat sales of vehicles.
BENEFITS TO CUSTOMERS
 Maruti assurance.
 Flexibility to approach any dealer in the country for warranty claims.
 Dealer takes the warranty decisions, so no delay for the customers.
 Total peace of mind, full cover for risks against manufacturing defects.
 Very nominal price to pay.
 Better re-sale value even if the vehicle is sold before 4 years.
 Customer stays in contact-High customer retention and increased referrals.
 Opportunity to sell new car to the customers after 3-4 years.
 Direct earning from sale of extended warranty.
 True value business.
MARUTI TRUE VALUE
Maruti’s initiative to provide Quality, reliability, transparency and convenience to the Indian
used car customers.
Under Maruti True Value customers can buy, sell or exchange pre-owned Maruti cars up to 10
years/100000 km, non accidental and not more than 2 previous owners.
Cars of any age/mileage/condition/make can be bought under exchange of a new Maruti car.
OBJECTIVES OF MARUTI TRUEVALUE
1. Increase the new car sales.
 By Promoting Exchange.
 By managing residual value (RV) of our cars.
2. Enhancing your organization viability.
 Trough gross margins on True Value of cars.
 Revenues from Finance Payouts.
 Earning from Refurbishment.
3. Customer Retention for life
True Value buying customers will come back to you for service, MGA, Insurance and later for
buying a new car.
BENEFITS-MARUTI TRUE VALUE
Seller/New car Buyer-
1. Transparent Evaluation ensures right price.
2. Hassle free and instant payments.
3. No commission payable by seller.
4. Assurance that your car going to right hands.
5. Attractive exchange options
Buyer-
1. Car certified by Maruti after 120 point inspection.
2. Cars Refurbished using Maruti Genuine parts.
3. Maruti Warranty up to 1 year and 3 free services.
4. Verified seller bonafides.
Sales Staff-
1. Very effective way to sell new cars to customers who are replacing their existing car.
2. High residual value (RV) ensured by True Value makes exchange convection easier and
enhance customer delight.
3. Better Relationship with customer.
4. More incentives.
CUSTOMER DELIGHT
Over three decades, Maruti Suzuki has won the hearts of customers through high quality
products and services.
Individual customers vouch for the quality and low Cost of Ownership of Maruti Suzuki
products. Structured, independent studies like the J D Power Asia Pacific Customer
Satisfaction Index, has ranked Maruti Suzuki as number one for the last twelve years in a
row. This unique achievement is unparalleled in the world, across industries, as nowhere
else in the world is the market leader no. 1 in customer satisfaction.
Benefits of Maruti Suzuki Loyalty Program
Up to 4% value back and much more
Additional discounts on car exchange
Exciting rewards on car referrals
Complimentary gift vouchers
Fuel surcharge waiver of 2.5% across all petrol pumps
Maruti Suzuki Loyalty card is a unique loyalty reward program designed exclusively for
you- the owners of Maruti Suzuki Car. The program is loaded with powerful features and
offers you the best services along with exciting rewards and privileges. With this
program you not only get rewarded on your spends but also on the contribution you
make towards the ever increasing sales of Maruti Suzuki.
So next time whenever you refer your friends/relatives to buy a new Maruti Car or get
your car serviced at our network just use your Maruti Suzuki Loyalty Card and gets
rewarded with high value Auto points (One Auto point equals 1 rupee in value).
This is not all. You get an attractive exchange loyalty bonus of 3000 auto points when
you exchange your existing Maruti car with a new one. To maximize the benefits on the
Loyalty Card, Maruti has partnered with State Bank of India- India's leading and most
trusted bank. Maruti & SBI are both leading brands, have consistently spelt trust and
quality in all their product offerings for the Indian consumer.
There is a card for everyone, just apply for the one of your choice.
SBI MARUTI CARD
Joining bonus of 200 Auto Points, 4% Auto Points on every transaction at any Maruti
Network, with complimentary gift vouchers.
MARUTI SUZUKI AUTO CARD
Joining bonus of 100 Auto Points, 3% Auto Points on every transaction at Maruti
Network, complimentary gift vouchers.
AUTOMOTIVE INDUSTRY IN INDIA
The Automobile industry in India is one of the largest in the world and one of the fastest growing
globally. India's passenger car and commercial vehicle manufacturing industry is the seventh
largest in the world, with an annual production of more than 3.7 million units in 2010.
According to recent reports, India is set to overtake Brazil to become the sixth largest passenger
vehicle producer in the world, growing 16-18 per cent to sell around three million units in the
course of 2011-12. In 2009, India emerged as Asia's fourth largest exporter of passenger cars,
behind Japan, South Korea, and Thailand.
The Indian Automobile Industry manufactures over 11 million vehicles and exports about 1.5
million each year. The dominant products of the industry are two wheelers with a market share
of over 75% and passenger cars with a market share of about 16%. Commercial vehicles and
three wheelers share about 9% of the market between them. About 91% of the vehicles sold are
used by households and only about 9% for commercial purposes. The industry has a turnover of
more than USD $35 billion and provides direct and indirect employment to over 13 million
people.
The supply chain is similar to the supply chain of the automotive industry in Europe and
America.
Interestingly, the level of trade exports in this sector in India has been medium and imports have
been low. However, this is rapidly changing and both exports and imports are increasing. The
demand determinants of the industry are factors like affordability, product innovation,
infrastructure and price of fuel. Also, the basis of competition in the sector is high and
increasing, and its life cycle stage is growth. With a rapidly growing middle class, all the
advantages of this sector in India are yet to be leveraged.
With a high cost of developing production facilities, limited accessibility to new technology, and
increasing competition, the barriers to enter the Indian Automotive sector are high. On the other
hand, India has a well-developed tax structure. The power to levy taxes and duties is distributed
among the three tiers of Government. The cost structure of the industry is fairly traditional, but
the profitability of motor vehicle manufacturers has been rising over the past five years. Major
players, like Tata Motors and Maruti Suzuki have material cost of about 80% but are recording
profits after tax of about 6% to 11%.
The level of technology change in the Motor vehicle Industry has been high but, the rate of
change in technology has been medium. Investment in the technology by the producers has been
high. System-suppliers of integrated components and sub-systems have become the order of the
day. However, further investment in new technologies will help the industry be more
competitive. Over the past few years, the industry has been volatile. Currently, India's increasing
per capita disposable income which is expected to rise by 106% by 2015 and growth in exports is
playing a major role in the rise and competitiveness of the industry.
Tata Motors is leading the commercial vehicle segment with a market share of about 64%.
Maruti Suzuki is leading the passenger vehicle segment with a market share of 46%. Hyundai
Motor India and Mahindra and Mahindra are focusing expanding their footprint in the overseas
market. Hero Honda Motors is occupying over 41% and sharing 26% of the two wheeler market
in India with Bajaj Auto. Bajaj Auto in itself is occupying about 58% of the three wheeler
market.
Consumers are very important of the survival of the Motor Vehicle manufacturing industry. In
2008-09, customer sentiment dropped, which burned on the augmentation in demand of cars.
Steel is the major input used by manufacturers and the rise in price of steel is putting a cost
pressure on manufacturers and cost is getting transferred to the end consumer. The price of oil
and petrol affect the driving habits of consumers and the type of car they buy.
The key to success in the industry is to improve labor productivity, labor flexibility, and capital
efficiency. Having quality manpower, infrastructure improvements, and raw material availability
also play a major role. Access to latest and most efficient technology and techniques will bring
competitive advantage to the major players. Utilizing manufacturing plants to optimum level and
understanding implications from the government policies are the essentials in the Automotive
Industry of India.
Both, Industry and Indian Government are obligated to intervene the Indian Automotive
industry. The Indian government should facilitate infrastructure creation, create favorable and
predictable business environment, attract investment and promote research and development.
The role of Industry will primarily be in designing and manufacturing products of world-class
quality establishing cost competitiveness and improving productivity in labor and in capital.
With a combined effort, the Indian Automotive industry will emerge as the destination of choice
in the world for design and manufacturing of automobiles.
SUPPLY CHAIN OF AUTOMOBILE INDUSTRY
The supply chain of automotive industry in India is very similar to the supply chain of the
automotive industry in Europe and America. The order of the industry arises from the bottom of
the supply chain i. e., from the consumers and goes through the automakers and climbs up until
the third tier suppliers. However the products, as channeled in every traditional automotive
industry, flow from the top of the supply chain to reach the consumers. Automakers in India are
the key to the supply chain and are responsible for the products and innovation in the industry.
The description and the role of each of the contributors to the supply chain are discussed below.
Third Tier Suppliers: These companies provide basic products like rubber, glass, steel, plastic
and aluminum to the second tier suppliers.
Second Tier Suppliers: These companies design vehicle systems or bodies for First Tier
Suppliers and OEMs. They work on designs provided by the first tier suppliers or OEMs. They
also provide engineering resources for detailed designs. Some of their services may include
welding, fabrication, shearing, bending etc.
First Tier Suppliers: These companies provide major systems directly to assemblers. These
companies have global coverage to follow their customers to various locations around the world.
They design and innovate to provide "black-box" solutions for the requirements of their
customers. Black-box solutions are solutions created by suppliers using their own technology to
meet the performance and interface requirements set by assemblers.
First tier suppliers are responsible not only for the assembly of parts into complete units like
dashboard, breaks-axle-suspension, seats, or cockpit but also for the management of second-tier
suppliers.
Automakers/Vehicle Manufacturers/Original Equipment Manufacturers (OEMs): After
researching consumers' wants and needs, automakers begin designing models which are tailored
to consumers' demands. The design process normally takes five years. These companies have
manufacturing units where engines are manufactured and parts supplied by first tier suppliers
and second tier suppliers are assembled. Automakers are the key to the supply chain of the
automotive industry. Examples of these companies are Tata Motors, Maruti Suzuki, Toyota, and
Honda. Innovation, design capability and branding are the main focus of these companies.
Dealers: Once the vehicles are ready they are shipped to the regional branch and from there, to
the authorized dealers of the companies. The dealers then sell the vehicles to the end customers.
Parts and Accessory: These companies provide products like tires, windshields, and air bags etc.
to automakers and dealers or directly to customers.
Service Providers: Some of the services to the customers include servicing of vehicles, repairing
parts, or financing of vehicles. Many dealers provide these services but, customers can also
choose to go to independent service providers.