IIS UNIVERSITYA PROJECT REPORTONCUSTOMER RETENTIONAND BRAND IDENTITY OF CARS AT HONDA SIEL CARS INDIA LTDSubmitted in partial fulfilment for the award of degreee of BACHELORS OF BUSINESS ADMINISTRATION

Submitted to: Submitted by:Miss. Akshita Darda ICG/2011/11909

CONTENTSS.NoParticularsPage no.

1.Introduction of the company1.1 1.1Introduction1.2 1.2Background1.3 1.3Objectives1.4 1.4Executive summary

2.Research Methodology2.1 Methodology2.2 scope and limitations

3.Analysis of the data3.1 economic industry analysis3.2 company analysis3.3 project specific analysis3.4 Theoretical framework 3.5 Data anaysis

4.Findings and Conclusion4.1 summary and findings4.2conclusion&Recommendation

5.Contribution/Outcome

6.Annextures6.1 Books6.2 Research 6.3 Newspaper and reports6.5 Webliography

Acknowledgement

At once end completion of this project report has served me with much knowledge and great experience and on the other end it has filled me with a deep sense of gratitude towards persons who made this project possible.It gives me immense pleasure to express my deep sense of gratitude to Asst. Professor Bachelor Of Business Administration, International College For Girls, Jaipurfor her valuable guidance, motivation and providing such an opportunity.A deep sense of gratitude is owed to Swati Rathore who extended her supervision and assistance through the project duration. Needless to say their knowledge and experience has served as a continuous source of encouragement and motivation. Without their invaluable support and guidance the project would not have been possible.Last but not the least, I owe thanks to myparents and friends for their constant support and strongest motivation, which has been a source of inspiration at every step of my life.Without the cooperation of the above persons it was not possible to complete the project successfully.

AKSHITA DARDAICG/2011/11909

PREFACE

Project work is something that every Management student should carry out seriously at any organization irrespective of their topic they choose to do. This is a part of complete management study and carrying out such a project work is required by the examination and evaluation of IIS University, International College for Girls necessary for the partial fulfillment of B.B.A. course.

As a part of BBA curriculum and in order to gain practical knowledge in the field of management, I was required to make a report on Customer retention & Brand identity of Honda seil carsThe basic objective behind preparation of this project was to get knowledge about different tools of marketing especially marketing.

In this project report, I have included various concepts, effects and implications regarding various forms of customer intention towards cars at Honda seil car India ltd.

Creating this project report helped me to enhance my knowledge regarding the attitude of consumers towards customer retention & brand identity. Through this project I realized the importance of research, primary data and role of devotion towards the work.

CERTIFICATE

This is to certify that the project entitled Customer retention & brand identity of cars at Honda cars India ltd is a bona fide work carried out by Miss Akshita Darda, student of BBA III year of International College For Girls in the academic session 2013-14. To the best of my knowledge, this work has not been submitted for the award of any other diploma or degree.This is his original work which has not been submitted to any other institute/organization for any degree/diploma programThe study was carried out under my supervision and guidance.

DECLARATION

I hereby declare that project report entitledCustomerretention and brand identity of cars at Honda Seil cars India ltd, is a bonafide record of work done by me during the project work and that it has not previously formed the basis for the award to me for any degree/diploma, associate ship, fellowship or other similar title of any other institute/society.

Date Akshita Darda

Chapter 1

Introduction of the company

Chapter -1

INTRODUCTION

1.1 BACKGROUND

Competition in Indian Automobile Industry is high and increasing. This competitiveness in turn depends on the capacity and the speed of the industry to innovate and upgrade. To survive and grow in this industry, Automobile companies need to find innovative and successful ways to retain the customers increase the sales/profits and increase the market share. Honda Siel, which has a market share of fewer than 2% despite being in the country for over 15 years, has been overtaken by rivals like Volkswagen who came in much later.

1.2 OBJECTIVE

The objective of the project is whether to initiate customer retention in Honda Cars India Ltd. by starting a loyalty card program, to what extent it is being implemented by other companies who are using it as their retention tool. Some companies which have loyalty card programs are Honda, Maruti Suzuki, and Ford etc.Other project objective is to find out the brand identity and personality of lower segment sedan cars. .It will help Honda understanding the chosen segment better and also to position their brand rightly in future and also the advertisement can be made accordingly by showing the brand personality. It will help Honda to know which segment is untapped. (according to Need Scope Model)Brand identity is more of a qualitative research which involves knowing the physique, personality, relationship, self-image, reflection and culture of four brands Toyota Etios, Honda Accent, Swift Dzire and Tata Manza (price range between 4.5 to 6.5 lakhs) (based on Kapferer model).

EXECUTIVE SUMMARY

Honda Siel Cars India Ltd.Is a leading manufacturer of passenger cars in India was established in December 1995as a joint venture between Honda Motor Co. Ltd (Japan) and Siel Limited with a commitment to provide Hondas latest passenger car models and technologies, to the Indian customers. Honda was founded by Soichiro Honda. Honda was the seventh largest automobile manufacturer in the world behind Toyota, General Motors, Volkswagen AG, Honda Motor Group, Ford, and Nissan in 2010. Customer retention is one of the biggest challenges in the automobile sector and to tackle it HSCIL has been carrying out several CRM activities but looking at thecompetition we are still lagging behind in retaining our customers. Customer loyalty is all about attracting the right customer, getting them to buy, buy often, buy in higher quantities and bring you even more customers. Customer retention helps an organization grow bigger, earn huge profits, flourish, expand and capturing a greater market share than its competitors. Thus, the need crops up to reform the retention program and look into the pros and cons of developing a loyalty program for Honda.

Brand identityA brand is a "Name, term, design, symbol, or any other feature that identifies one seller'sgood or service as distinct from those of other sellers." How you want the consumer toperceive your product or your brand. The outward expression of a brand including itsname, trademark, communications, and visual appearance is brand identity. Becausethe identity is assembled by the brand owner, it reflects how the owner wants theconsumer to perceive the brand and by extension the branded company, organization,product or service. This is in contrast to the brand image, which is a customer's mentalpicture of a brand.Companies try to bridge the gap between the brand image and the brand identity. By understanding the LC segment cars (BI), Honda can strategies while launching a new car in that segment and how to position it, how to make the advertisements so that it can send a clear brand identity picture to the customers.

Chapter 2Research and Methodology

Chapter - 2

2.1 METHODOLOGYThe project was started with an intensive secondary research which involved studying about the various loyalty programs offered in different industries like aviation, apparels and durables and to find out the reasons behind their success or failures. Then I studied about the automobile industry and what has been done by competitors in this regard and how they have fared. An appointment was taken from the marketing manager of the automobile company that has implemented the program (Maruti Suzuki &Hero Honda in this case) and their view point were taken into account about loyalty programs and the thought process behind designing and implementing such programs would be analyzed. A meeting was arranged with the back end company to know how the data is processed and the front end AutoCard executives to know how they are pitching it to the customers. From the discussion, parameters were assessed and a questionnaire was prepared for Maruti Suzuki owners. The main focus of this questionnaire was to understand the awareness of loyalty programs, expectations from such programs, how frequently they use and suggestions, if any. Also, the factors affecting buying behavior were analyzed and their relation with the loyalty card was established coding & analysiswas done with the help of MS-Excel & SPSS and on the basis of that analysisrecommendations were presented at Honda Siel Cars Ltd

Secondary Sources Internet, books, articles

Primary Sources 1. Associate Manager (Marketing), Hero Honda2. Deputy Manager (Loyalty Department), Maruti Suzuki3. AutoCard Executive4. Maruti Suzuki Dealer5. CustomersAlso study was done about the brand identity and brand personality and the use of it formarketing managers. Brand identity represents how the brand wants to be perceived, itleads brand image and is situated on the sender's side. The way a brand is perceived byits customers is the key to its success.

Brand Identity Prismis often used by marketers to gauge the identity for any brand.4cars were taken for the study Toyota Etios, Tata Manza, Honda Accent, Swift Dzire.Secondary Research was done by studying in deep about the brand attributes and thephysical attributes of these cars.

Primary research was done with the help of questionnaires and personal interviews of the customers (owners and non-owners both).Snowballing Technique (chain sampling, chain-referral sampling, referral sampling) was used for sampling. Also magazines were used to show different pictures of people in it and to link the driver of that car so that its easy for that person to link their imagination. (Collage making was also used in some interviews).People including dealers were interviewed for approximately 30 minutes asking questions and getting their perception about the four cars and brands overall. An excel sheet was made dividing all the words under 6 heads of Kapferer Model 1. Physique2. Personality3. Relationship4. Culture5. Self-image6. Reflection

Common words said for a particular car were grouped together and analysis was doneusing the Need Scope Model, which helps seeing which area of LC segment is untapped.

2.2 SCOPE & LIMITATIONS

ScopeThe project focuses mainly on Indian automobile industry scenario where competition is very high, competitors include both Indian and Foreign automobile companies. In such a competition companies have to be very careful while taking up anything new be it customer retention program or new product development etc.The Project will help Honda in looking into the positive and negative points of starting a customer retention program by Loyalty Cards. This will help Honda implement a successful Program and to expand their customer base and market share in the industry. Also studying the LC segment players in the market will give an edge to Honda to launch, advertise, position their new car in the most appropriate way and also to cater to the needs of the untapped LC area by seeing the need scope model.

Limitations of the study:1. Difficult to find respondents who are using Maruti Suzuki loyalty program so, the sample size is small.2. Due to time and access constraints the geographical area of survey will be confined to the service centers of West Delhi.3. Respondents may not answer correctly about the number of cars and make of carowned thus leading to inaccuracy in demographic analysis.4. As snowballing technique was used for sampling, it can be a source of bias.5. Qualitative research was done for Brand Identity of LC segment; some people are not expressive and cannot express the true feelings in words.6. Time constraint while interviewing the people is that most of them are working.

Chapter 3Analysis of the data

Chapter - 3

3.1ECONOMY-INDUSTRY ANALYSIS

History

The Automobile Industry finally came of age with Henry Ford in 1914 for the bulk production of cars. This lead to the development of the industry and it first began in the assembly lines of his car factory. The several methods adopted by Ford, made the new invention (that is, the car) popular amongst the rich as well as the masses. US dominated the automobile markets around the globe with no notable competitors. However, after the end of the Second World War in 1945, the Automobile Industry of other technologically advanced nations such as Japan and certain European nations gained momentum and within a very short period, beginning in the early 1980s, the U.SA automobile Industry was flooded with foreign automobile companies, especially those of Japan and Germany. The current trends of the Global Automobile Industry reveal that in the developed countries the Automobile Industries are stagnating as a result of the drooping car markets, whereas the Automobile Industry in the developing nations, such as, India and Brazil, have been consistently registering higher growth rates every passing year for their flourishing domestic automobile markets.

Industry Profile & Industry Structure

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 isthe sixth 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. In 2010, India reached as Asia's third largest exporter of passenger cars, behind Japan and South Korea beating Thailand.As of 2010, India is home to 40 million passenger vehicles. More than 3.7 million automobile vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second fastest growing automobile market in the world. According to the Society of Indian Automobile Manufacturers, annual vehicle sales are projected toincrease to 5 million by 2015 and more than 9 million by 2020.By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation's roads.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 production of automobiles has greatly increased in the last decade. It passed the 1 million mark during 2003-2004 and has more than doubled since 1998.

As per the 2010-11 data released by the Society of Indian Automobile Manufacturers (SIAM), domestic vehicle market is dominated by two-wheelers segment with 76 per cent of the pie. Passenger vehicles, commercial vehicles and three-wheelers account for 16.25 per cent, 4.36 per cent and 3.39 per cent of the market, respectively. The majority of India's car manufacturing industry is based around three clusters in the south, west and north. The southern cluster near Chennai is the biggest with 40% of the revenue share. The western hub near Maharashtra is 33% of the market. The northern cluster is primarily Haryana with 32%.Chennai accounts for 60% of the country'sautomotive. Indian automobile sector has huge demands from its own country. This demand also attracts the giant automobile suppliers throughout the world to come and invest in the Indian automotive industry. The automobile industry in India happens to be the ninth largest in the world. Following Japan, South Korea and Thailand, in 2009, India emerged as the fourth largest exporter of automobiles. Several Indian automobile manufacturers have spread their operations globally as well, asking for more investments in the Indian automobile sector by the MNCs.

Type of Vehicle2005-20062006-20072007-20082008-20092009-2010

PassengerVehicles1,209,8761,309,3001,545,2231,777,5831,838,697

CommercialVehicles353,703391,083519,982549,006417,126

Three Wheelers374,445434,423556,126500,660501,030

Two Wheelers6,529,8297,608,6978,466,6668,026,6818,418,626

Total.8,467,8539,743,50311,087,99710,853,93011,175,479

Product and service segmentationThe automotive industry of India is categorized into passenger cars, two-wheelers, commercial vehicles and three-wheelers, with two-wheelers dominating the market. More than 75% of the vehicles sold are two-wheelers. Nearly 59% of these two-wheelers sold were motorcycles and about 12% were scooters. The passenger vehicles are further categorized into passenger cars, utility vehicles and multi-purpose vehicles. All sedan, hatchback, station wagon and sports cars fall under passenger cars

Automobile Production

Automobile salesType of Vehicle2004-20052005-20062006-20072007-20082008-2009

Passenger Vehicles1,061,5721,143,0761,379,9791,549,8821,551,880

Commercial Vehicles318,430351,041467,765490,494384,122

Three Wheelers307,862359,920403,910364,781349,719

Two Wheelers6,209,7657,052,3917,872,3347,249,2787,437,670

Total7,897,6298,906,42810,123,9889,654,4359,723,391

STRENGHTS

1.Domestic Market is large2.Government provides monetaryassistance for manufacturing units3.Reduced Labour costWEAKNESSES1. Infrastructural setbacks2.Low productivity3.Too many taxes levied bygovernment increase the cost ofproduction4.Low investments in Researchand Development

THREATS1.Increasing rates of interest2.Too much competition3.Rising cost of raw materialsOPPORTUNITIES1.Reduction in Excise duty2.Rural demand is rising3.Income level is at a constantincrease

SWOTANALYSIS

Demand driversDeterminants of demand for this industry include vehicle prices and exchange rates, preferences, the running cost of a vehicle, income, interest rates, scrapping rates, andproduct innovation.

1. Exchange Rate: Movement in the value of Rupee determines the attractiveness of Indian products overseas and the price of import for domestic consumption.

2. Affordability: Movement in income determine the affordability of new motor vehicles. Allowing unrestricted Foreign Direct Investment (FDI) led to increase in competition in the domestic market hence, making better vehicles available at affordable prices.

3. Product Innovationis an important determinant as it allows better models to be available each year and also encourages manufacturing of environmental friendlycars.4. Demographics: It is evident that high population of India has been one of the major reasons for large size of automobile industry in India. Factors that may be augment demand include rising population and an increasing proportion of young persons in the population that will be more inclined to use and replace cars. Alsoincrease in people with lesser dependency on traditional single family incomestructure is likely to add value to vehicle demand.5. Infrastructure: Longer-term determinants of demand include development in Indian's infrastructure. India's banking giant State Bank of India and Australia's Macquarie Group has launched an infrastructure fund to rise up to USD 3 billion for infrastructure improvements. India needs about $500 billion to repair its been made with an aim to generate long-term cash flow from automobile, power, and telecom industries. (Source: Silicon India)6. Price of Petrol: Movement in oil prices also have an impact on demand for large cars in India. During periods of high fuel cost as experienced in 2007 and the first half of 2008, demand for large cars declined in favour of smaller, more fuelefficient vehicles. The changing patterns in customer preferences for smaller, more fuel-efficient vehicles led to the launch of Tata Motor's Nano one of theworld's smallest and cheapest cars.

Critical Success FactorsConsumer Sentiment Index

1. End customers are very important to ensure the survival of the Motor Vehicle Manufacturing industry. Economic downturns and other events can affect the expenditure decision of households. When customers are not happy or optimistic about the future of the economy, they will tend to postpone expenditure until times are better. In 2008-09, customer sentiment is expected to fall, which will have a brunt on the augmentation in demand of cars.

Domestic Goods Price Metal Iron and Steel

Description: The price of input such as steel.2. Steel is a major input used when manufacturing a motor vehicle. Rises in the price of steel puts cost pressures on manufacturers, which often leads to a fall in profitability. Over the past five years, the price of steel has been rising rapidly. These rises in price eventually pass from the manufacturers to the end customers.

Import and Export Taxes (Duties) Motor Vehicle TariffsDescription: Tariff rates applicable to the industry3. High taffies may restrict flow of trade but may attract investment if domestic market is big enough and growing. Over the last few years India's tariff policies and conditions of import of vehicles have served the purpose of attracting investments. Industry is keen that the existing tariff structure roadmap and conditions of import of vehicles are retained without any modifications because of certain systematicdeficiencies which make manufacturing less cost competitive in India as compared to some of the neighbouring countries like China, Thailand, Indonesia, etc.Wold Price - Energy Crude OilDescription: The world price of crude oil, $US/barrel, and price analysis.4. The price of oil and petrol affect the driving habits of consumers and the type ofcar they buy. Over the past five years, the price of petrol has been influenced thebuying decision of motorists, who are switching more to fuel efficient options These include cars that run on liquefied petroleum gas (LPG), diesel and smallcars that achieve better mileage.Other success factors1. Positive ImageOne critical factor that often defines an automotive company is its public image. Becausebuyers entrust their safety, along with a sizable portion of their income, to a car company,the perception of the company figures greatly in the buying decision. Factors influencingan automotive company's image include advertising, word of mouth and expert reviewsand opinions.

2. Distribution NetworkA more practical critical success factor for any automotive company is a strong network for distribution. Because cars and trucks are not sold directly to customers, auto manufacturers rely on franchised dealerships to provide local showrooms. These dealers must be knowledgeable and reputable to sell cars, which is essential for the automaker. Like auto corporations, dealers are reliant on a positive image that may be influenced by, or influence in turn, the image of the automaker.

3. Cash FlowA healthy cash flow is another practical critical success factor. When an automaker provides incentives or lowers prices, it almost always sells more cars, but the profit margin may not be a healthy one.

4. ComplianceAutomakers must also ensure that the vehicles they sell are in compliance with various federal and local regulations. These include emissions standards, fuel efficiency and safety standards.

5. FlexibilityAn elusive critical success factor for the automotive industry is the ability to be flexible.American car buyers may change their buying habits quickly in response to factors likethe state of the economy, the price of fuel and new automotive technologies. It isessential that automakers remain attentive to these trends and keep in place a system.Domestic Economic Conditions

India is one of worlds fastest growing economies. Apart from China, no other country hasas high an economic growth rate as India. This country offers several economicadvantages to its nationals as well as foreign investors. Indias economic boom has beenmade possible mainly through its information technology and outsourcing business. TheEconomy of India is a mixed one. That means the Indian economy has a mix of capitalistas well as socialist economies. The automobile sector of any country reflects the healthof its economy. By this virtue, the Indian economy is very much in a good shape as thecountry's automobile industry has marked impressive growth in the last fiscal. The overallIndian automobile industry grew by 12.12 per cent in 2011-12 by selling 17.3 million units,majorly driven by demand for two-wheelers and light trucks. Further, the sector witnessedSales growth of 12.46 per cent for the period between April 2011 and February 2012.Theindustry has undergone numerous developments and investments recently that havesubstantially impacted the market dynamics.

Fiscal & Monetary PolicyTaxationIndia has a well-developed tax structure. The power to levy taxes and duties is distributedamong the three tiers of Government, in accordance with the provisions of the IndianConstitution. The main taxes/duties that the Union Government is empowered to levy are:- Income Tax (except tax on agricultural income, which the State Governments can levy),Customs duties, Central Excise and Sales Tax and Service Tax. The principal taxeslevied by the State Governments are: - Sales Tax (tax on intra-State sale of goods),Stamp Duty (duty on transfer of property), and State Excise (duty on manufacture ofAlcohol), and Land Revenue (levy on land used for agricultural/non-agriculturalpurposes), Duty on Entertainment and Tax on Professions & Callings. The Local Bodiesare empowered to levy tax on properties (buildings, etc.), Octroi (tax on entry of goods foruse/consumption within areas of the Local Bodies), Tax on Markets and Tax/UserCharges for utilities

Central Excise DutyCentral Excise duty is an indirect tax levied on those automobiles which are manufactured in India and are meant for home consumption. The taxable event is 'manufacture' and the liability of central excise duty arises as soon as the automobiles are manufactured. It is a tax on manufacturing, which is paid by a manufacturer, who passes its incidence on to the customers.

MODVAT & CENVATTaxation of inputs, like raw materials, components and other intermediaries has a number of limitations. In production process, raw material passes through various processes stages till a final product emerges. Thus, output of the first manufacturer becomes input for second manufacturer and so on. This is called cascading effect or double taxation. Therefore, the Government tried to remove these defects of the Central Excise System by progressively relieving inputs from excise and countervailing duties. An ideal system to realize this objective would have been to adopt value added taxation (VAT). However, on account of some practical difficulties it was not possible to fully adopt the value added taxation. Hence, Government evolved a new scheme, `MODVAT' (Modified Value Added Tax).Subsequently, MODVAT scheme was restructured into CENVAT (Central Value Added Tax) scheme under the CENVAT Scheme, a of duty of excise as well as of service tax paid on any input received in the factory or any input service received by manufacturer of final product. Inputs include goods used in theManufacture of capital goods which are further used in the factory of the manufacturer.

Customs DutyCustoms Duty (Import duty and Export tax) is a type of indirect tax levied on goods imported into India as well as on goods exported from India. It provides for levy and collection of duty on imports and exports, import/export procedures, prohibitions on importation and exportation of goods, penalties, offences, etc. Export duties are levied occasionally to mop up excess profitability in international prices of goods in respect ofwhich domestic prices may be low at the given time. But the sweep of import duties is quite wideService TaxService tax is a tax levied on services the rendered by a person and the responsibility of payment of the tax is cast on the service provider. It is an indirect tax as it can be recovered from the service receiver by the service provider in course of his business transactions.

Auto FinancingA personal loan to purchase an automobile, a loan that establishes consumer credit that is granted for personal use; usually unsecured and based on the borrower's integrity and ability to payThere are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer An indirect auto loan is where a car dealership acts as an intermediary between financial organization and the customer. Interest rates on unsecured loans are nearly always higher than for secured loan. Most of the financial institutions provide Max funding: upto 80% of car price. Processing fees: upto 0.75% of loan.Prevailing interest rates in the market is 11.5 to 14.75 approx. (differs according to term of the loan) for a new car and 16.50% - 18.50% for used cars.

Global Economic Environment

In the latter half of 2008, a global-scale recession adversely affected the economy of the United States. A combination of several years of declining automobile sales and scarce availability of credit led to a more widespread crisis in the United States auto industry in 2008 and 2009. GM and Chrysler were faced with imminent bankruptcy and liquidation. Following the2000s energy crisis, the U.S. automakers failed to produce more fuelefficient vehicles as opposed to the high-profit sport utility vehicles that were popular in the late 1990s and early 2000s which led to excess inventory and undesirable product. As of 2012, the industry has recovered to some extent. GM had 2011 sales of more than 9 million vehicles, more than Toyota. However the US government may have to write off about $14 billion of its $80 billion loan. Data provided by the International Organization of Motor Vehicle Manufacturers (OICA) shows that total world auto production increased by some 16% over the period 19972009 to 61.7 million vehicles. Vehicle production in the USA, Japan and Europerepresented 77% of global production in 1997 but this had declined to around 50% by 2009 whilst production in China had risen from 3% of the total in 1997 to over 22% in 2009 It is a time of economic restructuring in the world's car industry and the implication for individual nations and regions is profound. In the rapidly expanding markets of Brazil, India and China, there is expansion of capacity with new plants being opened as local markets grow on the back of rising domestic incomes. The pattern in the traditional markets of the West is the reverse, with significant contraction and even plant closures by the traditional volume producers. The earthquake, tsunami and the nuclear crisis in Japan in March last year have thrown the global automotive industry out of gear. The auto parts supply chains have paralyzed, triggering production shutdowns, work shift reductions and cancellation of orders. Japan accounts for about 13% of the worldwide automobile production, with U.S. being its largest market. Production of about 40 auto-parts manufacturers in the country has been jeopardized due to plant outages and power shortages following the earthquake.

Major players

TATA MotorsMarket Share: Commercial Vehicles 63.94%, Passenger Vehicles16.45% Tata Motors Limited is India's largest automobile company, with consolidated revenues of USD 14 billion in 2008-09. It is the leader in commercial vehicles and among the top three in passenger vehicles. Tata Motors has winning products in the compact, midsize car and utility vehicle segments. The company is the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer with over 24,000 employees. Since first rolled out in 1954, Tata Motors as has produced and sold over 4 million vehicles in India.

Maruti Suzuki IndiaMarket Share: Passenger Vehicles 46.07%Maruti Suzuki India Limited, a subsidiary of Suzuki Motor Corporation of Japan, is India'slargest passenger car company, accounting for over 45% of the domestic car market. The company offers a complete range of cars from entry level Maruti-800 and Alto, to stylish hatchback Ritz, A star, Swift, Wagon-R, Estillo and sedans Dzire, SX4 and SportsUtility vehicle Grand Vitara.Since inception in 1983, Maruti Suzuki India has produced and sold over 10 millionVehicles in India and exported over 500,000 units to Europe and other countries. TheCompanys revenue for the fiscal 2010-2011 stood over Rs 375,224 million and Profitsafter Tax at over Rs. 22,886 million

Honda Motor IndiaMarket Share: Passenger Vehicles 14.15%Honda Motor India Limited is a wholly owned subsidiary of world's fifth largest automobile company, Honda Motor Company, South Korea, and is the largest passenger car exporter. Honda Motor presently markets 49 variants of passenger cars across segments. These includes the Santro in the B segment, the i10, the premium hatchback i20 in the B+ segment, the Accent and the Verna in the C segment, the Sonata Transform in the E segment.

Indian automotive companies1. Chinkara Motors: Beachster, Hammer, Roadster 1.8S, Rockster, Jeepster, Sailster2. Hindustan Motors: Ambassador3. ICML: Rhino Rx4. Honda: Major, Xylo, Scorpio, Bolero, Thar, Verito, Genio, XUV500.5. Premier Automobiles Limited: Sigma, Rio6. San Motors: Storm7. Tata Motors: Nano, Indica, Vista, Indigo, Manza, IndigoCS, Sumo, Grande, Venture,Safari, Xenon, Aria

Foreign automotive companies in IndiaVehicles manufactured or assembled in India1. BMW India: 3 Series, 5 Series, X1, X32. Fiat India (in collaboration with Tata Motors): Grande Punto, Linea.3. Ford India: Figo, Fiesta Classic, Fiesta, Endeavour.4. General Motors India Chevrolet: Spark, Beat, Aveo U-VA, Optra, Cruze, Tavera5. Honda Siel: Brio, Jazz, City, Civic, Accord.6. Honda Motor India: Eon, Santro, i10, i20, Accent, Verna, Sonata.7. Land Rover: Freelander 28. Maruti Suzuki: 800, Alto, WagonR, Estilo ,A-star, Ritz, Swift, Swift DZire, SX4, Omni,9. Mercedes-Benz India: C-Class, E-Class, M-Class, S-Class.10. Mitsubishi (in collaboration with Hindustan Motors): Lancer, Lancer Cedia, Pajero.11. Nissan Motor India: Micra, Sunny, Evalia.12. Renault India: Pulse, Duster, Fluence, Koleos.13. Toyota Kirloskar: EtiosLiva, Etios, Corolla Altis, Innova, Fortuner.14. Volkswagen Group Sales India:15. Audi India: A4, A6, Q5.16. Skoda Auto India: Fabia, Rapid, Laura.17. Volkswagen India Polo, Vento, Jetta, Passat.

The Indian Automotive Industry after de-licensing in July 1991 has grown at a spectacular rate on an average of 17% for last few years. The industry has attained a turnover of USD $35.8 billion, (INR 165,000 crores) and an investment of USD 10.9 billion. The industry has provided direct and indirect employment to 13.1 million people. Automobile industry is currently contributing about 5% of the total GDP of India. India's current GDP is about $1.4 trillion and is expected to grow to $3.75 trillion by 2020. The projected size in 2016 of the Indian

Regulatory IssuesSIAM stands for Society of Indian automobiles manufacturers

Vehicular Safety Standards & RegulationsEnvironmental imperatives and safety requirements are two critical issues facing the automotiveindustry, worldwide. Indian Automobile Industry in the last decade has made significant progress on the environmental front by adopting stringent emission standards, and is progressively aligning technically with international safety standards. Central Motor Vehicle Rules (CMVR) came into force from 1989 and serious enforcement of regulations came into effect. Chapter V of the Central Motor Vehicle Rules, 1989 deals with construction, equipment and maintenance of vehicles and in addition to rules governing emission limits, there are several rules in this chapter requiring motor vehicles to comply with safety regulations.Vehicles being manufactured in the country have to comply with relevant Indian Standards (IS) and Automotive Industry standards (AIS). Indian Standards (IS) have been issued since the late 1960s. Regulations are reviewed periodically by the Technical standing Committee on MCVR (CMVR-TSC).

States also have their State Motor Vehicle Rules.

In order to have a planned approach to introduction of advanced safety features, SIAM drew up a Road Map for Automobile Safety Standards. The Roadmap was prepared by the CMVR, Safety & Regulations Committee.

The current traffic conditions, driving habits, traffic density and road user behavior necessitate that maximum safety be built into the vehicles. Progressive tightening of safety standards taking into account unique India requirements has been addressed by the Road Map with a view to reducing the impact of accidents and thereby improving safety of the vehicle occupants and vulnerable road users.

Economic AffairsIn the first section we have given the Auto Policies of Government of India to facilitatesustainable development of Indian Automobile industry.In the second section we have given the current rates of major duties and taxes applicable to vehicles in India. Excise Duty is essentially a manufacturing tax imposed on all vehicles manufactured in India. The same rate is applicable to imported vehicles in the form of Counter Vailing Duty (CVD). Custom Duty is essentially an import duty applicable on all imports.Porters ModelThe automobile manufacturing sector is characterised by a high cyclical growth patterns,high fixed cost and break-even point levels, and an excessive gain access to technologyof major operators, as the present incumbents include some of the largest multinationalsthat have considerable claims to new technology. The relative large size of domesticmarket, together with high competition, has already seen significant rationalisation of this industry.

Porters five forces

A MODEL FOR AUTOMOBILE INDUSTRY ANALYSISThe model of pure competition implies that risk-adjusted rates of return should be constant across firms and industries. However, numerous economic studies have affirmed that different industries can sustain different levels of profitability; part of this difference is explained by industry structure. Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates.

3.2 COMPANY ANALYSISHonda Siel Cars India Limited (HSCI) is aJoint venture between the Honda motor Company of Japan and Siel Limited for theproduction, marketing and export of passenger cars in India, a SiddharthShriram Group company, with a commitment to providing Hondas latest passenger car models and technologies, to the Indian customers. It began operations in December 1995.

It operates production facilities at Greater Noida in Uttar Pradesh and at Bhiwadi inRajasthan. The company's total investment in its production facilities in India as of 2010 was over 16.2 billionHSCI's first manufacturing unit at Greater Noida commenced operations in 1997. Setup at an initial investment of over 4.5 billion, the plant is spread over 150 acres (0.61 km2). The initial capacity of the plant was 30,000 cars per annum, which was thereafter increased to 50,000 cars on a two-shift basis. The capacity has further been enhanced to 100,000 units annually as of 2008. This expansion led to an increase in the covered area in the plant from 107,000 m to over 130,000 m The company invested 7.8 billion in Bhiwadi for its second production plant with anannual production capacity of 50,000 units. It operates under the ISO 9001 standard for quality management and ISO 14001 for environment management. Honda Siel Cars India Ltd. launched its much-awaited small car, the Honda Brio(pronounced as Br-ee-o and means energetic and cheerful in Italian), in the Indian market. The car, offered as the perfect package for a new era, embodies the best of Hondas technologies to deliver fun and agile driving, fuel-efficiency, spaciousness & safety. The companys product range includes Honda Brio, Honda Jazz, Honda City, Honda Civic and Honda Accord which are produced at the Greater Noida facility with an indigenization level of 80%, 77%, 76%, 74% and 28% respectively. The CR-V is imported from Japan as Completely Built Units. Hondas models are strongly associated with advanced design and technology, apart from its established qualities of durability, reliability andfuel-efficiency.

Present CEO - Mr. Hironori Kanayamais the new President and CEO of the company. Mr. Kanayama has replaced Mr. Takashi Nagai who has taken up the post of President and Representative Director for Honda Logistics Inc.( April1, 2012.)Mr. JnaneswarSen HSCI is the Senior Vice-President (Sales andMarketing)

ModelsHSCI produces the following vehicles in India for local and export markets:1. Honda City (Launched 1998)2. Honda Accord (Launched 2001)3. Honda Civic (Launched 2006)4. Honda Jazz (Launched 2009)5. Honda Brio (Launched 2011)It also imports the Honda CR-V for sale in the local market.

SalesHSCI has 127 dealerships across 79 cities in 20 states and 3 Union Territories of India.It sold 55,884 units during the period April '09 - February '10 as against 45,052 unitsduring the same period a year ago, recording an increase of over 24%. Honda jazz isknown as Honda fit in other countries.

Awards 2006 Best Indian Company (unlisted) by Business Standard Group Manufacturer of the Year by NDTV Profit-Car India Manufacturer of the Year by CNBC-TV 18 Auto car India No 1 Mid-Size Car (Honda City); No 1 Entry Luxury Car (Honda Accord) and No 1 Premium SUV (Honda CR-V) by TNS Best Mid-size Car in Initial Quality (Honda City) and Most Appealing Mid-size car(Honda City) by JD Power CNBC Autocar CAR of the year 2004 - Honda City ICICI Overdrive SUV of the Year 2004 - Honda CR-V ICICI Overdrive Car of the Year 2004 - Honda City Business Standard Motoring Car of the Year 2004 - Honda City

Business lifecycle

The life cycle stage is growth Life Cycle ReasonsThe market for manufacturing motorvehicles consistently increasing. The products manufactured by this industry are profitable. Companies have been consistently opening new plants and employing over the past five years. Japanese and European manufacturers of motor vehicles have entered the market. Industry value added has been rising, along with the rise in GDP. LifeCycle Analysis.

General improvement in availability of trained manpower and good infrastructure is required for sustainable growth of the industry.

HONDA lies in the early stage where sales continue to increase and profits are maximum. So HONDA tries its level best to maintain this present situation.

It is common view that consumes view a brand name as an important part of the product and no doubt branding ads to the value of the product.

Honda recognizes Life Cycle Assessment (LCA) as a critical tool for understanding the impact of its products and operations on the environment. Using the LCA framework, the company is working to minimize that impact in virtually every aspect of its business.

Branding practices & Strategy

The Honda brand is built around several key pillars, two of which are fuel economy and environmental awareness. Honda says that environmental technology has and will continue to be at top, Honda was actually first to the market with a hybrid, the Honda Insight. Now they are introducing the electric Honda Fit EV.

While Honda has never been flashy, always conservative; you know what you are going to get from a Honda.

Brand decision of HONDA is based on the fact that it is most popular perceived by the customer as luxurious vehicle. HONDA brand name has strong consumer loyalty but only in a specific target segment of the whole society.

HONDA has struggled a lot to keep its brand being remain in minds of consumers. Under this regard the main strategy is to add the valuable features to vehicles to keep the brand loyalty. Every brand of HONDA has its own branding strategy

Honda Cars are a premium brand. It provides versatility, style and sporty drive etc. in its vehicles. Honda highlights new-age body line, quiet-smoother handling, cutting edge i-VTEC engine technology, plush interiors and high-end security system. Thus Honda brand name also adds as a USP to its products, coz brand name adds the factor of trust its customers have in Honda cars. Honda believes fuel efficiency as a brand attribute.

Honda spent billions (along with their dealer network) to create brand consistent facilities, showrooms, and shops. These investments are required to show multiple-brand car shoppers the superior experience that they will receive from Honda and Honda Dealers. True Cars intent of excluding the dealerships showroom, and other brand investments during the pre-sale experience, will only lead to brand defection for Honda. In order for brand loyalty to occur, Honda drivers must be comfortable with the entire customer experience. This includes recognizing the value they receive on their new Honda from the same local dealership that will service it. If customers are not purchasing from their local Honda dealerships but instead the dealership with the cheapest True Car price (that could be a distance away), the entire dealer/market model is severely weakened, leading to brand defection for Honda .The Top 20 World Brands from "The Interbrand/Business Week Rankings For2009"

Brand Rank 2009Brand NameBrand Value ($ billion)

1Coca-Cola69

2IBM60

3Microsoft57

4GE48

5Nokia45

6McDonald's32

7Google32

8Toyota31

9Intell 31

10Disney28

11Hewlett-Packard24

12Mercedes-Benz24

13Gillette23

14Cisco22

15BMW22

16Louis Vuitton21

17Marlboro19

18Honda18

19Samsung18

20Apple15

Honda Earns 2012 Kelley Blue Book Brand Image Awards for Best Value Brand andMost Trusted BrandPromotional PracticesHonda has long been committed to spreading mobility throughout society while promoting traffic safety for everyone. On a global basis,Honda is directly involved in real-life safety training that expands safe driving practices one person at a time. HONDA promotes its product through Adds, Billboards, and TV. Sponsoring sports event, Customer service, Environment friendly automobiles.

CALL CENTER SERVICE: HSCIL has itsown call center service cell. Any informationon nearest authorised dealers, service centres, on call problems etc. are provided by thecall center officials. Personal selling Sales Promotion Public Relations Direct Mail Trade Fairs and Exhibitions Advertisement &Sponsorship

Considering the advertisement, Honda has been very careful and precise in their advertisements. Honda always projected their image as most reliable brand, advanced technology, eco-friendly cars. Even considering the television commercials, Honda promoted their hybrid car that runs without gasoline and emits water as the bye product rather than advertising the specific brands existing in the market. The ad was more concentrated to the companys technological advancements and eco-friendly image which differentiated.Honda promoted their products in majority through print media compared to others. Majority advertisements come in magazines and national newspapers through that they could educate the target customers in a better way. The customers were always aware of the company policies of providing latest technology and upgrading whenever necessary and also remodelling the entire model after certain period of time. Considering the pilot model in India, Honda City the company had remodelled it thrice till the inception. Honda always tried to create a surprise element during the launch of every model.

The company plans to stage road shows, to display vehicles in the pavilions duringvarious college festivals and exhibition.

If we consider the television commercial of the new Honda City shows the car driving through a picture-perfect landscape. The driver drives through a waterfall only to realize he was seeing his own reflection. The car zooms past the reflection and stops. When the driver steps out he realizes that he was only imagining the landscape projecting thesmoothness of the car.12 January 2009 Honda Motors emerged a winner at the second edition of the India Best Brand Survey Awards, bagging eight prizes three in the four wheeler segment including Very Reliable Brand, Good Advertising and Environment Friendly

Customer RelationshipIncreasingly, what were considered 'value-added services' a few years ago, are fast becoming hygiene services something that we are expected to provide as routine. Loaner cars and cashless transactions for insurance-based repairs are just some of the demands that today's savvy customers expect as the norm.

Customer handling, throughout the entire ownership experience, from the first test drive, through the regular service check-ups, and finally to the trade-in process on the next vehicle purchase, is extremely critical to upholding our brand image. As we all know, it takes years of continuous and consistent focus on customer satisfaction to build our reputations and one misstep destroys its dealers have the extremely important responsibility to uphold the brand image of theHonda. As manufacturers, the only touch points they have with the customers are through them- be it on the sales floor or in your service workshops.

Dealers play an important role in connecting Honda to its customers.

CRM STRATEGIES OF HSCIL HONDA ASSURE:Under the Honda Assure program all Honda customers get the benefit of a more transparent, hassle-free transaction and a quick turnaround time on their insurance claims. The entire transaction is routed through an on-line central server which enables HSCI to monitor the overall operations more effectively. Some of the direct benefits to the customers include Cashless Insurance across India, instant policyissuance, and improved turnaround time.Manufacturers give exciting products, built with outstanding quality, and price them competitively to allow dealers to generate the returns to reinvest in your dealerships. With these shared responsibilities, it is the quality of the relationships that we maintain, between manufacturers and dealers, which decides how we survive in this extremely competitive environment. Here again, it takes honest and open communication to build the mutual trust that is necessary for such a critical association, and it takes only one misplaced action or word to destroy a relationship that may have taken years to establish. Customers can visit Web Sites without sharing personally identifiable information. They can visit Web sites without telling us who they are and without revealing any personally identifiable information to learn about Honda, our product and service information, special offers and promotions. Honda Revs Up Relationships With Dealers, Customers. Consumers get price quotes and pre-approved financing online; dealers get lead. Honda says Cambridge Technology and his IT department worked to integrate the online site with Honda's customer-relationship management database to better track all the leads generated at the site. The automaker also integrated the site with its financing department's credit-assessing system, letting online consumers receive information on whether they are pre-approved for financing within a minute or so. Under Honda's plan, the only steps the customer has to complete at the dealer are signing the final paperwork--and handing over the check. Honda dealership personnel are trained professionals. They are able to answer all your questions. If you encounter a problem that your dealership does not solve to your satisfaction, please discuss it with the dealerships management. The Service Manager or General Manager can help. Almost all problems are solved in this way. When the customers call or write to Honda they have to give following info.

Vehicle Identification Number Name and address of the dealer who services your car Date of purchase Mileage on your car Your name, address, and telephone number A detailed description of the problem Name of the dealer who sold the car to you If you are dissatisfied with the decision made by the dealerships management,contact your Honda Customer Relations Office

Competitor analysisMain competitors are Toyota and Maruti. Every car of Honda has a different completionand different competitors in different segments of cars.

The competitors for Brio- are Maruti Ritz, Toyota EtiosLiva, and Honda i10. The Honda City has Volkswagen Vento, Ford Fiesta, Honda Verna, Maruti SX4, FiatLinea and Chevrolet Aveo The main challenger is the Volkswagen Vento, which ever since its launch in the laterhalf of last year, has slowly started making inroads. The Volkswagen brand whichcarries with it as much credibility if not more as that of a Honda, novelty, great qualityand stylish looks and most importantly terrific diesel engine is helping Ventos cause. Civic is well behind its competitors such as Toyota Altis and Chevrolet Cruze. In thepremium segment category, Honda Accord has lost pole position to Skoda Auto IndiaPvt. Ltd s Superb. In the SUV category, Hondas CR-V has competition with Mitsubishi Outlander, Honda Santa Fe, Grand Vitara, Honda Tucson and FordEndeavour.

Market DynamicsThe pricing signals are created as a result of changing supply and demand levels in a given market. Market dynamics describes the dynamic, or changing, price signals that result from the continual changes in both supply and demand of any particular product or group of products. Market dynamics is a fundamental concept in supply, demand and pricing economic models. The Indian automobile industry is experiencing an exponential rise in demand, but its sustainability is an issue due to the dynamic nature of the market and environmental conditions As per the 2010-11 data released by the Society of Indian Automobile Manufacturers (SIAM), domestic vehicle market is dominated by two-wheelers segment with 76 per cent of the pie. Passenger vehicles, commercial vehicles and three-wheelers account for 16.25 per cent, 4.36 per cent and 3.39 per cent of the market, respectively.

Demand factors Financing options Advertisement & Marketing Price of the car Increase In Affordability Demographic Drivers Availability Of Easy Financing Options New Offerings Exports

Supply Factors Presence Across Segments Efficient Operations Wide Dealer Network And Availability Of Finance Access To Latest Technologies Price Of The Car Factors Of Production Government Policies And Taxes

The demand for cars in the past was supply driven as demand did not match supply. This led to high premium and long waiting periods for the cars. But change in government policies coupled with aggressive capacity additions and upgradation of models by MUL in the early nineties led to increase in supply and subsequently reduced the waiting periods for economy cars. The automotive industry, increasingly characterized by global mergers and relocation of production centers to emerging developing economies, is in the grips of a global pricewar. The industry is subject to imperfect competition which has resulted in too much of everything too much capacity, too many competitors and too much redundancy and overlap. Honda Siel Cars India (HSCI) has announced a second price hike of Rs 8,000-Rs 10,000 on its flagship sedan car model Honda City with effect from April 1, 2012. The company has already increased prices across all car models in its portfolio with a hike of Rs 5,000- Rs 10,500 on the Honda City in response to the increment in the excise duty in theBudget 2012-13.According to Mr. JnaneswarSen Honda Siel Cars India (HSCI) Senior Vice President (Sales and Marketing), the company is compelled to transfer the additional costs to the customers. The earlier hike was a partial cost being passed on to customers. With the implementation of the new hike, the company will pass on the total effect of the exciseduty hike.

Business segmentation

Grouping customers according to homogeneous attributes. For example, an automobilemanufacturer with a full line of vehicles uses segmentation by income level in planningthe marketing of its products. Small, entry-level vehicles are marketed to individuals andfamilies with modest incomes, while wealthy individuals are market targets for the firm'sluxury vehicles. Segmentation allows a business to focus its marketing where it will bemost productive

SmallBrio

Mid sizeNone

Premium mid sizeJazz

ExecutiveCity

LuxuryCivic, Accord

SUVCR-V

HONDA has segmented its market in a way that its ACCORD &CR-V is for elite classHONDA CIVIC for upper middle class .HONDA CITY, JAZZ & BRIO for middle class.In general always upper class groups, upper middle class, and middle class& have beenvery successful in maintaining its target market and providing with the products of theirneeds.

Products & ServicesProduct range of HONDA includes Automobiles, Motorcycles ,Scooters, Electrical Generators, Water pumps, Lawn and Garden Equipments, Tillers, Outboard motors, Robotics, Jets, Jet Engines, Thin-film solar cells.

CAR MODELS

Honda AccordThe large triangular headlamps make the front end look daunting but the heavy-lookingbehind is incongruous with the bold front. The Accord is a car that can achieve speedsclose to 200kmph with ease

Rs. 18, 81,552 - 28, 09,779

8 variants available

Honda Brio

Rs. 3, 95,000 - 5, 44,7074 variants availableThe Brio is the new entry-level hatchback from Hondas stable which is placed a segmentbelow the premium hatchback Jazz also gets the same 1.2-litre Jazz engine. The Briohas been designed smartly which doesnt just look funky but is also a practicalHatchback.

Honda City

Rs. 6, 99,000 - 10, 77,910

7 variants availableThe Honda City which is produced in seven countries and enjoyed by customers in 39Nations around the world have been given a new lease of life. the third-generation City is a hot favorite as the luxurious sedan offers a lot to its potential buyers - new engine, new design, more grandeur, increased cabin space, and of course, top-notch performance. Honda City has been regarded a prestigious brand in India since its launch in 1998. It maintains a significant market share in its class and the latest model has taken it popularity to a much higher level.

Honda Civic

Rs. 12, 22,000 - 15, 22,652

5 variants availableThe cab-forward design has been carried on to the Civic too which partly helps it achieve an aerodynamic shape. The V-shaped hood and fenders merge perfectly while at the rear you get a good dose of style. The double-barreled tail pipe looks stunning and adds to the style quotient.Equating the dashboard with a cockpit will not be an exaggeration; such is its look. The1.8-litre, 130bhp engine is rev-happy and comes equipped with the famed VTEC badge

Honda CR-V

Rs. 22, 51,554 - 25, 85,8423 variants availableThe 2007 Honda CR-V has very bold looks and is the most compact crossover SUVavailable. It is very evident that Honda has attempted to make it more car-like and hassucceeded. What this has done is made the new CRV sportier. The engine choices onoffers are the 2.0l and 2.4l. The 2.4l version also comes with an automatic. . A fine cruiser for long drives wherein you can expect 12kpl and around 9kpl within city limits. The 2.0l version could give you a tad bit more on the mileage front

Honda Jazz

Rs. 5, 50,000 - 6, 46,935

3 variants available

After achieving success on most of its models in India, Honda has launched its first everhatchback called the Jazz for the Indian car market. The Jazz is a costliest premiumhatchback available in the Indian market and is powered by a 1.2-litre petrol engineproducing 90bhp.

3.3 ON SITE PROJECT ANALYSIS

Specific project backgroundThe project proposed is to initiate a customer retention program in Honda Siel cars IndiaLtd. by starting a loyalty card program.Customer retention is one the biggest challenges in the automobile sector and to tackle it HSCIL has been carrying out several CRM activities but looking at the competition we are still lagging behind in retaining our customers.

Thus, the need crops up to reform the retention program and look into developing a loyalty program. Other one is whether Honda should go for loyalty card programs to retain their present customers (done by Maruti Suzuki & Ford), whether it will be beneficial for them and to what extent it will it work.Other project objective is to find out the brand identity of lower segment sedan cars.

Brand identity is more of a qualitative research which involves knowing the physique, personality, relationship, self-image, reflection and culture of four brands Toyota Etios, Honda Accent, Swift Dzire and Tata Manza (based on Kapferer model).It will help Honda understanding the chosen segment better.

Both the topics have almost the same sample and can go hand in hand.

Primary and secondary data were collected for the better understanding of the projectand for the analysis.Primary data is collected through questionnaires and personal interview. Also focusgroup discussions were held from time to time. Brand identity is more of a qualitativeresearch and involves less numbers.

3.4THEORETICAL FRAMEWORK

LITERATURE REVIEWModern marketers are rediscovering the ancient mantras for success in corporate worldand blending them with contemporary marketing practices. Long term survival andcompetitive advantage can only be attained by establishing an emotional bond with thecustomers. A shift is taking place from marketing to anonymous masses of customers todeveloping and managing relationships with more or less well known or at least someidentified customers

What is Customer Relationship Management?Customer Relationship Management (CRM) is the core business strategy that integrates internal processes and functions, and external networks, to create and deliver value to targeted customers at a profit. It is grounded on high-quality customer data and enabled by IT. CRM is a business strategy to identify, cultivate, and maintain long-term profitable customer relationships. It requires developing a method to select your most profitable customer relationships (or those with the most potential) and working to provide those customers with service quality that exceeds their expectations.An organizations survival depends largely on harmonious relationships with its stakeholders in the market. Customers provide the .life-blood to the organization in terms of competitive advantage, revenue and profits. Managing relationships with customers is imperative for all types and size of service organizations. A sound base of satisfied customers allows the organization to move on the path of growth, enhance profitability, fight out competition and carve a niche in the market place. Bennett (1996) described that CRM seeks to establish long term, committed, trusting and cooperative relationship with customers, characterized by openness, genuine concern for the delivery of high qualityservices, responsiveness to customer suggestions, fair dealings and willingness to sacrifice short term advantage for long term gains. Schneider and Bowen (1999) advocated that service business can retain customers and achieve profitability by building reciprocal relationships founded on safeguarding and affirming customer security, fairness and self-esteem. It requires that companies view customers as people first and consumerssecond. Trust, commitment, ethical practices, fulfillment of promises, mutual exchange, emotional bonding, personalization and customer orientation have been reported to be the key elements in the relationship building process. It is common knowledge that a dissatisfied and unhappy customer will share his unfortunate experience more than a satisfied customer. It is also observed that a fraction of unhappy customers choose to complain while others simply switch their loyalty to others service providers. Loss of customer is loss of business along with the opportunity for business growth and profitability. Feedback collection from the customer is essential for the supplier to ascertain customer satisfaction and scope for improvisation. Having a CRM software installed does not ensure a successful customer relationship. For this to happen business processes and company culture have to be redesigned to focus on the customer. CRM software can be only a tool to implement a customer strategy. It is known that it takes up to five times more money to acquire a new customer than to get an existing customer to make a new purchase. Improving customer retention rates increases the size of the customer base. Thus, customer retention is essential.

Loyalty Programs :We define loyalty programs as long-term-oriented programs thatallow consumers to accumulate some form of program currency, which can be redeemed later for free rewards. An airlines frequent-flier program represents a typical loyalty program. By focusing on long-term programs, we exclude promotional programs that offer only one-shot, immediate benefits, such as instant-win scratch cards and grocery stores discount card programs. Program-related factors include both program design and management. From the design perspective, a loyalty program needs three key specifications: (1) participation requirements, (2) point structure, and (3) rewards .The effectiveness of a loyalty program is likely to depend on its design. Loyalty programs provide members with benefits such as discounts and saving rewards, which make these programs popular among consumers. Many retailers have introduced loyalty programs to enhance customer loyalty .This evidence may relate at least partly to the fact, expenditure differences between members and non-members may be partly driven by the most loyal customers into the loyalty program .Further, consumers are often regular buyers at different companies. The relevant issue is that in a model with customer loyalty as the dependent variable and loyalty program content as an independent variable .We must identify variables that influence the customer loyalty factors. Loyalty programs enhance customer loyalty through several economic, psychological and sociological mechanisms .Loyalty Program such as the ones introduced by Ford is also important strategies forretaining customers. We offer FordCarGainz and Ford's Total Maintenance Plan (TMP) to our owners.

Our Total Maintenance Plan (TMP) is an innovative programme that offers totalmaintenance at a price starting as low as Re. 0.39 per km. The plan ensures that thecustomer gets scheduled maintenance or unplanned repairs completed at any authorized Ford dealership for a fixed price.

FordCarGainz is the first customer loyalty program introduced by an automobilemanufacturer, and rewards customers who maintain their routine service schedules atFord dealerships. FordCarGainz rewards owners with loyalty points, which can becashed in to purchase accessories and even to pay for service charges. Above all,regular maintenance at authorised service centres generates better vehicle residualvalues.

Economic BenefitFrom an economic perspective, loyalty programs provide members with rewards as economic benefit. The key economic design elements of the loyalty program are its discount and saving features. The program with a discount feature gives price discounts on certain items of the assortment for loyalty program members only. In this way, a discount feature supplies member customers with immediate rewards for their purchases. A program with a saving feature gives loyalty program members saving points, dependent on the monetary amount spent at the company. A program member can redeem these points for a reward, such as a free product, after reached a saving threshold. Further, a saving feature creates switching costs if a consumer stops purchasing s/he loses the accumulated saving points. A saving feature stimulates purchases of the entire assortment and not only of specific items (as the discount feature does). Obtaining saving rewards requires considerable consumer effort, so that we expect stronger feelings of uniqueness and pride. On the other hand, customers prefer to obtain a reward immediately instead of getting it sometime in the future. Regarding the issuing of reward points, and find that though point threshold stays the same, the way points are issued over each purchase (ascending points versus same points per purchase) affects consumerschoices. This suggests that point issuance is not a nuisance to consumers and should not be determined arbitrarily. Point threshold isanother important aspect of point structure, and it has been tied in to program relevance. If the point threshold for a freereward is too high, it will be considered unobtainable for the average consumers and thus will be dismissed as irrelevant.

Psychological BenefitSeveral psychological drivers enhance customer loyalty. First of all, consumers appreciate rewards -- not only in an absolute sense, but also relative to other consumers knowing that you are provided with better value than others creates feelings of being a preferred or special customer, and thereby further stimulates loyal behaviour. Second, Loyalty program incentives can induce smart shopper feelings and pride about being economical. The effort to obtain the reward may even justify luxury consumption.Third, existing research shows that customers overvalue the rewards they obtain, as they tendto maximize the value offered by the medium (the loyalty program), rather than the final outcome. This implies that customers aim to maximize discounts and saving points, whereas it would be rational to assess the utility of the final products and rewards minus the disutility of their costs.

Sociological BenefitLoyalty programs can also have sociological effects. The need to belong to groups is a fundamental human motivation, and identification with commercial organizations is intensifying due to the growing centrality of consumption and materialistic desires in society. Strategies to develop customer identification are especially beneficial in industries where consumers purchase frequently, and differentiation between suppliers is low. In addition, customers who become members of the loyalty program are likely to identify more strongly with the company, because the membership relates them to a group of privileged customers hence, loyalty programs can create affective commitment; loyalty programs not only buy, but also earn, customer loyalty

Customer relationship management(CRM) is a widely-implemented strategy for managing a companys interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processesprincipally sales activities, but also those for marketing, customer service, and technical support. The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service. Customer relationship management describes a company-wide business strategy including customer-interface departments as well another departments.

Benefits of CRM Quality and efficiency Decrease in overall costs Decision support Enterprise agility Customer Attention

Relationship MarketingRelationship Marketing was first defined as a form of marketing developed from directresponse marketing campaigns which emphasizes customer retention and satisfaction, rather than a dominant focus on sales transactions. As a practice, Relationship Marketing differs from other forms of marketing in that it recognizes the long term value of customer relationships and extends communication beyond intrusive advertising and sales promotional messages.

Methods & Tools of Customer RetentionMaintenance of a Retention Database- An important aspect for an organization isto think what should be the reasons that enhance repeat purchase. On paper it is notpossible to make definite strategies to increase customer retention. Hence, retentiondatabases are created to have a wider range of data and information which helps inmeasuring and analyzing theoretical strategies for modelling customer retention behaviour. Database could help in tracking and moderating all the interactions that acustomer is indulged in with the supplier. However, the interaction with customers or prospect customers do not generate any revenue for the organization but it important to monitor it as it may return a potential profit in the coming future. This database is normally linked with a CRM system which helps the supplier to identify the reasons for customer defect and also to analyze the possible strategies to overcome it. Take an example of a loyal customer who spends Rs.1, 00,000 per annum with an airline to travel for business reasons. Now this customer is having a bad experience with the airlines due to many delayed or cancelled flights or bad service provided by flight attendants. This customer could be on an urge to defect due to the overall negative experience.

Decile Analysis-Decile analysis method helps in determining profitability and product sales aspects of segmented customers. This type of analysis identifies themost prominent percentage of customers who are responsible for incurring the actualprofit. Deciles are nothing but the top grouping of customers which are ranked highaccording to the purchases they have made in a given period of time. The decilespercentage is normally 10% or 5% or even 1%, sometimes depending upon theorganizational strategies. These deciles alone are responsible for 60 % to 80% ofsales and profit. Hence, after determining this range of customers it becomes easy forthe organization to determine which customers are profitable and which are not. Afterthis, retaining strategies could be implemented to retain valuable customer.

RFM Analysis- RFM technique is the one of the best tool to predict future valuablecustomers. RFM stands for Recency Frequency Monetary value. Recency means customer purchase in recent time, Frequency means what is the frequency of purchase and Monetary value means how much the customer is ready to spend. These three aspects are determined by creating an RFM matrix and putting all analyzed data and information inside this matrix. This technique is very important to characterize customers according to their buying habits so that according strategiescould be implemented to retain them.

Targeting Defectors- It is painful for a manufacturer to lose loyal customers as these are the ones who are responsible for the real profit to the organization. If the organizations identify potential defectors before they defect, then retaining becomesfeasible. For this, recency sales (RS) matrix is created which is a simple but powerfulmethod to target defectors. This process includes all the customers who have at least bought products for three times. For each of these customers the following three statistics are computed:

1. Total time taken by the customer since last purchase. This is called recency.2. Sales per period which the time taken by the customer since first purchase divided bythe total number of times he did purchase.3. Total number of periods gone until the customer is supposed to purchase again.According to the above statistics, if the customer recency is more than the first statistic,then the customer is more likely to divert. Hence after identifying this possibility ofdefection it becomes easy to retain the customers

Ways to improve Customer RetentionCustomer retention is ultimately driven by value. Even the best segmentation, targeting,positioning, creative messaging or promotion with flawless execution will fall flat in theabsence of value. In developing a plan to maintain and upgrade a customer base it isnecessary then to build on solid foundation. Then, and only then will the steps unlock the door to greater customer retention and overall organizational success.To succeed, customer retention must be a top-down, company-wide initiative. Trulycommitting to customer retention is hard work, because it affects virtually every aspect of your organization. But the ultimate payback in sustainable growth and profitability makes the effort worthwhile.

The path to customer retention involves six key steps

One should remember that Happy customers are Active customers- Happy customers are retained customers. If your keep your customers involved, they develop a sense of contentment from the fact that they are in control. Marketers will take advantage of this by offering promotions that allow these customers to exercise this feeling of control. The most common means of achieving this kind of relationship with your customers is to offer promotions such as discount cards, discounts, sweepstakes, coupons, and customer points that can be converted to prizes. Remember, if the marketing is not active, then the customer is not active as well. Many companies focus on rewarding customers who have repeat purchases. Such reward programs have their place in assuring customer loyalty. However, if the product or service doesn't meet customer needs, no reward program will keep them returning. For success in the long run, an organization must: Continuously improve. Quickly identify and resolve problems to the customer's satisfaction.Structured, comprehensive research programs are necessary to provide the data upon which to develop projects and initiatives to improve customer loyalty. The first step incustomer loyaltyresearch programs is formulating the objectives. The second step is the current state of customer loyalty needs to be documented. That is, what is the satisfaction level and the defection rate? Depending on the state of the company's data bases, the latter figure may be difficult to ascertain. The third step is data collection such as survey questionnaires and other research tools must be developed. The goal in these tools is to find out customers' satisfaction level and how many customers are defecting. Follow-on detailed research should help determine why customers are defecting.

The final step after the feedback is captured and analyzed is to communicate the findingsto the root source where improvement is needed.

A loyalty program as an integrated system of marketing actions that aims to makemember customers more loyal. Customer loyalty is an important strategic objective ofmanagers around the world. A worldwide survey of chief executive officers conducted by the Conference Board found that customer loyalty and retention was the most important challenge that chief executive officers believed they faced. Loyalty programs are important tools for driving customer retention in many industries including airlines, credit card companies, retail and hotel chains. Loyal customers are reported to have higher customer retention rates, commit a higher share of their category spending to the firm, and are more likely to recommend others to become customers of the firm. According to the 80/20 principle, an enterprise's total sales volume probably some 80% comes from its top 20% customers. Therefore the enterprise should focus the limited resources reasonably to this 20% customer to obtain maximum sales.

Six critical factors in designing a successful loyalty program

1. Successful Loyalty programs are strategic in nature.

2. Trade offs are required to realize financial goals.

3. Objective must drive program strategy.

4. Identify how program design delivers value.

5. Leverage best practices of industry leaders.

6. Align loyalty program with CRM

Successful loyaltyprograms identified inIndia IndustryCompanyProgram Name

AviationKingfisher airlineKing Club

Apparels

Shopper StopFirst Citizen

HospitalityITCWelcome Award

AutomobileHero HondaPassport

AutomobileMaruti SuzukiAuto Card

The Types ofLoyalty ProgramAccording toresearch Berman(2006) identify fourtypes of loyaltyprogramCharacteristics of ProgramExample

Type 1: Memberreceive additionaldiscount at register Membership open to all customersClerk will swipe discount card if member forgets or does not have card Each member receives the same discount regardless of purchase history Firm has no information base on customer name,demographics, or purchase historyThere is no targeted communications directed at membersSupermarket programs

Type 2: Membersreceive 1 freewhen theypurchase n units Membership open to all customersFirm does not maintain a customer database linking purchases to specificcustomersLocal car wash, nailsalon, Supercuts,Airport Fast Park,PETCO

Type 3: Membersreceive rebates orpoints based oncumulativepurchases Seeks to get members to spend enoughto receive qualifying discountAirlines, hotels, creditcard programs, Staples,Office Depot

Type 4: Membersreceive targetedoffers and mailings Members are divided into segmentsbased on their purchase historyRequires a comprehensive customerdatabase of customer demographics andpurchase historyTesco, Dorothy LaneMarkets, Wake fernsShopRite, Giant EagleSupermarkets, HarrisTeeter, Winn-Dixie,Harrah

Loyalty Programs in Automobile Sector

HERO HONDA PASSPORT PROGRAMIt started in 2000 as Passport program to cater to the aspiration value of customer of having a Passport thus named it as Passport program. The card was also designed as an ATM card. Over time the program started to lose momentum and interest among the customers and thus it was restructured as a Good Life program in 2008 with more customer touch points. This time the card came with a price whereas, earlier it was given for free. The reason behind this given by NeerajTiwari, Associate Manager (Marketing) of Hero Honda is that when you charge customers for something then the usage of that charged product increases. Card given for free was seldom used by the customer which was one of the major constraints of the Passport program.

The objectives of the Passport program were:1. To create a loyalty program for Hero Honda customers.2. 2. To have a structured database.Features Covered for one year Accident Insurance Rs. 1 lakh. Entitlement for special rewards and discounts at any of theauthorized Hero Honda dealerships / service centers. Invitations to exclusive local events, such as movie shows,musical nights and carnivals

Benefits Discount on Spares First Transaction Benefit Winner of the month Activity Referral System Go Green- Get 50 Green Rewards points for every Pollutionunder Control check of your vehicle. Present the PollutionCheck certificate to the dealer and earn your points.

How to earnpoints? 1 Re. spent = 1 Re. earned Regular Free Service. Regular Paid Service. Referring anyone to buy a Hero Honda two-wheeler. For upgrading your Hero Honda two-wheeler. Making transactions on your birthday. For getting PUC done on your two-wheeler

FORD LOYALTY PROGRAMFord CarGainzThe loyalty program by Ford wasintroduced in July 2004. It was the first initiative by a 4 wheeler company to start a loyaltyprogram in India. However, the program was far from being a success and wasdiscontinued after a year.How toenroll? Enrollment is free without any annual charge. Filling application form at the ford dealership. Not applicable to Ford Escort owners.

Rewards Bonus Points - Earned every time the prescribed Periodic Maintenance Service is availed. Service Points - When the Ford vehicle is serviced at an authorized Ford Dealership. 1 Service point is earned for every Rs.100 spent on Spares/Labour/Ford Gear. Loyalty Points - Loyalty points are earned on continued ownership and availing of the prescribed Periodic maintenance services at authorized Ford Dealerships

How toredeem? The Bonus points and Service points can be accumulated and subsequently redeemed for Spares/Labour/Ford Gear/Extended Warranty/Trade in for a new Ford vehicle, whichever the membermay choose. Loyalty Points can be redeemed only on Trade in for a new Ford vehicle

Reasonsfor failure Failure to create the desired customer base. Incentive system was not appealing as Ford did not have enough service centers at that time and maintenance was regarded as expensive. Insufficient product line.

MARUTI SUZUKI LOYALTY PROGRAM Maruti Suzuki Auto Card Maruti Suzukistarted their loyalty program in collaboration with Citibank which was known as theCitibank Auto Card. But, the program was terminated in a year as people didnt have faith on Citibank and many complaints were reported due to banking issues and fraudulent credit card practices on part of the bank. After 2 years Maruti renewed their loyalty program with two types of card

Maruti Suzuki Auto Card SBI Maruti Credit CardThis way those who dont want to opt for a credit card can also reap the benefits of theLoyalty program.

Objective: To sell more cars through the loyalty program. To keep the customer within the Maruti Suzuki networkAccording to AmitKaushik, Assistant Manager (Loyalty Program) Maruti Suzuki, thediagram below explains the whole ideology of Maruti behind the loyalty program.Maruti Suzuki SBI CardMaruti Suzuki Auto Card

Joining bonus of 200 Auto Points3 Auto Points Rs. 100 spend at Marutinetwork.

1 Auto Point per Rs. 125 for all retailSpends3,000 Auto Points as additional discounton exchange of Maruti Car with a newone.

3,000 Auto Points as additional discounton exchange of Maruti Car with a newone.1,000 Auto Points on referring a friend orrelative to buy a new Maruti car.

CAR CLASSIFICATIONThere are many ways to classify the cars; Honda classifies the cars in the following wayaccording to the size and price of the car.A- Tata Nano, Maruti 800B- Estilo, Wagon R, Spark, Alto, Eon, i10,A-StarB+ - i20, Swift, Polo, Brio, Ritz, Beat, Pulse, Micra, Liva, FabiaLC- Dzire, Manza, Accent, Indigo, Fiesta classic, VeritoUC- City, Verna, Vento, Sunny, New Fiesta, Rapid, LineaLD- Civic, Corolla, Cruze, Jetta, Fluence, ElantraUD- Superb, Accord, Passat, BMW X1, SonataSUV- CR-V, Fortuner, Scorpio, Innova, XUV500, Captiva, XyloMUV- Ertiga, Ario

BRAND IDENTITYBrand identity provides strategic direction, purpose and meaning for a brand. For that the brand identity is one of the main drivers for brand equity. Aaker defines brandidentity as: "...a unique set of brand associations that the brand strategist aspires to create or maintain. These associations represent what the brand stands for and imply a promise to customers from the organization members. Brand identity should help establish a relationship between the brand and the customer by generating a value proposition involving functional, emotional, or self-expressive benefits." (Aaker, 1996:68) The outward expression of a brand including its name, trademark, communications, and visual appearance is brand identity. Because the identity is assembled by the brand owner, it reflects how the owner wants the consumer to perceive the brand andby extension the branded company, organization, product or service. This is in contrast to the brand image, which is a customer's mental picture of a brand. The brand owner will seek to bridge the gap between the brand image and the brand identity. Effective brand names build a connection between the brand personalityas it isperceived by the target audience and the actual product/service. The brand name should be conceptually on targ