A FEASIBILITY STUDY OF LAUNCHING CAR WASH BUSINESS IN BANGKOK

Transcription

1 A FEASIBILITY STUDY OF LAUNCHING CAR WASH BUSINESS IN BANGKOK By Warun Jirachaisingh SIU PS: SOM-MBA

2 A FEASIBILITY STUDY OF LAUNCHING CAR WASH BUSINESS IN BANGKOK A Project Presented By Warun Jirachaisingh Master of Business Administration in Management School of Management Shinawatra University June 2007 Copyright of Shinawatra University

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4 Acknowledgments Many people have greatly supported and provide enormous assistance to the completion of my project study. I would like to faithfully acknowledge my advisor, Dr. Chanchai Bunchapatanasakda. This study would not be able to be successfully completed without Dr. Chanchai s ultimate kindness for his supervision and valuable advices. His experiences, expertise, professional guidance, and encouragement and any necessary inspirations received from him had brought me out to the confidences and strong attempt and willingness to commit myself to the research. I would like to express my thankful faithfulness to all MBA professors for teaching me in all courses and for additional useful and supportive advices and recommendations and suggestions, especially Dr. Pacapol Anurit, who gave very useful suggestions on proposal defense presentation day. I would like to deliver my honest gratitude to Shinawatra University for its granted educational scholarship and good experiences, and all of the university staffs for providing all possible conveniences and good coordinative management and assistances during I have spent for whole academic years in university. Furthermore, I would like to state my sincere impressions to all colleagues, who had given me a very truly strong friendship, encouragement and shared experiences and activities throughout the times we have spent on studies. Finally, I was utterly grateful to my family, Mr. Visith, Mrs. Prannarai, and Mr. Wanich Jirachaisingh, my parents and my younger brother who had continuously and fully always and encouraged me in every time and everything whenever needed. i

5 Abstract The purpose of this study was to identify the direction of market opportunity for car wash business in Bangkok and provide database and information for entrepreneurs who are interested in this business can make a decision on investing in launching car wash business based on customers need not just financially but also in other aspects of management as well. The study investigated the significance of the relationship between demographic factors, marketing mix factors and factors that influence decision making on using car wash service in Bangkok. We employed descriptive statistics to analyze demographic data and One-Way ANOVA methods was used to test the hypotheses. The findings indicated that 86.8 percent of the respondents are regularly using car wash service. Their most convenient time is in the evenings during the weekends. Majority of them select the service with service charge 100 to 200 baht per time. They prefer to subscribe to the car wash service membership less than 2,000 baht. Top three priorities when they are choosing to be membership with car wash service operators were location, reliability and cleanness. The groups also stated that quality of the wash, safety, scratch protection, and satisfaction with the works are very important decision making factors that they concern when using car wash service. Finally, the group recommended that car wash service should charge the reasonable price, have good and friendly employees and do not waste the customers time. It should have a delivery service and have guarantee policies not only the quality of the wash matters but also the safety and properties inside the car. It should have additional services such as the waiting room, coffee club, bookstore, beauty shop for customers to use when they are waiting for their cars cleaned. Regarding financial analysis, we found that the investment will be returned within 3 years and IRR (Internal rate of return) for this project is 17.54% based on the assumption that the initial investment is estimated at 1,500,000 baht. Keywords: Car washes, Car wash industry Bangkok, Customer satisfaction, Quality guarantee policy ii

6 Table of Contents Title Acknowledgments Abstract Table of Contents List of Figures List of Tables Page i ii iii v vi Chapter 1 Introduction 1.1 Research Background Research Objectives Scope of Research Research Significance Conceptual Framework Hypotheses Definitions of Terms 4 Chapter 2 Literature Review 2.1 Marketing Mix Service Marketing Consumer Buying Decision Processes The consumer decision process model Variables that shape the decision process Previous Researches 19 Chapter 3 Research Methodology 3.1 Introduction Population and Sample Size Data Collecting Method Research Design Data Collecting Procedure 27 iii

7 3.6 Data Analysis 28 Chapter 4 Research Findings and Analysis 4.1 Demographic Characteristics of Respondents Using Car Wash Service Behavior Pattern of Respondents Decision Making on Using Car Wash Service in Bangkok Testing of the Hypothesis Financial Analysis Revenues forecast Unit cost Break-even analysis Income forecast Cash flow forecast Revenues forecast, income forecast, And cash flow forecast from the fifth year on Cash Management Human Resources Management SWOT Analysis BCG Matrix 76 Chapter 5 Conclusions and Recommendations 5.1 Conclusions Recommendations 80 References 82 Appendices Appendix A Questionnaire (English) 85 Appendix B Questionnaire (Thai) 91 Biography 97 iv

8 List of Figures Title Page Figure 2.1 Model of Buyer Behavior 6 Figure 2.2 The Four Ps Components of the Marketing Stimulus 7 Figure 2.3 How Consumers Make Decisions for Goods and Services 17 Figure 4 BCG Matrix 7 v

9 List of Tables Title Page Table 3 Width of Class Interval 28 Table 4.1 Respondents Demographic Data Classified by Gender 29 Table 4.2 Respondents Demographic Data Classified by Age 30 Table 4.3 Respondents Demographic Data Classified by Marital Status 30 Table 4.4 Respondents Demographic Data Classified by Education 31 Table 4.5 Respondents Demographic Data Classified by Occupation 31 Table 4.6 Respondents Demographic Data Classified by Working Position 32 Table 4.7 Respondents Demographic Data Classified by Salary 32 Table 4.8 Respondents Using Car Wash Service Behavior Pattern Classified by Regularly Using Car Wash Service 33 Table 4.9 Respondents Using Car Wash Service Behavior Pattern Classified by Reasons for not Using Car Wash Service 33 Table 4.10 Respondents Using Car Wash Service Behavior Pattern Classified by Frequency in Using Car Wash Service 34 Table 4.11 Respondents Using Car Wash Service Behavior Pattern Classified by Convenient Time 34 Table 4.12 Respondents Using Car Wash Service Behavior Pattern Classified by the Day in the Week That Uses Car Wash Regularly 35 Table 4.13 Respondents Using Car Wash Service Behavior Pattern Classified by Car Wash Service Program That Always Use 35 Table 4.14 Respondents Using Car Wash Service Behavior Pattern Classified by Spending Budget Per Time 36 Table 4.15 Respondents Using Car Wash Service Behavior Pattern Classified by Membership 36 Table 4.16 Respondents Using Car Wash Service Behavior Pattern Classified by Reasons for not being Car Wash Service Membership 37 Table 4.17 Respondents Using Car Wash Service Behavior Pattern Classified by Persuasion 37 vi

10 Table 4.18 Respondents Using Car Wash Service Behavior Pattern Classified by Media Persuasion 38 Table 4.19 Respondents Using Car Wash Service Behavior Pattern Classified by Guarantee Policy 38 Table 4.20 Respondents Using Car Wash Service Behavior Pattern Classified by Guarantee is better or not 39 Table 4.21 Respondents Using Car Wash Service Behavior Pattern Classified by Yearly Member 39 Table 4.22 Respondents Using Car Wash Service Behavior Pattern Classified by Regularly Car Wash Service Place 40 Table 4.23 Respondents Using Car Wash Service Behavior Pattern Classified by Rationales for becoming a Member 40 Table 4.24 Respondents Using Car Wash Service Behavior Pattern Classified by Rationales for becoming a Member for People who have been Membership already 41 Table 4.25 Respondents Using Car Wash Service Behavior Pattern Classified by Rationales for becoming a Member for People who have not been Membership yet 42 Table 4.26 Respondents Using Car Wash Service Behavior Pattern Classified by Expectation from Using Car Wash Service 43 Table 4.27 Respondents Using Car Wash Service Behavior Pattern Classified by Additional Services That Car Wash Service Place might think of 43 Table 4.28 Decision Making on Using Car Wash Service in Bangkok of Respondents 45 Table 4.29 Relationship between Gender and Marketing Mix Factors 47 Table 4.30 Relationship between Age and Marketing Mix Factors 48 Table 4.31 Relationship between Marital Status and Marketing Mix Factors 49 Table 4.32 Relationship between Educational Background and Marketing Mix Factors 50 Table 4.33 Relationship between Occupation and Marketing Mix Factors 51 Table 4.34 Relationship between Working Position and Marketing Mix Factors 52 Table 4.35 Relationship between Salary and Marketing Mix Factors 53 Table 4.36 Relationship between Gender and Decision Making Factors 54 vii

11 Table 4.37 Relationship between Age and Decision Making Factors 55 Table 4.38 Relationship between Marital Status and Decision Making Factors 56 Table 4.39 Relationship between Educational Background and Decision Making Factors 57 Table 4.40 Relationship between Occupation and Decision Making Factors 58 Table 4.41 Relationship between Working Position and Decision Making Factors 59 Table 4.42 Relationship between Salary and Decision Making Factors 60 Table 4.43 Relationship between Car Wash Service Program that always used and Decision Making Factors 61 Table 4.44 Relationship between Price and Decision Making Factors 62 Table 4.45 Relationship between Membership and Decision Making Factors 63 Table 4.46 Relationship between Guarantee Policy and Decision Making Factors 64 Table 4.47 Relationship between Guarantee is better or not and Decision Making Factors 65 Table 4.48 Relationship between Yearly Member and Decision Making Factors 66 Table 4.49 Relationship between regularly place and Decision Making Factors 67 Table 4.50 Revenues Forecast from 2008 to Table 4.51 Total Washing Unit Cost 69 Table 4.52 Total Waxing Unit Cost 69 Table 4.53 Income Forecast from 2008 to Table 4.54 Cash Flow Forecast from 2008 to Table 4.55 Revenues Forecast from 2013 to Table 4.56 Income Forecast from 2013 to Table 4.57 Cash Flow Forecast from 2013 to Table 4.58 Number of Employees in each Department 74 Table 4.59 Number of Employees in each Department after Expansion 74 viii

12 Chapter 1 Introduction 1.1 Research Background At present, Bangkok is one of the most dynamic communities in the world which approximately 6 million people are living in ( Number of population, 2006) and most of them are middle incomes group of people (According to National Housing Authority, average salary of people who are living in Bangkok in 2004 is 28,135 baht) who have more purchasing power and want entertaining services and relaxation at the same time. In the meantime, car has become a part of their lives as well as a fifth factor for these groups of people who have needs and wants continuously as the number of personal car registered in Bangkok has increased from 1,526,417 in 2004 to 1,691,544 and 1,867,902 in 2005 and 2006 respectively ( Number of personal car, 2007). The great automobile has made the aftermarket what it is today, and along with the times and technology advancements that came tumbling along with it, business in this field has become far more competitive. The automobile aftermarket such as car wash and repair business hasn t stopped shifting and changing, right along with the dynamic of the automobile. With such a rapidly-changing market, this industry does not lend itself to business as usual. Those within it must keep up with all the changes and advancements. They must stay attuned to their target market, try to convince and retain most customers in order not to shift to others. Nowadays, it seems that there are no entrepreneurs can satisfy and completely dominate car wash business in Thailand seriously. Therefore, this research focused on a feasibility study of launching car wash business in Bangkok which the researcher believed that it will be useful for entrepreneurs who are interested in this business. 1

13 1.2 Research Objectives To conduct the feasibility study of launching car wash business in Bangkok 1) To identify the direction of market opportunity for car wash business in Bangkok 2) To provide database and information for entrepreneurs who are interested in this business can make a decision on investing in launching car wash business based on customers need To become successful in an extremely fierce competition in the capitalism market, entrepreneurs must have outstanding and well-defined strategies and visionary management style. This research article will mainly focus on the suggestions that will lead entrepreneurs to success not just financially but also in other aspects of management as well. 1.3 Scope of Research This research will focus on people who live in business districts, Bangkok only, not including suburban area because the researcher believes these groups of people are targeted and potential customers that might use car wash service. 1.4 Research Significance Firstly, researchers can achieve and gain more knowledge about factors that are likely to influence decision making on car wash service in Bangkok Secondly, the information about demographic factors and marketing mix factor that influence decision making on car wash service in Bangkok is useful for car wash operators to access market situation, attract customers and plan effectively marketing strategy. Thirdly, the results of this research will benefit for companies, investors or entrepreneurs who are interested in establishing car wash business in Bangkok. Finally, findings from this study could be a reference for further study in the same field of car wash and selected business. The further study could use information from this study for other research such as the impact of car wash franchise on one stop service, the expansion plan to operate new car wash systems and etc. 2

14 1.5 Conceptual Framework Independent Variable (IV) Demographic Factors - Gender - Age - Income - Occupation - Housing/Working Location - Education Background - Marital status H 1 Marketing Mix Factors - Products or Services - Price - Place - Promotion H 2 H 3 Dependent Variable (DV) Factors that influence decision making on using car wash service in Bangkok - Quality of the wash - Service fees - Convenience - Speed of services - Scratch protection - Safety - Environmental Safety - Services of employees - Satisfaction 1.6 Hypotheses Hypothesis 1: There is no significance difference between demographic factors and marketing mix factors Hypothesis 2: There is no significance difference between demographic factors and factors that influence decision making on using car wash service in Bangkok 3

15 Hypothesis 3: There is no significance difference between marketing mix factors and factors that influence decision making on using car wash service in Bangkok 1.7 Definitions of Terms Self-Service Wash: A wash where the customer performs all the labor. Generally, the customer drives into a bay and washes the car by means of a high pressure hose and a foaming brush ( Car wash glossary, n.d.). Full-Service Wash: A conveyorized or tunnel wash that provides a complete wash, vacuuming and drying, usually by hand ( Car wash glossary, n.d.). Exterior Wash: Carwash service that includes only a cleaning of the outside of the car. Often this refers to an unattended wash, where no detailing services are offered ( Car wash glossary, n.d.). Wash Material: Industry term for cloth used for cleaning in a friction wash ( Car wash glossary, n.d.). Water Hardness: Soluble metal salts, (principally those of calcium and magnesium, and sometimes iron and manganese) that when present in water in sufficient amounts create cleaning problems. These metal salts remain on a vehicle after the water evaporates leaving white spots ( Car wash glossary, n.d.). 4

16 Chapter 2 Literature Review This chapter consists of the point of view of Concept Framework why the researcher thinks to run the car wash business and what is the origin of Car wash. Moreover, the researcher takes the important Marketing Theory to apply the opportunity to run business for maximize success. Concepts, theories, and previous researches relating to the present study including: 1) Marketing Mix 2) Service Marketing 3) Consumer buying decision processes 4) Previous researches 2.1 Marketing Mix McCarthy (1996) mentioned that marketing mix is the external factor that influence on buyers purchasing decision. It consists of a set of controllable tactical marketing tools such as product, price, place and promotion that the firm uses to produce the response it wants in the target market. Zikmund (1996) stated that marketing stimulus is the specific combination of interrelated and independent marketing activities in which an organization engages to meet the objective. The basic elements of the marketing stimulus are product, place, price, and promotion, which also called controllable variables of marketing. Kotler (2000) stated that on the left, marketing stimuli consist of 4Ps, Product, Price, Place, and Promotion. Other stimuli include major forces and events in the buyer s environment- economic, technological, political and cultural. All stimuli enter the buyer s black box, where they are turned into a set of observable buyer response shown on the right-product choice, brand choice, dealer choice, purchase timing and purchase amount. Model of buyer behavior is shown in figure 2.1: 5

17 Marketing Stimulus Other Stimulus Buyer s Characteristic Buyer Decision Process Buyer s Decision - Product - Price - Place - Promotion - Economic - Technological - Political - Cultural - Cultural - Social - Personal - Psychological - Problem recognition - Information search - Evaluation of alternatives - Purchase Decision - Postpurchase behavior - Product choice - Brand choice - Dealer choice - Purchase timing - Purchase amount Figure 2.1 Model of Buyer Behavior Source: Kotler (2000) The marketer must understand how the stimuli are changed into responses inside the consumer s black box. The black box has two parts. First, the buyer s characteristics influence how he or she perceives and reacts to the stimuli. Second, the buyer s decision process itself affects outcomes. Kotler (1997) suggested marketing stimulus is product, price, place and promotion-components involved with the model of buyer behavior-influence on the buyer s consciousness, which related to buyer s purchase decision. Kotler (2000) also mentioned that marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. It is the communication of these elements that meets customer needs and provides customer value; the particular marketing variables under study are shown in Figure 2.2 6

18 Marketing Stimulus Product Price Place Promotion Product Variety Quality Design Features Brand Name Package Sizes Service Warranties Returns List Price Discount Allowances Payment Period Credit Term Channels Coverage Assortment Location Inventory Transport Sale Promotion Advertising Sales Force Public Relation Direct Marketing Figure 2.2 The Four Ps Components of the Marketing Stimulus Source: Kotler (2000) Product. Zikmund (1996) suggested that it is a good, service, or idea that offers a bundle of tangible and intangible attributes to satisfy customers. (Hawkins and Kenneth, 1998) mentioned that product is the element of the marketing mix that represents the basic offering being made to consumers. Schaffner. Schroder R.,and Earle D.Mary (1998) mentioned that consumers identify the product characteristics as important to them in buying and using the product. Kotler (2000), said that "Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. In includes physical objects, services, persons, places, organizations and ideas." Kotler (2003) stated that product can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. The product has many attributes. These attributes of product include quality, features, styling options, brand name, packaging, size, services, warranties and returns. As mentioned by Zikmund (1996), the product is anything that a customer acquires or might acquire to meet a perceived need. 7

19 Product Varieties: Kotler (2003) mentioned that product variety is the assortment breadth or the number of the product lines provided by seller. Normally customer prefers a grater assortment because more choice provides and increases the chance of finding what they need. Quality: McCarthy (1996) mentioned that it is a product s ability to satisfy a consumer s need or requirements. Kotler (2003) stated that product quality is the ability of a product to perform its functions; it includes the product s overall durability, reliability, precision, ease of operation and repair; and other valued attributes. Design: As mentioned by Kotler (2003) the design is the heart of the product, good design contributes to the product s usefulness as well as its looks. Feature: Kotler (2003) mentioned that product can be offered with variations of each product in the mix in terms of colors, size, or models offered within each product line. These features are competitive tool for differentiating the company s product from competitors products. Brand: A name, term, sign, symbol, design, or combination of these, intended to identify the goods, or services of one seller or group of sellers and differentiate them from those competitor is called brand, mentioned by Kotler (2003) Packaging: Chee and Harris (1993) stated that packaging can influence consumer s attitude toward the product. For the consumer goods, the packaging must give the product competitive edge. The customer s first exposure to the product is package. Berkowitz (1994) mentioned that packaging is a component of the product refers to any container in which it is offered for sale and on which information is communicated. Kotler (2003) argued that packaging of designing and producing the container or wrapper for a product. Innovative packaging can give a company an advantage over competitors. Size: The Company can introduce additional package sizes to the market under the same brand name for line extensions (Kotler, 2003). Product Support Services: Mentioned by Kotler (2003), the product support service is the augment actual products such as Internet and modern technology. The product support services will be focused on service industries. No less important are product-bases industries that must provide a service bundle. All manufacturers of equipment have to provide product support services to the customers and can charge for it. 8

20 Warranties and Return: Chee and Harris (1993) stated that the important factor of many products is the warranty. The manufacturers or service provider will replace or refund or refund the product s purchase s price, if it is proves defective during a specified time period. McCarthy (1996) stated that it is what the seller promises about its product. Kotler (2003) also mentioned that the Company can sell the product or service by adding warranty and return for supporting the consumer in order to making a buying decision. Seller provides free maintenance and repair service for specified period of time at a specified contract price Price. Zikmund (1996) stated that price is amount of money or other consideration that is something of value given in exchange for a product. (Hawkins and Kenneth, 1998) mentioned that price refers to the perceived value of goods and service measured in some medium of exchange. Price refers to the cost of acquiring the products / services in the eyes of customers. The different perception in products / service quality leads to different identifying price. Consumers are often prepared to pay a premium price for something that fits their needs better than the product they currently use. E. Jerome McCarthy (1999) mentioned that price is amount of money that is charged for something of value. Kotler (1999) said "The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service." Kotler (2000) mentioned that price refers to the perceived value of goods and service measured in some medium of exchange. Hawkins et.al (2001) stated that price is the amount of money one must pay to obtain the right to use the product. List price: Hawkins and Kenneth (1998) The price of the product that the sellers are willing to sell to the consumers. When setting prices, the marketer needs to in line with what the customer is prepared to pay or reasonably expects to pay; this bears no relation to the firm s costs in manufacturing the product. Food price is also a factor that influences consumer income. McCarthy (1999) stated that list prices are the prices final customers or users are normally asked to pay for products. 9

21 Discount: McCarthy (1999) stated that it is a reduction from the list price given by a seller to buyers who either give up some marketing function or provide the function themselves. It is a price reduction to buyers who pay their bill promptly. Kotler (2003) also mention that price is a straight reduction in price on purchases during a stated period of time. Allowance: Berkowitz (1994) mentioned that allowance is the reductions from list or quoted price to buyers for performing some activity. Kotler (2003) stated that allowance is the promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer s products in some way. Payment Period: It is the duration that the consumers who are retailers or wholesalers have to pay money for the product to the seller according to the agreement of parties such as weekly, monthly, quarterly and etc. It s mostly used in B2B business. As Kotler (2003) argued that the customers mostly prefer longer payment period with lower monthly payment for purchasing the product. Credit Term: The term of credit can also affect the total cost of credit transaction in B2B business. Kotler (2003) mention that it is one of the sale conditions for buying products. Credit is a trust or promise to buy now and pay later under designated terms for goods or services (Source from Equifax learning Center) Place. Zikmund (1996) suggested that place is an element of the marketing mix involving all aspects of getting products to the consumer in the right location at the right time. Kotler (1997) mentioned that place is another key marketing-stimuli tool and stands for the various activities the company undertakes to make the product accessibility and variable to get the target customer. Kotler (1999) said that all the company activities that make the product or service available to target customers. Kotler (2000) also stated that place includes the various activities the company undertakes to make the product accessible and available to target customer. Distribution Channels: Zikmund (1996) mentioned that it is the complete sequence of marketing organization involved in bringing a product from the producer to the consumer. The channel of distribution often includes such intermediaries as wholesalers and retailers. McCarthy (1996), it is any series of firm or individual who participate in the flow of products from producer to final user or consumers. Kotler 10

22 (2003) mentioned that a set of independent organizations involved in the process of marketing a product or service available for use or consumption by the consumer or business user. Coverage: To cover the market, the companies have to decide on the number of intermediaries. The exclusive distribution will limit the number of the intermediaries, but selective distribution will use more than a few and less than all of the intermediaries, where as intensive distribution will placing goods as many as possible. (Kotler, 2003) Assortment: Kotler (2003) also mentioned that place assortment is the arrangement method by classifying and arranging the products into group according to the size, taste, and etc at that place. The customer can find the product easily by good place assortment. Locations: As mentioned by Kotler (2003) Location is the critical factors in retailing success and key to its ability to attract customers. Inventory: McCarthy (1996) stated that inventory is amount of goods being stored. The Company should balance the level of inventory with the customer orderfulfillment standard by doing Justin time (JIT). Sales people would like the company to carry enough stock to fill all customer orders immediately. (Kotler, 2003) Transport: McCarthy (1996) mentioned that transporting is the marketing function of moving goods. Marketers need to concern transportation. It is the process in shipping goods to the warehouses, dealers, and customers. Kotler (2003) stated that transportation affects the pricing in shipping products to the consumers. On-time delivery performance and the condition of goods when they arrive can affect the customer satisfaction Promotion. Zikmund (1996) state that it is all form of marketing communication or the means by which marketers talk to existing customers and potential buyers. Promotion may convey a message about the organization, a product, or some other element of the marketing mix. Shimp (1997) mentioned that sales promotion consists of all marketing activities that attempt to stimulate quick buyer action or immediate sales of a product. Promotion is about communicating with the consumer and about persuading people to try our products and is often very much concerned with attitude change. Because attitudes are learned, promotional activities can offer new 11

23 information to the consumer. Although the consumer s knowledge of the product is based on experience can be vicarious rather than personal. Kotler (1999) said that activities that communicate the product or service and its merits to target customers and persuade them to buy. Sales promotion: McCarthy (1996) stated that sales promotion is activities that stimulate interest, trial, purchase, by final customer or others in the channel which can involve use of coupon, point-of-purchase material, samples, signs, catalogs, novelties, or circulars. It is short-term incentives to encourage purchase or sale of a product or service. Kotler (2000) mentioned that sales promotion consists of a diverse collection of incentive tools, mostly short term, designed to stimulate quicker and/or greater purchase of particular products/services by consumers or the trade companies use sales promotion tools to draw a stronger and quicker buyer response, Sales promotion can be use for short-run effects such as to dramatize product offers and boost sagging sales. Advertising: Any paid form of non-personal presentation and promotion of ideas, goods or service by an identified sponsor. Pelsmacker et.al (2001) defined advertising as non-personal mass communication using mass media such as TV, radio, newspapers, magazines, billboard and etc) the content of which is determined and paid by a clearly identified sender-the company. Personal Selling: McCarthy (1996) stated that personal selling involves direct spoken communication between seller and potential customer. It s usually happens face-to-face or telephone in sometime at expensive cost. Kotler (2000) mentioned that personal selling is face-to-face interaction with one or more prospective purchases for the purpose of making presentations, answering questions, and procuring orders. Pelsmacker et al. (2001) stated that personal selling is the oral presentation and/or demonstration of one or more salespersons aimed at selling the product or service or a company. It is a personal contact between a company representative and a prospect or client. Public relations: It is used for public purpose. Kotler (2000) stated that public relations are a variety of programs designed to promote or protect company s image or its individual products. Kotler (2003) also mentioned that public relation is the way to build good relations with the company s various publics by obtaining favorable 12

24 publicity, building up a good corporation image, and handling or heading off unfavorable rumors, stories and events. Direct Marketing: It is non-public and non-store selling. As mentioned by Kotler (2003), direct marketing is a direct communications with carefully targeted individual consumers to obtain an immediate response and cultivate lasting customer relationships by using telephone, , Internet, and other tools to communicate directly with specific consumers. The table 2.1 shows the operational components of the independent or influencing variables. 2.2 Service Marketing Service Marketing is marketing based on relationship and value. It may be used to market a service or a product. Marketing a service-base business is different from marketing a product-base business. There are several major differences, including: 1) The buyer purchases are intangible 2) The service may be based on the reputation of a single person 3) It's more difficult to compare the quality of similar services 4) The buyer cannot return the service 5) Service Marketing mix adds 3 more p's, i.e. people, physical environment, and process. When one markets a service business, one must keep in mind that reputation, value, delivery of "Managing the evidence" refers to the act of informing customers that the service encounter has been performed successfully. It is best done in subtle ways like providing examples or descriptions of good and poor service that can be used as a basis of comparison. The underlying rationale is that a customer might not appreciate the full worth of the service if they do not have a good benchmark for comparisons. However, it is worth remembering that many of the concepts, as well as many of the specific techniques, will work equally well whether they are directed at products or services. In particular, developing a marketing strategy is much the same for products and services, in that it involves selecting target markets and formulating a marketing mix. Thus, Theodore Levitt suggested that "instead of talking of 'goods' and of 'services', it is better to talk of 'tangibles' and 'intangibles'. Levitt also went on to suggest that marketing a physical product is often more concerned with intangible 13

25 aspects (frequently the `product service' elements of the total package) than with its physical properties. Charles Revson made a famous comment regarding the business of Revlon Inc.: `In the factory we make cosmetics. In the store we sell hope.' Arguably, service industry marketing merely approaches the problems from the opposite end of the same spectrum. 2.3 Consumer Buying Decision Processes Buyer decision processes are the decision making processes undertaken by consumers in regards to a potential market transaction before, during, and after the purchase of a product or service. More generally, decision making is the cognitive process of selecting a course of action from among multiple alternatives. Common examples include shopping, deciding what to eat. Decision making is said to be a psychological construct. This means that although we can never "see" a decision, we can infer from observable behavior that a decision has been made. Therefore we conclude that a psychological event that we call "decision making" has occurred. It is a construction that imputes commitment to action. That is, based on observable actions, we assume that people have made a commitment to effect the action. In general there are three ways of analysing consumer buying decisions. They are: Economic models: These models are largely quantitative and are based on the assumptions of rationality and near perfect knowledge. The consumer is seen to maximize their utility. See consumer theory. Game theory can also be used in some circumstances. Psychological models: These models concentrate on psychological and cognitive processes such as motivation and need reduction. They are qualitative rather than quantitative and build on sociological factors like cultural influences and family influences. Consumer behavior models: These are practical models used by marketers. They typically blend both economic and psychological models. 14

26 2.3.1 The consumer decision process model. This model breaks down the consumer decision process into seven basic decisions that have to be taken during the purchase process:- Need Recognition Search for Information Pre-purchase Evaluation of Alternatives Purchase and Consumption Post-Consumption Evaluation Divestment In themselves each of these decisions are almost self explanatory and we can easily identify with them and relate them to our own purchase experiences. However, when we come to generalize this model we need to consider the factors that influence each of the stages in the process. 1) Need recognition This is influenced by three factors: Environmental Influences Individual Differences and Memory So clearly this initial stage is strongly influenced by the specific situation, the individual and their past experience, however this can be influenced by marketing activity, if for example past experience of purchasing a product has been positive, perhaps a strong, positive image of a product or brand has been made in the buyers memory and the purchase environment has been made conducive to a specific purchase. 2) Search For Information Again this can be more complex, firstly the search process is both an internal and an external process. If the purchase situation is a familiar one, the purchaser s memory might satisfactorily provide the information needed. The level of information required to the involvement, experience and level of perceived risk - so even if there has been a significant degree of past experience if there is a high degree of involvement or risk the purchase will require an external search for information. 15

27 3) Pre-purchase evaluation of alternatives Once the information is brought together the purchaser will make their decision - this is the result of their individual characteristics. This might be a simple process or a complex process, a logical or an emotional purchase or the result of a simplification. Where complex information requires processing often a heuristic or simple rational is used. This might be to base the purchase on a single feature or benefit that will be used as a surrogate for quality or low risk, or the choice reduced to one of brand. 4) Purchase and Consumption These are highly individual aspects - but in some purchases they are extremely important, particularly in the way they influence future purchase behavior. For example services such as they are actually produced at the time of consumption. 5) Post-consumption evaluation After consumption the purchaser will both consciously or unconsciously evaluate and decide if the result of purchase process was satisfaction or dissatisfaction. This feeds back into the future purchase behavior either stimulating a more complex behavior in the future due to an increased level of perceived risk or as a simplification of the behavior as the purchaser will have learnt by a positive reinforcement. 6) Divestment Finally a consumer will need to consider how they will divest themselves of the purchase. The resale value of high ticket items is an important factor in the purchase decision. Increasingly ecological factors also effect purchase decisions - will the item be recycled? As with all models of human behavior this model provides a framework for analysis that can influence marketing decisions or explain problems that might arise in the purchase process. Models are far less in predicting what will happen, how consumers will react. 16

28 Figure 2.3 How consumers Make Decisions for Goods and Services Source: Variables that shape the decision process. Consumer decision making is influenced and shaped by many factors and determinants that fall into these three categories: (1) individual differences, (2) environmental influences, and (3) psychological process. A summary of these variables follows, but each is covered in depth in later part, with Part a. focusing on individual differences, Part b. on environmental influences, and Part c. on influencing consumer behavior. 1) Individual differences Five major categories of individual differences affect behavior: (1) demographics, values and personality, (2) consumer resources, (3) motivation, (4) knowledge, and (5) attitudes. Demographics, psychographics, values, and personality: How people differ affects decision process and buying behavior. These variables include what has come to be known as psychographic research to probe 17

29 into those individual traits, values, beliefs, and preferred behavior patterns that correlate with behavior in market segments. Consumer resources: Each person brings three primary resources into every decision-making situation: (1) time, (2) money, and (3) information reception and processing capability of each, thus requiring some careful allocation. Motivation: Psychologists and marketers alike have conducted a wide variety of studies to determine what takes place when goal-directed behavior is energized and activated. Knowledge: It encompasses a vast array of items such as the availability and characteristics of products and services; where and when to buy; and how to use products. One main goal of advertising and selling is to provide relevant knowledge and information to consumers so as to assist them with decision making, especially in extended problem solving. Attitude: Behavior is strongly influenced by attitudes toward a given brand or product. Attitudes are simply an overall evaluation of an alternative role on future choice and are difficult to change. 2) Environmental influences Consumers live in a complex environment. In addition to individual variables, their decision process behavior is influenced by environmental factors, including (1) culture, (2) social class, (3) family, (4) personal influence, and (5) situation. Culture: Culture, as used in the study of consumer behavior, refers to the values, ideas, artifacts, and other meaningful symbols that help individuals communicate, interpret, and evaluate as members of society. Social class: Social classes are divisions within society that comprise individuals sharing similar values, interests, and behaviors. Family: Since the field of consumer research was founded, the family has been a focus of research. The family is the primary decision-making unit, with a complex and varying pattern of roles and functions. Personal influences: As consumers, our behavior are often affected by those with whom we closely associate. Consumer often respond to 18

30 perceived pressure to conform to the norms and expectations provided by others seeking and talking their counsel on buying choices, observing what others are doing as information about consumption choices, and comparing their decisions to those of others. Situation: Behavior change as situation change. Sometimes these changes are erratic and unpredictable, such as a job layoff, and at other times, they can be predicted by research. Situation is treated as a research variable in its own right. 3) Psychological process influencing consumer behavior Finally, those who wish to understand and influence consumer behavior must have a practical grasp of three basic psychological processes: (1) information processing, (2) learning, and (3) attitude and behavior change. 2.4 Previous Researches International Carwash Association identified and detailed variables that influence costs and profitability in doing car wash business. They indicated that there were plenty of details for entrepreneurs to pay attention to, including what type of car wash machine to install, whether to purchase or lease that equipment, how many washes a month to aim for, and how to set prices to ensure profit without driving away valuable customers. They investigated that one of many factors that make business succeed for any site is the number of vehicles it washes on a yearly basis. According to their study in 2002, the average number of vehicles washed at respondents' car washes of all types in Chicago, USA was 84,586. They found that self-service sites had the highest average number of washes, 92,093; conveyor sites placed second with an average 82,019; and in-bay automatics ranked third, with an average 54,184 washes. They also found that annual revenues of operators differed dramatically, depending on equipment type. Operators in the conveyor segment reported the highest annual average operating income per site: $1.7 million while the second and the third were self-service operators, who reported average operating income of $314,029 and in-bay automatic operators with the average of $208,038 only. ICA recorded wide divergences by wash segment. The average wash price for all conveyor operations was $8.43 while in-bay automatic operations, the average minimum was $4.53; the average maximum, $8. At self-service operations, the 19

31 average price of a wash was $1.71; in the sub-segment of self-service operations with a secondary business, however, the average price was a bit more: $2.39 and it also noted that self-service prices were highest on average in suburban areas at self-serves with secondary businesses (as cited in Bennett, 2004). Vaubel indicated that price hikes at car washes may be driven by a mix of factors or by a single factor that's having a huge impact on costs such as water rates and water quality. He also found that altering pricing structure by reducing the number of wash offerings can bolster the margins. He insisted that even though the company's wash businesses might lose some customers who were resistant to the change, it didn t have a negative effect on the overall business (as cited in Bennett, 2004). Vercollone indicated that the quality of the car washes has been a boon for the convenience store and petroleum industry. New technology in brushes, conveyors and chemicals has lifted the entire industry to the point where it should be deciding just how much of a margin to make on a wash and not what kind of a discount to offer to attract business. He also found that customers get their cars washed when their car is dirty. So, the best strategy is to go after them with the best wash possible and insisted that you can not create a very stable foundation to grow the business if you're counting on building sales with an inferior wash, offering discounts and couponing. He found out that for most Americans, their car is the most expensive purchase they'll ever make besides a house, so they want to take good care of it. The wash has to emphasize quality-that is ultimately what earns their trust and brings them back. Willkomm also agreed with Vercollone and indicated that the quality has to be there first and foremost. He also convinced that price isn't even in the top three considerations when it comes to choosing a wash, but it's not just the one-time customer looks after. It's getting them again and again where you see real profits. Willkomm insisted that offering a quality package takes teamwork, but it also requires a lot of homework to make sure you have the support to satisfy your customers. "At the end of the day, it's your name on the sign and that's all customers are going to remember when they leave the store. Make sure they always walk away satisfied" (as cited in Lofstock, 2007). Gregorie indicated that advances in technology made it possible for car wash operators to get vehicles cleaner, to boost customer services and increase throughput, reduce labor and operating costs, and charge consumers more. However, he found out 20

32 that these same advances also prompted more competitors to enter the car wash business, including private investors and hypermarket retailers. Dollhopf and Campbell also agreed with Gregorie as Dollhopf stated that some hypermarket chains wanted to offer a discounted car wash and others wanted to provide their customers with one-stop convenience while Campbell noted that hypermarkets started to dabble in car washes because advancing technology made the business easier and more profitable (as cited in Warren, 2005). Cole stated that some car wash staff concerned how customers feel about the company's services and its long-term role in the community. They looked for every opportunity to demonstrate concern for customers. He also noted some lessons from the car-wash chain that might apply to other businesses as well in the following (as cited in Johnston, 1994): Pay attention to the details. Just as the hospitality industry wants travelers to feel pampered, the car wash service operators want customers to view the car-wash service as a positive experience. The first clues to this service philosophy: flower beds decorate the entrance to the wash, neatly groomed employees greet customers courteously, and car owners receive little treats such as peanuts as they enter the cleaning tunnel. Inside, the cars are cleaned by an equipment system that is configured for the most effective treatment possible. Meanwhile, any kids on board may be delighted to see cartoon characters like Garfield or Bart Simpson mounted on poles inside the tunnel. These familiar characters are intended to calm kids who are frightened when the washing machine descends on their family car -- and thus allow their parents to relax. Once drivers emerge from the wash, they can go to a waiting room and get free coffee if they want the insides of their cars cleaned. Some customers -- depending on the make of their car and the level of service they've chosen -- have their wheels cleaned with a toothbrush. Others can go to the "satisfaction center," a final service checkpoint, for any extra attention they feel the car needs. The goal is to make sure customers feel well taken care of when they drive out of the lot. Know the customer. The marketing and service programs rely heavily on the tracking of customers' buying habits. The company should use a 21