Summary:
The Nano
was much heralded and expected to take the Indian car industry by storm.
However it didn’t quite pan out that way. To begin with the decision to
manufacture it in West Bengal was a major catastrophe. Why anyone would locate an
industry in a communist infested region begs reason. With a timely invitation
from Modi’s government coupled with sheer grit and determination, the
unfortunate site selection error though overcome, was just the beginning of
many missteps the Nano had to contend with. The technical glitch that caused a
few cars to catch fire was overcome as well. However, the biggest error in
marketing the Nano was the choice of the Distribution Channel which has
resulted in lack luster sales.
Related
Info:
Tata
bought the bleeding Jaguar-Land Rover company for $2.3 Billion. The expectation
was the $2,500 Nano would revolutionize the car industry by launching the “poor
man’s car”, and the $65,000 luxury brand would be a millstone around Tata’s
neck.
The outcome
was quite the opposite. For 2010-11 out of the consolidated net profit of Rs.
9,274 crores, just Rs. 1,812 crores came from the Indian operations of the
company. The rest came from JLR and other associated companies.
Sales of UK India
The
Importance of Positioning:
Launching
the Nano as a “cheap” car pretty much ruined its Brand Value. The assumption
was that if it is cheap enough, then it would attract buyers who were priced
out of the existing auto market. This flies in the face of the fundamental
marketing principle of targeting early adopters first, then going after a
broader market segment. Despite this error, there was an initial ground swell
of interest where many people signed up and a lottery was held to select the
initial set of buyers. In that sense the hype that accompanied the launch prior
to availability did work for a short period of time. And then it fizzled out.
It is not
clear what a successful positioning could have been. Clearly it is meant for
the married motorcycle owner who now has a child or two. But this buyer is
conservative not only with regards to price, but is also risk averse and would
rather wait till “others” buy and provide feedback. The fire glitch certainly
did not help.
Other
positioning questions are:
-
Is
it an Urban car or a Rural car?
-
Intended
for teenagers?
-
A
second car?
-
Self
driven or driver driven?
None of
the above supports the premise that providing a cheap car will result in
buyers. In fact the most appropriate positioning would have been to promote it
as an Auto Rickshaw replacement or a cheaper taxi, but in order to do so it
would have to run on LPG and also deal with bureaucratic and administrative
hurdles.
Pricing
error:
It was
never a Rs. 1 lakh car, with taxes and transportation added. This immediately
set the perception that the 1 Lakh price is just a teaser price and that what
one lands up buying will cost more.
The
expectations mismatch:
The Nano
was trumpeted as an engineering marvel, which it is. However, bringing it to
market presents one set of challenges and marketing it successfully is another.
As in any new product, the expectations are typically set high and in reality the
performance falls short. Too much importance was given to the technical aspects
instead of highlighting the fact that it is a “no frills’ car that transports
four people safely and economically. The goal should have been to highlight its
utilitarian value.
In
essence, it should have been promoted as a utilitarian vehicle at and
affordable price
The
Channel Mistake:
The Nano
was sold through the existing Tata Motors car dealerships. What happens when a
person interested in a Nano shows up is that the sales person will up-sell the
person and convince them that they are better off buying the car next model up.
With financing the monthly outlay will not be that much more. The incentive to the
dealer and the sales person is better margins and commission respectively. The
net result is that the buyer either buys the next model up from Tata or goes
some place else with the “upgrade” intent in mind.
A few
years down the road, Bajaj will launch their competitive offering. If they do
it right they will sell it through their existing motor cycle dealerships. In
this case a person interested in buying a motorcycle, like a family man is a
potential customer who could be motivated to buy the car instead.
This
underscores the importance of the Distribution Channel, which is a major hurdle
for Tata. What they have been doing recently is taking the Nano on the road and
getting people to test drive it. It appears the objective is to make the sale
on the road and rope the customer into the dealership to seal the deal.
Lessons
Learned:
This kind
of car is targeted to a new market and does not cannibalize the existing
market. This is more of a commuter car and appeals to a person who will drive
the car themselves.
Growing a
market involves patience and the first set of buyers targeted should be early
adopters. This was a new product targeted to a new market. The expectation of
high volumes at low margins works if one is introducing a better, cheaper
replacement to an existing established market.
The
target customer is one who has out grown the motorcycle or a buyer who values
the utility, safety and economics of such a car. The bulk of the sales eventually
will come from the first time car buyers.
It is better
to underestimate demand and start with under capacity initially so that demand
out strips supply. Having a back log, gives the impression that this is a much
desired commodity and worth the wait since the savings are significant.
One can
hark back to the VW Bug, which was a bare bones car with the transmission and
engine being the two major assemblies that formed the motion system. It was
positioned as “the people’s” car and named appropriately. It found popularity
amongst the youth. Ultimately, if one wants to repeat this phenomenon in
today’s context, the VW Bug serves as an example to build upon.
Nice info about JEE and comparison of it to business as well.Thanks.
ReplyDelete