Any company attempting an innovation with regard to high-involvement durable categories, especially at the level of disruptive innovation at the lower end of the market, faces unexpected risks as the brand has to strike a competitive balance between several aspects of the offering and the price.”
S.Ramesh kumar, professor of marketing at the Indian Institute of Management, Bangalore.
Nano has been one of the most talked about aspirational cars which came from Indian stable. The car which was priced at 1 lakh and called as the people’s car (aam aadmi) achieved this feat by extensive process innovation. The car completely followed the path of disruptive innovation by using plastic and adhesives rather than following the regular used bolts and other joining techniques and materials. Infact it was also awarded the best car of the year award in 2010 by Autocar.
Even then the car did not live completely to the hype.
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It can be seen from the above sales data that Nano has never seen a consistent sales path. It has been erratic most of the times. Even after winning the Autocar India 2010 Car of the Year Award sales were not visible.
The various reasons behind these are:-
- Nano got stuck up in political issues regarding its plant at Singur. This led to a lack of mother plant from mass manufacturing was initially planned. Shifting of the plant location brought delays in the delivery. This led to loosing on high OSL customers who are normally ready to try new products because of their risk taking ability.
- With lack of shelf availability the sales were made through a booking model. This although created initial hype but killed a lot of waiting customers. Basically, the intent could not be converted into sales. Of the 200,000 people who had initially registered 100,000 were shortlisted by lottery. Of which only 75000 sales happened. Many customers cancelled their orders.
- Because of the above issues the market perception became that Nano was a product which if booked might take even two years for delivery. Once the attitude was formed the unlearning was quite difficult. Soon this became general perception.
- Erroneous marketing techniques for target market. Tata Motor’s Nano was built kept in mind the people who are using two wheelers and would consider buying a car for the safety, comfort and attractive price that Nano offers. With over 11 million two-wheelers sold in India last year (according to SIAM), the market clearly exists. Rather than understanding the purchase behaviour of this intended segment Tata Motors looked at margins as their main focus. This class of people are normally not internet savvy and do not use facebook, blogs etc to a high extent. Instead of this Tata’s marketing presence was through web portals and social media sites. Although there was huge traffic on online ads ads and blogs but it was not by the target customers but majority of these people were just curious bystanders and not ones who had the intent of buying.
- Nano although once in business quickly so huge sales falls because of a total of 6 Nanos catching fire. In order to address the core issue of fire, the company identified the cause as the falling of foreign material on the exhaust system and has decided to provide additional protection in the exhaust and electrical systems.
But even after fitting these systems at no extra cost company could not use the situation for its goodwill. This was a major blow to its safety image.
- The core customers who planned to buy Nano were not very well off. To buy they were mostly dependent on loans. The loan schemes were not conducive enough, many took almost 15 days to process whereas many banks did not readily give loans to these segments because of their erratic records. Customer carried a profile suited more for a two wheeler customer, while they were looking for financing a four wheeler. This resulted in issues and delays from the banks end which in turn affected the sale of Nano.
- A management change also led to a lot of time for the team getting accustomed to the problems that customers were facing.
Sumit Bali, CEO of Kotak Mahindra Prime (which makes auto loans), cites yet another reason. “Since the exit of Rajeev Dube [president, Tata Motors, passenger car division], the whole passenger car division was restructured. Hence, most of the team responsible for the marketing was no longer involved. The new team, with diverse backgrounds, took time to understand the issues.”
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- Image portrayed as the 1 lakh car did not fall in sync with the aspirational need of a customer. Every human being wants to buy things which are one level up from theirs i.e. a poor man would want to buy products that a middle class man buys, just to show of his status. In such a case Nano being labelled as the cheapest car blocked the buyers in the budget conscious segment who is unable to buy a costly car. Cars are a Status symbol in Indian market. The image for most families is buying a car is a sense of pride. Buying the car popularised as ‘the cheapest car in the world” does not exactly fit this picture. People buying them don’t want to be called as a budget monger. Media further labelling it as the poor man’s car made people shy away from purchasing it.
- There is a huge second hand car market which can give you a host of real cars within the same price range (M800s, Altos, Sparks, even earlier model Santro, Wagon R, Zen, and so on). With access to complete cars like this that has more space, practicality, reliability and comfort they prefer to go in for one of these cars.
- Running costs: target customer will be upgrading from a 2 wheeler. They would be more concerned about the Fuel Efficiency and maintenance costs.
- Normally months such as monsoon months generally see a dip. There has also been some resistance because of increasing fuel prices and interest rates. But these being macroeconomic and natural problems are not a car specific but industry specific problem.
What can they do now
Tata Nano has been doing many things so as to revive them and again grab their share of the pie.
The homegrown firm’s total passenger vehicles sales in the domestic market stood at 27,737 units in November, up 80.81 per cent from 15,340 units in the same month last year, Tata Motors said in a statement.
The company’s small car Nano’s sales stood at 6,401 units during the month compared to 509 units in the year-ago period, recording an over 12-fold jump
The major areas where they should now focus are:-
- Improve on the safety issue. Tata nano did not handle the fire issue quite convincingly. A company when faced with such issues should use them to its advantage by completely astonishing its customers with its services. In case of nano tata motors initially din’t take up the responsibility. After agreeing they dint call it a recall and fitted with the updation. They could have gone many steps further which would make customers completely forget the problem and see Tatas in a new light increasing the trust.
The following example quoted speaks of what can be done in such situations:
The LS 400 product, designed to compete with Mercedes-Benz, Audi and BMW vehicles, but priced much below them, had a (non-safety-related) quality problem soon after release. Toyota took this potential disaster as an opportunity to demonstrate the extraordinary level of service that the new Lexus dealerships would be providing. Dealer personnel picked up the vehicles at the owner’s home at a prearranged time, did the repair, washed and waxed the car, and returned it in the same day with a full tank of gas. Toyota and Lexus received a huge amount of positive publicity from this, more than was received by the quality problem, and this launched the brand/product splendidly.
- Nano has customers who are middle class people. Such people have a different kind of purchase behaviour. They are happy in big bazar only if they get the feel of a local market there. Such people feel intimidated by big classy showrooms and would refrain from going there. Tata motors should address this issue .The channels should be customised and scaled up to the customers. So, specialised centres should be created.
Tata motors have following this:
So in addition to the 874 regular sales outlets, 289 Special Nano Access Points have been set up for customers to test-drive or test-ride the car. Some 1,200 salespersons have been recruited and trained to work out of these dealerships
People of this class are more concerned about the warranty and maintenance. That should be beefed up.
As a further purchase incentive and a confidence-boosting measure, Tata Motors has more than doubled the Nano’s warranty to four-years or 60,000 km (whichever comes earlier) at no extra cost
- There are other countries where the customer mindset follows the Indianised pattern and where cost is a major issue. Hence, export markets but only the ones with close resemblance to Indian markets like Sri Lanka and Nepal should be tapped.
- What Tata motors need to do right now is to break the created attitude of people. They should do more of experiential selling approach at this point of time. People need to have more of test drive. Dedicated salesmen should drive down to localities and let people drive the car and have their feedback and generate interest.
Tata motors has recently launched a program where a customer keeps the car for 15 days to have a feel of it.
- The financing options need to be completely improved and reworked so that loans for this process become easier.
Tata Motors has set up financing arrangements with 29 banks and non-banking finance companies, with almost 90% assistance at “easy rates.” Additionally, Tata Motors Finance, a subsidiary of Tata Motors that helps finance their vehicles, will process the loan of applicants with unclear documentation (a rampant problem with customers in that segment) in just 48 hours.
- They should properly market the laurels that the car has achieved. The awards like Autocar best car of the year 2010 should be shown in all commercials. This would help in reinforcing the belief of a technologically powerful car and the best in the segment.
- Tata Motors advertised on tv two years after the first car rolled out citing that since complete shelf selling had not started and hence ads would be useless as customer won’t be able to buy the product. Even then some sort of advertising would have kept the brand lively. The new promotional campaigns have been taking care of these issues.
“[The Nano] was not available off the shelf until we started open sales,” he (roy) says. “There is no question of sluggish sales. Until August [2010], we were only delivering pre-booked cars. I was not selling openly because I did not have the capability to. Despite that, had I started advertising, would I not be wasting money? So in classical marketing style, I have brought in advertising only when it was required — initially print and now, television.
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- Image of the car needs to be changed from a poor man’s car to one which signifies the quirkiness of independence and youth. This would appeal to the two wheeler segment as independence from the traditional mode of transport etc. The campaign should be reinvented in such a light.
- The earlier used online medium was hardly the right way to sell Nano to their target segment. It should instead be focused around shops, bazaars, where they can create buzz around the car through word of mouth. Tata Motors should look at other brands which have successfully sold the vehicle sto rural and semi urban segments. They should observe the sales techniques of Maruti Suzuki and Hero Honda in the rural areas and to attempt innovations based upon those approaches. This would be a lot better than being lured into emphasizing social and online media.
In all the increased level of extended warranty, the greater availability of different types of financing options, the new Nano Access Points and new training for salespeople, and the new advertising campaign should all help tremendously. These would make the customer look at Nano in a new light.
Refrences
- How Tata Nano hit a big bump in India – Economic Times, December 3, 2010
- https://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4564
- https://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4561
- https://www.thehindubusinessline.com/companies/article2677780.ece)
- https://www.thehindubusinessline.com/companies/article2201385.ece