Tata Nano: The Story
The idea behind the Tata Nano itself was revolutionary. While the execution hit some roadblocks, the product was an engineering marvel without a doubt. It brought together cost, fuel and space efficiencies in a way like no other while still retaining world-class features and a sleek design. True, there were a few safety issues and the fire incidents in a few cars. There was also the lack of power, low stability, less boot space and small fuel tank.
But here’s the market reality. The car which promised to see a million units is somewhere around 920,000 short after two years of its launch. Now why would a discerning and price-conscious Indian public shun a product that’s so good? The reasons are simple. The Tata’s have messed up with the marketing. The very nature of the product created massive hype. Add to that the goodwill that the prestigious Tata brand carries. And you should ideally have a sure fire recipe for success. But even after two years, the Tata Nano continues to languish when it comes to sales. So what happened?
With the plant being shifted to Gujarat, there were obvious delays. Furthermore, a lack of capacity only added to the woes as the initial demand was huge. A lottery system was used to select buyers, but the delays as well as refunds and cancellations led to a wane in the interest. Tata expected the initial hype and its reputation to carry the brand, but when that failed, it did not take the necessary steps to build its sales, assuming that it would be able to sell its stock due to limited capacity. Hence, marketing was sidelined. The restructuring only served to escalate the problems.
Then there was the problem of positioning. The car was obviously to be targeted to families that travelled on two-wheelers at great discomfort and risk. But instead of using marketing channels to reach their target audience, Tata used social media and other non-conventional methods of marketing, probably due to margin issues. The sales reflected this. Half of the Nanos purchased were second cars, clearly violating the positioning which sought to transition people from two wheelers to four wheelers. The lack of communication to the appropriate customer segment led to the downfall.
Reasons for the failure of the disruptive innovation
Pride of ownership: The Nano was essentially branded as the world’s cheapest car. While this was presumed to be an exciting, disruptive idea the truth is that no one wants to own a car that is thought off as cheap. People want to brag about how awesome their car is and how it kicks their neighbor/friends car’s butt. It was wrongly positioned as a poor man’s car.
Price Differential: The launch price came in two variants ranging between Rs. 1.2 to 1.5 lacs. It was 20 – 50% higher than the proposed rates which was a major setback to customers. And now due to inflation, increase in raw material prices has led to further increase in Nano’s price.
Advertising campaign: The advertisements have unfortunately been bland and catering again to the theme of affordability. Especially with cars people want to own something they can aspire for and be proud of. They want to feel excited about it. The focus in advertisements has only been on safety and relative comfort over the two-wheeler but nothing exciting or incredibly desirable.
Competition: In the Tata Nano advertisement there’s always either a couple or family on scooters or road bikes alongside. Tata is essentially trying to convince people that Nano is a safer, better option than these. The fact remains many owners of other road bikes consider their bikes a preferable option in terms of style and speed.
Technical issues: Within a few months of initial sales, technical problems were found in the product and there were a few reports of Nano catching fire, which further weakened the trust for the brand ‘Nano’ as a whole. Tata also faced political problems and had to shift the plant location which led to production delays.
Inadequate dealer network: Mr. Ratan Tata was quoted as saying “We never really got our act together…I don’t think we were adequately ready with an advertising campaign or a dealer network”. The Nano did not have a large enough dealer network in the rural areas and smaller towns where the affordability branding was more relevant. The paucity of dealer networks meant they could not capitalize on the initial enthusiasm and interest.
Possible Solutions for the Success of Tata Nano if Re-launched
Communicate Safety Aspects
Inspiration behind Nano –“What motivated me, and sparked a desire to produce such a vehicle, was constantly seeing Indian families riding on scooters, four or five on a scooter, maybe the child sandwiched between the mother and father, riding to wherever they were going, often on slippery roads in the dark.” – Ratan Tata
The car was launched keeping in mind the safety of a small family who used to travel on a two wheeler. But since it was launched as a Re. 1 Lac car it led to the perception that Nano was equipped with inferior quality materials as compared to other cars. Then there were instances of car catching fire due to heating problems. This led to decline in trust among the buyer’s about the car’s safety features. Hence, the basic reason behind the inspiration of launching the car, i.e. safe and comfortable ride seemed to have failed.
Even incorporating the required safety features in the car such issues created a negative perception that Tata finds hard to erase from peoples memory. The reason cited is “You cannot expect the safest and best quality in a car when you are going for a cheap car”. Tata made little or no direct effort to build confidence. Tata Motors should conduct a comparison of the safety standards with its competitors and improve upon where they are lacking. So to increase the trust among buyers they should publish all the safety standards which the product meets in their promotional campaigns.
Safety standards are clearly not going to be the differentiating factors for Nano. But these are a ‘Must Haves’ for any car manufacturer. This would help to remove any kind of false perceptions that Nano compromised on certain features to achieve its low cost positioning.
Change in Target Segment
It was targeted at the small family of four which owns a two wheeler and would want to upgrade to a car. It was also supposed that people who ride high end bikes would prefer to have a car having just a little price difference.
The look and feel of the car is small, elegant, lesser power and easy maneuverability. This should have been targeted at the young women or at the youth segment. This would have helped TATA’s create a generation of customers and keep these students in the same family as they grow up. Families in which both husband and wives are earning and need to travel, women in those families should be targeted. Rather than being a status symbol the car would be used for convenience.
Focus on Features
In the initial launch too much was given on Price. The differentiating factors, however, for any product are its features. Other car manufacturers also focus on the car’s features like maneuverability- the Maruti Suzuki Alto was positioned this way, Mileage – Maruti Zen and Performance – Hyundai Verna. Tata Nano should focus on some of its innovative feature like better fuel economy (24 km per liter) than the other car in this category, eco – friendly because of low carbon dioxide emission, the use of a rear mounted engine to help maximize interior space and meet all safety standards.
Tata Nano was launched in many variants with its price ranging from Re. 1 lakh to Rs. 2 lakh. All had the same look from outside and were under a single brand name Tata Nano. Since it was hyped to be a Re. 1 lac car even if buyers opted for the higher end model it still gave an impression to others that it was low cost car. Every household has aspiration to move to something better and higher and not necessarily cheaper. With the current strategy Tata focused on the lower base model and hoped that people would also choose the higher version. This is quite contrary to how people aspire for things. They should make some modifications in the outer look of Nano to clearly differentiate between the different versions of Nano. Currently different versions are named Deluxe, Luxury, etc. They could have different names for the versions so the higher version does not come under the same family.
Also when they go for re-launch they should focus in the promotional campaigns on the higher end models of Nano and mention that they have lower models also.
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