Positioning the Tata Nano – Case Memo
Positioning the Tata Nano – Case Memo Introduction: Tata Motors Limited (TML), a part of Tata group, a highly respected conglomerate has a product that will revolutionize the way India travels. The team was successful in delivering a car that meets the goal price of 1 lakh rupees. People welcomed it with high pre bookings and initial sales.
But it has been found that the car didn’t hit the target market. The initial excitement faded away leading to drastic downfall in sales. We have analyzed the case to bring out the strengths and marketing strategies that TML can play to improve upon its sales. Strength: . At 1 lakh, price is the major strength of Nano. It has been priced between the cheapest car and a bike. 2. Fuel efficient car in the Indian market. 3. Easily accommodate a family of four. 4. Tata group is the most respected corporates in India. This gives TML an advantage as people trust the brand. 5. The compact design provides easy maneuverability in the congested city traffics. Weakness: 1. Positioning of the product as a cheap car. 2. Capacity limitation due to postponement of new factory lead to lottery based delivery. 3. Absence of enough TML dealers to cover the length and breadth of the country. . Low margin for the dealers. While TML provided 4 to 10 percent dealer margin for Nano the dealer margin was only 2 to 3 percent. Opportunities: 1. TML team views nano as an opportunity to provide a safer means of transport to a typical Indian family which rides on a motorcycle. The two wheeler segment presents itself as a great opportunity to nano to tap in. 76 % of automobile sales is in two wheeler market. 2. A large percentage of Indians lie in the middle class income range. Presently their disposable income is on the rise due to better job opportunities.
The fact that this section of people doesn’t have a car and also prefer to own one if affordable provides TML with unprecedented market opportunity. 3. Rising fuel prices will be advantageous to Nano as it is fuel efficient when compared to other cars in the same segment. 4. The new Sanand factory will help achieve the scale of operation . Threats: 1. The major threat for Nano is from the cars placed in mid-sized segment. Paying a bit more customers get a larger car with bigger engine and a longer track record. 2. Incidents of some Nanos catching fire also deterred customers from buying the car.
Although the fire was due to foreign electronic particles it did dampened the market sentiments. 3. Nano missed its target market and it was catering to a market of second car buyers. 4. The advanced versions which were well above 1 lakh were selling more than basic model. This led to critics criticize that Nano might increase the congestion in roads. 5. Political threats like Singur land problem. The SWOT analysis of Nano provided a picture of the product and the brand. We have used 4 Ps of marketing mix to further analyze the different aspects of Nano. Product:
While developing Nano the whole team had one objective to provide a low cost car without compromising on the quality of the car. TML went on with the following strategies to achieve this goal. 1. Nano was the most fuel efficient and economical car. 2. Three models are available: Nano, Nano CX and Nano LX. Nano had only the basic features without power steering, power windows etc. The other models had extra features. 3. The car was designed to accommodate more in less space. Engine was kept in rear portion to achieve this goal. 4. The suppliers were also roped into the design.
They made light weight , low cost parts designed especially for Tata Nano. 5. Nano had parts supplied from 100 suppliers. The suppliers viewed this as a new opportunity to develop their capabilities. 6. The engines for Nano were developed by TML itself. Tata nano has a 624 cc 2 engine cylinder. The car as a product achieved its stated goals. But unexpected incidents of some Nanos catching fire led to build up of negative outlook on the quality of the product. Tata did took steps to ensure the quality of the product. 1. It fitted additional safety parts in every nano. . TML had four nanos touring all over India to prove that their product is capable of withstanding all conditions. TML could have gone for safety certifications but the cost prevented it from providing basic safety measures like air bags and anti-lock brakes. Pricing: Pricing is the USP for Nano. The whole product evolved around the goal price of 1 lakh. Apart from the lower price of Nano TML also had cut dealership margins. 1. Only the basic model was priced at 1 lakh while the other variants CX and LX were priced at 157,808 and 181,438 rupees. 2.
Dealer margins for nano were between 2 to 3 percentage with a 1 percent discount off the full dealer cost if the dealer paid cash up front. 3. Although nor confirmed by TML it is believed that manufacturer margin was around 15 percent. The basic model with 1 lakh pricing failed to lure the customers while the advanced models with higher prices had more takers. Distribution: 1. Inadequacy of dealerships was bothering TML as they couldn’t reach out to the target market. 2. TML had 214 dealerships spread over 28 states in the country. 3. TML followed an unique model for pre bookings. It took leverage of other Tata group companies.
The pre booking forms were made available in Croma ,Westside stores, World of Titan and Tata Indicom exclusive stores. In addition the pre booking can be done through online or from SBI banks. 4. The land problem led to capacity limitation. The initial production was limited to 50,000 nanos. 5. A lottery system was used to allocate cars to people who had pre booked it. 6. TML had an idea to promote entrepreneurial engineers to assemble the car at a rural location where distribution was not available. But this idea was dropped due to concerns on warranty. Promotions: Promotion of nano was a major task ahead of Ratan Tata.
TML needs to adjust its marketing strategies in order to sell the volume of cars that could be produced with the new plant. The following are the ways in which the product was promoted. 1. Right from the beginning Nano was promoted heavily by advertisements. The car was advertised as cheapest car in the market. 2. TML concentrated on the price aspect alone in its campaigns. This had negative impact on the minds of customers that the car may not be on par with its qualities. TML should make sure to change the perception of customers so that they don’t view nano as low cost car but an affordable car with quality standards.
The quality standards and safety measures have to be promoted vigorously as the people expect these features when investing 1 lakh rupees. Conclusion: TML has a product that will help the millions to get a decent and safe way to travel. Unlike the second car buyers, the middle class i. e. the first time car buyers will view nano as a way to travel along with family. It leads to high expectations on safety and quality since individuals never risk the safety of their family. TML has to make sure that the product is rightly positioned as the one with necessary quality standards and high safety measures to rope in a middle class customer.