The Tata Nano : What Went Wrong?

CASE STUDY ANALYSIS REPORT THE TATA NANO: WHAT WENT WRONG?

I. Case Synopsis Tata Nano is India’s cheapest car with not the most affordable or the best value for the money. In 2009 Tata Nano had entered for being the lowest priced car in the world and predicted the Indian car market would expand by 65% as only 8.5% of people in India owned a car. Ratan Tata is the Chairman Emeritus, Tata Sons, has a vision to make a new project to make the small car with the cost $2,500. This new car first want to have only 3 wheels, however in the end they made 4 wheels small car with different design specifications. In 2009 they present the people’s car in India that has a segmentation for low income people. The Basic model of Nano didn’t have stereo, Air Conditioner, Power windows, love compartment, No airbags, antilock brakes, no power steering, no remote locking, body made of biodegradable plastic to keep it lightweight and reduce the cost (some of them didn’t meet industry standard), and had two cylinders instead of 4. This new small car was targeted to the low income people, who’s exactly people who only ride two-wheeler and the family who just wanted to have their own first car. Unfortunately, Two-wheeler riders couldn’t afford to pay the Nano’s price outright and Tata Motors did nothing to make loans easily available to target customers because low-income consumers often denied loans by bank. Only in 2011 the financing was easier because finally Tata Motors had partnership with other 29 Banks and non-banking companies. Tata also announced they got the fasttrack loans plan by financing arm approved the loan but with a higher interest rate. Tata Motors didn’t establish distribution channels where its actual target consumers lived in semiurban and rural areas of India, there was no show room for the place that they targeted. After did some analysis of strategy, finally they followed a two-pronged strategy (Big Bazaar had wellestablished), and in 2012 the sales had grown 18%. The communication strategy of Tata Motors, the got a free coverage that the media gave to the Nano resulted in publicity worth more than $80 million, in here Nano created national news and received global attention as well and was acclaimed as the world’s cheapest car. Nevertheless, because it was free, the media focused not only on good news but on bad news as well. As a consequence of unprecedented hype in the media, technical problems with the Nano were confabulated and quickly exposed to the world. Thus, the Singur plant controversy and the fire incidents were viral on the Internet. In this moment, competitors also took advantage of the negative attention and disparaged the Nano for production delays and car fires. 1

For the Nano, the advertising budget was kept to a minimum only $800,000 meanwhile the other car launch advertising budget in India ranged from $3.2 million to $4.8 million for the first few weeks. Many people associated with the Nano in 2009 genuinely believed that because of existing hype, the Nano did not require advertising. Furthermore, since the Nano was about innovation, Tata Motors intentionally decided to use unconventional advertising by using special website for the Nano. On the day of the Nano launch, all the web search engines like Google, Yahoo, and others were booked by Tata Motors for pop-up ads, so as to encourage the internet-savvy community to have a look at the features of the Nano and to subsequently book one. The future of the Tata Nano would began to appeal to a different market segment, which was commercial taxi, as their image brand has already damaged because of the viral car fired in the internet. II. Problem Statement Based on the synopsis of the case that has been described before, there are some major problems that Tata Nano faced in India : 1. The new upgrade price was not affordable to the target market in India The first time Tata Nano was launched, the price was about only $2,500, but as the time goes by, they added some new features to that car and finally the price also going up until $4,000. If in that price, for consumer better to have a better value for money with the Alto or Eon compared to Nano. Adding features and increasing the price only resulted in poor differentiation between the Nano Twist and its competitors models 2. The damaging of Nano’s reputation By free publicity, media not only focused on a good news but also on a bad news, while there was a fire incidents, it went viral on the Internet and the competitors took advantage of the negative attention and disparaged the Nano for production delays and car fires, Nano had become a victim of its own hype. The damaging of Nano’s reputation, was not got a quick response from the public relations of Tata Motors. Finally the reputation was about Tata Nano is the cheapest car with the low quality. 3. False image of the Nano as a “poor man’s car” As the incident of the Nano fire was already viral in the internet, the price was also the very cheapest car in India, people started to build their own perception that the image of the Nano was only a poor people who wants to buy it, because beside the price, the features of the car also not as good as the other cars. 4. The advertising did not boost any sales

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The unconventional advertising that Tata Motors innovated, did not boost sales and the prospects of Nano in the Indian market remained bleak. The social media had failed to reach its target customers, it resorted to television advertising, targeting its original segment of consumer. 5. Repeat the same mistake of Edsel The Nano gave a high expectation for customers, by only waste $2,500 customer would got a very comfortable and safe car just like a dream come true, but in the end, the expectation was not the same with the real one. The fact customers found a not suitable car with the basic model of the Nano. III. Theories / Framework SWOT STRENGTHS

WEAKNESSES

1. The world’s least expensive car which has the price about $2,500 when the Nano was first launched 2. It has 86 patents related to its innovation. 3. It had the best fuel efficiency in the low-cost car segment. 4. It had low carbon dioxide emissions. 5. The Nano could be purchased with a credit card at 0% interest rate. 6. Two-pronged strategy increased sales of Tata Nano by 18% from November 2011 to December 2012. 7. Nano won some awards regarding to its innovation. 8. The first Indian brand whose accesories were being made available through an online shopping portal.

1. Target market of the car became blurred when the Nano was launched. 2. The Tata Nano was associated with a cheap car rather than a low priced and affordable car. 3. The lowest engine volume in low-cost car segment with a 624 cubic centimetre capacity. 4. The wheel bearings were only strong enough to handle speeds up to 45 miles. 5. Using dual positioning strategy for the Nano. 6. Very poor build quality. 7. The highway performance was poor compared to other low-cost cars. 8. The Nano had some safety issues such as fire incidents which would frightened many customers. 9. The shape of the car was ugly. 10. Maintenanced costs of Nano were high. 11. Tata Motors had not invested in building a dealer network. 12. It had poor brand image.

OPPORTUNITIES

THREATS

1. Indian car market would expand by 65%. 1. Only 8.5% of people in India owned a car in 2. The middle class India was predicted to grow 2009. to 583 million by 2025. 2. The used-car market in India was five times larger than new car market. 3. Most residential areas in tier 2 and tier 3 cities were non-gated communities.

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STP Segmenting: • Demographics: For every life cycle above 19 years old, has a low income, young generation that first buyer of vehicle • Geographic: Semi-urban and urban people who lives in the city • Psychographic: First time buyer of car (fresh graduates) who only have motorcycle before • Behavior: People who loved to buy goods that consider the price (Price shoppers), Medium product usage frequency Target market: Tata Nano targeted the middle-low young generation who the fist buyer of vehicle due to the affordability factor. Positioning:

PREMIUM

CONSERVATIVE

SPORTY



AFFORDABLE



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TARGET PERSONA

The middle-low young generation who the fist buyer of vehicle

PRODUCT NAME

GenX Nano

CATEGORY KEY CUSTOMER BENEFIT NEAREST COMPETITIVE ALT

Smart city car that offered benefits with an affordable price and value of better interior Small car designed specially for eco-friendly, safety, better interior, largest full tank Unlike Maruti Alto and Nano which doesn’t meet customer expectation

Blue Ocean Strategy Strategy Canvas to compare the existing product between GenX and Maruti Alto 800



Reduce: Eliminate:



- The ability of purchase two wheelers vehicle

- Compatitive purchase cost (cheaper) comparing with competitors which is affordable for middle low younger generation and first time buyer vehicle while offers more value GenX Smart City Car for Smart Buyer



Create: Raise: - Car Audio System with MP3 player, USB & AUX support with front-door speakers - Space efficiency (no need wide parking space) - Eco friendly (less use mileage gasoline) - Running cost efficiency - Cheerfull colours variance



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- Mileage 25 kilometers per litre becomes 20 kilometers per litre

Marketing Mix a) Product GenX Nano is the new brand of smart city car that will be launched by Tata Motors. This products has some advantages, as follows: • Stylish and comfortable GenX Nano will be designed with complete features similar as the old Nano Twist, but has some additional things that can meet the customer’s expectation. That additional features including larger full tank which amount to 20 Liters, better interior like car audio system equipped with MP3 player, USB and AUX with front-door speakers that can make the car looks more stylish and comfortable to drive. GenX Nano will also provided in many variance colors. • Meets all safety requirements GenX Nano will be equipped with an all sheet-metal body that has a strong passenger compartment, with safety features such as crumple zones, intrusion-resistant doors, seats belts, strong seats and anchorages, and the rear tailgate glass bonded to the body. Tubeless tyres further enhance safety. • Environment-friendly In terms of overall pollutants, it has a lower pollution level than two-wheelers being manufactured. The high efficiency also ensures that GenX Nano has low carbon dioxide emmisions, thereby providing the twin benefits of an affordable transportation solution with a low carbon footprint. b) Promotion “Have Fun, Pay Less and Get More with GenX Nano”. That sentence will be the tagline for GenX Nano product. It is created to make people remembered GenX Nano easily and feel happy all the ways with this product. GenX will be known as a safety car that everybody can travel with everywhere and to get it all the customer just need to pay at affordable price. Besides, there are also some advertising strategy that will be did to make the brand awareness of GenX Nano is increasing. The advertising strategy, as follows: • Online advertisement Website and Blogs have become important outlet for word of mouth that is regularly updated online diaries. With that kind of online advertisements, the communication with the customer will be better. The website will contains a lot of information about the product and try to bring the customer inside the company. While the blogs will bringing together people with common interest. They can vary wide and influence a vast audience due to many internet users have read blogs. Those will become a good way to build up brand awareness.

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• Television advertisement Television advertisement will become the most powerful to perform the GenX Nano to the public by demonstrating it attributes and persuasively explaining their corresponding consumer benefits. It also will be completed by using the famous artist who ride this product in order to increase the brand awareness so it can improve the brand quality and affect it sales. • Newspaper advertisement Most of people will saw a newspaper everyday. So this will be also a good market coverage with a lower cost. From here, GenX can get the broad acceptance and good reputation from the customers. c) Place / Distribution We perform the GenX Nano by selling it directly to the customers. Customers can deal directly with the dealers and make the booking by visit the sales office or at any special event. By this way, we can save more cost and maintain the cheapest purchasing price rather than through retailers or resellers. d) Price Because GenX Nano will be performed as well as Nano Twist but with some additional features, it will cost a little more. The price will be around $3,500. But that price still below the Maruti Alto 800, considering the target of Tata Motors at the beginning to be the lowest or affordable car in the world. IV. Analysis of Alternatives Based on the SWOT above, there are some alternative strategy that can be taken by using TOWS matrics. Those alternative strategy, as follows: 1. “Maxi-Maxi” Strategy that use strengths to maximize the opportunities • Improve a car’s fuel efficiency (S2, S3, S7, O1) • Reduce a car’s emissions (S2, S4, S7, O1) • Build fast and reliable distribution through online shopping portal (S7, S8, 02) • Develop and build an affordable car with high build quality (S1, S2, S7, O1, O2) 2. “Mini-Maxi” Strategy which minimize weakness by taking advantage of the opportunities • Make a single positioning strategy and define appropriate target market (W1, W5, O1, O2) • Increase volume of an engine and build a reliable car (W3, W4, W6, W7, O1, O2) • Add safety features (W8, O1, O2) • Make a good car designs (W9, O1, O2) • Build a dealer network and service center (W10, W11, O1, O2)

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• Rebranding image (W2, W12, O1, O2) 3. “Maxi-Mini” Strategy which use strengths to minimize the treats • Add some safety features (S2, S7, T3) • Make an innovative promotion to raise the interest of Indians to buy a new car (S5, S6, T1, T2) 4. “Mini-Mini” Strategy which minimize weakness and avoid threats • Improve the aftersales services (W10, W11, O2) V. Recommended Strategies It is important to note that the main problem of this failure is because of the media hype that surround Tata. Therefore, it is best for Tata to pilot GenX quietly through a small scale limited production in second or third tier city in India in order to efficiently adjust some aspects from engineering, pricing, financing, and marketing to suit the needs of the target market far from publicity, thus avoiding being a cynosure. Sales could be carried out in second or third tier city in West Bengal with limited sales in order to conceive a great insight of what customers want. Sales could be carried by establishing a showroom in the city or by taking part in a local automotive exhibition, then the customers who wanted to buy GenX could book the prodct by contacting the sales office in each showroom or from given number that spread from the exhibition. It is important for Tata to communicate its brand through limited promotion through website, blogs, and social media in order to convey people about the new product and its positioning statement. Online diaries from previous attempt could be applied to GenX with additional promotion through online advertisement banners in well known websites. Other means of advertising include giving pamphlets about GenX and its features and tagline either by giving it manually or slip it inside newspapers. Television advertisement should be reserved for later and conditionally if sales in targeted cities was showing positive feedback and generate great sales. Hire a spokesperson that able to communicate with the public. Any challenges faced by Tata should be communicated to public in order for the public to understand the situation. False perception should be corrected and any kind of incidents should be acknowledge. VI. Lesson Learn From the case, it can be learned that planning and demand forecasting are very important and fundamental things to achieve product success in the market. Tata Nano failed to plan appropriately by using dual positioning strategy which makes the target market blurred. Tata Nano also made same

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mistakes by following the same problems of Ford’s previous case. Moreover, build a strong and good brand image is one of the key to stand out among competitors and also to increase the market share of the company. VII. Multimedia Support

Nano Twist Product









Maruti Alto 800

Video: •

Comparison between Nano and Maruti Alto 800 (https://www.youtube.com/watch?v=TGC68ak7Nec)

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Tata Nano’s fails Explanation (https://www.youtube.com/watch?v=QDPcFit_WNQ)

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Tata Nano GenX first drive (https://www.youtube.com/watch?v=a2X6MAHQ2I0)



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