Tata Nano: can frugal marketing come to its rescue
The Tata Nano was a dream project of the chairman of Tata Groups, Ratan Tata. He had wanted to make a car that would be affordable to the 700 million Indians who lived in its rural areas. Not only as proud owners of a car is what Ratan Tata had visioned the Nano to be but also as a means of furthering their entrepreneurship. He had hoped the parts to be supplied by his company would be assembled by the people in these rural areas. The dream however took a twist and the production of the cars was set up in a giant factory in Sanand, Gujarat. With a rolling capacity of 250,000 Nano’s a year the factory at the moment is however just barely ticking in its existence.
The car has been facing many an obstacle in its course of living and prospering. There was the first bit of uncertainty when the proposed site in West Bengal was opposed by the local population there. The company had to shift its factory finally to Gujarat and Sanand in particular. Given the high promotional activities that had been enacted prior to its launch in 2009, there was a huge line of early orders. The factory at Sanand was unable to meet up with this demand due which customer interest waned. Then came the issue of the cars bursting up in flames giving it an unsafe label. Sales dropped drastically following these fiery incidents to as low as 509 units in November last year.
The company had speculated a sale of 20,000 units a month instead of which as of now it stands at hardly 3,000 units on a monthly basis. Rising prices of raw materials combined with a low market demand has only added to Tata’s woes as far as their Nano sales go.
The Editor of Autocar India, Homazd Sorabjee says, “The Nano is a brilliant concept. It does the job, it feels good with its high seating position, but it is a monumental marketing blunder.” This after he has personally driven 10,000 miles in the car. He has also appreciated the space and fuel efficiency of the car.
Carl-Peter Forster has taken over as the head of Tata Motors since February 2010. He has been the boss of General Motors Europe and from his experience points at the weak business model of the Nano for its poor sales performance. As per him, there is no distribution system as well the marketing and advertising is quite ineffective till now. He also states that the car meant for the rural mass has not been seen by most of the people in the rural areas.
Marketing of the car itself went wary right from the beginning with the cost of the car rising by about 15 percent and therefore out of reach for many aspiring buyers. These buyers mostly had no fixed income and therefore were not able to obtain any loan for the purchase. Buying out of saved and shelved money they found the increased price as something they had not planned for. The marketing strategy that was applied for the Nano was highlighting its cheap factor rather than any other features of the car.
Customers who therefore had the money to buy the car went off in search of other cars which had better features like that of the Maruti which also has the small cars giving the Tata Nano a stiff competition.
Rata Tata therefore has personally joined up the process of resurrecting his dream car. With guidance from Mr. Forster the company has started fresh advertisement of the car. The car is now shown in every major television channel that beams its signals all over the country including the rural areas. Local drop in centers have also been opened up all over to attract the customers to this car and its availability. The company has also established finance schemes with local banks as well as offering improved guarantee clause in the sales.
The Tata Nano project has been a case for study by other car making company also. Carlos Ghosn the boss at Renault Nissan had coined the phrase of “frugal engineering” to this Nano project. He has taken up some of the ideas from this car to make the Logan which is a back-to-basics car model. The car is under production at Renault’s subsidiary in Romania and is making sales of around 400,000 per year as per Hadi Zablit, who studies emerging markets at Boston Consulting Group.
Companies like Ford and General Motors has however decided not to follow the frugal engineering techniques in their car models for the Indian Market. Tata themselves have adopted this engineering technique for producing other cheap products. Medical scanners are being produced by GE following this technique and then being sold to the West. Frugal marketing is what Tata Motors have to find a way to ensure their frugal engineering succeeds.
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