Marketing strategy for Chevrolet Spark Marketing Management I Project Report

Submitted to: Prof. Prem Purwar

Submitted by: Sarin Bhaskaran Shivkumar Swaminathan Shreyas Dhamdhere Soumen Das Souvick Paul 25090 25099 25100 25101 25102

Table of Contents
Executive Summary....................................................................................................................................... 1 Automotive industry in India ........................................................................................................................ 2 Growth Drivers for auto industry in India ................................................................................................. 2 Segments of the Indian Auto market ............................................................................................................ 3 Consumer market segmentation .............................................................................................................. 3 Market segmentation by automakers .......................................................................................................... 7 Classification based on product specification........................................................................................... 7 Classification based on Design of Car ....................................................................................................... 7 Classification Based on price..................................................................................................................... 7 New Product Development........................................................................................................................... 9 Need to develop a new product ............................................................................................................... 9 Use of a new product ................................................................................................................................ 9 New product classification ........................................................................................................................ 9 New Product Planning............................................................................................................................. 10 Stages in new product development ...................................................................................................... 10 Factors for success of a new product ..................................................................................................... 11 Reasons for failure of launched products ............................................................................................... 12 Challenges in new product development ............................................................................................... 12 Use of new product development for managing product lines .............................................................. 12 Key Factors Influencing Purchase ............................................................................................................... 14 Going Green: Fuel Efficiency Takes Centre Stage ................................................................................. 14 New product development in GMs perspective .................................................................................... 14 General Motors India .................................................................................................................................. 16 GM- Daewoo Matiz ................................................................................................................................. 16 Global Marketing .................................................................................................................................... 17 Why GM-Daewoo Matiz failed? .............................................................................................................. 18 Pricing.......................................................................................................................................................... 19 Factors considered for pricing a new product ........................................................................................ 19 Pricing Strategies .................................................................................................................................... 20 Key Players in Indian Market ...................................................................................................................... 22

Identifying End Customers .......................................................................................................................... 23 Maruti Udyog Limited ............................................................................................................................. 23 Hyundai Motors India Ltd ....................................................................................................................... 23 General Motors ....................................................................................................................................... 23 Tata Motors............................................................................................................................................. 23 Ford India Limited ................................................................................................................................... 23 Interacting with Customers ........................................................................................................................ 25 Maruti Udyog Limited ............................................................................................................................. 25 Hyundai Motors India Ltd ....................................................................................................................... 25 General Motors ....................................................................................................................................... 25 Tata Motors............................................................................................................................................. 26 Ford India Limited ................................................................................................................................... 26

Executive Summary
The automobile industry today is one of the most lucrative industries. Due to the increase in disposable income in both rural and urban sector and easy finance being provided by all the financial institutes, the passenger car sales have increased at the rate of 38% per annum in June 2006-07 over the corresponding period in the previous year. Further competition is heating up in the sector with a host of new players coming in and other like Porsche, Bentley, Audi, Mercedes, and BMW all set to venture in the Indian markets. One factor that could help the companies in the marketing of their product is by knowing and creating a personality for their brands. This report attempts to answer how product and pricing helps to create brand personality of selected cars in India. This report is categorized into parts, deals with introduction of Automotive industry in India, attractiveness of automotive market, various segments of the auto market, new product development, key factors consumer considers while making decision of buying a car/ how consumer behaviour helps automaker in developing successful new product, New product development on GMs perspective(why Matiz failed and how product and pricing modification helped it to get success after re-launching it as Chevrolet Spark), Pricing, Key players, customer behaviour analysis. This personality sketching will help in knowing what a customer (or a potential customer) thinks about a given brand of car and what are the possible factors guiding a possible purchase. How the carmaker uses these factors to develop their new product or improves their existing product. Analysis of the product and pricing models in depth helps the new car manufacturers and the existing carmakers to find out the possible gaps between the customer expectations and the present market offerings. This way these companies will be able to find their share in the ever-expanding Indian market pie.

Automotive industry in India

Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the Automobile Industry of India has come a long way. With HM establishing the first automobile factory way back in 1948, the Indian passenger vehicle industry was for long dominated by Ambassadors and the Premier Padminis. Then in the year 1985, following the liberalization and various tax reliefs, the Governmentt of India in collaboration with Suzuki motor corporation of Japan formed Maruti Suzuki ; a powerful alliance which changed the face of the Indian roads. The only car with the latest technology then was the Maruti 800. It became very popular because of the low price, high fuel efficiency and good reliability. Since then the market has grown with over 20 manufacturers and hundreds of models and variants. The Indian automobile industry has matured over the years and is now highly comptetitive with major Japanese, Korean, American, European and Indian companies all holding significant market shares. Indian auto industry, which is currently growing at the pace of around 18 % per annum, has become a hot destination for global auto players like Volvo, General Motors, Daimler-Chrysler, Volkswagen, Toyota and Ford. Global players have either entered or are eyeing India as a strategic target for future development A well developed transportation system plays a key role in the development of an economy, and India is no exception to it. With the growth of transportation system the Automotive Industry of India is also growing at rapid speed, occupying an important place on the 'canvas' of Indian economy. Today Indian automotive industry is fully capable of producing various kinds of vehicles and can be divided into 3 broad categories: Cars, two-wheelers and heavy vehicles.

Growth Drivers for auto industry in India

Segments of the Indian Auto market

The market for any product is normally made up of several segments. A market after all is the aggregate of consumers of a given product. And, consumer (the end user), who makes a market, are of varying characteristics and buying behaviour. There are different factors contributing for varying mind set of consumers. It is thus natural that many differing segments occur within a market. In order to capture this heterogeneous market for any product, marketers usually divide or disintegrate the market into a number of sub-markets/segments. This report attempts to analyze and understands how Indian carmaker have successfully segmented the market and how they are leveraging these segmentation to introduce new product and grow their market share. With proper segmentation carmakers could look at the differences among the customer groups and decide on appropriate strategies/offers for each group. These strategies then helped them in dividing the markets for conquering them. Every buyer has individual needs, preferences, resources and behaviours. Since it is virtually impossible to cater for every customers individual characteristics, carmakers grouped customers to market segments by variables they have in common. These common characteristics allowed developing a standardized marketing mix for all customers in that segment. This segmentation helped the carmaker to increase their profit by tapping the market through adapting the offer to that segment. They brought the necessary changes in the product to suit to the particular segment. We would analyze how consumer market is segmented and on what basis automaker segment the market.

Consumer market segmentation

1. Geographic Segmentation. 2. Demographic Segmentation. 3. Psychographic Segmentation. 4. Behaviouralistic Segmentation. 1) Geographic Segmentation Potential customers are in a local, state, regional or national marketplace segment. Geographic location is a major factor in segmenting target markets for automakers since their customer needs are varied for different region. The customers can be segmented based on: a. Region: - Segmentation by continent / country / state / district / city. b. Size: - Segmentation on the basis of size of a metropolitan area as per its population size. c. Population density: - Segmentation on the basis of population density such as urban / sub-urban / rural etc. d. Climate: - Segmentation as per climatic condition or weather.

Example of Ford: - Ford has gained useful insights through segmentation and adapted its offer to suit the Indian target market. For the Indian segment Ford made some changes in its cars in comparison to their European version. Modifications such as: a. Higher ground clearance to make the car compatible to the rougher road surface in India. b. Stiffer rear springs to enable negotiating the ubiquitous potholes on Indian roads. c. Changes in cooling requirement, with greater airflow to the rear. d. Higher resistance to dust. e. Compatibility of engine with the quality of fuel available in India. f. Location of horn buttons on the steering wheel. As Indian motorists use horn far more frequently than the European where the horns are located on the lever. 2) Demographic Segmentation In this type of segmentation, the customers are segmented based on the following factors. a. Age (dominant factor) - Segmentation is done on the basis of age of person. Car manufacturers offer a product range that caters for the needs of all phases of a customer life cycle: first car for early teens, fun-car for young professionals, family car for young families, etc. Example of General Motors:GM has identified about 40 different customer needs and correspondingly, 40 different market segments in which it would present with its vehicles. For example, it has targeted the Pontiac at active, sports-oriented, young couples, the Chevrolet at price-conscious young families, the Oldsmobile at affluent families, and the Buick at older, more conservative couples. b. Income & Purchasing power (dominant factor) - Segmentation is done on the basis of income level of a person and purchasing power of the customer. Examples of different car segments based on purchasing power are: Budget car segment It is the largest segment in Indian market. Here the entry level starts from Rs 1.5 to 3 lakh. Maruti 800 and Omni are the dominant players in these segments. With the launch of Tata Nano with a price range of 1lakh the outlook of this segment has changed. This segment is sometimes referred to as the small car segment. Competition in this segment is extreme in Indian market. Compact car segment It lies between budget car and family car. Preferred price range is between Rs 3 to 4.5 lakh. Maruti Zen, Fiat Uno, Tata Indica, Santro, Matiz is some of the dominant players in this segment.

Family car segment The purchasing capacity of buyers of this segment is somewhat higher than that of the budget and compact car segment. Price ranges between Rs 4.5 to 6 lakhs. Maruti Esteem, Daewoo Cielo, and HM Contessa belongs to this segment. In India cars that are sold in India as Budget Car and Compact Car do not meet their purpose, especially in term of space, that they turn to the family car segment. Premium car segment This segment represents the buyer who require true world class luxury car. Price ranges between Rs 6 to 8 lakh. Ford Escort, Honda City, Honda City, Mitsubishi Lancer, Audi 1800, Opel Astra etc are some of the major cars in this segment. Super luxury saloon segment Buyer in this segment looks for a real super premium segment car. Mercedes Benz E229, E-250, Rover Montego, Audi 6, BMW are the players in this segment. Obviously, this is a tiny segment in the Indian context. c. Occupation. d. Gender (dominant factor):-Product can be segmented for male and female. e. Family Size. f. Family life cycle. g. Nationality. h. Religion. i. Education - Primary, High School, Secondary, College, Universities.

3) Psychographic Segmentation Psychographic Segmentation groups customers according to their life-style and buying psychology. Many businesses offer products based on the attitudes, beliefs and emotions of their target market. The desire for status, enhanced appearance and more money are examples of psychographic variables. They are the factors that influence your customers' purchasing decision. A seller of luxury items would appeal to an individual's desire for status symbols. Psychographic Segmentation includes variables such as:a. Activities b. Interests c. Opinions d. Attitudes e. Values Activities, Interests, and Opinions (AIO) surveys are one tool of measuring lifestyle.

4) Behaviouralistic Segmentation Markets can be segmented on the basis of buyer behaviour as well. Since all Segmentation is in a way related to buyer behaviour, one might be tempted to ask why buyer behaviour-based segmentation should be a separate method. It is because there is some distinction between buyers characteristics that are reflected by their geographic, demographic and psychographic profiles, and their buying behaviour. Marketers often find practical benefit in using buying behaviour as a separate segmentation base in addition to bases like geographic, demographics, and psychographics. The primary idea in buyer behaviour segmentation is that different customer groups expect different benefits from the same product and accordingly, they will be different in their motives in owing it and their behaviour in buying it. Variables of buyer behaviour are:a. Benefit sought: - Quality / economy / service / look etc of the product. b. Usage rate: - Heavy user / moderate user / light user of a product. c. User status: - Regular / potential / first time user / irregular /occasional. d. Brand Loyalty: - Hard core loyal / split loyal / shifting / switches. e. Readiness to buy. f. Occasion: - Holidays and occasion stimulate customer to purchase products. g. Attitude toward offering: - Enthusiastic

Market segmentation by automakers

Classification based on product specification
According to the engine size and overall length of the car, market is segmented into A, B, C, D and E segments. A two box car (with an engine compartment and a passenger compartment) with an engine lower side of 1000 CC is termed as A segment car. Example: Maruti 800, Alto 800. Bigger two box cars with engine above 1000 CC and below 1300 CC can be termed a B segment car. Examples: Zen, Wagon R and the Santro Xing, Maruti Swift, Tata Indica, Chevrolet Spark Small three box cars, most of the time hatchbacks with added boots form the lower C segment. These cars have engines that vary from 1300 CC to 1600 CC. Ikon (based on the Fiesta hatchback), Siena (based on the Palio hatchback) and the Corsa sedan (based on the Cors hatchback) are thus classified. The D segment is slightly blurred. Bigger three box cars with 1800 CC or more engines come into play here. The Lower D segment comprises of Chevrolet Optra, Toyota Corolla and to some extent Skoda Octavia. The proper D segment will have the Honda Accord, Toyota Camry and Opel Vectra. Typically, these cars will have a 2000 CC or bigger engine. Then there are cars such as the C class Mercedes which falls between the lower and upper D segment cars. E segment cars are more luxurious and offer better levels of trim and equipment. Then there is SUV segment, which do not fall into these classifications. They are classified as a softroader (without proper SUV-off-road credentials and mean for only city use) or a real sports utility vehicle with a low-ratio gear box.

Classification based on Design of Car

Compact ( Maruti 800, Hyundai Santro) Compact Plus (Maruti Swift, Hyundai Getz, Chevrolet Spark) Sedan ( Hyundai Accent, Ford Ikon) Premium Sedan ( Ford Fiesta, Chevrolet Optra) Super Premium Sedan ( Toyota Corolla) Utility Vehicles ( Toyota Innova, Chevrolet Tavera)

Classification Based on price

Based on price, the cars available in the Indian auto market can be classified into the following segments. Rs. 3 Lakhs Maruti 800, Alto, Omni Reva

Rs. 3-5 Lakhs Ambassador Hyundai Santro, Getz Chevrolet Opel Corsa, Spark Maruti Zen, Wagon R, Versa, Esteem, Gypsy Ford Icon & Fiesta Tata Indica, Indigo Rs. 5-10 Lakhs Chevrolet Swing, Optra, Tavera Hyundai Accent, Elantra Maruti Baleno Toyota Corolla, Innova Tata Safari Honda City Rs. 10-15 Lakhs Ford Mondeo & Endeavour Chevrolet Forester Skoda Octavia Classic & Combi Honda Civic & CR-V Rs. 15-30 Lakh Maruti Suzuki Grand Vitara Hyundai Sonata Embera, Terracan & Tucson Mitsubishi Pajero Audi A4 Honda Accord Mercedes C Class Toyota Camry Rs. 30-90 Lakhs Audi A6, A8 & TT BMW X5, 5 Series & 7 Series Mercedes E Class, S Class, SLK, SL & CLS-Class Porsche Boxster, Cayenne, 911 Carrera & Cayman S Toyota Prado Above Rs. 1 Crore Bentley Arnage, Continental GT & Flying Spur Rolls Royce Phantom Maybach *The segregation is made on Ex-Showroom price of base models. 8

New Product Development

New Product Development is a process which is designed to develop, test and consider the viability of products which are new to the market in order to ensure the growth or survival of the organization. New product can be described as follows: The products open up an entirely new market. The product adapts and replaces an existing product. A product significantly broadens the market for an existing product. An old product introduced in a new market. An old product packaged in a different way. An old product marketed in a different way.

Need to develop a new product

New Product Development is the major component of the firms product policy. Its necessities are as follows: To add product portfolio. To replace declining products. To take advantages of a new products. To maintain/increase market share. To defeat rivals. To keep up with rivals. To maintain competitive advantage. To fill a gap in the market. To bring new customers.

Use of a new product

New products can be used to increase or to defend market share by offering more choice or updating older products. It can be diversified into new markets and appealed to new segments. New products help to improves relations with distributers. Firms reputation can be maintained by new product. It makes better use of the organizations.

New product classification

New product can be classified into six categories which are as follows:a) Major innovations: - This type of new products are new to the world called as innovative products.TV, iPod, Flat screen TV etc are the examples of innovative products. b) New product lines: - When a company enters in an existing market segment the product is new to the company. For examples- Tata Indicom from Tata, because Tata is an existing brand but they newly entered in the Tele-communication lines as Tata Indicom.

c) Product line extension: - Additions to product line to supplement the firms existing product lines. When a company adds new products to its existing product line extensions. Civic by Honda is the best example for product line extension. d) Product improvements: - When a company improves or revises its existing product then it is also a new product. We can have an example of Chevrolet Spark. General Motors has developed Chevrolet Spark on the same architecture as of Daewoo Matiz. It improved the product in ragards to maintainability. e) Repositioning: - When an already existing product is targeted towards a new market segments is known as Repositioning. For this as we can see today Dairy milk is more focusing on adults for its chocolates with tagline of Pappu pass ho gaya. f) Cost reductions: - New product is modified to provide similar performance but at a lower cost are cost reductions. We can have a best example for cost reduction is Tata Nano. Tata is providing similar features in low cost which was never even thought of in car industry.

New Product Planning

New product planning is a strategic stage. In this stage firm assess its current product portfolio and also assess the opportunities and threats. The firm then determines the type of products which would be best fit with the corporate strategies.

Stages in new product development

New product development in respect of intrinsically new products goes through these important stages. Each of these stages requires careful planning. Let us discuss them one by one. Generating New Product Ideas: New products ideas may emanate from customers, dealers, in-company sources, including the market research group and external research organizations. Consumers problem are the most fertile ground for the generation of new product ideas. R & D staffs and salesmen are also sources of new product ideas. Sometimes new product ideas emanate just as a matter of happening. Idea Screening: The second stage of new product development is idea screening. In this stage, screening of products takes place to spot good ideas and drop poor ones as soon as possible. Ideas are also checked for technical feasibility, financial viability and marketability. The business analyzes the product to evaluate its demand, marketability and profit potential and given ideas rating according to marketing production and strategic factors takes place. The more attractive looking ideas pass on to the concept testing stage. Concept Development and Testing: This stage is the detailed version of new product idea stated in meaningful consumer terms. Turning of ideas into Tangible products that consumer perceive as being valuable comes under concept development. Testing of new products process with a group of consumers to find out if the concept 10

have strong consumer appeal or not is concept testing. This stage has a special importance when totally new products are being planned for introduction. Marketing Strategy Development: From the stage of concept development and testing new product travels to the stage of market strategy development. In this stage an initial marketing strategy is designed for a new product based on the product concept. Formal market research is also carried out to assess the products market potential. Business Analysis: Business analysis is the next stage. This stage is of special importance in the new product development process because several vital decisions regarding the projects are taken based on the analysis done at this stage. This stage is the review of the sales, costs and the profit projection for a new product to find out whether these factors satisfy the firms objective. It estimates potential sales, income, breakeven point, profit and return on investments from new ideas and projecting probable costs and sales to see, will profit reach the firms target. Actual Development of the New Product: In this stage, the firm develops the product as such. R&D turns the idea into product. This stage is concerned with design, materials, production processes, quality and safety. Developing the product concept into physical product to ensure that the product idea can be turned into a workable product. Test Marketing: In test marketing, the new product, with the support of the chosen marketing mix, is actually launched and marketed in a small but representative market where consumer reactions can be assessed and marketing mix checked and adjusted. Commercialization/Product Launch: At this stage, the company takes the decision to go in for large scale manufacturing and marketing the product. It gets to this stage when all the previous steps are favorable signals .Timing is critical for success and the product has to be well targeted and positioned.

Factors for success of a new product

Many new ideas do not reach the market at all. Only little get success, in many cases, the success is short lived; they die out after the initial boom. Factors for the success of a new product are as follows: Development of a new superior product Differentiation from rivals Well conceived, properly executed launch Top management backing Market attractiveness the product should be aimed at attractive markets Resources must be in place Speed and timely 11

Quality Market driven on customer focus

Reasons for failure of launched products

It is found that new products suffer from a high attrition rate. New products which manage to react the market after years of preparation and works get failed. The rationale for these is as follows: Neglect of market research Inaccurate market research Poor marketing after launch Poor distribution Product performance below expectation Product too complex Unforeseen products Market not ready for the products Inadequate support for the market

Challenges in new product development

Companies coming up with innovative market offerings often face challenges which we can discuss with help of these points: Develop innovative products that capture the imagination of consumers to retain existing customers and attract new ones. Bring new ideas to market ahead of the competition to grow revenue and market share. Achieve global development excellence and efficiency by leveraging core competencies of the value chain to increase profit margins. Integrate regulatory compliance into product lifecycle processes to reduce business risk and sell products in global markets. Effectively manage the global manufacturing supply chain to ensure on-time, on-cost and quality product delivery. In today's competitive global market, innovative products are not enough. To compete effectively, companies need to accelerate new product development and reduce product cost. The only way to accomplish all these objectives is to radically rethink the way new product introductions (NPI) are managed.

Use of new product development for managing product lines

Managing product lines is an essential part of any companys NPD efforts. In larger companies it is important that a cross-functional NPD team be assembled to control the overall workload going through the NPD system for the duration of a specific project. Management can facilitate innovation by providing support, commitment and buy-in and by ensuring that projects are managed efficiently. Top

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management support in particular from the CEO or owner/manager is a critical success factor in NPD. This information can then be used to: Develop an NPD management system Allocate resources and management support Set up a team/allocate staff Identify opportunities for new products (idea generation) Screen and prioritize ideas Conduct feasibility studies Develop the concept Prepare a business case Develop the product Promote and launch the new product Monitor and measure performance of product, project and team Continually improve your NPD system

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Key Factors Influencing Purchase

When it comes to making their final decision about which vehicle to buy, consumers focus on factors such as reliability, safety, and price and fuel economy. Additional warranty coverage is important to consumers who are furthest away from the point of purchase. However, the number declines as consumers get closer to actually buying the car. This reflects the fact that consumers will narrow down the factors that really matter to them as they get closer to the point of purchase. Demographic factors such as age and gender account for some variances. For example, older consumers tend to put more emphasis on reliability and safety than do younger. Those in the 50-plus age group are also more concerned with environmental issues and fuel economy. Women tend to rate most of the factors as more important than do men. The difference is most pronounced for cash-back incentives, low financing, safety, environmental issues, fuel economy and additional warranty coverage.

Going Green: Fuel Efficiency Takes Centre Stage

Fuel efficiency and environmental issues have moved to the forefront in consumers minds and in automotive industry forums thanks to factors including global warming, fluctuating gasoline prices, and proposed legislation to increase fuel efficiency and reduce CO2 emissions. The interest in so-called green vehicles is increasing. The numbers for alternative-fuel vehicles are lower. Only few people currently own an alternative-fuel vehicle but there are many who are planning to buy or thinking seriously about buying one. The most common type of alternative-fuel vehicle are gas and electric hybrids. Biodiesel vehicles are the second most common. The alternative-fuel market remains in transition and its still too early to tell how it will ultimately shake out, although sales are expected to continue to grow. For example, J.D. Power and Associates analyzed that U.S. sale of hybrid vehicles increased by 35% in 2007, compared with 2006. Current ownership of fuel-efficient and alternative-fuel vehicles tend to be quite consistent across gender and age groups, although the oldest consumers are somewhat more likely to be seriously thinking about buying an alternative-fuel car.

New product development in GMs perspective

General Motors Company

General Motors Company, one of the world's largest automakers, traces its roots back to 1908. With its global headquarters in Detroit, GM employs 235,000 people in every major region of the world and does business in some 140 countries. GM and its strategic partners produce cars and trucks in 34 countries, and sell and service these vehicles through the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Vauxhall and Wuling. GM's largest national market is the United States, followed 14

by China, Brazil, the United Kingdom, Canada, Russia and Germany. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. General Motors Company acquired operations from General Motors Corporation on July 10, 2009, and references to prior periods in this and other press materials refer to operations of the old General Motors Corporation.

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General Motors India

General Motors India, incorporated in 1994 as a 50-50 joint venture company with the C.K. Birla Group of Companies, became a fully owned subsidiary of GM in 1999 when GMAC bought the remaining shares. The company was restructured in 1999 and was converted from a Public Limited company to a Private Limited company. GM APH LLC currently holds 86 percent of voting shares, and Holden (Australia) holds 14 percent. The SPO business was integrated with the main business in the same company in 2000. In India, GM strengthened its presence with new product launches Chevrolet Optra in 2003, Chevrolet Tavera (Multi Utility Vehicle) in 2004 and Chevrolet Spark in 2007. With sales volume going up, the market share of GM India has gone to nearly 5%. The existing GM India plant was originally built by Hindustan Motors. In 1994, GM India entered into a 50% Joint Venture partnership with Hindustan Motors and modernized the 45,000-square-meter plant near Halol, 45 kilometers northwest of Vadodara, in the western state of Gujarat. In February, 1999, GM bought the holdings of Hindustan Motors and GM India became a 100% subsidiary of General Motors Corporation of USA. The plant produces the Chevrolet Optra, Chevrolet Tavera and Chevrolet Spark. The Chevrolet Forester and Opel Vectra are sold as CBUs (Completely Built in Units) and as imported from Japan and Germany respectively

Considering the above mentioned facts for new product development , we will analyze about how GMDaewoo developed new product called Matiz and why did it failed. Then how GM identified the drawback and modified accordingly and re-launched the product with the name of Spark. This re-launch of GM-Spark can be classified as Product improvements, Repositioning and Cost reduction. GM repositioned it into different segment in India (Matiz was in A segment with 800cc engine, Spark falls in B segment with 1000cc engine).

GM- Daewoo Matiz

The Matiz was a city car produced by the South Korean automaker GM Daewoo that has been marketed worldwide since 1998. Available solely as a five-door hatchback with two engine configurations, and replacing the Daewoo Tico, the Matiz was originally designed by Italdesign Giugiaro and has been facelifted twice. The Matiz had won the Best City car in the 1998 World's Most Beautiful Automobile competition and it drews involuntary smiles from even the wierdest of cretin. Even the rear of this car was cute to look at. The engine was packaged tightly to provide a great deal of front leg room and was throughly refined in its behaviour. However, all this cuteness was lost when compared with the competition. The Santro, an immediate competitor, scores over most features over the Matiz except in the looks department. Nevertheless, Matiz offered good value for money. The Matiz was developed by GM Daewoo. It is also called as Chevrolet Matiz, Chevrolet Joy, Pontiac Matiz G2, Pontiac Matiz, Pontiac G2, Chevrolet Exclusive, FSO Matiz, Chevrolet Taxi 7:24 Chronos, UZ Daewoo Matiz. The Daewoo Matiz started 16

production in 1998 and sold in South Korea and many European markets with the code name M100. The exterior design was based on the Lucciola, a Fiat Cinquecento concept by Italdesign Giugiaro which had been rejected by Fiat. The 0.8-litre gasoline engine and the transmission were carryovers from the Daewoo Tico. The car became the best selling Daewoo model in Europe for the next four years. The Matiz was available in one body style: a five-door hatchback. Its Curb weight was 847 kg (1867 lb). The Matiz was originally launched with just a 0.8 L 3-cylinder engine, however with the 2001 model-year revisions a 1.0 L 4- cylinder was added to the upper models of the range. In 2008 the 0.8 L was revised to fall below the 120g/km level, thus qualifying for the UK's 35 road tax band and no London Congestion Charge.

Global Marketing
Asia From 1998 until 2001, the Matiz was sold in Japan under Chevrolet Matiz. From 2001 until 2006, it was sold under Chevrolet Matiz II. In fact, both models were distributed and marketed by Suzuki Motor Corporation. In 2006, it took the Daewoo marque. In India, it was launched in 1999 as the Daewoo Matiz. General Motors India relaunched it as the Chevrolet Spark in 2007. In Pakistan, the car was initially introduced as Chevrolet Exclusive in 2003. It is currently manufactured by Nexus Automotive under the name Chevrolet Joy. In the Philippines, the Matiz was available during the years 1999-2000 through the Grey Market. In 2007, it was released under the name Chevrolet Spark.

Europe From 1998 until 2004, the Matiz was sold in Europe under the Daewoo badge. In 2005, it took the Chevrolet marque, as well as the other South Korean models of General Motors. Since 2000, CKD kits have been supplied UzDaewooAuto, FSO and Rodae, to be built and sold in Uzbekistan, Poland and Romania respectively. At the beginning of 2005, the Polish Matiz started to be sold under the marque FSO (FSO Matiz), which obtained autonomy. New models of Matiz are sold as Chevrolet Spark. Latin America In Mexico, the Matiz was introduced to the market in 2003. The 2006 model was renamed to Pontiac Matiz G2. It was also sold as Pontiac Matiz and Pontiac G2. In the Dominican Republic it is sold as the Chevy Spark. Also sold is the Chery QQ. In Colombia, the Matiz was imported by Daewoo distributors between 2002 and 2005 and then GM Colmotores began to assemble and sell it branded as Chevrolet Spark. In 2006, a taxi version called 7/24 was launched. In Argentina, Ecuador and Peru it is sold as the Chevrolet Spark. In Paraguay, it was initially sold as Daewoo Matiz, but from 2008 it is sold through Chevrolet dealers.

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Why GM-Daewoo Matiz failed?

Designed by Giorgetto Guigiaro, the Matiz had won international acclaim - 'Most Beautiful Automobile' Milan Show & 'Best Small Car' - UK Motor Show. The interiors were not cluttered, were comfortable and held much space for a car of its size. The car conformed to European Safety Regulations. The Matiz formed a protective shell around the passengers to protect them in case of serious accidents. The Matiz was the only car in India to have successfully passed the stringent 40% Offset Frontal Crash Test. The Matiz also met the Euro II norms. The car ran on a 796-cc engine that produces 52bhp with a torque of 7.3kg-m.It had a Multi-Point Fuel Injection system. With a seating capacity of upto five people and five doors, it was sure, a car to be in. In spite of these specialities Matiz Failed. It is the main part which is very important to think upon where would be the new product will fail. Matiz definitely left some part of new product development that is why it failed. Let us see why Matiz failed: The main problem was the Matiz' positioning. They had launched ONLY a fully loaded variant at 4 lacs in Mumbai. Compare that to the Santro and Zen, which had fully loaded as well as midrange and basic versions Its design was allegedly copied outright by Chinese manufacturer Chery's QQ. It was not much powerful for highways. When the car was launched it was overpriced by Daewoo. Matiz price was later on corrected and the sales gap to Santro was coming down fast, and when it was just about to overtake, Daewoo collapsed. Hyundais determination and Daewoos lack of it. They suddenly brought down their prices by Rs 1 lakh. This created very bad impression on public. The car was never properly customised for India faulty fuel pumps, etc. It had lots of problems with the cooling system and suspension. Its wheel rims were awful - got bent very fast and wore out the tyres even faster It was most difficult to repair, because aesthetics overtook convenience inside the bonnet

Matiz failed but after this a new car launched by Chevrolet Spark (built on the same architecture and platform) which was the just modifications of Matiz, it got tremendous success. Thus, every process is very important for a new product.

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Pricing
In the marketing mix, price is the one element that directly generates revenue. It can be changed quickly unlike product features or promotion strategies. Finding the right price is a decisive factor in the success or failure of a product. It is no different in the automobile sector as well. Particularly, in a price-sensitive market like India, the price determines to a great extent, the market share gained by the product. The advancement of technology has taken us back to an era of negotiated pricing. The internet offers several options for the consumer to compare the available products in terms of features, prices, total cost of ownership and several other parameters (e.g. eBay). This enables the consumer to gain a holistic view of the value of a product or brand and then make the purchase decision. At the same time, the firms are able to access high quality data about consumer behaviour and preferences through the various services offered on the highly connected web space (e.g. Google Analytics). Therefore, it is essential for a company to leverage the information available to it to ensure that the product is offered at the optimum price, which maximises profit, but at the same time leads the consumer to believe that he is getting value for the money that he is spending. For this, price has to be set with the context of the entire marketing mix, rather than being based simply on the cost. Some of the factors that need to be considered in pricing are described below.

Factors considered for pricing a new product

The following factors should be looked into while deciding the price with which a new product must be launched. Positioning The price of the product depends on how the company wants to positions it. This decision is taken based on the market segment that the product is aimed at. The pricing is done in such a way as to maximise purchases by the target group. Therefore, the firm should consider the income levels and spending patterns of the target group, their preferences etc. The price of the product should also be decided based on the value of the brand. For example, if a luxury hotel chain suddenly reduces their prices drastically, then it will affect the perceived value of their brand. Demand Curve The pricing has to be done considering the effect that the price would have on the demand curve. The demand curve can be estimated by conducting market research. Environmental factors The firm should also keep in mind environmental factors like the government, competitors etc. An important point to be considered while pricing is the reaction of competitors. The market dynamics would be greatly affected by the competitors response to any pricing decision.

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Pricing Strategies
There are a variety of strategies that a firm could follow in pricing. The four broad strategies that firms use are explained below. Low Price

Low Quality

High Quality

High Price

Premium Pricing In this pricing strategy, the firm sets a high price for the product, to capitalise on the uniqueness of the product as compared to other alternatives. This approach is used when there is a competitive advantage over other players in the market. This is usually followed by luxury brands like Concorde, Savoy etc. Penetration Pricing In this strategy, the price is set at a very low level in order to gain market share. The quality of the product is high although the cost is low. Once market share is achieved, the price can be increased to improve profitability. Economy Pricing This is a no-frills low price. The cost of marketing and manufacturing are kept at a minimum. The quality is also low in terms of the number of features. Price Skimming In this strategy, the company charges a high price because it has a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. 20

GM uses several of these strategies for various products under the brand Chevrolet. The prices of the base models of Spark as compared to the other cars in segment B are shown in the table below.

Chevrolet Spark 3,22,804

Maruti Swift 4,19,050

Maruti A-Star 3,55,791

Hyundai i10 3,33,993

Comparative prices of base models of segment B cars

It can be observed from the table that Chevrolet Spark is priced lower than all the major competing products in its segment. In fact, the highest priced model of Spark, with all features including airbag, comes at around 4.5 lakh rupees, which is only about 7% higher than the price of Maruti Swifts base model,. The features offered by Spark are at par with (and in some cases even better than) its peers. In addition to pricing the car aggressively, GM also runs discount offers frequently, especially during festive seasons. The last such offer included a discount of Rs.55,000 along with financing options. Thus, GM is employing a penetration pricing strategy to gain market share in the case of Spark. This strategy might have been used because there were many established players in the segment when Spark was launched. At a later point in the future, when it gains sufficient market share, the prices may be hiked to improve profitability.

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Key Players in Indian Market

The largest player in the Indian industry and launched new and exciting products in the Indian markets, including the 100,000 car

The third largest passenger car manufacturer in India and one of the largest exporters of vehicles. Has established India as one of its manufacturing bases in the world. Is planning to invest heavily to boost exports from India Has vision of capturing 10 % share of the Indian passenger car market by 2010 Suzukis JV in India and the largest passenger car manufacturer in India One of the leading players in the Indian premium cars segment

One of the leading players in the Indian premium cars segment

One of the leading players in the Indian premium cars segment. GM entered the small car segment by re-launching the Matiz

One of the largest players in the UV / MUV segment The 2nd largest CV manufacturer in India

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Identifying End Customers

Maruti Udyog Limited
According to the officials of MUL, the companys endeavor is to be close to the customer, to anticipate and fulfill their needs. They believe that the new business initiatives taken by MUL have expanded the scope of this relationship. Maruti offers auto insurance, auto finance, corporate lease and fleet management and resale of pre-owned cars in partnership with its dealers. For the first time, car customers in India are able to access these services through a one-stop shop, backed by the leader brand. The way they look at it is that this will provide complete mobility solutions to the Maruti customer. This also enables them to extend their relationship with the customer beyond the point of purchase to the entire ownership life cycle. Since these services play a vital role in the car customer's ownership experience, the new initiatives enable them to offer Maruti owners greater value, assurance and convenience.

Hyundai Motors India Ltd

According to the officials of Hyundai Motor India is at a very exciting stage in India today. They are experiencing tremendous growth - which is a true sign of enjoying customer confidence. In order to strengthen their position further in the Indian market, they need to continuously work on building their corporate reputation while aggressively positioning their products. For HMI's focus and commitment to the Indian automobile customers is of critical importance. Its been their continuous endeavor to fulfill the entire spectrum of customer needs and desires, across all socio-economic & lifestyle groups. They have therefore, in just 6 years of HMI's young life, established nationwide sales & service network, scaled up state-of-the-art manufacturing capacity, launched global-standard cars in rapid succession and exported cars made-in-India across the globe. Getz, a much admired lifestyle brand in Europe and elsewhere, is a step in the same direction and is a cutting-edge, addition to HMI's extensive product portfolio.

General Motors
According to the officials at General Motors is positioned as a mature and responsible car manufacturer, which offers great value for money products to its customers. The company leverages its global expertise to manufacture and market well engineered and safe products through its well-established retail network that provide an excellent ownership experience to its customers.

Tata Motors
According to the officials of Tata Motors the foundation of the companys growth over the last 50 years is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer-desired offerings through leading edge R&D.

Ford India Limited

According to the officials of Ford India has reaffirmed its commitment to enhancing the purchase and ownership experience for its customers with the rollout of Ford Brand@Retail concept across the 23

country. Ford India has been revamping all dealerships under the Ford Brand@ Retail, a global corporate identity program to offer a world-class purchase experience to the customer. Ford India continues to expand its distribution network and has grown to around 150 dealer outlets. The officials also mentioned that Ford India provides training support to dealers in areas including customer satisfaction, sales, technical and non-technical aspects of the business and in the financial management of the dealership.

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Interacting with Customers

Maruti Udyog Limited
According to the officials of MUL, their overall strength lies in building an organization that is sharply focused on the voice of the customer. Maruti's consistent performance over the past several years has resulted in a steady increase in the percentage of its customers who say they intend to remain loyal to the brand. In order to be closer to the customers, MUL has multiple avenues of one-to-one interaction with customers. As a major step in this direction they have started Call Center service with toll-free number for the people of National Capital Region in year 2000. This service, named Anytime Maruti, is now available nation-wide. Customers in over 700 cities/towns across India can contact them any time during the day and all days of the week. The toll-free service is 1800 1800 180, it is accessible from any fixed-line or mobile phone of BSNL/MTNL network across the nation. The Anytime Maruti Call-center can also be accessed using telephones on other networks by dialing 09811801515 (not toll-free). The objective of this service is to ensure that customers have quick and easy access to all information on their models, prices, dealers, value added services, finance options, and the locations of our numerous service stations. Anytime Maruti helps customers to learn more about their Maruti Cars and also about other services offered by Maruti. For prospective buyers, Anytime Maruti can help them deciding amongst various Maruti Models and benefits of buying from Maruti.

Hyundai Motors India Ltd

According to the officials at HMI, the Company has set up more than 70 dealer workshops that are equipped with the latest technology, machinery, and international quality press, body and paint shops, across the country, thereby providing a one-stop shop for a Hyundai customer. Hyundai also has a fleet of 78 emergency road service cars - specially equipped Santro that can provide emergency service to all its customers anytime, anywhere. The customers can also call on 1800-11- 4645 (Toll Free - Only from MTNL & BSNL numbers) 011- 26924645 (For all GSM Connections / Landline other than MTNL & BSNL numbers) for any queries & customer complaints.

General Motors
According to the official at GM, to bring greater value and service to customers, they have introduced the GM Service Plus a unique cluster of services, designed to compliment every aspect of owning a car and ensuring complete peace of mind. So be it emergency assistance, an urgent car servicing or even sourcing genuine accessories, Customers can be assured of yet another great moment from General Motors. For any car related query or emergency requirement, customers can call 24-hour assistance at 30308080. The unique 3-hour service programme comes with a promise of servicing your car in just 3 hours, or you get the service free. With their 24-hour workshops, customers can now conveniently get their car serviced, when they use it the least. Widespread sales and service outlets across the country ensure that customers have the assurance of great service wherever they travel in India.

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Tata Motors
According to the officials of Tata Motors, the company has strengthened its distribution and customer care network and today has 77 dealers and 230 authorized service outlets spread across 119 locations in India.

Ford India Limited

According to the officials at Ford solutions, the company aims to provide quality, peace-of-mind products for the customer and embodies a brand synonymous with its ability to provide products that can be tailored to suit one's individual needs. Ford Solutions serve to develop products for Ford and the Dealer body that enhance customer satisfaction. When vehicle needs a repair or a component replacement, customer needs Quality Care service, Ford Dealership is simply the best place to have vehicles serviced. Brakes, shocks, batteries or anything the vehicle may need, dealership is the place to get it. Customers can place an online service request at Ford.

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