Background

Tata Nano is an Engineering success but a Marketing failure, an amazing invention that didnt
turn out to be an innovation thats how one expert described Tata Motors Nano. Indeed, the
current predicament of the $2,000 compact car that was introduced in India with great fanfare in
2008 holds some valuable takeaways for aspiring disrupters.

In India, entire families too poor to afford a car usually crowd onto a single motor scooter and
take to the streets. A decade ago, Tata Motorss chairman Ratan Tata decided to make a
peoples car that would appeal to these poor Indian families. It was heralded as one of the
greatest and most disruptive innovations in the auto industry since the Model-T.

Fast forward today, though, and the company has sold under 250,000 Nanos since deliveries
began in 2009. The piece, entitled Tatas Nano, the Worlds Cheapest Car, Is Sputtering,
blamed the dull sales to the car being too cheapat least for consumers who dont want to be
associated with a low-end ride. The company is planning to add improvements including
innovative doors, automatic transmission, and a diesel engine to try to invigorate interest in the
model. These moves would also increase the price to be comparable to rival cars.

Problem in product

There is no doubt that the 4 wheel marvel which had intelligently mixed fuel, space and cost
efficiencies in a way like no other with good impressive and sleek design as well as world-class
features.

As a matter of fact NANO had its own little issues like low quality paint job, no air bags,
undersized engine, small boot and fuel tank, but all this was more than compensated by the price
and it could still do what it was supposed to do that is carry a family of four to five people in
comfort and in more safely than a two wheeler.

Even before the production started NANO, was being discussed on national television about its
impact on the future of Auto Industry as well as the environmental impact due to the numbers in
which it was supposed to sell.
The idea that people who use two wheelers would upgrade to four wheelers was fundamentally
wrong. The two wheelers serve a very different need in India's metropolitan congested road
system. The two wheelers can navigate through small spaces in between cars as well as on the
sides of the road. Thus saves time in commuting in India's highly congested road system
especially in big cities. Many people in India who own cars also own a two wheeler for this
reason. Plus the cost of ownership over lifetime of the vehicle for a two wheeler in India is much
lower than a four wheeler. Thus the low initial price of Nano is not that attractive to switch from
two wheeler to four wheeler.

A reversed priced product is where the price of the product is decided first, the quality of the
materials used and technology in general are worked backwards to provide a quality which is
better or at least equivalent in the existing market.

To make matters worse, three Nanos have caught fire because of some reason or the other since
its launch raising serious questions about its safety and severely damaging its Brand Equity.
Though Tata Motors has not commented on the reasons behind the fires, there has been strong
word-of-mouth negative publicity towards the car.

Problem in re-sale value

The re-sale car market gives stiff competition to the Nano. A 3-4 year old used car originally
costing 3-4 lakh in on-road price (like Chevrolet Spark and Maruti Alto) can pose a stiff
challenge to Nano given the relative price-parity that emerges when it comes to re-sale. For
instance, Nanos Mumbai on-road price for Std BSIII model pegged at 1.51 lakhs is a few walks
away from the Rs.2 lakh plus used-car-version Spark. People, who may go for the advanced
model NanoCx BSIII, may consider opting for Spark or Alto given that the said Nano model
costs around 1.82 lakh rupees.

In fact, Nano seems to have failed to pose a challenge to the market players in this re-sale car
niche segment. Needless to say, there is not much value extracted from a Nano upon resale
either.
Problem in pricing

"The People's Car" also known as the worlds cheapest car cost a mere 100,000 rupees - about
$2,000. Achieving this price point represents a feat of frugal engineering. Yet as others have
noted that no one aspires to own the cheapest car in the world. Sure, consumers love bargains.

Tata added insult to injury in that the top-end Nano model was priced at about 200,000 rupees
(two lakh) while still being perceived as a one lakh value.

Problem in promotion

Instead of using right marketing channels, NANO was promoted using non-conventional
marketing concepts like social-media which was simply a case of lack of communication to the
appropriate customer. The car was 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. In addition
Nano was communicated as the cheapest car ever produced. And who in the world is interested
to own the cheapest car. So this promotional campaign was a huge mistake that down sided
Nano.
There was no real national distribution scheme, very little marketing and advertising, and no
effective system of consumer finance. The irony was that many rural Indians never got to hear
about or have the opportunity to see the car that was supposed to help transform their lives.

Let us take a look on the above advertisements. The first one is a relative comparison between a
bike and a car. Nobody wants to compare car as a better version of the bike. They want to
compare it with its set of product: thats car. On top of that the second picture correctly addresses
the communication misleads of Nano as they are promoting it as the cheapest car ever build.
Again who wants to ride the cheapest car now? Todays youth demand power, control,
robustness, thrill, adventure, and most importantly speed, which are strikingly in contrast with
the Tata Nano brand personality and the advertisement campaign of awesomeness unveiled
commercial shows happy youth dancing all through the drive but fails to communicate which
attribute of Nano leads to awesomeness. Thus the brand association of Tata Nano with the
youth is very low.

Problem in distribution

Tata boasted of an initial start-up of 250,000 Nanos from the Singur plant, providing thousands
of jobs to residents, it failed to make Singur residents take ownership of the plant. To the people
of Singur, wealthy Tata was coming to grab their land to make billions of dollars for itself. It
cannot fulfill its promise of distributing its product which adversely affect its brand image.Also
their dealer network is almost entirely urban and they didnt really have a way to reach out to
small towns and villages, where much of the real target market lived.

Problem in Market segmentation and Targeting

The mis-step in the Nano marketing plan was in understanding the psyche of the target
consumer. The initial assumption was that Nano's target customers would behave like any other
walk into dealerships, take a test drive, and buy the car. But the experience has been
otherwise. They are a little apprehensive and shy and hesitant to come to showrooms.
One of the key aspects which Tata seems to have missed in its strategy is the complexities of
category transition. It is not natural for people to move from a high-end bike to a low-end car as
would have been the expectation of Tata Motors. This is a typical expectation. However, no one
wants to be in the bottom of a higher segment after being at the top of the previous segment.

Once branded the cheapest car in the world, it is unlikely it will get rid of that tag to become the
most hip car under the sun for youngsters.

It is in further danger of being neither the humble third car of the high income segment, nor the
awesome driving machine for the young. In the durables category, communication can only take
the brand so far.

Misunderstanding the target market

The target market knew how to buy scooters but they didnt know how to buy cars. In India, the
two processes are completely different and it appears that many people were simply intimidated
to go into a car dealership. Tata doesnt sell scooters and appears to have underestimated this
issue. Also their dealer network is almost entirely urban and they didnt really have a way to
reach out to small towns and villages, where much of the real target market lived.

Tata has to effectively plan to successfully bring a product as novel as the Nano to market. First,
they have to conceive of something people will actually want. Thats really three steps
thinking up something thats wanted, identifying who actually wants it, and working out the
details of how and under what circumstances they will use the product. Way should be devised to
produce it reliably and profitably at the price those people will pay. And communication should
be clear, targeted value proposition, differentiated from competing offerings. Tata has had trouble
with just about every one of those steps, and this fact has played out very publicly.

There is a clear mismatch between the target audience (youth) as defined by the awesomeness
unveiled Campaign and the product offering. Todays youth demand power, control, robustness,
thrill, adventure, and most importantly speed, which are strikingly in contrast with the Tata Nano
brand personality.Thus the brand association of Tata Nano with the youth is very low. The
awesomeness unveiled commercial shows happy youth dancing all through the drive but fails to
communicate which attribute of Nano leads to awesomeness.

Traditional logic would say that a high end cycle owner would naturally like to own a Moped if
it comes at similar cost, and a high end bike owner would naturally prefer to own a Entry
Segment Car next. And that is possibly what lead Nano to go to town with the concept of the
cheapest car in the world, in all PR and the initial advertising. But this is not the way consumers
behave.

Most consumers would like to be at the top of the segment they belong to rather than at the
bottom of the next segment. The reason being that the moment the consumer makes a shift in the
product category, he moves to that category and very quickly forgets the fact that he belongs to
the previous category. The feeling is very similar to the discomfort of being in an elite party
when you are not one among them.This comfort factor is very important especially for younger
consumers, who are always worried about not belonging to the group they would like to.

Problem in Product Positioning

The Nanos marketing problems began with its product positioning. The price crept up by around
15%, putting it out of the reach of first-time buyers with no regular employment or pays lips to
back an application for credit. And by emphasizing its cheapness rather than its basic but
appealing qualities, it deterred slightly better-off consumers who could afford one but aspired to
more sophisticated vehicles, such as those from Tatas biggest rival, Maruti, the leader in Indias
small-car market.

Tata Nano tried to position itself in the two-wheeler market. Tata Motors thought they should go
after the young college kids or anyone who currently owns a motorbike. They believed that if
they created a car that could match the qualities that make the motorbikes so attractive: the fuel
efficiency, low purchase and maintenance costs, and small size. What they didnt realize was that
they priced themselves out of the market. While the Nano was set at the lowest price for an
automobile it was still expensive compared to the motorbikes. They were never effective in their
efforts to target or market to any group and never seemed clear on who they were really going
after. They had so many options to choose from when trying to position itself in the market. But
in the end they went half way and never fully committed to a single group. They tried to go after
the two-wheeler market but priced themselves out of that market, while they marketed
themselves as the worlds cheapest car. which brings up the next problem it was marketed as a
cheap car. Its hard to understand the reason they marketed the Nano this way. Why would
anyone want to buy a car that is cheapest?
Consumer Analysis

We conducted a research to know more about Tata Nano, its features and current positioning. For
this we contacted a few people who own a Nano. The current advertisements which show city
urban youth driving Tata Nano around the city, who are among the targeted customer segment,
were included in our research.

To understand the impact of repositioning on urban youth, their needs and perceptions, we
conducted primary survey among other young adults (students and young professionals). A
verbal communication focusing on the Nano was done with this target customer segment.

The respondents answers were analysed. The primary research was followed by secondary
research to understand Nanos automotive market. Based on the results obtained thus far, market
research was conducted among current non-target customers to identify whether the target
segment can be changed.

Analysis
From our analysis we found that the current positioning to attract youth will not succeed.

Following are the reasons:

1. From the interview of Tata Nano owners, we understood that they had bought it for two
reasons: the price factor, because it is the cheapest car in the market so they think they can
afford, and as a second car for a spouse to help navigate crowded areas in cities and towns.

2. The survey revealed that majority of the respondents had not considered buying the Nano.
They either wanted to buy a high-end motorcycle or a medium-sized car. They were not averse to
taking a loan to buy a car or motorcycle. Though the price is less than the closest competitor,
people are more comfortable buying a second-hand car at the same price as the Nano.

3. Its perception of being a poor mans car still lingers in the minds of the customers. There is
belief that buying a Nano can negatively affect the social status of the owner. Young
professionals in cities have generally good source of income. They would prefer to wait or take a
loan to buy a medium-level car.
4. Students are mostly dependent on parents for their financial needs. Based on their parents
income levels, we can classify students in three groups - high income group (HIG), Middle
Income Group (MIG) Low Income Group (LIG).

Students belonging to HIG can afford an expensive car with better features; price is not a
consideration for them.

Students belonging to MIG would have a car at home. But they would not have sufficient
financial means to buy a car for themselves. Their parents would rather invest in their education
and future.

Students belonging to LIG do not have sufficient financial means to buy a car, even if it is Tata
Nano.

For the rich, their self-worth does not rest on this car and they would opt for the convenience of a
small car and even earning a reputation of being rich but simple people. The same is not the
motivation for the lower income segment.

And suprisingly, none of the owner complained about the technical aspect of the Nano. Everyone
is happy with the performance. Nano is delivering more than what people expect it technically.
Recommendation

1. Market Segmentation: Tata Motors needs to understand that the initial interest in Nano
was due to the curiosity in the publics mind whether such an inexpensive car can sustain
Indian conditions. Somehow Tata Motors missed campaigning around this. Being a small
car, maneuverability and mileage are the biggest plus points of this car. Who better than
Nano can beat the pothole menace? In cities, where finding a parking space is a task,
Nano takes a much smaller space. All this needs to be highlighted so that Nano is seen as
a smart car for Indian cities. The youth focus needs to be dropped because the car has
still not shed its image of a cheap car and todays youth, believing in gaudy display, will
opt for a cheaper bike with cool looks. As a smart car, Nano can be pitched to office-
goers for whom driving a sedan or an SUV through rush hour traffic is a nightmare

Comfort features, such as, more height than Alto, high ground clearance, among a few,
should be highlighted. Tata Motors should create hype about the indigenous design or
Swadesi to touch upon this educated class who is more aware of the Indian economy or
idolises Ratan Tata. On weekends, what can be a better car than Nano to drive through
the crammed bazaars with wife for saree-shopping? All these will not be appreciated by
the youth, but will be appreciated by a 30-40 years old man.

Another related strategy can be to market Nano as something convenient for women. To
associate with women, they should advertise it at community festivals like Durga Puja,
Baisakhi and other family oriented functions. To connect to these independent
progressive-looking women, Tata Motors should definitely provide some customisations
such as child-lock, air-bags, etc. Similarly, one will be more relaxed if his or her old
parents drive a car that cannot achieve too high speeds. Basically, Tata Motors should try
to make those members of the family their customers, who so far depended on family
head to drive them.

2. Repositioning Strategy: Tata Nano was positioning and focusing itself too much for the
people riding two wheelers. They were trying to persuade them to buy the cheapest car as
it will fit their budget but the strategy was not successful because It turns out that those
 climbing into India's middle class want cheap cars, but they don't want cars that seem
cheap and are willing to pay more than Tata reckoned for a vehicle that has a more
upmarket image. So some of the recommendations for repositioning strategies would be:

Target Market: (lower middle class and middle class)

The Nano could be positioned as a reliable partner in ensuring the safety of college going
students and working women in the age group of 18-35. With Tata Nano, the safety needs
of women in a society where crime rate is very high will be taken care of. So parents, no
longer need to worry about the security of their daughters, when they return from their
office late night.

Positioning Statement: Ensure your daughters safety, the Tata Nano Way!

The target audience are families with a lower income bracket. Tata Nano would provide
them with an affordable and a reliable partner in safeguarding women. Thus this feeling
of security would bring about a feeling of contentment and spread happiness in their
lives.

Nano could be positioned for different class of family in different way such as:

Lower Middle Class: The first prefered car.

Upper Middle Class: Second Car used for shopping and to get away from congestions.

A better option would be to build upon the current brand associations in such a way so
that the negative factor associated with the choice of a low-cost cars becomes positive. A
positioning that would fit this purpose is not an awesome choice but a smarter choice:
a smarter choice over an unsafe two-wheeler, a smarter choice over other entry-level cars
in the market. Use the attributes where Nano stands better than other entry-level cars for
this purpose.

3. Change in Perception: The company promoted their product as the cheapest car in the
market. Hence the perception of the people about the nano turned out to be cheap. Tata
focused upon competing with the two wheelers rather than competing with the product
within the same range that are available in the market for example Maruti Suzuki Alto,
800 and others.

Hence, it is necessary to change the way people are making a concept about Nano. So the
following steps could be taken:

a. Change in Advertisement campaign: Nano should stop the cheapest and awesome car
campaign. It sould start focusing upon making the Nano as a basic car that people
could compare and purchased against other same range competing brands. So
communicate the target market about the features,benefit and creative stuff so that
customer would purchase it as a smart choice rather than awesome choice.
b. Competition with four wheelers: Nano should view the other small cars of same range
as its competitors and add up its value to the customers based upon creative features
and functions.
c. The above repositioning and right segmentation as per discussed above would also
help to build right perception towards the customer.
d. Create functional need for the customers such as:
- Beat the city congestion car The first adopters would be the people who already
own a car possibly but the numbers would be large. This still does not prevent the
bike guy from owning it. He has a reason better than the cheapest car.

- Dont let your college going girl on two wheeler car And of course the father or
the mother would not mind driving the car around sometime. We are not very
ashamed of taking our sons bike for a spin once in a way or if we are going
somewhere close.

- Dont take your big car out for small distances car In most cases it would have
been possibly the second car, but still a larger segment based on ease of
acceptance.