Demystifying Nano's marketing weaknesses

Over two years ago, Tata Motors launched the Nano in India, a car priced at around $2000 that was expected to revolutionise the domestic passenger car market. I remember telling a friend, who was in the US at that time on a project, with a lot of pride, "Obama is also talking about the Nano. Tata has done us all so proud." My friend joked, "Ask Obama if he would like to ride the Nano. This car won't even pass the stringent security tests in the US. You should see the cars on display at the Detroit Auto Show." It seems, these days, even Indians don't like the Nano, let alone Americans! The company has been reporting very disappointing sales in recent times: Nano sales slumped 29% in June this year to just 5451 units. But, other car makers such as Maruti Suzuki, Hyundai and Toyota (even other Tata brands), are doing well. Somewhere amidst the fanfare, both domestic and international, Tata lost its marketing plot and maybe even assumed that the Nano was an automatic success. Let us analyse the marketing weaknesses with the 5 C model:

Company - Tata Motors is associated with high quality cars and commercial vehicles. Technological innovation that helps to cut down cost and make vehicles affordable is also a key feature of the company. The company owns luxury car brands such as Jaguar and Land Rover, implying that Tata operates at both price spectrums of the car industry.
The problem that Tata faced in marketing the Nano was the excessive focus on the 'cheapness' of the car and not the high degree of innovation, superior design and engineering excellence that went into it. Suddenly, prospective customers were being bombarded with TV advertisements, posters and emails talking about 'low price' and not sufficiently about the other important features. They wanted to know whether Tata was lending its name to a good quality car and not just cutting corners by offering a 'cheap' car.

Competitors - Tata faces stiff competition in the Indian market from Maruti Suzuki, Hyundai, Toyota and a few other German manufacturers. The other companies offer low-cost hatchbacks but not quite as cheap as Nano. But, the cars are of high quality in terms of convenience, fuel economy and security and are usually lapped up by consumers even at higher prices. Tata's marketing weakness was the excessive focus on 'price' and not on other features such as fuel economy and security.
 
Customers - Indian customers are hard to please, especially if you are offering a 'cheap' product. They are highly aspirational and if they are convinced about the features of a product, they will go for it even at a higher price. Tata was forced to recall a huge number of Nanos and pay full compensation when the cars started catching fire shortly after launch. Customers started doubting the security features and lost faith in the product. Given that the company faced manufacturing delays and high raw material costs, customers began to doubt the marketing campaigns and whether Tata was cutting corners just to keep the price low.
 
Collaborators - Tata collaborated with a number of car parts suppliers and initially purchased various components at a low price. But, trouble started when component costs started shooting up due to high global prices of the raw materials used in the components. Reports started trickling in that Tata was having problems in controlling costs with price of components going northwards. Given that the Nano marketing campaigns focussed so much on just 'price', the whole low-cost model went astray and led to doubts among prospective customers.

Context - PESTLE analysis
Political - NA
i. Economic - Tata's intention was good, a low-cost car focussing on first-time buyers and motorbike riders. But, the excessive focus on 'low cost' was a marketing weakness.
ii. Social - Indian customers are highly aspirational and look for good quality (convenience, fuel economy, security) and not just low price. Nano marketing campaigns' price focus alienated customers.
iii. Technological - Nano was made after months of research and technological innovation. Superior design was the hallmark of the car such as putting the engine at the back to make it more spacious for taller people. However, marketing campaigns failed to sufficiently convey the message about quality, convenience and security.
iv. Legal - NA
v. Environmental - Some activists were initially concerned what effect a cheap car would have on the level of pollution. However, this did not have any major effect on the car's marketing and prospects because the Nano's influence on India's car penetration levels and the overall effect on the passenger car market were main focus areas.   

The Nano could possibly register better sales going forward but it's not likely to be substantial. Tata has not been able to market the Nano properly. Competitors are rolling out new products each month which are of sufficiently high quality though not as cheap as the Nano: even Tata is coming out with pricier cars. Motorbike riders (and other first-time buyers) would rather ride their bikes as of now or purchase a 'better' car with a car loan rather than be viewed as the owners of the world's 'cheapest' car. Times are certainly tough for the Nano!      

Sky is the limit for Aakash

Recently, an important event happened in India the day Steve Jobs passed away. On that day, the $35 tablet computer called Aakash (meaning Sky) was unveiled by a company called Datawind with basic computing functions and internet capability. This is aimed primarily at secondary and higher-secondary school students. The overarching objective is to provide a low-cost technological platform to students and expand internet penetration overtime, which is very important in India. Let us look at the segmentation, targeting and positioning for Aakash with the STP model:

  - Identify total market   - Over 40 million secondary and higher-secondary school students in India.
 
  -  Determine segmenting dimensions - The market can be segmented geographically. The proportion of secondary and higher-secondary school students is almost evenly distributed across urban and rural areas. Thus, the number of students in rural areas is around 20 million, the same as urban areas. Geographical segmentation is important, in this case, because of the disparity in usage of technology in rural and urban areas in India. This is the key factor in determining which segment to target and how to position the tablet computers.
 
  -  Profile each segment - The students in the urban areas have access to the latest technology and their families have the purchasing power to provide them computers and mobile phones, even at a higher price. On the other hand, students in rural areas do not have ready access to technology and face infrastructural deficiencies. They require low-priced computers to avail technology for educational purposes.

  -  Assess segment attractiveness - Even though the number of students in both segments are nearly the same, the rural segment is more attractive for a cheap product such as Aakash. This is because Datawind would be looking at selling higher volumes to the 20 million students and even at the low price point of $35 this would most likely help the company generate profits.
On the other hand, students in the urban areas are not an attractive segment since they already have access to better technology. Uptake for the cheap Aakash tablet is not likely to be as high as in rural areas since price is not a constraint for students in urban areas. For instance, their families can purchase tablet computers launched by Samsung and Apple at higher prices with better functionalities and applications.  

- Select target markets  - The students in rural areas are prime targets. This is because targeting this segment is profitable for Datawind because of the prospect of selling higher volumes and because of the lack of competition at such a low price point of $35. Even in the urban areas, Datawind faces low competition at the low price of $35 but the sales prospect is not good since students are technologically savvy and would prefer to buy computers with better functionalities and applications even at higher prices.

- Positioning - Datawind would have to position Aakash as a cheap technological platform that satisfies an important need of students, especially in rural areas. The marketing strategy would have to focus on conveying the long-term benefits for society, such as expansion of internet access and the positive effects on educational standards. The low price of the tablet computer can be used as a key marketing tool. Television advertisements featuring important national figures conveying such messages would be an important way of marketing the product. Social media, such as Facebook, can also be used to market the product.

Indians will be keenly observing the performance of Aakash over the next few months. The sky is surely the limit for this important innovation.  

The 'Rockstar' of Indian Dairy

It was more than half a decade ago when a dairy revolution was started in the western Indian state of Gujarat. Amul, a dairy cooperative formed in 1946 is currently the largest food brand in India and the world's largest pouched milk brand with annual revenues of $2.15 billion (FY 2011). Around 2.8 million dairy farmers jointly own the cooperative with around 735 employees in the marketing arm. The management has recently expressed an ambitious objective to join the Nestles and Danones of the world in excellence in the dairy industry. What interests me most is how has Amul been able to market its products and target the right type of customers to achieve the sort of success that it has? Is it doing anything differently because currently the Indian market is dominated by young consumers, whose needs are vastly different from the older consumer two decades back?

The answer is: Yes, Amul is trying to market itself differently as it competes with other large, global players in the lIndian market. It realizes it can't afford to be perceived as a staid old, brand which produces milk in large containers. And, it is responding by changing its marketing strategy. Let's look at the issues with the STP model:

 - Identify the total market - The total Indian market comprises 1.2 billion people. Indians across all age groups both in urban and rural areas have a strong preference for liquid milk as a principal source of protein. Fluid milk, ghee (clarified butter) and butter are the most important items consumed (USDA Foreign Agricultural Service, 2010).

 -  Determine segmenting dimensions - The Indian market can be segmented based on demographics and behaviours. The chief consumers are in the 18-30 age group both in urban and rural areas. The other consumers fall in the higher age ranges, especially those over 30. The 18-30 age group like to experiment with the dairy products that they consume (not just fluid milk, other value-added products); people in the higher age group generally stick to fluid milk.

-  Profile each segment - The 18-30 age group is fitness- conscious, spend a lot of their time on social networking, have relatively high disposable income, especially those who enter the job market at a young age of around 21-23. This is also true for young consumer in many smaller towns, which are getting increasingly connected to lifestyles in bigger metros. These young consumers don't prefer fluid milk, they like cheese products (vegetable cheese products) and generally don't like ghee (clarified butter) as well due to its fatty nature. The higher age groups (over 30) prefer fluid milk as well as ghee.

 - Assess segment attractiveness  - The 18-30 age group, rural and urban combined, comprise over 50% of the Indian consumer base. Their preference for higher value-added and expensive products makes this segment more attractive than the over-30 age segment.

-  Select target markets - The prime target segment is the 18-30 age group and Amul is following a concentrated marketing strategy by targeting this segment with new marketing tools. The over-30 age segment is not a major focus since the Amul has a ready market here with its high quality fluid milk, butter and ghee.

 - Positioning - Amul has initiated a marketing campaign to change its dull and conservative image among the youth. The company is repositioning traditional, fatty products like ghee as something which could result in a glowing skin. It is a sponsor of the Sauber Formula 1 team in the Airtel Indian Grand Prix, slated for October 30 in New Delhi. The recent ad spoof on former Pakistani fast bowler Shoaib Akhtar "Tab bhi phekta tha, aj bhi phekta hai!" (Used to fib then, and is still fibbing) drew a huge response from youngsters on Twitter. A 22-year old called the company a 'Rockstar'. There are other events and brand positioning plans in the works to connect with the young consumers.

It is still to be seen how the new marketing strategy works out in the medium to long term. But, the initial signs are encouraging for the 'Rockstar'.