The un-mystery of low Nano sales

Ratan Tata stayed true to his word of giving India the ‘1 lakh’ car and showing the world that India is not all about cost advantage but can talk and walk innovativeness. The whole world converged in India when Tata Nano was launched. Tata Nano was an embodiment of catering to the ‘bottom-of-the-pyramid’ customer. It was supposed to show that given a value proposition, no product will fail irrespective of the target segment. Technically, it isn’t a bottom-of-the-pyramid product but in the context of the car market and sub USD3000 price tag can be considered as one such product.

Nano was considered to be so much in demand even prior to its launch because it gave an India, the possibility of a four-wheeler at a price unthinkable before. However it did not result in the forecasted sales. There were many reasons for it. As obvious, consumer behaviour was the critical reason. Nano failed on this count. Nano does not, and will never be able to give the consumer the aura of buying a car. In India, when a family buys a car, it signals their arrival on the richness scale. It signifies a certain standard of living. Nano, unfortunately, does not have the snob value generally associated with buying car in India.

One of the other reasons is the negative publicity it received due to the fire mishaps in its rear engine. Rear engines are generally considered unsafe. Although a perception, it added to the frenzy with people staying away from the Nano. For Nano, publicity turned out to be a double edged sword. It got free publicity during, prior and after its launch due to its ridiculously low price tag but the same publicity turned up on its head in a negative way after the mishaps. News of some customers suing the Tatas for compromising on their safety did not do much good to the Tata brand as well.

Things though are changing now. With production volumes up and better distribution in place, we can now see the Nano TVCs running. Although not quite an outstanding ad, it is decently good. I am not sure if I am reading the minds of the Tata Brand Managers but it seems that they are targeting the Tier 1 or 2 and rural towns who have disposable incomes. The second TVC is quite obvious in tis attempt at targeting the couple to move on from two-wheelers to the four-wheeler. Here too I am slightly unhappy with the casting of the actors in the ad. The urban couple would wait till they buy a bigger car rather than a Nano. They have double incomes with both husband-wife earning and easy financing options. A middle aged couple conservative in their buying would have been a more apt audience.

The Nano indeed is picking up volumes now but the mystery behind sluggish sales isn’t a mystery anymore or is it?

The ‘Elusive’ Indian premium brand:

Can you think of an Indian brand which commands a ‘premium’ tag? Let me define a premium brand first. A brand which commands a price higher than its immediate competition and is bought more for its intangible benefits than attributes. Agreed. There are some brands. But would it stand the test when confronted with international competition? At least I could not find any such Indian brand.

A similar problem with all the emerging nations. Less said about the under developed nations, the better. China and India have always fought international competition based on price. They have been few times, if any, when they have talked of quality or snob value. India or China has never had the technological wherewithal or resources in terms of money. Let’s talk of India.

The Indian consumer after independence through to the nineties was bought up on self-sufficiency and socialism of the Nehruvian era and then the Indira Gandhi era of nationalization. Conspicuous consumption was frowned upon and would attract the eye of the taxman. No wonder India has the highest savings rate along with China. It is only after the liberalization process started in 1992 that Indian masses got the resources and options to spend. 2000s saw the start of the consumption cycle. With easily available financing options and plastic money to fuel demand, consumerism had finally arrived in India, much to the satisfaction of MNCs. The urban middle class soon found surplus money with increasing salaries of IT, pharma, services industry employees finding their way into the mushrooming malls. With an urge to show their arrival on the ‘richness’ scale, people splurged as if there was no tomorrow.

Thus we saw major international brands such as Tissot, Rolex for watches, designer apparels, bags, shoes from renowned designers such as Gucci, Jimmy Choo, Louis Vuitton, hospitality giants such as Marriotts, Hyatts among others. Indian domestic brands obviously could not fight these acclaimed international labels on snob value. The only option remaining was to fight on price to drive volumes and be profitable. We saw Videocon taking on the Sony, Samsung, LG in consumer electronics; Maruti Suzuki taking on Hyundai, Ford, Fiat, and lately Skoda, GM among others in cars. Even now we have Tata Nano as the world’s cheapest car fighting on price. Although it has been touted as an innovation to cater to the bottom of the pyramid consumer, it still fights on price.

Moving from consumer goods, even the commodities such as steel, cement, food (sugar, rice, wheat, meat) are exported based on price difference rather than its high quality or rare sweetness and exquisite taste or looks (specific to flowers). I am not questioning the quality here but just the business appeal for a prospective customer.

India’s real tryst with a premium brand came when Tatas took over iconic and marquee brands Jaguar and Land Rover. They have retained the names and not added Tata to the newest family member because the primary market of these brands is Europe and Americas, and Tata isn’t even a renowned name in cars, let alone a premium name. Woodland is an Indian brand which can be considered as a premium Indian brand but not compared to its international counterparts such as Adidas, Nike, and Reebok. It should be given its due though because it has all the makings to take the brand global. I doubt how many Indians know that it is an Indian brand. Credit should be given to its international type of communication in TVCs, print and online media where it has international models as its ambassadors.

Indian motorbike companies such as Bajaj Auto, Hero Honda, TVS, it would take a lot of effort to become a premium brand since majority of their offerings are for the mass markets in India and abroad. Same is the case with the car maker Maruti Suzuki, and Tata motors. Maruti Suzuki has been successful in the last decade or so in scaling up till only the 8 lakh car. Ditto Tata Motors. It has yet to take on the 10 lakh plus luxury car segment comprising of the Skodas, Volkswagens, Toyotas and the super luxurious Mercedeses or BMWs.

The IT sector is famous the world over yet Infosys or TCS or Wipro isn’t considered as an innovative brand. Google, Oracle, Microsoft, Yahoo, SAP are brands due to their innovation. The Indian brands are still fighting on price. But now we hear talk of Infosys trying to move beyond just the IT solutions and get into consultancy which would make them in direct competition with heavy weight such as Accenture, BCG, Booz, Allen Hamilton, and other. Of course, competing with them would need another decade of experience but at least there is a start.

There have been a spate of acquisitions in the last decade by Tatas, Birlas, Ambanis, Mallyas and others which would hold us in good stead to get an Indian premium brand. Till then that premium Indian brand remains elusive.