Thursday, May 31, 2012

Nano Re-visited

My article in Outlook Business attributing the difference in market performance of the Tata Ace and the Tata Nano to differences in the development processes they followed evoked several insightful responses.

Most of the comments suggested that the Nano "failed" because of wrong positioning. Several readers thought that the Nano failed to appreciate the social psychology of the Indian buyer.

HS, for example, wrote that “whatever level of social pyramid a person belongs to, he has a self-respect (or may be an alter-ego) associated with him. Positioning ‘Nano’ as a low cost car (“lakhtakia”) rubbed the intended consumer wrong way. The debacle was further worsened by “fire accidents” which further hurt the psyche and physical safety of the intended consumer ( i.e. low middle class common man).”

Many readers referred to words such as “aspiration” and “middle class psyche,” implying that these were not adequately addressed by the Nano.

Others, like SR, attributed the Nano’s "failure" to negative publicity: “First the movement of the Nano project (whether or not it was not justified) created a lot of negativity. Other negative factors were the delay in launch, its 1 lakh price promise and not being able to meet it (the feeling in the general public was Nano would be available at 1 Lakh on-road and irrespective of models) and finally the fires in the cars. I think the fires were the nail in the coffin as there was always a feeling of an inferior good for Nano, and that was re-enhanced by these sporadic events. Thus the car had an inferior goods perception accentuated by the fires and a failure on expectation management on the cost side.” NP agreed with this perception of the Nano being seen as an inferior product: “Nano was seen as removing features to fit the 1L bill. It never came across as a vehicle that the two-wheeler riders will be proud of.”

It’s difficult to disagree with many of these points, and Tata Motors has now begun to address them. But these points support (rather than contradict) the core argument that I made in my article – if the Nano team had spent more time talking to prospective customers (as Tata Motors did in the case of the Ace) during the Nano’s development, they would have understood when, why and how a customer chooses to buy a car like the Nano, and been able to incorporate these inputs in the design, positioning and launch strategy of the Nano.

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