Tata Nano- The Brilliant Blunder
In 2008 Mr. Ratan Tata had the novel idea of producing a cheap car for the common man in India, getting safety and comfort during travel to the masses for just 1 lakh rupees with a modern, space and fuel efficient car.
This "people's car" was expected to start off a revolution of affordable four wheelers for the middle and lower class Indian population. After all, it was expected to be a quality product from the "Tata" brand available for the affordable price of just 1 lakh Rs. It was sure to generate great demand amongst the masses, wasn't it?
Indeed, the idea of Tata Nano sounded great and found heavy investment for production and marketing campaigns.
The initial excitement, however, soon fizzled out as reality struck. Tata found low profit margins and poor sales from its dream project and were left clueless. Tata Nano never found demand in the market, contrary to the belief of the company's founder and experts. The idea remained good only on paper and the production of Tata Nano was completely halted in 2019 after a total sales of 1 car in the year.
So what happened here?
There have been numerous studies on this case with some significant findings about strategic errors:-
1. POSITIONING ERROR
The "lakhtakiya" car for those with low budget was simply perceived by the masses as a car for poor people. Who would want to be associated with a compromised poor man's car when they could get a higher segment car for similar price in second hand?
The social stigma linked with "cheap" products was only encouraged by the marketing campaigns which focused on the low price and "common man" factors. By the time new campaigns were designed, the damage had been long done. It was a clear marketing strategy blunder.
“It (Nano) became termed as a cheapest car by the public and, I am sorry to say, by ourselves, not by me, but the company when it was marketing it. I think that is unfortunate.”- Ratan Tata
2. CONFUSED UNIQUE SELLING POINT
The actual price of the car soon rose to over 2 lakhs to compensate for losses due to delays and low sales, further dampening its unique selling point of being cheap.
3. QUALITY ISSUES
The car also faced issues of fires, low stability, low driving comfort and structural weaknesses. Also, the lower cost variants lacked many basic facilities and the car gained the reputation of being uncomfortable and unsafe. The low cost of production was destined to compromise the quality and so it did.
4. PUBLIC RELATIONS FAILURE
No significant quality improvement or public relations measures to assure people were carried out, leaving a stamp of a compromised product on Tata Nano. Some delayed remarketing efforts turned out to be useless. Also, many targeted customers were not acquainted with understanding or experience about cars and buying cars which Tata failed to correct.
5. DISTRIBUTION STRATEGY ERROR
The distribution strategy also turned out to be faulty as the showrooms were in urban areas only while the market could be significant in rural areas.
6. LOCATION ERROR
Another blow to the Nano project came when it faced an eighteen-month delay as the production unit had to be shifted from Singur, West Bengal to Sanand, Gujrat due to instabilities and protests in West Bengal. Yet another mistake, this time in plant location.
In brief, Tata made a string of strategic mistakes in almost every area, leading to the failure of what could have been a revolutionary product. This indicates how a good idea may turn out to be impractical, specially due to poor implementation. And yes, it verifies that such blunders can happen with the best in the business.
The question now is- Can Nano make a return?
- The answer may lie with a complete revamp and rebranding of the product and correction of mistakes made in the first effort. Initiating sale in markets of other countries at the same time may also bring better product image and profits.
- However, hurrying up for a revival, specially in the present market conditions, would probably result in a short lived zombie of the product.
- Alternatively, it may be best that the idea is abandoned and the company may turn to its cash cows; till it is completely prepared to take up such a project again with better experience, detailed planning, rebranding and sufficient budget. And of course, the release must be planned only when the market is conducive.
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