2015
Great Lakes
Instituteof
Management,
Chennai
Prateek Sharma
DM 16160
[WHAT DID NANO DO
WRONG? WHAT CAN THEY DO
NOW?]

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Introduction
TATA Nano was a classic case of a product manager who chooses not to respect the aspirations
of his prospective consumers. A famous marketer once said “A man buys a car for what he
wants to be and buys a house based on what he is”. When Indian industrial giant Tata
launched the Nano, the hype was huge. Sleek and cute in buttercup yellow, its sticker price was
$2,000, making it the “world’s cheapest car”, as promised in 2006 by Mr Ratan Tata.
He said he wanted to get low-income Indian families who typically travel by scooter (families of
four, five, even six, piled on a single cycle, helmet-less) off their two-wheeler, as they are called
here, and into something safer. As a side benefit, he hoped the car could be produced in an
IKEA-esque flat pack and shipped to remote corners of the country, creating a business
opportunity for mechanics to assemble them.
It promised to revolutionize both its market – putting low-income consumers behind the wheel
– and car-making, through a process called “frugal engineering.” The Indian public clamored
with excitement; people lined up for hours at events to sit in a prototype. Auto companies
outside India watched with great anticipation, too: was this the future for emerging markets in
developing countries?
Two years later, the Nano is a cute, yellow disaster – not because there’s anything wrong with
the car, which remains something of an engineering triumph, but because of a series of
surprising blunders on the part of Tata.
What went wrong?
Missteps in everything from distribution, advertising, marketing and financing plans hobbled
the car from the start. There was a mis-match between what they wanted to position Nano and
what they actually did position it as.

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The Nano was marketed as the car for people who could barely afford a car. But in a market
where car purchases are hugely aspirational, nobody wants that car. People save for years for
their first vehicle. So if they drive a Nano home, the reaction from the kids would be, “What
have you brought, a compromise, a car that is almost a motorcycle?’ This was not the kind of
car people were dreaming of.
 Politics:
The Nano faced two big problems early on. Its original production facility, in West
Bengal, got tangled up in messy politics with the state’s Marxist then-government, and
at the 11th hour the plant was shifted to Gujarat – so the company wasn’t able to meet
an early rush of orders and thereby, forego Consumer Innovativeness.
 Safety:
Once cars were on the road, there were safety fears. A few early Nanos burst into
flames while being driven, and Tata didn’t mount the public relations offensive it should
have over those incidents.
In 2014 a Nano car was crashed for NCAP by ADAC in Germany. Despite Tata's claimthat
it was expecting 4 stars, the Nano actually achieved zero-star adult protection rating and
failed to meet even the most basic UN safety requirements.
 Complacency:
Nano received a whopping 2, 00,000 bookings initially. Clearly, people were gravitating
towards Optimum Stimulation Level (OSL) from Actual Stimulation Level (ASL). Tata
became complacent and did not follow-up with a comprehensive advertising strategy to
keep the public interest going. Post the fire incident, Tata started advertising which was
not very effective as it seemed reactive and only augmented the negative publicity.
 Marketing:
There was barely any print or television advertising to give the Nano a brand identity
beyond cheap. Tata marketed the Nano through showrooms in big cities, which meant

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that much of its target market in small cities and towns never saw one. Marketing
strategy does not operate in a vacuum. It failed to generate emotions and thereby, fire
incidents forced people to be in Cognitive state instead of Affect, which Tata Motors
would have liked.
Possibly, they were too much dependent on the buzz (Word of Mouth) created around
the car, besides the Brand value of Tata Motors.
 Finance:
Although the car was cheap (about $2,500 once it finally went on sale), the company
failed to make it easy for the lowest earners to obtain financing – the Nano needed
below-market interest rates and fast onsite loans. Instead, as would-be buyers struggled
through the process of getting a bank loan based on their low-wage jobs, they realized
they could get a slightly larger loan, and perhaps buy a Maruti Swift, the lowest-price
vehicle from Tata’s main competitor, which has none of the stigma of being a poor
person’s car.
 Domestic Economy:
A big hike in fuel prices and interest rates squashed all of India’s car market, including
Tata Nano. It must be noted that the Nano’s target customers were the most vulnerable
to those kinds of expense increases.
 Distribution Strategy:
The distribution strategy failed to bridge the last mile to the consumer segment that
Tata Motor’s built this car for, due to paucity of large enough dealer network. The Nano
did not have a large enough dealer network in the rural areas and smaller towns where
the affordability branding was more likely to work. The lack of dealer networks meant
they could not capitalize on the initial enthusiasm and interest.

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 Positioning:
The target customers for Tata Nano were lower and middle income families (A car for
the masses), who aspire to upgrade to 4- wheelers from being 2-wheeler users and since
many of such families stay away from purchasing 4- wheelers primarily due to the
affordability factor, Management at Tata Motors tried to focus on the price factor and
developed “Price Positioning Strategy” for Tata Nano. Tata Nano tried to position itself
as the most Affordable Car in the world. The former Chairman of Tata, Mr. Ratan Tata,
had envisioned Tata Nano to become a “People’s car.” The car was positioned as the
people’s car since it offers comfort and affordability to every person but inadvertently
Tata Nano got positioned as the “Poor Man’s Car” and “Cheap Car” and the impression
became almost impossible to de-anchor. Here, the focus on the price and the product
grew to such an extent that the consumer needs were ignored, giving birth to Marketing
Myopia.
Positioning is an ingredient of total strategy. Product, brand, price, promotion and
distribution must all be consistent with the positioning strategy. But Tata Nano’s
positioning strategy and communication tactics didn’t gel with each other. Tata Nano’s
distribution system was not also consistent with its positioning strategy .The Nano did
not have a large enough dealer network in the rural areas and smaller towns where the
positioning by price was more relevant. The paucity of dealer networks meant they
could not capitalize on the initial enthusiasmand interest. The target market knew how
to buy scooters but they didn’t 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 doesn’t sell scooters and appears to have underestimated this
issue. The distribution strategy failed to bridge the last mile to the consumer segment
that Tata Motor’s built this car for. Lower income customers were apprehensive and
hesitant to walk into large Tata Motor’s showrooms.
While Nano was intended by the company for the lower-end belt who are price
conscious, instead of reaching out to the intended segment Tata Motor’s relied heavily
on non-conventional methods like social-media. They created a special Nano website

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where one could design their own Nano and play games; used social networking sites
such as Facebook and Orkut; leveraged blogs; and purchased online advertising. The
online medium was hardly the right way to sell to their target segment and the strategy
failed to create buzz around the car. The sales reflected this. Half of the Nano’s
purchased were second cars, clearly violating the positioning which sought to transition
people from two wheelers to four wheelers. Thus, the lack of proper communication to
the appropriate customer segment led to the downfall.
Moreover, use of metaphors in positioning strikes a chord with the market.
What can they do now?
The main inspiration of TATA Nano was the “Hum Do Hamare Do” concept.
The company should craft and execute different strategy towards target audience and
the positioning of the car must be changed.
 We Indians, generally, try to derive the esteem from whatever we buy, or in other
words we show-off. Tata Nano was not the car which was seen as an esteemed vehicle
due to the misunderstood tag which was stuck to it as ‘Cheapest car’. Although, no
aspect of your behavior tends to be affected by personality, it does affect purchase and
consumption behavior.
 People preferred TATA Nano as a second car, despite of their ability to pay for the costly
cars. In other words, people are postponing the purchase of Tata Nano waiting for their
first car. The target audiences of the company are the people who belong to lower
middle class and lower class. Lower middle and lower class still purchase the car based
on esteem need to improve their social status.
 88% of the lower and lower middle class do not know driving and thus they are
comfortable riding the bike. Company must launch a marketing programme to teach
driving to the target audience (of course free, unlike Maruti). Once the target audience
know driving, it will be easier for the company to identify, anticipate and satisfy
customer requirements profitably.

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 Most of the people in the target audience own a bike and it is not easy for them to
abandon the bike which costs half of the price of Tata Nano. Therefore, Company must
give them the exchange offer and offer good them resale price of bike.
 Company focused on price factor, mainly, but failed to communicate the features, safety
and other benefits to the target market. Company must keep in mind that apart from
price, consumers are looking for many other aspects while buying a car as well.
 Most of the target market likes the advertisement which is informative followed by
which show the safety. Currently, company has advertisement which brings pride which
is a bit unbelievable on the part of consumer, thus, it wasn’t liked by the target
consumer as well.
Thus, company must design the advertisement which combines the information and
safety.
 Tata Motors must look beyond its current target audience (which comprises of males),
and should focus on including females (Specifically, urban) in their target audience.
As the car is perceived to be compatible and easy to drive by the female segment, it will
prove successful.
 An automatic transmission by default - which will target women and senior citizens.
Honda scooters is the preferred choice of all those who don't want to be kicking bikes
into action. No reason why cars have to be more complicated. The Maruti-Suzuki Celerio
is an effort to rope in new car users. The Nano should target the same.
 There is a difference in attitude between the prospects and the current users. Current
users are satisfied with the car, while prospect users have many uncertainties in mind.
Company must try to minimize this gap by including various innovative marketing
programmes. They can be ‘drive a car’, or ‘the Goodwill drive’ , or ‘Drive thru’, etc.
These slogans should be localized in the local regional language as you are targeting
those segments which may not understand English language.
Let the prospect user drive the car for a day, and then let him decide. Its highly possible
that such test drives will shorten the decision making process, and the target customer

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will become a customer. This is due to the fact that when we touch a product,
psychologically we get attached to it.
 Indigenous Character of the car must be promoted. It became a weakness for the car
earlier as we Indians prefer cars or anything, which is ‘not so Indian’, but ‘international’.
May be Tata salt can teach something to Tata Nano. Thus, the car can be promoted as
‘Desh ki Car’ to let the emotion come into the play and the Affect. Eventually, it will find
mass acceptance after its image gets a facelift.
 Design the car in attractive ‘new age graphics’ to find appeal among the college youth
segment. College-goers now using bikes may, conceivably, buy a car that looked like the
VW Beetle, even if it performed like a - well – Nano, but re-packaging the brand would
make it a hedonic product. Moreover, the company needs to tailor its marketing
communication according to the customer segment, for one size does not fit all
(according to Elaboration Likelihood Model)
For Attitude goes for long-term and Attitude shapes behavior, so company needs to
shape the underlying attitude as well.
Company must adopt the Fast-Fashion Approach here, by launching new graphics cars
every year, to keep up the interest of this youth and ‘young at heart’ segment.

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 Besides the basic low priced models, expensive versions of this car must also be
launched with newer features, as mentioned in the above point. In other words, one
which targets purely Utilitarian and the other, Hedonic aspects of the behavior but with
different names. Thus, price game can be played for the hedonic model (targeted at
people who can afford a bit expensive models). It can be highly competitive in the 2-3.5L
range.
Moreover in the long run, brand working on the hedonic aspect will rise more than the
utilitarian only thing. This will raise Brand Loyalty as well.
 A name change. The name Nano was a good one in 2008; today it has the looks of a
loser and has become irrelevant. It is not easy to reposition a loser with cosmetic
changes and an old name. A new name will help Tata Motors reinvent the platform.
For Example: Tata Serata, Tata Squadra (Italian names for Party), they rhyme and are
easy to speak for the natives. They also sound international.
 Limited edition cars must be launched with transparent overhead part and the
continuous uninterrupted window (what it should look from the outside) of the car, but
priced a bit higher. Consumer behavior is open to managerial influence. Make the
affluent fall for it by calling it ‘Future on The Road’. This will help it become the first car
of choice for the affluent, and not the second or third car, as the Hedonic quotient of
the car will increase due to brand packaging. Here, the scarcity Effect will come in handy
for the entire Tata Serata and Tata Squadra line(name changed from Tata Nano).
 Hiring ace driver with mass appeal in India like Narain Karthikeyan, who has an
understandable authority; Virat Kohli who himself owns a number of cars, is aggressive,
popular cricketer, a winner and passionate driver can drive up the sales for the company
if the company uses this expert bias strategy.
 Improve the search quality of Tata Motors by improving brand Equity.
Once the sales pick up, Social Proof will take care of the rest for in India this works the
best.

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