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In 2009, Tata Motors, one of India’s leading automobile companies, launched the Nano, a car priced at around US$2,500 (or INR 100,000), about half the price of its nearest competitor. It was considered the “cheapest car in the world”. The company’s website crashed because it received over 40 million hits in a short period of time, which the company could not handle.
Back then, buying a car in India was a luxury. For comparison, the number of cars per capita in India was significantly lower than in the United States – about 20 in India versus 800 in the United States per 1,000 people. While the Indian passenger car market sold 1.4 million units in 2008, the most affordable car at the time, the Maruti Alto, sold 230,000 units, almost 15% of the total market. Since Indians are an extremely cost-sensitive population, they used motorcycles 8 million times in 2008. So cars at the lower end of the price range compete with motorcycles and not necessarily just other cars.
The launch of the Nano was spearheaded by Tata Group Chairman Ratan Tata, who promised a car priced at INR 100,000 (or INR 1 lakh). Tata focused on this price point because it represents a symbolic benchmark in India, and then challenged its engineers to build a car that could sell for that price. He believed that the Nano would democratize car ownership and make the dream of owning a car affordable to a whole new segment of society, particularly those who would otherwise have bought motorcycles.
It has been estimated that Tata Nano could expand the Indian car market by 65%. But the Nano was unconvincing – its maximum ever sales were 75,000 units in 2012, after which sales fell rapidly. In fact, only a single Tata Nano was sold across the country in February 2019, and the Tatas stopped production of the car altogether in 2020.
This was a costly mishap for the Tata Group that holds many valuable lessons for marketers.
So what positioning lessons can we learn from the Nano?
Related: Why positioning is more important than ever
1. Don’t overlook your customers’ emotional motivations
When positioning your product, you need to truly understand your consumer and their emotional needs. For Indians, owning a car was a matter of pride rather than just utility, and buying a car was a sign of acceptance into society. This is important to understand. The previous cheapest car on the market, the Maruti Alto, was a very successful car and was bought by hundreds of thousands of Indians, but it was never advertised as the cheapest car on the market.
Anyone who wants to signal to society that they are doing well in life does not want to be associated with the “cheapest car in the world”. But unfortunately, knowingly or unknowingly, the Nano was positioned that way and it turned out to be a colossal mistake. As a marketer, you need to fully understand your customers’ motivations because that is key to positioning.
2. Remember that price often implies quality
The Indian consumer’s preferences had evolved over time: quality was also a crucial element in car purchasing decisions, not just price. They also associated low price with low quality. In this case, the Nano’s exceptionally low price was a sign of its quality, and consumers interpreted the Rs 1 lakh price tag to mean that the Nano was a poorly built car. Reports of the Nano catching fire did nothing to improve this perception. In practice, the car only produced 36 horsepower and a top speed of 65 miles per hour.
While it lacked many of the things one would normally expect from even the cheapest cars in Western countries, such as air conditioning, the price raised questions about whether the car’s design was compromised and whether the car was safer, for example. a motorcycle. So be aware of what your price might unintentionally convey to your customer.
Related: How to define your product and set your prices
3. Don’t try to be everything to everyone
When launching a product, it is important to clearly define and understand the target audience – this adds important focus to your positioning approach. A clearly defined market allows a marketer to tailor messages to better resonate with the target customer segment. In the case of the Nano, it was never clear who the Nano was intended for. Should it replace the motorcycle for commuting? Was it an ambitious first car for a young driver? Or was it a second car for a wealthy family? By trying to please everyone, the Nano failed to create a strong connection with a specific customer segment.
4. Respect your marketers’ research
Even if a company’s top executive is driving a product launch, it may still be worth listening to your marketing manager, who is more knowledgeable about consumer sentiment, market research and branding pitfalls. Visionary leadership must be accompanied by sound marketing strategies that combine consumer psychology and positioning.
When Ratan Tata chose price and based product design on price, he inadvertently took away some of the most important levers available to Tata’s marketers. Tata Motors marketing managers could not influence the positioning at all. The fact that Tata announced all this publicly well before the launch meant that marketers had no control over the message and perception of the product. So, as a business leader, respect the opinions of your marketers.
Related: 5 Steps to Positioning Your Brand for Maximum Success
In summary, the failure of the Tata Nano offers crucial insights for marketers, highlighting the importance of understanding your customers’ emotional motivations, perceptions of price and quality, clearly defining your target audience and conducting your marketers’ research respect. Keeping these positioning lessons in mind can help ensure your next product launch is a success.