The Story Behind Tata Nano’s Failure

The Tata Nano Story

Ratan Tata is well known as a social entrepreneur as most of his ventures are for society. His businesses have strengthened the country’s economy and have provided employment opportunities to many across various sectors. Ratan Tata is a philanthropist and, along with the Tata Group, committed to donating ₹1500 crore to fight COVID-19.

Tata Motors is the automotive entity of the brand and made a splash back in 2008 with the revolutionary Tata Nano. The vision was to make cars available to the lower-middle-class masses. The brand realized that there was a huge gap in the automobile industry, and Tata Nano was born as a result. The car came with the vision of bringing comfortable and safe mobility to the masses and was introduced as “The People’s Car” at the 2008 Auto Expo in India.

Tata Nano was presented as a 1 Lakh rupee car—small but spacious with a capacity of 4 and no power steering, no airbags, and no A/C in the base model. It stood firmly with quality, mileage, and environmental standards for the price.

Now, let’s look at how Tata marketed its new product and what led to Tata Nano’s failure as a brand?

Tata Nano’s Marketing Strategy

The target market was the middle-class and lower-middle-class sector, and hence the car was positioned and marketed as a “One Lakh Rupees Car.” Its price was its biggest USP.

Tata Nano was the most ambitious venture of the brand. To make it cost-effective, it was made of steel, was small, lightweight, and without luxury features. The marketing strategy was to stage it as an affordable car for the Indian masses.

It was presented as a safer alternative to a bike or a scooter for an Indian middle-class family of 4 members. Nano never intended to compete with other car companies. The funky colors appealed to modern families and the spacious interiors offered comfort.

Tata Nano’s marketing strategy seemed to be perfect so far, then what went wrong?

Customer Response to Tata Nano

Kunal Shah, the founder of Freecharge and Cred, often repeats this well-understood fact of how obsessed humans are with their social status. A car is a status symbol that everyone wants to own. The bigger and more luxurious the car, the higher they perceive themselves to be in society.

The major reason for Tata Nano’s failure is the perception it creates in the minds of its target audience. A car, back then, was a luxury to own, and not a commodity to use. Branding Nano as a “cheap car” killed the entitlement that was supposed to come with it, and hence people did not find it worth buying.

The pre-launch buzz around Tata Nano was huge. All the media houses, national and international, were extensively covering the Tata Nano story. The buzz publicized the product, but as a “cheap car.” But, Ratan Tata, in an interview, said that he always called it a “people’s car.” It was the media and unfortunately the company, that termed it as a “cheap car.”

5 Reasons Behind Tata Nano’s Marketing Failure

Tata Motors aimed to produce 2,50,000 Nano cars annually whereas the opening sales were 30,000 (approx.) only. The highest ever sales of 74,527 were achieved in 2011-12, which went down to 7,591 in 2016-17. The plant assembled only 1 Nano in June 2018 and closed production.

Harvard Business School covers a case study on Tata Nano’s failure and inculpates the company’s marketing strategy for the failure. Let’s see the 5 reasons behind Tata Nano’s failure.

1. Invalid market analysis

It seems like the company had assumed what their market desired. They were so ambitious about the product launch that they forgot to empathize with their target market before positioning their product.

Their emotional attachment to the product didn’t let them skeptically analyze their strategy. Tata possibly thought that the car was a necessity, but it was actually a luxury.

If they had given it more thought, they’d have realized that their customer did not want “the cheapest car.” They were more comfortable living as they were than going for a cheap car. Thus, a comfortable, fully functional car that came with a tag of “cheap” was not appreciated by the market.

2. The Lakhtakiya positioning

Tata Nano was often called “Lakhtakiya,” translated as “worth a lakh.” Tata Motors used the penetration pricing strategy. The company marketed it as the cheapest car in the world to make it accessible to the masses irrespective of their socio-economic background. The media hyped the positioning and it backfired.

A noble idea went kaput because it could not sell entitlement. People did not want to own an item known for its cheap cost. Also, with the tag of cheap, quality stereotypes are bound to arise. People assumed that cost-effectiveness comes with quality compromises, and hence Tata Nano could not find its footing.

3. Logic over emotion

Tata Nano’s marketing strategy was unable to touch the hearts of Indians. Buying decisions are mostly emotional rather than rational. The marketing campaigns lacked that emotional touch and focused more on the features.

Vouching on features in the marketing was also necessary, as the company wanted to tell people that they provide almost everything that cars usually have. But, somewhere, they could not bridge the emotional connection, and thus lost their grip on the market.

4. The hype

The Tata Nano launch was hugely hyped in 2008. And as people were waiting for the launch, Tata announced the shift of the brand’s production plant from Singur, West Bengal to Sanand, Gujarat on October 7, 2008.

The West Bengal government, led by Mamta Banerjee accused Tata Motors of land acquisition and initiated the “Save Farmland” movement with local farmers and environmental activists. Tata Motors had to leave the state and was welcomed by Gujarat to set up their plant at Sanand. But the delay dulled public enthusiasm.

The hype was a problem as it mainly revolved around the price of the Tata Nano and not around the value proposition.

5. Negative PR

The leftover image was destroyed by the negative PR it had attracted. Many times, the initial models of Tata Nano caught fire and burst into flames on the road. Some said it was because of the faulty wiring. Others said a foreign object had entered the exhaust system.

Also, its lightweight affected the stability of the car on highways. The engine was not powerful and no A/C was installed in the base model. All these things contributed to a poor-quality ride.

The on-road price of Tata Nano was 2.59 lakh rupees instead of 1 lakh, as promised. Its close competitor, Maruti 800 was priced at 2.88 lakh rupees.

Lastly, Tata Nano received a Zero-star adult protection rating in a crash test. It failed to meet the basic UN safety requirements, and thus the very purpose—the safety of the car was crushed.

All these incidents decided the fate of the car and soon enough the car faded away from the market.

Ref: -Pepper Blog