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In 2009, Tata Motors, one of India’s leading automobile companies, launched Nano, a car priced at about $2500 (or INR 100,000), around half the cost of its nearest rival. It was known as the “world’s cheapest car.” The company’s website crashed because it received over 40 million hits in a short span, which it was not able to cope with.
Buying a car in India was a luxury back then. For context, the number of cars in India per capita was significantly fewer than in the United States — around 20 in India vs. 800 in the U.S. per 1000 inhabitants. While the Indian passenger car market saw 1.4 million units being sold in 2008, the then lowest-priced car, the Maruti Alto sold 230,000 units, almost 15% of the entire market. As a highly cost-sensitive population, Indians flocked to motorbikes, with 8 million units sold in 2008. Thus, cars at the lowest end of the price range competed with motorbikes and not necessarily with just other cars.
The launch of the Nano was driven by Ratan Tata, Chairman of the Tata Group, who promised a car priced at INR 100,000 (or INR 1 Lakh). Tata zeroed in on this price point, as it is a symbolic benchmark in India, and then on his engineers to build a car that could be sold for this price. He believed that the Nano would democratize car ownership and make the dream of owning a car affordable to a whole new stratum of society, especially those who would have otherwise bought motorbikes.
It was estimated that Tata Nano could expand the Indian car market by 65%. But the Nano underwhelmed — the maximum sales ever achieved was 75,000 units in 2012, with sales declining rapidly thereafter. In fact, in February 2019, just one Tata Nano was sold in the entire country, and the Tatas stopped production of the car in 2020 altogether.
This was a costly misadventure for the Tata Group that holds a lot of valuable lessons for marketers.
So, what positioning lessons can we learn from the Nano?
Related: Why Positioning Is More Important Than Ever
1. Do not overlook your customers’ emotional motivations
When you are positioning your product, you need to really understand your consumer and their emotional needs. For Indians, car ownership was a matter of pride, not just utility, and buying a car was a sign that one had arrived in society. This is critical to understand. The previous cheapest car in the market, the Maruti Alto, was a very successful automobile and bought by hundreds of thousands of Indians, but it was never advertised as the cheapest car in the market.
No one who wants to signal to society that they are doing well in life would want to be associated with the “world’s cheapest car.” But, wittingly or unwittingly, that is unfortunately how the Nano was positioned, and it turned out to be a colossal mistake. As a marketer, you need to fully understand your customer’s motivations as that’s key to positioning.
2. Remember that price often implies quality
The Indian consumer’s preferences had evolved over time: Quality was also a critical element in car purchase decisions, not just the price. They also associated low price with low quality. In this instance, the extraordinarily low price of the Nano was a signal about its quality, and consumers interpreted the 1 Lakh price tag to mean that the Nano was a poorly built car. Reports of the Nano catching fire did nothing to help that perception. In practical terms, the car provided only 36 horsepower and a top speed of 65 mph.
While it was missing many of the things that one would normally expect even in the cheapest automobiles in the Western countries, such as air conditioning, the price point threw into question whether the car’s build was compromised and whether the car was any safer than, say, a motorbike. So, be cognizant of what your price point might unintentionally convey to your customer.
Related: How to Define Your Product and Set Your Prices
3. Don’t try to be everything for everybody
When launching any product, it is critical to clearly define and understand the target audience — this brings an important focus to your positioning approach. A well-defined market allows a marketer to tailor messaging to resonate better with the target consumer segment. In the Nano’s case, it was never clear who the Nano was for. Was it to replace the motorbike for commuting? Was it an aspirational first car for a young driver? Or was it a second car for an affluent family? By trying to cater to everyone, the Nano failed to connect strongly with any specific segment of customers.
4. Respect your marketers’ research
Even when the top executive of a company drives a product launch, it might still be worthwhile listening to your marketing manager who will be closer to consumer sentiment, market research and branding pitfalls. Visionary leadership needs to be balanced with grounded marketing strategies that combine consumer psychology and positioning.
When Ratan Tata chose the price point and drove the product design around the price, he unwittingly took away some of the most important levers that Tata’s marketers had. The marketing managers at Tata Motors couldn’t influence positioning at all. The fact that Tata announced all of this publicly, well before launch, meant that the marketers controlled nothing about messaging and how the product would be perceived. So, as a business leader, respect your marketers’ opinions.
Related: 5 Steps to Position Your Brand for Maximum Success
In conclusion, the failure of the Tata Nano offers crucial insights for marketers and highlights the importance of understanding your customers’ emotional motivations, perceptions of price and quality, clearly defining your target audience and respecting your marketers’ research. By keeping these positioning lessons in mind, you can ensure your next product launch is a success.
