Capturing value – Managing Price

For the scope of this exercise, I will be considering the passenger cars (A & B
segments) in the Indian market.

What drives a car demand is really a tough question considering the crowded car
market in India. Purchasing of the car has lots of emotional factor behind it and it
is always a challenge for the car manufactures to satisfy.
In India, cars are being purchased especially for
a) Commute to work place (self/house hold)
b) For business/professional use
c) For social outings (city/highway)
d) Shopping
e) Dropping children at schools
f) Weekend trips etc;
And depending upon the principal application, customers’ buying decision is
based on the value he/she perceives in a particular car model. Tata Motors
has recently conducted a country wide research for understanding the various
segments of the market and their expectations. The study indicates that while
purchasing a car (A & B segment), the customer’s (applicability of the findings
for foreign markets is yet to be done) decision is always based on three
dimensions
a) Psychological dimension: “what do I get out of my car for myself?”
b) Social dimension: “what do I show about myself with my car?”
c) Functional: “ what do I acheive without any compramise?”

• “Car reveals a person’s personality , for eg colorful cars are preferred by

woman”
Social • “Cars are indicators of financial status, taste and lifestyle”

 “When you have everything like car , house money , family is happy , you
are happy”
Psychological “You feel safe and secured in the car , from hot sun , rain, winter “

“You can carry your kids safely”

“price first, secondly fuel consumption, then design and spare parts”

“Male mostly concentrate on the speed and performance “

Functional
“ Like to have an economy and an environmental friendly car “

“Sometime use car when going with the entire family.”

Ref: Tata Motors research
All the above decision drivers are considered as the refernce to classify the
faetures and performance attributes offered across the variety of passenger
cars (mostly, A-, A, B- and B segment). The analysis shows following
clusting- a) Core needs based on the Functional benefits b) Must have
features based on Funtional as well as Relationship bebenits and c) Good to
have features. The same is illustrated as below:

Customer benefit analysis:

Good to have

Fuel options like

CNG/LPG Rear screen wiper
Must have
Seating options Stylish looks
Brand

Ride & handling Core-

Larger boot
Functional
space
Metallic Mileage Power
colours Low maintenance Warranty
Powerful AC Decorative
Pick-up interiors
Interior space
Power window
Comfort &
Tubeless convenience
Power steering
tyres
Inbuilt infotainment

Anti theft system Ground clearance

Ref: Tata Motors research

Tata Motors later conducted the survey of 2500 customers of A & B segment
(internal analysis) across all Tier 1 and Tier 2 cities in India and identified
following pattern related to perceived importance of the above mentioned
attributes. The same is represented in the bar chart as below. The preference
pattern is based on the customer feedback to the questionnaire.
Preference pattern
Fuel type
Decorative interiors
Metallic colours
Ground clearance
Tubeless tyres
Anti theft system
Comfort & Convenience
Powerful AC
Inbuilt infotainment
Seating options

Ride & Handling

Power steering
Power window
Warranty
Attractive styling
Brand
Interior space
Power
Lower Maintenance cost
Mileage

0% 2% 4% 6% 8% 10% 12% 14% 16%

Perceived importance

Ref: Tata Motors research

Based on the above data, it is evident that Brand, Interior space, Power,
Warranty and features like power steering; decorative interiors etc are the
major offerings considered as against the price of a car. All other features
and performance attributes are considered secondary.

To illustrate the value proposition, an example of Tata Indica Vista and Suzuki
Swift is being considered as follows:

Value proposition of Indica Vista: Priced between `3.75lac to `5.75lac

1) Mileage : best in class ~ 22 Km/lit

2) Interior space : best in class 5 seater
3) Boot space : best in class boot space (450 lit)
4) Power : 79 PS with Euro IV emission norms
5) Ground clearance: best in class (180mm)
6) Rigid structure meeting Indian Safety norms
7) Features like inbuilt infotainment system, tilt able power steering,
power window, rear wiper, antitheft system
8) Brand: Tata Brand (perceived for Trust and indigenize vehicles)
Value proposition of Suzuki Swift: Priced between `3.95lac to `6.15lac

1) Mileage : Near best in class ~ 21.6 Km/lit

2) Power : 79 PS with Euro IV emission norms
3) Option for personalization: best in class (50 different combinations)
4) Rigid structure meeting European norms
5) Warranty : Best in class (3 year unlimited kilometers)
6) Comfort and convenience: Best in class
7) Ride and Handling : Best in class drivability, maneuverability, ease of
parking etc
8) Brand : Maruti-Suzuki (perceived for best quality-reliability and nation wide
service networks)

With above value proposition, Tata Indiac Vista has market share of ~ 11.45
% as against that of Maruti-Suzuki Swift market share of 28.92%.
The comparison of the offerings clearly indicates that Indian consumers (of A
& B segment cars) value Comfort, ride & handling, warranty (maintenance
cost) & brand more than that of indigenization, interior space, rigid off road
capabilities at the similar price range (`3.50lac to `6.30lac). This in turn
indicates that a car model from a reputed brand offering all the mentioned
value proposition at a price point less than `3.50lac can create a disruption in
the Indian market. This is exactly what is being followed by Chevrolet and
Ford while launching their new products viz. Beat and Figo recently in the
Indian markets. Both of these cars are enjoying ~18% market share within 6
months of the launch.