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Tata Ace Serving An Ace

Tata Ace Serving An Ace






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  • It’s difficult to get spare parts of ape truck – low in serviceGood resale value
  • Ray of hope - Improving rural access by launching the PradhanMantri Gram SadakYojana (Prime Minister’s Rural Roads Program) – 10th 5 yr plan

Tata Ace Serving An Ace Tata Ace Serving An Ace Presentation Transcript

  • We begin with a story!!
    • Name: RavindraSalukhe
    • Sells vegetables and fruits
    • Upmarket Cuffe Parade in
    South Mumbai
    • A shop area of 1.5X2.2 sq. mtrs.
    • Borrowed Rs 1 lakh from his
    brother & balance from ICICI
    • Pays an EMI of Rs 6,500
    The reason: his mobile grocery unit, a TATA ACE, earns him a monthly income much higher than his EMI payout.
    Source: Business Standard Article : Serving a ‘super’ ace 05.11.2009
  • Agenda
    LCV Segment & Road Infrastructure (India)
    TATA Motors
    Gap Analysis & Market Research
    Existing Competition
    New Product Design
    Servicing Mix
    Launch & Response
    The Way Ahead
  • “TATA ACEbears testament to the company’s efforts to identifynew categories & develop logistic solutions that will improve the lives of the people.”
    Ravi Kant, Vice Chairman, Tata Motors
    Source: THE HINDU: Making Inroads Serving a ‘super’ ace 06.05.2005
  • Redefining the adjectives!
  • LCV
  • Segment Overview
    • Structure of Indian CV Segment
    • Classified on Gross vehicle weight (GVW)
    • GCW<7.5tonnes – LCV
    • Goods 77% + passenger carriers 23%
    • 45% LCV + 55% M/HCV
    Source: SIAM & ICRA CV Sector Report April 2009
  • Demand Drivers
    • GDP/IIP & Freight Outlook- High degree of correlation
    • Fuel price- PBIT rises 3.5% for a 1% decline in fuel prices
    • Policy initiatives
    • Discouraging the use of old, polluting and uneconomical vehicles.
    • Supreme Court ban on overloading, Leading to incremental volumes in the last 2 yrs
    • Scrapping vehicles >15 years old; Potentially unleash a huge replacement demand.
    • Replacement cycle- Declining from about 12 years to nearly 7 years now. The proportion of trucks under five years of age rose from about 34% in FY02 to nearly 45% in FY06
    • Indian Railways Freight Services- Vis-à-vis the railways, the share of road transport currently stands at about 65%.
    • Easy availability of finance at low interest rate
    Source: DBS Cholamandalam Securities Ltd.
  • LCV Segment Overview : FY08
  • PEST Analysis
  • PEST Analysis
  • Road
  • Facts & Figures
    • 3.32 million kms road, 2% Highways, 12% of this 2% four lane
    • Traffic in cities, entry barriers/ timing barriers for heavy vehicles
    • Poor rural road connectivity
    • Ban of 3-wheelers on flyovers due to slower speeds & safety considerations
    • Golden Quadrilateral Project
    • PradhanMantriGraminSadakYojana
    Mr. Ratan Tata
    Mr. Ravi Kant
    Mr. GirishWagh
  • Product Range
  • TATA Motors-Financials for FY 09
    • Basic Earning Per Share (EPS) decreased to Rs. 22.70 as compared to Rs. 52.64 last year for Ordinary Shares.
  • The idea of a vehicle called Ace: GAP analysis
    Market Situation
    • Government plans of road network expansion.
    • Higher GDP growth positively correlated with truck penetration.
    • High probability of increased demand in LCV segment.
    Company Situation
    • Tata product portfolio lacked greater than 45tons and sub 2 ton vehicles.
    • Scope of enhancing the market share was there
  • GAP Analysis
  • GAP Analysis: Value Net Model
    Customers: Balanced perspective and ROI sensitive customers would buy the product
    Suppliers: TATA could utilize its existing supplier base
    Competitors: There was no competition in the identified product segment
    Complementors: The Government road network improvement schemes and high GDP growth rate of the country
    SOURCE: 12manage.com
  • GAP Analysis: Company strategy
    Basis of Strategy
    • Value Net Model
    Strategy Adopted
    • New Product Development
    Company Decision
    • AddTata Ace, “The Last Mile” distribution vehicle to the Product Portfolio
  • ANSOFF Matrix
  • Market Research Objectives
  • Collection of Information
    Sampling plan: Ajudgmental sampling technique was used
    Contact method: Personal interview
    Primary datawas used
    Research Instrument:
    4000 truck and three wheeler drivers were interviewed!
  • Information analysis and findings
    There was market for a vehicle that offered the price, fuel efficiency, and maneuverability of a three wheeler but with the safety, durability, additional payload, and comfort of a four-wheeled truck.
    Customers also viewed four wheelers as a higher-status vehicle.
    Customers wanted a product that would travel across the length and breadth of the country and would withstand overloading.
    People wanted a vehicle with a feel good factor for the driver.
    In order to convert the prospective consumers into potential consumers the price had to be below 2lacs.
    45% of the Ace’s customer base would come from people planning to purchase three wheelers, 15% from potential pickup and light-commercial-vehicle purchasers, and 40% from first-time commercial-vehicle purchasers.
  • Decision making
  • Existing
  • Competition
    Commercial Vehicle Sector
  • Players in 3 wheeled vehicles
  • Players in 4 wheeled vehicles
  • Functional Market Segmentation
    Customer Market Segmentation was done within the functional market segments
  • Customer Market Segmentation
  • Customer Market Segmentation
  • Targeting
  • Positioning
  • Positioning
    Safaltakinayisawari – jo do lakhzindagibadalchukahai – aapkachotahathi
    • Positioned as ChotaHathi
    • A symbol of power
    • A symbol of ‘mini’ product
    • A symbol of reliability
  • Positioning
    Boy rushing to school
    Off to work in Tata ACE
    Wife seeing husband off for the day
    To school in Tata ACE
  • Positioning Statements
  • Competitive Positioning
    Force Motors Minidor
    Bajaj GC Max
    Bajaj GC Max
    M & M Champion
    M & M Champion
    Tata ACE
    Tata ACE
    M & M Maxx
    Piaggio Ape Truck
    Piaggio Ape Truck
    Tata SFC 407
    Eicher 10.xx
    Eicher 10.xx
    Swaraj Mazda Cosmo
    Swaraj Mazda Cosmo
    Style & Comfort
    Style & Comfort
    Piaggio Ape Truck
    Tata ACE
    Tata ACE
    Tata SFC 407
    M & M Maxx
  • Designing the ACE
    • Per unit cost of transportation perceived as a much
    desired quality. Acceleration not of much importance
    • Overloading stress points identified using CAD
    • Higher strength steel used only there to come out with
    low cost yet durable product.
    • Semi-monocoque frame
  • Designing the ACE
    • Customer preference – Diesel engine and 1 engine
    option ruled out due to NVH targets
    • Foreign made 4 cylinder engine would double cost and HP
    • Indica model based 2 cylinder engine reduced costs
    • Rotary fuel injection pump met emissions standard and
    avoided use of electronic system
  • Designing the ACE
    • In spite of strict cost target, M1/N1 standard
    adhered to .
    • Customers were not for Semi forward engine
    • Flat faced model adhered to which gave it a large
    commercial vehicle look and better space
    • Full frontal crash requirement
  • Product
    “At the heart of any great brand lies a great product”
    BBC Top Gear’s Annual “Best commercial vehicle design” Award winner -2006
  • Product Specifications
  • Product Features
  • Tata Ace differentiation - Versatility
    • Ideal for both City and rural areas.
    • 12” tyres give higher ground clearance and
    higher loading capacity
    • Rigid front axle for Indian conditions & a turning radius of 8.6m
    • The truck-like strength of the front and rear leaf spring
    suspensions provide a smooth riding experience
    • Usages range from vegetable vendors to cargo pickup to
    passenger transport.
  • Tata Ace differentiation - Savings
    • Comfortable conditions for the driver allow the ACE to
    travel over 500 kms a day
    • Electronic start and stop increases mileage by 6-10
    • Flat, large loading area gives a fantastic opportunity to
    earn higher business revenue
    • Low operating costs and highly reliable – an
    altogether safe investment for small time
    Ample load space with three side panels
  • Tata Ace differentiation - Safety
    • M1/N1 safety norms for frontal crash, roof crush etc
    • Seat belts & bright halogen bulbs Headlamps
    • High performance by front disc brakes & rear drum brakes
    • Large windscreen, large rear-view mirror and the large rear window
    • Easily accessible hazard warning switch for emergency
    • The frontal windshield was pasted to the steel window frame to add
    structural strength
  • Tata Ace differentiation - Comfort
    • Sheet metal cab with doors, roof lining, floor mat
    protect from rain, heat and cold
    • Control pedals, gear shift and parking brake
    ergonomically positioned for comfort
    • Higher door opening angle and low floor height for
    easy boarding
    • Sun visor for protection from direct glare
  • Tata Ace differentiation - Performance
    • 700cc engine delivers a power of 16 HP @ 3200 rpm
    • Torque of 3.8 m kg @ 2000 rpm
    • Soft cushion seats and back support
    • Meets BS II and BS III standards
    • Lowest loading height of 675 mm, heavy loads can be conveniently placed in the load body
    • The 4-forward synchromesh +1 gear box gives smooth shifting
  • Tata Ace differentiation - Style
    • Styled dashboard with tray, digital clock, radio fitment provision, utility
    tray and clearly visible instrument cluster
    • Smooth external finish - exquisite look
    • Flat faced large commercial vehicle look.
    • Lockable glove-box for keeping valuable documents
    • A spare wheel attached to the lockable swing frame at the rear
  • Tata Ace variants
  • ACE : Product Life Cycle
  • Target Segment for TATA Magic
  • Tata Ace Magic
    • A frills-free, affordable transportation
    solution for rural commuter
    • Passenger version of Tata Ace
    • Customer insight -ACE being used for
    passenger transportation
    • Separate marketing strategy adopted
    • Transport 4 to 7 passengers + baggage
    • Tubular construction, Rexene windows
  • Pricing
  • ACE Pricing
    Pricing Objective
    • Product- Quality Leadership
    • Perceived Quality higher than competing 3-wheelers
    • Priced just beyond the max price of 3-wheelers at Rs. 200000
    • A premium on the price of three wheelers
  • ACE Pricing
    • Determining Demand
    • Total Cost of Ownership less in the long run than three wheelers
    • Estimating Costs
    • Increasing Variable cost percentage of total costs
    • Target Costing method used to produce the whole product before at a predetermined cost
    Quantity Demanded
    Price (Rs.)
  • ACE Pricing
    • Analyzing competitors costs, prices and offers
    • Competitors sold at a lesser price than the target price of ACE
    • The value package of Ace was however higher than the competitors
    • Pricing Method
    • Value pricing
    • The Final Price
    • Priced at Rs. 225000
    • Priced at a premium of 12.5% over the maximum price of three wheelers in the market
  • VARIANT Pricing Strategy
    • Tata Super Ace
    • Is priced at Rs. 355000
    • Significant premium on the normal price of ACE
    • Increase in the value offering
    • Load Capacity of 1 ton
    • Increased driver comforts
    • Increased power at 70bhp
    • Tata Ace Magic
    • Passenger variant priced at Rs. 260000
    • Costlier than autos used for road transport
    • Priced higher than Maruti Omni van
  • Place
  • Inbound
    Value Chain : TATA Motors
    Transporters, Convoy Drivers Association
    Dealer Network, Marketing Research Firms, Vehicle Financing
    SAP , VCM
    SAP , CRM - DMS
    Suppliers , Contractors
    Regional Warehouses, Dealer Workshops, Distributors, TASS
    Strategic Alliances
  • Supplier Network : ACE
    • Outsource most of the parts
    • Convert fixed cost to variable cost
    • Wage rates of TATA motors double of suppliers
    • Aggregate Outsourcing
    • Procurement of sub-assemblies rather than individual parts
    • Concurrent Designing
    • Suppliers involved at design & development Stage
    • e-Sourcing
    • Requirement based e-bidding from prequalified suppliers
    • Parts Commonisation
    • Cost reduction due to bulk purchases
    • Supplier Commonisation
    • Use of existing supplier base
    81.5%Outsourced, 20% Reduction in cost
  • Distribution Network : Hub & Spoke Model
    • 3S to IS Approach
    • A sales outlet every 40 to 50kilometers
    • ‘Only Sales’ stores compared to traditional ‘Sales, Services & Spares’
    • Existing dealerships acted as hubs and set up 1S dealerships
    • Each dealer set up 15 to 20 1S stores
    • 300 new distribution points set up in 3 months
    • Location close to target market
    • Plant located in Pune at the time of launch
    • Target Markets : Southern & Western Regions
  • The Target Audience
    • Three Wheeler Owners
    • Owners of trucks
    • Trucking Fleet Owners
    • First time LCV purchasers
  • Communication Objective
    • Good Brand awareness of the umbrella brand, TATA
    • To communicate the benefits of the product, ACE
    • To develop a positive brand attitude among the target customer group
    • To translate the positive brand attitude into sales
  • Design the Communications
    Message Strategy
    • Dealers were educated in the benefits of Ace versus the competition
    • The core message was created around new opportunities that Ace would provide its customers
    • The dissatisfied three wheeler owners were targeted with the message of “feeling good about your job”
    • India’s first Mini Truck
    • Use of local languages for communication
    Creative Strategy
    • Tata - a trusted source of information
    • No other endorsers were used
    • Informational appeal of the product i.e. the load capacity, power etc.
    • Emotional benefits of the product i.e. better social status
  • Communication Channels
  • Marketing Communication Budget
    • Tata Motors did not have enough money to spend on the advertising budget
    • Affordable method was used in the launch phase to decide the advertising budget
  • 3 Ps of service
    • Free training to rural mechanics
    • Free tool set and signboard
    • Provision of spare parts and lubricants to mechanics and customers
    • Necessary help in case of major accident
    • Dedicated dealers
    • Well trained mechanics
    • “SUVIDHA”
    • Mobile workshops
    • Service outlet every
    40- 50 km
    Physical Evidence
  • CRM
  • CRM : Giving TATA an edge
    • Why CRM?
    • Low rating in Sales Satisfaction
    • Needed a centralized customer database
    • Respond promptly to customer requests
    • Required better feedback on product quality
    • Effective measurement of campaigns
    • CRM Implementation
    • CRM-DMS (Dealer Management System)
    • Launched in 2003
    • Now supports 15000 users
    • Covers 1000 locations
    • Real time customer data
    • Purchase Cycle Intimacy
    • Individual Ownership Experience
    JD Power SSI Scores
    Source: www.jdpower.com/corporate/india/ 
  • CRM : Giving TATA ACE an edge
  • Launch & Response
    • Launch
    • Launched in May 2005
    • Major 3-wheeler users in south & west
    • Priced at Rs. 225,000
    • Pune production facility close to target market
    • 25% of the country covered for initial launch
    • Response
    • Exceeded Tata Motors’s expectations
    • Sold its annual production target of 30,000 vehicles in less than a year
    • Increase sales by 13.1%
    • Market share increased by 13.6% points
    • Contributed 15 % companies volume in 1st year
    • 54% First time buyers, 33% Previously owned 3-wheelers, 30% owned LCV
    • ACE sold 90000 units in FY08
    • Rolled out 1,00,000th ACEwithin
    22 months of launch
    • ACE 26%YoY growth rate FY09
    • MAGIC37%YoY growth rate FY09
    • Has 90% market share against
    competitive launches from Piaggio
    & Force Motors
    BCG Matrix
    Source: TATA Motors Business Review 2008
  • SWOT Analysis
    • Strong brand name of TATA
    • First mover advantage
    • Good Consumer relationship
    • Continuous innovation
    • Good logistic management
    • Provision of finance to buyers
    • Higher cost
    • After sales service
    • Complaints on gear shifting
    • Rural market
    • Export Segment
    • High growth rate of LCV segment
    • Further fragmentation of market
    • Increased competition
    • Creation of a new segment by
    Mahindra & Mahindra’s GIO
  • Branding
  • ACE : Making of a Brand
    Source: The Blake Project: Brand Equity Measurement – Brand Insistence Model
  • ACE : Making of a Brand
    • Umbrella Branding : The TATA Legacy
    • ‘Pride of India’
    • Emotional attachment
    • Trustworthy
    • TATA Motors brand – taking a hit (2001)
    • Arrogant
    • Slow to respond to customer needs
    • Unreliable products
    • Research
    • Demand for scaled down version of TATA
    407 truck
    • Good brand image in LCV segment
    Source: JD Power Customer Satisfaction Ranking 2001
  • ACE : Leveraging the Brand…
    • Making ‘MAGIC’
    • Launch of ACE MAGIC in June’07
    • Variants
    • Super ‘ACE’ 1 tonner
    • Multiple engine variants
    • Gasoline & CNG
    • Accessory-production opportunities
    • Dumper attachment , Water tanker , Elevated platform
    • Green & Global : ACE Electric Variant (EV)
    • Joint development with Global Electric Motorcars
    • To be retailed in US market by Chrysler Corp.
    • 250 units US postal department
    Source: http://www.vicky.in/straightfrmtheheart/chrysler-to-sell-tata-ace-electric-in-us-2/
  • Exports
    • Emerging markets similar to India
    • Emerging markets more developed than India
    • Developed Markets
    • Countries for Expansion
    • Sri Lanka
    • Nepal (Specially for hilly terrains)
    • Bangladesh (CNG Variant)
    • Electric version for US market
    • South Korea
    • Africa
    • Gulf Countries
  • Rural markets – a huge potential
    &quot;It has always been our desire to anticipate demand and develop products to meet that need. We perceived that there would be a growing demand for a safe, reliable and versatile 4-wheel very light commercial vehicle for carrying goods and people. It would facilitate inter-city transport and extensively connect town and villages in rural India. I believe the Tata Ace will deliver excellent value to its owners and operators.&quot;
    • 56% of the National Income
    • 64% of the Total Expenditure
    • Predicted to be Rs. 16 Trillion by 2012-13
    • Needed for transporting agricultural yields
    • To deliver small lots of CPGs
  • Roads in Indian villages
    • 65% of country’s freight traffic through roads
    • 40% of villages(825000) have no access to all
    weather roads
    • Poor quality
    • Access cut off during rains
    • Under funded road maintenance
    • Northern and North-eastern states - poorly
    linked to the country’s major economic centres
  • Rural India – Road transportation
    Common modes of transport in villages -
    • Bullock carts
    • Human labour
    • Three wheelers
    Disadvantages –
    • Longer lead times
    • Shrinkage
    • Poor transportation – Longer cash conversion cycle
    • Hinder a high standard of living
  • Tata Ace - Rural markets focus
    Demand for
    • Small trucks delivering on full truck load basis
    • Cost effective transport for last mile delivery in supply chain
    • Safe transport for low income group
    • Emotional quotient
    Benefits offered
    • Training of rural mechanics free of cost
    • Free tool set and display at garage
    • Mobile Workshop
    Introduced Ace Magic targeted at rural population
    “If I drove a four wheeler, I would receive better marriage proposals in my village.”
  • The Way Ahead…
  • Stepping Stone for Nano
    • Involving customers in product development
    • Strict cost constraints
    • Market Research
    “Systematise and institutionalise the cost down efforts during the design and development phase to make the product more cost competitive.” ~ GirishWagh
  • New Competition
    • Mahindra is working on a mass-market cargo and passenger vehicle
    • The Rajkot-based Atul Auto Ltd new launch
    • Hyundai Motor Corporation, Korea, plans to set up a LCV manufacturing plant in India. Though Hyundai denied it may launch it LCV porter.
    • Bajaj Auto working on a 4-wheeled goods carrier
    • Other major players such as TVS, Hindustan Motors, Ashok Leyland and Suzuki are seriously mulling their foray in to this segment.
  • PIAGGIO APE – ‘APE’ING the ACE Success?
    • Offers 20 kplcompared to 14 kpl offered by Tata Ace
    • 6 speed gear box as opposed to 5 speed gear box of Tata Ace
    • Better design and styling
    • Maximum gradeability of 17 to woo hill station commuters
    • Lower turning radius – 7.7 m
    • High ground clearance of 185 mm
    • Aggressive price tag of Rs 215,000
    • 1 year , 36000 km warranty
    • 8 free services
    • New manufacturing facility in Uttarkhand250000 units
    • Industry specific incentives, free land & tax benefits
    • Entry into US market
    • After market accessories opportunities (attachments etc.)
    • Concentrate on after sales services to make competitive
    advantage sustainable (like extended warranty)
    • Focus on MAGIC design to make it appealing to a broader
    The Way Ahead….