Report on Marketing Strategy of Maruti Versa

We have analysed Auto sector in India. The product segment is Multi Purpose Vehicle

(MPV). Then analysis of consumer behaviour is done using segmentation and decision

making parameters. We have observed major competing brands with their target and

positioning. Finally we have identified a product with decreasing market share (Maruti

Suzuki Versa) and provided recommendations which could have saved the brand.

Auto Sector in India:

Introduction

The Indian auto industry is one of the largest in the world with an annual production of

21.48 million vehicles in FY 2013-14. The automobile industry accounts for 22 per cent of

the country's manufacturing gross domestic product (GDP). An expanding middle class, a

young population, and an increasing interest of the companies in exploring the rural

markets have made the two wheelers segment (with 80 per cent market share) the leader of

the Indian automobile market. The overall passenger vehicle segment has 14 per cent

market share.

India is also a substantial auto exporter, with solid export growth expectations for the near

future. Various initiatives by the Government of India and the major automobile players in

the Indian market is expected to make India a leader in the Two Wheeler and Four Wheeler

market in the world by 2020.

Context:

Economic:

Increase in Purchase Power Parity led to the increase in market share of compact

cars.

EXIM policy has helped car manufacturers to boost exports.

Major global players like Audi, BMW, Hyundai etc have set up their manufacturing

units in India leading to car price reduction.

Auto industry registered a growth rate of 65.35 % in 2002-03 and 16-18% in 2011-12.

Social:

Indian customers are discerning and well informed. They are price sensitive and put

a lot of emphasis on value for money.

Preference for fuel efficient cars with low running costs.

Technological:

Emphasis on R&D by the govt. through initiatives like NATRIP (National Automotive

Testing and R&D Infrastructure Projects)

Entry of global companies into Indian market helped to develop new technologies

along with new product process.

Consumer Behaviour:

Decision Making Parameters:

1. Social Parameters: This includes road infrastructure, life style, competition in

market

2. Economical Parameters: Monthly income, disposable income, loan interest,

easy loan availability, fuel price.

3. Political Parameters: Government budget planning, taxation and duty

structure.

4. Product & Technology Parameters: Exterior/interior of car, performance,

driving comfort,

5. Demographic Parameters: Source of income, gender, education, occupation,

age

6. Geographic Parameters: Region, Size/Area, Population density, off-road/on-

road.

7. Psychographic Parameters: Activities, interest, opinions, attitudes

Segmentation by utility:

1. Family Car Segment: Small Families/Large Families

2. Premium Car Segment

3. Commercial Usage: e.g. : Car Rentals, Cab Service providers, Ambulances and

Service vans.

In 2001, Indian consumers were unaware about the segment MPV – Multi Purpose

Vehicle.

Major Competing Brands (in 2001, Price segment: C, 5 L to 10 L):

Maruti Versa, Target: Middle class and upper-middle class, Positioned as : A MUV for

the entire family travelling together

Ford Ikon, Target: Young business executives, Positioned as : Positioned as a car

designed for customers by improved fuel efficiency and good in city driving

experience

Fiat Palio, Target: Positioned to capture the segment graduating to Hatchback,

Positioned as : A car with a new design and high performance

Tata Indigo, Target: Targeted towards the families belonging to upper middle class

segment, Positioned as : Positioned as one of the most reliable sedan car delivering

competitive fuel efficiency

Hyundai Getz, Target: Young urban upper-middle income group, Positioned as : A

global small car with sporty looks

Maruti Wagon R, Target: Middle class and upper-middle class, Positioned as : A

compact car for the smart urban nuclear family

Buying decision of target segment:

Source: SIAM

Ford Ikon: Limited Editions, Ikon- Made for India : Priorities were ride comfort on

poorly maintained road, stable handling on bad surfaces, interior spaciousness,

comfortable entry and exit and affordable cost. Further, in order to enhance the

driving comfort, sufficient ground clearance, powerful and smooth suspensions,

durable tyres, low turning diameter and power steering were accommodated. The

company also paid equal attention to the interior comfort. Based on the assumption,

that Indian car owners are Chauffeur driven, the rear part of the interior received

superlative attention. As some of the car owners wear turbans, adequate rear

headroom was provided. As Indian drivers tend to sit close to the steering wheel, the

door apertures have been designed to be tall enough to enhance easy entry and exit.

The company also paid meticulous attention to the special needs of women. As

Indian women wear Sarees, snagging was a perennial problem. In order to overcome

this, sharp edges were eliminated by using injection-moulded parts. Also the length

of the metal tracks was reduced. Another feature, designed in response to the Indian

customer requirements, was the massive trunk volume of 400 litres. This was

necessitated by the fact that the luggage carried by the Indians particularly during

the family trips is quite large by any standard. The air conditioning system was

another attribute, which had to be improved significantly. Information collected in

the system about various weather conditions help them to accurately answer this air

conditioner questions. The air conditioner in Ford Ikon was developed taking into

account the extreme temperatures in different parts of the country and particularly

the hot summer. The fact that the air conditioning system in Ford Ikon was validated

during the summer of 1999 in Rajasthan provides ample evidence to the importance

attached to the design and development of the car in accordance with the

expectations of the Indian market.

Tata Indigo:

The brand adopted the tagline " Spoil Yourself" and all the ads, highlighted the

goodies that came with the product. Another series of ads promised the customers,

business class experience. The basic focus of the brand was to drive home the fact

that Indigo has more legroom and space compared to most of the C-class sedans.

This campaigns and the reasonable performance of the car with the tempting price

tag ensured the brand's success in the market. Indigo has now 33% market share in

the c-segment.

Marketing Mix (Maruti Versa):

Product:

Launched as Multi Purpose Vehicle, with width of 1,475 mm, height of 1,905 mm and

length of 3,675 mm.

It was offered with a petrol engine and had a seating capacity of 8 persons, whereas

the base model came with a 5 seat configuration.

It was powered by a 1298 cc 1.3-litre 4-stroke, all aluminium water cooled engine,

which had the potential to belt out a maximum power of 82 bhp with peak torque of

102 Nm. (Same as Maruti Esteem)

It is a perfect family vehicle as far as its interiors, internal space management,

engine, suspension.

Twin Air Conditioning

High Power to Weight ratio, results in superior pick up and acceleration.

High seating position and easy controls make it a driver-friendly car. It is easy to park

and has ability to cruise at high speeds with full ease.

The occupant’s safety is ensured during front collision because of pout of the

bonnet.

The capabilities matched the likes of Toyota Qualis and best in class technical

capabilities in the given price range are added plus points.

Price:

Versa was launched with a price of Rs 5.15 lakh for the base model and the top end

model costs around Rs 6 lakh.

Versa was priced at par with Maruti Esteem and other entry level sedans.

Sedan was available at the same price. Moreover the ' Mini Bus ' shape of the car

also was a put off for many customers .

Place:

Distribution Channel: Maruti Suzuki has well established network of distribution

channels all over India for its products. A dedicated floor was allocated to Versa to

improve the showcasing of the product.

Direct sales:

1. Offered Exchange offer for up-gradation from 4-5 seat vehicle to Versa at

competitive discounts.

2. Special discounts to joint families with 4 or more children in a house.

Indirect sales:

1. Promoting Versa for commercial use like intra-city travel for various agencies

(viz. staff movement for companies, small gatherings, etc.)

2. Use as a special purpose vehicle e.g. ambulance, service van, etc

Promotion:

Versa was promoted as a “complete family car” to target big families segment in India. The

message of staying together & travelling together would help to tie a closer relationship

with prospective customer.

Individual communication:

1. Periodic promotional events at major distribution centers by celebrities like

Bacchans'. Celebrity would also be featured in various electronic media (e.g.

television, radio, online websites) advertisements, print media adv.; and

hoardings & banners.

2. Promoting test drives with whole families to enable customer to check actual

comfort and quality of ride.

3. Roadshows and display of vehicle in various exhibitions & festivals.

Print Media:

1. Periodic advertisements in leading national newspapers, sports magazines,

automobile magazines etc. as well as in local language.

2. Publishing interviews of satisfied customers in their own language.

TV Media:

1. Regular ads. during popular time e.g. soap-operas (to target families) or

cricket matches.

Identifying problem brand:

In October 2001, Maruti launched ‘Versa’ in Multi Purpose Vehicle segment. Versa was the

first Multi Purpose Vehicle from Maruti. It was a sad story in Indian brand scene. This brand

was launched with much hype in 2001 but failed to make the cut. The sales was just 808

cars/year in calendar year 2002.

Versa was the logical upgrade brand for Maruti Omni. Omni was successful as a family van

and Maruti thought that there is a market for a luxury van that can carry more passengers

than an ordinary car. Versa is the Indian version of the popular Japanese Van EVERY.

Problem Analysis:

Product:

Versa was a large car and the initial buyers were essentially those who had large family.

There were four variants namely Versa std, DX, DX2 and the top end SDX. For a small

family , there was no logic in going for Versa when a sedan was available at the same price.

Moreover the 'Mini bus' shape of the car was also a put off for many customer. Fuel

consumption of Versa was high, mileage only 11 kmpl and diesel model was not available.

Pricing:

Despite the dream launch, Versa failed to generate volume . The key reason was the price.

Versa was launched with a price of Rs 5.15 lakh for the base model and the top end model

costs around Rs 6 lakh. Those enthusiastic customers who flocked the showroom after

viewing the ads were shocked by the high price of Versa. Versa was priced at par with

Maruti Esteem and other entry level sedans.

Maruti was wrong in estimating the customer's perception of price in this case. It was

paradoxical because the company had blockbuster products like Maruti 800 and Alto which

were in sync with Indian consumer's price value equation. In the case of Versa, Maruti was

little too ambitious.

Price reduction 1: On June 2003, Maruti reduced the price to 4 lakhs due to poor sales.

Price reduction 2: Again on April 2004, price was further reduced to 3.27 lakhs resulting in

sales increase as given in table.

2002-03 2003-040

1000

2000

3000

4000

5000

1950

4291

SALES (UNITS)

2002-03 2003-040123456 5.5

3.27

PRICE in lacs INR (avg)

But these improved sales were in no way comparable to other models of Maruti as they

were too high with Maruti 800 posting a sales of 95,924 units/yr.

Positioning:

Initial Launch: Versa was launched as an affluent Microvan. The brand was positioned as "

Two luxury cars for the price of one" . The ads talked about twin A/C, comfort and space.

Re-launch: In 2004, Maruti re-launched Versa with new positioning. The brand’s new

positioning was based on the joys of travelling together. The tagline was changed to "

Travelling in company in a car has its own kind of fun". New campaigns were launched

which highlighted the theme of travelling together . The aim of the campaign was to inform

the new reduced price along with conveying that Versa is ideal for large families.

But these campaigns did not had the desired results. Although sales peaked immediately

after the announcement of price cut, Versa was not able to sustain the volume. More over

the brand was eclipsed by the success of Maruti Wagon R which was priced even higher

than Versa and with less leg-space and engine power.

J.D. Power Asia Pacific on competitive India passenger-car market established that despite

its Japanese origin, consumers view Maruti Suzuki as an Indian brand, less modern than

other brands but distinctly positioned as offering affordable and fuel-efficient cars. Similar to

Maruti Suzuki, Tata also is seen as a brand primarily positioned on affordability and fuel

efficiency. In contrast, Japanese brands, such as Honda and Toyota, are able to more

effectively differentiate themselves from other brands. Consumers in India perceive these

Japanese brands to be more contemporary—offering the latest technology and engineering

—and perceive them to have a more global image than their European, Korean and U.S.

counterparts. This image was also detrimental for Maruti Suzuki to position Versa among

foreign player brands.

Recommendation: The promotion and distribution of the product was apt to Indian market

and sentiments. The positioning and pricing impacted the Versa success. So

recommendations centred to these are:

1. During Initial Launch: Positioning which talks about features of luxury cars with low

price contradicted the actually high launch price. So Maruti should have priced Versa

much lower so that it should not have competed with entry level sedans.

2. During Relaunch: Maruti had done a comparatively better positioning of travelling

together and a reduced price but the product remained same. They should have

made some changes in exterior, interior and additional features. That would have

made the people to perceive Versa as a different product with better features and

reduced price.

3. Maruti should have kept an eye on Versa’s appearance as the looks of competing

brands were much appealing. The initial launch positioning of luxury car was not

correlated to the actual ‘box’ type car.

4. Maruti could not grab the first mover advantage because of over pricing Versa. As

purchasing in India was dependent on disposable income.

5. Versa came only in petrol model and diesel model was not available. Mileage was

also low (11 kmpl) leading to high cost of owning the vehicle. Maruti should have

launched diesel model too. These factors reduce the running cost and increase the

economic value to customer.

References

1.Maruti Suzuki Annual Report (2012-13)

2.EY Report on Indian Passenger Vehicle Industry :

http://www.ey.com/IN/en/Industries/Automotive/Mega-trends-shaping-the-

Indian-passenger-vehicle-industry

3.Auto Car Reviews: http://www.autocarindia.com/auto-reviews/maruti-suzuki-eeco-

269284.aspx

4. Economic times

5. Top Speed Magazine Reviews.