Positioning - Small Cars

Small Car
The small car is one of the largest car segments in India. It comprises of nearly two-third of the sales in the country.
This car segment has grown by 15% CAGR over last 5 yrs. The new breed of young executives with fatter pay-
checks has led to more purchase power. By the year 2010, India shall witness a boom in the small car segment with
major car makers making their foray in India and India will have small cars from General Motors, VW, Fiat, Ford,
Toyota, Honda, etc.
India will become the world's largest producer of A-segment small cars by 2013, a recent study by US-based market
global intelligence firm Global Insight reveals. By 2013, India will produce about 31 per cent of the world's A-
segment cars.
A combination of key reasons such as technical expertise, low costs, stable economy, and government policies
favouring small cars, large and integrated supplier base, and competence in diesel power train manufacturing will
propel India as a major small car manufacturer.
Segmentation
1. Geographic
a. Region: The major regions for small car market in India are north, south, and west. The most auspicious
moths in the south, when buyers, laterally lap up cars from the showrooms, often turn out to be the lean
season in the north or west. So marketers need to identify when to market a product according to the
region in which the consumer lies.
b. Rural/Urban: Since more than 60% of the total population is living in interiors, it becomes all the more
important to cater to this segment. However, so far, the marketers have laid more focus on Urban/semi
urban market and their products are primarily catering to the needs of the urban segment. But with the
recent market hits, the companies are trying to pay more attention the rural market segment to gain
profits.
Ex: Maruti Suzuki India said that by the end of 2009 calendar year as much as 8 per cent of sales will
come from rural areas, up from 3.8 per cent last year.
Ex: Tata Magic which is priced @ 2.6lacs is primarily targeted to the rural India.
2. Demographic
a. Age & life cycle stage: Student, Young Married, Single working.
The average age profile of a car buyer is 25-46 years. Although the percentage of people buying cars
between 31 and 40 years of age has remained stagnant at 31 per cent (1999-03), there has been a 9
percentage point increase in the number of car buyers in the 25-30 age groups. The number of older
people (51 to 60 plus) buying cars has gone down.

b. Family Size: Average Indian household size is 5 people. Hence Small cars are the most obvious and
affordable choice available for the Indian middle class.

c. Income: Higher income households tend to be less price-sensitive, placing a higher value on buying
higher-quality merchandise. Because of the growth in dual-income households, there has been a dramatic
growth in the proportion of total spending in the economy coming from such households, implying that
the market for high-end products and services should increase substantially. Thanks to the easy
availability of cheap financing options, there has been an increase in the number of younger people
buying cars in India during 1999-2003EMI: a factor affecting the most of the buyers. 3 out of the 4 cars
sold in the country are funded by a loan.
Distribution of households (owning a car) by income
d. Occupation
Occupation of the consumer affects the
buying power. For ex: A Regular salaried
employee will easily get finance done for
buying a car , whereas a self employed
consumer will opt for full down payment
option. This explains the reason for high
contribution from salaried and self
employed people in buying small cars

e. Literacy Distribution of household (owning a car) by literacy%

3. Behavioural Segmentation
a. Decision Roles: When it comes to car, where huge investment is involved, people generally tend to take
reference from other users. They go for test rides, get it checked from some experienced people who are
much more comfortable about cars.
b. Occasions: In India, people do buy cars in the festival season, and during the marriage seasons.
c. Benefits: Consumer looks for the following benefits from a car.
i. Power: People do look for power from power. According to their need they look for cars in
their respective power basket (i.e. 600cc – 1300cc). A higher power is related to give higher
speed, acceleration by the consumers.
 ii.Technology: With all sort of products available in the small cars market, technology can act as
a differentiator for consumer. New technologies such as MPFI (multi point fuel injection),
turbo charging, electronic traction control, anti locking braking systems, and catalytical
convertors.
iii.Fuel Economy: People do look for better fuel economy in terms of mileage given by the car.
Preferred Fuel: With the rise in petrol prices, people have been looking for alternatives such
as diesel, CNG, LPG. Many car buyers in India prefer the diesel variant whatever may be the
choice of car, because of the favourable cost differential diesel.
iv.Low operational cost: For some of the users, operational cost is a major factor in deciding
the buying decision. Operational cost includes Maintenance cost, insurance cost, spare parts,
cost of service.
v.Space and comfort: Buyer does look for spacious and comfortable ride. Various factors in
deciding comfortable ride are leg room, head room, driving position, adjustable steering.
vi.Safety: the most important factor for family buyers is the safety feature of a car. A car must
follow safety norms, various safety features which people look in car are ABS, airbags.
vii.Styling: To certain buyers, functionality was not everything, looks were also important. They
wanted styling, and contemporary looks.
d. User Status: The kind of buyer can be classified into non-buyer, first time buyers, and repeat buyers. The
major of the buyers in the small car are a first time buyer, that’s why this market is often referred as entry
level car market. While going for car replacement, 50 percent of small car owners in India are again going
for small cars and are reluctant to experiment with luxury cars.
e. Usage Rate: On the basis of the frequency of travel, people decide on the car to buy. In case a person
needs a family car only for family outing, they may look for a one time investment in a spacious car. On
the other hand, if a person has huge amount of daily travel, he would prefer a good mileage car with less
operational cost as well.
4. Psychographic Segmentation
a. Social Class – Social class plays a major role in segmentation for the automobile industry. With more
than 40% of the population of Indian lying in the middle class bracket, it becomes all the more important
segment for the marketers to consider. Working class and upper lowers constitute the other prime target in
the small car manufacturers.
b. Life-style – life style is an important psychographic segmentation composed of a combination of factors
such as activities, interest and opinions. Ex: As part of its rebranding exercise, Fiat India is rolling out a
number of products to cater to the lifestyle segment in the auto market.(economic times)
c. Personality – The customers are further segmented on their personality traits like sports oriented person,
easy going. People are also segmented on their value system.

The awareness about the new technologies, latest

trends in the car market is a direct attribute of the
level of education of the consumer. This is evident
from the fact that 2/3rd of the car buyer are graduate
or above.
5. Behavioural Segmentation
a. Decision Roles: When it comes to car, where huge investment is involved, people generally tend to take
reference from other users. They go for test rides, get it checked from some experienced people who are
much more comfortable about cars.
b. Occasions: In India, people do buy cars in the festival season, and during the marriage seasons.
c. Benefits: Consumer looks for the following benefits from a car.
i. Power: People do look for power from power. According to their need they look for cars in
their respective power basket (i.e. 600cc – 1300cc). A higher power is related to give higher
speed, acceleration by the consumers.
ii.Technology: With all sort of products available in the small cars market, technology can act as
a differentiator for consumer. New technologies such as MPFI (multi point fuel injection),
turbo charging, electronic traction control, anti locking braking systems, and catalytical
convertors.
iii.Fuel Economy: People do look for better fuel economy in terms of mileage given by the car.
Preferred Fuel: With the rise in petrol prices, people have been looking for alternatives such
as diesel, CNG, LPG. Many car buyers in India prefer the diesel variant whatever may be the
choice of car, because of the favourable cost differential diesel.
 iv.Low operational cost: For some of the users, operational cost is a major factor in deciding
the buying decision. Operational cost includes Maintenance cost, insurance cost, spare parts,
cost of service.
v.Space and comfort: Buyer does look for spacious and comfortable ride. Various factors in
deciding comfortable ride are leg room, head room, driving position, adjustable steering.
vi.Safety: the most important factor for family buyers is the safety feature of a car. A car must
follow safety norms, various safety features which people look in car are ABS, airbags.
vii.Styling: To certain buyers, functionality was not everything, looks were also important. They
wanted styling, and contemporary looks.
d. User Status: The kind of buyer can be classified into non-buyer, first time buyers, and repeat buyers. The
major of the buyers in the small car are a first time buyer, that’s why this market is often referred as entry
level car market. While going for car replacement, 50 percent of small car owners in India are again going
for small cars and are reluctant to experiment with luxury cars.
e. Usage Rate: On the basis of the frequency of travel, people decide on the car to buy. In case a person
needs a family car only for family outing, they may look for a one time investment in a spacious car. On
the other hand, if a person has huge amount of daily travel, he would prefer a good mileage car with less
operational cost as well.
6. Psychographic Segmentation
a. Social Class – Social class plays a major role in segmentation for the automobile industry. With more
than 40% of the population of Indian lying in the middle class bracket, it becomes all the more important
segment for the marketers to consider. Working class and upper lowers constitute the other prime target in
the small car manufacturers.
b. Life-style – life style is an important psychographic segmentation composed of a combination of factors
such as activities, interest and opinions. Ex: As part of its rebranding exercise, Fiat India is rolling out a
number of products to cater to the lifestyle segment in the auto market.(economic times)
c. Personality – The customers are further segmented on their personality traits like sports oriented person,
easy going. People are also segmented on their value system.

Segment Targeting
Single Segment concentration: In this type of segmentation Petrol Electric Diesel
targeting, the company identifies a specific segment and fully Cars Cars /CNG
concentrate its marketing energies to reap the maximum from / LPG
the segment. A typical example in the Indian small car market is
Maruti
- Reva, an electric car. The car manufacturers have identified
electric car user target segment and works on updating the same Reva
model with the market demand.
Hyundai

Selective Specialization: With the growing market and tougher

competition in the small car industry, there is a need for the
marketers to cater to the needs to different market segments.
Here the marketer approaches more than 1 market segment, and
designs its strategies accordingly. For example, Maruti which
primarily targeted the middle men through Maruti 800 and Dual Price
Maruti Alto have now moved to new segment which comprises Fuel sensitivity Style
of youth and the member of the upper middle class by
launching premium range of hatchbacks like Swift and Ritz. WagonR
Alto
Swift

Deep Segmentation:
The purpose of deep segmentation is to create a deep differentiation among the products in the market. There are
distinct group of car buyers with widely varying and clearly distinguishable needs. Hence marketers to target these
kinds of buyers created sub-segments. They enlarged the number of segments in three ways:
 • They discovered new segments: Whenever marketers discovered a new segment and decided to
incorporate it into their target markets, they had to necessarily bring in a new offer.
Ex: When they hit upon the lifestyle segment, they had to, for those specific buyers, make available
lifestyle oriented vehicles.
• They propped up sub-segments within a given segment: There were sub segments that preferred
different versions of the same vehicle. The difference between the two versions was substantial. Also
almost all the players had brought in many versions/models in each of their offers.
• They located very small niches with special requirements and served them-even though they were not
sizeable.

Downside of Deep segmentation:

1) Cannibalisation among one’s own offers
2)Price slots in a narrow range blur distinction between segments/offers
3)Lowering of EMI accentuates the blurring.
How Maruti have created deep segmentation within its small car offering
The above chart shows how different products in the same segment/sub segment have been offered by the same
company targeting different needs of the buyers. For ex: Maruti offers a car, Alto which low on price, maintenance
cost, style but is high on fuel efficiency. When you compare this with Maruti swift, it is higher in price (in the small
car), technology, style, space and comfort, but lower in fuel economy. Maruti has a gamut of cars in the small car
market, as it has off late focused on creating new sub-segment or creates deep segmentation within a segment.
Segment invasion plan – Maruti Udyog limited

Dark colour indicates competition existed at the time when Maruti targeted the segment

1. M-800 had dominated the Indian car market since it was launched in 1984.
2. Maruti introduced Maruti Zen into the market (in 1993) which catered as an entry level car for the people
who can afford to spend more (as compared to M-800), with better features available. Maruti enjoyed being
the only small car manufacturer till year 1996, when Hyundai launched Santro.
3. In the mean while Tata also launched Indica, and there was a gradual decrease in sales of M800. The
introduction of new cars by competitors made the M-800 look obsolete as it had not been changed in any
major way for over a decade. Hence Maruti launched Alto in the year 2000, trying to recover the lost
market. Alto was once again targeting the entry level low cost segment, but it gave features of a good car.
Within 18 months of the launch, the Maruti was able to regain its market share and was once again in a
position to hold entry level A-segment in its pocket.
4. Watching the dominance of Maruti in the A-segment, competitors focused on other segments, Maruti also
followed and launched its first Duo car, Wagon R duo in the year 2004. This car could be run on LPG along
with petrol.
5. In an effort to move beyond the value for money or the basic utilitarian function of a car, Maruti launched
Swift in the year in 2004, to target the high end customers, who are willing to pay more for a better styled,
safe, sporty car.
 6. Maruti strengthened its position in the small car market by launching Ritz in the year 2009 , which was
targeting upper middle income group ,who were looking for exciting looking , globally renowned car.

Positioning
Small cars have been positioned in India as city cars, which are easy to drive, give high mileage, with low
operational cost and low price. Because of the tremendous growth in the small car market, various global car
manufacturers are entering this market and thus leading to growing competition. This has further led to each
manufacturer positioning it, better than the rest; by upgrading products, several versions, new technology giving
discounts & offers, better financing options.
The table below shows customer focused value proposition, showcasing the reason why the target market should
buy their product.

Brand and Target Customer Benefits Value Proposition (Point Positioning

Company of difference) Image
Santro Eco , Environmentally Better power and fuel Economical and Santro Eco – An
Hyundai conscious efficiency, Better environment friendly environment
consumers who performance on city small car friendly car
want an economic roads, less maintenance
and a safe small car costs, spacious interiors
and more headroom
Swift, Customer seeking a Powerful, Styling and A vehicle that provide Style, modern
Maruti stylish, powerful Handling, Advanced comfort , power and looks and young
Suzuki and a premium car features luxury in small package attitude
for City driving
Spark, “Value for Money” Low Maintenance cost, A vehicle that provides “Big car luxury
Chevrolet consumer Extended warranty of good mileage and extra at a Small car
spare parts, Good features at competitive price”
mileage, High end prices
Features
Indica , Small- car Spaciousness A small spacious car “More Car per
Tata Motors consumers who with no extra cost Car”
want a more
spacious car
Fabia, Customers seeking World-class styling, A vehicle in the upper- India’s #1
Skoda a luxurious small technology, luxury and end of the B-segment Super-hatch
car safety features and lower end of the C-
segment. Dynamic
looks, compact yet
roomy, first-in-its class
features and exemplary
performance
Alto, Maruti A first-time car Good performance, A trusted and reliable car India’s largest
 Suzuki buyer looking for good fuel economy. with access to the largest selling car.
the best affordable Good in price as well as service network and “Your Sachha
car in the market quality commanding the highest Hamsafar”.
resale value “Alto. Let’s go”.
Nano, Tata A middle class Affordable price, very An engineering marvel The People’s
family that needs a high fuel efficiency in terms of cost , fuel Car
car but cannot and space efficiency
afford one

Positioning – Hyundai Santro Case

The table below represents the changes in the positioning strategy of Santro car by Hyundai Motors. It shows that a
company has repositioned its product about 5 times in past ten years. The main factors were either competitors’
activities or changes in the mindset of consumers. Each time the company has repositioned itself, they have changed
their ‘Target customers’ and has done a deeper penetration in segmenting its market.
Year Positioning Strategy Forces Target Consumers
1998 Family Car A car in competition with the best selling A 35-45 year family
Maruti 800 and Zen. person
2003 A smart car for young The average age of a car owner had declined Age group of 25-30
people from around 35-40 three years ago, at that years and First time
time, to 25-30, primarily because of buyers.
changing lifestyles, cheap and easily
available finance, etc
2004 Focused on pride that Changes in strategy and positioning by rival Anyone for whom
consumers will derive on competitors like Maruti and Fiat. buying a car was a
buying the car. status symbol

The tagline was “Santro

wale hain”
2005-06 Changed the tagline to “ Income of middle class during that period as First Time Buyers
First Car, First Choice” economy was growing rapidly and they
focused on new buyers.
2008 Environment friendly car Idea of “Going Green” and saving Environment Conscious
– Santro Eco environment was spreading and at the same and people looking for
time demand for a cheaper fuel was at cheaper fuel
maximum.
Positioning of Various Small Car players based on POD (Point of Difference) & POP (Point of Parity)
The figure below shows that majority of the cars fall in all the POP, as it’s the important characteristic of that
segment. In case of small cars, low price, fuel efficiency, low maintenance cost and space. Whereas companies do
target special buyers by offering innovation like new style, features, or may be the car itself is environment friendly,
it is considered as a POD for that car. POD acts as a stimulating factor for a buyer to get attracted toward a car,
whereas absence of POP will make the buyer uninterested in that car.
 PO

PO

Perceptual Map – Maruti Udyog Limited

The above map shows the perceptions of the customers or potential customers. The map shows the change in the
perception of the various models of the cars based on the price and benefits perceived by the consumer.
The observation from the map shows that, most of the cars which have low cost are being perceived to have lower
benefits as well, exception being Santro Xing, and Zen Estilo which are believed to give more benefits compared to
the cost incurred in buying those cars. Same thing also applies to cars which are perceived to be higher on the cost
side are having higher benefits, exception being Hyundai Getz ,which despite being high on cost , still is perceived
to have lower benefits.
Positioning Strategy of MUL : The line drawing from Maruti 800 to Maruti Swift shows that Maruti has positioned
its products across all range from low cost-low benefit perception to high cost-high benefit perception. This shows
the change in the positioning strategy of Maruti, where it has moved away from the only low cost –low benefit
(Maruti 800) model to other models as well.
References:
1. Marketing Management, VS Ramaswamy, S Namakumari
2. KPMG Automobile Industry Analysis, 2007
3. Contemporary Market, Tapan Panda
4. Lifestyle Market Segment, Dennis J. Cahill
5. Wikipedia.com :
a. http://en.wikipedia.org/wiki/Suzuki_Wagon_R
b. http://en.wikipedia.org/wiki/Suzuki_Swift
c. http://en.wikipedia.org/wiki/Perceptual_mapping
6. Fiat India drives into lifestyle segment. Economic Times, 28-08-2008
7. Magazine: Autocar, July 2009