Case Study 2 1. Discuss the critical factors which led to the success of Tata Ace.

Ace, Indias first indigenously developed sub one ton mini truck, was launched in May 2005. Tata motors decided to develop Ace, after a study it conducted found that customers wanted a last mile distribution vehicle that had low maintenance costs, higher driver safety, and better driving comfort. In 2001, Tata Motors experienced a different phase with severe losses due to the decline in vehicle sales, spiraling manufacturing costs and a capacities expansion plan that cost Rs 13 billion. The difficult phase prompted the company to completely re-examine the market and customer requirements. This re-examination threw up several interesting findings. The important finding was that continuous improvement of highways and other road infrastructure in India would lead to the plying of larger numbers of heavier and faster vehicles along the highways. This increase in traffic would encourage transporters to store heavier goods in convenient depots or warehouse along the highways, from which smaller loads would be transported through feeder routes to cities and towns. Before commencing the design of the vehicle, the project team conducted a study in various parts of India to understand the exact needs of the potential customer, so these would keep in the forefront at the design stage. The study found that the customer needed a vehicle that would provide fuel efficiency, overall comfort, less emission, and reduced noise and vibrations. The study also found that customers gave highest priority to safety, and were ready to compromise on power in favor of fuel efficiency. The choice of engine for the vehicle was also a critical one. The team conducted a worldwide search for an appropriate engine and finally decided to modify the engine of its own passenger car Indica. The decision in favor of modification was taken after it was found that the Ace project had exceeded the allotted budget, and a modification of the Indicas engine would suit the new vehicle. Various cost reduction measures were adopted to decrease the cost of the vehicle for the low cost strategy initiatives. The team identified measures such as value engineering, use of carryover items, single sourcing of parts in all possible areas, even involved the vendors in the cost reduction efforts. The capital expenditure targets were also determined in such a way

that the break even point remained low. Tata Motors also relied entirely on its in-house expertise in the development of tooling designs. Ace had many firsts to its credits. Apart from being the first indigenously developed sub-one ton mini truck, for Tata Motors it was the first product in the companys portfolio that made extensive use of plastic, had parts outsourced from vendors right from the initial stages, made use of e-sourcing, etc. Ace was powered by a twin-cylinder, 16 bhp, and 700cc IDI diesel engine. The fuel efficiency of Ace was estimated at 18- 20Km per liter of diesel with a maximum payload capacity of 745 kg .It sporty car-like interiors: its noise and vibration levels were on par with passenger cars, and not at the high levels found in trucks. Ace had a full steel cabin with a display of carlike features including elegant two toned seats, clear instrument cluster, utility trays, magazine pockets, twin-blade twin-speed wipers, and combination switches. Tata Motors also mentioned that the dealership and service strategy of Ace was developed on similar lines as two-wheeler dealerships, so that the customers did not have to travel long distances for service or repair. The company planned to set up dealer points at district headquarters and at locations that were less than 2Km (1.25 miles) from key landmarks such as agri-commodity markets and General Post Offices. The company also said that in order to boost the sales, service and spares centers from 88 to 160 by October 2005. In addition to this, the company planned to increase the number of sales points from 22 to 51 in the same period. The company also planned to set up 238 Tata-certified garages capable of servicing the Ace. The success of Ace was that customers were given a product that looked and performed better than the existing alternatives. Various value enhancers such as car-like features in the drivers cabin, attractive finishing, etc helped improve the value perceived by customers. The company also offered a range of additional accessories such as vehicle protection system, music systems, and even Ganesha idols.

2. Critically examine the targeting and positioning of Tata Ace and comment on its Marketing Mix and the appropriateness of the marketing mix in the target segment.

The main targeted customer of Tata Ace were those who were willing to pay higher price for extra value provided to them and also vehicle is designed to reduced the operating cost. Segmentation Tata Ace has focused on geographical, demographic, psychographic and behavioral segmentation. In geographic segmentation, it has divided into rural areas and urban areas. In the demographic segmentation, it has divided into age group, gender, working class level, occupation which contains truck owner, farmers, small trade etc. In psychological segmentation, it has used the science of using psychology and demographics to better understand consumers. The buyers are classified on the basis of personality traits, values and lifestyle. In behavioral segmentation, it has define benefits given by the 4-wheeler i.e.; comfort, style, safety. It also segmented the user by the first time 4-wheeler users and the existing 3-wheeler users. Targeting The target segment of Tata Ace was focused on the customer who expects a high Return on Investment (ROI) along with safety, comfort, and status. After the segmentation was made the targeting includes the drivers who ferry passengers between hub towns and villages. It targeted the people who could not afford to own motorized vehicle, who commute in tractors, flatbeds or rickshaws and public transport vehicles. Positioning Tata Ace has positioned itself as the Indias first mini-truck. The marketing strategy of Small is Big with elephant cover has been success in positioning the Tata Ace in the market. Is has the stability and the trust as of the big truck. The main focused part was on the mileage of the vehicle. Even though Tata Motors knew that they will face tough competition from 3wheeler, they were confident Aces features and value addition would definitely attract many three wheeler customers. They also felt that improved road infrastructure definitely called for a good last mile distribution vehicle like the Ace.

The deliberate positioning of Ace as a 'mini truck' was also an important marketing strategy adopted by Tata Motors. In the advertisement, the company did not focus on the looks of Ace lest there be a danger of it being perceived as a delicate vehicle that could not carry heavy loads. Instead, it was promoted as a mini truck and advertised with the caption, 'Small is Big'. The advertisement projected Ace as an elephant calf, standing beside the big mother elephant, to imply that it was a sturdy mini truck. 4Ps Product: Tata Ace has factors such as looks, pricing and efficiency, which were lacking in the light commercial vehicle segment so far. It is safer and much comfortable than the 3 wheeler. The capacity of the Ace is 1.5 tons with stylish look. The 3-wheelers were not allowed on express highways which was additional advantages of being 4-wheeler. Moreover it can easily travel in rural areas. The engine is innovative two cylinder diesel engine which can give speed up to 100km/hr. Price: The main targeted customer of Tata Ace were those who were willing to pay higher price for extra value provided to them and also vehicle is designed to reduced the operating cost. The number of components used was kept low, the assembly line was made short and around 80% of TATA ACE component were outsourced. Tata ACE was a winning concept with 4 Wheeler Functionality and Price close to that of 3 Wheelers. Place: Tata Ace is made available at right place at right time, when the development of road infrastructure was being emphasized and goods distribution movement. Ace was initially launched only in the southern states of India, namely Karnataka, Tamil Nadu, Andhra Pradesh, Kerala, and the Union Territory of Pondicherry, as they were considered as key markets for small tonnage vehicles. Promotion: Various communication channels were used for promoting the product. The print media Chota Hathi advertisement has become the success in promoting the product. It has

maintained good public relations from lots of positive press in the launch period and also by gaining International Awards.