An Unhappy Brand

Harsh V Verma, Associate Professor, FMS, Uinversity of Delhi, Delhi- 110007.harshverma@fms.edu

(The dates in this case are not relevant for the problem and discussion. The situation needs to be
interpreted and discussed only from the perspective of consumer perception)

The history of the Indian automobile industry can easily be seen to have passed through three different
stages. First was the era of Ambassador, Premier and Standard. The reign of these cars lasted till early
eighties. Second began with the arrival of Maruti. This was the time when a new began to challenge the
unchallenged supremacy of the three brands. The post 1990s saw the arrival of many foreign players by
of tie ups and direct entry. During the pre Maruti years the technology remained stagnant and firms
marketed same models for decades with little or very minor improvements. As and when new models
were announced these were different only in name. Sometimes the grills or bumpers were modified a
little bit. The engineering aspect of the cars remained more or less same.
Maruti started its operations with a product mix consisting of three types of automobiles- the 800, a van
and Gypsy. The first two products were aimed at the passenger segment and the later was targeted at
the special segments which needed all terrain vehicles. People typically call this segment as the Jeep
segment.
The company chose van with a lot of calculations. The van was introduced considering the importance
that people attach to family in India. The engine was engineered to provide fuel efficiency and the shape
of the vehicle was designed to provide good space to a small family. It promised an optimal combination
of space and economy. Its floor size, engine power, etc compared very favorably to any other
conventional car. The van as a vehicle enjoyed good popularity in other markets both in some of the
eastern and western countries. Therefore, management felt here was product which will become a
major success in Indian market too. When bookings for the vehicle began this expectation was fully
realized. The company received and overwhelming response from public when it announced the launch
of the cars.





The trouble


In 1986 over 1,20,000 bookings were pending of the this vehicle. It was a very happy situation for the
company. But then soon some signs of ensuing trouble began to surface. And there was a sudden spurt
in cancellation of bookings. Cancelation is nothing abnormal for any vehicle. People at times do multiple
bookings. Here in this case India has had a long history of shortage economy and all those products
which were in short supply promised opportunity to make a fast buck in black market. It was known that
people would do multiple bookings both for this vehicle and the 800.
Some of the prospective buyer did cancel their booking of the van even before 1986. However by the
end of the third quarter the cancellation rate shot up dramatically. And this was worrisome for the
company. Cancellation rate was up from 0.4% in July to 4.8% in Sept. it amounted to loss of bookings of
over 5000 every month. The sales were also showing a declining trend. Its brand share in the standard
car market (all car brands included then) was sliding. Van enjoyed a good 23% market share in the
beginning of 1987 which nosedived to 14% in Dec 1987.
The Measures
In an attempt to counter the declining trend, the company initially tried to make the car attractive by
partially skipping the price increase planned in March 1987. But the price advantage did not really
proved to be of any help. It did not arrest the decline and booking cancellations continued to soar. The
worst was when the cancellations reached all time high in July 1987.
A dealer scheme was announced toward the end of 1987. This did help the brand but only temporarily.
Volumes picked up a little. But this did not last longer. The immediate fillip in the sales figure was
followed by the same declining trend.
Another indication of a brands success is the wait that buyers are willing to do. Even on this account the
product did not live up to expectations. The company ran through the entire lit of the car brokers and
found that the car was available off the shelf. This was however in stark contrast to the original schedule
of completing deliveries against bookings in future lasting till 1990.
The research
In order to understand the problem well a comprehensive research was undertaken. The target for the
research included the van owners, intending buyer and the cancellers. The primary reason for the
purchase of the van was stated to be its easy availability. The van and 800 were perceived to close
substitutes in the situation of unavailability of 800. The demand of the van was critically dependent
upon the availability of 800. Some of the customers cited the reasons such as the easy handling, space,
fuel economy, driving comfort and pick up. And the product did not seem to have any distinctive feature
or benefits of its own. Some of the observations of the customers were:
I booked both of the vehicles with a reason to be able to sell these bookings later at premium
There seem to be some substitutability between the two models. And van was considered as an option
by those who did not have ready allotment of car
I bought this vehicle because of the space that it offers me and driving comfort
I will certainly buy this car because my family size is big and often we travel together.
There is certainly a security issue with this vehicle because it does not have a nose
The owners of the van or intending buyers were primarily the traders and businessmen. They valued its
space. This vehicle could be used for ferrying things around the city. And it could also be used for travel
when not used for business purposes.
The cancellers when quizzed had a slightly different take on the vehicle. And one of them said, I can
drive this vehicle in known circles. But certainly I would not like it to drive to a five star hotel. On a
regular day I dont mind driving this vehicle to office but I shall borrow a car from my friend if I were to
go on a date observed a younger customer. Given a chance if I have an option to drive another car I
shall not drive this van to attend a meeting, said a business executive.
Some of the people in the category of cancellers very strongly argued against the vehicle because of the
safety. The missing nose of the vehicle makes it risky in situation of head on collusion.
The company does not want to limit the vehicles appeal to only business men. If it is done a sizeable
segment of the market would be lost forever. People although use this vehicle for business purposes but
it is not meant that way.
Occasional commercial use is fine but if it is perceived as a commercial vehicle it is fine but it is not a
commercial vehicle opined one of the team member involved in strategy design.
In order to get volumes this vehicle must be appeal to potential car buyers. There seem to be
something which is obstructing it acceptance which must be uncovered then only an effective strategy
could be devised, observed, a summer trainee with the company.
A dip stick survey with the cancellers revealed that this vehicle was praised on account of issues like
maneuverability, drive comfort, and pick up, maintenance and fuel efficiency. However some concerns
were raised about the safety. The vehicle scored well on almost all the criteria used by a typical car
buyer. But the paradox is if the vehicle is appreciated than it must lead to buying. Why are people
cancelling the bookings?
The launch of this variation of car was meant to provide the Indian market an assortment of cars with
almost identical specification but with different shapes.
The marketing chief looked for insights to arrest cancellation and make the vehicle acceptable to a
potential car buyer. But he feels there is something more to be discovered.