One of the key aspects which Tata seems to have missed in its strategy is the complexities of category transition. It is not natural for people to move from a high-end bike to a low-end car as would have been the expectation of Tata Motors.
A small diagram given here offers an explanation. You can find a more detailed explanation in the following link, in an article written by me a couple of years ago.
This is a typical expectation. However, no one wants to be in the bottom of a higher segment after being at the top of the previous segment.
Hence making sure that the consumer does not feel he is entering at the bottom of the higher segment is the key to success of a category transition strategy.
And, in this case, the Tatas really worked hard, with all their PR machinery to make sure that the entire world knew that if you were driving a Nano, you were driving the cheapest car in the world.
What Tata is doing today with the Nano is what would have been the right strategy during launch. Instead, it took the onus of the safety of two-wheeler riding families across the country on itself.
In short, Tata would have sold many more cars if ithad positioned it as the second or third car for the rich and not the first car for a two-wheeler rider.
For the rich, their self-worth does not rest on this car and they would opt for the convenience of a small car and even earning a reputation of being rich but simple people. The same is not the motivation for the lower income segment.
My recommendation:
Does the above explanation mean that Tata Motors has finally found the right strategy and will succeed now with Nano.
Very unlikely. Once branded the cheapest car in the world, it is unlikely it will get rid of that tag to become the most hip car under the sun for youngsters.
It is in further danger of being neither the humble third car of the high income segment, nor the awesome driving machine for the young. In the durables category, communication can only take the brand so far.
So, my guess is that Nano will bleed slowly and surely till the Tatas decide to jettison the project. A better strategy for Tata would be to use the technology and launch a totally new car with a different name. Learn from all its past mistakes and not harp on price at all, but only on its performance and functional benefit.
The only argument against it is the amount of money that Tata has spent on Nano and hence the reluctance to drop the brand.
But, given that all the money has gone into pushing the brand in the wrong direction, it will take a huge amount of money to first neutralise the negative and then build the positive.
Instead, a new brand would start from zero base. Get a fancy exterior design and a fancier name and aim at the second or third car segment. It will automatically attract the first car buyers, once they see rich people using the car.
In short, while a small car has a great future the Nano, with its current avatar and name, has a bleak future.