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Old 6th November 2011, 11:17   #151
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

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Originally Posted by 4x4addict View Post
Excellent Topic GTO.

I always wonder who these IVY Leagues who sit at the top of these companies are? My feeling is that they are just some hot shot product/marketing managers who jump from MNC to MNC regardless of the product. So they spend x no of years selling detergents and shampo for Unilever or P&G and then get a to job in Tata selling cars. They have no passion for Autos like us.
I would differ slightly. How many have passion for soap or toothpaste? Yet they sell successfully. If you are a hot shot Ivy League, then you most probably will be much above average in tenacity (all the hard work for school boards, preparing for the entrance exams etc). That coupled with the tremendous grit (in competing and then completing the course), would suggest that you also have above average analytical capabilities. If you are successful in selling soap (a very fickle commodity), what prevents you from being successful in selling durables and capital goods?

For one, you are not developing the product. Then you are not involved in its manufacture (which for all you know is produced by a contract manufacturer). All you do is to price it and sell.

So if the product is decent (even good) and the costing is correct, there should be no reason for having a successful sale. And here crops up the major hurdle. Automobile development and pricing is an emotional issue and a lot of upper management will be involved, along with a whole gamut of finance and cost accountants. At some stage the vision is lost and profit maximization (or delusion) takes over. If not kept in check, this may transform a perfectly viable product into a white elephant.

Take the case of the Mahindra Thar. An excellent product, which could have been better. Some where down the line some one must have vetoed the idea of having an AC and the Hard Top. Both available in other Mahindra products - Bolero and Scorpio amongst others. Same is the case with dismal paint job, where certain areas are not covered (again XUV500 has it pat down). In my opinion some one high up enough to influence the events did not want to increase the cost, and as the "public" laps up their products could not care less about what the same public really wants and is willing to pay for. The same mind set comes into play when the 4x4 is offered only at the highest trim level and not at the lowest, after all those who want to do hard core 4x4 neither need nor want any fancy electronics.

Last edited by Aroy : 6th November 2011 at 11:31.
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Old 6th November 2011, 11:56   #152
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

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Hey the CRV was a very successful car at the time of its launch and enjoyed decent numbers for quite some time before the Petrol prices started hurting it and also the price of Yen forcing honda to price it insanely. Yea right now its a dud and I am sure with a new model Honda will price it more aggressively.

Mitsubishi is a mystery. A company which came and tasted success with Lancer. A company which most people will still be looking forward to and still has a good fan following. But they are just not bothered. I don't think they feel that the Indian market is for them. Otherwise I don't see any reason why they don't want to clean up the mess they have made out of the whole deal and start fresh.
Is there any reason Mitsubishi doesn't come into India on its own ? They can even gamble huge investments and I feel, they will get their returns. They already have a good perception from the Indian market for their products as well as the pricing (Lancer/ Cedia). They should get away from that tie up with HM and come into India on their own.
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Old 6th November 2011, 19:40   #153
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

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Is there any reason Mitsubishi doesn't come into India on its own ? They can even gamble huge investments and I feel, they will get their returns. They already have a good perception from the Indian market for their products as well as the pricing (Lancer/ Cedia). They should get away from that tie up with HM and come into India on their own.

MMC is not doing great worldwide, But there were talks of it buying a controlling stake in HM, but now i guess that plan is also going nowhere.
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Old 6th November 2011, 21:12   #154
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Wow! Don't think anyone could've been as articulate in summing up their stupidity!
I've always wondered the same myself. I always think of Honda whenever someone mentions VFM because Honda knows nothing about it! Although I may change my views after testing out the Brio. Like you said, they easily lost out on the fastest growing hatchback segment because of over-enthusiasm with the Jazz. Their downfall actually served as a lesson to the other manufacturers who acted swiftly.

Optimism is a double edged sword, someone ought to tell these companies that
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Old 7th November 2011, 10:58   #155
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

Well, on the flip side... Even if you have the product, pricing and VFM it sometimes does not warrant to be a volume puller - FIAT :(

Build me car which has almost everything in it and under INR 9 lacs

Look what the Linea did to the mid-segment... Verna/Fiesta et they all had to add competitive features in their next releases to cope-up with the benchmarks.

Even benchmarks can't retain volumes if the strategists goof up some way or the other.

The majority of the market demands "VFM" + "Value Addition" + "Benchmarks" which in turn translates to better overall acceptability of the product.
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Old 7th November 2011, 11:49   #156
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

The CRV can be a case study on how to kill a great product.

It is a good product, good brand value and was selling @ decent numbers. But Honda decided to raise prices by almost 30% !!!

I got my CR-V 2.0 in 2008 for 17.x lac ex showroom. Now Honda expects to sell the same vehicle @ 22 / 23 lacs ex showroom? What the hell are they smoking?
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Old 7th November 2011, 14:52   #157
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

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Is there any reason Mitsubishi doesn't come into India on its own ? They can even gamble huge investments and I feel, they will get their returns. They already have a good perception from the Indian market for their products as well as the pricing (Lancer/ Cedia). They should get away from that tie up with HM and come into India on their own.
Mitsubishi is the smallest of the OEM. Think in global sales they are close to $20 Bn company, 1/10th of Toyota and VW. They can never compete with any of these players on a full line up basis.
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Old 7th November 2011, 18:44   #158
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

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I would differ slightly.
I agree with you, but for different reasons.

1. I don't think the best marketing talent goes to auto companies
Regarding analytical skills: anyone who cracks a premier engineering school (IITs say) or a top B-School is usually in the 99th percentile of analytical skills. However, there is a big different between capability and application.

Having said that, FMCG (fast moving consumer goods - soap, colas etc.) companies pay marketing MBAs much more than what auto companies do at least at the junior and mid levels. FMCG jobs are in more demand at entry levels and mid levels. Also, career prospects are not so great at an Indian auto company for a marketing superstar. A Unilever hotshot can go on to lead Asian and Global operations. Can the marketing head of an Indian auto company dream of that? Maybe if someday Indian companies become big international players...

Also, selling soap is very different from selling cars. The distribution structure is different. The nature of purchase and consumer behaviour are different. I don't know whether people really move from a traditional high flying FMCG marketing career to an auto one (haven't come across anyone among the people I know), but if they do, the market dynamics will be different.

It is only recently that auto companies have become focused on the marketing function (and social media, web etc.) While marketing has been the key function in FMCG companies for many decades. A marketing leader can call all the shots at a soap or shampoo company. Can a marketing leader do the same at an Auto company? I doubt...FMCG companies in junior/ middle management have a lot of empowerment regarding the 4Ps of Marketing. In auto companies, one can't play around much with a number of important variable. In auto MNCs, too many decisions happen outside the country. Local leaders can provide their inputs, but even then many significant decisions get taken at HQ.

2. The Indian auto market is still nascent
I see many auto companies screwing up while assessing or plotting the price elasticity of demand curve (a graphical representation of how many units are expected to sell at what price point).

Given the sudden increase in purchasing power of Indians in the last 10 years and different market dynamics (compared to China or Brazil, say), there are no proven models. That is why some companies are erring in terms of pricing and go to market strategy (say bring CBU - no sales due to pricing - product never takes off e.g. Suzuki - Kizashi) or capacity estimation (e.g. Toyota - Fortuner). Experience, intuition (that comes from experience, observation and personal interest) and even luck play big roles.
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Old 7th November 2011, 19:39   #159
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Yes +1 to what Nillanjan has mentioned.
Most people will actually be surprised to know that even the top German car companies in India don't even have marketing people -there are hardly 2-3 people and that too doing Marcom, not marketing per se. They only employ Sales people to sell the famous German cars and technologies which they are proud of. VW is an exception to this and they are among the few who have started doing India specific marketing.
There is still a long way to go and we are lucky that we are now starting to get cars made for India (even though variants) like Vento and Rapid, which will also be exported from India.
The Indian market is now becoming much more important due to very high growth rates and India's resilience to recession.

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Old 7th November 2011, 22:03   #160
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Talking Re: Big Money + Big Talent does not matter

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Eg Mahindra. They failed with the Logan debacle, but in SUV space they know exactly what majority want. XUV, Scorpio, Xylo, and Bolero are proof.[u] They create vehicles which look straight out of a horror movie, yet they sell so well.
You are spot on about the horror movie stuff. especially the gylo.
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Old 8th November 2011, 10:57   #161
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

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You'd think Ford learned of India's obsession with value-for-money after the Figo's success. Evidently not. Ford's attempt at pricing the Fiesta above the City, Verna and Vento was disastrous. If a car fails to gain traction in the initial months from launch, you can bet that price cuts are inevitable along the way. I can't think of a single car that was overpriced at launch, and managed to gain volumes without a price cut in the long run. Expect special editions, discounts and even a price correction soon.
Ford's philosophy with New Fiesta seems to be "I got it and I want to sell it, so you better buy it." With Figo, I thought Ford has learnt to give want the market wants, but alas the New Fiesta proved otherwise. They throw in fancy items like voice control, then price it higher than a City, Verna, and Vento, and expect people to lap it up. Ford should listen to what the market wants and tailor their products accordingly.
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Old 8th November 2011, 20:41   #162
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Post Re: Big Money + Big Talent = The overpriced market dud. How?

It is seriously sad and surprising that such a situation prevails in the automobile industry also.

However, my thought is shouled we question the authorities/manufacturers who price the vehicle, or the unusual consumers who buy such products though they are heavily priced.

Let us take the All New Honda City, for instance for explaining my perception. It was introduced with a huge price tag by the manufacturer purely because it had a H badge on its collar. However, it was selling a lot for its other reliable factors. Now, why wouldnt Honda price Jazz on the upper side thinking the consumers will still buy Honda even if it is highly priced yet again?



It is like the usual Tamil hero, who keeps on doing masala movies just because his one masala movie was a hit . Now would you question the actor or the viewers!
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Old 8th November 2011, 21:35   #163
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

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It is like the usual Tamil hero, who keeps on doing masala movies just because his one masala movie was a hit . Now would you question the actor or the viewers!
Both are to blame. But the beauty is that even if you fool a few people, the majority will vote against you by not buying, and you land up with a marketing dud. As in case of Jazz, as long as there was no alternative, it sold. The moment there was an alternative it bombed. The same will be the case with Fortuner. The moment any viable competition comes up, the sales will drop drastically, and we may hope for a price correction.

Of course some people do not learn. HM is one such company. With a price correction of even 4L, Pajero can increase its sales drastically. Keeping it above the Fortuner level has no marketing justification.
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Old 9th November 2011, 12:03   #164
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Default Re: Big Money + Big Talent = The overpriced market dud. How?

I agree with you on the Jazz bit, Honda lost the market the day they priced it that much to the Hyundais and the rest of the gang. They saved the product by slashing the price, but what many still dont know is, despite the competition, its still the most coolest looking, uber-functional, stylish hatch out there and for that, even if it sells gives the others a run for their money. It actually is an option to the City and not a hatch & is in an category of its own, which has found a few buyers here.

The only saving point now is for Honda to introduce a diesel mill, the 1.5 option and an automatic as well.
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Old 9th November 2011, 20:44   #165
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Unhappy Re: Big Money + Big Talent = The overpriced market dud. How?

You said it GTO!

I feel, somewhere in the search for coming out with a successful vehicle in one of those segments and the time to market, and I must add this - some amount of over confidence - Automobile Corporate think-tanks failed to see the point.

1). I recall saying this to my friends when Kizashi was launched earlier this year – “Maruti is venturing into D Segment (discounting the Vitara) for the first time and they aren’t known to be fully equipped to deliver in that area. And they come out and launch Kizashi which looks like a blown-up / extended SX4 (not a criticism as such, but Kizashi is not a head-turner) and you price it as if you have been ruling the roost in that segment from times immemorial. I expected Maruti to price it between 12-14 lakhs.”

MS – it is never late!



2). In Tata’s case at least, I thought, better sense would prevail and the Tata Aria would be priced at least slightly above the Innova, but who’s listening? Do they need to? They taught the success formula to the world when they launched the Indigo CS.

Best practice forgotten.



3). Honda is mildly arrogant and that’s what we saw and that’s what they hopefully realized in 2 years of failure with the Jazz in India. I feel their strategy 2 years back was to launch the Jazz and project it as a premium hatchback so that it fetches them a price close to what the City was doing until then. And at the same time, they planned to move the upgraded City one bracket higher and reap twin benefits. Honda knows math I must say, but Indians did not understand that math.

At least 24 months of, “God knows how many units of Jazz” sales that never happened!


Enough case studies out there in the open, if they don't study today, they probably never ever will...

Thanks,
C_
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