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I have also seen some companies price their cars initially at low price, then after very short period, they start charging higher prices and no one complains or even notices. I remember the launch prices of Qualis, Octavia, etc. So in some of the cases mentioned by GTO in this thread, the companies should have been smart enough to adopt the same. Take the case of XUV500, we all know that the price at which it is launched is definitely not sustainable for Mahindra, and they have already mentioned that they will revise the prices when bookings open again. But till then the reputation is already built and most importantly the product itself will do the talking and people will be ready to pay more. IMHO Honda must have applied this route for Jazz and Skoda for Fabia.

I don't think MUL was serious about the Kizashi. I am going to go with ARG's line of thought and assume that they merely intended to signal to Honda/Toyota/Skoda/VW/Nissan that if they want to compete with MUL in the A/B segments, then MUL is not going to take it sitting down either.

History is replete with many such examples (the most famous of which, Barco Projector Systems vs. Sony, ended up becoming a famous marketing case study in top MBA programs).

MUL may not care what the media and consumers think of the Kizashi, as long as the heads at Honda/Toyota et al have heard the message loud and clear.

Now that Toyota has anyway gone ahead and launched the Liva, and Honda the Brio, MUL may decide to make their threat credible and hit them where it hurts (C+/D segments). And this may mean, like dot suggested, spawning off a specialty brand.

Any manager who sees his company meeting a target will be happy. If they planned 150 sales and hit them, they are entitled to feel that the market response has been overwhelming.

Now, you may dismiss them for being so timid with their projections, but when they are testing out a market which you do not know completely, like nilanjanray others on this thread have said, it's better to be conservative. It's very rare that you research a market and decide that it can take 'x' volume, but you go with your gut at say '5x' and still succeed. It's heady when it happens and you will be praised no end, but if the move doesn't succeed, it's actually very costly for the business in all respects.

You do realize how tough that is, right?

The population isn't homogeneous. Manufacturers segment their market and target them appropriately. A car that is fast may not necessarily have best-in-class mileage. A car that handles brilliantly may not have the best ride. A car that sails our roads and ditches and potholes and speed-breakers will not be a low-slung tarmac-hugger. A low-slung car will have poorer visibility and cabin space than a cab-forward high-set car.

Unfortunately, the segment that TBHPians and the like belong to isn't a particularly voluminous segment. So where will they get their margins if they make a sub-9 lac car that ticks all the boxes for us? And when a manufacturer goes out of his way and makes such a car, we lambast it for "not doing well" in the market or for being priced way too high.

While the Nano and Aria aren't the hits they were hoped/expected to be, most of the rest of their cars are market leaders or close to them. Look at the Indica, Indigo and Manza. Here are cars that fit the needs of many value-conscious Indian customers to the T. Acres of space, "basic comfort" (i.e. AC, ride quality, leg room, cubbyholes etc.) that rivals cars from at least two segments higher and extremely cheap to run and maintain. If that isn't a marketing win, what is? Marketing after is all understanding what the market needs, building it and delivering it supremely well. To my mind, Tata has had only two failures - Nano and Aria. And in the Nano's case, Ratan Tata probably over-ruled the marketing head all the way, so he is not even to blame.

Regards,
spadix

There are various reasons for this.
1) Top management are generally well paid and for most of them the value for money concept is not as ingrained in their psyche as for the common man. I mean if you earn a crore a year, would it make a difference to you if you paid 8, 9 or 10 lakhs for a car. If not, then that differential pricing of 2 lakhs is enough to kill your market offering.
2) Most top management do not think along the lines of having to pay for a product that they put in blood, sweat and tears to earn (they all get free company cars). In India, after a house, a vehicle is the second most expensive purchase a family makes so how the common man values a car and how the executives value a car is different.
3) The top management only looks at the company bottom line and hope they can get away with higher pricing as that means they come out of it looking better. There is an element of greed and profiteering in this, along with an element of your company needing to make short term margins and thus looking good to shareholders. Especially if you are an employee who can get fired for not meeting financial expectations. In this sense companies like Mahindra have a bit of an edge if an owner in the company is involved in the process.
4) There are intangibles that some company executives factor in that the common man doesn't care about. Is a Mercedes for example really justified in the price they ask for their car. How much of that is just the mind set of "I have made it in the world and show it by the car I can afford to drive". That is why the Japanese manufacturers have made such a killing with their executive brands (Lexus, Infiniti, Acura etc.)
5) Very few car executives and car companies take a long term view of the market. Too many of them are focused on this quarters numbers (In some ways connected to point 3 above). Long term means higher volumes at lower margins.
6) At least some of the cars are over priced due to tax reasons (CKD, CBU etc.). This does not help. Obviously localisation does matter. Maruti showed us that with their CBU's never selling (GV, Kizashi) despite the fact that they are much better than vehicles than their locally made super sellers like the new Dzire (I still cannot figure out what this cars USP is). Assuming they assembled the GV and Kizashi here, they should be able to price them better and thus should be better sellers.

I would like to think that is not true.

No one can survive in business with such an attitude. Just because someone earns in chores and/or gets a company car doesn't mean he has free reign over pricing. There would be enough checks and balances to ensure that such biases, if any, don't reflect in the final pricing. Secondly, no one will make it to a position of such responsibility if they have displayed such callousness in decision-making at any point of time in their career.

It is the a) most inexpensive, b) Maruti with a c) boot.

What else does it need?

Regards,
spadix

I too would like to think it is not true, but what other explanation is there. I mean, at the end of the day, the top management have to sign off on the pricing even if they don't make the original decision of what to price it at. They will not let some 25 year old yuppie a year out of B-school make the final decision, even if they might permit him to make the first decision, right. Eventually the buck has to stop with top management, which is why I say what I do. I would love to hear another rationale which shows me how sensible these people are and why the pricing is skewed, but I don't see one unfortunately. Also, if this type of decision making results in greater profits, it is not callousness from a business perspective, just smart business strategy. Sad but true

So essentially it is selling because it is a Maruti. Let me put my question another way, would the Dzire sell even half as much if it had another logo on the boot. I don't think so. JMHO

What we tend to ignore is that that the large volume cars are those where
- Cost of acquisition is low
- Cost of maintenance is low
- Required equipment is there

Now for quite some time M800 was a large volume seller. Slowly better engine and better AC of Alto converted the M800 buyers to the Alto 800. The Alto 1.1 never sold in numbers and neither does the A Star, which is the latest version of the Alto, just because the extra goodies - safety, better build etc are just not (perceived to be) affordable to the buyers.

While deciding on the sale price of vehicle the top management has to juggle a lot of factors
1. actual cost to manufacture.
2. cost of advertising.
3. premium that the market can absorb.

Contrast the case between Aria and Fortuner. Assuming that both the vehicles cost the same to manufacture, the factor # 3 - premium that market can absorb worked, for the Fortuner and against the Aria.

On the other hand Kizashi being a CBU, tanked because of factor #1 - actual landed cost, which was not commensurate with what the market is willing to bear.

Another factor is the quality of construction and subsequent niggles. No manufacturer is willing to admit that their quality is bad, so if they are let down by the manufacturing, the costing is immaterial. This may explain the difference in sales numbers of the Scorpio and the Safari.

On the whole getting the pricing right is more of an art than a science, and that is why a lot of marketing duds and a few run away successes.

Adding to the list is the latest avataar of the Hyundai Sonata


Barring the first Sonata model launched in India with the Jag looks


The current version has been launched in only with a gasoline power plant in a country crazy of mileage and efficient oil burning bigger motors. Being a very competent machine on it own, without a second engine option, it is a sure shot recipe for failure.

Hyundai could have capitalized on capturing a very healthy lead over its arch rivals such as Accord and Camry with its current fluidic design philosophy being quite popular in our market with both the Verna and Elantra doing quite well in their segments.