Perspectives from ISB

“When entire industry believes the same thing, there is a huge blind spot” of opportunity hidden somewhere that everyone is missing out on. This was one of the many pearls of wisdom that Sudhir Voleti, Associate Professor, ISB, shared with prospective candidates of PGP PRO, an executive MBA equivalent from ISB. To illustrate this, he narrated a brilliant example of Tata Motors and how they disrupted the LCV market.

In the year 2001, Tata Motors decided to enter the LCV or the ‘Light Commercial Vehicle’ market. The Tatas were already a name to reckon with in the HCV or ‘Heavy Commercial Vehicle’ market, and hence, they had a robust supply-side or production side infrastructure. “They had the assembly lines, they had the chassis, the engineering talent, and every capability they needed to enter India’s under one-tonne load carrier market which was dominated by 3 wheelers”, shared Sudhir Voleti. “The industry defined the market as very price sensitive and the race was on to provide the highest functionality at the lowest price.” Most of the customers who bought the vehicles fell into the category of shop owners, small vendors, and farmers, who would use it to transport goods. Girish Wagh, the project leader at Tata Motors in-charge of this segment, met with farmers in the state of Andhra Pradesh in India and spoke to them about their desirability from a load carrier, and about what was it exactly that they found lacking in their current vehicle or in the existing offerings in the market. “In a couple of conversations, he struck gold… and he discovered benefits beyond the merely functional in what is essentially a commercial vehicle for the B2Bish category.”

Here are some of the responses he received:

  1. “Honestly, I am embarrassed to be driving a 3-wheeler. I don’t take it to my in-laws’ place. I’d rather park it out of sight and walk.”
  2. “My vehicle has no doors. If it had one, I could slam it hard. The noise would announce my arrival. People would stop and notice.”
  3. “I wish I could drive with one arm and sling the other over the door like car drivers do.”

This insight changed the entire game. Girish realized that producer was fixated with the 3-wheeler category instead of realizing that the customer wanted something else from the vehicle. The conversations he had were enough to prove that perhaps the customer didn’t want a cheaper 3-wheeler. Instead, what they really wanted to be a car with the functionality of the 3-wheeler. This led to the birth of Tata Ace in 2005. “It was a 4-wheeler designed to meet the functionality of a 3-wheeler – such as an overload capacity, fuel efficiency, and speed. Pain points in driving experience in 3-wheelers like changing gears, noise, and vibration were addressed. Result? Tata Ace disrupted the category and became the only Indian vehicle to hit 1 million units in sales within 7 years of launch! And, not just that, it captured the market while charging a premium of 44% over the rest of the industry – from the same people who the industry had thought to price-sensitive to pursue with a premium offering!” Of course, Tata Capital came up with offers of lucrative loans for the customers as a smart marketer knows that the ability to buy is as important as the willingness to buy and hence, tries to influence both to increase sales. “The credit card was born in the marketing department, not in finance department” commented Sudhir Voleti in his attempt to explain how marketing helps sales and discussed other examples where marketers have tried to influence the ability to purchase through leasing or time-sharing, for example, in the case of Mahindra holiday resorts.

“This is where the strategy comes in! You must constantly remember and ask yourself, what are you in business for? Are you in the business of load carriers or are you in the business of 3 wheelers? Are you in the business of selling music or are you in the business of selling CDs? And unless you focus on what is your core business, you are going to be wiped off by the next disruption.”

“Exceptional valuations are derived from exceptional profits, which in turn come from exceptional sales, which imply, an exceptional influence on customer spend, behaviour and preference. This emerges from the creation and delivery of exceptional value, which implies an exceptional understanding of the customer – needs, wants, perceptions, preferences”, Sudhir summarized the masterclass with the biggest takeaway that KYC or know your customer is the most important function of marketing and successful marketers always have two eager ears to listen to both their customers’ voice as well as their silence.

(Professor Voleti is an Associate professor of marketing at ISB. Previously, he worked in the industry in different capacities as a management consultant and a software analyst. Professor Voleti’s research focuses on combining data with econometric and statistical methods to explain phenomena of marketing interest such as evolution in the equity of brands across time, valuation of brands using secondary sales data, the sales impact of geographic and abstract distances between products and markets and the performance, productivity and benchmarking of salesforce organisations.)