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Project scorpio: marketing concepts and strategies flashcard

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The current management held his dream and vision as an integral part of their existence and that led them to set themselves a challenging goal of retaining their domestic market leadership with over 50 per cent market share of the Indian utility vehicle segment and create their name in the global market. Market Reality The Indian automobile industry had undergone a radical change since the opening up of the its economy in 1991. By 1997, the Indian automobile market was probably one of the most open and competitive automobile markets in the world, with all major global players having a presence there.

Most of the global players present in India had focused their business strategy in the passenger car segment with the exception of Toyota, whose entry strategy in the Indian market is through a Multi Utility Vehicle (MOVE). Even the other global majors had realized the intensity of competition in the passenger car segment and were now eyeing the utility vehicle segment. The products they planned to launch in the Indian market were all to be positioned in the urban market, making it a highly competitive market.

Maidenhair Context Maidenhair, hitherto a leader in the UP segment, was fast witnessing loss of market share. Global players were entering the auto market and aggressively launching products. The Maidenhair share of business was largely from the semi urban and rural markets of India. A large contribution also came from institutional sales – army, police, paramilitary groups and other institutional groups. Though Maidenhair had a wide product portfolio, what it was lacking was products that catered to the modern urban consumer needs. The markets where Maidenhair was strong were stagnating.

The urban markets where it did not have a product to offer were seeing all the growth and action. The Maidenhair Image was a big barrier as well. Though it had strives as rugged, tough, reliable, economical vehicles, the brand was not seen as modern or technologically advanced. The negative parameters were – uncomfortable, rough, not easy-to-drive, rural imagery, down market, buddy-duty, etc. Consumer The unique thing was that while these changes had led to creating a market of highly demanding customers, the basic psyche of the Indian buyer had not changed.

He still was looking for Value for Money, FM, in terms of low unit cost, operating economics packaged with modern style and robust design. Strategic Approach With the above reality as a backdrop, M&M defined a two pronged strategy for the Automotive Sector: * Continue to dominate the rural and semi-urban market with a range of products catering to the needs for low cost mass transportation needs. * Develop a strong presence in the fast growing urban markets with a range of value for money products.

To compete against the global players and also to meet its goal of developing a strong presence in the urban market, M&M embarked on Project Scorpio. M&M needed to work to its strengths and competencies. To find ways of side stepping the NC competition for it did not have the deep pockets that global majors did. The implication was that the project cost had to be optimized to a fraction of what world majors would spend. The other direction was to develop a product which would provide great value and hence would be very affordable.

A world class product which is also affordable is no mean task. It needs innovation and out-of-the-box thinking. The approach taken was to focus on and to priorities what the customer values the most and to excel at it. The broad objectives of the Project Scorpio were: *To create a new segment and retain market domination *To differentiate offering (visit-a visit Macs)- an excellent value proposition * To optimism project costs New Product Development -to create a world class, yet Indian, product M&M developed a new product to meet the above objectives and to create a world class product.

Key achievements of the product development process were as follows: * A unique process called ‘ DAM *Best in the world tie-ups but in-house execution *Customer focus from thought to finish *A cross-functional, co-located, young, lean team * Lowest Project Costs * Intensive Testing * All new Manufacturing Set up A New Product Development Process called ‘ DAM Integrated Design and Manufacturing (ADAM), is a product development process, which was adopted by M&M to streamline the delivery of a world class, zero-defect, trouble-free product to the customer. It encompasses the entire value chain starting and ending with the customer.

This outside-in approach ensures that the product is designed around the customer and not vice versa. Unlike the traditional department structure, the ‘ DAM team consisted of cross-functional teams, co-located in the ‘ DAM Centre in Iambi. These teams had cross-functional strengths that cover every aspect of product development, from ‘ Design & Development, Testing & Validation and Manufacturing to Vendor Development and Marketing. Global Alliances for best of the world inputs M tied up with the best in the world in their respective areas of the global auto industry.

Fuji, Japan for the Press shop. Fuji, Japan for the Dies. Korean company Whooshing for body shop. For Automation, USA for the tester line for final assembly. Durra Germany for the paint shop. Lear, USA for Seats and interiors. Visited, USA for exteriors. Sample, Korea for suspension and BEHR, Germany for AC. M tied up with Renault for petrol engines. M facilitated the development of these aggregates and played the role of an integrator. The vendors set up facilities in and around the actors. The end result was a fully indigenous product with international quality at affordable price.

The most heartening of it all was the fact that not only was M a staunch follower of the DAM concept but even logistic support companies, vendors dealers bought into it whole heartedly. This synchronicity in commitment aided implementation and guaranteed success. Maidenhair didn’t compromise on international quality and at the same time ensured that the product was fully Indian. Customer Focus- from thought to finish The first step was to trap customer requirements and map the market potential of he various vehicle categories.

For this purpose, the in-house team visited the market and met customers from various segments. As a result, key buying factors were evolved through the Quality Function Deployment process (SF). These customer requirements were then converted into product specifications and were taken to the design phase. At every stage, customer inputs were taken from first design to finished product. A young lean team Project Scorpio had Just 120 people. These people worked in tandem, round the clock to develop a product unassailable in its design and manufacturing.

The ‘ DAM team for Scorpio was divided into 19 cross-functional design teams with people from design & development, testing & validation, marketing, manufacturing and supplier development. Low Project Cost A project cost of 120 million US Dollars may seem like a lot. But it’s only a fifth of what a world major would have spent on a similar-sized project. A typical ground up, new platform project would have cosseted 500 million dollars. This low cost was achieved by a series of innovative decisions. Intensive Testing Seventy four! That was the number of vehicles built only for testing. Then using the

Simultaneous Testing & Examination Process (STEP), they were tested and re-tested. To check every component till only the best combination of form and function was left. Then the vehicle itself, as a whole, was put through the NOVA-C (New Overall Vehicle Audit-customer) system to measure the overall quality of the production process itself. Thus, the Scorpio was put through some of the most grueling tests. Manufacturing Set Up A world class manufacturing facility spread over 120 acres with a capacity of producing 40, 000 units on a 2 shift basis was set up in Nashua with an investment of USED 120 million.

Infrastructure-wise, three new, state-of-the-art lines had been set- up for Scorpio: 1 . A fully automated press shop set-up with help from Fuji of Japan with Dies imported from Fuji, Japan to ensure quality output delivery. 2. The Gig and fixtures in the body shop were developed with Whooshing of Korea, also on an automated line, equipped with CM to ensure a high quality final output with excellent fit and finish. 3. A state-of-the-art Trim Chassis Final (ETC) line with a world class tester line, built in collaboration with For Automation USA for vigorous testing room the wheel alignment to squeak and rattle test.

The paint shop was set-up in collaboration with Durra of Germany. The final assembly and testing is done on the ETC line. The programmed logistics and flexible manufacturing system can accommodate a large number of variants in the product mix. This fully considered system with minimum handling and effort combined with continuous improvement training for the workers ensures a quality product at the end of the line. Marketing Strategy: To create a market category The Marketing Objectives set for Scorpio A tale of category creation count…

First year of launch Scorpio to capture 22 per cent of the premium hard top market in OFF(9 months) * sell 12000 Scorpio in FOB (9 months) *Maidenhair unaided brand recall score to increase by 22 puts (defined in terms of Brand Track study scores) * Scorpio brand recall score to achieve 50 points (in WWW) Within three years of launch * Scorpio to capture 45 per cent of the premium hard top market * Scorpio to sell 24, 000 units in OFF * Maidenhair to emerge as a true urban player Market Context The soft tops sales, which were Maidenhair’s strength, were stagnating. Hard top vehicles like Sumo and Quails were garnering market share.

The urban market was showing more potential for vehicle sales and I-JSP were gaining higher acceptability in urban cities. The competition was getting tougher with international I-JSP entering the market. And also operating in the urban market meant competing with cars. The market was moving from traditional multi utility, non-luxurious vehicles to luxurious vehicles. M had launched Bolero in 2000 to cater to this newly emerging segment. However, to add to the category’s woes, it declined at the rate of 3. 1 percent in year 2001 over year 2000. I-JSP as a percentage of the overall passenger car market was just 16 per cent in 2001.

This simply meant that for attaining the volumes, Scorpio needed to look beyond I-JSP in terms of competitive framework to decide on a marketing strategy. Competitive Context The conventional UP market was too small in size. The UP market in urban markets was even smaller a percentage. The trend was that the I-JSP operating in the urban market were eating into the car share, primarily the cars which operated in the same price bracket. Quails was taking market away from midsized cars. With these facts in place the whole of automobile market was studied in details.

In the arena of cars, A- segment cars, which have been the leaders in terms of volumes and grew at the rate of 55. 2 percent in the year 1999, were having a reduced growth rate of 34. 2 percent in the year 2001. It was found that the fastest growing segment (growing at the rate of 42. 9 per cent) in year 2001 was semi luxurious cars or B segment cars. And the luxurious car segment I. E. C segment cars were also growing at a healthy rate of 14. 2 percent in that year. However, super premium cars termed as segment D and E cars, were not growing at such healthy rates and did not offer volume in terms of number f cars sold.

It was imperative for Scorpio to look beyond Jibs. Apart from appealing to a typically UP buyer, it was also necessary to appeal to a wider target audience – prospective car buyers belonging to 5 lack and 5 lack+ segment. The midsized car market (C class) which was in the RSI. Five to Seven lack price bracket had grown in FOE at 36 per cent and in FOE at 22 per cent, and small luxury car segment (B class) which was up to Five lack segment was also showing a healthy growth. Analysis showed that the volumes in the automobile industry were coming from B and C segment cars.

This meant that the mid size car market was the competitive arena for Scorpio for it to attain the volume growth and market share it was looking for. It was decided that the offer had to appeal to segment C buyer and should be aspiration for segment B buyers. Therefore, an analysis of the offers of all the segment C cars and the relevant I-JSP was done. The table below summarizes the analysis: Interpretations: All the vehicle are feature packed within a price range of RSI. 6-8 Lacks. All of them, including I-JSP, are with a proposition of luxury and comfort, with no differentiation.

Implication: With this analysis it came out clearly that the positioning of Scorpio has to be such that it should communicate that the vehicle is better than any of these cars and is a better buy in terms of money. Consumer Having defined the competitive framework, the next task undertaken was that of analyzing the consumer. Consumer segments of B and C category car buyers were analyzed in terms of their expectations from a car, their perceptions about cars and their relationship. Proprietary techniques of research, of the advertising agency Interface Communications, like Mind & Mood, ICON and VII were used to understand this consumer.

The findings were: * Size matters- big size stands for status * Consumers seek latest technology * Imagery but at affordable prices * The sheer thrill and passion of driving an SUB * Power of the vehicle makes a statement * But along with the others, luxury was a very important parameter * International vehicles define imagery D Subs like Pesaro, Land Cruiser and Paradox are seen as urban vehicles for the rich and famous D Consumers aspire to own these vehicles as the imagery of these vehicles has become very desirable The Key Consumer Insight that emerged from all the consumer analysis and which was used for strategy development was Consumers want to consume premium imagery at prices affordable to them” Strategic Branding Approach – Identifying the need gap and occupying it There existed a gap that wasn’t tapped. There was no SUB in the country that the masses could buy. To make Subs a mass concept in India – I-JSP needed to be seen as comfortable, easy-for-city driving and should have imagery comparable to international brands. Therefore, as a strategy it was decided that Scorpio would not take the traditional UP imagery of tough, off-reading and ex..

A ex. approach would be a very niche category and would not generate numbers. To appeal to a car buyer, the Scorpio needed to be seen as a car that offers much more. A Scorpio had to be seen as providing car-like driving pleasure and at the same time providing the edge over cars in space, power, style, fuel efficiency, luxury and comfort. In short, to provide status of a Pesaro (international SUB) at the price of midsized car The Scorpio product package offered – Superior technology, Dynamic Looks, Car-like product and great value for the price Value Proposition for Scorpio: To capture the identified need -gap, the value proposition of Scorpio was defined as – ‘ Car plus’

Rational benefits: World class vehicle, good looks, car like comfort, great value Emotional benefits: Ownership experience of thrill, excitement and power Relational benefits: Young modern, premium, city companion / extension of lifestyle. Brand Promise: ‘ Luxury of a car. Thrill of an SUB This brand positioning addresses the key consumer Insight and the product delivers the promise. The position is also a unique proposition, which will help the brand have a distinct image in the consumers’ mind. Baseline – “ Nothing Else Will do” The baseline captures the essence of the brand, which is superiority and uncompromising attitude. It also summarizes the spirit behind the making of the Scorpio.

Brand Strategy – Parent brand relationship defining A study of international brand names was done and a classification of brand names of midsized cars and Subs was done into groups. International brand naming trends and strategies were analyses. New names were generated. These brand names were researched massively first by qualitative techniques and then by quantitative techniques. The name that emerged as most popular, and which was also the most liked name internally at Maidenhair was SCORPIO. Brand Endorsement Strategy The relation between Scorpio and the mother brand Maidenhair was also deliberated upon. The strategy chosen for Brand Endorsement was – Scorpio from Maidenhair – shadow endorsement, one which does not shout “ Maidenhair. The Maidenhair brand image was not modern and young. There was a need to create a strong distinct modern brand. Hence Maidenhair as a Mastermind could not contribute towards enhancing the Value Proposition. Yet Maidenhair had to provide source reassurance. Also the distribution would be through Maidenhair dealerships. Hence it became a shadow endorser. Advertising and Promotions Strategy The creative strategy was to drive home the ‘ Car Plus’ positioning forward. There was a need to leverage on product strengths. And a need to establish car plus story. Hence the product was to be the hero in all communications The tone and manner was to help associate the brand with the modern and urban lifestyle.

The TV’s as well as the press still-shots were shot in Australia to provide an international city feel. This brought in the international, premium, up-market association for the brand. Media Strategy Role of Media *Dramatic and high impact launch * High visibility * Push brand image even by the media vehicle Building impact through multiple-media * PR, Mass Media, Direct Marketing, Events Public Relations Pre-launch excitement and buzz was created by a full blown PR program. Media coverage on the ‘ DAM process, the people behind the Scorpio, the obsession, the world class technology, etc set the tone for the hyped up launch. PR was also the first tool used for launching the Scorpio.

The coverage of the launch was massive. It got four cover stories Mass Media While the media targets would be achieved through the right selection of the media mix, the Scorpio media posture was to ensure that Scorpio was present on the ecocide media but With a difference. ‘ Scorpio would use media innovations to create differentiation on the traditional media and do things in a ‘ bigger and better’ manner. Customer Relationship Management (CRM) CRM as a tool was used to create positive word-of-mouth, to monitor customer experiences and generate referrals. A series of CRM activities were implemented with regular direct communication, events and customer research.

The CRM plan included a welcome Pack on filling up Scorpio Club (Top Gear) form, satisfaction surveys, Events, Festive offers, Rewards Program, etc. Pricing Strategy: to be a remit brand yet having universal appeal Scorpio was to compete with the midsized cars like Handy Accent, Ford Icon, People Coors, Marti Suzuki Esteem on the one side and I-JSP like Toyota Quails, Data Safari and the Data Sumo on the other. Scorpio adopted the penetrative pricing strategy positioned in the psychological price barrier of RSI. 5-7 Lacks. Distribution Strategy – Serve less markets at a time but serve them well Since the Scorpio was targeted at an urban clientele it needed a stronger attribution presence in Metros and urban areas.

Hence, the distribution channel had to focus on providing an appealing experience for modern car buyers and on offering international standards of auto retail. Phased Launch The Scorpio was launched in a phased manner – first in Metros Iambi, Delhi, Bangor, Achaean. Twenty cities were included over a period of 4 months and within a year 50 cities were covered. This ensured attention to main markets and to ensure that initial production of the vehicle could match demand. Dealerships were revamped prior to launch in a particular city. Showroom Experience The showroom revamp was centered around the intention to provide a uniform customer experience at all the touch points and to provide the customer with a unique “ experience” and not Just a “ product”.

Therefore the back office would remain outside the customer’s line of vision because the customer would be concerned with the product and not with the paperwork. Infrastructure Thirty-five showrooms across the country were redone entirely with the same look and identity and a dcore built around movement, technology and spottiness. The theme focused on giving the customer a memorable experience. Response – The strategy delivered Volumes and Market Shares: Scorpio achieved its targets on market share and achieved a volume of 12000 vehicles in the first 9 months of its launch. Image: Scorpio advertising had a very high recall for the Maidenhair brand (Exhibit 3) as well as for the product (Exhibit 4).

Apart from this, advertising actually positioned Scorpio as a powerful vehicle with a sporty look, solidly built with good cargo capacity amongst the premium car consumers and sports utility vehicle consumers. Overall response to the Scorpio was stupendous. The product was well received across the country and got rave reviews across media. More importantly the product and the strategy delivered in terms of the various objectives set before launch. Footfalls in he showrooms had been massive and demand had far exceeded supply of vehicles with a waiting period of three months. Impact on Maidenhair Image: The saliency of Maidenhair increased considerably.

Maidenhair enjoyed stronger recall as a manufacturer of personal vehicles and stronger customer perceptions on the following attributes – *Well-respected manufacturers *Technologically advanced *Suitable for city driving *Great to drive *Makes FM vehicles *Proud to own *Makes good quality vehicles Scorpio Brand Recall In the SUB/MIMIC segment, Scorpio has the second-largest awareness and has merged as a strong brand in the C & sub-C car segment, however as compared to Quails, it needed higher recall. Scorpio advertising had been able to create a good impression on appearance and styling of the vehicle. Scorpio buyer profile Scorpio managed to pull out customers from the C segment of vehicles.

The product, communication and the retail experience of the Scorpio passed the stringent test of luxury car buyers and the buyer profile was exactly as per the target profile. The strategy delivered with more and more small and midsized car buyers choosing the Scorpio over the others. Awards The Scorpio was awarded various awards from various bodies Maidenhair achieved the objectives it set out to achieve. M&M has more than 39 per cent of market share in hard tops, sold 11800 Scorpio in first nine months of operation and due to this campaign, Maidenhair image improved. Scorpio Impact on Scorpio was launched on June 19, 2002. At that time Maidenhair was losing market share and the share prices were also at an all time low at around RSI. 100.

The Maidenhair share of business was largely from the semi-urban and rural market of India and the markets where Maidenhair was strong were stagnating. With the launch of Scorpio, things started looking up for Maidenhair. There was an improvement in the bottom line as well as the return to the shareholder. The revenue for M&M Auto Sector increased from RSI. 1827 Car. In F 02 to RSI. 2511 Car. In F 03, a growth of 37 per cent. The profits before Interest and Tax (BIT) too zoomed up from RSI. 102 Car. In F 02 to RSI. 147 Car. In F 03, an increase of 43 per cent. In OFF the scenario has further improved. The half-yearly results show a growth of 54 per cent in revenue and 218 per cent increase in BIT.

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