Pricing Strategy for India

Opinion / Marketing

Pricing Strategy for India
B V Krishnamurthy, Member, CxO / Board, India

Nissan has launched the Micra in India at an unrealistic high price. Will it work?

NISSAN is the latest entrant in the Indian automobile market with the much-hyped MICRA (Match in Japan). The base version is priced at INR 400000 and the “loaded” version is over INR 600000. Most reviewers have pointed out the absence of some key features, some referring to the rear seat as a “bench.”
One is really at a loss to understand the strategy if any in NISSAN’s approach. India is seen as a land of over a billion people and hence a great opportunity. The demographic dispersion of this huge population is rarely taken into account. The strategists at NISSAN appear to be of the “ivory tower planning” type since they have obviously not looked at the ground realities.
The car that has been launched in India was launched in Japan in 1982. Thus, we are talking of a 28 year old vintage. Cosmetic embellishments are unlikely to sway customers to burn a big hole in their pockets.
Why is it that automobile manufacturers fail to understand the simple fact that Indian buyers of automobiles are not as gullible as the manufacturers would like to believe? The market leader MARUTI SUZUKI has taken over 25 years to phase out the 800 Model which it introduced in 1984. The market leader was seen as a follower since it did not pioneer new technologies in the Indian market. It was only after competitors had challenged its position by introducing Multi-Point Fuel Injection and the “Tall Boy” design did the market leader wake up and respond. The key success factor in MARUTI’s position in the market is the phenomenal network of service points. New entrants will find it difficult if not impossible to replicate the service dimension.
More than anything else, India is a price-sensitive market. The mere increase in purchasing capacity does not ensure that customers will pay a premium price for an ordinary product. Thanks to the ubiquity of information and the mobility of people, information from across the world gets around faster than the speed of thought. Given these harsh realities, one is disappointed with the lack of sensitivity on the part of manufacturers and service-providers when it comes to getting their pricing right in India.
Even after allowing for the diffusion of technology from innovating countries to other developed countries and then to the emerging economies, it is puzzling that all the players make similar mistakes and pay a heavy price for it. Even the largest car maker TOYOTA can be faulted on this dimension. It introduced the COROLLA as a luxury car and continues to market it as such. Everyone knows what the model is in Japan. Similarly, an outdated QUALIS was introduced merely because it was a boon to the BPO sector. FORD made a similar mistake with its dated ESCORT before realizing the Indian customer deserved something better. The experience of DAIMLER-BENZ has been nothing to write home about largely due to its myopic view of the market. One can cite similar cases of failure of other automobile makers.
The message is loud and clear if only the automobile makers are willing to listen. You cannot make huge dents into the Indian market unless you get your pricing right. The price-performance ratio is critical in the Indian context. A premium price is possible only for a contemporary product with features comparable to similar models anywhere else in the world. There is also the ethical dimension of charging exorbitant prices for products that are dated, and in which scale economies should have been achieved long ago. In fact, there is a strong case for making available such products at highly affordable prices. That is the recipe for succeeding in India.
It is a pity NISSAN is the latest in a series of strategic disasters. Unless the company re-looks at its pricing and features, failure may soon be staring in its face.

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