AURO

UNIVERSITY
Bachelor of Business Administration
School of Business

Rural Marketing
TATA Ace Case Solution
BBA 2017-20
Semester 6

Submitted on: 
Monday
6th April 2020 

Submitted To:                                                 Submitted By:

Dr. Rohit Singh                                               Disha Bhadani
1. Tata Motors successful launched Tata Ace to grow, think creatively, and offering unique
products. Highlight the growth and uniqueness which Tata brought through product like
Ace. You may consider segmentation strategy, competitors offering strategy, and bringing
uniqueness by studying the market scenario.

The Tata Ace was a small four-wheeled commercial vehicle launched by Tata Motors in May
2005 at a price of 225,000 rupees with a payload capacity of 0.75 tons. The Ace cost 50% less
than any other four-wheeled commercial vehicle in India and was significantly cheaper than
pickup trucks with similar payload capacities found in international markets.

In 2005, the Indian commercial-vehicle sector included three- and four-wheeled vehicles. Two
wheelers (motorcycles, mopeds, and scooters) as well as passenger cars and sport utility vehicles
(SUVs) were also occasionally used for freight transport. In addition, India had a nonmotorized-
vehicle sector that included bullock carts, bicycle rickshaws, horse-drawn carriages, and manual
pull carts. The size of this nonmotorized segment was large but undocumented.

Overview of the Indian Commercial Vehicle Sector:

4 Wheelers

 Sales of 2005- 119877 units

 Growth rate 22%
 Trucks, Pickups, small buses
 83% cargo, 17% passenger
 Payload- 1.2 to 7.5 tons
 Major Manufacturers
 TATA Motors- 51%
 Mahindra & Mahindra- 33%
 Swaraj Mazda-5%
 Eicher Motors- 5%

3 Wheelers

 World’s largest Market

 Sales 2005- 307887 units
 Growth rate 14%
 44 % cargo, 56% passenger
 Payload – 0.5 to 1.0 tons
 Cost- Rs.100000 to Rs.200000
 Major Manufacturers
  Bajaj- 5%
 Piaggio- 26%
 Force Motors- 8%
 Mahindra & Mahindra- 8%

Non Motorized Vehicles

 Bullock Cart
 Bicycle Rickshaws
 Horse drawn carriages

Others

 Motorcycles
 Mopeds
 Scooters
 Cars
 Sports Utility Vehicles (SUV)

Road Infrastructure in India

 Inadequate and underdeveloped and needed rapid development

 3.32 million kms of road networks out of which only 2% were national highways and
only 12% of this 2% were four lanes or more.
 The maximum percentage share of total roads in India is by district and rural roads
 In urban areas, near commercial and retail markets roads were very narrow and
congested.
 Roads in Rural India are poorly paved and lacked markings.
 Lack of adherence of traffic rules
 Ban of three wheelers on highway due to slow speed and safety concerns

Market Research

 Consumers were looking for vehicle that offered the price, fuel efficiency and
maneuverability of a three wheeler but with safety, durability, additional payload and
comfort of a four wheeled truckload.
 Customers wanted a scale down version of Tata’s four-ton 407 truck.
 Customers viewed four wheelers as higher-status vehicle.
  In addition to business case, there was also a personal motive for purchasing a vehicle
like Tata Ace
 Being a three wheeler driver was not s desirable occupation.
 There was a need of a vehicle that made the driver “feel good”
 Customers would not be able to or were willing to pay much more for the Ace than they
would for a three wheeler.
 The team set a target price of Rs. 200000 for the Ace.

Problems in three & four wheelers:

 Being a Three wheeler driver was not a desirable occupation

 Due to more load on three wheelers it would flip around at times
 Safety was not there in three wheelers
 Four wheelers were not able to reach final destination due to road infrastructure
 High maintenance cost
 No driving comfort

Functional Segmentation:

The Ace’s core market was decided to be customers looking to transport 750 to 1500 kgs over a
distance of 100 to 200 kms. Based on this target market as well as the opportunity to grow the
total market pie, the team oface estimated that45% of the Ace’s customer base would come from
people planning to purchase three wheelers, 15% from potential pick up and light commercial
vehicle purchasers and 40% from first time commercial vehicle purchasers.

Customer Segmentation:
Performance-sensitive (7%) customers were those who were interested in status, brand image,
and speed. Purchasers in this segment were willing to pay a higher price for features such as air
conditioning, metallic paint, and a radio.

Balanced-perspective (25%) customers were typically owner-entrepreneurs who wanted a

vehicle that justified itself on an ROI basis but also wanted comfort and convenience features
that would improve their quality of life.

ROI-sensitive (55%) customers were those who would buy a vehicle based on the lowest cost
per mile of transport and did not place any value on nonmonetary purchase considerations. Fleet
owner/operators who hired drivers as well as some individual owners were part of this category.

Acquisition-price-constrained (13%) customers were those who lacked credit and the financial
means to purchase an even slightly more expensive vehicle. Given their financial situation, these
customers would purchase three wheelers even if there was a better alternative.

Finally, there was a large group of people i.e., bottom of pyramid who could not afford any
motorized vehicle. The size of this group was not easily quantified. They used bullock cars,
bicycle rickshaws, horse-drawn carriages, and manual pull carts for transportation. Over time, as
prosperity increased and new small businesses were started, the team concluded that more people
would move up from the lower categories.

In order to capture customers in the second and third segments, the vehicle had to be more
economical than a three wheeler in the long run. The team benchmarked the Ace to its
competitors’ operating economics. Though the Ace would have a higher initial acquisition cost
than most three wheelers, by offering longer intervals between maintenance, higher payloads,
and the opportunity for more trips per day (due to better acceleration, higher speeds, greater
driver comfort, and the ability of a water-cooled engine to travel 500 kilometers without
stopping), the Ace would deliver goods at an all-in cost of Rs. 6.70 to transport one ton a
distance of one kilometer compared with Rs. 7.88 for the next-best competitor and a segment
average of Rs. 8.54.

Other Uniqueness that TATA Ace brought:

 Better design and better performance than other three wheelers

 Car like features in drivers cabin
 Better safety standards
 Lower operating cost
 Payload capacity of 0.75 tons

Uniqueness in 4 A’s

1. Availability

The first challenge in rural marketing is to ensure availability of the product or service.
India’s 7, 00,000 villages are spread over 3.2 million sq km; 700 million Indians may live
in rural areas, thus to reach all this consumers gets quite difficult and there needs to be a
proper distribution system for the same.

 Production done at underutilized plant in pune to reduce freight cost

 5 states in western and southern India, with strongest three wheeler demand
targeted
 Ace distribution network was benchmarked with two and three wheeler dealer
network having sales and service outlay to cover more and more rural market
 New dealership format 1S(Sales) developed to increase the reach of TATA Ace
 300 distribution points set up within three months
 “Suvidham” meaning convenience, a program launched to train existing rural
mechanics free of cost to complete simple maintenance works of Ace.

2. Affordability

The second major challenge is to ensure affordability of the product or service. With low
disposable incomes, products need to be affordable to the rural consumer, most of who
are on daily wages.

 More economical than three wheelers in the long run

  Less operating cost than the next best competitor(Rs. 6.70 per km per ton vs Rs.
788 per km per ton)
 27% less operating cost than the segment average
 Financing offered through Tata’s own financing firm
 Third-party financiers were willing to offer five-year loans compared with the
three-year loans offered on three wheelers
 Monthly payments for Ace were lower than those of three wheelers
 81.5% material required was outsourced to keep the cost price low
 The Ace was priced at Rs. 225000
 Well suited for ROI sensitive customers

3. Acceptability

The next challenge is to gain acceptability for the product or service. Therefore, there is a need to
offer products that suit the rural market.

 Overload Capabilities were designed as per payload

 Two cylinder engine was designed based on the concept of Indica
 Engine is matched to the fuel efficiency and speed demanded by customer
 Water cooled engine allowed more travel per day
 Rotary fuel injection pump designed to meet emission norms’
 Highest safety norms achieved through Flat face design
 Using existing facility and aggregated outsourcing, high performance car like product
was developed
 Semi monocoquwe design resulting in low cost, high durability and a ride quality of a car
 4 wheeler was a higher status symbol in many rural areas.
 Payload capacity 750 kgs to 1000 kgs
 Sold annual production target of 30000 vehicles in less than a year
 Was more popular in the urban area

4. Awareness

Building awareness is another challenge in rural marketing. A large part of rural India is
inaccessible to conventional advertising media.

 Educate dealers in the perating- economics analysis

 Tag lines to emotionally attack customers, “feeling good about your job”
 “Free themselves” a marketing message for owners to highlight the new opportunities
this vvehicle to create for them compared to three wheelrs
 Advertised as “India’s first mini truck”
  Newspaper advertisements, television advertisements and wall paintings created while
teaming up with an Indian advertisement agency named Rediffusion DY &R
 Local language used for advertising
 Ace “small is big” campaign suggested the Tata customers the stability and trust of a big
Tata truck in a small package
 A television ad created for the South Indian state of Tamil Nadu which called Ace
“Chinna Annai” Tamil word meaning “little elephant” to promote Ace

Opportunities Ace had during its introduction in the Market

 The growth of highway system between major cities and secondary road networks within
various states would trigger the demand for larger vehicles that could carry bulk loads of
more than 45 tons from hub to hub and lower the per unit cost of transport.
 The construction of an all weather tertiary road network connecting rural towns would
create a paradigm shift in the movement of goods and people. This, combined with
increasing vehicle congestion in major Indian cities, would trigger the demand for a
vehicle that could service the “last mile” in the transportation supply chian y delivering
small loads on a full truckload basis from various hubs to urban and rural consumption
centers.
 It would be a last mile distribution vehicle as it would be also able to go on highways and
narrow roads in the cities and villages.

Response to TATA Ace:

 Tata Ace exceeded the expectations of Tata Motors and its annual production target of
30,000 vehicles were self in less than a year
 54% of the customers were first time buyers, 33% previously owned 3 wheelers and 30%
had LCV suggesting that the launch was successful
 Customer in the age group 25-35 were the first time buyers suggesting that Ace was
successful in attracting first time buyers
 56% of customers were using Ace for intra-city transport, 35% for intercity transport, 7%
for village to city transport and 2% for inter-village transport

Growth of Ace:

2005
 Tata Ace, India's first mini-truck, launched
2006
 Launch of Tata Ace HT
 Tata Ace wins 'BBC-Top Gear' Design of the Year 2006 Award
2007
  Tata Ace crosses 1 lakh sales mark
 Launch of Tata Magic, for passenger transportation
2008
 Dedicated Plant set up at Pantnagar
 Launch of Tata Ace CNG
2009
 Tata Super Ace and Tata Ace EX introduced

2010
 Tata Ace-India's first 1-lakh-per -year CV brand
 Total sales crosses 5 lakh mark
2011
 Launch of Tata Magic IRIS and Tata Ace Zip
2012
 Total Ace Family celebrates 1 million units sold
2014
 Launch of new Super Ace Mint
2015
 Launch of Ace Mega small Pickup
2016
 Launch of Ace Zip CNG
2017
 Introduction of XL range
 Tata Ace Family crosses 2 million mark
 A Tata Ace gets sold every 3 minutes
2018
 Launch of Ace Gold
References

 http://managementstudiesentries.blogspot.com/2008/12/4-ps-and-4-as-
of-rural-marketing.html
 https://ace.tatamotors.com/tata-trucks/tata-ace/story/tata-ace-
story.aspx