pricing strategies for “the people’s car” presented by: dr. amrita singh alok kumar ajay singh...

PRICING STRATEGIES for “the people’s car”

Presented by:Dr. Amrita Singh

Alok KumarAjay Singh

Anushree PanditGaganbir Kaur

Jatin SaxenaJyoti

Ishrat Batool

Team - Brazen

Development of a One lakh Car

WHAT MAKES IT SO CHEAP!

• The TATA Nano uses plastics and adhesives rather than welding.

• Partially using inexpensive polymers or biodegradable plastics instead of a full metal body.

• It has no AC, no power steering, no power windows.

Target Market

Why should People Buy Nano..

• Low price and covers basic needs of a car.

• Its look cute and attractive• Better facilities for servicing and

maintenance• Easy finance

But was It REALLY a 1 LAKH Rupees Car?

Why the price hike?

Tata said that

“ expensive lending rates, higher fuel costs, and inflation hit margins during the last year is forcing us to pass on the costs to its customers.”

Increasing input costs, especially that of steel and other commodities like rubber, had put pressure on margins.

TATA PRICING OBJECTIVES

• Survival• Maximizing market share• Keeping the price range near 1 lakh• Discouraging potential competition

TATA’S PRICING STRATEGY

Though the one lack tag was not fixed by TATA group, it was the word of mouth of people which fixed the range. This expectation of people creates a big challenge for the company. To accept this challenge the following strategies are followed:

•  Increasing market share

• Penetration pricing

• Low pricing policy with minimum profit margin

PRICE OF VARIOUS CARS

NANO 1.3-1.9 LACK MARUTI 800 1.9-2.3 LACK

ALTO 2.3 LACK SANTRO 2.77 LACK

AVAILABLE FINANCING SCHEMES • Tata Motors Finance (TMF) will provide finance up

to 90% for the Nano at easy rates.

• the company has announced a four-year or 60,000 kilometer manufacturing warranty at no extra cost.

• Loan within 48 hours

• comprehensive maintenance contract at Rs. 99 per month for all new customers.

Proposed pricing objectives

• Survival

• New market penetration

• Increase the perceived value of Nano

• Increase market share

PROPOSED PRICING STRATEGIES

• Penetration pricing

• Target costing

•  Low pricing policy with minimum profit margin which is only 2%

• Perceived value pricing

• Increased market growth

• Discouraged potential competition

Selecting the final pricing

• Influence of other marketing mix

• Cash discount

Price Listex showroom prices

ModelNano BS IV

Nano CX BS IV

Nano LX BS IV

PriceRs 145,000

Rs 170,078

Rs 196,956

Banks

PROJECTED NEW COST

% allocated 2010 2011

145,000 153,000Manufacturing

cost 40 58000 61200

place 20 29000 30600

promotion 30 43500 45900

tax 5 7250 7650

misc. 3 4350 4590

profit 20 2900 3060

sales 60,000 69000

RECOMMENDATIONS

 • Through government subsidies and tax

• Collaboration for loans with Gramin banks and post offices

• Cost effectiveness – Spare parts packages

• Nano Special Outlets(NSO) discount

• Decreasing down payment in rural areas

Thank You