The document discusses the marketing strategy used by Tata Motors for the successful launch of the Tata Ace light commercial vehicle (LCV) in India. It describes how Tata Motors conducted market research to identify a need for an affordable LCV below 1 ton payload to replace aging three-wheelers. Tata Motors segmented the market functionally based on payload and distance, and segmented customers based on priorities like price, performance, and return on investment. Tata Motors then implemented a marketing mix strategy addressing the 4Ps - developing Ace based on customer needs, pricing it affordably, distributing it widely through dealers, and promoting it aggressively. The launch was a success with over 50% of customers being first-time buyers, exceeding sales targets

1. Solution TATA Ace case study
Ganesh Iyer
MMS-B, R.No.-85
1. Explain the following aspects of the case study in brief? (refer exhibit 1 and 2)
o Overview of the Indian Commercial Vehicle Sector
Commercial vehicle: A commercial vehicle is a type of motor vehicle that is used for
transportation of goods or passenger
Overview of Indian Commercial Vehicle Sector as per case study,
Indian
Commercial
Vehicle
sector
4-Wheelers
Sales for 2005-119877 units
Trucks, Pick-ups, Small buses
83% cargo 17% passenger
Payload-1.2-7.5tons
TATA motors (51%)
Mahindra & Mahindra (33%)
Swaraj Mazda (5%)
Eicher Motors(5%)
3-Wheelers
Worlds Largest Market
Sales 2005-307887 units
44% cargo 56% passenger
Payload -0.5-1.0 tons
Bajaj (51%)
Piaggio (26%)
Force Motors (8%)
Mahindra & Mahindra (7%)
2-Wheelers
motorcycles , mopeds, sccoters
cars &
sports utility vehicles (SUV)
Non Motorised Vehicles
Bullock cart
BIcycle Rickshaws
horse-drawn carriages
manully pulled carts
Major Manufacturers (Market share)

2. Segmentation of Commercial Vehicle Industry
Road Transportation Infrastructure in India
 Inadequate and underdeveloped and needs rapid development
 3.32 million Kilometre of road network out of which national highways network is only 66400
km. Out of 66400 only 7968km is four lane or above.
 The maximum percentage share of total roads in India is by District and rural roads
 Roads near retail outlets in urban areas in congested and narrow
 Roads in rural India are poorly paved and lack markings.
 Ban of three wheelers on highways due to slower speed and safety concerns
Roads transportation infrastructure in India as of 2015
 India has the second largest road network in the world, spanning a total of 4.87 million
kilometres
 India transport over 60 per cent of all goods and 85 per cent of total passenger traffic.
Indian Commercial Vehicle Industry
Gross Vehicle Weight
(GVW)
LCV-Light
Commercial
Vehicle
GVW < 7.5
tons
E.g TATA Ace .
Mahindra
Maximo
M&CV-
Medium and
Heavy
Commercial
Vehicle
GVW > 7.5
tons
E.g.Mahindra
Traco
Application
GOODS PASSENGER
LCV passengers
Seating Capacity >
13
UTILITY VEHICLES (UV)
Seating Capacity< 13

3. Overview of the TATA Group and TATA Motors
TATA Motors
 TATA motors was initially TATA Engineering and Locomotive Company (TELCO) established
in 1945
 Tata motors together with Daimler Benz started manufacturing medium size commercial
vehicles in 1954 and set up an Indian research and development centre in 1959
 Launched a four ton Tata 407 truck which became the top selling in the category
 Launched Tata Indica in the year 1998 which received an overwhelming response in the
market
 Began exporting Indica to U.K through M.G Rover
 2003 TELCO was changed to TATA motors
 TATA motors is the major manufacturer of passenger cars and commercial vehicles in India
2. Explain the Idea for the Ace and role of Market Research in finding the attractive
segment of LCV of less than 1 ton? (refer exhibit 34)
TATA
Group
54
Operations
Countries
2,02,000
Employees
6 Continents
96
Operating
Companies
$21.9 bn
Revenue
(2006)
120
Exports
Nations
TATA
Group
(Business sectors)
1-IT & Comm
2-Engineering
3-Chemicals
4-Energy
5-Consumer
products
6-Materials
7-Services

4. Idea for ACE
 Tata Motors posted a loss of Rs.5 billion in 2001 added with a downturn of commercial vehicle
sector and absence of smaller than 2 ton vehicle threatened the company to develop a new
product.
 As we can see from the exhibit 3 the Road density (paved highway (km)/ Area (km2)) is very
low for India so it was must for the automobile manufacturers to deliver a better vehicle then
three wheeler that could reach the remote areas having unpaved roads
 From the second graph it is clear that the GDP per capita of India was very low which
recommended for a low cost vehicle to be launched
 Three wheelers were banned from entering highways and heavy commercial vehicle in city
areas
 The exhibit 4 shows that the requirement in the 750-1000kgs and 1000-1250kgs was diversified
and a new substitute was required which could do the work of both three wheeler truck and
pickup. This opportunity was by grasped by TATA motors through TATA ACE
Role of Market Research
Customer analysis to know the exact requirement
Market research revealed the different perspective of buying a LCV
Price at which the vehicle will be accepted by customer willing to buy below 1 ton LCV
Different criteria (safety, facilities etc.) for selection of vehicle was studied through research
Demand of the new product was studied
3. Explain the Functional and Customer Segmentation used for effective Segmentation
and Targeting Strategy adopted for TATA Ace? (refer exhibit 4 and 5)
Functional segmentation
Ace’s core market
750-1500kgs over 100-200 km distance
First Time
Purchsers
40%
3-
Wheelers
45%
Pick-
up/LCV
15%
Percentage

5. Customer Segmentation
Performance sensitive customers were those
interested in Status, brand image and speed
and are willing to pay higher for features (AC,
metallic paint, and radio)
Balanced Perspective customers were
typically entrepreneurs and want vehicle that
justified itself on an ROI basis but also want
comfort and convenience to improve quality of
life.
ROI-sensitive customers were those who buy
on lowest cost per mile basis. Largely consist
of fleet owners
Acquisition Price Constrained customers are
those who lacked credit and financial means to
purchase slightly higher price car
7%
25%
55%
13%
Customer Type
Performance sensitive
Balanced perspective
ROI sensitive
Acquisition Price constrained

6. 4. Explain the 4P's of Marketing Mix strategy used for TATA Ace?
•Overload capabilities were designed as per payload
•Two cylinder engine is designed based on the concept of
Indica
•Engine is matched to the fuel efiifciency and speed
demanded by the 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 aggregate outsourcing, high
performance car like product was developed
•Semi monocoque design resulting in low cost, high
durability and a ride quality of a car.
•4-wheelers is hiigher status symbol in few rural areas
•Payload capacity 750kgs to 1000kgs
•More economical than three wheelers in the long run
•Less operating cost than the next best competitor (RS.6.70
perkm per ton vs Rs.7.88perkm per ton)
•27 % less operating cost than the segment average
•Financing offered through Tata's own financing firm
•Third party financers were ready to offer a 5-years loan (3-
years for three wheelers) resulting to low monthly
installments compared to three wheelers loans
•81.5% of material required was outsourced to keep the
cost price low
•Targeted at Rs.2,00,000 whereas price of three wheeler is
Rs.1,00,000-Rs2,00,000
•Well suited price for ROI sensitive customers

7. •Production done at underutilised plant in pune to reduce
freight cost
•5 states in western and southern India, with strongest
three wheeler demand targeted
•Ace distribution netwrok 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 convinience, a program launched to
train existing rural mechanica free of cost to complete
simple maintenance works of Ace
•Educate dealers in the operating-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 vehicle could create for
them compared to three wheelers
•Advertised as "India's first mintruck"
•Newspaper, advertising media involved for aggresive
promotion
•Local language used for advertisement
•Ace "small is big " campaign to suggest the Tata
customers the stability and trust of a big TATA truck in a
small package
•A television ad created "Chinna Annai" Tamil word
meaning "little elephant"to promote Ace

8. 5. Explain the market launch and response of TATA Ace
Response of TATA Ace
 TATA Ace exceeded the expectations of TATA Motors and its annual production target of
30,000 vehicles was sold in less than one year
 54% of the customers were first time buyers, 33% previously owned 3-wheelers customers
and 30% had LCV suggesting that the launch was successful
 Customers 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 intracity transport, 35% for intercity transport, 7% for
village to city transport and 2% for intervillage transport
 In Jan 2006 TATA Ace won BBC Top Gear’s annual “Best Commercial Vehicle Design”
award.
6. Provide your key learning from the case study on how marketing strategy was
used by TATA Motors for the successful launch of TATA Ace
 The marketing strategy should start with the requirement of a customer and then
designing a new-product or upgrading a new product as per customer need.
 4 P’s analysis should be used to successfully market and launch a product
 Demand estimation should be done through proper market research
 Consumer behaviour should be studied
 Sales strategy should be designed that is best suited for the product
http://www.ibef.org/industry/roads-presentation
Maharashtra
Tamil Nadu
Karnataka
Andra
Pradesh
Kerala &
Pondicherry
Market launch
 Launched in May 2005
 South and West India
were the initial launch
regions
 Priced competitively at
Rs.2,25,000
 25% of India covered
for initial launch