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Diesel Swift and sexed-up SX4 helped Maruti to reach admirable heights

With an incredible 61 points lead over the industry average, Maruti Suzuki won the JD Power’s India customer satisfaction index study for the eighth time in a row. Fictional as it sounds, India’s largest car maker even bettered global heavyweights like Honda and Toyota by 73 and 98 points, respectively. After firmly establishing itself as a low-cost compact car producer, Maruti company has established itself in higher segments too.

Explains Car India’s Vikram Gaur, “Maruti has consistently upgraded its models and understood the Indian psyche better than competition. The brand positioning has been such that the company has transformed itself into a ‘quality manufacturer’ from being just a ‘cheap manufacturer’.” Surviving in an excessively unfaithful & cruel market, Maruti has proven itself and has most definitely evolved.” True, for it has managed to retain its marketshare despite past critical conclusions that it had lost its way.

Its glorious moment this year was the launch of SX4. Initially, analysts argued that the model’s positioning was as faulty as Baleno’s (Maruti’s prior effort at cracking the C segment). The Baleno was large, well-engineered, and expensive; it was targeted at customers who wanted style and comfort. However, buyers overlooked the Baleno when confronted with the Hondas and Mitsubishis. It seemed that the same would happen to SX4. But SX4 surprised everyone with a dream rollout selling close to 30,000 units in seven months. “The SX4 is a radical product. While being positioned in a segment lower than Toyota Corolla and similar models, it offers features which are not present in even these entry-level luxury cars,” adds Gaur. For once, Maruti had a sexed-up model.

Later this year, the company launched its much-awaited Swift Diesel with an engine that was developed at the new facility in Mannesar. With its looks, the petrol Swift had already mesmerised customers. Maruti quickly converged Swift’s looks with cost efficiency that led to the development of the sophisticated multi-jet diesel motor. This was critical as Tata Motors had stolen the thunder in the diesel compact car category.

But surprisingly, Maruti didn’t opt for a head-on collision with Tata’s Indica. Instead, the former created a new segment – B+ diesel despite critics’ contention that the company should have launched diesel versions of its more popular B segment cars. “We identify gaps in the market and then give the consumer what she/he wants,” says Mayank Pareek, CGM (Marketing) Maruti Suzuki. True, for Maruti has invariably updated its models at almost the right time. The Zen, for instance, has been replaced with Estilo, while Wagon R has been updated with an LPG alternative.

It has also been quick to learn from bad experiences and quietly transform them into positives. Take the example of the Grand Vitara XL7, which was Maruti’s attempt to make a mark in the higher segments. Aware of its brand’s limitations, the SUV’s image was more Suzuki centric, rather than Maruti’s. It did click a bit with rich customers, but it didn’t prove to be enticing to the brand-obsessed buyers in this segment. Especially as the XL7 was considered expensive for the brand it represented.

But when Maruti launched the new Vitara this year, it overcame most of these issues. For one, the new model was priced Rs.5 lakh cheaper than rivals’ products like Honda CRV. It also had a smaller engine under its bonnet and, obviously, it became more affordable. As usual, it created a new segment of consumers who eyed the CRV but couldn’t afford it.

What proves Maruti’s tactical success is that Honda too is planning to introduce a smaller engine in its new version of CRV. This is Maruti’s marketing blueprint: test waters before making the kill. “Models like the Baleno and the older Grand Vitara were part of strategic launches in order to get a market feedback” explains Pareek.

Such customer responses may prove to be critical for the company. As competition hots up in the small compact segment, which is Maruti’s bread-n-butter, it will need to seek extra market share in other segments, where it is a weaker player. This will happen when Tata Motors launches a car priced at Rs.1.5 lakh, and others vie to match that benchmark price. So, getting into higher segments is like a hedging and defensive strategy for Maruti, as it is bound to lose market in the small segment.

However, Maruti managers view this differently. “We are a complete car company and, therefore, we are also concentrating on premium segments. It is really not the case that the outlook of Maruti is changing” answers Pareek. Clarifies Jagdish Khattar, MD, Maruti Suzuki, “We are present in all segments. If you have noticed, all the launches last year were in the compact segment.” It is clear that while small cars will remain Maruti’s USP, higher segments too are important. Whichever way it happens, Maruti will slowly and steadily make its way into the elite ‘full model range’ club.

But the transition will surely not be a cakewalk. As public transportation improves in the metros, especially Delhi and Mumbai that are two major car buying centres, global oil prices shoot up, and several players introduce low-cost models, Maruti will need to quickly re-strategise itself, redefine its philosophy, and re-energise its engines. Or else, it will find itself on low gear, or handbrakes.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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